WASHINGTON, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

SIRIUS XM RADIO INC.

Delaware (State or other jurisdiction of incorporation or organization)		52-1700207 (I.R.S. Employer Identification Number)
1221 Avenue of the Americas, 36th Floor New York, New York (Address of principal executive offices)		10020 (Zip Code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

(Class)		(Outstanding as of April 30, 2010)
COMMON STOCK, $0.001 PAR VALUE		3,885,636,465 SHARES

 

 

SIRIUS XM RADIO INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q

Item No.		Description
		PART I — Financial Information
Item 1.		Financial Statements:
		Unaudited Consolidated Statements of Operations for the three months ended March 31, 2010 and 2009			1
		Consolidated Balance Sheets as of March 31, 2010 (Unaudited) and December 31, 2009			2
		Unaudited Consolidated Statements of Stockholders’ Equity as of March 31, 2010 and Comprehensive Income for the three months ended March 31, 2010			3
		Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2010 and 2009			4
		Notes to Unaudited Consolidated Financial Statements			6
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			32
Item 3.		Quantitative and Qualitative Disclosures About Material Risk			52
Item 4.		Controls and Procedures			53
		PART II — Other Information
Item 1.		Legal Proceedings			54
Item 1A.		Risk Factors			54
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			54
Item 3.		Defaults Upon Senior Securities			54
Item 4.		(Removed and Reserved)			54
Item 5.		Other Information			54
Item 6.		Exhibits			54
		Signatures			55
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SIRIUS XM RADIO INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

		For the Three Months
		Ended March 31,
(in thousands, except per share data)		2010				2009
Revenue:
Subscriber revenue, including effects of rebates		$	579,509			$	559,389
Advertising revenue, net of agency fees			14,527				12,304
Equipment revenue			14,283				9,909
Other revenue			55,465				5,377
Total revenue			663,784				586,979
Operating expenses (depreciation and amortization shown separately below):
Cost of services:
Revenue share and royalties			98,184				100,466
Programming and content			78,434				80,408
Customer service and billing			56,211				60,208
Satellite and transmission			20,119				20,279
Cost of equipment			7,919				7,993
Subscriber acquisition costs			89,379				73,068
Sales and marketing			49,117				51,423
Engineering, design and development			11,436				9,778
General and administrative			57,580				59,314
Depreciation and amortization			70,265				82,367
Restructuring, impairments and related costs			-				614
Total operating expenses			538,644				545,918
Income from operations			125,140				41,061
Other income (expense):
Interest expense, net of amounts capitalized			(77,868	)			(67,980	)
Loss on extinguishment of debt and credit facilities, net			(2,566	)			(17,957	)
Interest and investment loss			(3,270	)			(7,168	)
Other income			1,329				511
Total other expense			(82,375	)			(92,594	)
Income (loss) before income taxes			42,765				(51,533	)
Income tax expense			(1,167	)			(1,115	)
Net income (loss)			41,598				(52,648	)
Preferred stock beneficial conversion feature			-				(186,188	)
Net income (loss) attributable to common stockholders		$	41,598			$	(238,836	)
Net income (loss) per common share:
Basic		$	0.01			$	(0.07	)
Diluted		$	0.01			$	(0.07	)
Weighted average common shares outstanding:
Basic			3,677,897				3,523,888
Diluted			6,335,114				3,523,888

See accompanying Notes to the unaudited consolidated financial statements

SIRIUS XM RADIO INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

		March 31, 2010				December 31, 2009
(in thousands, except share and per share data)		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	268,538			$	383,489
Accounts receivable, net			115,870				113,580
Receivables from distributors			54,775				48,738
Inventory, net			13,968				16,193
Prepaid expenses			119,185				100,273
Related party current assets			108,453				106,247
Restricted cash			534,225				-
Deferred tax asset			75,022				72,640
Other current assets			14,849				18,620
Total current assets			1,304,885				859,780
Property and equipment, net			1,730,141				1,711,003
Long-term restricted investments			3,400				3,400
Deferred financing fees, net			61,887				66,407
Intangible assets, net			2,677,819				2,695,115
Goodwill			1,834,856				1,834,856
Related party long-term assets			107,745				111,767
Other long-term assets			19,621				39,878
Total assets		$	7,740,354			$	7,322,206
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses		$	396,877			$	543,686
Accrued interest			63,193				74,566
Current portion of deferred revenue			1,152,916				1,083,430
Current portion of deferred credit on executory contracts			259,325				252,831
Current maturities of long-term debt			452,874				13,882
Current maturities of long-term related party debt			54,874				-
Related party current liabilities			68,547				108,246
Total current liabilities			2,448,606				2,076,641
Deferred revenue			269,267				255,149
Deferred credit on executory contracts			716,197				784,078
Long-term debt			2,764,305				2,799,702
Long-term related party debt			356,895				263,579
Deferred tax liability			943,794				940,182
Related party long-term liabilities			26,599				46,301
Other long-term liabilities			62,672				61,052
Total liabilities			7,588,335				7,226,684
Commitments and contingencies (Note 14)
Stockholders’ equity:
Preferred stock, par value $0.001; 50,000,000 authorized at March 31, 2010 and December 31, 2009:
Series A convertible preferred stock (liquidation preference of $51,370 at March 31, 2010 and December 31, 2009); 24,808,959 shares issued and outstanding at March 31, 2010 and December 31, 2009			25				25
Convertible perpetual preferred stock, series B (liquidation preference of $13 at March 31, 2010 and December 31, 2009); 12,500,000 shares issued and outstanding at March 31, 2010 and December 31, 2009			13				13
Convertible preferred stock, series C junior; no shares issued and outstanding at March 31, 2010 and December 31, 2009			-				-
Common stock, par value $0.001; 9,000,000,000 shares authorized at March 31, 2010 and December 31, 2009; 3,885,195,021 and 3,882,659,087 shares issued and outstanding at March 31, 2010 and December 31, 2009, respectively			3,885				3,882
Accumulated other comprehensive loss, net of tax			(5,976	)			(6,581	)
Additional paid-in capital			10,366,582				10,352,291
Accumulated deficit			(10,212,510	)			(10,254,108	)
Total stockholders’ equity			152,019				95,522
Total liabilities and stockholders’ equity		$	7,740,354			$	7,322,206

See accompanying Notes to the unaudited consolidated financial statements

     

SIRIUS XM RADIO INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

		Series A								Convertible Perpetual
		Convertible								Preferred Stock,																Accumulated
		Preferred Stock								Series B								Common Stock								Other				Additional								Total
																										Comprehensive				Paid-in				Accumulated				Stockholders’
(in thousands, except share and per share data)		Shares				Amount				Shares				Amount				Shares				Amount				Loss				Capital				Deficit				Equity
Balance at December 31, 2009			24,808,959			$	25				12,500,000			$	13				3,882,659,087			$	3,882			$	(6,581	)		$	10,352,291			$	(10,254,108	)		$	95,522
Net income																																			41,598				41,598
Other comprehensive income:
Unrealized gain on available-for-sale securities			-				-				-				-				-				-				469				-				-				469
Foreign currency translation adjustment, net of tax of $63			-				-				-				-				-				-				136				-				-				136
Total comprehensive income			-				-				-				-				-				-				-				-				-				42,203
Issuance of common stock to employees and employee benefit plans, net of forfeitures			-				-				-				-				2,535,934				3				-				1,205				-				1,208
Share-based payment expense			-				-				-				-				-				-				-				13,086				-				13,086
Balance at March 31, 2010			24,808,959			$	25				12,500,000			$	13				3,885,195,021			$	3,885			$	(5,976	)		$	10,366,582			$	(10,212,510	)		$	152,019

