<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

                       THE SECURITIES EXCHANGE ACT OF 1934

                  For The Quarterly Period Ended June 30, 2001


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

                        Commission file number 000-27441

                     DELAWARE                          54-1878819
             --------------------------------------------------------
         (State or other jurisdiction of            (I.R.S. Employer
          incorporation or organization)           Identification No.)

                            1500 ECKINGTON PLACE, NE
                            WASHINGTON, DC 20002-2194
                           ---------------------------
                    (Address of principal executive offices)
                                   (Zip code)

                                  202-380-4000
                           ---------------------------
              (Registrant's telephone number, including area code)

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

YES    X       NO
-----------------------

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

                        Commission file number 333-39178

                     DELAWARE                          52-1805102
             --------------------------------------------------------
             (State or other jurisdiction of        (I.R.S. Employer
              incorporation or organization)       Identification No.)

                            1500 ECKINGTON PLACE, NE
                            WASHINGTON, DC 20002-2194
                           ---------------------------
                    (Address of principal executive offices)
                                   (Zip code)

                                  202-380-4000
                           ---------------------------
              (Registrant's telephone number, including area code)

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

YES    X       NO
---------------------------

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

(Class)
(Outstanding as of  June 30, 2001)

                        XM SATELLITE RADIO HOLDINGS INC.
                        --------------------------------

CLASS A COMMON STOCK, $0.01 PAR VALUE                          44,575,384 SHARES
CLASS B COMMON STOCK, $0.01 PAR VALUE                          13,905,019 SHARES
-------------------------------------

                             XM SATELLITE RADIO INC.
                             -----------------------
COMMON STOCK, $0.10 PAR VALUE                                         125 SHARES
                   (all of which are issued to XM Satellite Radio Holdings Inc.)


<PAGE>


                XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)

                    XM SATELLITE RADIO INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)

                                      INDEX


<TABLE>
<CAPTION>
PART I   - FINANCIAL INFORMATION
                                                                                                            Page
<S>      <C>                                                                                                <C>
Item 1.  Financial Statements

         XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

         Unaudited Condensed Consolidated Statements of Operations for the three-month and six-month
         periods ended June 30, 2000 and 2001 and for the period December 15, 1992 (date of inception) to
         June 30, 2001.......................................................................................  1

         Condensed Consolidated Balance Sheets as of December 31, 2000 and June 30, 2001
         (unaudited).........................................................................................  2

         Unaudited Condensed Consolidated Statements of Cash Flows for the six-month periods ended
         June 30, 2000 and 2001 and for the period December 15, 1992 (date of inception)
         to June 30, 2001....................................................................................  3

         Notes to Unaudited Condensed Consolidated Financial Statements......................................  4

         XM SATELLITE RADIO INC. AND SUBSIDIARIES

         Unaudited Condensed Consolidated Statements of Operations for the three-month and six-month
         periods ended June 30, 2000 and 2001 and for the period December 15, 1992 (date of inception) to
         June 30, 2001.......................................................................................  9

         Condensed Consolidated Balance Sheets as of December 31, 2000 and June 30, 2001
         (unaudited)......................................................................................... 10

         Unaudited Condensed Consolidated Statements of Cash Flows for the six-month periods ended
         June 30, 2000 and 2001 and for the period December 15, 1992 (date of inception)
         to June 30, 2001.................................................................................... 11

         Notes to Unaudited Condensed Consolidated Financial Statements...................................... 12


Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations............... 17

Item 3.  Quantitative and Qualitative Disclosures About Market Risk ......................................... 24

PART II - OTHER INFORMATION

</TABLE>



<PAGE>


                                EXPLANATORY NOTE

This quarterly report is filed jointly by XM Satellite Radio Holdings Inc.
("Holdings") and XM Satellite Radio Inc. ("XM"). XM is a wholly-owned subsidiary
of Holdings. Unless the context requires otherwise, the terms "we", "our" and
"us" refer to Holdings and its subsidiaries. This report on Form 10-Q contains
separate financial statements for each of Holdings and XM. The management's
discussion and analysis section has been combined, focusing on the financial
condition and results of operations of Holdings but including an explanation of
any differences between the companies.




<PAGE>


PART I: FINANCIAL INFORMATION

Item 1:     Financial Statements

                XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
                          (A Development Stage Company)

            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
          Three-Month and Six-Month Periods ended June 30, 2000 and 2001
 and for the period from December 15, 1992 (date of inception) to June 30, 2001

<TABLE>
<CAPTION>

                                                                Three Months ended         Six Months ended      December 15, 1992
                                                                     June 30,                  June 30,         (date of inception)
                                                                 2000          2001         2000        2001      to June 30, 2001
                                                                 ----          ----         ----        ----      ----------------
                                                                        (in thousands, except share data)
<S>                                                           <C>           <C>           <C>           <C>            <C>
Revenue...................................................    $        --   $       --    $        --   $        --     $       --
                                                              -----------   ----------    -----------   -----------     ----------



Operating expenses:
   Research and development...............................            219         2,771         4,739         4,275         22,887
   Professional fees......................................          5,193         3,660        10,787         8,729         47,866
   General and administrative.............................          8,525        35,663        15,300        71,214        140,938
                                                              -----------   -----------   -----------   -----------     ----------
Total operating expenses..................................         13,937        42,094        30,826        84,218        211,691
                                                              -----------   -----------   -----------   -----------     ----------

     Operating loss.......................................        (13,937)      (42,094)      (30,826)      (84,218)      (211,691)
Other income (expense):
   Interest income (expense), net.........................          8,849         3,616        12,999         8,792         29,670
                                                              -----------   -----------   -----------   -----------     ----------

     Net loss.............................................    $    (5,088)  $   (38,478)  $   (17,827)  $   (75,426)    $ (182,021)
                                                              ===========   ===========   ===========   ===========     ==========

Series B preferred stock dividend requirement.............         (2,171)         (942)       (3,643)       (1,883)
Series C preferred stock dividend requirement ............             --        (4,847)           --        (9,694)
                                                              -----------   -----------   -----------   -----------

Net loss attributable to common stockholders..............    $    (7,259)  $   (44,267)  $   (21,470)  $   (87,003)
                                                              ===========   ===========   ===========   ===========


Net loss per share:
   Basic and diluted......................................    $     (0.15)  $     (0.76)  $     (0.45)  $     (1.49)
                                                              ===========   ===========   ===========   ===========


Weighted average shares used in computing net loss per share:
   Basic and diluted......................................     48,735,802    58,368,072    48,033,191    58,269,976
                                                              ===========   ===========   ===========   ===========

</TABLE>


See accompanying notes to unaudited condensed consolidated financial statements.


                                       1
<PAGE>


                XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                       December 31, 2000 and June 30, 2001

<TABLE>
<CAPTION>
                                                                                       December 31,     June 30,
                                                                                           2000           2001
                                                                                           ----           ----
                                                                                                       (unaudited)
                                                                                              (in thousands)
<S>                                                                                    <C>            <C>
ASSETS
Current assets:
  Cash and cash equivalents.........................................................   $  224,903   $    206,525
  Restricted investments............................................................       45,585         44,715
  Prepaid and other current assets..................................................        8,815         17,731
                                                                                       ----------   -----------

      Total current assets..........................................................      279,303        268,971

Other assets:
  Restricted investments, net of current portion....................................      115,581         80,638
  System under construction.........................................................      805,563        417,420
  Property and equipment, net.......................................................       59,505        615,276
  Goodwill and intangibles, net.....................................................       24,001         23,319
  Other assets, net.................................................................        9,265         13,219
                                                                                       ----------   ------------

    Total assets....................................................................   $1,293,218   $  1,418,843
                                                                                       ==========   ============


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..................................................................   $   47,159   $     39,172
  Accrued expenses..................................................................        4,030          4,671
  Due to related parties............................................................           63            110
  Accrued interest .................................................................       13,397         16,725
  Royalty payable...................................................................        2,565          2,965
                                                                                       ----------     ----------

    Total current liabilities.......................................................       67,214         63,643

Senior secured notes................................................................      261,298        262,736
Convertible subordinated notes......................................................           --        125,000
Royalty payable, net of current portion.............................................        2,600          2,200
Capital lease, net of current portion...............................................        1,367          4,158
Other non-current liabilities.......................................................        4,787          5,395
                                                                                       ----------     ----------

    Total liabilities...............................................................      337,266        463,132
                                                                                       ----------     ----------

Stockholders' equity:
  Series A convertible preferred stock, par value $0.01 (liquidation preference
       of $102,688,000 at December 31, 2000 and June 30, 2001 (unaudited));
       15,000,000 shares  authorized, 10,786,504 shares issued and outstanding at
       December 31, 2000 and June 30, 2001 (unaudited)..............................          108            108
  Series B convertible redeemable preferred stock, par value $0.01 (liquidation
       preference of $43,364,000 at December 31, 2000 and June 30, 2001 (unaudited));
       3,000,000 shares authorized, 867,289 shares issued and outstanding at
       December 31, 2000 and June 30, 2001 (unaudited)..............................            9              9
  Series C convertible redeemable preferred stock, par value $0.01 (liquidation
       preference of $244,277,000 and $253,971,000 at December 31, 2000 and June 30,
       2001 (unaudited), respectively); 250,000 shares authorized, 235,000 shares
       issued and outstanding at December 31, 2000 and June 30, 2001 (unaudited)....            2              2
  Class A common stock, par value $0.01; 180,000,000 shares authorized,
       34,073,994 shares and 44,575,384 shares issued and outstanding at December 31,
       2000, and June 30, 2001 (unaudited), respectively............................          341            446
  Class B common stock, par value $0.01; 30,000,000 shares authorized,
    16,557,262 and 13,905,019 shares issued and outstanding at December 31, 2000 and
    June 30, 2001 (unaudited), respectively.........................................          166            139
  Class C common stock, par value $0.01; 30,000,000 shares authorized, no shares
    issued and outstanding at December 31, 2000 and June 30, 2001 (unaudited).......           --             --
  Additional paid-in capital........................................................    1,061,921      1,137,028
  Deficit accumulated during development stage......................................     (106,595)      (182,021)
                                                                                       ----------     ----------

    Total stockholders' equity......................................................      955,952        955,711
                                                                                       ----------     ----------

Commitments and contingencies
  Total liabilities and stockholders' equity........................................   $1,293,218     $1,418,843
                                                                                       ==========     ==========

</TABLE>


See accompanying notes to unaudited condensed consolidated financial statements.


                                       2
<PAGE>


                XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
                          (A Development Stage Company)

           UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
     Six-Month Periods ended June 30, 2000 and 2001 and for the period from
             December 15, 1992 (date of inception) to June 30, 2001



<TABLE>
<CAPTION>
                                                                           Six Months ended        December 15, 1992
                                                                                June 30,         (date of inception) to
                                                                        2000            2001          June 30, 2001
                                                                        ----            ----          -------------
                                                                                      (in thousands)
<S>                                                                    <C>            <C>               <C>
Cash flows from operating activities:
  Net loss...........................................................  $ (17,827)     $ (75,426)        $ (182,021)
  Adjustments to reconcile net loss to net
   Cash used in operating activities:
   Depreciation and amortization.....................................      1,014          8,268             13,204
   Amortization of deferred financing fees...........................         --             --                972
   Non-cash stock compensation.......................................      2,258          2,443              9,396
   Non-cash charge for beneficial conversion feature of note issued
    to related party.................................................         --             --              5,520
   Changes in operating assets and liabilities:
     Increase in prepaid and other current assets....................       (313)        (8,916)           (17,731)
     Increase in other assets........................................         --             --             (1,105)
     Increase (decrease) in accounts payable and accrued expenses....      8,554         (4,149)            28,584
     Increase in accrued interest ...................................         --          1,092              1,092
     Increase in amounts due to related parties......................         21             47                110
                                                                       ----------     ----------        -----------

     Net cash used in operating activities...........................     (6,293)       (76,641)          (141,979)
                                                                       ----------     ----------        -----------

Cash flows from investing activities:
  Purchase of property and equipment.................................    (18,814)        (8,520)           (57,753)
  Additions to system under construction.............................   (191,319)      (113,236)          (877,976)
  Net purchase/maturity of short-term investments....................     69,471             --                 --
  Purchase/maturity of restricted investments........................   (125,863)        19,796            (86,542)
  Other investing activities.........................................    (54,250)       (32,901)           (40,342)
                                                                       ----------     ----------        -----------

     Net cash used in investing activities...........................   (320,775)      (134,861)        (1,062,613)
                                                                       ----------     ----------        -----------

Cash flows from financing activities:
  Proceeds from sale of common stock and capital contribution........    229,225         72,742            329,555
  Proceeds from issuance of Series B convertible redeemable
     preferred stock.................................................         --             --             96,472
  Proceeds from issuance of convertible notes payable to
     related party...................................................         --             --            157,866
  Proceeds from issuance of options..................................         --             --              1,500
  Proceeds from issuance of Series A convertible preferred stock.....         --             --            250,000
  Proceeds from issuance of 14% senior secured notes and warrants....    322,898             --            322,889
  Proceeds from issuance of Series C convertible redeemable preferred
      stock..........................................................         --             --            226,822
  Proceeds from issuance of 7.75% convertible subordinated notes.....         --        125,000            125,000
  Repayments of loans payable to related party.......................         --             --            (75,000)
  Payments for deferred financing costs..............................     (8,381)        (4,618)           (23,987)
                                                                       ----------     ----------        -----------

     Net cash provided by financing activities.......................    543,742        193,124          1,411,117
                                                                       ----------     ----------        -----------

     Net increase (decrease) in cash and cash equivalents............    216,674        (18,378)           206,525

Cash and cash equivalents at beginning of period.....................     50,698        224,903                 --
                                                                       ----------     ----------        -----------

Cash and cash equivalents at end of period...........................  $ 267,372      $ 206,525         $  206,525
                                                                       ==========     ==========        ===========

Supplemental cash flow disclosure:
  Increase in FCC license, goodwill and intangibles..................  $      --      $     --          $ 51,624
  Liabilities exchanged for convertible note to related party........         --            --            81,676
  Non-cash capitalized interest......................................     15,499        27,556            95,686
  Accrued system milestone payments..................................     26,699        26,887            26,887
  Property acquired through capital lease............................         --         4,331             6,489
  Conversion of debt to equity.......................................         --            --           353,315
  Use of deposit/escrow for terrestrial repeater contracts...........      3,422        48,827                --
  Cash paid for interest.............................................         --        22,750            45,500

</TABLE>


See accompanying notes to unaudited condensed consolidated financial statements.


                                       3
<PAGE>


                XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
                          (A Development Stage Company)
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(1)  ORGANIZATION AND BUSINESS

XM Satellite Radio Inc. ("XM") was incorporated on December 15, 1992 in the
State of Delaware as a wholly owned subsidiary of Motient Corporation
("Motient"), formerly American Mobile Satellite Corporation, for the purpose
of procuring a digital audio radio service ("DARS") license. Business
activity for the period from December 15, 1992 through December 31, 1996 was
insignificant. On May 16, 1997, Motient and WorldSpace, Inc. ("WSI") formed
XM Satellite Radio Holdings Inc. ("Holdings") as a holding company for XM in
connection with the construction, launch and operation of a domestic
communications satellite system for the provision of DARS. Motient and WSI
exchanged their respective interests in XM for equivalent interests in
Holdings, which had no assets, liabilities or operations prior to the
transaction.

(2)  PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

The condensed consolidated financial statements include the accounts of XM
Satellite Radio Holdings Inc. and its subsidiaries. All significant intercompany
transactions and accounts have been eliminated. Holdings' management has devoted
its time to the planning and organization of Holdings, obtaining its DARS
license, conducting research and development programs, conducting market
research, constructing the satellite and terrestrial repeater systems, securing
manufacturers for its radios and obtaining retail distribution channels,
securing content, securing adequate debt and equity capital for anticipated
operations and growth and addressing regulatory matters. Holdings' satellites,
"Rock" and "Roll", were successfully launched into their geosynchronous orbits
on March 18, 2001 and May 8, 2001, respectively. Holdings accepted in-orbit
delivery of the satellites from Boeing Satellite Systems International, Inc.
("BSS" - formerly Hughes Space and Communications, Inc.) on May 15, 2001 for
"Rock" and June 28, 2001 for "Roll". However, Holdings has not generated any
revenues and planned principal operations have not commenced. Accordingly,
Holdings' financial statements are presented as those of a development stage
enterprise, as prescribed by Statement of Financial Accounting Standards
("SFAS") No. 7, ACCOUNTING AND REPORTING BY DEVELOPMENT STAGE ENTERPRISES.

In the opinion of management, the accompanying unaudited condensed consolidated
financial statements reflect all adjustments, consisting of only normal
recurring accruals, necessary for a fair presentation of the consolidated
financial position of XM Satellite Radio Holdings Inc. and its subsidiaries, a
development stage entity, as of June 30, 2001, and the results of operations for
the three-month and six-month periods ended June 30, 2000 and 2001 and the
period from December 15, 1992 (date of inception) through June 30, 2001 and the
cash flows for the six-month periods ended June 30, 2000 and 2001 and the period
from December 15, 1992 (date of inception) through June 30, 2001. The results of
operations for the six months ended June 30, 2001 are not necessarily indicative
of the results that may be expected for the full year. These condensed
consolidated financial statements are unaudited, and do not include all related
footnote disclosures. The interim unaudited condensed consolidated financial
statements should be read in conjunction with the audited financial statements
of Holdings included in Holdings' filings with the Securities and Exchange
Commission.

(3)  NET INCOME (LOSS) PER SHARE

Holdings computes net income (loss) per share in accordance with SFAS No. 128,
EARNINGS PER SHARE and SEC Staff Accounting Bulletin No. 98 ("SAB 98"). Under
the provisions of SFAS No. 128 and SAB 98, basic net income (loss) per share is
computed by dividing the net income (loss) available to common stockholders
(after deducting preferred dividend requirements) for the period by the weighted
average number of common shares outstanding during the period. Diluted net
income (loss) available per share is computed by dividing the net income (loss)
available to common stockholders for the period by the weighted average number
of common and dilutive common equivalent shares outstanding during the period.
Holdings has presented historical basic and diluted net income (loss) per share
in accordance with SFAS No. 128. As Holdings had a net loss in each of the
periods presented, basic and diluted net income (loss) per share are the same.

(4)  RESTRICTED INVESTMENTS

Restricted investments consist of fixed income securities and are stated at
amortized cost plus accrued interest income. Holdings classifies restricted
investments that will be used for the operating commitments within the next


                                       4
<PAGE>


                XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
                          (A Development Stage Company)
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


twelve months as current assets and those restricted investments that will be
used for either the construction of assets or to secure lease commitments as
non-current assets. The securities included in restricted investments are $86.5
million of US Treasury strips restricted to provide for the remaining four of
the first six scheduled interest payments on XM's 14 percent senior secured
notes due 2010, which are classified as held-to-maturity securities under the
provisions of SFAS No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND
EQUITY SECURITIES, $34.9 million in money market funds for scheduled milestone
payments under the Hughes Electronics Corporation contract and $4.0 million in
certificates of deposit to collateralize letters of credit required by facility
leases and other secured credits.

(5) SYSTEMS UNDER CONSTRUCTION

Holdings is currently developing its XM Radio system. Costs related to the
project are being capitalized to the extent that they have future benefits.
During the six months ended June 30, 2001, Holdings placed satellites "Rock" and
"Roll" into service as well as many of its broadcast facilities and transferred
$556,528,000 from systems under construction to property and equipment. As of
June 30, 2001, amounts recorded as system under construction relate to costs
incurred in obtaining a Federal Communications Commission ("FCC") license and
approval as well as the system development. Depreciation and amortization of the
system will be calculated using the straight-line method over the following
estimated useful lives:

<TABLE>
<S>                                                              <C>
           License...............................................17.5 years
           Satellite system......................................17.5 years
           Terrestrial system....................................5-10 years
           Spacecraft control facilities.........................10-15 years
           Broadcast facilities..................................3-7 years
           Computer systems .....................................3-5 years

</TABLE>

In July 2001, Holdings received notification from BSS that the expected life of
the satellites was extended due to the accuracy of the respective launches,
which used less fuel than anticipated. Holdings, therefore, changed the useful
life estimate for the satellite system and the FCC license from 15 years to 17.5
years.

Amortization of the license will begin on commercial launch. Depreciation of
Holdings' satellites, "Rock" and "Roll," commenced in May and June 2001,
respectively. Depreciation of Holdings' ground stations will commence upon
commercial launch.

(6) DEBT

On March 6, 2001, Holdings closed a public offering of $125.0 million of its
7.75 percent convertible subordinated notes due 2006, which yielded net proceeds
of $120.7 million. The subordinated notes are convertible into shares of
Holdings' Class A common stock at a conversion price of $12.23 per share.

Subsequent to the end of the second quarter 2001, as of August 10, 2001, the
holders of the convertible subordinated notes converted $45.9 million of
notes into 4,194,272 shares of Holdings' Class A common stock.

(7) EQUITY

   (a)   APPROVAL FOR CHANGE OF CONTROL

   On July 14, 2000, Holdings filed an application with the FCC to allow
   Holdings to transfer its control from Motient to a diffuse group of owners,
   none of whom will have controlling interest. On December 22, 2000, the
   application was approved by the FCC.

   On January 12, 2001, Motient converted 2,652,243 shares of the Company's
   Class B common stock into Class A common stock on a one-for-one basis. During
   the three months ended March 31, 2001, Motient sold 2,000,000 shares of Class
   A common stock. As of March 31, 2001, Motient's voting interest was reduced
   to 44 percent of the shares outstanding. Motient still retains its Board of
   Directors membership but does not have the right to elect a majority of
   Holdings' Board of Directors.


                                       5
<PAGE>


                XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
                          (A Development Stage Company)
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


   On May 14, 2001, Motient signed a definitive merger agreement with Rare
   Medium Group, Inc. ("RMG") through which Motient proposes to acquire 100% of
   the ownership of RMG. If the merger transaction is completed, Motient will
   transfer 9 million shares of Holdings' Class A common stock to the holders of
   all outstanding shares of preferred stock of RMG, which are held by
   affiliates of Apollo Management, L.P. This transfer will require Motient
   to convert shares of Holdings' Class B common stock into shares of Holdings'
   Class A common stock.

   (b)  STOCK DIVIDENDS ON SERIES B CONVERTIBLE REDEEMABLE PREFERRED STOCK

   On May 1, 2001, Holdings paid its regular quarterly dividend on its 8.25%
   Series B convertible redeemable preferred stock. The dividend was paid in
   shares of Class A common stock and 178,099 shares of Class A common stock
   were issued to the holders of record on April 20, 2001. The net loss
   attributable to common stockholders reflects the accrual and payment of the
   dividends to the preferred stockholders as of June 30, 2001.

   On July 6, 2001, Holdings announced its regular quarterly dividend on its
   8.25% Series B convertible redeemable preferred stock, which was paid on
   August 1, 2001. The dividend was paid in shares of Class A common stock and
   63,934 shares of Class A common stock were issued to the holders of record on
   July 20, 2001. The net loss attributable to common stockholders reflects the
   accrual of the dividends to the preferred stockholders as of June 30, 2001.

   (c)  CLASS A COMMON STOCK OFFERING

   On March 6, 2001, Holdings completed a follow-on offering of 7,500,000 shares
   of its Class A common stock, which yielded net proceeds of $72.0 million. The
   closing of the offerings of $125.0 million of 7.75 percent convertible
   subordinated notes and 7,500,000 shares of Class A common stock caused the
   conversion price of the Series C preferred stock to be adjusted from $26.50
   to $22.93 and the exercise price of the warrants sold in March 2000 to be
   adjusted to $45.27 and the number of warrant shares to be increased to
   8.776003 per warrant.


(8)  RECLASSIFICATIONS

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

(9)  COMMITMENTS AND CONTINGENCIES

   (a)   FCC LICENSE

   The FCC has established certain system development milestones that must be
   met for Holdings to maintain its license to operate the system. Holdings
   believes that it is completing the system development as planned and in
   accordance with the FCC milestones.

