<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended June 30, 1997
Commission file number 0-24710
-------
CD RADIO INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 52-1700207
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
SIXTH FLOOR, 1001 22ND STREET, N.W., WASHINGTON, D.C.
20037
- -------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip code)
202-296-6192
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
COMMON STOCK, $.001 PAR VALUE 12,488,883
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(Class) (Outstanding as of August 13, 1997)
<PAGE> 2
CD RADIO INC.
(A DEVELOPMENT STAGE ENTERPRISE)
INDEX
<TABLE>
<S> <C>
Part I - Financial Information
Page
Consolidated Statements of Operations (unaudited) for the three 1
and the six month periods ended June 30, 1997 and 1996 and
for the period May 17, 1990 (date of inception) to June 30, 1997
Consolidated Balance Sheets (unaudited) as of June 30, 1997 2
and December 31, 1996
Consolidated Statements of Cash Flows (unaudited) for the six 3
month periods ended June 30, 1997 and 1996 and for the
period May 17, 1990 (date of inception) to June 30, 1997
Notes to Consolidated Financial Statements (unaudited) 4
Management's Discussion and Analysis of Financial Condition and 7
Results of Operations
Part II - Other Information 12
Signatures
</TABLE>
<PAGE> 3
CD RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the period
Three months end Six months ended May 17,1990
---------------------------- ---------------------------- (date of inception)
June 30, June 30, June 30, June 30, to June 30,
1997 1996 1997 1996 1997
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue $ - $ - $ - $ - $ -
------------ ------------ ------------ ------------- ------------
Expenses:
Legal, consulting and
regulatory fees 1,009,110 347,495 1,245,751 575,169 8,494,715
Other general and administrative 566,250 330,151 846,915 611,832 8,379,678
Research and development 15,434 24,576 35,058 52,477 1,951,413
Write-off of investment in
Sky-Highway Radio Corp. - - - - 2,000,000
------------ ------------ ------------ ------------- ------------
Total expenses 1,590,794 702,222 2,127,724 1,239,478 20,825,806
------------ ------------ ------------ ------------- ------------
Other income (expense)
Interest income 1,237,003 20,099 1,297,684 45,389 1,626,356
Interest expense (34) (4,903) (4,945) (9,820) (171,395)
------------ ------------ ------------ ------------- ------------
1,236,969 15,196 1,292,739 35,569 1,454,961
------------ ------------ ------------ ------------- ------------
Net loss $ (353,825) $ (687,026) $ (834,985) $ (1,203,909) $(19,370,845)
============ ============ ============ ============= ============
Net loss per common share $ (4.23) $ (0.07) $ (4.28) $ (0.13)
============ ============ ============ =============
Weighted average common shares
outstanding 10,313,114 9,322,471 10,307,255 9,385,781
============ ============ ============ =============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
1
<PAGE> 4
CD RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
June 30, December 31,
1997 1996
------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 30,184,349 $ 4,583,562
Interest receivable and other 447,141 9,368
------------- ------------
Total current assets 30,631,490 4,592,930
------------- ------------
Property and equipment in service, at cost:
Technical equipment 254,200 254,200
Office equipment and other 93,720 89,220
Demonstration equipment 38,664 38,664
------------- ------------
386,584 382,084
Less accumulated depreciation (233,118) (213,344)
------------- ------------
153,466 168,740
------------- ------------
Satellite construction in process 6,500,000 -
Other assets
Launch deposit 3,420,000 -
FCC license deposit 16,669,200 -
Designated cash 66,676,800 -
Other deposits 303,793 303,793
------------- ------------
Total other assets 87,069,793 303,793
------------- ------------
Total assets $ 124,354,749 $ 5,065,463
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 187,172 $ 131,118
Other 20,082 20,174
------------- ------------
Total current liabilities 207,254 151,292
Deferred rent and other 5,743 15,795
------------- ------------
Total liabilities 212,997 167,087
============= ============
Commitments and contingencies
5% Delayed Convertible Preferred Stock, $0.001 par value;
8,000,000 shares authorized, 5,400,000 shares issued and
outstanding at June 30, 1997 (liquidation preference
of $136,400,000), at net carrying value 111,855,311
Stockholders' equity:
Preferred stock, $0.001 par value, 50,000,000 shares
authorized; 8,000,000 shares designated as 5% Delayed
Convertible Preferred Stock
Common stock, $0.001 par value; 200,000,000 shares
authorized; 10,313,391 and 10,300,391 shares issued and
outstanding at June 30, 1997 and December 31, 1996,
respectively 10,313 10,300
Additional paid-in capital 75,424,923 23,423,936
Subscription receivable (465,450) -
Deficit accumulated during the development stage (62,683,345) (18,535,860)
------------- ------------
Total stockholders' equity 12,286,441 4,898,376
------------- ------------
Total liabilities and stockholders' equity $ 124,354,749 $ 5,065,463
============= ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
2
<PAGE> 5
CD RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the period
Six months ended May 17,1990
------------------------------ (date of inception)
June 30, June 30, to June 30,
1997 1996 1997
----------- ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (834,985) $ (1,203,909) $(19,370,845)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 19,774 26,885 243,817
Write off of investment in Sky-Highway Radio Corp. - - 2,000,000
Compensation expense in connection with
issuance of stock options - 160,000 1,715,500
Common stock issued for services rendered - 222,731 901,576
Common stock options granted for services 119,820
rendered - -
Increase (decrease) in cash and cash equivalents
resulting from changes in assets and liabilities:
Interest receivable and other (437,773) 4,713 (447,141)
Due to related party - - 350,531
Deposits - - 303,793)
Accounts payable and accrued expenses 56,054 57,405 262,411
Other liabilities (10,144) (12,995) 25,825
------------ ------------ ------------
Net cash used in development stage activities (1,207,074) (745,170) (14,502,299)
------------ ------------ ------------
Cash flows from investing activities:
Payments for satellite construction (6,500,000) - (6,500,000)
Advance payment for launch services (3,420,000) - (3,420,000)
License fee payments to the FCC (16,669,200) - (16,669,200)
Designated cash (66,676,800) - (66,676,800)
Capital expenditures (4,500) - (397,283)
Acquisition of Sky-Highway Radio Corp. - - (2,000,000)
------------ ------------ ------------
Net cash used in investing activities (93,270,500) - (95,663,283)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from issuance of units and common stock - - 14,557,482
Proceeds from issuance of preferred stock 120,052,361 - 120,052,361
Proceeds from exercise of stock warrants - 211,800 4,589,088
Proceeds from issuance of promissory notes - - 200,000
Proceeds from issuance of promissory notes to
related parties - - 2,965,000
Proceeds from exercise of stock options by
Company employees 26,000 105,000 181,000
Repayment of promissory note - - (200,000)
Repayment of promissory notes to related parties - - (2,435,000)
Loan from officer - - 440,000
Deferred offering costs - - -
------------ ------------ ------------
Net cash provided by financing activities 120,078,361 316,800 140,349,931
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 25,600,787 (428,370) 30,184,349
Cash and cash equivalents at the beginning of period 4,583,562 1,799,814 -
------------ ------------ ------------
Cash and cash equivalents at the end of period $ 30,184,349 $ 1,371,444 $ 30,184,349
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
3
<PAGE> 6
CD RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
GENERAL
The accompanying consolidated financial statements do not include all
of the information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles. In the opinion of management, all adjustments (consisting only of
normal, recurring adjustments) considered necessary to fairly reflect the
Company's consolidated financial position and consolidated results of
operations have been included.
SATELLITE CONSTRUCTION
In March 1997, the Company extended its satellite construction
contract with Space Systems/Loral ("Loral") and amended the contract to allow
Loral to commence work associated with the program schedule. In April 1997 the
Company made its first payment of $6.5 million under this agreement.
BROADCAST LICENSE
In April 1997, the Federal Communications Commission held an auction
for two national satellite radio broadcast licenses. The Company was the
winning bidder in such auction for one of these licenses (the "FCC License")
with a bid price of $83.3 million. Of the total bid price, $16.7 million has
been deposited with the FCC, with the remainder due within 10 business days
following the public notice by the FCC that it is prepared to award the
license. The Company has classified $66.7 million as designated cash in the
June 30, 1997 balance sheet reflecting the balance due the FCC if and when the
license is awarded.
PRIVATE PLACEMENT
In April 1997, the Company completed a private placement of its 5%
Delayed Convertible Preferred Stock (the "5'% Preferred Stock"). The Company
sold a total of 5.4 million shares of the 5% Preferred Stock for an aggregate
sale price of $135 million. In connection with the private placement, the
Company paid $10.1 million in fees to its placement agent, Libra Investments,
Inc. ("Libra"), and $2.7 million to Batchelder & Partners, Inc., a financial
advisory firm. In addition, the Company agreed to grant a warrant to Libra to
purchase 486,000 shares of the 5% Preferred Stock with an exercise price of
$25.00 per share. As a result of the private placement, options to purchase
200,000 shares of Common Stock held by Batchelder & Partners, Inc. vest and
become exercisable for three years with an exercise price of $6.25. Reference
is made to the Company's report on Form 8-K filed May 5, 1997 for a description
of the terms of the 5% Preferred Stock.
