XM Satellite Radio 10-Q/A 2007 Q1 Quarterly report (amended)

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period Ended March 31, 2007

Commission File Number	Exact name of Registrant As Specified in its Charter	I.R.S. Employer Identification Number
000-27441	XM SATELLITE RADIO HOLDINGS INC.	54-1878819
333-39178	XM SATELLITE RADIO INC.	52-1805102

DELAWARE

(State or other jurisdiction of incorporation or organization of both registrants)

1500 ECKINGTON PLACE, NE

WASHINGTON, DC 20002-2194

(Address of principal executive offices) (Zip code)

202-380-4000

(Registrants’ telephone number, including area code)

Indicate by check mark whether each 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  x    No  ¨

Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

XM Satellite Radio Holdings Inc.	Large Accelerated Filer  x	Accelerated Filer  ¨	Non-Accelerated Filer  ¨
XM Satellite Radio Inc.	Large Accelerated Filer  ¨	Accelerated Filer  ¨	Non-Accelerated Filer  x

Indicate by check mark whether each registrant is a shell company (as defined in Exchange Act Rule 12b- 2).    Yes  ¨    No  x

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 March 31, 2007)
XM SATELLITE RADIO HOLDINGS INC. CLASS A COMMON STOCK, $0.01 PAR VALUE	306,082,407
XM SATELLITE RADIO INC. COMMON STOCK, $0.10 PAR VALUE (all shares are issued to XM Satellite Radio Holdings Inc.)	125

EXPLANATORY NOTE

In this Amendment No. 1 on Form 10-Q/A to the quarterly report on Form 10-Q for the quarter ended March 31, 2007, XM Satellite Radio Holdings Inc. (the “Company”, “Holdings”, or “XM”) and XM Satellite Radio Inc. (“Inc.”) are amending Note 6 of the “Notes to the Unaudited Condensed Consolidated Financial Statements” to delete references to a third party appraiser in the disclosure relating to the Company’s satellite sale-leaseback transaction. This deletion is in response to a comment from the Securities and Exchange Commission staff requiring the Company to either delete the references to a third party appraiser or name and obtain the consent of the appraiser. Other than this change to Note 6, this Amendment does not modify or update any of the financial statements or other disclosure presented in the originally filed Form 10-Q. This Amendment continues to speak as of the date of the original report, and we have not updated the disclosures to reflect any events that have occurred subsequent to that date.

FORWARD-LOOKING STATEMENTS

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: This Form 10-Q contains forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Without limitation, the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “will” and similar expressions are intended to identify forward-looking statements. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to growth, expected levels of expenditures and statements expressing general optimism about future operating results — are forward-looking statements. Similarly, statements that describe the Company’s business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. All such forward-looking statements including those presented elsewhere by our management from time to time are subject to certain risks and uncertainties that could cause actual results to differ materially from those in forward-looking statements. These risks and uncertainties include, but are not limited to, those described in Part I, “Item 1A. Risk Factors” of our Form 10-K for the year ended December 31, 2006 filed with the SEC on March 1, 2007. These cautionary statements should not be construed by you to be exhaustive and are made only as of the date of this filing. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

1

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three months ended March 31,
(in thousands, except share and per share data)	2007			2006
Revenue:
Subscription	$	236,486		$	188,102
Activation		4,654			3,579
Merchandise		5,297			3,551
Net ad sales		7,478			6,518
Other		10,197			6,216
Total revenue		264,112			207,966
Operating expenses:
Cost of revenue (excludes depreciation & amortization, shown below):
Revenue share & royalties		47,426			34,276
Customer care & billing operations(1)		27,928			22,455
Cost of merchandise		18,277			7,993
Ad sales(1)		3,385			3,356
Satellite & terrestrial(1)		13,882			13,049
Broadcast & operations:
Broadcast(1)		6,544			5,852
Operations(1)		9,716			8,887
Total broadcast & operations		16,260			14,739
Programming & content(1)		43,952			37,643
Total cost of revenue		171,110			133,511
Research & development (excludes depreciation & amortization, shown below)(1)		7,310			10,981
General & administrative (excludes depreciation & amortization, shown below)(1)		34,185			17,630
Marketing (excludes depreciation & amortization, shown below):
Retention & support(1)		9,756			8,047
Subsidies & distribution		43,602			55,473
Advertising & marketing		32,809			33,925
Marketing		86,167			97,445
Amortization of GM liability		6,504			9,313
Total marketing		92,671			106,758
Depreciation & amortization		46,882			39,882
Total operating expenses(1)		352,158			308,762
Operating loss		(88,046	)		(100,796	)

2

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS – (Continued)

	Three months ended March 31,
(in thousands, except share and per share data)	2007			2006
Other income (expense):
Interest income		3,544			6,573
Interest expense		(27,609	)		(33,236	)
Loss from de-leveraging transactions		(2,965	)		(18,380	)
Equity in net loss of affiliate		(5,425	)		(8,884	)
Minority interest		(1,697	)		—
Other income		444			4,634
Net loss before income taxes		(121,754	)		(150,089	)
(Provision for) benefit from deferred income taxes		(684	)		868
Net loss		(122,438	)		(149,221	)
8.25% Series B and C preferred stock dividend requirement		—			(2,149	)
Net loss attributable to common stockholders	$	(122,438	)	$	(151,370	)
Net loss per common share - basic and diluted	$	(0.40	)	$	(0.60	)
Weighted average shares used in computing net loss per common share - basic and diluted		305,877,670			253,213,066
(1)    These captions include non-cash stock-based compensation expense as follows:
	Three months ended March 31,
(in thousands)	2007			2006
Customer care & billing operations	$	440		$	86
Ad sales		356			428
Satellite & terrestrial		520			461
Broadcast		600			481
Operations		378			583
Programming & content		2,166			1,892
Research & development		1,726			1,457
General & administrative		6,048			5,061
Retention & support		1,897			1,612
Total stock-based compensation	$	14,131		$	12,061

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements.

3

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)	March 31, 2007			December 31, 2006
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	319,391		$	218,216
Accounts receivable, net of allowance for doubtful accounts of $5,240 and $4,946		54,914			62,293
Due from related parties		8,672			13,991
Related party prepaid expenses		71,021			66,946
Prepaid programming content		71,835			28,172
Prepaid and other current assets		42,818			43,040
Total current assets		568,651			432,658
Restricted investments		396			2,098
System under construction		138,760			126,049
Property and equipment, net of accumulated depreciation and amortization of $814,339 and $767,768		814,683			849,662
DARS license		141,387			141,387
Intangibles, net of accumulated amortization of $8,533 and $8,222		4,329			4,640
Deferred financing fees, net of accumulated amortization of $22,292 and $20,537		40,273			38,601
Related party prepaid expenses, net of current portion		155,388			160,712
Investments		75,015			80,592
Prepaid and other assets, net of current portion		4,282			4,219
Total assets	$	1,943,164		$	1,840,618
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	44,232		$	51,844
Accrued expenses		131,464			147,591
Accrued satellite liability		2,145			64,875
Accrued interest		34,704			18,482
Current portion of long-term debt		14,365			14,445
Due to related parties		48,805			46,459
Subscriber deferred revenue		358,974			340,711
Deferred income		9,915			9,915
Total current liabilities		644,604			694,322
Long-term debt, net of current portion		1,478,936			1,286,179
Subscriber deferred revenue, net of current portion		94,697			86,482
Deferred income, net of current portion		129,074			130,780
Other non-current liabilities		40,829			40,735
Total liabilities		2,388,140			2,238,498
Commitments and contingencies
Minority interest		59,397			—
Stockholders’ deficit:
Series A convertible preferred stock, par value $0.01 (liquidation preference of $51,370 at March 31, 2007 and December 31, 2006); 15,000,000 shares authorized, 5,393,252 shares issued and outstanding at March 31, 2007 and December 31, 2006		54			54
Class A common stock, par value $0.01; 600,000,000 shares authorized, 306,082,407 shares and 305,781,515 shares issued and outstanding at March 31, 2007 and December 31, 2006, respectively		3,061			3,058
Accumulated other comprehensive income, net of tax		3,545			3,590
Additional paid-in capital		3,109,881			3,093,894
Accumulated deficit		(3,620,914	)		(3,498,476	)
Total stockholders’ deficit		(504,373	)		(397,880	)
Total liabilities and stockholders’ deficit	$	1,943,164		$	1,840,618

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements.

4

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three months ended March 31,
(in thousands)	2007			2006
Cash flows from operating activities:
Net loss	$	(122,438	)	$	(149,221	)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for doubtful accounts		3,202			3,055
Depreciation and amortization		46,882			39,882
Amortization of deferred income related to XM Canada		(2,498	)		(2,523	)
Loss from de-leveraging transactions		2,965			18,380
Non-cash loss on equity in affiliate		5,425			8,884
Amortization of deferred financing fees and debt discount		2,602			14,769
Stock-based compensation		14,131			12,061
Provision for (benefit from) deferred income taxes		684			(868	)
Gain on sale of fixed assets		—			(4,378	)
Minority interest		1,697			—
Other		(39	)		187
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable		4,218			(4,550	)
Decrease (increase) in due from related parties		5,319			(2,392	)
Increase in prepaid programming content		(43,662	)		(17,646	)
Decrease in prepaid and other assets		1,408			9,157
Decrease in accounts payable, accrued expenses and other liabilities		(8,866	)		(113,826	)
Increase in accrued interest		16,222			14,682
Increase (decrease) in due to related parties		2,346			(9,327	)
Increase in subscriber deferred revenue		26,478			22,540
Decrease in deferred income		792			—
Net cash used in operating activities		(43,132	)		(161,134	)
Cash flows from investing activities:
Purchase of property and equipment		(24,872	)		(14,952	)
Additions to system under construction		(73,132	)		(22,225	)
Proceeds from sale of assets		—			6,997
Net maturity (purchase) of restricted investments		1,702			20
Net cash used in investing activities		(96,302	)		(30,160	)
Cash flows from financing activities:
Proceeds from exercise of warrants and stock options		1,857			3,135
Proceeds from sale-leaseback transaction		288,500			—
Payment of premiums on de-leveraging transactions		(2,965	)		—
Retirement of mortgages on corporate facilities		(38,877	)		—
Payments on other borrowings		(3,975	)		(2,012	)
Deferred financing costs		(3,931	)		—
Net cash provided by financing activities		240,609			1,123
Net increase (decrease) in cash and cash equivalents		101,175			(190,171	)
Cash and cash equivalents at beginning of period		218,216			710,991
Cash and cash equivalents at end of period	$	319,391		$	520,820

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements.

5

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) Nature of Business

XM Satellite Radio Inc. (“Inc.”) was incorporated on December 15, 1992 in the State of Delaware for the purpose of operating a digital audio radio service (“DARS”) under a license from the Federal Communications Commission (“FCC”). XM Satellite Radio Holdings Inc. (“Holdings”) was formed as a holding company for Inc. on May 16, 1997. The Company commenced commercial operations in two markets on September 25, 2001 and completed its national rollout on November 12, 2001.