See accompanying Notes to the unaudited consolidated financial statements

SIRIUS XM RADIO INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

		For the Three Months
		Ended March 31,
(in thousands)		2010				2009
Cash flows from operating activities:
Net income (loss)		$	41,598			$	(52,648	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization			70,265				82,367
Non-cash interest expense, net of amortization of premium			11,119				6,666
Provision for doubtful accounts			7,502				7,575
Amortization of deferred income related to equity method investment			(2,194	)			(694	)
Loss on extinguishment of debt and credit facilities, net			2,450				17,957
Loss on investments			2,729				7,906
Share-based payment expense			17,182				20,179
Deferred income taxes			1,167				1,115
Other non-cash purchase price adjustments			(58,817	)			(41,150	)
Changes in operating assets and liabilities:
Accounts receivable			(9,792	)			(344	)
Inventory			2,225				4,573
Receivables from distributors			(6,037	)			(276	)
Related party assets			1,285				8,880
Prepaid expenses and other current assets			(14,690	)			22,104
Restricted cash			(10,160	)			-
Other long-term assets			7,876				21,995
Accounts payable and accrued expenses			(115,469	)			(53,339	)
Accrued interest			(11,373	)			(18,087	)
Deferred revenue			81,034				46,927
Related party liabilities			(57,207	)			(7,081	)
Other long-term liabilities			1,619				(7,754	)
Net cash (used in) provided by operating activities			(37,688	)			66,871
Cash flows from investing activities:
Additions to property and equipment			(98,965	)			(71,140	)
Merger related costs			-				623
Sale of restricted and other investments			9,450				-
Net cash used in investing activities			(89,515	)			(70,517	)
Cash flows from financing activities:
Preferred stock issuance costs, net of costs			-				(3,712	)
Long-term borrowings, net of costs			637,406				-
Related party long-term borrowings, net of costs			147,094				211,463
Payment of premiums on redemption of debt			-				(10,072	)
Repayment of long-term borrowings			(248,183	)			(198,993	)
Restricted cash to be used for the redemption of debt			(524,065	)			-
Net cash provided by (used in) financing activities			12,252				(1,314	)
Net decrease in cash and cash equivalents			(114,951	)			(4,960	)
Cash and cash equivalents at beginning of period			383,489				380,446
Cash and cash equivalents at end of period		$	268,538			$	375,486

See accompanying Notes to the unaudited consolidated financial statements

SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued

		For the Three Months
		Ended March 31,
(in thousands)		2010				2009
Supplemental Disclosure of Cash and Non-Cash Flow Information
Cash paid during the period for:
Interest, net of amounts capitalized		$	76,198			$	85,810
Non-cash investing and financing activities:
Common stock issued in exchange of 21/2% Convertible Notes due 2009, including accrued interest			-				18,000
Structuring fee on 10% Senior PIK Secured Notes due 2011			-				5,918
Preferred stock issued to Liberty Media			-				227,716
Release of restricted investments			-				138,000
Sale-leaseback of equipment			5,305				-

See accompanying Notes to the unaudited consolidated financial statements

SIRIUS XM RADIO INC. AND SUBSIDIARIES

(Dollar amounts in thousands, unless otherwise stated)

(1) Business

          We broadcast our music, sports, news, talk, entertainment, traffic and weather channels in the United States for a subscription fee through our proprietary satellite radio systems — the SIRIUS system and the XM system. The SIRIUS system consists of four in-orbit satellites with over 125 terrestrial repeaters, satellite uplink facilities and studios. The XM system consists of four in-orbit satellites with over 650 terrestrial repeaters, satellite uplink facilities and studios. The terrestrial repeaters receive and retransmit signals. Subscribers can also receive certain of our music and other channels over the Internet.

          Our satellite radios are primarily distributed through automakers (“OEMs”); nationwide through retail locations; and through our websites. We have agreements with every major automaker to offer SIRIUS or XM satellite radios as factory- or dealer-installed equipment in their vehicles. SIRIUS and XM radios are also offered to customers of rental car companies.

          Our primary source of revenue is subscription fees, with most of our customers subscribing to an annual, semi-annual, quarterly or monthly plan. We also derive revenue from activation and other fees, the sale of advertising on select non-music channels, the direct sale of satellite radios and accessories, and other ancillary services, such as our Backseat TV, data and weather services.

          In certain cases, automakers include a subscription to our radio services in the sale or lease price of vehicles. The length of these prepaid subscriptions varies, but is typically three to twelve months. In many cases, we receive subscription payments from automakers in advance of the activation of our service. We also reimburse various automakers for certain costs associated with satellite radios installed in their vehicles.

          We also have an interest in the satellite radio services offered in Canada.

          Unless otherwise indicated,

•

“we,” “us,” “our,” the “company,” “the companies” and similar terms refer to Sirius XM Radio Inc. and its consolidated subsidiaries;

•

“SIRIUS” refers to Sirius XM Radio Inc. and its consolidated subsidiaries, excluding XM Satellite Radio Inc., and its consolidated subsidiaries; and

•

“XM” refers to XM Satellite Radio Inc. and its consolidated subsidiaries.

          In July 2008, our wholly owned subsidiary, Vernon Merger Corporation, merged (the “Merger”) with and into XM Satellite Radio Holdings Inc., a Delaware corporation, and, as a result, XM Satellite Radio Holdings Inc. became our wholly-owned subsidiary. On April 14, 2010, XM Satellite Radio Holdings Inc. merged with and into XM. XM was the surviving corporation of the merger, and as a result XM became a direct wholly-owned subsidiary of SIRIUS.

(2) Principles of Consolidation and Basis of Presentation

       Principles of Consolidation

          The accompanying unaudited consolidated financial statements of Sirius XM Radio Inc. and subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), the instructions to Form 10-Q and Article 10 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”) for interim financial reporting. Accordingly, these interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. All significant intercompany transactions have been eliminated in consolidation.

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

       Basis of Presentation

          In the opinion of management, all normal recurring adjustments necessary for a fair presentation of our unaudited consolidated financial statements as of March 31, 2010, and for the three months ended March 31, 2010 and 2009 have been made.

          Interim results are not necessarily indicative of the results that may be expected for a full year. This Quarterly Report on Form 10-Q should be read together with our Annual Report on Form 10-K for the year ended December 31, 2009, that was filed with the SEC on February 25, 2010.

          We have evaluated events subsequent to the balance sheet date and prior to the filing of this Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 and have determined there have not been any events that have occurred that would require adjustment to our unaudited consolidated financial statements.

(3) Summary of Significant Accounting Policies

       Use of Estimates

          In presenting unaudited consolidated financial statements, management makes estimates and assumptions that affect the amounts reported and accompanying notes. Estimates, by their nature, are based on judgment and available information. Actual results could differ materially from those estimates.

          Significant estimates inherent in the preparation of the accompanying unaudited consolidated financial statements include revenue recognition, asset impairment, useful lives of our satellites, share-based payment expense, and valuation allowances against deferred tax assets. Economic conditions in the United States could have a material impact on our accounting estimates.