4
<PAGE> 7
CD RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
SUBSEQUENT EVENTS
On July 22, 1997, the Company entered into two loan agreements
(collectively the "AEF Agreements") with Arianespace Finance S.A. ("AEF"), a
subsidiary of Arianespace S.A. ("Arianespace"), to finance approximately $105
million of the estimated $176 million price of the launch services to be
provided by Arianespace. Under these agreements, the Company is able to borrow
funds to meet the progress payments due to Arianespace for the construction of
each launch vehicle and other launch costs (the "Loans"). The Company has the
opportunity upon satisfying a variety of conditions specified in the AEF
Agreements to extend the Loans. Otherwise, if not refinanced, the Company will
be required to repay the Loans in full, together with accrued interest and all
fees and other amounts due, approximately three months before the applicable
launch date. The AEF Agreements impose restrictions on the Company's ability to
permit liens on certain assets of the Company, other than liens in favor of
AEF. If the loans are extended, the Company will be subject to provisions
restricting its ability to incur additional indebtedness or make investments.
On August 5, 1997, Loral agreed to an amendment to the Company's
satellite construction contract under which Loral agreed defer for three years
$20 million in payments to be made by the Company in connection with the
contract. In addition, on the same date, Loral's parent company, Loral Space &
Communications Ltd., purchased from the Company 1.9 million shares of common
stock for $25 million.
NET LOSS PER COMMON SHARE
Net loss per common share has been computed based on the weighted
average number of common and common equivalent shares outstanding. Common
equivalent shares representing the common shares that would be issued on
conversion of convertible securities and exercise of outstanding stock options
and warrants reduced by the number of shares which could be purchased from the
related exercise proceeds are not included since their effect would be
anti-dilutive.
The net loss attributable to common stockholders has been adjusted for
deemed dividends. The deemed dividend relates to the discount feature
associated with the Company's 5% Delayed Convertible Preferred Stock, computed
in accordance with the SEC's position on accounting for preferred stock which
is convertible at a discount to the market. The discount, which totaled
approximately $52 million, will be recognized as a return to the 5% Delayed
Convertible Preferred Stock shareholders over the period April 1997 through
July 1997, which is the minimum period in which the shareholders can realize
that return.
5
<PAGE> 8
<TABLE>
<CAPTION>
3 months 6 months
ended ended
June 30, June 30,
1997 1997
-------- --------
<S> <C> <C>
Net loss $ (353,825) $ (834,985)
Deemed dividends
on preferred stock (43,312,500) (43,312,500)
--------------- --------------
Net loss attributable
to common stockholders ($43,666,325) ($44,147,485)
=============== ==============
Per common share:
Net loss $ (.03) $ (.08)
Deemed dividends on
on preferred stock (4.20) (4.20)
----- -----
Net loss attributable to
common stockholders $ (4.23) $ (4.28)
===== =====
</TABLE>
For reporting periods ending after December 15, 1997, the Company will
be required to report earnings (loss) per share in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). As
long as the Company continues to experience net losses, there will be no
material impact on the Company's net loss per share from adoption of SFAS 128.
6
<PAGE> 9
CD RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
CD Radio Inc. was founded in 1990 to pioneer and commercialize a
compact disc quality, multi-channel radio service broadcast directly from
satellites to vehicles and is in its development stage. The Company's principal
activities to date have included technology development, pursuing regulatory
approval for CD Radio, market research, design, development, contract
negotiations with satellite and launch vehicle contractors, technical efforts
with respect to standards, and securing adequate financing for working capital
and capital expenditures. The Company does not expect to derive any revenues
from operations prior to the commercial launch of CD Radio, which is expected
to occur no earlier than the end of 1999. The Company has incurred substantial
losses to date and expects to incur substantial losses until at least a year
after the commercial launch of CD Radio. The Company will require substantial
additional capital to complete development and commence commercial operations.
