SIRIUS SATELLITE RADIO INC - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period ended March 31, 2003

Commission file number 0-24710

SIRIUS SATELLITE RADIO INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)

Delaware 52-1700207
---------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

1221 Avenue of the Americas, 36th Floor
New York, New York 10020
----------------------------------------
(Address of principal executive offices)
(Zip code)

212-584-5100
----------------------------------------------------
(Registrant's telephone number, including area code)

--------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X] No [_]

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

Yes [X] No [_]

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

Common Stock, $.001 par value 911,815,900 shares
------------------------------------------------------------------------------
(Class) (Outstanding as of May 12, 2003)

SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Part I - Financial Information

Consolidated Statements of Operations for the three months ended March 31,
2003 and 2002 (Unaudited)................................................. 1

Consolidated Balance Sheets as of March 31, 2003 (Unaudited) and December 31,
2002...................................................................... 2

Consolidated Statement of Stockholders' Equity for the three months ended
March 31, 2003 (Unaudited)................................................ 3

Consolidated Statements of Cash Flows for the three months ended March 31,
2003 and 2002 (Unaudited)................................................. 4

Notes to Consolidated Financial Statements (Unaudited)....................... 5

Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 13

Part II - Other Information

Item 2. Changes in Securities and Use of Proceeds............................ 22

Item 4. Submission of Matters to a Vote of Security Holders.................. 22

Item 6. Exhibits and Reports on Form 8-K..................................... 22

Signatures................................................................... 23

Certification of Chief Executive Officer..................................... 24

Certification of Acting Chief Financial Officer.............................. 25

SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)

For the Three Month Ended
March 31,
-------------------------
2003 2002
-------- --------

Revenue:
Subscriber revenue, net of mail-in rebates ............................. $ 1,554 $ 4
Advertising revenue, net of agency fees ................................ 17 29
Other revenue .......................................................... 20 --
-------- --------
Total revenue ............................................................. 1,591 33
-------- --------
Operating expenses:
Cost of services (excludes depreciation expense shown separately below):
Satellite and transmission ....................................... 7,867 8,757
Programming and content .......................................... 6,574 3,783
Customer service and billing ..................................... 2,202 1,842
Sales and marketing .................................................... 45,340 15,659
General and administrative ............................................. 9,094 7,540
Research and development ............................................... 4,983 7,713
Depreciation expense ................................................... 24,100 14,481
Non-cash stock compensation expense/(benefit) (1) ...................... 559 (9,024)
-------- --------
Total operating expenses .................................................. 100,719 50,751
-------- --------
Loss from operations ................................................... (99,128) (50,718)
Other income (expense):
Debt restructuring ..................................................... 256,538 --
Interest and investment income ......................................... 1,343 2,000
Interest expense, net of amounts capitalized ........................... (18,665) (30,193)
-------- --------
Total other income (expense) .............................................. 239,216 (28,193)
-------- --------
Net income (loss) ...................................................... 140,088 (78,911)
Preferred stock dividends ................................................. (8,574) (11,042)
Preferred stock deemed dividends .......................................... (79,634) (171)
-------- --------
Net income (loss) applicable to common stockholders .................... $ 51,880 $(90,124)
======== ========
Net income (loss) per share applicable to common stockholders:
Basic ............................................................... $ 0.16 $ (1.22)
======== ========
Diluted ............................................................. $ 0.16 $ (1.22)
======== ========
Weighted average common shares outstanding:
Basic ............................................................... 327,785 73,861
======== ========
Diluted ............................................................. 327,872 73,861
======== ========

- --------------
(1) Allocation of non-cash stock compensation expense/(benefit) to other
operating expenses:

Satellite and transmission ................................................ $ 79 $ (1,596)
Programming and content ................................................... 88 (1,921)
Customer service and billing .............................................. 7 (185)
Sales and marketing ....................................................... 208 (1,372)
General and administrative ................................................ 126 (1,856)
Research and development .................................................. 51 (2,094)
-------- --------
Total non-cash stock compensation expense/(benefit) .................... $ 559 $ (9,024)
======== ========

The accompanying notes are an integral part of these consolidated financial
statements.

1

SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)

March 31, December 31,
2003 2002
----------- ------------
(Unaudited)

ASSETS
Current assets:
Cash and cash equivalents...................................................... $ 254,180 $ 18,375
Marketable securities.......................................................... 35,562 155,327
Prepaid expenses............................................................... 22,589 24,562
Other current assets........................................................... 1,941 1,345
---------- ----------
Total current assets..................................................... 314,272 199,609
Property and equipment, net....................................................... 1,014,179 1,032,874
FCC license....................................................................... 83,654 83,654
Restricted investments............................................................ 7,200 7,200
Other long-term assets............................................................ 1,680 17,603
---------- ----------
Total assets................................................................ $1,420,985 $1,340,940
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses.......................................... $ 45,188 $ 43,336
Accrued interest............................................................... 3,105 3,234
Deferred revenue............................................................... 2,711 1,750
---------- ----------
Total current liabilities................................................... 51,004 48,320
Long-term debt.................................................................... 58,205 670,357
Accrued interest, net of current portion.......................................... -- 46,914
Other long-term liabilities....................................................... 8,535 7,350
---------- ----------
Total liabilities........................................................... 117,744 772,941
---------- ----------
Commitments and contingencies:
9.2% Series A Junior Cumulative Convertible Preferred Stock, $.001 par value:
4,300,000 shares authorized, no shares and 1,902,823 shares issued and
outstanding at March 31, 2003 and December 31, 2002, respectively
(liquidation preference of $0 and $190,282), at net carrying value
including accrued dividends................................................. -- 193,230
9.2% Series B Junior Cumulative Convertible Preferred Stock, $.001 par value:
2,100,000 shares authorized, no shares and 853,450 shares issued and
outstanding at March 31, 2003 and December 31, 2002, respectively
(liquidation preference of $0 and $85,345), at net carrying value including
accrued dividends........................................................... -- 84,781
9.2% Series D Junior Cumulative Convertible Preferred Stock, $.001 par value:
10,700,000 shares authorized, no shares and 2,558,655 shares issued and
outstanding at March 31, 2003 and December 31, 2002, respectively
(liquidation preference of $0 and $255,866), at net carrying value
including accrued dividends................................................. -- 253,142
Stockholders' equity:
Common stock, $.001 par value: 2,500,000,000 shares authorized, 911,747,153
and 77,454,197 shares issued and outstanding at March 31, 2003 and
December 31, 2002, respectively............................................. 912 77
Additional paid-in capital..................................................... 2,089,551 963,335
Accumulated other comprehensive income......................................... 169 913
Accumulated deficit............................................................ (787,391) (927,479)
---------- ----------
Total stockholders' equity.................................................. 1,303,241 36,846
---------- ----------
Total liabilities and stockholders' equity.................................. $1,420,985 $1,340,940
========== ==========

The accompanying notes are an integral part of these consolidated
financial statements.

2

SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands, except share and per share amounts)
(Unaudited)

Accumulated
Common Stock Additional Other
-------------------- Paid-In Comprehensive
Shares Amount Capital Income
----------- ------ ---------- -------------

Balances, December 31, 2002 ...................... 77,454,197 $ 77 $ 963,335 $ 913
Net income ....................................... -- -- -- --
Change in unrealized gain on available-for-sale
securities .................................... -- -- (744)
Issuance of common stock to employees and
employee benefit plans ........................ 557,550 1 509 --
Compensation in connection with the issuance of
stock options ................................. -- -- 49 --
Warrant expense associated with marketing
agreement ..................................... -- -- 1 --
Sale of common stock, par value $.001 per share,
between $0.92 and $1.04 per share, net of
expenses ...................................... 211,730,379 212 192,641
Exchange of Lehman term loans, including accrued
interest ...................................... 120,988,793 121 85,781 --
Exchange of Loral term loans, including accrued
interest ...................................... 58,964,981 59 41,806 --
Exchange of 15% Senior Secured Discount Notes
due 2007, including accrued interest .......... 204,319,915 204 144,863 --
Exchange of 14 1/2% Senior Secured Notes due 2009,
including accrued interest .................... 148,301,817 148 105,146 --
Exchange of 8 3/4% Convertible Subordinated Notes
due 2009, including accrued interest .......... 12,436,656 13 24,342 --
Exchange of 9.2% Series A and B Junior
Cumulative Convertible Preferred Stock,
including accrued dividends ................... 39,927,796 40 304,807 --
Exchange of 9.2% Series D Junior Cumulative
Convertible Preferred Stock, including
accrued dividends ............................. 37,065,069 37 283,748 --
Issuance of warrants in connection with the
exchange of 9.2% Series A, B and D Junior
Cumulative Convertible Preferred Stock ........ -- -- 30,731
Preferred stock dividends ........................ -- -- (8,574) --
Preferred stock deemed dividends ................. -- -- (79,634) --
----------- ---- ---------- -----
Balances, March 31, 2003 ......................... 911,747,153 $912 $2,089,551 $ 169
=========== ==== ========== =====

Accumulated
Deficit Total
----------- ----------

Balances, December 31, 2002 ...................... $(927,479) $ 36,846
Net income ....................................... 140,088 140,088
Change in unrealized gain on available-for-sale
securities .................................... -- (744)
Issuance of common stock to employees and
employee benefit plans ........................ -- 510
Compensation in connection with the issuance of
stock options ................................. -- 49
Warrant expense associated with marketing
agreement ..................................... -- 1
Sale of common stock, par value $.001 per share,
between $0.92 and $1.04 per share, net of
expenses ...................................... -- 192,853
Exchange of Lehman term loans, including accrued
interest ...................................... 85,902
Exchange of Loral term loans, including accrued
interest ...................................... -- 41,865
Exchange of 15% Senior Secured Discount Notes
due 2007, including accrued interest .......... -- 145,067
Exchange of 14 1/2% Senior Secured Notes due 2009,
including accrued interest .................... -- 105,294
Exchange of 8 3/4% Convertible Subordinated Notes
due 2009, including accrued interest .......... -- 24,355
Exchange of 9.2% Series A and B Junior
Cumulative Convertible Preferred Stock,
including accrued dividends ................... -- 304,847
Exchange of 9.2% Series D Junior Cumulative
Convertible Preferred Stock, including
accrued dividends ............................. -- 283,785
Issuance of warrants in connection with the
exchange of 9.2% Series A, B and D Junior
Cumulative Convertible Preferred Stock ........ 30,731
Preferred stock dividends ........................ -- (8,574)
Preferred stock deemed dividends ................. -- (79,634)
--------- ----------
Balances, March 31, 2003 ......................... $(787,391) $1,303,241
========= ==========

The accompanying notes are an integral part of this consolidated
financial statement.

