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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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

THE SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period Ended September 30, 2007

Commission file number 000-51466



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WORLDSPACE, INC.

(Exact name of registrant as specified in its charter)



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

8515 Georgia Avenue, Silver Spring, MD 20910

(Address of principal executive offices) (Zip code)

301-960-1200

(Registrants telephone number, including area code)

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

Class A Common Stock, par value $0.01 per share



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

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



|                         |  |                    |  |                         
|------------------------ |  | ------------------ |  | ------------------------
|Large accelerated filer ̈ |  | Accelerated filer ̈ |  | Non-accelerated filer  x

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

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



|                                      |  |                                     
|------------------------------------- |  | ------------------------------------
|(Class)                               |  | (Outstanding as of November
9, 2007)
|CLASS A COMMON STOCK, $0.01 PAR VALUE |  | 42,473,129                          



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##### Table of Contents

WORLDSPACE, INC. AND SUBSIDIARIES

INDEX



|                             |  |                                                                                                                                                |  |   
|---------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------- |  | --
|                             |  | Page                                                                                                                                          
|PART IFINANCIAL INFORMATION |  |                                                                                                                                               
|                             |  |                                                                                                                                               
|Item 1.                      |  | Financial Statements (Unaudited)                                                                                                               |  |   
|                             |  |                                                                                                                                               
|                             |  | Condensed Consolidated Statements of Operations for the three and nine-month periods ended September 30, 2007 and 2006                         |  | 3 
|                             |  |                                                                                                                                               
|                             |  | Condensed Consolidated Balance Sheets as of September 30, 2007 and December 31, 2006                                                           |  | 4 
|                             |  |                                                                                                                                               
|                             |  | Condensed Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2007 and 2006                                   |  | 5 
|                             |  |                                                                                                                                               
|                             |  | Condensed Consolidated Statement of Changes in Shareholders Deficit and Comprehensive Loss for the nine-month period ended September 30, 2007 |  | 6 
|                             |  |                                                                                                                                               
|                             |  | Notes to Condensed Consolidated Financial Statements                                                                                           |  | 7 
|                             |  |                                                                                                                                               
|Item 2.                      |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                          |  | 18
|                             |  |                                                                                                                                               
|Item 3.                      |  | Quantitative and Qualitative Disclosures About Market Risk                                                                                     |  | 30
|                             |  |                                                                                                                                               
|Item 4.                      |  | Controls and Procedures                                                                                                                        |  | 30
|                             | 
|PART IIOTHER INFORMATION    |  |                                                                                                                                               
|                             |  |                                                                                                                                               
|Item 1.                      |  | Legal Proceedings                                                                                                                              |  | 32
|                             |  |                                                                                                                                               
|Item 1A.                     |  | Risk Factors                                                                                                                                   |  | 32
|                             |  |                                                                                                                                               
|Item 2.                      |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                                    |  | 32
|                             |  |                                                                                                                                               
|Item 3.                      |  | Defaults upon Senior Securities                                                                                                                |  | 32
|                             |  |                                                                                                                                               
|Item 4.                      |  | Submission of Matters to a Vote of Security Holders                                                                                            |  | 32
|                             |  |                                                                                                                                               
|Item 5.                      |  | Other Information                                                                                                                              |  | 33
|                             |  |                                                                                                                                               
|Item 6.                      |  | Exhibits                                                                                                                                       |  | 33

EXPLANATORY NOTE

This quarterly report is filed by WorldSpace, Inc. (the Company). Unless the context requires otherwise, the terms we,
our and us refer to the Company and its subsidiaries.

This quarterly report and all other reports and amendments
filed by us with the SEC can be accessed, free of charge, through our website at http://investor.worldspace.com on the same day that they are electronically filed with the SEC.



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##### Table of Contents

PART I. FINANCIAL INFORMATION

Item 1: Financial Statements

WORLDSPACE, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three-Months and Nine-Months ended September 30, 2007 and 2006



|                                                                |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|--------------------------------------------------------------- |  | ----------------------------------------------- | ---------- | - | ------------------------------ | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                                |  | Three months endedSeptember 30,                 |            |   | Nine months endedSeptember 30, |  
|                                                                |  | 2007                                            |            |   | 2006                           |   |            | 2007 |  |   | 2006       |  
|                                                                |  | (in thousands, except share and per share data) |           
|Revenue                                                         |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Subscription revenue                                            |  | $                                               | 1,870      |   |                                | $ | 1,810      |      |  | $ | 5,575      |   |  | $ | 5,340      |  
|Equipment revenue                                               |  |                                                 | 581        |   |                                |   | 659        |      |  |   | 1,595      |   |  |   | 2,433      |  
|Other revenue                                                   |  |                                                 | 879        |   |                                |   | 874        |      |  |   | 2,814      |   |  |   | 2,810      |  
|                                                                |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Total Revenue                                                   |  |                                                 | 3,330      |   |                                |   | 3,343      |      |  |   | 9,984      |   |  |   | 10,583     |  
|                                                                |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|                                                                |  |                                                 |            |  
|Operating Expenses                                              |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Cost of Services (excludes depreciation shown separately below) |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Satellite and transmission, programming and other               |  |                                                 | 7,862      |   |                                |   | 7,503      |      |  |   | 23,497     |   |  |   | 21,657     |  
|Cost of equipment                                               |  |                                                 | 865        |   |                                |   | 2,674      |      |  |   | 3,571      |   |  |   | 8,144      |  
|Research and development                                        |  |                                                 | 541        |   |                                |   | 265        |      |  |   | 2,066      |   |  |   | 756        |  
|Selling and marketing                                           |  |                                                 | 2,611      |   |                                |   | 5,403      |      |  |   | 8,596      |   |  |   | 17,199     |  
|General and administrative                                      |  |                                                 | 11,786     |   |                                |   | 14,312     |      |  |   | 41,885     |   |  |   | 48,860     |  
|Depreciation and amortization                                   |  |                                                 | 14,887     |   |                                |   | 14,602     |      |  |   | 44,289     |   |  |   | 44,056     |  
|                                                                |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Total Operating Expenses                                        |  |                                                 | 38,552     |   |                                |   | 44,759     |      |  |   | 123,904    |   |  |   | 140,672    |  
|                                                                |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Loss from Operations                                            |  |                                                 | (35,222    | ) |                                |   | (41,416    | )    |  |   | (113,920   | ) |  |   | (130,089   | )
|                                                                |  |                                                 |            |  
|Other Income (Expense)                                          |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Interest income                                                 |  |                                                 | 785        |   |                                |   | 2,714      |      |  |   | 4,858      |   |  |   | 8,754      |  
|Interest expense                                                |  |                                                 | (2,987     | ) |                                |   | (1,991     | )    |  |   | (7,748     | ) |  |   | (5,857     | )
|Write-off of deferred debt issuance costs                       |  |                                                 |           |   |                                |   |           |      |  |   | (11,516    | ) |  |   |           |  
|Deferred financing costs and warrants amortization              |  |                                                 | (891       | ) |                                |   | (380       | )    |  |   | (1,820     | ) |  |   | (1,139     | )
|Other                                                           |  |                                                 | 52         |   |                                |   | (327       | )    |  |   | (349       | ) |  |   | (3,141     | )
|                                                                |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Total Other Income (Expense)                                    |  |                                                 | (3,041     | ) |                                |   | 16         |      |  |   | (16,575    | ) |  |   | (1,383     | )
|                                                                |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Loss Before Income Taxes                                        |  |                                                 | (38,263    | ) |                                |   | (41,400    | )    |  |   | (130,495   | ) |  |   | (131,472   | )
|Income Tax Benefit                                              |  |                                                 | 1,569      |   |                                |   | 12,468     |      |  |   | 7,023      |   |  |   | 36,686     |  
|                                                                |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Net Loss                                                        |  | $                                               | (36,694    | ) |                                | $ | (28,932    | )    |  | $ | (123,472   | ) |  | $ | (94,786    | )
|                                                                |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Loss per sharebasic and diluted                                |  | $                                               | (0.91      | ) |                                | $ | (0.77      | )    |  | $ | (3.12      | ) |  | $ | (2.54      | )
|                                                                |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Weighted Average Number of Shares Outstanding                   |  |                                                 | 40,459,200 |   |                                |   | 37,584,541 |      |  |   | 39,627,833 |   |  |   | 37,253,549 |  
|                                                                |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  

See accompanying notes to unaudited condensed consolidated financial statements.



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WORLDSPACE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, 2007 and December 31, 2006



|                                                                                                                                                                                                 |  |                                         |            |   |                   |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------------------------------- | ---------- | - | ----------------- | - | ---------- | -
|                                                                                                                                                                                                 |  | September 30, 2007                      |            |   | December 31, 2006 |  
|                                                                                                                                                                                                 |  | Unaudited                               |            |   |                   |  
|                                                                                                                                                                                                 |  | (in thousands, exceptshare information) |           
|Assets                                                                                                                                                                                           |  |                                         |            |   |                   |   |            |  
|Current Assets                                                                                                                                                                                   |  |                                         |            |   |                   |   |            |  
|Cash and cash equivalents                                                                                                                                                                        |  | $                                       | 13,200     |   |                   | $ | 27,565     |  
|Marketable securities                                                                                                                                                                            |  |                                         | 10,479     |   |                   |   | 137,894    |  
|Accounts receivable, net of $1,585 and $1,302 allowance for doubtful accounts                                                                                                                    |  |                                         | 1,997      |   |                   |   | 2,693      |  
|Prepaid expenses                                                                                                                                                                                 |  |                                         | 5,699      |   |                   |   | 8,693      |  
|Inventory, net                                                                                                                                                                                   |  |                                         | 5,584      |   |                   |   | 3,936      |  
|Other current assets                                                                                                                                                                             |  |                                         | 4,173      |   |                   |   | 2,548      |  
|                                                                                                                                                                                                 |  |                                         |            |   |                   |   |            |  
|Total Current Assets                                                                                                                                                                             |  |                                         | 41,132     |   |                   |   | 183,329    |  
|                                                                                                                                                                                                 |  |                                        
|Restricted Cash and Investments                                                                                                                                                                  |  |                                         | 4,817      |   |                   |   | 5,869      |  
|Property and Equipment, net                                                                                                                                                                      |  |                                         | 16,419     |   |                   |   | 17,745     |  
|Satellites and Related Systems, net                                                                                                                                                              |  |                                         | 309,576    |   |                   |   | 345,046    |  
|Deferred Financing Costs, net                                                                                                                                                                    |  |                                         |           |   |                   |   | 12,149     |  
|Deferred Tax Assets                                                                                                                                                                              |  |                                         | 3,588      |   |                   |   | 3,599      |  
|Other Assets                                                                                                                                                                                     |  |                                         | 555        |   |                   |   | 908        |  
|                                                                                                                                                                                                 |  |                                         |            |   |                   |   |            |  
|Total Assets                                                                                                                                                                                     |  | $                                       | 376,087    |   |                   | $ | 568,645    |  
|                                                                                                                                                                                                 |  |                                         |            |   |                   |   |            |  
|Current Liabilities                                                                                                                                                                              |  |                                         |            |   |                   |   |            |  
|Current Portion of Long Term Debt                                                                                                                                                                |  | $                                       | 27,500     |   |                   | $ |           |  
|Accounts payable                                                                                                                                                                                 |  |                                         | 15,982     |   |                   |   | 16,270     |  
|Accrued expenses                                                                                                                                                                                 |  |                                         | 16,540     |   |                   |   | 19,669     |  
|Income taxes payable                                                                                                                                                                             |  |                                         | 2,223      |   |                   |   | 17,784     |  
|Accrued purchase commitment                                                                                                                                                                      |  |                                         | 18,242     |   |                   |   | 18,242     |  
|Accrued interest                                                                                                                                                                                 |  |                                         | 849        |   |                   |   | 1,962      |  
|Deferred tax liability                                                                                                                                                                           |  |                                         | 1,774      |   |                   |   | 2,109      |  
|                                                                                                                                                                                                 |  |                                         |            |   |                   |   |            |  
|Total Current Liabilities                                                                                                                                                                        |  |                                         | 83,110     |   |                   |   | 76,036     |  
|                                                                                                                                                                                                 |  |                                        
|Long-term Debt                                                                                                                                                                                   |  |                                         | 69,142     |   |                   |   | 155,368    |  
|Deferred Tax Liability                                                                                                                                                                           |  |                                         | 117,976    |   |                   |   | 122,227    |  
|Other Liabilities                                                                                                                                                                                |  |                                         | 4,666      |   |                   |   | 4,194      |  
|Contingent Royalty Obligation                                                                                                                                                                    |  |                                         | 1,814,175  |   |                   |   | 1,814,175  |  
|                                                                                                                                                                                                 |  |                                         |            |   |                   |   |            |  
|Total Liabilities                                                                                                                                                                                |  |                                         | 2,089,069  |   |                   |   | 2,172,000  |  
|                                                                                                                                                                                                 |  |                                         |            |   |                   |   |            |  
|Commitments and Contingencies                                                                                                                                                                    |  |                                         |           |   |                   |   |           |  
|Minority Interest                                                                                                                                                                                |  |                                         | 798        |   |                   |   | 304        |  
|Shareholders Deficit                                                                                                                                                                            |  |                                         |            |   |                   |   |            |  
|Preferred Stock, $.01 par value; 25,000,000 shares authorized; no shares issued and outstanding as of September 30, 2007 and
December 31, 2006                                                   |  |                                         |           |   |                   |   |           |  
|Class A Common stock, $.01 par value; 200,000,000 shares authorized; 40,887,785 shares and 38,305,839 shares issued and outstanding as of
September 30, 2007 and December 31, 2006, respectively |  |                                         | 408        |   |                   |   | 383        |  
|Additional paid-in capital                                                                                                                                                                       |  |                                         | 731,868    |   |                   |   | 716,250    |  
|Accumulated other comprehensive loss                                                                                                                                                             |  |                                         | 2,234      |   |                   |   | 1,620      |  
|Accumulated deficit                                                                                                                                                                              |  |                                         | (2,448,290 | ) |                   |   | (2,321,912 | )
|                                                                                                                                                                                                 |  |                                         |            |   |                   |   |            |  
|Total Shareholders Deficit                                                                                                                                                                      |  |                                         | (1,713,780 | ) |                   |   | (1,603,659 | )
|                                                                                                                                                                                                 |  |                                         |            |   |                   |   |            |  
|Total Liabilities and Shareholders Deficit                                                                                                                                                      |  | $                                       | 376,087    |   |                   | $ | 568,645    |  
|                                                                                                                                                                                                 |  |                                         |            |   |                   |   |            |  

See accompanying notes to unaudited condensed consolidated financial statements.