   (b)   APPLICATION FOR REVIEW OF FCC LICENSE

   One of the losing bidders for the DARS licenses filed an Application for
   Review by the full FCC of the Licensing Order which granted Holdings its FCC
   license. The Application for Review alleges that WSI had effectively taken
   control of Holdings without FCC approval. The FCC or the U.S. Court of
   Appeals has the authority to overturn the award of the FCC license should
   they rule in favor of the losing bidder. Although Holdings believes that its
   right to the FCC license will withstand the challenge as WSI is no longer a
   stockholder in Holdings, no prediction of the outcome of this challenge can
   be made with any certainty.

   (c)   TECHNICAL SERVICES

   Effective January 1, 1998, Holdings entered into agreements with Motient and
   WorldSpace Management Corporation ("WorldSpace MC"), an affiliate of WSI, in
   which Motient and WorldSpace MC would provide technical support in areas
   related to the development of a DARS system. Payments for services provided
   under these agreements are made based on negotiated hourly rates. These
   agreements may be terminated by the parties on or after the date of the
   commencement of commercial operation following the launch of Holdings' first


                                       6
<PAGE>


                XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
                          (A Development Stage Company)
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


   satellite. There are no minimum services purchase requirements. Holdings
   incurred costs of $98,000 and $84,000 under its agreement with Motient and
   no costs were incurred under its agreement with WorldSpace MC during the
   quarters ended June 30, 2001 and 2000, respectively. Holdings incurred costs
   of $1,137,000 under its agreement with Motient and $5,317,000 in costs were
   incurred under its agreement with WorldSpace MC from December 15, 1992 (date
   of inception) through June 30, 2001.

   (d)   TECHNOLOGY LICENSES

   Effective January 1, 1998, XM entered into a technology licensing agreement
   with Motient and WorldSpace MC by which as compensation for certain licensed
   technology then under development to be used in the XM Radio system, XM will
   pay up to $14,300,000 to WorldSpace MC over a ten-year period. As of June 30,
   2001, XM incurred costs of $6,696,000 payable to WorldSpace MC. Any
   additional amounts to be incurred under this agreement are dependent upon
   further development of the technology, which is at XM's option. No liability
   exists to Motient or WorldSpace MC should such further developments prove
   unsuccessful. XM maintains an accrual of $5,251,000 payable to WorldSpace MC,
   for quarterly royalty payments to be made.

   (e)   SATELLITE CONTRACT

   During the first half of 1999, Holdings and BSS amended the satellite
   contract to construct and launch Holdings' satellites to implement a revised
   work timetable, payment schedule to reflect the timing of the receipt of
   additional funding, and technical modifications. Holdings expects to incur
   total payment obligations under this contract of approximately $541,300,000,
   which includes amounts Holdings expects to pay pursuant to the exercise of
   the option to build the ground spare satellite and certain financing costs
   and in-orbit incentive payments. On June 27, 2000, Holdings exercised the
   option to build the ground spare. As of June 30, 2001, Holdings had paid
   $470,012,000 under the Satellite contract with BSS and had accrued $212,000.

   (f)   TERRESTRIAL REPEATER SYSTEM CONTRACTS

   In August 1999, Holdings signed a contract with LCC International, Inc., a
   related party, calling for payments of approximately $115,000,000 for
   engineering and site preparation for the terrestrial repeater system. In
   January 2001, the contract was amended and the estimated contract value was
   reduced to $107,500,000. As of June 30, 2001, Holdings has paid $81,748,000
   under this contract, and accrued an additional $17,240,000. Holdings has
   entered into tower construction agreements with various companies, which will
   provide certain services that LCC International, Inc. was to provide.
   Holdings also entered into a contract effective October 22, 1999, with Hughes
   Electronics Corporation for the design, development and manufacture of the
   terrestrial repeaters. Payments under this contract are expected to be
   approximately $128,000,000. As of June 30, 2001, Holdings had paid
   $64,184,000 under this contract and accrued an additional $2,552,000.

   (g)   GENERAL MOTORS DISTRIBUTION AGREEMENT

   Holdings has signed a long-term distribution agreement with the OnStar
   division of General Motors providing for the installation of XM radios in
   General Motors vehicles. During the term of the agreement, which expires 12
   years from the commencement date of Holdings' commercial operations, General
   Motors has agreed to distribute the service to the exclusion of other S-band
   satellite digital radio services. Holdings will also have a non-exclusive
   right to arrange for the installation of XM radios included in OnStar systems
   in non-General Motors vehicles that are sold for use in the United States.
   Holdings has significant annual, fixed payment obligations to General Motors
   for four years following commencement of commercial service. These payments
   approximate $35,000,000 in the aggregate during this period. Additional
   annual fixed payment obligations beyond the initial four years of the
   contract term range from less than $35,000,000 to approximately $130,000,000
   through 2009, aggregating approximately $400,000,000. In order to encourage
   the broad installation of XM radios in General Motors vehicles, Holdings has
   agreed to subsidize a portion of the cost of XM radios, and to make incentive
   payments to General Motors when the owners of General Motors vehicles with
   installed XM radios become subscribers for Holdings' service. Holdings must
   also share with General Motors a percentage of the subscription revenue
   attributable to General Motors vehicles with installed XM radios, which
   percentage increases until there are more than 8 million General Motors
   vehicles with installed XM radios. Holdings will also make available to
   General Motors bandwidth on XM's systems. The agreement is subject to
   renegotiation at any time based upon


                                       7
<PAGE>


                XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
                          (A Development Stage Company)
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


   the installation of radios that are compatible with a unified standard or
   capable of receiving Sirius Satellite Radio's service. The agreement is
   subject to renegotiation if, four years after the commencement of Holdings'
   commercial operations and at two-year intervals thereafter, General Motors
   does not achieve and maintain specified installation levels of General
   Motors vehicles capable of receiving Holdings' service, starting with
   1,240,000 units after four years, and thereafter increasing by the lesser
   of 600,000 units per year and amounts proportionate to target market
   shares in the satellite digital radio service market. There can be no
   assurances as to the outcome of any such renegotiation. General Motors'
   exclusivity obligations will discontinue if, four years after Holdings
   commences commercial operations and at two-year intervals thereafter,
   Holdings fails to achieve and maintain specified minimum market share
   levels in the satellite digital radio service market.

   (h)   SONY WARRANT

   In February 2000, Holdings issued a warrant to Sony exercisable for shares of
   Holdings' Class A common stock. The warrant will vest at the time that
   Holdings attains its millionth customer, and the number of shares underlying
   the warrant will be determined by the percentage of XM Radios that have a
   Sony brand name as of the vesting date. If Sony achieves its maximum
   performance target, it will receive 2 percent of the total number of shares
   of Holdings' Class A common stock on a fully-diluted basis upon exercise of
   the warrant. The exercise price of the Sony warrant will equal 105 percent of
   fair market value of the Class A common stock on the vesting date, determined
   based upon the 20-day trailing average.

   (i)   JOINT DEVELOPMENT AGREEMENT

   On January 12, 1999, Sirius Radio, the other holder of an FCC satellite radio
   license, commenced an action against Holdings in the United States District
   Court for the Southern District of New York, alleging that Holdings was
   infringing or would infringe three patents assigned to Sirius Radio. In its
   complaint, Sirius Radio sought money damages to the extent Holdings
   manufactured, used or sold any product or method claimed in their patents and
   injunctive relief. On February 16, 2000, this suit was resolved in accordance
   with the terms of a joint development agreement between Holdings and Sirius
   Radio and both companies agreed to cross-license their respective property.
   Each party is obligated to fund one half of the development cost for a
   unified standard for satellite radios. Each party will be entitled to license
   fees or a credit towards its one half of the cost based upon the validity,
   value, use, importance and available alternatives of the technology it
   contributes. The amounts for these fees or credits will be determined over
   time by agreement of the parties or by arbitration. The parties have yet to
   agree on the validity, value, use, importance, and available alternatives of
   their respective technologies. If the parties fail to reach agreement, the
   fees or credits may be determined through binding arbitration. The companies
   have agreed to seek arbitration to resolve issues with respect to certain
   existing technology. If this agreement is terminated before the value of the
   license has been determined due to Holdings' failure to perform a material
   covenant or obligation, then this suit could be refiled.

   (j)  PURCHASE OF PROPERTY

   In May 2001, Holdings entered into a definitive agreement to purchase its
   headquarters for $34.0 million. This transaction is expected to close in the
   third quarter of 2001.

   (k)  SALES, MARKETING AND DISTRIBUTION AGREEMENTS

   Holdings has entered into various joint sales, marketing and distribution
   agreements. Under the terms of these agreements, the Company is obligated to
   provide incentives, subsidies and commissions to other companies that may
   include fixed payments, per-unit subscriber amounts and revenue sharing
   arrangements. The amount of these operational, promotional, subscriber
   acquisition, joint development, and manufacturing costs related to these
   agreements cannot be estimated, but are expected to be substantial.


                                       8
<PAGE>


                    XM SATELLITE RADIO INC. AND SUBSIDIARIES
                          (A Development Stage Company)

            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                Three-Month Periods ended June 30, 2000 and 2001
 and for the period from December 15, 1992 (date of inception) to June 30, 2001


<TABLE>
<CAPTION>

                                                                Three Months ended         Six Months ended      December 15, 1992
                                                                     June 30,                  June 30,         (date of inception)
                                                                 2000          2001         2000        2001      to June 30, 2001
                                                                 ----          ----         ----        ----      ----------------
                                                                        (in thousands, except share data)
<S>                                                           <C>          <C>          <C>          <C>             <C>
Revenue...................................................    $      --    $      --    $      --    $      --       $      --
                                                              ---------    ---------    ---------    ---------       ---------

Operating expenses:
   Research and development...............................          219        2,771        4,738        4,275          22,887
   Professional fees......................................        5,155        3,660       10,713        8,729          47,760
   General and administrative.............................        8,462       35,663       15,237       71,056         140,513
                                                              ---------    ---------    ---------    ---------       ---------

     Total operating expenses.............................       13,836       42,094       30,688       84,060         211,160
                                                              ---------    ---------    ---------    ---------       ---------

     Operating loss.......................................      (13,836)     (42,094)     (30,688)     (84,060)       (211,160)
Other income (expense):
    Interest income (expense), net........................        8,840        3,648       12,983        8,392          36,023
                                                              ---------    ---------    ---------    ---------       ---------

     Net loss.............................................    $  (4,996)   $ (38,446)   $ (17,705)   $ (75,668)      $(175,137)
                                                              ==========   ==========   ==========   ==========      ==========

</TABLE>


See accompanying notes to unaudited condensed consolidated financial statements.



                                       9
<PAGE>


                    XM SATELLITE RADIO INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                       December 31, 2000 and June 30, 2001

<TABLE>
<CAPTION>
                                                                                              December 31,      June 30,
                                                                                                  2000            2001
                                                                                                  ----            ----
                                                                                                               (unaudited)
                                                                                                     (in thousands)
<S>                                                                                          <C>             <C>
ASSETS
Current assets:
   Cash and cash equivalents..............................................................    $  203,191      $  180,862
   Restricted investments.................................................................        45,585          44,715
   Prepaid and other current assets.......................................................         8,815          17,731
                                                                                              ----------      ----------

     Total current assets.................................................................       257,591         243,308
Other assets:
   Restricted investments, net of current portion.........................................       115,581          80,638
   System under construction..............................................................       776,706         396,965
   Property and equipment, net............................................................        59,505         615,276
   Goodwill and intangibles, net..........................................................        24,001          23,319
   Other assets, net......................................................................         9,133           9,118
                                                                                              ----------      ----------

     Total assets.........................................................................    $1,242,517      $1,368,624
                                                                                              ==========      ==========

LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
   Accounts payable.......................................................................    $   47,072      $   38,763
   Accrued expenses.......................................................................         4,021           4,660
   Accrued interest.......................................................................        13,397          13,496
   Royalty payable........................................................................         2,565           2,965
                                                                                              ----------      ----------
     Total current liabilities............................................................        67,055          59,884

Senior secured notes......................................................................       261,298         262,736
Royalty payable, net of current portion...................................................         2,600           2,200
Capital lease, net of current portion.....................................................         1,367           4,158
Other non-current liabilities.............................................................         4,787           5,395
                                                                                              ----------      ----------

     Total liabilities....................................................................       337,107         334,373
                                                                                              ----------      ----------


Stockholder's equity:
   Common stock, par value $0.10; 3,000 shares authorized, 125 shares issued and
     outstanding..........................................................................            --              --
   Additional paid-in capital.............................................................     1,004,879       1,209,388
   Deficit accumulated during development stage...........................................       (99,469)       (175,137)
                                                                                              ----------      ----------

     Total stockholder's equity...........................................................       905,410       1,034,251
                                                                                              ----------      ----------

Commitments and contingencies
     Total liabilities and stockholder's equity...........................................    $1,242,517      $1,368,624
                                                                                              ==========      ==========

</TABLE>


See accompanying notes to unaudited condensed consolidated financial statements.


