<PAGE>
================================================================================


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

                                    FORM 10-K

(Mark One)

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

                                       OR

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

            For the transition period from __________ to ___________.

                        Commission file number: 333-31929

                            ECHOSTAR DBS CORPORATION
             (Exact name of registrant as specified in its charter)

<Table>
<S>                                                                     <C>
                           COLORADO                                                    84-1328967
(State or other jurisdiction of incorporation or organization)           (I.R.S. Employer Identification No.)
</Table>


<Table>
<S>                                                                     <C>
                    5701 S. SANTA FE
                   LITTLETON, COLORADO                                                   80120
        (Address of principal executive offices)                                       (Zip Code)
</Table>

       Registrant's telephone number, including area code: (303) 723-1000

        Securities registered pursuant to Section 12(b) of the Act: None

        Securities registered pursuant to Section 12(g) of the Act: None


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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

         As of March 20, 2002, the Registrant's outstanding Common stock
consisted of 3,000 shares of Common Stock, $0.01 par value.

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS (I)(1)(a)
AND (b) OF FORM 10-K AND IS THEREFORE FILING THIS ANNUAL REPORT ON FORM 10-K
WITH THE REDUCED DISCLOSURE FORMAT.


                       DOCUMENTS INCORPORATED BY REFERENCE

         The following documents are incorporated into this Form 10-K by
reference:

         None

================================================================================


<PAGE>




                                TABLE OF CONTENTS


<Table>
<S>                                                                                                             <C>
                                                       PART I

     Item 1.   Business......................................................................................     2
     Item 2.   Properties....................................................................................     3
     Item 3.   Legal Proceedings.............................................................................     4
     Item 4.   Submission of Matters to a Vote of Security Holders...........................................     *

                                                       PART II

     Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters.........................     9
     Item 6.   Selected Financial Data.......................................................................     *
     Item 7.   Management's Narrative Analysis of Results of Operations......................................     9
     Item 7A.  Quantitative and Qualitative Disclosures About Market Risk....................................    17
     Item 8.   Financial Statements and Supplementary Data...................................................    18
     Item 9.   Changes In and Disagreements with Accountants on Accounting and Financial Disclosure..........    18

                                                      PART III

     Item 10.  Directors and Executive Officers of the Registrant............................................     *
     Item 11.  Executive Compensation........................................................................     *
     Item 12.  Security Ownership of Certain Beneficial Owners and Management................................     *
     Item 13.  Certain Relationships and Related Transactions................................................     *

                                                       PART IV

     Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K...............................    19

                 Signatures..................................................................................    22
                 Index to Financial Statements...............................................................   F-1
</Table>





* This item has been omitted pursuant to the reduced disclosure format as set
forth in General Instructions (I)(1)(a) and (b) of Form 10-K.



<PAGE>





                 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

         We make "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 throughout this document. Whenever you
read a statement that is not simply a statement of historical fact (such as when
we describe what we "believe," "expect" or "anticipate" will occur, and other
similar statements), you must remember that our expectations may not be correct,
even though we believe they are reasonable. We do not guarantee that the
transactions and events described in this document will happen as described or
that they will happen at all. You should read this document completely and with
the understanding that actual future results may be materially different from
what we expect. Whether actual results will conform with our expectations and
predictions is subject to a number of risks and uncertainties. The risks and
uncertainties include, but are not limited to: EchoStar Communications
Corporation's proposed merger with Hughes Electronics Corporation may not occur
as a result of: (1) the failure to obtain necessary Internal Revenue Service,
which is referred to as the IRS, tax rulings, antitrust clearance, Federal
Communications Commission, or FCC, approval or the requisite approval from
General Motors' stockholders, (2) shareholder litigation challenging the merger,
or (3) the failure to satisfy other conditions; while we need substantial
additional financing, we are highly leveraged and subject to numerous
constraints on our ability to raise additional debt; we may incur unanticipated
costs in connection with the Hughes merger financing or any refinancings we must
undertake or consents we must obtain to enable us to consummate the Hughes
merger; regulatory authorities may impose burdensome terms on us as a condition
of granting their approval of the Hughes, and legislative and regulatory
developments may create unexpected challenges for us; we may not realize the
benefits and synergies we expect from, and may incur unanticipated costs with
respect to, the Hughes merger due to delays, burdensome conditions imposed by
regulatory authorities, difficulties in integrating the businesses or
disruptions in relationships with employees, customers or suppliers; we are
party to various lawsuits which, if adversely decided, could have a significant
adverse impact on our business; we may be unable to obtain patent licenses from
holders of intellectual property or redesign our products to avoid patent
infringement; we may be unable to obtain needed retransmission consents, FCC
authorizations or export licenses; the regulations governing our industry may
change; our satellite launches may be delayed or fail, our satellites may fail
prematurely in orbit, we currently do not have traditional commercial insurance
covering losses incurred from the failure of launches and/or satellites; and we
may be unable to settle outstanding claims with insurers; weakness in the global
economy may harm our business generally, and adverse local political or economic
developments may occur in some of our markets; service interruptions arising
from technical anomalies on some satellites, or caused by war, terrorist
activities or natural disasters, may cause customer cancellations or otherwise
harm our business; we face intense and increasing competition from the cable
television industry, new competitors may enter the subscription television
business, and new technologies may increase competition; DISH Network subscriber
growth may decrease; subscriber turnover may increase; and subscriber
acquisition costs may increase; sales of digital equipment and related services
to international direct-to-home service providers may decrease; future
acquisitions, business combinations, strategic partnerships and divestitures may
involve additional uncertainties; the September 11, 2001 terrorist attacks and
changes in international political conditions as a result of these events may
continue to affect the U.S. and the global economy and may increase other risks;
and we may face other risks described from time to time in periodic reports we
file with the Securities and Exchange Commission. All cautionary statements made
herein should be read as being applicable to all forward-looking statements
wherever they appear. In this connection, investors should consider the risks
described herein and should not place undue reliance on any forward-looking
statements.

                                     PART I

         In this document, the words "we," "our," and "us" refer to EchoStar DBS
Corporation and its subsidiaries, unless the context otherwise requires. "EBC"
refers to our parent company, EchoStar Broadband Corporation and its
subsidiaries. EchoStar Communications Corporation, is referred to herein as
"ECC" or, together with ECC's subsidiaries, as "EchoStar". "General Motors" or
"GM" refers to General Motors Corporation and "Hughes" refers to Hughes
Electronics Corporation, or a holding company that is expected to be formed to
hold all of the stock of Hughes, in each case including their respective
subsidiaries, unless the context otherwise requires.




                                       1
<PAGE>



ITEM 1. BUSINESS

BRIEF DESCRIPTION OF BUSINESS

         We are a wholly-owned subsidiary of EchoStar Broadband Corporation or
EBC, which is a wholly-owned subsidiary of EchoStar Communications Corporation
or ECC, a publicly traded company on the Nasdaq National Market under the symbol
"DISH". During March 1999, ECC placed ownership of all of its direct broadcast
satellites and related FCC licenses into subsidiaries of EchoStar Broadband
Corporation. During September 2000, EBC was formed for the purpose of issuing
new debt. In connection with the EBC debt offering, ECC contributed all of the
outstanding capital stock of its wholly-owned subsidiaries, EchoStar Orbital
Corporation and us, to EBC concurrent with the closing of the offering. The
accompanying financial statements retroactively reflect these reorganizations.

         Unless otherwise stated, or the context otherwise requires, references
to ECC shall include all of its direct and indirect wholly-owned subsidiaries.
We refer readers of this report to ECC's Annual Report for the year ended
December 31, 2001. Substantially all of our operations are conducted by
subsidiaries. We operate two business units:

         o   The DISH Network -- a direct broadcast satellite subscription
             television service, which we refer to as DBS, in the United States.
             As of December 31, 2001, we had approximately 6.83 million DISH
             Network subscribers; and

         o   EchoStar Technologies Corporation -- engaged in the design,
             development, distribution and sale of DBS set-top boxes, antennae
             and other digital equipment for the DISH Network, which we refer to
             as EchoStar receiver systems, and the design, development and
             distribution of similar equipment for international satellite
             service providers, which we refer to as DTH.

RECENT DEVELOPMENTS

THE PROPOSED MERGER WITH HUGHES

         On October 28, 2001, ECC signed definitive agreements with Hughes and
General Motors, which is Hughes' parent corporation relating to ECC's merger
with Hughes in a stock-for-stock transaction. Hughes, through its DIRECTV
subsidiary, is a provider of satellite-based entertainment information and
communications services for the home and business markets, including video,
data, voice, multimedia and Internet services, including DBS services.

         The following description of the Hughes merger and related transactions
summarizes the terms of a series of detailed agreements. ECC filed copies of
these agreements with the Securities and Exchange Commission on October 31, 2001
on a Current Report on Form 8-K. A more detailed description of the Hughes
merger and related transactions is contained within an information statement on
Schedule 14C of ECC, which we refer to as the EchoStar information statement,
which was filed by ECC with the SEC on March 18, 2002. ECC expects to distribute
the information statement to its common stockholders this summer. You may read
and copy any document that we file at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to you free of charge at the SEC's website at
http://www.sec.gov.

         The surviving corporation in the merger will carry the EchoStar name
and will provide DBS services in the United States and Latin America, primarily
under the DIRECTV brand name. It will also provide global fixed satellite
services and other broadband communication services. The merger is subject to
the prior separation of Hughes from GM by way of a recapitalization of Hughes
and split-off of Hughes from GM. As a result of these transactions, the Hughes
holding company would become an independent, publicly owned company, separate
from GM. This is a condition to our obligation to complete the merger.
Immediately following the Hughes split-off, the businesses of Hughes and
EchoStar would be combined in the merger. Pursuant to the merger, we would merge
with and into the Hughes holding company to form New EchoStar.




                                       2
<PAGE>

         The proposed transaction also is subject to anti-trust clearance and
approval by the Federal Communications Commission. In addition, the transaction
is contingent upon the receipt of a favorable ruling from the IRS that the
separation of Hughes from GM will be tax-free to GM and its stockholders for
U.S. federal income tax purposes and are subject to various other conditions.
While there can be no assurance, the transactions are currently expected to
close in the second half of 2002.

         The Hughes merger agreement requires that EchoStar use commercially
reasonable efforts to: 1) amend the indentures relating to certain of EchoStar's
debt instruments so that the Hughes merger and related transactions would not
constitute a change of control requiring EchoStar to make an offer to repurchase
those notes, 2) obtain additional committed financing, on terms reasonably
satisfactory to Hughes, sufficient to refinance the notes outstanding under the
indentures which EchoStar is unable to amend, or 3) present to Hughes a plan,
taking into account prevailing market conditions for the relevant notes,
designed so that at and after the effective time of the Hughes merger, the
surviving corporation and its subsidiaries would not be in breach of their
obligations under those indentures. These consent fees could be material, and
EchoStar's financing costs may increase significantly as a result of obtaining
these consents or refinancing these notes.

Debt Exchange

         EBC, in connection with its September 2000 offering of $1 billion of
10 3/8% Seven Year Notes, agreed to cause EDBS to make an offer to exchange (the
"EDBS Exchange Offer") all of the outstanding 10 3/8% Seven Year Notes for a new
class of substantially identical notes issued by EDBS as soon as practical
following the first date (as reflected in EDBS' most recent quarterly or annual
financial statements) on which EDBS is permitted to incur indebtedness in an
amount equal to the outstanding principal balance of the 10 3/8% Seven Year
Notes under the "Indebtedness to Cash Flow Ratio" test contained in the
indentures (the "EDBS Indentures") governing the EDBS 9 1/4% Seven Year Notes
and 9 3/8% Ten Year Notes, and such incurrence of indebtedness would not
otherwise cause any breach or violation of, or result in a default under, the
terms of the EDBS Indentures.

         Pursuant to the terms of the EDBS indentures, the actual EDBS Exchange
offer will commence during the first half of 2002. However, because EDBS met the
required Indebtedness to Cash Flow Ratio test for the year ended December 31,
2001, accounting rules required that EDBS record indebtedness at December 31,
2001 in an amount equal to the outstanding principal balance of the 10 3/8%
Seven Year Notes, with an offsetting charge to stockholder's equity.

         Pursuant to the agreement between EBC and EDBS, the primary purpose of
the use of proceeds from the 10 3/8% Seven Year Notes is for the construction
and launch of additional satellites, strategic acquisitions and other general
working capital purposes which are intended, directly or indirectly, to benefit
the operations of EDBS and its subsidiaries. In addition, the aggregate benefit
received by EDBS from the use of proceeds of the 10 3/8% Seven Year Notes is
required to be equal to the aggregate principal balance of the 10 3/8% Seven
Year Notes exchanged. EBC currently expects that EDBS will receive this benefit
through contribution of the benefit of the EchoStar VII and EchoStar VIII
satellites by EBC to EDBS.

ITEM 2. PROPERTIES

         The following table sets forth certain information concerning our
material properties:

<Table>
<Caption>
                                                       SEGMENT(S) USING        APPROXIMATE
DESCRIPTION/USE/LOCATION                                   PROPERTY           SQUARE FOOTAGE      OWNED OR LEASED
----------------------------------------------------  --------------------  -------------------  -------------------

<S>                                                   <C>                   <C>                  <C>
Corporate headquarters and customer service
   center, Littleton, Colorado.....................           All                 156,000              Owned

EchoStar Technologies Corporation office and
   distribution center, Englewood, Colorado........           ETC                 155,000              Owned

EchoStar Technologies Corporation engineering
   offices, Englewood, Colorado....................           ETC                  57,200              Owned

Digital broadcast operations center, Cheyenne,
   Wyoming.........................................      DISH Network             144,000              Owned

Digital broadcast operations center, Gilbert,
   Arizona.........................................      DISH Network             120,000              Owned

Customer service center, McKeesport, Pennsylvania..      DISH Network             100,000              Leased

Customer service center, El Paso, Texas............      DISH Network             100,000              Owned

Customer service center, Christiansburg, Virginia..      DISH Network             100,000              Owned

Customer service center, Thornton, Colorado........      DISH Network              55,000              Owned

Customer service center, Bluefield, West Virginia..      DISH Network              51,000              Owned

Warehouse and distribution center, Atlanta, Georgia           ETC                 160,000              Leased

Warehouse and distribution center, Denver, Colorado           ETC                 132,800              Leased

Warehouse and distribution center, Sacramento,
   California......................................           ETC                  78,500              Owned

European headquarters and warehouse, Almelo, The
   Netherlands.....................................      ETC and Other             53,800              Owned
</Table>




                                       3
<PAGE>



ITEM 3. LEGAL PROCEEDINGS

Fee Dispute

         EchoStar had a contingent fee arrangement with attorneys who
represented EchoStar in prior litigation with The News Corporation, Ltd. The
contingent fee arrangement provides for the attorneys to be paid a percentage of
any net recovery obtained by EchoStar in the News Corporation litigation. The
attorneys asserted that they might be entitled to receive payments totaling
hundreds of millions of dollars under this fee arrangement. EchoStar
consistently maintained that the demand significantly overstated the amount to
which the attorneys might reasonably be entitled.

         During mid-1999, EchoStar initiated litigation against the attorneys in
the Arapahoe County, Colorado, District Court arguing that the fee arrangement
was void and unenforceable. In December 1999, the attorneys initiated an
arbitration proceeding before the American Arbitration Association. The
litigation was stayed while the arbitration proceeded. The arbitration hearing
concluded on October 11, 2001. During the four week arbitration hearing, the
attorneys presented a damage model for $56 million. EchoStar asserted even that
amount significantly overstated the amount to which the attorneys might
reasonably be entitled. During closing arguments, the attorneys presented a
separate damage calculation for $111 million to the arbitration panel.

         On November 7, 2001, the arbitration panel awarded the attorneys
approximately $40 million for its contingency fee under the fee agreement. In
the award, the arbitration panel also dismissed EchoStar's claims against the
attorneys that EchoStar had initiated in the Arapahoe County, Colorado, District
Court. Pursuant to the award, approximately $8 million was to be paid within 30
days of the award with the balance to be paid in equal quarterly principal
installments over four years, commencing February 1, 2002. Interest is to be
paid at the prime rate (calculated as the average amount for each relevant year
as published daily in the Wall Street Journal), compounded annually.

         On November 30, 2001, EchoStar filed a motion to vacate the award on
the following grounds: (1) the award as issued violates public policy and cannot
be enforced; and (2) the Panel exceeded its authority under Colorado Revised
Statutes Section 13-22-214(1)(a)(III). Alternatively, EchoStar requested that
the Arapahoe County District Court modify the award to correct a calculation
error. The attorneys have opposed EchoStar's motion to vacate. The motion
remains pending before the District Court in Arapahoe County, Colorado. There
can be no assurance that EchoStar will succeed in its effort to vacate or modify
the arbitration award.

WIC Premium Television Ltd.

         During July 1998, a lawsuit was filed by WIC Premium Television Ltd.,
an Alberta corporation, in the Federal Court of Canada Trial Division, against
General Instrument Corporation, HBO, Warner Communications, Inc., John Doe,
Showtime, United States Satellite Broadcasting Company, Inc., EchoStar, and two
of EchoStar's wholly-owned subsidiaries, Echosphere Corporation and Dish, Ltd.
EchoStar Satellite Corporation, EchoStar DBS Corporation, EchoStar Technologies
Corporation, and EchoStar Satellite Broadcast Corporation were subsequently
added as defendants. The lawsuit seeks, among other things, interim and
permanent injunctions prohibiting the defendants from activating receivers in
Canada and from infringing any copyrights held by WIC.

         During September 1998, WIC filed another lawsuit in the Court of
Queen's Bench of Alberta Judicial District of Edmonton against certain
defendants, including EchoStar. WIC is a company authorized to broadcast certain
copyrighted work, such as movies and concerts, to residents of Canada. WIC
alleges that the defendants engaged in, promoted, and/or allowed satellite dish
equipment from the United States to be sold in Canada and to Canadian residents
and that some of the defendants allowed and profited from Canadian residents
purchasing and viewing subscription television programming that is only
authorized for viewing in the United States. The lawsuit seeks, among other
things, interim and permanent injunctions prohibiting the defendants from
importing hardware into Canada and from activating receivers in Canada, together
with damages in excess of $175 million.

         The Court in the Alberta action recently denied EchoStar's Motion to
Dismiss, and EchoStar's appeal of such decision. The Court in the Federal action
has stayed that case pending the outcome of the Alberta action. The





                                       4
<PAGE>

case is now currently in discovery. EchoStar intends to vigorously defend the
suit. It is too early to make an assessment of the probable outcome of the
litigation or to determine the extent of any potential liability or damages.

Broadcast network programming

         Until July 1998, EchoStar obtained distant broadcast network channels
(ABC, NBC, CBS and FOX) for distribution to its customers through PrimeTime 24.
In December 1998, the United States District Court for the Southern District of
Florida entered a nationwide permanent injunction requiring PrimeTime 24 to shut
off distant network channels to many of its customers, and henceforth to sell
those channels to consumers in accordance with certain stipulations in the
injunction.

         In October 1998, EchoStar filed a declaratory judgment action against
ABC, NBC, CBS and FOX in the U.S. District Court for the District of Colorado.
EchoStar asked the court to enter a judgment declaring that its method of
providing distant network programming did not violate the Satellite Home Viewer
Act ("SHVA") and hence did not infringe the networks' copyrights. In November
1998, the networks and their affiliate groups filed a complaint against EchoStar
in Miami Federal Court alleging, among other things, copyright infringement. The
court combined the case that EchoStar filed in Colorado with the case in Miami
and transferred it to the Miami court. The case remains pending in Miami. While
the networks have not sought monetary damages, they have sought to recover
attorney fees if they prevail.

         In February 1999, the networks filed a "Motion for Temporary
Restraining Order, Preliminary Injunction and Contempt Finding" against DirecTV,
Inc. in Miami related to the delivery of distant network channels to DirecTV
customers by satellite. DirecTV settled this lawsuit with the networks. Under
the terms of the settlement between DirecTV and the networks, some DirecTV
customers were scheduled to lose access to their satellite-provided distant
network channels by July 31, 1999, while other DirecTV customers were to be
disconnected by December 31, 1999. Subsequently, PrimeTime 24 and substantially
all providers of satellite-delivered network programming other than EchoStar
agreed to this cut-off schedule, although EchoStar does not know if they adhered
to this schedule.

         In December 1998, the networks filed a Motion for Preliminary
Injunction against EchoStar in the Miami court, and asked the court to enjoin
EchoStar from providing network programming except under limited circumstances.
A preliminary injunction hearing was held on September 21, 1999. In March 2000,
the networks filed an emergency motion again asking the court to issue an
injunction requiring EchoStar to turn off network programming to certain of its
customers. At that time, the networks also argued that EchoStar's compliance
procedures violate the Satellite Home Viewer Improvement Act ("SHVIA"). EchoStar
opposed the networks' motion and again asked the court to hear live testimony
before ruling upon the networks' injunction request.

         During September 2000, the Court granted the Networks' motion for
preliminary injunction, denied the Network's emergency motion and denied
EchoStar's request to present live testimony and evidence. The Court's original
order required EchoStar to terminate network programming to certain subscribers
"no later than February 15, 1999," and contained other dates with which it would
be physically impossible to comply. The order imposes restrictions on EchoStar's
past and future sale of distant ABC, NBC, CBS and Fox channels similar to those
imposed on PrimeTime 24 (and, EchoStar believes, on DirecTV and others). Some of
those restrictions go beyond the statutory requirements imposed by the SHVA and
the SHVIA. For these and other reasons EchoStar believes the Court's order is,
among other things, fundamentally flawed, unconstitutional and should be
overturned. However, it is very unusual for a Court of Appeals to overturn a
lower court's order and there can be no assurance whatsoever that it will be
overturned.

         On October 3, 2000, and again on October 25, 2000, the Court amended
its original preliminary injunction order in an effort to fix some of the errors
in the original order. The twice amended preliminary injunction order required
EchoStar to shut off, by February 15, 2001, all subscribers who are ineligible
to receive distant network programming under the court's order. EchoStar
appealed the September 2000 preliminary injunction order and the October 3, 2000
amended preliminary injunction order. On November 22, 2000, the United States
Court of Appeals for the Eleventh Circuit stayed the Florida Court's preliminary
injunction order pending EchoStar's appeal. At that time, the Eleventh Circuit
also expedited its consideration of EchoStar's appeal.




