<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 September 30, 1998
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.)
1180 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
(Address of principal executive offices)
(Zip code)
212-899-5000
(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 23,145,104 SHARES
(Class) (Outstanding as of November 6, 1998)
<PAGE> 2
CD RADIO INC.
(A DEVELOPMENT STAGE ENTERPRISE)
INDEX
Part I - Financial Information
<TABLE>
<CAPTION>
Page
<S> <C>
Consolidated Statements of Operations (unaudited) for the three and nine 1
month periods ended September 30, 1998 and 1997 and for the period May
17, 1990 (date of inception) to September 30, 1998
Consolidated Balance Sheets (unaudited) as of September 30, 1998 2
and December 31, 1997
Consolidated Statements of Cash Flows (unaudited) for the nine months 3
ended September 30, 1998 and 1997 and for the period May 17, 1990 (date
of inception) to September 30, 1998
Notes to Consolidated Financial Statements (unaudited) 4
Management's Discussion and Analysis of Financial Condition and 7
Results of Operations
Part II - Other Information 15
Signatures 16
</TABLE>
<PAGE> 3
CD RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative
for
the period
May 17,
For the Three Months For the Nine Months 1990
Ended Sept 30, Ended Sept 30, (date of
-------------------- ------------------- inception)
to Sept
1998 1997 1998 1997 30, 1998
---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C>
Revenue $ - $ - $ - $ - $ -
Operating expenses:
Legal, consulting and
regulatory fees 960,000 1,357,000 2,888,000 2,603,000 13,373,000
Other general and
administrative 2,104,000 865,000 5,371,000 1,711,000 16,476,000
Research and development 1,000 8,000 22,000 43,000 1,995,000
Special charges -- -- 25,682,000 -- 27,682,000
------------ ------------ ------------ ------------ ------------
Total operating
expenses 3,065,000 2,230,000 33,963,000 4,357,000 59,526,000
------------ ------------ ------------ ------------ ------------
Other income (expense):
Interest and investment
income 1,866,000 1,576,000 5,769,000 2,873,000 10,171,000
Interest expense, net (2,045,000) -- (11,027,000) (5,000) (13,139,000)
------------ ------------ ------------ ------------ ------------
(179,000) 1,576,000 (5,258,000) 2,868,000 (2,968,000)
------------ ------------ ------------ ------------ ------------
Income taxes -- -- (38,000) -- (38,000)
------------ ------------ ------------ ------------ ------------
Net loss (3,244,000) (654,000) (39,259,000) (1,489,000) (62,532,000)
------------ ------------ ------------ ------------ ------------
Preferred stock dividend (4,344,000) -- (13,563,000) -- (15,901,000)
Preferred stock
deemed dividend -- (8,663,000) -- (51,975,000) (51,975,000)
Accretion of dividends in
connection with the
issuance of warrants
on preferred stock (62,000) -- (6,434,000) -- (6,434,000)
------------ ----------- ------------ ------------ -------------
Net loss applicable to common
stockholders $ (7,650,000) $(9,317,000) $(59,256,000) $(53,464,000) $(136,842,000)
============ =========== ============ ============ =============
Net loss per share applicable
to common stockholders
(basic and diluted) $ (0.43) $ (0.80) $ (3.51) $ (4.97)
============ =========== ============ ============
Weighted average common shares
outstanding (basic and
diluted) 17,686,000 11,711,000 16,859,000 10,761,000
============ =========== ============ ============
</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
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 72,375,000 $ 900,000
Marketable securities, at market 11,375,000 169,482,000
Prepaid expense and other 626,000 928,000
------------- -------------
Total current assets 84,376,000 171,310,000
------------- -------------
Property and equipment, at cost:
Satellite construction in process 141,440,000 49,400,000
Launch construction in process 67,924,000 10,885,000
Terrestrial repeater network in process 1,125,000 --
Broadcast studio in process 488,000 --
Technical equipment and other 443,000 389,000
------------- -------------
211,420,000 60,674,000
Less accumulated depreciation (238,000) (243,000)
------------- -------------
211,182,000 60,431,000
Other assets:
FCC license 83,346,000 83,346,000
Debt issue cost, net 9,964,000 8,617,000
Deposits and other 826,000 104,000
------------- -------------
Total other assets 94,136,000 92,067,000
------------- -------------
Total assets $ 389,694,000 $ 323,808,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 2,531,000 $ 401,000
Current portion of deferred satellite
payments 8,000,000 --
Short-term notes payable 60,421,000 --
Other -- 15,000
------------- -------------
Total current liabilities 70,952,000 416,000
Long-term notes payable and accrued interest 144,336,000 131,387,000
Deferred satellite payments 20,570,000 --
Dividends payable 14,602,000 2,338,000
------------- -------------
Total liabilities 250,460,000 134,141,000
------------- -------------
Commitments and contingencies
10.5% Series C Convertible Preferred Stock,
no par value:
2,025,000 shares authorized,
1,538,561 and 1,846,799 shares issued and
outstanding at September 30, 1998 and
December 31, 1997, respectively (liquidation
preferences of $153,856,100 and $184,679,900),
at net carrying value 91,838,000 110,237,000
Stockholders' equity:
Preferred stock, $0.001 par value, 50,000,000
shares authorized; 8,000,000 shares
designated as 5% Delayed Convertible Preferred
Stock; none issued or outstanding -- --
Common stock, $0.001 par value; 200,000,000
shares authorized; and 17,794,127 and
16,048,691 shares issued and outstanding
as of September 30, 1998 and
December 31, 1997, respectively 18,000 16,000
Additional paid-in capital 109,910,000 102,687,000
Deficit accumulated during the
development stage (62,532,000) (23,273,000)
------------- -------------
Total stockholders' equity 47,396,000 79,430,000
------------- -------------
Total liabilities and stockholders' equity $ 389,694,000 $ 323,808,000
============= ==============
</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>
Cumulative for
the period
May 17, 1990
For the Nine Months (date of
Ended Sept 30, inception) to
1998 1997 Sept 30, 1998
------------- ------------- --------------
<S> <C> <C> <C>
Cash flows from development stage activities:
Net loss $ (39,259,000) $ (1,489,000) $ (62,532,000)
Adjustments to reconcile net loss to net cash provided by
(used in) development stage activities:
Depreciation expense 34,000 30,000 288,000
Amortization of debt issue costs 659,000 -- 732,000
(Gain) loss on marketable securities (96,000) -- (720,000)
Special charges 23,557,000 -- 25,557,000
Accretion of note payable charged as interest expense 17,302,000 -- 19,170,000
Sales (purchases) of marketable securities, net 158,203,000 -- (10,655,000)
Compensation expense in connection with