Upon commencing commercial operations, the Company expects its primary
source of revenues to be monthly subscription fees. The Company currently
anticipates that its subscription fee will be approximately $10 per month to
receive CD Radio broadcasts, with a one time, modest activation fee per
subscriber. To receive the service, subscribers will need to purchase a radio
card or S-band radio and a miniature satellite dish antenna. The Company does
not intend to manufacture these products and thus will not receive any revenues
from their sale. Although the Company holds patents covering certain technology
to be used in the radio cards, S-band radios and satellite dish antennas, the
Company expects to license its technology to manufacturers at no charge. As the
number of subscribers to CD Radio increases, the Company may also derive
revenues from producers of sports, news and talk programming for providing
national distribution of their programming to subscribers.
The Company expects that the operating expenses associated with
commercial operations will consist primarily of costs to acquire programming;
costs to maintain and operate its satellite broadcasting system and studio;
sales, general and administrative costs; and royalties paid for rights to
programming (calculated based on a percentage of revenue). Costs to acquire
programming are expected to include payments to build and maintain an extensive
music library and royalty payments for broadcasting music. Sales, general and
administrative costs are expected to consist primarily of advertising costs,
salaries of studio personnel, program hosts, technical staff, rent and other
administrative expenses. The Company expects that the number of its employees
will increase from 10 to approximately 100 by the time it commences commercial
operations.
In addition to funding initial operating losses, the Company will require
funds for working capital, interest and financing costs on borrowings and
capital expenditures. The Company's interest expense will increase
significantly as a result of its financing plan. However, a substantial portion
of its planned indebtedness will not require cash payments of interest and
principal for some time.
7
<PAGE> 10
RESULTS OF OPERATIONS
The Company recorded net losses of $835,000 and $1,204,000 for the six
months ended June 30, 1997 and 1996, respectively, and $354,000 and $687,000
for the three months ended June 30, 1997 and 1996, respectively. The Company's
total operating expenses were $2,128,000 and $1,239,000 for the six months
ended June 30, 1997 and 1996, respectively, and were $1,591,000 for the three
months ended June 30, 1997 compared to $702,000 for the three months ended June
30, 1996.
Legal, consulting and regulatory fees increased for the six months
ended June 30, 1997 to $1,246,000 from $575,000 for the six months ended June
30, 1996, and increased to $1,009,000 from $347,000 for the three months ended
June 30, 1997 and 1996, respectively. These levels of expenditures are the
result of increased activity since winning an auction for a national satellite
radio broadcast license (the "FCC License") conducted by the Federal
Communications Commission in April 1997.
Research and development costs were $35,000 and $52,000 for the six
months ended June 30, 1997 and 1996, respectively, and $15,000 and $25,000 for
the three months ended June 30, 1997 and 1996, respectively. The Company
completed the majority of such activities in 1994.
Other general and administrative expenses increased for the six months
ended June 30, 1997 to $847,000 from $612,000 for the six months ended June 30,
1996 and to $566,000 from $330,000 for the three months ended June 30, 1997 and
1996, respectively. General and administrative expenses are expected to
continue to increase as the Company continues to develop its business. The
Company also incurred a non-cash charge of $160,000 for the six month period
ended June 30, 1996, attributable to the recognition of compensation expense in
connection with stock options issued to officers of the Company.
The increase in interest income to $1,298,000 for the six months ended
June 30, 1997, from $45,000 in the six months ended June 30, 1996 and to
$1,237,000 from $20,000 for the three months ended June 30, 1997 and 1996,
respectively, was the result of a higher average cash balance during the second
quarter of 1997. The cash and cash equivalents on hand were primarily obtained
from the preferred stock offering in April 1997.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company had working capital of approximately
$30,424,000 compared to $4,442,000 at December 31, 1996. The increase in
working capital was primarily the result of remaining cash proceeds from the
preferred stock offering in April 1997. Approximately $66.7 million of the
proceeds from the preferred stock offering have been classified as designated
cash reflecting the balance due the FCC if and when the FCC License is awarded.
The Company is the winning bidder for one of two FCC Licenses with a
winning bid of $83.3 million, of which $16.7 million has been paid as a
deposit. The Company would be required to pay the balance of the winning bid
assuming petitions to deny the license are dismissed. In order to finance the
payment of the purchase price for the FCC License and for
8
<PAGE> 11
working capital prior to the completion of subsequent financings, the Company
completed a private placement of $135 million of the 5% Preferred Stock, of
which $12.8 million was paid in commissions and fees to its placement agent and
a financial advisor, and $1.7 million was paid in commitment fees to the
investors. The Company has also commenced satellite construction with Space
Systems/Loral.