                                       5
<PAGE>

         Oral argument before the Eleventh Circuit was held on May 24, 2001. On
September 17, 2001, the Eleventh Circuit vacated the District Court's nationwide
preliminary injunction, which the Eleventh Circuit had stayed in November 2000.
The Eleventh Circuit also rejected EchoStar's First Amendment challenge to the
SHVA. However, the Eleventh Circuit found that the District Court had made
factual findings that were clearly erroneous and not supported by the evidence,
and that the District Court had misinterpreted and misapplied the law. The
Eleventh Circuit also found that the District Court came to the wrong legal
conclusion concerning the grandfathering provision found in 17 U.S.C. ss.
119(d); the Eleventh Circuit reversed the District Court's legal conclusion and
instead found that this grandfathering provision allows subscribers who switch
satellite carriers to continue to receive the distant network programming that
they had been receiving. The Eleventh Circuit's order indicated that the matter
was to be remanded to the District Court for an evidentiary hearing. On December
28, 2001, the Eleventh Circuit denied EchoStar's request for rehearing. The
Eleventh Circuit issued its mandate on January 29, 2002, remanding the case to
the Florida District Court. Echostar cannot predict when an evidentiary hearing
will be set before the District Court or when a trial will be set before the
District Court if the Networks withdraw their request for a preliminary
injunction as they have indicated they will do when the case was remanded to the
District Court.

         EchoStar is considering an appeal to the United States Supreme Court.
If EchoStar decides to appeal, there is no guarantee that the United States
Supreme Court will agree to hear any petition filed or that EchoStar's appeal
will be heard before any evidentiary hearing or trial in the District Court.

         If, after an evidentiary hearing or trial, the District Court enters an
injunction against EchoStar, the injunction could force EchoStar to terminate
delivery of distant network channels to a substantial portion of its distant
network subscriber base, which could also cause many of these subscribers to
cancel their subscription to its other services. Management has determined that
such terminations would result in a small reduction in EchoStar's reported
average monthly revenue per subscriber and could result in a temporary increase
in churn. If EchoStar loses the case at trial, the judge could, as one of many
possible remedies, prohibit all future sales of distant network programming by
EchoStar, which would have a material adverse affect on EchoStar's business.

Gemstar

         During October 2000, Starsight Telecast, Inc., a subsidiary of
Gemstar-TV Guide International, Inc., filed a suit for patent infringement
against EchoStar and certain of its subsidiaries in the United States District
Court for the Western District of North Carolina, Asheville Division. The suit
alleges infringement of United States Patent No. 4,706,121 ("the `121 Patent")
which relates to certain electronic program guide functions. EchoStar has
examined this patent and believes that it is not infringed by any of its
products or services. EchoStar will vigorously defend against this suit. On
March 30, 2001, the court stayed the action pending resolution of the
International Trade Commission matter discussed below.

         In December 2000, EchoStar filed suit against Gemstar - TV Guide (and
certain of its subsidiaries) in the United States District Court for the
District of Colorado alleging violations by Gemstar of various federal and state
anti-trust laws and laws governing unfair competition. The lawsuit seeks an
injunction and monetary damages. Gemstar filed counterclaims alleging
infringement of United States Patent Nos. 5,923,362 and 5,684,525 that relate to
certain electronic program guide functions. EchoStar examined these patents and
believes they are not infringed by any of EchoStar's products or services. In
August 2001, the Federal Multi-District Litigation panel combined this suit, for
discovery purposes, with other lawsuits asserting antitrust claims against
Gemstar, which had previously been filed by other plaintiffs. In January 2002,
Gemstar dropped the counterclaims of patent infringement. Recently, the Court
denied Gemstar's Motion to Dismiss EchoStar's antitrust claims.

         In February 2001, Gemstar filed patent infringement actions against us
in District Court in Atlanta, Georgia and in the International Trade Commission
("ITC"). These suits allege infringement of United States Patent Nos. 5,252,066,
5,479,268 and 5,809,204 all of which relate to certain electronic program guide
functions. In addition, the ITC action alleges infringement of the `121 Patent
which is asserted in the North Carolina case. In the Atlanta District Court
case, Gemstar seeks damages and an injunction. The North Carolina and Atlanta
cases have been stayed pending resolution of the ITC action. ITC actions
typically proceed according to an expedited schedule. In December 2001, the ITC
held a 15-day hearing before an administrative judge. Prior to the hearing,
Gemstar dropped its allegations regarding Unites States Patent No. 5,252,066
with respect to which EchoStar had asserted substantial allegations of
inequitable conduct. The hearing addressed, among other things, Gemstar's
allegations of






                                       6
<PAGE>

patent infringement and respondents' (EchoStar, SCI, Scientific Atlanta and
Pioneer) allegations of patent misuse. A decision by the judge is expected by
March 21, 2002 and a final ruling by the full ITC is expected on or about June
21, 2002. While the ITC cannot award damages, an adverse decision in this case
could temporarily halt the import of EchoStar receivers and could require
EchoStar to materially modify certain user-friendly electronic programming
guides and related features EchoStar currently offers to consumers. EchoStar has
examined the patents in dispute and believes they are not infringed by any of
its products or services. EchoStar will vigorously contest the ITC, North
Carolina and Atlanta allegations of infringement and will, among other things,
challenge both the validity and enforceability of the asserted patents. EchoStar
is providing a defense and indemnification to SCI in the ITC and Atlanta cases
pursuant to the terms of their contract.

         During 2000, Superguide Corp. also filed suit against EchoStar, DirecTV
and others in the United States District Court for the Western District of North
Carolina, Asheville Division, alleging infringement of United States Patent Nos.
5,038,211, 5,293,357 and 4,751,578 which relate to certain electronic program
guide functions, including the use of electronic program guides to control VCRs.
Superguide seeks injunctive and declaratory relief and damages in an unspecified
amount. It is EchoStar's understanding that these patents may be licensed by
Superguide to Gemstar. Gemstar has been added as a party to this case and is now
asserting these patents against EchoStar. EchoStar has examined these patents
and believes that they are not infringed by any of its products or services. A
Markman ruling was issued by the Court and in response to that ruling EchoStar
has filed motions for summary judgment of non-infringement for each of the
asserted patents. Gemstar has filed a motion for summary judgment of
infringement with respect to the patents. EchoStar intends to vigorously defend
this case and to press its patent misuse defenses.

         In the event it is ultimately determined that EchoStar infringes on any
of the aforementioned patents EchoStar may be subject to substantial damages,
including the potential for treble damages, and/or an injunction that could
require EchoStar to materially modify certain user friendly electronic
programming guide and related features it currently offers to consumers. It is
too early to make an assessment of the probable outcome of the suits.

IPPV Enterprises

         IPPV Enterprises, LLC and MAAST, Inc. filed a patent infringement suit
against EchoStar, and its conditional access vendor Nagra, in the United States
District Court for the District of Delaware. The suit alleged infringement of
five patents. One patent was subsequently dropped by plaintiffs. Three of the
remaining patents disclose various systems for the implementation of features
such as impulse-pay-per view, parental control and category lock-out. The fourth
remaining patent relates to an encryption technique. The Court entered summary
judgment in our favor on the encryption patent. Plaintiffs had claimed $80
million in damages with respect to the encryption patent. On July 13, 2001, a
jury found that the remaining three patents were infringed and awarded damages
of $15 million. The jury also found that one of the patents was willfully
infringed which means that the judge is entitled to increase the award of
damages. The parties have completed briefing and oral argument of post-trial
motions. EchoStar intends to appeal any adverse decision and plaintiffs have
indicated they may appeal as well. Any final award of damages would be split
between EchoStar and Nagra in percentages to be agreed upon between EchoStar and
Nagra.

California Actions

         A purported class action was filed against EchoStar in the California
State Superior Court for Alameda County during May 2001 by Andrew A. Werby. The
complaint, relating to late fees, alleges unlawful, unfair and fraudulent
business practices in violation of California Business and Professions Code
Section 17200 et seq., false and misleading advertising in violation of
California Business and Professions Code Section 17500, and violation of the
California Consumer Legal Remedies Act. On September 24, 2001, EchoStar filed an
answer denying all material allegations of the Complaint. On September 27, 2001,
the Court entered an Order Pursuant to Stipulation for a provisional
certification of the class, for an orderly exchange of information and for
mediation. The provisional Order specifies that the class shall be de-certified
upon notice in the event mediation does not resolve the dispute. The matter was
mediated on March 11, 2002 and the mediation will continue until March 27, 2002.
It is too early in the litigation to make an assessment of the probable outcome
of the litigation or to determine the extent of any potential liability or
damages. EchoStar intends to deny all liability and to vigorously defend the
lawsuit.





                                       7
<PAGE>

         A purported class action relating to the use of terms such as "crystal
clear digital video," "CD-quality audio," and "on-screen program guide", and
with respect to the number of channels available in various programming
packages, has also been filed against EchoStar in the California State Superior
Court for Los Angeles County by David Pritikin and by Consumer Advocates, a
nonprofit unincorporated association. The complaint alleges breach of express
warranty and violation of the California Consumer Legal Remedies Act, Civil Code
ss.ss. 1750, et. seq., and the California Business & Professions Code ss.ss.
17500, 17200. EchoStar has filed an answer and the case is currently in
discovery. Plaintiffs filed their Motion for Class Certification on January 21,
2002 and EchoStar has filed its opposition. The Court will conduct a hearing on
class certification in early May 2002. It is too early in the litigation to make
an assessment of the probable outcome of the litigation or to determine the
extent of any potential liability or damages. EchoStar denies all liability and
intends to vigorously defend the lawsuit.

Retailer Class Actions

         EchoStar has been sued by retailers in three separate purported class
actions. In two separate lawsuits filed in the District Court, Arapahoe County,
State of Colorado and the United States District Court for the District of
Colorado, respectively, Air Communication & Satellite, Inc. and John DeJong, et.
al. filed lawsuits on October 6, 2000 on behalf of themselves and a class of
persons similarly situated. The plaintiffs are attempting to certify nationwide
classes allegedly brought on behalf of persons, primarily retail dealers, who
were alleged signatories to certain retailer agreements with EchoStar Satellite
Corporation. The plaintiffs are requesting the Courts to declare certain
provisions of the alleged agreements invalid and unenforceable, to declare that
certain changes to the agreements are invalid and unenforceable, and to award
damages for lost commissions and payments, charge backs, and other compensation.
EchoStar intends to vigorously defend against the suits and to assert a variety
of counterclaims. It is too early to make an assessment of the probable outcome
of the litigation or to determine the extent of any potential liability or
damages.

         Satellite Dealers Supply, Inc. filed a lawsuit in the United States
District Court for the Eastern District of Texas on September 25, 2000, on
behalf of itself and a class of persons similarly situated. The plaintiff is
attempting to certify a nationwide class on behalf of sellers, installers, and
servicers of satellite equipment who contract with EchoStar and claims the
alleged class has been "subject to improper chargebacks." The plaintiff alleges
that EchoStar: (1) charged back certain fees paid by members of the class to
professional installers in violation of contractual terms; (2) manipulated the
accounts of subscribers to deny payments to class members; and (3)
misrepresented to class members who own certain equipment related to the
provision of satellite television service. On September 18, 2001, the Court
granted EchoStar's Motion to Dismiss for lack of personal jurisdiction.
Plaintiff Satellite Dealers Supply has moved for reconsideration of the Court's
order dismissing the case.

PrimeTime 24 Joint Venture

         PrimeTime 24 Joint Venture filed suit against EchoStar during September
1998 alleging breach of contract, wrongful termination of contract, interference
with contractual relations, trademark infringement and unfair competition.
EchoStar's motion for summary judgment was granted with respect to PrimeTime
24's claim of interference with contractual relations and unfair competition.
Plaintiff's motion for summary judgment was granted with respect to its
approximate $10 million claim of breach of contract claim for fees during the
period from May 1998 through July 19, 1998. It is too early to make an
assessment of the probable outcome of the remainder of the litigation or to
determine the extent of any additional potential liability or damages.

Satellite Insurance

         In September 1998, EchoStar filed a $219.3 million insurance claim for
a constructive total loss under the launch insurance policies covering EchoStar
IV. The satellite insurance consists of separate substantially identical
policies with different carriers for varying amounts that, in combination,
create a total insured amount of $219.3 million. EchoStar's insurance carriers
offered it a total of approximately $88 million, or 40% of the total policy
amount, in settlement of the EchoStar IV insurance claim. The insurers offered
to pay only part of the $219.3 million claim because they allege EchoStar did
not abide by the exact terms of the insurance policy. The insurers also assert
that EchoStar IV was not a constructive total loss, as that term is defined in
the policy. EchoStar strongly disagrees and filed an arbitration claim against
the insurers for breach of contract, failure to pay a valid insurance claim and
bad faith denial of a valid claim, among other things. There can be no assurance
that EchoStar will receive





                                       8
<PAGE>

the amount claimed or, if EchoStar does, that EchoStar will retain title to
EchoStar IV with its reduced capacity. Based on the carriers' failure to pay the
amount EchoStar believes is owed under the policy and their improper attempts to
force EchoStar to settle for less than the full amount of its claim, EchoStar
has added causes of action in our EchoStar IV demand for arbitration for breach
of the duty of good faith and fair dealing, and unfair claim practices.
Additionally, EchoStar filed a lawsuit against the insurance carriers in the
U.S. District Court for the District of Colorado asserting causes of action for
violation of Federal and State antitrust laws. During March 2001, EchoStar
voluntarily dismissed its antitrust lawsuit without prejudice. EchoStar has the
right to re-file an antitrust action against the insurers in the future. With
respect to EchoStar's arbitration claims, EchoStar is hopeful they will be
resolved, and EchoStar believes it is probable that it will receive a
substantial portion of the benefits due.

         We are subject to various other legal proceedings and claims which
arise in the ordinary course of business. In the opinion of management, the
amount of ultimate liability with respect to those actions will not materially
affect our financial position or results of operations.

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         As of March 20, 2002, all 1,000 authorized, issued and outstanding
shares of our common stock were held by EchoStar. There is currently no
established trading market for our common stock.

         We have never declared or paid any cash dividends on our common stock
and do not expect to declare dividends in the foreseeable future. Payment of any
future dividends will depend upon our earnings and capital requirements, our
debt facilities, and other factors the Board of Directors considers appropriate.
We currently intend to retain our earnings, if any, to support future growth and
expansion. Our ability to declare dividends is affected by covenants in our debt
facilities.

ITEM 7. MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Year Ended December 31, 2001 Compared to the Year Ended December 31, 2000.

         Revenue. Total revenue for the year ended December 31, 2001 was $3.987
billion, an increase of $1.278 billion compared to total revenue for the year
ended December 31, 2000 of $2.709 billion. The increase in total revenue was
primarily attributable to continued DISH Network subscriber growth and higher
average revenue per subscriber. Assuming a continued slow economy, we expect
that our revenues will increase 20% to 25% in 2002 as the number of DISH Network
subscribers increases.

         DISH Network subscription television services revenue totaled $3.584
billion for the year ended December 31, 2001, an increase of $1.242 billion
compared to the same period in 2000. DISH Network subscription television
services revenue principally consists of revenue from basic, premium and
pay-per-view subscription television services. This increase was directly
attributable to continued DISH Network subscriber growth and higher average
revenue per subscriber. DISH Network added approximately 1.57 million net new
subscribers for the year ended December 31, 2001 compared to approximately 1.85
million net new subscriber additions during the same period in 2000. We believe
the reduction in net new subscribers for the year ended December 31, 2001
primarily resulted from the slowing economy and increased churn. As of December
31, 2001, we had approximately 6.83 million DISH Network subscribers compared to
approximately 5.26 million at December 31, 2000, an increase of approximately
30%. DISH Network subscription television services revenue will continue to
increase to the extent we are successful in increasing the number of DISH
Network subscribers and maintaining or increasing revenue per subscriber. While
there can be no assurance, notwithstanding our expectation of a continued slow
U.S. economy, we expect to end 2002 with more than 8 million DISH Network
subscribers.

         Monthly average revenue per subscriber was approximately $49.32 during
the year ended December 31, 2001 and approximately $45.33 during the same period
in 2000. The increase in monthly average revenue per subscriber is





                                       9
<PAGE>

primarily attributable to $1.00 price increases in both May 2000 and February
2001, the increased availability of local channels by satellite, the
introduction of our high-end America's Top 150 basic programming package during
April 2000, together with an increase in subscriber penetration in our higher
priced Digital Home Plans. This increase is also attributable to a change in
marketing promotions from 2000 to 2001. From August 2000 to January 31, 2001, we
marketed a promotion offering consumers free premium movie channels. Under this
promotion, all new subscribers who ordered certain qualifying programming
packages and any or all of our four premium movie packages between August 1,
2000 and January 31, 2001, received those premium movie packages free for three
months. This promotion had a negative impact on monthly average revenue per
subscriber during 2000 since no premium movie package revenue was received from
participating subscribers for the term of each participating subscriber's free
service. The increase from discontinuing our free premium movie channel
promotion was partially offset by the introduction of our I Like 9 promotion,
discussed below, during August 2001. While there can be no assurance, we expect
a modest increase in monthly average revenue per subscriber during 2002.

         Impacts from our litigation with the networks in Florida, new FCC rules
governing the delivery of superstations and other factors could cause us to
terminate delivery of distant network channels and superstations to a material
portion of our subscriber base, which could cause many of those customers to
cancel their subscription to our other services. Any such terminations could
result in a small reduction in average monthly revenue per subscriber and could
result in an increase in our percentage churn.

         Commencing January 1, 2002, we were required to comply with the
statutory requirement to carry all qualified over the air television stations by
satellite in any market where we carry any local network channels by satellite.
Any reduction in the number of markets we serve in order to comply with "must
carry" requirements for other markets would adversely affect our operations and
could result in a temporary increase in churn. While we believe we meet
statutory "must carry" requirements, the FCC could interpret or implement its
"must carry" rules in ways that may require us to reduce the number of markets
where we provide local service. In combination, these resulting subscriber
terminations would result in a small reduction in average monthly revenue per
subscriber and could increase our percentage churn.

         For the year ended December 31, 2001, DTH equipment sales and
integration services revenue totaled $267 million, an increase of $11 million
compared to the same period during 2000. DTH equipment sales consist of sales of
digital set-top boxes and other digital satellite broadcasting equipment to
international DTH service operators, sales of StarBand equipment and sales of
DBS accessories, including equipment upgrades. This increase in DTH equipment
sales and integration services revenue was primarily attributable to an increase
in sales of StarBand equipment and DBS accessories. This increase was partially
offset by a decrease in demand for digital set-top boxes from our two primary
international DTH customers.

         A significant portion of DTH equipment sales and integration services
revenues through 2001 resulted from sales to two international DTH providers,
Via Digital in Spain and Bell ExpressVu in Canada. For 2002, we have binding
purchase orders from Bell ExpressVu and we are actively trying to secure new
orders from Via Digital for delivery starting in the third quarter of 2002.
However, we cannot guarantee at this time that those negotiations will be
successful. In addition, our future revenue from the sale of DTH equipment and
integration services in international markets depends largely on the success of
these DTH operators and continued demand for our digital set-top boxes. As a
result of these factors, we expect total DTH equipment sales and integration
services revenue to decrease in 2002 compared to 2001. Although we continue to
actively pursue additional distribution and integration service opportunities
internationally, no assurance can be given that any such efforts will be
successful.

         DISH Network Operating Expenses. DISH Network operating expenses
totaled $1.771 billion during the year ended December 31, 2001, an increase of
$503 million or 40% compared to the same period in 2000. DISH Network operating
expenses represented 49% and 54% of subscription television services revenue
during the years ended December 31, 2001 and 2000, respectively. The increase in
DISH Network operating expenses in total was consistent with, and primarily
attributable to, the increase in the number of DISH Network subscribers. We
expect to continue to control costs and create operating efficiencies. While
there can be no assurance, we expect operating expenses as a percentage of
subscription television services revenue to remain near current levels during
2002. If we are successful in obtaining commercial launch and in-orbit
insurance, this expense to revenue ratio could increase.





                                       10
<PAGE>

         Subscriber-related expenses totaled $1.449 billion during the year
ended December 31, 2001, an increase of $468 million compared to the same period
in 2000. The increase in total subscriber-related expenses is primarily
attributable to the increase in DISH Network subscribers. Such expenses, which
include programming expenses, copyright royalties, residuals currently payable
to retailers and distributors, and billing, lockbox and other variable
subscriber expenses, represented 40% and 42% of subscription television services
revenues during the years ended December 31, 2001 and 2000, respectively. The
decrease in subscriber-related expenses as a percentage of subscription
television services revenue primarily resulted from our programming package
price increases during 2001. While there can be no assurance, we expect
subscriber-related expenses as a percentage of subscription television services
revenue to remain near current levels during 2002.

         Customer service center and other expenses principally consist of costs
incurred in the operation of our DISH Network customer service centers, such as
personnel and telephone expenses, as well as other operating expenses related to
our service and installation business. Customer service center and other
expenses totaled $285 million during the year ended December 31, 2001, an
increase of $34 million as compared to the same period in 2000. The increase in
customer service center and other expenses primarily resulted from increased
personnel and telephone expenses to support the growth of the DISH Network and
from operating expenses related to the expansion of our installation and service
business. Customer service center and other expenses totaled 8% of subscription
television services revenue during the year ended December 31, 2001, as compared
to 11% during the same period in 2000. The decrease in this expense to revenue
ratio primarily resulted from the on-going construction and start-up costs of
our fifth customer service center in Virginia and our sixth customer service
center in West Virginia during 2000, as well as increased operating efficiencies
during 2001. While there can be no assurance, we expect these expenses in total,
and as a percentage of subscription television services revenue, to remain near
current levels during 2002. These expenses and percentages could temporarily
increase in the future as additional infrastructure is added to meet future
growth. We continue to work to automate simple telephone responses, and intend
to increase Internet-based customer assistance in the future, in order to better
manage customer service costs.

         Satellite and transmission expenses include expenses associated with
the operation of our digital broadcast centers, contracted satellite telemetry,
tracking and control services, and commercial satellite launch and in-orbit
insurance premiums. Satellite and transmission expenses totaled $38 million
during the year ended December 31, 2001, a $2 million increase compared to the
same period in 2000. Satellite and transmission expenses totaled 1% and 2% of
subscription television services revenue during the year ended December 31, 2001
and 2000, respectively. We expect satellite and transmission expenses in total
and as a percentage of subscription television services revenue to increase in
the future as additional satellites or digital broadcast centers are placed in
service and to the extent we successfully obtain commercial launch and in-orbit
insurance.

         Cost of sales - DTH equipment and Integration Services. Cost of sales -
DTH equipment and integration services totaled $188 million during the year
ended December 31, 2001, a decrease of $9 million compared to the same period in
2000. Cost of sales - DTH equipment and integration services principally
includes costs associated with digital set-top boxes and related components sold
to international DTH operators and DBS accessories. The decrease in cost of
sales - DTH equipment and integration services principally resulted from a
decrease in sales of digital set-top boxes to our two primary international DTH
customers. Cost of sales - DTH equipment and integration services represented
70% and 77% of DTH equipment revenue, during the year ended December 31, 2001
and 2000, respectively. The decrease in this expense to revenue ratio primarily
resulted from an increase in sales of higher-margin DBS accessories during 2001.