issuance of stock options -- -- 2,164,000
Common stock issued for services rendered 41,000 -- 943,000
Common stock options granted for services rendered -- -- 120,000
Increase (decrease) in cash and cash equivalents
resulting from changes in assets and liabilities:
Prepaid expense and other 302,000 (557,000) (626,000)
Due to related party -- -- 351,000
Deposits and other assets (2,728,000) -- (3,032,000)
Accounts payable and accrued expenses 2,130,000 (68,000) 2,606,000
Accrued interest and other liabilities (19,000) (17,000) (5,000)
------------- ------------- -------------
Net cash provided by (used in) development stage activities 160,126,000 (2,101,000) (25,639,000)
------------- ------------- -------------
Cash flows from investing activities:
Purchase of FCC license -- (16,669,000) (83,346,000)
Payments for satellite construction (63,470,000) (31,150,000) (112,770,000)
Designated cash -- (66,677,000) --
Payments for launch services (83,995,000) (3,527,000) (90,287,000)
Capital expenditures (1,706,000) (13,000) (2,105,000)
Acquisition of Sky-Highway Radio Corp. -- -- (2,000,000)
------------- ------------- -------------
Net cash used in investing activities (149,171,000) (118,036,000) (290,508,000)
------------- ------------- -------------
Cash flows from financing activities:
Proceeds from issuance of notes payable 60,421,000 -- 60,421,000
Proceeds from issuance of common stock, net -- 24,395,000 85,379,000
Proceeds from issuance of 5% Preferred Stock, net -- 120,518,000 120,518,000
Proceeds from exercise of stock options 99,000 26,000 310,000
Proceeds from exercise of stock warrants -- -- 4,589,000
Proceeds from issuance of promissory note
and Units -- -- 116,535,000
Proceeds from issuance of promissory notes to
related parties -- -- 2,965,000
Repayment of promissory note -- -- (200,000)
Repayment of promissory notes to related parties -- -- (2,435,000)
Loan from officer -- -- 440,000
------------- ------------- -------------
Net cash provided by financing activities 60,520,000 144,939,000 388,522,000
------------- ------------- -------------
Net increase in cash and cash equivalents 71,475,000 24,802,000 72,375,000
Cash and cash equivalents at the beginning of period 900,000 4,584,000 --
------------- ------------- -------------
Cash and cash equivalents at the end of period $ 72,375,000 $ 29,386,000 $ 72,375,000
============= ============= =============
</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
SEPTEMBER 30, 1998
(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. These financial statements should be read in
connection with the Company's consolidated financial statements and the notes
thereto for the fiscal year ended December 31, 1997 included in the Company's
Annual Report on Form 10-K as filed with the Securities and Exchange Commission
(the "SEC").
NET LOSS PER SHARE
Net loss per common share is based on the weighted average number of
common shares outstanding during such periods. Options and warrants granted by
the Company have not been included in the calculation of net loss per share
because such items were antidilutive. Since December 15, 1997, the Company is
required to report earnings (loss) per share in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128").
As long as the Company continues to experience net losses, there will be no
impact on the Company's net loss per share from adoption of SFAS No. 128.
Earnings per share for all periods presented conform to SFAS No. 128.
The following is a reconciliation of net loss per common share before
preferred stock dividend requirements to net loss per share applicable to common
stockholders:
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Per common shares (basic and diluted):
Net loss $(0.18) $(0.06) $(2.33) $(0.14)
Preferred stock dividend requirements (0.25) (0.74) (0.80) (4.83)
Accretion of dividends in connection with the
issuance of warrants on preferred stock -- -- (0.38) --
------ ------ ------ ------
Net loss applicable to common stockholders $(0.43) $(0.80) $(3.51) $(4.97)
------ ------ ------ ------
</TABLE>
4
<PAGE> 7
COMPREHENSIVE INCOME
In 1997, the Financial Accounting Standards Board ("the FASB") issued SFAS
No. 130, "Reporting Comprehensive Income." SFAS No. 130 requires additional
reporting with respect to certain changes in assets and liabilities that
previously were included in shareholders' equity. The Company has no
comprehensive income items to report for the current presentation.
RECENT ACCOUNTING PRONOUNCEMENTS
The FASB has issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which requires financial and descriptive
information with respect to operating segments of an entity based on the way
management disaggregates the entity for internal operating decisions. There is
no impact to the Company's September 30, 1998 financial statements from the
adoption of this standard.
SPECIAL CHARGES
During the quarter ended June 30, 1998, the Company decided to enhance its
satellite delivery system to include a third in-orbit satellite and to terminate
certain launch and orbit related contracts. The Company recorded special charges
totaling $25,682,000 related primarily to the termination of such contracts.
MARKETABLE SECURITIES
Marketable securities consist of fixed income securities and are stated at
market value. Marketable securities are defined as trading securities under the
provision of Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" and unrealized holding
gains and losses are reflected in earnings. Unrealized holding gains were
$96,000 and $624,000 at September 30, 1998 and December 31, 1997, respectively.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and include interest on funds
borrowed to finance construction. Capitalized interest was $8,068,000 for the
nine months ended September 30, 1998.
DEFERRED SATELLITE PAYMENTS
Under an amended and restated agreement (the "Loral Satellite Contract")
with Space Systems/Loral, Inc. ("SS/L"), SS/L has agreed to defer certain
amounts due under the Loral Satellite Contract. The amounts deferred will bear
interest at 10% per year. The Company has the right to prepay any deferred
payments together with accrued interest, without penalty.
5
<PAGE> 8
SHORT-TERM NOTES PAYABLE
The Company has entered into a credit agreement with Bank of America
("BofA") and a group of financial institutions (together with BofA, the
"Lenders") pursuant to which the Lenders will provide the Company a term loan
facility in an aggregate principal amount of up to $115 million. The proceeds of
the facility will be used to fund progress payments for the purchase of launch
services and to pay interest, fees and other related expenses. The amounts
advanced under the facility are due on September 30, 1999 and bear interest, at
a variable rate to be selected by the Company.