The Company estimates that the total cost of the construction and
launch of the Company's satellites, the commencement of CD Radio and cash
reserves required for the first year of service will be at least $500 million.
The amount and timing of cash payments vary based on payment terms under the
Company's satellite and launch contracts.
On July 22, 1997, the Company entered into two loan agreements
(collectively the "AEF Agreements") with Arianespace Finance S.A. ("AEF"), a
subsidiary of Arianespace S.A. ("Arianespace"), to finance approximately $105
million of the estimated $176 million price of the launch services to be
provided by Arianespace. Under these agreements, the Company is able to borrow
funds to meet the progress payments due to Arianespace for the construction of
each launch vehicle and other launch costs (the "Loans"). The Company has the
opportunity upon satisfying a variety of conditions specified in the AEF
Agreements to extend the Loans. There can be no assurance that the Company will
be able to satisfy these conditions. Otherwise, if not refinanced, the Company
will be required to repay the Loans in full, together with accrued interest and
all fees and other amounts due, approximately three months before the
applicable launch date. The AEF Agreements impose restrictions on the Company's
ability to permit liens on certain assets of the Company, other than liens in
favor of AEF. If the loans are extended, the Company will be subject to
provisions restricting its ability to incur additional indebtedness or make
investments.
On August 5, 1997, Loral agreed to an amendment to the Company's
satellite construction contract under which Loral agreed defer for three years
$20 million in payments to be made by the Company in connection with the
contract. In addition, on the same date, Loral's parent company, Loral Space &
Communications Ltd., purchased from the Company 1.9 million shares of common
stock for $25 million.
The Company believes that its working capital is sufficient to
maintain its construction schedule approximately through November 1997 and to
fund operations through the second quarter of 1998. There can be no assurance,
however, that the Company's actual cash requirements will not be greater than
currently anticipated. The Company intends to seek additional financing through
the issuance of debt and equity securities. However, there can be no assurance
that the Company will be able to obtain additional financing on favorable
terms, if at all, or that such financing will be available in a timely manner.
If additional financing were not available on a timely basis, the Company would
be required to delay satellite and/or launch vehicle construction in order to
conserve cash to fund continued operations, which would cause delays in the
commencement of operations and increased costs.
The terms of the 5% Preferred Stock financing require that additional
financings be pari passu or junior to the 5% Preferred Stock in seniority,
structure and maturity until the Company completes a public offering of Common
Stock that meets certain specified criteria.
9
<PAGE> 12
The Company's estimates of the cost of commencing CD Radio, its cash
requirements and the adequacy of its current cash resources to satisfy its cash
requirements through December 1997 and the second quarter of 1998 are
forward-looking statements that involve a number of risks and uncertainties
that could cause actual events to differ materially from those anticipated by
the Company. The estimates assume that service will commence in late 1999 and
do not include interest costs or any payments that may be required to holders
of the 5% Preferred Stock as the result of failure to satisfy certain
requirements under the terms of the 5% Preferred Stock financing in a timely
manner. The amount and timing of the Company's actual cash requirements will
depend upon numerous factors, including costs associated with the construction
and deployment of its satellite system and the rate of growth of its business
subsequent to commencing service, costs of financing and the possibility of
unanticipated expenses. Additional funds would be required in the event of
delay, cost overruns, launch failure, launch services or satellite system
change orders, or any shortfalls in estimated levels of operating cash flow, or
to meet unanticipated expenses.
10
<PAGE> 13
PART II
OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities
In March 1997, the Board of Directors authorized for issuance
8 million shares of 5% Delayed Convertible Preferred Stock (the
"5% Preferred Stock'). For a description of the 5% Preferred
Stock, see "Description of Securities" contained on the Form 8-K
filed by the Company on May 5, 1997, which is incorporated by
reference herein in its entirety. In April 1997, the Company sold
an aggregate of 5.4 million shares of the 5% Preferred Stock at
$25.00 per share to 51 institutional investors, each of which the
Company believes to be an "accredited investor"' within the
meaning of Rule 502(a) of Regulation D under the Securities Act.
In connection with the private placement, the Company paid $10.1
million in fees to its placement agent, Libra Investments, Inc.