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WORLDSPACE, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months ended September 30, 2007 and 2006



|                                                                            |  |                                |          |   |      |   |          |  
|--------------------------------------------------------------------------- |  | ------------------------------ | -------- | - | ---- | - | -------- | -
|                                                                            |  | Nine months endedSeptember 30, |         
|                                                                            |  | 2007                           |          |   | 2006 |  
|                                                                            |  | (in thousands)                 |         
|Cash Flows from Operating Activities                                        |  |                                |          |   |      |   |          |  
|Net loss                                                                    |  | $                              | (123,472 | ) |      | $ | (94,786  | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                                |          |   |      |   |          |  
|Depreciation and amortization                                               |  |                                | 44,289   |   |      |   | 44,056   |  
|Write-off of deferred finance costs                                         |  |                                | 11,516   |   |      |   |         |  
|Amortization of deferred financing costs and warrants                       |  |                                | 1,820    |   |      |   | 1,139    |  
|Loss on disposal of assets                                                  |  |                                | 208      |   |      |   | 1,693    |  
|Stock-based compensation                                                    |  |                                | 3,444    |   |      |   | 9,386    |  
|Allowance for doubtful accounts                                             |  |                                | (285     | ) |      |   |         |  
|Deferred tax benefit                                                        |  |                                | (7,023   | ) |      |   | (36,686  | )
|Other                                                                       |  |                                | (257     | ) |      |   | 58       |  
|Changes in assets and liabilities:                                          |  |                                |          |   |      |   |          |  
|Accounts receivable and other assets                                        |  |                                | 699      |   |      |   | (1,763   | )
|Accounts payable and accrued expenses                                       |  |                                | (3,418   | ) |      |   | (3,369   | )
|Accrued interest                                                            |  |                                | (1,113   | ) |      |   | 5        |  
|Income taxes payable                                                        |  |                                | (15,561  | ) |      |   |         |  
|Other liabilities                                                           |  |                                | 497      |   |      |   | 1,616    |  
|                                                                            |  |                                |          |   |      |   |          |  
|Net Cash Used in Operating Activities                                       |  |                                | (88,656  | ) |      |   | (78,651  | )
|                                                                            |  |                                |          |   |      |   |          |  
|Cash Flows from Investing Activities                                        |  |                                |          |   |      |   |          |  
|Purchase of property and equipment                                          |  |                                | (1,748   | ) |      |   | (5,675   | )
|Purchase of marketable securities                                           |  |                                | (188,447 | ) |      |   | (358,987 | )
|Maturities of marketable securities                                         |  |                                | 315,862  |   |      |   | 441,744  |  
|Purchase of satellite and related systems                                   |  |                                | (4,583   | ) |      |   | (2,744   | )
|Decrease (Increase) in restricted cash, net                                 |  |                                | 1,052    |   |      |   | (1,972   | )
|                                                                            |  |                                |          |   |      |   |          |  
|Net Cash Provided by Investing Activities                                   |  |                                | 122,136  |   |      |   | 72,366   |  
|                                                                            |  |                                |          |   |      |   |          |  
|Cash Flows from Financing Activities                                        |  |                                |          |   |      |   |          |  
|Redemption of Convertible Debt                                              |  |                                | (50,000  | ) |      |   |         |  
|Proceeds from exercise of employee stock options                            |  |                                | 2,995    |   |      |   | 2,206    |  
|Proceeds from exercise of warrants                                          |  |                                | 705      |   |      |   |         |  
|Proceeds from the issuance of notes payable                                 |  |                                |         |   |      |   | 400      |  
|Payment of withholding taxes on restricted stock vesting, net               |  |                                | (1,465   | ) |      |   |         |  
|Minority interest                                                           |  |                                | 494      |   |      |   | 420      |  
|                                                                            |  |                                |          |   |      |   |          |  
|Net Cash Provided (Used in) by Financing Activities                         |  |                                | (47,271  | ) |      |   | 3,026    |  
|                                                                            |  |                                |          |   |      |   |          |  
|Net Decrease in Cash and Cash Equivalents                                   |  |                                | (13,791  | ) |      |   | (3,259   | )
|Net effect of Foreign Currency rate changes                                 |  |                                | (574     | ) |      |   |          |  
|Cash and Cash Equivalents, beginning of period                              |  |                                | 27,565   |   |      |   | 36,925   |  
|                                                                            |  |                                |          |   |      |   |          |  
|Cash and Cash Equivalents, end of period                                    |  | $                              | 13,200   |   |      | $ | 33,666   |  
|                                                                            |  |                                |          |   |      |   |          |  
|Supplemental Disclosure of Cash Flow Information                            |  |                                |          |   |      |   |          |  
|Cash paid for income taxes                                                  |  | $                              | 16,260   |   |      | $ | 1,127    |  
|Cash paid for interest                                                      |  | $                              | 6,820    |   |      | $ | 5,796    |  
|Long-term debt converted to equity                                          |  | $                              | 2,953    |   |      | $ |         |  
|Issuance of warrants                                                        |  | $                              | 7,011    |   |      | $ |         |  

See accompanying notes to unaudited condensed consolidated financial statements.



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WORLDSPACE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS DEFICIT
AND COMPREHENSIVE LOSS

Nine months ended September 30, 2007

(in thousands, except share information)



|                                                                   |  |                     |  |        |     |                          |   |         |                                            |  |   |                    |   |  |       |            |   |                   |   |            |   |  |   |         |  
|------------------------------------------------------------------ |  | ------------------- |  | ------ | --- | ------------------------ | - | ------- | ------------------------------------------ |  | - | ------------------ | - |  | ----- | ---------- | - | ----------------- | - | ---------- | - |  | - | ------- | -
|                                                                   |  | Class A CommonStock |  |        |     |                          |   |         |                                            |  |   |                    |   |  |       |            |  
|                                                                   |  | Shares              |  | Amount |     | AdditionalPaid-inCapital |   |         | AccumulatedOtherComprehensiveIncome (Loss) |  |   | AccumulatedDeficit |   |  | Total |            |   | ComprehensiveLoss |  
|Balance, Dec 31, 2006                                              |  | 38,305,839          |  | $      | 383 |                          | $ | 716,250 |                                            |  | $ | 1,620              |   |  | $     | (2,321,912 | ) |                   | $ | (1,603,659 | ) |  |   |         |  
|Employee stock option exercises                                    |  | 162,772             |  |        | 2   |                          |   | 290     |                                            |  |   |                   |   |  |       |           |   |                   |   | 292        |   |  |   |         |  
|Warrant exercises                                                  |  | 238,329             |  |        | 2   |                          |   | 705     |                                            |  |   |                   |   |  |       |           |   |                   |   | 707        |   |  |   |         |  
|Employee stock-based compensation                                  |  |                    |  |        |    |                          |   | 1,026   |                                            |  |   |                   |   |  |       |           |   |                   |   | 1,026      |   |  |   |         |  
|Foreign currency translation adjustment                            |  |                    |  |        |    |                          |   |         |                                            |  |   | (15                | ) |  |       |           |   |                   |   | (15        | ) |  |   | (15     | )
|Employee restricted stock vesting, net of withholding tax payments |  | 517,932             |  |        | 5   |                          |   | (1,465  | )                                          |  |   |                   |   |  |       |           |   |                   |   | (1,460     | ) |  |   |         |  
|FIN 48 transition amount                                           |  |                    |  |        |    |                          |   |        |                                            |  |   |                   |   |  |       | (2,904     | ) |                   |   | (2,904     | ) |  |   |         |  
|Net loss                                                           |  |                    |  |        |    |                          |   |        |                                            |  |   |                   |   |  |       | (35,534    | ) |                   |   | (35,534    | ) |  |   | (35,534 | )
|                                                                   |  |                     |  |        |     |                          |   |         |                                            |  |   |                    |   |  |       |            |   |                   |   |            |   |  |   |         |  
|Comprehensive Loss                                                 |  |                     |  |        |     |                          |   |         |                                            |  |   |                    |   |  |       |            |   |                   |   |            |   |  | $ | (35,549 | )
|                                                                   |  |                     |  |        |     |                          |   |         |                                            |  |   |                    |   |  |       |            |   |                   |   |            |   |  |   |         |  
|Balance, March 31, 2007                                            |  | 39,224,872          |  | $      | 392 |                          | $ | 716,806 |                                            |  | $ | 1,605              |   |  | $     | (2,360,350 | ) |                   | $ | (1,641,547 | ) |  |   |         |  
|                                                                   |  |                     |  |        |     |                          |   |         |                                            |  |   |                    |   |  |       |            |   |                   |   |            |   |  |   |         |  
|Employee stock option exercises                                    |  | 260,600             |  |        | 2   |                          |   | 790     |                                            |  |   |                   |   |  |       |           |   |                   |   | 792        |   |  |   |         |  
|Employee stock-based compensation                                  |  |                    |  |        |    |                          |   | 1,048   |                                            |  |   |                   |   |  |       |           |   |                   |   | 1,048      |   |  |   |         |  
|Foreign currency translation adjustment                            |  |                    |  |        |    |                          |   |        |                                            |  |   | 210                |   |  |       |           |   |                   |   | 210        |   |  |   | 210     |  
|Value of Warrants attached to debt                                 |  |                     |  |        |     |                          |   | 7,011   |                                            |  |   |                    |   |  |       |            |   |                   |   | 7,011      |   |  |   |         |  
|Conversion of convertible debt                                     |  | 70,975              |  |        | 1   |                          |   | 301     |                                            |  |   |                    |   |  |       |            |   |                   |   | 302        |   |  |   |         |  
|Net loss                                                           |  |                    |  |        |    |                          |   |        |                                            |  |   |                   |   |  |       | (51,246    | ) |                   |   | (51,246    | ) |  |   | (51,246 | )
|                                                                   |  |                     |  |        |     |                          |   |         |                                            |  |   |                    |   |  |       |            |   |                   |   |            |   |  |   |         |  
|Comprehensive Loss                                                 |  |                     |  |        |    |                          |   |         |                                            |  |   |                    |   |  |       |            |   |                   |   |            |   |  | $ | (51,036 | )
|                                                                   |  |                     |  |        |     |                          |   |         |                                            |  |   |                    |   |  |       |            |   |                   |   |            |   |  |   |         |  
|Balance, June 30, 2007                                             |  | 39,556,447          |  |        | 395 |                          |   | 725,956 |                                            |  |   | 1,815              |   |  |       | (2,411,596 | ) |                   |   | (1,683,430 | ) |  |   |         |  
|                                                                   |  |                     |  |        |     |                          |   |         |                                            |  |   |                    |   |  |       |            |   |                   |   |            |   |  |   |         |  
|Employee stock option exercises                                    |  | 598,420             |  |        | 6   |                          |   | 1,897   |                                            |  |   |                   |   |  |       |           |   |                   |   | 1,903      |   |  |   |         |  
|Employee stock-based compensation                                  |  |                    |  |        |    |                          |   | 1,370   |                                            |  |   |                   |   |  |       |           |   |                   |   | 1,370      |   |  |   |         |  
|Foreign currency translation adjustment                            |  |                    |  |        |    |                          |   |        |                                            |  |   | 419                |   |  |       |           |   |                   |   | 419        |   |  |   | 419     |  
|Employee Restricted Stock Vesting                                  |  | 109,006             |  |        | 1   |                          |   |         |                                            |  |   |                    |   |  |       |            |   |                   |   | 1          |   |  |   |         |  
|Conversion of convertible debt                                     |  | 623,912             |  |        | 6   |                          |   | 2,645   |                                            |  |   |                    |   |  |       |            |   |                   |   | 2,651      |   |  |   |         |  
|Net loss                                                           |  |                    |  |        |    |                          |   |        |                                            |  |   |                   |   |  |       | (36,694    | ) |                   |   | (36,694    | ) |  |   | (36,694 | )
|                                                                   |  |                     |  |        |     |                          |   |         |                                            |  |   |                    |   |  |       |            |   |                   |   |            |   |  |   |         |  
|Comprehensive Loss                                                 |  |                     |  |        |    |                          |   |         |                                            |  |   |                    |   |  |       |            |   |                   |   |            |   |  | $ | (36,275 | )
|                                                                   |  |                     |  |        |     |                          |   |         |                                            |  |   |                    |   |  |       |            |   |                   |   |            |   |  |   |         |  
|Balance, September 30, 2007                                        |  | 40,887,785          |  | $      | 408 |                          | $ | 731,868 |                                            |  | $ | 2,234              |   |  | $     | (2,448,290 | ) |                   | $ | (1,713,780 | ) |  |   |         |  
|                                                                   |  |                     |  |        |     |                          |   |         |                                            |  |   |                    |   |  |       |            |   |                   |   |            |   |  |   |         |  

See accompanying notes to unaudited condensed consolidated financial statements.