3

SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

(Unaudited)

For the Three Months Ended
March 31,
--------------------------
2003 2002
--------- ---------

Cash flows from operating activities:
Net income (loss) ......................................................... $ 140,088 $ (78,911)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense ................................................... 24,100 14,481
Non-cash interest expense .............................................. 1,767 21,607
Non-cash stock compensation expense/(benefit) .......................... 559 (9,024)
Amortization of prepaid in-orbit satellite insurance ................... 2,173 2,756
Non-cash gain associated with debt restructuring ....................... (261,275) --
Costs associated with debt restructuring ............................... 4,737 --
Other .................................................................. 1 20
Increase/(decrease) in cash and cash equivalents resulting from changes in
assets and liabilities:
Marketable securities .................................................. (979) (74,093)
Prepaid expenses and other current assets .............................. (796) (707)
Other long-term assets ................................................. 24 (320)
Accrued interest ....................................................... 14,436 8,880
Accounts payable and accrued expenses .................................. 4,025 (2,622)
--------- ---------
Net cash used in operating activities ............................... (71,140) (117,933)
--------- ---------

Cash flows from investing activities:
Additions to property and equipment .................................... (5,405) (11,359)
Maturities of available-for-sale securities ............................ 120,000 --
--------- ---------
Net cash provided by/(used in) investing activities ................. 114,595 (11,359)
--------- ---------

Cash flows from financing activities:
Proceeds from issuance of common stock, net ............................... 197,112 147,500
Costs associated with debt restructuring .................................. (4,737) --
Proceeds from exercise of stock options ................................... -- 22
Other ..................................................................... (25) (9)
--------- ---------
Net cash provided by financing activities ........................... 192,350 147,513
--------- ---------
Net increase in cash and cash equivalents .................................... 235,805 18,221
Cash and cash equivalents at the beginning of period ......................... 18,375 4,726
--------- ---------
Cash and cash equivalents at the end of period ............................... $ 254,180 $ 22,947
========= =========

The accompanying notes are an integral part of these consolidated
financial statements.

4

SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, unless otherwise stated)
(Unaudited)

1. Business

Sirius Satellite Radio Inc. broadcasts digital-quality audio from three
orbiting satellites throughout the continental United States for a monthly
subscription fee of $12.95. We deliver 60 streams of 100% commercial-free music
in virtually every genre, and over 40 streams of news, sports, weather, talk,
comedy, public radio and children's programming.

Since inception, we have used substantial resources to develop our
satellite radio system. Our satellite radio system consists of our FCC license,
satellite system, national broadcast studio, terrestrial repeater network and
satellite telemetry, tracking and control facilities.

We launched our service in select markets on February 14, 2002 and
nationally on July 1, 2002. As of March 31, 2003, we had 68,059 subscribers. We
consider subscribers to be those who have agreed to pay for our service and have
activated their SIRIUS radio, including those who are currently in promotional
periods, and active SIRIUS radios under our agreement with Hertz Corporation.
Our primary source of revenue is subscription and activation fees. In addition,
we derive revenues from selling limited advertising on our non-music streams.

2. Recapitalization

On March 7, 2003, we completed a series of transactions to restructure our
debt and equity capitalization. As part of these transactions:

o we issued 545,012,162 shares of our common stock in exchange for
approximately 91% of our outstanding debt, including all of our Lehman
term loans, all of our Loral term loans, $251,230 in aggregate
principal amount at maturity of our 15% Senior Secured Discount Notes
due 2007, $169,742 in aggregate principal amount of our 14 1/2% Senior
Secured Notes due 2009, and $14,717 in aggregate principal amount of
our 8 3/4% Convertible Subordinated Notes due 2009;

o we issued 39,927,796 shares of our common stock and warrants to
purchase 45,416,690 shares of our common stock in exchange for all
outstanding shares of our 9.2% Series A and B Junior Cumulative
Convertible Preferred Stock held by affiliates of Apollo Management,
L.P. ("Apollo");

o we issued 37,065,069 shares of our common stock and warrants to
purchase 42,160,424 shares of our common stock in exchange for all
outstanding shares of our 9.2% Series D Junior Cumulative Convertible
Preferred Stock held by affiliates of The Blackstone Group L.P.
("Blackstone");

o we sold 24,060,271 shares of our common stock to Apollo for an
aggregate of $25,000 in cash;

o we sold 24,060,271 shares of our common stock to Blackstone for an
aggregate of $25,000 in cash; and

o we sold 163,609,837 shares of our common stock to affiliates of
OppenheimerFunds, Inc. ("Oppenheimer") for an aggregate of $150,000 in
cash.

We recorded a gain of $256,538 as a result of the exchange transactions. As
of March 31, 2003, we had $61,202 in aggregate principal amount at maturity of
outstanding debt, consisting of $29,200 in aggregate principal amount at
maturity of our 15% Senior Secured Discount Notes due 2007, $30,258 in aggregate
principal amount of our 14 1/2% Senior Secured Notes due 2009 and $1,744 in
aggregate principal amount of our 8 3/4% Convertible Subordinated Notes due
2009.

In connection with the exchange offer relating to our debt, we also amended
the indentures under which our 15% Senior Secured Discount Notes due 2007,
14 1/2% Senior Secured Notes due 2009 and 8 3/4% Convertible Subordinated Notes
due 2009 were issued to eliminate substantially all of the restrictive
covenants. Holders of our debt also waived any existing events of default or
events of default caused by the restructuring.

5

SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands, unless otherwise stated)
(Unaudited)

3. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements, including the
accounts of Sirius Satellite Radio Inc. and Satellite CD Radio, Inc., our wholly
owned subsidiary, have been prepared in accordance with accounting principles
generally accepted in the United States and the instructions to Form 10-Q and
Article 10 of Regulation S-X for interim financial reporting. In the opinion of
management, all adjustments (consisting only of normal, recurring adjustments)
considered necessary for fair presentation have been included. All intercompany
transactions have been eliminated in consolidation. Our consolidated financial
statements should be read together with our consolidated financial statements
and the notes thereto contained in our Annual Report on Form 10-K for the year
ended December 31, 2002.

Revenue Recognition

Revenue from subscribers consists of subscription fees, including revenue
derived from our agreement with Hertz, and non-refundable activation fees. We
recognize subscription fees as our service is provided. Activation fees are
recognized ratably over the estimated term of a subscriber relationship,
currently 3.5 years. The estimated term of a subscriber relationship is based on
market research and management's judgment and, if necessary, will be refined in
the future as historical data becomes available. As required by Emerging Issues
Task Force No. 01-09, "Accounting for Consideration Given by a Vendor to a
Customer (Including a Reseller of the Vendor's Products)," mail-in rebates that
are paid by us directly to subscribers are recorded as a reduction to
subscription revenue in the period the subscriber activates service.

We recognize advertising revenue from the sale of spot announcements on our
non-music streams as the announcements are broadcast. Agency fees are calculated
based on a stated percentage applied to gross billing revenue for our
advertising inventory and are reported as a reduction of advertising revenue.

Stock Options

We have adopted the disclosure provisions of Statement of Financial
Accounting Standards ("SFAS") No. 148, "Accounting for Stock-Based
Compensation--Transition and Disclosure--An Amendment of FASB Statement No.
123." In addition, we have elected to continue using the intrinsic value method
to measure the compensation costs of stock-based awards granted to employees in
accordance with Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees"; as a result, we recognize compensation expense
for employee stock options granted at a price less than the market value of our
common stock on the date of grant.

The following table illustrates the effect on net income (loss) and net
income (loss) per share had stock-based employee compensation been recorded
based on the fair value method under SFAS No. 123.

For the Three Months
Ended March 31,
--------------------
2003 2002
-------- --------

Net income (loss) applicable to common stockholders--as reported $51,880 $ (90,124)
Non-cash stock compensation expense/(benefit)--as reported ...... 559 (9,024)
Stock-based compensation--pro forma ............................. (7,718) (9,441)
------- ---------
Net income (loss) applicable to common stockholders--pro forma .. $44,721 $(108,589)
======= =========

6

SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands, unless otherwise stated)
(Unaudited)

Net income (loss) per share applicable to common stockholders:
Basic--as reported ......................................... $0.16 $(1.22)
===== ======
Diluted--as reported ....................................... $0.16 $(1.22)
===== ======
Net income (loss) per share applicable to common stockholders:
Basic--pro forma ........................................... $0.14 $(1.47)
===== ======
Diluted--pro forma ......................................... $0.14 $(1.47)
===== ======

Option valuation models require highly subjective assumptions, including
the expected stock price volatility, which may be significantly different from
those of traded options. Because changes in subjective assumptions can
materially affect the fair value estimate, it is our opinion that the existing
models do not necessarily provide a reliable single measure of the fair value of
our stock-based awards. The Black-Scholes option valuation model was developed
for use in estimating the fair value of traded options, which have no vesting
restrictions and are fully transferable. The pro forma stock-based employee
compensation was estimated using the Black-Scholes option pricing model with the
following weighted average assumptions for each period:

For the Three Months
Ended March 31,
--------------------
2003 2002
---- ----

Risk-free interest rate ................................. 1.87% 2.48%
Expected life of options--years ......................... 4.89 4.75
Expected stock price volatility ......................... 115% 110%
Expected dividend yield ................................. N/A N/A

In accordance with APB Opinion No. 25, we use the intrinsic value method to
measure the compensation costs of stock-based awards granted to employees as the
excess of the market value of our common stock on the date of grant over the
exercise price. We record these compensation costs over the vesting period of
the stock-based award.

We account for stock-based awards granted to non-employees at fair value in
accordance with SFAS No. 123, "Accounting for Stock-Based Compensation."