("Libra"), a commitment fee of $1.7 million to the investors and
$2.7 million to Batchelder & Partners, Inc., a financial advisory
firm. In addition, the Company agreed to grant a warrant to Libra
to purchase 486,000 shares of the 5% Preferred Stock with an
exercise price of $25.00 per share. As a result of the private
placement, options previously granted to purchase 200,000 shares
of Common Stock held by Batchelder & Partners, Inc. vest and
become exercisable for three years with an exercise price of
$6.25. The sale of the 5% Preferred Stock was exempt from
registration pursuant to Section 4(2) of the Securities Act and
Rule 506 of Regulation D thereunder.
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
*3.1 Amended and Restated Certificate of Incorporation.
*3.2 Amended and Restated By-Laws.
3.3 Certificate of Designations of 5% Delayed Convertible Preferred Stock
Incorporated by reference to Exhibit 10.24 to the Form 10-K/A for the
year ended December 31, 1996 (the " 1996 Form 10-K")).
*4.1 Description of Capital Stock contained in the Amended and Restated
Certificate of Incorporation and Certificate of Designations (see
Exhibits 3.1 and 3.3).
*4.2 Description of Rights of Security Holders contained in the Amended and
Restated Bylaws (see Exhibit 3.2).
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
*4.3 Form of Certificate for Shares of Common Stock.
10.1 Lease Agreement, dated October 20, 1992, between 22nd & K Street
Office Building Limited Partnership and the Company (Incorporated by
reference to Exhibit 10.3 to the Company's Registration Statement on
Form S-1 (File No. 33-74782) (the "Registration Statement")).
10.2 Letter Agreement, dated November 18, 1992, between the Company and
Batchelder & Partners, Inc. (Incorporated by reference to Exhibit 10.4
to the Registration Statement).
10.3.1 Proprietary Information and Non-Competition Agreement, dated February
9, 1993, for Robert Briskman (Incorporated by reference to Exhibit
10.9.1 to the Registration Statement).
10.3.2 Amendment No. 1 to Proprietary Information and Non-Competition
Agreement between the Company and Robert Briskman (Incorporated by
reference to Exhibit 10.8.2 to the Registration Statement).
+10.4.1 Satellite Construction Agreement, dated March 2, 1993, between Space
Systems/Loral and the Company (Incorporated by reference to Exhibit
10.9.1 to the Registration Statement).
+10.4.2 Amendment No. 1 to Satellite Construction Agreement, effective
December 28, 1993, between Space Systems/Loral and the Company
(Incorporated by reference to Exhibit 10.9.2 to the Registration
Statement).
+10.4.3 Amendment No. 2 to Satellite Construction Agreement, effective March
8, 1994, between the Space Systems/Loral and the Company (Incorporated
by reference to Exhibit 10.9.3 to the Registration Statement).
10.4.4 Amendment No. 3 to Satellite Construction Agreement, effective
February 12, 1996, between the Space System/Loral, Inc. and the
Company (Incorporated by reference to Exhibit 10.9.4 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1995 (the
"1995 Form 10-K")).
10.4.5 Amendment No. 4 to Satellite Construction Agreement, effective June
18, 1996, between the Space Systems/Loral, Inc. and the Company.
(Incorporated by reference to Exhibit 10.8.5 to the Company's Form
10-Q for the period ended September 30, 1996.)
10.4.6 Amendment No. 5 to Satellite Construction Agreement, effective August
26, 1996, between the Space Systems/Loral, Inc. and the Company.
(Incorporated by reference to Exhibit 10.8.6 to the Company's Form
10-Q for the period ended September 30, 1996).
10.4.7 Amendment No. 6 to Satellite Construction Agreement, effective August
26, 1996, between the Space System/Loral, Inc. and the Company
(Incorporated by reference to Exhibit 10.5.7 to the 1996 Form 10-K.
10.4.8 Amendment No. 8 to Satellite Construction Agreement, effective January
29, 1997, between the Space System/Loral, Inc. and the Company
(Incorporated by reference to Exhibit 10.5.8 to the 1996 Form 10-K.
10.4.9 Amendment No. 9 to Satellite Construction Agreement, effective
February 26, 1997, between the Space System/Loral, Inc. and the
Company (Incorporated by reference to Exhibit 10.5.9 to the 1996 Form
10-K.
10.4.10 Amendment No. 11 to Satellite Construction Agreement, effective March
24, 1997, between the Space Systems/Loral, Inc., and the Company
(Incorporated by reference to Exhibit 10.5.10 to the 1996 Form 10-K.