         Marketing Expenses. Generally, under most promotions, we subsidize the
cost and installation of EchoStar receiver systems in order to attract new DISH
Network subscribers. Marketing expenses totaled $1.089 billion during the year
ended December 31, 2001 compared to $1.175 billion for the same period in 2000.
This decrease primarily resulted from a decrease in Subscriber promotion
subsidies - cost of sales as a result of higher penetration of our Digital Home
Plan promotion, pursuant to which certain equipment costs are capitalized, as
discussed below. This decrease was partially offset by an increase in subscriber
promotion subsidies - other due to increases in installation subsidies for
multiple receivers under the Digital Home Plan promotion and an increase in
advertising expense related to our 2001 marketing promotions, primarily our I
Like 9 promotion. Subscriber promotion subsidies - cost of sales includes the
cost related to EchoStar receiver systems distributed to retailers and other
distributors of our equipment. Subscriber promotion subsidies - other includes
net costs related to our free installation promotion and other





                                       11
<PAGE>

promotional incentives. Advertising and other expenses totaled $145 million and
$138 million during the year ended December 31, 2001 and 2000, respectively.

         During the year ended December 31, 2001, our marketing promotions
included our DISH Network One-Rate Plan, Bounty Programs, Free Now, I Like 9,
free installation program, and Digital Home Plan, which are described below.

         DISH Network One-Rate Plan, Bounty Programs, Free Now Promotion and I
Like 9. Under the DISH Network One-Rate Plan, consumers were eligible to receive
a rebate of up to $199 on the purchase of certain EchoStar receiver systems. To
be eligible for this rebate, we required a one-year commitment to our America's
Top 150 programming or our America's Top 100 CD programming package plus one
premium movie package (or equivalent additional programming). This promotion
expired on January 31, 2001.

         Under the Bounty Programs, qualified customers were eligible to receive
a free base-level EchoStar receiver system and free installation. To be eligible
for this program, a subscriber must have made a one-year commitment to subscribe
to a qualified programming package. Certain of these promotions expired on
January 31, 2001.

         From February through July 2001, we offered new subscribers a free
base-level EchoStar receiver system and free installation under our Free Now
promotion. To be eligible, a subscriber had to provide a valid major credit card
and make a one-year commitment to subscribe to either our America's Top 150
programming package or our America's Top 100 CD or DISH Latino Dos programming
package plus additional programming totaling at least $39.98 per month.
Subscriber acquisition costs were materially higher under this plan compared to
historical promotions.

         During August 2001, we commenced our I Like 9 promotion. Under this
promotion, subscribers who purchased an EchoStar receiver system for $199 or
higher, receive free installation and either our America's Top 100 CD or our
DISH Latino Dos programming package for $9 a month for the first year.
Subscriber acquisition costs are materially lower under this plan compared to
historical promotions. This promotion expired January 31, 2002.

         Our direct sales to consumers pursuant to our DISH Network One-Rate
Plan, Bounty Programs, Free Now promotion and I Like 9 fall under the scope of
EITF Issue No. 00-14, "Accounting for Certain Sales Incentives" ("EITF 00-14").
In accordance with EITF 00-14, we account for the rebate (substantively
equivalent to the return of a customer deposit) under our DISH Network One-Rate
Plan by establishing a liability equal to the amount of the rebate to be paid to
the customer upon receipt of the upfront payment from the subscriber and do not
recognize revenue for that amount. The return of the upfront payment received
from the customer is charged against such liability account when such amount is
paid back to the customer. We do not receive any up-front proceeds from
subscribers under Bounty Programs or the Free Now promotion. Programming revenue
under the I Like 9 promotion is recorded at the substantially discounted monthly
rate charged to the subscriber.

         Our dealer sales under our DISH Network One-Rate Plan, the Bounty
Programs, Free Now promotion and I Like 9 fall under the scope of EITF Issue No.
00-25, "Vendor Income Statement Characterization of Consideration Paid to a
Reseller of the Vendor's Products" ("EITF 00-25"). In accordance with the
consensus guidance for Issue 2 of EITF 00-25, "buydowns" should be characterized
as a reduction of revenue. As such, certain commissions paid to dealers are
recorded as a reduction of the net proceeds received by us from the dealers. We
also charge the equipment reimbursements paid under the Bounty Programs and the
Free Now promotion against the proceeds from the dealer. The rebate paid under
the One Rate Plan is treated similarly as a reduction of proceeds from the
dealer by analogy to lease inducements, which are also generally recognized as a
reduction of revenue.

         Free Installation. Under our free installation program all customers
who purchase an EchoStar receiver system from January 2000 through April 2000,
from May 24, 2000 to July 31, 2000 and from September 15, 2000 to the present,
are eligible to receive a free professional installation.

         Digital Home Plan. Our Digital Home Plan promotion, introduced during
July 2000, offers several choices to consumers, ranging from the use of one
EchoStar receiver system and our America's Top 100 CD or DISH Latino Dos
programming package for $36.99 per month, to providing consumers two or more
EchoStar receiver systems and our America's Top 150 programming package for
$50.99 to $60.99 per month. With each plan, consumers receive in-




                                       12
<PAGE>

home service, must agree to a one-year commitment and incur a one-time set-up
fee of $49.99, which through December 31, 2001, included the first month's
programming payment. For consumers who choose the Digital Home Plan with Dish
PVR, which includes the use of one or more EchoStar receiver systems, one of
which includes a built-in hard drive that allows viewers to pause and record
live programming without the need for videotape, the consumer will incur a
one-time set-up fee of $148.99. Since we retain ownership of equipment issued
pursuant to the Digital Home Plan promotion, equipment costs are capitalized and
depreciated over a period of four years. Although there can be no assurance as
to the ultimate duration of the Digital Home Plan promotion, we intend to
continue it through at least April 30, 2002.

         Generally, under most promotions, we subsidize the cost and
installation of EchoStar receiver systems in order to attract new DISH Network
subscribers. There is no clear industry standard used in the calculation of
subscriber acquisition costs. Our subscriber acquisition costs include
subscriber promotion subsidies - cost of sales, subscriber promotion subsidies -
other and DISH Network acquisition marketing expenses. During the year ended
December 31, 2001, our subscriber acquisition costs totaled approximately $1.074
billion, or approximately $395 per new subscriber activation. Since we retain
ownership of the equipment, amounts capitalized under our Digital Home Plan are
not included in our calculation of these subscriber acquisition costs, which
would be materially higher if we expensed rather than capitalized Digital Home
Plan equipment costs. Comparatively, our subscriber acquisition costs during the
year ended December 31, 2000 totaled $1.155 billion, or approximately $452 per
new subscriber activation. The decrease in our per new subscriber acquisition
cost primarily resulted from an increase in penetration of our Digital Home
Plans, the introduction of our I Like 9 promotion and an increase in direct
sales. Capital expenditures under our Digital Home Plan promotion totaled
approximately $338 million and $65.4 million for the years ended December 31,
2001 and 2000, respectively. While there can be no assurance, we expect per
subscriber acquisition costs for the year ended December 31, 2002 to be
consistent with per subscriber acquisition costs for the year ended December 31,
2001.

         Our subscriber acquisition costs, both in the aggregate and on a per
new subscriber activation basis, may materially increase to the extent that we
introduce other more aggressive promotions if we determine that they are
necessary to respond to competition, or for other reasons.

         General and Administrative Expenses. General and administrative
expenses totaled $362 million during the year ended December 31, 2001, an
increase of $128 million as compared to the same period in 2000. The increase in
G&A expenses was principally attributable to increased legal fees and personnel
expenses to support the growth of the DISH Network. G&A expenses represented 9%
of total revenue during the years ended December 31, 2001 and 2000. While there
can be no assurance, we expect G&A expenses as a percentage of total revenue to
remain near current levels in future periods.

         Non-cash, Stock-based Compensation. During 1999, we adopted an
incentive plan which provided certain key employees with incentives including
stock options. The payment of these incentives was contingent upon our
achievement of certain financial and other goals. We met certain of these goals
during 1999. Accordingly, during 1999 we recorded approximately $179 million of
deferred compensation related to post-grant appreciation of stock options
granted pursuant to the 1999 incentive plan. The related deferred compensation
will be recognized over the five-year vesting period. Accordingly, during the
years ended December 31, 2001 and 2000 we recognized $20 million and $51
million, respectively, under this performance-based plan. The remaining deferred
compensation of $25 million, which will be reduced by future forfeitures, if
any, will be recognized over the remaining vesting period.

         We report all non-cash compensation based on stock option appreciation
as a single expense category in our accompanying statements of operations. The
following table represents the other expense categories in our statements of
operations that would be affected if non-cash, stock-based compensation was
allocated to the same expense categories as the base compensation for key
employees who participate in the 1999 incentive plan:



                                       13
<PAGE>




<Table>
<Caption>
                                                                       DECEMBER 31,
                                                                   2000           2001
                                                               ------------   ------------
                                                                     (in thousands)
<S>                                                            <C>            <C>
Customer service center and other ..........................   $      1,744   $      1,767
Satellite and transmission .................................          3,061          1,115
General and administrative .................................         46,660         17,291
                                                               ------------   ------------
   Total non-cash, stock-based compensation ................   $     51,465   $     20,173
                                                               ============   ============
</Table>

         Options to purchase an additional 9.7 million shares are outstanding as
of December 31, 2001 and were granted at fair market value during 1999, 2000 and
2001 pursuant to a Long Term Incentive Plan. The weighted-average exercise price
of these options is $9.04. Vesting of these options is contingent on meeting
certain longer-term goals, which may be met upon the consummation of the
proposed merger with Hughes. However, as the achievement of these goals cannot
be reasonably predicted as of December 31, 2001, no compensation was recorded
during 1999, 2000 and 2001 related to these long-term options. We will continue
to evaluate the likelihood of achieving these long-term goals and will record
the related compensation at the time achievement of these goals becomes
probable. Such compensation, if recorded, could result in material non-cash
stock-based compensation expense in our statements of operations.

         Pre-Marketing Cash Flow. Pre-marketing cash flow is comprised of
EBITDA, as defined below, plus total marketing expenses. Pre-marketing cash flow
was $1.591 billion during the year ended December 31, 2001, an increase of $614
million or 63% compared to the same period in 2000. Pre-marketing cash flow was
adversely effected by a $30 million fourth quarter charge resulting from our
News Corp. attorney fee arbitration. Our pre-marketing cash flow as a percentage
of total revenue was approximately 40% during the year ended December 31, 2001
compared to 36% during the same period in 2000. We believe that pre-marketing
cash flow can be a helpful measure of operating efficiency for companies in the
DBS industry. While there can be no assurance, we expect pre-marketing cash flow
as a percentage of total revenue to remain at approximately 40% during 2002.

         Earnings Before Interest, Taxes, Depreciation and Amortization. EBITDA
is defined as operating income (loss) plus depreciation and amortization, and
non-cash, stock-based compensation. EBITDA was $502 million during the year
ended December 31, 2001, compared to negative $199 million during the same
period in 2000. This improvement in EBITDA was directly attributable to the
increase in the number of DISH Network subscribers and higher average revenue
per subscriber, resulting in recurring revenue which was large enough to support
the cost of new and existing subscribers, together with the introduction of our
Digital Home Plan in July 2000. Our calculation of EBITDA for the years ended
December 31, 2001 and 2000 does not include approximately $20 million and $51
million, respectively, of non-cash compensation expense resulting from
post-grant appreciation of employee stock options. In addition, EBITDA does not
include the impact of amounts capitalized under our Digital Home Plan of
approximately $65.4 million and $338 million during 2000 and 2001, respectively.
While there can be no assurance, we expect EBITDA to increase approximately 80%
to 100% in 2002 compared to 2001. As previously discussed, to the extent we
introduce new marketing promotions and our subscriber acquisition costs
materially increase, our EBITDA results will be negatively impacted because
subscriber acquisition costs are generally expensed as incurred.

         It is important to note that EBITDA and pre-marketing cash flow do not
represent cash provided or used by operating activities. EBITDA and
pre-marketing cash flow should not be considered in isolation or as a substitute
for measures of performance prepared in accordance with generally accepted
accounting principles.

         Depreciation and Amortization. Depreciation and amortization expenses
aggregated $266 million during the year ended December 31, 2001, a $91 million
increase compared to the same period in 2000. The increase in depreciation and
amortization expenses principally resulted from an increase in depreciation
related to the commencement of operation of EchoStar VI in October 2000 and
other depreciable assets, including Digital Home Plan equipment, placed in
service during late 2000 and 2001.

         Other Income and Expense. Other expense, net, totaled $183 million
during the years ended December 31, 2001 and 2000.




                                       14
<PAGE>

Year Ended December 31, 2000 Compared to the Year Ended December 31, 1999.

         Revenue. Total revenue for the year ended December 31, 2000 was $2.709
billion, an increase of $1.103 billion compared to total revenue for the year
ended December 31, 1999 of $1.606 billion. The increase in total revenue was
primarily attributable to DISH Network subscriber growth.

         DISH Network subscription television services revenue totaled $2.342
billion for the year ended December 31, 2000, an increase of $999 million
compared to the same period in 1999. This increase was directly attributable to
the increase in the number of DISH Network subscribers and higher average
revenue per subscriber. DISH Network added approximately 1.85 million net new
subscribers for the year ended December 31, 2000, an increase of approximately
26% compared to approximately 1.47 million net subscriber additions during 1999.
As of December 31, 2000, we had approximately 5.26 million DISH Network
subscribers compared to approximately 3.4 million at December 31, 1999, an
increase of 54%. Monthly average revenue per subscriber was approximately $45.33
during the year ended December 31, 2000 and approximately $42.71 during the same
period in 1999. The increase in monthly average revenue per subscriber is
primarily attributable to a $1.00 price increase in America's Top 100 CD, our
most popular programming package, during May 2000, the increased availability of
local channels by satellite together with the earlier successful introduction of
our America's Top 150 programming package.

         For the year ended December 31, 2000, DTH equipment sales and
integration services totaled $256 million, an increase of $78 million compared
to the same period during 1999. DTH equipment sales consist of sales of digital
set-top boxes and other digital satellite broadcasting equipment to
international DTH service operators and sales of DBS accessories. This increase
in DTH equipment sales and integration services revenue was primarily
attributable to an increase in international demand for digital set-top boxes as
compared to the same period during 1999.

         DISH Network Operating Expenses. DISH Network operating expenses
totaled $1.268 billion during the year ended December 31, 2000, an increase of
$530 million or 72% compared to the same period in 1999. DISH Network operating
expenses represented 54% and 55% of subscription television services revenue
during the years ended December 31, 2000 and 1999, respectively. The increase in
DISH Network operating expenses in total was consistent with, and primarily
attributable to, the increase in the number of DISH Network subscribers.

         Subscriber-related expenses totaled $981 million during the year ended
December 31, 2000, an increase of $400 million compared to the same period in
1999. Such expenses represented 42% and 43% of subscription television services
revenues during the years ended December 31, 2000 and 1999, respectively.

         Customer service center and other expenses totaled $251 million during
the year ended December 31, 2000, an increase of $134 million as compared to the
same period in 1999. The increase in customer service center and other expenses
primarily resulted from increased personnel and telephone expenses to support
the growth of the DISH Network and from operating expenses related to the
expansion of our installation and service business. Customer service center and
other expenses totaled 11% of subscription television services revenue during
the year ended December 31, 2000, as compared to 9% during the same period in
1999. The increase in this expense to revenue ratio primarily resulted from the
on-going construction and start-up costs of our fifth customer service center in
Virginia, our sixth customer service center in West Virginia, and the continued
build-out of our installation offices nationwide.

         Satellite and transmission expenses include expenses associated with
the operation of our digital broadcast center, contracted satellite telemetry,
tracking and control services, and satellite in-orbit insurance. Satellite and
transmission expenses totaled $36 million during the year ended December 31,
2000, a $4 million decrease compared to the same period in 1999. Satellite and
transmission expenses totaled 2% and 3% of subscription television services
revenue during the years ended December 31, 2000 and 1999, respectively.

         Cost of sales - DTH equipment and Integration Services. Cost of sales -
DTH equipment and integration services totaled $197 million during the year
ended December 31, 2000, an increase of $47 million compared to the same period
in 1999. This increase in cost of sales - DTH equipment and integration services
is consistent with the increase in DTH equipment sales and integration services
revenue. Cost of sales - DTH equipment and integration services represented 77%
and 84% of DTH equipment revenue, during the years ended December 31, 2000 and
1999, respectively. The higher margin was principally attributable to a $16.6
million loss provision recorded during 1999






                                       15
<PAGE>

primarily for component parts and purchase commitments related to our first
generation model 7100 set-top boxes, for which production was suspended in favor
of our second generation model 7200 set-top boxes.

         Marketing Expenses. Marketing expenses totaled $1.175 billion during
the year ended December 31, 2000, an increase of $433 million compared to the
same period in 1999. The increase in marketing expenses was primarily
attributable to an increase in subscriber promotion subsidies. Subscriber
promotion subsidies - cost of sales includes the cost related to EchoStar
receiver systems distributed to retailers and other distributors of our
equipment. Subscriber promotion subsidies - other includes net costs related to
our free installation promotion and other promotional incentives. Advertising
and other expenses totaled $138 million and $65 million during the years ended
December 31, 2000 and 1999, respectively.

         General and Administrative Expenses. General and administrative
expenses totaled $234 million during the year ended December 31, 2000, an
increase of $92 million as compared to the same period in 1999. The increase in
G&A expenses was principally attributable to increased personnel expenses to
support the growth of the DISH Network. G&A expenses represented 9% of total
revenue during the years ended December 31, 2000 and 1999.

         Non-cash, Stock-based Compensation. As a result of substantial
post-grant appreciation of stock options, during the years ended December 31,
2000 and 1999 we recognized $51 million and $61 million, respectively, of the
total remaining deferred stock-based compensation under the 1999 incentive plan.
The remainder will be recognized over the remaining vesting period.

         We report all non-cash compensation based on stock option appreciation
as a single expense category in our accompanying statements of operations. The
following table represents the other expense categories in our statements of
operations that would be affected if non-cash, stock-based compensation was
allocated to the same expense categories as the base compensation for key
employees who participate in the 1999 incentive plan:

<Table>
<Caption>
                                                                 DECEMBER 31,
                                                              1999           2000
                                                          ------------   ------------
                                                                (in thousands)
<S>                                                       <C>            <C>
Customer service center and other .....................   $      4,328   $      1,744
Satellite and transmission ............................          2,308          3,061
General and administrative ............................         54,424         46,660
                                                          ------------   ------------
   Total non-cash, stock-based compensation ...........   $     61,060   $     51,465
                                                          ============   ============
</Table>

         Pre-Marketing Cash Flow. Pre-marketing cash flow is comprised of EBITDA
plus total marketing expenses. Pre-marketing cash flow was $977 million during
the year ended December 31, 2000, an increase of 75% compared to the same period
in 1999. Our pre-marketing cash flow as a percentage of total revenue was 36% in
2000 compared to 35% in 1999. We believe that pre-marketing cash flow can be a
useful measure of operating efficiency for companies in the DBS industry.

         Earnings Before Interest, Taxes, Depreciation and Amortization. EBITDA
is defined as operating income (loss) plus depreciation and amortization, and
non-cash, stock-based compensation. EBITDA was negative $199 million during the
year ended December 31, 2000 compared to negative $182 million during the same
period in 1999. This decline in EBITDA principally resulted from an increase in
DISH Network marketing expenses primarily resulting from increased subscriber
additions. Our calculation of EBITDA for the years ended December 31, 2000 and
1999 does not include approximately $51 million and $61 million, respectively,
of non-cash compensation expense resulting from post-grant appreciation of
employee stock options. In addition, EBITDA does not include the impact of
amounts capitalized under our Digital Home Plan of approximately $65.4 million
during 2000.

         It is important to note that EBITDA and pre-marketing cash flow do not
represent cash provided or used by operating activities. EBITDA and
pre-marketing cash flow should not be considered in isolation or as a substitute
for measures of performance prepared in accordance with generally accepted
accounting principles.

         Depreciation and Amortization. Depreciation and amortization expenses
aggregated $175 million during the year ended December 31, 2000, a $65 million
increase compared to the same period in 1999. The increase in





                                       16
<PAGE>

depreciation and amortization expenses principally resulted from an increase in
depreciation related to the commencement of operation of EchoStar V in November
1999 and EchoStar VI in October 2000 and other depreciable assets placed in
service during 2000 and late 1999.

         Other Income and Expense. Other expense, net, totaled $183 million
during the year ended December 31, 2000, a decrease of $26 million compared to
the same period in 1999. This decrease primarily resulted from a loss on
disposal of assets during the year ended December 31, 1999 and a decrease in
interest expense during the year ended December 31, 2000.

EFFECTS OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

         In July 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 141, "Business Combinations," ("FAS 141"),
which is required to be adopted July 1, 2001. FAS 141 requires the purchase
method of accounting for all business combinations initiated after June 30,
2001. The application of FAS 141 has not had a material impact on our financial
position or results of operations.

         In July 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 142, "Goodwill and Other Intangible
Assets" ("FAS 142"), which requires goodwill and intangible assets with
indefinite useful lives to no longer be amortized but to be tested for
impairment at least annually. Intangible assets that have finite lives will
continue to be amortized over their estimated useful lives. The amortization and
non-amortization provisions of FAS 142 will be applied to all goodwill and
intangible assets acquired after June 30, 2001. Effective January 1, 2002, we
are required to apply all other provisions of FAS 142. We are currently
evaluating the potential impact, if any, the adoption of FAS 142 will have on
our financial position and results of operations.

         In August 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("FAS 144"), which is effective for
fiscal periods beginning after December 15, 2001 and interim periods within
those fiscal years. FAS 144 establishes an accounting model for impairment or
disposal of long-lived assets to be disposed. We are currently evaluating the
potential impact, if any, the adoption of FAS 144 will have on our financial
position and results of operation.

SEASONALITY

         Our revenues vary throughout the year. As is typical in the
subscription television service industry, our first six months generally produce
fewer new subscribers than the second half of the year. Our operating results in
any period may be affected by the incurrence of advertising and promotion
expenses that do not necessarily produce commensurate revenues in the short-term
until the impact of such advertising and promotion is realized in future
periods.