As of March 31, 2007, the principal differences between the financial conditions of Holdings and Inc., were:

• the ownership by Holdings of the corporate headquarters and data center since August 2001 and September 2005, respectively, and the lease of these buildings to Inc.;

• XM-1, XM-2, and XM-3, except for the B702 bus portion of XM-3, are owned by Inc.; the transponders of XM-4, are owned by Satellite Leasing (702-4) LLT, a separate legal entity subject to consolidation by the Company and leased to Inc.; and XM-5 and the B702 bus portion of XM-3 and XM-4 are owned by Holdings;

• the presence at Holdings of additional indebtedness, primarily the 1.75% Convertible Senior Notes due 2009, not guaranteed by Inc.;

• the investments by Holdings in Canadian Satellite Radio (including related revenue and deferred income) and WorldSpace, Inc.; and

• the existence of cash balances at Holdings.

Accordingly, the results of operations for Inc. and its subsidiaries are substantially the same as the results for Holdings and its subsidiaries except that Inc. has:

• additional rent, less depreciation and amortization expense and less other income, in each case principally related to Inc.’s rental of its corporate headquarters and data center buildings from Holdings, which are intercompany transactions that have been eliminated in the consolidated Holdings financial statements;

• less interest expense principally related to the additional indebtedness at Holdings;

• less revenue associated with the amortization of deferred income and equity in losses from Holdings’ investment in Canadian Satellite Radio;

• no gains or losses on Holdings’ investments in Canadian Satellite Radio or WorldSpace, Inc.; and

• less interest income because of additional cash balances at Holdings.

Proposed Merger

On February 19, 2007, XM Satellite Radio Holdings Inc. (“XM”) and Sirius Satellite Radio Inc. (“Sirius”) entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which XM and Sirius will combine its businesses through a merger of XM and a newly formed, wholly owned subsidiary of Sirius (the “Merger”).

Each of XM and Sirius has made customary representations and warranties and covenants in the Merger Agreement. The completion of the Merger is subject to various closing conditions, including obtaining the approval of XM’s and Sirius’ stockholders and receiving certain regulatory and antitrust approvals (including from the Federal Communications Commission (“FCC”) and under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended).

XM filed a Notification and Report Form pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“the HSR Act”), with respect to the transactions contemplated by the Merger Agreement between XM and Sirius. On April 12, 2007, both XM and Sirius received from the Department of Justice requests for additional information and documentary material relating to the merger, generally referred to as a “Second Request.” The effect of the Second Request is to extend the waiting period imposed by the HSR Act until 30 days after XM and Sirius have substantially complied with the Second Request.

6

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

On March 20, 2007, XM and Sirius filed a Consolidated Application for Authority to Transfer Control with the FCC with respect to the Merger Agreement. XM and Sirius anticipate that the FCC will issue a public notice in the near future that sets a schedule to comment on the Merger. The public notice will trigger a comment period followed by a reply period.

(2) Summary of Significant Accounting Policies and Practices

Principles of Consolidation and Basis of Presentation

The unaudited Condensed Consolidated Financial Statements include the accounts of XM Satellite Radio Holdings Inc. and its subsidiaries. All significant intercompany transactions and accounts have been eliminated. In addition, the Company evaluates its relationships with other entities to identify whether they are variable interest entities as defined by Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 46(R),Consolidation of Variable Interest Entities, and to assess whether it is the primary beneficiary of such entities. If the determination is made that the Company is the primary beneficiary, then that entity is consolidated in the unaudited Condensed Consolidated Financial Statements in accordance with FIN No. 46(R). Beginning March 31, 2007, the Company reported a variable interest entity subject to consolidation by the Company pursuant to FIN No. 46(R). Satellite Leasing (702-4) LLT is a separate legal entity whose primary beneficiary, as defined under FIN No. 46(R), is the Company. Satellite Leasing (702-4) LLC, an entity solely owned by the equity investors in the transaction, will be entitled to the residual benefits, including ownership of the assets of the trust after repayment of the debt incurred by that entity.

The accompanying interim unaudited Condensed Consolidated Financial Statements have been prepared in conformity with United States generally accepted accounting principles. It is suggested that these interim unaudited Condensed Consolidated Financial Statements be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 filed with the SEC on March 1, 2007. All adjustments that, in the opinion of management, are necessary for a fair presentation of the periods presented have been reflected as required by Regulation S-X, Rule 10-01.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation. Amounts from Subsidies & distribution in the amount of $4.3 million were reclassified to Advertising & marketing related to on-going loyalty payments.

Restricted Investments

Restricted investments consist principally of certificates of deposits. During the three months ended March 31, 2007, the restricted investments which represented securities held in escrow on the Company’s buildings were redeemed and included in the total cash paid to retire the mortgage loans on the buildings. There were no gross unrealized holding gains or losses on these restricted investments at December 31, 2006.

Inventory

Inventories are stated at the lower of average cost or market. The Company provides estimated inventory allowances for excess, slow moving and obsolete inventory as well as inventory whose carrying value is in excess of net realizable value. Inventories consist of both finished goods and raw materials. The Company had $13.5 million and $17.0 million of net inventory at March 31, 2007 and December 31, 2006, respectively, which are included in Prepaid and other current assets on the Condensed Consolidated Balance Sheets.

During the three months ended March 31, 2007 and 2006, the Company recorded total inventory write-down charges of $5.2 million and $0, respectively, which charges are reflected in Cost of merchandise in the unaudited Condensed Consolidated Statements of Operations.

Investments

Investments in marketable equity securities of companies in which XM does not have a controlling interest or is unable to exert significant influence are accounted for at market value if the investments are publicly traded and resale restrictions of less than one year exist (“available-for-sale equity securities”). Unrealized holding gains and losses on marketable available-for-sale equity securities are carried net of taxes as a component of Accumulated other comprehensive income in Stockholders’ deficit in the Condensed Consolidated Balance Sheets.

7

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Investments in equity securities that do not have readily determinable fair values and in which XM does not have a controlling interest or is unable to exert significant influence are recorded at cost, subject to other than temporary impairment (“cost method”).

For those investments in which the Company has the ability to exercise significant influence, the equity method of accounting is used. Under this method, the investment, originally recorded at cost, is adjusted to recognize the Company’s share of net earnings or losses of the affiliate as they occur rather than as dividends or other distributions are received, limited to the extent of the Company’s investment in, advances to and commitments to the investee. The Company’s share of net earnings or loss of affiliate is recorded in Other income (expense).

Investments are periodically reviewed for impairment and a write down is recorded whenever declines in fair value below carrying value are determined to be other than temporary. In making this determination, the Company considers, among other factors, the severity and duration of the decrease as well as the likelihood of a recovery within a reasonable timeframe.

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation and amortization. Equipment under capital leases and leasehold improvements are stated at the present value of minimum lease payments. Depreciation and amortization is calculated using the straight-line method over the following estimated useful lives:

Spacecraft system	6.75 – 15 years
Terrestrial repeater network	5 – 10 years
Spacecraft control and uplink facilities	17.5 years
Broadcast facilities	3 – 7 years
Computer systems	3 – 7 years
Building and improvements	20 years
Furniture and fixtures	3 – 7 years
Equipment under capital leases and leasehold improvements	Lesser of useful life or remaining lease term

Maintenance and repairs costs are expensed as incurred, whereas expenditures for renewal and betterments are capitalized. The cost of internally developed software is capitalized in accordance with Statement of Position (“SOP”) 98-1,Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, and amortized over its estimated useful life. Interest costs incurred in connection with the construction of major equipment and facilities are capitalized as part of the asset cost to which it relates and depreciated over the asset’s useful life. Upon the normal sale or retirement of depreciable property, the net carrying value less any salvage value is recognized as an operating gain or loss in the unaudited Condensed Consolidated Statements of Operations.

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets, such as property and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Net Loss Per Common Share

The Company computes net loss per common share in accordance with SFAS No. 128, Earnings Per Share and SEC Staff Accounting Bulletin (“SAB”) No. 98, Computations of Earnings Per Share. Under the provisions of SFAS No. 128 and SAB No. 98, basic net loss per common share is computed by dividing the net loss attributable to common stockholders (after deducting preferred dividend requirements) for the period by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing the net loss attributable to common stockholders for the period by the weighted average number of common and dilutive equivalent shares outstanding during the period. Options, warrants and convertible instruments outstanding as of March 31, 2007 to purchase 51 million shares of common stock (47 million of which were vested) were not included in the computation of diluted net loss per common share for the three months ended March 31, 2007 as their inclusion would have been anti-dilutive. Options, warrants and convertible instruments outstanding as of March 31, 2006 to purchase 90 million shares of

8

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

common stock (85 million of which were vested) were not included in the computation of diluted net loss per common share for the three months ended March 31, 2006 as their inclusion would have been anti-dilutive. Unvested shares of restricted stock in the amount of 3,441,608 and 2,255,754 as of March 31, 2007 and 2006, respectively, are not included in the computation of basic net loss per common share or in diluted net loss per common share because their inclusion would have been anti-dilutive. The Company had a net loss in each of the periods presented, and therefore, basic and diluted net loss per common share are the same.

Comprehensive Income or Loss

Accumulated other comprehensive income or loss is reported on the Condensed Consolidated Balance Sheets. Unrealized gains and losses on available-for-sale securities (see Note 4, under the heading “WorldSpace”) and foreign currency translation adjustments (see Note 4, under the heading “Canadian Satellite Radio”) are included in other comprehensive income or loss. However, in the event that an unrealized loss is deemed other than temporary, the loss is recognized in earnings. The components of Comprehensive income or loss for the three months ended March 31, 2007 and 2006 are as follows (in thousands):

	Three months ended March 31,
	2007			2006
Net loss	$	(122,438	)	$	(149,221	)
Unrealized gain (loss) on available-for-sale securities		125			(6,688	)
Foreign currency translation adjustment, net of tax		(170	)		2,311
Total comprehensive loss	$	(122,483	)	$	(153,598	)

The Company did not recognize a tax expense for the unrealized gain on available-for-sale securities for the three months ended March 31, 2007, as the investment did not have a cumulative gain . Unrealized loss on available-for-sale securities for the three months ended March 31, 2006 is shown net of tax benefit of approximately $4.2 million. Foreign currency translation adjustment, for the three months ended March 31, 2007, is shown net of tax benefit of approximately $0.1 million. Foreign currency translation adjustment, for the three months ended March 31, 2006, is shown net of tax expense of approximately $1.4 million. The unrealized loss on available-for-sale securities relates to the Company’s investment in WorldSpace, while the foreign currency translation adjustment relates to the Company’s investment in XM Canada (discussed further in Note 4).

Recent Accounting Pronouncements

In February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115. This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement, which is consistent with the Board’s long-term measurement objectives for accounting for financial instruments. This Statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Company will adopt this Statement effective January 1, 2008. The Company is currently evaluating the impact of the adoption of SFAS No. 159 on its consolidated results of operations and financial position.

