XM Radio 1999 Annual Report Download - page 36

34 XM RADiO
NOTES TO CONSOLiDATED FiNANCiAL STATEMENTS
(1) Summary of Significant Accounting Policies and Practices
(a) Nature of Business
XM Satellite Radio Inc. (“XMSR”), formerly American Mobile Radio Corporation, was incorporated on December
15, 1992 in the State of Delaware as a wholly owned subsidiary of American Mobile Satellite Corporation
(“AMSC” or “Parent”) for the purpose of procuring a digital audio radio service (“DARS”) license. Business activity
for the period from December 15, 1992 through December 31, 1996 was insignificant. Pursuant to various
financing agreements entered into in 1997 between AMSC, XMSR and WorldSpace, Inc. (“WSI”), WSI acquired a
20 percent interest in XMSR.
On May 16, 1997, AMSC and WSI formed XM Satellite Radio Holdings Inc. (the “Company”), formerly AMRC
Holdings Inc., as a holding company for XMSR in connection with the construction, launch and operation of a
domestic communications satellite system for the provision of DARS. AMSC and WSI exchanged their respective
interests in XMSR for equivalent interests in the Company, which had no assets, liabilities or operations prior to
the transaction.
On July 7, 1999, AMSC acquired WSI’s 20 percent interest in the Company, which is discussed in note 4.
(b) Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of XM Satellite Radio Holdings Inc. and its
subsidiaries, XM Satellite Radio Inc. and XM Radio Inc. All significant intercompany transactions and accounts
have been eliminated. The Company’s management has devoted substantially all of its time to the planning and
organization of the Company, obtaining its DARS license, and to the process of addressing regulatory matters,
initiating research and development programs, conducting market research, initiating construction of the satellite
system, securing content providers, and securing adequate debt and equity capital for anticipated operations
and growth. The Company has not generated any revenues and planned principal operations have not
commenced. Accordingly, the Company’s financial statements are presented as those of a development stage
enterprise, as prescribed by Statement of Financial Accounting Standards (“SFAS”) No. 7, Accounting and
Reporting by Development Stage Enterprises.
As discussed in Note 6, on September 9, 1999, the Company effected a 53,514-for-1 stock split. The effect of
the stock split has been reflected as of December 31, 1999 in the consolidated balance sheet and consolidated
statement of stockholders’ equity (deficit); however, the activity in prior periods was not restated in those
statements. All references to the number of common shares and per share amounts in the consolidated financial
statements and notes thereto have been restated to reflect the effect of the split for all periods presented.
(c) Cash and Cash Equivalents
The Company considers short-term, highly liquid investments with an original maturity of three months or less to
be cash equivalents. The Company had the following cash and cash equivalents balances:
December 31,
1998 1999
(in thousands)
Cash on deposit $ 28 $ 66
Money market funds 282 10,620
Commercial paper — 40,012
$ 310 $ 50,698
(d) Short-term Investments
The Company holds commercial paper with maturity dates of less than one year that is stated at amortized cost,
which approximates fair value.