In accordance with Financial Accounting Standards Board Interpretation
No. 44, "Accounting for Certain Transactions Involving Stock Compensation,"
we record compensation charges or benefits related to repriced stock options
based on the market value of our common stock until the repriced stock options
are exercised, forfeited or expire.

7

SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands, unless otherwise stated)
(Unaudited)

Debt Restructuring

We recorded a gain of $256,538 in connection with the restructuring of our
long-term debt. This gain represents the difference between the carrying value
of our 15% Senior Secured Discount Notes due 2007, 14 1/2% Senior Secured Notes
due 2009, Lehman term loans and Loral term loans, including accrued interest,
and the fair market value of the common stock issued, adjusted for unamortized
debt issuance costs and direct costs associated with the restructuring. This
gain is net of a loss on our 8 3/4% Convertible Subordinated Notes due 2009
exchanged in the restructuring. This loss represents the difference between the
fair market value of the common stock issued in the exchange and the fair market
value of the common stock which would have been issued under the original
conversion ratio, including accrued interest, adjusted for unamortized debt
issuance costs and direct costs associated with the restructuring.

Preferred Stock Deemed Dividend

We recorded a deemed dividend of $79,510 in connection with the exchange of
all outstanding shares of our preferred stock for shares of our common stock
and warrants. This deemed dividend represents the difference between the fair
market value of the common stock and warrants issued in exchange for all
outstanding shares of our 9.2% Series A, B and D Junior Cumulative Convertible
Preferred Stock and the fair market value of the common stock which would have
been issued under the original conversion ratio, adjusted for unamortized
issuance costs and direct costs associated with the exchange of the preferred
stock.

Net Loss Per Share

Basic net loss per share is based on the weighted average common shares
outstanding during each reporting period. Diluted net loss per share adjusts the
weighted average for the potential dilution that could occur if common stock
equivalents (convertible preferred stock, convertible debt, warrants and stock
options) were exercised or converted into common stock. Approximately 61,000 and
16,997,000 common stock equivalents were outstanding as of March 31, 2003 and
2002, respectively, and were excluded from the calculation of diluted net loss
per share, as they were anti-dilutive.

Marketable Securities

Marketable securities consist of U.S. government notes and U.S. government
agency obligations. Effective April 1, 2002, we began classifying marketable
securities as available-for-sale securities rather than trading securities
because we no longer intend to actively buy and sell marketable securities with
the objective of generating trading profits. Available-for-sale securities are
carried at fair market value and unrealized gains and losses are included as a
component of stockholders' equity. Prior to April 1, 2002, marketable securities
were classified as trading securities and unrealized holding gains and losses
were recognized in earnings. Marketable securities held at March 31, 2003 and
December 31, 2002 mature within one year from the date of purchase. We had
unrealized holding gains on marketable securities of $169 and $913 as of March
31, 2003 and December 31, 2002, respectively.

Classification of Long-Term Debt and Accrued Interest

In accordance with SFAS No. 6, "Classification of Short-Term Obligations
Expected to be Refinanced," the current portion of long-term debt and accrued
interest that were exchanged for shares of our common stock on March 7, 2003
were classified as long-term liabilities as of December 31, 2002.

Asset Retirement Obligation

In accordance with SFAS No. 143, "Accounting for Asset Retirement
Obligations," we recorded costs equal to the present value of the future
obligation associated with the retirement of terrestrial repeater equipment.
These costs include an amount which we estimate will be sufficient to satisfy
our obligations under leases to remove our terrestrial repeater equipment and
restore the sites to their original condition. The following table reconciles
the beginning and ending aggregate carrying amount of this asset retirement
obligation.

8

SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands, unless otherwise stated)
(Unaudited)

Asset
Retirement
Obligation
----------

Balance, December 31, 2002 ............................................. $ --
Present value of asset retirement obligation upon adoption of SFAS
No. 143 ............................................................. 153
Accretion expense ...................................................... 46
----
Balance, March 31, 2003 ................................................ $199
====

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
expenses during the reported period. Estimates involve judgments with respect
to, among other things, various future factors which are difficult to predict
and are beyond our control. Actual amounts could differ from these estimates.

Reclassifications

Certain amounts in the prior years' consolidated financial statements have
been reclassified to conform to the current presentation.

4. Subscriber Revenue

Subscriber revenue, which consists of subscription and non-refundable
activation fees, was partially offset by the cost of mail-in rebate programs.
Mail-in rebates that are paid by us directly to subscribers are recorded as a
reduction to subscriber revenue in the period the subscriber activates our
service. Subscriber revenue consists of the following:

For the Three Months
Ended March 31,
--------------------
2003 2002
------ ----

Subscription revenue .................................... $1,523 $4
Activation revenue ...................................... 43 --
Mail-in rebates ......................................... (12) --
------ ---
Total subscriber revenue ............................. $1,554 $4
====== ===

5. Non-cash Stock Compensation

We record non-cash stock compensation benefits or expenses in connection
with the grant of certain stock options, the issuance of common stock to
employees and the issuance of common stock to our employee benefit plans. We
recognized non-cash stock compensation expense of $559 for the three months
ended March 31, 2003 and a non-cash stock compensation benefit of $9,024 for the
three months ended March 31, 2002. The non-cash stock compensation benefit for
the three months ended March 31, 2002 includes a non-cash stock compensation
benefit of $9,717 related to options that were repriced in April 2001.

6. Supplemental Cash Flow Information

We paid $2,461 and $4,079 for interest during the three months ended March
31, 2003 and 2002, respectively. We have incurred the following non-cash
operating, investing and financing activities:

9

SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands, unless otherwise stated)
(Unaudited)

For the Three Months Ended
March 31,
--------------------------
2003 2002
-------- -------

Supplemental non-cash operating activities:
Common stock issued in satisfaction of accrued compensation ..... $ -- $ 1,720

Supplemental non-cash investing and financing activities:
Capitalized interest ............................................ -- 4,401
Common stock issued in connection with the exchange of 8 3/4%
Convertible Subordinated Notes due 2009, including accrued
interest ..................................................... 24,355 37,993
Common stock issued in exchange of 15% Senior Secured Discount
Notes due 2007, including accrued interest ................... 145,067 --
Common stock issued in exchange of 14 1/2% Senior Secured Notes
due 2009, including accrued interest ......................... 105,294 --
Common stock issued in exchange of Lehman term loans, including
accrued interest ............................................. 85,902 --
Common stock issued in exchange of Loral term loans, including
accrued interest ............................................. 41,865 --
Common stock issued in connection with the exchange of 9.2%
Series A and B Junior Cumulative Convertible Preferred Stock,
including accrued dividends .................................. 304,847 --
Common stock issued in connection with the exchange of 9.2%
Series D Junior Cumulative Convertible Preferred Stock,
including accrued dividends .................................. 283,785 --
Warrants issued in connection with the exchange of 9.2% Series
A, B and D Junior Cumulative Convertible Preferred Stock,
including accrued dividends .................................. 30,731 --

7. Property and Equipment

Subscriber Management System

On April 17, 2003, we terminated our agreement with Sentraliant, the
company that developed and operated our subscriber management system. Pursuant
to that agreement, we have agreed to pay Sentraliant an aggregate of $5,000.
In addition to this termination fee, we recorded a non-cash charge of
approximately $14,000 related to the net book value of our subscriber management
system in the second quarter of 2003.

On May 8, 2003, we ceased using the subscriber management system that
Sentraliant developed and operated for us and began using a replacement
subscriber management system operated by IntegraTouch LLC. Our new system
effectively manages our subscriber data, bills subscribers and interfaces with
our conditional access system. We will continue to evaluate the effectiveness
of our new system as our subscriber base grows and implement enhancements to
the system as required.

8. Long-term Debt

Our long-term debt consists of the following:

As of As of
March 31, 2003 December 31, 2002
-------------- ------------------

15% Senior Secured Discount Notes due 2007 ............ $29,200 $280,430
14 1/2% Senior Secured Notes due 2009 ................. 27,261 179,382
8 3/4% Convertible Subordinated Notes due 2009 ........ 1,744 16,461
Lehman term loans ..................................... -- 144,084
Loral term loans ...................................... -- 50,000
------- --------
Total long-term debt ............................... $58,205 $670,357
======= ========

10

SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands, unless otherwise stated)
(Unaudited)

Debt Restructuring

In connection with our recapitalization, on March 7, 2003, we issued
204,319,915, 148,301,817 and 12,436,656 shares of our common stock in exchange
for $251,230 in aggregate principal amount at maturity of our 15% Senior Secured
Discount Notes due 2007, $169,742 in aggregate principal amount of our 14 1/2%
Senior Secured Notes due 2009 and $14,717 in aggregate principal amount of our
8 3/4% Convertible Subordinated Notes due 2009, respectively, including in each
case, accrued interest. In addition, we issued 120,988,793 and 58,964,981 shares
of our common stock in exchange for all of our outstanding Lehman term loans and
Loral term loans, including, in each case, accrued interest. Long-term debt and
accrued interest that were exchanged for shares of our common stock were
classified as long-term liabilities as of December 31, 2002.

As of March 31, 2003, we had approximately $61,202 in aggregate principal
amount at maturity of outstanding debt, consisting of $29,200 in aggregate
principal amount at maturity of our 15% Senior Secured Discount Notes due 2007,
$30,258 in aggregate principal amount of our 14 1/2% Senior Secured Notes due
2009 and $1,744 in aggregate principal amount of our 8 3/4% Convertible
Subordinated Notes due 2009.

In connection with the exchange offer relating to our debt, we also amended
the indentures under which our 15% Senior Secured Discount Notes due 2007,
14 1/2% Senior Secured Notes due 2009 and 8 3/4% Convertible Subordinated Notes
due 2009 were issued to eliminate substantially all of the restrictive
covenants. Holders of our debt also waived any existing events of default or
events of default caused by the restructuring. Refer to Note 2 for further
information regarding our recapitalization.

15% Senior Secured Discount Notes due 2007

Our 15% Senior Secured Discount Notes mature on December 1, 2007. Cash
interest is payable semi-annually on each June 1 and December 1, commencing on
June 1, 2003, through December 1, 2007. The obligations under our 15% Senior
Secured Discount Notes due 2007 are secured by a lien on the stock of Satellite
CD Radio, Inc., our subsidiary that holds our FCC license, and our spare
satellite.