       Recent Accounting Pronouncements

          The Financial Accounting Standards Board (“FASB”) updated Accounting Standards Codification (“ASC”) 470 to incorporate the previously ratified EITF No. 09-1, Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance, into the ASC. This standard requires share-lending arrangements in an entity’s own shares to be initially measured at fair value and treated as an issuance cost, excluded from basic and diluted earnings per share, and requires an entity to recognize a charge to earnings if it becomes probable the counterparty will default on the arrangement. This guidance was adopted as of January 1, 2010, as required, on a retrospective basis for all arrangements outstanding as of that date. In connection with the adoption, we have revised our original estimate of the fair value of the share-lending arrangements from $378,000 to $70,960 as a result of modifications to the valuation methodology and the inclusion of market participant information obtained in the first quarter of 2010. The following table reflects the retrospective adoption of EITF No. 09-1 on our December 31, 2009 consolidated balance sheet:

		As Originally				Retrospective				As Currently
Balance Sheet Line Item:		Reported				Adjustments				Reported
Deferred financing fees, net		$	8,902			$	57,505			$	66,407
Related party long-term assets, net of current portion			110,594				1,173				111,767
Long-term debt, net of current portion			2,799,127				575				2,799,702
Long-term related party debt, net of current portion			263,566				13				263,579
Additional paid-in capital			10,281,331				70,960				10,352,291
Accumulated deficit			(10,241,238	)			(12,870	)			(10,254,108	)

          For the three months ended March 31, 2009, we originally reported Interest expense and Net loss attributable to common stockholders of $65,743 and $236,599, respectively. The retrospective adoption of EITF No. 09-1 resulted in additional Interest expense of $2,237 and resulted in revised Interest expense and Net loss attributable to common stockholders of $67,980 and $238,836, respectively.

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

          For the three months ended March 31, 2010, we recorded $2,427 in Interest expense related to the amortization of the issuance costs associated with the share-lending arrangement and other issuance costs. As of March 31, 2010, the unamortized balance of the debt issuance costs was $58,911, with $57,733 recorded in Deferred financing fees, net, and $1,178 recorded in Long-term related party assets. As of March 31, 2010, the fair value of the remaining 202,400,000 loaned shares was estimated to be $176,088.

          In January 2010, the FASB issued ASU No. 2010-6, Improving Disclosures about Fair Value Measurements, which requires expanded disclosures for significant transfers in and out of Level 1 and 2 fair value measurements including reasons for such transfers. Additionally, in the reconciliation for fair value measurements using Level 3 inputs, reporting entities should present separately information about purchases, sales, issuances, and settlements (that is, on a gross basis rather than as one net number). ASU 2010-6 is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. We adopted the applicable guidance on January 1, 2010, with no impact to our disclosures as fair value disclosures are not included due to immateriality.

          In February 2010, the FASB issued ASU No. 2010-9, Subsequent Events, to address certain implementation issues related to an entity’s requirement to perform and disclose subsequent-events procedures. ASU No. 2010-9 requires SEC filers to evaluate subsequent events through the date the financial statements are issued and exempts SEC filers from disclosing the date through which subsequent events have been evaluated (thus alleviating potential conflicts between ASC subtopic 855-10 and the SEC’s requirements). ASU No. 2010-9 was immediately effective. We adopted this guidance immediately, which has impacted our disclosures.

       Earnings per Share (“EPS”)

          Basic net income (loss) per common share is calculated using the weighted average common shares outstanding during each reporting period. Diluted net income (loss) per common share adjusts the weighted average common shares outstanding for the potential dilution that could occur if common stock equivalents (convertible debt and preferred stock, warrants, stock options and restricted stock shares and units) were exercised or converted into common stock. For the three months ended March 31, 2010, common stock equivalents of approximately 714,293,000 were not included in the calculation of diluted net income per common share as the effect would have been anti-dilutive. Due to the net loss for the three months ended March 31, 2009, all common stock equivalents of 3,272,091,000 were excluded from net loss per common share because they were anti-dilutive.

       Accounts Receivable

          Accounts receivable are stated at amounts due from customers net of an allowance for doubtful accounts. Our allowance for doubtful accounts considers historical experience, the age of amounts due, current economic conditions and other factors that may affect the debtor’s ability to pay.

          Accounts receivable, net, consists of the following:

		March 31,				December 31,
		2010				2009
Gross accounts receivable		$	124,306			$	122,247
Allowance for doubtful accounts			(8,436	)			(8,667	)
Total accounts receivable, net		$	115,870			$	113,580

       Inventory

          Inventory consists of finished goods, refurbished goods, chip sets and other raw material components used in manufacturing radios. Inventory is stated at the lower of cost, determined on a first-in, first-out basis, or market. We record an estimated allowance for inventory that is considered slow moving, obsolete or whose carrying value is in excess of net realizable value. The provision related to products purchased for our direct to consumer distribution channel is reported as a component of Cost of equipment in our unaudited consolidated statements of operations. The remaining provision is reported as a component of Subscriber acquisition costs in our unaudited consolidated statements of operations.

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

          Inventory, net, consists of the following:

		March 31,				December 31,
		2010				2009
Raw materials		$	16,581			$	17,370
Finished goods			18,987				19,704
Allowance for obsolescence			(21,600	)			(20,881	)
Total inventory, net		$	13,968			$	16,193

       Fair Value of Financial Instruments

          The fair value of a financial instrument is the amount at which the instrument could be exchanged in an orderly transaction between market participants to sell the asset or transfer the liability. As of March 31, 2010 and December 31, 2009, the carrying amounts of cash and cash equivalents, accounts and other receivables, and accounts payable approximated fair value due to the short-term nature of these instruments.

          The fair value for publicly traded instruments is determined using quoted market prices and, for non-publicly traded instruments, fair value is based upon estimates from a market maker and brokerage firm. As of March 31, 2010 and December 31, 2009, the carrying value of our debt was $3,628,948 and $3,077,163, respectively; and the fair value approximated $3,445,793 and $3,195,375, respectively.

       Reclassifications

          Certain amounts in our prior period unaudited consolidated financial statements have been reclassified to conform to our current period presentation.

(4) Goodwill

          Goodwill represents the excess of the purchase price over the estimated fair value of net tangible and identifiable intangible assets acquired in business combinations. Our annual impairment assessment is performed as of October 1^st of each year, and an assessment is made at other times if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. During the three months ended March 31, 2010 and 2009, there were no indicators of impairment and no impairment loss was recorded for our goodwill.

(5) Intangible Assets

          Intangible assets consisted of the following:

						March 31, 2010												December 31, 2009
						Gross												Gross
		Weighted Average				Carrying				Accumulated				Net Carrying				Carrying				Accumulated				Net Carrying
		Useful Lives				Value				Amortization				Value				Value				Amortization				Value
Indefinite life intangible assets
FCC licenses		Indefinite				$	2,083,654			$	-			$	2,083,654			$	2,083,654			$	-			$	2,083,654
Trademark		Indefinite					250,000				-				250,000				250,000				-				250,000
Definite life intangible assets
Subscriber relationships		9 years				$	380,000			$	(105,170	)		$	274,830			$	380,000			$	(91,186	)		$	288,814
Licensing agreements		9.1 years					75,000				(16,360	)			58,640				75,000				(13,906	)			61,094
Proprietary software		6 years					16,552				(7,626	)			8,926				16,552				(6,823	)			9,729
Developed technology		10 years					2,000				(333	)			1,667				2,000				(283	)			1,717
Leasehold interests		7.4 years					132				(30	)			102				132				(25	)			107
Total intangible assets						$	2,807,338			$	(129,519	)		$	2,677,819			$	2,807,338			$	(112,223	)		$	2,695,115

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

     Indefinite Life Intangible Assets

          We have identified our FCC licenses and the XM trademark as indefinite life intangible assets after considering the expected use of the assets, the regulatory and economic environment within which they are being used, and the effects of obsolescence on their use.