                                       10
<PAGE>


                    XM SATELLITE RADIO INC. AND SUBSIDIARIES
                          (A Development Stage Company)

               UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
        Six-Month Periods ended June 30, 2000 and 2001 and for the period from
             December 15, 1992 (date of inception) to June 30, 2001


<TABLE>
<CAPTION>
                                                                            Six Months ended        December 15, 1992
                                                                                June 30,         (date of inception) to
                                                                        2000            2001          June 30, 2001
                                                                        ----            ----          -------------
                                                                                      (in thousands)
<S>                                                                    <C>            <C>          <C>
Cash flows from operating activities:
  Net loss...........................................................  $ (17,705)     $ (75,668)       $  (175,137)
  Adjustments to reconcile net loss to net
    Cash used in operating activities:
    Depreciation and amortization....................................      1,013          8,268             13,204
    Non-cash stock compensation......................................      2,258          2,443              9,396
    Changes in operating assets and liabilities:
       Increase in prepaid and other current assets..................       (314)        (8,916)           (17,731)
       Increase in other assets......................................        (67)            --               (159)
       Decrease in accrued interest..................................      8,545            894                894
       Increase (decrease) in accounts payable and
          accrued expenses...........................................        (67)        (4,473)            25,674
                                                                       ----------     ----------       ------------

      Net cash used in operating activities..........................     (6,337)       (77,452)          (143,859)
                                                                       ----------     ----------       ------------


Cash flows from investing activities:
   Purchase of property and equipment................................    (18,742)        (8,520)           (57,753)
   Additions to system under construction............................   (191,319)      (113,236)          (877,976)
   Net purchase/maturity of short-term investments...................     69,472             --                 --
   Purchase/maturity of restricted investments.......................   (125,863)        19,796            (86,542)
   Other investing activities........................................    (54,250)       (32,902)           (40,056)
                                                                       ----------     ----------       ------------

    Net cash used in investing activities............................   (320,702)      (134,862)        (1,062,327)
                                                                       ----------     ----------       ------------


Cash flows from financing activities:
   Proceeds from sale of securities and
     capital contribution from Holdings..............................    292,868        190,350          1,136,152
   Proceeds from issuance of options.................................         --             --                500
   Proceeds from issuance of 14% senior secured notes ...............    259,254             --            259,254
   Payments for deferred financing costs.............................     (8,382)          (365)            (8,858)
                                                                       ----------     ----------       ------------

    Net cash provided by financing activities........................    543,740        189,985          1,387,048
                                                                       ----------     ----------       ------------

    Net increase (decrease) in cash and cash equivalents.............    216,701        (22,329)           180,862

Cash and cash equivalents at beginning of period.....................     49,630        203,191                 --
                                                                       ----------     ----------       ------------

Cash and cash equivalents at end of period...........................  $ 266,331      $ 180,862        $   180,862
                                                                       ==========     ==========       ============

Supplemental cash flow disclosure:
  Increase in FCC license, goodwill and intangibles..................  $      --      $      --        $    51,624
  Contribution of fixed assets from Parent...........................         --         11,716             11,716
  Non-cash capitalized interest......................................     15,499         24,242             63,515
  Accrued system milestone payments..................................     26,699         26,887             26,887
  Property acquired through capital lease............................         --          4,331              6,489
  Use of deposit/escrow for terrestrial repeater contracts...........      3,422         48,827                 --
  Cash paid for interest.............................................         --         22,750             45,500

</TABLE>


See accompanying notes to unaudited condensed consolidated financial statements.


                                       11
<PAGE>


                    XM SATELLITE RADIO INC. AND SUBSIDIARIES
                          (A Development Stage Company)
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(1)  ORGANIZATION AND BUSINESS

XM Satellite Radio Inc. ("XM") was incorporated on December 15, 1992 in the
State of Delaware as a wholly owned subsidiary of Motient Corporation
("Motient"), formerly American Mobile Satellite Corporation, for the purpose of
procuring a digital audio radio service ("DARS") license. Business activity for
the period from December 15, 1992 through December 31, 1996 was insignificant.
On May 16, 1997, Motient and WorldSpace, Inc. ("WSI") formed XM Satellite Radio
Holdings Inc. ("Holdings") as a holding company for XM in connection with the
construction, launch and operation of a domestic communications satellite system
for the provision of DARS. Motient and WSI exchanged their respective interests
in XM for equivalent interests in Holdings, which had no assets, liabilities or
operations prior to the transaction.

(2)  PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

The condensed consolidated financial statements include the accounts of XM
Satellite Radio Inc. and its subsidiaries. All significant intercompany
transactions and accounts have been eliminated. XM's management has devoted
substantially all of its time to the planning and organization of XM, obtaining
its DARS license, conducting research and development programs, conducting
market research, constructing the satellite and terrestrial repeater systems,
securing manufacturers for its radios and obtaining retail distribution
channels, securing content, securing adequate debt and equity capital for
anticipated operations and growth and addressing regulatory matters. XM's
satellites, "Rock" and "Roll", were successfully launched into their
geosynchronous orbits on March 18, 2001 and May 8, 2001, respectively. XM
accepted in-orbit delivery of the satellites from Boeing Satellite Systems
International, Inc. ("BSS" - formerly Hughes Space and Communications, Inc.) on
May 15, 2001 for "Rock" and June 28, 2001 for "Roll". However, XM has not
generated any revenues and planned principal operations have not commenced.
Accordingly, XM's financial statements are presented as those of a development
stage enterprise, as prescribed by Statement of Financial Accounting Standards
("SFAS") No. 7, ACCOUNTING AND REPORTING BY DEVELOPMENT STAGE ENTERPRISES.

In the opinion of management, the accompanying unaudited condensed consolidated
financial statements reflect all adjustments, consisting of only normal
recurring accruals, necessary for a fair presentation of the consolidated
financial position of XM Satellite Radio Inc. and its subsidiaries, a
development stage entity, as of June 30, 2001, and the results of operations for
the six-month periods ended June 30, 2000 and 2001 and the period from December
15, 1992 (date of inception) through June 30, 2001 and the cash flows for the
six-month periods ended June 30, 2000 and 2001 and the period from December 15,
1992 (date of inception) through June 30, 2001. The results of operations for
the six months ended June 30, 2001 are not necessarily indicative of the results
that may be expected for the full year. These condensed consolidated financial
statements are unaudited, and do not include all related footnote disclosures.
The interim unaudited condensed consolidated financial statements should be read
in conjunction with the audited financial statements of XM included in XM's
filings with the Securities and Exchange Commission.

(3) RESTRICTED INVESTMENTS

Restricted investments consist of fixed income securities and are stated at
amortized costs plus accrued interest income. XM classifies restricted
investments that will be used for the operating commitments within the next
twelve months as current assets and those restricted investments that will be
used for either the construction of assets or to secure lease commitments as
non-current assets. The securities included in restricted investments are $86.5
million of US Treasury strips restricted to provide for the remaining four of
the first six scheduled interest payments on XM's 14 percent senior secured
notes due 2010, which are classified as held-to-maturity securities under the
provisions of SFAS No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND
EQUITY Securities, $34.9 million in money market funds for scheduled milestone
payments under the Hughes Electronics Corporation contract and $4.0 million in
certificates of deposit to collateralize letters of credit required by facility
leases and other secured credits.


                                       12
<PAGE>


                    XM SATELLITE RADIO INC. AND SUBSIDIARIES
                          (A Development Stage Company)
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(4) SYSTEMS UNDER CONSTRUCTION

XM is currently developing its satellite system. Costs related to the project
are being capitalized to the extent that they have future benefits. During the
six months ended June 30, 2001, XM placed satellites "Rock" and "Roll" into
service as well as many of its broadcast facilities and transferred $556,528,000
from systems under construction to property and equipment. As of June 30, 2001,
amounts recorded as system under construction relate to costs incurred in
obtaining a Federal Communications Commission ("FCC") license and approval as
well as the system development. Depreciation and amortization of the system will
be calculated using the straight-line method over the following estimated useful
lives:

<TABLE>
<S>                                                       <C>
             License......................................17.5 years
             Satellite system.............................17.5 years
             Terrestrial system...........................5-10 years
             Spacecraft control facilities................10-15 years
             Broadcast facilities.........................3-7 years
             Computer systems ............................3-5 years
</TABLE>

In July 2001, Holdings received notification from BSS that the expected life of
the satellites was extended due to the accuracy of the respective launches,
which used less fuel than anticipated. Holdings, therefore, changed the useful
life estimate for the satellite system and the FCC license from 15 years to 17.5
years.

Amortization of the license will begin on commercial launch. Depreciation of
Holdings' satellites, "Rock" and "Roll," commenced in May and June 2001,
respectively. Depreciation of the Company's ground stations will commence upon
commercial launch.

(5) EQUITY

On March 6, 2001, Holdings completed a follow-on offering of 7,500,000 shares of
its Class A common stock and a concurrent offering of $125.0 million of 7.75
percent convertible subordinated notes due 2006. Holdings contributed $189.6
million of the net proceeds to XM. Furthermore, Holdings contributed $0.8
million to XM from the exercise of stock options and shares sold under the
employee stock purchase plan. Additionally, Holdings contributed $11.7 million
of fixed assets to XM during the second quarter of 2001.

(6) RECLASSIFICATIONS

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

(7) COMMITMENTS AND CONTINGENCIES

   (a)   FCC LICENSE

   The FCC has established certain system development milestones that must be
   met for XM to maintain its license to operate the system. XM believes that it
   is completing the system development as planned and in accordance with the
   FCC milestones.

   (b)   APPLICATION FOR REVIEW OF FCC LICENSE

   One of the losing bidders for the DARS licenses filed an Application for
   Review by the full FCC of the Licensing Order which granted XM its FCC
   license. The Application for Review alleges that WSI had effectively taken
   control of XM without FCC approval. The FCC or the U.S. Court of Appeals has
   the authority to overturn the award of the FCC license should they rule in
   favor of the losing bidder. Although XM believes that its right to the FCC
   license will withstand the challenge as WSI is no longer a stockholder in XM,
   no prediction of the outcome of this challenge can be made with any
   certainty.


                                       13
<PAGE>


                    XM SATELLITE RADIO INC. AND SUBSIDIARIES
                          (A Development Stage Company)
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


   (c)   TECHNICAL SERVICES

   Effective January 1, 1998, Holdings entered into agreements with Motient and
   WorldSpace Management Corporation ("WorldSpace MC"), an affiliate of WSI, in
   which Motient and WorldSpace MC would provide technical support in areas
   related to the development of a DARS system. Payments for services provided
   under these agreements are made based on negotiated hourly rates. These
   agreements may be terminated by the parties on or after the date of the
   commencement of commercial operation following the launch of XM's first
   satellite. There are no minimum services purchase requirements. XM incurred
   costs of $98,000 and $84,000 under its agreement with Motient and no costs
   were incurred under its agreement with WorldSpace MC during the six months
   ended June 30, 2001 and 2000, respectively. XM incurred costs of $1,137,000
   under its agreement with Motient and $5,317,000 in costs were incurred under
   its agreement with WorldSpace MC from December 15, 1992 (date of inception)
   through June 30, 2001.

