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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-K

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

THE SECURITIES EXCHANGE ACT OF 1934

For The Fiscal Year Ended December 31, 2007

Commission file number 000-51466





WORLDSPACE, INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 52-1732881                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

8515 Georgia Avenue, Silver Spring, MD 20910

(Address of principal executive offices) (Zip code)





301-960-1200

(Registrants telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



|                                                |  |                                                   
|----------------------------------------------- |  | --------------------------------------------------
|Title of Each Class                             |  | Name of Exchange on Which Registered              
|Class A Common Stock, par value $0.01 per share |  | The Nasdaq Stock Market LLC (Nasdaq Global Market)

Securities registered pursuant to Section 12(g) of the Act:

None





Indicate by checkmark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   ̈    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Act.    Yes   ̈    No  x

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 if
disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ̈

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a small reporting company. See definitions of large accelerated filer, accelerated filer and
small reporting company in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer   ̈        Accelerated filer   ̈        Non-accelerated filer  x        Smaller reporting company   ̈

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

The aggregate market value of the
voting and non-voting common equity held by non-affiliates of the registrant as of the close of business on June 30, 2007 was $37,822,320.

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



|                                      |  |                                   
|------------------------------------- |  | ----------------------------------
|(Class)                               |  | (Outstanding as of March 28, 2008)
|CLASS A COMMON STOCK, $0.01 PAR VALUE |  | 42,385,966                        

DOCUMENTS INCORPORATED BY REFERENCE

PART IIICertain portions of our definitive Proxy Statement for Annual Meeting of Stockholders for 2008.









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INDEX

|         |  |                                                                                                               |  |     
|-------- |  | ------------------------------------------------------------------------------------------------------------- |  | ----
|         |  |                                                                                                               |  | Page
|PART I  
|Item 1.  |  | Business                                                                                                      |  | 2   
|Item 1A. |  | Risk Factors                                                                                                  |  | 26  
|Item 1B. |  | Unresolved Staff Comments                                                                                     |  | 43  
|Item 2.  |  | Properties                                                                                                    |  | 44  
|Item 3.  |  | Legal Proceedings                                                                                             |  | 45  
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                           |  | 45  
|        
|PART II 
|Item 5.  |  | Market for Registrants Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities |  | 46  
|Item 6.  |  | Selected Financial Data                                                                                       |  | 48  
|Item 7.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                         |  | 50  
|Item 7A. |  | Quantitative and Qualitative Disclosures about Market Risk                                                    |  | 68  
|Item 8.  |  | Consolidated Financial Statements and Supplementary Data                                                      |  | 69  
|Item 9.  |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                          |  | 69  
|Item 9A. |  | Controls and Procedures                                                                                       |  | 69  
|Item 9B. |  | Other Information                                                                                             |  | 70  
|        
|PART III
|Item 10. |  | Directors and Executive Officers and Corporate Governance                                                    |  | 71  
|Item 11. |  | Executive Compensation                                                                                        |  | 71  
|Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                |  | 71  
|Item 13. |  | Certain Relationships and Related Transactions, and Director Independence                                     |  | 71  
|Item 14. |  | Principal Accountant Fees and Services                                                                        |  | 72  
|        
|PART IV 
|Item 15. |  | Exhibits and Consolidated Financial Statement Schedules                                                       |  | 73  



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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This annual report on Form 10-K contains forward-looking statements. These statements relate to our growth strategy and our future financial performance,
including our operations, economic performance, financial condition and prospects, and other future events. We generally identify forward-looking statements by using such words as anticipate, believe, can,
continue, could, estimate, expect, intend, may, plan, potential, seek, should, will, or variations of such words or
other similar expressions and the negatives of such words. These forward-looking statements are only predictions and are based on our current expectations.

In addition, a number of known and unknown risks, uncertainties and other factors could affect the accuracy of these statements, including the risks outlined under Item 1A. Risk factors. Some of the more
significant known risks that we face are uncertainty regarding market acceptance of our products and services and our ability to generate revenue or profit. Other important factors to consider in evaluating our forward-looking statements include:



| |  |  | our possible inability to execute our strategy due to changes in our industry or the economy generally;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | our possible inability to execute our strategy due to changes in political, economic and social conditions in the markets in which we operate;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | uncertainties associated with currency exchange fluctuations;
| | - |  | -------------------------------------------------------------



| |  |  | changes in laws and regulations governing our business and operations or permissible activities;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | changes in our business strategy; and
| | - |  | -------------------------------------



| |  |  | the success of our competitors and the emergence of new competitors.
| | - |  | --------------------------------------------------------------------

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee our future results, levels of
activity or performance. Any or all of our forward-looking statements in this annual report on Form 10-K may turn out to be inaccurate. We have based these forward-looking statements on our current expectations and projections about future events
and financial, political and social trends and assumptions we made based on information currently available to us. These statements may be affected by inaccurate assumptions we might have made or by known or unknown risks and uncertainties,
including the risks and uncertainties described in Item 1A. Risk factors. In light of these assumptions, risks and uncertainties, the forward-looking events and circumstances discussed in this annual report on Form 10-K may not occur as
contemplated, and actual results could differ materially from those anticipated or implied by the forward-looking statements.

Forward-looking statements contained herein speak only as of the date of this report. Unless required by law, we undertake no obligation to update publicly or revise any forward-looking statements to reflect new information or future events
or otherwise. You should, however, review the factors and risks we describe in the reports we will file from time to time with the Securities and Exchange Commission (SEC).



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PART I



|ITEM 1. | BUSINESS
|------- | --------

Overview

We were the first company to establish an operational satellite-based digital radio system, commonly known as Digital Audio Radio Service (DARS) and today
are the only licensed DARS provider outside of North America, South Korea and Japan.

Through the end of December 2007, we have spent
approximately $1.7 billion in connection with the development and launch of our business. With the signing of a major distribution arrangement with Fiat Group Automobiles S.p.A. (Fiat), we are close to launching in Italy our first mobile service; we
expect to launch this mobile service in early 2009. In 2009, in addition to Italy, we are planning to launch a mobile service first in Bahrain and then in the United Arab Emirates (UAE) and potentially in Switzerland; in each of these jurisdictions
we now have the regulatory authorizations to establish a mobile service. We have delayed previously scheduled launches in the Middle East in order to take advantage of the enhancements to our planned mobile system provided by our European standard
technical development activities undertaken for Italy and other countries in the European Union. These enhancements include, among other things, a new generation of satellite receivers, which will receive broadcasts from our networks of terrestrial
repeaters as well as from our satellites. We are planning similar system enhancements in India, where we initiated a non-mobile service in 2005, subject to the resolution of the satellite radio regulatory issues and the formation of a strategic
alliance with a local partner.

Our operational system consists of four main elements: two geostationary satellites, AfriStar and AsiaStar;
the associated ground systems that provide content to and control satellites; a terrestrial repeater network to be built out (subject to regulatory approval) in each of our target jurisdictions, commencing in Italy, in order to facilitate a mobile
service; and the receivers owned by our customers. Each of our satellites can service three large geographic areas through three beams capable of carrying up to 50-60 channels each, based upon the waveform and other changes we are making in
implementing our European technology. As a result, we will have the technical capacity to broadcast a tailored mix of up to 50-60 channels on a subscription basis in each of six target areas.

We are focusing our current efforts on Europe beginning with our launch in 2009 in Italy. During the period 2005-07, we concentrated substantial efforts
on marketing our non-mobile services in India where we have, beginning in 2007, reduced spending and marketing and sales activities pending the issuance of a terrestrial repeater license and the completion of a strategic alliance with a local party.
In China, although we continue to work with a local partner to obtain the regulatory approvals necessary for service launch, we are not confident of a breakthrough in the near term.

We currently continue to offer a subscription package for non-mobile services in India for $3.75 (Rs.150) per month, a subscription package for
non-mobile services in Africa and the Middle East for $5.00 per month and a premium package for non-mobile services targeted to English-speaking expatriates living throughout our current broadcast area for $9.99 per month. As of December 31,
2007, we had more than 174,000 paying subscribers, including approximately 163,000 subscribers in India, and over 11,000 subscribers in the rest of the world, including Europe, the Middle East, and Africa. We have ceased, however, traditional
marketing and promotional activities for our non-mobile services in these areas.

Our strategy is to keep a narrow focus and establish a
strong set of local alliances and strategic partnerships to assist in funding operations and provide support for distribution, content procurement, regulatory compliance and the build-out of a terrestrial infrastructure prior to embarking on a full
roll-out in a particular market.

We continue to face severe problems in financing our development and operations. See Risk
FactorsWe have faced in the past and may face in the future, challenges and constraints to obtaining financing and Managements Discussion and Analysis and Results of OperationsFuture Operating Liquidity and Capital
Resource Requirements and Capital Expenditures.



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Our Markets

Within our broadcast coverage area, we believe that Europe, India, the Middle East and, possibly China, are the most attractive target markets for the launch of our service. Other markets we may pursue opportunistically include Africa, the
expatriate communities within our coverage area and government agencies.

Our European business plan

We currently offer service in parts of Europe through satellite receivers and have a relatively small number of subscribers. Mobile reception there,
however, requires the implementation of complementary terrestrial repeaters. These repeaters would operate within our assigned frequency band and would be used to fill gaps in satellite coverage, particularly in urban zones.

Following our establishment in 2006 of an Italian joint venture with minority partner Class Editori, a media company based in Milan, the joint venture
company, WorldSpace Italia, S.p.A., received a license from the Italian government to establish a repeater network in Italy and provide a mobile service. WorldSpace Italia concluded the Fiat transaction in July 2007 and based upon Fiats
commitment to OEM distribution and after-market support we have accelerated implementation for a scheduled roll-out in early 2009. We have installed terrestrial repeaters in Milan currently used for the testing of various components of the system.
Chipset and receiver development, repeater network deployment, and the integration of a robust conditional access system are all moving towards the launch next year. We are also in discussions with content providers and other potential partners. In
early 2008, we signed a development agreement with Delphi Corporation, one of the leading satellite radio providers, to design an after-market receiver for the Italy launch. Fiat is working with Delphi to develop an OEM receiver.

Our regulatory franchise, including radio frequency assignments and the associated orbital location of our AfriStar satellite as well as our Italian and
Swiss licenses, position us to initiate our DARS service in Europe. However, for countries other than Italy and Switzerland, we will need to obtain additional local regulatory approvals for the deployment of our mobile DARS service. We are in
discussions with potential partners and regulatory authorities in a number of other European countries, including Germany, the United Kingdom, France, and Spain, among others. We expect to achieve positive regulatory results in at least two
additional countries in 2008. Accordingly, we plan to launch our hybrid mobile service in Europe in two phases. The first phase would offer mobile services in a single national market, Italy, while the second phase would focus on adding selected
other targeted countries. Phase One would utilize the west beam of our AfriStar satellite, which has sufficient capacity to provide an attractive product offering in at least one European country (Italy), and a complementary terrestrial repeater
network in that markets urban zones. We are also evaluating the potential reconfiguration of our AfriStar satellite payload to provide additional capacity for a second European market. In Phase Two, we plan to provide a pan-European service
through the launch of a third co-located L-band satellite (AfriStar-2) and the deployment of complementary terrestrial repeater networks in urban zones within additional service countries. We have received authorization from the FCC to launch and
operate an additional satellite at the same orbital location as our AfriStar satellite. We plan to launch this additional satellite, which is fully assembled and in storage, subject to receiving required terrestrial repeater approvals in additional
countries in Europe and arranging financing.

We intend to offer multiple country-specific program packages, consisting, respectively, of
various European language programming, together with a number of English language pan-European channels. We anticipate each country package would contain around thirty to fifty channels including music, talk and sports, as well as niche services
such as a mixed audio and data nautical channel. The content offering will include original and exclusive channels targeting different population segments that have been identified by our market studies. Although the intended primary focus of our
plan is to target the automobile market, other potential applications such as the home reception or commercial vehicle markets would also be implemented.

In preparing for the launch of a mobile DARS in Europe, we continue to pursue strategic relationships with automobile OEMs, media groups, content providers, receiver manufacturers and technology providers.



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Our India business plan

India has proved to be a difficult market to achieve the level of subscriber additions we were expecting when we launched our commercial service in 2005
with marketing and promotional spending. We still believe the India market fundamentals are attractive, but we have continued to reduce spending pending the approval of our request for licenses to support the launch of our hybrid mobile service and
the completion of a strategic alliance with a local partner. We plan to use 2008 to work to meet these two objectives and plan for the launch of a mobile service. We plan to introduce a terrestrially augmented mobile service in India after receiving
appropriate regulatory approvals and are currently studying the use of our technology developed for Europe to that end. We believe a terrestrially augmented signal along with next generation receivers will not only make a mobile service possible,
but will also eliminate a number of the challenges consumers face with our current service, such as antenna installation and manual password insertion.

We currently offer subscribers in India to our non-mobile service 45 channels of music, entertainment and information programming in twelve languages, and may introduce additional channels in the near future. This
programming ranges from regional to national and international in its focus. The basic subscription package that we offer in India consists of international news (such as NPR, BBC and CNN International); WorldSpace-branded English language channels
playing a full range of international music; Indian niche genre channels such as Gandharv, Shruti and Farishta; Indian news channels such as CNN/IBN and CNBC TV-18; Indian regional music channels such as Sparsha, Spandana, Tunak, Umang, Surabhi,
Falak, Sonar, KL Radio and Madhuri; and lifestyle and meditation channels such as Moksha and the Art of Living. We have also featured the WorldSpace-created channel PLAY, which is the first all-sports, talk radio channel in India and provides
comprehensive coverage of cricket and other sports for the Indian market. The channels are broadcast 24 hours a day.In 2007 we launched a comedy channel (Punchline), an 80s-90s pop hit channel (Retro Radio), a channel featuring
Christmas/Holiday music which ran for a six week period in November and December (Holly) and the CNN/IBN and CNBC TV-18 channels. In 2007 we also added additional live programs on a number of WorldSpace branded channels. Our long term strategy
focuses on live music broadcasting, the creation of unique, compelling and exclusive content events that can be leveraged on one or more WorldSpace channels, as well as increasing channels of both music and talk that target a mass audience.

We plan to use Indias extensive electronics and automobile aftermarket networks to sell our early automobile-mountable mobile
receivers. We are working to establish partnerships with automobile manufacturers so that they can offer factory-installed WorldSpace receivers in their new cars. We also plan to establish distribution relationships with auto accessories store
chains, which play an important role in the Indian aftermarket.

Our Middle Eastern business plan

In light of the regulatory success we have experienced in markets in the Middle East, we have been targeting the launch of our mobile service in markets
such as Bahrain and the UAE. These target segments will include the local Arabic population as well as South Asian and western expatriates. We are implementing a mobile service based upon authorizations received from the telecommunications
regulatory authorities of Bahrain and the UAE, and intend to roll out our mobile service initially in Bahrain, followed by the UAE. We expect to launch the service with our Europe standard technology, which we expect to be ready in early 2009. We
have added two dedicated Arabic channels, Ranin (new Arabic hits) and Min Zaman (Arabic retro/classical), concluded on agreement with CNBC Arabia, and have begun efforts to launch additional Arabic channels covering key genres of Arabic music. We
plan to leverage our Indian content to provide a voice from home for the large number of expatriates from India, Pakistan, Sri Lanka and Bangladesh. We believe the South Asian expatriates, as well as the western expatriates who are
interested in receiving reliable news, information and entertainment from sources and in formats that they are used to receiving at home, provide an attractive market with a high disposable income and strong ties to their homeland.

Our China business plan

While
we have in place our satellite infrastructure for China, we have not yet begun to offer DARS in China. The path to the launch of a commercial business in China remains unclear, even though we continue to work with our local partner to structure an
arrangement that will receive government approval. Pursuant to a



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series of agreements and approval documents issued by relevant governmental authorities, China Satellite Communications Corporation (ChinaSat), our agent and
one of six state-owned telecommunications operators in China, has acquired satellite spectrum allocation and certain other approvals to operate complementary terrestrial retransmission services in China. ChinaSat has installed four repeaters in
Beijing and two repeaters in Tianjin to conduct the experimental L-band network operations. Additionally, our agent, ChinaSat, has established an uplink station in Beijing for our AsiaStar satellite.

We have developed a China-Only version of our receivers, which is programmed to decode only those broadcasts intended for listeners within
China. This feature will ensure that programming from outside China will not be decoded by China-Only receivers within China. To facilitate local low-cost production in China, we have an active agreement with China-based receiver producer Tongshi.

We believe we are well positioned to offer an initial DARS system to the Chinese market, subject to the required government approvals.
Through WorldSpace China, we have established relationships with several third-party providers of content relating to these services, including China National Radio, China Radio International, SEEC Media Group, Ltd., and Hunan Radio & TV
and we expect to activate these relationships upon receiving government approval.

Programming and Content

Consumer radio

Our content is
a key differentiating factor in attracting subscribers and increasing our subscription revenue. Our approach to content comprises three key strategies: (i) to form relationships with the best international, national and regional content
providers; (ii) to create high-quality unique content, including content that has not been available through the local radio providers in a particular market; and (iii) to aggregate in each of our markets the most appealing mix of audio
programs. The mix of audio content provided in each market is tailored to the needs and preferences of major, as well as niche, target listener segments within such market. Each of our satellites can broadcast three beams of information covering
different parts of the satellites footprint. Each beam will have the capability to broadcast 50-60 channels with its own individual mix of programming.

Overall, we currently broadcast a total of 90 separate digital channels, delivering music and multilingual news, sports, information and data. Currently, 39 channels are provided by international, national and
regional third parties and 35 are WorldSpace-branded channels produced by us, or by third parties uniquely for us. The balance are data and First Voice channels. In 2007, we introduced six new channels, a comedy channel (Punchline), an
80s-90s pop hit channel (Retro Radio), Hosanna (Christian) a channel featuring Christmas/Holiday music which ran for a six week period in November and December (Holly), CNN/IBN (Indian News) and CNBC TV-18 (Indian and global Business
News). We are exploring ways of enhancing our talk, entertainment and sports related programming in a cost-effective way.

On our
WorldSpace branded channels we generate exclusive, compelling and unique content by creating events or partnering with existing events in the entertainment world. An example of this is the UPop Sessions @ Abbey Road in which we brought in over 30
bands for live recording sessions. We broadcast this three day event live on our UPop channel as well as archived all the content for future playback. In 2008, we expect to create a special channel WorldSpace Live to showcase all of the
Abbey Road content we have collected over the last three years as well as other live content we have recorded in the WorldSpace studios over the years. In addition to WorldSpace-created events, we also partnered with existing events such as the Brit
Awards, Live Earth, the Virgin Mobile Festival and many others to deliver the most current, exciting entertainment content to our subscribers. We use encryption technology to mitigate signal piracy and to protect access to, copying of and tampering
with the manner and method through which our content is offered as well as the content itself. Our next generation receivers will use improved compression technology, eventually allowing a greater number of channels to be sent over our existing
bandwidth.



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We have agreed to provide free of charge 5% of the capacity of each of our satellites to First Voice
International (First Voice) through the life of such satellites and to provide uplink service for First Voices content at least through June 2005. At present, we continue to provide uplink service to First Voice at no charge. First Voice is a
nonprofit organization whose establishment was inspired by our Chairman and Chief Executive Officer, Noah Samara, and which provides free informational and educational programming to local communities within our broadcast coverage area.
Mr. Samara is also the Chairman of First Voice.

AsiaStar

The northwest beam of our AsiaStar satellite offers 45 channels to our primary market of India. Some of our channels are available free-to-air, but most
require subscription service.

The other two beams on the AsiaStar satellite are configured to broadcast in China and Southeast Asia.

AfriStar

Our
AfriStar satellite offers 59 channels, most of which are available on two of the three beams, the west beam having been substantially cleared for testing preliminary to the launch of our mobile service in Italy. The programs offered on these
channels are broadcast into Africa, the Mediterranean basin countries, the Middle East and parts of Europe.

Receivers and Multimedia and Data Devices

Technology and Waveforms

WorldSpace has developed for Europe and other markets a satellite-terrestrial broadcast technology based on the Satellite Digital Radio (SDR) standard approved in September 2006 by the European Telecommunications
Standards Institute (ETSI).

This waveform uses state-of-the-art error correction codes (turbo-codes) together with highly adaptable time
interleavers. In addition, the product implements a flexible modulation scheme that addresses low-power and high-power satellites. Furthermore, the standards built-in quality of service (QoS) capabilities optimizes bandwidth utilization by
enabling bandwidth allocation based on the class of service required. This feature enables real-time audio and video service and product implementations that need bandwidth resources reserved and/or protected while also enabling less bandwidth
intensive data services that can benefit from retransmission techniques at the application layer. The terrestrial component of our SDR system uses carriers of 1.5 MHz each, thereby facilitating frequency coordination and planning at the pan-European
level.

The WorldSpace SDR technology will also use the following:



| |  |  | HE-AAC v2 for audio coding offering the best audio quality for low to medium bit rate applications
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | Optional MPEG Surround binaural audio coding to render surround sound effects in headphones
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | Program associated data such as artist name, song title, album title and album arts
| | - |  | -----------------------------------------------------------------------------------

Partnerships to implement the new ETSI waveform

WorldSpace has entered into a contract with the Fraunhofer Institute (Germany) for the development of an SDR receiver reference design. This design will:



| |  |  | enable fast product development by aftermarket and OEM receiver vendors using a first generation architecture based on semi-custom ASIC and an ARM9 processor, and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | allow the fast track development of full custom ASICs with reputable foundries.
| | - |  | --------------------------------------------------------------------------------



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WorldSpace has recently concluded agreements with ST Microelectronics, a major chipset development
company, and Delphi Corporation, a leading satellite radio system developer to develop the ETSI chip-set, OEM, and After-Market products for Europe (see belowConsumer audio receivers).

WorldSpace has awarded a contract to Certicoman experienced conditional access (CA) vendor with a proven track record in the satellite radio space.
The CA system delivers entitlements to receive over-the-air and enables pre-activation of OEM and After-Market receivers at the factory. This capability, in turn, enables WorldSpace to offer and better manage customer trial periods without unduly
burdening the call centers/dealers, which we anticipate should improve the service adoption rate by users.

Following an international
competitive bid, WorldSpace awarded in June 2006 a contract to Sodielec (France)a leading company in DVB-T transmittersfor the development and delivery of eight repeaters. The initial compatibility tests between repeaters and receivers
were performed successfully in December 2006 and repeaters were installed in Toulouse (France), Erlangen (Germany) and Milan (Italy) for field trials. Following the field trials, in 2008, we have commenced activities to install the repeater network
required to launch service in Italy.

Consumer audio receivers

Until now, we made available for our markets satellite reception only receivers, which, although many were portable, were used primarily for fixed
reception, since we had not built out any terrestrial repeater networks that are needed for mobile reception. These receivers have been available in a range of individual, home and office models. In anticipation of our upcoming launches of our
mobile services first in Europe and then in the Middle East, we have been working with key vendors to have ready a mobile reception receiver to work in conjunction with our newly developed European technology. We expect to use this technology for
all our European market launches and our launch in the Middle East and are studying its introduction into India once we have secured a repeater network license there. In order to take full advantage of the new capabilities of the European
technology, we will have to broadcast our signal in a new waveform; which our current generation of receivers will not be able to interpret. As we introduce new technology and market our next generation receivers in markets where there are
significant numbers of current subscribers with first generation receivers, we are developing transition plans that could involve, among other things a promotional program to address replacement of the older receivers. Another potential plan under
evaluation may include a period during which we could broadcast in both waveforms. Under this potential plan, at some point in the future as our next generation receivers achieve broad market acceptance, we expect that we will discontinue
broadcasting the signal used by our current generation of receivers.



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WorldSpace has recently concluded an agreement with Delphi Corporation, a leading satellite radio
receiver product developer to develop the after-market products for Europe. The first such agreement to develop two generations of the first after-market SDR receiver was signed with Delphi in January 2008. In addition, WorldSpace and Delphi are in
the final stages of negotiating the development agreement for the first generation OEM receiver implementing the new ETSI Technology.

LOGO

Europe & Middle-East

Products: WorldSpace intends to provide a wide range of receivers to its subscribers in Europe and the Middle East. The primary focus is the automotive market which is expected to drive the growth in the early
stages. Within the automotive space, two markets will be addressed:

OEM (Original Equipment Manufacturers):

Addressed by the following two kinds of receivers



| |  |  | Receiver Modules: typically small tuner modules (3 x 2, for example) that are mounted directly into the car entertainment (or navigation) system of a
car
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Black Box Modules: larger modules assembled in other parts of the car (boot, glove box.) and wired to the head unit of the cars
entertainment/navigation system. While this configuration is likely to be a bit more costly, it offers the flexibility to integrate the satellite radio into all head units, including ones that do not have the space and connectivity provisions for an
internal module.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

After-market: Addressed by plug and play (PnP) receivers that are removable from the
car. The initially planned PnP receiver will be positioned in the mid to high end for the market and may include a color screen and enough memory to appeal to tech-savvy, early adopter consumers.

All the above mentioned receivers will be capable of supporting advanced data and data-enabled media applications through easy integration with existing
and emerging sources of data in cars, including navigation (GPS) and telematic systems. Advanced data applications and premium services geared towards motorists will enable consumers to view in real time a wide range of relevant information
including up-to-date traffic conditions, weather forecast, parking space availability, and other valuable information.



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Some receiver models may feature capabilities that include pause and rewind, preview of next artist, and
many other attractive services, including push download services.

Networks

After WorldSpace obtained a license to build and operate the first L-band satellite radio repeater network in Italy, WorldSpace signed an agreement with
Telecom Italia to design and deploy the terrestrial repeater network throughout Italy for the launch of its first service in Europe. We are currently considering a plan for Switzerland where we recently received a license to deploy terrestrial
repeaters.

India & Rest of the World

Our existing receivers used in India are manufactured by BPL and are sold in the retail market at prices ranging from Rs.2,499 to Rs.3,599 (approximately, $60 to $90). Currently, the lowest cost BPL receiver is the
One World, which is offered at a retail price of Rs.2,499 (approximately $60). To help achieve this price point, we currently provide a subsidy for this receiver. Substantially all receiver sales are of this low-cost BPL receiver. We continue to
pursue all opportunities to reduce receiver costs.

We are considering plans to introduce our new ETSI receiver product line intended for
automobile use in India, upon receiving the terrestrial license. Although this entails developing a transition plan for our current subscribers (since full introduction of this technology will result in the first generation receivers being unable to
receive our signal), using this technology systemwide provides synergies and potential cost efficiencies that we expect will ultimately benefit our subscribers. For the automobile market initially, we plan to introduce after-market oriented
products, which will be housed in a docking station on the automobiles dashboard and will use an omni-directional antenna mounted on the automobiles roof. Similar to the receivers used by Sirius and XM, these automobile receivers would
access our satellite when in line of sight of our satellite or a terrestrial repeater network when line of sight to our satellite is blocked, which would generally only be the case when the receiver is in a major metropolitan area and large
buildings, trees and other natural obstructions obscure the line of sight with our satellites.

The WorldSpace System

Our system is a complete digital audio, data and multimedia system comprising three major components: the space segment, the ground segment, which
includes satellite control, content uplinking and terrestrial repeaters (when we complete the repeater network installation in Italy), and the user segment. The space segment is designed to cover most of the geographical areas of the world (except
North America and Australia) using three geostationary satellites. We have spent approximately $747 million on required infrastructure, including the satellites and the earth stations. Presently, two of the satellites, AsiaStar and AfriStar and
their associated ground control systems, are providing operational services to Asia, all of the Middle East and Africa, and parts of Europe. In addition, we have a fully assembled satellite in storage (which we plan to use to expand our mobile DARS
in Europe) and the long lead parts for another (which may serve as a ground spare). The satellites are designed to provide digital audio, multimedia and data broadcasting to small fixed and portable L-band receivers in their line of sight anywhere
in their broadcast coverage area. In order to provide a robust mobile service, we are implementing terrestrial repeater networks, initially in Italy, that will be part of our system in selected markets within our satellite broadcast coverage area.
With the addition of suitably located terrestrial repeater networks, the system can provide more reliable urban broadcast services to receivers in automobiles (similar to the services provided by XM and Sirius in the United States).

We built our system working with industry leaders, including Alcatel Space (now Thales Alenia Space), EADS Astrium and Arianespace (France), SED
(Canada), GSI (USA), Fraunhofer Institute (Germany), ST Microelectronics (Italy), Micronas (Germany) and others, to realize high quality and reliability of service.



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Space segment

Our orbiting satellites, AfriStar and AsiaStar, and our satellite in storage are Matra Marconi Eurostar 2000+ buses built by Alcatel Space and EADS Astrium, formerly known as Matra Marconi Space. Both are
geostationary orbit satellites broadcasting programs in the L-band frequency (1452-1492 MHz range). Each of the two satellites has three downlink spot beams, with each beam covering approximately 14 million square kilometers of the earth. The
AfriStar satellite, launched in October 1998, is located at the 21o East Longitude orbital location with beams covering all regions of Africa, the Mediterranean basin countries, the Middle East and parts of Europe. The AsiaStar satellite,
launched in March 2000, is located at the 105o East Longitude orbital location with beams covering the most densely populated parts of Asia, including India, China and the southern part of Russia. The third satellite, which is fully assembled
and ready for launch, is currently in storage at EADS Astriums and Thales Alenia Space facilities in Toulouse, France and Stevenage, U.K. A fourth satellite of identical design, for which long lead parts have been procured and partially
assembled, is also maintained in storage in Toulouse, France and can be integrated and tested for launch in an abbreviated period of time.

Each satellite has a design life of twelve years, with an orbital maneuver life of 15 years, which means that each satellite has been designed and fueled to maintain its assigned orbital position (within 0.1 degrees) for 15 years. After
that point, the satellite must be decommissioned. Our AfriStar satellite has developed a defect in its solar panels. As a result of this defect, the energy collected by those panels is less than intended. Based upon the past few years operational
experience with this issue and consultations with Astrium, we believe the defects likely effect is limited to potential satellite power inadequacy during solar eclipses. We have adapted our satellite procedures accordingly and, in consultation
with Astrium, we have implemented operational procedures that would extend the useful life of the satellite relevant to this solar array issue through careful management of the power generated by the solar arrays. Such procedures, which are expected
to be invoked during the critical eclipse periods, may result in a temporary and relatively insignificant reduction of the power radiated by one or more of its beams with a resulting reduction of the broadcast coverage area of such beam(s).

Each of our satellites provides two types of channel capacity: transparent and processed. In the transparent mode, signals from ground
stations are sent to the satellite in a time sequence known as time division multiplex (TDM). In this mode, different channels are brought to a central hub station for aggregation and uplink to the satellite. The satellite receives and broadcasts
these channels to ground receivers within its coverage area. The three downlink beams receive programs from corresponding uplinks in different frequencies. In the processed mode, the satellite has the ability to process the received signals before
transmission to its coverage area. This second mode allows individual broadcasters to uplink to the satellite directly from their respective sites. In the processed mode, any program uplinked on a single frequency can be broadcast in any or all of
the downlink beams.

Ground segment

Operation of each satellite currently in-orbit is monitored and controlled by the ground control system, comprising a regional operations center (ROC), two telemetry, command and ranging (TCR) stations and one
communications system monitoring (CSM) station that performs monitoring of the downlink signal quality and control of each satellite. Our regional operations centers are located in Silver Spring, Maryland for AfriStar and Melbourne, Australia for
AsiaStar. The regional operating centers, through their satellite control centers, manage the performance and status of the satellite by controlling the satellite and monitoring the status of the onboard communications payload. In addition, the
regional operations centers, through mission control centers, facilitate delivery and control the quality of the signals from the individual uplink stations to the satellites by assigning signals to the appropriate uplink frequencies and routing
them to their appropriate downlink carriers. The system architecture is identical for each region.

The regional operating centers control
the satellites via dedicated data lines to the TCR stations. Each satellite has two TCR stations with sufficient geographic distance between them so that if natural disasters or any unforeseen events were to make one inoperable, a back-up station
will be available. TCR stations consist of an



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X-Band uplink command and control system and an L-band telemetry monitoring system. A backup mode has also been provided using an S Band link from Bangalore,
India. The TCR stations for AfriStar are located in Bangalore, India and Port Louis, Mauritius and for AsiaStar in Melbourne, Australia and Port Louis, Mauritius.

In addition to the TCR stations, a CSM station is associated with each satellite to monitor continuously the quality of the downlink services. Our CSM facilities are located in Libreville, Gabon for AfriStar and
Melbourne, Australia for AsiaStar.

Network management system

Our network management system provides the connectivity between the programming sources, the satellites and the receivers. The satellite transponders
permit (i) a multiplicity of uplinks to the satellites directly from the broadcasters studio or from common hub feeder link stations (linked terrestrially to broadcasters through dedicated communication lines) and (ii) downlinks
directly to receivers.

LOGO

In the common hub mode, the WorldSpace-branded broadcast channels, all audio channels from external
broadcasters and multimedia content are backhauled and aggregated to a broadcast operations center (BOC) and the content is fed directly to a transparent hub feeder link station (TFLS). The external broadcasters contents are backhauled to the
BOC using off-the-shelf codec equipment and dedicated communication lines. The TFLS multiplexes all the incoming audio channels and data, and translates the encoded signal into the TDM format compatible with the receivers. The TFLS then uses a
single carrier frequency to uplink transmissions to the satellite. Onboard the satellite, the signal is routed by the transparent transponder to a specific downlink beam and transmitted via L-band frequencies to the receivers. A TFLS located in
Johannesburg provides the uplink to the AfriStar satellite. A station in Singapore provides the uplink for the west and south beams of the AsiaStar satellite. The north beam of the AsiaStar satellite is supported by a TFLS located in Beijing, China.

As an alternative to the TFLS, individual broadcasters may also uplink directly to the satellite from their own facilities or from a
central location via a Processed Feeder Link Station (PFLS). The PFLS can be installed



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at the broadcasters location or a location central to several broadcasters (to which programming is transmitted by the broadcasters via dedicated
communication lines). The PFLS, after coding, translates the signal into PRCs for onward transmission to the processed transponder onboard the satellite. The processed payload transponder receives multiple uplink signals and processes them for
rebroadcast in L-band. PFLSs in London and Toulouse currently provide access to AfriStar; a new PFLS has been constructed in Dubai to replace a decommissioned Nairobi PFLS. PFLSs in Melbourne and Singapore provide access to AsiaStar. The TFLSs and
the PFLSs are equipped with custom-built encryption nodes to encrypt any channel or a group of channels to support the subscription management service.

We will also introduce an over-the-air authorization capability, which will allow suitably equipped receivers to be activated or de-activated using a dedicated channel without requiring consumers to enter passwords
directly into a receiver. This will facilitate quick and easy activation and deactivation of receivers over the air without requiring the manual entry of passwords into a receiver.

Terrestrial system

Since
uninterrupted line of sight reception may be difficult in the urban areas in which we operate, we intend to install terrestrial repeating transmitters to rebroadcast our satellite signals in the largest metropolitan areas of our intended mobile DARS
markets. Our next generation receivers will be capable of receiving this broadcast. The development and introduction of next generation mobile receivers will coincide with the launch of our first terrestrial repeater network in Italy and will follow
in other markets in which we intend to offer a mobile service. The satellite component of the system will be based on the same TDM signal we currently use, but will use a modified waveform with several significant enhancements designed to improve
in-vehicle reception in areas partially shadowed by trees or other obstructions.

User segment

Users must purchase a receiver compatible with the L-band frequency in order to access our system. The radio receiver processes, decodes and descrambles
the signals to allow users to receive our programming content. Our broadcast frequency and satellites require a special receiver design incorporating either a small patch antenna measuring approximately 6 to 8 cm (2.4 to 3.2 inches) which folds
neatly into the receiver unit or a similarly sized omni-directional antenna mounted on the car rooftop. Each receiver is individually addressable via a unique identifier that can be used to unlock specially coded audio or multimedia signals. This
capability provides us with the flexibility to deliver free, subscription and/or premium services to consumers.

The currently available
receivers are manually coded for subscription authorization. A password, valid for varying periods of time depending upon the length of the subscription purchased and paid for, is provided to a subscriber and entered into the receiver. Currently
passwords are re-validated on a quarterly basis. Upon subscription renewal, a new passcode is provided and similarly entered into the receiver. As new receiver products are introduced, we plan to provide for over-the-air activation of subscriptions.

Competition

We expect competition for
our services from a diverse mix of audio, video and data providers ranging from traditional AM/FM and shortwave broadcasters to cable television and DTH satellite broadcasters, Internet-based radio broadcasters and other potential satellite DARS
providers.

Traditional radio

We face competition from traditional AM/FM and shortwave radio broadcasters. The shortwave and AM/FM radio industries are well established and generally offer free-to-air reception paid for by commercial advertising.
In addition, certain stations offer free-to-air programming without commercial interruption. Many



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shortwave and AM/FM radio stations also offer information programming of a local nature, such as local news or traffic, which we may not be able to offer.
Radio stations compete for listeners and advertising revenue directly with other radio stations within their markets on the basis of a variety of factors, including program content, on-air talent, transmitter power, audience characteristics, local
program acceptance and the number and characteristics of other radio stations in the market. AM/FM radio is deeply rooted in most European markets. And although there has recently been limited expansion of AM/FM radio in India, traditional AM/FM
radio there is still not as important a source of competition as in other markets because of the poorer quality and narrow selection of programming currently offered.

Terrestrial Digital Broadcast Services

We may also face competition from terrestrial digital
broadcast services in the future, such as Terrestrial Digital Radio (TDR) services. TDR is a digital technological upgrade of traditional radio that offers up to CD-quality radio in over-the-air broadcasts with text information such as song title,
weather and news alerts included. TDR experimental services are being conducted in a number of countries worldwide, including China, parts of Europe, India and Israel. A few countries, including Canada, the U.K., Denmark and Germany, have started
regular commercial TDR services, and France has announced its intention to launch a similar service in 2008. Standards for providing such services in the United States were authorized by the FCC in October 2002.

Other digital broadcast systems and services include technological upgrades which permit the service to provide digital TV and multimedia signals to
mobile phones and other portable devices  or mobile TV. Experiments in terrestrial mobile TV services are being conducted in a number of countries worldwide, including Germany, the US and France, while Korea and Italy started offering regular
commercial services in January 2005 and in 2006, respectively. It is possible that the anticipation of the 2008 Olympics may stimulate the introduction of similar services by the summer of 2008 in China and other European countries.

Satellite television and cable

Traditional cable operators and DTH satellite broadcasters programming television offer programming that may compete with ours. Many cable television operators provide a set of music channels as an ancillary service for cable subscribers.
Delivery of television via DTH satellite transmission is a growing phenomenon worldwide, including in most of the countries we have targeted, and these satellites may broadcast audio channels. Many DTH satellite services provide a set of music
channels accessible through fixed dish receivers mounted on a home or building as an ancillary service for customers investing in the television dish and receiver, and paying the monthly or annual subscription price. DTH and cable audio programs may
offer high quality signals and a customers choice of available programming is considerably broadened by these offeringsboth aspects common to our planned service. Cable services and DTH television, however, are not portable and can only
be heard through televisions or stereo receivers wired into the satellite antenna or cable television system, so they will not compete with our portable satellite receivers or our intended mobile automotive service. In addition, most DTH and cable
audio services are presently limited to packaged recorded music and are secondary in marketing emphasis to television. However, there are a few existing providers of DTH radio, such as Digital Music Express in the U.S., which offers over ninety
channels of digital commercial free sound through a subscription service. However, such DTH radio services do not offer traditional radio type broadcasts, which include live DJs and up-to-the-minute news.

Internet radio broadcasts

There are large numbers of Internet radio broadcasts which can be accessed from any PC connected to the Internet anywhere in the world. In general, the audio quality of these broadcasts is dependent on the bandwidth available and the
quality of the Internet connection. To the extent that higher quality sound is available, for the listener to experience a high quality broadcast they must have a broadband connection to the Internet and the listeners must connect their PC to
quality speakers or earphones. It is unlikely that there will be a portable



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Internet solution in the markets we are targeting for some time to come. Much of the current radio broadcasts are pre-programmed music playlists, not
traditional radio type broadcasts with live DJs or up-to-the-minute news programming.

PC users can download music in formats suitable for
storage and playback on their PCs. In contrast to music that is played on a PC directly from the Internet, the sound quality of music that is downloaded from specialty Internet sites for future listening on PCs can be comparable to our broadcasts.

Other satellite service providers

Direct satellite DARS competition in the L-band is limited by the digital satellite radio spectrum allocation established by the 1992 WRC, referred to as WARC-92, and by our current use of this allocation. Although a
number of countries have since submitted filings to the ITU for potential use of the same unique L-band frequencies allocated to satellite radio, we are not aware of any other satellite DARS providers in the L-band. While new competitors could
emerge, particularly if our service proves to be a commercial success, any potential satellite users of the L-band are required to protect our receivers from harmful interference. Moreover, our two satellites currently occupy most of the L-band
spectrum allocation in our target regions.

In addition to direct satellite DARS competition in the L-band, we may face competition from
satellite Digital Multimedia Broadcasting, or DMB, service providers in one or more of our target markets. Satellite DMB consists primarily of delivering TV programs and multimedia content, including audio, to mobile phones. While the
service is aimed primarily at the mobile phone market, it is also possible to provide in-vehicle reception of the service. While satellite DMB is currently available only in Japan and South Korea, similar services have also been proposed for
provision in different S-band allocations in other parts of the world, including Europe, India, the Middle East and China. Since satellite DMB consists mainly of delivering video channels, while satellite DARS is tailored to provide multiple audio
channels, especially to automobiles, we believe any potential competition from future satellite DMB operators is likely to be mainly indirect.

Music players

In addition, listeners increasingly have additional choices for high quality music reproduction, such
as CDs, cassettes and MP3 players. Prices for devices to play these media may be lower than the price for our receivers. However, CDs, cassettes and MP3 players cannot provide the real-time news and public affairs programming offered on
radio. The vast majority of mass-produced, portable MP3 players do not have any AM, FM or satellite radio capability.

Intellectual
Property/Trademarks/Patents

We use and hold intellectual property rights for a number of trademarks, service marks and logos for our
system and services and for our receivers. We have two main marksWORLDSPACE and the Orbital Logoboth of which are registered in over 25 countries in the international categories for satellite communications or
radio and data business. We have under consideration certain modifications to our main marks and expect to make a decision in the near term. We also hold, in various jurisdictions, a small number of regional taglines or channel brand names including
but not limited to AmeriSpace, AmeriStar, AfriStar, and AsiaStar. In addition, we currently own or have applied for more than 40 patents in more than 40 countries relating to various aspects of our
system and receivers, and at any time we may file additional patent applications in the appropriate countries for various aspects of our system. Our patents cover various aspects of the satellite direct radio broadcast system and terrestrial
repeaters with formatting of broadcast data, and the processing thereof by the satellite and reception by remote radio receivers. In India we have six patents pending, and in China we have been issued two patents and have five additional patents
pending. We also have exclusive rights in various Fraunhofer Gesellschaft patents.



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We believe that all intellectual property rights used in our system were independently developed or duly
licensed by us, by those we license the rights from or by the technology companies who supplied portions of our system. We cannot assure you, however, that third parties will not bring suit against us for patent or other infringement of intellectual
property rights.

We have granted XM, a royalty-free, non-exclusive and irrevocable license to use and sublicense all improvements to our
technology made up to January 1, 2003. This license renews automatically on an annual basis unless terminated for a breach which has not been or cannot be remedied.

The recording rights federation, International Federation of the Phonographic Industry (IFPI), and we have entered into a global blanket license for sound recording rights that is expected to cover those rights for
our soon to be launched service in Italy. We are currently exploring the licensing of composers rights for that market. For the India market, we entered into a license agreement with Phonographic Performance Ltd. (PPL) for the equivalent rights
granted by IFPI for the India catalogue once PPL opted out of the global arrangement with IFPI. The term of this agreement expired at the end of 2007 and we remain in good faith negotiations with PPL for a renewal.

We also hold a blanket license granted by the Composers and Authors Society of Singapore (COMPASS), to broadcast, perform, transmit and otherwise use all
musical works which COMPASS has or will have the right to license. The license is deemed to continue from year to year unless terminated by notice in writing by either party at least 60 days before the end of the prior covered year. It was granted
concurrently with the launch of transmissions through our AsiaStar satellite. The license covers our transmission of music contained in the COMPASS catalog to and from AsiaStar on a direct-to-receiver basis only, but does not cover third-party
retransmissions. With respect to certain music works not contained in the COMPASS catalog and which we may wish to include in future programming, we may approach the rights-holders directly for licenses, which may result in increased costs.

Although we believe the license granted by COMPASS covers all necessary broadcasting rights for transmissions from our Singapore uplink
station to India, China and other countries within the AsiaStar broadcast coverage area, its sister rights societies in other jurisdictions within the AsiaStar broadcast coverage area may not recognize such license and may seek to require separate
licenses for broadcasts into their jurisdictions. This could increase our cost of broadcasting in such jurisdictions. Indeed, the society in India, India Performing Rights Society (IPRS), has recently announced that it is opting out of the COMPASS
arrangement with respect to its India catalogue. We are in good faith negotiations with IPRS and expect to reach agreement on terms in the near future.

Regulatory Matters

As an international satellite system operator and provider of DARS, we are subject to regulation at the
international and national levels. At the international level, we are subject to the radio frequency spectrum allocation process and satellite coordination procedures of the ITU. Additionally, at the national level, we are subject to regulation by
jurisdictions that have licensed our satellites and their associated ground segments. Finally, while provision of our satellite-only service in most markets does not require service authorization, the implementation of hybrid satellite and
complementary terrestrial networks requires that we obtain prior service and/or frequency authorization(s) in each respective market.

Regulation at the international level

The ITU radio-frequency spectrum allocation process

The ITU, a specialized agency of the United Nations with over 190 member countries, meets every three to four years at a World Radiocommunication
Conference (WRC). The purpose of the WRC is to update frequency



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allocation decisions and other conditions for use of radio frequency spectrum at the international level. Once the ITU allocates a particular frequency band
to a given service, individual member countries may assign and license frequencies within that band to specific communications and media service providers in such countries.

At WARC-92, the ITU allocated the 1452-1492 MHz frequency band (within the so-called L-band) to the Broadcasting-Satellite Service (Sound),
(BSS (Sound)) referred to as DARS in the United States, on a global basis. Recognizing the line of sight physics of satellite broadcasting and the need to provide seamless coverage in urban areas, the ITU specified that the global allocation covered
BSS (Sound) and complementary terrestrial broadcasting. Further, WARC-92 limited BSS (Sound) initial operations to the upper 25 MHz of the L-band allocation (1467-1492 MHz), with the use of the lower 15 MHz of the L-band to commence after the
conclusion of a planning conference, which has not been scheduled.