INFLATION

         Inflation has not materially affected our operations during the past
three years. We believe that our ability to increase the prices charged for our
products and services in future periods will depend primarily on competitive
pressures. We do not have any material backlog of our products.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

MARKET RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS

         As of December 31, 2001, our unrestricted cash, cash equivalents and
marketable investment securities had a fair value of approximately $128 million
which was invested in: (a) cash; (b) debt instruments of the U.S. Government and
its agencies; (c) commercial paper with an average maturity of less than one
year and rated in one of the four highest rating categories by at least two
nationally recognized statistical rating organizations; and (d) instruments with
similar risk characteristics to the commercial paper described above. The
primary purpose of these investing activities has been to preserve principal
until the cash is required to fund operations. Consequently, the size of this
portfolio fluctuates significantly as cash is raised and used in our business.




                                       17
<PAGE>

         The value of certain of the investments in this portfolio can be
impacted by, among other things, the risk of adverse changes in securities and
economic markets generally, as well as the risks related to the performance of
the companies whose commercial paper and other instruments we hold. However, the
high quality of these investments (as assessed by independent rating agencies),
reduces these risks. The value of these investments can also be impacted by
interest rate fluctuations. At December 31, 2001, all of our investments in this
category were in fixed rate instruments or money market type accounts. While an
increase in interest rates would ordinarily adversely impact the fair value of
fixed rate investments, we normally hold these investments to maturity.
Consequently, neither interest rate fluctuations nor other market risks
typically result in significant gains or losses to this portfolio. A decrease in
interest rates has the effect of reducing our future annual interest income from
this portfolio, since funds would be re-invested at lower rates as the
instruments mature. Over time, any net percentage decrease in interest rates
could be reflected in a corresponding net percentage decrease in our interest
income. As of December 31, 2001 our marketable securities portfolio balance was
approximately $128 million with an average annual interest rate of approximately
3.2%. A hypothetical 10% decrease in interest rates would result in a decrease
of approximately $410,000 in annual interest income.

         In accordance with generally accepted accounting principles, declines
in the fair market value of a marketable investment security which are estimated
to be "other than temporary" must be recognized in the statement of operations,
thus establishing a new cost basis for such investment. We evaluate our
marketable investment securities portfolio on a quarterly basis to determine
whether declines in the market value of these securities are other than
temporary. This quarterly evaluation consists of reviewing, among other things,
the fair value of our marketable investment securities compared to the carrying
value of these securities and any market and company specific factors related to
each security. Generally, absent specific factors to the contrary, declines in
the fair value of investments below cost basis for a period of less than six
months are considered to be temporary. Declines in the fair value of investments
for a period of six to nine months are evaluated on a case by case basis to
determine whether any company or market-specific factors exist which would
indicate that such declines are other than temporary. Declines in the fair value
of investments below cost basis for greater than nine months are considered
other than temporary and are recorded as charges to earnings, absent specific
factors to the contrary. We have recorded unrealized losses totaling
approximately $642,000 as of December 31, 2001.

         As of December 31, 2001, we estimated the fair value of our fixed-rate
debt and mortgages and other notes payable to be approximately $3.8 billion
using quoted market prices where available, or discounted cash flow analyses.
The interest rates assumed in such discounted cash flow analyses reflect
interest rates currently being offered for loans with similar terms to borrowers
of similar credit quality. The fair value of our fixed rate debt and mortgages
is affected by fluctuations in interest rates. A hypothetical 10% decrease in
assumed interest rates would increase the fair value of our debt by
approximately $166 million. To the extent interest rates increase, our costs of
financing would increase at such time as we are required to refinance our debt.
As of December 31, 2001, a hypothetical 10% increase in assumed interest rates
would increase our annual interest expense by approximately $36 million.

         We have not used derivative financial instruments for speculative
purposes. We have not hedged or otherwise protected against the risks associated
with any of our investing or financing activities.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Our Consolidated Financial Statements are included in this report
beginning on page F-1.

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

         None.



                                       18
<PAGE>



                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

   (a) The following documents are filed as part of this report:

<Table>
<Caption>
       (1) Financial Statements                                                                                PAGE
                                                                                                               ----

<S>                                                                                                            <C>
           Report of Independent Public Accountants..........................................................   F-2
           Consolidated Balance Sheets at December 31, 2000 and 2001.........................................   F-3
           Consolidated Statements of Operations and Comprehensive Loss for the years ended
              December 31, 1999, 2000 and 2001...............................................................   F-4
           Consolidated Statements of Changes in Stockholder's Deficit for the years ended
              December 31, 1999, 2000 and 2001...............................................................   F-5
           Consolidated Statements of Cash Flows for the years ended December 31, 1999, 2000
              and 2001.......................................................................................   F-6
           Notes to Consolidated Financial Statements........................................................   F-7
</Table>

       (2) Financial Statement Schedules

           None. All schedules have been included in the Consolidated Financial
           Statements or Notes thereto.

       (3) Exhibits


Exhibit No.       Description

         3.1(a)*  Articles of Incorporation of the Company (incorporated by
                  reference to Exhibit 3.4(a) to the Company's Registration
                  Statement on Form S-4, Registration No. 333-31929).

         3.1(b)*  Bylaws of the Company (incorporated by reference to Exhibit
                  3.4(b) to the Company's Registration Statement on Form S-4,
                  Registration No. 333-31929).

         4.1*     Indenture relating to the EchoStar DBS Corporation 9 1/4%
                  Senior Notes ("Seven Year Notes"), dated as of January 25,
                  1999, by and among EDBS, the Guarantors and U.S. Bank Trust
                  National Association, as trustee.(incorporated by reference to
                  Exhibit 4.1 to EDBS' Registration Statement on Form S-4,
                  Registration No. 333-71345).

         4.2*     Indenture relating to the EchoStar DBS Corporation 9 3/8%
                  Senior Notes ("Ten Year Notes"), dated as of January 25, 1999,
                  by and among EDBS, the Guarantors and U.S. Bank Trust National
                  Association, as trustee. (incorporated by reference to Exhibit
                  4.3 to EDBS' Registration Statement on Form S-4, Registration
                  No. 333-71345).

         4.3*     Registration Rights Agreement relating to the Seven Year Notes
                  by and among EDBS, the Guarantors and the parties named
                  therein. (incorporated by reference to Exhibit 4.5 to EDBS'
                  Registration Statement on Form S-4, Registration No.
                  333-71345).

         4.4*     Registration Rights Agreement relating to the Ten Year Notes
                  by and among EDBS, the Guarantors and the parties named
                  therein. (incorporated by reference to Exhibit 4.6 to EDBS'
                  Registration Statement on Form S-4, Registration No.
                  333-71345).

         4.5*     Indenture, relating to the EchoStar DBS Corporation 9 1/8%
                  Senior Notes Due 2009, dated as of December 28, 2001 between
                  EchoStar DBS Corporation and U.S. Bank Trust National
                  Association, as Trustee (incorporated by reference to Exhibit
                  4.17 to the Annual Report on Form 10-K of ECC for the year
                  ended December 31, 2001, Commission File No. 0-26176).



                                       19
<PAGE>


         4.6*     Registration Rights Agreement, relating to the EchoStar DBS
                  Corporation 9 1/8% Senior Notes Due 2009, dated as of December
                  28, 2001, by and among EchoStar DBS Corporation and Deutsche
                  Banc Alex. Brown, Inc., Credit Suisse First Boston
                  Corporation, Lehman Brothers Inc. and UBS Warburg LLC
                  (incorporated by reference to Exhibit 4.18 to the Annual
                  Report on Form 10-K of ECC for the year ended December 31,
                  2001, Commission File No.0-26176).

         10.1*    Key Employee Bonus Plan, dated as of January 1, 1994
                  (incorporated by reference to Exhibit 10.7 to the Registration
                  Statement on Form S-1 of Dish, Registration No. 33-76450).

         10.2*    Consulting Agreement, dated as of February 17, 1994, between
                  ESC and Telesat Canada (incorporated by reference to Exhibit
                  10.8 to the Registration Statement on Form S-1 of Dish,
                  Registration No. 33-76450).

         10.3*    Form of Satellite Launch Insurance Declarations (incorporated
                  by reference to Exhibit 10.10 to the Registration Statement on
                  Form S-1 of Dish, Registration No. 33-81234).

         10.4*    Dish 1994 Stock Incentive Plan (incorporated by reference to
                  Exhibit 10.11 to the Registration Statement on Form S-1 of
                  Dish, Registration No. 33-76450).

         10.5*    Form of Tracking, Telemetry and Control Contract between AT&T
                  Corp. and ESC (incorporated by reference to Exhibit 10.12 to
                  the Registration Statement on Form S-1 of Dish, Registration
                  No. 33-81234).

         10.6*    Manufacturing Agreement, dated as of March 22, 1995, between
                  Houston Tracker Systems, Inc. and SCI Technology, Inc.
                  (incorporated by reference to Exhibit 10.12 to the
                  Registration Statement on Form S-1 of Dish, Commission File
                  No. 33-81234).

         10.7*    Statement of Work, dated January 31, 1995 from ESC to Divicom
                  Inc. (incorporated by reference to Exhibit 10.14 to the
                  Registration Statement on Form S-1 of ECC, Registration No.
                  33-91276).

         10.8*    EchoStar 1995 Stock Incentive Plan (incorporated by reference
                  to Exhibit 10.16 to the Registration Statement on Form S-1 of
                  ECC, Registration No. 33-91276).

         10.9*    Satellite Construction Contract, dated as of July 18, 1996,
                  between EDBS and Lockheed Martin Corporation (incorporated by
                  reference to Exhibit 10.18 to the Quarterly Report on Form
                  10-Q of ECC for the quarter ended June 30, 1996, Commission
                  File No. 0-26176).

         10.10*   Confidential Amendment to Satellite Construction Contract
                  between DBSC and Martin Marietta, dated as of May 31, 1995
                  (incorporated by reference to Exhibit 10.14 to the
                  Registration Statement of Form S-4 of ECC, Registration No.
                  333-03584).

         10.11*   Agreement between HTS, ESC and ExpressVu Inc., dated January
                  8, 1997, as amended (incorporated by reference to Exhibit
                  10.18 to the Annual Report on Form 10-K of ECC for the year
                  ended December 31, 1996, as amended, Commission file No.
                  0-26176).

         10.12*   Amendment No. 9 to Satellite Construction Contract, effective
                  as of July 18, 1996, between Direct Satellite Broadcasting
                  Corporation, a Delaware corporation ("DBSC") and Martin
                  Marietta Corporation (incorporated by reference to Exhibit
                  10.1 to the Quarterly Report on Form 10-Q of ECC for the
                  quarterly period ended June 30, 1997, Commission File No.
                  0-26176).

         10.13*   Amendment No. 10 to Satellite Construction Contract, effective
                  as of May 31, 1996, between DBSC and Lockheed Martin
                  Corporation (incorporated by reference to Exhibit 10.2 to the
                  Quarterly Report on Form 10-Q of ECC for the quarterly period
                  ended June 30, 1997, Commission File No. 0-26176).





                                       20
<PAGE>

         10.14*   OEM Manufacturing, Marketing and Licensing Agreement, dated as
                  of February 17, 1998, by and among HTS, ESC and Philips
                  Electronics North America Corporation (incorporated by
                  reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q
                  of ECC for the quarterly period ended March 31, 1998,
                  Commission File No. 0-26176).

         10.15*   Licensing Agreement, dated as of February 23, 1998, by and
                  among HTS, ESC and VTech Communications Ltd. (incorporated by
                  reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q
                  of ECC for quarterly period ended March 31, 1998, Commission
                  File No. 0-26176).

         10.16*   Purchase Agreement by and among American Sky Broadcasting,
                  LLC, The News Corporation Limited, MCI Telecommunications
                  Corporation and EchoStar Communications Corporation, dated
                  November 30, 1998. (incorporated by reference to Exhibit 10.1
                  to the Form 8-K filed by ECC on November 30, 1998, Commission
                  File No. 0-26176).

         10.17*   Voting Agreement dated November 30, 1998, among EchoStar
                  Communications Corporation, American Sky Broadcasting, LLC,
                  The News Corporation Limited and MCI Telecommunications
                  Corporation (incorporated by reference to Exhibit 10.3 to the
                  Current Report on Form 8-K of EchoStar, filed as of December
                  1, 1998).

         99.1+    Letter regarding representation of Arthur Andersen LLP.

----------
*        Incorporated by reference.

**       Constitutes a management contract or compensatory plan or arrangement.

+        Filed herewith.

    (b)      Reports on Form 8-K

         No reports on Form 8-K were filed during the fourth quarter of 2001.




                                       21
<PAGE>



                                   SIGNATURES

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

                              ECHOSTAR DBS CORPORATION

                              By: /s/ Michael R. McDonnell
                                 --------------------------------------------
                                  Michael R. McDonnell
                                  Senior Vice President and
                                  Chief Financial Officer

Date:  March 21, 2002

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of EchoStar
and in the capacities and on the dates indicated:

<Table>
<Caption>
Signature                           Title                                                 Date
---------                           -----                                                 ----


<S>                                  <C>                                                  <C>
/s/ Charles W. Ergen                 Chief Executive Officer and Director                 March 21, 2002
---------------------------------    (Principal Executive Officer)
Charles W. Ergen


  /s/ Michael R. McDonnell          Senior Vice President and Chief Financial Officer     March 21, 2002
---------------------------------   (Principal Financial Officer)
Michael R. McDonnell


  /s/ James DeFranco                Director                                              March 21, 2002
---------------------------------
James DeFranco


/s/ David K. Moskowitz              Director                                              March 21, 2002
---------------------------------
David K. Moskowitz
</Table>



                                       22




<PAGE>




                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



<Table>
<Caption>
                                                                                                               PAGE
                                                                                                               ----
<S>                                                                                                            <C>
CONSOLIDATED FINANCIAL STATEMENTS:
   Report of Independent Public Accountants..................................................................   F-2
   Consolidated Balance Sheets at December 31, 2000 and 2001.................................................   F-3
   Consolidated Statements of Operations and Comprehensive Loss for the years ended
     December 31, 1999, 2000 and 2001........................................................................   F-4
   Consolidated Statements of Changes in Stockholder's Deficit for the years ended
     December 31, 1999, 2000 and 2001........................................................................   F-5
   Consolidated Statements of Cash Flows for the years ended December 31, 1999, 2000 and 2001................   F-6
   Notes to Consolidated Financial Statements................................................................   F-7
</Table>




                                      F-1
<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS




To EchoStar DBS Corporation:

         We have audited the accompanying consolidated balance sheets of
EchoStar DBS Corporation (a Colorado corporation) and subsidiaries as of
December 31, 2000 and 2001, and the related consolidated statements of
operations and comprehensive loss, changes in stockholder's deficit and cash
flows for each of the three years in the period ended December 31, 2001. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
EchoStar DBS Corporation and subsidiaries as of December 31, 2000 and 2001, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States.


                                                ARTHUR ANDERSEN LLP





Denver, Colorado,
February 27, 2002.





                                      F-2
<PAGE>


                            ECHOSTAR DBS CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in thousands)

<Table>
<Caption>
                                                                                                 DECEMBER 31,
                                                                                        ----------------------------
                                                                                            2000            2001
                                                                                        ------------    ------------
<S>                                                                                     <C>             <C>
ASSETS
Current Assets:
   Cash and cash equivalents ........................................................   $     91,572    $     39,052
   Marketable investment securities .................................................          4,992          89,019
   Trade accounts receivable, net of allowance for uncollectible accounts of
     $19,934 and $8,848, respectively ...............................................        275,321         313,580
   Insurance receivable .............................................................        106,000         106,000
   Inventories ......................................................................        159,665         189,665
   Other current assets .............................................................         25,201          38,263
                                                                                        ------------    ------------
Total current assets ................................................................        662,751         775,579
Cash reserved for satellite insurance (Note 3) ......................................         82,393         122,068
Property and equipment, net .........................................................      1,329,181       1,502,221
FCC authorizations, net .............................................................        709,817         696,242
Other noncurrent assets .............................................................         86,249          91,629
                                                                                        ------------    ------------
     Total assets ...................................................................   $  2,870,391    $  3,187,739
                                                                                        ============    ============

LIABILITIES AND STOCKHOLDER'S DEFICIT
Current Liabilities:
   Trade accounts payable ...........................................................   $    144,263    $    203,685
   Deferred revenue .................................................................        282,939         356,903
   Accrued expenses .................................................................        615,693         765,178
   Advances from affiliates, net ....................................................        758,814              58
   Current portion of long-term debt ................................................         19,642          13,444
                                                                                        ------------    ------------
Total current liabilities ...........................................................      1,821,351       1,339,268

Long-term obligations, net of current portion:
   9 1/4% Seven Year Notes ..........................................................        375,000         375,000
   9 3/8% Ten Year Notes ............................................................      1,625,000       1,625,000
   10 3/8% Seven Year Notes .........................................................             --       1,000,000
   9 1/8% Seven Year Notes ..........................................................             --         700,000
   Mortgages and other notes payable, net of current portion ........................         11,644           5,577
   Long-term deferred distribution and carriage revenue and other long-term
     liabilities ....................................................................         56,047         102,454
                                                                                        ------------    ------------
Total long-term obligations, net of current portion .................................      2,067,691       3,808,031
                                                                                        ------------    ------------
     Total liabilities ..............................................................      3,889,042       5,147,299

Commitments and Contingencies (Note 8)

Stockholder's Deficit:
   Common Stock, $.01 par value, 3,000 shares authorized, issued and outstanding ....             --              --
   Additional paid-in capital .......................................................      1,440,252         435,590
   Deferred stock-based compensation ................................................        (58,193)        (25,456)
   Accumulated other comprehensive loss .............................................             (7)           (642)
   Accumulated deficit ..............................................................     (2,400,703)     (2,369,052)
                                                                                        ------------    ------------
Total stockholder's deficit .........................................................     (1,018,651)     (1,959,560)
                                                                                        ------------    ------------
     Total liabilities and stockholder's deficit ....................................   $  2,870,391    $  3,187,739
                                                                                        ============    ============
</Table>



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



                                      F-3
<PAGE>


                            ECHOSTAR DBS CORPORATION
     CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
                                 (In thousands)

<Table>
<Caption>
                                                                               YEAR ENDED DECEMBER 31,
                                                                     --------------------------------------------
                                                                         1999            2000            2001
                                                                     ------------    ------------    ------------
<S>                                                                  <C>             <C>             <C>
REVENUE:
   DISH Network:
     Subscription television services ............................   $  1,343,234    $  2,342,358    $  3,583,698
     Other .......................................................          9,369           8,482          21,743
                                                                     ------------    ------------    ------------
   Total DISH Network ............................................      1,352,603       2,350,840       3,605,441
   DTH equipment sales and integration services ..................        178,325         255,925         266,743
   Other .........................................................         75,363         102,149         114,699
                                                                     ------------    ------------    ------------
Total revenue ....................................................      1,606,291       2,708,914       3,986,883

COSTS AND EXPENSES:
   DISH Network Operating Expenses:
     Subscriber-related expenses .................................        580,979         981,403       1,448,617
     Customer service center and other ...........................        117,249         250,672         284,869
     Satellite and transmission ..................................         40,083          36,178          37,555
                                                                     ------------    ------------    ------------
   Total DISH Network operating expenses .........................        738,311       1,268,253       1,771,041
   Cost of sales - DTH equipment and integration services ........        149,527         196,908         187,810
   Cost of sales - other .........................................         17,076          32,978          75,385
   Marketing:
     Subscriber promotion subsidies - cost of sales
      (exclusive of depreciation included below) .................        478,122         747,020         466,610
     Subscriber promotion subsidies - other ......................        199,405         290,197         477,903
     Advertising and other .......................................         64,660         138,202         144,724
                                                                     ------------    ------------    ------------
   Total marketing expenses ......................................        742,187       1,175,419       1,089,237
   General and administrative ....................................        141,668         233,966         361,629
   Non-cash, stock-based compensation ............................         61,060          51,465          20,173
   Depreciation and amortization .................................        110,031         174,607         265,912
                                                                     ------------    ------------    ------------
Total costs and expenses .........................................      1,959,860       3,133,596       3,771,187
                                                                     ------------    ------------    ------------

Operating income (loss) ..........................................       (353,569)       (424,682)        215,696

Other Income (Expense):
   Interest income ...............................................         12,566          13,066          10,321
   Interest expense, net of amounts capitalized ..................       (196,390)       (193,685)       (192,900)
   Other .........................................................        (24,892)         (2,239)           (620)
                                                                     ------------    ------------    ------------
Total other income (expense) .....................................       (208,716)       (182,858)       (183,199)
                                                                     ------------    ------------    ------------

Income (loss) before income taxes ................................       (562,285)       (607,540)         32,497
Income tax provision, net ........................................           (131)           (125)           (846)
                                                                     ------------    ------------    ------------
Income (loss) before extraordinary charges .......................       (562,416)       (607,665)         31,651
Extraordinary charge for early retirement of debt, net of tax ....       (228,733)             --              --
                                                                     ------------    ------------    ------------
Net income (loss) ................................................   $   (791,149)   $   (607,665)   $     31,651
                                                                     ============    ============    ============

Change in unrealized gain (loss) on available-for-sale
   securities, net of tax ........................................             --              (7)           (635)
                                                                     ------------    ------------    ------------
Comprehensive income (loss) ......................................   $   (791,149)   $   (607,672)   $     31,016
                                                                     ============    ============    ============
</Table>


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



                                      F-4
<PAGE>





                            ECHOSTAR DBS CORPORATION
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S DEFICIT
                                 (In thousands)




<Table>
<Caption>
                                                                                                         ACCUMULATED
                                                                                            DEFERRED     DEFICIT AND
                                                                                             STOCK-      UNREALIZED
                                                         COMMON STOCK         ADDITIONAL      BASED        HOLDING
                                                   ------------------------    PAID-IN       COMPEN-        GAINS
                                                      SHARES        AMT.       CAPITAL       SATION        (LOSSES)       TOTAL
                                                   -----------  -----------  -----------   -----------   -----------   -----------