10.4.11 Amendment No. 12 to Satellite Construction Agreement, effective April
25, 1997, between the Space Systems/Loral, Inc. and the Company
(Incorporated by reference 10.4.11 to the Company's Form 10-Q/A for
the period ended March 31, 1997).
10.4.12 Amendment No. 13 to Satellite Construction Agreement, effective May
30, 1997, between the Space Systems/Loral, Inc. and the Company.
10.4.13 Amendment No. 14 to Satellite Construction Agreement, effective June
30, 1997, between the Space Systems/Loral, Inc. and the Company.
10.5 Assignment of Technology Agreement, dated April 15, 1993, between
Robert Briskman and the Company (Incorporated by reference to Exhibit
10.10 to the Registration Statement).
10.6 Amended and Restated
Option Agreement between the Company the Robert Briskman (Incorporated
by reference Exhibit 10.13 to Registration Statement).
10.7 Employment and Noncompetition Agreement between the Company and Joseph
Capobianco (Incorporated by reference to Exhibit 10.17 to the
Company's Form 10-Q/A for the period ended March 31, 1997).
10.8 Employment and Noncompetition Agreement between the Company and Keno
Thomas (Incorporated by reference to Exhibit 10.18 to the Company's
Form 10-Q/A for the period ended March 31, 1997).
11.1 Computation of Net Loss Per Share
27 Financial Data Schedule
</TABLE>
* Incorporated by reference to the same exhibit number of the Company
Registration Statement on Form S-1, Commission File No. 33-74782.
+ Portions of these exhibits, which are incorporated by reference to
Registration No. 33-74782, have been omitted pursuant to an Application for
Confidential Treatment filed by the Company with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
12
<PAGE> 15
(b) Reports on Form 8-K
On March 17, 1997, the Company filed a report on Form 8-K
under Item 5 regarding the terms of the FCC auction scheduled
for April 1, 1997.
On March 18, 1997, the Company filed a report on Form 8-K
under Item 5 regarding the extension of the satellite
construction contract with Space Systems/Loral, Inc.
On April 10, 1997, the Company filed a report on Form 8-K
under Item 5 and Item 7 regarding the private placement of
approximately $86 million of the 5% Preferred Stock.
On May 5, 1997, the Company filed a report on Form 8-K
under Item 5 regarding the completion of the second tranche
of the private placement of the 5% Preferred Stock resulting
in an aggregate sale price for the first and second tranches
of $135 million. The Form 8-K also contained a description of
the capital stock of the Company.
13
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CD Radio Inc.
(Registrant)
Date: August 14, 1997 /s/David Margolese
--------------------------------------
David Margolese
Chief Executive Officer
(Duly authorized officer and
principal financial officer)
<PAGE> 1
EXHIBIT 10.4.12
AMENDMENT NO. 13
TO
CONTRACT NO. SS/L-TP93002-01
AND
SPACE SYSTEMS/LORAL
FOR
DELIVERY OF CD RADIO DARS SYSTEM
THIS CONTRACT AMENDMENT NO. 13 (the "Amendment") is entered into
effective as of the 30th day of May, 1997, between CD RADIO INC. (the
"Purchaser") and SPACE SYSTEMS/LORAL, INC. (the "Contractor").
WHEREAS, Contractor and Purchaser are parties to Contract No. SS/L-
TP93002-01 dated March 2, 1993, as amended by the parties thereto, most
recently pursuant to Contract Amendment No. 12 dated April 25, 1997 (as so
amended, the "Contract"),
WHEREAS, Contractor and Purchaser desire to amend the Contract,
NOW, THEREFORE, in consideration of the mutual covenants and
conditions in this Amendment and in the Agreement, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. The page from the Contract, attached to this Amendment as Exhibit
A and incorporated herein by reference, are hereby substituted for existing
pages in the Contract, in their entirety, as follows:
Existing Page (Remove) Replacement Page (Attached)
71 71
2. All capitalized terms in this Amendment, not otherwise defined
herein, shall have the meanings ascribed to them in the Contract.
3. The Contract, as modified by the express terms of this Amendment,
is hereby ratified and affirmed by Purchaser and Contractor, and shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment effective
as of the date first above written.
CONTRACTOR: PURCHASER:
SPACE SYSTEMS/LORAL, INC. CD RADIO INC.