ITU satellite coordination

Our use of the orbital locations assigned to us in our licenses is subject to the frequency coordination and registration process of the ITU. In order to
protect satellite systems from harmful radio frequency interference from other communications systems, the ITU maintains a Master International Frequency Register (MIFR) of radio frequency assignments and their associated orbital locations. Each ITU
member state (referred to as an administration) is required by treaty to give notice of, coordinate, and register its proposed use of radio frequency assignments and associated orbital locations with the ITUs Radiocommunication
Bureau.

In our case, the governments of the United States, Australia and Trinidad and Tobago have licensed or authorized our AfriStar and
AsiaStar satellites and the satellite intended for use in Central and South America (AmeriStar), respectively, and are therefore the notifying administrations for each of those respective satellites as well as another satellite intended as a
replacement for AfriStar. As our notifying administrations, they are responsible for filing and coordinating our allocated radio frequency assignments and associated orbital locations for each satellite with both the ITUs Radiocommunication
Bureau and the national administrations of other countries in each satellites service region.

BSS (Sound) services share the L-band
frequencies on a co-primary basis with terrestrial fixed, mobile and broadcasting services. Therefore, our satellites were required to be coordinated with existing systems either lawfully operating in our service regions or enjoying date priority
ahead of us. While our notifying administrations, as the formal members of the ITU, are responsible for coordinating our satellites, in practice they require that we, as the satellite licensee, identify any potential interference concerns with
existing systems or those enjoying date priority ahead of us, and provide the analytical work and interface necessary to coordinate with such systems. If we are unable to reach agreement and finalize coordination, our notifying administrations would
then assist us with such coordination.

When the coordination process is completed, the ITU formally enters each satellite systems
orbital and frequency use characteristics in the MIFR. Such registration notifies all proposed users of frequencies that such registered satellite system is protected from interference from subsequent or nonconforming uses by other nations.

In the event disputes arise during coordination, the ITUs Radio Regulations do not contain mandatory dispute resolution or
enforcement mechanisms. Rather, the Radio Regulations dispute resolution procedures are based on the willingness of the parties concerned to reach a mutually acceptable agreement. Neither the ITU specifically, nor international law generally,
provides clear remedies if this voluntary process fails. As further described below, each of our satellites in-service has been fully coordinated and registered in the MIFR and therefore enjoys priority over all later-filed requests for coordination
and any non-conforming uses. Further, coordination information has been submitted for our AfriStar-2 satellite. However, while the ITUs Radio

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after coordination is completed and satellites are registered, as a practical matter there are no mandatory dispute resolution or enforcement mechanisms at
the ITU.

Regulation at the national level

Regulation of the satellites

AfriStar-1: Regulation by the United States. Following a
previously issued experimental license, on December 17, 1999, the FCC granted AfriSpace, Inc., our wholly-owned subsidiary (AfriSpace), a full license authorizing AfriSpace to launch and operate the AfriStar-1 satellite at the 21° East
Longitude orbital location to provide commercial digital audio broadcasting services in the L-band to Africa and the Middle East. The license specifically provides for a ten year license term and expires in January 2010. It is renewable at that
time.

We successfully coordinated the operation of AfriStar-1 with each of the administrations in the satellites coverage area. On
February 7, 2006, the ITU registered the AfriStar satellite network in the MIFR. Under current ITU spectrum priority rules, therefore, AfriStar-1 has priority for use of the relevant radio frequencies and the associated orbital position. The
AfriStar-1 filing has a period of validity of thirty years, through October 2028.

Our AfriStar satellite is licensed to serve all markets
within its footprint. As noted above, AfriSpace received its license to serve the Africa and Middle East regions. As a U.S. -licensed satellite system, AfriStar is subject to the FCCs general policies governing satellite services. In this
regard, in its DISCO I Report and Order, the FCC gave U.S. satellite operators the flexibility to serve any market within their satellites footprint, provided the United States international obligations to coordinate the
spacecraft are satisfied. AfriStar has been fully coordinated for service throughout its service region, which includes not only the Middle East and Africa, but also portions of South Asia and Europe. Therefore, on April 8, 2004, AfriSpace
notified the FCC that it intended to provide service to all regions within the satellites footprint.

Additionally, on
February 5, 2008, AfriSpace filed with the FCC a request to modify its AfriStar-1 license in order to allow that satellite to operate in a configuration which provides expanded coverage of Europe. The request has not yet been granted by the
FCC.

AfriStar-2: Regulation by the United States. On January 3, 2006, we were awarded a license by the FCC to launch and
operate AfriStar-2, and to co-locate it with AfriStar-1 at the 21° East Longitude orbital location. The satellite would operate within the same authorized frequency band (from 1467 to 1492 MHz) as AfriStar-1 and is expected to enhance our
service coverage in North Africa, the Mediterranean basin and Europe, as well as provide certain overlap redundancy for the northwestern and northeastern portions of AfriStars current coverage area. The first request for
coordination with respect to AfriStar-2 was published by the ITU on May 3, 2005 and a second request for coordination, identical to the first but with a later validity date to cater for possible launch delays, was published by the ITU on
June 12, 2007.

The FCC did not impose a performance bond requirement on AfriStar-2 and only required that it be launched and placed
into operation prior to decommissioning AfriStar-1.

A number of ITU filings for the L-band currently have date priority over our
AfriStar-2 filings. Although we are required to coordinate our AfriStar-2 filings with these prior-in-time filings, those filings must themselves be coordinated with our AfriStar-1 and AsiaStar satellite notifications.

On February 2, 2006, an application for review was filed asking the FCC to reverse the order by which the FCC had granted the AfriStar-2 license. We
timely submitted an opposition to this application for review. While we believe that the application for review lacks any legal basis that would justify a reversal of the FCCs decision to grant the AfriStar-2 license, there is no guarantee
that the FCC will uphold its order and our license.



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Other United States regulation. We are also subject to U.S. export controls laws and regulations,
specifically the Arms Export Control Act, the International Traffic in Arms Regulations, the Export Administration Regulations and the trade sanctions laws and regulations administered by the U.S. Department of the Treasurys Office of Foreign
Assets Controls in the operation of our business. We have obtained all the specific authorizations currently needed to operate our business and believe that the terms of these licenses are sufficient given the scope and duration of the activities to
which they pertain.

AsiaStar: regulation by Australia

Our AsiaStar satellite is subject to regulation under the Radiocommunications Act1992 (Cth) and the Radiocommunications Licence Conditions (Apparatus Licence) Determination 2003 (Cth), related
subordinate legislation and a Deed of Agreement between the Australian Communications Authority (ACA) (now the Australian Communications and Music Authority (ACMA)) and AsiaSpace Limited, the Companys wholly-owned Australian subsidiary
(AsiaSpace).

In 1995, the ACA (now the ACMA) on behalf of the Australian government agreed to be the ITU notifying administration for our
AsiaStar satellite, operated by AsiaSpace. In 1999, following the ACA filings with the ITU on behalf of AsiaSpace, a Deed of Agreement between the ACA and AsiaSpace was executed that provided for the frequency coordination and operational control of
the AsiaStar satellite network from Australia (the Deed).

The Deed remains in force as long as AsiaSpace fulfills its obligations as
specified therein, which include compliance with the ITU Radio Regulations, maintenance of a telemetry, tracking and control facility in Australia, AsiaSpaces continued incorporation in Australia and location of its central management and
control in Australia. If AsiaSpace is determined to have breached the Deed, the ACMA has the discretion to terminate the Deed and suppress the ITU notification of the network. In 2005, AsiaSpace agreed in principle to amend the Deed so that it is
responsible for all costs payable to the ITU. This requirement is imposed upon other satellite operators in Australia who have entered into similar deeds with the ACMA. AsiaSpace is presently discussing draft amendments with the ACMA. Once the
AsiaStar satellite reaches the end of its service life, if a new satellite is launched from Australia or an Australian national (including an Australian corporation within the WorldSpace group) authorizes the launch, the Space Activities Act 1998(Cth) would apply and we will need to apply to the ACMA and the Space Licensing and Safety Office (SLASO) for authorization to launch a replacement satellite. However, there can be no guarantee that the ACMA and SLASO will grant such an
authorization, in which case, the radio frequency assignments and associated orbital location currently used by our AsiaStar satellite could become available for use by other satellite operators.

AsiaSpace also currently holds apparatus licenses 1105214, 1105215, 1317666 and 1317667 which are issued by the ACA (now ACMA) and authorize the use of
certain frequencies and facilities necessary in Australia for the operation of the AsiaStar satellite. The licenses are renewed annually. Although renewal is not automatic, there is a reasonable expectation that they will be renewed at the
appropriate time.

AsiaSpace has successfully coordinated the AsiaStar satellite at the 105o East Longitude orbital location and, on
June 15, 2004, the ITU registered the AsiaStar satellite network in the MIFR. Under current ITU spectrum priority rules, AsiaStar has priority for use of the relevant radio frequencies and the associated orbital position.

AmeriStar: regulation by Trinidad and Tobago and France

On December 30, 1992, the Government of Trinidad and Tobago granted a special license to WorldSpace Caribbean Ltd., a wholly-owned subsidiary, to provide commercial digital audio broadcasting services from the
95° West Longitude orbital location. This license expired on April 2, 2000 and was subsequently renewed in December 2001 and would have remained effective for twelve years (until 2013) unless we failed to launch the satellite within the
period of validity of the ITU filing (January 2002).



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As a result of a lengthy coordination process, the initial filing for AmeriStar expired in January 2002.
The Government of Trinidad and Tobago subsequently submitted a new advance publication filing to the ITU effective January 2002. This new filing will expire in January 2009 if a satellite is not launched by that time.

Since we do not intend to launch a satellite by January 2009, the 2002 filing will expire at that time, and we do not intend to seek a renewal of our
license from Government of Trinidad and Tobago. As an alternative strategy, the French administration, at our request, has submitted to the ITU on February 22, 2008, two filings, at 78° West Longitude and 65° West Longitude,
respectively. We will seek a corresponding license(s) from the French administration at the appropriate time.

Regulation of the
WorldSpace ground system

Operation of the satellites

Our satellites are monitored and controlled by the ground control system, which is comprised of regional operations centers (ROCs) in Silver Spring,
Maryland and Melbourne, Australia; telemetry, command and ranging (TCR) stations in Bangalore, India, Melbourne, Australia and Mauritius; and in-orbit testing/communications system monitoring (IOT/CSM) stations in Libreville, Gabon and Melbourne,
Australia that control and monitor the downlink signal quality of each satellite. Pursuant to our contracts with relevant in-country service providers such as Gabon Télécom, Antrix Corporation Limited of India and Mauritius Telecom,
the responsibility for obtaining and maintaining all necessary regulatory authorizations for operation of the ROC, TCR and IOT/CSM stations not owned or operated by WorldSpace resides with the applicable local service providers. We believe that our
ground system service providers have obtained all necessary regulatory authorizations for the operation and monitoring of the AfriStar and AsiaStar satellites. In Mauritius and Gabon, our previous long-term agreements for ground systems services
have expired and we are currently operating on a month-to-month basis with no change in terms.

Regulation of Receivers. Our
receiver manufacturers have the broad responsibility to market the receivers. Pursuant to our receiver development, production, marketing and license agreements, the relevant receiver manufacturers are responsible for obtaining and maintaining any
permits and similar approvals relating to the sale of the receivers and for complying with all applicable export compliance laws.

In the
international trade of products, most countries follow the Harmonized Commodity and Coding System, also referred to as the Harmonized System (HS), as a basis to calculate customs tariffs. To date, most countries that have allowed the importation of
satellite DARS receivers have used the Harmonized System 85.27 classification, which also applies to conventional analog radios. Thus, customs restrictions and tariff levels may vary from country-to-country or region-to-region.

Regulatory status in Europe

Digital
radio broadcasting services constitute a relatively new commercial sector in Europe; consequently, many European administrations are re-examining their existing regulatory frameworks to accommodate the potential new services. At the pan-European
level, European administrations have established a frequency plan, known as the Maastricht 2002 plan, to facilitate and encourage the introduction of national terrestrial digital radio networks. As described below, one consequence of the terrestrial
frequency plan is the reduction of the available spectrum in Europe for the deployment of satellite radio networks.

In July 1995, the
European Conference of Postal and Telecommunications Administrations (CEPT), met in Wiesbaden, Germany and agreed on a Special Arrangement concerning the introduction and planning of Terrestrial Digital Audio Broadcasting (T-DAB), in the VHF
frequencies (174-230 MHz) and L-band (1452- 1467.5 MHz) in the territories of the signatory Administrations (referred to as the WI-95 arrangement). In the Special Arrangement, each of the signatory administrations received a certain number of
allotments, consisting of T-DAB frequency blocks that were geographically limited and pre-coordinated so as not to interfere with each other, and distributed with a view to forming two complete national coverages per country.



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Subsequently, terrestrial digital radio proponents requested that additional L-band spectrum resources
above 1467.5 MHz be allocated for T-DAB, in addition to the WI-95 plan. In October 2000, the European Radio communications Committee (ERC), the highest body within the CEPT in charge of radio communications matters, authorized seven additional
frequency blocks (approximately 12 MHz) from the satellite-only part of the upper 25 MHz of the L-band to be used for the planning of one further T-DAB coverage in each country. A CEPT Conference took place in June 2002 in Maastricht to develop this
third coverage plan and to transfer former L-band T-DAB allotments from the WI-95 arrangement into the resulting new MA-02 Special Arrangement.

The resulting MA-02 plan leaves 12.5 MHz (1479.5-1492 MHz) of the original WARC-92 allocation for satellite digital audio broadcasting, including ancillary terrestrial components, and our AfriStar satellite has been
coordinated to use this frequency range within its broadcast coverage area, which includes most of Europe. We believe the 12.5 MHz set aside by the MA-02 plan provides sufficient radio-frequency spectrum to execute our business development plans in
Europe, including our contemplated provision of DARS and mobile DARS.

Italy and Switzerland

In May 2006, our Italian subsidiary, WorldSpace Italia S.p.A., received an authorization from the Italian Ministry of Communications to launch a
subscription satellite radio and data service in Italy, utilizing the frequency band 1479.5-1492 MHz for the operation of the corresponding hybrid satellite/terrestrial network. We anticipates launching Europes first satellite digital radio
service to portable and vehicular devices in early 2009, using our AfriStar satellite and a terrestrial gap-filler network to be rolled out in the major Italian cities.

In April 2008, we also received approval from Switzerlands Office Fédéral de la Communication (OFCOM) to operate terrestrial repeaters that will work in conjunction with our AfriStar satellite.

United Kingdom

In May
2001, the Radio Authority issued WorldSpace U.K. Ltd. a Radio Authority Satellite Service License under Part III of the Broadcasting Act 1990, which authorizes WorldSpace U.K. to offer a multi-channel service receivable via custom-built receivers
and carried on the AfriStar satellite. The Radio Authority ceased to exist on December 29, 2003, and its duties were assumed by a new communications regulator, the Office of Communications (Ofcom). Ofcom varied the license in December 2003 to
conform with the requirements of the Communications Act 2003 (CA). The license will remain in effect until surrendered by WorldSpace U.K. or revoked in accordance with the conditions of the license, and requires payment of such fees as Ofcom may
specify.

Ofcom has recently confirmed its plans to auction 40 MHz of L-band spectrum suitable for a range of services, including satellite
radio and mobile TV. The release of 40 MHz of L-band spectrum is part of a wider plan of Ofcom to release around 400 MHz of valuable spectrum, including the spectrum that will be freed-up through the future switch to digital television. The L-band
spectrum will be auctioned in two sub packages, on an application-neutral basis, with associated rights of spectrum trading:



| |  |  | The rights to use the 12.5 MHz allocated in Europe to satellite broadcasting will be auctioned as a single licence, subject to constraints to protect reception of
satellite radio services, such as our own, in neighbouring countries.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The remaining 27.5 MHz will be auctioned as more than one sub-band, to enable the establishment of a competitive environment in the provision of particular types of
service, including the potential for licensees to choose their preferred technology.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We intend to participate in the
L-band auction, which will likely take place during the second quarter of 2008.



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Other European countries:

We are actively pursuing regulatory authorizations to deploy terrestrial repeaters in additional European markets, notably Germany, France and Spain. In
France, the authorities recently approved the ETSI SDR standard for deployment in the L-band allocation for satellite radio.

India

We began offering free-to-air service to India in 2000, and started providing the first subscription digital radio service in India in
2002. We are now in the advanced stages of seeking approval to offer a hybrid digital radio service in India. This service will utilize terrestrial repeaters located in urban and other areas where reception is problematic, in conjunction
with our AsiaStar satellite, in order to develop a new mobile service intended for use in automobiles. Radio services in India are governed by the central government pursuant to the Indian Telegraph Act, 1885 and the Indian Wireless Telegraphy Act,
1933 which, among other powers, give the central government the power to grant licenses to persons establishing, maintaining or working a telegraph apparatus, or even possessing a wireless telegraph apparatus, including radios, within any part of
India. Each successive step in our Indian business strategy entails an increased level of regulation, and involves various regulatory authorities. These include: the Ministry of Information and Broadcasting, which is responsible for policy
formulation; the Department of Telecommunications under the Ministry of Communications and Information Technology, which is responsible for licensing and wireless spectrum management, among others; the Telecom Regulatory Authority of India (TRAI),
an autonomous government entity created under the TRAI Act, 2000, which is charged with regulating the telecommunications sector and providing recommendations to the government; the Wireless Planning & Coordination Committee (WPCC) Wing of
the Ministry of Communications & Information Technology, created under the Government New Telecommunications Policy, 1999, which sets spectrum policy in India; the Ministry of Home Affairs; the Department of Space; and the Standing Advisory
Committee on Radio Frequency Allocation (SACFA). The regulatory aspects of the different stages of our business plan for India, as well as the respective roles of these governmental bodies, are described in more detail below.

Free-to-air services.India does not currently require downlink service/frequency authorizations to provide free-to-air, satellite-only digital
radio services, including ancillary data transmissions. Currently, only Indian companies are authorized to downlink and uplink television channels to and from India. With respect to protection from interference into our L-band frequencies, the
Indian administration has adopted the WARC-92 allocation for BSS (Sound) in its national table of allocations on a co-primary basis with the fixed service. Any potential interference issues are coordinated on a case-by-case basis.

Satellite-based subscription services.We have secured a general business license to carry out various activities including the collection of
revenue. This, in turn, allows us to provide subscription audio services in India. Under the Indian Telegraph Act, 1885 and Indian Wireless Telegraphy Act, 1933, establishing, maintaining or working any telecom equipment or possessing any wireless
equipment, including satellite receivers, uplinking equipment or terrestrial repeaters, requires the approval of the Department of Telecommunications unless the equipment has been issued a general license or has been specifically exempted from the
licensing requirement. Radio receivers have been exempted from specific licensing requirements. We also hold an import license for our receivers.

Hybrid services.For the terrestrial retransmission component of our hybrid digital radio services, we must obtain a spectrum allocation, spectrum and transmitter authorizations and may also be required to
obtain a service license from the Indian government pursuant to the Indian Telegraph Act, 1885, Indian Wireless Telegraph Act, 1933, the National Telecommunication Policy, 1999 and related regulations of the TRAI. We are studying the use of the ETSI
SDR terrestrial waveform for our terrestrial component in each urban/suburban area where the satellite signal will be retransmitted. The WPCC process is to allocate terrestrial frequencies after assessing the spectrum requirement and utilization in
each city. We expect that the WPCC will carry out this exercise in advance of issuing a full wireless operating license, and in parallel with the separate process of obtaining a service license.



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The transmitter authorization, which is under the authority of SACFA, covers the transmitter equipment
inclusive of antenna, RF, IF and Baseband. All radio transmitters require SACFA and WPCC clearance, which is issued by the WPCC based upon the equipment specifications. The transmitter authorization is also required for importing equipment into
India, as is a Telecommunications Engineering Center certificate. The manufacturers of our receivers are contractually required to obtain all relevant regulatory authorizations.

In addition to the SACFA and WPCC licenses described above, the terrestrial retransmission component may also require a service license and other related
authorization from the Ministry of Information and Broadcasting to operate a digital multiplex of channels. At the moment, the Ministry does not have regulations governing service authorizations for hybrid DARS.

Pending DARS deliberations. In response to the gap described above in the regulations of the Ministry of Information and Broadcasting, TRAI
issued a consultation paper in December 2004 and on June 27, 2005 issued a recommendation paper to the Ministry on appropriate terms and conditions for satellite DARS licensees. As we are currently the only DARS provider in India, WorldSpace
India has been participating in the governments deliberation process regarding the DARS policy.

In its recommendation paper, TRAI
recommended that licenses for DARS be granted for periods of 10 years. Licenses would only be granted to Indian subsidiaries. TRAI recommended that no licensing fee be imposed, unless the number of license applications exceeds the available spectrum
space. Instead, satellite DARS providers that are permitted to use terrestrial repeaters would be subject to a revenue share of 4% of gross earnings generated in India. TRAI also recommended that 100% foreign ownership be permitted in Indian DARS
licenses, including terrestrial repeater licensees. The Indian government may or may not accept the TRAI recommendations. Even if the government accepts the TRAI recommendations, it can be selective in accepting the recommendations and may accept
them in part.

When a regulatory regime is established, WorldSpace may be required to obtain approval from the WPCC, SACFA, the Ministry of
Home Affairs, the Department of Space or other government bodies. WorldSpace may also be required to partner with a local entity to provide service. Although TRAIs recommendations for DARS do not include foreign ownership restrictions, the
laws governing most other telecommunications and broadcasting services in India, including the Foreign Exchange Management Act, 1999, do include foreign ownership restrictions. We anticipate that WorldSpace will be able to continue providing service
in India in some fashion, either through its wholly-owned subsidiary, a joint venture with a locally-owned service provider, or some other arrangement.

China

Our wholly owned subsidiary, WorldSpace (China), Information Technology, Ltd. has entered into
a memoranda of understanding with several third-party providers of content with respect to possible cooperation agreements. In addition, WorldSpace China intends, through local Chinese media entities or alliances with local Chinese media entities,
to provide services to local radio broadcasters and other media groups who hold appropriate licenses granted by SARFT to engage in radio broadcast and television programming business in China. While we are not yet providing commercial DARS service
in China and the path to such service is not clear, we have established the necessary satellite infrastructure that will allow us, through cooperation with local China media entities, to begin providing service, if we receive the necessary
regulatory approvals.

The telecommunications industry in China is subject to extensive government regulation. The Ministry of Information
Industry (MII) is the primary agency of the Chinese government for regulating the telecommunications industry in China. As such, MII is responsible for, among other things: formulating and enforcing telecommunications industry policies and
regulations; establishing technical standards; granting telecommunications services licenses; supervising the operations and quality of service of telecommunications operators; allocating and administering telecommunications resources, such as
spectrum and telephone numbers; and, together with other relevant government agencies, formulating tariff standards.



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Currently, a national telecommunications law is in the process of being drafted. If and when the
telecommunications law is adopted, it is expected to become the basic telecommunications statute and provide a new regulatory framework for the telecommunications industry in China. The Telecommunications Regulations, effective as of
September 25, 2000, were promulgated by the State Council, and provide the primary regulatory framework for Chinas telecommunications industry until finalization and adoption of the new telecommunications law. The Telecommunications
Regulations primarily address: entry into the telecommunications industry; network interconnection; telecommunications resource allocation; tariffs; and service standards.

The Telecommunications Regulations distinguish between basic and value-added telecommunications services, which are subject to different licensing
requirements. According to the Catalog of Telecommunications Services, promulgated by the MII and made effective as of April 1, 2003, satellite communications services are categorized as basic telecommunications services. All operators of
telecommunications businesses in China must obtain appropriate licenses or permits. An operator of a basic telecommunications business is required to obtain certain authorizations, such as a license for providing VSAT service, a license for leasing
a satellite transmitter and a frequency approval, in order to provide such specific telecommunications services. Further, the Administrative Regulations on Foreign-Invested Telecommunications Enterprises, promulgated by the State Council and
made effective as of January 1, 2002, provide that the foreign equity ownership in a basic telecommunications service provider must not exceed 49%. However, foreign investment in basic telecommunications services, including but not limited to
satellite communications services, is highly restricted and regulated.

Currently spectrum utilization by our AsiaStar satellite for
broadcasting services to individual households in China must be implemented through a local satellite service provider with appropriate license(s) granted by the MII. In 2000, we entered into several agreements, including an exclusive agency
agreement, with China Telecommunications Broadcast Satellite Corporation, through which, after a restructuring in 2001, ChinaSat (acting, as appropriate, through its parent company, subsidiary or subsidiaries or affiliated company), became the sole
agent to lease our AsiaStar satellite and develop our satellite leasing business in China. ChinaSat is one of six state-owned telecommunications operators in China and is the largest satellite operator. All existing licenses/permits regarding our
satellite leasing business in China were granted to ChinaSat by the MII, including a basic telecommunications business license, and an operation license for leasing a satellite transmitter. According to the agency agreement, ChinaSat assumes full
responsibility for obtaining the requisite government approvals, licenses and permits (if any) to ensure the legality of our satellite leasing business. In 2000, China Telecommunications Broadcast Satellite Corporation, which became a wholly-owned
subsidiary of China Satellite Corporation after a restructuring in 2001, obtained MIIs approval for its one year commercial testing of satellite-based information service using the L-band of AsiaStar. In October 2004, ChinaSat obtained the
MIIs approval to establish an L-band satellite digital audio broadcasting transmission system and uplink station subject to annual review by the MII.

Foreign investment in value-added telecommunications services, including but not limited to Internet data center and Internet access services, electronic data interchange services and information transmission
services, is also subject to regulatory restrictions. In connection with Chinas entry into the World Trade Organization (WTO), the threshold of the foreign investment in a company, which is engaged in value-added telecommunications services,
can be up to 50%. It is, however, not permitted in China to operate value-added telecommunications services by either a foreign company or its wholly foreign-owned enterprise. Under such a WTO commitment, we, through our wholly-owned subsidiary,
have entered into memoranda of understanding with several third-party providers of content with respect to possible cooperation agreements. WorldSpace China is validly existing in China and holds a business license to engage in, among others,
researching and developing technologies for electronic equipment and multimedia information services, providing e-business information services, and providing technology services, consultations and training concerning its own products and sale of
its own products.



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The radio and television industry in China is highly regulated by the Chinese government. The SARFT,
along with the Ministry of Culture and the Information Office of the State Council regulate and censor the information which can be provided via radio, film and television. Foreign investors are currently prohibited from operating radio and
television stations, radio and television transmission networks comprising transmission stations, relaying stations, satellite up-link stations, satellite receiving stations, microwave stations, monitoring stations and cable broadcasting and
television transmission networks as well as publishing and playing broadcast and television programs. However, as of November 28, 2004, foreign investors are allowed, subject to approval by the SARFT and the Ministry of Commerce, to cooperate
with local partners in China to produce television and radio programs, provided that the local Chinese partners hold a majority of the interests.

Although beginning in 2004, the regulatory framework for the radio and television industry in China has become more deregulated and transparent, restrictions remain tight on foreign investment in the radio and television fields in China and
censorship procedures remain relatively restrictive with respect to content that is to be broadcast in China. The SARFT has indicated its intention to further liberalize this industry and strengthen the development of the digital television and
broadcasting service, however, it is uncertain as to when and how these restrictions will be liberalized. Under the current Chinese regulatory regime, we are neither allowed to hold, or to establish any foreign-invested company with Chinese entities
to hold, a license or permit with respect to the broadcasting business, nor are we currently engaged in the radio or television broadcasting business in China. If the Chinese government further opens the radio and television industries and grants
licenses and permits to foreign investors or foreign-invested companies, we intend to implement a broadcast service using our AsiaStar satellite.

In China, a permit from the Ministry of Commerce or its local counterparts is required for any technology licensing agreements between foreign companies and the Chinese licensees for technology which is subject to restrictions on
importation under Chinese laws. With regard to technology that may be freely imported, Chinese licensees are required to register the technology licensing agreements with the Ministry of Commerce or its local counterparts and obtain a registration
certificate. If the licensed technology is protected by a Chinese patent, the parties to the technology licensing agreement are required to file the agreement with the State Intellectual Property Office (SIPO) or the local patent offices authorized
by SIPO. Chinese licensees are also required to present the permit or the registration certificate or, if the licensed technology is protected by a Chinese patent, the filing documents, as the case may be, to the Chinese foreign currency control
departments, local banks, taxation departments and customs when they make payment of the royalties to us. We have entered into technology license agreements with several Chinese companies to manufacture the receivers necessary for Chinese customers
to listen to our programming upon the successful launch of our services in China.

Singapore

In February 2000, The Singapore Broadcasting Authority issued an International Satellite Radio Service License to WorldSpace Asia which authorizes
WorldSpace to downlink its DARS service into Singapore. The license expired on January 31, 2005, but has been renewed for an additional 5 year term.

Executive Officers of the Company

Below please find certain information concerning each of our executive officers.



|                     |  |     |  |                                                        
|-------------------- |  | --- |  | -------------------------------------------------------
|Name                 |  | Age |  | Position(s)                                            
|Noah A. Samara       |  | 51  |  | Chairman, Chief Executive Officer and President        
|Sridhar Ganesan      |  | 45  |  | Executive Vice PresidentChief Financial Officer       
|Gregory B. Armstrong |  | 61  |  | Co-Chief Operating Officer                             
|Alexander P. Brown   |  | 45  |  | Co-Chief Operating Officer                             
|Donald J. Frickel    |  | 65  |  | Executive Vice President, General Counsel and Secretary



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Noah A. Samara has served as the Chairman, Chief Executive Officer and President of WorldSpace and its
predecessors since inception. Mr. Samara has been involved in the development of both geostationary and low earth orbit (LEO) satellite systems since the mid-1980s. Mr. Samaras early career was in satellite telecommunications, first
with Geostar Corporation and later with the Washington law firm of Venable, Baetjer, Howard & Civiletti.

Sridhar Ganesan has
served as Executive Vice PresidentChief Financial Officer of WorldSpace and its predecessors since October 2004. Mr. Ganesan joined the WorldSpace group in September 2001 as Senior Vice President, Corporate Strategy &
Development. Prior to joining the WorldSpace group, Mr. Ganesan was the founder and Chief Executive officer of a US-based applications services provider, Skymach Corporation, from 2000 to 2001. Prior to that, Mr. Ganesan worked at Lockheed
Martin Global Telecommunication in business development positions. Mr. Ganesan has more than twenty years of experience in business development, implementation of international businesses and projects and marketing and sales in the satellite,
telecommunication, Internet, information technology and media areas.

Gregory B. Armstrong has served as Co-Chief Operating Officer of
WorldSpace since May 2006. Prior to joining WorldSpace, Mr. Armstrong had been Executive Vice President and Chief Operating Officer of Jupiter Telecommunications Co., Ltd., Japans largest multiple system telecommunications operator based
on the number of subscribers, since January 2002. As Executive Vice President he was responsible for franchise operations, sales and marketing, AIT & billing, customer service, operations, engineering/construction, new technologies and
digital product development. Prior to joining Jupiter, he held numerous positions with Liberty Media, a holding company owning interests in electronic retailing, media, communications and entertainment businesses, and its affiliated companies,
including Executive Vice President and Chief Operating Officer of On Command Corporation, one of the largest providers of in-room entertainment for hotels; Managing Director for Latin America at Liberty Media International; Senior Vice President of
Cable Operations at Tele-Communications International, Inc.; and Vice President of UK Operations of Viacom Worldwide.

Alexander P. Brown
has served as Co-Chief Operating Officer of WorldSpace since May 2006. Mr. Brown has held international leadership roles with a variety of major content companies in the media industry. Prior to joining WorldSpace, he had been President and CEO
of CNBC Asia Pacific, a cable television network specializing in business news, since May 2002. From January through November 2001, Mr. Brown was President and CEO of Virtual Spectator, Inc., a developer of on-line software for sports
applications. From 1996 until 2000 Mr. Brown was managing director of ESPN Star Sports, a joint venture between ESPN, a sports and entertainment network, and Star TV. From February 1992 until 1996, Mr. Brown was Managing Director of ESPN
Asia, where he launched and established ESPNs Asian operations.

Donald J. Frickel has served as Executive Vice President, General
Counsel and Secretary of WorldSpace and its predecessors since January 1999. Mr. Frickel joined the WorldSpace group in March 1996 as Senior Vice President, Legal & Regulatory Affairs. Prior to joining the WorldSpace group,
Mr. Frickel served as Associate General Counsel for Mobil Oil Corporation.

Available Information

Copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to the reports are
available free of charge through our Internet website, http://www.worldspace.com. We post each of these reports on the website as soon as reasonably practicable after the report is filed with the Securities and Exchange Commission. The information
on our website is not incorporated into this Form 10-K.



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|ITEM 1A. | RISK FACTORS
|-------- | ------------

Our business, prospects, financial
condition, operating results or cash flows may be materially and adversely affected by the following risks, or other risks and uncertainties that we have not yet identified or currently consider to be immaterial.

RISKS RELATED TO OUR BUSINESS

We have faced in the past, and
may face in the future, challenges and constraints in obtaining financing.

We will need to raise additional financing to continue
our operations, including the launch of service in Europe and the Middle East, the launch of a mobile service in India and possibly the launch of a service in China (if we are able to construct a workable arrangement there that is approved by the
Chinese government). We have faced, and continue to face, severe challenges and constraints in financing our development and operations. For several years we experienced severe working capital constraints and incurred substantial delays in
implementing our business plan largely as a result of our inability to raise financing. For example, prior to 2005, financing shortfalls forced us to limit our Indian marketing effort and the roll-out of our services in India. Recently, the
potential exercise of an optional redemption right by our convertible noteholders presented cash flow constraints and made fundraising more difficult. In 2007, we entered into an agreement with the convertible note holders to restructure the notes
and eliminate the optional redemption right. As part of the restructuring we used $50 million of our current cash reserves to redeem a portion of the outstanding notes and issued new senior secured notes, amended and restated convertible notes and
warrants in exchange for the remaining principal amount of the convertible notes. The senior secured notes and amended and restated convertible notes contain mandatory prepayment provisions and limitations on the amounts of additional secured
indebtedness we may incur, including a $27.5 million prepayment requirement for May 31, 2008, of which we repaid $9.8 million plus interest in January 2008 and the remaining $17.7 million plus interest must be paid on May 31, 2008. Going
forward, we will continue to need significant amounts of cash to fund our operations, capital expenditures, administrative and overhead costs, and other contractual obligations as well as to pay down existing and future indebtedness. See
Managements Discussion and Analysis of Financial Condition and Results of OperationsFuture Operating Liquidity and Capital Resource Requirements and Capital Expenditures. This will require us to continue to
depend on the availability of outside financing. If we are not able to obtain additional financing, we would be forced to curtail, or even cease, operations. We cannot give any assurance that, either in the near-term or the long-term, we will be
able to raise the required financing on favorable terms or at all, or that we will not continue to experience periods where our operations are severally restricted by our limited funding.

Our business has experienced significant losses and we may not be able to generate sufficient revenue to fund our business or to become profitable.

Through the end of December 2007, we have spent approximately $1.7 billion in connection with the development and launch of our
business. To date, the build-out of our infrastructure and our day-to-day operations have been financed substantially entirely by our financing activities, and we have had limited revenue from operations. As of December 31, 2007, we had
incurred aggregate losses of approximately $2.5 billion. We plan to dedicate significant resources to our current business strategy, including launch of service in Europe and, launch of a mobile service in India. If we are able to construct a
workable commercial arrangement in China that will pass regulatory approval, we expect we will make similar expenditures there. In addition, to the extent we have positive annual earnings before interest, taxes, depreciation and amortization
(EBITDA), we are required to make payments of 10% of our EBITDA, if any, to Stonehouse Limited (Stonehouse) for each annual period through December 31, 2015 under a royalty agreement with Stonehouse Capital Ltd.
(Stonehouse). See Note C to our Consolidated Financial Statements contained in Item 8 herein. We anticipate that, in the near term, we will continue to rely on the proceeds from financings to sustain our operations. In the future,
we will need to generate significant revenue in order to achieve a profit from operations, and we can offer no assurance that we will ever generate such levels of revenue or become profitable from operations.



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If we do not achieve sufficient demand for our services or are unable to retain our customers, we may not generate
sufficient revenues for us to become profitable.

We cannot estimate with any degree of certainty the potential market demand in our
target markets for a subscription-based digital satellite radio service or the degree to which our service will meet such market demand. We will achieve or fail to gain market acceptance depending upon many factors, some of which are not within our
control, including:



| |  |  | the extent to which, in each of our target markets, car manufacturers integrate our satellite receivers into their new automobiles (see immediately following risk
factor);
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the availability of regulatory authorizations for repeater networks in the markets we are targeting (see following risk factors);
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | whether we can offer sufficient high-quality programming consistent with our potential customers preferences;
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | the willingness of consumers, on a mass-market basis, to pay subscription fees to obtain satellite radio broadcasts;
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | the extent to which we can limit customer turnover (or churn), either as a result of customers electing voluntarily to discontinue our service
(including customers who discontinue following rate increases at the end of any promotion) or as a result of customers being discontinued due to nonpayment;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the cost, availability and consumer acceptance of receivers capable of receiving our broadcasts;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | our marketing and pricing strategies, as well as those of our receiver manufacturers;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | competition from other media and entertainment in our target markets;
| | - |  | ---------------------------------------------------------------------



| |  |  | the development of alternative technologies or services; and
| | - |  | ------------------------------------------------------------



| |  |  | the general economic, political and social conditions in our target markets.
| | - |  | ----------------------------------------------------------------------------

If for any reason we cannot achieve a rapid and significant level of consumer acceptance for our service, or we are unable to retain sufficient
percentages of our customers (including promotion subscribers), we may not generate sufficient revenues for us to become profitable.

Our mobile
service business model is reliant on car manufacturers integration of satellite receivers into their new automobiles.

We
intend to target our mobile service offering on consumers who listen to radio in their automobiles and, in order to be effective with this strategy, we need major car manufacturers to agree to integrate our receivers into their new automobiles (OEM
distribution), as Fiat Group Automobiles has agreed to do in Italy commencing in the latter part of 2009. Although we are in discussions with several car manufacturers with distribution in Europe, the Middle East and India, there is no assurance
that these manufacturers will agree to OEM distribution of our receivers or, even if they agree to do so, will aggressively implement such agreement in a significant portion of their production in any given market.

We may incur significant delays and expense in the development and installation of terrestrial repeater transmitters, and we cannot be certain that the systems
will function properly.

Our planned introduction of a mobile service in Italy and other European countries, India, Bahrain and the
UAE requires the installation of a network of terrestrial repeating transmitters (terrestrial repeaters), which serve as gap fillers to avoid signal disruption in the markets in which we plan to offer a mobile service. The eventual roll-out of our
mobile services in China or elsewhere would also require the installation of networks of terrestrial repeaters.



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We intend to install terrestrial repeaters to rebroadcast our satellite signals in various cities in
Italy as we prepare to roll out our mobile services. We have developed new technology for the terrestrial repeaters in cooperation with the Sodielec group and have commenced taking repeater deliveries in Italy. As our current receivers are not
compatible with the terrestrial repeaters, we will also need to offer a next generation of receivers that can receive these rebroadcasts as well as broadcasts directly from our satellites. Although our initial tests in Milan have been positive,
until we have installed and tested a substantial portion of the new equipment, we can not be certain that our mobile DARS will function in accordance with expectations using the terrestrial repeaters. In addition, some areas may still experience
dead zones and we may incur additional costs to install terrestrial repeaters to cover these areas. We also may experience significant delays and expense in the implementation of our current plan to install terrestrial repeaters in the
event that third-parties with existing terrestrial repeater networks, including radio broadcasters, upon whom we may be relying to secure optimal sites and install our terrestrial repeater network, do not cooperate with us or do not act in a timely
and effective manner.

We may also experience signal interference with our new receivers due to terrestrial transmissions in portions of
the L-band spectrum. When we identify a signal that is interfering with our terrestrial rebroadcasts, we will seek to negotiate a solution with the local operator of the transmitter. However, we may not always be able to reach a timely agreement
through the relevant government authorities responsible for frequency management that will allow our customers to receive our service without any interference.

We may be unable to obtain the authorizations required to operate our terrestrial repeater networks in key markets in Europe, the Middle East and India or to retain the necessary authorizations to operate a subscription service.

While we believe our regulatory franchise positions us favorably to become a provider of mobile DARS in Europe, and while we have
already obtained authorization from the Italian and Swiss governments to install our repeater networks and to commence DARS in Italy and Switzerland, we will need to obtain additional spectrum allocation, transmitter and service licenses from local
regulatory authorities in other countries to develop a terrestrial repeater network and to operate a mobile DARS subscription service. In the United Kingdom, for example, the regulatory authority Ofcom has decided to auction in the second quarter of
2008 the part of the L-band we need to provide our service. Depending upon the number of additional bidders and the price they may be willing to pay, there is no assurance that we will prevail in the auction. In addition, we must coordinate the use
of our allocated L-band spectrum in Europe with providers of Terrestrial Digital Audio Broadcasting, or T-DAB, to avoid any instances of harmful inter-system interference. Any failure to obtain required licenses or authorizations to develop a
terrestrial repeater network and operate a mobile DARS subscription service in European countries other than Italy and Switzerland could adversely affect our ability to conduct business in the region.

The Indian government does not currently have a regulatory framework or written policy governing satellite radio services, and we are presently the only
satellite radio services provider in the country. We have received the government authorizations that are presently required to provide our existing (non-mobile) subscription service and to import our current receivers. However, in order to deploy
complementary terrestrial repeaters in India, we will be required to obtain spectrum allocation and transmitter authorizations and may also be required to obtain service licenses. In addition, the Indian government may require that we obtain
additional authorizations or licenses or may impose restrictions on our business. Moreover, in the recommendation paper issued on June 27, 2005 the Telecom Regulatory Authority of India (TRAI) recommended to the Indian government that a revenue
share fee of 4% of gross earnings generated in India be imposed if the satellite broadcaster uses terrestrial repeaters. Further, the Indian government is planning to issue regulations governing DARS, and such regulations may require us to obtain
additional authorizations or licenses or impose restrictions on our business. In addition, TRAI has also recommended that the Indian government regulate content of DARS providers. Any failure to obtain any required licenses or further authorizations
or any material changes in our current authorizations or imposition of any additional restrictions could adversely affect our ability to carry out our business plan in India.



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Moreover, we are planning to introduce a new generation of receiver products incorporating new technology. We expect some increased risk during the period
when our manufacturing partners begin commercial manufacture of receiver products incorporating the new technology.

We may incur significant delays
and expense in the build out of additional elements of infrastructure needed to launch our mobile service in Italy.

In addition to
the installation of a terrestrial repeater network in Italy for the launch of our mobile service there, we propose to build, test and operate a production studio in Milan and a broadcast operations center with a new uplink facility in Europe, which
we anticipate will serve a number of markets in Europe, beginning with Italy. Delays in completing the studios or the broadcast operations center could delay the launch of our mobile service in Italy.

We may experience delays and incur significant costs in the development and production of our new generation of receivers.

We have commenced a new development project for our European technology (SDR) mobile receivers and may experience delays and significant costs in the
project. Because the market for our receivers is still limited, the financial incentive for manufacturers to produce significant quantities of our receivers at an attractive price is similarly limited. Our business plan depends on the reduction of
the cost of our receivers in order to make them available to consumers at an attractive price. The new mobile receivers will initially cost more than current models and, to encourage sales, we plan to subsidize the after-market version of the
receivers in Italy and possibly other markets as well. We already subsidize our non-mobile receivers in India. We expect that in the near term future, we will need to continue to subsidize the cost of our receivers by offering them to distributors
at a price below their cost to us. If we cannot reduce such subsidies in the future, our earnings and results of operations will be negatively affected.

Our mobile receivers will eventually replace our current receivers, which may result in increased costs, higher subscriber turnover, or lower receiver sales.

In connection with the introduction of our mobile DARS and the introduction of our next generation of receivers, we intend to begin broadcasting our
signal in a modified waveform. Our current receivers will not be able to decode the modified waveform signal. While we are considering a plan to broadcast in both waveforms for a period of time in markets with significant numbers of subscribers,
even if we decide to implement such a plan we will eventually cease broadcasting in the older waveform. We will have to transition our subscribers from the older receivers to our next generation receivers. Because our next generation of receivers
will, when introduced, be more expensive than our existing receivers, we will face increased costs to the extent we decide to subsidize the transition of our current subscribers to our next generation receivers. In addition, new customers may not be
willing to pay for the higher priced new receivers. We may also experience higher subscriber turnover if existing subscribers decide not to purchase a new receiver.

High subscriber acquisition costs could adversely affect our profitability.

We expect that
the introduction of our mobile service will increase subscriber acquisition costs due to increased subsidies and higher marketing and promotional expenses. The Italy mobile introduction may require aggressive advertising, promotions or other
marketing efforts to promote faster subscriber growth or to respond to competition, or are otherwise advisable. If these subscriber acquisition costs become sufficiently high they could materially adversely affect our financial performance.

We may not be able to compete effectively against conventional radio stations or other potential providers of consumer audio services.

In seeking market acceptance, we will encounter competition for both listeners and future subscription and advertising revenue from
many sources, including traditional AM/FM radio, shortwave radio, Internet based



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audio providers, satellite television and cable and digital music players. We could also face competition from Terrestrial Digital Radio services, which are
offered in several markets in Europe. We may also face competition from satellite Digital Multimedia Broadcasting, or DMB, which is directed primarily at the mobile phone market but can also provide in-vehicle reception, although DMB
consists primarily of delivering TV programs and multimedia content. See BusinessCompetition.

Unlike our service,
traditional AM/FM radio already has a well-established market presence for its services and generally offers free-to-air broadcast reception supported by commercial advertising, rather than by a subscription fee. Also, many radio stations offer
information programming of a local nature, such as news and sports reports, which we may not be able to offer as effectively as local radio stations. To the extent that consumers place a high value on these features of traditional AM/FM radio, we
are at a competitive disadvantage to the traditional providers of audio entertainment services.

In addition, although potential
competition in our target markets with other satellite broadcast radio services is limited by regulatory and other restrictions, such competition could emerge. While all of our target countries have selected the L-band frequency allocation for
satellite radio, India, Pakistan, Mexico and Thailand have also selected the S Band as an additional allocation within their respective territories. If an alternative satellite radio broadcast system that is comparable or superior to our system
were to be introduced in our target markets, or if any competitor were to begin offering another mobile DARS before we do, we could experience competitive pressure or be at a competitive disadvantage.