6



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##### Table of Contents

WORLDSPACE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(A) Organization

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

(B) Liquidity

The Company has
incurred an accumulated deficit of approximately $2.4 billion through September 30, 2007 and expects to continue incurring losses for the foreseeable future. As such, the Company must raise substantial additional capital during the remaining
part of 2007 in order to continue to pursue its business plan.

The Company currently anticipates that its cash, cash equivalents, and
restricted cash balances, together with revenues it expects to generate and interest it expects to earn on invested funds will be sufficient to meet its anticipated cash requirements through the end of 2007.

Management believes that the Company has access to capital resources through possible public or private equity offerings or debt financings and the
Company is currently in discussions to raise additional funds. However, it has not secured any commitment for new financing at this time nor can it provide any assurance that new financing will be available on commercially acceptable terms, if at
all. If the Company is unable to secure additional capital, it will be required to curtail its operations and if these measures fail, it may not be able to continue its business. Curtailment of operations would cause significant delays in the
Companys efforts to introduce its products to market which is critical to the realization of its business plan and the future operations of the Company.

(C) Principles of Consolidation, Significant Accounting Policies and Basis of Presentation

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

The balance sheet and operating results of our foreign operations are consolidated using the local currencies of the countries in which they are located as the functional currency. The balance sheet accounts are
translated at exchange rates in effect at the end of the period, and income statement accounts are translated at average exchange rates during the period. The resulting translation gains and losses are included as a separate component of
stockholders equity. Foreign currency transaction gains and losses are included in our income statement in the period in which they occur.

In the Companys opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring entries, necessary for a fair presentation of the consolidated financial
position of WorldSpace, Inc. and its subsidiaries as of September 30, 2007; the results of operations, and changes in shareholders deficit for the three and nine-months ended September 30, 2007 and 2006, and cash flows for the
nine-months ended September 30, 2007 and 2006. Certain reclassifications have been made to the 2006 financial statements to conform to the 2007 presentation.



7



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##### Table of Contents

WORLDSPACE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



These financial statements have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted
pursuant to such rules and regulations. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Companys annual report on Form 10-K.

Revenue Recognition

Revenue from the
Companys principal activities, subscription audio services and capacity leasing, is recognized as the services are provided. Revenue from subscribers, which is generally billed in advance, consists of fixed charges for service, which are
recognized as the service is provided, and non-refundable activation fees are recognized ratably over the estimated term of the subscriber relationship. Direct activation costs are expensed as incurred. Advertising revenue is recognized in the
period in which the spot announcement is broadcast.

Revenue from the sale of satellite radio receivers is recognized when the product is
shipped. Promotions and discounts are treated as an offset to revenue during the period of promotion. Sales incentives, consisting of discounts to subscribers, offset earned revenue. The Companys current policy is not to accept product returns
but if, in the future, the Company were to accept product returns that are not covered under the manufacturers warranty, a sales return allowance will be established based on the guidance provided under Statement of Financial Accounting Standards
(SFAS) No. 48. Revenue Recognition When a Right of Return Exists and Staff Accounting Bulletin, Topic 13A-4b.

Marketable
Securities

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

Cash and Cash Equivalents

All liquid investments, defined as having initial maturities of three months or less, have been classified as cash equivalents. Cash equivalents, as of September 30, 2007 and December 31, 2006, consisted primarily of demand
deposits and money market instruments. Cash balances in individual banks exceed insurable amounts. At September 30, 2007, the Company had $6.2 million of cash in foreign bank accounts.

Restricted Cash and Investments

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

Inventories

Inventories are stated at the
lower of cost or market value using the first in, first out (FIFO) method of accounting. Inventories primarily consist of satellite radio receivers manufactured to the Companys specifications by independent third parties. Provisions have been
recognized to reduce excess or obsolete inventories to their estimated net realizable value. The Company periodically evaluates inventory levels on hand



8



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##### Table of Contents

WORLDSPACE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



as to potential obsolescence based on current and future selling prices and anticipated future sales. At September 30, 2007 and December 31, 2006,
the Company has recorded a reserve for inventory obsolescence of $4.0 million and $3.5 million respectively.

(D) Stock-Based Compensation

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

The Company has a stock-based employee compensation plan which is described below. The compensation cost charged against income under the plan was $1.4
million and $3.4 million for the three and nine-month periods ending September 30, 2007 and $2.2 million and $9.4 million for the three and nine-month periods ending September 30, 2006, respectively. In accordance with SFAS No. 123R,
the Company will not recognize a deferred tax asset with respect to excess stock compensation deductions until those deductions actually reduce our tax liabilities. The total income tax benefit recognized in the income statement for share-based
compensation arrangements was $0 for the three and nine-month periods ending September 30, 2007 and 2006.

2005 Incentive Award
Plan

On July 7, 2005, the Companys shareholders approved the 2005 Incentive Award Plan (the Plan). The Plan provides for
the grant of up to 5,625,000 shares of our Class A Common Stock for stock based awards to employees, consultants and directors of the Company and its subsidiaries and affiliates. On May 25, 2007, the Companys shareholders approved an
increase in the number of shares of Class A Common Stock available for grant under the Plan to 12,625,000 shares. The Company has granted employees restricted stock awards, stock options and stock appreciation rights under this plan. The stock
award program offers employees the opportunity to earn shares of our stock over time, rather than options that give employees the right to buy stock at a pre-determined price. Option awards are generally granted with an exercise price of the
Companys stock at the date of grant; those option awards generally vest based on 3 years of continuous service and have 10-year contractual terms.

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



|                            |  |          
|--------------------------- |  | ---------
|                            |  | 2007     
|Expected volatility         |  | 72% -100%
|Weighted-average volatility |  | 85%      
|Expected dividends          |  | 0%       
|Risk-free rate              |  | 4.6%     
|Expected term               |  | 6.0 years



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##### Table of Contents

WORLDSPACE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Stock Appreciation Rights (SARS)

On April 9, 2007, the Company granted 2,639,200 units of stock appreciation rights (SARS) to employees, consultants and directors of the
Company under the Plan. For the nine months ended September 30, 2007, of the $3.4 million stock based compensation recorded in income statement, $1.0 million was for the SARS. These SARS vest equally over a period of three years from the grant
date and have a weighted-average grant date fair value per unit of $2.49. The summary of option activity below includes details of SARS discussed herein. The SARS can only be net-share settled.

Summary of option activity:

Summary
of the status of the Companys stock option awards, inclusive of awards granted and fully vested prior to the Plan and SARS as of January 1, 2007 and changes during the nine-month period ending September 30, 2007 is presented below:



|                                  |  |                   |   |  |                                 |      |                                             |            |                          |   |            |  
|--------------------------------- |  | ----------------- | - |  | ------------------------------- | ---- | ------------------------------------------- | ---------- | ------------------------ | - | ---------- | -
|                                  |  | Number of options |   |  | Weighted average exercise price |      | Weighted average contractual life remaining |            | Aggregate intrinsicvalue |  
|Non-qualified stock options:      |  |                   |   |  |                                 |      |                                             |            |                          |   |            |  
|Outstanding as of January 1, 2007 |  | 17,243,831        |   |  | $                               | 5.86 |                                             |            |                          | $ | 2,519,516  |  
|Granted                           |  | 2,764,200         |   |  | $                               | 4.79 |                                             |            |                          | $ | 2,302,460  |  
|Exercised                         |  | (1,021,792        | ) |  | $                               | 4.47 |                                             |            |                          | $ | (1,650,113 | )
|Forfeited or expired              |  | (886,420          | ) |  | $                               | 4.51 |                                             |            |                          | $ | (556,440   | )
|Outstanding at September 30, 2007 |  | 18,099,819        |   |  | $                               | 5.99 |                                             | 4.21Years  |                          | $ | 3,622,644  |  
|Exercisable at September 30, 2007 |  | 14,528,611        |   |  | $                               | 6.80 |                                             | 2.96 Years |                          | $ | 2,874,531  |  

Cash received from the exercise of stock options under all share-based payment arrangements for
the three-month period ending September 30, 2007 and 2006 was $2.3 million and $0, respectively. The actual tax benefit realized for the tax deductions from option exercise of the share-based arrangements totaled $0 for the nine months ending
September 30, 2007 and 2006. Cash received from the exercise of stock options under all share-based payment arrangements for the nine month period ending September 30, 2007 and 2006 was $3.0 million and $2.2 million, respectively.

Summary of the status of the Companys nonvested restricted share awards and SARS as of January 1, 2007 and changes during the
nine-month period ending September 30, 2007 is presented below:



|                                |  |           |   |  |                                 |             |   |                                        |   |      
|------------------------------- |  | --------- | - |  | ------------------------------- | ----------- | - | -------------------------------------- | - | -----
|                                |  | Shares    |   |  | Aggregate Grant Date Fair
Value |             |   | Weighted average grant date fair value
|Nonvested restricted shares:    |  |           |   |  |                                 |             |   |                                        |   |      
|Nonvested at January 1, 2007    |  | 1,600,735 |   |  | $                               | 27,330,990  |   |                                        | $ | 17.07
|Granted                         |  | 57,681    |   |  | $                               | 204,767     |   |                                        | $ | 3.55 
|Vested                          |  | (664,050  | ) |  | $                               | (13,830,546 | ) |                                        | $ | 20.83
|Forfeited/Cancelled             |  | (462,565  | ) |  | $                               | (9,580,759  | ) |                                        | $ | 20.71
|                                |  |           |   |  |                                 |             |   |                                        |   |      
|Nonvested at September 30, 2007 |  | 531,801   |   |  | $                               | 4,124,452   |   |                                        | $ | 7.76 
|                                |  |           |   |  |                                 |             |   |                                        |   |      



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##### Table of Contents

WORLDSPACE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Summary of the status of the Companys nonvested stock options as of September 30, 2007 and
changes during the nine-month period ending September 30, 2007 is presented below:



|                                |  |           |   |  |                                 |            |   |                                        |   |     
|------------------------------- |  | --------- | - |  | ------------------------------- | ---------- | - | -------------------------------------- | - | ----
|                                |  | Shares    |   |  | Aggregate Grant Date Fair
Value |            |   | Weighted average grant date fair value
|Nonvested stock options:        |  |           |   |  |                                 |            |   |                                        |   |     
|Nonvested at January 1, 2007    |  | 970,098   |   |  | $                               | 4,802,364  |   |                                        | $ | 4.95
|Granted                         |  | 2,764,200 |   |  | $                               | 6,893,420  |   |                                        | $ | 2.49
|Vested                          |  | (71,962   | ) |  | $                               | (612,556   | ) |                                        | $ | 8.51
|Forfeited                       |  | (91,128   | ) |  | $                               | (640,018   | ) |                                        | $ | 7.02
|                                |  |           |   |  |                                 |            |   |                                        |   |     
|Nonvested at September 30, 2007 |  | 3,571,208 |   |  | $                               | 10,443,210 |   |                                        | $ | 2.92
|                                |  |           |   |  |                                 |            |   |                                        |   |     

As of September 30, 2007, there was $12.5 million of total unrecognized compensation related
to restricted stock awards, units and options granted under the Plan. That cost is expected to be recognized over a weighted-average period of 1.91 years.

Warrant issued to XM

On July 18, 2005, the Company issued to XM 1,562,500 shares of
Class A Common Stock for an aggregate purchase price of $25 million. In connection with this transaction, the Company entered into a global satellite radio cooperation agreement on receiver technology, terrestrial repeater technology, OEM and
third party distribution relationships, content opportunities and new applications and services. In connection with this transaction, the Company also granted to XM a performance-based warrant to purchase 1,785,714 shares of Class A Common
Stock. Half of the warrant shares will vest upon the Company obtaining an operational chipset developed with substantial support from XM under the cooperation agreement. The remaining warrant shares vest upon the Companys design for deployment
of a terrestrial repeater network utilizing and relying on XM software, XM know-how in utilizing the software of others or XM support personnel under the cooperation agreement. This warrant expires on July 17, 2008.