9

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(3) Property and Equipment

Property and equipment consists of the following (in thousands):

	March 31, 2007			December 31, 2006
Spacecraft system	$	905,535		$	905,507
Terrestrial repeater network		264,315			264,223
Spacecraft control and uplink facilities		46,918			46,181
Broadcast facilities		65,336			65,302
Land		8,788			8,788
Buildings and improvements		73,310			73,252
Computer systems, furniture and fixtures, and equipment		264,820			254,177
Total property and equipment		1,629,022			1,617,430
Accumulated depreciation and amortization		(814,339	)		(767,768	)
Property and equipment, net	$	814,683		$	849,662

Spacecraft System

The Company currently operates four in-orbit satellites, all of which are owned, except for the transponders on XM-4, which are leased under a capital lease. The Company launched its first two satellites, XM-1 and XM-2 in the first half of 2001 prior to the commencement of commercial operations. Depreciation commenced upon acceptance of the satellites from Boeing Satellite Systems, which occurred during the first half of 2001. The XM-1 and XM-2 satellites suffer from a progressive solar array power degradation issue and during 2004, the Company recovered from insurers approximately $142 million, of which $134 million was recorded as a reduction to the carrying values of XM-1 and XM-2. In February 2005, XM-3 was successfully launched and moved into the 85° West Longitude orbital location. In October 2006, XM-4 was successfully launched and moved into the 115° West Longitude orbital location. XM-1 and XM-2 are collocated with XM-4, and are in-orbit spares. Depreciation of XM-3 and XM-4 commenced upon acceptance of the satellites, which occurred during April 2005 and December 2006, respectively. In February 2007, the transponders on XM-4 were the subject of a sale-leaseback transaction and are now being depreciated over their nine-year lease term, less the estimated residual value.

(4) Investments

The Company’s investments consist of an equity method investment, a cost method investment and available-for-sale equity securities as follows (in thousands):

	March 31, 2007		December 31, 2006
Equity method investment	$	68,550	$	74,252
Cost method investment		480		480
Available-for-sale equity securities		5,985		5,860
Total investments	$	75,015	$	80,592

Equity Method Investment

Canadian Satellite Radio (“XM Canada”)

In November 2005, XM entered into a number of agreements (“Agreements”) with XM Canada that provide XM Canada with exclusive rights to offer XM satellite digital radio service in Canada. In December 2005, XM Canada issued to XM 11,077,500 Class A Subordinate Voting Shares representing a 23.33% ownership interest and 11% voting interest in XM Canada. These shares were determined to have an initial fair value of $152.1 million, based on the XM Canada initial public offering price of CDN$16.00 per share. 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 at no additional cost beyond the current financial arrangements. XM Canada has expressed its intent to exercise this option at the end of the initial term of the Agreements.

The various deliverables of these Agreements entered into in November 2005 are considered a single accounting unit in accordance with the EITF No. 00-21, and as such are accounted for as follows:

• The $152.1 million fair value of the shares received is recorded as Deferred income on the Company’s Condensed Consolidated Balance Sheets and amortized on a straight-line basis into income as Other revenue in the unaudited Condensed Consolidated Statements of Operations over the 15-year expected term of the Agreements. During each of the three months ended March 31, 2007 and 2006, XM amortized $2.5 million into income as Other revenue. As of March 31, 2007 and December 31, 2006, the Deferred income balance related to the fair value of shares received was $136.2 million and $138.6 million, respectively.

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XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

• The Company receives a 15% royalty fee for all subscriber fees earned by XM Canada each month for its basic service and a nominal activation fee for each gross activation of an XM Canada subscriber on the Company’s system. Beginning in 2006, XM began to accrue for, and record as revenue, royalties and activation fees related to XM Canada’s subscribers. During the three months ended March 31, 2007 and 2006, XM accrued approximately $0.8 million and $0.2 million, respectively, in subscriber revenue royalty and activation fees. During the three months ended March 31, 2007 and 2006, recognized revenue was not material. The remaining unrecognized revenue was recorded as Deferred income and will be amortized on a straight-line basis into income over the remaining expected term of the Agreements in accordance with the EITF No. 00-21. As of March 31, 2007 and December 31, 2006, the Deferred income balance related to the subscriber revenue royalty and activation fees was $2.8 million and $2.0 million, respectively. In subsequent periods, the Company will recognize the pro-rata portion of the current period’s accrued revenue in addition to the amortization for each previous periods’ accrued revenue.

XM has also provided XM Canada with a CDN$45 million standby credit facility, which can only be utilized to finance purchases of terrestrial repeaters or for the payment of subscription fees to XM. The facility matures on December 31, 2012 and bears interest at a rate of 9% 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, 2007, XM Canada had not drawn on this facility.

In addition, XM Canada will pay XM $69.1 million for the rights to broadcast and market National Hockey League (“NHL”) games for the 10-year term of XM’s contract with the NHL. The $69.1 million payment is comprised of $57.0 million in license fees and $12.1 million in advertising costs and is required to be paid in ten annual installments ranging from $5.25 million to $7.5 million per year. In accordance with EITF No. 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent, XM recognizes these payments “gross as a principal” in Other revenue. During each of the three months ended March 31, 2007 and 2006, XM recognized $1.1 million of license fees; advertising cost reimbursements were not material.

During 2006, XM recognized a $4.5 million gain as Other income related to the sale of 78 terrestrial repeaters to XM Canada during 2005. XM Canada purchased these repeaters from XM at their original cost.

XM accounts for its ownership in XM Canada using the equity method of accounting. XM Canada has a fiscal year end of August 31. Therefore, XM will record its share of XM Canada’s net income or loss, using the average currency exchange rate for the period, based on XM Canada’s quarterly periods ending on the last day of February, May, August and November. Summarized financial information for XM Canada is as follows (US$ in thousands):

	February 28, 2007		November 30, 2006
Current assets	$	41,903	$	50,641
Non-current assets	$	231,478	$	247,848
Current liabilities	$	18,094	$	17,782
Non-current liabilities	$	102,745	$	101,674
Total shareholders’ equity	$	152,542	$	179,033
	Three months ended February 28, 2007		Three months ended February 28, 2006
Revenues	$	4,177	$	992
Net loss	$	23,253	$	38,106
XM’s share of net loss	$	5,425	$	8,884

During the three months ended March 31, 2007, XM recorded a currency translation loss of approximately $0.2 million, as a component of Accumulated other comprehensive income in Stockholders’ deficit in the Condensed Consolidated Balance Sheets. The $0.2 million loss is net of a tax benefit of approximately $0.1 million, which is offset by a corresponding $0.1 million

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XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

expense to the Provision for deferred income taxes. During the three months ended March 31, 2006, XM recorded a currency translation gain of approximately $2.3 million, as a component of Accumulated other comprehensive income in Stockholders’ deficit in the Condensed Consolidated Balance Sheets. The $2.3 million gain is net of a tax expense of approximately $1.4 million, which is offset by a corresponding $1.4 million benefit to the Provision for deferred income taxes.

During 2006, the Company reduced the carrying value of its investment in XM Canada due to a decrease in fair value that was considered to be other than temporary and recorded an impairment charge of $57.6 million. XM Canada’s shares trade publicly on the Toronto Stock Exchange under the symbol, “XSR.TO.” The quoted market price on February 28, 2007 (the date of XM Canada’s most recent financial statements) was CAD$6.65, or approximately US$5.68. Based on the number of shares held by the Company on March 31, 2007, the fair value of the Company’s investment in XM Canada was approximately $63.0 million. As of March 31, 2007 and December 31, 2006, the carrying value of the Company’s investment in XM Canada was approximately $68.6 million and $74.3 million, respectively. As of March 31, 2007 and December 31, 2006, the amounts due from XM Canada were $3.2 million and $1.6 million, respectively, and are included in Prepaid and other current assets in the Condensed Consolidated Balance Sheets.

Cost Method Investment and Available-for-Sale Equity Securities

WorldSpace

On July 18, 2005, XM acquired 1,562,500 shares of Class A common stock of WorldSpace, Inc. (“WSI”) and a warrant to purchase at WSI’s initial public offering price of $21.00 an additional aggregate number of shares equal to $37.5 million, subject to certain operational vesting conditions, in exchange for $25.0 million. XM allocated its $25.0 million investment between the two financial instruments, $12.9 million to the Class A common stock and $12.1 million to the warrant. XM accounts for its investment in WSI Class A common stock as available-for-sale securities and accounts for its investment in the warrant under the cost method, subject to other than temporary impairment. WorldSpace provides XM certain programming in exchange for a fixed monthly fee under an amended programming agreement that extends through June 7, 2009.

During 2006, the Company reduced the carrying values of its investments in WSI common stock and warrant due to decreases in fair values that were considered to be other than temporary and recorded impairment charges of $7.3 million and $11.6 million, respectively. WorldSpace’s shares trade publicly on the NASDAQ Stock Exchange under the symbol, “WRSP.” The quoted market price on March 31, 2007 was $3.58. Based on the number of shares held by the Company, the fair value of the Company’s investment in WSI common stock was approximately $5.6 million on March 31, 2007. As of March 31, 2007, the carrying value of the Company’s investments in WSI common stock and warrant was approximately $5.6 million and $0.5 million, respectively. As of December 31, 2006, the carrying value of the Company’s investments in WSI common stock and warrant was approximately $5.5 million (which included $0.1 million of unrealized losses) and $0.5 million, respectively.

(5) Deferred Financing Fees

Deferred financing fees consist of the following (in thousands):

	March 31, 2007			December 31, 2006
10% senior secured discount convertible notes due 2009	$	1,432		$	1,432
9.75% senior notes due 2014		16,091			16,091
Senior floating rate notes due 2013		5,354			5,354
1.75% convertible senior notes due 2009		10,066			10,066
Valuation of warrants issued to related party in conjunction with credit facilities		25,151			25,151
Valuation of warrants issued to related party in conjunction with the issuance of 10% senior secured discount convertible notes		540			540
Mortgage		—			504
Sale-leaseback transaction of XM-4 satellite		3,931			—
Total deferred financing fees		62,565			59,138
Accumulated amortization		(22,292	)		(20,537	)
Deferred financing fees, net	$	40,273		$	38,601

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XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(6) Long-Term Debt

Certain of the Company’s debt instruments and credit facility contain covenants that include restrictions on indebtedness, mergers, limitations on liens, liquidations and sale and leaseback transactions, and also require the maintenance of certain financial ratios. The Company was in compliance with all of its covenants as of March 31, 2007. The Company’s debt instruments and credit facilities permit the debt issued thereunder to be accelerated upon certain events, including the failure to pay principal when due under any of the Company’s other debt instruments or credit facilities subject to materiality thresholds.

The following table presents a summary of the debt activity for the three months ended March 31, 2007 (in thousands):

	December 31, 2006			Issuances / Additions		Discount Amortization		Principal Payments			Retirements / Extinguishments		March 31, 2007
9.75% senior notes due 2014	$	600,000		$	—	$	—	$	—		$	—	$	600,000
1.75% convertible senior notes due 2009		400,000			—		—		—			—		400,000
Senior floating rate notes due 2013		200,000			—		—		—			—		200,000
10% senior secured discount convertible notes due 2009		33,249			—		—		—			—		33,249
Less: discount		(5,213	)		—		342		—			—		(4,871	)
Debt of variable interest entity		—			230,800		—		—			—		230,800
Mortgages		38,877			—		—		(38,877	)		—		—
Capital leases		33,711			4,387		—		(3,975	)		—		34,123
Total debt		1,300,624		$	235,187	$	342	$	(42,852	)	$	—		1,493,301
Less: current portion		14,445												14,365
Long-term debt, net of current portion	$	1,286,179											$	1,478,936

Mortgages

1500 Eckington Place

As of March 31, 2007 and December 31, 2006, the remaining principal balance of the 1500 Eckington Place Mortgage Loan was $0 and $32.4 million, respectively. Principal and interest at a fixed rate of 6.015% was payable monthly until the mortgage was scheduled to mature in September 2014. The mortgage loan was secured by the building and an escrow with a balance of $1.4 million at December 31, 2006. The mortgage loan on this property was retired during February 2007, as further discussed below under the heading,“Capital Lease – XM-4 Satellite” and the Company recorded a de-leveraging charge of $2.2 million.