Our failure to acquire new content or maintain our current content may make our service less desirable to subscribers.

Third-party content is an important part of our service, and if we are unable to obtain or retain third-party content and brands at reasonable costs, we
will not be able to carry out our business plan successfully. We may face increased costs in the future with respect to third-party content, particularly in Europe where popular content such as sports programming is in high demand and expensive. We
currently offer many channels of third-party content on our system, and plan to offer additional channels in the future. We also plan to add additional channels of third-party content in any new markets into which we expand our service, including
Europe and the Middle East, for example, in order to tailor our service to such markets. We may not be able to obtain or retain the third-party content we need at all or within the costs contemplated by our business plan.

In addition, we may not be able to retain the third-party brand name content offered on our channels. Broadcasters of brand name content can choose one
or more of several alternative methods of reaching our coverage area, such as television, radio and the Internet. If we do not develop and maintain a subscriber base that is an attractive audience for some of our brand name content broadcasters,
they may not wish to continue broadcasting through our service. Brand name broadcasters may also demand greater compensation than we may be willing or able to pay. If we lose brand name content and are unable to replace it with similar programming,
our ability to deliver diverse programming will suffer and our service may become less desirable to our current and future subscribers.

We are
dependent on key suppliers and distributors and a failure to maintain and continue these relationships could adversely impact our business.

We have a number of key relationships with suppliers, distributors and other parties, the loss of which would have a material, adverse effect on our business. Our current receivers are manufactured by a limited number of third-party vendors
and our mobile receiver development program is contracted with a single, albeit DARS experienced, vendor. In India, one manufacturer accounted for all of the WorldSpace receivers sold in 2006 and 2007. While we expect other manufacturers to initiate
and expand production for the European, Middle East and Indian markets in the next few years, we expect receiver supply to remain dominated by a handful of manufacturers. We anticipate a similar dynamic in China if our Chinese business opportunity
becomes a reality.



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In addition, key component parts of our DARS system are also developed and supplied by third-party
vendors with which we have established working relationships. For example, ST Microelectronics is currently developing next-generation chipsets for our mobile receivers and working with Fraunhofer and Delphi on the integration of their chipsets into
our next generation of receivers. We are dependent on Telecom Italia to install and operate our repeater network in Italy and Singapore Telecom to operate our primary uplink station for our AsiaStar satellite. We are dependent on ChinaSat, as our
agent, for any operation of DARS in China.

If we are unable to maintain such established relationships, develop comparable relationships
with new parties, or should any of our key relationships fail to work effectively, we could experience, among other problems, delays in the production of receivers, interruption in the broadcast of our services or loss of our ability to operate in a
particular market.

The launch of mobile services will require significantly increased expenditures and management resources that will strain our
management, operational and financial infrastructure.

We expect to experience significant and rapid growth in the scope and
complexity of our business as we plan for and launch mobile services in Europe, the Middle East and India. We do not currently employ sufficient staff to handle all of our expected operational efforts in Europe and the Middle East, in particular,
The same is true for China should we develop a path to a commercial business there. Although we have hired experienced executives in this area, we must hire additional employees as we expand the commercial operations of our service.

In addition, our growth may strain our management and operational and financial infrastructure. In particular, our growth may make it more difficult for
us to:



| |  |  | develop, implement and improve our management, operational and financial controls and maintain adequate reporting systems and procedures;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | recruit, hire and train sufficient skilled personnel to perform all of the functions necessary to provide our service effectively;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | manage our distribution relationships, especially with car manufacturers
| | - |  | ------------------------------------------------------------------------



| |  |  | manage our subscriber base and business; or
| | - |  | -------------------------------------------



| |  |  | maintain subscriber and broadcaster satisfaction.
| | - |  | -------------------------------------------------

The improvements and increased staff required to manage our growth will require us to make significant expenditures and allocate valuable management resources. If we fail to manage our growth effectively, our
operating performance will suffer and we could lose part of our subscriber and broadcaster base.

Given the lack of mandatory dispute resolution or
enforcement mechanisms at the International Telecommunication Union, there is no guarantee that the frequencies used by AfriStar and AsiaStar will be protected from interference from non-conforming uses.

Even though the AfriStar-1 and AsiaStar frequency assignments have completed coordination and notification procedures under the International
Telecommunication Union (ITU) and therefore enjoy priority over other uses, there is no guarantee that the use of those frequencies will be protected from interference from non-conforming uses by other administrations. Further, while we have filed a
coordination request to the ITU to accommodate the technical operating parameters of AfriStar-2, and believe that we should be successful in coordinating with the other administrations in the service area of AfriStar-2, particularly given the
priority of AfriStar-1, there is no guarantee that we will be able to address all interference issues regarding AfriStar-2. In the event that harmful interference is caused by a non-conforming frequency assignment or we are unable to address all
coordination concerns regarding AfriStar-2, the ITU procedures described in Article 8 and Article 15 of the Radio Regulations would apply. While these procedures set forth the good faith obligations to resolve any such interference, they do not
contain mandatory dispute resolution or enforcement mechanisms.



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Rather, the Radio Regulations dispute resolution procedures are based on the willingness of the
parties concerned to reach a mutually acceptable agreement. Neither the ITU specifically, nor international law generally, provides clear remedies if this voluntary process fails. Since the frequency band that can be used for Broadcasting-Satellite
Service (Sound) is limited to 25 MHz (1,4671,492 MHz) and our two satellites combined occupy virtually all of that spectrum, it may not be possible to eliminate interference by changing frequencies in the area(s) affected.

Our satellites have a limited life and may fail in orbit.

Satellites utilize highly complex technology and, accordingly, are subject to in-orbit failures after they have been successfully placed into operation. Our AfriStar-1 satellite was launched in October 1998, and our
AsiaStar satellite was launched in March 2000. Our satellites are designed to operate reliably in orbit for not less than 12 years after launch. After this period, our satellites performance in delivering our service may deteriorate. Each
satellite has an orbital maneuver life of 15 years, which means that each satellite has been designed to maintain its assigned orbital position (within 0.1 degrees) for 15 years. The useful life of our satellites may vary from our estimate. If one
of our satellites were to fail or suffer significant performance degradation prematurely and unexpectedly, it would cause interruption in the continuity of our service or impair the quality of our service.

A number of factors could decrease the useful lives of our in-orbit satellites, including:



| |  |  | expected gradual environmental degradation of solar panels;
| | - |  | -----------------------------------------------------------



| |  |  | defects in the quality of construction;
| | - |  | ---------------------------------------



| |  |  | failure of satellite components or systems that are not protected by back-up units;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | loss of the on-board station-keeping system that maintains the geosynchronous position;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | unexpected increase in use of fuel; and
| | - |  | ---------------------------------------



| |  |  | in rare cases, damage or destruction by electrostatic storms or collisions with other objects in space.
| | - |  | -------------------------------------------------------------------------------------------------------

Our AfriStar satellite has developed a defect in its solar panels. The panels are collecting less power than intended, and we have adapted our satellite
operating procedures accordingly. We have developed, in consultation with Astrium, operational procedures that should extend the useful life of the satellite through careful management of power generated by the solar arrays. Such procedures, which
are relative to this solar array issue invoked during the critical eclipse periods, would permit the temporary reduction of the power radiated by one or more of its beams with a resulting reduction of the broadcast coverage area of such beam(s).
Certain of our target markets served by the AfriStar satellite could be affected by the performance of our AfriStar satellite.

Our insurance may not
cover all risks of operating our satellites, and we may elect not to renew in-orbit insurance for one or both of out in-orbit satellites.

We currently maintain in-orbit insurance coverage for our AsiaStar and AfriStar-1 satellites, which would reimburse us for a portion of the insured satellite value in the event of a partial loss or for the full insured value in the event of
a total loss, subject to stipulated deductibles and exclusions. The in-orbit policy for AsiaStar, which was renewed in March 2008, is for one year. The current in-orbit policy for AfriStar-1, also a one-year policy, expires in June 2008. We
anticipate that in-orbit insurance policies will continue to be on a year-to-year basis, which has become standard in the industry. In-orbit insurance for a satellite will not protect against all losses to a satellite. Our current AsiaStar and
AfriStar-1 policies contain specified exclusions, deductibles and material change limitations. Any determination we make year to year as to whether to maintain in-orbit insurance coverage with respect to either satellite will depend on a number of
factors, including the availability of insurance in the market and the cost of available insurance. We will also consider the exclusions to coverage, if any, required by insurers and the other terms and conditions upon which the insurance is
available. Even if we seek to obtain replacement insurance in the future, we may not be able to obtain this insurance on reasonable terms and conditions. Moreover, this insurance coverage may be costly, if available at all.



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Our on-ground satellites may be damaged or destroyed during launch.

In addition to AfriStar and AsiaStar, we have two additional satellites, one fully assembled satellite (AfriStar-2) and another satellite (F4) for which
the long lead parts have been procured and partially assembled, which are currently maintained in storage in Toulouse, France and Stevenage, U.K. We have accepted risk of loss for these satellites and maintain ground insurance for both these
satellites. The AfriStar-2 satellite, which could be used to replace either AfriStar or AsiaStar, is currently planned for modification and launch to provide additional capacity for our DARS in Europe. In such case and depending upon when we would
make that decision, it is possible that the F4 satellite, if fully assembled (the longer we wait to assemble the parts into a complete satellite, the more likely it is that the availability of newer satellite technology will influence us to decide
to procure a wholly new satellite instead of completing F4), would be maintained as an on-ground spare satellite that could be launched in the event that one of our other three satellites experienced an in-orbit failure. The launch of a satellite is
subject to significant risks, including launch failure, satellite destruction or damage during launch or failure to achieve proper orbital placement. Launch failure rates vary depending on the particular launch vehicle and contractor, which have not
yet been determined with respect to our AfriStar-2 and F4 satellites. If the launch of either our AfriStar-2, F4 or a new satellite were to fail, result in destruction or material damage during launch or fail to achieve proper orbital placement, we
would suffer, in addition to any cost relating to building or procuring a replacement satellite and launching such satellite that is not covered by insurance, a significant disruption in the development of the relevant portion of our business as
well as a significant impact on our earnings as a result of the delay in revenue producing activities.

Technological innovation in the satellite
industry and the audio entertainment industry is subject to rapid change, and we will need to develop and introduce on a timely basis new technology that addresses the changing preferences of our customers.

The satellite industry and the audio entertainment industry are both characterized by rapid technological change, frequent new product innovation, changes
in customer requirements and expectations and evolving industry standards. Our success will depend in part on our ability to develop and introduce on a timely basis new technology that keeps pace with technological developments and emerging industry
standards, and addresses the increasingly sophisticated and changing needs of our customers. We also depend on technologies being developed by third parties to implement key aspects of our system. The development of new technologically advanced
services and equipment is a complex and uncertain process requiring capital commitments and high levels of innovation, as well as the accurate anticipation of technological and market trends. Our failure to keep pace with, anticipate and respond
adequately to changes in technology or consumer preferences could have a material, adverse impact on our business, financial condition and results of operation.

Future royalty and other contingent payments could materially limit our available working capital and negatively impact our results of operations.

We have significant contingent annual payment obligations for the next ten years under our royalty agreement with Stonehouse. We are obligated to pay to Stonehouse 10% of our annual EBITDA, if any, for each annual
period through December 31, 2015. In addition, we must maintain a segregated reserve account to be funded in each quarter of any year in which EBITDA is forecast to be positive at the rate of 25% of the estimated annual payment. In addition,
$27.5 million of the principal amount of the senior secured notes will be repayable on May 31, 2008, of which we repaid $9.8 million plus interest in January 2008. See Notes C and N to our Consolidated Financial Statements contained in
Item 8 herein. The contingent royalty payment and reserve account obligation under the royalty agreement and the repayment obligation could each limit our cash flow and funds available for our working capital, and in the case of the royalty
agreement obligations could result in a charge against our earnings which could have a material, adverse effect on our results of operations.



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Because the vast majority of our revenue will be derived from operations outside the United States, while our
consolidated financial statements are presented in U.S. dollars, changes in the exchange rates between the local currencies of our operations and the U.S. dollar could materially affect our reported results of operations.

We anticipate that the vast majority of our revenue will be derived from our operations outside the United States, particularly Europe, the Middle East
India, and China . We present our consolidated financial statements in U.S. dollars. Because we report our financial results in U.S. dollars, our consolidated financial statements will include gains and losses from foreign currency translation
adjustments, and these adjustments could have a material impact on our reported results of operations and could result in significant period-to-period fluctuations in our reported results of operations which are not attributable to, and may be at
variance with, our actual business performance. Exchange rate fluctuations may also affect the relative values of working capital advances between our various subsidiaries and of payments to and receipts from third parties, the effects of which
impact our results of operations.

The loss of key personnel, including our Chairman and CEO, Noah Samara, could significantly harm our business and
our credibility in the marketplace.

Our success will depend, in part, upon key technical and managerial personnel, as well as our
ability to attract and retain additional highly-qualified personnel as we develop our services in Europe and the Middle East and develop a mobile service in India. The loss of Mr. Samara, our Chairman and CEO, or certain other executive
officers or key technical or managerial personnel or the inability to hire and retain qualified personnel in the future could have a material adverse effect on our ability to staff and manage various parts of our business or otherwise materially
adversely affect our business.

If we are unable to maintain appropriate internal controls we will not be able to comply with applicable regulatory
requirements imposed on reporting companies.

During 2006 and 2007, we have worked aggressively to improve and maintain our internal
controls and established such new and enhanced systems of internal controls as we believe necessary to allow management to report on, and our independent auditors to attest to, our internal controls, as required after December 31, 2008 with
respect to the Company by the management certification and auditor attestation requirements mandated by the Sarbanes-Oxley Act of 2002. We perform system and process evaluation and testing (and any necessary remediation) of our internal control
system on an ongoing basis.

In addition to addressing the accounting and internal controls of our current operations, our employees and
systems will have to accommodate increasingly complex financial reporting demands as we continue to expand our existing operations and as we introduce our services in other markets.

If we are unable to attract and retain qualified personnel, or if we are unable to scale our financial reporting and accounting systems to our growth, we
may not have adequate, accurate or timely financial information, and we may be unable to meet our reporting obligations or comply with the requirements of the SEC, The NASDAQ Global Market or the Sarbanes-Oxley Act of 2002, which could result in the
imposition of sanctions, including the suspension or delisting of our Class A Common Stock from The NASDAQ Global Market and the inability of registered broker dealers to make a market in our Class A Common Stock, or investigation by
regulatory authorities. Any such action or other negative results caused by our inability to meet our reporting requirements or comply with legal and regulatory requirements or by disclosure of an accounting, reporting or control issue could
adversely affect the price of our Class A Common Stock.



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Failure to maintain our FCC license authority, to comply with obligations under our Deed of Agreement with the ACA
(whose regulatory powers are now exercised by the ACMA) or to receive license renewals and extensions for our AfriStar and AsiaStar satellites from the relevant regulatory agencies could have a material, adverse effect on our business and
operations.

The operation of our AsiaStar satellite is authorized by a Deed of Agreement (the Deed) with the Australian
Communications Authority (ACA). As of July 1, 2005, the functions of the ACA became the responsibility of a new regulator, the Australian Communications and Media Authority (the ACMA). The Deed remains in force as long as our wholly-owned
Australian subsidiary, AsiaSpace Limited (AsiaSpace), fulfills its obligations as specified therein, which include compliance with the International Telecommunication Union (ITU) Radio Regulations, maintenance of the telemetry, tracking and control
facility in Australia, our subsidiarys continued incorporation in Australia and location of its central management and control in Australia. If AsiaSpace is determined to have breached the Deed, the ACMA has the discretion to terminate the
Deed and suppress the ITU notification of the network.

Additionally, once the AsiaStar satellite reaches the end of its service life, if a
replacement satellite will be launched from Australia or an Australian national (including an Australian corporation within the WorldSpace group) authorizes the launch, the Space Activities Act 1998 (Cth) would apply and we will need to apply
to the ACMA and the Australian Space Licensing and Safety Office (SLASO) for authorization to launch a replacement satellite. However, there can be no guarantee that the ACMA and SLASO will grant such an authorization. In addition to the ACMA and
SLASO authorizations, we will also need approval from the ITU to operate a new satellite from the current orbital location. In March 2004, the ITU published an extension to the frequency assignment of AsiaStar from 15 to 30 years. As the life of the
AsiaStar satellite is no more than 15 years, this provides an indication that a replacement satellite would be approved by the ITU to replace AsiaStar at its current orbital location. There is a risk that authorization to operate the new satellite
from the current orbital location may not occur, and in that case, the orbital location currently occupied by our AsiaStar satellite could become available for use by other satellite operators.

The AfriStar-1 satellite is licensed by the U.S. Federal Communications Commission (FCC). Our FCC license provides for a ten-year license term that
expires in January 2010, which is subject to renewal at that time. If we fail to comply with the terms of this license, the FCC may deny our request to renew the license. On January 3, 2006, we received an authorization to launch and operate a
second satellite, called AfriStar-2, to be co-located with AfriStar-1. AfriStar-2 is intended to enhance our service coverage in Europe and North Africa, and to extend the useful life of AfriStar-1 which has been affected by a defect in its solar
panels described above. See Our satellites have a limited life and may fail in orbit. The FCC did not impose a bond requirement on AfriStar-2 but did require that AfriStar-2 be placed into operation prior to the removal of
AfriStar-1 from service. On February 2, 2006, an application for review was filed asking the FCC to reverse the order by which it had granted the AfriStar-2 license. We timely submitted an opposition to this application for review. While we
believe that the application for review lacks any legal basis that would justify a reversal of the FCCs grant of the AfriStar-2 license, there is no guarantee that the FCC will uphold its order authorizing AfriStar-2. If the FCC reverses the
order by which it granted the AfriStar-2 license, if we are unsuccessful in constructing, launching or placing AfriStar-2 into operation prior to removing AfriStar-1 from service, or if AfriStar-1 expires prior to AfriStar-2 commencing operations,
we may lose the AfriStar-2 authorization and the orbital location currently occupied by AfriStar-1 could become available for use by other satellites operators. We may decide to launch a third collocated satellite to continue to service the region
currently served by AfriStar-1 and, in order to do so, we would need to obtain a satellite authorization from the FCC. The FCCs rules do not guarantee that it will grant licenses for replacement satellites or for additional co-located
satellites. In practice, however, the FCC generally grants such requests to a licensee in good standing. If the FCC does not issue to us a license to launch and operate a third or replacement satellite for AfriStar-1, then when AfriStar-1 expires we
may not be able to continue to serve certain potentially significant parts of the current service area of AfriStar-1, resulting in an adverse impact on our revenues from the AfriStar coverage area.



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Failure of our ground network infrastructure would adversely affect our ability to broadcast content up to our
satellites.

We rely on our ground network infrastructure, including our satellite control network and our broadcast facilities, for
key operations, including transmitting broadcast signals up to our satellites. We have limited broadcast facilities to transmit content to our satellites for broadcast to our customers. We are also planning a new uplink facility to handle content
for our European services, beginning with Italy. A new uplink facility has been established in Dubai owned and operated by Emirates Integrated Telecommunications Company to serve our Middle East business. We rely primarily on our Singapore uplink
station, which is hosted by Singapore Telecom, to transmit content to our Indian market, as our Melbourne, Australia uplink station only has the transmitting capacity to transmit approximately four channels. Our uplink stations were uniquely built
for us and, therefore, it will take a significant amount of time to obtain replacement parts in the event they are needed. If a natural or other disaster significantly damaged our broadcast system, particularly our Singapore uplink station, if key
parts were to fail for any reason, or if Singapore Telecom failed to support the Singapore uplink station properly or terminated their host services contract, our ability to provide service to subscribers, at least on an interim basis, would be
limited substantially.

Consumers may steal our service.

Like all radio transmissions, our signal is subject to interception. Consumers may be able to obtain or rebroadcast our signal without paying the subscription fee. Although we use encryption technology to mitigate
signal piracy, we may not be able to eliminate theft of our signal. Widespread signal theft could reduce the number of consumers willing to pay us subscription fees.

Our patents and licenses may not provide sufficient intellectual property protection.

We hold
licenses from third parties to utilize patents covering various types of technology used in our system, including our digital compression technology. In addition, we have obtained patents and have patent applications pending with respect to our
proprietary intellectual property. Although these licenses and patents cover various features of satellite radio technology, they may not cover all aspects of our system. Others may duplicate aspects of our system that are not covered by our patents
without liability to us. In addition, competitors may challenge, invalidate or circumvent our patents. We may be forced to enforce our patents or determine the scope and validity of other parties proprietary rights through administrative
proceedings, litigation or arbitration. An adverse ruling arising out of any intellectual property dispute could subject us to significant liability for damages, prevent us from operating our system, preclude us from preventing a third-party from
operating a similar system or require us to license disputed rights from or to third parties. In the event that we need to license rights from third parties, we may not be able to obtain the licenses on satisfactory terms, if at all. We also hold a
global license from the International Federation of the Phonographic Industry (IFPI) for the sound recording rights that we believe will cover those rights in conjunction with our Italy business. We are currently exploring the licensing of composers
rights for that market. We have also obtained a blanket license granted by the Composers and Authors Society of Singapore (COMPASS) to broadcast, perform, transmit, and otherwise use musical works which COMPASS has or will have the right to license.
Moreover, we have had a recording rights license from the India Phonographic Performance Ltd. (PPL). Although we believe the licenses granted to us by COMPASS, IFPI and PPL, along with licenses from other smaller copyright societies would cover all
necessary broadcasting rights for transmissions from our Singapore uplink station to countries within the AsiaStar broadcast coverage area, it is possible that other sister rights societies in other jurisdictions within the AsiaStar broadcast
coverage area will not recognize such license and will seek to require separate licenses for broadcasts into their jurisdictions. The India Performing Rights Society has indicated that it may seek to require a separate license. Any requirement in a
jurisdiction that we obtain a separate license could increase our cost of broadcasting in such jurisdiction.



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Risks Related to the Conduct of Our Business in Europe

Our ability to develop a mobile DARS business in Europe may be adversely affected by the fragmented and diverse nature of the European market.

We are in the process of implementing the launch of a new service in Europe, first in Italy, by building out a terrestrial repeater supported system
targeted at automobile listening. We are developing Italian programming content and will do the same for additional markets. However, given Europes fragmented markets and wide variety of ethnic and linguistic groups, we may face challenges in
creating and maintaining an appealing mix of content and programming in various languages to address the needs and preferences of the target listener segments. Our inability to develop and maintain desirable programming for the diverse ethnic and
linguistic listener segments in the targeted European markets could adversely impact our future plans to provide mobile DARS in the region.

See also the preceding Risk Factors for risks in implementing a mobile DARS network in Europe, in particular: If we do not achieve sufficient demand for our services or are unable to retain our customers, we may not generate
sufficient revenue for us to become profitable, Our mobile service bundle model is reliant on car manufacturers integration of satellite receivers into their new automobiles, We may incur significant delays and
expenses in the development and installation of terrestrial repeater transmitters, and we cannot be certain that the systems will function properly, We may be unable to obtain the authorizations required to operate our terrestrial
repeater network in key markets in Europe, the Middle East and India or to retain the necessary authorizations to operate a subscription service and We may incur significant delays and expense in the build out of additional
elements of infrastructure needed to launch our mobile service in Italy.

Risks Related to the Conduct of Our Business in India

Future changes to Indian regulations and policies governing the market in which we operate may have a material, adverse effect on our ability to
carry out our India business plan.

The TRAI consultation paper dated December 29, 2004 and the recommendation paper dated
June 27, 2005 highlight certain areas of potential changes in the regulation of satellite services, including:



| |  |  | Ban on private radio stations broadcasts of news and current affairs. Private FM operators in India are currently precluded from broadcasting news and
current affairs, including the re-broadcast of foreign channels such as BBC World Service based on security concerns. The TRAI consultation paper asks whether the ban on private FM operators, which does not apply to satellite TV, should be extended
to satellite DARS providers. The recommendation paper recommends that broadcasts of news and current affairs be permitted. If a ban on private radio broadcasts of news and current affairs were to be imposed on satellite DARS, we could be forced to
discontinue broadcast of prime news channels.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Uplinking. The Indian government could require satellite radio programs to be uplinked from India under a new regulatory regime. It may also require all
channels transmitted via satellite DARS to be registered with the Indian government before then can be downlinked, as is the case today with satellite TV channels. In such a case, some third party content providers may not agree to register their
channels with the Indian government, or may not be able to meet the Indian governments requirements for registration, which could adversely affect our offering to the Indian market.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | License fees. The TRAI recommendation paper recommends that a revenue share of 4% of gross earnings generated in India be imposed if the satellite
broadcaster uses terrestrial repeaters. Moreover, the Indian government could subject satellite DARS providers to high license fees in the form of fixed fees in lieu of revenue sharing or a one-time entry fee in addition to
revenue sharing.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Eligibility criteria. DARS providers could be subjected to eligibility criteria similar to those for private FM radio or other broadcasters. The TRAI
recommendation would not impose foreign ownership restrictions on providers, however, licenses would only be issued to an Indian subsidiary.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Although the TRAI recommendation paper proposed that 100% foreign ownership be permitted in Indian DARS
licenses, it is possible that the involved ministries may determine to require some limitation on the amount of foreign ownership in the entity holding a DARS license. If such a limitation became part of the approved policy, it is likely there would
be a period of time to come into compliance, but it is possible that such an imperative to divest a part of our interest in the WorldSpace Indian company could have a negative effect on the price we could achieve for the partial interest sold.



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Changes in the policies of the government of India or political instability could delay the further liberalization
of the Indian economy and adversely affect economic conditions in India, which could adversely impact demand for our services in India.

The role of the Indian central and state governments in the Indian economy is significant. Although the current government of India supports liberalization of the Indian economy, this economic liberalization may not continue in the future
and specific laws and policies affecting technology companies, foreign investment, currency exchange and other matters affecting our business could change as well.

The imposition of economic sanctions could affect our operations in India and adversely impact our business.

The
United States, Japan and certain other nations have announced and imposed economic sanctions against India in the past. For example, as required under Section 102 of the Arms Export Control Act, sanctions were imposed in response to the
detonation by India of nuclear devices. Although the current sanctions do not directly affect U.S. businesses, additional sanctions could be imposed which could have a material adverse effect on U.S. businesses with operations, sales or suppliers in
India. Although our operations have not been substantially affected by the sanctions to date and we do not believe our activities will be affected by the current sanctions, we cannot assure that our technologies will not, in the future, be included
in the specific technologies subject to sanctions or affected by the prohibition on items exported by third parties.

Companies operating in India
are subject to a variety of central and state government taxes and surcharges.

Tax and other levies imposed by the central and
state government in India that affect the tax liability of our India operations include: (i) central and state taxes and other levies; (ii) income tax; (iii) sales and value added tax; (iv) turnover tax; (v) service tax;
(vi) customs duty; (vii) excise duty; (viii) stamp duty and (ix) other special taxes and surcharges which are introduced on a temporary or permanent basis from time to time.

The central and state tax scheme in India is extensive and subject to change from time to time. The statutory corporate income tax in India, which
includes a surcharge and education tax, is currently approximately 34%. The central or state government may in the future increase the corporate income tax it imposes. Any such future increases or amendments may affect the overall tax efficiency of
companies operating in India and may result in significant additional taxes becoming payable. Additional tax exposure could have a material adverse effect on our India operations business, financial condition and results.

Risks Related to the Conduct of Our Business in China

Extensive government regulation of the telecommunications and broadcasting industries restricts our direct entry into China and may limit our ability to attract customers or generate profits.

Our business in China is highly regulated and subject to restrictions on foreign investment in the telecommunications industry and restrictions on the
broadcasting industry in China.

Foreign companies are currently not allowed to directly provide satellite communications services to
Chinese end users, and must conduct such business through qualified local telecommunications operators holding appropriate licenses and permits. Although we currently anticipate that all necessary approvals for satellite transmission services will
be granted to ChinaSat, there can be no assurance that it will be granted, or that either the spectrum allocation or the service license will continue to remain in effect if the regulatory landscape in China changes.

Additional examples of issues, risks and uncertainties relating to the Chinese governments regulation of the telecommunications industry include:



| |  |  | evolving licensing practices may subject the permits, licenses or approvals required for our operations to challenge, and may also subject us to onerous operating
conditions;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | the subscription fees permitted to be charged in China may be subject to approval by Chinas Pricing Bureau; subscriptions may need to be offered at an
unprofitable or unsustainably low rate pursuant to the request of the Pricing Bureau.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We have entered into a Technical
Service and Consulting Agreement with Beijing Guoxin Synchronization Data System Technology Limited (Guoxin), with respect to multimedia information to be broadcast in China. Because this agreement contains certain profit-sharing
provisions which may raise issues under Chinese law, we cannot be sure that relevant Chinese authorities will find the transactions under this agreement in compliance with PRC laws. If they are found to be non-compliant, the transactions under this
agreement may be prohibited or amendments to this agreement may be required.

Currently, most radio broadcasting in China is restricted to
Putonghua, the national language of China. The likely continuation of such restrictions will reduce the availability of overseas content for use in our business operations.

If any of our business conducted through WorldSpace China is found to be in violation of Chinese laws, rules or regulations regarding the legality of foreign investment in China, we could be subject to severe
penalties.

Our wholly owned subsidiary, WorldSpace China, has entered into memoranda of understanding with several third-party
providers of content with respect to possible cooperation agreements. In addition, WorldSpace China intends, through local Chinese media entities or alliance with such entities, to provide services to local radio broadcasters and other media groups
who hold appropriate licenses granted to engage in radio broadcast and television programming business in China. It is possible that Chinese authorities could, at any time, assert that any portion of WorldSpace Chinas business violates Chinese
laws, regulations or policies. If WorldSpace China were found to be in violation of Chinese laws or regulations, the relevant authorities would have broad discretion in dealing with such violations, including, without limitation, the following:



| |  | levying fines;
|- |  | --------------



| |  | revoking WorldSpace Chinas business license;
|- |  | ---------------------------------------------



| |  | shutting down WorldSpace Chinas provision of technical and content services; and
|- |  | ---------------------------------------------------------------------------------



| |  | requiring us to restructure our ownership structure or operations.
|- |  | ------------------------------------------------------------------

Our ability to conduct our business in China may be adversely affected if we cannot maintain our relationship with ChinaSat or another licensed Chinese telecommunications operator and obtain approval for our
content from the appropriate Chinese regulatory authorities.

Due to the ownership restrictions under Chinese law and our intention
to broadcast Chinese programming through an uplink station in Beijing, we have depended on China Satellite Communication Corporation (ChinaSat), in which we have no ownership, to obtain the necessary regulatory authorizations from the MII and SARFT.
We are also a party to two active agreements with Chinese companies to manufacture the receivers necessary for our customers to receive our service. We will also need to partner with local institutions to obtain regulatory approval from SARFT for
our audio content broadcast by our service and approval from the appropriate Chinese regulatory authorities for data content. Our ability to execute our business plan in China will depend on our relationship with ChinaSat (or with another of the
licensed Chinese telecommunications operators that are able to obtain and hold the necessary spectrum and operations licenses), the MII and SARFT. Therefore, any disruption in these relationships could materially delay or impair the implementation
of our China business plan and our future profits. Moreover, there can be no assurance that ChinaSat (or such other operator) or other future local partners will obtain the necessary licenses or approvals. In addition, should ChinaSat or any other
entity with which we partner in China fail to perform its obligations under our agreements, we may have to rely on legal remedies under Chinese law. The laws and regulations relating to contractual arrangements and foreign investment in China are
relatively new and their interpretation and enforcement involve uncertainties, which could limit our ability to enforce these agreements in China.



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Even if we are in compliance with Chinese governmental regulations relating to licensing and foreign investment
prohibitions, the Chinese government could prevent us from distributing particular content and subject us to liability for content that it believes is inappropriate.

China has enacted regulations governing the distribution of news and other information. In the past, the Chinese government has stopped the distribution
of information that it believes to violate Chinese law, including content that it believes is obscene, incites violence, endangers national security, is contrary to Chinas national interest or is defamatory. We are subject to potential
liability for content distributed through our satellite transmission network that is deemed inappropriate and for any unlawful actions of our customers. We may face liability for defamation, negligence, copyright, patent or trademark infringement
and other claims based on the nature and content of the materials that are provided via our satellite transmission network. Our business in China may be adversely affected if we do not get sufficient flexibility in our programming content to attract
customers in China. If the Chinese government were to take any action to limit or prohibit the distribution of information via our satellite broadcasting services or technical and content providing business, or to limit or regulate any current or
future content or services available to users on our network, our business could be materially and adversely affected.

Risks Related to Ownership of
Our Common Stock

Control by our executive officers and directors will limit other stockholders ability to influence the outcome of matters
requiring stockholder approval and could discourage our potential acquisition by third-parties.

As of March 28, 2008, our
Chairman and Chief Executive Officer, Noah Samara, owns, in the aggregate, directly or through entities which he controls or in which he has shared control, 20,192,905 shares of our outstanding Class A Common Stock, such shares constituting
approximately 47% of our Class A Common Stock. In addition, Mr. Samara holds options and SARS to acquire an additional 7,977,232 shares of our Class A Common Stock. Accordingly, Mr. Samara is in a position to exercise extensive
control over all matters requiring approval by our stockholders, including the election of our board of directors and the approval of mergers or other business combination transactions. This concentration of ownership could have the effect of
delaying or preventing a change in our control or otherwise discourage a potential acquirer from attempting to obtain control of us, which in turn could have an adverse effect on the market price of our common stock or prevent our stockholders from
realizing a premium over the market price for their shares of our common stock.

Allegations of ties between certain of our investors and terrorism
could negatively affect our reputation and stock price.

Certain of our original investors, consisting of three members of the Bin
Mahfouz family, Mohammed H. Al-Amoudi and Mr. Salah Idris, all of whom are Saudi Arabian citizens, have been the subject of allegations that they and/or charities they were involved in have supported terrorism, and three of these investors were
also named, along with a number of Saudi Arabian government officials and prominent Saudi Arabian citizens, in civil actions brought on behalf of victims of the September 11, 2001 terrorists attacks on the United States, which actions also
contain allegations that certain of such persons were involved in charities that supported terrorism. Such former investors have repeatedly denied all such allegations. In addition, in 1998 Mr. Idris acquired an interest in a pharmaceutical
factory in Sudan which, five months later, was bombed by U.S. military forces, purportedly in retaliation for manufacturing chemicals used by terrorists. These allegations were subject to serious challenge in the press and to our knowledge have
never been substantiated. Moreover, Mr. Idris has never appeared on the U.S. Governments designated terrorist list.

None of
such investors any longer has any direct debt or equity in our company or has any voting rights in our company. Stonehouse, an entity controlled by two Bin Mahfouz sons, is entitled to conditional royalty payments from us for each annual period
through December 31, 2015. Mr. Idris holds only non-voting shares in Yenura Ptd. Ltd., a Singapore company, which owns 17.4 million shares of our Class A Common Stock, and the



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right to convert convertible notes issued under its $40 million financing facility with us at a price of $4.25 per share. As of the date hereof, $19.2
million in convertible notes have been issued under the facility, which if converted would result in the issuance of approximately 4.5 million shares to Yenura. Yenura is controlled by our Chairman and Chief Executive Officer, Mr. Samara,
but Mr. Idris, through his ownership of non-voting shares of Yenura, holds a majority of the economic interest in Yenura. We cannot assure that past or future allegations against these individuals will not impair our ability to retain advisors,
impair our future attempts to raise additional financing or negatively impact the price of our stock.

The future sale of our Class A Common
Stock could negatively affect our stock price.

As of March 28, 2008, we have 42,385,966 shares of Class A Common Stock
outstanding. Any sales of a substantial number of our shares of Class A Common Stock in the public market could cause the market price of our Class A Common Stock to decline. In addition, 16,948,674 shares are issuable to our convertible
noteholders and warrant holders upon the conversion of outstanding convertible notes and warrants. XM may require us to file a shelf registration statement registering for resale its shares and warrant shares. We have registered all shares of
Class A Common Stock that we may issue to our employees under our 2005 incentive award program and a prior award program maintained by a predecessor company. Shares that have been registered are eligible for resale in the public market without
restriction.

We may face claims from former employees regarding previously granted stock options.

We could face claims from a number of former employees that they were promised options to purchase shares of our Class A Common Stock, or that they
were told that they had been granted stock options exercisable for period after termination of their employment. Although no such claims have been asserted against us, and we believe that any such claims would have expired several years ago, the
availability of a public trading market for our Class A Common Stock since our initial public offering could increase the likelihood of such claims. Such claims could seek contract damages or other remedies relating to putative options to
purchase shares of our Class A Common Stock at prices significantly less than the trading market price.

Our stock price may be highly volatile.

The market price of our Class A Common Stock could fluctuate significantly in response to the risks inherent in our business,
as well as to events unrelated to us. In recent years, the U.S. stock market has experienced significant price and volume fluctuations. Our Class A Common Stock may experience volatility unrelated to our own operating performance for reasons
that include:



| |  | demand for our Class A Common Stock;
|- |  | ------------------------------------



| |  | revenue and operating results failing to meet the expectations of securities analysis or investors in any particular quarter;
|- |  | -----------------------------------------------------------------------------------------------------------------------------



| |  | changes in expectations as to our future financial performance or changes in financial estimates, if any, of public market analysts;
|- |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  | our liquidity;
|- |  | --------------



| |  | our ability to raise additional funds;
|- |  | --------------------------------------



| |  | investor perception of our industry or our prospects;
|- |  | -----------------------------------------------------



| |  | general economic trends, particularly those in Europe, the Middle East, India, and China;
|- |  | -----------------------------------------------------------------------------------------



| |  | political and social conditions in the markets in which we operate, in particular Europe, the Middle East, India, and China;
|- |  | ----------------------------------------------------------------------------------------------------------------------------



| |  | changes in governmental regulations, particularly those in Europe, the Middle East, India, and China;
|- |  | -----------------------------------------------------------------------------------------------------



| |  | limited trading volume of our stock;
|- |  | ------------------------------------



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| |  | actual or anticipated quarterly variations in our operating results;
|- |  | --------------------------------------------------------------------



| |  | our involvement in litigation; and
|- |  | ----------------------------------



| |  | announcements relating to our business or the business of our competitors.
|- |  | --------------------------------------------------------------------------

In the past, companies that have experienced volatility in the market price of their stock have been the subject of securities class action litigation.
We may be involved in securities class action litigation in the future. Such litigation often results in substantial costs and a diversion of managements attention and resources.

Stonehouse has certain limited approval and other rights with respect to a sale of our assets.

Stonehouse, in addition to its right to receive royalty payments of 10% of EBITDA, if any, for each calendar year through December 31, 2015, has limited approval and other contractual rights with respect to the sale of our assets.
Under the Royalty Agreement, neither we nor our subsidiary, WorldSpace Satellite Company Ltd. which owns our satellite assets (the WorldSpace Parties), may voluntarily liquidate or sell substantially all of our respective assets, at any
time prior to December 31, 2007, without the prior written consent of Stonehouse, which consent is not to be unreasonably withheld, and the WorldSpace Parties are not permitted to sell certain key assets of the group, other than for fair value.
The WorldSpace Parties have agreed with Stonehouse that to the extent that any sale or transfer of assets by them would be reasonably likely to diminish materially the overall return to Stonehouse under the Royalty Agreement, such sales or transfers
are not permitted under the Royalty Agreement. In addition, Stonehouse has the right to be paid a fee in lieu of royalty payments from certain asset sale transactions. Stonehouses interests in the matters over which it has approval or other
contractual rights may be adverse to the interests of our stockholders in such matters.

We are subject to anti-takeover provisions which could
affect the price of our common stock.

Certain provisions of Delaware law and of our certificate of incorporation and by-laws could
have the effect of making it more difficult for a third-party to acquire, or of discouraging a third-party from attempting to acquire, control of us. For example, our certificate of incorporation and by-laws provide for a classified board of
directors, limit the persons who may call special meetings of stockholders and allow us to issue preferred stock with rights senior to those of the common stock without any further vote or action by our stockholders. In addition, we are subject to
the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, which could have the effect of delaying, deterring or preventing another party from acquiring control of us. These provisions could deprive our stockholders of
an opportunity to receive a premium for their common stock as part of a sale of our company or may otherwise discourage a potential acquirer from attempting to obtain control of our company, which in turn could have a material, adverse effect on the
market price of our common stock.



|ITEM 1B. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

None.



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|ITEM 2. | PROPERTIES
|------- | ----------

As of December 31, 2007, we leased
approximately 222,288 square feet of executive offices, regional offices, studio and production facilities, broadcast operations centers, uplink stations and sales offices in various locations as indicated in the chart below.



|                           |  |                                                                                                                      |  |               |  |                 
|-------------------------- |  | -------------------------------------------------------------------------------------------------------------------- |  | ------------- |  | ----------------
|Location                   |  | Type of Facility                                                                                                     |  | Squarefootage |  | Lease Expiration
|North America              |  |                                                                                                                      |  |               |  |                 
|Silver Spring, MD          |  | Headquarters, studio for WorldSpace-branded International channels and Regional Operations Center servicing AfriStar |  | 73,988        |  | Sept. 1, 2016   
|                           |  |                                                                                                                      | 
|India                      |  |                                                                                                                      |  |               |  |                 
|Bangalore                  |  | WorldSpace India headquarters                                                                                        |  | 18,722        |  | June 9, 2008    
|Bangalore                  |  | Corporate Guest House                                                                                                |  | 2,280         |  | March 31, 2009  
|Bangalore                  |  | Corporate Guest House II                                                                                             |  | 1,500         |  | Feb. 28, 2008   
|Bangalore                  |  | Sales Office                                                                                                         |  | 4,000         |  | March 31, 2008  
|Bangalore                  |  | Content Office                                                                                                       |  | 8,866         |  | Feb. 28, 2009   
|Bangalore                  |  | WorldSpace Studios                                                                                                   |  | 7,050         |  | Feb. 28, 2009   
|New Delhi                  |  | Regional Office                                                                                                      |  | 5,400         |  | Dec. 6, 2008    
|New Delhi                  |  | Guest House                                                                                                          |  | 2,500         |  | April 30, 2009  
|Chandigarh                 |  | Brand Showroom                                                                                                       |  | 1,362         |  | Dec. 7, 2008    
|Chennai                    |  | WorldSpace Studios                                                                                                   |  | 5,326         |  | Nov.29, 2010    
|Chennai                    |  | Regional Office                                                                                                      |  | 4,300         |  | July 1, 2008    
|Kolkata                    |  | Branch Office                                                                                                        |  | 5,597         |  | May 5, 2009     
|Mumbai                     |  | Regional Office                                                                                                      |  | 5,000         |  | March 14, 2008  
|Mumbai                     |  | WorldSpace Studios                                                                                                   |  | 3,393         |  | Aug. 17, 2011   
|Mumbai                     |  | Guest House                                                                                                          |  | 1,655         |  | Jan. 1, 2009    
|Noida                      |  | WorldSpace Franchise Store                                                                                           |  | 330           |  | April 30, 2009  
|Hyderabad                  |  | WorldSpace Studios                                                                                                   |  | 3,130         |  | July 14, 2012   
|Hyderabad                  |  | Business Center Space                                                                                                |  | 800           |  | Month-to-month  
|Ahmedabad                  |  | Business Center Space                                                                                                |  | 800           |  | Month-to-month  
|Kochi                      |  | Business Center Space                                                                                                |  | 800           |  | Month-to-month  
|Pune                       |  | Brand Showroom                                                                                                       |  | 755           |  | April 30, 2008  
|                           |  |                                                                                                                      | 
|China                      |  |                                                                                                                      |  |               |  |                 
|Beijing, China             |  | Regional Office                                                                                                      |  | 4,161         |  | March 20, 2008  
|                           |  |                                                                                                                      | 
|AsiaStar support           |  |                                                                                                                      |  |               |  |                 
|Melbourne, Australia       |  | TCR, ROC, Uplink and PFLS Stations broadcasting for AsiaStar                                                         |  | 34,107        |  | Month-to-month  
|Singapore                  |  | Host services contract with Sing Tel for TFLS Hub and PFLS station broadcasting for AsiaStar                         |  | 3,725         |  | Month-to-month  
|                           |  |                                                                                                                      | 
|Europe                     |  |                                                                                                                      |  |               |  |                 
|Paris, France              |  | Regional office                                                                                                      |  | 215           |  | Month-to-month  
|Toulouse, France           |  | Research and development engineering group and PFLS station broadcasting for AfriStar                                |  | 5,522         |  | Jan. 14, 2012   
|London                     |  | Operations center                                                                                                    |  | 685           |  | Month-to-month  
|                           |  |                                                                                                                      | 
|Middle East                |  |                                                                                                                      |  |               |  |                 
|Dubai, UAE                 |  | Regional office                                                                                                      |  | 1,417         |  | Jan. 28, 2008   
|Dubai, UAE                 |  | Regional office                                                                                                      |  | 1,962         |  | May 3, 2008     
|Bahrain, UAE               |  | Regional office                                                                                                      |  | 1,100         |  | April 30, 2008  
|Dubai, UAE                 |  | Content office                                                                                                       |  | 1,097         |  | Dec. 15, 2008   
|                           |  |                                                                                                                      | 
|AfriStar support           |  |                                                                                                                      |  |               |  |                 
|Johannesburg, South Africa |  | Regional office and operations center                                                                                |  | 10,743        |  | June 30, 2008   



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In addition to the locations leased by WorldSpace companies listed above, the following locations are
owned or operated by our partners:



|                           |  |                                                                                              
|-------------------------- |  | ---------------------------------------------------------------------------------------------
|Location                   |  | Type of Facility                                                                             
|India                      |  |                                                                                              
|                           | 
|Bangalore                  |  | TCR Station broadcasting for AfriStar                                                        
|                           | 
|China                      |  |                                                                                              
|                           | 
|Beijing                    |  | TFLS Hub broadcasting for AsiaStar                                                           
|                           | 
|AsiaStar support           |  |                                                                                              
|                           | 
|Singapore                  |  | Host services contract with Sing Tel for TFLS Hub and PFLS Station broadcasting for AsiaStar 
|                           | 
|Mauritius                  |  | TCR Station broadcasting for AsiaStar                                                        
|                           | 
|Europe                     |  |                                                                                              
|                           | 
|London                     |  | Antenna for PFLS station broadcasting for AfriStar owned and operated by WRN                 
|                           | 
|AfriStar support           |  |                                                                                              
|                           | 
|Johannesburg, South Africa |  | Equipment for Hub Feeder Link Station for AfriStar owned by Teleco and operated by WorldSpace
|                           | 
|Libreville, Gabon          |  | CSM for AfriStar                                                                             
|                           | 
|Mauritius                  |  | TCR Station broadcasting for AfriStar                                                        



|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------

We are subject to various
claims and assessments during the normal course of business. In our opinion, these matters are not expected to have a material, adverse impact on our financial position or results of operations. There were no proceedings commenced or terminated in
the fourth quarter of 2007 which are required to be reported here.