RECLASSIFICATIONS
Certain amounts in the prior period's financial statements have been
reclassified to conform to the current period presentation.
SUBSEQUENT EVENTS
On October 13, 1998, the Company signed an agreement with Prime 66
Partners, L.P. ("Prime 66") pursuant to which Prime 66 agreed to acquire 5
million shares of the Company's common stock for $100 million. Prime 66
completed the purchase of these shares for $100 million on November 2, 1998.
On November 13, 1998, the Company entered into a Stock Purchase Agreement
(the "Stock Purchase Agreement") with Apollo Investment Fund IV, L.P., a
Delaware limited partnership ("AIF IV"), and Apollo Overseas Partners IV, L.P.,
a Cayman Islands limited partnership ("AOP IV" and, together with AIF IV, the
"Apollo Investors") pursuant to which (a) the Company agreed to sell an
aggregate of 1,350,000 shares of its 9.2% Series A Junior Cumulative
Convertible Preferred Stock, par value $.001 per share (the "Series A Preferred
Stock"), to the Apollo Investors, for an aggregate purchase price of $135
million, and (b) the Apollo Investors agreed to grant the Company an option to
sell the Apollo Investors an additional 650,000 shares of its 9.2% Series B
Junior Cumulative Convertible Preferred Stock, par value $.001 per share (the
"Series B Preferred Stock" and, together with the Series A Preferred Stock, the
"Junior Preferred Stock"), for an aggregate purchase price of $65 million. The
Company may exercise its option to require the Apollo Investors to purchase the
Series B Preferred Stock at any time prior to the earlier of ten months from
the closing of the issuance and sale of the Series A Preferred Stock and
September 30, 1999. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Liquidity and Capital Resources-Sources of
Funding" for further information relating to the terms of the Junior Preferred
Stock.
The issuance and sale of the Junior Preferred Stock is subject to the
expiration, or early termination, of the waiting period under Hart-Scott-Rodino
Antitrust Improvement Act of 1976, approval of the stockholders of the Company
and other customary conditions.
6
<PAGE> 9
CD RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"), the Company is hereby
providing cautionary statements identifying important factors that could cause
the Company's actual results to differ materially from those projected in
forward-looking statements (as such term is defined in the Reform Act) made in
this report. Any statements that express, or involve discussions as to,
expectations, beliefs, plans, objectives, assumptions or future events or
performance (often, but not always, through the use of words or phrases such as
"will likely result," "are expected to," "will continue," "is anticipated,"
"estimated," "intends," "plans," "projection" and "outlook") are not historical
facts and may be forward-looking and, accordingly, such statements involve
estimates, assumptions and uncertainties that could cause actual results to
differ materially from those expressed in the forward-looking statements.
Accordingly, any such statements are qualified in their entirety by reference
to, and are accompanied by, the factors discussed in the Company's Annual Report
on Form 10-K for the year ended December 31, 1997. Among the key factors that
have a direct bearing on the Company's future results of operations are the
potential risk of delay in implementing the Company's business plan; possible
increased costs of construction and launch of necessary satellites; dependence
on satellite construction and launch contractors; risk of launch failure;
unproven market for the Company's proposed service; unproven applications of
existing technology; and the Company's need for substantial additional
financing.
OVERVIEW
The Company was organized in May 1990 and is in its development stage. The
Company's principal activities to date have included technology development,
obtaining regulatory approval for the CD Radio service, commencement of
construction of four satellites, acquisition of content for its programming,
strategic planning, market research, recruitment of its senior management team
and securing financing for working capital and capital expenditures. The Company
does not expect to generate any revenues from operations until 2000 at the
earliest, and expects that positive cashflow from operations will not be
generated until late 2000 at the earliest. In addition, the Company will require
substantial additional capital to complete development and commence commercial
operations of CD Radio. There can be no assurance that CD Radio will ever
commence operations, that the Company will attain any particular level of
revenues or that the Company will achieve profitability.
7
<PAGE> 10
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 $9.95 per month to
receive CD Radio broadcasts, with a one time, modest activation fee per
subscriber. In addition, the Company expects to derive additional revenues from
directly selling or bartering a portion of the advertising time on the Company's
sports, news and talk channels. To receive CD Radio, subscribers will need to
purchase an adapter (a "radio card") for existing radios or a new generation of
radios capable of receiving S-band as well as AM and FM signals ("S-band
radios") and a new 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 miniature satellite dish
antennas, the Company expects to license its technology to manufacturers at no
charge.
The Company expects that the operating expenses associated with commercial
operations will consist primarily of marketing, sales, programming, maintenance
of the satellite and broadcasting system and general and administrative costs.
Costs to acquire programming are expected to include payments to build and
maintain an extensive music library and royalty payments for broadcasting music
(calculated based on a percentage of revenues). Marketing, sales, general and
administrative costs are expected to consist primarily of advertising costs,
salaries of employees, rent and other administrative expenses. The Company
expects that the number of its employees will increase to approximately 150 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 has increased significantly
as a result of the public offering of Units (the "Units") consisting of the
Company's 15% Senior Secured Discount Notes due 2007 (the "Senior Notes") and
warrants to purchase additional Senior Notes (the "Warrants") and will increase
further as a result of the incurrence of additional debt in the future. However,
a substantial portion of this indebtedness will not require cash payments of
interest and principal for some time.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 1997
The Company recorded net losses of $3,244,000 and $654,000 for the three
months ended September 30, 1998 and 1997, respectively. The Company's total
operating expenses were $3,065,000 and $2,230,000 for the three months ended
September 30, 1998 and 1997, respectively.
8
<PAGE> 11
Legal, consulting and regulatory fees decreased to $960,000 in the quarter
ended September 30, 1998 from $1,357,000 in the quarter ended September 30,
1997. During the 1997 quarter, the Company was expending substantial efforts to
obtain its FCC license and to finalize contracts for the construction and launch
of its satellites. These expenditures were not matched in the 1998 quarter. The
major components of these fees in the 1998 quarter were legal (54%), consulting
(45%) and regulatory (1%), while in the 1997 quarter the major components were
legal (63%), consulting (34%) and regulatory (3%).
Research and development costs were $1,000 and $8,000 for the three months
ended September 30, 1998 and 1997, respectively. This level of research and
development cost is the result of the Company completing the majority of such
activities in 1994.