   (d)   TECHNOLOGY LICENSES

   Effective January 1, 1998, XM entered into a technology licensing agreement
   with Motient and WorldSpace MC by which as compensation for certain licensed
   technology then under development to be used in the XM Radio system, XM will
   pay up to $14,300,000 to WorldSpace MC over a ten-year period. As of June 30,
   2001, XM incurred costs of $6,696,000 payable to WorldSpace MC. Any
   additional amounts to be incurred under this agreement are dependent upon
   further development of the technology, which is at XM's option. No liability
   exists to Motient or WorldSpace MC should such developments prove
   unsuccessful. XM maintains an accrual of $5,251,000 payable to WorldSpace MC,
   for quarterly royalty payments to be made.

   (e)   SATELLITE CONTRACT

   During the first half of 1999, XM and BSS amended the satellite contract to
   construct and launch XM's satellites to implement a revised work timetable,
   payment schedule to reflect the timing of the receipt of additional funding,
   and technical modifications. XM expects to incur total payment obligations
   under this contract of approximately $541,300,000, which includes amounts XM
   expects to pay pursuant to the exercise of the option to build the ground
   spare satellite and certain financing costs and in-orbit incentive payments.
   On June 27, 2000, XM exercised the option to build the ground spare. As of
   June 30, 2001, XM had paid $470,012,000 under the Satellite contract with BSS
   and had accrued $212,000.

   (f)   TERRESTRIAL REPEATER SYSTEM CONTRACTS

   In August 1999, XM signed a contract with LCC International, Inc., a related
   party, calling for payments of approximately $115,000,000 for engineering and
   site preparation for the terrestrial repeater system. In January 2001, the
   contract was amended and the estimated contract value was reduced to
   $107,500,000. As of June 30, 2001, XM has paid $81,748,000 under this
   contract, and accrued an additional $17,240,000. XM has entered into tower
   construction agreements with various companies, which will provide certain
   services that LCC International, Inc. was to provide. XM also entered into a
   contract effective October 22, 1999, with Hughes Electronics Corporation for
   the design, development and manufacture of the terrestrial repeaters.
   Payments under this contract are expected to be approximately $128,000,000.
   As of June 30, 2001, XM had paid $64,184,000 and accrued an additional
   $2,552,000 under this contract.

   (g)   GENERAL MOTORS DISTRIBUTION AGREEMENT

   XM has signed a long-term distribution agreement with the OnStar division of
   General Motors providing for the installation of XM radios in General Motors
   vehicles. During the term of the agreement, which expires 12 years from the
   commencement date of XM's commercial operations, General Motors has agreed to
   distribute the service to the exclusion of other S-band satellite digital
   radio services. XM will also have a non-exclusive right to arrange for the
   installation of XM radios included in OnStar systems in non-General Motors
   vehicles that are sold for use in the United States. XM has significant
   annual, fixed payment obligations to General Motors for four years following
   commencement of commercial service. These payments approximate $35,000,000 in
   the


                                       14
<PAGE>


                    XM SATELLITE RADIO INC. AND SUBSIDIARIES
                          (A Development Stage Company)
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


   aggregate during this period. Additional annual fixed payment obligations
   beyond the initial four years of the contract term range from less than
   $35,000,000 to approximately $130,000,000 through 2009, aggregating
   approximately $400,000,000. In order to encourage the broad installation of
   XM radios in General Motors vehicles, XM has agreed to subsidize a portion of
   the cost of XM radios, and to make incentive payments to General Motors when
   the owners of General Motors vehicles with installed XM radios become
   subscribers for XM's service. XM must also share with General Motors a
   percentage of the subscription revenue attributable to General Motors
   vehicles with installed XM radios, which percentage increases until there are
   more than 8 million General Motors vehicles with installed XM radios. XM will
   also make available to General Motors bandwidth on XM's systems. The
   agreement is subject to renegotiation at any time based upon the installation
   of radios that are compatible with a unified standard or capable of receiving
   Sirius Satellite Radio's service. The agreement is subject to renegotiation
   if, four years after the commencement of XM's commercial operations and at
   two-year intervals thereafter GM does not achieve and maintain specified
   installation levels of General Motors vehicles capable of receiving XM's
   service, starting with 1,240,000 units after four years, and thereafter
   increasing by the lesser of 600,000 units per year and amounts proportionate
   to target market shares in the satellite digital radio service market. There
   can be no assurances as to the outcome of any such renegotiation. General
   Motors' exclusivity obligations will discontinue if, four years after XM
   commences commercial operations and at two-year intervals thereafter, XM
   fails to achieve and maintain specified minimum market share levels in the
   satellite digital radio service market.

   (h)   SONY WARRANT

   In February 2000, Holdings issued a warrant to Sony exercisable for shares of
   Holdings' Class A common stock. The warrant will vest at the time that XM
   attains its millionth customer, and the number of shares underlying the
   warrant will be determined by the percentage of XM Radios that have a Sony
   brand name as of the vesting date. If Sony achieves its maximum performance
   target, it will receive 2 percent of the total number of shares of Holdings'
   Class A common stock on a fully-diluted basis upon exercise of the warrant.
   The exercise price of the Sony warrant will equal 105 percent of fair market
   value of Holdings' Class A common stock on the vesting date, determined based
   upon the 20-day trailing average.

   (i)   JOINT DEVELOPMENT AGREEMENT

   On January 12, 1999, Sirius Radio, the other holder of an FCC satellite radio
   license, commenced an action against XM in the United States District Court
   for the Southern District of New York, alleging that XM was infringing or
   would infringe three patents assigned to Sirius Radio. In its complaint,
   Sirius Radio sought money damages to the extent XM manufactured, used or sold
   any product or method claimed in their patents and injunctive relief. On
   February 16, 2000, this suit was resolved in accordance with the terms of a
   joint development agreement between XM and Sirius Radio and both companies
   agreed to cross-license their respective property. Each party is obligated to
   fund one half of the development cost for a unified standard for satellite
   radios. Each party will be entitled to license fees or a credit towards its
   one half of the cost based upon the validity, value, use, importance and
   available alternatives of the technology it contributes. The amounts for
   these fees or credits will be determined over time by agreement of the
   parties or by arbitration. The parties have yet to agree on the validity,
   value, use, importance, and available alternatives of their respective
   technologies. If the parties fail to reach agreement, the fees or credits may
   be determined through binding arbitration. The companies have agreed to seek
   arbitration to resolve issues with respect to certain existing technology. If
   this agreement is terminated before the value of the license has been
   determined due to XM's failure to perform a material covenant or obligation,
   then this suit could be refiled

   (j)   SALES, MARKETING AND DISTRIBUTION AGREEMENTS

   The Company has entered into various joint sales, marketing and distribution
   agreements. Under the terms of these agreements, the Company is obligated to
   provide incentives, subsidies and commissions to other companies that may
   include fixed payments, per-unit subscriber amounts and revenue sharing
   agreements. The amounts of these operational, promotional, subscriber
   acquisition, joint development, and manufacturing costs related to these
   agreements cannot be estimated, but are expected to be substantial.


                                       15
<PAGE>


Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
                                  OF OPERATIONS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and other sections herein,
including statements regarding the development of our business, the markets for
our services, our anticipated capital expenditures, and other similar statements
are forward-looking statements (as such term is defined in the Private
Securities Litigation Reform Act of 1995) which can be identified as any
statement that does not relate strictly to historical or current facts.
Forward-looking statements use such words as "plans," "expects," "will," "will
likely result," "are expected to," "will continue," "is anticipated,"
"estimate," "project," "believes," "anticipates," "intends," "may," "should,"
"continue," "seek," "could" and other similar reasonable expressions. Although
we believe that our expectations are based on reasonable assumptions, we can
give no assurance that our expectations will be achieved. The important factors
that could cause actual results to differ materially from those in the
forward-looking statements herein (the "Cautionary Statements") include, without
limitation, the key factors that have a direct bearing on our future results of
operations. These are the potential risk of delay in implementing our business
plan; dependence on Boeing Satellite Systems International, Inc. ("BSS" -
formerly Hughes Space and Communications, Inc.), LCC International, Inc. and
Hughes Electronics Corporation and consumer electronics manufacturers; the
availability of receivers and antennas; unproven market for our proposed
service; unproven application of existing technology; difficulties in developing
with Sirius Radio a unified standard for satellite radio; our need for
additional financing, as well as other risks referenced from time to time in
filings with the SEC, including XM Satellite Radio Holdings Inc.'s Form 8-K,
filed February 22, 2001. All subsequent written and oral forward-looking
statements attributable to us or persons acting on our behalf are expressly
qualified in their entirety by the Cautionary Statements. We do not undertake
any obligation to release publicly any revisions to such forward-looking
statements to reflect the occurrence of unanticipated events.

The following discussion and analysis should be read in conjunction with our
Condensed Consolidated Financial Statements and Notes thereto included herewith,
and with our Management's Discussion and Analysis of Financial Condition and
Results of Operations and audited consolidated financial statements and notes
thereto for the three year period ended December 31, 2000, and for the period
from December 15, 1992 (date of inception) to December 31, 2000, included in our
Annual Report on Form 10-K.

INTRODUCTION

This quarterly report is filed jointly by XM Satellite Radio Holdings Inc.
("Holdings") and XM Satellite Radio Inc. ("XM"). XM is a wholly-owned subsidiary
of Holdings. Accordingly, the management's discussion and analysis section of
this report focuses on the financial condition and results of operations of
Holdings but contains an explanation of any differences between the two
companies.

OVERVIEW

XM Satellite Radio Inc. was incorporated in Delaware in 1992 as a wholly-owned
subsidiary of Motient Corporation ("Motient"), formerly American Mobile
Satellite Corporation. XM Satellite Radio Holdings Inc. became a holding company
for XM Satellite Radio Inc. in early 1997.

We are in the development stage. We expect to emerge from the development stage
following the commercial launch of our service and generation of significant
revenue from that service. Since our inception in December 1992, we have devoted
our efforts to establishing and commercializing the XM Radio system. Our
activities were fairly limited until 1997, when we pursued and obtained
regulatory approval from the FCC to provide satellite radio service. Our
principal activities to date have included

     o   designing and developing the XM Radio system;

     o   launching of our satellites, "Rock" and "Roll", thereby completing our
         space constellation

                                       16
<PAGE>


     o   completing our state-of-the-art broadcast studio facilities

     o   completing our ground segment

     o   continuing our terrestrial network build-out

     o   negotiating contracts with specialty programmers, radio manufacturers
         and car manufacturers;

     o   developing technical standards and specifications;

     o   conducting market research;

     o   conducting tests of XM radios on the XM radio system; and

     o   securing financing for working capital and capital expenditures.

We have incurred substantial losses to date and expect to continue to incur
significant losses for the foreseeable future as we continue to design, develop
and deploy the XM Radio system and for some period following our commencement of
commercial operations.

We capitalize all costs related to our satellite contract and our FCC license,
including all applicable interest. These capitalized costs will be depreciated
over the estimated useful lives of the satellites and ground control stations.
Depreciation of our satellites commenced in May and June, 2001. Depreciation of
our satellite control facilities and terrestrial repeaters and the amortization
of our FCC license will commence upon commercial operations.

After we begin commercial operations, which we are targeting for September,
2001, we anticipate that our revenues will consist primarily of customers'
subscription fees and advertising revenues.

In October 1999, Holdings completed an initial public offering which yielded net
proceeds of $114.1 million. Concurrent with the closing of its initial public
offering, $250.0 million of Holdings' Series A subordinated convertible notes,
together with associated accrued interest, converted into shares of Holdings'
Series A convertible preferred stock and shares of Holdings' Class A common
stock. The net proceeds from these offerings were contributed to XM.
Additionally, $103.3 million of convertible notes issued to Motient by Holdings,
together with associated accrued interest, converted into shares of Holdings'
Class B common stock.

In 2000, Holdings completed a follow-on offering of 4,370,000 shares of its
Class A common stock, which yielded net proceeds of $132.1 million. Holdings
completed a concurrent offering of 2,000,000 shares of Series B convertible
redeemable preferred stock, which yielded net proceeds of $96.5 million.
Holdings and XM completed a private placement of 325,000 units, each consisting
of $1,000 principal amount of 14% senior secured notes due 2010 of XM and one
warrant to purchase 8.024815 shares of Holdings' Class A common stock at $49.50
per share, which yielded net proceeds of $191.1 million excluding $123.0 million
for an interest reserve. Holdings completed a private placement of 235,000
shares of its Series C convertible redeemable preferred stock for $1,000.00 per
share, which yielded net proceeds of approximately $226.8 million. The issuance
of the Series C preferred stock caused the exercise price of the warrants sold
in March 2000 to be adjusted to $47.94 and the number of warrants shares to be
increased to 8.285948 per warrant.