During the fiscal year ending December 31, 2006, the Company determined that due to technological differences in developing customized chip-set and
terrestrial repeater networks, the likelihood of warrants vesting to XM is not probable. As a result, the Company reversed in fiscal year December 31, 2006, the $625,000 of Research and Development expense recorded earlier.

(E) Debt

Long-Term Debt

Long Term Debt at September 30, 2007 and December 31, 2006 consisted of the following (in thousands):



|                                  |  |                   |         |   |                  |   |         |  
|--------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|                                  |  | September 30,2007 |         |   | December 31,2006 |  
|Senior Secured Notes              |  | $                 | 44,997  |   |                  | $ |        |  
|Convertible Notes                 |  |                   | 57,069  |   |                  |   | 155,000 |  
|Discount on Long-Term Debt        |  |                   | (5,824  | ) |                  |   | (32     | )
|Notes payable                     |  |                   | 400     |   |                  |   | 400     |  
|                                  |  |                   |         |   |                  |   |         |  
|                                  |  | $                 | 96,642  |   |                  | $ | 155,368 |  
|Current portion of Long Term Debt |  |                   | (27,500 | ) |                  |   |        |  
|                                  |  |                   |         |   |                  |   |         |  
|Long Term Debt                    |  | $                 | 69,142  |   |                  | $ | 155,368 |  
|                                  |  |                   |         |   |                  |   |         |  



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##### Table of Contents

WORLDSPACE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Convertible Promissory Notes Restructuring

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

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



| | (i) | Senior secured notes in the aggregate principal amount of $45 million, with a maturity of 3 years secured by a first priority lien on the Companys assets. The senior secured
notes accrue interest at the rate of London Inter Bank Offering Rate (LIBOR) plus 650 basis points per year and have a mandatory principal repayment of $27.5 million on the first anniversary of the closing date of the transaction. The
senior secured notes also require mandatory principal repayment out of the net proceeds of any debt or equity financing, certain excess cash flow, or sale of assets or casualty loss, subject to customary exceptions.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | Amended and restated secured convertible notes in the principal amount of $60 million, with a maturity of 3 years secured by a second priority lien on the Companys assets. The
amended and restated convertible notes have an interest rate of 8 percent per annum and are convertible, at the option of the note-holders, at a price of $4.25 per share. Under the terms of agreement, the Company has right to redeem all the
outstanding convertible notes at any time after the second anniversary (eligibility date) if the weighted average price of shares of Class A Common Stock exceeds 200% of conversion price on the commitment date for ten consecutive trading days
following the eligibility date at price which is thirty days after its delivery of a mandatory redemption notice to the holders of secured convertible notes. The Company is also required to reserve out of its authorized and unissued shares of
Class A Common Stock a number of shares equal to 120% of outstanding convertible notes from time to time necessary to effect the conversion.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | The issuance of warrants to purchase 2.65 million shares of our Class A common stock, with an exercise price of $4.25 per share. The warrants are fully vested and
exercisable immediately. The warrants will expire five years from the date of issuance. The warrants were valued under Black-Scholes methodology as of the grant date. The aggregate value of $2.65 per warrant over the five year period is
approximately $7 million and will be amortized over a period of three years corresponding to terms of convertibility of secured and convertible notes as a discount on long-term debt. The following assumptions were used to determine the fair value of
warrants using the Black-Scholes valuation model: a term of five years, risk-free rate of 4.67%, volatility of 84%, and dividend yield of zero. The warrants were assigned a value of $7 million and are being amortized as a debt amortization expense
over the three year term of the Notes. The total discount recognized in income statement relating to warrants was $1.2 million during the nine month ended September 30, 2007.
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

WORLDSPACE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



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

For the nine months ended September 2007, certain holders of the convertible notes elected to convert principal debt and related interest of $3.0 million
into 694,887 shares of the Companys Class A Common Stock. The effect of this conversion reduced principal Convertible Debt and accrued interest and increased the issued and outstanding shares of the Companys Class A Common
Stock.

The Company evaluates the provisions of the Notes periodically to determine whether any provisions would be considered embedded
derivatives that would require bifurcation under Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133). Since the shares of common stock
underlying the Notes have been registered during the year ending December 31, 2006, they are readily convertible to shares of our Class A Common Stock. The registration with the SEC of the shares of common stock underlying the convertible
notes payable satisfied the provisions for net settlement under SFAS No. 133. The Company has determined that even though our Notes do contain an embedded conversion feature, the Notes however are both indexed to the Companys own stock
and classified in stockholders equity in its financial statements and therefore under SFAS No. 133 are not considered for derivative accounting treatment.

In accordance with EITF No. 00-27, Application of EITF 98-5: Accounting for Convertible Securities with Beneficial Conversion Features or Adjustable Conversion Ratios, the value
assigned to Notes and the Warrants were allocated based on their relative fair values. The value of the warrants was recorded as additional paid-in-capital and reduced the carrying value of the Notes. The Company did not record any value towards
beneficial conversion feature in accordance with EITF 98-5, since the fair market value of the common stock was less than the conversion price as on the commitment date.

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

Notes Payable

In June 2006, we received $200,000 from the Montgomery County of the State of Maryland under the Economic Development Fund as a contingent loan. This
loan could be converted into a grant if the Company maintains a specified number of employees on a particular maturity date and is in compliance with certain other terms of the agreement. The loan has a 5% annual interest rate. At September 30,
2007, under the terms of the loan, the Company was contingently obligated to repay the loan principal together with accrued interest.

In
August 2006, we received $200,000 from the Department of Business and Economic Development of the State of Maryland as a contingent loan. This loan could be converted into a grant if the Company maintains a specified number of employees on a
particular maturity date and is in compliance with certain other terms of the agreement. The loan has a 3% annual interest rate. At September 30, 2007, under the terms of the loan, the Company was contingently obligated to repay the loan
principal together with accrued interest.



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##### Table of Contents

WORLDSPACE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(F) Provision for Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes, which requires recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or income tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and the tax basis of
assets and liabilities, using enacted tax rates for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax
expense is the sum of taxes payable for the period and the change during the period in deferred tax assets and liabilities.

Our tax
provision for interim periods is determined using an estimate of our annual effective tax rate. The 2007 effective tax rate is estimated to be lower than the 35% statutory rate primarily due to anticipated earnings and losses of our subsidiaries
outside of the U.S. in jurisdictions where our effective tax rate is lower than in the U.S. and the establishment of a valuation allowance against a portion of the US losses. Cash paid for income taxes was $16.3 million and $1.1 million during the
nine months ended September 30, 2007 and 2006, respectively.

Effective January 1, 2007, we adopted the provisions of FASB
Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes. As a result of the implementation of FIN 48, our unrecognized tax benefits increased $2.9 million, which was accounted for as a decrease to retained earnings
of $ 2.9 million. These items would otherwise have increased our income tax expense in prior periods. We recognize interest and penalties related to our unrecognized tax benefits as income tax expense. We have included $84,000 for estimated
penalties and interest in foreign jurisdictions on the unrecognized tax benefit related to cross-border transactions.

We file U.S. federal
income tax returns as well as income tax returns in various states and foreign jurisdictions. We may be subject to examination by the Internal Revenue Service (IRS) for calendar years 1998 through 2006. Tax years 1998 through 2003 are
open due to the cancellation of debt and tax attribute reduction reported on the 2004 tax return. We currently are not under examination in any of the jurisdictions in which we file income tax returns.

We are required to review our FIN 48 contingencies on a quarterly basis and make adjustments if the facts change or our professional judgment of the
outcome of the item changes. There have been no FIN 48 adjustments required in the third quarter of 2007.

(G) Net Loss Per Share

The Company computes net loss per share in accordance with SFAS No. 128, Earnings Per Share and SEC Staff Accounting Bulletin No. 98
(SAB 98). Basic loss per share is computed by dividing net loss by the weighted-average number of outstanding shares of common stock. Diluted loss per share is computed by dividing net loss by the weighted-average number of shares
adjusted for the potential dilution that could occur if stock options, SARS, warrants and other convertible securities were exercised or converted into common stock.

As of September 30, 2007 and 2006, options, restricted stock awards, restricted stock units, SARS, warrants and other convertible securities to purchase approximately 35.9 million and 33.4 million
shares of common stock, respectively, were outstanding, but not included in the computation of diluted earnings per share, because the effect would be anti-dilutive.



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##### Table of Contents

WORLDSPACE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(H) Commitments and Contingencies

Leases

The Company leases office space under non-cancelable operating leases that expire
through 2016. As of September 30, 2007 minimum annual rental commitments under these leases are:



|                             |  |                |        |  
|---------------------------- |  | -------------- | ------ | -
|                             |  | (in thousands) |       
|October - December 2007      |  | $              | 1,158  |  
|2008                         |  |                | 3,679  |  
|2009                         |  |                | 2,961  |  
|2010                         |  |                | 2,973  |  
|2011                         |  |                | 2,864  |  
|Thereafter                   |  | $              | 12,072 |  
|                             |  |                |        |  
|                             |  |                | 25,707 |  
|Less: Sublease rental income |  |                | (3,136 | )
|                             |  |                |        |  
|Total lease commitments      |  | $              | 22,571 |  
|                             |  |                |        |  

Litigation, Claims and Income Taxes

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

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

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

Design and
Production Agreement

The Company is committed to purchasing 722,445 satellite radio receiver chipsets for approximately
$18.2 million at September 30, 2007. The chipsets have not been purchased as of September 30, 2007. The Company has recorded a liability of $18.2 million at September 30, 2007 and December 31, 2006, respectively, as accrued
purchase commitment in the accompanying consolidated balance sheets.



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##### Table of Contents

WORLDSPACE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(I) Contingent Royalty Obligation

Effective December 31, 2004 the Company restructured $1,553 million of notes payable and advances. Under the terms of the agreements, the ongoing
obligations of the Company to the lender were set forth in a separate Royalty Arrangement (Royalty Agreement), under which the Company is required to pay the lender 10 percent of earnings before interest, taxes, depreciation, and amortization, if
any, for each year through 2015 in exchange for the lender releasing all claims. The Company is subject to certain covenants regarding the disposition of assets, liquidation of the Company, reporting, and distributions or payments to certain current
shareholders. The Royalty Agreement also requires the Company to have a segregated reserve, to be funded each quarter in any year in which payment under the Royalty Agreement is projected, at the rate of 25 percent of the estimated annual payment.
In addition, 80 percent of the annual payment is required to be made within 60 days after year-end, and the remaining portion within 180 days following year-end. Even though management is satisfied that the debt may not be reinstated, in accordance
with SFAS No. 15, Accounting by Debtors and Creditors for Trouble Debt Restructuring,the debt restructuring is not considered an extinguishment of debt because the future payments under the agreement are indeterminate. Accordingly, the
carrying value of the debt and accrued interest of $1,814 million is shown as a contingent royalty obligation on the accompanying balance sheets.

(J)
Minority Interest

The Companys Italian subsidiary, WorldSpace Italia S.r.l., is a majority-owned subsidiary of the Companys
European holding company, Viatis Satellite Radio. WorldSpace Italias other partner is New Satellite Radio S.r.l., an Italian company whose primary shareholder is Class Editori S.p.A., a media and broadcast corporation based in Milan. New
Satellite Radio holds a 35 percent interest in WorldSpace Italia S.r.l., and has contributed $1.7 million towards capital investment. The net outstanding minority interest of New Satellite Radio S.r.l., as of September 30, 2007 and
December 31, 2006 was $0.8 and $0.3 million respectively is separately classified in the accompanying unaudited condensed consolidated balance sheets.

(K) Recent Accounting Pronouncements

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilitiesincluding an amendment of FASB Statement No. 115 which is effective fiscal year beginning after November 15, 2007. This statement permits, but does not require, entities to measure many
financial instruments at fair value. The objective is to provide entities with an opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting
provisions. Entities electing this option will apply it when the entity first recognizes an eligible instrument and will report unrealized gains and losses on such instruments in current earnings. This statement 1) applies to all entities, 2)
specifies certain election dates, 3) can be applied on an instrument-by-instrument basis with some exceptions, 4) is irrevocable and 5) applies only to entire instruments. With respect to SFAS 115, available-for-sale and held-to-maturity securities
at the effective date are eligible for the fair value option at that date. If the fair value option is elected for those securities at the effective date, cumulative unrealized gains and losses at that date shall be included in the cumulative-effect
adjustment and thereafter, such securities will be accounted for as trading securities. The Company is currently evaluating the impact of SFAS 159 on its results of operations and financial position.

In September 2006, The Financial Accounting and Standards Board has issues FAS 157, Fair Value Measurements (SFAS 157), which
provides guidance for using fair value to measure assets and liabilities. The standard also responds to investors requests for more information about the extent to which companies measure assets and liabilities at fair value, the information
used to measure fair value and the effect that fair-value



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##### Table of Contents

WORLDSPACE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



measurements have on earnings. SFAS 157 will apply whenever another standard requires (or permits) assets or liabilities to be measured at fair value. The
standard does not expand the use of fair value to any new circumstances. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company is
currently evaluating the impact, if any, of SFAS 157 on its results of operations and financial position.