Other general and administrative expenses for the three months ended
September 30, 1998 increased to $2,104,000 from $865,000 for the three months
ended September 30, 1997. General and administrative activities have grown as
the Company continues to expand its management team and the workforce necessary
to develop and commence the broadcast of CD Radio. The major components of
other general and administrative costs in the 1998 quarter were salaries and
employment related costs (65%), rent and occupancy costs (15%), while in the
1997 quarter the major components were salaries and employment related costs
(69%), rent and occupancy costs (9%). The remaining portion of other general
and administrative costs (20% in the 1998 quarter and 22% in the 1997 quarter)
consists of other costs such as insurance, market research, travel,
depreciation and supplies, with no amount exceeding 10% of the total.
Interest income increased to $1,866,000 for the three months ended
September 30, 1998, from $1,576,000 in the three months ended September 30,
1997. The increase was the result of a higher average investment balance during
the 1998 third quarter, due to the completion of the offering of the Units in
November 1997 and the sale to Loral Space & Communications, Ltd. ("Loral") of
$25 million of Common Stock in August 1997.
Interest expense, net of capitalized interest, was $2,045,000 for the
three months ended September 30, 1998 and was $0 in the 1997 period. This
increase was due to interest expense accruing on the Senior Notes issued in
November 1997. No cash interest on the Senior Notes will be paid until June
2003.
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1997
The Company recorded net losses of $39,259,000 and $1,489,000 for the nine
months ended September 30, 1998 and 1997, respectively. The Company's total
operating expenses were $33,963,000 and $4,357,000 for the nine months ended
September 30, 1998 and 1997, respectively. Excluding the special charges
recorded in the 1998 second quarter totaling $25,682,000, the Company recorded
net losses of $13,577,000 and operating costs of $8,281,000.
9
<PAGE> 12
Legal, consulting and regulatory fees increased to $2,888,000 in the nine
months ended September 30, 1998 from $2,603,000 in the nine months ended
September 30, 1997. The increase in the level of expenditures was the result of
greater consulting expenses due to the accelerated execution of the Company's
business plan. Consulting fees were generated primarily in connection with the
technical aspects of the Company's business plan, such as satellite
construction, chip set design and terrestrial repeater network build-out. The
major components of legal, consulting and regulatory fees in the 1998 period
were legal (41%), consulting (57%) and regulatory (2%), while in the 1997 period
the major components were legal (57%), consulting (39%) and regulatory (4%).
Research and development costs were $22,000 and $43,000 for the nine
months ended September 30, 1998 and 1997, respectively. This level of research
and development cost is the result of the Company completing the majority of
such activities in 1994.
Other general and administrative expenses increased for the nine months
ended September 30, 1998 to $5,371,000 from $1,711,000 for the nine months ended
September 30, 1997. General and administrative activities have grown as the
Company continues to expand its management team and the workforce necessary to
develop and commence the broadcast of CD Radio. The major components of other
general and administrative costs in the 1998 period were salaries and employment
related costs (57%), rent and occupancy costs (18%), while in the 1997 period
the major components were salaries and employment related costs (61%), rent and
occupancy costs (17%). The remaining portion of other general and administrative
costs (25% in the 1998 quarter and 22% in the 1997 quarter) consists of other
costs such as insurance, market research, travel, depreciation and supplies,
with no amount exceeding 10% of the total.
Interest income increased to $5,769,000 for the nine months ended
September 30, 1998, from $2,873,000 in the nine months ended September 30, 1997
and was the result of a higher average investment balance during the 1998
period. The increase in the investment balance was due to the completion of the
offering of the Units in November 1997 and the sale to Loral of $25 million of
Common Stock in August 1997.
Interest expense, net of capitalized interest, increased to $11,027,000
for the nine months ended September 30, 1998, from $5,000 in the 1997 period.
This increase was primarily due to interest expense accruing on the Senior
Notes. No cash interest on the Senior Notes will be paid until June 2003.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1998, the Company had working capital of approximately
$13,424,000 compared with $170,894,000 at December 31, 1997. The working capital
balance at September 30, 1998 includes short-term financing totaling
$68,421,000, which is due in September 1999. Excluding the short-term financing
due September 1999, the Company has $81,845,000 of available working capital.
The decrease in working capital was primarily the result of payments for
satellite and launch construction and operating expenses exceeding interest
income during the period. Working capital increased on November 2, 1998 when the
Company issued 5 million shares of Common Stock to Prime 66 for $100 million.
10
<PAGE> 13
FUNDING REQUIREMENTS
The Company is a development stage company and as such will continue to
require substantial amounts of continued outside financing to acquire and
develop its assets and commence commercial operations. The Company estimates
that it will require approximately $964 million to develop and commence
commercial operation of CD Radio by the second quarter of 2000. Of this amount,
the Company has raised approximately $592 million through November 4, 1998
(which excludes any amounts which may be received from the Apollo Investors) and
has entered into an agreement with BofA to attempt to arrange an additional
$106 million for the Company, leaving anticipated additional cash needs of
approximately $266 million to fund its operations through the first quarter of
2000. The Company anticipates additional cash requirements of approximately
$140 million to fund its operations through the first full year of commercial
operations. The Company expects to finance the remainder of its funding
requirements through the issuance of debt or equity securities, or a
combination thereof.
In April 1997, the Company was the winning bidder in a Federal
Communications Commission ("FCC") auction for one of two FCC Licenses with a
winning bid of $83.3 million, of which $16.7 million was paid as a deposit. The
Company paid the balance due the FCC in October 1997 and was awarded the FCC
License on October 10, 1997. In May 1998, the Company decided to increase the
number of satellites in its system from two to three and modify its orbital
locations from geostationary to inclined, geosynchronous, elliptical, requiring
modification of its FCC License. The Company has not yet filed an application
with the FCC for this modification and is in the process of preparing such
application. The Company intends to file this application in the fourth quarter
of 1998. Although the Company believes that the FCC will approve the
Company's application for this change, there can be no assurances that this
will occur.