In April and May 2007, securities class action litigation suits were
filed in the United States District Court for the Southern District of New York, on behalf of persons who purchased or otherwise acquired the Companys publicly traded securities. The lawsuits were filed against the Company, Noah A. Samara,
President and Chief Executive Officer; Sridhar Ganesan, Chief Financial Officer; Cowen & Co. LLC, and UBS Securities LLC (Defendants). The complaints (all similar) allege violations of Sections 11, 12(a)2, and 15 of the Securities
Act of 1933. The suits claim that certain customers were incorrectly counted as subscribers after they had ceased to be paying subscribers. The complaints have been consolidated and on August 9, 2007, an amended complaint was filed on behalf of all
the plaintiffs. The Company is planning to vigorously defend against these claims.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------

No matters were submitted to a vote of security holders during the fourth quarter of 2007.



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PART II



|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ------------------------------------------------------------------------------------------------------------

Price Range of Our Class A Common Stock

Our
Class A Common Stock has been quoted on The Nasdaq Global Market under the symbol WRSP since August 4, 2005. The following table presents, for the periods indicated, the high and low sales prices per share of the Class A
Common Stock as reported on The Nasdaq Global Market:



|               |  |      |      |     |   |     
|-------------- |  | ---- | ---- | --- | - | ----
|               |  | High |      | Low
|2007:          |  |      |      |     |   |     
|First Quarter  |  | $    | 4.66 |     | $ | 3.48
|Second Quarter |  | $    | 5.52 |     | $ | 3.05
|Third Quarter  |  | $    | 5.50 |     | $ | 3.78
|Fourth Quarter |  | $    | 4.50 |     | $ | 1.68

On March 28, 2008, the reported last sale price of our Class A Common Stock on The
Nasdaq Global Market was $1.45 per share. As of March 28, 2008, there were 124 holders of record of our Class A Common Stock. Because many of these shares are held by brokers and other institutions on behalf of stockholders, we are unable
to estimate the total number of stockholders represented by these holders of record.

Dividend Policy

We have never declared and paid cash dividends on our capital stock. We currently intend to retain our future earnings, if any, to finance the further
development and expansion of our business and do not currently anticipate declaring or paying cash dividends on our capital stock in the foreseeable future. Any future determination to declare and pay dividends, should we legally be entitled to do
so based on our surplus or earnings, will be at the discretion of our board of directors and will depend on our financial condition, results of operations, cash flow, capital requirements, restrictions contained in financing instruments to which we
are a party and such other factors as our board of directors deems relevant.



46



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Shareholder Return Performance Graph

This performance graph does not constitute soliciting material, is not deemed filed with the SEC and is not incorporated by reference in any of the Companys filings under the Securities Act of 1933 or the
Securities Exchange Act of 1934, whether made before or after the date of this Annual Report on Form 10-K and irrespective of any general incorporation language in any such filing, except to the extent the Company specifically incorporates by
reference this performance graph therein.

The following graph shows the cumulative total stockholder return on our Class A common
stock compared to the Russell 2000 Index and the Nasdaq Telecommunications Index (composed of publicly traded companies which are principally in the telecommunications business) between August 4, 2005, the date our Class A Common Stock
began trading on The Nasdaq Stock Market, and December 31, 2007. The graph assumes $100 was invested on August 4, 2005 in (1) our Class A Common Stock, (2) the Russell 2000 Index and (3) the Nasdaq Telecommunications
Index. Total stockholder return assumes that all dividends, if any, were reinvested.

LOGO

Use of Proceeds

On August 9, 2005, the Company completed its initial public offering of 11,868,400 shares of Class A Common Stock at an initial public offering price per share of $21.00. Of the 11,868,400 shares of Class A Common Stock
offered, the Company sold 11,500,000 shares and a selling stockholder sold 368,400 shares. The Company did not receive any of the proceeds of the sale by the selling stockholder.

The aggregate proceeds of the offering were $249.2 million, of which the aggregate gross proceeds to the Company were approximately $241.5 million. Net
proceeds to the Company were approximately $220.8 million. The Company incurred expenses in connection with the offering of $20.7 million which included direct payments of: (i) $3.6 million in legal, accounting and printing fees;
(ii) $16.9 million in underwriters discounts, fees and commissions payable by the Company and (iii) $0.2 million in miscellaneous expenses. None of the offering expenses were paid to directors, officers, ten percent
stockholders or affiliates of the Company.

As of December 31, 2007, the Company held approximately $9.9 million of the net proceeds
from the offering, all of which are invested in money market instruments, demand deposits and restricted cash with various banks. The Company utilized $210.9 million of the net proceeds towards the following expenditures:

(1) Capital expenditures to an extent of $11.8 million;

(2) Income taxes to an extent of $19.8 million;



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(3) Sales and marketing expenditures to an extent of $21.6 million;

(4) Cost of goods sold, general and administrative expenses to an extent of $103.5 million: and

(5) Convertible debt restructuring payment of $50 million and $4.2 million for financing costs and legal fees



|ITEM 6. | SELECTED FINANCIAL DATA
|------- | -----------------------

WorldSpace, Inc. and Subsidiaries

In considering the following selected consolidated financial data, you should also read our consolidated financial statements and notes and
the section captioned Managements Discussion and Analysis of Financial Condition and Results of Operations. The consolidated statements of operations data for each of the five years in the period ended December 31, 2007 and
the consolidated balance sheets data as of December 31, 2007, 2006, 2005, 2004 and 2003 are derived from our consolidated financial statements. These statements have been audited by Grant Thornton LLP, independent registered public accounting
firm.



|                                                                                                                  |  |                                         |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|----------------------------------------------------------------------------------------------------------------- |  | --------------------------------------- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | - |  | ---- | -------- | - |  | - | -------- | -
|                                                                                                                  |  | Years Ended December 31,                |         
|Consolidated statements of operations data:                                                                       |  | 2003                                    |          |   | 2004 |   |          | 2005 |  |   | 2006     |   |  | 2007 |         
|                                                                                                                  |  | (in thousands, except per share amount) |         
|Revenue                                                                                                           |  |                                         |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Subscription revenue                                                                                              |  | $                                       | 226      |   |      | $ | 1,038    |      |  | $ | 3,690    |   |  | $    | 7,294    |   |  | $ | 7,528    |  
|Equipment revenue                                                                                                 |  |                                         | 5,558    |   |      |   | 2,091    |      |  |   | 2,822    |   |  |      | 3,056    |   |  |   | 2,049    |  
|Other revenue                                                                                                     |  |                                         | 7,290    |   |      |   | 5,452    |      |  |   | 5,148    |   |  |      | 5,261    |   |  |   | 4,207    |  
|                                                                                                                  |  |                                         |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Total Revenue                                                                                                     |  |                                         | 13,074   |   |      |   | 8,581    |      |  |   | 11,660   |   |  |      | 15,611   |   |  |   | 13,784   |  
|                                                                                                                  |  |                                         |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Operation Expenses                                                                                                |  |                                         |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Cost of Services (excludes depreciation shown separately below) Satellite and transmission, programming and other |  |                                         | 19,156   |   |      |   | 20,918   |      |  |   | 18,592   |   |  |      | 27,556   |   |  |   | 30,078   |  
|Cost of equipment                                                                                                 |  |                                         | 4,313    |   |      |   | 2,385    |      |  |   | 6,725    |   |  |      | 16,615   |   |  |   | 7,569    |  
|Research and development                                                                                          |  |                                         | 64       |   |      |   |         |      |  |   | 1,040    |   |  |      | 2,563    |   |  |   | 7,100    |  
|Selling and marketing                                                                                             |  |                                         | 691      |   |      |   | 6,526    |      |  |   | 18,676   |   |  |      | 24,028   |   |  |   | 10,866   |  
|General and administrative                                                                                        |  |                                         | 35,734   |   |      |   | 107,936  |      |  |   | 67,956   |   |  |      | 68,243   |   |  |   | 48,632   |  
|Depreciation and amortization                                                                                     |  |                                         | 60,909   |   |      |   | 61,183   |      |  |   | 61,636   |   |  |      | 58,896   |   |  |   | 59,258   |  
|                                                                                                                  |  |                                         |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Total Operating Expenses                                                                                          |  |                                         | 120,867  |   |      |   | 198,948  |      |  |   | 174,625  |   |  |      | 197,901  |   |  |   | 163,503  |  
|                                                                                                                  |  |                                         |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Loss from Operation                                                                                               |  |                                         | (107,793 | ) |      |   | (190,367 | )    |  |   | (162,965 | ) |  |      | (182,290 | ) |  |   | (149,719 | )
|                                                                                                                  |  |                                         |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Other Income (Expense)                                                                                            |  |                                         |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Gain (Loss) on extinguishment of debt                                                                             |  |                                         |         |   |      |   |         |      |  |   | 14,130   |   |  |      |         |   |  |   | (1,435   | )
|Interest income                                                                                                   |  |                                         | 542      |   |      |   | 431      |      |  |   | 6,596    |   |  |      | 11,331   |   |  |   | 4,689    |  
|Interest expense                                                                                                  |  |                                         | (108,371 | ) |      |   | (119,302 | )    |  |   | (9,884   | ) |  |      | (9,332   | ) |  |   | (13,460  | )
|Write-off of deferred debt issuance costs                                                                         |  |                                         |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   | (11,516  | )
|Other                                                                                                             |  |                                         | (2,089   | ) |      |   | (877     | )    |  |   | 2,600    |   |  |      | (4,759   | ) |  |   | (559     | )
|                                                                                                                  |  |                                         |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Total Other Income (Expense)                                                                                      |  |                                         | (109,918 | ) |      |   | (119,748 | )    |  |   | 13,442   |   |  |      | (2,760   | ) |  |   | (22,281  | )
|                                                                                                                  |  |                                         |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Loss Before Income Taxes                                                                                          |  |                                         | (217,711 | ) |      |   | (310,115 | )    |  |   | (149,523 | ) |  |      | (185,050 | ) |  |   | (172,000 | )
|Income Tax Provision                                                                                              |  |                                         |         |   |      |   | (267,272 | )    |  |   | 69,660   |   |  |      | 56,447   |   |  |   | 2,493    |  
|                                                                                                                  |  |                                         |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Net Loss Losange                                                                                                  |  | $                                       | (217,711 | ) |      | $ | (577,387 | )    |  | $ | (79,863  | ) |  | $    | (128,603 | ) |  | $ | (169,507 | )
|                                                                                                                  |  |                                         |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Loss per sharebasic and diluted                                                                                  |  |                                         |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Net Loss per Share                                                                                                |  | $                                       | (37.64   | ) |      | $ | (99.00   | )    |  | $ | (2.77    | ) |  | $    | (3.44    | ) |  | $ | (4.22    | )
|                                                                                                                  |  |                                         |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Weighted Average Number of Shares Outstanding                                                                     |  |                                         | 5,785    |   |      |   | 5,833    |      |  |   | 28,829   |   |  |      | 37,396   |   |  |   | 40,187   |  



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|                                                     |  |                                         |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|---------------------------------------------------- |  | --------------------------------------- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | - |  | ---- | ---------- | - |  | - | ---------- | -
|                                                     |  | Years Ended December 31,                |           
|Consolidated balance sheet data:                     |  | 2003                                    |            |   | 2004 |   |            | 2005 |  |   | 2006       |   |  | 2007 |           
|                                                     |  | (in thousands, except per share amount) |           
|Current assets                                       |  |                                         |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Cash and cash equivalents, and marketable securities |  | $                                       | 1,740      |   |      | $ | 154,362    |      |  | $ | 275,973    |   |  | $    | 165,459    |   |  | $ | 3,597      |  
|Other current assets                                 |  |                                         | 9,615      |   |      |   | 6,322      |      |  |   | 14,778     |   |  |      | 17,870     |   |  |   | 13,092     |  
|                                                     |  |                                         |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Total current assets                                 |  |                                         | 11,355     |   |      |   | 160,684    |      |  |   | 290,751    |   |  |      | 183,329    |   |  |   | 16,689     |  
|Restricted cash and investments                      |  |                                         | 3,819      |   |      |   | 1,775      |      |  |   | 4,588      |   |  |      | 5,869      |   |  |   | 6,312      |  
|Property and equipment, net                          |  |                                         | 11,696     |   |      |   | 11,431     |      |  |   | 16,811     |   |  |      | 17,745     |   |  |   | 14,659     |  
|Satellites and related systems, net                  |  |                                         | 520,539    |   |      |   | 459,426    |      |  |   | 397,463    |   |  |      | 345,046    |   |  |   | 298,503    |  
|Deferred finance costs, net                          |  |                                         | 22,654     |   |      |   | 14,724     |      |  |   | 13,667     |   |  |      | 12,149     |   |  |   | 3,457      |  
|Other assets                                         |  |                                         | 1,982      |   |      |   | 1,047      |      |  |   | 6,237      |   |  |      | 4,507      |   |  |   | 394        |  
|                                                     |  |                                         |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Total assets                                         |  | $                                       | 572,045    |   |      | $ | 649,087    |      |  | $ | 729,517    |   |  | $    | 568,645    |   |  | $ | 340,014    |  
|                                                     |  |                                         |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Long-term debt, current portion                      |  |                                         | 1,411,723  |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   | 27,500     |  
|Other current liabilities                            |  |                                         | 526,923    |   |      |   | 114,338    |      |  |   | 69,943     |   |  |      | 76,036     |   |  |   | 58,779     |  
|Long-term debt, net of current portion               |  |                                         | 56,098     |   |      |   | 155,000    |      |  |   | 155,000    |   |  |      | 155,368    |   |  |   | 66,513     |  
|Contingent royalty obligation                        |  |                                         |           |   |      |   | 1,814,175  |      |  |   | 1,814,175  |   |  |      | 1,814,175  |   |  |   | 1,814,175  |  
|Other long-term liabilities                          |  |                                         | 37,811     |   |      |   | 254,980    |      |  |   | 182,852    |   |  |      | 126,421    |   |  |   | 124,778    |  
|                                                     |  |                                         |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Total liabilities                                    |  |                                         | 2,032,555  |   |      |   | 2,338,493  |      |  |   | 2,221,970  |   |  |      | 2,172,000  |   |  |   | 2,091,745  |  
|Minority interest                                    |  |                                         |           |   |      |   |           |      |  |   |           |   |  |      | 304        |   |  |   | 689        |  
|Shareholders deficit                                |  |                                         | (1,460,510 | ) |      |   | (1,689,406 | )    |  |   | (1,492,453 | ) |  |      | (1,603,659 | ) |  |   | (1,752,420 | )
|                                                     |  |                                         |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  
|Total liabilities and shareholders deficit          |  | $                                       | 572,045    |   |      | $ | 649,087    |      |  | $ | 729,517    |   |  | $    | 568,645    |   |  | $ | 340,014    |  
|                                                     |  |                                         |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   |            |  



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|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
|------- | ------------------------------------------------------------------------------------

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and Notes which appear elsewhere in this
Form 10-K. This discussion contains forward looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward looking statements as a result of various factors, including
those discussed below and elsewhere in this 10-K, particularly in Item 1A. Risk Factors.

Overview

We were founded in 1990 and pioneered the development of satellite-based digital radio service, commonly known as Digital Audio Radio Service (DARS). Our
vision was to offer on an international basis a variety and quality of international, national and regional radio programming not available from AM and FM broadcasters through low-cost portable and mobile radio receivers owned by customers. We were
the first company to establish an operational DARS system and today are the only licensed DARS provider outside of North America, South Korea and Japan.

Through the end of December 2007, we have raised and spent approximately $1.7 billion in connection with the development and launch of our business. Our operational system consists of four main elements: two
geostationary satellites, AfriStar (fuel life until 2013) and AsiaStar (fuel life until mid-2015); the associated ground systems that provide content to and control the satellites; a terrestrial repeater network to be built out (subject to
regulatory approval) in each of our target jurisdictions, commencing in Italy in order to facilitate a mobile service, and the receivers owned by our customers. Each of our satellites can service three large geographic areas through three beams
capable of carrying up to 50 - 60 channels each, based upon the waveform and other changes we are making in implementing our European technology.

Our initial focus was rolling out our services in India, and securing the required licenses and approvals in Western Europe and China to launch DARS in those markets. In 2007, our focus and execution included continuing to build towards the
launch of mobile services in Italy and the Middle East. We continue to fund business development and technology related expenses geared towards a service launch in Italy and the Middle East in early 2009, we anticipate minimal technology-related and
other expenditures for a service launch in Bahrain. For China, other European markets and other selected markets within our coverage areas, we anticipate limited business development expenses.

Our 2007 highlights include the following:



| |  |  | Agreed with our convertible note holders to a refinancing on June 1, 2007 as follows:
| | - |  | -------------------------------------------------------------------------------------



| |  |  | Redemption of $50 million of the $155 million convertible notes for cash.
| | - |  | -------------------------------------------------------------------------



| |  |  | $45 million in senior secured notes paying interest at LIBOR plus 6.5% per annum.
| | - |  | ---------------------------------------------------------------------------------



| |  |  | $60 million in amended and restated secured convertible notes paying interest at 8% per annum and convertible into shares of Class A Common Stock at $4.25
per share.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Warrants to acquire an aggregate amount of 2,647,059 shares of Class A Common Stock at $4.25 per share.
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | Entered into a facility agreement with Yenura Pte Ltd. (Yenura) in December 2007 as follows:
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | $40 million, principal amount,
| | - |  | ------------------------------



| |  |  | In consideration for the issuance of certain subordinated convertible notes, the convertible notes shall be convertible at the option of the note holders into
shares of Class A Common Stock. The conversion amount shall be calculated as the portion of the principal drawdown plus any accrued and unpaid interest and late charges. The conversion rate will be $4.25 per share.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | The subordinated convertible notes mature on January 31, 2013 and accrue interest at the rate of 8% per year and shall be payable in arrears with the
first interest date being January 15, 2009.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Signed an agreement with Telecom Italia to design and deploy a terrestrial repeater network in Italy.
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | Signed an agreement with Fiat Group Automobiles to distribute and market satellite radio in Italy.
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | Worldspace Satellite Radio broadcasts Live Earth 24-hour concert series internationally.
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | Worldspace provided live reporting and celebrity interviews from the 2nd Annual Virgin Festival by Virgin Mobile. Back-stage interviews aired on WorldSpace channels
Bob and Radio Voyager along with the music of artists that performed live at the 2-day Virgin Festival.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | EigoMANGA produces a Japanese Music Radio program exclusively for Worldspaces global pop channel, UPop. The weekly hour-long music show features a mix
of Japanese pop and rock music currently leading the Oricon music charts in Japan.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | WorldSpace Honors awards to best performing artists, announced during our Second Annual UPop@Abbey Road Sessions in London, UK, where over thirty artists recorded
and airing live from Studio 2.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Introduction of two new WorldSpace-branded channelsPunchline (comedy) and Retro Radio (70s and 80s songs).
| | - |  | -------------------------------------------------------------------------------------------------------------

Our goals for 2008 include the securing of further licenses or approvals in Europe and India. We are also in the process of rolling out a mobile DARS for
which we plan to establish terrestrial repeater networks in Italy, the Middle East (subject to securing the licenses and frequency authorizations required to operate terrestrial repeaters) and India. Through our mobile DARS, we expect to provide
services to automobiles and to improve the reliability of our service in urban areas. We expect to introduce new receiver products in different markets targeted at stratified market segments.



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Summary Operating Metrics

The key metrics we use to monitor our business growth and our operational results in India and the rest of the world (ROW) are: ending subscribers, Average Monthly Subscription Revenue Per Subscriber
(ARPU), Subscriber Acquisition Cost (SAC), Cost Per Gross Addition (CPGA) and EBITDA presented as follows:



|                                  |  |                                 |         |   |      |   |          |  
|--------------------------------- |  | ------------------------------- | ------- | - | ---- | - | -------- | -
|                                  |  | Twelve months endedDecember 31, |        
|                                  |  | 2007                            |         |   | 2006 |  
|Net Subscriber (Losses) Additions |  |                                 | (24,939 | ) |      |   | 83,799   |  
|India                             |  |                                 | 1,065   |   |      |   | 87,436   |  
|Rest of World (ROW)             |  |                                 | (26,004 | ) |      |   | (3,637   | )
|                                  |  |                                
|Total End Of Period Subscribers   |  |                                 | 174,166 |   |      |   | 199,105  |  
|India                             |  |                                 | 163,075 |   |      |   | 162,010  |  
|ROW (5)                           |  |                                 | 11,091  |   |      |   | 37,095   |  
|                                  |  |                                
|ARPU (1)                          |  | $                               | 3.39    |   |      | $ | 3.83     |  
|ARPU (India)                      |  |                                 | 3.11    |   |      |   | 3.01     |  
|ARPU (ROW)                        |  |                                 | 6.46    |   |      |   | 6.22     |  
|                                  |  |                                
|SAC (2)                           |  | $                               | 23      |   |      | $ | 35       |  
|SAC(India)                        |  |                                 | 24      |   |      |   | 38       |  
|SAC(ROW)                          |  |                                 | 0       |   |      |   | 0        |  
|                                  |  |                                
|CPGA (3)                          |  | $                               | 87      |   |      | $ | 140      |  
|CPGA(India)                       |  |                                 | 82      |   |      |   | 136      |  
|CPGA(ROW)                         |  |                                 | 153     |   |      |   | 208      |  
|                                  |  |                                
|EBITDA (4) (in thousands)         |  | $                               | (92,455 | ) |      | $ | (128,153 | )



|(1) | Average Monthly Subscription Revenue Per Subscriber (ARPU)Please see further discussion under Average Monthly Subscription Revenue Per Subscriber under
Managements Discussion and Analysis of Financial Condition and Results of OperationsResults of Operations
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | SACPlease see further discussion under Subscriber Acquisition Cost under Managements Discussion and Analysis of Financial Condition and Results of
OperationsResults of OperationsCost of services
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | CPGAPlease see further discussion under Cost Per Gross Addition under Managements Discussion and Analysis of Financial Condition and Results of OperationsResults
of OperationsOperating expense
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | EBITDAWe refer to net loss before interest income, interest expense, income taxes, depreciation and amortization as EBITDA. EBITDA is not a measure of financial
performance under generally accepted accounting principles. We believe EBITDA is often a useful measure of a companys operating performance and is a significant basis used by our management to measure the operating performance of our business.
Because we have funded and completed the build-out of our system through the raising and expenditure of large amounts of capital, our results of operations reflect significant charges for depreciation, amortization and interest expense. EBITDA,
which excludes this information, provides helpful information about the operating performance of our business, apart from the expenses associated with our physical plant or capital structure. EBITDA is frequently used as one of the bases for
comparing businesses in our industry, although our measure of EBITDA may not be comparable to similarly titled measures of other companies. EBITDA does not purport to represent operating loss or cash flow from operating activities, as those terms
are defined under generally accepted accounting principles and should not be considered as an alternative to those measurements as an indicator of our performance.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|                                                     |  |                                 |          |   |      |   |          |  
|---------------------------------------------------- |  | ------------------------------- | -------- | - | ---- | - | -------- | -
|                                                     |  | Twelve months endedDecember 31, |         
|                                                     |  | 2007                            |          |   | 2006 |  
|Reconciliation of Net Loss to EBITDA (in thousands): |  |                                 |          |   |      |   |          |  
|Net Loss as reported                                 |  | $                               | (169,507 | ) |      | $ | (128,603 | )
|Addback non-EBITDA items included in net loss:       |  |                                 |          |   |      |   |          |  
|Interest income                                      |  |                                 | (4,689   | ) |      |   | (11,331  | )
|Interest expense                                     |  |                                 | 24,976   |   |      |   | 9,332    |  
|Depreciation & amortization                          |  |                                 | 59,258   |   |      |   | 58,896   |  
|Income taxes benefit                                 |  |                                 | (2,493   | ) |      |   | (56,447  | )
|                                                     |  |                                 |          |   |      |   |          |  
|EBITDA                                               |  | $                               | (92,455  | ) |      | $ | (128,153 | )
|                                                     |  |                                 |          |   |      |   |          |  

|(5) | ROW End of Period subscribers for 2006 include approximately 13,000 subscribers from a contract with Kenyan Institute of Education which terminated on January 1, 2007.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. The
preparation of these consolidated financial statements requires us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported
amounts of revenue and expenses during the periods presented. We base our estimates and judgments on historical experience and on various other assumptions which we believe are reasonable under the circumstances. Due to the inherent uncertainty
involved in making estimates, actual results could differ from those estimates. We believe the following critical accounting policies require the most significant management estimates and judgments used in the preparation of the consolidated
financial statements.

Revenue recognition

Revenue from subscribers consists of subscription fees and non-refundable activation fees. We recognize subscription fees as our service is provided to a subscriber. We record deferred revenue for prepaid subscription
fees and amortize these prepayments to revenue ratably over the term of the respective subscription plan. Activation fees are recognized ratably over thirty months, the estimated term of the subscriber relationship. Promotions and discounts are
treated as an offset to revenue during the period of promotion. Sales incentives, consisting of discounts to subscribers, offset earned revenue. Management estimates the amount of required allowances for potential non-collectible accounts receivable
based upon past collection experience and consideration of other relevant factors. However, past experience may not be indicative of future collections and therefore reserves for doubtful accounts may increase as a percentage of accounts receivable
and sales. Our current policy is not to accept product returns but if in the future, we were to accept product returns that are not covered under the manufacturers warranty, a sales return allowance will be established based on the guidance provided
under Statement of Financial Accounting Standards (SFAS) No. 48, Revenue Recognition When a Right of Return Exists and Staff Accounting Bulletin, Topic 13A-4b.

Evaluation of satellites and other long-lived assets for impairment and satellite insurance coverage

We assess the recoverability of our long-lived assets pursuant to SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets. The costs of specific satellites are grouped together with other associated assets when assessing recoverability. Periodically, and when a change in circumstances occurs, this group of assets is compared with the expected future
undiscounted cash flows to be generated by us from the related satellites. Any excess of the net book value for this group of assets over the expected future undiscounted cash flows of the related satellite would result in an impairment charge that
would be recorded in our statement of operations in the period the determination is made. The impairment charge would be measured as the excess of the carrying value of the group of assets over the present value of estimated expected future cash
flows related to the asset group using a discount rate commensurate with the risks involved. Changes in estimates of future



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cash flows could result in a write-down of the asset in a future period. Estimated future cash flows could be impacted by, among other things:



| |  |  | changes in estimates of the useful life of the satellite;
| | - |  | ---------------------------------------------------------



| |  |  | changes in estimates of our ability to operate the satellite at expected levels;
| | - |  | --------------------------------------------------------------------------------



| |  |  | changes in the manner in which the satellite is to be used; and
| | - |  | ---------------------------------------------------------------



| |  |  | the loss of one or several significant customer contracts for capacity on the satellite.
| | - |  | ----------------------------------------------------------------------------------------

If an impairment loss was indicated, such amount would be recognized in the period of occurrence, net of any insurance proceeds to be received so long as
such amounts are determinable and receipt is probable.

Depreciable satellite lives

We calculate depreciation on a straight line basis over a ten-year period. As the communications industry is subject to rapid technological change and our
satellites have been subject to certain anomalies, we may be required to revise the estimated useful lives of our satellites and communications equipment or to adjust their carrying amounts. Accordingly, the estimated useful lives of our satellites
are periodically reviewed using current engineering data. If a significant change in the estimated useful lives of our satellites is identified, we would account for the effects of such changes on depreciation expense on a prospective basis.
Reductions in the estimated useful lives of our satellites would result in additional depreciation expense in future periods and may necessitate acceleration of planned capital expenditures in order to replace or supplement the satellite earlier
than planned. If the reduction in the estimated useful life of a satellite results in undiscounted future cash flows for the satellite, which are less than the carrying value of the satellite, an impairment charge would be recorded.

Stock-based compensation

In
accordance with SFAS No. 123 (Revised 2004), Share Based Payment (SFAS No. 123R) and the Securities and Exchange Commissions rule amending the compliance dates of SFAS No. 123R, the Company began to recognize
compensation expense for equity-based compensation using the fair value method in 2006 using the Modified Prospective Method. This method allows the Company to apply the fair value provisions of SFAS No. 123R only on the future
share-based payment arrangements and unvested portion of prior awards at the adoption date.

The Modified Prospective Method allows the
Company to account for the stock-based awards issued prior to the adoption of fair value provisions under SFAS No. 123R using the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to
Employees, and the disclosure provisions of SFAS No. 148, Accounting for Stock-Based CompensationTransition and DisclosureAn Amendment of FASB Statement No. 123.

Prior to our adoption of SFAS No. 123R, we accounted for the employee and director stock options using the intrinsic-value method in accordance with
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations and the disclosure-only provisions of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for
Stock-Based Compensation. Stock options and warrants issued to non-employees are recorded at their fair value as determined in accordance with SFAS No. 123 and Emerging Issues Task Force (EITF) No. 96-18, Accounting for Equity Instruments
That are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services, and amortized over the service period. A pro-forma disclosure for outstanding awards accounted for under the intrinsic value method of APB
Opinion No.25 during 2005 and 2004 is not disclosed since the Company used minimum value method to account for stock based awards in fiscal years 2004 and 2005 and the Companys common stock was not publicly traded until 2005.



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Valuation of deferred income taxes and income tax reserves

We are subject to taxation by federal, state and international jurisdictions. Our annual provision for income taxes and the determination of the resulting
deferred tax assets and liabilities involve a significant amount of management judgment and are based on the best information available at the time. We believe that we have recorded adequate liabilities and reviewed those balances on a quarterly
basis.

Judgment is also applied in determining whether deferred tax assets will be realized in full or in part. When it is more likely
than not that all or some portion of specific deferred tax assets will not be realized, a valuation allowance is established for the amount of the deferred tax assets that are determined not to be realizable. Realization of our deferred tax assets
may depend upon our ability to generate future taxable income, which is dependent upon our ability to successfully introduce and market our product, general economic conditions, competitive pressures, and other factors beyond managements
control.

Valuation of Inventory

Inventories are stated at the lower of cost or market value using the first in, first out (FIFO) method of accounting. Inventories primarily consist of satellite radio receivers manufactured to our specifications by
independent third parties. We periodically evaluate inventory levels on hand as to potential obsolescence based on current and future selling prices. Currently, we do not provide our customers with a right of return, and are covered under
manufacturers original warranty, and hence no provisions have been made for such purpose. We will adopt the provisions of SFAS No. 48, Revenue Recognition When Right of Return Exists if and when we provide such rights
in the future.

Pre-Production Design and Development Costs

The Company entered into agreements to reimburse vendors for certain costs related to pre-production design and development of new receiver models. The
Company treated these costs as fixed in nature and will subsequently be amortized as cost of equipment over the units specified in the production agreement. The Company follows the guidance provided under Emerging Issues Task Force
(EITF) Issue No. 99-5, Accounting for Pre-Production Costs Related to Long-Term Supply Arrangements for recognizing and amortizing such costs. During 2007, the Company switched to a standardized European
technology which required the Company to redirect its resources in the design and development of new receiver models. As a result, the Company has written off all pre-production design and development costs associated with the initial receiver
models under development. These costs of approximately $2.4 million have been recorded to Research and Development in the income statement.

As the Company incurs pre-production design and developments costs related to the new receivers, they will be accounted for Under EITF No. 99-5, Accounting for Pre-production Costs Related to Long-Term supply Arrangements. As of
December 31, 2007 no costs have been recognized in the accompanying balance sheet.

Recent Accounting Pronouncements

In June 2006, the FASB issued FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxesan interpretation of
FASB Statement No. 109, which clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. This
Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on
derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company has adopted this Interpretation effective January 1, 2007. Refer to Note IIncome Taxes, for further discussion.



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In September 2006, The Financial Accounting and Standards Board has issued FAS 157, Fair Value
Measurements (SFAS 157), which provides guidance for using fair value to measure assets and liabilities. The standard also responds to investors requests for more information about the extent to which companies measure assets
and liabilities at fair value, the information used to measure fair value and the effect that fair-value measurements have on earnings. SFAS 157 will apply whenever another standard requires (or permits) assets or liabilities to be measured at fair
value. The standard does not expand the use of fair value to any new circumstances. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The
Company is currently evaluating the impact, if any, of SFAS 157 on its results of operations and financial position.

In February 2007, the
FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilitiesincluding an amendment of FASB Statement No. 115. This statement permits, but does not require, entities to measure many
financial instruments at fair value. The objective is to provide entities with an opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting
provisions. Entities electing this option will apply it when the entity first recognizes an eligible instrument and will report unrealized gains and losses on such instruments in current earnings. This statement 1) applies to all entities, 2)
specifies certain election dates, 3) can be applied on an instrument-by-instrument basis with some exceptions, 4) is irrevocable and 5) applies only to entire instruments. With respect to SFAS 115, available-for-sale and held-to-maturity securities
at the effective date are eligible for the fair value option at that date. If the fair value option is elected for those securities at the effective date, cumulative unrealized gains and losses at that date shall be included in the cumulative-effect
adjustment and thereafter, such securities will be accounted for as trading securities. The Company is currently evaluating the impact of SFAS 159 on its results of operations and financial position.



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Results of Operations



|                                                                |                                          |                          |            |      |  |   |            |   |  |   |            |  
|--------------------------------------------------------------- | ---------------------------------------- | ------------------------ | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                                |                                          | Years ended December 31, |           
|                                                                | 2007                                     |                          |            | 2006 |  |   | 2005       |  
|                                                                | (in thousands, except share information) |                         
|Revenue                                                         |                                          |                          |            |      |  |   |            |   |  |   |            |  
|Subscription revenue                                            |                                          | $                        | 7,528      |      |  | $ | 7,294      |   |  | $ | 3,690      |  
|Equipment revenue                                               |                                          |                          | 2,049      |      |  |   | 3,056      |   |  |   | 2,822      |  
|Other revenue                                                   |                                          |                          | 4,207      |      |  |   | 5,261      |   |  |   | 5,148      |  
|                                                                |                                          |                          |            |      |  |   |            |   |  |   |            |  
|Total Revenue                                                   |                                          |                          | 13,784     |      |  |   | 15,611     |   |  |   | 11,660     |  
|Operating Expenses                                              |                                          |                          |            |      |  |   |            |   |  |   |            |  
|Cost of Services (excludes depreciation shown separately below) |                                          |                          |            |      |  |   |            |   |  |   |            |  
|Satellite and transmission, programming and other               |                                          |                          | 30,078     |      |  |   | 27,556     |   |  |   | 18,592     |  
|Cost of equipment                                               |                                          |                          | 7,569      |      |  |   | 16,615     |   |  |   | 6,725      |  
|Research and development                                        |                                          |                          | 7,100      |      |  |   | 2,563      |   |  |   | 1,040      |  
|Selling and marketing                                           |                                          |                          | 10,866     |      |  |   | 24,028     |   |  |   | 18,676     |  
|General and administrative                                      |                                          |                          | 48,632     |      |  |   | 68,243     |   |  |   | 67,956     |  
|Depreciation and amortization                                   |                                          |                          | 59,258     |      |  |   | 58,896     |   |  |   | 61,636     |  
|                                                                |                                          |                          |            |      |  |   |            |   |  |   |            |  
|Total Operating Expenses                                        |                                          |                          | 163,503    |      |  |   | 197,901    |   |  |   | 174,625    |  
|                                                                |                                          |                          |            |      |  |   |            |   |  |   |            |  
|                                                                |                                          |                          |            |      |  |   |            |   |  |   |            |  
|Loss from Operations                                            |                                          |                          | (149,719   | )    |  |   | (182,290   | ) |  |   | (162,965   | )
|Other Income (Expense)                                          |                                          |                          |            |      |  |   |            |   |  |   |            |  
|Gain (loss) on extinguishment of debt                           |                                          |                          | (1,435     | )    |  |   |           |   |  |   | 14,130     |  
|Interest income                                                 |                                          |                          | 4,689      |      |  |   | 11,331     |   |  |   | 6,596      |  
|Interest expense                                                |                                          |                          | (13,460    | )    |  |   | (9,332     | ) |  |   | (9,884     | )
|Write-off of deferred debt issuance costs                       |                                          |                          | (11,516    | )    |  |   |           |   |  |   |           |  
|Other income (expense)                                          |                                          |                          | (559       | )    |  |   | (4,759     | ) |  |   | 2,600      |  
|                                                                |                                          |                          |            |      |  |   |            |   |  |   |            |  
|Total Other Income (Expense)                                    |                                          |                          | (22,281    | )    |  |   | (2,760     | ) |  |   | 13,442     |  
|                                                                |                                          |                          |            |      |  |   |            |   |  |   |            |  
|Loss Before Income Taxes                                        |                                          |                          | (172,000   | )    |  |   | (185,050   | ) |  |   | (149,523   | )
|Income Tax Benefit (Provision)                                  |                                          |                          | 2,493      |      |  |   | 56,447     |   |  |   | 69,660     |  
|                                                                |                                          |                          |            |      |  |   |            |   |  |   |            |  
|Net Loss                                                        |                                          | $                        | (169,507   | )    |  | $ | (128,603   | ) |  | $ | (79,863    | )
|                                                                |                                          |                          |            |      |  |   |            |   |  |   |            |  
|Loss per Sharebasic and diluted                                |                                          | $                        | (4.22      | )    |  | $ | (3.44      | ) |  | $ | (2.77      | )
|                                                                |                                          |                          |            |      |  |   |            |   |  |   |            |  
|Weighted Average Number of Shares Outstanding                   |                                          |                          | 40,187,346 |      |  |   | 37,395,558 |   |  |   | 28,828,958 |  
|                                                                |                                          |                          |            |      |  |   |            |   |  |   |            |  

Twelve months ended December 31, 2007 compared with twelve months ended December 31, 2006

Revenue

The
table below presents our operating revenue for the twelve months ended December 31, 2007 and 2006, together with the relevant percentage of total revenue represented by each revenue category.



|                |  |                                  |        |                 |       |   |  |   |                 |  |       |  
|--------------- |  | -------------------------------- | ------ | --------------- | ----- | - |  | - | --------------- |  | ----- | -
|                |  | Twelve months ended December 31, |       
|                |  | 2007                             |        |                 | 2006  |  
|                |  |                                  |        | Percentof total |       |   |  |   | Percentof total | 
|                |  | ($ in thousands)                 |       
|Revenue:        |  |                                  |        |                 |       |   |  |   |                 |  |       |  
|Subscription    |  | $                                | 7,528  |                 | 54.6  |   |  | $ | 7,294           |  | 46.7  |  
|Equipment sales |  |                                  | 2,049  |                 | 14.9  |   |  |   | 3,056           |  | 19.6  |  
|Other           |  |                                  | 4,207  |                 | 30.5  |   |  |   | 5,261           |  | 33.7  |  
|                |  |                                  |        |                 |       |   |  |   |                 |  |       |  
|Total revenue:  |  | $                                | 13,784 |                 | 100.0 | % |  | $ | 15,611          |  | 100.0 | %
|                |  |                                  |        |                 |       |   |  |   |                 |  |       |  



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Total revenue for the twelve months ended December 31, 2007 was $13.8 million, a 11.7% decrease
compared with $15.6 million for the twelve months ended December 31, 2006. This was primarily due to decrease in equipment sales and other revenue during the year ending December 31, 2007.

Subscription revenue. Subscription revenue for the twelve months ended December 31, 2007 was approximately $7.5 million, an increase of
3.2% compared with $7.3 million generated in the twelve months ended December 31, 2006. This increase in subscription revenues was primarily due to the increase in average revenue per subscriber in India and Rest of the World (ROW) during the
twelve months ended December 31, 2007 as compared to twelve months ended December 31, 2006.



| |  | Average Monthly Subscription Revenue Per Subscriber (ARPU). Blended ARPU (for India and ROW) was $3.39 for the twelve months ended December 31, 2007 and
$3.83 for the twelve months ended December 31, 2006. The reduction in blended ARPU for 2007 compared to 2006 resulted from the larger subscribers weighing in India as compared to ROW, where India market ARPU is lower than other markets.
ARPU from India was $3.11 for the twelve months ended December 31, 2007, and $3.01 for the twelve months ended December 31, 2006. The marginal increase in ARPU for India during the year 2007 is primarily due to weakening of the US Dollar
with respect to foreign currency in which the revenue is earned.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Equipment sales revenue. Equipment sales
revenue was $2.0 million for the twelve months ended December 31, 2007, a decrease of 32.95% compared with $3.1 million for the twelve months ended December 31, 2006. This decrease was primarily due to decreased unit sales in India. We
sold approximately 67,000 receivers in the twelve months ended December 31, 2007, compared with approximately 160,000 receivers sold in the twelve months ended December 31, 2006.

Other revenue. Other revenue for the twelve months ended December 31, 2007 was $4.2 million, a decrease of 20.0% compared with $5.3 million
for the twelve months ended December 31, 2006. This decrease was primarily due to a decrease in government service revenue, miscellaneous other revenue and data subscription revenue partially offset by an increase in capacity lease revenue.
Other revenue primarily consists of capacity lease revenue, government services revenue, data subscription revenue, licensing/manufacturing income and syndication income.

Capacity lease revenue. Satellite capacity leasing revenue for the twelve months ended December 31, 2007 was $ 2.7 million, compared with $1.0 million for the twelve months ended
December 31, 2006, an increase of 157% primarily due to increase of capacity services to existing customers and addition of new capacity leases in France and South Africa during the year ending December 31, 2007.

Government services revenue. Government services revenue for the twelve months ended December 31, 2007 was $0.6 million, a decrease of
70.6% compared with $1.7 million for the twelve months ended December 31, 2006. Government services revenues decreased as a result of completion of Pakistan Education Initiative (PEI) contract in 2006 and no further service undertaken in 2007.

Miscellaneous other revenue. Other revenue (including licensing/manufacturing income and syndication income) for the twelve months
ended December 31, 2007 was $ 0.8 million, a decrease of 68% compared with $2.5 million, in the twelve months ended December 31, 2006. The decrease is the result of completion of certain contracts that ended in 2006.



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Cost of services

The table below presents our costs of services for the twelve months ended December 31, 2007 and 2006, together with the relevant percentages of
total cost of services for each cost category.



|                                    |  |                                  |        |                 |       |   |  |   |                 |  |       |  
|----------------------------------- |  | -------------------------------- | ------ | --------------- | ----- | - |  | - | --------------- |  | ----- | -
|                                    |  | Twelve months ended December 31, |       
|                                    |  | 2007                             |        |                 | 2006  |  
|                                    |  |                                  |        | Percentof total |       |   |  |   | Percentof total | 
|                                    |  | ($ in thousands)                 |       
|Cost of services:                   |  |                                  |        |                 |       |   |  |   |                 |  |       |  
|Engineering & broadcast operations  |  | $                                | 14,334 |                 | 38.1  | % |  | $ | 15,332          |  | 34.7  | %
|Content & programming               |  |                                  | 12,175 |                 | 32.3  | % |  |   | 10,147          |  | 23.0  | %
|Customer care, billing & collection |  |                                  | 2,889  |                 | 7.6   | % |  |   | 1,710           |  | 3.9   | %
|Cost of equipment                   |  |                                  | 7,569  |                 | 20.1  | % |  |   | 16,615          |  | 37.6  | %
|Other cost of services              |  |                                  | 680    |                 | 1.9   | % |  |   | 367             |  | 0.8   | %
|                                    |  |                                  |        |                 |       |   |  |   |                 |  |       |  
|Total cost of services:             |  | $                                | 37,647 |                 | 100.0 | % |  | $ | 44,171          |  | 100.0 | %
|                                    |  |                                  |        |                 |       |   |  |   |                 |  |       |  

Total cost of services for the twelve months ended December 31, 2007 was $37.6 million, a
decrease of 14.8% compared with $44.1 million in the twelve months ended December 31, 2006. This decrease was primarily due to decreases in cost of equipment, engineering and broadcast operations, offset by increases in content &
programming, customer care, billing and collection and other cost of services.

Engineering and broadcast
operations. Engineering and broadcast expense, including the cost of operating our two satellites, ground control systems and telecommunications links as well as our in-orbit insurance, for the twelve months ended December 31, 2007 was
$14.3 million, a decrease of 6.5% compared with $15.3 million in the twelve months ended December 31, 2006. This decrease was primarily due to reductions in the satellite insurance premiums.

Content and programming. Content and programming expense, which includes content production, music royalties and other content acquisition
costs, for the twelve months ended December 31, 2007 was $12.2 million, an increase of 19.9% compared with $10.1 million for the twelve months ended December 31, 2006. These expenses increased as we increased payments for music rights
royalties due to Bollywood and PPL content license expenses and license costs for ESPNs cricket matches.

Customer care,
billing & collection. Customer care, billing and collections expense for the twelve months ended December 31, 2007 was $2.9 million, an increase of 70.6% compared to $1.7 million for the twelve months ended December 31,
2006. This increase was due to increased retention efforts on our subscriber base.

Cost of Equipment. Cost of equipment for
the twelve months ended December 31, 2007 was $7.6 million, a decrease of 54.4% compared with $16.6 million, in the twelve months ended December 31, 2006. Cost of equipment in 2007 includes a write-off of $2.1 million for receiver parts
purchased in earlier years that are now obsolete as a result of the Companys decision to move to the European technology. Cost of equipment in 2006 includes approximately $5.1 million due to recognition of additional liability to reflect the
maximum purchase price commitment. Cost of equipment decreased approximately $6.1 million in 2007 due to a decreased number of receivers being sold in India. We sold approximately 67,000 receivers in the twelve months ended December 31, 2007,
compared with approximately 160,000 receivers sold in the twelve months ended December 31, 2006.



| |  | Subscriber Acquisition Cost (SAC)Total blended SAC (for India and ROW) calculated based on unit sales to our distributors, was approximately $23 per
subscriber for the twelve months ended December 31, 2007 and $35 for the twelve months ended December 31, 2006. SAC for India was approximately $24 per subscriber for the twelve months ended December 31, 2007 and approximately
$38 per subscriber for the twelve months ended December 31, 2006.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Other cost of services. Other cost of services for the twelve months ended December 31,
2007 was $0.7 million, an increase of 85.3% compared to $0.4 million in the twelve months ended December 31, 2006. This increase was primarily due to increases in program management and programming software fees in 2007.