          We hold FCC licenses to operate our satellite digital audio radio service and provide ancillary services. The following table outlines the years in which each of our licenses expire:

FCC license		Expiration year
SIRIUS FM-1 satellite		2017
SIRIUS FM-2 satellite		2017
SIRIUS FM-3 satellite		2017
SIRIUS FM-4 ground spare satellite		2017
SIRIUS FM-5 satellite		2017
XM-1 satellite		2014
XM-2 satellite		2014
XM-3 satellite		2013
XM-4 satellite		2014

          Prior to expiration, we will be required to apply for a renewal of our FCC licenses. The renewal and extension of our licenses is reasonably certain at minimal cost, which is expensed as incurred. Each of the FCC licenses authorizes us to use the broadcast spectrum, which is a renewable, reusable resource that does not deplete or exhaust over time.

          In connection with the Merger, $250,000 of the purchase price was allocated to the XM trademark. As of March 31, 2010, there were no legal, regulatory or contractual limitations associated with the XM trademark.

          We evaluate our indefinite life intangible assets for impairment on an annual basis as of October 1^st of each year. An assessment is made at other times if events or changes in circumstances indicate that it is more likely than not that the assets have been impaired. During the three months ended March 31, 2010 and 2009, there were no indicators of impairment and no impairment loss was recorded for intangible assets with indefinite lives.

     Definite Life Intangible Assets

          Subscriber relationships are amortized on an accelerated basis over 9 years, which reflects the estimated pattern in which the economic benefits will be consumed. Other definite life intangible assets include certain licensing agreements, which are amortized over a weighted average useful life of 9.1 years on a straight-line basis.

          Amortization expense for definite life intangible assets was $17,296 and $20,430 for the three months ended March 31, 2010 and 2009, respectively. Expected amortization expense for each of the fiscal years through December 31, 2014 and for periods thereafter is as follows:

Year ending December 31,		Amount
Remaining 2010		$	48,620
2011			58,850
2012			53,420
2013			47,097
2014			38,619
Thereafter			97,559
Total definite life intangibles assets, net		$	344,165

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

(6) Subscriber Revenue

          Subscriber revenue consists of subscription fees, revenue derived from our agreements with daily rental fleet operators, non-refundable activation and other fees and the effects of rebates. Revenues received from OEMs automakers for prepaid subscriptions included in the sale or lease price of vehicles are also included in subscriber revenue over the service period, after sale or subscriber activation.

          Subscriber revenue consists of the following:

		For the Three Months
		Ended March 31,
		2010				2009
Subscription fees		$	574,757			$	553,572
Activation fees			4,788				6,056
Effect of rebates			(36	)			(239	)
Total subscriber revenue		$	579,509			$	559,389

(7) Interest Costs

          We capitalize a portion of the interest on funds borrowed to finance the construction costs of our satellites. The following is a summary of our interest costs:

		For the Three Months
		Ended March 31,
		2010				2009
Interest costs charged to expense		$	77,868			$	67,980
Interest costs capitalized			14,177				16,126
Total interest costs incurred		$	92,045			$	84,106

          Included in interest costs incurred is non-cash interest expense, consisting of amortization related to original issue discounts, premiums and deferred financing fees of $11,119 and $6,666 for the three months ended March 31, 2010 and 2009, respectively.

(8) Property and Equipment

          Property and equipment, net, consists of the following:

		March 31,				December 31,
		2010				2009
Satellite system		$	1,694,769			$	1,680,732
Terrestrial repeater network			111,233				108,841
Leasehold improvements			43,483				43,480
Broadcast studio equipment			50,322				49,965
Capitalized software and hardware			146,785				146,035
Satellite telemetry, tracking and control facilities			56,011				55,965
Furniture, fixtures, equipment and other			62,703				57,536
Land			38,411				38,411
Building			56,435				56,424
Construction in progress			479,514				430,543
Total property and equipment			2,739,666				2,667,932
Accumulated depreciation and amortization			(1,009,525	)			(956,929	)
Property and equipment, net		$	1,730,141			$	1,711,003

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

          Construction in progress consists of the following:

		March 31,				December 31,
		2010				2009
Satellite system		$	447,747			$	398,425
Terrestrial repeater network			17,194				19,396
Other			14,573				12,722
Construction in progress		$	479,514			$	430,543

          Depreciation and amortization expense on property and equipment was $52,969 and $61,937 for the three months ended March 31, 2010 and 2009, respectively.

     Satellites

          SIRIUS’ original three orbiting satellites were successfully launched in 2000. Our spare SIRIUS satellite was delivered to ground storage in 2002. SIRIUS’ original three-satellite constellation and terrestrial repeater network were placed into service in 2002. In June 2009, SIRIUS launched a fourth satellite into a geostationary orbit and placed it into service in August 2009 along with SIRIUS’ other three non-geostationary orbiting satellites.

          SIRIUS has an agreement with Space Systems/Loral for the design and construction of a sixth SIRIUS satellite (“FM-6”). In January 2008, SIRIUS entered into an agreement with International Launch Services (“ILS”) to secure a satellite launch on a Proton rocket.

          XM owns four orbiting satellites; XM-1 and XM-2 serve as in-orbit spares while XM-3 and XM-4 currently transmit the XM signal. The XM satellites were launched in March 2001, May 2001, February 2005 and October 2006, respectively. Space Systems/Loral has constructed a fifth satellite, XM-5, for use in the XM system. In October 2009, we entered into an agreement with ILS to secure a satellite launch for XM-5 on a Proton rocket.

          During the three months ended March 31, 2010, we capitalized interest and expenses related to the build out and launch vehicle of the FM-6 and XM-5 satellites to be launched in the future.

(9) Related Party Transactions

          We had the following related party transaction balances at March 31, 2010 and December 31, 2009:

		Related party								Related party								Related party								Related party								Current maturies of related								Related party
		current assets								long-term assets								current liabilities								long-term liabilities								party long-term debt								long-term debt
		March 31,				December 31,				March 31,				December 31,				March 31,				December 31,				March 31,				December 31,				March 31,				December 31,				March 31,				December 31,
		2010				2009				2010				2009				2010				2009				2010				2009				2010				2009				2010				2009
Liberty Media		$	59			$	-			$	2,102			$	1,974			$	6,561			$	8,523			$	-			$	-			$	54,874			$	-			$	356,895			$	263,579
SIRIUS Canada			3,947				2,327				-				-				-				-				-				-				-				-				-				-
XM Canada			1,201				1,011				27,613				24,429				2,775				2,775				26,599				28,793				-				-				-				-
General Motors			101,105				99,995				78,030				85,364				55,132				93,107				-				17,508				-				-				-				-
American Honda			2,141				2,914				-				-				4,079				3,841				-				-				-				-				-				-
Total		$	108,453			$	106,247			$	107,745			$	111,767			$	68,547			$	108,246			$	26,599			$	46,301			$	54,874			$	-			$	356,895			$	263,579

     Liberty Media

          On February 17, 2009, we entered into an Investment Agreement (the “Investment Agreement”) with an affiliate of Liberty Media Corporation, Liberty Radio, LLC (collectively, “Liberty Media”). Pursuant to the Investment Agreement, in March 2009 we issued to Liberty Radio, LLC 12,500,000 shares of our Convertible Perpetual Preferred Stock, Series B (the “Series B Preferred Stock”) with a liquidation preference of $0.001 per share in partial consideration for certain loan investments. Liberty Media has representatives on our board of directors.

