XM Radio 1999 Annual Report Download - page 39

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37 1999 ANNUAL REPORT
period. The estimates involve judgments with respect to, among other things, various future factors which are
difficult to predict and are beyond the control of the Company. Significant estimates include valuation of the
Company’s investment in the DARS license, goodwill and intangible assets, and the valuation allowances against
deferred tax assets. Accordingly, actual amounts could differ from these estimates.
(n) Reclassifications
Certain fiscal year 1997 and 1998 amounts have been reclassified to conform to the fiscal 1999 consolidated
financial statement presentation.
(o) Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. The new standard establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other contracts and for hedging activities. This
statement, as amended, is effective for all fiscal quarters beginning after June 15, 2000. The Company does not
expect SFAS No. 133 to have a material affect on its financial position or results of operations.
(2) Related Party Transactions
The Company had related party transactions with the following shareholders:
(a) AMSC
In 1997, AMSC contributed $143,000 for the Company to establish the original application for the FCC license.
On March 28, 1997, the Company received $1,500,000 as a capital contribution from AMSC. During 1998 and
1999, AMSC incurred general and administrative costs and professional fees for the Company and established an
intercompany balance of $458,000 and $62,000, respectively, (see note 3). Effective January 15, 1999, the
Company issued a convertible note maturing on September 30, 2006 to AMSC for $21,419,000. (See note 4(d)).
(b) WSI
On March 28, 1997, the Company received $1,500,000 as a capital contribution from WSI. The Company
issued WSI 25 (6,689,250 post split) shares of common stock for this consideration.
On April 16, 1997, the Company received $15,000,000 from WSI, which represented $6,000,000 as an
additional capital contribution and $9,000,000 as a six-month bridge loan (see note 4).
On May 16, 1997, the Company obtained a $1,000,000 working capital loan facility from WSI. During 1997, the
Company drew down $663,000 against the facility with the remaining $337,000 drawn in 1998 (see note 4).
On October 16, 1997, the Company received $71,911,000 from WSI, which represented an additional
$13,522,000 under the bridge loan and $58,389,000 under the additional amounts loan (see note 4).
On April 1, 1998, the Company entered into an agreement with WSI to issue $54,536,000 in subordinated
convertible notes. During 1998 and 1999, the Company drew down $45,583,000 and $8,953,000,
respectively, under the agreement (see note 4).
As discussed in note 4(c) all amounts due to WSI under the debt agreements were acquired by AMSC or repaid
on July 9, 1999.
In July 1998, the Company acquired furniture and equipment from WSI for $104,000 and established a due to
WSI for the balance (see note 3).