Operating expense

The table
below presents our operating expense for the twelve months ended December 31, 2007 and 2006, together with the relevant percentage increase (decrease) year-over-year.



|                              |  |                                  |         |                 |       |   |      |   |                 |  |       |  
|----------------------------- |  | -------------------------------- | ------- | --------------- | ----- | - | ---- | - | --------------- |  | ----- | -
|                              |  | Twelve Months Ended December 31, |        
|                              |  | 2007                             |         | Percentof total |       |   | 2006 |   | Percentof total | 
|Operating expense:            |  |                                  |         |                 |       |   |      |   |                 |  |       |  
|Cost of Services              |  | $                                | 37,647  |                 | 23.1  | % |      | $ | 44,171          |  | 22.3  | %
|Research and development      |  |                                  | 7,100   |                 | 4.3   | % |      |   | 2,563           |  | 1.3   | %
|Selling and marketing         |  |                                  | 10,866  |                 | 6.7   | % |      |   | 24,028          |  | 12.1  | %
|General & administrative      |  |                                  | 48,632  |                 | 29.7  | % |      |   | 68,243          |  | 34.5  | %
|Depreciation and amortization |  |                                  | 59,258  |                 | 36.2  | % |      |   | 58,896          |  | 29.8  | %
|                              |  |                                  |         |                 |       |   |      |   |                 |  |       |  
|Total operating expense:      |  | $                                | 163,503 |                 | 100.0 | % |      | $ | 197,901         |  | 100.0 | %
|                              |  |                                  |         |                 |       |   |      |   |                 |  |       |  

Total operating expense for the twelve months ended December 31, 2007 was $163.5 million, a
decrease of 17.4% compared with $197.9 million for the twelve months ended December 31, 2006. This decrease was primarily due to decreases in our cost of services (discussed previously), decreases in selling and marketing and general and
administrative expenses, offset by an increase in research and development. Our increase in research & development expense is due to increase in receiver product development activities. Our selling and marketing expense for the twelve
months ended December 31, 2007 was $10.9 million, a decrease of 54.8% compared with $24.0 million in the twelve months ended December 31, 2006. This decrease was primarily due to the Companys decision to significantly reduce
marketing activity in India until the Company receives its India license to launch its mobile activity. Our general and administrative expense for the twelve months ended December 31, 2007 was $48.6 million, a decrease of 28.7% compared with
$68.2 million in the twelve months ended December 31, 2006. This decrease was primarily due to a $6.0 million decrease in bonus and severance costs, a decrease of $1.0 million in rent charges for our London facility, a one-time moving charge in
2006, a reduction in professional fees of $4.3 million and a $6.7 million decrease in stock based compensation. The Company granted certain key executives restricted stock awards, in connection with our initial public offering in August 2005, which
vested over a six month period. This vesting period was extended through January 3, 2007, hence the reduction in stock compensation expense related to these restricted stock grants for this period compared to last year. Depreciation and
amortization expense for the twelve months ended December 31, 2007 and 2006 were relatively constant.



| |  | Cost Per Gross Addition (CPGA) Total blended CPGA expense (for India and ROW) was approximately $7.9 million for the twelve months ended
December 31, 2007 and approximately $22.6 million for the twelve months ended December 31, 2006. Total CPGA expense for India was approximately $6.8 million for the twelve months ended December 31, 2007 and approximately $20.9 million
for the twelve months ended December 31, 2006. Unit blended CPGA (for India and ROW), was approximately $87 for the twelve months ended December 31, 2007 and approximately $140 for the twelve months ended December 31, 2006. CPGA for
India, was approximately $82 for the twelve months ended December 31, 2007 and approximately $136 for the twelve months ended December 31, 2006. Unit CPGA has decreased due to overall decreased marketing activity as discussed previously.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other income (expense)

Loss on extinguishment of debt. On June 1, 2007, the Company entered into a restructuring agreement with its debt holders as described in Note C  Debt to the financial statements. As a result of the
restructuring, the



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Company recorded a $1.4 million loss. The Company also wrote off in 2007 all previously capitalized debt offering costs related to this debt which totaled
$11.5 million.

Interest income. Interest income for the twelve months ended December 31, 2007 was $4.7 million, a
decrease of 58.7% compared with $11.3 million in the twelve months ended December 31, 2006. This decrease was due to decreased average cash balances resulting from working capital needs, operating losses and a $50 million repayment of debt as
part of the restructuring of our Convertible Notes. See Note C  Debt of the financial statements.

Interest
expense. Interest expense for the twelve months ended December 31, 2007 was $13.5 million, an increase of 45.2% compared with $9.3 million in the twelve months ended December 31, 2006. On June 1, 2007, we completed a
restructuring agreement with the holders of the $155 million Convertible Notes. Although the total debt has been reduced to $105 million, the refinanced balance of the debt carries a higher interest rate; a portion of the interest expense is based
on LIBOR + 6.5%, thus our future interest expense will fluctuate accordingly.

Other expense. Other expense for the twelve
months ended December 31, 2007 was $0.6 million compared with other expense of $4.8 million recorded in the twelve months ended December 31, 2006. This decrease was due to a write-off of leasehold improvements in 2006 and foreign currency
fluctuation adjustment under a contract where our payment obligation was denominated in Euros.

Income tax

During the twelve months ending December 31, 2007, the Company recorded an income tax benefit of $2.5 million compared to $56.4 million for the
twelve months ending December 31, 2006. This benefit is the result of current period operating losses reduced by the establishment of a valuation allowance on certain U.S. and foreign deferred tax assets amounting to approximately $65.1
million.

Twelve months ended December 31, 2006 compared with twelve months ended December 31, 2005

Revenue

The table below
presents our operating revenue for the twelve months ended December 31, 2006 and 2005, together with the relevant percentage of total revenue represented by each revenue category.



|                |  |                                  |        |                 |       |   |  |   |                 |  |       |  
|--------------- |  | -------------------------------- | ------ | --------------- | ----- | - |  | - | --------------- |  | ----- | -
|                |  | Twelve months ended December 31, |       
|                |  | 2006                             |        |                 | 2005  |  
|                |  |                                  |        | Percentof total |       |   |  |   | Percentof total | 
|                |  | ($ in thousands)                 |       
|Revenue:        |  |                                  |        |                 |       |   |  |   |                 |  |       |  
|Subscription    |  | $                                | 7,294  |                 | 46.7  |   |  | $ | 3,690           |  | 31.6  |  
|Equipment sales |  |                                  | 3,056  |                 | 19.6  |   |  |   | 2,822           |  | 24.2  |  
|Other           |  |                                  | 5,261  |                 | 33.7  |   |  |   | 5,148           |  | 44.2  |  
|                |  |                                  |        |                 |       |   |  |   |                 |  |       |  
|Total revenue:  |  | $                                | 15,611 |                 | 100.0 | % |  | $ | 11,660          |  | 100.0 | %
|                |  |                                  |        |                 |       |   |  |   |                 |  |       |  

Total revenue for the twelve months ended December 31, 2006 was $15.6 million, a 33.9 %
increase compared with $11.7 million for the twelve months ended December 31, 2005. This was primarily due to increased revenue from subscribers to our DARS service and equipment sales.

Subscription revenue. Subscription revenue for the twelve months ended December 31, 2006 was approximately $7.3 million, an increase of
97.7% compared with $3.7 million generated in the twelve months



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ended December 31, 2005. This increase in subscription revenues was primarily due to the increase in our paying subscribers. Subscription revenue
includes approximately $0.7 million from a contract with KIE which terminated on January 1, 2007.



| |  | Average Monthly Subscription Revenue Per Subscriber (ARPU). Blended ARPU (for India and ROW) was $3.83 for the twelve months ended December 31, 2006 and
$4.66 for the twelve months ended December 31, 2005. The reduction in blended ARPU for 2006 compared to 2005 resulted from the shift of the subscribers weighing to India where single market ARPU is lower than other markets. ARPU from
India was $3.01 for the twelve months ended December 31, 2006, and $2.76 for the twelve months ended December 31, 2005. In July 2005, we increased the annual subscription pricing by 50% to Rs. 1,800 (approximately $40) from Rs. 1,200
(approximately $27). The increase in the monthly subscription price took effect for all billing cycles on or after July 7, 2005. During 2006, we also introduced a six months subscription package of Rs 1,000 (approximately $22).
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Equipment sales revenue. Equipment sales revenue was approximately $3.1 million for the twelve months ended
December 31, 2006, an increase of 8.3% compared with $2.8 million for the twelve months ended December 31, 2005. This increase was primarily due to increased unit sales in India, partially offset by a lower average selling price of the
receivers. We sold approximately 160,000 receivers in the twelve months ended December 31, 2006, compared with approximately 82,000 receivers sold in the twelve months ended December 31, 2005.

Other revenue. Other revenue for the twelve months ended December 31, 2006 was $5.3 million, an increase of 2.2 % compared with $5.1
million for the twelve months ended December 31, 2005. This increase was primarily due to an increase in miscellaneous other revenue partially offset by a decrease in government services revenue and capacity lease revenue. Other revenue
primarily consists of capacity lease revenue, government services revenue, data subscription revenue, licensing/manufacturing income and syndication income.

Capacity lease revenue. Satellite capacity leasing revenue for the twelve months ended December 31, 2006 was $1.0 million, compared with $1.1 million for the twelve months ended December 31,
2005.

Government services revenue. Government services revenue for the twelve months ended December 31, 2006 was $1.7
million, a decrease of 0.9% compared with $1.8 million for the twelve months ended December 31, 2005. Government services revenues decreased as we completed the Pakistan Education Initiative (PEI) contract and finalized tasks.

Miscellaneous other revenue. Other revenue (including licensing/manufacturing income and syndication income) for the twelve months ended
December 31, 2006 was $2.5 million, an increase of 5.9% compared with $2.3 million, in the twelve months ended December 31, 2005. This increase was principally due to revenue from a contract with the European Union, a new data service
contract launched in the fourth quarter of 2005, an increase in syndication revenues from XM Radio, and a litigation settlement from a former broadcaster.



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Cost of services

The table below presents our costs of services for the twelve months ended December 31, 2006 and 2005, together with the relevant percentages of
total cost of services for each cost category.



|                                    |  |                                  |        |                 |       |   |  |   |                 |  |       |  
|----------------------------------- |  | -------------------------------- | ------ | --------------- | ----- | - |  | - | --------------- |  | ----- | -
|                                    |  | Twelve months ended December 31, |       
|                                    |  | 2006                             |        |                 | 2005  |  
|                                    |  |                                  |        | Percentof total |       |   |  |   | Percentof total | 
|                                    |  | ($ in thousands)                 |       
|Cost of services:                   |  |                                  |        |                 |       |   |  |   |                 |  |       |  
|Engineering & broadcast operations  |  | $                                | 15,332 |                 | 34.7  | % |  | $ | 12,279          |  | 48.5  | %
|Content & programming               |  |                                  | 10,147 |                 | 23.0  | % |  |   | 3,969           |  | 15.7  | %
|Customer care, billing & collection |  |                                  | 1,710  |                 | 3.9   | % |  |   | 658             |  | 2.6   | %
|Cost of equipment                   |  |                                  | 16,615 |                 | 37.6  | % |  |   | 6,725           |  | 26.6  | %
|Other cost of services              |  |                                  | 367    |                 | 0.8   | % |  |   | 1,685           |  | 6.6   | %
|                                    |  |                                  |        |                 |       |   |  |   |                 |  |       |  
|Total cost of services:             |  | $                                | 44,171 |                 | 100.0 | % |  | $ | 25,316          |  | 100.0 | %
|                                    |  |                                  |        |                 |       |   |  |   |                 |  |       |  

Total cost of services for the twelve months ended December 31, 2006 was $44.2 million, an
increase of 74.5% compared with $25.3 million in the twelve months ended December 31, 2005. This increase was primarily due to increases in the cost of equipment, engineering and broadcast operations, and content & programming.

Engineering and broadcast operations. Engineering and broadcast expense, including the cost of operating our two satellites,
ground control systems and telecommunications links as well as our in-orbit insurance, for the twelve months ended December 31, 2006 was $15.3 million, an increase of 24.9% compared with $12.3 million in the twelve months ended
December 31, 2005. This increase was primarily due to increased spending on product development efforts, partially offset by a pricing adjustment related to satellite monitoring services provided by a vendor.

Content and programming. Content and programming expense, which includes content production, music royalties and other content acquisition
costs, for the twelve months ended December 31, 2006 was $10.1 million, an increase of 155.7% compared with $4.0 million for the twelve months ended December 31, 2005. These expenses increased as we increased staffing levels to support the
launch of live programming and additional channels specifically for the Indian market. New channels included PLAY, the first 24 hour sports talk channel in that market, and Falak, Indias first 24 hour Urdu channel. We also increased payments
for music rights royalties due to the addition of a Bollywood content license expense, PPL license expenses and changes in other content royalties (IFPI, PRS London).

Customer care, billing & collection. Customer care, billing and collections expense for the twelve months ended December 31, 2006 was $1.7 million, an increase of 159.9% compared to $0.7
million for the twelve months ended December 31, 2005. This increase was due to increased subscriber base.

Cost of
Equipment. Cost of equipment for the twelve months ended December 31, 2006 was $16.6 million, an increase of 147.1 % compared with $6.7 million, in the twelve months ended December 31, 2005. Cost of equipment includes
approximately $5.1 million due to recognition of additional liability to reflect the maximum purchase price commitment.

Excluding this
expense, cost of equipment of approximately $11.6 million increased due to an increased number of receivers being sold in India as we focused on ramping up subscriptions in that market.



| |  | Subscriber Acquisition Cost (SAC)Total blended SAC (for India and ROW) calculated based on unit sales to our distributors, was approximately $35 per
subscriber for the twelve months ended December 31, 2006
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | and $30 for the twelve months ended December 31, 2005. SAC for India, was approximately $38 per subscriber for the twelve months ended
December 31, 2006 and approximately $36 per subscriber for the twelve months ended December 31, 2005.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other cost of services. Other cost of services for the twelve months ended December 31, 2006 was $0.4 million, a decrease of 78% compared to $1.7 million in the twelve months ended December 31, 2005. This decrease was
primarily due to reduction in staffing and overhead expenses incurred due to the completion of PEI contract in the fiscal year ended 2005

Operating expense

The table below presents our operating expense for the twelve months ended December 31, 2006
and 2005, together with the relevant percentage increase (decrease) year-over-year.



|                              |  |                                  |         |                 |       |   |      |   |         |  |       |  
|----------------------------- |  | -------------------------------- | ------- | --------------- | ----- | - | ---- | - | ------- |  | ----- | -
|                              |  | Twelve Months Ended December 31, |         | Percentof total |      
|                              |  | 2006                             |         | Percentof total |       |   | 2005 |  
|Operating expense:            |  |                                  |         |                 |       |   |      |   |         |  |       |  
|Cost of Services              |  | $                                | 44,171  |                 | 22.3  | % |      | $ | 25,316  |  | 14.5  | %
|Research and development      |  |                                  | 2,563   |                 | 1.3   | % |      |   | 1,040   |  | .6    | %
|Selling and marketing         |  |                                  | 24,028  |                 | 12.1  | % |      |   | 18,676  |  | 10.7  | %
|General & administrative      |  |                                  | 68,243  |                 | 34.5  | % |      |   | 67,956  |  | 38.9  | %
|Depreciation and amortization |  |                                  | 58,896  |                 | 29.8  | % |      |   | 61,636  |  | 35.3  | %
|                              |  |                                  |         |                 |       |   |      |   |         |  |       |  
|Total operating expense:      |  | $                                | 197,901 |                 | 100.0 | % |      | $ | 174,625 |  | 100.0 | %
|                              |  |                                  |         |                 |       |   |      |   |         |  |       |  

Total operating expense for the twelve months ended December 31, 2006 was $197.9 million, an
increase of 13.3% compared with $174.6 million for the twelve months ended December 31, 2005. This increase was primarily due to increases in our cost of services (discussed previously) and selling and marketing expenses. Our increase in
research & development expense is due to increase in receiver product development activities. Our selling and marketing expense for the twelve months ended December 31, 2006 was $24.0 million, an increase of 28.7 % compared with
$18.7 million in the twelve months ended December 31, 2005. This increase was primarily due to increased marketing activity as we ramped up our advertising activities in our launched markets. Our general and administrative expense for the
twelve months ended December 31, 2006 was $68.2 million, an increase of 0.4% compared with $68.0 million in the twelve months ended December 31, 2005. This increase was primarily due to a $8.9 million increase in headcount expense as we
increased staffing levels to execute on our business plan, and a $4.0 million increase in outside services (primarily temporary consultants, and technical & regulatory services) offset by a $14.5 million decrease in stock based
compensation. The Company granted certain key executives restricted stock awards, in connection with our initial public offering in August 2005, which vested over a six month period. This vesting period was extended through January 3, 2007,
hence the reduction in stock option expense related to these options for 2006 compared to 2005. Depreciation and amortization expense for the twelve months ended December 31, 2006 was $58.9 million, a 4.5% decrease as compared to $61.6 million
for the twelve months ended December 31, 2005.



| |  | Cost Per Gross Addition (CPGA) Total blended CPGA expense (for India and ROW) was approximately $ 22.6 million for the twelve months ended
December 31, 2006 and approximately $16.1 million for the twelve months ended December 31, 2005. Total CPGA expense for India was approximately $20.9 million for the twelve months ended December 31, 2006 and approximately $13.7
million for the twelve months ended December 31, 2005. Unit blended CPGA (for India and ROW), was approximately $140 for the twelve months ended December 31, 2006 and approximately $173 for the twelve months ended December 31, 2005.
CPGA for India, was approximately $136 for the twelve months ended December 31, 2006 and approximately $188 for the twelve months ended December 31, 2005. Unit CPGA decreased due to marketing expenditure being spread over a larger number
of gross subscriber additions.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Other income (expense)

Interest income. Interest income for the twelve months ended December 31, 2006 was $11.3 million, an increase of 71.8 % compared
with $6.6 million in the twelve months ended December 31, 2005. This increase was due to increased average cash balances as a result of our 2005 IPO, and higher interest rates.

Interest expense. Interest expense for the twelve months ended December 31, 2006 was $9.3 million, a decrease of 5.6 % compared
with $9.9 million in the twelve months ended December 31, 2005. This decrease was primarily due to the extinguishments of debt related to the Alcatel settlement in the twelve months ended December 31, 2005.

Other income (expense). Other expense for the twelve months ended December 31, 2006 was $4.8 million compared with other income of $2.6
million recorded in the twelve months ended December 31, 2005. This increase was due to a write-off of leasehold improvements.

Income tax

During the twelve months ending December 31, 2006, the Company recorded an income tax benefit of
$56.4 million compared to $69.7 million for the twelve months ending December 31, 2005. This benefit is the result of current period operating losses and re-establishment of a valuation allowance on a foreign net operating loss amounting
to approximately $2.1 million.

Liquidity and Capital Resources

Overview

As of December 31, 2007, we had cash and cash equivalents of $3.6 million.
Cash and cash equivalents and marketable securities decreased $161.9 million during the twelve months ended December 31, 2007. This decrease resulted from $106.6 million used in operating activities, $127.6 million provided by investing
activities, and $46.4 million used in financing activities. Cash flows used in operating activities includes the net loss of $169.5 million, and $16.9 million loss from working capital, offset in part by $79.9 million in non cash expenses included
in net loss. Cash flows from investing activities consisted mainly of $137.9 million in net sales of marketable securities, $1.9 million used for the purchase of property and equipment and $7.9 million used for purchase of satellite and related
systems and $0.4 million realized from Restricted Cash and Investment. Cash flows used in financing activities of $46.4 million mainly included the cash redemption of $50 million of Convertible Notes as part of the convertible debt restructuring,
offset in part by proceeds from exercise of warrants and employee options. The net effect of foreign currency rate changes on cash and cash equivalents was $1.4 million.

Historical sources of cash

We raised $1.7 billion of equity and debt net proceeds from
inception through August 3, 2005 from investors and strategic partners to fund our operations.

IPO

On August 3, 2005, we agreed to sell 11,500,000 shares of common stock at a price to the public of $21.00 per share in our initial public
offering. The aggregate gross proceeds to us from the public offering were approximately $241.5 million. We incurred expenses of approximately $20.5 million of which approximately $16.9 million represented underwriting discounts and commissions and
approximately $3.6 million represented expenses related to the offering. Net proceeds to us from the offering were $221.0 million.

XM
Investment

On July 18, 2005, we issued XM Satellite Radio 1,562,500 shares of Class A common stock for an aggregate purchase
price of $25 million. The net proceeds after deducting expenses were $22.5 million.



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Yenura Financing

In December 2007, the Company entered into a facility agreement with Yenura Pte Ltd. (Yenura) in which Yenura agreed to make available up to $40 million from time to time pursuant to draw down notices issued on or
prior to January 31, 2008, in consideration for the issuance of certain subordinated convertible notes. The subordinated convertible notes mature on January 3, 2013 and accrue interest at the rate of 8% per year and shall be payable
in arrears with the first interest date being January 15, 2009. During the first quarter 2008, the Company has drawn $19.2 million under this facility due to Yenuras slow action in making the full committed amount available. Yenura is a
company controlled by Noah Samara, chairman and CEO of Worldspace (referred to Note ERelated-Party Transaction to the financial statements for further discussion).

Uses of Cash

Our cash used
during the twelve months ended December 31, 2007, consisted primarily of funding operating expenses, and working capital, $17.2 million for income tax obligations; interest payments of $11.3 million; $50 million repayment as part of the
restructuring of our Convertible NotesSee Note CDebt of the financial statements, and $4.2 million in associated restructuring advisory and legal fees.

Contractual Obligations

The following table shows our contractual obligations as of
December 31, 2007:



|                                  |  |                                       |  |           |  |           |  |               |  |          
|--------------------------------- |  | ------------------------------------- |  | --------- |  | --------- |  | ------------- |  | ---------
|                                  |  | Payments Due By Period (in thousands)
|                                  |  | 2008                                  |  | 2-3 years |  | 4-5 years |  | After 5 years |  | Total    
|Long-term debt (1)                |  | 27,500                                |  | 70,091    |  | 200       |  |              |  | 97,791   
|Operating lease obligations       |  | 4,056                                 |  | 7,576     |  | 7,229     |  | 11,367        |  | 30,228   
|Purchase obligations              |  | 24,255                                |  | 12,273    |  | 9,862     |  | 10,342        |  | 56,732   
|ERP implementation obligation     |  | 2,723                                 |  | 4,101     |  |          |  |              |  | 6,824    
|Contingent royalty obligation (2) |  |                                      |  |          |  |          |  | 1,814,175     |  | 1,814,175
|                                  |  |                                       |  |           |  |           |  |               |  |          
|Total contractual obligations     |  | 58,534                                |  | 94,041    |  | 17,291    |  | 1,835,884     |  | 2,005,750
|                                  |  |                                       |  |           |  |           |  |               |  |          



|(1) | On January 31, 2008, the Company made a principal and interest payment of $10 million to the senior secured note holders.
|--- | -------------------------------------------------------------------------------------------------------------------------

|(2) | Stonehouse royalty payment referenced under Note CDebt of Notes to Consolidated Financial Statements. The obligation will be reduced by any future payments made
under the royalty agreement and will remain on our balance sheet until 2015; the last year payment under the royalty agreement is required. We are not required to pay this obligation in full; payments are based on a 10% of EBITDA each year and
cannot be determined at this time.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Future Operating Liquidity and Capital Resource Requirements

Normal operating and capital expenditures during 2007 amounted to approximately $106.2 million for total cash spend of approximately $161.4 million,
leaving the Company with total cash and cash equivalents, restricted cash and investments, of about $9.9 million at December 31, 2007.

The focus of our execution includes continuing to build towards the launch of mobile services in Italy and the Middle East. We contemplate funding business development and technology related expenses geared towards a service launch in Italy
and the Middle East in early 2009, we anticipate minimal technology-related and other expenditures for a service launch in India and Bahrain; and for China, other European markets and other selected markets within our coverage areas, we anticipate
limited business development expenses.



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Our financial projections are based on assumptions which we believe are reasonable but contain
significant uncertainties. Based upon our current plans, our cash and cash equivalents will not be sufficient to cover our estimated funding needs for 2008. We will require significant additional financing in 2008 to continue implementing our
current business plan. The Company has not secured any commitment for new financing at this time nor can it provide any assurance that new financing will be available on commercially acceptable terms, if at all. If the Company is unable to secure
additional capital, it will be required to curtail its operations, and if these measures fail, it may not be able to continue its business.

Our ability to obtain the financing in the future will depend on several factors, including future market conditions; our success in developing, implementing and marketing our satellite radio service; our future creditworthiness; and
restrictions contained in agreements with our investors or lenders. If we fail to obtain any necessary financing on a timely basis or on attractive terms, our results of operations would be materially adversely affected. Additional financings will
increase our level of indebtedness and/or result in further dilution to existing shareholders.

We regularly evaluate our plans and
strategy. These evaluations may result in changes to our plans and strategy, some of which may be material and significantly change our cash requirement. Our business plan is based on estimates regarding expected future costs and expected revenue.
Our costs may exceed or our revenues, may fall short of our estimates, our estimates may change, and future developments may affect our estimates.

In December 2007, the Company entered into a facility agreement with Yenura Pte Ltd. (Yenura) in which Yenura agreed to make available up to $40 million from time to time pursuant to draw down notices issued on or prior to January 31,
2008, in consideration for the issuance of certain subordinated convertible notes. The subordinated convertible notes mature on January 3, 2013 and accrue interest at the rate of 8% per year and shall be payable in arrears with the first
interest date being January 15, 2009. Yenura has been slow in making the full committed amount available to the Company and consequently, as of March 31, 2008, the Company has drawn $19.2 million. The convertible notes shall be
convertible at the option of the note holders into shares of Class A Common Stock. The conversion amount shall be calculated as the portion of the principal drawdown plus any accrued and unpaid interest and late charges. The conversion rate
will be $4.25 per share. During the first quarter 2008, the Company drew down $19.2 million under this facility.

On January 31, 2008
a principal amount of $9.8 million plus interest was paid to the holders of the senior secured notes and the balance of $17.7 million plus interest of the senior secured notes that was issued as part of the convertible note restructuring will be
repayable on May 31, 2008.

Under the terms of the senior secured notes and amended and restated convertible notes we issued as part
of the convertible note restructuring, we may incur secured indebtedness of up to $75 million (less any amounts outstanding under the senior secured notes) of senior secured first priority indebtedness. We may borrow up to $100 million (less any
amounts outstanding under the amended and restated convertible notes) of senior secured second priority indebtedness which is pari passu with the amended and restated convertible notes and unlimited unsecured debt, as long as such debt has a
maturity date that is at least 91 days after the maturity date of the amended and restated convertible notes. We will be required to repay any outstanding principal of the senior secured notes from new equity or debt financing, certain excess cash
flow or the cash proceeds of asset sales and casualty events, subject to customary exceptions. We are not permitted to make any mandatory or optional prepayment on debt, (other than previously discussed under the Yenura financing agreement) while
the amended and restated convertible notes are outstanding.

Capital Expenditures

We have spent approximately $747 million on capital expenditures related to the development and launch of our satellites, for our ground systems and for
property and equipment. We may spend additional amounts to



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enhance our infrastructure with terrestrial repeaters depending on licenses and business requirement, if supported by an appropriate business model and
funding of such projects. Over the next 12 months, we anticipate technology, terrestrial repeater network installation expenses, chip-set and receiver development expenses and studio facility build-out expenses associated with rolling out our
services in Italy. We estimate those expenses to be approximately $60 million beginning in 2008. We expect to start our terrestrial repeater network build-out in key metropolitan areas in India in 2009, assuming we obtain the necessary regulatory
approvals. We currently estimate those costs to be approximately $20 million over the next few years. These amounts will need to be reviewed as we conduct actual testing, including further topographical analysis. We also expect to start our
terrestrial repeater build out in Bahrain; however we do not expect this cost to be significant. Until we receive the final approvals from Chinas regulatory agencies, we will not start the build-out of a terrestrial repeater network in China.
Our future capital expenditures will depend on our business strategy and our response to business opportunities including receipt of additional licenses and trends in our industry and our markets.



|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------

Foreign Currency

As a global company, we are exposed to foreign currency risks that arise from normal business operations.
These risks include the translation of local currency balances of our foreign subsidiaries, inter-company balances between subsidiaries that operate in different functional currencies and transactions with customers, suppliers and employees that are
denominated in foreign currencies. Our objective is to minimize our exposure to these risks through our normal operating activities and, where appropriate, to have these transactions denominated in United States dollars. For the year ended
December 31, 2007, approximately 76% of our total revenues and 25% of total operating expenses were denominated in foreign currencies. For the year ended December 31, 2006, approximately 72% of our total revenues and 33% of total operating
expenses were denominated in foreign currencies. The following table shows approximately the split of these foreign currency exposures by principal currency:



|                                              |  |                                                |   |  |             |   |  |                |   |  |                   |   |  |       |   |  |               |  
|--------------------------------------------- |  | ---------------------------------------------- | - |  | ----------- | - |  | -------------- | - |  | ----------------- | - |  | ----- | - |  | ------------- | -
|                                              |  | Foreign Currency Exposure at December 31, 2007 |  
|                                              |  | Euro                                           |   |  | IndianRupee |   |  | KenyanShilling |   |  | South AfricanRand |   |  | Other |   |  | TotalExposure |  
|Total Revenues                                |  | 10                                             | % |  | 78          | % |  | 0              | % |  | 8                 | % |  | 4     | % |  | 100           | %
|Total Cost of Revenues and Operating Expenses |  | 16                                             | % |  | 55          | % |  | 0              | % |  | 6                 | % |  | 23    | % |  | 100           | %



|                                              |  |                                                |   |  |             |   |  |                |   |  |                   |   |  |       |   |  |               |  
|--------------------------------------------- |  | ---------------------------------------------- | - |  | ----------- | - |  | -------------- | - |  | ----------------- | - |  | ----- | - |  | ------------- | -
|                                              |  | Foreign Currency Exposure at December 31, 2006 |  
|                                              |  | Euro                                           |   |  | IndianRupee |   |  | KenyanShilling |   |  | South AfricanRand |   |  | Other |   |  | TotalExposure |  
|Total Revenues                                |  | 15                                             | % |  | 63          | % |  | 11             | % |  | 7                 | % |  | 4     | % |  | 100           | %
|Total Cost of Revenues and Operating Expenses |  | 13                                             | % |  | 64          | % |  | 1              | % |  | 5                 | % |  | 17    | % |  | 100           | %

Interest Rates

Our market risk from changes in interest rates is not material since the Companys debt includes $45 million of the Senior Secured Notes which accrue interest at the London Inter Bank Offering Rate (LIBOR) plus
650 basis points per year and the amended and restated Convertible Notes which have a fixed interest rate. For the period June 1, 2007 through December 31, 2007 the LIBOR has not fluctuated significantly.

We classify our investments in money market funds as cash equivalents. We currently do not hedge either foreign exchange or interest rate exposures, but
do not believe that an increase in interest rates would have a material effect on the value of our cash equivalents or the convertible notes.

At December 31, 2007, we had $9.9 million in cash and cash equivalents and restricted cash and investments.



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|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------

The
consolidated financial statements of WorldSpace, Inc., including consolidated balance sheets as of December 31, 2007 and 2006, and consolidated statements of operations, consolidated statements of stockholders equity and consolidated
statements of cash flows for each of the three-years in the period ended December 31, 2007 and notes to the consolidated financial statements, together with a report thereon of Grant Thornton LLP, dated March 31, 2008, are attached hereto
as pages F-1 through F-29.



|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- | ------------------------------------------------------------------------------------

Not Applicable



|ITEM 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------

Disclosure Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure
controls and procedures (as that term is defined in Rules 13a-15(e) or 15(d)-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that, as of the end of the period, the Companys disclosure controls and procedures are effective, in all material respects, to ensure that information required to be disclosed in the reports that we file and submit under the Exchange
Act (i) is recorded, processed, summarized and reported as and when required and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure.

Managements Report on Internal Control Over Financial Reporting

Our management, including our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal
controls over financial reporting (as that term is defined in Rules 13a-15(f) under the Exchange Act) for the Company. Our internal control over financial reporting is designed, under the supervision of our Chief Executive Officer and Chief
Financial Officer, and effected by our board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with accounting principles generally accepted in the United States of America (GAAP). Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use
or disposition of our assets that could have a material effect on the financial statements.

We conducted an evaluation of the
effectiveness of our internal control over financial reporting as of December 31, 2007. This evaluation was based on the framework in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

Based on our evaluation
under the framework in Internal ControlIntegrated Framework, our Chief Executive Officer and Chief Financial Officer concluded that internal control over financial reporting was effective as of December 31, 2007.



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This annual report does not include an attestation report of our registered public accounting firm
regarding internal control over financial reporting. Managements report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide
only managements report in this annual report.

Changes in Internal Control Over Financial Reporting

There were no significant changes in the Companys internal control over financial reporting (as that term is defined in Rules 13a-15(f) under the
Exchange Act) that occurred during the fiscal quarter ended December 31, 2007 that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.



|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------

Not Applicable



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PART III



|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|-------- | ------------------------------------------------------

The information with respect to our directors required to be included pursuant to this Item 10 is included under the caption Item 1. Election of Directors in the Proxy Statement relating to the 2008 Annual Meeting of
Stockholders (the 2008 Proxy Statement) to be filed with the Securities and Exchange Commission pursuant to Rule 14a-6 under the Exchange Act of 1934, and is incorporated in this Item 10 by reference. The information with respect to the
our executive officers required to be included pursuant to this Item 10 is included under the caption Executive Officers of the Company in Part I of this Annual Report on Form 10-K and is incorporated in this Item 10
by reference.

The information with respect to the audit committee of our Board of Directors required to be included pursuant to this
Item 10 is included under the caption Committees of the Board of Directors in the 2008 Proxy Statement and is incorporated in this Item 10 by reference.

Since the date of our Proxy Statement for our Annual Meeting held on May 10, 2006, we have not adopted any material changes to the procedures by
which our security holders may recommend nominees to our Board of Directors.

The information with respect to Section 16(a) reporting
compliance required to be included in this Item 10 is included under the caption Section 16(a) Beneficial Ownership Reporting Compliance in the 2008 Proxy Statement and is incorporated in this Item 10 by reference.

We have adopted a code of ethics that applies to our chief executive officer and senior financial officers. A copy of this code of ethics
can be found on our website at www.worldspace.com. In the event of any amendment to, or waiver from, the code of ethics, we will publicly disclose the amendment or waiver by posting the information on our website.



|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------

The information with
respect to the executive compensation required to be included pursuant to this Item 11 is included under the caption Executive Compensation in the 2008 Proxy Statement and is incorporated in this Item 11 by reference.



|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------

The information with respect to security ownership of certain beneficial owners and management required to be included pursuant to this Item 12 is
included under the caption Directors, Executive Officers and Principal Stockholders Stock Ownership in the 2008 Proxy Statement and is incorporated in this Item 12 by reference.

The information with respect to securities authorized for issuance under our equity compensation plans required to be included pursuant to this
Item 12 is included under the captain Securities Authorized for Issuance under Equity Compensation Plans in our 2008 Proxy Statement and is incorporated in this Item 12 by reference.



|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|-------- | -------------------------------------------------------------------------

The information with respect to any reportable transaction, business relationship or indebtedness between WorldSpace and the beneficial owners of more than 5% of our Class A Common Stock, our directors or



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nominees for director, our executive officers or the members of the immediate families of such individuals that are required to be included pursuant to this
Item 13 is included in the 2008 Proxy Statement under the caption Certain Relationships and Related Party Transactions and Procedures for Approval of Related Party Transactions and is incorporated in this Item 13 by
reference.

The information with respect to the independence of directors required to be included pursuant to this Item 13 is included
in the 2008 Proxy Statement under the Captions Board of Directors, Committees of the Board of Directors, Board Independence Policy and Item 1 Election of Directors and is incorporated in this
Item 13 by reference.



|ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES
|-------- | --------------------------------------

The
information with respect to fees paid and services rendered to our independent registered public accounting firm required to be included pursuant to this Item 13 is included under caption Auditors Fees and Services in the 2008
Proxy Statement and is incorporated in this Item 14 by reference.

The information with respect to audit committee pre-approval
policies and procedures required to be included pursuant to this Item 14 is included under the caption Policy for Approval of Audit and Permitted Non-audit Services in the 2008 Proxy Statement and is incorporated in this
Item 14 by reference.



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PART IV



|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|-------- | ------------------------------------------

(a)(1)
The following Consolidated Financial Statements of WorldSpace, Inc. and report of independent registered public accounting firm are included in Item 8 of this Form 10-K:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2007 and 2006

Consolidated Statements of Operations for
the years ended December 31, 2007, 2006 and 2005

Consolidated Statements of Changes in Shareholders Deficit and Comprehensive
Loss for the years ended December 31, 2007, 2006 and 2005

Consolidated Statements of Cash Flows for the years ended December 31,
2007, 2006 and 2005

(a)(2) The following consolidated financial statement schedule is filed as part of this report:

Schedule IIValuation and Qualifying Accounts

All other schedules for which provision is made in the applicable accounting regulations of the SEC have been included in our Consolidated Financial Statements or the notes thereto, are not required under the related instructions or are
inapplicable, and therefore have been omitted.

(a)(3) The following exhibits are either provided with this Form 10-K or are incorporated
herein by reference:



|           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|---------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                        
|2.1        |  | Agreement and Plan of Merger dated December 28, 2004, between WorldSpace, Inc., a Maryland corporation, and the Company (filed as Exhibit 2.1 to the Companys Registration Statement on
Form S-1, SEC File No. 333-124044, and incorporated by reference)                                                                                                                                                                                         
|           | 
|3.1(a)     |  | Certificate of Incorporation of the Company (filed as Exhibit 3.1(a) to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated by
reference)                                                                                                                                                                                                                                                                  
|           | 
|3.1(b)     |  | Certificate of Amendment to the Certificate of Incorporation of the Company (filed as Exhibit 3.1(b) to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and
incorporated by reference)                                                                                                                                                                                                                                  
|           | 
|3.1(c)     |  | Certificate of Amendment to the Certificate of Incorporation of the Company (filed as Exhibit 3.1(c) to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and
incorporated by reference)                                                                                                                                                                                                                                  
|           | 
|3.2        |  | By-Laws of the Company as amended (filed as Exhibit 3.1 to the Companys Current Report on Form 8-K, filed on November 2, 2007, SEC File No. 000-51466, and incorporated by reference)                                                                                                                                                                                                                                                             
|           | 
|4.1        |  | Securities Purchase Agreement dated December 30, 2004 among the Company, WorldSpace, Inc., a Maryland corporation, Highbridge International LLC, Amphora Limited, OZ Master Fund, Ltd.,
AG Offshore Convertibles, Ltd., AG Domestic Convertibles, L.P., Citadel Equity Fund Ltd., and Citadel Credit Trading Ltd (filed as Exhibit 4.1 to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated
by reference)
|           | 
|4.2        |  | Registration Rights Agreement dated December 30, 2004 among the Company, Highbridge International LLC, Amphora Limited, OZ Master Fund, Ltd., AG Offshore Convertibles, Ltd., AG Domestic
Convertibles, L.P., Citadel Equity Fund Ltd., and Citadel Credit Trading Ltd. (filed as Exhibit 4.2 to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)                                         



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|           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|---------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|4.3        |  | Agreement dated April 13, 2007 among the Company, Highbridge International LLC, OZ Master Fund, Ltd., AG Offshore Convertibles, Ltd., Citadel Equity Fund Ltd. (filed as Exhibit 99.2 to the
Companys Current Report on Form 8-K filed on April 16, 2007, SEC File No. 000-51466, and incorporated by reference)                                                                                                                                                                                                                                                                                                                                     
|           | 
|4.4        |  | Registration Rights Agreement dated July 18, 2005 between the Company and XM Satellite Radio Holdings Inc. (filed as Exhibit 4.4 to the Companys Registration Statement on Form S-1, SEC
File No. 333-124044, and incorporated by reference)                                                                                                                                                                                                                                                                                                                                                                                                         
|           | 
|4.5        |  | Registration Rights Agreement, dated September 12, 2005, between the Company and Alcatel Alenia Space France SAS (filed as Exhibit 1.1 to the Companys Current Report on Form 8-K
filed on September 30, 2005, SEC File No. 000-51466, and incorporated by reference)                                                                                                                                                                                                                                                                                                                                                                                
|           | 
|4.6        |  | Form of Amendment, Redemption and Exchange Agreement among the Company, Highbridge International LLC, OZ Master Fund, Ltd., AG Offshore Convertibles, Ltd., and Citadel Equity Fund Ltd. (filed
as Exhibit 99.1 to the Companys Current Report on Form 8-K filed on June 4, 2007, SEC File No. 000-51466, and incorporated by reference)                                                                                                                                                                                                                                                                                                             
|           | 
|4.7        |  | Form of Amended and Restated Secured Convertible Note issued under the Amendment, Redemption and Exchange Agreement (filed as Exhibit 99.2 to the Companys Current Report on Form 8-K
filed on June 4, 2007, SEC File No. 000-51466, and incorporated by reference)                                                                                                                                                                                                                                                                                                                                                                                  
|           | 
|4.8        |  | Form of Warrant issued under the Amendment, Redemption and Exchange Agreement (filed as Exhibit 99.4 to the Companys Current Report on Form 8-K filed on June 4, 2007, SEC File No.
000-51466, and incorporated by reference)                                                                                                                                                                                                                                                                                                                                                                                                                        
|           | 
|4.9        |  | Registration Rights Agreement, dated June 1, 2007, among the Company Highbridge International LLC, OZ Master Fund, Ltd., AG Offshore Convertibles, Ltd., and Citadel Equity Fund Ltd.
(filed as Exhibit 99.5 to the Companys Current Report on Form 8-K filed on June 4, 2007, SEC File No. 000-51466, and incorporated by reference)                                                                                                                                                                                                                                                                                                                
|           | 
|4.10       |  | Facility Agreement, dated December 31, 2007, between the Company and Yenura Pte. Ltd. (filed as Exhibit 99.2 to the Companys Current Report on Form 8-K filed on January 7,
2008, SEC File No. 000-51466, and incorporated by reference)                                                                                                                                                                                                                                                                                                                                                                                                             
|           | 
|4.11       |  | Form of Subordinated Convertible Note (filed as Exhibit 99.3 to the Companys Current Report on Form 8-K filed on January 7, 2008, SEC File No. 000-51466, and incorporated by
reference)                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|           | 
|4.12       |  | Form of Waiver Letters in connection with the Proposed Yenura Financing (filed as Exhibit 99.3 to the Companys Current Report on Form 8-K filed on January 7, 2008, SEC File No.
000-51466, and incorporated by reference)                                                                                                                                                                                                                                                                                                                                                                                                                           
|           | 
|10.1       |  | Conversion Agreement dated as of August 29, 2006 between WorldSpace, Inc. and Yenura Pte. Ltd. (filed as Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q filed on
November 14, 2006, SEC File No. 333-51466, and incorporated by reference)                                                                                                                                                                                                                                                                                                                                                                                               
|           | 
|10.2       |  | Loan Restructuring Agreement dated September 30, 2003 among Stonehouse Capital Ltd., WorldSpace, Inc., a Maryland corporation, WorldSpace International Network Inc. and WorldSpace Satellite
Company Ltd., as amended by the First Amendment to the Loan Restructuring Agreement and Royalty Agreement dated September 28, 2004 among the same parties and the Second Amendment to the Loan Restructuring Agreement and Royalty Agreement dated
December 30, 2004 among the same parties as well as the Company (filed as Exhibit 10.2 to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)**



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|           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|---------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10.3(a)    |  | Royalty Agreement dated as of September 30, 2003 among Stonehouse Capital Ltd., WorldSpace, Inc., a Maryland corporation, WorldSpace International Network Inc. and WorldSpace Satellite
Company Ltd., as amended by the First Amendment to the Loan Restructuring Agreement and Royalty Agreement dated September 28, 2004 among the same parties, the Second Amendment to the Loan Restructuring Agreement and Royalty Agreement dated as of
December 30, 2004 among the same parties as well as the Company and the Third Amendment to Royalty Agreement dated as of June 29, 2005 among Stonehouse Capital, Ltd., the Company and WorldSpace Satellite Company, Ltd. (filed as Exhibit 10.3 to the
Companys Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference) **
|           | 
|10.3(b)    |  | Fourth Amendment, dated as of February 28, 2006, to the Royalty Agreement dated as of September 30, 2003 among Stonehouse Capital Ltd., WorldSpace, Inc., a Maryland corporation, WorldSpace
International Network Inc. and WorldSpace Satellite Company Ltd. (filed as Exhibit 10.3(b) to the Companys Annual Report on Form 10-K filed on March 31, 2006, SEC File No. 000-51466, and incorporated by reference)                                                                                                                                                                                                                                                                                                                                                                                            
|           | 
|10.4(a)    |  | Warrant Agreement, dated as of July 11, 1994 and extended May 28, 1999, between Mr. Benno A. Ammann and the Company (filed as Exhibit 10.4(a) to the Companys Registration Statement
on Form S-1, SEC File No. 333-124044, and incorporated by reference)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|           | 
|10.4(b)    |  | Warrant Agreement, dated as of July 11, 1994 and extended May 28, 1999, between Mr. Ronald V. Mangravite and the Company (filed as Exhibit 10.4(b) to the Companys
Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|           | 
|10.4(c)    |  | Warrant Agreement, dated as of July 11, 1994 and extended May 28, 1999, between Mr. Wondwossen Mesfin and the Company (filed as Exhibit 10.4(c) to the Companys Registration
Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|           | 
|10.4(d)    |  | Non-Qualified Shares Option Agreement, dated as of February 12, 1996, between Mr. Scott A. Katzmann and the Company (filed as Exhibit 10.4(d) to the Companys Registration Statement on
Form S-1, SEC File No. 333-124044, and incorporated by reference)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.4(e)    |  | Non-Qualified Shares Option Agreement, dated as of February 12, 1996, between Ms. Donna Lozito and the Company (filed as Exhibit 10.4(e) to the Companys Registration Statement on Form
S-1, SEC File No. 333-124044, and incorporated by reference)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|           | 
|10.4(f)    |  | Non-Qualified Shares Option Agreement, dated as of February 12, 1996, between Lindsay A. Rosenwald, M.D. and the Company (filed as Exhibit 10.4(f) to the Companys Registration
Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|           | 
|10.4(g)    |  | Warrant Agreement, dated as of May 15, 2003, between Consultant and the Company (filed as Exhibit 10.4(g) to the Companys Registration Statement on Form S-1, SEC File No. 333-124044,
and incorporated by reference)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|           | 
|10.4(h)    |  | WorldSpace, Inc. Common Stock Purchase Warrant dated as of July 18, 2005 issued to XM Satellite Radio Holdings Inc. Company (filed as Exhibit 10.4(h) to the Companys Registration
Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|           | 
|10.6       |  | Strategic Cooperation Agreement Between Analog Devices, Inc. and WorldSpace, Inc. for the Development and Marketing of WorldSpace-Ready Analog DSP Platforms dated November 5, 2003 (filed
as Exhibit 10.6 to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|           | 
|10.7(a)    |  | Standard Production, Marketing and License Agreement for China WorldSpace PC Card and China WorldSpace Receiver dated August 18, 2001 between WorldSpace International Network Inc. and
Xian Tongshi Technology Limited Cooperation (filed as Exhibit 10.7 to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)                                                                                                                                                                                                                                                                                                                                                                                                                                       