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

          The Series B Preferred Stock is convertible into approximately 40% of our outstanding shares of common stock (after giving effect to such conversion). Liberty Media has agreed not to acquire more than 49.9% of our outstanding common stock prior to March 2012 except that Liberty Media may acquire more than 49.9% of our outstanding common stock at any time after March 2011 pursuant to any cash tender offer for all of the outstanding shares of our common stock that are not beneficially owned by Liberty Media or its affiliates at a price per share greater than the closing price of the common stock on the trading day preceding the earlier of the public announcement or commencement of such tender offer. The Investment Agreement also provides for certain other standstill provisions during such three year period.

          Liberty Media has advised us that as of March 31, 2010 and December 31, 2009, respectively, it owned the following principal amounts of our debt, excluding discounts of $17,452 and $15,642, respectively:

		March 31,				December 31,
		2010				2009
9⅝% Senior Notes due 2013		$	55,221			$	55,221
8.75% Senior Notes due 2015			150,000				-
9.75% Senior Secured Notes due 2015			50,000				50,000
11.25% Senior Secured Notes due 2013			87,000				87,000
13% Senior Notes due 2013			76,000				76,000
7% Exchangeable Senior Subordinated Notes due 2014			11,000				11,000
Total		$	429,221			$	279,221

          As of March 31, 2010 and December 31, 2009, we recorded $6,561 and $8,523, respectively, related to accrued interest with Liberty Media to Related party current liabilities. We recognized Interest expense related to Liberty Media of $9,062 and $11,741 for the three months ended March 31, 2010 and 2009, respectively.

     SIRIUS Canada

          In 2005, SIRIUS entered into a license and services agreement with SIRIUS Canada. Pursuant to such agreement, SIRIUS is reimbursed for certain costs incurred to provide SIRIUS Canada service, including certain costs incurred for the production and distribution of radios, as well as information technology support costs. In consideration for the rights granted pursuant to this license and services agreement, SIRIUS has the right to receive a royalty equal to a percentage of SIRIUS Canada’s gross revenues based on subscriber levels (ranging between 5% to 15%) and the number of Canadian-specific channels made available to SIRIUS Canada. SIRIUS’ investment in SIRIUS Canada is primarily non-voting shares which carry an 8% cumulative dividend.

          We recorded the following revenue from SIRIUS Canada in connection with the agreement above. Royalty income is included in Other revenue and dividend income is included in Interest and investment income (loss) in our unaudited consolidated statements of operations:

		For the Three Months
		Ended March 31,
		2010				2009
Royalty income		$	1,676			$	844
Dividend income			226				125
Total revenue from SIRIUS Canada		$	1,902			$	969

          Receivables recorded relating to royalty income and dividend income were fully utilized to absorb a portion of our proportionate share of net losses generated by SIRIUS Canada during the three months ended March 31, 2010. Total costs that have been or will be reimbursed by SIRIUS Canada for the three months ended March 31, 2010 and 2009 were $2,441 and $1,998, respectively.

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

     XM Canada

          In 2005, XM entered into agreements to provide XM Canada with the right to offer XM satellite radio service in Canada. The agreements have an initial term of ten years and XM Canada has the unilateral option to extend the term of the agreements for an additional five years. XM receives a 15% royalty for all subscriber fees earned by XM Canada each month for its basic service and an activation fee for each gross activation of an XM Canada subscriber on XM’s system. XM Canada is obligated to pay XM a total of $71,800 for the rights to broadcast and market National Hockey League (“NHL”) games for a 10-year term.

          The estimated fair value of deferred revenue from XM Canada as of the Merger date was approximately $34,000, and is amortized on a straight-line basis over the expected term of the agreements. As of March 31, 2010 and December 31, 2009, the carrying value of Deferred revenue related to XM Canada was $29,374 and $31,568, respectively.

          XM has extended a Cdn$45,000 standby credit facility to XM Canada, which can be utilized to purchase terrestrial repeaters or finance royalty and activation fees. The facility matures on December 31, 2012 and bears interest at 17.75% per annum. XM has the right to convert unpaid principal amounts into Class A subordinate voting shares of XM Canada at the price of Cdn$16.00 per share. As of March 31, 2010 and December 31, 2009, amounts drawn by XM Canada on this facility in lieu of payment of fees recorded in Related party long-term assets were $20,824 and $18,429, respectively. The balance as of March 31, 2010 included a $726 valuation allowance related to the equity net loss from our investment in XM Canada shares.

          As of March 31, 2010 and December 31, 2009, amounts due from XM Canada also included $6,789 and $6,000, respectively, attributable to deferred programming costs and accrued interest (in addition to the amounts drawn on the standby credit facility), all of which is reported as Related party long-term assets.

          We recorded the following revenue from XM Canada as Other revenue in our unaudited consolidated statements of operations, in connection with the agreements above:

		For the Three Months
		Ended March 31,
		2010				2009
Amortization of XM Canada deferred income		$	694			$	694
Subscriber and activation fee royalties			2,347				114
Licensing fee revenue			1,500				1,500
Advertising reimbursements			333				367
Total revenue from XM Canada		$	4,874			$	2,675

     General Motors and American Honda

          XM has a long-term distribution agreement with General Motors Company (“GM”). GM has a representative on our board of directors and is considered a related party. Mr. Huber is not standing for reelection at our Annual Meeting of Stockholders scheduled for May 27, 2010, and GM will no longer be a related party following his term as a director. During the term of the agreement, GM has agreed to distribute the XM service. XM subsidizes a portion of the cost of XM radios and makes incentive payments to GM when the owners of GM vehicles with installed XM radios become subscribers to XM’s service. XM also shares with GM a percentage of the subscriber revenue attributable to GM vehicles with installed XM radios. As part of the agreement, GM provides certain call-center related services directly to XM subscribers who are also GM customers for which we reimburse GM.

          XM makes bandwidth available to OnStar Corporation for audio and data transmissions to owners of XM-enabled GM vehicles, regardless of whether the owner is an XM subscriber. OnStar’s use of XM’s bandwidth must be in compliance with applicable laws, must not compete or adversely interfere with XM’s business, and must meet XM’s quality standards. XM also granted to OnStar a certain amount of time to use XM’s studios on an annual basis and agreed to provide certain audio content for distribution on OnStar’s services.

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

          XM has an agreement to make a certain amount of its bandwidth available to American Honda. American Honda has a representative on our board of directors and is considered a related party. Mr. Mendel is not standing for reelection at our Annual Meeting of Stockholders scheduled for May 27, 2010, and American Honda will no longer be a related party following his term as a director. American Honda’s use of XM’s bandwidth must be in compliance with applicable laws, must not compete or adversely interfere with XM’s business, and must meet XM’s quality standards. This agreement remains in effect so long as American Honda holds a certain amount of its investment in us. XM makes incentive payments to American Honda for each purchaser of a Honda or Acura vehicle that becomes a self-paying XM subscriber and shares with American Honda a portion of the subscriber revenue attributable to Honda and Acura vehicles with installed XM radios.