To build and launch the satellites necessary for the operations of CD
Radio, on July 28, 1998, the Company entered into the Loral Satellite Contract
with SS/L. The Loral Satellite Contract provides for SS/L to construct, launch
and deliver three satellites in-orbit and checked-out, to construct for the
Company a fourth satellite for use as a ground spare and to become the Company's
launch services provider. The Company is committed to make aggregate payments of
approximately $718 million under the Loral Satellite Contract. As of September
30, 1998, $201 million of this commitment has been satisfied through $115
million of cash payments from the Company, $58 million drawn from the Tranche A
Facility (as defined below) and $28 million of deferred payment financing from
Loral. Under the Loral Satellite Contract, with the exception of a payment made
to SS/L in March 1993, payments are made in installments commencing in April
1997 and ending in October 2000. Approximately half of these payments are
contingent upon SS/L meeting specified milestones in the manufacture of the
satellites. In addition, SS/L has agreed to defer a total of $50 million of the
payments under the Loral Satellite Contract. These deferred amounts bear
interest at 10% per annum and all interest on these deferred amounts will accrue
until December 2001, at which time interest will be payable quarterly in cash.
The principal amounts of the deferred payments under the Loral Satellite
Contract are required to be repaid in six installments between June 2002 and
December 2003. As collateral security for these deferred payments, the Company
has agreed to grant Loral a security interest in its terrestrial repeater
network.
The Company also will require funds for working capital, interest on
borrowings, acquisition of programming, financing costs and operating expenses
until some time after the commencement of commercial operations of CD Radio. 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. The Senior
Notes do not require cash payments until June 2003. The Company believes that
its working capital at September 30, 1998 plus the equity investment from Prime
66 that closed on November 2, 1998 and any amounts which may be received
from the Apollo Investors is sufficient to fund planned operations and
construction of its satellite system through the fourth quarter of 1999.
11
<PAGE> 14
SOURCES OF FUNDING
To date the Company has funded its capital needs through the issuance of
debt and equity. As of September 30, 1998, the Company had received a total of
$222 million in equity capital. A significant portion of the Company's equity
capital was received in 1997 as a result of the Company's issuance of 5,400,000
shares of 5% Preferred Stock and 4,955,488 shares of Common Stock resulting in
net proceeds of $121 million and $71 million, respectively. A total of 1,905,488
shares of Common Stock were sold to Loral in August 1997 and 3,050,000 shares of
Common Stock were sold to the public in November 1997. In November 1997, the
Company exchanged (the "Exchange Offer") 1,846,799 shares of its newly issued 10
1/2% Series C Convertible Preferred Stock ("Series C Preferred Stock") for all
of the previously outstanding shares of 5% Preferred Stock. The Company received
no proceeds from the Exchange Offer. On November 3, 1998, the Company sold an
additional 5,000,000 shares of Common Stock to Prime 66 for an aggregate
purchase price of $100 million.
In November 1997, the Company received net proceeds of $116 million from
the issuance of 12,910 Units, each Unit consisting of $20,000 aggregate
principal amount at maturity of Senior Notes and a Warrant to purchase
additional Senior Notes with an aggregate principal amount at maturity of
$3,000. All Warrants were exercised in 1997. The aggregate value at maturity of
the Senior Notes originally issued and the Senior Notes resulting from the
exercise of Warrants is $258 million and $38 million, respectively. The Senior
Notes mature on November 15, 2007 with the first cash interest payment due in
June 2003. The Indenture under which the Senior Notes were issued (the "Senior
Notes Indenture") contains certain limitations on the Company's ability to incur
additional indebtedness. The Senior Notes are secured by a pledge of the stock
of Satellite CD Radio, Inc., the subsidiary of the Company that holds the
Company's license from the FCC.
The Company has entered into a credit agreement (the "Tranche A Facility")
with a group of financial institutions and BofA, as agent and a lender (the
"Lenders") pursuant to which the Lenders agreed to provide the Company a term
loan facility in an aggregate principal amount of up to $115 million (the term
loans thereunder, the "Tranche A Loans"). The proceeds of the Tranche A Loans
will be used by the Company to fund a portion of the progress payments required
to be made by the Company under the Loral Satellite Contract for the purchase of
launch services and to pay interest, fees and other expenses related to the
Tranche A Facility. The Tranche A Loans are due on September 30, 1999 and bear
interest, at the option of the Company, at either (i) The London Interbank
Offered Rate plus 1.75% or (ii) the higher of (a) the rate publicly announced by
BofA as its reference rate and (b) 0.50% per annum above the Federal Funds Rate
then in effect. The Tranche A Loans are secured by the grant of a security
interest by the Company in the portion of the Loral Satellite Contract relating
to launch services. The Tranche A Facility also contains covenants relating to
financial information, the conduct of business of the Company, payments under
the Loral Satellite Contract, maintenance of governmental and other approvals,
maintenance of existence and qualifications, maintenance of books and records,
maintenance of property and insurance, compliance with laws and notice of
defaults. In addition, the terms of the Tranche A Facility requires the Company
to maintain a minimum net worth and sufficient cash.
12
<PAGE> 15
In connection with the Tranche A Facility, Loral agreed with BofA that at
maturity of the Tranche A Loans (including maturity as a result of an
acceleration), upon the occurrence of a bankruptcy of the Company or upon the
occurrence of an event of default by Loral under its agreement with BofA, Loral
will repurchase from the Lenders the Tranche A Loans at a price equal to the
principal amount of the Tranche A Loans plus accrued and unpaid interest. In
exchange for providing such credit support, the Company will pay Loral a fee
equal to 1.25% per annum of the outstanding amount of the Tranche A Loans from
time to time.
The Company has also entered into an agreement with BofA pursuant to which
BofA has agreed to attempt to arrange a syndicate of lenders to provide a term
loan facility (the "Tranche B Facility") for the Company in the aggregate
principal amount of $225 million (the term loans thereunder, the "Tranche B
Loans"). It is anticipated that a portion of the proceeds of the Tranche B Loans
would be used on or prior to September 30, 1999 to repay amounts outstanding
under the Tranche A Facility and for other general corporate purposes. BofA has
not committed to provide the Tranche B Loans, the closing of the Tranche B
Facility is expected to be subject to the satisfaction of certain significant
conditions and there are no assurances that such Tranche B Loans will be
arranged or the terms of any such Tranche B Loans.
On November 13, 1998, the Company entered into the Stock Purchase
Agreement with the Apollo Investors pursuant to which the Company agreed to
sell a total of 1,350,000 shares of its 9.2% Series A Junior Cumulative
Convertible Preferred Stock, par value $.001 per share (the "Series A Preferred
Stock"), to the Apollo Investors, for an aggregate purchase price of $135
million, and the Apollo Investors agreed to grant the Company an option to sell
the Apollo Investors an additional 650,000 shares of its 9.2% Series B Junior
Cumulative Convertible Preferred Stock, par value $.001 per share (the "Series
B Preferred Stock" and, together with the Series A Preferred Stock, the "Junior
Preferred Stock"), for an aggregate purchase price of $65 million. The Company
may exercise its option to require the Apollo Investors to purchase the Series
B Preferred Stock at any time prior to the earlier of ten months from the
closing of the issuance and sale of the Series A Preferred Stock and September
30, 1999.