60 Florida Avenue

As of March 31, 2007 and December 31, 2006, the remaining principal balance of the 60 Florida Avenue Mortgage Loan was $0 and $6.5 million, respectively. Principal and interest at a fixed rate of 8.26% was payable monthly until the mortgage was scheduled to mature in September 2010. The mortgage loan was secured by the building, the land, and an escrow with a balance of $0.3 million at December 31, 2006. The mortgage loan on this property was retired during February 2007, as further discussed below under the heading,“Capital Lease – XM-4 Satellite” and the Company recorded a de-leveraging charge of $0.8 million.

Capital Lease – XM-4 Satellite

On February 13, 2007, the Company entered into a sale-leaseback transaction with respect to the transponders on the XM-4 satellite, which was launched in October 2006 and placed into service during December 2006.

The Company sold the XM-4 transponders to Satellite Leasing (702-4) LLT (“Trust”), a third-party trust formed solely for the purpose of facilitating the sale-leaseback transaction. The Trust pooled the funds used to purchase the transponders from a $57.7 million investment by an equity investor and the $230.8 million in proceeds from the issuance of its 10% senior secured notes due 2013 (“Debt of variable interest entity”). The Company is accounting for

13

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

the sale and leaseback of the transponders under sale-leaseback accounting with a capital lease, pursuant to FASB 13, Accounting for Leases,as amended. Furthermore, the Company determined that the Trust is a variable interest entity, as that term is defined under FASB Interpretation (FIN) No. 46(R),Consolidation of Variable Interest Entities – An Interpretation of ARB No. 51, and that the Company is the primary beneficiary of the Trust. Pursuant to FIN No. 46(R), the Company consolidated the Trust into its unaudited Condensed Consolidated Financial Statements.

Under the terms of the lease, the Company is obligated to make payments that total approximately $437.4 million, of which $126.6 is interest, over the nine-year base lease term as follows (in millions): $27.9 in 2007, $33.2 in 2008, $28.9 in 2009, $28.4 in 2010, $71.0 in 2011 and $248.0 thereafter.

Summary of the Transaction. Under the sale-leaseback arrangement, the Company sold the XM-4 transponders to the Trust owned by Satellite Leasing (702-4) LLC (“Owner participant”) for $288.5 million. XM Satellite Radio Inc. is leasing the transponders for a term of nine years with an early buy-out option in year five and a buy-out option at the end of the term. These lease payment obligations, which are unconditional and guaranteed by XM Satellite Radio Holdings Inc., are senior unsecured obligations and rank equally in right of payment with existing and future senior unsecured obligations.

Throughout the term of the lease, at any time when the Company is not investment grade, the Company will provide credit support to Owner Participant. To provide this credit support, the Company retired the existing mortgages on its headquarters and data center properties in Washington, D.C. and put into place new mortgage liens on those properties in favor of the Owner participant.

The Company will have full operational control over the transponders for the lease term, absent default. The Company is subject to an obligation to sell the XM-4 Bus, the remaining component of the XM-4 satellite, to the lessor for a nominal sum in the event that the Company does not repurchase the transponders at the end of the term.

The Company has an early buyout option in year five, a buy-out right at the end of the lease term and other rights to purchase the transponders or the equity interest in the lessor. The Company also has rights to cause the lessor to effect a refinancing of the notes, and any interest savings from the refinancing would result in reduced lease payments.

The Company can be required to repurchase the transponders upon the occurrence of specified events, including an event of loss of the satellite (subject to the right to substitute another satellite meeting equivalent or better value and functionality tests), changes in law that impose a material regulatory burden on the Owner participant, changes of control and events resulting in the absence of another holder (other than the Company and its affiliates) of FCC satellite radio licenses in the frequency bands that can be served by the XM-4 satellite. The Company has agreed to provide indemnities in the event that certain actions by the Company cause the Owner participant to lose or not be able to take certain tax positions relating to the transaction.

(7) Financing Transactions

Satellite Sale-leaseback

On February 13, 2007, the Company entered into a sale-leaseback transaction with respect to the transponders on the XM-4 satellite. The Company received net proceeds of approximately $289 million from the transaction, of which $44 million (inclusive of interest) was used to retire outstanding mortgages on real property and the remainder of which provides additional liquidity available for working capital and general corporate purposes.

De-leveraging Transactions

In January 2006, the Company exchanged $42.4 million aggregate carrying value, or $52.3 million aggregate fully accreted face value at maturity, of its 10% Senior Secured Discount Convertible Notes due 2009 by issuing approximately 17.1 million shares of Class A common stock. As a result of the exchange, the Company recorded a de-leveraging charge consisting of a redemption premium of $18.4 million. In addition, the Company wrote-off an unamortized beneficial conversion feature of $9.9 million to interest expense and unamortized debt issuance costs of $1.4 million to Additional paid-in capital.

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XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(8) Equity

Preferred Stock

The Company has authorized 60,000,000 shares of preferred stock, par value $0.01, of which 15,000,000 shares were designated non-voting Series A convertible preferred stock, 3,000,000 shares were designated non-voting 8.25% Series B convertible redeemable preferred stock, and 250,000 shares were designated 8.25% Series C convertible redeemable preferred stock, all of which are convertible into Class A common stock at the option of the holder. Additionally, 250,000 shares were designated as non-voting Series D participating preferred stock in connection with the adoption of the Shareholders’ Rights Plan and are junior to all other classes of preferred stock. The Series A preferred stock receives dividends, if declared, ratably with the common stock. The Series C convertible redeemable preferred stock contained voting and certain consent rights.

There were 5,393,252 shares of Series A convertible preferred stock issued and outstanding with a liquidation preference of $51.4 million as of March 31, 2007 and December 31, 2006, respectively. During 2006, the Company repurchased the Series B convertible redeemable preferred stock and converted the Series C convertible redeemable preferred stock. There were no shares issued and outstanding of the Series B convertible redeemable preferred stock, Series C convertible redeemable preferred stock or Series D preferred stock as of March 31, 2007 and December 31, 2006, respectively.

Common Stock

The Company has authorized 600,000,000 shares of Class A common stock, par value of $0.01, of which 306,082,407 and 305,781,515 shares were issued and outstanding as of March 31, 2007 and December 31, 2006, respectively. The Company has authorized 15,000,000 shares of Class C common stock, par value of $0.01, of which no shares were issued and outstanding as of March 31, 2007 and December 31, 2006.

(9) Stock-Based Compensation

The Company has three stock-based compensation plans. It is the practice of the Company to satisfy awards and options granted under these plans through the issuance of new shares. During the three months ended March 31, 2007 and 2006, the Company recognized compensation expense of $14.1 million and $12.1 million, respectively. In each of the periods described above, compensation expense was recorded in the unaudited Condensed Consolidated Statements of Operations related to these plans. For a summarized schedule of the distribution of stock-based compensation expense, see the appended footnote to the unaudited Condensed Consolidated Statements of Operations on page 4 of this Form 10-Q. The Company did not capitalize any stock-based compensation cost during the three months ended March 31, 2007 and 2006, respectively. The Company did not realize any income tax benefits from stock-based payment plans during the three months ended March 31, 2007 and 2006, respectively, as a result of a full valuation allowance that is maintained for substantially all net deferred tax assets.

1998 Shares Award Plan and XM Talent Option Plan

On June 1, 1998, the Company adopted the 1998 Shares Award Plan (“1998 Plan”) under which, as amended, employees, consultants and non-employee directors may be granted stock options and restricted stock for up to 25,000,000 shares of the Company’s Class A common stock. Stock option awards and restricted stock awards under the 1998 Plan generally vest ratably over three years based on continuous service. Stock option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant and expire no later than ten years from the date of grant. At March 31, 2007, there were 154,379 shares available under the 1998 Plan for future grant.

In May 2000, the Company adopted the XM Talent Option Plan (“Talent Plan”) under which non-employee programming consultants to the Company may be granted stock options for up to 500,000 shares of the Company’s Class A common stock, which shares are reserved under the Talent Plan. Stock option awards under the Talent Plan generally vest ratably over three years based on continuous service. These stock option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant and expire no later than ten years from the date of grant. At March 31, 2007, there were 340,000 options available under the Talent Plan for future grant.

15

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Stock Options — The fair value of each stock option award is estimated on the date of grant using a Black-Scholes option-pricing model based on the following weighted average assumptions:

	Three months ended March 31,
	2007		2006
Expected dividend yield	0	%	0	%
Expected volatility(1)	46	%	42	%
Risk-free interest rate(2)	4.54	%	4.78	%
Expected term(3)	6 Years		6 Years

(1) Expected volatilities are based on implied volatilities from publicly traded options on the Company’s stock.

(2) The risk-free rate for periods within the contractual term of the stock option is based on the U.S. Treasury yield curve in effect at the time of grant.

(3) The expected term for 2006 and 2007 is calculated as the average between the vesting term and the contractual term, weighted by tranche, pursuant to SAB 107.

A summary of the status of the Company’s aggregate stock option awards under the 1998 Plan and the Talent Plan as of March 31, 2007, and activity during the three months then ended is presented below:

	Shares		Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in thousands)
Outstanding, January 1, 2007	15,843,884		$	17.82
Granted	162,200		$	13.81
Exercised	(261,341	)	$	5.84
Forfeited, cancelled or expired	(101,681	)	$	26.28
Outstanding, March 31, 2007	15,643,062		$	17.92	6.46	$	26,527
Vested and expected to vest, March 31, 2007	15,369,878		$	17.93	6.46	$	26,064
Exercisable, March 31, 2007	12,329,945		$	17.11	5.89	$	26,027

The per share weighted-average fair value of stock option awards granted during the three months ended March 31, 2007 and 2006 was $6.99 and $12.70, respectively, on the date of grant. The total intrinsic value on the date of exercise of stock option awards exercised during the three months ended March 31, 2007 and 2006 was $2.2 million and $3.9 million, respectively. As of March 31, 2007, there was $27.3 million of total unrecognized compensation cost related to stock option awards granted under the 1998 Plan and Talent Plan. The weighted-average period over which the compensation expense for these awards is expected to be recognized is 1.64 years as of March 31, 2007.

Restricted Stock — A summary of the status of the Company’s restricted stock as of March 31, 2007, and activity during the three months then ended is presented below:

	Shares		Weighted-Average Grant Date Fair Value
Nonvested, January 1, 2007	3,390,359		$	19.27
Granted	66,250		$	14.64
Vested	(10,001	)	$	28.75
Forfeited	(5,000	)	$	15.89
Nonvested, March 31, 2007	3,441,608		$	19.16

The fair value of each restricted stock award is the market value, as determined by the last sale price of the Company’s Class A common stock on The NASDAQ National Market, of the stock as if it were vested and issued on the grant date. As of March 31, 2007 and December 31, 2006, there were $43.5 million and $49.3 million, respectively, of total unrecognized compensation cost related to restricted stock granted under the 1998 Plan. The weighted-average period over which the compensation expense for these awards is expected to be recognized is 2.12 years as of March 31, 2007.