By: /s/ R.A. Haley By: /s/ R.D. Briskman
-------------------------- --------------------------
Name: R. A. Haley Name: R. D. Briskman
-------------------------- --------------------------
Title: Vice President & CFO Title: President
-------------------------- --------------------------
<PAGE> 2
3
EXHIBIT A - AMENDMENT 13
ARTICLE 44 AGREEMENT EXPIRATION
It is agreed between the Parties that if CD Radio Inc. has not been granted a
license and construction permit from the Federal Communication Commission by
the end of June 30, 1997, then the provisions of this Contract shall become
null and void, and the Parties shall have no further obligation whatsoever to
each other, and no financial obligation shall exist by either Party to the
other Party.
<PAGE> 1
EXHIBIT 10.4.13
AMENDMENT NO. 14
TO
CONTRACT NO. SS/L-TP93002-01
AND
SPACE SYSTEMS/LORAL
FOR
DELIVERY OF CD RADIO DARS SYSTEM
THIS CONTRACT AMENDMENT NO. 14 (the "Amendment") is entered into
effective as of 30 June 1997, between CD RADIO INC. (the "Purchaser") and SPACE
SYSTEMS/LORAL, INC. (the "Contractor").
WHEREAS, Contractor and Purchaser are parties to Contract No. SS/L-
TP93002-01 dated March 2, 1993, as amended by the parties thereto, most
recently pursuant to Contract Amendment No. 13 dated 30 May, 1997 (as so
amended, the "Contract"),
WHEREAS, Contractor and Purchaser desire to amend the Contract,
NOW, THEREFORE, in consideration of the mutual covenants and
conditions in this Amendment and in the Agreement, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. The page from the Contract, attached to this Amendment as Exhibit
A and incorporated herein by reference, are hereby substituted for existing
pages in the Contract, in their entirety, as follows:
Existing Page (Remove) Replacement Page (Attached)
71 71
2. All capitalized terms in this Amendment, not otherwise defined
herein, shall have the meanings ascribed to them in the Contract.
3. The Contract, as modified by the express terms of this Amendment,
is hereby ratified and affirmed by Purchaser and Contractor, and shall remain
in full force and effect.
IN WITNESS WHEREOF, the Parties have executed this Amendment effective
as of the date first above written.
CONTRACTOR: PURCHASER:
SPACE SYSTEMS/LORAL, INC. CD RADIO INC.
By: /s/ R.A. Haley By: /s/ R.D. Briskman
----------------------------- --------------------------
Name: R. A. Haley Name R. D. Briskman
----------------------------- --------------------------
Title: Vice President & CFO Title: Pres., CD Radio Systems
----------------------------- --------------------------
<PAGE> 2
2
EXHIBIT A - AMENDMENT 14
ARTICLE 44 AGREEMENT EXPIRATION
It is agreed between the Parties that if CD Radio Inc. has not been granted a
license and construction permit from the Federal Communications Commission by
the end of July 31, 1997, the provisions of this Contract shall become null and
void, and the Parties shall have no further obligation whatsoever to each
other, and no financial obligations shall exist by either Party to the other
Party.
<PAGE> 1
EXHIBIT 11.1
CD RADIO INC.
(A DEVELOPMENT STAGE ENTERPRISE)
COMPUTATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
Three months ended Six months ended
----------------------------- -----------------------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
--------------- ------------ --------------- ------------
<S> <C> <C> <C> <C>
Net loss ($353,825) ($687,026) ($834,985) ($1,203,909)
Deemed dividend on
preferred stock (43,312,500) - (43,312,500) -
--------------- ------------ --------------- ------------
Net loss attributable to
common shareholders $ (43,666,325) ($687,026) $ (44,147,485) ($1,203,909)
=============== ============ =============== ============
Weighted average common
shares outstanding 10,313,114 9,322,471 10,307,255 9,385,781
=============== ============ =============== ============
Net loss per common share ($4.23) ($0.07) ($4.28) ($0.13)
=============== ============ =============== ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 30,184,349
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 30,631,490
<PP&E> 6,653,466
<DEPRECIATION> 233,118
<TOTAL-ASSETS> 124,354,749
<CURRENT-LIABILITIES> 207,254
<BONDS> 0
0
111,855,311
<COMMON> 10,313
<OTHER-SE> 12,276,128
<TOTAL-LIABILITY-AND-EQUITY> 124,354,749
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,590,794
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34
<INCOME-PRETAX> (343,825)
<INCOME-TAX> 0
<INCOME-CONTINUING> (343,825)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (343,825)
<EPS-PRIMARY> (4.23)
<EPS-DILUTED> (4.23)
</TABLE>