<S>                                                <C>          <C>          <C>           <C>           <C>           <C>
Balance, December 31, 1998 ......................            3  $        --  $   145,164   $        --   $  (733,301)  $  (588,137)
   Contribution of satellite assets acquired
     by ECC from News Corporation and MCI .......           --           --    1,124,320            --            --     1,124,320
   Deferred stock-based compensation funded
     by ECC .....................................           --           --      178,840      (178,840)           --            --
   Deferred stock-based compensation
     recognized .................................           --           --           --        61,060            --        61,060
   Capital contribution to ECC ..................           --           --           --            --      (268,588)     (268,588)
   Net loss .....................................           --           --           --            --      (791,149)     (791,149)
                                                   -----------  -----------  -----------   -----------   -----------   -----------
Balance, December 31, 1999 ......................            3           --    1,448,324      (117,780)   (1,793,038)     (462,494)
   Forfeitures of deferred non-cash,
     stock-based compensation ...................           --           --       (8,072)        6,730            --        (1,342)
   Deferred stock-based compensation
     recognized .................................           --           --           --        52,857            --        52,857
   Unrealized holding losses on
     available-for-sale securities, net .........           --           --           --            --            (7)           (7)
   Net loss .....................................           --           --           --            --      (607,665)     (607,665)
                                                   -----------  -----------  -----------   -----------   -----------   -----------
Balance, December 31, 2000 ......................            3           --    1,440,252       (58,193)   (2,400,710)   (1,018,651)
   Forfeitures of deferred non-cash,
     stock-based compensation ...................           --           --      (12,564)        5,143            --        (7,421)
   Deferred stock-based compensation
     recognized .................................           --           --           --        27,594            --        27,594
   Assumption of debt, net of deferred
     financing costs (Note 1) ...................           --           --     (992,098)           --            --      (992,098)
   Change in unrealized holding losses on
     available-for-sale securities, net .........           --           --           --            --          (635)         (635)
   Net income ...................................           --           --           --            --        31,651        31,651
                                                   -----------  -----------  -----------   -----------   -----------   -----------
Balance, December 31, 2001 ......................            3  $        --  $   435,590   $   (25,456)  $(2,369,694)  $(1,959,560)
                                                   ===========  ===========  ===========   ===========   ===========   ===========
</Table>

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




                                      F-5
<PAGE>


                            ECHOSTAR DBS CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)




<Table>
<Caption>
                                                                                         YEAR ENDED DECEMBER 31,
                                                                              --------------------------------------------
                                                                                  1999            2000             2001
                                                                              ------------    ------------    ------------
<S>                                                                           <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ..................................................................   $   (791,149)   $   (607,665)   $     31,651
Adjustments to reconcile net loss to net cash flows from operating
  activities:
   Extraordinary charge for early retirement of debt ......................        228,733              --              --
   Loss on impairment of satellite (Note 3) ...............................         13,741              --              --
   Deferred stock-based compensation recognized ...........................         61,060          51,465          20,173
   Depreciation and amortization ..........................................        110,031         173,233         265,912
   Interest on notes payable to ECC added to principal ....................            330              --              --
   Amortization of debt discount and deferred financing costs .............         13,440           3,280           3,281
   Change in long-term deferred satellite services revenue and
     other long-term liabilities ..........................................         10,173          37,236          46,266
   Other, net .............................................................         (1,455)         10,512          25,751
   Changes in current assets and current liabilities:
     Trade accounts receivable, net .......................................        (50,201)       (117,377)        (38,259)
     Inventories ..........................................................        (45,175)        (41,160)        (25,665)
     Other current assets .................................................          2,373           4,062          (6,169)
     Trade accounts payable ...............................................         97,141         (43,440)         59,422
     Deferred revenue .....................................................         48,177         101,905          73,964
     Accrued expenses .....................................................        217,727         178,002         145,776
                                                                              ------------    ------------    ------------
Net cash flows from operating activities ..................................        (85,054)       (249,947)        602,103

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable investment securities .............................       (186,866)             --        (586,648)
Sales of marketable investment securities .................................        169,092          19,775         501,986
Cash reserved for satellite insurance (Note 3) ............................             --         (82,393)        (59,488)
Changes in cash reserved for satellite insurance due to depreciation
  on related satellites (Note 3) ..........................................             --              --          19,813
Funds released from escrow and restricted cash and marketable
  investment securities ...................................................         77,657              --              --
Purchases of property and equipment .......................................        (87,597)       (175,313)       (441,874)
Advances and payments under in-orbit satellite contract ...................         67,804         (48,894)         (8,441)
Other .....................................................................         (1,318)             --              --
                                                                              ------------    ------------    ------------
Net cash flows from investing activities ..................................         38,772        (286,825)       (574,652)

CASH FLOWS FROM FINANCING ACTIVITIES:
Non-interest bearing advances from (to) affiliates ........................        217,635         486,374        (758,756)
Proceeds from issuance of 9 1/4% Seven Year Notes .........................        375,000              --              --
Proceeds from issuance of 9 3/8% Ten Year Notes ...........................      1,625,000              --              --
Proceeds from issuance of 9 1/8% Seven Year Notes .........................             --              --         700,000
Debt issuance costs and prepayment premiums ...............................       (233,721)             --          (9,450)
Retirement of 1994 Notes ..................................................       (575,674)             --              --
Retirement of 1996 Notes ..................................................       (501,350)             --              --
Retirement of 1997 Notes ..................................................       (378,110)             --              --
Capital contribution to ECC ...............................................       (268,588)             --              --
Repayment of note payable to ECC ..........................................        (60,142)             --              --
Repayments of mortgage indebtedness and other notes payable ...............        (22,180)        (15,176)        (11,765)
Other .....................................................................          2,865          (2,615)             --
                                                                              ------------    ------------    ------------
Net cash flows from financing activities ..................................        180,735         468,583         (79,971)
                                                                              ------------    ------------    ------------

Net increase (decrease) in cash and cash equivalents ......................        134,453         (68,189)        (52,520)
Cash and cash equivalents, beginning of year ..............................         25,308         159,761          91,572
                                                                              ------------    ------------    ------------
Cash and cash equivalents, end of year ....................................   $    159,761    $     91,572    $     39,052
                                                                              ============    ============    ============
</Table>



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



                                      F-6
<PAGE>




                            ECHOSTAR DBS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. ORGANIZATION AND BUSINESS ACTIVITIES

Basis of Presentation

         EchoStar DBS Corporation ("EDBS" or the "Company"), is a wholly-owned
subsidiary of EchoStar Broadband Corporation ("EBC"), which is a wholly-owned
subsidiary of EchoStar Communications Corporation ("ECC" and together with its
subsidiaries "EchoStar"), a publicly traded company on the Nasdaq National
Market. During September 2000, EBC was formed for the purpose of issuing new
debt. In connection with the EBC debt offering, ECC contributed all of the
outstanding capital stock of its wholly-owned subsidiaries, EchoStar Orbital
Corporation and EDBS, to EBC concurrent with the closing of the offering.
Contracts for the construction and launch of EchoStar VII, EchoStar VIII and
EchoStar IX are held in EchoStar Orbital Corporation.

         EDBS was formed under Colorado law in January 1996 for the initial
purpose of participating in an FCC auction. On January 26, 1996, EDBS submitted
the winning bid of $52.3 million for 24 direct broadcast satellite ("DBS")
frequencies at the 148 degrees West Longitude ("WL") orbital location. During
March 1999, EchoStar placed ownership of all of its direct broadcast satellites
and related FCC licenses into subsidiaries of the Company. Dish, Ltd., and
EchoStar Satellite Broadcasting Company ("ESBC") were merged into the Company.
EchoStar IV and the related FCC licenses were transferred to ESC. The
accompanying financial statements retroactively reflect these reorganizations.


Principal Business

         Unless otherwise stated herein, or the context otherwise requires,
references herein to EchoStar shall include ECC, EBC, EDBS and all direct and
indirect wholly-owned subsidiaries thereof. The operations of EchoStar include
two interrelated business units:

         o        The DISH Network - a direct broadcast satellite ("DBS")
                  subscription television service in the United States; and

         o        EchoStar Technologies Corporation ("ETC") - engaged in the
                  design, development, distribution and sale of DBS set-top
                  boxes, antennae and other digital equipment for the DISH
                  Network ("EchoStar receiver systems") and the design,
                  development and distribution of similar equipment for
                  international satellite service providers.

         Since 1994, EchoStar has deployed substantial resources to develop the
"EchoStar DBS System." The EchoStar DBS System consists of EchoStar's
FCC-allocated DBS spectrum, seven DBS satellites ("EchoStar I" through "EchoStar
VII"), EchoStar receiver systems, digital broadcast operations centers, customer
service facilities, and other assets utilized in its operations. EchoStar's
principal business strategy is to continue developing its subscription
television service in the United States to provide consumers with a fully
competitive alternative to cable television service.


Recent Developments

The Proposed Merger with Hughes

         On October 28, 2001, ECC signed definitive agreements with Hughes and
General Motors, which is Hughes' parent corporation relating to ECC's merger
with Hughes in a stock-for-stock transaction. Hughes, through its DIRECTV
subsidiary, is a provider of satellite-based entertainment information and
communications services for the home and business markets, including video,
data, voice, multimedia and Internet services, including DBS services.





                                      F-7
<PAGE>


                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


         The surviving corporation in the merger will carry the EchoStar name
and will provide DBS services in the United States and Latin America, primarily
under the DIRECTV brand name. It will also provide global fixed satellite
services and other broadband communication services. The merger is subject to
the prior separation of Hughes from GM by way of a recapitalization of Hughes
and split-off of Hughes from GM. As a result of these transactions, the Hughes
holding company would become an independent, publicly owned company, separate
from GM. This is a condition to our obligation to complete the merger.
Immediately following the Hughes split-off, the businesses of Hughes and
EchoStar would be combined in the merger. Pursuant to the merger, we would merge
with and into the Hughes holding company to form New EchoStar.

         The Hughes merger agreement requires that EchoStar use commercially
reasonable efforts to: 1) amend the indentures relating to certain of EchoStar's
debt instruments so that the Hughes merger and related transactions would not
constitute a change of control requiring EchoStar to make an offer to repurchase
those notes, 2) obtain additional committed financing, on terms reasonably
satisfactory to Hughes, sufficient to refinance the notes outstanding under the
indentures which EchoStar is unable to amend, or 3) present to Hughes a plan,
taking into account prevailing market conditions for the relevant notes,
designed so that at and after the effective time of the Hughes merger, the
surviving corporation and its subsidiaries would not be in breach of their
obligations under those indentures. These consent fees could be material, and
EchoStar's financing costs may increase significantly as a result of obtaining
these consents or refinancing these notes.

Debt Exchange

         EBC, in connection with its September 2000 offering of $1 billion of
10 3/8% Seven Year Notes, agreed to cause EDBS to make an offer to exchange (the
"EDBS Exchange Offer") all of the outstanding 10 3/8% Seven Year Notes for a new
class of substantially identical notes issued by EDBS as soon as practical
following the first date (as reflected in EDBS' most recent quarterly or annual
financial statements) on which EDBS is permitted to incur indebtedness in an
amount equal to the outstanding principal balance of the 10 3/8% Seven Year
Notes under the "Indebtedness to Cash Flow Ratio" test contained in the
indentures (the "EDBS Indentures") governing the EDBS 9 1/4% Seven Year Notes
and 9 3/8% Ten Year Notes, and such incurrence of indebtedness would not
otherwise cause any breach or violation of, or result in a default under, the
terms of the EDBS Indentures.

         Pursuant to the terms of the EDBS indentures, the actual EDBS Exchange
offer will commence during the first half of 2002. However, because EDBS met the
required Indebtedness to Cash Flow Ratio test for the year ended December 31,
2001, accounting rules required that EDBS record indebtedness at December 31,
2001 in an amount equal to the outstanding principal balance of the 10 3/8%
Seven Year Notes, with an offsetting charge to stockholder's equity.

         Pursuant to the agreement between EBC and EDBS, the primary purpose of
the use of proceeds from the 10 3/8% Seven Year Notes is for the construction
and launch of additional satellites, strategic acquisitions and other general
working capital purposes which are intended, directly or indirectly, to benefit
the operations of EDBS and its subsidiaries. In addition, the aggregate benefit
received by EDBS from the use of proceeds of the 10 3/8% Seven Year Notes is
required to be equal to the aggregate principal balance of the 10 3/8% Seven
Year Notes exchanged. EBC currently expects that EDBS will receive this benefit
through contribution of the benefit of the EchoStar VII and EchoStar VIII
satellites by EBC to EDBS.

Organization and Legal Structure

         In December 1995, ECC merged Dish, Ltd. with another wholly-owned
subsidiary of ECC. During 1999, EchoStar placed ownership of all of its direct
broadcast satellites and related FCC licenses into subsidiaries of EchoStar DBS
Corporation. Dish, Ltd. and EchoStar Satellite Broadcasting Company were merged
into EchoStar DBS Corporation. EchoStar IV and the related FCC licenses were
transferred to ESC. During September 2000, EchoStar Broadband Corporation was
formed for the purposes of issuing new debt. Contracts for the construction and
launch of EchoStar VII, EchoStar VIII and EchoStar IX are held in EchoStar
Orbital Corporation. Substantially all of EchoStar's operations are conducted by
subsidiaries of EDBS.




                                      F-8
<PAGE>

                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


         The following table summarizes the organizational structure of EchoStar
and its principal subsidiaries as of December 31, 2001:



<Table>
<Caption>
                                                                        REFERRED TO
LEGAL ENTITY                                                            HEREIN AS             PARENT
-------------------------------------------------------------------   ---------------   -------------------

<S>                                                                   <C>               <C>
EchoStar Communications Corporation                                     ECC              Publicly owned
EchoStar Broadband Corporation                                          EBC              ECC
EchoStar DBS Corporation                                                EDBS             EBC
EchoStar Orbital Corporation                                            EOC              EBC
EchoStar Satellite Corporation                                          ESC              EDBS
Echosphere Corporation                                                  Echosphere       EDBS
EchoStar Technologies Corporation                                       ETC              EDBS
</Table>

Significant Risks and Uncertainties

         Substantial Leverage. The Company is highly leveraged, which makes it
vulnerable to changes in general economic conditions. As of December 31, 2001,
the Company had outstanding long-term debt (including both the current and
long-term portions) totaling approximately $3.7 billion. The Company has
semi-annual cash debt service obligations for all of its outstanding long-term
debt securities, as follows:

<Table>
<Caption>
                                                                  SEMI-ANNUAL PAYMENT           SEMI-ANNUAL DEBT
                                                                         DATES                SERVICE REQUIREMENTS
                                                                -------------------------    -----------------------
<S>                                                             <C>                          <C>
  9 1/4% Senior Notes due 2006 ("9 1/4% Seven Year Notes")...   February 1 and August 1           $ 17,343,750
  9 3/8% Senior Notes due 2009 ("9 3/8% Ten Year Notes").....   February 1 and August 1             76,171,875
10 3/8% Senior Notes due 2007 ("10 3/8% Seven Year Notes")...    April 1 and October 1              51,875,000
  9 1/8% Senior Notes due 2009 ("9 1/8% Seven Year Notes")...    January 15 and July 15             31,937,500
</Table>

         Semi-annual debt service requirements related to the Company's 9 1/8%
Senior Notes due 2009 will commence on July 15, 2002. There are no scheduled
principal payment or sinking fund requirements prior to maturity of any of these
notes. The Company's ability to meet its debt service obligations will depend
on, among other factors, the successful execution of its business strategy,
which is subject to uncertainties and contingencies beyond the Company's
control.

         Expected Operating Losses. Since 1996, the Company has reported
significant operating and net losses. Improvements in the Company's future
results of operations are largely dependent upon its ability to increase its
customer base while maintaining its overall cost structure, controlling
subscriber turnover and effectively managing its subscriber acquisition costs.
No assurance can be given that the Company will be effective with regard to
these matters. In addition, generally the Company incurs significant acquisition
costs to obtain DISH Network subscribers. The high cost of obtaining new
subscribers magnifies the negative effects of subscriber turnover.




                                      F-9
<PAGE>



                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

         The accompanying consolidated financial statements include the accounts
of the Company and all of its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated. The Company
accounts for investments in 50% or less owned entities using the equity or cost
method, except for its investments in marketable equity securities, which are
carried at fair value.

Use of Estimates

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses for each reporting
period. Actual results could differ from those estimates.

Foreign Currency Transaction Gains and Losses

         The functional currency of the Company's foreign subsidiaries is the
U.S. dollar because their sales and purchases are predominantly denominated in
that currency. Transactions denominated in currencies other than U.S. dollars
are recorded based on exchange rates at the time such transactions arise.
Subsequent changes in exchange rates result in transaction gains and losses
which are reflected in income as unrealized (based on period-end translation) or
realized (upon settlement of the transaction). Net transaction gains (losses)
during 1999, 2000 and 2001 were not material to the Company's results of
operations.

Statements of Cash Flows Data

         The following presents the Company's supplemental cash flow statement
disclosure (in thousands):

<Table>
<Caption>
                                                                             YEAR ENDED DECEMBER 31,
                                                                    ------------------------------------------
                                                                        1999           2000           2001
                                                                    ------------   ------------   ------------

<S>                                                                 <C>            <C>            <C>
Cash paid for interest ..........................................   $    126,172   $    188,911   $    187,431
Cash paid for income taxes ......................................            119            361            979
Assumption of debt, net of deferred financing costs (Note 1) ....             --             --        992,098
Assets acquired from News Corporation and MCI:
   FCC licenses and other .......................................        626,120             --             --
   Satellites ...................................................        451,200             --             --
   Digital broadcast operations center ..........................         47,000             --             --
Capital contribution from ECC ...................................      1,124,320             --             --
Forfeitures of deferred non-cash, stock-based compensation ......             --          8,072         12,564
</Table>

Cash and Cash Equivalents

         The Company considers all liquid investments purchased with an original
maturity of 90 days or less to be cash equivalents. Cash equivalents as of
December 31, 2000 and 2001 consist of money market funds, corporate notes and
commercial paper; such balances are stated at fair market value.

Marketable Investment Securities and Restricted Cash

         The Company currently classifies all marketable investment securities
as available-for-sale. The fair market value of marketable investment securities
approximates the carrying value and represents the quoted market prices at the
balance sheet dates. Related unrealized gains and losses are reported as a
separate component of stockholders' deficit,





                                      F-10
<PAGE>



                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

net of related deferred income taxes, if applicable. The specific identification
method is used to determine cost in computing realized gains and losses. Such
unrealized losses totaled approximately $642,000 as of December 31, 2001.

         In accordance with generally accepted accounting principles, declines
in the fair market value of a marketable investment security which are estimated
to be "other than temporary" must be recognized in the statement of operations,
thus establishing a new cost basis for such investment. The Company evaluates
its marketable investment securities portfolio on a quarterly basis to determine
whether declines in the market value of these securities are other than
temporary. This quarterly evaluation consists of reviewing, among other things,
the fair value of our marketable investment securities compared to the carrying
value of these securities, the historical volatility of the price of each
security and any market and company specific factors related to each security.
Generally, absent specific factors to the contrary, declines in the fair value
of investments below cost basis for a period of less than six months are
considered to be temporary. Declines in the fair value of investments for a
period of six to nine months are evaluated on a case by case basis to determine
whether any company or market-specific factors exist which would indicate that
such declines are other than temporary. Declines in the fair value of
investments below cost basis for greater than nine months are considered other
than temporary and are recorded as charges to earnings, absent specific factors
to the contrary.

         The major components of marketable investment securities are as follow
(in thousands):

<Table>
<Caption>
                                              MARKETABLE INVESTMENT SECURITIES
                                                        DECEMBER 31,
                                             ----------------------------------
                                                 2000                  2001
                                             ------------          ------------

<S>                                          <C>                   <C>
Commercial paper ..................          $         --          $     45,137
Corporate notes and bonds .........                    --                40,053
Government bonds ..................                 4,992                 3,829
                                             ------------          ------------
                                             $      4,992          $     89,019
                                             ============          ============
</Table>

         As of December 31, 2001, marketable investment securities include debt
securities of $83 million with contractual maturities of one year or less and $6
million with contractual maturities between one and five years. Actual
maturities may differ from contractual maturities as a result of the Company's
ability to sell these securities prior to maturity.

Fair Value of Financial Instruments

         Fair values for the Company's high-yield debt are based on quoted
market prices. The fair values of the Company's mortgages and other notes
payable are estimated using discounted cash flow analyses. The interest rates
assumed in such discounted cash flow analyses reflect interest rates currently
being offered for loans with similar terms to borrowers of similar credit
quality.

         The following table summarizes the book and fair values of the
Company's debt facilities at December 31, 2000 and 2001 (in thousands):

<Table>
<Caption>
                                                DECEMBER 31, 2000             DECEMBER 31, 2001
                                           ---------------------------   ---------------------------
                                            BOOK VALUE     FAIR VALUE     BOOK VALUE     FAIR VALUE
                                           ------------   ------------   ------------   ------------

<S>                                        <C>            <C>            <C>            <C>
9 1/4% Seven Year Notes ................   $    375,000   $    365,625   $    375,000   $    382,500
9 3/8% Ten Year Notes ..................      1,625,000      1,584,375      1,625,000      1,673,750
10 3/8% Seven Year Notes ...............             --             --      1,000,000      1,040,000
9 1/8% Seven Year Notes ................             --             --        700,000        701,750
Mortgages and other notes payable ......         31,286         30,837         19,021         19,021
</Table>




                                      F-11
<PAGE>


                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Inventories

         Inventories are stated at the lower of cost or market value. Cost is
determined using the first-in, first-out method. Proprietary products are
manufactured by outside suppliers to the Company's specifications. Manufactured
inventories include materials, labor, freight-in, royalties and manufacturing
overhead. Cost of other inventories includes parts, contract manufacturers'
delivered price, assembly and testing labor, and related overhead, including
handling and storage costs. Inventories consist of the following (in thousands):

<Table>
<Caption>
                                                             DECEMBER 31,
                                                     ----------------------------
                                                         2000            2001
                                                     ------------    ------------


<S>                                                  <C>             <C>
Finished goods - DBS .............................   $     94,997    $    126,316
Raw materials ....................................         40,069          45,460
Finished goods - reconditioned and other .........         23,101          19,541
Work-in-process ..................................          8,879           7,924
Consignment ......................................          2,461           3,611
Reserve for excess and obsolete inventory ........         (9,842)        (13,187)
                                                     ------------    ------------
                                                     $    159,665    $    189,665
                                                     ============    ============
</Table>


Property and Equipment

         Property and equipment are stated at cost. The costs of satellites
under construction are capitalized during the construction phase, assuming the
eventual successful launch and in-orbit operation of the satellite. If a
satellite were to fail during launch or while in-orbit, the resultant loss would
be charged to expense in the period such loss was incurred. The amount of any
such loss would be reduced to the extent of insurance proceeds received, if any,
as a result of the launch or in-orbit failure. Depreciation is recorded on a
straight-line basis for financial reporting purposes. Repair and maintenance
costs are charged to expense when incurred. Renewals and betterments are
capitalized.