16

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Employee Stock Purchase Plan

In 1999, the Company established an employee stock purchase plan (“ESPP”) that, as amended, provides for the issuance of 1,000,000 shares. All employees whose customary employment is more than 20 hours per week and for more than five months in any calendar year are eligible to participate in the stock purchase plan, provided that any employee who would own 5% or more of the Company’s total combined voting power immediately after an offering date under the ESPP is not eligible to participate. Eligible employees must authorize the Company to deduct an amount from their pay during offering periods established by the compensation committee. The purchase price for shares under the plan will be determined by the compensation committee but may not be less than 85% of the lesser of the market price of the common stock on the first or last business day of each offering period, a “look-back option.”

Under the provisions of SFAS 123R, the Company’s ESPP is considered a compensatory plan due to the greater than 5% discount and the “look-back option.” Effective January 1, 2006, the Company began recognizing compensation cost related to the ESPP. Compensation expense recognized pursuant to the ESPP is not material to the unaudited Condensed Consolidated Statements of Operations. As of March 31, 2007 and 2006, the Company had issued a cumulative total of 744,453 and 637,759 shares, respectively, under this plan. The weighted-average grant date fair value for shares issued during the three months ended March 31, 2007 and 2006 was $10.98 and $18.93, respectively, per share. The remaining shares available for issuance under the ESPP at March 31, 2007 were 255,547. Effective April 1, 2007, the Company suspended the ESPP pursuant to the terms of the February 19, 2007 merger agreement with Sirius Satellite Radio Inc.

(10) Related Party Transactions

The Company developed strategic relationships with certain companies that were instrumental in the construction and development of its system. In connection with the Company granting to them large supply contracts, some of these strategic companies have become large investors in XM and have been granted rights to designate directors or observers to XM’s board of directors. The negotiation of these supply contracts and investments primarily occurred at or prior to the time these companies became related parties.

The Company is a party to a long-term distribution agreement with General Motors (“GM”) that provides for the installation of XM radios in General Motors vehicles, as further described in Note 12. The Company has an agreement with GM to make available use of the Company’s bandwidth. The Company has arrangements with American Honda relating to the promotion of the XM Service to new car buyers, the use of bandwidth on the XM System and the development of telematics services and technologies. As of March 31, 2007, the Company is engaged in activities with GM and Honda to jointly promote new car buyers to subscribe to the XM service. Subscriber revenues received from GM and Honda for these programs are recorded as related party revenue. GM is one of the Company’s shareholders and Chester A. Huber, Jr., the President of OnStar Corporation, a subsidiary of General Motors, is a member of the Company’s board of directors. John W. Mendel, a member of the Company’s board of directors, is Senior Vice President, automobile operations of American Honda Motor Co., Inc.

The Company had the following related party balances at March 31, 2007 and December 31, 2006 (in thousands):

	Due from				Prepaid expense				Due to
	March 31, 2007		December 31, 2006		March 31, 2007		December 31, 2006		March 31, 2007		December 31, 2006
GM	$	6,792	$	8,149	$	226,409	$	227,658	$	48,056	$	44,975
Honda		1,880		5,842		—		—		749		1,484
Total	$	8,672	$	13,991	$	226,409	$	227,658	$	48,805	$	46,459

The Company earned the following total revenue, primarily consisting of subscriptions, in connection with sales to related parties described above (in thousands):

	Three months ended March 31,
	2007		2006
GM	$	6,365	$	6,118
Honda		4,367		3,617
Total	$	10,732	$	9,735

17

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Company has relied upon certain related parties for technical, marketing and other services. The Company has incurred the following costs in transactions with the related parties described above (in thousands):

	Three months ended March 31, 2007				Three months ended March 31, 2006
	GM		Honda		GM		Honda
Research & development	$	—	$	—	$	—	$	950
Customer care & billing operations		52		—		89		—
Revenue share & royalties		23,730		—		17,799		—
Marketing		37,483		477		39,013		336
Total	$	61,265	$	477	$	56,901	$	1,286

GM — In 1999, the Company established a distribution agreement with GM (see Note 12). Under the terms of the agreement, GM distributes the XM Radio Service in various models of its vehicles. This agreement was amended in June 2002 and January 2003 and continues to be clarified as XM’s business operations and working relationship with GM continues to evolve.

Honda — The Company has arrangements with Honda relating to the promotion of the XM service to new buyers, the use of bandwidth on the XM system and the development of telematics services and technologies.

In addition to the aforementioned related parties, the Company has transactions with an equity method investee, XM Canada, which are more fully discussed in Note 4.

(11) Supplemental Cash Flows Disclosures

The Company paid $9.1 million and $3.8 million for interest, net of amounts capitalized to System under construction of $2.2 million and $5.3 million, during the three months ended March 31, 2007 and 2006, respectively. Additionally, the Company incurred the following non-cash financing and investing activities (in thousands):

	Three months ended March 31,
	2007		2006
Accrued system construction costs	$	—	$	16,340
Conversion of 10% senior secured discount convertible notes due 2009 to Class A common stock		—		52,268
Write-off of deferred financing costs to equity in connection with the conversion of 10% Senior secured discount convertible notes due 2009		—		1,440
Property acquired through capital leases		4,387		1,078

(12) Commitments and Contingencies

Satellite System

Satellite Deployment Plan — The Company currently operates four satellites in-orbit. It launched its first two satellites, XM-1 and XM-2 in the first half of 2001 prior to the commencement of commercial operations. These satellites suffer from a progressive solar array power degradation issue that is common to the first six Boeing 702 class satellites in orbit — XM-2 and XM-1 were the fifth and sixth Boeing 702s launched. In February 2005, the Company launched XM-3. XM-3 was placed into one of the Company’s orbital slots and beginning in April 2005 is being used to transmit the XM service. During the second quarter of 2005, the Company collocated XM-1 with XM-2 in the other orbital slot. The Company successfully launched its fourth satellite (“XM-4”) into geosynchronous transfer orbit on October 30, 2006, which was handed over to the Company in December 2006 and is being used to transmit the XM service. XM-1 and XM-2 now function as in-orbit spares. During the second quarter of 2005, XM entered into a contract to construct a fifth satellite, (“XM-5”), expected to be completed by late 2007 or early 2008 for use as a ground spare or to be available for launch as needed.

18

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Satellite Contracts and Other Costs: XM-1, XM-2, XM-3, XM-4 and XM-5 — As of March 31, 2007, the Company has paid approximately $961.6 million, including manufacturing and launch costs, financing charges, in-orbit performance incentives and additional costs for collocation, under the satellite contracts related to XM-1, XM-2, XM-3, XM-4 and XM-5. The Company originally entered into its satellite contract with Boeing Satellite Systems International, Inc. (“BSS”) in March 1998, and has subsequently amended the contract, including most recently in July 2006. Under the satellite contract, BSS has delivered four satellites in-orbit, XM-1, XM-2, XM-3 and XM-4, supplied ground equipment and software used in the XM Radio system and provided certain launch and operations support services. As of March 31, 2007, XM had paid fully its contractual obligations to BSS, except for XM-3 and XM-4 performance incentive payments which are earned over the lifetime of the satellites. In August 2003, XM contracted with Sea Launch Company, LLC (“Sea Launch”) for the associated launch services for the XM-4 satellite, and in September 2006, the Company exercised an option in the Sea Launch contract for launch services for XM-5. In June 2005, the Company awarded a contract to Space Systems/Loral (“SS/L”) for the design and construction of its fifth satellite, XM-5. Construction of XM-5 is expected to be completed by late 2007 or early 2008.

XM-3 — In February 2005, the Company launched its XM-3 satellite. XM-3 was modified to correct the solar array degradation issues experienced by XM-1 and XM-2, as well as to optimize XM-3 for the specific orbital slot into which it has been placed. BSS has the right to earn performance incentive payments of up to $25.9 million, excluding interest, based on the in-orbit performance of XM-3 over its design life of fifteen years. The Company has in-orbit insurance relating to XM-3 through February 2008.

XM-4 — In October 2006, the Company launched its XM-4 satellite. BSS has the right to earn performance incentive payments of up to $12 million, plus interest, over the first twelve years of in-orbit life, up to $7.5 million for high performance (above baseline specifications) during the first fifteen years of in-orbit life, and up to $10 million for continued high performance across the five year period beyond the fifteen year design life. The Company has launch plus one year of in-orbit insurance for XM-4 and five years of in-orbit insurance for a portion of XM-4. These policies run concurrently. In February 2007, the Company entered into a sale-leaseback transaction of the transponders on the XM-4 satellite.

XM-5 — During the second quarter of 2005, XM entered into a contract with SS/L to construct a spare satellite. Upon the award of the contract, SS/L began construction of the XM-5 satellite. Approximately two years before, on July 15, 2003, SS/L, its parent, Loral Space & Communications Ltd. and certain other affiliated entities (collectively, the “Debtors”) commenced voluntary Chapter 11 bankruptcy cases under the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York (the “Court”), which cases are being jointly administered under lead case number 03-41710. Pursuant to an order entered on July 20, 2005, the Court approved the Company’s contract with SS/L. On August 1, 2005, the Court entered an order confirming the Debtors’ Fourth Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code (the “Reorganization Plan”). The Reorganization Plan became effective on November 21, 2005. Pursuant to the terms of the Company’s contract with SS/L, the Company is required to make construction payments on XM-5 into an escrow account until the occurrence of an “Emergence Date” as defined in the contract. Although the contractually-defined “Emergence Date” has not occurred, XM has authorized the escrow agent to release certain escrowed funds to SS/L to cover SS/L’s costs incurred as is reasonably necessary for SS/L to continue performing work under the contract. As of March 31, 2007, with respect to XM-5, the Company has paid $119.1 million and accrued costs of $2.1 million, excluding financing charges.

GM Distribution Agreement

The Company has a long-term distribution agreement with General Motors. The agreement had been assigned by GM to its subsidiary OnStar, but was assigned back to GM in June 2006. During the term of the agreement, which expires twelve years from the commencement date of the Company’s commercial operations in 2001, GM has agreed to distribute the service to the exclusion of other S-band satellite digital radio services. The agreement was amended in June 2002 and January 2003 to clarify certain terms in the agreement, including extending the dates when certain initial payments were due to GM and confirming the date of the Company’s commencement of commercial operations, and to provide that the Company could make certain payments to GM in shares of the Company’s Class A common stock. The Company’s total cash payment obligations were not increased. Under the distribution agreement, the Company is required to make a subscriber acquisition payment to GM for each person who becomes and remains an XM subscriber through the purchase of a GM vehicle.