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|           |  |                                                                                                                                                                                                                                                                                                                                                                      
|---------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Description                                                                                                                                                                                                                                                                                                                                                          
|10.7(b)    |  | Agreement dated July 20, 2005 between Xian Tongshi Technology Limited and WorldSpace, Inc. (filed as Exhibit 10.7 to the Companys Registration Statement on Form S-1, SEC File No.
333-124044, and incorporated by reference)                                                                                                                                      
|           | 
|10.7(c)    |  | Cooperation Agreement dated April 4, 2006 between WorldSpace Corporation and Xian Tongshi Technology Limited (filed as Exhibit 1.1 to the Companys Current Report on Form 8-K filed
on April 10, 2006, SEC File No. 000-51466, and incorporated by reference)                                                                                                      
|           | 
|10.7(d)    |  | Agreement, dated December 21, 2005, between the registrant and Xian Tongshi Technology Limited (filed as Exhibit 1.1 to the Companys Current Report on Form 8-K filed on
December 23, 2005, SEC File No. 000-51466, and incorporated by reference)                                                                                                                 
|           | 
|10.8       |  | Supply Agreement and Standard WorldSpace Receiver Development, Production, Marketing and License Agreement, both dated December 1, 2000 between BPL Limited and WorldSpace International
Network Inc. (filed as Exhibit 10.8 to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)                            
|           | 
|10.9(a)    |  | Cooperation Agreement on Technical and Commercial Trial Operation of WorldSpace L-Band Satellite Multimedia Services between China Telecommunications Broadcast Satellite Corp and WorldSpace
Corporation dated August 8, 2000 (filed as Exhibit 10.9(a) to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)
|           | 
|10.9(b)    |  | Memorandum of Understanding Regarding Cooperation Project between China Telecommunications Broadcast Satellite Corp and WorldSpace Corporation dated August 8, 2000 (filed as Exhibit
10.9(b) to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)                                                           
|           | 
|10.9(c)    |  | Agency Agreement between China Telecommunications Broadcast Satellite Corp and WorldSpace Corporation dated August 8, 2000 (filed as Exhibit 10.9(c) to the Companys Registration
Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)                                                                                                    
|           | 
|10.9(d)    |  | Supplementary Agreement to Agreements and Other Documents Regarding Cooperation Between China Telecommunications Broadcast Satellite Corporation, Beijing, China and WorldSpace Corporation
dated April 3, 2001 (filed as Exhibit 10.9(d) to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)               
|           | 
|10.9(e)    |  | Agreement between China Satellite Communications Corp. and WorldSpace Corporation dated February 22, 2005 (filed as Exhibit 10.9(e) to the Companys Registration Statement on Form S-1,
SEC File No. 333-124044, and incorporated by reference)                                                                                                                     
|           | 
|10.9(f)    |  | Agreement between China Satellite Communications Corp. and WorldSpace, Inc. dated July 18, 2005 (filed as Exhibit 10.9(f) to the Companys Registration Statement on Form S-1, SEC
File No. 333-124044, and incorporated by reference)                                                                                                                               
|           | 
|10.9(g)    |  | Cooperation Agreement, dated December 20, 2005, between the Company and China Satellite Communications Corporation (filed as Exhibit 1.1 to Form 8-K of the Company filed December 27,
2005, SEC File No. 000-51466, and incorporated by reference)                                                                                                                  
|           | 
|10.10(a)   |  | Executive Employment Agreement between WorldSpace, Inc. and Noah A. Samara entered into as of June 1, 2005 (filed as Exhibit 10.10(a) to the Companys Registration Statement on Form
S-1, SEC File No. 333-124044, and incorporated by reference)*                                                                                                                  
|           | 
|10.10(b)   |  | Executive Employment Agreement between WorldSpace, Inc. and Sridhar Ganesan entered into as of June 1, 2005 (filed as Exhibit 10.10(c) to the Companys Registration Statement on
Form S-1, SEC File No. 333-124044, and incorporated by reference)*                                                                                                                 



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|           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|---------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.10(c)   |  | Executive Employment Agreement between WorldSpace, Inc. and Donald J. Frickel entered into as of June 1, 2005 (filed as Exhibit 10.10(d) to the Companys Registration Statement on
Form S-1, SEC File No. 333-124044, and incorporated by reference)*                                                                                                                                                                             
|           | 
|10.10(d)   |  | Executive Employment Agreement between WorldSpace, Inc. and Gregory B. Armstrong effective as of May 12, 2006 (filed as Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q filed
August 14, 2006, SEC File No. 333-51466, and incorporated by reference)*                                                                                                                                                                 
|           | 
|10.10(e)   |  | Executive Employment Agreement between WorldSpace, Inc. and Alexander P. Brown effective as of May 12, 2006 (filed as Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q filed
August 14, 2006, SEC File No. 333-51466, and incorporated by reference)*                                                                                                                                                                   
|           | 
|10.11(a)   |  | WorldSpace 2005 Incentive Award Plan (filed as Exhibit 10.11(a) to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated by
reference)*                                                                                                                                                                                                                                                      
|           | 
|10.11(b)   |  | WorldSpace 2005 Incentive Award Plan Form of Stock Option Agreement (filed as Exhibit 10.11(b) to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and
incorporated by reference)*                                                                                                                                                                                                                       
|           | 
|10.11(c)   |  | WorldSpace 2005 Incentive Award Plan Form of Restricted Stock Agreement (filed as Exhibit 10.11(c) to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and
incorporated by reference)*                                                                                                                                                                                                                   
|           | 
|10.11(d)   |  | WorldSpace 2005 Incentive Award Plan Form of Stock Appreciation Right Agreement, filed as Exhibit 10.12(d) to the Companys Annual Report on Form 10K filed April 17, 2007, SEC File No.
000-51466, and incorporated by reference*                                                                                                                                                                                                 
|           | 
|10.12      |  | Stockholders Agreement, executed as of July 18, 2005 between WorldSpace, Inc., XM Satellite Radio Holdings Inc., Noah A Samara, TelUS Communication and Yenura Ptd. Ltd (filed as Exhibit 10.12
to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)                                                                                                                       
|           | 
|10.13      |  | Satellite Radio Cooperation Agreement dated as of July 18, 2005 between WorldSpace, Inc., XM Satellite Radio Holdings Inc. and XM Satellite Radio Inc. (filed as Exhibit 10.13 to the
Companys Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)                                                                                                                                        
|           | 
|10.14      |  | Form of Bridge Note issued under the Amendment, Redemption and Exchange Agreement (filed as Exhibit 99.3 to the Companys Current Report on Form 8-K filed on June 4, 2007, SEC File
No. 000-51466, and incorporated by reference)                                                                                                                                                                                                 
|           | 
|10.15      |  | First Lien Pledge and Security Agreement, dated June 1, 2007, among the Company, WorldSpace Systems Corporation, AfriSpace, Inc., Asia Space Limited, WorldSpace Satellite Company, and
The Bank of New York, as Collateral Agent (filed as Exhibit 99.6 to the Companys Current Report on Form 8-K filed on June 4, 2007, SEC File No. 000-51466, and incorporated by reference)                                                 
|           | 
|10.16      |  | Second Lien Pledge and Security Agreement, dated June 1, 2007, among the Company, WorldSpace Systems Corporation, AfriSpace, Inc., Asia Space Limited, WorldSpace Satellite Company, and
The Bank of New York, as Collateral Agent (filed as Exhibit 99.7 to the Companys Current Report on Form 8-K filed on June 4, 2007, SEC File No. 000-51466, and incorporated by reference)                                                
|           | 
|10.17      |  | Intercreditor Agreement, dated June 1, 2007, among the Company, WorldSpace Systems Corporation, AfriSpace, Inc., Asia Space Limited, WorldSpace Satellite Company, The Bank of New York,
as First Lien Collateral Agent, and The Bank of New York, as Second Lien Collateral Agent (filed as Exhibit 99.8 to the Companys Current Report on Form 8-K filed on June 4, 2007, SEC File No. 000-51466, and incorporated by
reference)



77



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|           |  |                                                                                                                                                                                                                                                                                                                                                 
|---------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Description                                                                                                                                                                                                                                                                                                                                     
|10.18      |  | First Lien Guaranty, dated June 1, 2007, among WorldSpace Systems Corporation, AfriSpace, Inc., Asia Space Limited, WorldSpace Satellite Company, and The Bank of New York, as Collateral
Agent (filed as Exhibit 99.9 to the Companys Current Report on Form 8-K filed on June 4, 2007, SEC File No. 000-51466, and incorporated by reference)
|           | 
|10.19      |  | Cooperation Agreement, dated July 16, 2007, among the Company, Fiat Group Automobiles S.p.A. and WorldSpace Italia S.p.A. (filed as Exhibit 10.1 to the Companys Quarterly Report on
Form 10-Q filed November 13, 2007, SEC File No. 000-51466, and incorporated by reference)**                                                               
|           | 
|21.1       |  | List of Subsidiaries of the Company                                                                                                                                                                                                                                                                                                             
|           | 
|23.1       |  | Consent of Grant Thornton LLP                                                                                                                                                                                                                                                                                                                   
|           | 
|31.1       |  | Certification of the Chief Executive Officer of WorldSpace, Inc. pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended                                                                                                                                                                                                  
|           | 
|31.2       |  | Certification of the Chief Financial Officer of WorldSpace, Inc. pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended                                                                                                                                                                                                  
|           | 
|32.1       |  | Certification of the Chief Executive Officer of WorldSpace, Inc. pursuant to Section 906 of Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                          
|           | 
|32.2       |  | Certification of the Chief Financial Officer of WorldSpace, Inc. pursuant to Section 906 of Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                          



|* | Executive compensation plan or arrangement.
|- | -------------------------------------------

|** | A portion of this Exhibit was omitted and has been filed separately with the Secretary of the Commission pursuant to an SEC order granting confidential treatment thereof.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



78



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##### Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on
March 31, 2008.



WORLDSPACE, INC.By:

/s/    Noah A.
SamaraNoah A. Samara Chairman, Chief Executive Officer and President


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities indicated on March 31, 2008.



|                                                     |  |                                                                                       
|---------------------------------------------------- |  | --------------------------------------------------------------------------------------
|                                                     | 
|/s/    Noah A. Samara
Noah A. Samara                 |  | Chairman of the Board, Chief Executive Officer and President (Chief Executive Officer)
|                                                     | 
|/s/    Sridhar Ganesan
Sridhar Ganesan               |  | Executive Vice PresidentChief Financial Officer (Chief Financial Officer)            
|                                                     | 
|/s/    Vincent Loiacono Vincent Loiacono             |  | Senior Vice President (Chief Accounting Officer)                                      
|                                                     | 
|/s/    Kassahun
Kebede Kassahun Kebede               |  | Director                                                                              
|                                                     | 
|/s/    James R. Laramie
James R. Laramie             |  | Director                                                                              
|                                                     | 
|/s/    Charles McC. Mathias Charles McC. Mathias     |  | Director                                                                              
|                                                     | 
|/s/    Michael
Nobel Michael Nobel                   |  | Director                                                                              
|                                                     | 
|/s/    Frank-Jurgen Richter Frank-Jurgen Richter     |  | Director                                                                              
|                                                     | 
|/s/    William Schneider,
Jr. William Schneider, Jr. |  | Director                                                                              



79



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##### Table of Contents

Index to consolidated financial statements



|                                                                                   |  |     
|---------------------------------------------------------------------------------- |  | ----
|Report of Independent Registered Public Accounting Firm                            |  | F-2 
|                                                                                   | 
|Consolidated Financial Statements                                                  |  |     
|                                                                                   | 
|Consolidated Balance Sheets                                                        |  | F-3 
|                                                                                   | 
|Consolidated Statements of Operations                                              |  | F-4 
|                                                                                   | 
|Consolidated Statements of Changes in Shareholders Deficit and Comprehensive Loss |  | F-5 
|                                                                                   | 
|Consolidated Statements of Cash Flows                                              |  | F-6 
|                                                                                   | 
|Notes to Consolidated Financial Statements                                         |  | F-7 
|                                                                                   | 
|Schedule IIValuation and Qualifying Accounts                                      |  | F-29



F-1



---

##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and

Shareholders of WorldSpace, Inc.

We have audited the accompanying
consolidated balance sheets of WorldSpace, Inc., (the Company) (a Delaware corporation) as of December 31, 2007 and 2006, and the related consolidated statements of operations, changes in stockholders deficit and comprehensive loss, and
cash flows for each of the three years in the period ended December 31, 2007. Our audits of the basic financial statements included Schedule II  valuation and qualifying accounts. These financial statements and financial statement
schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of WorldSpace, Inc. as of
December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of
America. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

As discussed in Notes B and I, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 123R Share Based Payment, effective
January 1, 2006 and SFAS No. 48, Accounting for Uncertainties in Income Taxes, effective January 1, 2007.

The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note A, the Company incurred a net loss of $169,507,000 during the year ended December 31, 2007, and, as of that
date, the Companys current liabilities exceeded its current assets by $69,590,000 and its total liabilities exceeded its total assets by $1,751,731,000. The Company has cash on hand and cash available totaling $3,597,000 at December 31,
2007 which management does not believe is sufficient to meets its operating needs during the coming year. These factors, among others, as discussed in Note A to the financial statements, raise substantial doubt about the Companys ability to
continue as a going concern. Managements plans in regard to these matters are also described in Note A. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Grant Thornton LLP

McLean, Virginia

March 31, 2008



F-2



---

##### Table of Contents

Consolidated Balance Sheets



|                                                                                                                                                              |  |                |            |   |      |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ---------- | - | ---- | - | ---------- | -
|                                                                                                                                                              |  | December 31,   |           
|                                                                                                                                                              |  | 2007           |            |   | 2006 |  
|                                                                                                                                                              |  | (in thousands) |           
|Assets                                                                                                                                                        |  |                |            |   |      |   |            |  
|Current Assets                                                                                                                                                |  |                |            |   |      |   |            |  
|Cash and cash equivalents                                                                                                                                     |  | $              | 3,597      |   |      | $ | 27,565     |  
|Marketable securities                                                                                                                                         |  |                |           |   |      |   | 137,894    |  
|Accounts receivable, net of $1,190 and $1,302 allowance for doubtful accounts                                                                                 |  |                | 1,454      |   |      |   | 2,693      |  
|Prepaid expenses                                                                                                                                              |  |                | 5,465      |   |      |   | 8,693      |  
|Inventory, net                                                                                                                                                |  |                | 2,313      |   |      |   | 3,936      |  
|Other current assets                                                                                                                                          |  |                | 3,860      |   |      |   | 2,548      |  
|                                                                                                                                                              |  |                |            |   |      |   |            |  
|Total Current Assets                                                                                                                                          |  |                | 16,689     |   |      |   | 183,329    |  
|Restricted Cash and Investments                                                                                                                               |  |                | 6,312      |   |      |   | 5,869      |  
|Property and Equipment, net                                                                                                                                   |  |                | 14,659     |   |      |   | 16,966     |  
|Satellites and Related Systems, net                                                                                                                           |  |                | 298,503    |   |      |   | 345,825    |  
|Deferred Financing Costs, net                                                                                                                                 |  |                | 3,457      |   |      |   | 12,149     |  
|Deferred Tax Asset                                                                                                                                            |  |                |           |   |      |   | 3,599      |  
|Other Assets                                                                                                                                                  |  |                | 394        |   |      |   | 908        |  
|                                                                                                                                                              |  |                |            |   |      |   |            |  
|Total Assets                                                                                                                                                  |  | $              | 340,014    |   |      | $ | 568,645    |  
|                                                                                                                                                              |  |                |            |   |      |   |            |  
|Liabilities and Shareholders Deficit                                                                                                                         |  |                |            |   |      |   |            |  
|Current Liabilities                                                                                                                                           |  |                |            |   |      |   |            |  
|Current Portion of Long Term Debt                                                                                                                             |  | $              | 27,500     |   |      | $ |           |  
|Accounts payable                                                                                                                                              |  |                | 22,976     |   |      |   | 16,270     |  
|Accrued expenses                                                                                                                                              |  |                | 15,417     |   |      |   | 20,056     |  
|Income taxes payable                                                                                                                                          |  |                | 1,334      |   |      |   | 17,784     |  
|Accrued purchase commitment                                                                                                                                   |  |                | 18,242     |   |      |   | 18,242     |  
|Accrued interest                                                                                                                                              |  |                | 810        |   |      |   | 1,962      |  
|Deferred tax liability                                                                                                                                        |  |                |           |   |      |   | 2,109      |  
|                                                                                                                                                              |  |                |            |   |      |   |            |  
|Total Current Liabilities                                                                                                                                     |  |                | 86,279     |   |      |   | 76,423     |  
|Long-term Debt                                                                                                                                                |  |                | 66,513     |   |      |   | 155,368    |  
|Deferred Tax Liability                                                                                                                                        |  |                | 120,325    |   |      |   | 122,227    |  
|Other Liabilities                                                                                                                                             |  |                | 4,453      |   |      |   | 3,807      |  
|Contingent Royalty Obligation                                                                                                                                 |  |                | 1,814,175  |   |      |   | 1,814,175  |  
|                                                                                                                                                              |  |                |            |   |      |   |            |  
|Total Liabilities                                                                                                                                             |  | $              | 2,091,745  |   |      | $ | 2,172,000  |  
|                                                                                                                                                              |  |                |            |   |      |   |            |  
|Commitments and Contingencies                                                                                                                                 |  |                |           |   |      |   |           |  
|Minority interest                                                                                                                                             |  |                | 689        |   |      |   | 304        |  
|Shareholders Deficit                                                                                                                                         |  |                |            |   |      |   |            |  
|Preferred Stock, $.01 par value; 25,000,000 shares authorized; no shares issued and outstanding as of December 31, 2007 and
2006                              |  |                |           |   |      |   |           |  
|Class A Common stock, $.01 par value; 200,000,000 shares authorized; 42,321,983 and 38,305,839 shares issued and outstanding as of
December 31, 2007 and 2006 |  |                | 423        |   |      |   | 383        |  
|Class B Common stock, $.01 par value; 75,000,000 shares authorized; 0 shares issued and outstanding as of December 31, 2007 and
2006                          |  |                |           |   |      |   |           |  
|Additional paid-in capital                                                                                                                                    |  |                | 738,468    |   |      |   | 716,250    |  
|Accumulated other comprehensive loss                                                                                                                          |  |                | 3,012      |   |      |   | 1,620      |  
|Accumulated deficit                                                                                                                                           |  |                | (2,494,323 | ) |      |   | (2,321,912 | )
|                                                                                                                                                              |  |                |            |   |      |   |            |  
|Total Shareholders Deficit                                                                                                                                   |  |                | (1,752,420 | ) |      |   | (1,603,659 | )
|                                                                                                                                                              |  |                |            |   |      |   |            |  
|Total Liabilities and Shareholders Deficit                                                                                                                   |  | $              | 340,014    |   |      | $ | 568,645    |  
|                                                                                                                                                              |  |                |            |   |      |   |            |  

See accompanying notes to consolidated financial statements



F-3



---

##### Table of Contents

Consolidated Statements of Operations



|                                                                                                                 |  |                                          |            |   |      |   |            |      |  |   |            |  
|---------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                                                                 |  | Years ended December 31,                 |           
|                                                                                                                 |  | 2007                                     |            |   | 2006 |   |            | 2005 | 
|                                                                                                                 |  | (in thousands, except share information) |           
|Revenue                                                                                                          |  |                                          |            |   |      |   |            |      |  |   |            |  
|Subscription revenue                                                                                             |  | $                                        | 7,528      |   |      | $ | 7,294      |      |  | $ | 3,690      |  
|Equipment revenue                                                                                                |  |                                          | 2,049      |   |      |   | 3,056      |      |  |   | 2,822      |  
|Other revenue                                                                                                    |  |                                          | 4,207      |   |      |   | 5,261      |      |  |   | 5,148      |  
|                                                                                                                 |  |                                          |            |   |      |   |            |      |  |   |            |  
|Total Revenue                                                                                                    |  |                                          | 13,784     |   |      |   | 15,611     |      |  |   | 11,660     |  
|Operating Expenses                                                                                               |  |                                          |            |   |      |   |            |      |  |   |            |  
|Cost of Services (excludes depreciation shown separately below)Satellite and transmission, programming and other |  |                                          | 30,078     |   |      |   | 27,556     |      |  |   | 18,592     |  
|Cost of equipment                                                                                                |  |                                          | 7,569      |   |      |   | 16,615     |      |  |   | 6,725      |  
|Research and development                                                                                         |  |                                          | 7,100      |   |      |   | 2,563      |      |  |   | 1,040      |  
|Selling and marketing                                                                                            |  |                                          | 10,866     |   |      |   | 24,028     |      |  |   | 18,676     |  
|General and administrative                                                                                       |  |                                          | 48,632     |   |      |   | 68,243     |      |  |   | 67,956     |  
|Depreciation and amortization                                                                                    |  |                                          | 59,258     |   |      |   | 58,896     |      |  |   | 61,636     |  
|                                                                                                                 |  |                                          |            |   |      |   |            |      |  |   |            |  
|Total Operating Expenses                                                                                         |  |                                          | 163,503    |   |      |   | 197,901    |      |  |   | 174,625    |  
|                                                                                                                 |  |                                          |            |   |      |   |            |      |  |   |            |  
|Loss from Operations                                                                                             |  |                                          | (149,719   | ) |      |   | (182,290   | )    |  |   | (162,965   | )
|Other Income (Expense)                                                                                           |  |                                          |            |   |      |   |            |      |  |   |            |  
|(Loss) Gain on extinguishment of debt                                                                            |  |                                          | (1,435     | ) |      |   |           |      |  |   | 14,130     |  
|Interest income                                                                                                  |  |                                          | 4,689      |   |      |   | 11,331     |      |  |   | 6,596      |  
|Interest expense                                                                                                 |  |                                          | (13,460    | ) |      |   | (9,332     | )    |  |   | (9,884     | )
|Write-off of deferred debt issuance costs                                                                        |  |                                          | (11,516    | ) |      |   |           |      |  |   |           |  
|Other income (expense)                                                                                           |  |                                          | (559       | ) |      |   | (4,759     | )    |  |   | 2,600      |  
|                                                                                                                 |  |                                          |            |   |      |   |            |      |  |   |            |  
|Total Other Income (Expense)                                                                                     |  |                                          | (22,281    | ) |      |   | (2,760     | )    |  |   | 13,442     |  
|                                                                                                                 |  |                                          |            |   |      |   |            |      |  |   |            |  
|Loss Before Income Taxes                                                                                         |  |                                          | (172,000   | ) |      |   | (185,050   | )    |  |   | (149,523   | )
|Income Tax Benefit                                                                                               |  |                                          | 2,493      |   |      |   | 56,447     |      |  |   | 69,660     |  
|                                                                                                                 |  |                                          |            |   |      |   |            |      |  |   |            |  
|Net Loss                                                                                                         |  | $                                        | (169,507   | ) |      | $ | (128,603   | )    |  | $ | (79,863    | )
|                                                                                                                 |  |                                          |            |   |      |   |            |      |  |   |            |  
|Loss per Sharebasic and diluted                                                                                 |  | $                                        | (4.22      | ) |      | $ | (3.44      | )    |  | $ | (2.77      | )
|                                                                                                                 |  |                                          |            |   |      |   |            |      |  |   |            |  
|Weighted Average Number of Shares Outstanding                                                                    |  |                                          | 40,187,346 |   |      |   | 37,395,558 |      |  |   | 28,828,958 |  
|                                                                                                                 |  |                                          |            |   |      |   |            |      |  |   |            |  

See accompanying notes to consolidated financial statements



F-4



---

##### Table of Contents

Consolidated Statements of Changes in Shareholders Deficit and Comprehensive Loss

Years ended
December 31, 2007, 2006 and 2005



|                                                  |  |                                          |  |                     |     |        |                          |   |        |                      |      |   |                                            |   |         |                    |  |   |         |   |  |                   |       |   |  |   |            |   |  |   |            |   |  |          |  
|------------------------------------------------- |  | ---------------------------------------- |  | ------------------- | --- | ------ | ------------------------ | - | ------ | -------------------- | ---- | - | ------------------------------------------ | - | ------- | ------------------ |  | - | ------- | - |  | ----------------- | ----- | - |  | - | ---------- | - |  | - | ---------- | - |  | -------- | -
|                                                  |  | Class ACommon Stock                      |  | Class BCommon Stock |     |        | AdditionalPaid-inCapital |   |        | DeferredCompensation |      |   | AccumulatedOtherComprehensiveIncome (Loss) |   |         | AccumulatedDeficit |  |   | Total   |   |  | ComprehensiveLoss |      
|                                                  |  | Shares                                   |  | Amount              |     | Shares |                          |   | Amount |                      |      |   |                                            |   |         |                   
|                                                  |  | (in thousands, except share information) | 
|Balance, January 1, 2005                          |  | 2,797,368                                |  | $                   | 28  |        | 20,413,949               |   |        | $                    | 204  |   |                                            | $ | 425,247 |                    |  | $ | (1,085  | ) |  | $                 | (354  | ) |  | $ | (2,113,446 | ) |  | $ | (1,689,406 | ) |  |          |  
|Conversion of common stock                        |  | 2,987,506                                |  |                     | 30  |        | (2,987,506               | ) |        |                      | (30  | ) |                                            |   |        |                    |  |   |        |   |  |                   |      |   |  |   |           |   |  |   |           |   |  |          |  
|IPO proceeds                                      |  | 11,500,000                               |  |                     | 115 |        |                         |   |        |                      |     |   |                                            |   | 220,748 |                    |  |   |        |   |  |                   |      |   |  |   |           |   |  |   | 220,863    |   |  |          |  
|XM Satellite radio private placement              |  | 1,562,500                                |  |                     | 16  |        |                         |   |        |                      |     |   |                                            |   | 22,441  |                    |  |   |        |   |  |                   |      |   |  |   |           |   |  |   | 22,457     |   |  |          |  
|Debt conversion                                   |  | 333,333                                  |  |                     | 3   |        |                         |   |        |                      |     |   |                                            |   | 6,997   |                    |  |   |        |   |  |                   |      |   |  |   |           |   |  |   | 7,000      |   |  |          |  
|Warrants issued to consultant                     |  |                                         |  |                     |    |        |                         |   |        |                      |     |   |                                            |   | 393     |                    |  |   |        |   |  |                   |      |   |  |   |           |   |  |   | 393        |   |  |          |  
|Employee stock-based compensation                 |  |                                         |  |                     |    |        |                         |   |        |                      |     |   |                                            |   | 40,698  |                    |  |   | (15,536 | ) |  |                   |      |   |  |   |           |   |  |   | 25,162     |   |  |          |  
|Employee stock option exercises                   |  | 184,625                                  |  |                     | 2   |        |                         |   |        |                      |     |   |                                            |   | 1,149   |                    |  |   |        |   |  |                   |      |   |  |   |           |   |  |   | 1,151      |   |  |          |  
|Investment in subsidiaries                        |  |                                         |  |                     |    |        |                         |   |        |                      |     |   |                                            |   | 45      |                    |  |   |        |   |  |                   |      |   |  |   |           |   |  |   | 45         |   |  |          |  
|Foreign currency translation adjustment           |  |                                         |  |                     |    |        |                         |   |        |                      |     |   |                                            |   |        |                    |  |   |        |   |  |                   | (255  | ) |  |   |           |   |  |   | (255       | ) |  | (255     | )
|Net loss                                          |  |                                         |  |                     |    |        |                         |   |        |                      |     |   |                                            |   |        |                    |  |   |        |   |  |                   |      |   |  |   | (79,863    | ) |  |   | (79,863    | ) |  | (79,863  | )
|                                                  |  |                                          |  |                     |     |        |                          |   |        |                      |      |   |                                            |   |         |                    |  |   |         |   |  |                   |       |   |  |   |            |   |  |   |            |   |  |          |  
|Comprehensive loss                                |  |                                          |  |                     |     |        |                          |   |        |                      |      |   |                                            |   |         |                    |  |   |         |   |  |                   |       |   |  |   |            |   |  |   |            |   |  | (80,118  | )
|                                                  |  |                                          |  |                     |     |        |                          |   |        |                      |      |   |                                            |   |         |                    |  |   |         |   |  |                   |       |   |  |   |            |   |  |   |            |   |  |          |  
|Balance, December 31, 2005                        |  | 19,365,332                               |  | $                   | 194 |        | 17,426,443               |   |        | $                    | 174  |   |                                            | $ | 717,718 |                    |  | $ | (16,621 | ) |  | $                 | (609  | ) |  | $ | (2,193,309 | ) |  | $ | (1,492,453 | ) |  |          |  
|                                                  |  |                                          |  |                     |     |        |                          |   |        |                      |      |   |                                            |   |         |                    |  |   |         |   |  |                   |       |   |  |   |            |   |  |   |            |   |  |          |  
|Conversion of common stock                        |  | 17,426,443                               |  |                     | 174 |        | (17,426,443              | ) |        |                      | (174 | ) |                                            |   |        |                    |  |   |        |   |  |                   |      |   |  |   |           |   |  |   |           |   |  |          |  
|Reversal related to the adoption of SFAS No. 123R |  |                                         |  |                     |    |        |                         |   |        |                      |     |   |                                            |   | (16,621 | )                  |  |   | 16,621  |   |  |                   |      |   |  |   |           |   |  |   |           |   |  |          |  
|Employee stock-based compensation                 |  |                                         |  |                     |    |        |                         |   |        |                      |     |   |                                            |   | 11,416  |                    |  |   |        |   |  |                   |      |   |  |   |           |   |  |   | 11,416     |   |  |          |  
|Employee stock exercises                          |  | 919,517                                  |  |                     | 9   |        |                         |   |        |                      |     |   |                                            |   | 3,632   |                    |  |   |        |   |  |                   |      |   |  |   |           |   |  |   | 3,641      |   |  |          |  
|Employee restricted stock vesting                 |  | 594,547                                  |  |                     | 6   |        |                         |   |        |                      |     |   |                                            |   |        |                    |  |   |        |   |  |                   |      |   |  |   |           |   |  |   | 6          |   |  |          |  
|Contributions from minority partners              |  |                                         |  |                     |    |        |                         |   |        |                      |     |   |                                            |   | 304     |                    |  |   |        |   |  |                   |      |   |  |   |           |   |  |   | 304        |   |  |          |  
|IPO costs                                         |  |                                         |  |                     |    |        |                         |   |        |                      |     |   |                                            |   | (199    | )                  |  |   |        |   |  |                   |      |   |  |   |           |   |  |   | (199       | ) |  |          |  
|Foreign currency translation adjustment           |  |                                         |  |                     |    |        |                         |   |        |                      |     |   |                                            |   |        |                    |  |   |        |   |  |                   | 2,229 |   |  |   |           |   |  |   | 2,229      |   |  | 2,229    |  
|Net loss                                          |  |                                         |  |                     |    |        |                         |   |        |                      |     |   |                                            |   |        |                    |  |   |        |   |  |                   |      |   |  |   | (128,603   | ) |  |   | (128,603   | ) |  | (128,603 | )
|                                                  |  |                                          |  |                     |     |        |                          |   |        |                      |      |   |                                            |   |         |                    |  |   |         |   |  |                   |       |   |  |   |            |   |  |   |            |   |  |          |  
|Comprehensive loss                                |  |                                          |  |                     |     |        |                          |   |        |                      |      |   |                                            |   |         |                    |  |   |         |   |  |                   |       |   |  |   |            |   |  |   |            |   |  | (126,374 | )
|                                                  |  |                                          |  |                     |     |        |                          |   |        |                      |      |   |                                            |   |         |                    |  |   |         |   |  |                   |       |   |  |   |            |   |  |   |            |   |  |          |  
|Balance, December 31, 2006                        |  | 38,305,839                               |  | $                   | 383 |        |                         |   |        |                      |     |   |                                            | $ | 716,250 |                    |  |   |        |   |  | $                 | 1,620 |   |  | $ | (2,321,912 | ) |  | $ | (1,603,659 | ) |  |          |  
|Employee stock-based compensation                 |  |                                          |  |                     |     |        |                          |   |        |                      |      |   |                                            |   | 4,794   |                    |  |   |         |   |  |                   |       |   |  |   |            |   |  |   | 4,794      |   |  |          |  
|Employee stock exercises                          |  | 1,299,217                                |  |                     | 13  |        |                          |   |        |                      |      |   |                                            |   | 3,663   |                    |  |   |         |   |  |                   |       |   |  |   |            |   |  |   | 3,676      |   |  |          |  
|Employee restricted stock vesting                 |  | 669,968                                  |  |                     | 7   |        |                          |   |        |                      |      |   |                                            |   | (1,465  | )                  |  |   |         |   |  |                   |       |   |  |   |            |   |  |   | (1,458     | ) |  |          |  
|Share Warrants Exercise                           |  | 238,329                                  |  |                     | 2   |        |                          |   |        |                      |      |   |                                            |   | 545     |                    |  |   |         |   |  |                   |       |   |  |   |            |   |  |   | 547        |   |  |          |  
|FIN 48 transition amount                          |  |                                          |  |                     |     |        |                          |   |        |                      |      |   |                                            |   |         |                    |  |   |         |   |  |                   |       |   |  |   | (2,904     | ) |  |   | (2,904     | ) |  |          |  
|Value of Warrant attached to debt                 |  |                                          |  |                     |     |        |                          |   |        |                      |      |   |                                            |   | 7,011   |                    |  |   |         |   |  |                   |       |   |  |   |            |   |  |   | 7,011      |   |  |          |  
|Foreign currency translation adjustment           |  |                                          |  |                     |     |        |                          |   |        |                      |      |   |                                            |   |         |                    |  |   |         |   |  |                   | 1,392 |   |  |   |            |   |  |   | 1,392      |   |  | 1,392    |  
|Conversion of Convertible Debt                    |  | 1,808,630                                |  |                     | 18  |        |                          |   |        |                      |      |   |                                            |   | 7,670   |                    |  |   |         |   |  |                   |       |   |  |   |            |   |  |   | 7,688      |   |  |          |  
|Net loss                                          |  |                                          |  |                     |     |        |                          |   |        |                      |      |   |                                            |   |         |                    |  |   |         |   |  |                   |       |   |  |   | (169,507   | ) |  |   | (169,507   | ) |  | (169,507 | )
|                                                  |  |                                          |  |                     |     |        |                          |   |        |                      |      |   |                                            |   |         |                    |  |   |         |   |  |                   |       |   |  |   |            |   |  |   |            |   |  |          |  
|Comprehensive loss                                |  |                                          |  |                     |     |        |                          |   |        |                      |      |   |                                            |   |         |                    |  |   |         |   |  |                   |       |   |  |   |            |   |  |   |            |   |  | (168,115 | )
|                                                  |  |                                          |  |                     |     |        |                          |   |        |                      |      |   |                                            |   |         |                    |  |   |         |   |  |                   |       |   |  |   |            |   |  |   |            |   |  |          |  
|Balance, December 31, 2007                        |  | 42,321,983                               |  | $                   | 423 |        |                         |   |        |                      |     |   |                                            | $ | 738,468 |                    |  |   |        |   |  | $                 | 3,012 |   |  | $ | (2,494,323 | ) |  | $ | (1,752,420 | ) |  |          |  
|                                                  |  |                                          |  |                     |     |        |                          |   |        |                      |      |   |                                            |   |         |                    |  |   |         |   |  |                   |       |   |  |   |            |   |  |   |            |   |  |          |  

See accompanying notes to consolidated financial statements



F-5



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##### Table of Contents

Consolidated Statements of Cash Flows



|                                                                            |  |                          |          |   |      |   |          |      |  |   |          |  
|--------------------------------------------------------------------------- |  | ------------------------ | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                            |  | Years ended December 31, |         
|                                                                            |  | 2007                     |          |   | 2006 |   |          | 2005 | 
|                                                                            |  | (in thousands)           |         
|Cash Flows from Operating Activities                                        |  |                          |          |   |      |   |          |      |  |   |          |  
|Net loss                                                                    |  | $                        | (169,507 | ) |      | $ | (128,603 | )    |  | $ | (79,863  | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                          |          |   |      |   |          |      |  |   |          |  
|Depreciation and amortization                                               |  |                          | 59,258   |   |      |   | 58,896   |      |  |   | 61,636   |  
|Write-off of deferred finance costs                                         |  |                          | 11,516   |   |      |   |         |      |  |   |         |  
|(Gain)Loss on extinguishment debt                                           |  |                          | 1,435    |   |      |   |         |      |  |   | (14,130  | )
|Amortization of deferred financing and warrant and debt discount            |  |                          | 3,265    |   |      |   | 1,486    |      |  |   | 1,057    |  
|Adjustment to cost basis of satellite & related systems                     |  |                          |         |   |      |   |         |      |  |   | 5,750    |  
|Accrued interest                                                            |  |                          | (1,073   | ) |      |   | 9        |      |  |   | 1,557    |  
|Stock-based compensation                                                    |  |                          | 4,794    |   |      |   | 11,416   |      |  |   | 25,161   |  
|Allowance for doubtful accounts receivable                                  |  |                          | 89       |   |      |   | (173     | )    |  |   | 721      |  
|Loss on inventory write-off                                                 |  |                          | 1,281    |   |      |   | 2,535    |      |  |   | 863      |  
|Loss on receiver parts- purchase commitments                                |  |                          | 2,364    |   |      |   |         |      |  |   |         |  
|Loss on disposition of assets                                               |  |                          | 206      |   |      |   | 2,204    |      |  |   | 6,286    |  
|Deferred tax benefit                                                        |  |                          | (2,493   | ) |      |   | (56,447  | )    |  |   | (69,708  | )
|Other                                                                       |  |                          | (734     | ) |      |   | 1,995    |      |  |   | (415     | )
|Changes in assets and liabilities:                                          |  |                          |          |   |      |   |          |      |  |   |          |  
|Accounts receivable and other assets                                        |  |                          | (3,248   | ) |      |   | (5,319   | )    |  |   | (10,040  | )
|Accounts payable and accrued expenses                                       |  |                          | 2,067    |   |      |   | 1,901    |      |  |   | (24,113  | )
|Income taxes payable                                                        |  |                          | (16,450  | ) |      |   | (2,216   | )    |  |   |         |  
|Other liabilities                                                           |  |                          | 679      |   |      |   | 8,229    |      |  |   | (8,333   | )
|                                                                            |  |                          |          |   |      |   |          |      |  |   |          |  
|Net Cash Used in Operating Activities                                       |  |                          | (106,551 | ) |      |   | (104,087 | )    |  |   | (103,571 | )
|                                                                            |  |                          |          |   |      |   |          |      |  |   |          |  
|Cash Flows from Investing Activities                                        |  |                          |          |   |      |   |          |      |  |   |          |  
|Purchase of property and equipment                                          |  |                          | (1,945   | ) |      |   | (6,032   | )    |  |   | (14,365  | )
|Purchase of satellite and related systems                                   |  |                          | (7,890   | ) |      |   | (3,585   | )    |  |   | (2,724   | )
|Purchase of marketable securities                                           |  |                          | (188,447 | ) |      |   | (351,758 | )    |  |   | (655,843 | )
|Sales/maturities of marketable securities                                   |  |                          | 326,341  |   |      |   | 452,912  |      |  |   | 416,795  |  
|Increase in restricted cash, net                                            |  |                          | (443     | ) |      |   | (1,281   | )    |  |   | (2,813   | )
|                                                                            |  |                          |          |   |      |   |          |      |  |   |          |  
|Net Cash Provided by (Used in) Investing Activities                         |  |                          | 127,616  |   |      |   | 90,256   |      |  |   | (258,950 | )
|                                                                            |  |                          |          |   |      |   |          |      |  |   |          |  
|Cash Flows from Financing Activities                                        |  |                          |          |   |      |   |          |      |  |   |          |  
|Redemption of Convertible Debt                                              |  |                          | (50,000  | ) |      |   |         |      |  |   |         |  
|Proceeds from short-term borrowings and notes payable                       |  |                          |         |   |      |   | 400      |      |  |   |         |  
|Proceeds from stock option exercises                                        |  |                          | 3,676    |   |      |   | 3,646    |      |  |   |         |  
|Proceeds from warrant exercises                                             |  |                          | 547      |   |      |   |         |      |  |   |         |  
|Payment of withholding taxes on restricted stock vesting, net               |  |                          | (1,458   | ) |      |   |         |      |  |   |         |  
|Contributions from minority partners                                        |  |                          | 810      |   |      |   | 304      |      |  |   |         |  
|Proceeds from the sale of common stock                                      |  |                          |         |   |      |   |         |      |  |   | 268,090  |  
|Costs incurred for the sale of common stock                                 |  |                          |         |   |      |   | (199     | )    |  |   | (23,180  | )
|                                                                            |  |                          |          |   |      |   |          |      |  |   |          |  
|Net Cash (Used in) Provided by Financing Activities                         |  |                          | (46,425  | ) |      |   | 4,151    |      |  |   | 244,910  |  
|                                                                            |  |                          |          |   |      |   |          |      |  |   |          |  
|Net Decrease in Cash and Cash Equivalents                                   |  |                          | (25,360  | ) |      |   | (9,680   | )    |  |   | (117,611 | )
|Net Effect of Foreign Exchange Rates on Cash and Cash Equivalents           |  |                          | 1,392    |   |      |   | 320      |      |  |   | 174      |  
|Cash and Cash Equivalents, beginning of year                                |  |                          | 27,565   |   |      |   | 36,925   |      |  |   | 154,362  |  
|                                                                            |  |                          |          |   |      |   |          |      |  |   |          |  
|Cash and Cash Equivalents, end of year                                      |  |                          | 3,597    |   |      | $ | 27,565   |      |  | $ | 36,925   |  
|                                                                            |  |                          |          |   |      |   |          |      |  |   |          |  
|Supplemental Disclosure of Cash Flow Information                            |  |                          |          |   |      |   |          |      |  |   |          |  
|Cash paid for interest                                                      |  | $                        | 11,283   |   |      | $ | 7,750    |      |  | $ | 5,884    |  
|Cash paid for income taxes                                                  |  | $                        | 17,164   |   |      | $ | 2,800    |      |  | $ |         |  
|Long-term debt converted to equity                                          |  | $                        | 7,688    |   |      | $ |         |      |  | $ |         |  
|Issuance of warrants                                                        |  | $                        | 7,011    |   |      | $ |         |      |  | $ |         |  
|FIN No. 48 transitional liability                                           |  | $                        | 2,904    |   |      | $ |         |      |  | $ |         |  

See accompanying notes to consolidated financial statements



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE AORGANIZATION AND LIQUIDITY

Organization

WorldSpace, Inc. (WSI) was organized on
July 29, 1990, and incorporated in the State of Maryland on November 5, 1990. WorldSpace, Inc. and Subsidiaries (the Company) is engaged in the design, development, construction, deployment and financing of a satellite-based radio and data
broadcasting service, which serve areas of the world where traditional broadcast media or internet services are limited. The Company, which operates in 10 countries, has one satellite in orbit over Africa (accepted for service in 1999) and another
over Asia (accepted for service in 2000). The Company has a completed third satellite currently in storage at EADS Astriums facilities in France. This satellite can be used to replace either of the Companys two operational satellites or
modified and launched to provide DARS in Western Europe.

Going Concern and Liquidity

The Consolidated Financial Statements of the Company have been prepared on a going concern basis, which contemplates the realization of assets and the
discharge of liabilities in the normal course of business for the foreseeable future. The Company has incurred substantial net losses of $169.5 million and $128.6 million for the fiscal years ended 2007 and 2006, respectively, has an
accumulated deficit as of December 31, 2007 of approximately $2,494 million and expects to continue incurring losses for the foreseeable future. The cash and marketable securities on hand at December 31, 2007 and 2006 were $3.6 million and
$165.4 million, respectively. The cash as of December 31, 2007 and 2006 consisted mainly of remaining proceeds from the issuance of the common stock through our IPO in 2005. These proceeds, net of transaction expenses, were used to fund
marketing, subscriber management, content development, capital expenditures (including the roll-out of terrestrial repeater networks), working capital needs to support the growth of its subscriber base in India and provide developmental funding in
Western Europe, China and other additional markets. As such, the Company must raise substantial additional capital during 2008 in order to continue its current level of operations and to pursue its business plan. Based upon our current plans, we
estimate that our cash and cash equivalents will not be sufficient to cover our estimated funding needs for 2008. With a view to increasing future operating liquidity and augment its capital resources, the Company is currently in discussions to
raise additional funds to meet our needs.

In June 2007, the Company entered into a restructuring agreement with the holders of 5%, $155
million Convertible Notes. The agreement calls for certain cash payments, senior secured notes, amended convertible notes and warrants at different maturity dates. (Refer to Note CDebt, Convertible Promissory Notes Restructuring). In December
2007, the Company entered into an agreement for $40 million financing facility (Refer to Note CDebt, Yenura Financing) . However, it has not secured any additional commitments for new financing at this time nor can it provide any assurance
that new financing will be available on commercially acceptable terms, if at all. If the Company is unable to secure additional capital, it will be required to curtail its operations and if these measures fail, it may not be able to continue its
business. Curtailment of operations would cause significant delays in the Companys efforts to introduce its products to market which is critical to the realization of its business plan and the future operations of the Company.

The Company is also subject to certain business risks associated with operating a satellite-based broadcasting company including, but not limited to,
in-orbit failures, regulatory compliance, and additional challenges such as developing successful satellite receiver and subscription sales programs adequate to fund operations, developing program content acceptable to and desired by its target
audiences and assuring the availability of appropriate levels of satellite radio receivers. There can be no assurances as to when, or if, the Company will be successful in meeting these challenges, some of which are not under its control.