The Junior Preferred Stock will be convertible into shares of the
Company's Common Stock at a price of $30 per share of Common Stock. The Junior
Preferred Stock will be callable by the Company beginning November 15, 2001 if
the current market price of the Common Stock, as defined in the Certificate of
Designation of the Junior Preferred Stock, exceeds $60 per share for a period
of 20 consecutive trading days, and in all events will be callable beginning
November 15, 2003 at a price of 100% and must be redeemed by the Company on
November 15, 2011. Dividends on the Junior Preferred Stock are payable-in-kind
or cash annually, at the option of the Company. The Junior Preferred Stock will
have the right to vote, on an as-converted basis, on matters in which the
holders of the Common Stock of the Company have the right to vote.
The issuance and sale of the Junior Preferred Stock is subject to the
expiration, or early termination, of the waiting period under the
Hart-Scott-Rodino Antitrust Improvement Act of 1976, approval of the
stockholders of the Company and other customary conditions.
In connection with the execution of the Stock Purchase Agreement, David
Margolese, Chairman and Chief Executive Officer of the Company, entered into a
Voting Agreement with the Apollo Investors pursuant to which he agreed to, and
did, consent to the transactions contemplated by the Stock Purchase Agreement,
including the issuance of the Junior Preferred Stock, with respect to 1,600,000
shares of Common Stock of the Company owned by him and an additional 2,834,500
shares of Common Stock which he has the right to vote pursuant to the terms of
a Voting Trust Agreement of which he is the voting trustee.
In connection with the execution of the Stock Purchase Agreement, David
Margolese and the Company also entered into a Tag-Along Agreement with the
Apollo Investors. Pursuant to the Tag-Along Agreement, in the event that Mr.
Margolese sells more than 800,000 shares of Common Stock of the Company prior
to the earlier of the date that the Apollo Investors beneficially own less than
2,000,000 shares of the Common Stock or the date that is six months after the
nationwide commercial introduction of the Company's CD Radio service, then the
Apollo Investors have certain rights to sell, on a pro rata basis with Mr.
Margolese, a portion of the Common Stock owned by the Apollo Investors in any
subsequent transaction in which Mr. Margolese disposes of 80,000 or more shares
of Common Stock of the Company.
In the event of a satellite or launch failure, the Company will be
required to pay SS/L the full-deferred amount for the affected satellite no
later than 120 days after the date of the failure. If the Company should elect
to put one of the first three satellites into ground storage, rather than having
it shipped to the launch site, the full-deferred amount for the affected
satellite will become due within 60 days of such election.
13
<PAGE> 16
The Company expects it will require an additional $266 million in
financing through the first quarter of 2000. However, there can be no assurance
that the Company's actual cash requirements will not increase. Potential sources
of additional financing include the sale of debt or equity securities in the
public or private markets. There can be no assurance that the Company will be
able to obtain additional financing on favorable terms, or at all, or that it
will be able to do so in a timely fashion. The Senior Notes Indenture and the
Tranche A Facility contain, and documents governing any indebtedness incurred in
the future are expected to contain, provisions limiting the ability of the
Company to incur additional indebtedness. The issuance by the Company of
additional equity securities could cause dilution of the interest in the Company
of the Company's current stockholders. 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 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 costs. Additional funds would be required in the event of delay,
cost overruns, unanticipated expenses, launch failure, launch services or
satellite system change orders, or any shortfalls in estimated levels of
operating cash flow.
OTHER MATTERS-THE YEAR 2000 ISSUE
The Year 2000 Issue concerns the inability of certain information and
technology ("IT") based and certain non-IT based operating systems to properly
recognize and process date-sensitive information beyond December 31, 1999. The
result of The Year 2000 Issue could be the failure of such systems or
miscalculations that cause disruptions to various activities and operations.
The Company has devised and commenced implementing a compliance program to
ensure it is not subject to problems as a result of The Year 2000 Issue. The
Company anticipates that it will spend less than $100,000 to implement the
compliance program, including making IT and non-IT system and equipment
modifications and replacing certain equipment, which program it expects complete
by mid-1999. The expected costs of The Year 2000 compliance program and the date
on which the Company expects to complete the implementation of the plan are
based on management's best estimates and involve certain assumptions, and actual
results could differ materially from the estimates set forth in this paragraph.
In addition, there can be no assurance that the Company's compliance program
will be successful.
The Company has not fully determined the extent to which it may be
impacted by The Year 2000 Issue effecting third parties' IT and non-IT systems
and equipment, including the IT and non-IT systems and equipment of the
Company's suppliers, vendors and service providers. While the Company has
commenced discussions with certain third parties with whom the Company has
relationships and arrangements material to the Company's business, to gain
reassurance that their IT and non-IT systems will not fail or cause disruptions
to the Company's business as the result of The Year 2000 Issue, there can be no
assurance that The Year 2000 Issue will not affect third parties with whom the
Company deals or on whom the Company relies, or that the failure of a third
party's IT or non-IT systems as the result of The Year 2000 Issue will not cause
a material adverse effect on the Company.
14
<PAGE> 17
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) See the Exhibit Index for a list of exhibit filed herewith.
(b) There were no Current Reports on Form 8-K filed by the Company
during the quarter ended September 30, 1998.
15
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities and 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.
By: /s/ John T. McClain
-----------------------------------
John T. McClain
Vice President and Controller
(Chief Accounting Officer)
November 16, 1998
16
<PAGE> 19
Exhibits
EXHIBIT DESCRIPTION
3.1 Amended and Restated Certificate of Incorporation (incorporated by
reference to Exhibit 3.1 to the Company's Registration Statement on
Form S-1 (File No. 33-74782) (the "S-1 Registration Statement")).
3.2 Amended and Restated By-Laws (incorporated by reference to Exhibit
3.2 to the S-1 Registration Statement).
3.3 Certificate of Designations of 5% Delayed Convertible Preferred
Stock (incorporated by reference to Exhibit 10.24 to the Company's
Form 10-K/A for the year ended December 31, 1996 (the "1996 Form
10-K")).