          We recorded the following total revenue from GM and American Honda, primarily consisting of subscriber revenue, in connection with the agreements above:

		For the Three Months
		Ended March 31,
		2010				2009
GM		$	7,764			$	6,992
American Honda			2,887				2,832
Total		$	10,651			$	9,824

          We have incurred the following expenses with GM and American Honda:

		For the Three Months Ended March 31,
		2010								2009
						American								American
		GM				Honda				GM				Honda
Sales and marketing		$	7,799			$	-			$	8,094			$	-
Revenue share and royalties			9,067				1,831				17,674				1,435
Subscriber acquisition costs			10,487				1,226				9,261				1,331
Customer service and billing			75				-				90				-
Interest expense, net of amounts capitalized			1,421				-				336				-
Total		$	28,849			$	3,057			$	35,455			$	2,766

(10) Restricted Cash and Investments

          Restricted cash and investments consist of the following:

		March 31,				December 31,
		2010				2009
Investment in SIRIUS Canada		$	-			$	-
Investment in XM Canada			-				2,390
Investment in XM Canada debentures			3,169				2,970
Auction rate certificates			-				8,556
Restricted cash and investments			537,625				3,400
Total restricted cash and investments		$	540,794			$	17,316

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

     Canadian Entities

          Our investments in SIRIUS Canada and XM Canada (“the Canadian Entities”) are recorded using the equity method since we have a significant influence, but do not control the Canadian Entities. Under this method, our investments in the Canadian Entities, originally recorded at cost, are adjusted quarterly to recognize our proportionate share of net earnings or losses as they occur, rather than at the time dividends or other distributions are received, limited to the extent of our investment in, advances to and commitments to fund the Canadian Entities. We have a 49.9% economic interest in SIRIUS Canada and a 23.33% economic interest in XM Canada.

          Our share of net earnings or losses of the Canadian Entities is recorded to Interest and investment income (loss) in our unaudited consolidated statements of operations. As it relates to XM Canada, this is done on a one month lag. We evaluate the Canadian Entities periodically and record an impairment charge to Interest and investment income (loss) in our unaudited consolidated statements of operations if we determine that decreases in fair value are considered to be other than temporary. In addition, any payments received from the Canadian Entities in excess of the carrying value of our investments in, advances and commitments to such entity is recorded to Interest and investment income (loss) in our unaudited consolidated statements of operations.

          We recorded the following amounts to Interest and investment income (loss):

          In addition, during the three months ended March 31, 2010, we recorded $35 as a foreign exchange gain to Accumulated other comprehensive loss, net of tax, related to our investment in XM Canada.

          XM holds an investment in Cdn$4,000 face value of 8% convertible unsecured subordinated debentures issued by XM Canada, for which the embedded conversion feature is bifurcated from the host contract. The host contract is accounted for at fair value as an available-for-sale security with changes in fair value recorded to Accumulated other comprehensive loss, net of tax. The embedded conversion feature is accounted for at fair value as a derivative with changes in fair value recorded in earnings as Interest and investment income (loss). As of March 31, 2010, the carrying values of the host contract and embedded derivative related to our investment in the debentures was $3,164 and $5, respectively. As of December 31, 2009, the carrying values of the host contract and embedded derivative related to our investment in the debentures was $2,961 and $9, respectively.

     Auction Rate Certificates

          Auction rate certificates are long-term securities structured to reset their coupon rates by means of an auction. We accounted for our investment in auction rate certificates as available-for-sale securities. In January 2010, our investment in the auction rate certificates was called by the issuer at par plus accrued interest, or $9,456, resulting in a gain of $425 in the three months ended March 31, 2010.

     Restricted Cash and Investments

          As of March 31, 2010, restricted cash included $534,225 of proceeds from the issuance of our 8.75% Senior Notes due 2015 on March 12, 2010 which were used to repay in full our obligations under the 9⅝% Senior Notes due 2013 on April 16, 2010.

          Restricted investments relate to deposits placed into escrow for the benefit of third parties pursuant to programming agreements and reimbursement obligations under letters of credit issued for the benefit of lessors of office space. As of March 31, 2010 and December 31, 2009, Long-term restricted investments were $3,400 and $3,400, respectively.

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

(11) Debt

          Our debt consists of the following:

SIRIUS Debt

     (a) 3¹/4% Convertible Notes due 2011

          In October 2004, SIRIUS issued $230,000 in aggregate principal amount of 3¹/4% Convertible Notes due 2011 (the “3¹/4% Notes”), which are convertible, at the option of the holder, into shares of our common stock at any time at a conversion rate of 188.6792 shares of common stock for each $1,000 principal amount, or $5.30 per share of common stock, subject to certain adjustments. The 3¹/4% Notes mature on October 15, 2011 and interest is payable semi-annually on April 15 and October 15 of each year. The obligations under the 3¹/4% Notes are not secured by any of our assets.

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

     (b) Senior Secured Term Loan due 2012

          In June 2007, SIRIUS entered into a term credit agreement with a syndicate of financial institutions. The term credit agreement provided for a senior secured term loan (the “Senior Secured Term Loan”) of $250,000, which was fully drawn. Interest under the Senior Secured Term Loan was based, at our option, on (i) adjusted LIBOR plus 2.25% or (ii) the higher of (a) the prime rate and (b) the Federal Funds Effective Rate plus ¹/2 of 1.00%, plus 1.25%. On March 16, 2010, we used net proceeds of $244,714 from the sale of our 8.75% Senior Notes due 2015 to repay the Senior Secured Term Loan. This amount included accrued and unpaid interest of $339. We recorded an aggregate loss on extinguishment on the Senior Secured Term Loan of $2,450 consisting of deferred financing fees to Loss on extinguishment of debt and credit facilities, net, in our unaudited consolidated statements of operations.

     (c) 9⅝% Senior Notes due 2013

          In August 2005, SIRIUS issued $500,000 in aggregate principal amount of 9⅝% Senior Notes due 2013 (the “9⅝% Notes”). The obligations under the 9⅝% Notes were not secured by any of our assets. On April 16, 2010, we used net proceeds of $534,091 from the sale of our 8.75% Senior Notes due 2015 to redeem the 9⅝% Notes. This amount included accrued and unpaid interest of $10,026 and a repayment premium of $24,065. We will record in the second quarter of 2010, an aggregate loss on extinguishment on the 9⅝% Notes of $27,705 consisting primarily of unamortized discount, deferred financing fees and repayment premium to Loss on extinguishment of debt and credit facilities, net, in our unaudited consolidated statements of operations.

     (d) 8.75% Senior Notes due 2015

          In March 2010, SIRIUS issued $800,000 aggregate principal amount of 8.75% Senior Notes due 2015 (the “8.75% Notes”). Interest is payable semi-annually in arrears on April 1 and October 1 of each year, commencing on October 1, 2010, at a rate of 8.75% per annum. The 8.75% Notes mature on April 1, 2015. The 8.75% Notes were issued for $786,000, resulting in an aggregate original issuance discount of $14,000. Certain of the domestic wholly-owned subsidiaries of SIRIUS guarantee SIRIUS’ obligations under the 8.75% Notes on a senior unsecured basis. SIRIUS operates XM as an unrestricted subsidiary under the 8.75% Notes indenture.

     (e) 9.75% Senior Secured Notes due 2015

          In August 2009, SIRIUS issued $257,000 aggregate principal amount of 9.75% Senior Secured Notes due 2015 (the “9.75% Notes”). Interest is payable semi-annually in arrears on March 1 and September 1 of each year at a rate of 9.75% per annum. The 9.75% Notes mature on September 1, 2015. The 9.75% Notes were issued for $244,292, resulting in an aggregate original issuance discount of $12,708.

          Certain of the domestic subsidiaries of SIRIUS guarantee SIRIUS’ obligations under the 9.75% Notes. The 9.75% Notes and related guarantees are secured by first-priority liens on substantially all of the assets of SIRIUS and the guarantors other than certain excluded assets (including cash, accounts receivable and certain inventory). SIRIUS operates XM as an unrestricted subsidiary under the 9.75% Notes indenture.

XM Debt

     (f) 10% Senior PIK Secured Notes due 2011

          XM has outstanding $113,685 aggregate principal amount of 10% Senior PIK Secured Notes due 2011 (the “PIK Notes”). Interest is payable on the PIK Notes semi-annually in arrears on June 1 and December 1 of each year at a rate of 10% per annum paid in cash from December 1, 2008 to December 1, 2009; at a rate of 10% per annum paid in cash and 2% per annum paid in kind from December 1, 2009 to December 1, 2010; and at a rate of 10% per annum paid in cash and 4% per annum paid in kind from December 1, 2010 to the maturity date.