In the first and second quarter of 2001

     o     Holdings completed a follow-on offering of 7,500,000 shares of its
           Class A common stock, which yielded net proceeds of $72.0 million;

     o     Holdings completed a concurrent offering of $125.0 million of 7.75%
           convertible subordinated notes due 2006, convertible into shares of
           Class A common stock at a conversion price of $12.23 per share, which
           yielded net proceeds of $120.7 million.

The follow-on offering of 7,500,000 shares of Holdings Class A common stock and
the concurrent offering of $125.0 million of 7.75% convertible subordinated
notes due 2006 caused the exercise price of the warrants sold in March 2000 to
be adjusted to $45.27 and the number of warrant shares to be increased to
$8.776003 per warrant. In addition, the conversion price of the Series C
convertible redeemable preferred stock was adjusted from $26.50 to $22.93.


                                       17
<PAGE>


Through June 30, 2001, the proceeds from these offerings were contributed by
Holdings to XM except for $25.7 million, which remains at Holdings.

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2001 COMPARED WITH THREE MONTHS ENDED JUNE 30, 2000


<TABLE>
<CAPTION>

                                                     Holdings & Subsidiaries               XM & Subsidiaries
                                                        Three months ended                 Three months ended
                                                             June  30,                           June 30,
                                                      2001               2000              2001            2000
                                                   ----------         ----------        ----------      ----------
                                                                           (in thousands)
<S>                                                 <C>               <C>                <C>            <C>
Research and development.....................         $  2,771           $   219         $  2,771        $   219
Professional fees............................            3,660             5,193            3,660          5,155
General and administrative expenses..........           35,663             8,525           35,663          8,462
Interest income..............................            4,708             8,849            4,466          8,840
Interest expense.............................           (1,092)               --             (818)            --
Net loss.....................................          (38,478)           (5,088)         (38,446)        (4,996)

</TABLE>

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

RESEARCH AND DEVELOPMENT. Research and development expenses increased to
approximately $2.8 million for the three months ended June 30, 2001, compared
with approximately $0.2 million for the three months ended June 30, 2000. The
increase in the research and development expenses primarily resulted from the
activity relating to our system technology development, including chipset design
and uplink technology. The final validation of our chipset by XM radio
manufacturers (including Sony, Pioneer, Alpine and Delphi-Delco) was completed
and the production of the chipsets commenced in the second quarter of 2001. We
expect research and development to trend downward during the remainder of 2001.

PROFESSIONAL FEES. Professional fees decreased to approximately $3.7 million for
the three months ended June 30, 2001, compared with $5.2 million for the three
months ended June 30, 2000. These expenses primarily reflect legal, regulatory
and marketing expenses as we engage consultants, including incurring $0.5
million and $3.2 million for enterprise information technology consultants
during the quarters ended June 30, 2001 and 2000, respectively. The decrease in
professional fees primarily resulted from the increase in employee headcount and
resulting reduction in the use of outside consultants. However, we expect the
professional fees to trend upward as we continue to develop market strategies.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased to
$35.7 million for the three months ended June 30, 2001, compared with $8.5
million for the three months ended June 30, 2000. The increase reflects
increased headcount, facilities, and sales and marketing expenses. The remaining
portion of the general and administrative expenses consist of other costs such
as rent, travel, insurance, depreciation and amortization and supplies. We also
recorded stock-based non-cash compensation charges of approximately $2.0 million
and $1.6 million during the three months ended June 30, 2001 and 2000,
respectively. We expect to continue to recognize quarterly non-cash compensation
charges depending on the market value of Holdings' Class A common stock at the
end of each quarter. We anticipate general and administrative expenses to
continue to increase through commercial launch.

INTEREST INCOME. Interest income decreased from $4.7 million for the three
months ended June 30, 2001, compared with $8.8 million for the three months
ended June 30, 2000. The decrease was the result of the expenditures for the
system under construction, other capital expenditures and operating expenses
exceeding the average balances of


                                       18
<PAGE>


cash and cash equivalents during the three months ended June 30, 2001 versus the
three months ended June 30, 2000.

INTEREST EXPENSE. We incurred interest costs of $15.3 million and $13.3 million
associated with our FCC license and the XM Radio system during the three months
ended June 30, 2001 and 2000, respectively. Of these amounts, we capitalized
$14.2 million and $13.3 million associated with our FCC license and the XM Radio
system and expensed $1.1 million and $0 during the three months ended June 30,
2001 and 2000, respectively, as the interest capitalization threshold was
exceeded. We expect interest expense to trend upward for the remainder of 2001.

NET LOSS. The net loss for the three-month periods ended June 30, 2001 and 2000
was $38.5 million and $5.1 million, respectively. The increase in net losses for
the three months ended June 30, 2001, compared with the three months ended June
30, 2000, reflects additional general and administration expenses, primarily due
to increased headcount, facility, and sales and marketing expenses in
preparation for commercial launch.

XM SATELLITE RADIO INC. AND SUBSIDIARIES

The results of operations for XM and its subsidiaries were substantially the
same as the results for Holdings and its subsidiaries discussed above.

SIX MONTHS ENDED JUNE 30, 2001 COMPARED WITH SIX MONTHS ENDED JUNE 30, 2000

<TABLE>
<CAPTION>

                                                     Holdings & Subsidiaries              XM & Subsidiaries
                                                         Six months ended                  Six months ended
                                                             June  30,                         June 30,
                                                      2001               2000              2001            2000
                                                   ----------         ----------        ----------      ----------
                                                                           (in thousands)
<S>                                                  <C>               <C>              <C>              <C>
Research and development.....................        $  4,275          $  4,739         $  4,275         $  4,738
Professional fees............................           8,729            10,787            8,729           10,713
General and administrative expenses..........          71,214            15,300           71,056           15,237
Interest income..............................           9,884            12,999            9,210           12,983
Interest expense.............................          (1,092)               --             (818)              --
Net loss.....................................         (75,426)          (17,827)         (75,668)         (17,705)

</TABLE>

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

RESEARCH AND DEVELOPMENT. Research and development expenses decreased from
approximately $4.3 million for the six months ended June 30, 2001, compared with
approximately $4.7 million for the six months ended June 30, 2000. The decrease
in the research and development expenses primarily resulted from the activity
relating to our system technology development, including chipset design and
uplink technology. The final validation of our chipset by XM radio manufacturers
(including Sony, Pioneer, Alpine and Delphi-Delco) was completed and the
production of the chipsets commenced in the second quarter of 2001. We expect
research and development to trend downward during the remainder of 2001.

PROFESSIONAL FEES. Professional fees decreased to approximately $8.7 million for
the six months ended June 30, 2001, compared with $10.8 million for the six
months ended June 30, 2000. These expenses primarily reflect legal, regulatory
and marketing expenses as we engage consultants, including incurring $3.1
million and $5.6 million for enterprise information technology consultants
during the six months ended June 30, 2001 and 2000, respectively. The decrease
in professional fees primarily resulted from the increase in employee headcount
and resulting reduction in the use of outside consultants. However, we expect
the professional fees to trend upward as we continue to develop market
strategies.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased to
$71.2 million for the six months ended June 30, 2001, compared with $15.3
million for the six months ended June 30, 2000. The increase reflects increased
headcount, facilities, and sales and marketing expenses. The remaining portion
of the general and administrative expenses consist of other costs such as rent,
travel, insurance, depreciation and amortization and supplies. We also recorded
stock-based non-cash compensation charges of approximately $2.4 million and $2.3
million during the six months ended June 30, 2001 and 2000, respectively. We
expect to continue to recognize


                                       19
<PAGE>


quarterly non-cash compensation charges depending on the market value of
Holdings' Class A common stock at the end of each quarter. We anticipate general
and administrative expenses to continue to increase through commercial launch.

INTEREST INCOME. Interest income decreased from $9.9 million for the six months
ended June 30, 2001, compared with $13.0 million for the six months ended June
30, 2000. The decrease was the result of higher expenditures for the system
under construction, other capital expenditures and operating expenses, which
exceeded the average balances of cash and cash equivalents during the six months
ended June 30, 2001 versus the six months ended June 30, 2000.

INTEREST EXPENSE. We incurred interest costs of $28.7 million and $15.5 million
associated with our FCC license and the XM Radio system during the six months
ended June 30, 2001 and 2000, respectively. Of these amounts, we capitalized
$27.6 million and $15.5 million associated with our FCC license and the XM Radio
system and expensed $1.1million and $0 during the six months ended June 30, 2001
and 2000, respectively, as the interest capitalization threshold was exceeded.
We expect interest expense to trend upward for the remainder of 2001.

NET LOSS. The net loss for the six-month periods ended June 30, 2001 and 2000
was $75.4 million and $17.8 million, respectively. The increase in net losses
for the six months ended June 30, 2001, compared with the six months ended June
30, 2000, reflects additional general and administration expenses, primarily due
to increased headcount, facility, and sales and marketing expenses in
preparation for commercial launch.

XM SATELLITE RADIO INC. AND SUBSIDIARIES

The results of operations for XM and its subsidiaries were substantially the
same as the results for Holdings and its subsidiaries discussed above.


LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2001, we had a total of cash and cash equivalents of $206.5 million,
which excludes the $45.0 million of restricted investments, and working capital
of $205.3 million, compared with cash and cash equivalents of $224.9 million,
which excludes $45.6 million of restricted investments, and working capital of
$212.1 million at December 31, 2000. The decreases in the respective balances
are due primarily to the increasing capital expenditures and operating expenses
for the six months ended June 30, 2001.

FUNDS REQUIRED FOR XM RADIO TO DATE

Since inception, we have raised an aggregate of $1.3 billion, net of expenses,
interest reserve and repayment of debt. These funds are expected to be
sufficient, in the absence of additional financing, to cover funding needs
through commencement of commercial operations and into 2002. These funds have
been used to acquire our FCC license, make required payments for our system,
including the satellites, terrestrial repeater system, and ground networks, and
for working capital and operating expenses.

SOURCES OF FUNDS

To date, we have raised, principally through Holdings, approximately $1.3
billion of net proceeds, net of expenses, interest reserve and repayment of
debt. These funds have been used to acquire our FCC license, make required
payments for our system, including the satellites, terrestrial repeater system,
and ground networks, and for working capital and operating expenses.

       In the first and second quarters of 2001:

       o   Holdings completed a follow-on offering of 7,500,000 shares of its
           Class A common stock, which yielded net proceeds of $72.0 million;

       o   Holdings completed a concurrent offering of $125.0 million of 7.75%
           convertible subordinated notes due


                                       20
<PAGE>


           2006, convertible into shares of Class A common stock at a
           conversion price of $12.23 per share, which yielded net proceeds of
           $120.7 million;

Through June 30, 2001, the proceeds from these offerings were contributed by
Holdings to XM except for $25.7 million, which remains at Holdings.

USES OF FUNDS

To date, we have paid $935.7 million in capital expenditures and incurred $211.7
million in operating expenses.

SATELLITE CONTRACT. Under our satellite contract, Boeing Satellite Systems
International, Inc. ("BSS" - formerly Hughes Space and Communications, Inc.)
delivered two satellites in orbit and will complete construction of a ground
spare satellite. BSS will also provide ground equipment and software to be used
in the XM Radio system and certain launch and operations support services. We
expect that by commencement of commercial operations in September 2001, we will
have had to pay an aggregate amount of approximately $472.6 million for these
items and for BSS to complete the ground spare satellite. This amount does not
include incentive payments, which will depend in part on projected satellite
performance at the acceptance date. Such payments could total up to an
additional $68.7 million over the useful lives of the satellites. As of June 30,
2001, we had paid approximately $470.0 million under our satellite contract and
have recognized an additional $0.2 million in accrued milestone payments. On
March 18, 2001, our first satellite, "XM Rock", was successfully launched into
its geosynchronous orbit. On May 8, 2001, our second satellite, "XM Roll", was
successfully launched into its geosynchronous orbit. We accepted in-orbit
delivery of the satellites from BSS on May 15, 2001 for "Rock" and June 28, 2001
for "Roll".