3.4 Form of Certificate of Designations of Series B Preferred Stock
(incorporated by reference to Exhibit A to Exhibit 1 to the
Company's Registration Statement on Form 8-A, filed with the
Commission on October 30, 1997 (the "Form 8-A")).
3.5.1 Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights of 10 1/2% Series
C Convertible Preferred Stock (the "Series C Certificate of
Designations") (incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-4 (File No. 333-34761)
(the "S-4 Registration Statement")).
3.5.2 Certificate of Correction of the Series C Certificate of
Designations (incorporated by reference to Exhibit 3.5.2 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1997 (the "1997 Form 10-K")).
3.5.3 Certificate of Increase of 10-1/2% Series C Convertible Preferred
Stock (incorporated by reference to Exhibit 3.5.3 to the Company's
Form 10-Q for the period ended March 31, 1998).
4.1 Form of Certificate for Shares of Common Stock (incorporated by
reference to Exhibit 4.3 to the S-1 Registration Statement).
4.2 Form of Certificate for Shares of 10 1/2% Series C Convertible
Preferred Stock (incorporated by reference to Exhibit 4.4 to the
S-4 Registration Statement).
4.3 Rights Agreement, dated as of October 22, 1997, between the Company
and Continental Stock Transfer & Trust Company, as Rights Agent
(incorporated by reference to Exhibit 1 to the Form 8-A).
4.4 Form of Right Certificate (incorporated by reference to Exhibit B
to Exhibit 1 to the Form 8-A).
4.5 Amendment to Rights Agreement, dated as of October 22, 1997,
between the Company and Continental Stock Transfer & Trust Company,
as Rights Agent, dated as of October 13, 1998 (incorporated by
reference to Exhibit 99.2 to the Company's Current Report on Form
8-K dated October 8, 1998).
4.6 Indenture, dated as of November 26, 1997, between the Company and
IBJ Schroder Bank & Trust Company, as Trustee (incorporated by
reference to Exhibit 4.1 to the Company's Registration Statement on
Form S-3 (File No. 333-34769) (the "Units Registration
Statement")).
4.7 Form of Note (incorporated by reference to Exhibit 4.2 to the Units
Registration Statement).
4.8 Pledge Agreement, dated as of November 26, 1997, between the
Company, as Pledgor, and IBJ Schroder Bank & Trust Company, as
Collateral Agent (incorporated by reference to Exhibit 4.5 to the
Units Registration Statement).
4.9 Warrant Agreement, dated as of November 26, 1997, between the
Company and IBJ Schroder Bank & Trust Company, as Warrant Agent
(incorporated by reference to Exhibit 4.3 to the Units Registration
Statement).
4.10 Form of Warrant (incorporated by reference to Exhibit 4.4 to the
Units Registration Statement).
4.11 Form of Preferred Stock Warrant Agreement, dated as of April
9,1997, between the Company and each Warrantholder thereof
(incorporated by reference to Exhibit 4.11 to the 1997 Form 10-K).
17
<PAGE> 20
Exhibit Description
- ------- -----------
4.12 Form of Common Stock Purchase Warrant granted by the Company to
Everest Capital Master Fund, L.P. and to The Ravich Revocable Trust
of 1989 (incorporated by reference to Exhibit 4.11 to the 1997 Form
10-K).
10.1.1 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 S-1 Registration Statement).
10.1.2 Lease Agreement, dated as of March 31, 1998, between Rock-McGraw,
Inc. and the Company (incorporated by reference to Exhibit 10.1.2
to the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1998).
10.2.1 Engagement Letter Agreement, dated November 18, 1992, between the
Company and Batchelder & Partners, Inc. (incorporated by reference
to Exhibit 10.4 to the S-1 Registration Statement).
10.2.2 Engagement Termination Letter Agreement, dated December 4, 1997,
between the Company and Batchelder & Partners, Inc. (incorporated
by reference to Exhibit 10.2.2 to the 1997 Form 10-K).
*10.3.1 Proprietary Information and Non-Competition Agreement, dated
February 9, 1993, for Robert D. Briskman (incorporated by reference
to Exhibit 10.8.1 to the S-1 Registration Statement).
*10.3.2 Amendment No. 1 to Proprietary Information and Non Competition
Agreement between the Company and Robert D. Briskman (incorporated
by reference to Exhibit 10.8.2 to the S-1 Registration Statement).
+10.4 Amended and Restated Contract, dated as of June 30, 1998, between
the Company and Space Systems/Loral, Inc. (incorporated by
reference to Exhibit 10.4 to the Company's Quarterly Report on Form
10-Q for the period ended June 30, 1998).
10.5 Assignment of Technology Agreement, dated April 15, 1993, between
Robert D. Briskman and the Company (incorporated by reference to
Exhibit 10.10 to the S-1 Registration Statement).
*10.6.1 Amended and Restated Option Agreement between the Company and
Robert D. Briskman (incorporated by reference to Exhibit 10.13 to
the S-1 Registration Statement).
*10.6.2 Stock Option Agreement, dated as of October 15, 1997, between the
Company and Robert D. Briskman (incorporated by reference to
Exhibit 10.6.2 to the 1997 Form 10-K).
*10.7.1 Employment and Noncompetition Agreement between the Company and
David Margolese (incorporated by reference to Exhibit 10.18.1 to
the S-1 Registration Statement).
*10.7.2 First Amendment to Employment Agreement between the Company and
David Margolese (incorporated by reference to Exhibit 10.18.2 to
the S-1 Registration Statement).
*10.8.1 Employment and Noncompetition Agreement between the Company and
Robert D. Briskman (incorporated by reference to Exhibit 10.19.1 to
the S-1 Registration Statement).
*10.8.2 First Amendment to Employment Agreement between the Company and
Robert D. Briskman (incorporated by reference to Exhibit 10.19.2 to
the S-1 Registration Statement).
*10.8.3 Second Amendment to Employment Agreement between the Company and
Robert D. Briskman (incorporated by reference to Exhibit 10.12.3 to
the 1996 Form 10-K).
*10.9 Employment and Noncompetition Agreement, dated as of July 10, 1997,
between the Company and Andrew J. Greenebaum (incorporated by
reference to Exhibit 10.10 to the Company's Quarterly Report on
Form 10-Q for the period ended September 30, 1997).