          The PIK Notes are fully and unconditionally guaranteed by XM 1500 Eckington LLC and XM Investment LLC (together, the “Subsidiary Guarantors”) and are secured by a first-priority lien on substantially all of the property of the Subsidiary Guarantors.

          On April 28, 2010, we announced XM’s redemption of all of its outstanding PIK Notes, at a price of 100% plus accrued interest on June 1, 2010. We will recognize an aggregate loss on extinguishment of the PIK Notes of $4,138 in the second quarter of 2010, consisting primarily of unamortized discount, as a Loss on extinguishment of debt and credit facilities, net, in our unaudited consolidated statements of operations.

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

     (g) 11.25% Senior Secured Notes due 2013

          In June 2009, XM issued $525,750 aggregate principal amount of 11.25% Senior Secured Notes due 2013 (the “11.25% Notes”). Interest is payable semi-annually in arrears on June 15 and December 15 of each year at a rate of 11.25% per annum. The 11.25% Notes mature on June 15, 2013. The 11.25% Notes were issued for $488,398, resulting in an aggregate original issuance discount of $37,352.

          Substantially all the domestic subsidiaries of XM guarantee XM’s obligations under the 11.25% Notes. The 11.25% Notes and related guarantees are secured by first-priority liens on substantially all of the assets of XM and the guarantors.

     (h) 13% Senior Notes due 2013

          In July 2008, XM issued $778,500 aggregate principal amount of 13% Senior Notes due 2013 (the “13% Notes”). Interest is payable semi-annually in arrears on February 1 and August 1 of each year at a rate of 13% per annum. The 13% Notes are unsecured and mature on August 1, 2013. Substantially all the domestic subsidiaries of XM guarantee XM’s obligations under the 13% Notes.

     (i) 9.75% Senior Notes due 2014

          XM has outstanding $5,260 aggregate principal amount of 9.75% Senior Notes due 2014 (the “XM 9.75% Notes”). Interest on the XM 9.75% Notes is payable semi-annually on May 1 and November 1 at a rate of 9.75% per annum. The XM 9.75% Notes are unsecured and mature on May 1, 2014. XM, at its option, may redeem the XM 9.75% Notes at declining redemption prices at any time on or after May 1, 2010, subject to certain restrictions. Prior to May 1, 2010, XM may redeem the XM 9.75% Notes, in whole or in part, at a price equal to 100% of the principal amount thereof, plus a make-whole premium and accrued and unpaid interest to the date of redemption. Substantially all the domestic subsidiaries of XM guarantee XM’s obligations under the XM 9.75% Notes.

          In March 2009, XM executed and delivered a Third Supplemental Indenture (the “XM 9.75% Notes Supplemental Indenture”). The XM 9.75% Notes Supplemental Indenture amended the indenture to eliminate substantially all of the restrictive covenants, eliminated certain events of default and modified or eliminated certain other provisions contained in the indenture and the XM 9.75% Notes.

     (j) 7% Exchangeable Senior Subordinated Notes due 2014

          In August 2008, XM issued $550,000 aggregate principal amount of 7% Exchangeable Senior Subordinated Notes due 2014 (the “Exchangeable Notes”). The Exchangeable Notes are senior subordinated obligations of XM and rank junior in right of payment to its existing and future senior debt and equally in right of payment with its existing and future senior subordinated debt. Substantially all the domestic subsidiaries of XM have guaranteed the Exchangeable Notes on a senior subordinated basis.

          The Exchangeable Notes are not guaranteed by SIRIUS or Satellite CD Radio, Inc. Interest is payable semi-annually in arrears on June 1 and December 1 of each year at a rate of 7% per annum. The Exchangeable Notes mature on December 1, 2014. The Exchangeable Notes are exchangeable at any time at the option of the holder into shares of our common stock at an initial exchange rate of 533.3333 shares of common stock per $1,000 principal amount of Exchangeable Notes, which is equivalent to an approximate exchange price of $1.875 per share of common stock.

     Covenants and Restrictions

          Our debt generally requires compliance with certain financial covenants, that restrict our ability to, among other things, (i) incur additional indebtedness unless our consolidated leverage ratio would be no greater than 6.00 to 1 pro forma for the incurrence, (ii) incur liens, (iii) pay dividends or make certain other restricted payments, investments or acquisitions, (iv) enter into certain transactions with affiliates, (v) merge or consolidate with another person, (vi) sell, assign, lease or otherwise dispose of all or substantially all of our assets, and (vii) make voluntary prepayments of certain debt, in each case subject to exceptions. SIRIUS operates XM as an unrestricted subsidiary for purposes of compliance with the covenants contained in its debt instruments.

          Under our debt agreements, the following generally constitute an event of default: (1) a default in the payment of interest; (2) a default in the payment of principal; (3) failure to comply with covenants; (4) failure to pay other indebtedness after final maturity or acceleration of other indebtedness exceeding a specified amount; (5) certain events of bankruptcy; (6) judgment for payment of money exceeding a specified aggregate amount; (7) voidance of subsidiary guarantees, subject to grace periods where applicable. If an event of default occurs and is continuing, our debt could become immediately due and payable.

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

          At March 31, 2010, we were in compliance with all our debt covenants.

(12) Stockholders’ Equity

       Common Stock, par value $0.001 per share

          We were authorized to issue up to 9,000,000,000 shares of common stock as of March 31, 2010 and December 31, 2009. There were 3,885,195,021 and 3,882,659,087 shares of common stock issued and outstanding as of March 31, 2010 and December 31, 2009, respectively.

          As of March 31, 2010, approximately 3,636,270,000 shares of common stock were reserved for issuance in connection with outstanding convertible debt, preferred stock, warrants, incentive stock awards and common stock to be granted to third parties upon satisfaction of performance targets.

          To facilitate the offering of the Exchangeable Notes, we entered into share lending agreements with Morgan Stanley Capital Services Inc. (“MS”) and UBS AG London Branch (“UBS”) in July 2008 under which we loaned MS and UBS an aggregate of 262,400,000 shares of our common stock in exchange for a fee of $.001 per share. The obligations of MS to us under its share lending agreement are guaranteed by its parent company, Morgan Stanley. During the third quarter of 2009, MS returned to us 60,000,000 shares of our common stock borrowed in July 2008. The returned shares were retired upon receipt. As of March 31, 2010, there were 202,400,000 shares on loan under the facilities.

          Under each share lending agreement, the share loan will terminate in whole or in part, as the case may be, and the relevant borrowed shares must be returned to us upon the earliest of the following: (i) the share borrower terminates all or a portion of the loan between it and us, (ii) we notify the share borrower that some of the Exchangeable Notes as to which borrowed shares relate have been exchanged, repaid or repurchased or are otherwise no longer outstanding, (iii) the maturity date of the Exchangeable Notes, December 1, 2014, (iv) the date as of which the entire principal amount of the Exchangeable Notes ceases to be outstanding as a result of exchange, repayment, repurchase or otherwise or (v) the termination of the share lending agreement by the share borrower or by us upon default by the other party, including the bankruptcy of us or the share borrower or, in the case of the MS share lending agreement, the guarantor. A share borrower may delay the return of borrowed shares for up to 30 business days (or under certain circumstances, up to 60 business days) if such share borrower is legally prevented from returning the borrowed shares to us, in which case the share borrower may, under certain circumstances, choose to pay us the value of the borrowed shares in cash instead of returning the borrowed shares. Once borrowed shares are returned to us, they may not be re-borrowed under the share lending agreements. There were no requirements for the share borrowers to provide collateral.