14 1/2% Senior Secured Notes due 2009

Our 14 1/2% Senior Secured Notes mature on May 15, 2009. Cash interest is
payable semi-annually on each May 15 and November 15, through May 15, 2009. We
accreted interest of $591 and $754 for the three months ended March 31, 2003 and
2002, respectively, related to warrants issued in conjunction with these notes.
The obligations under our 14 1/2% Senior Secured Notes due 2009 are secured by a
lien on the stock of Satellite CD Radio, Inc., our subsidiary that holds our FCC
license, and our spare satellite.

8 3/4% Convertible Subordinated Notes due 2009

Our 8 3/4% Convertible Subordinated Notes mature on September 29, 2009.
Cash interest is payable semi-annually on each March 29 and September 29,
through September 29, 2009. The obligations under our 8 3/4% Convertible
Subordinated Notes due 2009 are not secured by any of our assets.

During the three months ended March 31, 2002, we recorded a non-cash charge
of $9,314 related to the issuance of 2,816,483 shares of our common stock in
exchange for $28,475 in aggregate principal amount of our 8 3/4% Convertible
Subordinated Notes due 2009, including accrued interest.

9. Capital Stock

Common stock, par value $.001 per share

On March 4, 2003, our stockholders approved an amendment and restatement of
our certificate of incorporation to increase our authorized shares of common
stock from 500,000,000 to 2,500,000,000. We filed this amended and restated
certificate of incorporation with the Secretary of State of the State of
Delaware on March 4, 2003.

On March 7, 2003, we sold 24,060,271 shares of our common stock to Apollo
for an aggregate of $25,000 in cash; 24,060,271 shares of our common stock to
Blackstone for an aggregate of $25,000 in cash; and 163,609,837

11

SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in thousands, unless otherwise stated)
(Unaudited)

shares of our common stock to Oppenheimer for an aggregate of $150,000 in cash.
We received net proceeds of $197,112 in connection with the sale of these
securities.

Preferred Stock

On March 7, 2003, we issued 39,927,796 shares of our common stock to Apollo
in exchange for all of the outstanding shares of our 9.2% Series A and B Junior
Cumulative Convertible Preferred Stock, and 37,065,069 shares of our common
stock to Blackstone in exchange for all of the outstanding shares of our 9.2%
Series D Junior Cumulative Convertible Preferred Stock, including, in each case,
accrued dividends. Refer to Note 2 for further discussion regarding our
recapitalization.

Warrants

In connection with the exchange of our preferred stock on March 7, 2003, we
issued warrants to purchase 35,030,846 shares of our common stock at an exercise
price of $0.92 per share and warrants to purchase 52,546,268 shares of our
common stock at an exercise price of $1.04 per share. These warrants were
immediately exercisable and expire two years from the date of issuance.

10. Commitments and Contingencies

The following table summarizes our contractual commitments as of March 31,
2003:

2003 2004 2005 2006 2007 Thereafter Total
------- ------- ------- ------- ------ ---------- --------

Satellite and transmission..... $ 1,718 $ 2,291 $ 2,291 $ 2,291 $2,291 $18,328 $ 29,210
Programming and content........ 5,880 24,412 32,668 20,757 1,025 1,000 85,742
Customer service and billing... 6,789 1,548 1,548 387 -- -- 10,272
Sales and marketing............ 33,026 16,818 10,129 6,000 4,500 -- 70,473
Chip set development and
production.................. 21,312 14,400 -- -- -- -- 35,712
------- ------- ------- ------- ------ ------- --------
Contractual commitments..... $68,725 $59,469 $46,636 $29,435 $7,816 $19,328 $231,409
======= ======= ======= ======= ====== ======= ========

Satellite and Transmission

We have entered into an agreement with a provider of satellite services to
operate our external satellite telemetry, tracking and control facilities and
provide connectivity to our external facilities.

Programming and Content

We have entered into agreements with licensors of music and non-music
programming and, in certain instances, are obligated to pay license fees,
guarantee minimum advertising revenue share or purchase advertising on
properties owned or controlled by these licensors. In addition, we have
agreements with various performance rights organizations pursuant to which we
pay royalties for public performances of music.

Customer Service and Billing

We have entered into agreements with third parties to provide customer
service, billing service and subscriber management. On April 17, 2003, we
terminated our agreement with Sentraliant, the company that developed and
operated our subscriber management system. The commitments presented above
include $5,000 of payments to Sentraliant in connection with this termination
and exclude minimum monthly service fees required under our original subscriber
management system agreement.

Sales and Marketing

We have entered into various marketing and sponsorship agreements to
promote our brand and are obligated to make payments to sponsors, retailers,
automakers and radio manufacturers.

Chip Set Development and Production

We have entered into an agreement with Agere Systems, Inc. ("Agere") to
develop and produce chip sets for use in SIRIUS radios. This agreement requires
Agere to develop future generation chip sets and to produce a minimum quantity
of chip sets during each year of the agreement.

Other Commitments

In addition to the contractual commitments described above, we have also
entered into agreements with automakers, radio manufacturers and others that
include per-radio and per-subscriber required payments and revenue sharing
arrangements. These future costs are dependent upon many factors and are
difficult to anticipate; however, these costs may be substantial. We may enter
into additional programming, marketing and other agreements that contain
provisions similar to our current agreements.

12

Management's Discussion and Analysis of Financial Condition and Results
of Operations

(All dollar amounts are in thousands, unless otherwise stated)

Special Note Regarding Forward-Looking Statements

The following cautionary statements identify important factors that could
cause our actual results to differ materially from those projected in
forward-looking statements made in this Quarterly Report on Form 10-Q and in
other reports and documents published by us from time to time. Any statements
about our beliefs, plans, objectives, expectations, assumptions, future events
or performance are not historical facts and may be forward-looking. These
statements are often, but not always, made through the use of words or phrases
such as "will likely result," "are expected to," "will continue," "is
anticipated," "estimated," "intends," "plans," "projection" and "outlook." Any
forward-looking statements are qualified in their entirety by reference to the
factors discussed throughout our Annual Report on Form 10-K for the year ended
December 31, 2002 (the "Form 10-K") and in other reports and documents published
by us from time to time, particularly the risk factors described under
"Business--Risk Factors" in Part I of the Form 10-K. Among the significant
factors that could cause our actual results to differ materially from those
expressed in the forward-looking statements are:

o our need for substantial additional financing by early 2004, even
following our recently completed recapitalization;

o our competitive position; XM Satellite Radio, the other satellite
radio service provider in the United States, began offering its
service before us, has substantially more subscribers than us and may
have certain competitive advantages;

o our dependence upon third parties to manufacture, distribute, market
and sell SIRIUS radios and components for those radios;

o the unproven market for our service; and

o the useful life of our satellites, which have experienced circuit
failures on their solar arrays and may not be covered by insurance.
The circuit failures our satellites have experienced to date are not
expected to limit the power of our broadcast signal, reduce the
expected useful life of our satellites or otherwise affect our
operations.

Because the risk factors referred to above could cause actual results or
outcomes to differ materially from those expressed in any forward-looking
statements made by us or on our behalf, you should not place undue reliance on
any of these forward-looking statements. In addition, any forward-looking
statement speaks only as of the date on which it is made, and we undertake no
obligation to update any forward-looking statement or statements to reflect
events or circumstances after the date on which the statement is made, to
reflect the occurrence of unanticipated events or otherwise. New factors emerge
from time to time, and it is not possible for us to predict which will arise or
to assess with any precision the impact of each factor on our business or the
extent to which any factor, or combination of factors, may cause actual results
to differ materially from those contained in any forward-looking statements.

Overview

We broadcast digital-quality audio from three orbiting satellites
throughout the continental United States for a monthly subscription fee of
$12.95. We deliver 60 streams of 100% commercial-free music in virtually every
genre, and over 40 streams of news, sports, weather, talk, comedy, public radio
and children's programming. We hold one of only two licenses issued by the FCC
to operate a national satellite radio system.

We launched our service in select markets on February 14, 2002 and
nationally on July 1, 2002. As of March 31, 2003, we had 68,059 subscribers. We
consider subscribers to be those who have agreed to pay for our service and have
activated their SIRIUS radio, including those who are currently in promotional
periods, and active SIRIUS radios under our agreement with Hertz. We derive
revenue from:

o subscription fees, including revenue derived from our agreement with
Hertz,

13

o activation fees collected from our subscribers, and

o selling limited advertising on our non-music streams.

Results of Operations

Three Months Ended March 31, 2003 Compared With Three Months Ended March 31,
2002

Total Revenue. Total revenue for the three months ended March 31, 2003
increased to $1,591 from $33 for the three months ended March 31, 2002. Total
revenue for the three months ended March 31, 2003 included subscriber revenue of
$1,554, consisting of subscription and non-refundable activations fees, net
advertising revenue of $17 and revenue from other sources of $20. Total revenue
for the three months ended March 31, 2002 included subscription revenue of $4
and advertising revenue of $29.

Subscriber Revenue. The increase in subscriber revenue of $1,550 was
attributable to the growth of our subscriber base. We added 38,112 net new
subscribers during the three months ended March 31, 2003. Subscriber revenue
included subscription revenue of $1,523 and activation revenue of $43 for the
three months ended March 31, 2003, which was partially offset by $12 of costs
associated with mail-in rebate programs. Activation fees are recognized ratably
over the term of the subscriber relationship, currently estimated to be 3.5
years. Mail-in rebates that were paid by us directly to subscribers were
recorded as a reduction to subscription revenue in the period the subscriber
activated service. Future subscription revenue will be dependent upon, among
other things, growth of our subscriber base, discounts and mail-in rebates
offered to subscribers and the identification of additional revenue streams from
subscribers.

Average monthly revenue per subscriber ("ARPU") for the three months ended
March 31, 2003 was $10.94. Excluding the cost of mail-in rebate programs, ARPU
for the three months ended March 31, 2003 was $11.03. ARPU, which is not a
measure of financial performance under accounting principles generally accepted
in the United States, is derived from total earned subscription revenue and
activation revenue over the daily weighted average number of subscribers for the
period. Future ARPU will be dependent upon the amount and timing of subscriber
discounts, mail-in rebate programs and the identification of additional revenue
streams from subscribers.

