XM Radio 1999 Annual Report Download - page 23

21 1999 ANNUAL REPORT
Results of Operations
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Research and Development. Research and development expenses decreased to $4.3 million in 1999,
compared with $6.9 million in 1998. The decrease in research and development expenses resulted from the
completion of the development of some of our system technology during 1998.
Professional Fees. Professional fees increased to approximately $10.0 million in 1999, compared with $5.2
million in 1998. The increase primarily reflects additional legal, regulatory and marketing expenses.
General and Administrative. General and administrative expenses increased to $16.4 million in 1999, compared
with $4.0 million in 1998. The increase primarily reflects increased headcount and facility expenses to begin
program management and operations. We also commenced the amortization of our goodwill and intangibles
resulting from American Mobile’s acquisition of a former investor’s interest in us during 1999. We have granted
certain key executives stock options and incurred a non-cash compensation charge of approximately $4.1 million in
the fourth quarter of 1999 primarily for performance-based stock options. We will continue to incur quarterly non-
cash compensation charges over the vesting period depending on the market value of our Class A common stock.
Interest Income. Interest income increased to $2.9 million in 1999, compared with 1998, which was
insignificant. The increase was the result of higher average balances of cash and short-term investments during
1999 due to the proceeds from the issuance of Series A convertible notes in the third quarter of 1999
exceeding the amounts of expenditures for satellite and launch vehicle construction, other capital expenditures
and operating expenses.
Interest Expense. As of December 31, 1999 and 1998, we owed $0 and $140.2 million, respectively,
including accrued interest, under various debt agreements which we entered into for the purpose of financing the
XM Radio system. Our capitalized interest costs were $15.3 million and $11.8 million associated with our FCC
license and the XM Radio system during 1999 and 1998, respectively. We expensed interest costs of $9.1
million and $0 during 1999 and 1998, respectively. We incurred a one-time $5.5 million charge to interest due
to the beneficial conversion feature of the new American Mobile note. We also exceeded our interest
capitalization threshold by $3.6 million.
Net Loss. The net loss for 1999 and 1998 was $36.9 million and $16.2 million, respectively. The increase in net
losses for 1999, compared with 1998, primarily reflects an increase in net interest expense as discussed above
and additional general and administration expenses, primarily due to increased headcount and facility expenses, in
preparation for commercial operations and the commencement of amortization of goodwill and intangibles.
Year Ended December 31, 1998 Compared with Year Ended December 31, 1997
Research and Development. Research and development expenses amounted to approximately $6.9 million for
the year ended December 31, 1998. Research and development expenses for the year ended December 31,
1997 were insignificant. The increase in research and development expenses resulted from the development of
some of our system technology during 1998.
Professional Fees. Professional fees increased to approximately $5.2 million for the year ended December 31,
1998, compared with $1.1 million for the year ended December 31, 1997. The increase primarily reflects legal,
regulatory and marketing expenses.
General and Administrative. General and administrative expenses increased to $4.0 million for the year ended
December 31, 1998, compared with $20,000 for the year ended December 31, 1997. The increase primarily
reflects increased headcount and facility expenses to begin program management and operations.