          The shares we loaned to the share borrowers are issued and outstanding for corporate law purposes, and holders of borrowed shares (other than the share borrowers) have the same rights under those shares as holders of any of our other outstanding common shares. Under GAAP as currently in effect, however, the borrowed shares are not considered outstanding for the purpose of computing and reporting our net income (loss) per common share. The accounting method may change if, due to a default by either UBS or MS (or Morgan Stanley, as guarantor), the borrowed shares, or the equivalent value of those shares, will not be returned to us as required under the share lending agreements.

          In January 2004, SIRIUS signed a seven-year agreement with a sports programming provider. Upon execution of this agreement, SIRIUS delivered 15,173,070 shares of common stock valued at $40,967 to that programming provider. These shares of common stock are subject to transfer restrictions which lapse over time. We recognized expense associated with these shares of $1,641 in each of the three months ended March 31, 2010 and 2009, respectively. As of March 31, 2010, there was a $5,779 remaining balance of common stock value included in Other current assets. As of December 31, 2009, there was a $7,420 remaining balance of common stock value included in Other current assets and Other long-term assets in the amount of $5,852 and $1,568, respectively.

       Preferred Stock, par value $0.001 per share

          We were authorized to issue up to 50,000,000 shares of undesignated preferred stock as of March 31, 2010 and December 31, 2009. There were 24,808,959 shares of Series A Convertible Preferred Stock (“Series A Preferred Stock”) issued and outstanding as of March 31, 2010 and December 31, 2009. There were 12,500,000 shares of Convertible Perpetual Preferred Stock, Series B (the “Series B Preferred Stock”), issued and outstanding as of March 31, 2010 and December 31, 2009. There were no shares of Preferred Stock, Series C Junior (the “Series C Junior Preferred Stock”), issued and outstanding as of March 31, 2010 and December 31, 2009.

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

          The Series A Preferred Stock is redeemable at the option of the holder at any time for an equal number of shares of our common stock.

          The Series B Preferred Stock is convertible into shares of our common stock at the rate of 206.9581409 shares of common stock for each share of Series B Preferred Stock, representing approximately 40% of our outstanding shares of common stock (after giving effect to such conversion). As the holder of the Series B Preferred Stock, Liberty Radio LLC is entitled to a number of votes equal to the number of shares of our common stock into which each such Series B Preferred Stock share is convertible. Liberty Radio LLC will also receive dividends and distributions ratably with our common stock, on an as-converted basis. With respect to dividend rights, the Series B Preferred Stock ranks evenly with our common stock, the Series A Preferred Stock, and each other class or series of our equity securities not expressly provided as ranking senior to the Series B Preferred Stock. With respect to liquidation rights, the Series B Preferred Stock ranks evenly with each other class or series of our equity securities not expressly provided as ranking senior to the Series B Preferred Stock, and will rank senior to our common stock and the Series A Preferred Stock.

          In 2009, we accounted for the issuance of Series B Preferred Stock by recording a $227,716 increase to additional paid-in capital for the amount of allocated proceeds received and an additional $186,188 increase to paid-in capital for the beneficial conversion feature, which was recognized as a charge to retained earnings.

          In 2009, our board of directors created and reserved for issuance in accordance with the Rights Plan (as described below) 9,000 shares of the Series C Junior Preferred Stock. The shares of Series C Junior Preferred Stock are not redeemable and rank, with respect to the payment of dividends and the distribution of assets, junior to all other series of our preferred stock, unless the terms of such series shall so provide.

       Warrants

          We have issued warrants to purchase shares of common stock in connection with distribution and programming agreements, satellite purchase agreements and certain debt issuances. As of March 31, 2010, approximately 46,946,000 warrants to acquire an equal number of shares of common stock with an average exercise price of $3.00 per share were outstanding. Warrants vest over time or upon the achievement of milestones and expire at various times through 2015. We recognized aggregate warrant related expense of $0 and $2,522 for the three months ended March 31, 2010 and 2009, respectively.

       Rights Plan

          In April 2009, our board of directors adopted a rights plan. The terms of the rights and the rights plan are set forth in a Rights Agreement dated as of April 29, 2009 (the “Rights Plan”). The Rights Plan is intended to act as a deterrent to any person or group acquiring 4.9% or more of our outstanding common stock (assuming for purposes of this calculation that all of our outstanding convertible preferred stock is converted into common stock) without the approval of our board of directors.

          The Rights Plan will continue in effect until August 1, 2011, unless it is terminated or redeemed earlier by our board of directors. We will submit the Rights Plan to a stockholder vote at our Annual Meeting of Stockholders scheduled for May 27, 2010, and the failure to obtain this approval will result in a termination of the Rights Plan.

(13) Benefits Plans

          We maintain five share-based benefits plans. We satisfy awards and options granted under these plans through the issuance of new shares. We recognized share-based payment expense of $17,182 and $20,179 for the three months ended March 31, 2010 and 2009, respectively. We did not realize any income tax benefits from share-based benefits plans during the three months ended March 31, 2010 and 2009, as a result of a full valuation allowance that is maintained for substantially all net deferred tax assets.

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

     2009 Long-Term Stock Incentive Plan

          In May 2009, our stockholders approved the Sirius XM Radio Inc. 2009 Long-Term Stock Incentive Plan (the “2009 Plan”). Employees, consultants and members of our board of directors are eligible to receive awards under the 2009 Plan. The 2009 Plan provides for the grant of stock options, restricted stock, restricted stock units and other stock-based awards that the compensation committee of our board of directors may deem appropriate. Vesting and other terms of stock-based awards are set forth in the agreements with the individuals receiving the awards. Stock-based awards granted under the 2009 Plan are generally subject to a vesting requirement. Stock-based awards generally expire ten years from the date of grant. Each restricted stock unit entitles the holder to receive one share of common stock upon vesting. As of March 31, 2010, approximately 263,063,000 shares of common stock were available for future grants under the 2009 Plan.

       Other Plans

          SIRIUS and XM maintain four other share-based benefit plans — the XM 2007 Stock Incentive Plan, the Amended and Restated Sirius Satellite Radio 2003 Long-Term Stock Incentive Plan, the XM 1998 Shares Award Plan and the XM Talent Option Plan. These plans generally provide for the grant of stock options, restricted stock, restricted stock units and other stock-based awards. No further awards may be made under these plans. Outstanding awards under these plans are being continued.

          The following table summarizes the weighted-average assumptions used to compute the fair value of options granted to employees and members of our board of directors during the three months ended March 31, 2010 and 2009:

          There were no options granted during the three months ended March 31, 2009.

          The following table summarizes the range of assumptions used to compute the fair value of options granted to third parties, other than non-employee members of our board of directors, during the three months ended March 31, 2010 and 2009:

          There were no options granted during the three months ended March 31, 2010.

          The following table summarizes stock option activity under our share-based payment plans for the three months ended March 31, 2010 (shares in thousands):

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

          The weighted average grant date fair value of options granted during the three months ended March 31, 2010 and 2009 was $0.46 and $0, respectively. The total intrinsic value of stock options exercised during the three months ended March 31, 2010 and 2009 was $0 as no options were exercised in either period.

          We recognized share-based payment expense associated with stock options of $10,528 and $12,255 for the three months ended March 31, 2010 and 2009, respectively.

          The following table summarizes the nonvested restricted stock and restricted stock unit activity under our share-based payment plans for the three months ended March 31, 2010 (shares in thousands):