XM Radio 2000 Annual Report Download - page 34

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XM SATELLiTE RADiO 2000 Annual Report
(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 Motient Corporation, formerly American
Mobile Satellite Corporation (“Motient” 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 Motient, XMSR and
WorldSpace, Inc. (“WSI”), WSI acquired a 20 percent interest in XMSR.
On May 16, 1997, Motient 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. Motient 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, Motient acquired WSI’s 20 percent interest in the Company, which is discussed in note 3.
(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., XM Radio Inc. and XM Equipment Leasing, LLC. All significant intercompany transactions
and accounts have been eliminated. The Company’s management has devoted its time to the planning and
organization of the Company, obtaining its DARS license, conducting research and development programs, conducting
market research, constructing its satellite and terrestrial repeater systems, securing content providers, securing
manufacturers for its radios and obtaining retail distribution channels, securing adequate debt and equity capital
for anticipated operations and growth, and addressing regulatory matters. 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 5, 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 (in thousands):
December 31,
1999 2000
Cash on deposit...................................... $ 66 $ 97
Money market funds................................ 10,620 224,806
Commercial paper .................................. 40,012 —
$ 50,698 $ 224,903
FiNANCiALS 2000
NOTES TO CONSOLiDATED FiNANCiAL STATEMENTS