LAUNCH INSURANCE. As of June 30, 2001, we had launched both of our satellites
and paid $44.1 million with respect to launch insurance, which has been
capitalized to the system under construction.

TERRESTRIAL REPEATER SYSTEM. Based on the current design of the XM Radio system
and existing contracts, we estimate that through our expected commencement of
operations in September 2001 we will incur aggregate costs of approximately
$263.3 million for a terrestrial repeater system. We expect these costs to cover
the capital cost of the design, development and installation of a system of
terrestrial repeaters to cover approximately 70 cities and metropolitan areas.
In August 1999, we signed a contract with LCC International, Inc., a related
party, calling for payments of approximately $115.0 million for engineering and
site preparation. In January 2001, the contract was amended and the estimated
contract value was reduced to $107.5 million. As of June 30, 2001, we had paid
$81.7 million under this contract and accrued an additional $17.2 million. We
also entered into a contract effective October 22, 1999, with Hughes Electronics
Corporation for the design, development and manufacture of the terrestrial
repeaters. Payments under this contract are expected to be approximately $128.0
million. As of June 30, 2001, we had paid $64.2 million and accrued an
additional $2.6 million under this contract.

GROUND SEGMENT. Based on the design of the XM Radio system and available
research, we expect to incur ongoing ground segment costs through the expected
commencement of operations in September 2001. We expect these costs will cover
the satellite control facilities, programming production studios and various
other equipment and facilities. As of June 30, 2001, we had incurred $88.9
million with respect to the ground segment.

FCC LICENSE. In October 1997, we received one of two satellite radio licenses
issued by the FCC. We have paid approximately $90.0 million for this license,
including the initial bid right. There are no further payments required relating
to the license.

PURCHASE OF THE BUILDING. In May 2001, we entered into a definitive agreement to
purchase our headquarters for $34.0 million. This transaction is expected to
close in the third quarter of 2001.

OPERATING EXPENSES AND WORKING CAPITAL REQUIREMENTS. In addition to the above
capital needs, we will require funds for working capital, operating expenses and
royalty payments through targeted commercial launch in September 2001. From
inception through June 30, 2001, we have incurred total expenses, net of
interest income, of $182.0 million.

JOINT DEVELOPMENT AGREEMENT FUNDING REQUIREMENTS. We may require additional
funds to pay license fees or make


                                       21
<PAGE>


contributions towards the development of the technologies used to develop a
unified standard for satellite radios under our joint development agreement with
Sirius Radio. Each party is obligated to fund one half of the development cost
for such technologies. Each party will be entitled to license fees or a credit
towards its one half of the cost based upon the validity, value, use, importance
and available alternatives of the technology it contributes. The amounts of
these fees or credits will be determined over time by agreement of the parties
or by arbitration. The companies have agreed to seek arbitration to resolve
issues with respect to certain existing technology. We cannot predict at this
time the amount of license fees or contribution payable by us or Sirius Radio or
the size of the credits to us and Sirius Radio from the use of the other's
technology. This may require significant additional capital.

FUNDS REQUIRED FOLLOWING COMMENCEMENT OF COMMERCIAL OPERATIONS

We expect to need significant additional funds following commencement of
commercial operations to cover our cash requirements before we generate
sufficient cash flow from operations to cover our expenses. We estimate that our
existing resources, including proceeds of offerings concluded in March 2001,
would be sufficient in the absence of additional financing to cover our
estimated funding needs into 2002, including $150-$175 million required through
the end of 2001 to be used for marketing, system operating expenses and general
corporate purposes. After 2001, we anticipate that we will need an additional
$250-$300 million through 2002, and we will require additional funding
thereafter. These amounts are estimates, and may change, and we may need
additional financing in excess of these estimates. Funds will be needed to cover
operating expenses, marketing and promotional expenses including an extensive
marketing campaign in connection with the launch of our service, distribution
expenses, programming costs and any further development of the XM Radio system
that we may undertake after operations commence. Marketing and distribution
expenses are expected to include joint advertising and joint development with
and manufacturing subsidies of certain costs of some of our manufacturers and
distribution partners. We cannot estimate the total amount of these operational,
promotional, subscriber acquisition, joint development and manufacturing costs
and expenses, since they vary depending upon different criteria, but they are
expected to be substantial.

We will have significant payment obligations after commencement of operations
under our distribution agreement with General Motors. We will pay an aggregate
of approximately $35 million in the first four years following commencement of
commercial service. After that, through 2009, we will have additional fixed
annual payments ranging from less than $35 million to approximately $130
million, aggregating approximately $400 million. In order to encourage the broad
installation of XM radios, we have agreed to subsidize a portion of the cost of
XM radios and to make incentive payments to General Motors when the owners of
General Motors vehicles with installed XM radios become subscribers for the XM
Radio service. We must also share with General Motors a percentage of the
subscription revenue attributable to General Motors vehicles with installed XM
radios. This percentage increases until there are more than eight million
General Motors vehicles with installed XM radios. This agreement is subject to
renegotiation if General Motors does not achieve and maintain specified
installation levels, starting with 1.24 million units after four years and
thereafter increasing by the lesser of 600,000 units per year and amounts
proportionate to our share of the satellite digital radio market.

We currently expect to satisfy our funding requirements for the period following
commencement of commercial operations by selling debt or equity securities and
by obtaining loans or other credit lines from banks or other financial
institutions. If we are successful in raising additional financing, we
anticipate that a significant portion of the financing will consist of debt. We
are actively considering possible financings, and because of our substantial
capital needs we may consummate one or more financings at any time.

We may not be able to raise any funds or obtain loans on favorable terms or at
all. Our ability to obtain the required financing depends on several factors,
including future market conditions; our success or lack of 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, a
number of adverse effects could occur. We could default on our commitments to
creditors or others and may have to discontinue operations or seek a purchaser
for our business or assets.

RECENT ACCOUNTING PRONOUNCEMENTS

On July 20, 2001, the Financial Accounting Standards Board issued Statement No.
141 ("SFAS 141"), BUSINESS COMBINATIONS, and Statement No. 142 ("SFAS 142"),
GOODWILL AND OTHER INTANGIBLE ASSETS. SFAS 141 addresses


                                       22
<PAGE>


the accounting for acquisitions of businesses and is effective for
acquisitions occurring on or after July 1, 2001. SFAS 142 addresses the
method of identifying and measuring goodwill and other intangible assets
acquired in a business combination, eliminates further amortization of
goodwill and other intangibles with indefinite lives, and requires periodic
evaluations of impairment of goodwill and other intangible balances. SFAS 142
is effective on January 1, 2002. The Company is currently assessing the
impacts of the adoption of these standards and does not believe that SFAS 141
will have an impact on its current operations, but that SFAS 142 will have a
material effect on operations in 2002.

                                       23
<PAGE>


Item 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of June 30, 2001, we do not have any derivative financial instruments and do
not intend to use derivatives. We invest our cash in short-term commercial
paper, investment-grade corporate and government obligations and money market
funds. Our long-term debt includes fixed interest rates and the fair market
value of the debt is sensitive to changes in interest rates. We run the risk
that market rates will decline and the required payments will exceed those based
on current market rates. Under our current policies, we do not use interest rate
derivative instruments to manage our exposure to interest rate fluctuations.
Additionally, we believe that our exposure to interest rate risk is not material
to our results of operations.



                                       24
<PAGE>


PART II:   OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS.

On January 12, 1999, Sirius Radio, the other holder of an FCC satellite radio
license, commenced an action against us in the United States District Court for
the Southern District of New York, alleging that we were infringing or would
infringe three patents assigned to Sirius Radio. In its complaint, Sirius Radio
sought money damages to the extent we manufactured, used or sold any product or
method claimed in their patents and injunctive relief. This suit was dismissed
without prejudice in February 2000 in accordance with the terms of a joint
development agreement between XM Satellite Radio Inc. and Sirius Radio in which
both companies agreed to develop a unified standard for satellite radios and
license our respective intellectual property, including the patents that were
the subject of the suit, for use in this joint development. Each party is
obligated to fund one half of the development cost. Each party will be entitled
to license fees or a credit towards its one half of the cost based upon the
validity, value, use, importance and available alternatives of the technology it
contributes. The amounts for these fees or credits will be determined over time
by agreement of the parties or by arbitration. The parties have yet to agree on
the validity, value, use, importance, and available alternatives of their
respective technology. The companies have agreed to seek arbitration to resolve
issues with respect to certain existing technology. If this agreement is
terminated before the value of the licenses has been determined due to our
failure to perform a material covenant or obligation, then this suit could be
refiled.

Item 2. Changes in Securites and Use of Proceeds.

         In May 2001, Holdings issued a warrant to CNBC, Inc. excercisable for
up to an aggregate of 90,000 shares of Holdings' Class A common stock. This
warrant will vest in equal installments upon the first, second and third
anniversaries of our commencement of commercial operations. The exercise
price of the warrant is $26.50. The issuance of this warrant to CNBC was
exempt from registration under Section 4(2) of the Securities Act of 1933.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         The annual meeting of stockholders was held on May 24, 2001. At the
annual meeting, the stockholders voted on the following matters:

<TABLE>
<CAPTION>
----------------------------------------------------- ---------------- --------------- ----------------
                                                            Votes           Votes       Votes Abstained
                                                             For           Against
----------------------------------------------------- ---------------- --------------- ----------------
<S>                                                   <C>               <C>            <C>
ELECTION OF TEN DIRECTORS TO BOARD OF DIRECTORS
----------------------------------------------------- ---------------- --------------- ----------------
Gary M. Parsons                                         85,771,718        390,318
----------------------------------------------------- ---------------- --------------- ----------------
Hugh Panero                                             85,327,099        834,937
----------------------------------------------------- ---------------- --------------- ----------------
Nathaniel A. Davis                                      84,931,238       1,230,798
----------------------------------------------------- ---------------- --------------- ----------------
Thomas J. Donohue                                       85,817,308        344,728
----------------------------------------------------- ---------------- --------------- ----------------
Randall T. Mays                                         84,979,493       1,182,543
----------------------------------------------------- ---------------- --------------- ----------------
Pierce J. Roberts, Jr.                                  85,819,684        342,352
----------------------------------------------------- ---------------- --------------- ----------------
Randy S. Segal                                          85,817,094        344,942
----------------------------------------------------- ---------------- --------------- ----------------
Jack Shaw                                               85,817,849        344,187
----------------------------------------------------- ---------------- --------------- ----------------
Rajendra Singh                                          84,934,810       1,227,226
----------------------------------------------------- ---------------- --------------- ----------------
Ronald L. Zarrella                                      84,927,913       1,234,123
----------------------------------------------------- ---------------- --------------- ----------------

----------------------------------------------------- ---------------- --------------- ----------------
To approve an amendment to the XM Satellite Radio       69,842,285       3,929,040         18,370
Holdings Inc. 1998 Shares Award Plan to increase
the number of shares of Class A common stock that
may be issued under the plan from 5,000,000 to
8,000,000 shares

----------------------------------------------------- ---------------- --------------- ----------------

----------------------------------------------------- ---------------- --------------- ----------------
To approve an amendment to the XM Satellite Radio       73,411,875        367,095          10,725
Holdings Inc. Employee Stock Purchase Plan to
increase the number of shares of Class A common
stock that may be issued under the plan from
300,000 to 600,000 shares

----------------------------------------------------- ---------------- --------------- ----------------

----------------------------------------------------- ---------------- --------------- ----------------
To ratify the Board of Directors' appointment of        85,923,321        230,555           8,160
KPMG LLP as the independent public accountants of
XM Satellite Radio Holdings Inc. for the 2001
fiscal year

----------------------------------------------------- ---------------- --------------- ----------------

</TABLE>


                                       25
<PAGE>


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

(a)      Exhibits:

<TABLE>
<CAPTION>
EXHIBIT NO.                       DESCRIPTION
-----------                       -----------
<S>         <C>
3.1^        Restated Certificate of Incorporation of XM Satellite Radio Holdings Inc.