(L) Geographic Areas

The following tables present summary operating information by geographic segment for the three and nine months ended September 30, 2007 and 2006:



|                        |  |                                  |       |                                 |   |       |  |      |       |  |   |       
|----------------------- |  | -------------------------------- | ----- | ------------------------------- | - | ----- |  | ---- | ----- |  | - | ------
|                        |  | Geographical Area Data          
|                        |  | Three Months ended September 30, |       | Nine Months ended September 30,
|                        |  | 2007                             |       | 2006                            |   | 2007  |  | 2006
|                        |  | (in thousands)                   |       | (in thousands)                 
|Revenue                 |  |                                  |       |                                 |   |       |  |      |       |  |   |       
|United States           |  | $                                | 642   |                                 | $ | 752   |  | $    | 2,179 |  | $ | 2,153 
|France                  |  |                                  | 277   |                                 |   | 238   |  |      | 803   |  |   | 1,381 
|Kenya                   |  |                                  |      |                                 |   | 385   |  |      | 11    |  |   | 1,021 
|South Africa            |  |                                  | 171   |                                 |   | 193   |  |      | 611   |  |   | 623   
|Singapore               |  |                                  | 6     |                                 |   | 14    |  |      | 23    |  |   | 45    
|India                   |  |                                  | 2,145 |                                 |   | 1,698 |  |      | 6,090 |  |   | 5,102 
|Other foreign countries |  |                                  | 89    |                                 |   | 63    |  |      | 267   |  |   | 258   
|                        |  |                                  |       |                                 |   |       |  |      |       |  |   |       
|                        |  | $                                | 3,330 |                                 | $ | 3,343 |  | $    | 9,984 |  | $ | 10,583
|                        |  |                                  |       |                                 |   |       |  |      |       |  |   |       

Long-lived Segment Assets:



|                  |  |                    |         |                   |   |        
|----------------- |  | ------------------ | ------- | ----------------- | - | -------
|                  |  | September 30, 2007 |         | December 31, 2006
|                  |  | (in thousands)    
|United States     |  | $                  | 320,408 |                   | $ | 359,181
|Foreign countries |  |                    | 5,587   |                   |   | 3,610  

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

(M) Related Party Transactions

In March 2007, the Company agreed to indemnify the Chairman, Chief Executive Officer and President, Noah A. Samara, for personal legal expenses associated with certain matters arising by reason of the fact that
Mr. Samara was an officer and/or director of the Company. Total costs agreed to be reimbursed by the Company were $650,000 and $0 for the nine months ended September 30, 2007 and 2006, respectively. Such indemnifiable costs are included in
the accompanying Unaudited Condensed Consolidated Statements of Operations under General and Administrative expenses.

(N) Subsequent events

In October 2007, certain holders of the convertible notes elected to convert principal debt and related interest of $3,995,964 into
940,227 shares of the Companys Class A Common Stock. The effect of this conversion reduces Long Term Debt and accrued interest and increases outstanding shares of Class A Common Stock.



17



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##### Table of Contents

Item 2. Managements discussion and analysis of financial condition and results of operations

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 year ended December 31, 2006, which is included in the Companys Form 10-K filed with the Securities and Exchange Commission on April 17, 2007.

Executive Summary

The highlights for
the three months ending September 30, 2007 include:



| |  |  | Worldspace and Fiat Group Automobiles sign first ever distribution and marketing agreement for satellite radio in Europe. Worldspace expects that beginning in late
2008 or early 2009 it will be able to offer customers in Italy, through aftermarket equipment installations available through Fiats vast dealership network, a broadcast bouquet of 40-50 channels of music, sports, news and entertainment
programming. OEM or factory-installed equipment for Lancia, Fiat and Alfa Romeo models is expected to be available in late 2009.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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

Summary Operating Metrics

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



|                                  |  |                                 |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|--------------------------------- |  | ------------------------------- | ------- | - | ------------------------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                  |  | Three months endedSeptember 30, |         |   | Nine months ended September 30, |  
|                                  |  | 2007                            |         |   | 2006                            |   |         | 2007 |  |   | 2006    |  
|Net Subscriber Additions (Losses) |  |                                 | (12,689 | ) |                                 |   | 16,866  |      |  |   | (21,461 | ) |  |   | 61,525  |  
|India                             |  |                                 | (8,713  | ) |                                 |   | 18,568  |      |  |   | 2,892   |   |  |   | 63,491  |  
|ROW (5)                           |  |                                 | (3,976  | ) |                                 |   | (1,702  | )    |  |   | (24,353 | ) |  |   | (1,966  | )
|                                  |  |                                 |         |  
|Total EOP Subs                    |  |                                 | 177,644 |   |                                 |   | 176,831 |      |  |   | 177,644 |   |  |   | 176,831 |  
|India                             |  |                                 | 164,902 |   |                                 |   | 138,065 |      |  |   | 164,902 |   |  |   | 138,065 |  
|ROW (5)                           |  |                                 | 12,742  |   |                                 |   | 38,766  |      |  |   | 12,742  |   |  |   | 38,766  |  
|                                  |  |                                 |         |  
|ARPU (1)                          |  | $                               | 3.41    |   |                                 | $ | 3.58    |      |  | $ | 3.29    |   |  | $ | 3.86    |  
|ARPU (India)                      |  |                                 | 3.15    |   |                                 |   | 2.93    |      |  |   | 3.02    |   |  |   | 2.97    |  
|ARPU (ROW) (5)                    |  |                                 | 6.43    |   |                                 |   | 5.74    |      |  |   | 5.85    |   |  |   | 6.27    |  
|                                  |  |                                 |         |  
|SAC (2)                           |  | $                               | 10      |   |                                 | $ | 37      |      |  |   | 24      |   |  | $ | 40      |  
|SAC (India)                       |  |                                 | 12      |   |                                 |   | 38      |      |  |   | 25      |   |  |   | 41      |  
|SAC (ROW) (5)*                    |  |                                 | 0       |   |                                 |   | 5       |      |  |   | 0       |   |  |   | 0       |  
|                                  |  |                                 |         |  
|CPGA (3)                          |  | $                               | 80      |   |                                 | $ | 137     |      |  |   | 89      |   |  | $ | 134     |  
|CPGA (India)                      |  |                                 | 75      |   |                                 |   | 126     |      |  |   | 85      |   |  |   | 126     |  
|CPGA (ROW) (5)                    |  |                                 | 162     |   |                                 |   | 271     |      |  |   | 134     |   |  |   | 240     |  
|                                  |  |                                 |         |  
|EBITDA (4)                        |  | $                               | (20,283 | ) |                                 | $ | (27,141 | )    |  | $ | (69,980 | ) |  | $ | (89,174 | )



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##### Table of Contents

---

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

|(2) | SACPlease see further discussion under Subscriber Acquisition Cost under Managements Discussion and Analysis of Financial Condition and Results of
Operations-Cost of services. SAC does not include any cost related to corporate overhead or headcount.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | CPGAPlease see further discussion under Cost Per Gross Addition under Managements Discussion and Analysis of Financial Condition and Results of
Operations-Operating expense. CPGA does not include any cost related to corporate overhead or headcount.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|(5) | ROWRest of World: All other operating regions excluding India.
|--- | ---------------------------------------------------------------

|* | SAC (ROW) for the three and nine months ended September 30, 2007 and 2006 was negative, indicating a positive margin from the sale of equipment and therefore was denoted with a
zero value whereas Indias SAC represents negative margins resulting from its costs exceeding its revenues.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                               |  |                                  |          |   |      |   |         |  
|---------------------------------------------- |  | -------------------------------- | -------- | - | ---- | - | ------- | -
|                                               |  | Three months ended September 30, |         
|                                               |  | 2007                             |          |   | 2006 |  
|Reconciliation of Net Loss to EBITDA           |  |                                  |          |   |      |   |         |  
|Net Loss as reported                           |  | $                                | (36,694  | ) |      | $ | (28,932 | )
|Addback non-EBITDA items included in net loss: |  |                                  |          |   |      |   |         |  
|Interest income                                |  |                                  | (785     | ) |      |   | (2,714  | )
|Interest expense                               |  |                                  | 3,878    |   |      |   | 2,371   |  
|Depreciation & amortization                    |  |                                  | 14,887   |   |      |   | 14,602  |  
|Deferred income tax benefit                    |  |                                  | (1,569   | ) |      |   | (12,468 | )
|                                               |  |                                  |          |   |      |   |         |  
|EBITDA                                         |  | $                                | (20,283  | ) |      | $ | (27,141 | )
|                                               |  |                                  |          |   |      |   |         |  
|                                               | 
|                                               |  | Nine months ended September 30,  |         
|                                               |  | 2007                             |          |   | 2006 |  
|Reconciliation of Net Loss to EBITDA           |  |                                  |          |   |      |   |         |  
|Net Loss as reported                           |  | $                                | (123,472 | ) |      | $ | (94,786 | )
|Addback non-EBITDA items included in net loss: |  |                                  |          |   |      |   |         |  
|Interest income                                |  |                                  | (4,858   | ) |      |   | (8,754  | )
|Interest expense                               |  |                                  | 21,084   |   |      |   | 6,996   |  
|Depreciation & amortization                    |  |                                  | 44,289   |   |      |   | 44,056  |  
|Deferred income taxes benefit                  |  |                                  | (7,023   | ) |      |   | (36,686 | )
|                                               |  |                                  |          |   |      |   |         |  
|EBITDA                                         |  | $                                | (69,980  | ) |      | $ | (89,174 | )
|                                               |  |                                  |          |   |      |   |         |  



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##### Table of Contents

Results of Operations

WORLDSPACE, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three-Months and Nine-Months ended September 30, 2007 and 2006



|                                                                |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|--------------------------------------------------------------- |  | ----------------------------------------------- | ---------- | - | ------------------------------ | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                                |  | Three months endedSeptember 30,                 |            |   | Nine months endedSeptember 30, |  
|                                                                |  | 2007                                            |            |   | 2006                           |   |            | 2007 |  |   | 2006       |  
|                                                                |  | (in thousands, except share and per share data) |           
|Revenue                                                         |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Subscription revenue                                            |  | $                                               | 1,870      |   |                                | $ | 1,810      |      |  | $ | 5,575      |   |  | $ | 5,340      |  
|Equipment revenue                                               |  |                                                 | 581        |   |                                |   | 659        |      |  |   | 1,595      |   |  |   | 2,433      |  
|Other revenue                                                   |  |                                                 | 879        |   |                                |   | 874        |      |  |   | 2,814      |   |  |   | 2,810      |  
|                                                                |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Total Revenue                                                   |  |                                                 | 3,330      |   |                                |   | 3,343      |      |  |   | 9,984      |   |  |   | 10,583     |  
|                                                                |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Operating Expenses                                              |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Cost of Services (excludes depreciation shown separately below) |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Satellite and transmission, programming and other               |  |                                                 | 7,862      |   |                                |   | 7,503      |      |  |   | 23,497     |   |  |   | 21,657     |  
|Cost of equipment                                               |  |                                                 | 865        |   |                                |   | 2,674      |      |  |   | 3,571      |   |  |   | 8,144      |  
|Research and development                                        |  |                                                 | 541        |   |                                |   | 265        |      |  |   | 2,066      |   |  |   | 756        |  
|Selling and marketing                                           |  |                                                 | 2,611      |   |                                |   | 5,403      |      |  |   | 8,596      |   |  |   | 17,199     |  
|General and administrative                                      |  |                                                 | 11,786     |   |                                |   | 14,312     |      |  |   | 41,885     |   |  |   | 48,860     |  
|Depreciation and amortization                                   |  |                                                 | 14,887     |   |                                |   | 14,602     |      |  |   | 44,289     |   |  |   | 44,056     |  
|                                                                |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Total Operating Expenses                                        |  |                                                 | 38,552     |   |                                |   | 44,759     |      |  |   | 123,904    |   |  |   | 140,672    |  
|                                                                |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Loss from Operations                                            |  |                                                 | (35,222    | ) |                                |   | (41,416    | )    |  |   | (113,920   | ) |  |   | (130,089   | )
|                                                                |  |                                                 |            |  
|Other Income (Expense)                                          |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Interest income                                                 |  |                                                 | 785        |   |                                |   | 2,714      |      |  |   | 4,858      |   |  |   | 8,754      |  
|Interest expense                                                |  |                                                 | (2,987     | ) |                                |   | (1,991     | )    |  |   | (7,748     | ) |  |   | (5,857     | )
|Write-off of deferred debt issuance costs                       |  |                                                 |           |   |                                |   |           |      |  |   | (11,516    | ) |  |   |           |  
|Deferred financing costs and warrants amortization              |  |                                                 | (891       | ) |                                |   | (380       | )    |  |   | (1,820     | ) |  |   | (1,139     | )
|Other                                                           |  |                                                 | 52         |   |                                |   | (327       | )    |  |   | (349       | ) |  |   | (3,141     | )
|                                                                |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|                                                                |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Total Other Income (Expense)                                    |  |                                                 | (3,041     | ) |                                |   | 16         |      |  |   | (16,575    | ) |  |   | (1,383     | )
|                                                                |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Loss Before Income Taxes                                        |  |                                                 | (38,263    | ) |                                |   | (41,400    | )    |  |   | (130,495   | ) |  |   | (131,472   | )
|Income Tax Benefit                                              |  |                                                 | 1,569      |   |                                |   | 12,468     |      |  |   | 7,023      |   |  |   | 36,686     |  
|                                                                |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Net Loss                                                        |  | $                                               | (36,694    | ) |                                | $ | (28,932    | )    |  | $ | (123,472   | ) |  | $ | (94,786    | )
|                                                                |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Loss per sharebasic and diluted                                |  | $                                               | (0.91      | ) |                                | $ | (0.77      | )    |  | $ | (3.12      | ) |  | $ | (2.54      | )
|                                                                |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  
|Weighted Average Number of Shares Outstanding                   |  |                                                 | 40,459,200 |   |                                |   | 37,584,541 |      |  |   | 39,627,833 |   |  |   | 37,253,549 |  
|                                                                |  |                                                 |            |   |                                |   |            |      |  |   |            |   |  |   |            |  

See accompanying notes to unaudited condensed consolidated financial statements.