         The Company reviews its long-lived assets and identifiable intangible
assets for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. For assets which are
held and used in operations, the asset would be impaired if the book value of
the asset exceeded the undiscounted future net cash flows related to the asset.
For those assets which are to be disposed of, the assets would be impaired to
the extent the fair value does not exceed the book value. The Company considers
relevant cash flow, estimated future operating results, trends and other
available information including the fair value of frequency rights owned, in
assessing whether the carrying value of assets are recoverable.

FCC Authorizations

         FCC authorizations are recorded at cost and amortized using the
straight-line method over a period of 40 years. Such amortization commences at
the time the related satellite becomes operational; capitalized costs are
written off at the time efforts to provide services are abandoned. Accumulated
amortization related to FCC authorizations totaled approximately $28 million and
$47 million as of December 31, 2000 and 2001, respectively.

         Effective January 1, 2002, the Company will be required to adopt
Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" ("FAS 142"), which requires goodwill and intangible assets
with indefinite useful lives to no longer be amortized but to be tested for
impairment at least annually. Intangible assets that have finite lives will
continue to be amortized over their estimated useful lives. The amortization and
non-amortization provisions of FAS 142 will be applied to all goodwill and
intangible assets acquired after June 30, 2001. The Company is currently
evaluating the potential impact, if any, the adoption of FAS 142 will have on
its financial position and results of operations.






                                      F-12
<PAGE>

                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


Revenue Recognition

         Revenue from the provision of DISH Network subscription television
services and other satellite services is recognized as revenue in the period
such services are provided. Revenue from international sales of digital set-top
boxes and related accessories is recognized upon shipment to customers. Specific
revenue and subscriber acquisition cost recognition policies relating to the
marketing promotions for the periods presented are discussed below.

         During the year ended December 31, 2001, the Company's marketing
promotions included the DISH Network One-Rate Plan, Bounty Programs, Free Now, I
Like 9, and Digital Home Plan, which are described below.

         DISH Network One-Rate Plan, Bounty Programs, Free Now Promotion and I
Like 9. Under the DISH Network One-Rate Plan, consumers were eligible to receive
a rebate of up to $199 on the purchase of certain EchoStar receiver systems. To
be eligible for this rebate, a subscriber must have made a one-year commitment
to subscribe to EchoStar's America's Top 150 programming or EchoStar's America's
Top 100 CD programming package plus one premium movie package (or equivalent
additional programming). This promotion expired on January 31, 2001.

         Under the Bounty Programs, qualified customers were eligible to receive
a free base-level EchoStar receiver system and free installation. To be eligible
for this program, a subscriber must have made a one-year commitment to subscribe
to a qualified programming package. Certain of these promotions expired on
January 31, 2001.

         From February through July 2001, the Company offered new subscribers a
free base-level EchoStar receiver system and free installation under its Free
Now promotion. To be eligible, a subscriber had to provide a valid major credit
card and make a one-year commitment to subscribe to either EchoStar's America's
Top 150 programming package or EchoStar's America's Top 100 CD or DISH Latino
Dos programming package plus additional programming totaling at least $39.98 per
month.

         During August 2001, the Company commenced its I Like 9 promotion. Under
this promotion, subscribers who purchased an EchoStar receiver system for $199
or higher, received free installation and either EchoStar's America's Top 100 CD
or EchoStar's DISH Latino Dos programming package for $9 a month for the first
year. This promotion expired January 31, 2002.

         The Company's direct sales to consumers pursuant to its DISH Network
One-Rate Plan, Bounty Programs, Free Now promotion and I Like 9 fall under the
scope of EITF Issue No. 00-14, "Accounting for Certain Sales Incentives" ("EITF
00-14"). In accordance with EITF 00-14, EchoStar accounts for the rebate
(substantively equivalent to the return of a customer deposit) under its DISH
Network One-Rate Plan by establishing a liability equal to the amount of the
rebate to be paid to the customer upon receipt of the upfront payment from the
subscriber and does not recognize revenue for that amount. The return of the
upfront payment received from the customer is charged against such liability
account when such amount is paid back to the customer. The Company does not
receive any up-front proceeds from subscribers under Bounty Programs or the Free
Now promotion. Programming revenue under the I Like 9 promotion is recorded at
the substantially discounted monthly rate charged to the subscriber. See
Subscriber Promotions Subsidies and Subscriber Acquisition Costs below for
discussion regarding the accounting for costs under these promotions.

         The Company's dealer sales under its DISH Network One-Rate Plan, the
Bounty Programs, Free Now promotion and I Like 9 fall under the scope of EITF
Issue No. 00-25, "Vendor Income Statement Characterization of Consideration Paid
to a Reseller of the Vendor's Products" ("EITF 00-25"). In accordance with the
consensus guidance for Issue 2 of EITF 00-25, "buydowns" should be characterized
as a reduction of revenue. As such, certain commissions paid to dealers are
recorded as a reduction of the net proceeds received by the Company from the
dealers. The Company also charges the equipment reimbursements paid under the
Bounty Programs and the Free Now promotion against the proceeds from the dealer.
The rebate paid under the One Rate Plan is treated similarly as a reduction of
proceeds from the dealer by analogy to lease inducements, which are also
generally recognized as a reduction of revenue. See additional discussion under
Subscriber Promotions Subsidies and Subscriber Acquisition Costs below.




                                      F-13
<PAGE>



                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


         Digital Home Plan. The Company's Digital Home Plan promotion,
introduced during July 2000, offers several choices to consumers, ranging from
the use of one EchoStar receiver system and EchoStar's America's Top 100 CD or
DISH Latino Dos programming package for $36.99 per month, to providing consumers
two or more EchoStar receiver systems and EchoStar's America's Top 150
programming package for $50.99 to $60.99 per month. With each plan, consumers
receive in-home service, must agree to a one-year commitment and incur a
one-time set-up fee of $49.99, which through December 31, 2001, included the
first month's programming payment. For consumers who choose the Digital Home
Plan with Dish PVR, which includes the use of one or more EchoStar receiver
systems, one of which includes a built-in hard drive that allows viewers to
pause and record live programming without the need for videotape, the consumer
will incur a one-time set-up fee of $148.99. Since the Company retains ownership
of equipment issued pursuant to the Digital Home Plan promotion, equipment costs
are capitalized and depreciated over a period of four years.

         StarBand. Prior to September 27, 2001, the Company accounted for the
sale of StarBand equipment as a third-party distributor of the equipment. In
accordance with EITF 99-19, the Company recorded revenue and cost of sales
related to the sale of StarBand hardware on a gross basis upon shipment to its
retailers, as the Company assumed the risk associated with the inventory if the
equipment was not sold to its retailers. The Company also recorded revenue and
cost of sales related to StarBand installations performed by the Company on a
gross basis upon installation. The Company did not enter into a multiple element
arrangement with its independent retailers or the end users of StarBand's
service as the Company was only a distributor of StarBand's equipment. Once the
equipment was purchased from a Company retailer and installed in the StarBand
subscriber's home, the Company was not responsible for actual StarBand
subscriber activations or the provision of Internet services. Additionally, all
StarBand subscriber Internet service payments collected by the Company in
connection with a bundled billing are remitted directly to StarBand. If such
bundled service revenue for StarBand Internet services is not collected by the
Company as StarBand's billing agent, EchoStar has no remittance obligation to
StarBand whatsoever.

         Effective September 27, 2001, in connection with EchoStar's increased
equity interest in StarBand, the Company began subsidizing the cost of equipment
to the subscriber by offering discounted equipment through its independent
dealers. As such, beginning September 27, 2001, the Company accounts for the
sale of StarBand equipment similar to the accounting for its DISH Network
One-Rate Plan, Bounty Programs, and Free Now promotion, as discussed in
subscriber promotion subsidies below.

         The Company offers a bundled price of $100.99 for EchoStar's America's
Top 150 ("AT 150") programming and the Starband Internet service. For StarBand
customers activated prior to September 27, 2001, in accordance with EITF Issue
No. 99-19, the Company recognizes $35.99 for the video portion of the revenue
and records a liability to Starband for the $65.00 related to the Internet
service. The $10.00 discount from the total standard price of EchoStar's AT 150
($40.99/mo.) and the Starband Internet service ($70.00/mo.) is shared 50/50
between the Company and Starband. In the event the Company does not collect the
monthly programming and Internet payments from a subscriber, the Company is not
obligated to remit payment to Starband for Internet services rendered to the
subscriber.

         For StarBand customers activated after September 27, 2001, as a
retailer of the StarBand service, the Company recognizes the entire $100.99 of
revenue for the video and Internet service and records costs equal to the
monthly payment made by the Company to Starband for providing the service. In
the event the Company does not collect the monthly programming and Internet
payments from a subscriber, the Company is still obligated to remit payment to
Starband for the cost of providing the Internet service to the customer.

Subscriber Promotion Subsidies and Subscriber Acquisition Costs

         Subscriber promotion subsidies - cost of sales includes the cost of
Echostar receiver systems distributed to retailers and other distributors of the
Company's equipment and receiver systems sold directly by the Company to
subscribers. Subscriber promotion subsidies - other includes net costs related
to various installation promotions and other promotional incentives. The Company
makes payments to its independent dealers as consideration for equipment






                                      F-14
<PAGE>



                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

installation services and for equipment buydowns (commissions and rebates). The
Company expenses payments for equipment installation services as Subscriber
promotion subsidies - other. The Company's payments for equipment buydowns
represent a partial or complete return of the dealer's purchase price and are,
therefore, netted against the proceeds received from the dealer. The Company
reports the net proceeds or cost from its various sales promotions through its
independent dealer network as a component of Subscriber promotion subsidies -
other. No net proceeds or cost from the sale of subscriber related equipment is
recognized as revenue. Accordingly, subscriber acquisition costs are generally
expensed as incurred except for under the Company's Digital Home Plan which was
initiated during 2000 wherein the Company retains title to the receiver system
and certain ancillary equipment resulting in the capitalization and depreciation
of such equipment cost over its estimated useful life.

Deferred Debt Issuance Costs and Debt Discount

         Costs of issuing debt are generally deferred and amortized to interest
expense over the terms of the respective notes (see Note 4).

Deferred Revenue

         Deferred revenue principally consists of prepayments received from
subscribers for DISH Network programming. Such amounts are recognized as revenue
in the period the programming is provided to the subscriber.

Long-Term Deferred Distribution and Carriage Revenue

         Long-term deferred distribution and carriage revenue consists of
advance payments from certain content providers for carriage of their signal on
the DISH Network. Such amounts are deferred and recognized as revenue on a
straight-line basis over the related contract terms (up to ten years).

Accrued Expenses

         Accrued expenses consist of the following (in thousands):

<Table>
<Caption>
                                                   DECEMBER 31,
                                           ---------------------------
                                               2000          2001
                                           ------------   ------------

<S>                                        <C>            <C>
Programming ............................   $    176,566   $    250,795
Royalties and copyright fees ...........        106,459        140,733
Interest ...............................         79,957         80,407
Marketing ..............................         86,861         53,279
Other ..................................        165,850        239,964
                                           ------------   ------------
                                           $    615,693   $    765,178
                                           ============   ============
</Table>

Research and Development Costs

         Research and development costs are expensed as incurred. Research and
development costs totaled $10 million, $17 million and $19 million for the years
ended December 31, 1999, 2000, and 2001, respectively.

Comprehensive Loss

         The change in unrealized gain (loss) on available-for-sale securities
is the only component of the Company's other comprehensive loss. Accumulated
other comprehensive income (loss) presented on the accompanying consolidated
balance sheets consists of the accumulated net unrealized income (loss) on
available-for-sale securities, net of deferred taxes.




                                      F-15
<PAGE>


                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


Reclassifications

         Certain prior year balances in the consolidated financial statements
and accompanying notes to consolidated financial statements have been
reclassified to conform with the 2001 presentation.

New Accounting Pronouncements

         In July 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 141, "Business Combinations," ("FAS 141"),
which is required to be adopted July 1, 2001. FAS 141 requires the purchase
method of accounting for all business combinations initiated after June 30,
2001. The application of FAS 141 has not had a material impact on the Company's
financial position or results of operations.

         In July 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 142, "Goodwill and Other Intangible
Assets" ("FAS 142"), which requires goodwill and intangible assets with
indefinite useful lives to no longer be amortized but to be tested for
impairment at least annually. Intangible assets that have finite lives will
continue to be amortized over their estimated useful lives. The amortization and
non-amortization provisions of FAS 142 will be applied to all goodwill and
intangible assets acquired after June 30, 2001. Effective January 1, 2002, the
Company is required to apply all other provisions of FAS 142. The Company is
currently evaluating the potential impact, if any, the adoption of FAS 142 will
have on its financial position and results of operations.

         In August 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("FAS 144"), which is effective for
fiscal periods beginning after December 15, 2001 and interim periods within
those fiscal years. FAS 144 establishes an accounting model for impairment or
disposal of long-lived assets to be disposed of by sale. The Company is
currently evaluating the potential impact, if any, the adoption of FAS 144 will
have on its financial position and results of operations.

3.   PROPERTY AND EQUIPMENT

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

<Table>
<Caption>
                                                                      DECEMBER 31,
                                                   LIFE        ----------------------------
                                                (IN YEARS)        2000            2001
                                               ------------    ------------    ------------

<S>                                            <C>             <C>             <C>
EchoStar I .................................             12    $    201,607    $    201,607
EchoStar II ................................             12         228,694         228,694
EchoStar III ...............................             12         234,083         234,083
EchoStar IV ................................              4          89,505          89,505
EchoStar V .................................             12         208,548         210,446
EchoStar VI ................................             12         243,789         246,022
Furniture, fixtures and equipment ..........           2-12         324,715         402,014
Buildings and improvements .................           7-40          56,989          66,799
Digital Dynamite Plan equipment ............              4          62,726         353,567
Tooling and other ..........................              2           5,211           6,040
Land .......................................             --           3,336           3,649
Vehicles ...................................              7             922           1,550
Construction in progress ...................             --          81,163          99,089
                                                               ------------    ------------
    Total property and equipment ...........                      1,741,288       2,143,065
Accumulated depreciation ...................                       (412,107)       (640,844)
                                                               ------------    ------------
    Property and equipment, net ............                   $  1,329,181    $  1,502,221
                                                               ============    ============
</Table>





                                      F-16
<PAGE>



                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED



         Construction in progress consists of the following (in thousands):

<Table>
<Caption>
                                                        DECEMBER 31,
                                                ---------------------------
                                                    2000           2001
                                                ------------   ------------

<S>                                             <C>            <C>
Digital broadcast operations center .........   $     39,797   $     56,347
Other .......................................         41,366         42,742
                                                ------------   ------------
                                                $     81,163   $     99,089
                                                ============   ============
</Table>

EchoStar V

         EchoStar V is equipped with a total of three momentum wheels, including
one spare. During July 2001, EchoStar V experienced an anomaly resulting in the
loss of one momentum wheel. The satellite was quickly restored to normal
operations mode. An investigation conducted by the spacecraft manufacturer
concluded that a failure within the momentum wheel electronics caused the loss.
The manufacturer also believes that the failure was isolated to this particular
unit. While no further momentum wheel losses are expected, there can be no
assurance future anomalies will not cause further losses which could impact
commercial operation of the satellite. At EchoStar's request, the manufacturer
has developed contingency plans which include modification to the spacecraft's
on-board software that will allow continued operation in the event of additional
momentum wheel failures, with limited effect on spacecraft life. During August
2001, one of the thrusters on EchoStar V experienced an anomalous event
resulting in a temporary interruption of service. The satellite was quickly
restored to normal operations mode. An investigation by the manufacturer has
determined that the engine remains functional but with a reduction in rated
thrust. The satellite is equipped with a substantial number of backup thrusters.
EchoStar V is also equipped with a total of 48 traveling-wave-tube amplifiers
("TWTAs"), including 16 spares. A total of two TWTAs were taken out of service
and replaced by spares between the launch of the satellite and June 30, 2001.
During the third quarter 2001, EchoStar V experienced anomalous telemetry
readings on two additional TWTAs. As a precaution, during September 2001
EchoStar substituted one of those TWTA's with a spare. To the extent that
EchoStar V experiences anomalous telemetry readings on additional TWTAs it may
be necessary to utilize additional spare TWTAs. EchoStar V has also experienced
anomalies resulting in the loss of one solar array string. The satellite has a
total of approximately 96 solar array strings and approximately 92 are required
to assure full power availability for the 12-year design life of the satellite.
An investigation of the solar array anomalies, none of which have impacted
commercial operation of the satellite to date, is continuing. Until the root
cause of these anomalies is finally determined, there can be no assurance future
anomalies will not cause further losses which could impact commercial operation
of the satellite.

EchoStar VI

         EchoStar VI is equipped with a total of 48 transponders, including 16
spares. During April 2001, EchoStar VI experienced a series of anomalous events
resulting in a temporary interruption of service. The satellite was quickly
restored to normal operations mode. As a result of the anomaly, an investigation
conducted by the spacecraft manufacturer concluded that one stationkeeping
thruster and a pair of TWTA are unusable. The satellite is equipped with a
substantial number of backup transponders and thrusters. The satellite
manufacturer, Space Systems Loral ("SS/L"), has advised EchoStar that it
believes that the thruster anomaly was isolated to one stationkeeping thruster,
and that while further failures are possible, SS/L does not believe it is likely
that additional thrusters will be impacted. EchoStar VI has also experienced
anomalies resulting in the loss of two solar array strings. The satellite has a
total of approximately 112 solar array strings and approximately 106 are
required to assure full power availability for the 12-year design life of the
satellite. An investigation of the solar array anomalies, none of which have
impacted commercial operation of the satellite to date, is continuing. Until the
root cause of these anomalies is finally determined, there can be no assurance
future anomalies will not cause further losses which could impact commercial
operation of the satellite.




                                      F-17
<PAGE>



                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


Satellite Insurance

         As a result of the failure of EchoStar IV solar arrays to fully deploy
and the failure of 30 transponders to date, a maximum of approximately 14 of the
44 transponders on EchoStar IV are available for use at this time. In addition
to the transponder and solar array failures, EchoStar IV experienced anomalies
affecting its thermal systems and propulsion system. There can be no assurance
that further material degradation, or total loss of use, of EchoStar IV will not
occur in the immediate future.

         In September 1998, EchoStar filed a $219.3 million insurance claim for
a constructive total loss under the launch insurance policies covering EchoStar
IV. The satellite insurance consists of separate substantially identical
policies with different carriers for varying amounts that, in combination,
create a total insured amount of $219.3 million. EchoStar's insurance carriers
offered EchoStar a total of approximately $88 million, or 40% of the total
policy amount, in settlement of the EchoStar IV insurance claim. The insurers
offered to pay only part of the $219.3 million claim because they allege we did
not abide by the exact terms of the insurance policy. The insurers also assert
that EchoStar IV was not a constructive total loss, as that term is defined in
the policy. EchoStar strongly disagrees and filed an arbitration claim against
the insurers for breach of contract, failure to pay a valid insurance claim and
bad faith denial of a valid claim, among other things. There can be no assurance
that EchoStar will receive the amount claimed or, if EchoStar does, that
EchoStar will retain title to EchoStar IV with its reduced capacity. Based on
the carriers' failure to pay the amount EchoStar believes is owed under the
policy and their improper attempts to force EchoStar to settle for less than the
full amount of its claim, EchoStar has added causes of action in its EchoStar IV
demand for arbitration for breach of the duty of good faith and fair dealing,
and unfair claim practices. Additionally, EchoStar filed a lawsuit against the
insurance carriers in the U.S. District Court for the District of Colorado
asserting causes of action for violation of Federal and State antitrust laws.
During March 2001, EchoStar voluntarily dismissed its antitrust lawsuit without
prejudice. EchoStar has the right to re-file an antitrust action against the
insurers in the future.

         At the time EchoStar filed its claim in 1998, EchoStar recognized an
impairment loss of $106 million to write-down the carrying value of the
satellite and related costs, and simultaneously recorded an insurance claim
receivable for the same amount. EchoStar will have to reduce the amount of the
receivable if a final settlement is reached for less than this amount.

         As a result of the thermal and propulsion system anomalies, EchoStar
reduced the estimated remaining useful life of EchoStar IV to approximately 4
years during January 2000. EchoStar will continue to evaluate the performance of
EchoStar IV and may modify its loss assessment as new events or circumstances
develop.

         The indentures related to certain of EDBS' senior notes contain
restrictive covenants that require EchoStar to maintain satellite insurance with
respect to at least half of the satellites it owns or leases. In addition, the
indenture related to EBC's senior notes requires EchoStar to maintain satellite
insurance on the lesser of half of its satellites or three of its satellites.
EchoStar I through EchoStar IX are owned by a direct subsidiary of EBC.
Insurance coverage is therefore required for at least three of EchoStar's seven
satellites currently in-orbit. The launch and/or in-orbit insurance policies for
EchoStar I through EchoStar VII have expired. To date EchoStar has been unable
to obtain insurance on any of these satellites on terms acceptable to EchoStar.
As a result, EchoStar is currently self-insuring these satellites. To satisfy
insurance covenants related to EDBS' and EBC's senior notes, EchoStar has
reclassified an amount equal to the depreciated cost of three of its satellites
from cash and cash equivalents to cash reserved for satellite insurance on its
balance sheet. As of December 31, 2001, cash reserved for satellite insurance
totaled approximately $122 million. If EchoStar leases or transfers ownership of
EchoStar VII, EchoStar VIII or EchoStar IX to EDBS, which it is currently
considering, EchoStar would need to reserve additional cash for the depreciated
cost of additional satellites. The reserve would increase by approximately $60
million if one or two satellites are so leased or transferred, and by an
additional material amount if a third satellite is leased or transferred. The
reclassifications will continue until such time, if ever, as EchoStar can again
insure its satellites on acceptable terms and for acceptable amounts.




                                      F-18
<PAGE>


                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


4. LONG-TERM DEBT

9 1/4% Seven Year and 9 3/8% Ten Year Notes

         On January 25, 1999, EDBS sold $375 million principal amount of the 9
1/4% Seven Year Notes and $1.625 billion principal amount of the 9 3/8% Ten Year
Notes. Interest accrues at annual rates of 9 1/4% and 9 3/8%, respectively and
is payable semi-annually in cash in arrears on February 1 and August 1 of each
year, commencing August 1, 1999.

         Concurrently with the closing of the 9 1/4% Seven Year Notes and 9 3/8%
Ten Year Notes offering, EDBS used approximately $1.658 billion of net proceeds
received from the sale of the 9 1/4% Seven Year and 9 3/8% Ten Year Notes to
complete tender offers for its then outstanding senior notes issued in 1994,
1996 and 1997. In February 1999, EDBS contributed approximately $268 million of
net proceeds received from the sale of the 9 1/4% Seven Year and 9 3/8% Ten Year
Notes to ECC for the completion of tender offers related to ECC's 12 1/8% Senior
Exchange Notes due 2004, issued on January 4, 1999, in exchange for all issued
and outstanding 12 1/8% Series B Senior Redeemable Exchangeable Preferred Stock.