F-7



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The Consolidated Financial Statements do not give effect to any adjustments to record amounts and
their classifications, which would be necessary should the Company be unable to continue as a going concern and therefore, be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts
different from those reflected in the Consolidated Financial Statements.

Note BSummary of Significant Accounting Policies

Principles of Consolidation

The accompanying
consolidated financial statements include the accounts of WorldSpace, Inc. and its majority and wholly-owned controlled subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America. The
equity method of accounting is used to account for investments in enterprises over which the Company has significant influence, but of which it has less than 50 percent ownership. All significant inter-company transactions and balances have been
eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements which conform to accounting principles generally accepted in the United States of America requires that management make estimates and assumptions relating to the amounts of assets and
liabilities reported and the contingent assets and liabilities disclosed as of the date of the financial statements. Estimates and assumptions must also be made concerning the amounts of revenues and expenses reported in the financial statements.
Actual results may differ from managements estimates.

Revenue Recognition

Revenue from the Companys principal activities, subscription audio services and capacity leasing, is recognized as the services are provided.
Revenue from subscribers, which is generally billed in advance, consists of fixed charges for service, which are recognized as the service is provided, and non-refundable activation fees are recognized ratably over the estimated term of the
subscriber relationship. Direct activation costs are expensed as incurred. Advertising revenue is recognized in the period in which the spot announcement is broadcast. Revenue from the sale of satellite radio receivers is recognized when the product
is shipped. Promotions and Discounts are treated as an offset to revenue during the period of promotion. Sales incentives, consisting of discounts to subscribers, offset earned revenue. The Companys current policy is not to accept product
returns, but if in the future, the Company were to accept product returns that are not covered under the manufacturers warranty, a sales return allowance will be established based on the guidance provided under Statement of Financial Accounting
Standards (SFAS) No. 48. Revenue Recognition When a Right of Return Exists and Staff Accounting Bulletin, Topic 13A-4b.

Accounts Receivable

The Company records accounts receivable at the invoiced amount. The Company provides for an allowance
for doubtful accounts equal to the estimated uncollectible receivables. The Companys estimate is based on historical collection experience and a review of the current status of trade accounts receivable. The Company has recorded an allowance
for doubtful accounts of $1,190,000 and $1,302,000 at December 31, 2007 and 2006, respectively.

Foreign Currency Translation

Assets and liabilities were translated into U.S. dollars at the exchange rates in effect as of the respective balance sheet dates. Revenues and expenses
were translated into U.S. dollars at the average exchange rates in



F-8



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



effect during the periods reported. Translation adjustments have been reported as a component of accumulated other comprehensive loss in the accompanying
consolidated statements of changes in shareholders deficit and comprehensive loss. All transaction gains or losses due to foreign exchange rate differences have been charged to income.

Comprehensive Income and Loss

In accordance with the
requirements of SFAS No. 130, Reporting Comprehensive Income, the Company reports the net effects of foreign currency translation adjustments as comprehensive income or loss, and reflects the accumulated balance as a component of
shareholders deficit in the accompanying consolidated financial statements.

Marketable Securities

The Company accounts for marketable securities in accordance with the provisions of SFAS 115, Accounting for Certain Investments in Debt and Equity
Securities. The Company has determined that all of its investments are marketable securities to be classified as Held-to-Maturity. Held-to-Maturity securities are recorded at amortized cost. The amortized cost of debt securities is
adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in the Interest income line item on the accompanying consolidated statements of operations. The cost of securities sold is based
on the specific identification method. Interest and dividends on securities classified as held-to-maturity are included in the Interest income line item on the consolidated statements of operations. We invest in highly-liquid, short-term
marketable securities.

As of December 31, 2007, the Company has transferred the balances of its marketable securities to its cash
accounts for operational use.

The following table illustrates our holdings of marketable securities as of December 31, 2006
(in thousands):



|                                                                                            |  |               |         |                     |   |                     |  |   |             |   |  |   |        
|------------------------------------------------------------------------------------------- |  | ------------- | ------- | ------------------- | - | ------------------- |  | - | ----------- | - |  | - | -------
|                                                                                            |  | AmortizedCost |         | GrossUnrealizedGain |   | GrossUnrealizedLoss |  |   | MarketValue
|Commercial paper                                                                            |  | $             | 82,544  |                     | $ |                    |  | $ | (68         | ) |  | $ | 82,476 
|States of the United States and Political Sub-divisions of the states (States and Counties) |  |               | 55,350  |                     |   |                    |  |   |            |   |  |   | 55,350 
|                                                                                            |  |               |         |                     |   |                     |  |   |             |   |  |   |        
|Marketable securities                                                                       |  | $             | 137,894 |                     | $ |                    |  | $ | (68         | ) |  | $ | 137,826
|                                                                                            |  |               |         |                     |   |                     |  |   |             |   |  |   |        

Fair Value of Financial Instruments

The financial instruments included in the accompanying consolidated balance sheets consist of cash and cash equivalents, short-term investments,
marketable securities, restricted cash and investments, accounts receivable, accounts payable, short- and long-term debt, dividends payable, and royalty obligation. The recorded values of cash and cash equivalents, short-term investments, marketable
securities, restricted cash and investments, accounts receivable, accounts payable, dividends payable, and short-term debt approximate their fair values based on their short-term nature. Management is unable to estimate the fair value of convertible
notes and royalty obligation due to the unique features of these arrangements (see Note CDebt).



F-9



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Cash and Cash Equivalents

All liquid investments, defined as having initial maturities of three months or less, have been classified as cash equivalents. Cash equivalents, as of December 31, 2007 and 2006, consisted primarily of demand
deposits and money market instruments. Cash balances in individual banks exceed insurable amounts.

Restricted Cash and Investments

Cash and investments that are deposited with a lessor or committed to support letters-of-credit issued pursuant to lease agreements have been classified
as restricted cash and investments in the accompanying consolidated balance sheets.

Inventories

Inventories are stated at the lower of cost or market value using the first in, first out (FIFO) method of accounting. Inventories primarily consist of
satellite radio receivers manufactured to the Companys specifications by independent third parties. Provisions in the amount of $4,799,000 and $3,518,000 have been recognized at December 31, 2007 and 2006, respectively, to reduce excess
or obsolete inventories to their estimated net realizable value. The Company periodically evaluates inventory levels on hand as to potential obsolescence based on current and future selling prices.

Pre-Production Design and Development Costs

The
Company entered into agreements to reimburse vendors for certain costs related to pre-production design and development of new receiver models. The Company treated these costs as fixed in nature and will subsequently be amortized as cost of
equipment over the units specified in the production agreement. The Company follows the guidance provided under Emerging Issues Task Force (EITF) Issue No. 99-5, Accounting for Pre-Production Costs Related to Long-Term
Supply Arrangements for recognizing and amortizing such costs. During 2007, the Company switched to a standardized European technology which required the Company to redirect its resources in the design and development of new receiver
models. As a result, the Company has written off all pre-production design and development costs associated with the initial receiver models under development. These costs of approximately $2.4 million have been recorded to Research and Development
in the income statement.

As the Company incurs pre-production design and developments costs related to the new receivers, they will be
accounted for Under EITF No. 99-5, Accounting for Pre-production Costs Related to Long-Term supply Arrangements. As of December 31, 2007 no costs have been recognized in the accompanying balance sheet.

Property and Equipment

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



|                                                |  |              |         |   |      |   |         |  
|----------------------------------------------- |  | ------------ | ------- | - | ---- | - | ------- | -
|                                                |  | December 31, |        
|                                                |  | 2007         |         |   | 2006 |  
|Computers and equipment                         |  | $            | 23,925  |   |      | $ | 20,879  |  
|Furniture and fixtures                          |  |              | 4,541   |   |      |   | 2,796   |  
|Leasehold improvements                          |  |              | 14,654  |   |      |   | 18,090  |  
|                                                |  |              |         |   |      |   |         |  
|                                                |  |              | 43,120  |   |      |   | 41,765  |  
|Less: accumulated depreciation and amortization |  |              | (28,461 | ) |      |   | (24,799 | )
|                                                |  |              |         |   |      |   |         |  
|                                                |  | $            | 14,659  |   |      | $ | 16,966  |  
|                                                |  |              |         |   |      |   |         |  



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Property and equipment is stated at cost, net of accumulated depreciation and amortization, which is
computed using the straight-line method over the estimated useful lives of the related assets. Estimated useful lives are as follows:



|                                         |  |                                       
|---------------------------------------- |  | --------------------------------------
|Furniture, fixtures, equipment and other |  | 2-7 Years                             
|Broadcast studio equipment               |  | 3-8 Years                             
|Leasehold improvements                   |  | Lesser of lease termor estimated life.
|Computers and Equipment                  |  | 5 Years                               
|Computer Software                        |  | 5-10 Years                            

The Company applied the guidance provided under Statement of Position No. 98-1,
Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. The Company capitalized the costs during the application development stage related to the Company-wide implementation of an
Enterprise Resource Planning application after the Company authorized the funding for such purpose. The capitalized costs include external direct costs of materials and services incurred during the implementation. For the year ended
December 31, 2007, the costs associated with this implementation were approximately $3.3 million, and are included in Computers and equipment.

Satellites and Related Systems

Satellites and related systems consisted of the following (in thousands):



|                                                  |  |              |          |   |      |   |          |  
|------------------------------------------------- |  | ------------ | -------- | - | ---- | - | -------- | -
|                                                  |  | December 31, |         
|                                                  |  | 2007         |          |   | 2006 |  
|Satellites                                        |  | $            | 603,568  |   |      | $ | 603,568  |  
|Ground segment                                    |  |              | 81,819   |   |      |   | 81,567   |  
|Satellites and related systems under construction |  |              | 61,407   |   |      |   | 53,769   |  
|                                                  |  |              |          |   |      |   |          |  
|                                                  |  |              | 746,794  |   |      |   | 738,904  |  
|Less: accumulated depreciation and amortization   |  |              | (448,291 | ) |      |   | (393,079 | )
|                                                  |  |              |          |   |      |   |          |  
|                                                  |  | $            | 298,503  |   |      | $ | 345,825  |  
|                                                  |  |              |          |   |      |   |          |  

Expenditures relating to the development and construction of satellites and related systems
consist of satellite design, manufacture, launch, launch insurance, and ground system design and construction. Interest costs related to financing satellites and related systems under construction are capitalized and included in the costs of
construction. There was no interest capitalized during the years ended December 31, 2007 and 2006. Estimated lives of satellites and related systems are as follows:



|                                                     |  |           
|---------------------------------------------------- |  | ----------
|Satellite telemetry, tracking and control facilities |  | 3-15 Years
|Terrestrial repeater network                         |  | 5-15 Years
|Satellite system                                     |  | 10 Years  

The AfriStar satellite was launched in October 1998 and accepted in April 1999. The AsiaStar
satellite was launched in March 2000 and accepted in July 2000. A third satellite was delivered on the ground and accepted in January 2001. This third satellite, which can be used to replace either of the Companys two operational satellites,
may also be modified and launched to provide DARS in Western Europe. Title for the third satellite passed to the Company in March, 2005 and construction costs totaling approximately $132 million including capitalized interest were reclassified from
satellites and related systems under construction to satellites. The third satellite has not yet been placed in service. A fourth satellite, for which the long lead parts have been procured and partially assembled, is currently maintained in storage
at the manufacturers facility in Toulouse, France and Stevenage, United Kingdom.



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



As required by Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the
Impairment or Disposal of Long-lived Assets,the Company reviews the carrying values of its long-lived assets for impairment whenever current events or changes in circumstances indicate that the carrying values of its long-lived assets may not
be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of the asset
exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. The Company has not recorded any impairment charge due to its forecasted cash
flows, which are sufficient to recover the system assets. However, should the Company reduce or fail to meet its forecasted cash flows, or reduce the estimated useful lives of the satellites, it may be required to record an impairment, which may be
substantial, at that time.

During 2005, the Company recorded a $3.0 million loss for a defective battery for its fourth satellite. The
write-off is included in depreciation expense in the accompanying consolidated statement of operations as of December 31, 2005. In the first quarter of 2003, the Company filed a notice of loss relating to a progressive degradation problem with
the solar array output power of its AfriStar satellite which Management withdrew in April 2005. The Company has determined that the satellite will continue to function through the end of its estimated useful life; therefore, no adjustment has been
made to its useful life. The Company will continue to monitor this situation carefully with the aid of the satellite manufacturer, and may adjust the estimated useful life of this satellite based on future information. Management believes its
remaining investment in long lived assets is fully recoverable and no further adjustment for impairment is warranted. However, due to events and circumstances not necessarily under the Companys control, such as changes in technology,
regulatory actions, the availability of financing sufficient to enable the execution of managements business plan, and the competitive environment, it is possible that material reductions in the carrying value of long-lived assets may be
required in the future.

Deferred Rent Expense

It is the Companys policy to allocate the total cost of leasing space, including rent abatements and fixed or scheduled increases in rent, over the life of the lease on a straight-line basis in accordance with the provisions of SFAS
13, Accounting for Leases. Differences between rent expense recognized and rent paid are carried in the balance sheet as deferred rent.

Accounts Payable and Accrued Expenses

Our accounts payable and accrued expenses consist of the following (in thousands):



|                                                       |  |      |        |      |   |       
|------------------------------------------------------ |  | ---- | ------ | ---- | - | ------
|                                                       |  | 2007 |        | 2006
|Accounts payabletrade                                 |  | $    | 7,605  |      | $ | 3,506 
|Accounts payable- Satellite sub-contractor and related |  |      | 2,000  |      |   | 2,000 
|Accounts payable- other                                |  |      | 13,372 |      |   | 10,764
|Accrued payroll related costs                          |  |      | 4,929  |      |   | 5,469 
|Deferred revenue                                       |  |      | 6,641  |      |   | 3,642 
|Other current liabilities                              |  |      | 3,399  |      |   | 4,172 
|Accrued expensesother                                 |  |      | 447    |      |   | 6,773 
|                                                       |  |      |        |      |   |       
|Total accounts payable and accrued expenses            |  | $    | 38,393 |      | $ | 36,326
|                                                       |  |      |        |      |   |       



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Deferred Financing Costs

On June 1, 2007, the Company agreed with the holders of our $155 million convertible notes on the terms of a partial redemption and exchange of the currently outstanding convertible notes (Restructuring) as
described in Note CDebt. As a result, the Company expensed the remaining deferred financing costs of $1l.5 million which is recorded in Other Expense on the financial statements. Amortization of deferred financing costs was $1.5 million, $1.5
million and $1.1 million for the years ended December 31, 2007, 2006 and 2005, respectively.

Stock-based Compensation

In accordance with SFAS No. 123 (Revised 2004), Share Based Payment (SFAS No. 123R) and the Securities and Exchange
Commissions rule amending the compliance dates of SFAS No. 123R, the Company began to recognize compensation expense for equity-based compensation using the fair value method in 2006 using the Modified Prospective Method. This
method allows the Company to apply the fair value provisions of SFAS No. 123R only on the future share-based payment arrangements and unvested portion of prior awards at the adoption date.

The Modified Prospective Method allows the Company to account for the stock-based awards issued prior to the adoption of fair value provisions under SFAS
No. 123R using the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and the disclosure provisions of SFAS No. 148, Accounting for Stock-Based
CompensationTransition and DisclosureAn Amendment of FASB Statement No. 123.

For the year ended December 31,
2005, the Company had a stock-based employee compensation plan. The Company accounts for the plan under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. The Company adopted the disclosure provisions of SFAS No. 148, Accounting for Stock-Based CompensationTransition and DisclosureAn Amendment of FASB Statement No. 123. A pro-forma disclosure for
outstanding awards accounted for under the intrinsic value method of Opinion 25 method during 2005 and is not disclosed since the Company used minimum value method to account for stock based awards in the fiscal year 2005 and the Companys
common stock was not publicly traded until 2005.

Additionally, the Company issued 187,500 warrants to a consultant during 2003 in exchange
for investment banking services received. The warrants have an exercise price of $1.60 per share and a warrant life of 10 years. Following the successful completion of the Companys December 31, 2004 convertible note financing, 156,250 of
the warrants vested and became exercisable. The remaining 31,250 warrants vested and became exercisable following the SEC declared effectiveness of the Companys initial public offering on August 3, 2005. The fair value of the warrants on
December 31, 2005, as determined by the Black-Scholes option pricing model, was $2.5 million and is recorded in deferred financing costs in the accompanying balance sheets, as these costs were direct and incremental to the financing.

At December 31, 2007, the Company has a stock-based employee compensation plan which is described below. The compensation cost
charged against income under the plan was $4.8 million and $11.4 million for the fiscal years ending December 31, 2007 and 2006, respectively. The actual tax benefit realized in the income statement for share-based compensation arrangements was
$4.9 million for the fiscal years ending December 31, 2007.

2005 Incentive Award Plan

On July 7, 2005, the Companys shareholders approved the 2005 Incentive Award Plan (The Plan). The Plan provides for
the grant of up to 5,625,000 shares of our Class A Common Stock for stock based



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



awards to employees, consultants and directors of the Company and its subsidiaries and affiliates. On May 25, 2007, the Companys shareholders
approved an increase in the number of shares of Class A Common Stock available for grant under the Plan to 12,625,000 shares. The Company granted employees restricted stock awards and stock options under this plan. The stock award program
offers employees the opportunity to earn shares of our stock over time, rather than options that give employees the right to buy stock at a pre-determined price. Option awards are generally granted with an exercise price of the Companys stock
at the date of grant; those option awards generally vest based on 3 years of continuous service and have 10-year contractual terms.

The
fair value of each option award is estimated on the date of grant using Black-Scholes option pricing model (closed model) that uses the assumptions noted in the following table. Expected volatilities are based on historical volatility of the stock
price of similar entities, for a period not less than the required service period, since the Company does not have a historical volatility equal to the required service period. The Company uses historical data to estimate option exercise and
employee termination within the valuation model based on the employees career level, historical exercise behavior and other factors for valuation purposes. The expected term of options and other awards granted is derived from the guidance
provided under Staff Accounting Bulletin No. 107 (SAB 107), Share Based Payment, and represents the period of time that stock based awards are expected to be outstanding. The risk-free rate for periods within the
contractual life of the awards is based on the U.S. Treasury yield curve in effect at the time of grant.



|                            |  |           |  |           
|--------------------------- |  | --------- |  | ----------
|                            |  | 2007      |  | 2006      
|Expected volatility         |  | 72%  98% |  | 86%  100%
|Weighted-average volatility |  | 84%       |  | 96%       
|Expected dividends          |  | 0%        |  | 0%        
|Risk-free rate              |  | 4.67%     |  | 4.3%      
|Expected term               |  | 6.0 years |  | 6.0 years 

Stock Appreciation Rights (SARS)

On April 9, 2007, the Company granted 2,764,200 units of stock appreciation rights (SARS) to employees and directors of the Company under
the Plan. For the year ended December 31, 2007, of the $4.8 million stock based compensation recorded in income statement, $1.54 million related to SARS. These SARS vest equally over a period of three years from the grant date and have a
weighted-average grant date fair value per unit of $2.48. The SARS can only be net-share settled.



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Summary of option activity:

Summary of the status of the Companys stock option awards, inclusive of awards granted and fully vested prior to the Plan including SARS as of January 1, 2007 and changes during the fiscal year ending
December 31, 2007 is presented below:



|                                  |  |                  |   |  |                              |       |                                         |      |                          |   |      
|--------------------------------- |  | ---------------- | - |  | ---------------------------- | ----- | --------------------------------------- | ---- | ------------------------ | - | -----
|                                  |  | Number ofoptions |   |  | Weightedaverageexerciseprice |       | Weightedaveragecontractualliferemaining |      | Aggregateintrinsic value
|Non-qualified stock options:      |  |                  |   |  |                              |       |                                         |      |                          |   |      
|Outstanding as of January 1, 2005 |  | 17,699,292       |   |  | $                            | 6.26  |                                         |      |                          |   |      
|Exercised                         |  | (184,625         | ) |  |                              | 6.23  |                                         |      |                          |   |      
|Granted                           |  | 44,485           |   |  |                              | 15.21 |                                         |      |                          |   |      
|                                  |  |                  |   |  |                              |       |                                         |      |                          |   |      
|Balance, December 31, 2005        |  | 17,559,152       |   |  | $                            | 6.28  |                                         |      |                          |   |      
|Granted                           |  | 1,206,028        |   |  |                              | 6.28  |                                         |      |                          |   |      
|Exercised                         |  | (919,517         | ) |  |                              | 3.95  |                                         |      |                          |   |      
|Expired                           |  | (601,832         | ) |  |                              | 5.55  |                                         |      |                          |   |      
|                                  |  |                  |   |  |                              |       |                                         |      |                          |   |      
|Balance, December 31, 2006        |  | 17,243,831       |   |  | $                            | 5.86  |                                         |      |                          |   |      
|Granted                           |  | 2,764,200        |   |  |                              | 4.79  |                                         |      |                          |   |      
|Exercised                         |  | (1,299,217       | ) |  |                              | 4.47  |                                         |      |                          |   |      
|Forfeited/expired                 |  | (1,288,631       | ) |  |                              | 4.62  |                                         |      |                          |   |      
|                                  |  |                  |   |  |                              |       |                                         |      |                          |   |      
|Outstanding at December 31, 2007  |  | 17,420,183       |   |  | $                            | 6.16  |                                         | 4.06 |                          | $ | 5,620
|                                  |  |                  |   |  |                              |       |                                         |      |                          |   |      
|Exercisable at December 31, 2007  |  | 13,861,874       |   |  | $                            | 6.95  |                                         | 2.79 |                          | $ | 5,620
|                                  |  |                  |   |  |                              |       |                                         |      |                          |   |      

The weighted-average grant-date fair value of options granted during the fiscal year ending
December 31, 2007 was $2.48. The total grant-date fair value of all stock based awards issued during the fiscal year ending December 31, 2007 was $7.1 million of which $6.6 million was related to the stock option awards.

Cash received from the exercise of stock options under all share-based payment arrangements for the fiscal year ending December 31, 2007 and 2006
was $3.7 million and $3.6 million, respectively. The actual tax benefit realized for the tax deductions from option exercise of the share-based arrangements totaled $4.9 million, for fiscal year ending December 31, 2007.

Summary of the status of the Companys non-vested restricted share awards and units as of January 1, 2007 and changes during the fiscal year
ending December 31, 2007 is presented below:



|                               |  |           |   |  |                               |             |   |                                     |   |      
|------------------------------ |  | --------- | - |  | ----------------------------- | ----------- | - | ----------------------------------- | - | -----
|                               |  | Shares    |   |  | AggregateGrant DateFair Value |             |   | Weightedaveragegrant datefair value
|Nonvested restricted shares:   |  |           |   |  |                               |             |   |                                     |   |      
|Nonvested at December 31, 2004 |  |          |   |  | $                             |            |   |                                     | $ |     
|Granted                        |  | 1,842,133 |   |  | $                             | 38,666,372  |   |                                     |   | 20.99
|Nonvested at December 31, 2005 |  | 1,842,133 |   |  | $                             | 38,666,372  |   |                                     | $ | 20.99
|                               |  |           |   |  |                               |             |   |                                     |   |      
|Granted                        |  | 437,597   |   |  | $                             | 2,916,723   |   |                                     |   | 6.67 
|Vested                         |  | (594,547  | ) |  | $                             | (12,479,542 | ) |                                     |   | 20.99
|Forfeited/Expired              |  | (84,448   | ) |  | $                             | (1,772,564  | ) |                                     |   | 20.99
|                               |  |           |   |  |                               |             |   |                                     |   |      
|Nonvested at December 31, 2006 |  | 1,600,735 |   |  | $                             | 27,330,990  |   |                                     | $ | 17.07
|Granted                        |  | 75,453    |   |  | $                             | 275,144     |   |                                     |   | 3.65 
|Vested                         |  | (669,968  | ) |  | $                             | (13,853,982 | ) |                                     |   | 20.68
|Forfeited/Expired              |  | (463,326  | ) |  | $                             | (9,596,732  | ) |                                     |   | 20.71
|                               |  |           |   |  |                               |             |   |                                     |   |      
|Nonvested at December 31, 2007 |  | 542,894   |   |  | $                             | 4,155,420   |   |                                     | $ | 7.65 
|                               |  |           |   |  |                               |             |   |                                     |   |      



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Summary of the status of the Companys non-vested stock options as of January 1, 2007 and
changes during the fiscal year ending December 31, 2007 is presented below:



|                               |  |           |   |  |                               |            |   |                                     |   |     
|------------------------------ |  | --------- | - |  | ----------------------------- | ---------- | - | ----------------------------------- | - | ----
|                               |  | Shares    |   |  | AggregateGrant DateFair Value |            |   | Weightedaveragegrant datefair value
|Nonvested stock options:       |  |           |   |  |                               |            |   |                                     |   |     
|Nonvested at December 31, 2004 |  |           |   |  |                               |            |   |                                     |   |     
|Granted                        |  | 44,485    |   |  | $                             | 431,109    |   |                                     | $ | 9.69
|                               |  |           |   |  |                               |            |   |                                     |   |     
|Nonvested at December 31, 2005 |  | 44,485    |   |  | $                             | 431,109    |   |                                     | $ | 9.69
|Granted                        |  | 1,206,028 |   |  |                               | 5,169,535  |   |                                     |   | 4.29
|Vested                         |  | (265,493  | ) |  |                               | (661,712   | ) |                                     |   | 2.49
|Forfeited                      |  | (14,922   | ) |  |                               | 136,568    |   |                                     |   | 9.15
|                               |  |           |   |  |                               |            |   |                                     |   |     
|Nonvested at December 31, 2006 |  | 970,098   |   |  | $                             | 4,802,364  |   |                                     | $ | 4.95
|Granted                        |  | 2,764,200 |   |  |                               | 6,893,420  |   |                                     |   | 2.49
|Vested                         |  | (71,962   | ) |  |                               | (612,555   | ) |                                     |   | 8.51
|Forfeited                      |  | (104,025  | ) |  |                               | (525,195   | ) |                                     |   | 5.05
|                               |  |           |   |  |                               |            |   |                                     |   |     
|Nonvested at December 31, 2007 |  | 3,558,311 |   |  | $                             | 10,558,033 |   |                                     | $ | 2.97
|                               |  |           |   |  |                               |            |   |                                     |   |     

As of December 31, 2007, there was $8.8 million of total unrecognized compensation related to
restricted stock awards, units and options, including SARS granted under the plan. That cost is expected to be recognized over a weighted-average period of 1.78 years.

Warrant issued to XM Satellite Radio

On July 18, 2005, the Company issued to XM Satellite Radio
(XM) 1,562,500 shares of Class A Common Stock for an aggregate purchase price of $25 million. In connection with this transaction, the Company entered into a global satellite radio cooperation agreement on receiver technology,
terrestrial repeater technology, OEM and third party distribution relationships, content opportunities and new applications and services. In connection with this transaction, the Company also granted to XM, a performance-based warrant to purchase
1,785,714 shares of Class A Common Stock. This warrant expires on July 17, 2008. However, during fiscal year ending December 31, 2006, the Company determined that due to technological differences in developing customized chip-set and
terrestrial repeater networks, the likelihood of warrants vesting to XM is not probable. As a result, the company reversed in fiscal year December 31, 2006, the $625,000 of Research and Development expense recorded earlier.

Research and Development Costs

Research and
development costs are charged to expense as incurred.

Advertising

Advertising costs are charged to expense as incurred, and are included in selling and marketing expenses. The Company incurred advertising expense of $6.1 million, $17.6 million and $12.6 million for the years ending
December 31, 2007, 2006 and 2005, respectively. These expenses include promotions, advertising, event marketing, creative services, commissions and certain other marketing expenses.



F-16



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. Deferred income taxes are recognized for the tax consequences in future years of differences between the
tax bases of assets and liabilities, the financial reporting amounts at each year-end, and operating loss carry-forwards, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Effective January 1, 2007, the Company adopted the provisions of FASB Interpretation (FIN)
No. 48, Accounting for Uncertainty in Income Taxes. Refer to Note IIncome Taxes, for further discussion.

Net Loss Per Share

The Company calculates basic and diluted loss per share in accordance with SFAS 128, Earnings Per Share.. Basic loss per share is
computed by dividing net loss by the weighted-average number of outstanding shares of common stock. Diluted loss per share is computed by dividing net loss by the weighted-average number of shares adjusted for the potential dilution that could occur
if stock options, warrants and other convertible securities were exercised or converted into common stock.

For the years ended
December 31, 2007, 2006 and 2005, options, restricted stock awards, restricted stock units, SSARS, warrants and other convertible securities to purchase 34.2 million, 32.6 million and 32.7 million shares of common stock,
respectively, were outstanding, but not included in the computation of diluted earnings per share, because the effect would have been anti-dilutive.

Recent Accounting Pronouncements

In September 2006, The Financial Accounting and Standards Board has issued FAS 157, Fair
Value Measurements (SFAS 157), which provides guidance for using fair value to measure assets and liabilities. The standard also responds to investors requests for more information about the extent to which companies measure
assets and liabilities at fair value, the information used to measure fair value and the effect that fair-value measurements have on earnings. SFAS 157 will apply whenever another standard requires (or permits) assets or liabilities to be measured
at fair value. The standard does not expand the use of fair value to any new circumstances. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.
The Company is currently evaluating the impact, if any, of SFAS 157 on its results of operations and financial position.

In February 2007,
the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilitiesincluding an amendment of FASB Statement No. 115. This statement permits, but does not require, entities to measure many
financial instruments at fair value. The objective is to provide entities with an opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting
provisions. Entities electing this option will apply it when the entity first recognizes an eligible instrument and will report unrealized gains and losses on such instruments in current earnings. This statement 1) applies to all entities, 2)
specifies certain election dates, 3) can be applied on an instrument-by-instrument basis with some exceptions, 4) is irrevocable and 5) applies only to entire instruments. With respect to SFAS 115, available-for-sale and held-to-maturity securities
at the effective date are eligible for the fair value option at that date. If the fair value option is elected for those securities at the effective date, cumulative unrealized gains and losses at that date shall be included in the cumulative-effect
adjustment and thereafter, such securities will be accounted for as trading securities. The Company is currently evaluating the impact of SFAS 159 on its results of operations and financial position.



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Concentration of Credit Risk

In the years ended December 31, 2007, 2006 and 2005, the Company had revenue from the contractors and sub-contractors of various U.S. Government agencies and divisions of approximately $0.07 million, $1.1 million
and $1.8 million, representing, 0.1 percent, 7.2 percent and 15.4 percent of total revenue, respectively.

NOTE CDEBT

Long-Term Debt

Long Term Debt at
December 31, 2007 and 2006 consisted of the following (in thousands):



|                                  |  |                  |         |   |                  |   |         |  
|--------------------------------- |  | ---------------- | ------- | - | ---------------- | - | ------- | -
|                                  |  | December 31,2007 |         |   | December 31,2006 |  
|                                  | 
|Senior Secured Notes              |  | $                | 44,997  |   |                  | $ |        |  
|Convertible Notes                 |  |                  | 52,394  |   |                  |   | 155,000 |  
|Discount on Long-Term Debt        |  |                  | (4,934  | ) |                  |   | (32     | )
|Loss on Debt Extinguishment       |  |                  | 1,156   |   |                  |   |        |  
|Notes Payable                     |  |                  | 400     |   |                  |   | 400     |  
|                                  |  |                  |         |   |                  |   |         |  
|                                  |  | $                | 94,013  |   |                  | $ | 155,368 |  
|Current portion of Long Term Debt |  |                  | (27,500 | ) |                  |   |        |  
|                                  |  |                  |         |   |                  |   |         |  
|Long Term Debt                    |  | $                | 66,513  |   |                  | $ | 155,368 |  
|                                  |  |                  |         |   |                  |   |         |  

Convertible Promissory Notes Restructuring

In December 2004, the Company raised $142 million ($155 million, less $13 million in issuance costs) by issuing $155 million of 5 percent
convertible promissory notes to several investors. The convertible promissory notes were due to mature on December 31, 2014, and were convertible into reserved Class A shares of the Companys common stock at $13.52 per share, subject
to certain adjustments as defined in the promissory note agreements. Interest payments were due quarterly beginning on March 31, 2005.

On June 1, 2007, the Company entered into an agreement with the holders of our $155 million convertible notes to affect a partial redemption and exchange of the currently outstanding convertible notes (Restructuring). The Restructuring
agreement has two elements: cash redemption of part of the principal amount of the convertible notes; and issuance of new notes (senior secured and convertible) and warrants in exchange for the unredeemed portion of the new notes. The Company repaid
$50 million principal amount of the existing notes for cash and exchanged the remaining $105 million principal amount of the existing notes for:



| | (i) | Senior secured notes in the aggregate principal amount of $45 million, with a maturity of 3 years secured by a first priority lien on the Companys assets. The senior secured
notes accrue interest at the rate of London Inter Bank Offering Rate (LIBOR) plus 650 basis points per year and have a mandatory principal repayment of $27.5 million on the first anniversary of the closing date of the transaction. The
senior secured notes also require mandatory principal repayment out of the net proceeds of any debt or equity financing, certain excess cash flow, or sale of assets or casualty loss, subject to customary exceptions. In December 2007, the Company
entered into a facility agreement with Yenura Pte Ltd (see Yenura financing) for a $40 million credit facility. A mandatory repayment requirement under the senior secured notes would have required us to pay down the entire proceeds of the Yenura
facility. We obtained agreement from the holders of these senior secured notes to pay down $9.8 million of the outstanding balance plus accrued interest under the senior secured notes in connection with the Yenura facility. Accordingly, $10 million
was paid on January 31, 2008.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | (ii) | Amended and restated secured convertible notes in the principal amount of $60 million, with a maturity of three years secured by a second priority lien on the Companys assets.
The amended and restated convertible notes have an interest rate of 8 percent per annum and are convertible into 14.1 million shares of our Class A common stock, at the option of the note-holders, at a price of $4.25 per share. Under the
terms of agreement, the Company has right to redeem all the outstanding convertible notes at any time after the second anniversary (eligibility date) if the weighted average price of shares of Class A Common Stock exceeds 200% of conversion
price on the commitment date for ten consecutive trading days following the eligibility date at price which is thirty days after its delivery of a mandatory redemption notice to the holders of secured convertible notes. The Company is also required
to reserve out of its authorized and unissued shares of Class A Common Stock a number of shares equal to 120% of outstanding convertible notes from time to time necessary to effect the conversion.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | The issuance of warrants to purchase 2.65 million shares of our Class A common stock, with an exercise price of $4.25 per share. The warrants are fully vested and
exercisable immediately. The warrants expire five years from the date of issuance. The warrants were valued under Black-Scholes methodology as of the grant date. The Company computed fair value of $2.65 per warrant for a total of approximately $7
million. This amount will be amortized over a period of three years corresponding to terms of convertibility of secured and convertible notes as a discount on long-term debt. The following assumptions were used to determine the fair value of
warrants using the Black-Scholes valuation model: a term of five years, risk-free rate of 4.67%, volatility of 84%, and dividend yield of zero. The Company recognized $2.1 million of this discount during the year ended December 31, 2007 as
additional interest expense in the financial statements. In accordance with EITF No. 00-27, Application of EITF 98-5: Accounting for Convertible Securities with Beneficial Conversion Features or Adjustable Conversion
Ratios, the value assigned to Notes and the Warrants were allocated based on their relative fair values. The value of Warrants was recorded as additional paid-in-capital and reduced the carrying value of the Notes. The Company did
not record any value towards beneficial conversion feature in accordance with EITF 98-5, since the fair market value of the common stock was less than the conversion price as on the commitment date.
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company paid all accrued interest on the existing notes of $1.3 million, paid and reimbursed $1.2 million for all reasonable out-of-pocket costs and
expenses incurred during this restructuring process, and a $3.0 million restructuring fee to its advisor.

The Company accounted for the
restructuring of these notes as debt extinguishment in accordance with EITF 96-16 Debtors Accounting for Modification or Exchange of Debt Instrustments. We recorded a loss of $1.4 million, which represents the difference
between the fair value and carrying value of the restructured notes. Additionally, we also capitalized approximately $4.3 million in costs, primarily legal and investment advisor fees, associate with this transaction. These costs are amortized over
the term of the notes of three years. As of December 31,2007 the unamortized balance on these deferred financing costs is $ 3.4 million. The unamortized deferred financing costs of $ 11.5 million associated with the old notes were written
off.

For the year ended December 2007, certain holders of the convertible notes elected to convert principal debt and related interest of
$7.7 million into 1.8 million shares of the Companys Class A Common Stock. The effect of this conversion reduced principal Convertible Debt and accrued interest and increased the issued and outstanding shares of the Companys
Class A Common Stock.

The Company evaluates the provisions of the Notes periodically to determine whether any provisions would be
considered embedded derivatives that would require bifurcation under Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133). Since the shares
of common stock underlying the Notes have been registered during the year ending December 31, 2006, they are readily convertible to shares of our Class A Common Stock. The registration with the SEC of the



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



shares of common stock underlying the convertible notes payable satisfied the provisions for net settlement under SFAS No. 133. The Company has
determined that even though our Notes do contain an embedded conversion feature, the Notes however are both indexed to the Companys own stock and classified in stockholders equity in its financial statements and therefore under SFAS
No. 133 are not considered for derivative accounting treatment.

Under the registration rights agreement, the Company has agreed to
use its best efforts to file a registration statement for the resale of the 120% of Common stock issuable upon exercise of the Warrants. EITF 00-19-2, Accounting for Registration Payment Arrangements, requires the registration payment arrangements
to be accounted for as a contingent liability. Since the Company complied with terms of the registration rights agreement by filing on July 31, 2007 the agreements with the Securities and Exchange Commission, accounting for a contingent
liability was not required.

Notes Payable

In June 2006, the Company received $200,000 from the Montgomery County of the State of Maryland under the Economic Development Fund as a contingent loan. This loan could be converted into a grant if the Company maintains a specified number
of employees on a particular maturity date and is in compliance with certain other terms of the agreement. The loan has a 5% annual interest rate. At December 31, 2007, under the terms of the loan, the Company was contingently obligated to
repay the loan principal together with accrued interest.

In August 2006, the Company received $200,000 from the Department of Business and
Economic Development of the State of Maryland as a contingent loan. This loan could be converted into a grant if the Company maintains a specified number of employees on a particular maturity date and is in compliance with certain other terms of the
agreement. The loan has a 3% annual interest rate. At December 31, 2007, under the terms of the loan, the Company was contingently obligated to repay the loan principal together with accrued interest.

Yenura Financing

On December 31, 2007, the
Company entered into a facility agreement with Yenura Pte Ltd. (Yenura) (Refer to Note E Related-Party Transactions) in which Yenura agreed to make available up to $40 million from time to time pursuant to draw down notices issued on or prior to
January 31, 2008, in consideration for the issuance of certain subordinated convertible notes. Yenura has been slow in making the full amount available to the Company and consequently, as of March 31, 2008, the Company has drawn
$19.2 million of the $40 million. The subordinated convertible notes issued on draw downs mature on January 3, 2013 and accrue interest at the rate of 8% per year and shall be payable in arrears with the first interest date being
January 15, 2009. The convertible notes shall be convertible at the option of the note holders into shares of Class A Common Stock. The conversion amount shall be calculated as the portion of the principal drawdown plus any accrued and
unpaid interest and late charges. The conversion rate will be $4.25 per share.

Contingent Royalty Obligation

On September 30, 2003, the Company concluded definitive agreements (the Restructuring Agreements) with a lender to restructure $1,553 million in
notes payable and advances. The executed Restructuring Agreements were placed in escrow until the Company met certain conditions, the principal condition being the raising of $50 million from one or more parties unrelated to the Companys
equity and debt holders within one year of the signing of the Restructuring agreements. On September 28, 2004 the Restructuring Agreements were amended to provide the Company until March 31, 2005 to meet the conditions precedent for the
restructuring.

Under the Restructuring Agreements, the ongoing obligations of the Company to the lender were set forth in a separate
Royalty Arrangement (Royalty Agreement), under which the Company is required to pay the lender



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10 percent of earnings before interest, taxes, depreciation, and amortization, if any, for each year through 2015 in exchange for the lender releasing
all claims. The Company is subject to certain covenants regarding the disposition of assets, reporting, and distributions or payments to certain of the current shareholders. The Royalty Agreement also requires the Company to have a segregated
reserve, to be funded each quarter in any year in which payment under the Royalty Agreement is projected, at the rate of 25 percent of the estimated annual payment. In addition, 80 percent of the annual payment is required to be made within 60
days after year-end, and the remaining portion within 180 days following year-end. Even though management is satisfied that the debt may not be reinstated, in accordance with SFAS No. 15, Accounting by Debtors and Creditors for Trouble Debt
Restructuring,the debt restructuring is not considered an extinguishment of debt because the future payments under the agreement are indeterminate. Accordingly, the carrying value of the debt and accrued interest of $1,814 million has been
reclassified as a contingent royalty obligation on the accompanying balance sheet at December 31, 2007 and 2006. The obligation will be reduced by the future payments made under the Royalty Agreement and will remain on the Companys
balance sheet until 2015; the last year payment under the Royalty Agreement is required.

NOTE DCOMMON STOCK

During December 2004, upon incorporation in Delaware, the Companys Board of Directors authorized the issuance of Class A and Class B Common
Stock. The Company converted 2,987,506 shares of common stock held, directly or indirectly, by the Companys CEO to Class B Common Stock and the remaining 2,797,368 shares of outstanding common stock converted to Class A Common Stock. On
December 31, 2004, Yenura, which is controlled by Mr. Samara, was issued 17,426,443 shares of Class B Common Stock in exchange for the assumption and cancellation of debt as described in Note CDebt.

During 2005, the Company and its Board of Directors converted 2,987,506 Class B Common Stock controlled by Mr. Samara into 2,987,506 shares of
Class A Common Stock.

On August 24, 2006, the Company received notice from The Nasdaq Stock Market (NASDAQ) that for
the last ten consecutive trading days, the market value of the Companys Class A Common Stock had been below the minimum $50,000,000 requirement for continued inclusion on The Nasdaq Global Market under Marketplace Rule 4450(b)(1)(A). In
response to this notification, the Company and Yenura Pte. Ltd., the Companys largest stockholder, agreed that Yenura would exchange its equity holdings in the Company consisting of all of the outstanding shares of the Companys Class B
Common Stock, par value, $.01 per share, for shares of Class A Common Stock. The exchange was on a share-for-share basis. This transaction resulted in the issuance of an additional 17,426,443 shares of Class A Common Stock which are listed
in The Nasdaq Global Market. The Company received a letter from NASDAQ on August 24, 2006 indicating that such required minimum market value has been achieved.

Rights and Privileges of Common Stock

As provided in the Companys certificate of
incorporation, holders of shares of Class A are entitled to vote as one class on all corporate matters with the exception of amendments to the Certificate of Incorporation that relate solely to the terms of one or more series of outstanding
preferred stock. As of December 31, 2007, no preferred stock or Class B Common Stock was issued or outstanding.

Class A Common Stock

On June 23, 2005, the Companys Board of Directors approved a proposed amendment to the Companys Certificate of
Incorporation increasing authorized Class A shares to 200 million on a post-split basis. On July 7, 2005, the proposed amendment received shareholder approval.



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Reverse Stock Split

On June 23, 2005, the Companys Board of Directors also approved a proposed amendment to the Companys Certificate of Incorporation, affecting a 1.6 to 1.0 reverse stock split in the Companys
outstanding Class A and Class B common stock. On July 7, 2005, the proposed amendment received shareholder approval. As a result of the reverse stock split, all share and per share amounts have been adjusted.

XM Satellite Radio Transaction

On July 18,
2005, the Company issued to XM 1,562,500 shares of Class A common stock for an aggregate purchase price of $25 million. The Company also issued to XM a warrant to purchase an aggregate number of shares of Class A common stock equal to
$37.5 million. In connection with the transaction, the Company appointed to its Board of Directors, Gary M. Parsons, the Chairman of XMs Board of Directors. On October 18, 2006, Gary M. Parsons resigned as a director of the Company. In
resigning, Mr. Parsons stated that, in order to focus more of his attention on his primary responsibilities as Chairman of XM Satellite Radio Holdings Inc. (XM), he was reducing his outside areas of responsibility. Pursuant to a
Stockholders Agreement dated as of July 18, 2005 between the Company and XM, XM has the right, until the Companys 2008 Annual Meeting of Stockholders, to designate a director to serve on the Companys board of directors.

Initial Public Offering

On August 3, 2005,
the Companys registration statement for its initial public offering of 11.8 million shares of its Class A Common Stock became effective. The offering closed on August 9, 2005 and the Company and a stockholder sold
11.5 million shares and 0.3 million shares, respectively.

On August 9, 2005, the Company completed its initial public
offering of 11,868,400 shares of Class A common stock at an initial public offering price per share of $21.00. Of the 11,868,400 shares of Class A Common Stock offered, the Company sold 11,500,000 shares and a selling stockholder sold
368,400 shares. The Company did not receive any of the proceeds of the sale by the selling stockholder.

The aggregate proceeds of the
offering were $249.2 million, of which the aggregate gross proceeds to the Company were approximately $241.5 million. Net proceeds to the Company were approximately $220.8 million. The Company incurred expenses in connection with the offering of
$20.7 million which included direct payments of: (i) $3.6 million in legal, accounting and printing fees; (ii) $16.9 million in underwriters discounts, fees and commissions payable by the Company and
(iii) $0.2 million in miscellaneous expenses. None of the offering expenses were paid to directors, officers, ten percent stockholders or affiliates of the Company.

NOTE ERELATED-PARTY TRANSACTIONS

The Company in December 2007 secured a $40 million financing
facility from Yenura Pte. Ltd., a company controlled by Noah Samara, chairman and CEO of WorldSpace. Yenura is a special purpose entity established by Mr. Samara and Mr. Salah Idris to invest in WorldSpace. Mr. Samara holds all of the
voting shares in Yenura. Mr. Idris, through his ownership of non-voting shares holds the major economic interest in Yenura. The Company did not draw funds on this facility in 2007 but has drawn $19.2 million through March 2008. Refer to Note
C-Debt, Yenura financing for further discussion.