3.2^        Restated Bylaws of XM Satellite Radio Holdings Inc.

3.3         Restated Certificate of Incorporation of XM Satellite Radio Inc. (incorporated by reference to XM's
            Registration Statement on Form S-4, File No. 333-39178).

3.4         Amended and Restated Bylaws of XM Satellite Radio Inc. (incorporated by reference to XM's Registration
            Statement on Form S-4, File No. 333-39178).

4.1         Form of Certificate for Holdings' Class A common stock (incorporated by reference to Exhibit 3 to
            Holdings' Registration Statement on Form 8-A, filed with the SEC on September 23, 1999).

4.2         Form of Certificate for Holdings' 8.25% Series B Convertible Redeemable Preferred Stock (incorporated by
            reference to Holdings' Registration Statement on Form S-1, File No. 333-93529).

4.3         Certificate of Designation Establishing the Voting Powers, Designations, Preferences, Limitations,
            Restrictions and Relative Rights of 8.25% Series B Convertible Redeemable Preferred Stock due
            2012 (incorporated by reference to Holdings' Annual Report on Form 10-K for the fiscal year ended
            December 31, 1999, filed with the SEC on March 16, 2000).

4.4         Warrant to purchase shares of Holdings' Class A common stock, dated February 9, 2000, issued to Sony
            Electronics, Inc. (incorporated by reference to Holdings' quarterly report on Form 10-Q for the
            quarter ended March 31, 2000, filed with the SEC on May 12, 2000).

4.5         Warrant Agreement, dated March 15, 2000, between XM Satellite Radio Holdings Inc. as Issuer and
            United States Trust Company of New York as Warrant Agent (incorporated by reference to Holdings'
            Registration Statement on Form S-1, File No. 333-39176).

4.6         Warrant Registration Rights Agreement, dated March 15, 2000, between XM Satellite Radio Holdings Inc.
            and Bear, Stearns & Co., Inc., Donaldson, Lufkin and Jenrette Securities Corporation, Salomon Smith
            Barney Inc. and Lehman Brothers Inc. (incorporated by reference to Holdings' Registration Statement on
            Form S-1, File No. 333-39176).

4.7         Form of Warrant (incorporated by reference to Holdings' Registration Statement on Form S-1, File
            No. 333-39176).

4.8         Certificate of Designation Establishing the Powers, Preferences, Rights, Qualifications, Limitations
            and Restrictions of the 8.25%  Series C Convertible Redeemable Preferred Stock due 2012 (incorporated by
            reference to Holdings' Registration Statement on Form S-1, File No. 333-39176).

4.9         Form of Certificate for Holdings' 8.25% Series C Convertible Redeemable Preferred Stock (incorporated
            by reference to Holdings' Registration Statement on Form S-1, File No. 333-39176).

4.10        Indenture, dated as of March 15, 2000, between XM Satellite Radio Inc. and United States Trust
            Company of New York (incorporated by reference to XM's Registration Statement on Form S-4, File
            No. 333-39178).

</TABLE>


                                       26
<PAGE>


<TABLE>
<S>         <C>
4.11        Registration Rights Agreement, dated March 15, 2000, between XM Satellite Radio Inc. and Bear,
            Stearns & Co. Inc., Donaldson, Lufkin and Jenrette Securities Corporation, Salomon Smith Barney Inc.
            and Lehman Brothers Inc. (incorporated by reference to XM's Registration Statement on Form S-4, File
            No. 333-39178).

4.12        Form of 14% Senior Secured Note of XM Satellite Radio Inc. (incorporated by reference to XM's
            Registration Statement on Form S-4, File No. 333-39178).

4.13        Security Agreement, dated March 15, 2000, between XM Satellite Radio Inc. and United States
            Trust Company of New York (incorporated by reference to XM's Registration Statement on Form S-4,
            File No. 333-39178).

4.14        Pledge Agreement, dated March 15, 2000, between XM Satellite Radio Inc. and United States Trust
            Company of New York (incorporated by reference to XM's Registration Statement on Form S-4, File
            No. 333-39178).

4.15        Indenture, dated March 6, 2001, between Holdings and United States Trust Company of New York
            (incorporated by reference to Holdings' annual report on Form 10-K for fiscal year ended
            December 31, 2000, filed with the SEC on March 15, 2001).

4.16        Form of 7.75% convertible subordinated note (incorporated by reference to Holdings' annual report
            on Form 10-K for the fiscal year ended December 31, 2000, filed with SEC on March 15, 2001).

4.17        Warrant to purchase shares of Holdings' Class A common stock, dated May 2001, issued to CNBC, Inc.

10.1        Amended and Restated Shareholders' Agreement, dated as of August 8, 2000, by and among XM Satellite
            Radio Holdings Inc., Motient Corporation, Baron Asset Fund, Baron iOpportunity Fund, Baron Capital Asset
            Fund, Clear Channel Investments, Inc., Columbia XM Radio Partners, LLC, Columbia Capital Equity Partners
            III (QP), L.P., Columbia XM Satellite Partners III, LLC, DIRECTV Enterprises, Inc., General Motors
            Corporation, Madison Dearborn Capital Partners III, L.P., Special Advisors Fund I, LLC, Madison Dearborn
            Special Equity III, L.P., American Honda Motor Co., Inc. and Telcom-XM Investors, L.L.C. (incorporated
            by reference to Holdings' Registration Statement on Form S-1, File No. 333-39176).

10.2        Amended and Restated Registration Rights Agreement, dated as of August 8, 2000, by and among XM
            Satellite Radio Holdings Inc., Motient Corporation, Baron Asset Fund, Baron iOpportunity Fund, Baron
            Capital Asset Fund, Clear Channel Investments, Inc.,Columbia XM Radio Partners, LLC, Columbia Capital
            Equity Partners III (QP), L.P., Columbia XM Satellite Partners III, LLC, DIRECTV Enterprises, Inc.,
            General Motors Corporation, Madison Dearborn Capital Partners III, L.P., Special Advisors Fund I, LLC,
            Madison Dearborn Special Equity III, L.P., American Honda Motor Co., Inc. and Telcom-XM Investors,
            L.L.C. (incorporated by reference to Holdings' Registration Statement on Form S-1, File No. 333-39176).

10.3^       Note Purchase Agreement, dated June 7, 1999, by and between XM Satellite Radio Holdings Inc., XM
            Satellite Radio Inc., Clear Channel Communications, Inc., DIRECTV Enterprises, Inc., General Motors
            Corporation, Telcom-XM Investors, L.L.C., Columbia XM Radio Partners, LLC, Madison Dearborn Capital
            Partners III, L.P., Madison Dearborn Special Equity III, L.P., and Special Advisors Fund I, LLC
            (including form of Series A subordinated convertible note of XM Satellite Radio Holdings Inc. attached
            as Exhibit A thereto).

10.4^*      Technology Licensing Agreement by and among XM Satellite Radio Inc., XM Satellite Radio Holdings Inc.,
            WorldSpace Management Corporation and American Mobile Satellite Corporation, dated as of January 1,
            1998, amended by Amendment No. 1 to Technology Licensing Agreement, dated June 7, 1999.

10.5^*      Technical Services Agreement between XM Satellite Radio Holdings Inc. and American Mobile Satellite
            Corporation, dated as of January 1, 1998, as amended by Amendment No. 1 to Technical Services Agreement,
            dated June 7, 1998.

</TABLE>


                                       27
<PAGE>


<TABLE>
<S>         <C>
10.6^*      Satellite Purchase Contract for In-Orbit Delivery, by and between XM Satellite Radio Inc. and Hughes
            Space and Communications International Inc., dated July 21, 1999.

10.7^*      Amended and Restated Agreement by and between XM Satellite Radio Inc. and STMicroelectronics Srl, dated
            September 27, 1999.

10.8^*      Distribution Agreement, dated June 7, 1999, between OnStar, a division of General Motors Corporation, and
            XM Satellite Radio Inc.

10.9^*      Operational Assistance Agreement, dated as of June 7, 1999, between XM Satellite Radio Inc. and DIRECTV,
            INC.

10.10^*     Operational Assistance Agreement, dated as of June 7, 1999, between XM Satellite Radio Inc. and Clear
            Channel Communication, Inc.

10.11^*     Operational Assistance Agreement, dated as of June 7, 1999, between XM Satellite Radio Inc. and TCM, LLC.

10.12       Intentionally omitted.

10.13       Intentionally omitted.

10.14       Intentionally omitted.

10.15^      Form of Letter Agreement with Senior Vice Presidents.

10.16       Intentionally omitted.

10.17^      Form of Indemnification Agreement between XM Satellite Radio Holdings Inc. and each of its directors and
            executive officers.

10.18       1998 Shares Award Plan (incorporated by reference to Holdings' Registration Statement on Form S-8, File
            No. 333-65020).

10.19^      Form of Employee Non-Qualified Stock Option Agreement.

10.20^*     Firm Fixed Price Contract #001 between XM Satellite Radio Inc. and the Fraunhofer Gesellschaft zur
            Foderung Der angewandten Forschung e.V., dated July 16, 1999.

10.21^*     Contract for Engineering and Construction of Terrestrial Repeater Network System by and between XM
            Satellite Radio Inc. and LCC International, Inc., dated August 18, 1999.

10.22       Employee Stock Purchase Plan (incorporated by reference to Holdings' Registration Statement on Form S-8,
            File No. 333-65020).

10.23^      Non-Qualified Stock Option Agreement between Gary Parsons and XM Satellite Radio Holdings Inc., dated
            July 16, 1999.

10.24^      Non-Qualified Stock Option Agreement between Hugh Panero and XM Satellite Radio Holdings Inc., dated
            July 1, 1998, as amended.

10.25^      Form of Director Non-Qualified Stock Option Agreement.

10.26^      Lease between Consortium One Eckington, L.L.C. and XM Satellite Radio Inc., dated September 29, 1999.

</TABLE>


                                       28
<PAGE>


<TABLE>
<S>         <C>
10.27       Intentionally omitted.

10.28*      Contract for the Design, Development and Purchase of Terrestrial Repeater Equipment by and
            between XM Satellite Radio Inc. and Hughes Electronics Corporation, dated February 14, 2000
            (incorporated by reference to Holdings' Annual Report on Form 10-K for the fiscal year
            ended December 31, 1999, filed with the SEC on March 16, 2000).

10.29*      Joint Development Agreement, dated February 16, 2000, between XM Satellite Radio Inc. and Sirius
            Satellite Radio Inc. (incorporated by reference to the Holdings' quarterly report on Form 10-Q for the
            quarter ended March 31, 2000, filed with the SEC on May 12, 2000).

10.30       XM Satellite Radio Holdings Inc. Talent Option Plan (incorporated by reference to Holdings' Registration
            Statement on Form S-8, File No. 333-65022).

10.31       Employment Agreement, dated as of June 1, 2001, between XM Satellite Radio Holdings Inc. and Hugh Panero.

10.32       Form of Employment Agreement, dated as of July 1, 2001, between XM Satellite Radio Holdings Inc. and
            Gary Parsons.

</TABLE>

----------------
^    Incorporated by reference to Holdings' Registration Statement on Form S-1,
     File No. 333-83619.
*    Pursuant to the Commission's Orders Granting Confidential Treatment under
     Rule 406 of the Securities Act of 1933 or Rule 24(b)-2 under the
     Securities Exchange Act of 1934, certain confidential portions of this
     Exhibit were omitted by means of redacting a portion of the text.


(b)     Reports on Form 8-K:

        None.




                                       29

<PAGE>



                                   SIGNATURES

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


                              XM SATELLITE RADIO HOLDINGS INC.
                                     (Registrant)

     August 13, 2001          By: /s/ Heinz Stubblefield
                              -----------------------------------
                               Heinz Stubblefield
                              Senior Vice President and Chief Financial Officer
                              (principal financial and accounting officer)



                              XM SATELLITE RADIO INC.
                                     (Registrant)

     August 13, 2001          By: /s/ Heinz Stubblefield
                              -----------------------------------
                               Heinz Stubblefield
                              Senior Vice President and Chief Financial Officer
                              (principal financial and accounting officer)





                                       30