Advertising Revenue. Advertising revenue, net of agency fees of $3, was $17
for the three months ended March 31, 2003. Advertising revenue, net of agency
fees of $5, was $29 for the three months ended March 31, 2002. We recognize
advertising revenue from sales of spot announcements on our non-music streams as
the announcements are broadcast.

Satellite and Transmission. Satellite and transmission expenses decreased
to $7,867 for the three months ended March 31, 2003 from $8,757 for the three
months ended March 31, 2002. Satellite and transmission expenses consist
primarily of personnel costs, in-orbit satellite insurance expense and costs
associated with the operation and maintenance of our satellite tracking,
telemetry and control system, terrestrial repeater network and national
broadcast studio. The decrease in satellite and transmission expense was
primarily attributable to decreased in-orbit satellite insurance expense as a
result of reduced in-orbit satellite insurance coverage. Our current policies
cover each of our three satellites up to $110,000 in the event of a total or
constructive total loss. We are evaluating the benefits of continuing to
purchase in-orbit satellite insurance and may decline to purchase insurance or
purchase less insurance than we currently maintain. We expect that a significant
portion of our satellite and transmission costs will remain relatively constant,
and that increases or decreases in satellite and transmission costs will be due,
in large part, to increased or decreased costs of insuring our in-orbit
satellites.

Programming and Content. Programming and content expenses increased to
$6,574 for the three months ended March 31, 2003 from $3,783 for the three
months ended March 31, 2002. Programming and content expenses include costs to
acquire programming from third parties, on-air talent costs, broadcast royalties
and programming personnel costs. The increase in costs was primarily
attributable to on-air talent and broadcast royalties.

Acquired programming. We have entered into various agreements with
third parties for music and non-music programming. These agreements require
us to share advertising revenue, pay license fees and purchase advertising
on property owned or controlled by the licensor. In addition, certain
agreements include guaranteed obligations which we recognize on a
straight-line basis over the term of the applicable agreement. Advertising
revenue share is expensed as the associated revenue is recognized; license
fees are expensed as the programming is aired and purchased advertising is
recorded as a sales and marketing expense when the advertising is aired.

14

Broadcast royalties. We have entered into agreements with various
performance rights organizations pursuant to which we pay royalties for
public performances of music. These agreements include fixed and variable
payment obligations. We record variable broadcast royalties as they are
incurred and fixed obligations on a straight-line basis over the term of
the applicable agreement.

We anticipate that our programming costs will increase over time as we
continue to develop our streams, share advertising revenue from the sales of
spot advertisements and incur additional variable royalties.

Customer Service and Billing. Customer service and billing costs increased
to $2,202 for the three months ended March 31, 2003 from $1,842 for the three
months ended March 31, 2002. Customer service and billing costs include costs
associated with the full time operation of our customer service center and
subscriber management system. The increase in costs during the quarter was
primarily attributable to additional customer representatives at our customer
service center. On April 17, 2003, we terminated our agreement with Sentraliant,
the company that developed and operated our subscriber management system. We
have agreed to pay Sentraliant an aggregate of $5,000 in connection with this
termination. In addition to this termination fee, we recorded a non-cash charge
of approximately $14,000 related to the disposal of our current subscriber
management system in the second quarter of 2003.

Our new subscriber management system has been tested to ensure that it
effectively manages our existing subscriber data, bills subscribers and
interfaces with our conditional access system. We will continue to evaluate
the effectiveness of our new system as our subscriber base grows and implement
enhancements to the system as required.

Sales and Marketing. Sales and marketing expenses increased to $45,340 for
the three months ended March 31, 2003 from $15,659 for the three months ended
March 31, 2002. Sales and marketing expenses include costs related to sales and
marketing personnel, advertising media and production activities, sponsorships,
costs to acquire subscribers and payments to reimburse retailers, distributors
and automakers for marketing and promotional activities. Sales and marketing
expenses increased due to launch of our national advertising campaign, certain
marketing activities by retailers, automakers and radio manufacturers,
sponsorship activities and the costs associated with subsidies paid to radio and
chip set manufacturers.

Advertising Media and Production. These costs include promotional
events, media, advertising production and market research. Media is
expensed when it is aired and advertising production costs are expensed
as they are incurred.

Retail and Distribution. We pay retailers commissions, residuals and
market development funds for the marketing and sale of SIRIUS radios.
Commissions are based upon the number of SIRIUS radios sold and are
expensed at the time of sale. Residuals are monthly fees paid based upon
the number of active subscribers using a SIRIUS radio purchased from such
retailer and are expensed as incurred. Market development funds are fixed
and variable payments to reimburse retailers for the cost of advertising
and other product awareness activities. Fixed market development funds are
expensed over the periods specified in the contract; variable costs are
expensed at the time a subscriber is activated.

Automakers. We have entered into agreements with DaimlerChrysler,
Ford, BMW and other automakers which anticipate that such automakers will
manufacture, market and sell vehicles which are equipped with radios
capable of receiving our broadcasts ("Enabled Vehicles"). Under certain of
these agreements we share a portion of the revenue we derive from
subscribers using Enabled Vehicles. This revenue share is expensed as the
corresponding subscription revenue is recorded. In addition, we reimburse
automakers for certain advertising, promotional, hardware and engineering
costs. We record expenses associated with these reimbursements when they
are incurred or on a straight-line basis over the contract period for
guaranteed obligations.

We have issued a warrant to purchase 4,000,000 shares of our common
stock to each of DaimlerChrysler and Ford. These warrants become
exercisable based on, among other conditions, the number of Enabled
Vehicles the automakers manufacture. We record warrant expense for interim
reporting periods based upon the performance of the automakers in
manufacturing Enabled Vehicles and the fair value of the warrants at the
reporting dates. The final measurement date of these warrants will be the
date that each performance commitment for such warrants is reached.

Subscriber Acquisition Costs. Subscriber acquisition costs increased
to $11,863 for the three months ended March 31, 2003 from $1,665 for the
three months ended March 31, 2002. Subscriber acquisition costs

15

include incentives for the purchase, installation and activation of SIRIUS
radios, as well as subsidies paid to radio manufacturers and Agere. Certain
subscriber acquisition costs are recorded in advance of acquiring a
subscriber. Subscriber acquisition costs do not include advertising and
promotional activities, loyalty payments to distributors and dealers of
SIRIUS radios, revenue sharing payments to manufacturers of SIRIUS radios
and guaranteed payments to automakers. We retain ownership of the SIRIUS
radios used in our agreement with Hertz; as a result, amounts capitalized
in connection with this program are not included in our subscriber
acquisition costs.

We expect sales and marketing expenses to increase in the future as we
continue to build brand awareness through national advertising and continue to
offer subsidies, commissions and other incentives to acquire subscribers. In
addition, we expect to incur significant costs related to our agreements with
automakers as they increase production of Enabled Vehicles. We anticipate that
the costs of certain subsidized components of SIRIUS radios will decrease as
manufacturers experience economies of scale in production and we secure
additional manufacturers of these components.

General and Administrative. General and administrative expenses increased
to $9,094 for the three months ended March 31, 2003 from $7,540 for the three
months ended March 31, 2002. General and administrative expenses include rent
and occupancy, accounting, legal and public relations costs and costs of general
and administrative personnel. The increase was a result of professional fees
related to litigation with Sentraliant, the company that developed and operated
our former subscriber management system. This overall increase was offset by a
decrease in rent and occupancy costs associated with the termination of a lease
on non-essential office space.

Research and Development. Research and development costs decreased to
$4,983 for the three months ended March 31, 2003 from $7,713 for the three
months ended March 31, 2002. Research and development costs include costs to
develop our next generation chip sets, new product design and personnel costs.
The decrease related to the reduction in chip set development costs as we
completed our first generation of chip sets.

Chip Set Development. We have an agreement with Agere to develop and
produce chip sets for use in SIRIUS radios. This agreement requires Agere
to develop future generation chip sets and to manufacture a minimum
quantity of chip sets during each year of the agreement. The agreement
requires us to pay Agere fixed monthly payments. These costs are allocated
between research and development expense and sales and marketing expense
for development work and chip set production, respectively.

The amount of our future research and development costs is dependent upon
modifications to our existing technology and enhancements to SIRIUS radios, and
we expect these costs to decrease in future periods.

Depreciation Expense. Depreciation expense increased to $24,100 for the
three months ended March 31, 2003 from $14,481 for the three months ended March
31, 2002. The increase was due to a full quarter of depreciation of our
satellite radio system, which began in February 2002. We expect depreciation
expense to remain relatively constant as our satellite radio system is complete.

Non-cash Stock Compensation. We recognized non-cash stock compensation
expense of $559 and a non-cash stock compensation benefit of $9,024 for the
three months ended March 31, 2003 and 2002, respectively. Non-cash stock
compensation includes charges and benefits associated with the grant of certain
stock options, the issuance of our common stock to employees and an employee
benefit plan. The non-cash stock compensation benefit for the three months ended
March 31, 2002 was principally due to the repricing of certain employee stock
options in April 2001.

16

Other Income. We recorded a gain of $256,538 in connection with the
restructuring of our long-term debt. This gain represents the difference
between the carrying value of our 15% Senior Secured Discount Notes due 2007,
14 1/2% Senior Secured Notes due 2009, Lehman term loans and Loral term loans,
including accrued interest, and the fair market value of the common stock
issued, adjusted for unamortized debt issuance costs and direct costs associated
with the restructuring. This gain is net of a loss on our 8 3/4% Convertible
Subordinated Notes due 2009 exchanged in the restructuring. This loss represents
the difference between the fair market value of the common stock issued in the
exchange and the fair market value of the common stock which would have been
issued under the original conversion ratio, including accrued interest, adjusted
for unamortized debt issuance costs and direct costs associated with the
restructuring.

Interest and investment income decreased to $1,343 for the three months
ended March 31, 2003 from $2,000 for the three months ended March 31, 2002. This
decrease was attributable to lower returns on our investments in U.S. government
securities and lower average balances of cash, cash equivalents and marketable
securities during 2003.