20



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##### Table of Contents

Three months ended September 30, 2007 compared with three months ended September 30, 2006

Revenue

The table below presents our operating
revenue for the three months ended September 30, 2007 and 2006, together with the relevant percentage of total revenue represented by each revenue category.



|                |  |                                  |       |  |       |   |  |   |       |  |       |  
|--------------- |  | -------------------------------- | ----- |  | ----- | - |  | - | ----- |  | ----- | -
|                |  | Three months ended September 30, |      
|                |  | 2007                             |       |  | 2006  |  
|                |  | ($ in thousands)                 |      
|Revenue:        |  |                                  |       |  |       |   |  |   |       |  |       |  
|Subscription    |  | $                                | 1,870 |  | 56.2  | % |  | $ | 1,810 |  | 54.1  | %
|Equipment sales |  |                                  | 581   |  | 17.4  | % |  |   | 659   |  | 19.7  | %
|Other           |  |                                  | 879   |  | 26.4  | % |  |   | 874   |  | 26.2  | %
|                |  |                                  |       |  |       |   |  |   |       |  |       |  
|Total revenue:  |  | $                                | 3,330 |  | 100.0 | % |  | $ | 3,343 |  | 100.0 | %
|                |  |                                  |       |  |       |   |  |   |       |  |       |  

Total revenue for the three months ended September 30, 2007 was $3.3 million, a 0.3%
decrease compared with $3.3 million for the three months ended September 30, 2006. The marginal reduction is the result of offsetting change between an increase in subscription revenue and a decrease in equipment sales revenue during the three
months ended September 30, 2007.

Subscription revenue. Subscription revenue for the three months ended September 30,
2007 was approximately $1.9 million, an increase of 3.3% compared with $1.8 million generated in the three months ended September 30, 2006. The marginal increase in subscription revenue is due to sale of subscription packages with higher
subscription base rates during the three months ending September 30, 2007. However, we experienced an overall net loss in subscriber additions in India and ROW during the three months ending September 30, 2007.

Average Monthly Subscription Revenue Per Subscriber (ARPU).

Blended ARPU (for India and ROW) was $3.41 for the three months ended September 30, 2007 and $3.58 for the three months ended September 30, 2006. The reduction in blended ARPU for 2007 compared to 2006
resulted mainly due to net loss in subscriber additions in India and ROW. However, ARPU for India for three months ended September 30, 2007 was $3.15, an increase of 8% compared with $2.93 for the three months ended September 2006 mainly due to
increase in sale of twelve months and above subscription packages.

Equipment sales revenue. Equipment sales revenue was
approximately $0.6 million for the three months ended September 30, 2007 a decrease of 11.9% compared with $0.7 million for the three months ended September 30, 2006. This decrease was primarily due to decreased unit sales in India.
We sold approximately 12,500 receivers in the three months ended September 30, 2007, compared with approximately 37,000 receivers sold in the three months ended September 30, 2006.

Other revenue. Other revenue for the three months ended September 30, 2007 was $0.9 million compared with $0.9 million for the three months
ended September 30, 2006. Although satellite capacity leasing revenue increased, this was offset by a decline in miscellaneous other revenue.

Capacity lease revenue. Satellite capacity leasing revenue for the three months ended September 30, 2007 was $0.6 million, an increase of 163.9% compared with $0.2 million for the three months ended
September 30, 2006. This increase was primarily due to a new contract from South Africa.

Miscellaneous other
revenue. Other revenue (including licensing/manufacturing income and syndication income) for the three months ended September 30, 2007 was $0.3 million, a decrease of 64.3%



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##### Table of Contents

compared with $0.7 million for the three months ended September 30, 2006. This decrease was primarily due to a litigation settlement received from a
former broadcaster in 2006 in France and a 2006 syndication billing adjustment from XM Satellite Radio.

Cost of services

The table below presents our costs of services for the three months ended September 30, 2007 and 2006, together with the relevant percentages of
total cost of services for each cost category.



|                                    |  |                                  |       |  |       |   |  |   |        |  |       |  
|----------------------------------- |  | -------------------------------- | ----- |  | ----- | - |  | - | ------ |  | ----- | -
|                                    |  | Three months ended September 30, |      
|                                    |  | 2007                             |       |  | 2006  |  
|                                    |  | ($ in thousands)                 |      
|Cost of services:                   |  |                                  |       |  |       |   |  |   |        |  |       |  
|Engineering & broadcast operations  |  | $                                | 3,412 |  | 39.1  | % |  | $ | 4,408  |  | 43.3  | %
|Content & programming               |  |                                  | 3,078 |  | 35.3  | % |  |   | 2,665  |  | 26.2  | %
|Customer care, billing & collection |  |                                  | 716   |  | 8.2   | % |  |   | 422    |  | 4.1   | %
|Cost of equipment                   |  |                                  | 865   |  | 9.9   | % |  |   | 2,674  |  | 26.3  | %
|Other cost of services              |  |                                  | 657   |  | 7.5   | % |  |   | 8      |  | 0.1   | %
|                                    |  |                                  |       |  |       |   |  |   |        |  |       |  
|Total cost of services:             |  | $                                | 8,727 |  | 100.0 | % |  | $ | 10,177 |  | 100.0 | %
|                                    |  |                                  |       |  |       |   |  |   |        |  |       |  

Total cost of services for the three months ended September 30, 2007 was $8.7 million a 14.2%
decrease compared with $10.2 million for the three months ended September 30, 2006. Decreases in engineering & broadcast operations expense and cost of equipment were partially offset by increases in content & programming
costs.

Engineering and broadcast operations. Engineering and broadcast expense, including the cost of operating our two
satellites, ground control systems and telecommunications links as well as our in-orbit insurance, for the three months ended September 30, 2007 was $3.4 million, a decrease of 22.6% compared with $4.4 million in the three months ended
September 30, 2006. Operational costs decreased approximately $ 0.3 million and a decrease in in-orbit insurance of $0.3 million as our policy premiums on our AfriStar and AsiaStar satellites were reduced.

Content and programming. Content and programming expense, which includes content production, music royalties and other content acquisition
costs, for the three months ended September 30, 2007 was $3.1million, an increase of 15.5% compared with $2.7 million for the three months ended September 30, 2006. These expenses increased as a result of additional expenses for music rights
royalties due to the addition of a Bollywood content license, exclusive rights for live audio broadcast of cricket outside of India, PPL license expenses and changes in other content royalties (IFPI, PRS London).

Customer care, billing & collection. Customer care, billing and collections expense for the three months ended September 30,
2007 was $0.7 million, an increase of 69.7% compared with $0.4 million for the three months ended September 30, 2006, due to an increased focus on customer retention programs.

Cost of Equipment. Cost of equipment for the three months ended September 30, 2007 was approximately $0.9 million, a decrease of 67.7%
compared with $2.7 million, in the three months ended September 30, 2006. Cost of equipment decreased due to a decreased number of receivers being sold in India. We sold approximately 12,500 receivers in the three months ended
September 30, 2007, compared with approximately 37,000 receivers sold in the three months ended September 30, 2006.

Subscriber Acquisition Cost (SAC)

Total blended SAC (for India and ROW) calculated based on unit sales to our distributors,
was approximately $10 per subscriber for the three months ended September 30, 2007 and $37 for the three months ended



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##### Table of Contents

September 30, 2006. SAC for India was approximately $12 per subscriber for the three months ended September 30, 2007 and approximately $38 per
subscriber for the three months ended September 30, 2006. The decrease in SAC for India is mainly due to reduction in the hardware subsidies granted to our distributors.

Operating expense

The table below presents our operating expense for the three months ended
September 30, 2007 and 2006 together with the relevant percentages of total operating expenses for each cost category.



|                              |  |                                  |        |  |       |   |  |   |        |  |       |  
|----------------------------- |  | -------------------------------- | ------ |  | ----- | - |  | - | ------ |  | ----- | -
|                              |  | Three months ended September 30, |       
|                              |  | 2007                             |        |  | 2006  |  
|                              |  | ($ in thousands)                 |       
|Operating expense:            |  |                                  |        |  |       |   |  |   |        |  |       |  
|Cost of Services              |  | $                                | 8,727  |  | 22.6  | % |  | $ | 10,177 |  | 22.7  | %
|Research & Development        |  |                                  | 541    |  | 1.4   | % |  |   | 265    |  | 0.6   | %
|Selling and Marketing         |  |                                  | 2,611  |  | 6.8   | % |  |   | 5,403  |  | 12.1  | %
|General & Administrative      |  |                                  | 11,786 |  | 30.6  | % |  |   | 14,312 |  | 32.0  | %
|Depreciation and amortization |  |                                  | 14,887 |  | 38.6  | % |  |   | 14,602 |  | 32.6  | %
|                              |  |                                  |        |  |       |   |  |   |        |  |       |  
|Total operating expense:      |  | $                                | 38,552 |  | 100.0 | % |  | $ | 44,759 |  | 100.0 | %
|                              |  |                                  |        |  |       |   |  |   |        |  |       |  

Total operating expense for the three months ended September 30, 2007 was $38.6 million,
a decrease of 13.9% compared with $44.8 million for the three months ended September 30, 2006. This decrease was primarily due to reduction in our cost of services, selling and marketing, and general and administrative expenses. Our cost of
services for the three months ended September 30, 2007, was $8.7 million, a decrease of 14.2 % compared with $10.1 million in the three months ended September 30, 2006. See cost of services above for further discussion on the
decreases. Our selling and marketing expense for the three months ended September 30, 2007 was $2.6 million, a decrease of 51.7% compared with $5.4 million for the three months ended September 30, 2006. This decrease was primarily due
to reduction in marketing activity as having completed launches in our key markets during 2006, we reduced operational resources allocated to the Indian market during 2007 pending greater clarity on Indias satellite radio policy. Our general
and administrative expense for the three months ended September 30, 2007 was $11.8 million, a decrease of 17.5% compared with $14.3 million in the three months ended September 30, 2006. This decrease was primarily due to a $0.8 million
decrease in stock based compensation which included three key executives stock based compensation in 2006 only, and an overall $1.7 million decrease in discretionary spending. Research and development expenses was $0.5 million for the
three months ended September 30, 2007, an increase of $0.2 million compared with $0.3 million for the three months ended September 30, 2006. This increase was primarily due to continued development work on the European chipset during 2007.

Cost Per Gross Addition (CPGA)

Total blended CPGA expense (for India and ROW) was approximately $1.7 million for the three months ended September 30, 2007 and approximately $5.4 million for the three months ended September 30, 2006. CPGA for India was
approximately $1.4 million for the three months ended September 30, 2007 and approximately $4.7 million for the three months ended September 30, 2006. Unit blended CPGA (for India and ROW), was approximately $80 for the three months
ended September 30, 2007 and approximately $137 for the three months ended September 30, 2006. CPGA for India was approximately $75 for the three months ended September 30, 2007 and approximately $126 for the three months ended
September 30, 2006. CPGA declined due to a reduced marketing spend in India pursuant to short term cash conservation efforts.



23



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##### Table of Contents

Other income (expense)

Interest income. Interest income for the three months ended September 30, 2007 was $0.8 million, a decrease of 71.1% compared with $2.7 million in the three months ended September 30, 2006.
This decrease was due to decreased average cash balances resulting from operating losses and a $50 million repayment of debt as part of the restructuring of our Convertible Notes. See Note E  Debt of the financial statements.

Interest expense. Interest expense for the three months ended September 30, 2007 and 2006 was $3.0 million and $2.0 million,
respectively. On June 1, 2007, we completed a restructuring agreement with the holders of the $155 million Convertible Notes. Although the total debt has been reduced to $105 million, the refinanced balance of the debt carries a higher interest
rate. In addition, a portion of the interest expense is based on LIBOR + 6.5% thus our future interest expense will fluctuate accordingly.

Other expense. We recorded other income of $0.1 million during the three months ended September 30, 2007 compared with other expense of $0.3 million during the three months ended September 30, 2006. This decreased
expense was primarily due to foreign currency fluctuations.