In April 2006, the Company amended the distribution agreement pursuant to which the Company made a prepayment in May 2006 in the amount of $237 million to GM to retire at a discount approximately $320 million of the remaining fixed payment obligations that would have come due in 2007, 2008, and 2009. The April 2006 amendments eliminated the Company’s ability to make up to $35 million of subscriber acquisition payments in shares of the Company’s Class A common stock. In addition, the Company’s credit facility with GM was increased from $100 million to $150 million. The facility will

19

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

terminate, and all draws will become due, upon the earlier of December 31, 2009 and six months after the Company achieves investment grade status. The amendments also provide that the security arrangements on the GM facility will be unsecured until the first draw under the bank credit facility and then secured on a second priority basis behind the secured indebtedness permitted to be incurred under the bank credit facility. As of March��31, 2007, the Company has $26.0 million of current prepaid expense to related party and $143.1 million of non-current prepaid expense to related party in connection with the guaranteed fixed payments, as the result of a prepayment of $237 million to GM in May 2006.

In order to encourage the broad installation of XM radios in GM vehicles, the Company has agreed to subsidize a portion of the cost of XM radios, and to make incentive payments to GM when the owners of GM vehicles with installed XM radios become subscribers to the Company’s service. The Company must also share with GM a percentage of the subscription revenue attributable to GM vehicles with installed XM radios, which percentage increases until there are more than eight million GM vehicles with installed XM radios (at which point the percentage remains constant). Accordingly, the revenue share expense is recognized as the related subscription revenue is earned. As of March 31, 2007, the Company has $45.0 million of current prepaid expense to related party and $12.3 million of non-current prepaid expense to related party in connection with this revenue sharing arrangement. As part of the agreement, GM provides certain call-center related services directly to XM subscribers who are also GM customers for which the Company must reimburse GM. The agreement is subject to renegotiation at any time based upon the installation of radios that are compatible with a common receiver platform or capable of receiving Sirius Satellite Radio’s service. The agreement was subject to renegotiation in November 2005, and will be subject to renegotiation at two-year intervals thereafter, if GM did or does not achieve and maintain specified installation levels of GM vehicles capable of receiving the Company’s service. The specified installation level of 1,240,000 units by November 2005 was achieved in 2004. The specified installation levels in future years are the lesser of 600,000 units per year or amounts proportionate to targets in the satellite digital radio service industry. There can be no assurances as to the outcome of any such renegotiations. GM’s exclusivity obligations will discontinue if, by November 2007 and at two-year intervals thereafter, the Company fails to achieve and maintain specified minimum share levels in the satellite digital radio service industry. The Company was significantly exceeding the minimum levels at March 31, 2007. For the three months ended March 31, 2007 and 2006, the Company incurred total costs of $61.3 million and $56.9 million, respectively, under the distribution agreement.

Legal Proceedings

The Company is currently subject to claims, potential claims, inquiries or investigations, or party to legal proceedings, in various matters described below. In addition, in the ordinary course of business the Company becomes aware from time to time of claims, potential claims, inquiries or investigations, or may become party to legal proceedings arising out of various matters, such as contract matters, employment related matters, issues relating to its repeater network, product liability issues, copyright, patent, trademark or other intellectual property matters and other federal regulatory matters.

Litigation and Arbitration

Securities class action — A consolidated action was filed in the United States District Court for the District of Columbia on behalf of a purported nationwide class of purchasers of the Company’s common stock between July 28, 2005 and February 16, 2006 against the Company and its chief executive officer. The complaint, as amended in September 2006, sought an unspecified amount of damages and claimed violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, alleging various statements made during the putative class period by the Company and its management failed to project accurately or disclose in a timely manner the amount of higher costs to obtain subscribers during the fourth quarter of 2005. On March 28, 2007, the Company’s motion to dismiss the action was granted and the case dismissed with prejudice. The court concluded that “plaintiffs have failed to identify any materially misleading statements or omissions that are actionable under Section 10(b)” of the Securities Exchange Act of 1934.

Atlantic Recording Corporation, BMG Music, Capital Records, Inc., Elektra Entertainment Group Inc., Interscope Records, Motown Record Company, L.P., Sony BMG Music Entertainment, UMG Recordings, Inc., Virgin Records, Inc and Warner Bros. Records Inc. v. XM Satellite Radio Inc. — Plaintiffs filed this action in the United States District Court for the Southern District of New York on May 16, 2006. The complaint seeks monetary damages and equitable relief, alleging that recently introduced XM radios that also have MP3 functionality infringe upon plaintiffs’ copyrighted sound recordings. The Company’s motion to dismiss this matter was denied in January 2007.

The Company believes these allegations are without merit and that these products comply with applicable copyright law, including the Audio Home Recording Act, and intends to vigorously defend the matter. Music publishing companies have filed a lawsuit with similar allegations. There can be no assurance regarding the ultimate outcome of these matters, or the significance, if any, to the Company’s business, consolidated results of operations or financial position.

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XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Matthew Enderlin v. XM Satellite Radio Holdings Inc. and XM Satellite Radio Inc. — Plaintiff filed this action in the United States District Court for the Eastern District of Arkansas on January 10, 2006 on behalf of a purported nationwide class of all XM subscribers. The complaint alleges that the Company engaged in a deceptive trade practice under Arkansas and other state laws by representing that its music channels are commercial-free. The Company has filed an answer to the complaint, and instituted arbitration with the American Arbitration Association pursuant to the compulsory arbitration clause in its customer service agreement. The arbitration has been stayed pending judicial determination of Enderlin’s objections to the arbitration. The United States Court of Appeals for the Eighth Circuit held on April 17, 2007 that those objections are to be decided by the trial court, not the arbitrator. The Company believes the suit is without merit and intends to vigorously defend the matter. There can be no assurance regarding the ultimate outcome of this matter, or the significance, if any, to the Company’s business, consolidated results of operations or financial position.

Copyright Royalty Board Arbitration — The Company is participating in a Copyright Royalty Board (CRB) proceeding in order to set the royalty rate payable by the Company under the statutory license covering its performance of sound recordings over the XM system for the six year period starting in January 2007. The Company and Sirius have recently filed their direct cases with the CRB proposing a rate of 0.88% of each of their adjusted gross revenues for this statutory license. SoundExchange, a collective operated on behalf of owners of copyrighted recordings, such as the major record labels, has filed a direct case proposing a rate increasing from 10% of adjusted gross revenues for the first year of the license increasing each year to over 23% during the final year of the license term; their requested guaranteed minimums could result in a rate in excess of the foregoing percentages. The Company is also participating in a concurrent proceeding to set the royalty rate payable by the Company under the statutory license covering its performance of sound recordings over XM channels transmitted over the DIRECTV satellite television system. The Company anticipates that hearings in these matters will take place during 2007, and that the CRB will render its decision by the end of 2007. There can be no assurance regarding the ultimate outcome of these matters, or their significance to the Company’s business, consolidated results of operations or financial position.

Regulatory Matters and Inquiries

Federal Communications Commission (“FCC”)

FCC Receiver Matter — As the Company has previously disclosed, it has received inquiries from, and responded to, the Federal Communications Commission regarding FM modulator wireless transmitters in various XM radios not in compliance with permissible emission limits. No health or safety issues have been involved with these wireless XM radios.

The Company has implemented a series of design and installation modifications, and the Company has obtained new certifications for numerous models of modified XM radios using its new SureConnect technology. In addition, the Company has implemented a regulatory compliance plan, including the appointment of an FCC regulatory compliance officer, to monitor FCC regulatory compliance, specifically with reference to the design, verification/certification, and production of XM radio receivers.

The Company has been submitting documents to the FCC and is in discussions with the FCC to resolve this matter. The Company cannot predict at this time the extent of any further actions that it will need to undertake or any financial obligations it may incur.

There can be no assurance regarding the ultimate outcome of this matter, or its significance to the Company’s business, consolidated results of operations or financial position.

FCC Repeater Network Matter — In October 2006, the Company filed for both a 30-day Special Temporary Authority (“STA”) and a 180-day STA with respect to its terrestrial repeater network, seeking authority to continue to operate its entire repeater network despite the fact that the technical characteristics of certain repeaters, as built, differ from the technical characteristics in the original STAs granted for its repeater network. These differences include some repeaters not being built in the exact locations, or with the same antenna heights, power levels, or antenna characteristics than set forth in the earlier STAs. Prior to making these recent filings, the Company reduced the power or discontinued operation of certain repeaters. As a result, the Company believes that service quality in portions of the affected metro areas has been somewhat reduced, including in terms of more frequent interruptions and/or occasional outages to the service. There has been no impact on the satellite signal. The Company continues to hold meetings with the staff of the FCC regarding these matters. In February 2007, the Company received a letter of inquiry from the FCC relating to these matters, to which the Company has responded. This proceeding may result in the imposition of financial penalties against the Company or adverse changes to the Company’s repeater network resulting from having repeaters turned off or otherwise modified in a manner that would reduce service quality in the affected areas. There can be no assurance regarding the ultimate outcome of this matter, or its significance to the Company’s business, consolidated results of operations or financial position.

21

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

These recent STA requests are distinct from (and if granted would modify) the STAs originally granted by the FCC relating to the Company’s commencing and continuing operation of the repeater network. As the Company has been disclosing, the FCC has not yet issued final rules permitting the Company (or Sirius) to deploy terrestrial repeaters, and the Company has been deploying and operating its repeater network based on those early STAs and requests the Company has filed previously to extend the time periods of those STAs, which have expired. The Company (and Sirius) and others have been requesting that the FCC establish final rules for repeater deployment.

Federal Trade Commission (“FTC”)

FTC Inquiry — On April 25, 2006, the Company received a letter from the Federal Trade Commission stating that they are conducting an inquiry into whether its activities are in compliance with various acts, including the FTC Act, the Telemarketing Sales Rule, the Truth in Lending Act and the CAN-SPAM Act. This letter requests information about a variety of the Company’s marketing activities, including free trial periods, rebates, telemarketing activities, billing and customer complaints.

The Company has been submitting documents to the agency in response to the letter and is cooperating fully with this inquiry. There can be no assurance regarding the ultimate outcome of this matter, or the significance, if any, to the Company’s business, consolidated results of operations or financial position.

Securities and Exchange Commission (“SEC”)

SEC Inquiry — As previously disclosed, the Staff of the Securities and Exchange Commission (“SEC”) has requested that the Company voluntarily provide documents to the Staff, including information relating to its subscriber targets, costs associated with attempting to reach those targets during the third and fourth quarters of 2005, the departure of Mr. Roberts from its board of directors, its historic practices regarding stock options and certain other matters. In this connection, the Company retained outside counsel, who engaged an independent accounting advisor, to conduct a review of its stock option practices. The inquiry did not reveal the existence of material errors in any prior financial statements.

The Company has been submitting documents to the SEC in response to their requests and is cooperating fully with this inquiry. There can be no assurance regarding the ultimate outcome of these SEC matters, or the significance, if any, to the Company’s business, consolidated results of operations or financial position.

Leases

In February 2007, the Company entered into a sale-leaseback transaction of the transponders on the XM-4 satellite. For a further discussion, see Note 6, under the heading,“Capital Lease – XM-4 Satellite”.

The Company has noncancelable operating leases for terrestrial repeater sites, office space, and software, and noncancelable capital leases for equipment that expire over the next fifteen years. Additionally, the Company owns several buildings and leases a portion of the space to other entities.