In 2005, the Company entered into a global satellite radio cooperation agreement with XM
Satellite Radio (XM) pursuant to which both parties agreed to cooperate with one another on receiver technology, terrestrial repeater technology, OEM and third party distribution relationships, content opportunities and new applications
and technologies. The Company also issued 1,562,500 shares of Class A Common Stock for an aggregate amount



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of $25 million. In addition, pursuant to a stockholders agreement among Noah Samara, our Chairman, certain entities controlled by Mr. Samara, XM and
ourselves, Gary Parsons, the Chairman of the board of directors of XM, was elected to our board of directors and served as a director through October 18, 2006. In connection with this transaction, we also granted to XM a performance-based
warrant to purchase 1,785,714 shares of Class A Common Stock. The warrant will expire on August 8, 2008. During the fiscal year ending December 31, 2006, the Company determined that due to technological differences in developing
customized chip-set and terrestrial repeater networks, the likelihood of warrants vesting to XM is not probable and as a result, reversed $0.6 million in research and development expense.

The Company entered into a technology licensing agreement to use certain technology comprised of patents, patent applications, software, databases,
know-how and the intellectual property rights. The agreement provides for certain royalty payments after XM achieves certain revenue and subscriber targets. The agreement calls for $800,000 payment upon signing the agreement and 25 quarterly
payments of $200,000. The Company recorded revenues related to this agreement to an extent of approximately $737,000, $1.0 million and $637,000 for the years ending December 31, 2007, 2006 and 2005, which is included in other revenue in the
consolidated statement of operations. The Company was owed $0 and $57,000 by XM as of December 31, 2007 and 2006 respectively. The Company also recorded interest income of approximately $394,000 each year during the three year period ended
December 31, 2007, respectively.

NOTE FCOMMITMENTS AND CONTINGENCIES

Leases

The Company leases office space under various non-cancelable operating leases that expire
through 2016. The minimum annual rental commitments under non-cancelable leases as of December 31, 2007 (in thousands), are as follows:



|                             |  |   |        |  
|---------------------------- |  | - | ------ | -
|2008                         |  | $ | 4,056  |  
|2009                         |  |   | 3,766  |  
|2010                         |  |   | 3,810  |  
|2011                         |  |   | 3,731  |  
|2012                         |  |   | 3,497  |  
|Thereafter                   |  |   | 11,369 |  
|                             |  |   |        |  
|Total lease commitments      |  |   | 30229  |  
|Less: Sublease rental income |  |   | (6,547 | )
|                             |  |   |        |  
|                             |  | $ | 23,682 |  
|                             |  |   |        |  

Rent expense was approximately $4.1 million, $4.7 million and $6.3 million for the years ended
December 31, 2007, 2006 and 2005, respectively. As security for three of its lease commitments, the Company issued letters-of-credit in the amount of $4.1 million to the lessors. This cash is held in interest-bearing accounts and has been
included in restricted cash and investments in the accompanying consolidated balance sheets.

On May 18, 2005, the Company entered into a lease Agreement (Agreement) to relocate its Washington D.C. Headquarters to Silver Spring, Maryland. The lease term is for eleven years commencing on September 1, 2005. On
October 21, 2005, the Companys Silver Spring Headquarters office lease was amended whereby the Company leased an additional 20,130 sq. ft. on the 6thand 7thfloors. The Agreements called for a security deposit in the amount of $3.5 million, which is recorded as
restricted cash in the accompanying consolidated balance sheets.



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On July 18, 2006, the Company entered into an agreement with Acorn, pursuant to which 8,402 sq.
foot of excess office space in our Headquarters in Silver Spring, Maryland was subleased. The total minimum lease payments receivable under this agreement is $1.6 million over a period of 60 months. These total minimum lease payments receivable from
Acorn are included as Sublease rental income in the table presented above.

On December 21, 2006, the Company entered into
an agreement with Prologis, pursuant to which 4,507 sq. foot of excess office space in our Headquarters in Silver Spring, Maryland was subleased. The total minimum lease payments receivable under this agreement is $0.7 million over a period of 60
months, starting January 1, 2007. These total minimum lease payments receivable from Prologis are included as Sublease rental income in the table presented above.

On October 1, 2007, the Company entered into an agreement with Syncom, pursuant to which 6,393 sq. foot of excess office space in our Headquarters
in Silver Spring, Maryland was subleased. The total minimum lease payments receivable under this agreement is $1.1 million over a period of 60 months, starting October 1, 2007. These total minimum lease payments receivable from Syncom are
included as Sublease rental income in the table presented above.

On December 31, 2007, the Company entered into an
agreement, subject to the Board of Directors approval, with three subtenants, pursuant to which 4,662 sq. foot of excess office space in our Headquarters in Melbourne, Australia was subleased. The total minimum lease payments receivable under
this agreement is $3.6 million over a period of 84 months, starting January 1, 2008. These total minimum lease payments receivable are included as Sublease rental income in the table presented above.

Litigation, Claims and Income Taxes

The Company is
subject to various claims and assessments. In the opinion of management, these matters will not have a material adverse impact on the Companys financial position or results of operations. In evaluating the exposure associated with various tax
filing positions, the Company accrues charges for probable exposures. Based on annual evaluations of tax positions, the Company believes it has appropriately accrued for probable exposures.

The Company entered into an agreement with the Internal Revenue Service in March 2007 to pay outstanding income taxes payable of approximately $16.0
million on an installment basis. The terms of the agreement require monthly payments of $340,000 beginning April 28, 2007 through August 28, 2007. The remaining outstanding balance of approximately $13.8 million including accrued interest
was paid on September 27, 2007.

In April and May 2007, securities class action litigation suits were filed in the United States
District Court for the Southern District of New York, on behalf of persons who purchased or otherwise acquired the Companys publicly traded securities. The lawsuits were filed against the Company, Noah A. Samara, President and Chief Executive
Officer; Sridhar Ganesan, Chief Financial Officer; Cowen & Co. LLC, and UBS Securities LLC (Defendants). The complaints (all similar) allege violations of Sections 11, 12(a)2, and 15 of the Securities Act of 1933. The suits
claim that certain customers were incorrectly counted as subscribers after they had ceased to be paying subscribers. The complaints have been consolidated and on August 9, 2007, an amended complaint was filed on behalf of all the plaintiffs.
The Company is planning to vigorously defend against these claims.

Contribution of Satellite Capacity

The Company has entered into a gifting agreement with First Voice International; a nonprofit Washington, D.C. corporation recognized under the U.S. tax
laws as a charitable corporation (First Voice). Under this agreement, the Company gifted to First Voice five percent of the capacity for the AfriStar and AsiaStar satellites



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for social welfare and human development use. The gifting was for the remaining life of the satellites, subject to five-year reviews by WorldSpace to
ensure First Voices performance in making social welfare contributions in the coverage area of the satellites. Additionally, the Company agreed to provide uplink service to the satellites on a gifted basis for at least the first two years
of the gifting agreements term. The Company values the services provided during 2007, 2006 and 2005 at approximately $3.8 million, $3.9 million, $2.7 million, respectively, which is not recorded in the Companys financial statements. The
Companys Chairman and CEO is also the Chairman of First Voice.

Design and Production Agreement

The Company is committed to purchasing 722,445 satellite radio receiver chipsets for approximately $18.2 million as of December 31, 2007. The
chipsets have not been purchased as of December 31, 2007. The Company has recorded a liability equal to the excess of the aggregate purchase price over the expected sales price, of $18.2 million at December 31, 2007, and 2006,
respectively, as accrued purchase commitment on the accompanying consolidated balance sheets. This increase in liability of approximately $5.0 million in 2006 resulted from an additional accrual to reflect the maximum purchase commitment. This
resulted in an expense of an equal amount which is included in year ended December 31, 2006, Cost of Equipment in our Consolidated Statements of Operations.

New Systems Implementation

The Company entered into an agreement with a systems integrator to
implement a global enterprise resource planning (ERP) application to effectively manage the financial, accounting, materials management and human resources processes as well as a global customer care and billing application to manage sales, customer
care, billing and marketing processes. The Company formally completed the implementation during the three months ended September 30, 2006. The total cost of implementing the financial, accounting, inventory, global customer care and billing
systems was $3.3 million. In February 2006, the Company also signed an agreement with the vendors of the ERP system which provides for maintenance, enhancements, upgrades and technical support for 35 months at a total cost of $1.7 million to be paid
in equal monthly installments.

NOTE GSATELLITES AND GROUND STATION CONSTRUCTION AGREEMENTS

Contractual Agreements

On January 21, 1995, the
Company entered into an in-orbit delivery contract (the IOD Contract) with Alcatel Espace (Alcatel), under which Alcatel was to deliver three in-orbit satellites, one ground spare satellite, ground stations, mission control stations, and related
documentation and training. Alcatel was also obligated to provide launch services and launch insurance for the three in-orbit satellites. The risk of loss of each satellite transfers to the Company after the successful first eclipse following
launch. For launched satellites, title to each satellite passes to the Company after the satellite has been placed in orbit and the Company has completed an in-orbit acceptance review. In July 1999, the Company decided to delay the construction of
the ground spare satellite. As a result, the Company has incurred, and will continue to incur, costs related to storage and resuming construction (if that decision is made). In January 2001, the Company decided to accept the third satellite
constructed by Alcatel under the IOD Contract on the ground rather than in orbit. The third satellite is also now in storage and title passed to the Company during the first quarter of 2005. During the year ended December 31, 2007, 2006
and 2005, $0.9 million, $.9 million and $1.1 million, respectively, was charged to expenses relating to storage for these two satellites.



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On January 7, 2000, Alcatel agreed to defer certain payments from the Company, related to the
IOD Contract, the OSOS Contract, the EtE contract and cost for the satellite construction delay. Under this arrangement and subsequent understandings, the Company was required to pay interest on the outstanding deferred payment balance at the rate
of LIBOR plus 3 percent. As of December 31, 2004, the Company had paid Alcatel a total of $666.0 million and had accrued approximately $40.1 million, consisting of $29.0 million of deferred payments and other invoices and $11.1 million of
interest. On February 25, 2005, the Company entered into a Memorandum of Agreement (Agreement) with Alcatel under which the total amount due of $40 million consisting of deferred payments and accrued interest as accrued through March 31,
2005 was reduced to $21 million. As of December 31, 2005, $12 million had been paid and $7 million was paid through the issuance of 333,333 shares of the Companys Class A common stock at the closing of the IPO on August 3, 2005.
The Company may also be subject to additional payments of at least $2 million if certain events occur as defined in the Agreement. During the year ended December 31, 2005, the Company recorded $14.1 million of the reduction in deferred
payments and accrued interest as a gain on the extinguishment of debt and the remaining $5.8 million as a decrease in Satellites and related systems under construction. This Agreement also terminated the OSOS Contract, the IOD Contract and the EtE
Contract. The Company included this gain on extinguishment of debt in the accompanying Statement of Operations under Other Income.

NOTE
HEMPLOYEE BENEFIT PLAN

The Company maintains a defined contribution plan (Plan) that covers all eligible employees provided that
certain service requirements are met. Participants may elect to contribute a specified portion of their salary to the Plan on a tax-deferred basis. The Company makes discretionary matching contributions to the Plan up to 3% of the employees
annual salary. For the years ended December 31, 2007, 2006 and 2005, the Company contributed to the Plan $327,000, $271,000 and $103,000, respectively.

NOTE IINCOME TAXES

The Company accounts for income taxes in accordance with SFAS No. 109, Accounting for
Income Taxes, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or income tax returns. Under this method, deferred tax assets
and liabilities are determined based on the differences between the financial statement and the tax basis of assets and liabilities, using enacted tax rates for the year in which the differences are expected to reverse.

The significant components of the Companys income tax provision (benefit) are as follows (in thousands):



|                   |  |              |        |   |      |   |         |      |  |   |         |  
|------------------ |  | ------------ | ------ | - | ---- | - | ------- | ---- |  | - | ------- | -
|                   |  | December 31, |       
|                   |  | 2007         |        |   | 2006 |   |         | 2005 | 
|Current Provision  |  |              |        |   |      |   |         |      |  |   |         |  
|Federal            |  | $            | (688   | ) |      | $ | (1,960  | )    |  | $ |        |  
|State              |  |              | 108    |   |      |   | 83      |      |  |   | 47      |  
|Foreign            |  |              | 1,017  |   |      |   | 2,393   |      |  |   |        |  
|                   |  |              |        |   |      |   |         |      |  |   |         |  
|Total              |  | $            | 437    |   |      | $ | 516     |      |  | $ | 47      |  
|                   |  |              |       
|Deferred Provision |  |              |        |   |      |   |         |      |  |   |         |  
|Federal            |  | $            | (8,920 | ) |      | $ | (48,185 | )    |  | $ | (37,411 | )
|State              |  |              | 2,068  |   |      |   | (10,362 | )    |  |   | (27,265 | )
|Foreign            |  |              | 3,922  |   |      |   | 1,584   |      |  |   | (5,031  | )
|                   |  |              |        |   |      |   |         |      |  |   |         |  
|Total              |  | $            | (2,930 | ) |      | $ | (56,963 | )    |  | $ | (69,707 | )
|                   |  |              |        |   |      |   |         |      |  |   |         |  
|Total              |  | $            | (2,493 | ) |      | $ | (56,447 | )    |  | $ | (69,660 | )
|                   |  |              |        |   |      |   |         |      |  |   |         |  



F-26



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The reconciliation between the Companys statutory tax rate and the effective tax rates is as
follows:



|                                           |  |              |    |  |        |    |  |        |   
|------------------------------------------ |  | ------------ | -- |  | ------ | -- |  | ------ | --
|                                           |  | December 31, |   
|                                           |  | 2007         |    |  | 2006   |    |  | 2005   |   
|U.S. federal statutory rate                |  | (35.00       | )% |  | (35.00 | )% |  | (35.00 | )%
|State income taxes, net of federal benefit |  | (4.19        | )  |  | (4.25  | )  |  | (4.07  | ) 
|Withholding taxes                          |  | (0.38        | )  |  | (1.06  | )  |  | 0.00   |   
|Change in tax rates                        |  | 0.80         |    |  |       |    |  | (7.78  | ) 
|Stock compensation                         |  | 3.20         |    |  | 5.81   |    |  | 0.11   |   
|Sec. 162(m) limitation                     |  | 0.13         |    |  | 0.99   |    |  |       |   
|Foreign rate differential                  |  | 0.37         |    |  | 0.14   |    |  | 0.18   |   
|Change in valuation allowance              |  | 32.62        |    |  | 0.56   |    |  | (15.70 | ) 
|Adjustment of foreign NOLs                |  |             |    |  | 2.63   |    |  | 15.16  |   
|Non-deductible interest                    |  | 0.86         |    |  | 0.73   |    |  | 0.50   |   
|Other                                      |  | 0.14         |    |  | (1.06  | )  |  | 0.02   |   
|                                           |  |              |    |  |        |    |  |        |   
|Effective tax rate                         |  | (1.45        | )% |  | (30.51 | )% |  | (46.58 | )%
|                                           |  |              |    |  |        |    |  |        |   

As of December 31, 2007 and 2006, the significant components of deferred taxes are as follows
(in thousands):



|                                    |  |              |          |   |      |   |          |  
|----------------------------------- |  | ------------ | -------- | - | ---- | - | -------- | -
|                                    |  | December 31, |         
|                                    |  | 2007         |          |   | 2006 |  
|Deferred Tax Assets (in thousands): |  |              |          |   |      |   |          |  
|Unrealized inventory loss           |  | $            | 2,573    |   |      | $ | 2,028    |  
|Stock option compensation           |  |              | 50,494   |   |      |   | 55,271   |  
|Other                               |  |              | 8,515    |   |      |   | 538      |  
|Net operating losses                |  |              | 118,768  |   |      |   | 81,271   |  
|                                    |  |              |          |   |      |   |          |  
|                                    |  |              | 180,350  |   |      |   | 139,108  |  
|Less: valuation allowance           |  |              | (65,111  | ) |      |   | (10,690  | )
|                                    |  |              |          |   |      |   |          |  
|Total deferred tax assets           |  |              | 115,239  |   |      |   | 128,418  |  
|                                    |  |              |          |   |      |   |          |  
|Deferred Tax Liabilities:           |  |              |          |   |      |   |          |  
|Depreciation                        |  |              | (115,270 | ) |      |   | (133,431 | )
|Accounts receivables                |  |              | (2,611   | ) |      |   | (2,461   | )
|Inter-company receivables           |  |              | (117,093 | ) |      |   | (113,048 | )
|Other                               |  |              |         |   |      |   |         |  
|                                    |  |              |          |   |      |   |          |  
|Total deferred tax liabilities      |  |              | (234,973 | ) |      |   | (248,940 | )
|                                    |  |              |          |   |      |   |          |  
|Net deferred tax liabilities        |  | $            | (119,734 | ) |      | $ | (120,522 | )
|                                    |  |              |          |   |      |   |          |  

During the twelve month period ended December 31, 2007, the Company recorded an income tax
benefit of $2.5 million. As of December 31, 2007, the Company had foreign net operating losses of approximately $46.2 million (net of $5.9 million of unrecognized tax benefit), some of which expire at various dates and some are indefinite. The
Company has US net operating losses amounting to approximately $257.8 million, net of $2.2 million of unrecognized tax benefits. Management established a valuation allowance against the benefit of the foreign losses as a result of uncertainty
surrounding their ultimate utilization. Due to the Companys liquidity position, a valuation allowance has been established against the net deferred tax assets in Australia and India. The Company established a valuation allowance on the net
U.S. deferred tax assets to the extent that they exceeded any deferred tax liabilities unrelated to inter-company receivables, which are not expected to be settled in the foreseeable future. Since the timing of the reversal of these deferred tax
liabilities is indefinite, they were not used as a source of future taxable income to support the realization of U.S. deferred tax assets.

The Company intends to indefinitely reinvest the undistributed 2007 earnings of certain foreign subsidiaries. Accordingly, the annualized effective tax rate applied to the Companys pre-tax income for the year ended December 31,
2007 did not include any provision for U.S. federal and state taxes on the projected amount of these undistributed 2007 foreign earnings.



F-27



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Effective January 1, 2007, the Company adopted the provisions of FASB Interpretation (FIN)
No. 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109. FIN 48 contains a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with SFAS
No. 109. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related
appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. We consider many factors when evaluating and estimating our tax
positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes. As a result of the implementation of FIN 48, the Company recognized approximately $2.9 million increase in the unrecognized
tax benefits, which was accounted for as a reduction to the January 1, 2007, balance of retained earnings.

The change in the
unrecognized tax benefits is shown in the table below:

|                                                                 |  |      |          
|---------------------------------------------------------------- |  | ---- | ---------
|                                                                 |  | 2007
|Unrecognized tax benefits at 1/1/07                              |  | $    | 2,905,327
|Increase (decrease) related to positions taken in prior period   |  |      | 1,851,793
|Increase (decrease) related to positions taken in current period |  |      |         
|Increase (decrease) related to settlement with tax authorities   |  |      |         
|Reductions related to expiration of statute of limitations       |  |      |         
|                                                                 |  |      |          
|Unrecognized tax benefits at 12/31/07                            |  | $    | 4,757,120
|                                                                 |  |      |          

As of December 31, 2007, the total amount of unrecognized tax benefits which would affect the
effective tax rate, if recognized, was $4.7 million. While the Company does not expect a significant change in its unrecognized tax benefits during the next twelve months, it is possible that there could be an increase of up to $1.7 million, based
upon a pending foreign tax examination.

The Company or one of its subsidiaries files income tax returns in the U.S. federal and various
state and foreign tax jurisdictions. For income tax returns filed by the Company, the Company is no longer subject to U.S. federal, state and local tax examinations by tax authorities for years before 2004. The Companys policy is to record
interest and penalties related to income taxes in income tax expense.

During 2007, the Company recorded a net reduction to tax expense of
approximately $630,000 primarily related to penalties accrued in the U.S. that were abated during 2007.

NOTE JGEOGRAPHIC AREAS

|                        |  |                        |        |      |   |        |  |   |       
|----------------------- |  | ---------------------- | ------ | ---- | - | ------ |  | - | ------
|                        |  | Geographical Area Data
|                        |  | 2007                   |        | 2006 |   | 2005  
|                        |  | (in thousands)        
|Revenues from Customers |  |                        |        |      |   |        |  |   |       
|United States           |  | $                      | 3,368  |      | $ | 4,409  |  | $ | 4,038 
|France                  |  |                        | 1,039  |      |   | 1,711  |  |   | 1,880 
|Kenya                   |  |                        | 24     |      |   | 1,229  |  |   | 813   
|South Africa            |  |                        | 800    |      |   | 768    |  |   | 1,029 
|Singapore               |  |                        | 30     |      |   | 57     |  |   | 56    
|India                   |  |                        | 8,156  |      |   | 7,100  |  |   | 3,418 
|Other foreign countries |  |                        | 367    |      |   | 337    |  |   | 426   
|                        |  |                        |        |      |   |        |  |   |       
|                        |  | $                      | 13,784 |      | $ | 15,611 |  | $ | 11,660
|                        |  |                        |        |      |   |        |  |   |       

Long-lived Assets

|                  |  |      |         |      |   |        
|----------------- |  | ---- | ------- | ---- | - | -------
|                  |  | 2007 |         | 2006
|United States     |  | $    | 306,727 |      | $ | 359,181
|Foreign countries |  |      | 6,435   |      |   | 3,610  

Excludes deferred financing costs, investments in restricted assets and investments in affiliates
and other assets.



F-28



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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



NOTE KQUARTERLY FINANCIAL DATA (UNAUDITED)



|                                     |  |                                   |         |   |               |   |         |              |  |   |               |   |  |               |         |   |  |   |          |  
|------------------------------------ |  | --------------------------------- | ------- | - | ------------- | - | ------- | ------------ |  | - | ------------- | - |  | ------------- | ------- | - |  | - | -------- | -
|                                     |  | FirstQuarter                      |         |   | SecondQuarter |   |         | ThirdQuarter |  |   | FourthQuarter |   |  | Total forYear |        
|                                     |  | (in thousands, except share data) |        
|2007                                 |  |                                   |         |   |               |   |         |              |  |   |               |   |  |               |         |   |  |   |          |  
|Revenue                              |  | $                                 | 3,046   |   |               | $ | 3,608   |              |  | $ | 3,330         |   |  | $             | 3,800   |   |  | $ | 13,784   |  
|Operating expense                    |  |                                   | 40,589  |   |               |   | 45,004  |              |  |   | 38,552        |   |  |               | 39,358  |   |  |   | 163,503  |  
|Net loss                             |  |                                   | (35,534 | ) |               |   | (51,246 | )            |  |   | (36,694       | ) |  |               | (46,033 | ) |  |   | (169,507 | )
|Net loss per sharebasic and diluted |  |                                   | (0.91   | ) |               |   | (1.30   | )            |  |   | (0.91         | ) |  |               | (1.10   | ) |  |   | (4.22    | )



|                                     |  |                                   |         |   |               |   |         |              |  |   |               |   |  |               |         |   |  |   |          |  
|------------------------------------ |  | --------------------------------- | ------- | - | ------------- | - | ------- | ------------ |  | - | ------------- | - |  | ------------- | ------- | - |  | - | -------- | -
|                                     |  | FirstQuarter                      |         |   | SecondQuarter |   |         | ThirdQuarter |  |   | FourthQuarter |   |  | Total forYear |        
|                                     |  | (in thousands, except share data) |        
|2006                                 |  |                                   |         |   |               |   |         |              |  |   |               |   |  |               |         |   |  |   |          |  
|Revenue                              |  | $                                 | 3,480   |   |               | $ | 3,759   |              |  | $ | 3,343         |   |  | $             | 5,029   |   |  | $ | 15,611   |  
|Operating expense                    |  |                                   | 49,058  |   |               |   | 46,855  |              |  |   | 44,759        |   |  |               | 57,229  |   |  |   | 197,901  |  
|Net loss                             |  |                                   | (29,194 | ) |               |   | (36,661 | )            |  |   | (28,932       | ) |  |               | (33,816 | ) |  |   | (128,603 | )
|Net loss per sharebasic and diluted |  |                                   | (0.79   | ) |               |   | (0.98   | )            |  |   | (0.77         | ) |  |               | (0.89   | ) |  |   | (3.44    | )

NOTE LSUBSEQUENT EVENTS

As disclosed in Note CDebt, Yenura financing, Yenura agreed to make available to the Company up to $40 million from time to time pursuant to draw down notices. During the first quarter 2008, the Company has
drawn $19.2 million from this financing facility.

In December 2007, the Company received mandatory prepayment waivers from the holders of
the senior secured notes in connection with the Yenura Financing agreement. As required in the waiver agreements, the Company made a principal and interest payment of $10 million on January 31, 2008, to the holders of senior secured notes.

Schedule IIValuation and Qualifying Accounts

WorldSpace, Inc., and Subsidiaries

December 31, 2007, 2006 and 2005



|                                            |  |                                 |        |                            |        |        |                         |   |            |         |   |                               |       
|------------------------------------------- |  | ------------------------------- | ------ | -------------------------- | ------ | ------ | ----------------------- | - | ---------- | ------- | - | ----------------------------- | ------
|Col. A                                      |  | Col. B                          |        | Col. C Additions           |        | Col. D |                         |   | Col. E    
|Description                                 |  | Balance atbeginningof theperiod |        | Chargedto costsandexpenses |        |        | Chargedto otheraccounts |   | Deductions |         |   | Balance atthe endof theperiod
|                                            |  | (in thousands)                 
|Year Ended December 31, 2005                |  |                                 |        |                            |        |        |                         |   |            |         |   |                               |       
|Allowance for doubtful receivables          |  | $                               | 2,530  |                            | 721    |        |                         |  |            | (1,776  | ) |                               | 1,475 
|Valuation allowance on inventory            |  |                                 |       |                            | 983    |        |                         |  |            |        |   |                               | 983   
|Valuation allowances on deferred tax assets |  |                                 | 33,127 |                            |       |        |                         |  |            | (23,462 | ) |                               | 9,665 
|                                            |  |                                 |        |                            |       
|Year Ended December 31, 2006                |  |                                 |        |                            |        |        |                         |   |            |         |   |                               |       
|Allowance for doubtful receivables          |  | $                               | 1,475  |                            | (173   | )      |                         |  |            |        |   |                               | 1,302 
|Valuation allowance on inventory            |  |                                 | 983    |                            | 2,535  |        |                         |  |            |        |   |                               | 3,518 
|Valuation allowances on deferred tax assets |  |                                 | 9,665  |                            | 1,025  |        |                         |  |            |        |   |                               | 10,690
|                                            |  |                                 |        |                            |       
|Year Ended December 31, 2007                |  |                                 |        |                            |        |        |                         |   |            |         |   |                               |       
|Allowance for doubtful receivables          |  | $                               | 1,302  |                            | 89     |        |                         |  |            | 201     |   |                               | 1,190 
|Valuation allowance on inventory            |  |                                 | 3,518  |                            | 1,281  |        |                         |  |            |        |   |                               | 4,799 
|Valuation allowances on deferred tax assets |  |                                 | 10,690 |                            | 54,421 |        |                         |  |            |        |   |                               | 65,111



F-29



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##### Table of Contents

Exhibit Index



|           |     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|---------- | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |     |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                        
|2.1        |     |  | Agreement and Plan of Merger dated December 28, 2004, between WorldSpace, Inc., a Maryland corporation, and the Company (filed as Exhibit 2.1 to the Companys Registration Statement on
Form S-1, SEC File No. 333-124044, and incorporated by reference)                                                                                                                                                                                         
|           |    
|3.1        | (a) |  | Certificate of Incorporation of the Company (filed as Exhibit 3.1(a) to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated by
reference)                                                                                                                                                                                                                                                                  
|           |    
|3.1        | (b) |  | Certificate of Amendment to the Certificate of Incorporation of the Company (filed as Exhibit 3.1(b) to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and
incorporated by reference)                                                                                                                                                                                                                                  
|           |    
|3.1        | (c) |  | Certificate of Amendment to the Certificate of Incorporation of the Company (filed as Exhibit 3.1(c) to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and
incorporated by reference)                                                                                                                                                                                                                                  
|           |    
|3.2        |     |  | By-Laws of the Company as amended (filed as Exhibit 3.1 to the Companys Current Report on Form 8-K, filed on November 2, 2007, SEC File No. 000-51466, and incorporated by reference)                                                                                                                                                                                                                                                             
|           |    
|4.1        |     |  | Securities Purchase Agreement dated December 30, 2004 among the Company, WorldSpace, Inc., a Maryland corporation, Highbridge International LLC, Amphora Limited, OZ Master Fund, Ltd.,
AG Offshore Convertibles, Ltd., AG Domestic Convertibles, L.P., Citadel Equity Fund Ltd., and Citadel Credit Trading Ltd (filed as Exhibit 4.1 to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and
incorporated by reference)
|           |    
|4.2        |     |  | Registration Rights Agreement dated December 30, 2004 among the Company, Highbridge International LLC, Amphora Limited, OZ Master Fund, Ltd., AG Offshore Convertibles, Ltd., AG Domestic
Convertibles, L.P., Citadel Equity Fund Ltd., and Citadel Credit Trading Ltd. (filed as Exhibit 4.2 to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)                                         
|           |    
|4.3        |     |  | Agreement dated April 13, 2007 among the Company, Highbridge International LLC, OZ Master Fund, Ltd., AG Offshore Convertibles, Ltd., Citadel Equity Fund Ltd. (filed as Exhibit 99.2 to the
Companys Current Report on Form 8-K filed on April 16, 2007, SEC File No. 000-51466, and incorporated by reference)                                                                                                                                  
|           |    
|4.4        |     |  | Registration Rights Agreement dated July 18, 2005 between the Company and XM Satellite Radio Holdings Inc. (filed as Exhibit 4.4 to the Companys Registration Statement on Form S-1, SEC
File No. 333-124044, and incorporated by reference)                                                                                                                                                                                                      
|           |    
|4.5        |     |  | Registration Rights Agreement, dated September 12, 2005, between the Company and Alcatel Alenia Space France SAS (filed as Exhibit 1.1 to the Companys Current Report on Form 8-K
filed on September 30, 2005, SEC File No. 000-51466, and incorporated by reference)                                                                                                                                                                             
|           |    
|4.6        |     |  | Form of Amendment, Redemption and Exchange Agreement among the Company, Highbridge International LLC, OZ Master Fund, Ltd., AG Offshore Convertibles, Ltd., and Citadel Equity Fund Ltd. (filed
as Exhibit 99.1 to the Companys Current Report on Form 8-K filed on June 4, 2007, SEC File No. 000-51466, and incorporated by reference)                                                                                                          
|           |    
|4.7        |     |  | Form of Amended and Restated Secured Convertible Note issued under the Amendment, Redemption and Exchange Agreement (filed as Exhibit 99.2 to the Companys Current Report on Form 8-K
filed on June 4, 2007, SEC File No. 000-51466, and incorporated by reference)                                                                                                                                                                               
|           |    
|4.8        |     |  | Form of Warrant issued under the Amendment, Redemption and Exchange Agreement (filed as Exhibit 99.4 to the Companys Current Report on Form 8-K filed on June 4, 2007, SEC File No.
000-51466, and incorporated by reference)                                                                                                                                                                                                                     



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##### Table of Contents

|           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|---------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.9        |  | Registration Rights Agreement, dated June 1, 2007, among the Company Highbridge International LLC, OZ Master Fund, Ltd., AG Offshore Convertibles, Ltd., and Citadel Equity Fund Ltd.
(filed as Exhibit 99.5 to the Companys Current Report on Form 8-K filed on June 4, 2007, SEC File No. 000-51466, and incorporated by reference)                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|           | 
|4.10       |  | Facility Agreement, dated December 31, 2007, between the Company and Yenura Pte. Ltd. (filed as Exhibit 99.2 to the Companys Current Report on Form 8-K filed on January 7,
2008, SEC File No. 000-51466, and incorporated by reference)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|           | 
|4.11       |  | Form of Subordinated Convertible Note (filed as Exhibit 99.3 to the Companys Current Report on Form 8-K filed on January 7, 2008, SEC File No. 000-51466, and incorporated by
reference)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|           | 
|4.12       |  | Form of Waiver Letters in connection with the Proposed Yenura Financing (filed as Exhibit 99.3 to the Companys Current Report on Form 8-K filed on January 7, 2008, SEC File No.
000-51466, and incorporated by reference)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|           | 
|10.1       |  | Conversion Agreement dated as of August 29, 2006 between WorldSpace, Inc. and Yenura Pte. Ltd. (filed as Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q filed on
November 14, 2006, SEC File No. 333-51466, and incorporated by reference)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|           | 
|10.2       |  | Loan Restructuring Agreement dated September 30, 2003 among Stonehouse Capital Ltd., WorldSpace, Inc., a Maryland corporation, WorldSpace International Network Inc. and WorldSpace Satellite
Company Ltd., as amended by the First Amendment to the Loan Restructuring Agreement and Royalty Agreement dated September 28, 2004 among the same parties and the Second Amendment to the Loan Restructuring Agreement and Royalty Agreement dated
December 30, 2004 among the same parties as well as the Company (filed as Exhibit 10.2 to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)**                                                                                                                                                         
|           | 
|10.3(a)    |  | Royalty Agreement dated as of September 30, 2003 among Stonehouse Capital Ltd., WorldSpace, Inc., a Maryland corporation, WorldSpace International Network Inc. and WorldSpace Satellite
Company Ltd., as amended by the First Amendment to the Loan Restructuring Agreement and Royalty Agreement dated September 28, 2004 among the same parties, the Second Amendment to the Loan Restructuring Agreement and Royalty Agreement dated as of
December 30, 2004 among the same parties as well as the Company and the Third Amendment to Royalty Agreement dated as of June 29, 2005 among Stonehouse Capital, Ltd., the Company and WorldSpace Satellite Company, Ltd. (filed as Exhibit 10.3 to the
Companys Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference) **
|           | 
|10.3(b)    |  | Fourth Amendment, dated as of February 28, 2006, to the Royalty Agreement dated as of September 30, 2003 among Stonehouse Capital Ltd., WorldSpace, Inc., a Maryland corporation, WorldSpace
International Network Inc. and WorldSpace Satellite Company Ltd. (filed as Exhibit 10.3(b) to the Companys Annual Report on Form 10-K filed on March 31, 2006, SEC File No. 000-51466, and incorporated by reference)                                                                                                                                                                                                                                                                                                                                                                                            
|           | 
|10.4(a)    |  | Warrant Agreement, dated as of July 11, 1994 and extended May 28, 1999, between Mr. Benno A. Ammann and the Company (filed as Exhibit 10.4(a) to the Companys Registration Statement
on Form S-1, SEC File No. 333-124044, and incorporated by reference)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|           | 
|10.4(b)    |  | Warrant Agreement, dated as of July 11, 1994 and extended May 28, 1999, between Mr. Ronald V. Mangravite and the Company (filed as Exhibit 10.4(b) to the Companys
Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|           | 
|10.4(c)    |  | Warrant Agreement, dated as of July 11, 1994 and extended May 28, 1999, between Mr. Wondwossen Mesfin and the Company (filed as Exhibit 10.4(c) to the Companys Registration
Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   



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##### Table of Contents

|           |  |                                                                                                                                                                                                                                                                                                                                                                         
|---------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Description                                                                                                                                                                                                                                                                                                                                                             
|10.4(d)    |  | Non-Qualified Shares Option Agreement, dated as of February 12, 1996, between Mr. Scott A. Katzmann and the Company (filed as Exhibit 10.4(d) to the Companys Registration Statement on
Form S-1, SEC File No. 333-124044, and incorporated by reference)                                                                                                              
|10.4(e)    |  | Non-Qualified Shares Option Agreement, dated as of February 12, 1996, between Ms. Donna Lozito and the Company (filed as Exhibit 10.4(e) to the Companys Registration Statement on Form
S-1, SEC File No. 333-124044, and incorporated by reference)                                                                                                                   
|           | 
|10.4(f)    |  | Non-Qualified Shares Option Agreement, dated as of February 12, 1996, between Lindsay A. Rosenwald, M.D. and the Company (filed as Exhibit 10.4(f) to the Companys Registration
Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)                                                                                                         
|           | 
|10.4(g)    |  | Warrant Agreement, dated as of May 15, 2003, between Consultant and the Company (filed as Exhibit 10.4(g) to the Companys Registration Statement on Form S-1, SEC File No. 333-124044,
and incorporated by reference)                                                                                                                                                  
|           | 
|10.4(h)    |  | WorldSpace, Inc. Common Stock Purchase Warrant dated as of July 18, 2005 issued to XM Satellite Radio Holdings Inc. Company (filed as Exhibit 10.4(h) to the Companys Registration
Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)                                                                                                      
|           | 
|10.6       |  | Strategic Cooperation Agreement Between Analog Devices, Inc. and WorldSpace, Inc. for the Development and Marketing of WorldSpace-Ready Analog DSP Platforms dated November 5, 2003 (filed
as Exhibit 10.6 to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)                                                 
|           | 
|10.7(a)    |  | Standard Production, Marketing and License Agreement for China WorldSpace PC Card and China WorldSpace Receiver dated August 18, 2001 between WorldSpace International Network Inc. and
Xian Tongshi Technology Limited Cooperation (filed as Exhibit 10.7 to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)
|           | 
|10.7(b)    |  | Agreement dated July 20, 2005 between Xian Tongshi Technology Limited and WorldSpace, Inc. (filed as Exhibit 10.7 to the Companys Registration Statement on Form S-1, SEC File No.
333-124044, and incorporated by reference)                                                                                                                                         
|           | 
|10.7(c)    |  | Cooperation Agreement dated April 4, 2006 between WorldSpace Corporation and Xian Tongshi Technology Limited (filed as Exhibit 1.1 to the Companys Current Report on Form 8-K filed
on April 10, 2006, SEC File No. 000-51466, and incorporated by reference)                                                                                                         
|           | 
|10.7(d)    |  | Agreement, dated December 21, 2005, between the registrant and Xian Tongshi Technology Limited (filed as Exhibit 1.1 to the Companys Current Report on Form 8-K filed on
December 23, 2005, SEC File No. 000-51466, and incorporated by reference)                                                                                                                    
|           | 
|10.8       |  | Supply Agreement and Standard WorldSpace Receiver Development, Production, Marketing and License Agreement, both dated December 1, 2000 between BPL Limited and WorldSpace International
Network Inc. (filed as Exhibit 10.8 to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)                               
|           | 
|10.9(a)    |  | Cooperation Agreement on Technical and Commercial Trial Operation of WorldSpace L-Band Satellite Multimedia Services between China Telecommunications Broadcast Satellite Corp and WorldSpace
Corporation dated August 8, 2000 (filed as Exhibit 10.9(a) to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)   
|           | 
|10.9(b)    |  | Memorandum of Understanding Regarding Cooperation Project between China Telecommunications Broadcast Satellite Corp and WorldSpace Corporation dated August 8, 2000 (filed as Exhibit
10.9(b) to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)                                                              



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##### Table of Contents

|           |  |                                                                                                                                                                                                                                                                                                                                                       
|---------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Description                                                                                                                                                                                                                                                                                                                                           
|10.9(c)    |  | Agency Agreement between China Telecommunications Broadcast Satellite Corp and WorldSpace Corporation dated August 8, 2000 (filed as Exhibit 10.9(c) to the Companys Registration
Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)                                                                                     
|           | 
|10.9(d)    |  | Supplementary Agreement to Agreements and Other Documents Regarding Cooperation Between China Telecommunications Broadcast Satellite Corporation, Beijing, China and WorldSpace Corporation
dated April 3, 2001 (filed as Exhibit 10.9(d) to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)
|           | 
|10.9(e)    |  | Agreement between China Satellite Communications Corp. and WorldSpace Corporation dated February 22, 2005 (filed as Exhibit 10.9(e) to the Companys Registration Statement on Form S-1,
SEC File No. 333-124044, and incorporated by reference)                                                                                                      
|           | 
|10.9(f)    |  | Agreement between China Satellite Communications Corp. and WorldSpace, Inc. dated July 18, 2005 (filed as Exhibit 10.9(f) to the Companys Registration Statement on Form S-1, SEC
File No. 333-124044, and incorporated by reference)                                                                                                                
|           | 
|10.9(g)    |  | Cooperation Agreement, dated December 20, 2005, between the Company and China Satellite Communications Corporation (filed as Exhibit 1.1 to Form 8-K of the Company filed December 27,
2005, SEC File No. 000-51466, and incorporated by reference)                                                                                                   
|           | 
|10.10(a)   |  | Executive Employment Agreement between WorldSpace, Inc. and Noah A. Samara entered into as of June 1, 2005 (filed as Exhibit 10.10(a) to the Companys Registration Statement on Form
S-1, SEC File No. 333-124044, and incorporated by reference)*                                                                                                   
|           | 
|10.10(b)   |  | Executive Employment Agreement between WorldSpace, Inc. and Sridhar Ganesan entered into as of June 1, 2005 (filed as Exhibit 10.10(c) to the Companys Registration Statement on
Form S-1, SEC File No. 333-124044, and incorporated by reference)*                                                                                                  
|           | 
|10.10(c)   |  | Executive Employment Agreement between WorldSpace, Inc. and Donald J. Frickel entered into as of June 1, 2005 (filed as Exhibit 10.10(d) to the Companys Registration Statement on
Form S-1, SEC File No. 333-124044, and incorporated by reference)*                                                                                                
|           | 
|10.10(d)   |  | Executive Employment Agreement between WorldSpace, Inc. and Gregory B. Armstrong effective as of May 12, 2006 (filed as Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q filed
August 14, 2006, SEC File No. 333-51466, and incorporated by reference)*                                                                                    
|           | 
|10.10(e)   |  | Executive Employment Agreement between WorldSpace, Inc. and Alexander P. Brown effective as of May 12, 2006 (filed as Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q filed
August 14, 2006, SEC File No. 333-51466, and incorporated by reference)*                                                                                      
|           | 
|10.11(a)   |  | WorldSpace 2005 Incentive Award Plan (filed as Exhibit 10.11(a) to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated by
reference)*                                                                                                                                                                         
|           | 
|10.11(b)   |  | WorldSpace 2005 Incentive Award Plan Form of Stock Option Agreement (filed as Exhibit 10.11(b) to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and
incorporated by reference)*                                                                                                                                          
|           | 
|10.11(c)   |  | WorldSpace 2005 Incentive Award Plan Form of Restricted Stock Agreement (filed as Exhibit 10.11(c) to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and
incorporated by reference)*                                                                                                                                      
|           | 
|10.11(d)   |  | WorldSpace 2005 Incentive Award Plan Form of Stock Appreciation Right Agreement, filed as Exhibit 10.12(d) to the Companys Annual Report on Form 10K filed April 17, 2007, SEC File No.
000-51466, and incorporated by reference*                                                                                                                    



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##### Table of Contents

|           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|---------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNo. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.12      |  | Stockholders Agreement, executed as of July 18, 2005 between WorldSpace, Inc., XM Satellite Radio Holdings Inc., Noah A Samara, TelUS Communication and Yenura Ptd. Ltd (filed as Exhibit 10.12
to the Companys Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)                                                                                                                       
|           | 
|10.13      |  | Satellite Radio Cooperation Agreement dated as of July 18, 2005 between WorldSpace, Inc., XM Satellite Radio Holdings Inc. and XM Satellite Radio Inc. (filed as Exhibit 10.13 to the
Companys Registration Statement on Form S-1, SEC File No. 333-124044, and incorporated by reference)                                                                                                                                        
|           | 
|10.14      |  | Form of Bridge Note issued under the Amendment, Redemption and Exchange Agreement (filed as Exhibit 99.3 to the Companys Current Report on Form 8-K filed on June 4, 2007, SEC File
No. 000-51466, and incorporated by reference)                                                                                                                                                                                                 
|           | 
|10.15      |  | First Lien Pledge and Security Agreement, dated June 1, 2007, among the Company, WorldSpace Systems Corporation, AfriSpace, Inc., Asia Space Limited, WorldSpace Satellite Company, and
The Bank of New York, as Collateral Agent (filed as Exhibit 99.6 to the Companys Current Report on Form 8-K filed on June 4, 2007, SEC File No. 000-51466, and incorporated by reference)                                                 
|           | 
|10.16      |  | Second Lien Pledge and Security Agreement, dated June 1, 2007, among the Company, WorldSpace Systems Corporation, AfriSpace, Inc., Asia Space Limited, WorldSpace Satellite Company, and
The Bank of New York, as Collateral Agent (filed as Exhibit 99.7 to the Companys Current Report on Form 8-K filed on June 4, 2007, SEC File No. 000-51466, and incorporated by reference)                                                
|           | 
|10.17      |  | Intercreditor Agreement, dated June 1, 2007, among the Company, WorldSpace Systems Corporation, AfriSpace, Inc., Asia Space Limited, WorldSpace Satellite Company, The Bank of New York,
as First Lien Collateral Agent, and The Bank of New York, as Second Lien Collateral Agent (filed as Exhibit 99.8 to the Companys Current Report on Form 8-K filed on June 4, 2007, SEC File No. 000-51466, and incorporated by
reference)
|           | 
|10.18      |  | First Lien Guaranty, dated June 1, 2007, among WorldSpace Systems Corporation, AfriSpace, Inc., Asia Space Limited, WorldSpace Satellite Company, and The Bank of New York, as Collateral
Agent (filed as Exhibit 99.9 to the Companys Current Report on Form 8-K filed on June 4, 2007, SEC File No. 000-51466, and incorporated by reference)                                                                                   
|           | 
|10.19      |  | Cooperation Agreement, dated July 16, 2007, among the Company, Fiat Group Automobiles S.p.A. and WorldSpace Italia S.p.A. (filed as Exhibit 10.1 to the Companys Quarterly Report on
Form 10-Q filed November 13, 2007, SEC File No. 000-51466, and incorporated by reference)**                                                                                                                                                  
|           | 
|21.1       |  | List of Subsidiaries of the Company                                                                                                                                                                                                                                                                                                                                                                                                
|           | 
|23.1       |  | Consent of Grant Thornton LLP                                                                                                                                                                                                                                                                                                                                                                                                      
|           | 
|31.1       |  | Certification of the Chief Executive Officer of WorldSpace, Inc. pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended                                                                                                                                                                                                                                                                                     
|           | 
|31.2       |  | Certification of the Chief Financial Officer of WorldSpace, Inc. pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended                                                                                                                                                                                                                                                                                     
|           | 
|32.1       |  | Certification of the Chief Executive Officer of WorldSpace, Inc. pursuant to Section 906 of Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                             
|           | 
|32.2       |  | Certification of the Chief Financial Officer of WorldSpace, Inc. pursuant to Section 906 of Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                             



|* | Executive compensation plan or arrangement.
|- | -------------------------------------------

|** | A portion of this Exhibit was omitted and has been filed separately with the Secretary of the Commission pursuant to an SEC order granting confidential treatment thereof.
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