18
<PAGE> 21
Exhibit Description
- ------- -----------
*10.10 Employment and Noncompetition Agreement, dated as of April 16,
1997, between the Company and Joseph S. Capobianco (incorporated by
reference to Exhibit 10.17 to the Company's Quarterly Report on
Form 10-Q/A for the period ended March 31, 1997).
*10.11.1 Employment and Noncompetition Agreement, dated as of April 28,
1997, between the Company and Keno V. Thomas (incorporated by
reference to Exhibit 10.18 to the Company's Quarterly Report on
Form 10-Q/A for the period ended March 31, 1997).
*10.11.2 Separation Agreement, dated as of July 6, 1998, between the Company
and Keno V. Thomas (incorporated by reference to Exhibit 10.11.2 to
the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1998).
*10.12 Employment and Noncompetition Agreement, dated as of May 18, 1998,
between the Company and Patrick L. Donnelly (incorporated by
reference to Exhibit 10.12 to the Company's Quarterly Report on
Form 10-Q for the period ended June 30, 1998).
10.13 Registration Agreement, dated January 2, 1994, between the Company
and M.A. Rothblatt and B.A. Rothblatt (incorporated by reference to
Exhibit 10.20 to the S-1 Registration Statement).
*10.14 1994 Stock Option Plan (incorporated by reference to Exhibit 10.21
to the S-1 Registration Statement).
*10.15 Amended and Restated 1994 Directors' Nonqualified Stock Option Plan
(incorporated by reference to Exhibit 10.22 to the Annual Report on
Form 10-K for the year ended December 31, 1995).
10.16.1 Option Agreement, dated as of October 21, 1992, between the Company
and Batchelder & Partners, Inc. (incorporated by reference to
Exhibit 10.24 to the S-1 Registration Statement).
10.16.2 Form of Option Agreement, dated as of December 29, 1997, between
the Company and each Optionee (incorporated by reference to Exhibit
10.16.2 to the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 1998).
10.17 Settlement Agreement, dated as of April 1, 1994, among the Company,
M.A. Rothblatt, B.A. Rothblatt and Marcor, Inc. (incorporated by
reference to Exhibit 10.27 to the S-1 Registration Statement).
*10.18 1995 Stock Compensation Plan (incorporated by reference to Exhibit
10.37 to the Annual Report on Form 10-K for the year ended December
31, 1995).
10.19.1 Preferred Stock Investment Agreement dated October 23, 1996 between
the Company and certain investors (incorporated by reference to
Exhibit 10.24 to the 1996 Form 10-K).
10.19.2 First Amendment to Preferred Stock Investment Agreement dated March
7, 1997 between the Company and certain investors (incorporated by
reference to Exhibit 10.24.1 to the 1996 Form 10-K).
10.19.3 Second Amendment to Preferred Stock Investment Agreement dated
March 14, 1997 between the Company and certain investors
(incorporated by reference to Exhibit 10.24.2 to the 1996 Form
10-K).
10.20 Stock Purchase Agreement, dated as of August 5, 1997, between the
Company, David Margolese and Loral Space & Communications Ltd.
(incorporated by reference to Exhibit 99.1 to the Company's Current
Report on Form 8-K filed on August 19, 1997).
10.21 Letter, dated May 29, 1998, terminating Launch Services Agreement
dated July 22, 1997 between the Company and Arianespace S.A.;
Arianespace Customer Loan Agreements dated July 22, 1997 for
Launches #1 and #2 between the Company and Arianespace Finance
S.A.; and the Multiparty Agreements dated July 22, 1997 for
Launches #1 and #2 among the Company, Arianespace S.A. and
Arianespace Finance S.A. (incorporated by reference to Exhibit
10.21 to the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1998).
19
<PAGE> 22
Exhibit Description
- ------- -----------
10.22 Credit Agreement, dated as of June 30, 1998, among the Company, the
financial institutions from time to time parties thereto and Bank
of America National Trust and Savings Association, as
Administrative Agent (incorporated by reference to Exhibit 10.22 to
the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1998).
10.23 Pledge Agreement, dated as of June 30, 1998, made by the Company in
favor of Bank of America National Trust and Savings Association, as
Administrative Agent (incorporated by reference to Exhibit 10.23 to
the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1998).
10.24 Summary Term Sheet/Commitment, dated June 15, 1997, among the
Company and Everest Capital International, Ltd., Everest Capital
Fund, L.P. and The Ravich Revocable Trust of 1989 (incorporated by
reference to Exhibit 99.1 to the Company's Current Report on Form
8-K filed on July 8, 1997).
10.25.1 Engagement Letter Agreement, dated June 14, 1997, between the
Company and Libra Investments, Inc. (incorporated by reference to
Exhibit 10.26.1 to the 1997 Form 10-K).
10.25.2 Engagement Termination Letter Agreement, dated August 6, 1997,
between the Company and Libra Investments, Inc. (incorporated by
reference to Exhibit 10.26.2 to the 1997 Form 10-K).
10.26 Engagement Letter Agreement, dated October 8, 1997, between the
Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated
(incorporated by reference to Exhibit 10.27 to the 1997 Form 10-K).
+10.27 Radio License Agreement, dated January 21, 1998 between the Company
and Bloomberg Communications Inc. (incorporated by reference to
Exhibit 10.28 to the Company's Quarterly Report on Form 10-Q for
the period ended March 31, 1998).
+10.28 Agreement, dated April 24, 1998 between Lucent Technologies Inc.
and the Company (incorporated by reference to Exhibit 10.28 to the
Company's Quarterly Report on Form 10-Q for the period ended June
30, 1998).
*10.29 CD Radio Inc. 401(k) Savings Plan (incorporated by reference to
Exhibit 4.4 to the Company's Registration Statement on Form S-8
(File No. 333-65473)).
10.30 Stock Purchase Agreement, dated as of October 8, 1998, between the
Company and Prime 66 Partners, L.P. (incorporated by reference to
Exhibit 99.1 to the Company's Current Report on Form 8-K dated
October 8, 1998).
27.1 Financial Data Schedule.
- ------------
* This document has been identified as a management contract or compensatory
plan or arrangement.
+ Portions of these exhibits, which are incorporated by reference, have been
omitted pursuant to an Application for Confidential treatment filed by the
Company with the Securities and Exchange Commission.
20
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<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
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<SECURITIES> 11,375,000
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</TABLE>