(13) Condensed Consolidating Financial Information

The Company has certain series of debt securities outstanding that are guaranteed by Holdings and two of the Company’s subsidiaries, XM Equipment Leasing LLC, which owns certain terrestrial repeaters, and XM Radio Inc. These guarantees are full and unconditional and joint and several. Inc. is owned 100% by Holdings, while XM Equipment Leasing LLC and XM Radio Inc. are owned 100% by Inc. Satellite Leasing (702-4) LLT is a separate legal entity subject to consolidation by the Company, pursuant to FIN 46(R). Accordingly, the Company provides the following condensed consolidating financial information.

22

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES

UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEETS

AS OF MARCH 31, 2007

(in thousands)	XM Satellite Radio Inc.			XM Radio Inc.		XM Equipment Leasing LLC			XMSR Non- Guarantor Subsidiaries		Eliminations			Consolidated XM Satellite Radio Inc.			XM Satellite Radio Holdings Inc.			Satellite Leasing (702-4), LLT		XM Holdings Non- Guarantor Subsidiaries			Eliminations			Consolidated XM Satellite Radio Holdings Inc.
Current assets:
Cash and cash equivalents	$	127,630		$	—	$	—		$	—	$	(56	)	$	127,574		$	191,022		$	—	$	795		$	—		$	319,391
Accounts receivable, net		54,914			—		—			—		—			54,914			—			—		—			—			54,914
Due from subsidiaries/affiliates		3,794			305,389		34,271			639,478		(982,889	)		43			11,072			—		32,421			(43,536	)		—
Due from related parties		8,672			—		—			—		—			8,672			—			—		—			—			8,672
Related party prepaid expenses		71,021			—		—			—		—			71,021			—			—		—			—			71,021
Prepaid programming content		71,835			—		—			—		—			71,835			—			—		—			—			71,835
Prepaid and other current assets		41,944			—		—			—		—			41,944			1,241			30,726		758			(31,851	)		42,818
Total current assets		379,810			305,389		34,271			639,478		(982,945	)		376,003			203,335			30,726		33,974			(75,387	)		568,651
Restricted investments		386			—		—			—		—			386			—			—		10			—			396
System under construction		—			—		—			—		—			—			138,760			—		—			—			138,760
Property and equipment, net		708,696			—		23,799			—		—			732,495			51,058			—		40,077			(8,947	)		814,683
Investment in subsidiary/affiliates		1,083,853			—		—			—		(1,083,853	)		—			(373,151	)		—		—			373,151			—
DARS license		—			141,387		—			—		—			141,387			—			—		—			—			141,387
Intangibles, net		4,329			—		—			—		—			4,329			—			—		—			—			4,329
Deferred financing fees, net		34,749			—		—			—		—			34,749			5,524			—		—			—			40,273
Related party prepaid expenses		155,388			—		—			—		—			155,388			—			—		—			—			155,388
Investments		—			—		—			—		—			—			75,015			—		—			—			75,015
Prepaid and other assets		2,350			—		—			—		—			2,350			—			506,695		1,932			(506,695	)		4,282
Total assets	$	2,369,561		$	446,776	$	58,070		$	639,478	$	(2,066,798	)	$	1,447,087		$	100,541		$	537,421	$	75,993		$	(217,878	)	$	1,943,164
Current liabilities:
Accounts payable	$	44,128		$	—	$	(25	)	$	—	$	(56	)	$	44,047		$	184		$	1,152	$	1		$	(1,152	)	$	44,232
Accrued expenses		131,172			—		107			—		—			131,279			73			—		553			(441	)		131,464
Accrued satellite liability		—			—		—			—		—			—			2,145			—		—			—			2,145
Accrued interest		33,205			—		—			—		—			33,205			2,333			3,026		204			(4,064	)		34,704
Current portion of long-term debt		43,582			—		—			—		—			43,582			—			—		—			(29,217	)		14,365
Due to related parties		48,805			—		—			—		—			48,805			—			—		—			—			48,805
Due to subsidiary/affiliates		955,430			245		2,360			25,227		(982,868	)		394			—			—		7,111			(7,505	)		—
Subscriber deferred revenue		358,974			—		—			—		—			358,974			—			—		—			—			358,974
Deferred income		—			—		—			—		—			—			13,338			30,726		—			(34,149	)		9,915
Total current liabilities		1,615,296			245		2,442			25,227		(982,924	)		660,286			18,073			34,904		7,869			(76,528	)		644,604
Long-term debt, net of current portion		1,081,872			—		—			—		—			1,081,872			400,000			230,800		—			(233,736	)		1,478,936
Subscriber deferred revenue, net of current portion		94,697			—		—			—		—			94,697			—			—		—			—			94,697
Deferred income, net of current portion		2,837			—		—			—		—			2,837			153,181			213,473		—			(240,417	)		129,074
Other non-current liabilities		13,497			32,536		—			—		—			46,033			33,660			—		(1,315	)		(37,549	)		40,829
Total liabilities		2,808,199			32,781		2,442			25,227		(982,924	)		1,885,725			604,914			479,177		6,554			(588,230	)		2,388,140
Commitments and contingencies
Minority interest		—			—		—			—		—			—			—			—		—			59,397			59,397
Stockholders’ equity (deficit):
Capital stock		—			—		—			—		—			—			3,115			—		—			—			3,115
Accumulated other comprehensive income		—			—		—			—		—			—			3,545			—		—			—			3,545
Additional paid-in-capital		3,126,120			146,271		60,759			286,765		(493,795	)		3,126,120			3,109,881			56,547		46,972			(3,229,639	)		3,109,881
Retained earnings (deficit)		(3,564,758	)		267,724		(5,131	)		327,486		(590,079	)		(3,564,758	)		(3,620,914	)		1,697		22,467			3,540,594			(3,620,914	)
Total stockholders’ equity (deficit)		(438,638	)		413,995		55,628			614,251		(1,083,874	)		(438,638	)		(504,373	)		58,244		69,439			310,955			(504,373	)
Total liabilities and stockholders’ equity (deficit)	$	2,369,561		$	446,776	$	58,070		$	639,478	$	(2,066,798	)	$	1,447,087		$	100,541		$	537,421	$	75,993		$	(217,878	)	$	1,943,164

23

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES

UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEETS

AS OF DECEMBER 31, 2006

(in thousands)	XM Satellite Radio Inc.			XM Radio Inc.		XM Equipment Leasing LLC			XMSR Non- Guarantor Subsidiaries		Eliminations			Consolidated XM Satellite Radio Inc.			XM Satellite Radio Holdings Inc.			Satellite Leasing (702-4), LLT		XM Holdings Non- Guarantor Subsidiaries			Eliminations			Consolidated XM Satellite Radio Holdings Inc.
Current assets:
Cash and cash equivalents	$	92,445		$	—	$	32		$	—	$	—		$	92,477		$	125,593		$	—	$	146		$	—		$	218,216
Accounts receivable, net		62,293			—		—			—		—			62,293			—			—		—			—			62,293
Due from subsidiaries/affiliates		3,645			267,724		31,251			624,991		(927,582	)		29			—			—		29,235			(29,264	)		—
Due from related parties		13,991			—		—			—		—			13,991			—			—		—			—			13,991
Related party prepaid expenses		66,946			—		—			—		—			66,946			—			—		—			—			66,946
Prepaid programming content		28,172			—		—			—		—			28,172			—			—		—			—			28,172
Prepaid and other current assets		42,288			—		—			—		—			42,288			1,280			—		597			(1,125	)		43,040
Total current assets		309,780			267,724		31,283			624,991		(927,582	)		306,196			126,873			—		29,978			(30,389	)		432,658
Restricted investments		386			—		—			—		—			386			—			—		1,712			—			2,098
System under construction		—			—		—			—		—			—			126,049			—		—			—			126,049
Property and equipment, net		475,521			—		26,895			—		—			502,416			311,767			—		40,578			(5,099	)		849,662
Investment in subsidiary/affiliates		1,032,642			—		—			—		(1,032,642	)		—			(379,419	)		—		—			379,419			—
DARS license		—			141,387		—			—		—			141,387			—			—		—			—			141,387
Intangibles, net		4,640			—		—			—		—			4,640			—			—		—			—			4,640
Deferred financing fees, net		32,185			—		—			—		—			32,185			6,025			—		391			—			38,601
Related party prepaid expenses		160,712			—		—			—		—			160,712			—			—		—			—			160,712
Investments		—			—		—			—		—			—			80,592			—		—			—			80,592
Prepaid and other assets		2,315			—		—			—		—			2,315			—			—		1,904			—			4,219
Total assets	$	2,018,181		$	409,111	$	58,178		$	624,991	$	(1,960,224	)	$	1,150,237		$	271,887		$	—	$	74,563		$	343,931		$	1,840,618
Current liabilities:
Accounts payable	$	51,634		$	—	$	—		$	—	$	—		$	51,634		$	210		$	—	$	—		$	—		$	51,844
Accrued expenses		146,902			—		127			—		—			147,029			713			—		290			(441	)		147,591
Accrued satellite liability		—			—		—			—		—			—			64,875			—		—			—			64,875
Accrued interest		15,277			—		—			—		—			15,277			3,001			—		204			—			18,482
Current portion of long-term debt		13,883			—		—			—		—			13,883			—			—		562			—			14,445
Due to related parties		46,459			—		—			—		—			46,459			—			—		—			—			46,459
Due to subsidiary/affiliates		900,055			245		2,226			25,062		(927,562	)		26			29,235			—		112			(29,373	)		—
Subscriber deferred revenue		340,711			—		—			—		—			340,711			—			—		—			—			340,711
Deferred income		—			—		—			—		—			—			9,915			—		—			—			9,915
Total current liabilities		1,514,921			245		2,353			25,062		(927,562	)		615,019			107,949			—		1,168			(29,814	)		694,322
Long-term debt, net of current portion		847,864			—		—			—		—			847,864			400,000			—		38,315			—			1,286,179
Subscriber deferred revenue, net of current portion		86,482			—		—			—		—			86,482			—			—		—			—			86,482
Deferred income, net of current portion		2,045			—		—			—		—			2,045			128,735			—		—			—			130,780
Other non-current liabilities		14,043			31,958		—			—		—			46,001			33,083			—		(1,316	)		(37,033	)		40,735
Total liabilities		2,465,355			32,203		2,353			25,062		(927,562	)		1,597,411			669,767			—		38,167			(66,847	)		2,238,498
Commitments and contingencies
Stockholders’ equity (deficit):
Capital stock		—			—		—			—		—			—			3,112			—		—			—			3,112
Accumulated other comprehensive income		—			—		—			—		—			—			3,590			—		—			—			3,590
Additional paid-in-capital		3,002,594			146,271		60,759			286,765		(493,795	)		3,002,594			3,093,894			—		10,830			(3,013,424	)		3,093,894
Retained earnings (deficit)		(3,449,768	)		230,637		(4,934	)		313,164		(538,867	)		(3,449,768	)		(3,498,476	)		—		25,566			3,424,202			(3,498,476	)
Total stockholders’ equity (deficit)		(447,174	)		376,908		55,825			599,929		(1,032,662	)		(447,174	)		(397,880	)		—		36,396			410,778			(397,880	)
Total liabilities and stockholders’ equity (deficit)	$	2,018,181		$	409,111	$	58,178		$	624,991	$	(1,960,224	)	$	1,150,237		$	271,887		$	—	$	74,563		$	343,931		$	1,840,618