         With the exception of certain de minimis domestic and foreign
subsidiaries, the 9 1/4% Seven Year and 9 3/8% Ten Year Notes are fully,
unconditionally and jointly and severally guaranteed by all subsidiaries of
EDBS. The 9 1/4% Seven Year and 9 3/8% Ten Year Notes are general senior
unsecured obligations which:

         o        rank pari passu in right of payment to each other and to all
                  existing and future senior unsecured obligations;

         o        rank senior to all existing and future junior obligations; and

         o        are effectively junior to secured obligations to the extent of
                  the collateral securing such obligations, including any
                  borrowings under future secured credit facilities.

         Except under certain circumstances requiring prepayment premiums, and
in other limited circumstances, the 9 1/4% Seven Year and 9 3/8% Ten Year Notes
are not redeemable at EDBS's option prior to February 1, 2003 and February 1,
2004, respectively. Thereafter, the 9 1/4% Seven Year Notes will be subject to
redemption, at the option of EDBS, in whole or in part, at redemption prices
decreasing from 104.625% during the year commencing February 1, 2003 to 100% on
or after February 1, 2005, together with accrued and unpaid interest thereon to
the redemption date. The 9 3/8% Ten Year Notes will be subject to redemption, at
the option of EDBS, in whole or in part, at redemption prices decreasing from
104.688% during the year commencing February 1, 2004 to 100% on or after
February 1, 2008, together with accrued and unpaid interest thereon to the
redemption date.

         The indentures related to the 9 1/4% Seven Year and 9 3/8% Ten Year
Notes (the "Seven and Ten Year Notes Indentures") contain restrictive covenants
that, among other things, impose limitations on the ability of EDBS to:

         o        incur additional indebtedness;

         o        apply the proceeds of certain asset sales;

         o        create, incur or assume liens;

         o        create dividend and other payment restrictions with respect to
                  EDBS's subsidiaries;

         o        merge, consolidate or sell assets; and

         o        enter into transactions with affiliates.

         In addition, EDBS may pay dividends on its equity securities only if no
default shall have occurred or is continuing under the Seven and Ten Year Notes
Indentures; and after giving effect to such dividend and the incurrence of any
indebtedness (the proceeds of which are used to finance the dividend), EDBS'
ratio of total indebtedness to cash flow (calculated in accordance with the
Indentures) would not exceed 8.0 to 1.0. Moreover, the aggregate amount of such
dividends generally may not exceed the sum of the difference of cumulative
consolidated cash flow (calculated in accordance with





                                      F-19
<PAGE>

                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

the Indentures) minus 120% of consolidated interest expense of EDBS (calculated
in accordance with the Indentures), in each case from April 1, 1999 plus an
amount equal to 100% of the aggregate net cash proceeds received by EDBS and its
subsidiaries from the issuance or sale of certain equity interests of EDBS or
EchoStar.

         In the event of a change of control, as defined in the Seven and Ten
Year Notes Indentures, EDBS will be required to make an offer to repurchase all
of the 9 1/4% Seven Year and 9 3/8% Ten Year Notes at a purchase price equal to
101% of the aggregate principal amount thereof, together with accrued and unpaid
interest thereon, to the date of repurchase.

10 3/8% Seven Year Notes

         On September 25, 2000, EBC, sold $1 billion principal amount of the 10
3/8% Seven Year Notes. Interest accrues at an annual rate of 10 3/8% and is
payable semi-annually in cash, in arrears on April 1 and October 1 of each year.
The proceeds of the 10 3/8% Seven Year Notes will be used primarily by EBC's
subsidiaries for the construction and launch of additional satellites, strategic
acquisitions and other general working capital purposes. As discussed in Note 1,
the actual EDBS Exchange Offer has not occurred. However, for accounting
purposes, EDBS recorded indebtedness in an amount equal to the outstanding
principal balance of the 10 3/8% Seven Year Notes.

         The indenture related to the 10 3/8% Seven Year Notes (the "10 3/8%
Seven Year Notes Indenture") contains certain restrictive covenants that
generally do not impose material limitations on EBC. Subject to certain
limitations, the 10 3/8% Seven Year Notes Indenture permits EBC to incur
additional indebtedness, including secured and unsecured indebtedness that ranks
on parity with the 10 3/8% Seven Year Notes. Any secured indebtedness will, as
to the collateral securing such indebtedness, be effectively senior to the 10
3/8% Seven Year Notes to the extent of such collateral.

         The 10 3/8% Seven Year Notes are:

         o        general unsecured obligations of EBC;

         o        ranked equally in right of payment with all of EBC's existing
                  and future senior debt;

         o        ranked senior in right of payment to all of EBC's other
                  existing and future subordinated debt; and

         o        ranked effectively junior to (i) all liabilities (including
                  trade payables) of EBC's subsidiaries and (ii) all of EBC's
                  secured obligations, to the extent of the collateral securing
                  such obligations, including any borrowings under any of EBC's
                  future secured credit facilities, if any.

         Except under certain circumstances requiring prepayment premiums, and
in other limited circumstances, the 10 3/8% Seven Year Notes are not redeemable
at EBC's option prior to October 1, 2004. Thereafter, the 10 3/8% Seven Year
Notes will be subject to redemption, at EBC's option, in whole or in part, at
redemption prices decreasing from 105.188% during the year commencing October 1,
2004 to 100% on or after October 1, 2006, together with accrued and unpaid
interest thereon to the redemption date.

         In the event of a change of control, as defined in the 10 3/8% Seven
Year Notes Indenture, EBC will be required to make an offer to repurchase all or
any part of a holder's 10 3/8% Seven Year Notes at a purchase price equal to
101% of the aggregate principal amount thereof, together with accrued and unpaid
interest thereon, to the date of repurchase.

9 1/8% Seven Year Notes

         On December 28, 2001, EDBS sold $700 million principal amount of the 9
1/8% Seven Year Notes. Interest accrues at an annual rate of 9 1/8% and is
payable semi-annually in cash, in arrears on January 15 and July 15 of each
year, commencing July 15, 2002. EDBS used the net proceeds of the 9 1/8% Seven
Year Notes to repay amounts owed to ECC. ECC intends to use these amounts for
one or more of the following: 1) to provide a portion of the financing for the
proposed merger of EchoStar with Hughes Electronics Corporation, 2) if EchoStar
does not consummate the merger, to provide a portion of the financing for the
acquisition by EchoStar of Hughes' approximately 81% interest in PanAmSat
Corporation, and 3) the construction, launch and insurance of additional
satellites, strategic acquisitions and other general corporate purposes.




                                      F-20
<PAGE>


                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

         The 9 1/8% Seven Year Notes are guaranteed by substantially all
subsidiaries of EDBS on a senior basis. The 9 1/8% Seven Year Notes are general
unsecured senior obligations which:

         o        rank senior with all of EDBS' future subordinated debt; and

         o        rank junior to any of EDBS' secured debt to the extent of the
                  value of the assets securing such debt.

         Except under certain circumstances requiring prepayment premiums, and
in other limited circumstances, the 9 1/8% Seven Year Notes are not redeemable
at EDBS' option prior to January 15, 2006. Thereafter, the 9 1/8% Seven Year
Notes will be subject to redemption, at EDBS' option, in whole or in part, at
redemption prices decreasing from 104.563% during the year commencing January
15, 2006 to 100% on or after January 15, 2008, together with accrued and unpaid
interest thereon to the redemption date.

         The indenture related to the 9 1/8% Seven Year Notes (the "9 1/8% Seven
Year Notes Indenture") contains restrictive covenants that, among other things,
impose limitations on the ability of EDBS and its restricted subsidiaries to:

         o        incur additional indebtedness or enter into sale and leaseback
                  transactions;

         o        pay dividends or make distribution on EDBS' capital stock or
                  repurchase EDBS' capital stock;

         o        make certain investments;

         o        create liens;

         o        enter into transactions with affiliates;

         o        merge or consolidate with another company; and

         o        transfer and sell assets

         In the event of a change of control, as defined in the 9 1/8% Seven
Year Notes Indenture, EDBS will be required to make an offer to repurchase all
or any part of a holder's 9 1/8% Seven Year Notes at a purchase price equal to
101% of the aggregate principal amount thereof, together with accrued and unpaid
interest thereon, to the date of repurchase.

Mortgages and Other Notes Payable

         Mortgages and other notes payable consists of the following (in
thousands):

<Table>
<Caption>
                                                                                                     DECEMBER 31,
                                                                                             ----------------------------
                                                                                                 2000            2001
                                                                                             ------------    ------------

<S>                                                                                          <C>             <C>
8.25% note payable for satellite vendor financing for EchoStar I due in equal monthly
  installments of $722,including interest, through February 2001 .........................   $      2,137    $         --
8.25% note payable for satellite vendor financing for EchoStar II due in equal
  monthly installments of $562, including interest, through November 2001 ................          5,930              --
8.25% note payable for satellite vendor financing for EchoStar III due in
  equal monthly installments of $294, including interest, through October 2002 ...........          5,978           2,829
8.25% note payable for satellite vendor financing for EchoStar IV due upon
  resolution of satellite insurance claim (Note 3) .......................................         11,327          11,327
Mortgages and other unsecured notes payable due in installments through
  November 2009 with interest rates ranging from 4% to 10% ...............................          5,914           4,865
                                                                                             ------------    ------------
Total ....................................................................................         31,286          19,021
Less current portion .....................................................................        (19,642)        (13,444)
                                                                                             ------------    ------------
Mortgages and other notes payable, net of current portion ................................   $     11,644    $      5,577
                                                                                             ============    ============
</Table>




                                      F-21
<PAGE>


                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED



         Future maturities of the Company's outstanding long-term debt are
summarized as follows (in thousands):

<Table>
<Caption>
                                                                       DECEMBER 31,
                                ------------------------------------------------------------------------------------------------
                                    2002          2003          2004          2005          2006       THEREAFTER      TOTAL
                                ------------  ------------  ------------  ------------  ------------  ------------  ------------
<S>                             <C>           <C>           <C>           <C>           <C>           <C>           <C>
9 1/4% Seven Year Notes ......  $         --  $         --  $         --  $         --  $    375,000  $         --  $    375,000
9 3/8% Ten Year Notes ........            --            --            --            --            --     1,625,000     1,625,000
10 3/8% Seven Year Notes .....            --            --            --            --            --     1,000,000     1,000,000
9 1/8% Seven Year Notes ......            --            --            --            --            --       700,000       700,000
Mortgages and Other Notes
   Payable ...................        13,444         1,911           655           696           739         1,576        19,021
                                ------------  ------------  ------------  ------------  ------------  ------------  ------------
Total ........................  $     13,444  $      1,911  $        655  $        696  $    375,739  $  3,326,576  $  3,719,021
                                ============  ============  ============  ============  ============  ============  ============
</Table>

Satellite Vendor Financing

         The purchase price for satellites is required to be paid in progress
payments, some of which are non-contingent payments that are deferred until
after the respective satellites are in orbit (satellite vendor financing). The
Company utilized $36 million, $28 million, $14 million and $13 million of
satellite vendor financing for EchoStar I, EchoStar II, EchoStar III and
EchoStar IV, respectively. The satellite vendor financings for both EchoStar
III, EchoStar IV and EchoStar VII are secured by an ECC corporate guarantee.

5. INCOME TAXES

         As of December 31, 2001, the Company had net operating loss
carryforwards ("NOLs") for Federal income tax purposes of approximately $2.073
billion. The NOLs will begin to expire in the year 2012. The use of the NOLs is
subject to statutory and regulatory limitations regarding changes in ownership.
Statement of Financial Accounting Standard No. 109, "Accounting for Income
Taxes," ("FAS No. 109") requires that the potential future tax benefit of NOLs
be recorded as an asset. FAS No. 109 also requires that deferred tax assets and
liabilities be recorded for the estimated future tax effects of temporary
differences between the tax basis and book value of assets and liabilities.
Deferred tax assets are offset by a valuation allowance to the extent it is
considered more likely than not that the benefits of such assets will not be
realized.

         In 2001, the Company increased its valuation allowance sufficient to
offset net deferred tax assets arising during the year except for the deferred
tax asset related to federal alternative minimum income tax, which has an
indefinite life. Realization of net deferred tax assets is not assured and is
principally dependent on generating future taxable income prior to expiration of
the NOLs. Management believes existing net deferred tax assets in excess of the
valuation allowance will, more likely than not, be realized. The Company
continuously reviews the adequacy of its valuation allowance. Future decreases
to the valuation allowance will be made only as changed circumstances indicate
that it is more likely than not that the additional benefits will be realized.
Any future adjustments to the valuation allowance will be recognized in the
Company's provision for income taxes.

         The actual tax benefit (provision) for 1999, 2000 and 2001 are
reconciled to the amounts computed by applying the statutory Federal tax rate to
income before taxes as follows:

<Table>
<Caption>
                                                                     YEAR ENDED DECEMBER 31,
                                                           ----------------------------------------
                                                              1999           2000           2001
                                                           ----------     ----------     ----------

<S>                                                        <C>            <C>            <C>
Statutory rate .........................................         35.0%          35.0%         (35.0)%
State income taxes, net of Federal benefit .............          2.3            2.9           (3.2)
Employee stock option exercise and sale ................           --            3.4            9.6
Cumulative effect of change in effective tax rate ......           --             --          (79.5)
License amortization ...................................           --             --           (8.3)
Non-deductible interest expense ........................         (0.3)            --             --
Other ..................................................          1.5            1.6           (1.7)
(Increase) decrease in valuation allowance .............        (38.5)         (42.9)         115.5
                                                           ----------     ----------     ----------
Total provision for income taxes .......................           --%            --%          (2.6)%
                                                           ==========     ==========     ==========
</Table>




                                      F-22
<PAGE>


                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

         The temporary differences that give rise to deferred tax assets and
liabilities as of December 31, 2000 and 2001 are as follows (in thousands):

<Table>
<Caption>
                                                              DECEMBER 31,
                                                     ----------------------------
                                                         2000            2001
                                                     ------------    ------------
<S>                                                  <C>             <C>
Current deferred tax assets:
  Accrued royalties ..............................   $     36,425    $     47,217
  Inventory reserves and cost methods ............          3,928           5,326
  Accrued expenses ...............................         37,698          46,297
  Allowance for doubtful accounts ................          7,473           3,231
  Reserve for warranty costs .....................             79             243
                                                     ------------    ------------
Total current deferred tax assets ................         85,603         102,314
                                                     ------------    ------------
Gross current deferred tax assets ................         85,603         102,314
Valuation allowance ..............................        (72,080)        (81,899)
                                                     ------------    ------------
Net current deferred tax assets ..................         13,523          20,415

Noncurrent deferred tax assets:
  General business and foreign tax credits .......          2,504           3,904
  Net operating loss carryforwards ...............        794,347         756,986
  Incentive plan stock compensation ..............         38,509          44,393
  Other ..........................................         23,934          39,470
                                                     ------------    ------------
Total noncurrent deferred tax assets .............        859,294         844,753
Noncurrent deferred tax liabilities:
  Depreciation ...................................        (80,861)       (118,929)
  Other ..........................................         (1,057)         (1,300)
                                                     ------------    ------------
Total noncurrent deferred tax liabilities ........        (81,918)       (120,229)
                                                     ------------    ------------
Gross deferred tax assets ........................        777,376         724,524
                                                     ------------    ------------
Valuation allowance ..............................       (723,552)       (676,192)
                                                     ------------    ------------
Net noncurrent deferred tax assets ...............         53,824          48,332
                                                     ------------    ------------
Net deferred tax assets ..........................   $     67,347    $     68,747
                                                     ============    ============
</Table>

         The components of the benefit from (provision for) income taxes are as
follows (in thousands):

<Table>
<Caption>
                                                               YEAR ENDED DECEMBER 31,
                                                     --------------------------------------------
                                                         1999            2000            2001
                                                     ------------    ------------    ------------
<S>                                                  <C>             <C>             <C>
Current benefit (provision):
  Federal ........................................   $         --    $         --    $     (1,400)
  State ..........................................            (46)            (35)           (860)
  Foreign ........................................            (85)            (90)             14
                                                     ------------    ------------    ------------
                                                             (131)           (125)         (2,246)
Deferred benefit:
  Federal ........................................        285,724         233,640          (9,608)
  State ..........................................         27,720          27,091         (26,533)
  (Increase) decrease in valuation allowance .....       (313,444)       (260,731)         37,541
                                                     ------------    ------------    ------------
                                                               --              --           1,400
                                                     ------------    ------------    ------------
     Total benefit (provision) ...................   $       (131)   $       (125)   $       (846)
                                                     ============    ============    ============
</Table>

Deferred Tax Assets

         Net deferred tax assets of approximately $69 million and $67 million as
of December 31, 2001 and 2000, respectively, have remained substantially
unchanged on EchoStar's balance sheet since 1996. Additional deferred tax assets
of approximately $844 million generated since 1996 have been substantially
offset by adjustments to EchoStar's valuation allowance. EchoStar expects to
generate taxable income in the future, but the timing and






                                      F-23
<PAGE>



                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

amount of that taxable income is uncertain and EchoStar does not believe the
criteria for recognition of additional tax benefits are presently satisfied.
EchoStar needs to generate future taxable income of approximately $190 million
to realize the benefit of the net deferred tax assets recognized and EchoStar
continues to believe it is more likely than not that the assets it has recorded
will be realized. EchoStar expects to adjust the valuation allowance in the
future when the timing and amount of additional future taxable income becomes
more certain. If it is determined at some point in the future that any or all of
previously reserved deferred tax assets are more likely than not realizable,
significant deferred income tax benefits will need to be recorded and such
benefits may be material.

Internal Revenue Service Proposed Adjustment

         During 2001, the Internal Revenue Service conducted an audit of
EchoStar's consolidated federal income tax returns for the years 1997, 1998, and
1999. As a result of this review, the IRS' position is that certain subscriber
acquisition costs deducted by EchoStar in those years should instead be
capitalized and amortized over a period of five years. EchoStar does not agree
with this proposed adjustment and has initiated an appeal of the agent's
position. At this time, the ultimate resolution of this dispute is uncertain. If
EchoStar's arguments for deductibility are unsuccessful and EchoStar is required
to capitalize and amortize these costs over five years, the federal net
operating losses ("NOLs") available to EchoStar at December 31, 2001 could be
reduced by as much as $1.7 billion. Such an outcome would not materially alter
EchoStar's ultimate tax obligations but could significantly accelerate the
timing of when it would be required to begin making material current income tax
payments. EchoStar would also incur a cumulative alternative minimum tax
liability for the years 1998, 2000, and 2001 totaling approximately $7 million.
Any reduction in NOLs and the resulting alternative minimum tax liability would
be offset by corresponding deferred tax assets related to the unamortized
capitalized cost and the future credit for the alternative minimum taxes paid
which may be carried forward indefinitely. EchoStar intends to vigorously defend
its position that EchoStar will be able to continue its current policy of
deducting subscriber acquisition costs as incurred for tax purposes. However, as
of December 31, 2001, the outcome is uncertain.

6. STOCK COMPENSATION PLANS

Stock Incentive Plan

         In April 1994, EchoStar adopted a stock incentive plan to provide
incentive to attract and retain officers, directors and key employees. EchoStar
currently has reserved up to 80 million shares of its class A common stock for
granting awards under its 1995 Stock Incentive Plan and an additional 80 million
shares of its class A common stock for granting awards under its 1999 Stock
Incentive Plan. In general, stock options granted through December 31, 2001 have
included exercise prices not less than the fair market value of EchoStar's class
A common stock at the date of grant, and vest, as determined by EchoStar's Board
of Directors, generally at the rate of 20% per year.

         During 1999, EchoStar adopted the 1999 Incentive Plan which provided
certain key employees a contingent incentive including stock options and cash.
The payment of these incentives was contingent upon the achievement of certain
financial and other goals of EchoStar. EchoStar met certain of these goals
during 1999. Accordingly, in 1999, EchoStar recorded approximately $179 million
of deferred compensation related to post-grant appreciation of options to
purchase approximately 4.2 million shares, granted pursuant to the 1999
Incentive Plan. The related deferred compensation will be recognized over the
five-year vesting period. During the year ended December 31, 1999, 2000 and
2001, EchoStar recognized expense of $61 million, $51 million and $20 million,
respectively, under the 1999 Incentive Plan. The remaining deferred compensation
of $25 million, which will be reduced by future forfeitures, if any, will be
recognized over the remaining vesting period.

         Options to purchase an additional 9.7 million shares are outstanding as
of December 31, 2001 and were granted at fair market value during 1999, 2000 and
2001 pursuant to a Long Term Incentive Plan. The weighted-average exercise price
of these options is $9.04. Vesting of these options is contingent on meeting
certain longer-term goals, which may be met upon the consummation of the
proposed merger with Hughes. However, as the





                                      F-24
<PAGE>
                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


achievement of these goals cannot be reasonably predicted through December 31,
2001, no compensation was recorded during 1999, 2000 and 2001 related to these
long-term options. EchoStar will continue to evaluate the likelihood of
achieving these long-term goals and will record the related compensation at the
time achievement of these goals becomes probable. Such compensation, if
recorded, could result in material non-cash stock-based compensation expense in
EchoStar's statements of operations.