Other Expense. Interest expense decreased to $18,665 for the three months
ended March 31, 2003 from $30,193 for the three months ended March 31, 2002, net
of amounts capitalized of $0 and $4,401, respectively. Interest expense for the
three months ended March 31, 2002 included non-cash costs of $9,314 associated
with the induced conversion of $28,475 in aggregate principal amount of our
8 3/4% Convertible Subordinated Notes due 2009. We expect our interest expense
to be lower in the future as a result of our restructuring.

Cash Flows

Three Months Ended March 31, 2003 Compared With Three Months Ended March 31,
2002

Net cash used in operating activities was $71,140 and $117,933 for the
three months ended March 31, 2003 and 2002, respectively. The decrease in cash
used in operations was primarily attributable to the change in the
classification of our marketable securities in the second quarter of 2002 to
available-for-sale securities from trading securities. Transactions relating to
trading securities are considered operating activities; transactions relating to
available-for-sale securities are considered investing activities. Excluding our
transactions in marketable securities, cash used in operating activities
increased to $70,161 for the three months ended March 31, 2003 from $43,840 for
the three months ended March 31, 2002. This increase was primarily due to the
cost of our national advertising campaign, the costs of acquiring subscribers
and the cost of producing our music and non-music programming.

Net cash provided by investing activities for the three months ended March
31, 2003 was $114,595, compared to net cash used in investing activities of
$11,359 for the three months ended March 31, 2002. The change from the prior
period was principally due to a change in the classification of our marketable
securities from trading securities to available-for-sale securities during the
second quarter of 2002. Excluding our transactions in available-for-sale
securities, cash used in investing activities decreased to $5,405 for the three
months ended March 31, 2003 from $11,359 for the three months ended March 31,
2002. This decrease was a result of a reduction in capital expenditures as we
completed the construction of our satellite radio system during 2002.

Net cash provided by financing activities was $192,350 and $147,513 for the
three months ended March 31, 2003 and 2002, respectively. During 2003, we sold
211,730,379 shares of common stock resulting in net proceeds of $197,112 and
incurred costs associated with our debt restructuring of $4,737. During 2002, we
sold 16,000,000 shares of common stock resulting in net proceeds of $147,500.

Liquidity and Capital Resources

At March 31, 2003, we had cash, cash equivalents and marketable securities
totaling $289,742 and working capital of $263,268 compared with cash, cash
equivalents and marketable securities totaling $173,702 and working capital of
$151,289 at December 31, 2002.

We estimate that our cash, cash equivalents and marketable securities are
sufficient to cover our estimated funding needs into the second quarter of 2004.
We estimate that we will need additional funding of approximately $100,000
before we achieve cash flow breakeven, the point at which our revenues are
sufficient to fund expected operating expenses, capital expenditures, interest
and principal payments and taxes.

17

Our actual funding requirements could vary materially from our current
estimates. We may have to raise more funds than expected to remain in business
and continue to develop and market our satellite radio service.

Our financial projections are based on assumptions which we believe are
reasonable but contain significant uncertainties, including, most importantly,
the length of time and level of costs necessary to obtain the number of
subscribers required to sustain our operations. At March 31, 2003, we had 68,059
subscribers. We estimate that we will need approximately two million subscribers
before we achieve cash flow breakeven.

We plan to raise future funds by selling debt or equity securities, or
both, publicly and/or privately, and by obtaining loans or other credit lines
from banks or other institutions. We may not be able to raise sufficient funds
on favorable terms or at all. If we fail to obtain necessary financing on a
timely basis, then our business would be materially impacted and we could
default on commitments to our distribution partners, creditors or others, and
may have to discontinue operations or seek a purchaser for our business or
assets.

Funds Raised to Date

Since inception, we have funded the development of our satellite radio
system and the introduction of SIRIUS through the issuance of debt and equity
securities. As of March 31, 2003, we had raised approximately $1,448,112 in
equity capital from the sale of our common stock and convertible preferred
stock. In addition, we have received approximately $638,000 in net proceeds from
public debt offerings and private credit arrangements.

Recapitalization

On March 7, 2003, we completed a series of transactions to restructure our
debt and equity capitalization. As part of these transactions:

o we issued 545,012,162 shares of our common stock in exchange for
approximately 91% of our outstanding debt, including all of our Lehman
term loans, all of our Loral term loans, $251,230 in aggregate
principal amount at maturity of our 15% Senior Secured Discount Notes
due 2007, $169,742 in aggregate principal amount of our 14 1/2% Senior
Secured Notes due 2009, and $14,717 in aggregate principal amount of
our 8 3/4% Convertible Subordinated Notes due 2009;

o we issued 39,927,796 shares of our common stock and warrants to
purchase 45,416,690 shares of our common stock in exchange for all
outstanding shares of our 9.2% Series A and B Junior Cumulative
Convertible Preferred Stock held by affiliates of Apollo Management,
L.P. ("Apollo");

o we issued 37,065,069 shares of our common stock and warrants to
purchase 42,160,424 shares of our common stock in exchange for all
outstanding shares of our 9.2% Series D Junior Cumulative Convertible
Preferred Stock held by affiliates of The Blackstone Group L.P.
("Blackstone");

o we sold 24,060,271 shares of our common stock to Apollo for an
aggregate of $25,000 in cash;

o we sold 24,060,271 shares of our common stock to Blackstone for an
aggregate of $25,000 in cash; and

o we sold 163,609,837 shares of our common stock to Oppenheimer for an
aggregate of $150,000 in cash.

We recognized a gain of $256,538 as a result of the exchange transactions.
As of March 31, 2003, we had $61,202 in aggregate principal amount at maturity
of outstanding debt, consisting of $29,200 in aggregate principal amount at
maturity of our 15% Senior Secured Discount Notes due 2007, $30,258 in aggregate
principal amount of our 14 1/2% Senior Secured Notes due 2009 and $1,744 in
aggregate principal amount of our 8 3/4% Convertible Subordinated Notes due
2009.

In connection with the exchange offer relating to our debt, we also amended
the indentures under which our 15% Senior Secured Discount Notes due 2007,
14 1/2% Senior Secured Notes due 2009 and 8 3/4% Convertible Subordinated Notes
due 2009 were issued to eliminate substantially all of the restrictive
covenants. Holders of our debt also waived any existing events of default or
events of default caused by the restructuring.

Contractual Commitments

The following table summarizes our expected contractual commitments as of
March 31, 2003:

18

2003 2004 2005 2006 2007 Thereafter Total
------- ------- ------- ------- ------- ---------- --------

Long-term debt obligations..... $ 8,844 $ 8,920 $ 8,920 $ 8,920 $38,120 $41,082 $114,806
Operating leases............... 7,548 7,628 6,860 6,069 6,032 35,903 70,040
Satellite and transmission..... 1,718 2,291 2,291 2,291 2,291 18,328 29,210
Programming and content........ 5,880 24,412 32,668 20,757 1,025 1,000 85,742
Customer service and billing... 6,789 1,548 1,548 387 -- -- 10,272
Sales and marketing............ 33,026 16,818 10,129 6,000 4,500 -- 70,473
Chip set development and
production.................. 21,312 14,400 -- -- -- -- 35,712
------- ------- ------- ------- ------- ------- --------
Contractual commitments........ $85,117 $76,017 $62,416 $44,424 $51,968 $96,313 $416,255
======= ======= ======= ======= ======= ======= ========

Long-Term Debt Obligations

Long-term debt obligations include principal and interest payments after
giving effect to our debt restructuring. As of March 31, 2003, we had $61,202 in
aggregate principal amount of outstanding debt, consisting of $29,200 in
aggregate principal amount at maturity of 15% Senior Secured Discount Notes due
2007, $30,258 in aggregate principal amount of 14 1/2% Senior Secured Notes due
2009 and $1,744 in aggregate principal amount of 8 3/4% Convertible Subordinated
Notes due 2009.

Operating Leases

We have entered into operating leases related to our national broadcast
studio, office space, terrestrial repeater sites and equipment.

Satellite and Transmission

We have entered into an agreement with a provider of satellite services to
operate our external satellite telemetry, tracking and control facilities and
provide connectivity to our external facilities.

Programming and Content

We have entered into agreements with licensors of music and non-music
programming and, in certain instances, are obligated to pay license fees,
guarantee minimum advertising revenue share or to purchase advertising on
properties owned or controlled by these licensors. In addition, we have
agreements with various performance rights organizations pursuant to which we
pay royalties for public performances of music.

Customer Service and Billing

We have entered into agreements with third parties to provide customer
service, billing service and subscriber management. On April 17, 2003, we
terminated our agreement with Sentraliant, the company that developed and
operated our subscriber management system. The commitments presented above
include an aggregate of $5,000 of payments to Sentraliant in connection with
this termination and exclude minimum monthly service fees required under our
original subscriber management system agreement.

Sales and Marketing

We have entered into various marketing and sponsorship agreements to
promote our brand and are obligated to make payments to sponsors, retailers,
automakers and radio manufacturers.

Chip Set Development and Production

We have entered into an agreement with Agere to develop and produce chip
sets for use in SIRIUS radios. This agreement requires Agere to develop future
generation chip sets and to manufacture a minimum quantity of chip sets during
each year of the agreement.

19

Other Commitments

In addition to the contractual commitments described above, we have also
entered into agreements with automakers, radio manufacturers and others that
include per-radio and per-subscriber required payments and revenue sharing
arrangements. These future costs are dependent upon many factors and are
difficult to anticipate; however, these costs may be substantial. We may enter
into additional programming, marketing and other agreements that contain
provisions similar to our current agreements.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States, which require
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the periods. A summary of our
significant accounting policies is contained in Note 3 to the consolidated
financial statements contained in this report. We have identified the following
policies, which were discussed with the Audit Committee of our board of
directors, as critical to our business and understanding our results of
operations.

Subscription Revenue Recognition

Revenue from subscribers consists of subscription fees, including revenue
derived from our agreement with Hertz, and non-refundable activation fees. We
recognize subscription fees as our service is provided. Activation fees are
recognized ratably over the term of the subscriber relationship, currently
estimated to be 3.5 years. The estimated term of a subscriber relationship is
based on market research and management's judgment and, if necessary, will be
refined in the future as historical data becomes available. Mail-in rebates that
are paid by us directly to subscribers are recorded as a reduction to
subscription revenue in the period the subscriber activates our service.

