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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 10, 1998
CD RADIO INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-24710 52-1700207
(State or other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
1180 AVENUE OF THE AMERICAS, 14TH FL., NEW YORK, NY 10036
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (212) 899-5000
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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 Current Report on Form 8-K. 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. 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 Annual Report on Form 10-K
for the year ended December 31, 1997, and investors should not place undue
reliance on any such forward- looking statements. Among the key factors that
have a direct bearing on the Company's results of operations are the potential
risk of delay in implementing the Company's business plan; increased costs of
construction and launch of necessary satellites; dependence on satellite
construction and launch contractors; risk of launch failure; unproven market and
unproven applications of existing technology; and the Company's need for
additional financing.
Management cannot assess the impact of each such factor on the
Company's business or the extent to which any factor, or combination of factors,
may cause actual results to differ materially from those contained in any
forward-looking statements. Further, any forward looking statement speaks only
as of the date on which such statement is made, and the Company undertakes no
obligation to update any forward-looking statement or statements to reflect
events or circumstances after the date on which such statement is made or to
reflect the occurrence of unanticipated events. New factors emerge from time to
time, and it is not possible for management to predict all of such factors.
ITEM 5. OTHER EVENTS.
On October 7, 1998, CD Radio Inc. (the "Company") filed Amendment No. 3
to its Registration Statement on Form S-3 (File No. 333-52893) (the
"Amendment"). At the time of the filing of the Amendment, certain uncertainties
existed, as described in "RISK FACTORS--EXPECTATION OF CONTINUING LOSSES;
NEGATIVE CASH FLOW" and "--NEED FOR SUBSTANTIVE ADDITIONAL FINANCING" in the
Amendment, which indicated that the Company may not have been able to continue
as a going concern through 1999. Such uncertainties were noted in the report of
the Company's independent public accountants, PricewaterhouseCoopers, LLP, on
the Company's financial statements for the year ended December 31, 1997 (the
"l997 Financial Statements") that was filed as an exhibit to the Amendment.
Subsequent to the filing of the Amendment, the Company sold 5,000,000
shares of its common stock, par value $0.001 per share, to Prime 66 Partners,
L.P. for a purchase price of $100 million and has agreed to sell 1,350,000 of a
new class of 9.2% Series A Junior Cumulative Convertible Preferred Stock to
Apollo Investment Fund IV, L.P. and Apollo Overseas Partners IV, L.P.
(collectively, the "Apollo Investors") for $135 million. In
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addition, the Apollo Investors have granted the Company an option to sell them
650,000 shares of a new class of 9.2% Series B Junior Cumulative Convertible
Preferred Stock for $65 million. The Company expects that the net proceeds from
the sale of these securities will provide the Company sufficient funding to
continue as a going concern through 1999. Accordingly, PricewaterhouseCoopers,
LLP has revised its report on the Company's 1997 Financial Statements. A copy of
their revised report is filed herewith as Exhibit 99.l.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits.
99.1 Report of PricewaterhouseCoopers, LLP.
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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.
By: /s/ Patrick L. Donnelly
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Patrick L. Donnelly
Executive Vice President, General Counsel
and Secretary
Dated: December 10, 1998
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EXHIBIT INDEX
Pursuant to Item 601 of Regulation S-K
Exhibit No. Description of Exhibit
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99.1 Report of PricewaterhouseCoopers, LLP
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Exhibit 99.1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of CD Radio Inc.:
We have audited the accompanying consolidated balance sheets of CD
Radio Inc. and Subsidiary (a Development Stage Enterprise) as of December 31,
1996 and 1997, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1997 and for the period May 17, 1990 (date of inception) to
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our previously issued report, dated March 3, 1998 and October 7,
1998, on our audits of the aforementioned consolidated financial statements, we
included an explanatory paragraph describing certain uncertainties with respect
to the availability of funds to sustain the Company's activities through 1999.
Subsequent to that report, the Company has obtained additional funding as
described in Item 5 of the Company's Form 8-K, filed on December 10, 1998. This
funding alleviates those uncertainties that the Company may be able to continue
as a going concern through 1999.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of CD
Radio Inc. and Subsidiary as of December 31, 1996 and 1997, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997 and for the period May 17, 1990 (date of
inception) to December 31, 1997 in conformity with generally accepted accounting
principles.
/s/ PricewaterhouseCoopers LLP
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McLean, VA
March 3, 1998, except as to
the third paragraph for which
the date is December 10, 1998.
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