Income tax

During the three months ending September 30, 2007 the Company recorded an income tax benefit of $1.5 million compared to $12.5 million for the
three months ending September 30, 2006 due to an establishment of a valuation allowance against a portion of the U.S. loss. This benefit is the result of current period operating losses, certain foreign net operating losses and a
Section 162(m) limitation on deductibility of certain executive compensation.

Nine months ended September 30, 2007 compared with nine months
ended September 30, 2006

Revenue

The table below presents our operating revenue for the nine months ended September 30, 2007 and 2006, together with the relevant percentage of total revenue represented by each revenue category.



|                |  |                                 |       |  |       |   |  |   |        |  |       |  
|--------------- |  | ------------------------------- | ----- |  | ----- | - |  | - | ------ |  | ----- | -
|                |  | Nine months ended September 30, |      
|                |  | 2007                            |       |  | 2006  |  
|                |  | ($ in thousands)                |      
|Revenue:        |  |                                 |       |  |       |   |  |   |        |  |       |  
|Subscription    |  | $                               | 5,575 |  | 55.8  | % |  | $ | 5,340  |  | 50.5  | %
|Equipment sales |  |                                 | 1,595 |  | 16.0  | % |  |   | 2,433  |  | 23.0  | %
|Other           |  |                                 | 2,814 |  | 28.2  | % |  |   | 2,810  |  | 26.5  | %
|                |  |                                 |       |  |       |   |  |   |        |  |       |  
|Total revenue:  |  | $                               | 9,984 |  | 100.0 | % |  | $ | 10,583 |  | 100.0 | %
|                |  |                                 |       |  |       |   |  |   |        |  |       |  

Total revenue for the nine months ended September 30, 2007 was approximately
$10 million, a 5.7% decrease compared with $11 million for the nine months ended September 30, 2006. This was primarily due to a reduction in revenue from equipment sales, offset by increased revenue from subscribers to our DARS.

Subscription revenue. Subscription revenue for the nine months ended September 30, 2007 was approximately $5.6 million, an increase
of 4.4% compared with $5.3 million generated in the nine months ended September 30, 2006. This increase in subscription revenues was primarily due to an increase in subscriber base, offset by the lower ARPU in India compared to ROW. We lost
approximately 13,000 subscribers from ROW as our contract with KIE terminated on January 1, 2007. In addition , we experienced a net loss in subscriber additions in India during three months ending September 30, 2007 and net subscriber
loss in ROW primarily in South Africa and Europe where we stopped selling new subscriptions to European customers within the Northwest beam coverage area of the AfriStar satellite in preparation for the testing and subsequent planned launch of our
mobile service in Italy.



24



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##### Table of Contents

Average Monthly Subscription Revenue Per Subscriber (ARPU).

Blended ARPU (for India and ROW) was $3.29 for the nine months ended September 30, 2007 and $3.86 for the nine months ended September 30, 2006. The
reduction in blended ARPU for 2007 compared to 2006 resulted mainly due to net loss in subscriber additions in ROW. ARPU from India was $3.02 for the nine months ended September 30, 2007, and $2.97 for the nine months ended September 30,
2006

Equipment sales revenue. Equipment sales revenue was approximately $1.6 million for the nine months ended
September 30, 2007, a decrease of 34.5% compared with $2.4 million for the nine months ended September 30, 2006. This decrease was primarily due to decreased unit sales in India. We sold approximately 56,500 receivers in the nine months
ended September 30, 2007, compared with approximately 117,000 receivers sold in the nine months ended September 30, 2006.

Other revenue. Other revenue for the nine months ended September 30, 2007 was $2.8 million remaining, relatively flat compared with the nine months ended September 30, 2006. Other revenue primarily consists of capacity
lease revenue.

Capacity lease revenue. Satellite capacity leasing revenue for the nine months ended September 30, 2007
was $1.7 million, an increase of 62.3% compared with $1.0 million for the nine months ended September 30, 2006, primarily due to a new contract in South Africa.

Miscellaneous other revenue. Other revenue (including licensing/manufacturing income and syndication income) was $0.8 million for the nine months ended September 30, 2007 a decrease of 48.8% compared with
$1.6 million for the nine months ended September 30, 2006. This decrease was primarily due to a litigation settlement received from a former broadcaster in 2006 in France and a 2006 syndication billing adjustment from XM Satellite Radio.

Cost of services

The table below presents our
costs of services for the nine months ended September 30, 2007 and 2006, together with the relevant percentages of total cost of services for each cost category.



|                                    |  |                                 |        |  |       |   |  |   |        |  |       |  
|----------------------------------- |  | ------------------------------- | ------ |  | ----- | - |  | - | ------ |  | ----- | -
|                                    |  | Nine months ended September 30, |       
|                                    |  | 2007                            |        |  | 2006  |  
|                                    |  | ($ in thousands)                |       
|Cost of services:                   |  |                                 |        |  |       |   |  |   |        |  |       |  
|Engineering & broadcast operations  |  | $                               | 10,661 |  | 39.4  | % |  | $ | 12,533 |  | 42.0  | %
|Content & programming               |  |                                 | 9,762  |  | 36.0  | % |  |   | 6,881  |  | 23.1  | %
|Customer care, billing & collection |  |                                 | 2,077  |  | 7.7   | % |  |   | 1,543  |  | 5.2   | %
|Cost of equipment                   |  |                                 | 3,571  |  | 13.2  | % |  |   | 8,144  |  | 27.3  | %
|Other cost of services              |  |                                 | 997    |  | 3.7   | % |  |   | 700    |  | 2.4   | %
|                                    |  |                                 |        |  |       |   |  |   |        |  |       |  
|Total cost of services:             |  | $                               | 27,068 |  | 100.0 | % |  | $ | 29,801 |  | 100.0 | %
|                                    |  |                                 |        |  |       |   |  |   |        |  |       |  

Total cost of services for the nine months ended September 30, 2007 was $27.1 million, a
9.2% decrease compared with $29.8 million in the nine months ended September 30, 2006. This decrease was primarily due to decreases in the engineering and broadcast operations, and cost of equipment offset by increases in content &
programming.

Engineering and broadcast operations. Engineering and broadcast expense, including the cost of operating our two
satellites, ground control systems and telecommunications links as well as our in-orbit insurance, for the



25



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##### Table of Contents

nine months ended September 30, 2007 was $10.7 million, a decrease of 14.9% compared with $12.5 million in the nine months ended September 30,
2006. This was primarily due to a decrease in in-orbit insurance of $1.2 million as our policy premiums on our AfriStar and AsiaStar satellites were reduced.

Content and programming. Content and programming expense, which includes content production, music royalties and other content acquisition costs, for the nine months ended September 30, 2007 was
$9.8 million, an increase of 41.9% compared with $6.9 million for the nine months ended September 30, 2006. The cost increase were for music rights royalties due to the addition of a Bollywood content license, exclusive rights for live
audio broadcast of cricket outside of India, PPL license expenses and changes in other content royalties (IFPI, PRS London).

Customer
care, billing & collection. Customer care, billing and collections expense for the nine months ended September 30, 2007 was $2.1 million, an increase of 34.6% compared to $1.5 for the nine months ended September 30,
2006 due to an increased focus on customer retention programs in India.

Cost of Equipment. Cost of equipment for the nine
months ended September 30, 2007 was $3.6 million, a decrease of 56.2% compared with $8.1 million, in the nine months ended September 30, 2006. Cost of equipment decreased due to a decreased number of receivers being sold in India. We
sold approximately 56,500 receivers in the nine months ended September 30, 2007, compared with approximately 117,000 receivers sold in the nine months ended September 30, 2006.

Subscriber Acquisition Cost (SAC)

Total blended SAC (for India and ROW) calculated based on unit sales to our distributors, was approximately $24 per subscriber for the nine months ended September 30, 2007 and $40 for the nine months ended September 30, 2006. SAC
for India, was approximately $25 per subscriber for the nine months ended September 30, 2007 and approximately $41 per subscriber for the nine months ended September 30, 2006.

Other cost of services. Other cost of services for the nine months ended September 30, 2007 was $1.0 million, an increase of 42.4%
compared to $0.7 million the nine months ended September 30, 2006, primarily due to program management costs incurred on certain government related programs.

Operating expense

The table below presents our operating expense for the nine months ended September 30, 2007 and
2006, together with the relevant percentage of total operating expense for each cost category.



|                              |  |                                 |         |  |       |   |  |   |         |  |       |  
|----------------------------- |  | ------------------------------- | ------- |  | ----- | - |  | - | ------- |  | ----- | -
|                              |  | Nine months ended September 30, |        
|                              |  | 2007                            |         |  | 2006  |  
|                              |  | ($ in thousands)                |        
|Operating expense:            |  |                                 |         |  |       |   |  |   |         |  |       |  
|Cost of Services              |  | $                               | 27,068  |  | 21.9  | % |  | $ | 29,801  |  | 21.2  | %
|Research & Development        |  |                                 | 2,066   |  | 1.7   | % |  |   | 756     |  | 0.6   | %
|Selling and Marketing         |  |                                 | 8,596   |  | 6.9   | % |  |   | 17,199  |  | 12.2  | %
|General & Administrative      |  |                                 | 41,885  |  | 33.8  | % |  |   | 48,860  |  | 34.7  | %
|Depreciation and amortization |  |                                 | 44,289  |  | 35.7  | % |  |   | 44,056  |  | 31.3  | %
|                              |  |                                 |         |  |       |   |  |   |         |  |       |  
|Total operating expense:      |  | $                               | 123,904 |  | 100.0 | % |  | $ | 140,672 |  | 100.0 | %
|                              |  |                                 |         |  |       |   |  |   |         |  |       |  

Total operating expense for the nine months ended September 30, 2007 was $123.9 million,
a 11.9% decrease compared with $140.7 million for the nine months ended September 30, 2006. This decrease was



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primarily due to decreases in our selling and marketing, general and administrative expense and our cost of services. Our selling and marketing expense for
the nine months ended September 30, 2007 was $8.6 million, a decrease of 50.0% compared with $17.2 million in the nine months ended September 30, 2006. This decrease was primarily due to reduction in marketing activity as we completed
launches in our key markets during 2006, and reduced operational resources allocated to the Indian market during 2007 pending greater clarity on Indias satellite radio policy and cash preservation. Our general and administrative expense for
the nine months ended September 30, 2007 was $41.9 million, a decrease of 14.3% compared with $48.9 million in the nine months ended September 30, 2006. This decrease was primarily due to a $6.0 million decrease in stock based
compensation which included three key executives stock based compensation in 2006 only, a $1.4 million decrease in headcount expense, and $3.7 million decrease in bonuses, offset by a $4.2 million increase in financing & legal fees
paid as a result of the restructuring of our Convertible NotesSee Note E Debt of the financial statements. Research & development expenses were $2.1 million for the nine months ended September 30, 2007; an increase of 173.3%
compared to $0.8 million for the nine months ended September 30, 2006. This increase is due to continuing work on the Companys European ESDR Network.

Cost Per Gross Addition (CPGA)

Total blended CPGA expense (for India and ROW) was approximately $6.5
million for the nine months ended September 30, 2007 and approximately $16.2 million for the nine months ended September 30, 2006. CPGA for India was approximately $5.8 million for the nine months ended September 30, 2007 and
approximately $14.5 million for the nine months ended September 30, 2006. Unit blended CPGA (for India and ROW), was approximately $89 for the nine months ended September 30, 2007 and approximately $134 for the nine months ended
September 30, 2006. CPGA for India, was approximately $85 for the nine months ended September 30, 2007 and approximately $126 for the nine months ended September 30, 2006. CPGA declined due to a reduced marketing spend in India on
account of short term cash conservation efforts.

Other income (expense)

Interest income. Interest income for the nine months ended September 30, 2007 was $4.9 million, a decrease of 44.5% compared with
$8.8 million in the nine months ended September 30, 2006. This decrease was due to decreased average cash balances used for operations and a $50 million repayment as part of the restructuring of our Convertible Notes. See Note EDebt of the
financial statements.

Interest expense. Interest expense for the nine months ended September 30, 2007 and 2006 was
$7.7 million and $5.9 million respectively. On June 1, 2007, we completed a restructuring agreement with the holders of the $155 million Convertible Notes. Although the total debt has been reduced to $105 million, the refinanced debt
carries a higher interest rate. In addition, a portion of the interest expense is based on LIBOR + 6.5% thus our future interest expense will fluctuate accordingly.

Write-off of deferred debt issuance costs. Write-off of deferred debt issuance costs for the nine months ended September 30, 2007 was $11.5 million compared with no expense recorded in the nine months
ended September 30, 2006. This write-off was due to the recently completed debt restructuring agreement in 2007.

Other
expense. Other expense for the nine months ended September 30, 2007 was $0.4 million compared with $3.1 million of expense recorded in the nine months ended September 30, 2006. This decreased expense was primarily due to a
write-off of leasehold improvements in 2006 and foreign currency fluctuation adjustment under a contract where our payment obligation was denominated in Euros.

Income tax

During the nine months ending September 30, 2007, the Company recorded an income tax benefit of
$7.0 million compared to $36.7 million for the nine months ending September 30, 2006 due to an establishment



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of a valuation allowance against a portion of the U.S. loss. This benefit is the result of current period operating losses, certain foreign net operating
losses and a Section 162(m) limitation on deductibility of certain executive compensation.