Subscriber Acquisition Costs

Subscriber acquisition costs include incentives for the purchase,
installation and activation of SIRIUS radios, as well as subsidies paid to radio
manufacturers and Agere. Certain subscriber acquisition costs are recorded in
advance of acquiring a subscriber. Subscriber acquisition costs do not include
advertising and promotional activities, loyalty payments to distributors and
dealers of SIRIUS radios, revenue sharing payments to manufacturers of SIRIUS
radios and guaranteed payments to automakers. We retain ownership of the SIRIUS
radios used in our agreement with Hertz; as a result, amounts capitalized in
connection with this program are not included in our subscriber acquisition
costs.

Marketable Securities

Marketable securities consist of U.S. government agency obligations.
Effective April 1, 2002, marketable securities were classified as
available-for-sale securities because management no longer intends to buy and
sell marketable securities with the objective of generating profits.
Available-for-sale securities are carried at fair market value and unrealized
gains and losses are included as a component of stockholders' equity. In prior
periods, marketable securities were classified as trading securities and
unrealized holding gains and losses were recognized in earnings.

Long-Lived Assets

We carry our long-lived assets at cost less accumulated depreciation. We
review our long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset is not recoverable.
At such time as an impairment in value of a long-lived asset is identified, the
impairment will be measured as the amount by which the carrying amount of a
long-lived asset exceeds its fair value. To determine fair value we would employ
an expected present value technique, which utilizes multiple cash flow scenarios
that reflect the range of possible outcomes and an appropriate discount rate.

Useful Life of Satellite System

Our satellite system includes the cost of satellite construction, launch
vehicles, launch insurance, capitalized interest, our spare satellite and our
terrestrial repeater network. We monitor our satellites for impairment whenever

20

events or changes in circumstances indicate that the carrying amount of the
asset is not recoverable. The expected useful lives of our in-orbit satellites
are fifteen years from the date they were placed into orbit. We are depreciating
our three in-orbit satellites over their respective remaining useful lives
beginning February 14, 2002 or, in the case of our spare satellite, from the
date it was delivered to ground storage on April 19, 2002. If placed into orbit,
our spare satellite is expected to operate effectively for fifteen years;
however, our spare satellite may be replaced at the time we launch a new
satellite system.

FCC License

We carry our FCC license at cost. Our FCC license has an indefinite life
and will be evaluated for impairment on an annual basis. We completed an
impairment analysis of our FCC license on November 1, 2002, and determined that
there was no impairment. We use projections regarding estimated future cash
flows and other factors in assessing the fair value of our FCC license. If these
estimates or projections change in the future, we may be required to record an
impairment charge related to our FCC license.

Accrued Expenses

Payments owed to our manufacturing and distribution partners and other
service providers are expensed during the month in which the applicable service
is performed. The amount of these expenses are dependent upon information
provided by our internal systems and processes and partner systems and
processes. However, due to lags in receiving information from these partners,
estimates of amounts due are necessary in order to record monthly expenses. In
subsequent months when lagged data is received, expenses are reconciled, and
adjusted where necessary. Since launching commercial operations, we continue to
refine the estimation process based on an increased understanding of the timing
lags, and close working relationships with our partners.

Controls and Procedures

As of March 31, 2003, an evaluation was performed under the supervision and
with the participation of our management, including Joseph P. Clayton, our
President and Chief Executive Officer, and Patrick L. Donnelly, our Executive
Vice President, General Counsel and Secretary who is serving as our acting Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure and control procedures. Based on that evaluation, our management,
including our chief executive officer and the officer serving as our chief
financial officer, concluded that our disclosure controls and procedures were
effective as of March 31, 2003. There have been no significant changes in our
internal controls or in other factors that could significantly affect these
internal controls subsequent to March 31, 2003.

21

PART II OTHER INFORMATION

Item 2. Changes in Securities and Use of Proceeds.

On March 7, 2003, we entered into supplemental indentures relating to the
indentures governing our 15% Senior Secured Discount Notes due 2007, our 14 1/2%
Senior Secured Notes due 2009 and our 8 3/4% Convertible Subordinated Notes due
2009. These supplemental indentures deleted substantially all of the restrictive
covenants in these indentures. Holders of these securities also waived all
existing events of default and events of defaults caused by the restructuring.

Item 4. Submission of Matters to a Vote of Security Holders.

On March 4, 2003, at a special meeting of stockholders, our stockholders
voted to approve the three proposals described below:

Votes Cast
For Against Abstain
---------- ---------- -------

Approval of the issuance of an aggregate of
885,393,009 shares of common stock and warrants to
purchase 87,577,114 shares of common stock in the
restructuring transactions .......................... 56,142,236 1,013,887 202,210

Approval of the amendment and restatement of our
certificate of incorporation to increase our
authorized common stock from 500,000,000 to
2,500,000,000 shares ................................ 55,886,198 1,275,983 196,152

Approval of the Sirius Satellite Radio 2003
Long-Term Stock Incentive Plan ...................... 51,918,071 4,714,044 726,218

During the three months ended March 31, 2003, our stockholders also voted
to accept the prepackaged plan of bankruptcy described in, and attached to, the
Proxy Statement dated January 30, 2003. Stockholders cast 51,747,847 votes to
accept, and 3,507,351 votes to reject, this prepackaged plan of bankruptcy. On
March 7, 2003, we completed the recapitalization of our debt and equity
capitalization and abandoned any intention of filing this prepackaged plan of
bankruptcy.

In addition to the items described above, on March 7, 2003, we issued
545,012,162 shares of our common stock in exchange for approximately 91% of our
outstanding debt, resulting in the cancellation of all of our Lehman term loans,
all of our Loral term loans, approximately $251.2 million in aggregate principal
amount at maturity of our 15% Senior Secured Discount Notes due 2007,
approximately $169.7 million in aggregate principal amount of our 14 1/2% Senior
Secured Notes due 2009, and approximately $14.7 million in aggregate principal
amount of our 8 3/4% Convertible Subordinated Notes due 2009. As part of this
exchange, the holders of our 15% Senior Secured Discount Notes due 2007, 14 1/2%
Senior Secured Notes due 2009 and our 8 3/4% Convertible Subordinated Notes due
2009 voted to amend the indentures under which each of these notes were issued
to eliminate substantially all of the restrictive covenants and to waive any
existing events of default or events of default caused by the restructuring.

Item 6. Exhibits and Current Reports on Form 8-K.

(a) Exhibits. See Exhibit Index attached hereto.

(b) Reports on Form 8-K. During the three months ended March 31, 2003, we
did not file any Current Reports on Form 8-K.

22

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

SIRIUS SATELLITE RADIO INC.

By: /s/ Edward Weber, Jr.
------------------------------
Edward Weber, Jr.
Vice President, Controller and
Chief Accounting Officer
(Principal Accounting Officer)

May 14, 2003

23

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Joseph P. Clayton, the Chief Executive Officer of Sirius Satellite Radio
Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Sirius Satellite
Radio Inc.;

2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:

a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 45 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent function):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and

b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

By: /S/ JOSEPH P. CLAYTON
-------------------------------------
Joseph P. Clayton
President and Chief Executive Officer
(Principal Executive Officer)

May 14, 2003

24

CERTIFICATION OF ACTING CHIEF FINANCIAL OFFICER

I, Patrick L. Donnelly, the Executive Vice President, General Counsel, Secretary
and acting Chief Financial Officer of Sirius Satellite Radio Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Sirius Satellite
Radio Inc.;

2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:

a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 45 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and

b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

By: /S/ Patrick L. Donnelly
-------------------------------------
Patrick L. Donnelly
Executive Vice President, General
Counsel, Secretary and acting
Chief Financial Officer
(Principal Financial Officer)

May 14, 2003

25

Exhibit Index

Exhibit Description
- ------- -----------

3.1 Amended and Restated Certificate of Incorporation dated March 4, 2003
(incorporated by reference to Exhibit 3.1 to the Company's Annual
Report on Form 10-K for the year ended December 31, 2002).

3.2 Amended and Restated By-Laws (incorporated by reference to Exhibit 3.2
to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 2001).

3.3 Form of Certificate of Designations of Series B Preferred Stock
(incorporated by reference to Exhibit A to Exhibit 1 to the Company's
Registration Statement on Form 8-A filed on October 30, 1997 (the "Form
8-A")).

4.1 Form of certificate for shares of Common Stock (incorporated by
reference to Exhibit 4.3 to the Company's Registration Statement on
Form S-1 (File No. 33-74782) (the "S-1 Registration Statement")).

4.2.1 Rights Agreement, dated as of October 22, 1997 (the "Rights
Agreement"), between the Company and Continental Stock Transfer & Trust
Company, as rights agent (incorporated by reference to Exhibit 1 to the
Form 8-A).

4.2.2 Form of Right Certificate (incorporated by reference to Exhibit B to
Exhibit 1 to the Form 8-A).

4.2.3 Amendment to the Rights Agreement dated as of October 13, 1998
(incorporated by reference to Exhibit 99.2 to the Company's Current
Report on Form 8-K dated October 13, 1998).

4.2.4 Amendment to the Rights Agreement dated as of November 13, 1998
(incorporated by reference to Exhibit 99.7 to the Company's Current
Report on Form 8-K dated November 17, 1998).

4.2.5 Amended and Restated Amendment to the Rights Agreement dated as of
December 22, 1998 (incorporated by reference to Exhibit 6 to Amendment
No. 1 to the Form 8-A filed on January 6, 1999).

4.2.6 Amendment to the Rights Agreement dated as of June 11, 1999
(incorporated by reference to Exhibit 4.1.8 to the Company's
Registration Statement on Form S-4 (File No. 333-82303) (the "1999
Units Registration Statement")).

4.2.7 Amendment to the Rights Agreement dated as of September 29, 1999
(incorporated by reference to Exhibit 4.1 to the Company's Current
Report on Form 8-K filed on October 13, 1999).

4.2.8 Amendment to the Rights Agreement dated as of December 23, 1999
(incorporated by reference to Exhibit 99.4 to the Company's Current
Report on Form 8-K filed on

Exhibit Description
- ------- -----------

December 29, 1999).