24

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES

UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2007

(in thousands)	XM Satellite Radio Inc.			XM Radio Inc.			XM Equipment Leasing LLC			XMSR Non- Guarantor Subsidiaries			Eliminations			Consolidated XM Satellite Radio Inc.			XM Satellite Radio Holdings Inc.			Satellite Leasing (702-4), LLT			XM Holdings Non- Guarantor Subsidiaries			Eliminations			Consolidated XM Satellite Radio Holdings Inc.
Revenue	$	261,614		$	37,665		$	2,741		$	—		$	(40,405	)	$	261,615		$	2,498		$	4,723		$	2,522		$	(7,246	)	$	264,112
Cost of revenue		172,608			—			7			—			114			172,729			—			—			268			(1,887	)		171,110
Research & development		7,310			—			—			—			—			7,310			—			—			—			—			7,310
General & administrative		32,807			—			—			—			—			32,807			136			—			1,367			(125	)		34,185
Marketing		92,671			—			—			—			—			92,671			—			—			—			—			92,671
Depreciation & amortization		41,652			—			3,096			—			—			44,748			2,604			—			502			(972	)		46,882
Total operating expenses		347,048			—			3,103			—			114			350,265			2,740			—			2,137			(2,984	)		352,158
Operating income (loss)		(85,434	)		37,665			(362	)		—			(40,519	)		(88,650	)		(242	)		4,723			385			(4,262	)		(88,046	)
Other income (expense):
Interest income		1,518			—			165			14,487			(14,652	)		1,518			2,026			—			—			—			3,544
Interest expense		(41,762	)		—			—			(165	)		14,652			(27,275	)		(855	)		(3,026	)		(517	)		4,064			(27,609	)
Loss from de-leveraging transactions		—			—			—			—			—			—			—			—			(2,965	)		—			(2,965	)
Equity in net loss of affiliate		—			—			—			—			—			—			(5,425	)		—			—			—			(5,425	)
Minority interest		—			—			—			—			—			—			—			—			—			(1,697	)		(1,697	)
Other income (expense)		10,688			—			—			—			(10,693	)		(5	)		(117,258	)		—			—			117,707			444
Net income (loss) before income taxes		(114,990	)		37,665			(197	)		14,322			(51,212	)		(114,412	)		(121,754	)		1,697			(3,097	)		115,812			(121,754	)
Benefit from (provision for) deferred income taxes		—			(578	)		—			—			—			(578	)		(684	)		—			—			578			(684	)
Net income (loss)	$	(114,990	)	$	37,087		$	(197	)	$	14,322		$	(51,212	)	$	(114,990	)	$	(122,438	)	$	1,697		$	(3,097	)	$	116,390		$	(122,438	)

25

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES

UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2006

(in thousands)	XM Satellite Radio Inc.			XM Radio Inc.			XM Equipment Leasing LLC			XMSR Non- Guarantor Subsidiaries			Eliminations			Consolidated XM Satellite Radio Inc.			XM Satellite Radio Holdings Inc.			Satellite Leasing (702-4), LLT		XM Holdings Non- Guarantor Subsidiaries			Eliminations			Consolidated XM Satellite Radio Holdings Inc.
Revenue	$	205,619		$	29,559		$	2,730		$	—		$	(32,282	)	$	205,626		$	2,340		$	—	$	2,542		$	(2,542	)	$	207,966
Cost of revenue		135,184			—			8			—			126			135,318			—			—		106			(1,913	)		133,511
Research & development		10,981			—			—			—			—			10,981			—			—		—			—			10,981
General & administrative		17,687			—			—			—			—			17,687			95			—		(28	)		(124	)		17,630
Marketing		106,758			—			—			—			—			106,758			—			—		—			—			106,758
Depreciation & amortization		35,142			—			3,272			—			—			38,414			966			—		502			—			39,882
Total operating expenses		305,752			—			3,280			—			126			309,158			1,061			—		580			(2,037	)		308,762
Operating income (loss)		(100,133	)		29,559			(550	)		—			(32,408	)		(103,532	)		1,279			—		1,962			(505	)		(100,796	)
Other income (expense):
Interest income		301			—			223			14,487			(14,653	)		358			6,062			—		153			—			6,573
Interest expense		(47,165	)		—			—			(166	)		14,653			(32,678	)		(560	)		—		2			—			(33,236	)
Loss from de-leveraging transactions		(18,380	)		—			—			—			—			(18,380	)		—			—		—			—			(18,380	)
Equity in net loss of affiliate		—			—			—			—			—			—			(8,884	)		—		—			—			(8,884	)
Other income (expense)		14,757			—			4,192			—			(14,759	)		4,190			(148,564	)		—		—			149,008			4,634
Net income (loss) before income taxes		(150,620	)		29,559			3,865			14,321			(47,167	)		(150,042	)		(150,667	)		—		2,117			148,503			(150,089	)
Benefit from (provision for) deferred income taxes		—			(578	)		—			—			—			(578	)		1,446			—		—			—			868
Net income (loss)	$	(150,620	)	$	28,981		$	3,865		$	14,321		$	(47,167	)	$	(150,620	)	$	(149,221	)	$	—	$	2,117		$	148,503		$	(149,221	)

26

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES

UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2007

(in thousands)	XM Satellite Radio Inc.			XM Radio Inc.		XM Equipment Leasing LLC			XMSR Non- Guarantor Subsidiaries		Eliminations			Consolidated XM Satellite Radio Inc.			XM Satellite Radio Holdings Inc.			Satellite Leasing (702-4), LLT			XM Holdings Non- Guarantor Subsidiaries			Eliminations			Consolidated XM Satellite Radio Holdings Inc.
Net cash (used in) provided by operating activities	$	(45,409	)	$	—	$	3,943		$	—	$	(56	)	$	(41,522	)	$	(42,399	)	$	—		$	40,789		$	—		$	(43,132	)
Cash flows from investing activities:
Purchase of property and equipment		(24,872	)		—		—			—		—			(24,872	)		—			(288,500	)		—			288,500			(24,872	)
Additions to system under construction		—			—		—			—		—			—			(73,132	)		—			—			—			(73,132	)
Proceeds from sale of assets		—			—		—			—		—			—			288,500			—			—			(288,500	)		—
Net maturity (purchase) of restricted investments		—			—		—			—		—			—			—			—			1,702			—			1,702
Net cash (used in) provided by investing activities		(24,872	)		—		—			—		—			(24,872	)		215,368			(288,500	)		1,702			—			(96,302	)
Cash flows from financing activities:
Proceeds from exercise of warrants and stock options		—			—		—			—		—			—			1,857			—			—			—			1,857
Capital contributions from Holdings		109,397			—		—			—		—			109,397			(109,397	)		—			—			—			—
Capital contributions from outside investor to minority interest		—			—		—			—		—			—			—			57,700			—			(57,700	)		—
Proceeds from issuance of debt by minority interest		—			—		—			—		—			—			—			230,800			—			(230,800	)		—
Proceeds from sale-leaseback transaction		—			—		—			—		—			—			—			—			—			288,500			288,500
Retirement of mortgages on corporate facilities		—			—		—			—		—			—			—			—			(38,877	)		—			(38,877	)
Payment of premiums on de-leveraging transactions		—			—		—			—		—			—			—			—			(2,965	)		—			(2,965	)
Payments on other borrowings		—			—		(3,975	)		—		—			(3,975	)		—			—			—			—			(3,975	)
Deferred financing costs		(3,931	)		—		—			—		—			(3,931	)		—			—			—			—			(3,931	)
Net cash provided by (used in) financing activities		105,466			—		(3,975	)		—		—			101,491			(107,540	)		288,500			(41,842	)		—			240,609
Net increase (decrease) in cash and cash equivalents		35,185			—		(32	)		—		(56	)		35,097			65,429			—			649			—			101,175
Cash and cash equivalents at beginning of period		92,445			—		32			—		—			92,477			125,593			—			146			—			218,216
Cash and cash equivalents at end of period	$	127,630		$	—	$	—		$	—	$	(56	)	$	127,574		$	191,022		$	—		$	795		$	—		$	319,391

27

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES

UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2006

(in thousands)	XM Satellite Radio Inc.			XM Radio Inc.		XM Equipment Leasing LLC			XMSR Non- Guarantor Subsidiaries		Eliminations		Consolidated XM Satellite Radio Inc.			XM Satellite Radio Holdings Inc.			Satellite Leasing (702-4), LLT		XM Holdings Non- Guarantor Subsidiaries			Eliminations		Consolidated XM Satellite Radio Holdings Inc.
Net cash (used in) provided by operating activities	$	(160,751	)	$	—	$	(6,855	)	$	—	$	—	$	(167,606	)	$	4,625		$	—	$	1,847		$	—	$	(161,134	)
Cash flows from investing activities:
Purchase of property and equipment		(14,952	)		—		—			—		—		(14,952	)		—			—		—			—		(14,952	)
Additions to system under construction		—			—		—			—		—		—			(22,225	)		—		—			—		(22,225	)
Proceeds from sale of assets		—			—		6,997			—		—		6,997			—			—		—			—		6,997
Net maturity (purchase) of restricted investments		—			—		—			—		—		—			—			—		20			—		20
Net cash (used in) provided by investing activities		(14,952	)		—		6,997			—		—		(7,955	)		(22,225	)		—		20			—		(30,160	)
Cash flows from financing activities:
Proceeds from exercise of warrants and stock options		—			—		—			—		—		—			3,135			—		—			—		3,135
Capital contributions from Holdings		130,715			—		—			—				130,715			(130,715	)		—		—			—		—
Payment of premiums on de-leveraging transactions		—			—		—			—		—		—			—			—		—			—		—
Payments on other borrowings		(1,829	)		—		—			—				(1,829	)		—			—		(183	)		—		(2,012	)
Deferred financing costs		—			—		—			—				—			—			—		—			—		—
Net cash provided by (used in) financing activities		128,886			—		—			—		—		128,886			(127,580	)		—		(183	)		—		1,123
Net increase (decrease) in cash and cash equivalents		(46,817	)		—		142			—		—		(46,675	)		(145,180	)		—		1,684			—		(190,171	)
Cash and cash equivalents at beginning of period		57,598			—		6			—		—		57,604			638,246			—		15,141			—		710,991
Cash and cash equivalents at end of period	$	10,781		$	—	$	148		$	—	$	—	$	10,929		$	493,066		$	—	$	16,825		$	—	$	520,820

28

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	XM SATELLITE RADIO HOLDINGS INC.
	(Registrant)
Date: October 3, 2007	/s/ NATHANIEL A. DAVIS
	Nathaniel A. Davis President and Chief Executive Officer (principal executive officer)
Date: October 3, 2007	/s/ JOSEPH J. EUTENEUER
	Joseph J. Euteneuer Executive Vice President and Chief Financial Officer (principal financial and accounting officer)
	XM SATELLITE RADIO INC.
	(Registrant)
Date: October 3, 2007	/s/ NATHANIEL A. DAVIS
	Nathaniel A. Davis President and Chief Executive Officer (principal executive officer)
Date: October 3, 2007	/s/ JOSEPH J. EUTENEUER
	Joseph J. Euteneuer Executive Vice President and Chief Financial Officer (principal financial and accounting officer)