LIQUIDITY AND CAPITAL RESOURCES

Overview

As of September 30, 2007, we had cash
and cash equivalents of $13.2 million, and marketable securities of $10.5 million. Cash and cash equivalents and marketable securities decreased $142.0 million during the nine months ended September 30, 2007. This decrease resulted from
$88.7 million used in operating activities, $122.1 million provided by investing activities, and $47.2 million used in financing activities. Cash flows used in operating activities of $88.7 million, includes the net loss of $123.5 million, and $18.9
million loss from working capital, offset in part by $53.7 million in non cash expenses included in net loss. Cash flows from investing activities of $122.1 million consisted mainly of $127.4 million in net sales of marketable securities, $1.7
million used for the purchase of property and equipment and $4.6 million used for purchase of satellite and related systems and $1.0 million realized from Restricted Cash and Investment. Cash flows used in financing activities of $47.2 million
mainly included the cash redemption of $50 million of Convertible Notes as part of the convertible debt restructuring, offset in part by proceeds from exercise of warrants and employee options. The net effect of foreign currency rate changes was
$0.6 million.

Historical sources of cash

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

IPO

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

XM Investment

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

Uses of Cash

Our cash used during the nine months ended September 30, 2007, consisted primarily of funding operating expenses and working capital, $16.3
million payment for an income tax obligation; interest payments of $6.8 million; $50 million repayment as part of the restructuring of our Convertible NotesSee Note EDebt of the financial statements, and $5.5 million in associated
restructuring, interest, and legal fees.

Future Operating Liquidity and Capital Resource Requirements

Normal operating and capital expenditures during the third quarter of 2007 amounted to $35.2 million for total cash spend of $142.8 million, leaving the
Company with total cash and cash equivalents, marketable securities, restricted cash and investments of about $28.5 million at September 30, 2007.

We currently intend to use existing cash reserves mainly to execute our business plans. The focus of our execution includes continuing to build towards the launch of mobile services in Italy and the Middle East. For
the



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remainder of 2007, we contemplate funding business development and technology related expenses geared towards a service launch in Italy in late 2008 or early
2009; for the Middle East, in first quarter 2008, we anticipate minimal technology-related and other expenditures for a service launch in Bahrain; and for China, other European markets and other selected markets within our coverage areas, it
includes limited business development expenses.

We continue to review our business plan for potential modifications that could result in
the reduction of cash expenditures for the remainder of 2007.

Our financial projections are based on assumptions which we believe are
reasonable but contain significant uncertainties. Based upon our current plans, though challenging, if we are able to reduce our cash expenditures for the remainder of 2007, we estimate that our cash, cash equivalents and marketable securities will
be sufficient to cover our estimated funding needs for the remainder 2007.

With a view to increasing future operating liquidity and
augment its capital resources, the Company is currently in discussions to raise additional funds.

We regularly evaluate our plans and
strategy. These evaluations may result in changes to our plans and strategy, some of which may be material and significantly change our cash requirement. Our business plan is based on estimates regarding expected future costs and expected revenue.
Our costs may exceed or our revenues may fall short of our estimates, our estimates may change, and future developments may affect our estimates. Furthermore, we will require a significant amount of additional cash to fully launch our business in
Western Europe and China, subject to receipt of regulatory approvals, and fund the cost to modify and launch our spare satellite. In addition, a principal amount of $27.5 million of the senior secured notes that was issued as part of the convertible
note restructuring will be repayable on May 31, 2008. We will require additional financing in 2007 to continue implementing our current business plan. However, there can be no assurance that we will be successful in securing financing or that
it will be available to us at attractive terms.

Management believes that the Company has access to capital resources through possible
public or private equity offerings or debt financings and the Company is currently in discussions to raise additional funds. However, it has not secured any commitment for new financing at this time nor can it provide any assurance that new
financing will be available on commercially acceptable terms, if at all. If the Company is unable to secure additional capital, it will be required to curtail its operations, and if these measures fail, it may not be able to continue its business.

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

Under the terms of the senior secured notes and amended and restated convertible notes we issued as part of the convertible note restructuring, we may
incur secured indebtedness of up to $105 million (less any amounts outstanding under the senior secured notes) of senior secured first priority indebtedness. We may borrow up to $100 million (less any amounts outstanding under the amended and
restated convertible notes) of senior secured second priority indebtedness which is pari passu with the amended and restated convertible notes and unlimited unsecured debt, as long as such debt has a maturity date that is at least 91 days after the
maturity date of the amended and restated convertible notes. We will be required to repay any outstanding principal of the senior secured notes from new equity or debt financing, certain excess cash flow or the cash proceeds of asset sales and
casualty events, subject to customary exceptions. We are not permitted to make any mandatory or optional prepayment on debt, (other than permitted first priority secured debt) while the amended and restated convertible notes are outstanding.



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Capital Expenditures

We have spent approximately $754 million on capital expenditures related to the development and launch of our satellites, for our ground systems and for property and equipment. We may spend additional amounts to
enhance our infrastructure with terrestrial repeaters depending on licenses and business requirement, if supported by an appropriate business model and funding of such projects. Over the next 12 months, we also anticipate technology and terrestrial
repeater development expenses associated with rolling out our services in Italy. We estimate those expenses to be approximately $45 million beginning in 2008. We expect to start our terrestrial repeater network build-out in key metropolitan areas in
India in 2008, assuming we obtain the necessary regulatory approvals. We currently estimate those costs to be approximately $20 million over the next few years. These amounts will need to be reviewed as we conduct actual testing, including further
topographical analysis. We also expect to start our terrestrial repeater build out in Bahrain; however we do not expect this cost to be significant. Until we receive the final approvals from Chinas regulatory agencies, we will not start the
build-out of a terrestrial repeater network in China. Our future capital expenditures will depend on our business strategy and our response to business opportunities and trends in our industry and our markets.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency

As a global company, we are exposed to foreign currency risks that arise from normal business operations. These risks include the translation of local
currency balances of our foreign subsidiaries, inter-company balances between subsidiaries that operate in different functional currencies and transactions with customers, suppliers and employees that are denominated in foreign currencies. Our
objective is to minimize our exposure to these risks through our normal operating activities and, where appropriate, to have these transactions denominated in United States dollars. For the nine months ended September 30, 2007, approximately
78% of our total revenues and 26% of total operating expenses were denominated in foreign currencies. The following table shows approximately the split of these foreign currency exposures by principal currency:



|                                                                                     |  |                           |   |  |             |   |  |                    |   |  |       |   |  |                |  
|------------------------------------------------------------------------------------ |  | ------------------------- | - |  | ----------- | - |  | ------------------ | - |  | ----- | - |  | -------------- | -
|                                                                                     |  | Foreign Currency Exposure |   |  |             |   |  |                    |  
|                                                                                     |  | Euro                      |   |  | IndianRupee |   |  | South AfricanRands |   |  | Other |   |  | Total Exposure |  
|Total Revenues (nine months ended September 30, 2007)                                |  | 10                        | % |  | 78          | % |  | 8                  | % |  | 4     | % |  | 100            | %
|                                                                                     |  |                           |   |  |            
|Total Cost of Revenues and Operating Expenses (nine months ended September 30, 2007) |  | 15                        | % |  | 55          | % |  | 6                  | % |  | 24    | % |  | 100            | %

For the nine months ended September 30, 2006, approximately 56% of our total revenues and 23%
of our total operating expenses were denominated in foreign currencies.

Interest Rates

As a result of the Companys restructuring agreement noted in Note E  Debt, a portion of the interest expense on the senior secured debt for
the period ending September 30, 2007, is based on LIBOR, which will fluctuate in the future. Prior to June 1, 2007, the Companys market risk from changes in interest rates was not material because our long-term debt only included
Convertible Notes which had a fixed interest rate.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures that have been
designed to ensure that information related to the Company is recorded, processed, summarized and reported on a timely basis. The Company has



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established a Disclosure Committee that is responsible for accumulating potentially material information regarding the Companys activities and
considering the materiality of this information. The Disclosure Committee is also responsible for making recommendations regarding disclosure and communicating this information to our Chief Executive Officer and Chief Financial Officer to allow
timely decisions regarding required disclosure. The Companys Disclosure Committee comprises our senior legal official, chief financial officer, chief operating officer, chief accounting officer, head of internal audit and certain other members
of the Companys finance department.

Evaluation of the Companys disclosure controls and procedures. An evaluation
was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and
procedures as of the end of the period covered by this Quarterly Report on Form 10-Q, as required by Rule 13a-15 of the Securities Exchange Act of 1934. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that
these disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting. The Company has
instituted control improvements, including a greater level of internal control consciousness. In addition, during the quarter ended September 30, 2007, the Company added further controls by implementing additional review procedures over the
selection, application and monitoring of appropriate accounting policies, and increasing oversight of its overseas subsidiaries. There have been no additional changes in our respective internal control over financial reporting during the quarter
ended September 30, 2007, that have materially affected, or are reasonably likely to materially affect, our respective internal control over financial reporting.



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Part IIOther Information

Item 1. Legal Proceedings

As disclosed in the Companys Annual Report on Form 10-K for the year ended
December 31, 2006, securities class action litigation suits were filed in the United States District Court for the Southern District of New York on behalf of persons who purchased or otherwise acquired the Companys publicly traded
securities. The lawsuits were filed against the Company, Noah A. Samara, President and Chief Executive Officer, Sridhar Ganesan, Chief Financial Officer, Cowen & Co. LLC, and UBS Securities LLC. The complaints (all similar) allege
violations of Sections 11, 12(a)2, and 15 of the Securities Act of 1933. The complaints have been consolidated and on August 9, 2007, an amended complaint was filed. The complaint alleges that certain customers were incorrectly counted as
subscribers after they had ceased to be paying subscribers. The Company is vigorously defending against these claims.

Item 1A. Risk Factors

Not applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Not applicable.

(b) Use of proceeds.

On
August 9, 2005, the Company completed its initial public offering of Class A Common Stock. As of September 30, 2007, the Company held approximately $28.5 million of the net proceeds from the offering, of which $10.5 million are
invested in short-term marketable securities and money market instruments and $18.0 million are held as demand deposits and restricted cash with various banks. The Company has utilized $192.5 million of the net proceeds towards the following
expenditures:

(1) Capital expenditures to an extent of $11.5 million;

(2) Income taxes to an extent of $19.6 million;

(3) Sales and marketing expenditures to an extent of $19.3 million;

(4) Cost of goods sold, general and administrative expenses
to an extent of $87.9 million; and

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

(c) Not applicable.

Item 3. Defaults Upon Senior Securities

(a) Not applicable.

(b) Not applicable.

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

Not applicable.



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Item 5. Other Information

(a) Not applicable.

(b) Not applicable.

Item 6. Exhibits



|     |  |                                                                                                                                                
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|10.1 |  | Cooperation Agreement, dated as of July 16, 2007, between Fiat Group Automobiles S.p.A., WorldSpace Italia S.p.A. and WorldSpace, Inc.*        
|     | 
|31.1 |  | Certification of the Chief Executive Officer of WorldSpace, Inc. pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
|     | 
|31.2 |  | Certification of the Chief Financial Officer of WorldSpace, Inc. pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
|     | 
|32.1 |  | Certification of the Chief Executive Officer of WorldSpace, Inc. pursuant to Section 906 of Sarbanes-Oxley Act of 2002.                        
|     | 
|32.2 |  | Certification of the Chief Financial Officer of WorldSpace, Inc. pursuant to Section 906 of Sarbanes-Oxley Act of 2002.                        

---

|* | A portion of this Exhibit was omitted and has been filed separately with the Secretary of the Commission pursuant to the Companys application requesting confidential treatment
thereof.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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SIGNATURES

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



WORLDSPACE, INC. (Registrant)By:

/S/ NOAH A. SAMARANoah A. Samara Chairman, Chief Executive Officer and President/S/ SRIDHAR
GANESANSridhar Ganesan Executive Vice PresidentChief Financial Officer


Dated: November 13, 2007



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EXHIBIT INDEX



|            |  |                                                                                                                                                
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  |                                                                                                                                                
|            | 
|10.1        |  | Cooperation Agreement, dated as of July 16, 2007, between Fiat Group Automobiles S.p.A., WorldSpace Italia S.p.A. and WorldSpace, Inc.*        
|            | 
|31.1        |  | Certification of the Chief Executive Officer of WorldSpace, Inc. pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
|            | 
|31.2        |  | Certification of the Chief Financial Officer of WorldSpace, Inc. pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
|            | 
|32.1        |  | Certification of the Chief Executive Officer of WorldSpace, Inc. pursuant to Section 906 of Sarbanes-Oxley Act of 2002                         
|            | 
|32.2        |  | Certification of the Chief Financial Officer of WorldSpace, Inc. pursuant to Section 906 of Sarbanes-Oxley Act of 2002                         

---

|* | A portion of this Exhibit was omitted and has been filed separately with the Secretary of the Commission pursuant to the Companys application requesting confidential treatment
thereof.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



35