4.2.9 Amendment to the Rights Agreement dated as of January 28, 2000
(incorporated by reference to Exhibit 4.6.9 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1999 (the "1999
Form 10-K")).

4.2.10 Amendment to the Rights Agreement dated as of August 7, 2000
(incorporated by reference to Exhibit 4.6.10 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 2000).

4.2.11 Amendment to the Rights Agreement dated as of January 8, 2002
(incorporated by reference to Exhibit 4.6.11 to the Company's Annual
Report on Form 10-K for the year ended December 31, 2001 (the "2001
Form 10-K")).

4.2.12 Amendment to the Rights Agreement dated as of October 22, 2002
(incorporated by reference to Exhibit 99.1 to the Company's Current
Report on Form 8-K filed on October 24, 2002).

4.2.13 Amendment to Rights Agreement dated as of March 6, 2003 (incorporated
by reference to Exhibit 4.2.13 to the Company's Annual Report on Form
10-K for the year ended December 31, 2002).

4.2.14 Amendment to the Rights Agreement dated as of March 31, 2003
(incorporated by reference to Exhibit 99.1 to the Company's Current
Report on Form 8-K dated March 31, 2003).

4.3 Indenture, dated as of November 26, 1997, between the Company and IBJ
Schroder Bank & Trust Company, as trustee, relating to the Company's
15% Senior Secured Discount Notes due 2007 (incorporated by reference
to Exhibit 4.1 to the Company's Registration Statement on Form S-3
(File No. 333-34769) (the "1997 Units Registration Statement")).

4.4 Supplemental Indenture, dated as of March 7, 2003, between the Company
and The Bank of New York (as successor to IBJ Schroder Bank & Trust
Company), as trustee, relating to the Company's 15% Senior Secured
Discount Notes due 2007 (incorporated by reference to Exhibit 4.4 to
the Company's Annual Report on Form 10-K for the year ended December
31, 2002).

4.5 Form of 15% Senior Secured Discount Note due 2007 (incorporated by
reference to Exhibit 4.2 to the 1997 Units Registration Statement).

4.6 Warrant Agreement, dated as of November 26, 1997, between the Company
and IBJ Schroder Bank & Trust Company, as warrant agent (incorporated
by reference to Exhibit 4.3 to the 1997 Units Registration Statement).

4.7 Form of Warrant (incorporated by reference to Exhibit 4.4 to the 1997
Units Registration Statement).

4.8 Form of Common Stock Purchase Warrant granted by the Company to Everest
Capital

Exhibit Description
- ------- -----------

Master Fund, L.P. and to The Ravich Revocable Trust of 1989
(incorporated by reference to Exhibit 4.11 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1997).

4.9 Indenture, dated as of May 15, 1999, between the Company and United
States Trust Company of New York, as trustee, relating to the Company's
14 1/2% Senior Secured Notes due 2009 (incorporated by reference to
Exhibit 4.4.2 to the 1999 Units Registration Statement).

4.10 Supplemental Indenture, dated as of March 7, 2003, between the Company
and The Bank of New York (as successor to United States Trust Company
of New York), as trustee, relating to the Company's 14 1/2% Senior
Secured Notes due 2009 (incorporated by reference to Exhibit 4.10 to
the Company's Annual Report on Form 10-K for the year ended December
31, 2002).

4.11 Form of 14 1/2% Senior Secured Note due 2009 (incorporated by reference
to Exhibit 4.4.3 to the 1999 Units Registration Statement).

4.12 Warrant Agreement, dated as of May 15, 1999, between the Company and
United States Trust Company of New York, as warrant agent (incorporated
by reference to Exhibit 4.4.4 to the 1999 Units Registration
Statement).

4.13 Common Stock Purchase Warrant granted by the Company to Ford Motor
Company, dated October 7, 2002 (incorporated by reference to Exhibit
4.16 to the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2002).

4.14 Indenture, dated as of September 29, 1999, between the Company and
United States Trust Company of Texas, N.A., as trustee, relating to the
Company's 8 3/4% Convertible Subordinated Notes due 2009 (incorporated
by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K
filed on October 13, 1999).

4.15 First Supplemental Indenture, dated as of September 29, 1999, between
the Company and United States Trust Company of Texas, N.A., as trustee,
relating to the Company's 8 3/4% Convertible Subordinated Notes due
2009 (incorporated by reference to Exhibit 4.01 to the Company's
Current Report on Form 8-K filed on October 1, 1999).

4.16 Second Supplemental Indenture, dated as of March 4, 2003, among the
Company, The Bank of New York (as successor to United States Trust
Company of Texas, N.A.), as resigning trustee, and HSBC Bank USA, as
successor trustee, relating to the Company's 8 3/4% Convertible
Subordinated Notes due 2009 (incorporated by reference to Exhibit 4.16
to the Company's Annual Report on Form 10-K for the year ended December
31, 2002).

4.17 Third Supplemental Indenture, dated as of March 7, 2003, between the
Company and HSBC Bank USA, as trustee, relating to the Company's 8 3/4%
Convertible Subordinated Notes due 2009 (incorporated by reference to
Exhibit 4.17 to the Company's Annual Report on Form 10-K for the year
ended December 31, 2002).

4.18 Form of 8 3/4% Convertible Subordinated Note due 2009 (incorporated by
reference to

Exhibit Description
- ------- -----------

Article VII of Exhibit 4.01 to the Company's Current Report on Form 8-K
filed on October 1, 1999).

4.19 Common Stock Purchase Warrant granted by the Company to DaimlerChrysler
Corporation dated October 25, 2002 (incorporated by reference to
Exhibit 4.20 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2002).

4.20 Form of Series A Common Stock Purchase Warrant dated March 7, 2003
(incorporated by reference to Exhibit 4.20 to the Company's Annual
Report on Form 10-K for the year ended December 31, 2002).

4.21 Form of Series B Common Stock Purchase Warrant dated March 7, 2003
(incorporated by reference to Exhibit 4.21 to the Company's Annual
Report on Form 10-K for the year ended December 31, 2002).

4.22 Amended and Restated Warrant Agreement, dated as of December 27, 2000,
between the Company and United States Trust Company of New York, as
warrant agent and escrow agent (incorporated by reference to Exhibit
4.27 to the Company's Registration Statement on Form S-3 (File No.
333-65602)).

4.23 Second Amended and Restated Pledge Agreement, dated as of March 7,
2001, among the Company, as pledgor, The Bank of New York, as trustee
and collateral agent, United States Trust Company of New York, as
trustee, and Lehman Commercial Paper Inc., as administrative agent
(incorporated by reference to Exhibit 4.25 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 2001).

4.24 Collateral Agreement, dated as of March 7, 2001, between the Company,
as borrower, and The Bank of New York, as collateral agent
(incorporated by reference to Exhibit 4.26 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 2001).

4.25 Amended and Restated Intercreditor Agreement, dated as of March 7,
2001, by and between The Bank of New York, as trustee and collateral
agent, United States Trust Company of New York, as trustee, and Lehman
Commercial Paper Inc., as administrative agent (incorporated by
reference to Exhibit 4.27 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 2001).

10.1.1 Lease Agreement, dated as of March 31, 1998, between Rock-McGraw, Inc.
and the Company (incorporated by reference to Exhibit 10.1.2 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1998).

10.1.2 Supplemental Indenture, dated as of March 22, 2000, between
Rock-McGraw, Inc. and the Company (incorporated by reference to Exhibit
10.1.2 to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2000).

10.1.3 Supplemental Indenture, dated as of November 30, 2001, between
Rock-McGraw, Inc. and the Company (incorporated by reference to Exhibit
10.1.3 to the 2001 Form 10-K).

Exhibit Description
- ------- -----------

*10.2 Employment Agreement, dated as of February 28, 2003, between the
Company and Patrick L. Donnelly (filed herewith).

*10.3 Employment Agreement, dated as of August 29, 2001, between the Company
and Michael S. Ledford (incorporated by reference to Exhibit 10.6 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 2001).

*10.4 Employment Agreement, dated as of November 26, 2002, between the
Company and Joseph P. Clayton (incorporated by reference to Exhibit
10.6 to the 2001 Form 10-K).

*10.5 Employment Agreement, dated as of January 7, 2002, between the Company
and Guy D. Johnson (incorporated by reference to Exhibit 10.7 to the
2001 Form 10-K).

*10.6 Employment Agreement, dated as of May 3, 2002, between the Company and
Mary Patricia Ryan (incorporated by reference to Exhibit 10.8 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
2002).

*10.7 Agreement, dated as of October 16, 2001, between the Company and David
Margolese (incorporated by reference to Exhibit 10.7 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
2001).

*10.8 1994 Stock Option Plan (incorporated by reference to Exhibit 10.21 to
the S-1 Registration Statement).

*10.9 Amended and Restated 1994 Directors' Nonqualified Stock Option Plan
(incorporated by reference to Exhibit 10.22 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995).

*10.10 CD Radio Inc. 401(k) Savings Plan (incorporated by reference to Exhibit
4.4 to the Company's Registration Statement on Form S-8 (File No.
333-65473)).

*10.11 Sirius Satellite Radio 2003 Long-Term Stock Incentive Plan
(incorporated by reference to Exhibit 10.12 to the Company's Annual
Report on Form 10-K for the year ended December 31, 2002).

10.12 Form of Option Agreement, dated as of December 29, 1997, between the
Company and each Optionee (incorporated by reference to Exhibit 10.16.2
to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998).

'D'10.13 Joint Development Agreement, dated as of February 16, 2000, between the
Company and XM Satellite Radio Inc. (incorporated by reference to
Exhibit 10.28 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000).

99.1 Certificate of Joseph P. Clayton, President and Chief Executive
Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

99.2 Certificate of Patrick L. Donnelly, Executive Vice President, General
Counsel and

Exhibit Description
- ------- -----------

Secretary (acting Chief Financial Officer), pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (filed herewith).

- ----------

* This document has been identified as a management contract or
compensatory plan or arrangement.

'D' Portions of these exhibits have been omitted pursuant to Applications
for Confidential treatment filed by the Company with the Securities and
Exchange Commission.

STATEMENT OF DIFFERENCES

The dagger symbol shall be expressed as.........................'D'