         A summary of EchoStar's incentive stock option activity for the years
ended December 31, 1999, 2000 and 2001 is as follows:

<Table>
<Caption>
                                                    1999                          2000                           2001
                                        ----------------------------   ----------------------------   ----------------------------
                                                         WEIGHTED-                      WEIGHTED-                      WEIGHTED-
                                                          AVERAGE                        AVERAGE                        AVERAGE
                                                          EXERCISE                       EXERCISE                       EXERCISE
                                          OPTIONS          PRICE         OPTIONS          PRICE         OPTIONS          PRICE
                                        ------------    ------------   ------------    ------------   ------------    ------------
<S>                                     <C>             <C>            <C>             <C>            <C>             <C>
Options outstanding, beginning of
   year .............................     11,576,120    $       2.04     27,843,640    $       6.26     25,117,893    $      10.81
Granted .............................     20,847,712            7.71      2,942,000           51.56        867,500           37.30
Exercised ...........................     (3,808,114)           1.84     (3,591,209)           3.05     (1,579,324)           5.17
Forfeited ...........................       (772,078)           4.92     (2,076,538)          20.78     (1,658,476)          10.86
                                        ------------    ------------   ------------    ------------   ------------    ------------
Options outstanding, end of year ....     27,843,640    $       6.26     25,117,893    $      10.81     22,747,593    $      13.18
                                        ============    ============   ============    ============   ============    ============
Exercisable at end of year ..........      2,755,432    $       1.86      2,911,256    $       5.49      4,701,357    $      10.77
                                        ============    ============   ============    ============   ============    ============
</Table>

         Exercise prices for options outstanding as of December 31, 2001 are as
follows:

<Table>
<Caption>
                                     OPTIONS OUTSTANDING                            OPTIONS EXERCISABLE
                     ---------------------------------------------------    ----------------------------------
                        NUMBER           WEIGHTED-                              NUMBER
                     OUTSTANDING         AVERAGE                              EXERCISABLE
                         AS OF          REMAINING            WEIGHTED-           AS OF             WEIGHTED-
      RANGE OF       DECEMBER 31,      CONTRACTUAL           AVERAGE          DECEMBER 31,          AVERAGE
   EXERCISE PRICES       2001             LIFE           EXERCISE PRICE          2001           EXERCISE PRICE
-------------------  ------------    --------------      ---------------    ----------------    --------------

<S>                  <C>             <C>                 <C>                <C>                 <C>
$ 1.167  -  $ 2.750     3,294,790              4.48      $          2.21           2,174,862    $         2.14
  3.000  -    3.434       148,904              5.69                 3.01              35,704              3.05
  5.486  -    6.600    12,221,723              7.08                 6.01           1,216,399              6.02
 10.203  -   19.180     3,060,976              6.81                13.75             570,392             12.33
 22.703  -   27.688       608,200              8.41                23.42              91,400             22.71
 32.420  -   39.500     1,818,000              7.32                35.50             272,000             34.30
 48.750  -   52.750       442,000              8.11                49.31             126,000             48.94
 60.125  -   79.000     1,153,000              8.42                65.90             214,600             64.93
-------------------  ------------    --------------      ---------------    ----------------    --------------
$ 1.1667 - $ 79.000    22,747,593*             6.80      $         13.18           4,701,357    $        10.77
===================  ============    ==============      ===============    ================    ==============
</Table>

         * This amount includes 9.7 million shares outstanding pursuant to the
Long Term Incentive Plan.

Accounting for Stock-Based Compensation

         EchoStar has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," ("APB 25") and related
interpretations in accounting for its stock-based compensation plans. Under APB
25, EchoStar generally does not recognize compensation expense on the issuance
of stock under its Stock Incentive Plan because the option terms are typically
fixed and typically the exercise price equals or exceeds the market price of the
underlying stock on the date of grant. In October 1995, the Financial Accounting
Standards Board issued Financial Accounting Standard No. 123, "Accounting and
Disclosure of Stock-Based Compensation," ("FAS No. 123") which established an
alternative method of expense recognition for stock-based compensation awards to
employees based on fair values. EchoStar elected to not adopt FAS No. 123 for
expense recognition purposes.


                                      F-25


<PAGE>


                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED



         Pro forma information regarding net income and earnings per share is
required by FAS No. 123 and has been determined as if EchoStar had accounted for
its stock-based compensation plans using the fair value method prescribed by
that statement. For purposes of pro forma disclosures, the estimated fair value
of the options is amortized to expense over the options' vesting period. All
options are initially assumed to vest. Compensation previously recognized is
reversed to the extent applicable to forfeitures of unvested options. The fair
value of each option grant was estimated at the date of the grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions:

<Table>
<Caption>
                                                               YEAR ENDED DECEMBER 31,
                                                     --------------------------------------------
                                                         1999            2000            2001
                                                     ------------    ------------    ------------

<S>                                                  <C>             <C>             <C>
Risk-free interest rate ..........................        5.38%           6.19%           4.94%
Volatility factor ................................          76%             98%             64%
Dividend yield ...................................        0.00%           0.00%           0.00%
Expected term of options .........................     6 years         6 years         6 years
Weighted-average fair value of options granted ...     $  7.14         $ 30.41         $ 15.75

</Table>

         The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its
stock-based compensation awards.

7. EMPLOYEE BENEFIT PLANS

Employee Stock Purchase Plan

         During 1997, the Board of Directors and shareholders approved an
employee stock purchase plan (the "ESPP"), effective beginning October 1, 1997.
Under the ESPP, EchoStar is authorized to issue a total of 800,000 shares of
class A common stock. Substantially all full-time employees who have been
employed by EchoStar for at least one calendar quarter are eligible to
participate in the ESPP. Employee stock purchases are made through payroll
deductions. Under the terms of the ESPP, employees may not deduct an amount
which would permit such employee to purchase capital stock of EchoStar under all
stock purchase plans of EchoStar at a rate which would exceed $25,000 in fair
market value of capital stock in any one year. The purchase price of the stock
is 85% of the closing price of the class A common stock on the last business day
of each calendar quarter in which such shares of class A common stock are deemed
sold to an employee under the ESPP. The ESPP shall terminate upon the first to
occur of (i) October 1, 2007 or (ii) the date on which the ESPP is terminated by
the Board of Directors. During 1999, 2000 and 2001, employees purchased
approximately 44,000, 58,000 and 80,000 shares of class A common stock through
the ESPP, respectively.

401(k) Employee Savings Plan

         EchoStar sponsors a 401(k) Employee Savings Plan (the "401(k) Plan")
for eligible employees. Voluntary employee contributions to the 401(k) Plan may
be matched 50% by EchoStar, subject to a maximum annual contribution by EchoStar
of $1,000 per employee. EchoStar also may make an annual discretionary
contribution to the plan with approval by EchoStar's Board of Directors, subject
to the maximum deductible limit provided by the Internal Revenue Code of 1986,
as amended. EchoStar's cash contributions to the 401(k) Plan for matching
contributions totaled $314,000 in 1999, $1.6 million in 2000 and $429,000 in
2001. Additionally, during 1999, EchoStar 520,000 shares of its class A common
stock (fair value of approximately $3 million) to the 401(k) Plan related to its
1998 discretionary contribution. During 2000, EchoStar contributed 120,000
shares of its class A common stock (fair value of approximately $6 million) to
the 401(k) Plan related to its 1999 discretionary contribution. During 2001,
EchoStar contributed approximately $2 million in cash to the 401 (k) Plan
related to its






                                      F-26
<PAGE>



                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


2000 discretionary contribution and accrued approximately $6.7 million related
to its 2002 discretionary contribution.

8. OTHER COMMITMENTS AND CONTINGENCIES

Leases

         Future minimum lease payments under noncancelable operating leases as
of December 31, 2001, are as follows (in thousands):

<Table>
<Caption>
YEAR ENDING DECEMBER 31,
<S>                                                              <C>
   2002.....................................................     $  11,918
   2003.....................................................        11,486
   2004.....................................................         9,551
   2005.....................................................         5,262
   2006.....................................................         1,623
   Thereafter...............................................         3,444
                                                                  --------
      Total minimum lease payments..........................      $ 43,284
                                                                  ========
</Table>

         Total rental expense for operating leases approximated $4 million, $9
million and $14 million in 1999, 2000 and 2001, respectively.

Purchase Commitments

         As of December 31, 2001, the Company's purchase commitments totaled
approximately $79 million. The majority of these commitments relate to EchoStar
receiver systems and related components. All of the purchases related to these
commitments are expected to be made during 2002. The Company expects to finance
these purchases from existing unrestricted cash balances and future cash flows
generated from operations.

Patents and Intellectual Property

         Many entities, including some of EchoStar's competitors, now have and
may in the future obtain patents and other intellectual property rights that
cover or affect products or services directly or indirectly related to those
that EchoStar offers. EchoStar may not be aware of all patents and other
intellectual property rights that its products may potentially infringe. Damages
in patent infringement cases can include a tripling of actual damages in certain
cases. Further, EchoStar cannot estimate the extent to which it may be required
in the future to obtain licenses with respect to patents held by others and the
availability and cost of any such licenses. Various parties have asserted patent
and other intellectual property rights with respect to components within
EchoStar's direct broadcast satellite system. EchoStar cannot be certain that
these persons do not own the rights they claim, that its products do not
infringe on these rights, that it would be able to obtain licenses from these
persons on commercially reasonable terms or, if it was unable to obtain such
licenses, that it would be able to redesign its products to avoid infringement.

Fee Dispute

         EchoStar had a contingent fee arrangement with attorneys who
represented EchoStar in prior litigation with The News Corporation, Ltd. The
contingent fee arrangement provides for the attorneys to be paid a percentage of
any net recovery obtained by EchoStar in the News Corporation litigation. The
attorneys asserted that they might be entitled to receive payments totaling
hundreds of millions of dollars under this fee arrangement. EchoStar
consistently maintained that the demand significantly overstated the amount to
which the attorneys might reasonably be entitled.





                                      F-27
<PAGE>


                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


         During mid-1999, EchoStar initiated litigation against the attorneys in
the Arapahoe County, Colorado, District Court arguing that the fee arrangement
was void and unenforceable. In December 1999, the attorneys initiated an
arbitration proceeding before the American Arbitration Association. The
litigation was stayed while the arbitration proceeded. The arbitration hearing
concluded on October 11, 2001. During the four week arbitration hearing, the
attorneys presented a damage model for $56 million. EchoStar asserted even that
amount significantly overstated the amount to which the attorneys might
reasonably be entitled. During closing arguments, the attorneys presented a
separate damage calculation for $111 million to the arbitration panel.

         On November 7, 2001, the arbitration panel awarded the attorneys
approximately $40 million for its contingency fee under the fee agreement. In
the award, the arbitration panel also dismissed EchoStar's claims against the
attorneys that EchoStar had initiated in the Arapahoe County, Colorado, District
Court. Pursuant to the award, approximately $8 million was to be paid within 30
days of the award with the balance to be paid in equal quarterly principal
installments over four years, commencing February 1, 2002. Interest is to be
paid at the prime rate (calculated as the average amount for each relevant year
as published daily in the Wall Street Journal), compounded annually. As a result
of this award, EchoStar recorded a charge of approximately $30 million during
2001.

         On November 30, 2001, EchoStar filed a motion to vacate the award on
the following grounds: (1) the award as issued violates public policy and cannot
be enforced; and (2) the Panel exceeded its authority under Colorado Revised
Statutes Section 13-22-214(1)(a)(III). Alternatively, EchoStar requested that
the Arapahoe County District Court modify the award to correct a calculation
error. The attorneys have opposed EchoStar's motion to vacate. The motion
remains pending before the District Court in Arapahoe County, Colorado. There
can be no assurance that EchoStar will succeed in its effort to vacate or modify
the arbitration award.

WIC Premium Television Ltd.

         During July 1998, a lawsuit was filed by WIC Premium Television Ltd.,
an Alberta corporation, in the Federal Court of Canada Trial Division, against
General Instrument Corporation, HBO, Warner Communications, Inc., John Doe,
Showtime, United States Satellite Broadcasting Company, Inc., EchoStar, and two
of EchoStar's wholly-owned subsidiaries, Echosphere Corporation and Dish, Ltd.
EchoStar Satellite Corporation, EchoStar DBS Corporation, EchoStar Technologies
Corporation, and EchoStar Satellite Broadcast Corporation were subsequently
added as defendants. The lawsuit seeks, among other things, interim and
permanent injunctions prohibiting the defendants from activating receivers in
Canada and from infringing any copyrights held by WIC.

         During September 1998, WIC filed another lawsuit in the Court of
Queen's Bench of Alberta Judicial District of Edmonton against certain
defendants, including EchoStar. WIC is a company authorized to broadcast certain
copyrighted work, such as movies and concerts, to residents of Canada. WIC
alleges that the defendants engaged in, promoted, and/or allowed satellite dish
equipment from the United States to be sold in Canada and to Canadian residents
and that some of the defendants allowed and profited from Canadian residents
purchasing and viewing subscription television programming that is only
authorized for viewing in the United States. The lawsuit seeks, among other
things, interim and permanent injunctions prohibiting the defendants from
importing hardware into Canada and from activating receivers in Canada, together
with damages in excess of $175 million.

         The Court in the Alberta action recently denied EchoStar's Motion to
Dismiss, and EchoStar's appeal of such decision. The Court in the Federal action
has stayed that case pending the outcome of the Alberta action. The case is now
currently in discovery. EchoStar intends to vigorously defend the suit. It is
too early to make an assessment of the probable outcome of the litigation or to
determine the extent of any potential liability or damages.




                                      F-28
<PAGE>



                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


Broadcast network programming

         Until July 1998, EchoStar obtained distant broadcast network channels
(ABC, NBC, CBS and FOX) for distribution to its customers through PrimeTime 24.
In December 1998, the United States District Court for the Southern District of
Florida entered a nationwide permanent injunction requiring PrimeTime 24 to shut
off distant network channels to many of its customers, and henceforth to sell
those channels to consumers in accordance with certain stipulations in the
injunction.

         In October 1998, EchoStar filed a declaratory judgment action against
ABC, NBC, CBS and FOX in the U.S. District Court for the District of Colorado.
EchoStar asked the court to enter a judgment declaring that its method of
providing distant network programming did not violate the Satellite Home Viewer
Act ("SHVA") and hence did not infringe the networks' copyrights. In November
1998, the networks and their affiliate groups filed a complaint against EchoStar
in Miami Federal Court alleging, among other things, copyright infringement. The
court combined the case that EchoStar filed in Colorado with the case in Miami
and transferred it to the Miami court. The case remains pending in Miami. While
the networks have not sought monetary damages, they have sought to recover
attorney fees if they prevail.

         In February 1999, the networks filed a "Motion for Temporary
Restraining Order, Preliminary Injunction and Contempt Finding" against DirecTV,
Inc. in Miami related to the delivery of distant network channels to DirecTV
customers by satellite. DirecTV settled this lawsuit with the networks. Under
the terms of the settlement between DirecTV and the networks, some DirecTV
customers were scheduled to lose access to their satellite-provided distant
network channels by July 31, 1999, while other DirecTV customers were to be
disconnected by December 31, 1999. Subsequently, PrimeTime 24 and substantially
all providers of satellite-delivered network programming other than EchoStar
agreed to this cut-off schedule, although EchoStar does not know if they adhered
to this schedule.

         In December 1998, the networks filed a Motion for Preliminary
Injunction against EchoStar in the Miami court, and asked the court to enjoin
EchoStar from providing network programming except under limited circumstances.
A preliminary injunction hearing was held on September 21, 1999. In March 2000,
the networks filed an emergency motion again asking the court to issue an
injunction requiring EchoStar to turn off network programming to certain of its
customers. At that time, the networks also argued that EchoStar's compliance
procedures violate the Satellite Home Viewer Improvement Act ("SHVIA"). EchoStar
opposed the networks' motion and again asked the court to hear live testimony
before ruling upon the networks' injunction request.

         During September 2000, the Court granted the Networks' motion for
preliminary injunction, denied the Network's emergency motion and denied
EchoStar's request to present live testimony and evidence. The Court's original
order required EchoStar to terminate network programming to certain subscribers
"no later than February 15, 1999," and contained other dates with which it would
be physically impossible to comply. The order imposes restrictions on EchoStar's
past and future sale of distant ABC, NBC, CBS and Fox channels similar to those
imposed on PrimeTime 24 (and, EchoStar believes, on DirecTV and others). Some of
those restrictions go beyond the statutory requirements imposed by the SHVA and
the SHVIA. For these and other reasons EchoStar believes the Court's order is,
among other things, fundamentally flawed, unconstitutional and should be
overturned. However, it is very unusual for a Court of Appeals to overturn a
lower court's order and there can be no assurance whatsoever that it will be
overturned.

         On October 3, 2000, and again on October 25, 2000, the Court amended
its original preliminary injunction order in an effort to fix some of the errors
in the original order. The twice amended preliminary injunction order required
EchoStar to shut off, by February 15, 2001, all subscribers who are ineligible
to receive distant network programming under the court's order. EchoStar
appealed the September 2000 preliminary injunction order and the October 3, 2000
amended preliminary injunction order. On November 22, 2000, the United States
Court of Appeals for the Eleventh Circuit stayed the Florida Court's preliminary
injunction order pending EchoStar's appeal. At that time, the Eleventh Circuit
also expedited its consideration of EchoStar's appeal.



                                      F-29
<PAGE>



                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


         Oral argument before the Eleventh Circuit was held on May 24, 2001. On
September 17, 2001, the Eleventh Circuit vacated the District Court's nationwide
preliminary injunction, which the Eleventh Circuit had stayed in November 2000.
The Eleventh Circuit also rejected EchoStar's First Amendment challenge to the
SHVA. However, the Eleventh Circuit found that the District Court had made
factual findings that were clearly erroneous and not supported by the evidence,
and that the District Court had misinterpreted and misapplied the law. The
Eleventh Circuit also found that the District Court came to the wrong legal
conclusion concerning the grandfathering provision found in 17 U.S.C. Section
119(d); the Eleventh Circuit reversed the District Court's legal conclusion and
instead found that this grandfathering provision allows subscribers who switch
satellite carriers to continue to receive the distant network programming that
they had been receiving. The Eleventh Circuit's order indicated that the matter
was to be remanded to the District Court for an evidentiary hearing. On December
28, 2001, the Eleventh Circuit denied EchoStar's request for rehearing. The
Eleventh Circuit issued its mandate on January 29, 2002, remanding the case to
the Florida District Court. Echostar cannot predict when an evidentiary hearing
will be set before the District Court or when a trial will be set before the
District Court if the Networks withdraw their request for a preliminary
injunction as they have indicated they will do when the case was remanded to the
District Court.

         EchoStar is considering an appeal to the United States Supreme Court.
If EchoStar decides to appeal, there is no guarantee that the United States
Supreme Court will agree to hear any petition filed or that EchoStar's appeal
will be heard before any evidentiary hearing or trial in the District Court.

         If, after an evidentiary hearing or trial, the District Court enters an
injunction against EchoStar, the injunction could force EchoStar to terminate
delivery of distant network channels to a substantial portion of its distant
network subscriber base, which could also cause many of these subscribers to
cancel their subscription to its other services. Management has determined that
such terminations would result in a small reduction in EchoStar's reported
average monthly revenue per subscriber and could result in a temporary increase
in churn. If EchoStar loses the case at trial, the judge could, as one of many
possible remedies, prohibit all future sales of distant network programming by
EchoStar, which would have a material adverse affect on EchoStar's business.

Gemstar

         During October 2000, Starsight Telecast, Inc., a subsidiary of
Gemstar-TV Guide International, Inc., filed a suit for patent infringement
against EchoStar and certain of its subsidiaries in the United States District
Court for the Western District of North Carolina, Asheville Division. The suit
alleges infringement of United States Patent No. 4,706,121 ("the '121 Patent")
which relates to certain electronic program guide functions. EchoStar has
examined this patent and believes that it is not infringed by any of its
products or services. EchoStar will vigorously defend against this suit. On
March 30, 2001, the court stayed the action pending resolution of the
International Trade Commission matter discussed below.

         In December 2000, EchoStar filed suit against Gemstar - TV Guide (and
certain of its subsidiaries) in the United States District Court for the
District of Colorado alleging violations by Gemstar of various federal and state
anti-trust laws and laws governing unfair competition. The lawsuit seeks an
injunction and monetary damages. Gemstar filed counterclaims alleging
infringement of United States Patent Nos. 5,923,362 and 5,684,525 that relate to
certain electronic program guide functions. EchoStar examined these patents and
believes they are not infringed by any of EchoStar's products or services. In
August 2001, the Federal Multi-District Litigation panel combined this suit, for
discovery purposes, with other lawsuits asserting antitrust claims against
Gemstar, which had previously been filed by other plaintiffs. In January 2002,
Gemstar dropped the counterclaims of patent infringement.

         In February 2001, Gemstar filed patent infringement actions against us
in District Court in Atlanta, Georgia and in the International Trade Commission
("ITC"). These suits allege infringement of United States Patent Nos. 5,252,066,
5,479,268 and 5,809,204 all of which relate to certain electronic program guide
functions. In addition, the ITC action alleges infringement of the '121 Patent
which is asserted in the North Carolina case. In the Atlanta District Court
case, Gemstar seeks damages and an injunction. The North Carolina and Atlanta
cases have been






                                      F-30
<PAGE>



                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

stayed pending resolution of the ITC action. ITC actions typically proceed
according to an expedited schedule. In December 2001, the ITC held a 15-day
hearing before an administrative judge. Prior to the hearing, Gemstar dropped
its allegations regarding Unites States Patent No. 5,252,066 with respect to
which EchoStar had asserted substantial allegations of inequitable conduct. The
hearing addressed, among other things, Gemstar's allegations of patent
infringement and respondents' (EchoStar, SCI, Scientific Atlanta and Pioneer)
allegations of patent misuse. A decision by the judge is expected by March 21,
2002 and a ruling by the full ITC is expected 60 days later. While the ITC
cannot award damages, an adverse decision in this case could temporarily halt
the import of EchoStar receivers and could require EchoStar to materially modify
certain user-friendly electronic programming guides and related features
EchoStar currently offers to consumers. EchoStar has examined the patents in
dispute and believes they are not infringed by any of its products or services.
EchoStar will vigorously contest the ITC, North Carolina and Atlanta allegations
of infringement and will, among other things, challenge both the validity and
enforceability of the asserted patents. EchoStar is providing a defense and
indemnification to SCI in the ITC and Atlanta cases pursuant to the terms of
their contract.

         During 2000, Superguide Corp. also filed suit against EchoStar, DirecTV
and others in the United States District Court for the Western District of North
Carolina, Asheville Division, alleging infringement of United States Patent Nos.
5,038,211, 5,293,357 and 4,751,578 which relate to certain electronic program
guide functions, including the use of electronic program guides to control VCRs.
Superguide seeks injunctive and declaratory relief and damages in an unspecified
amount. It is EchoStar's understanding that these patents may be licensed by
Superguide to Gemstar. Gemstar has been added as a party to this case and is now
asserting these patents against EchoStar. EchoStar has examined these patents
and believes that they are not infringed by any of its products or services. A
Markman ruling was issued by the Court and in response to that ruling EchoStar
has filed motions for summary judgment of non-infringement for each of the
asserted patents. Gemstar has filed a motion for summary judgment of
infringement with respect to the patents. EchoStar intends to vigorously defend
this case and to press its patent misuse defenses.

         In the event it is ultimately determined that EchoStar infringes on any
of the aforementioned patents EchoStar may be subject to substantial damages,
including the potential for treble damages, and/or an injunction that could
require EchoStar to materially modify certain user friendly electronic
programming guide and related features it currently offers to consumers. It is
too early to make an assessment of the probable outcome of the suits. See Note
14 for events occurring subsequent to date of Auditors' Report.

IPPV Enterprises

         IPPV Enterprises, LLC and MAAST, Inc. filed a patent infringement suit
against EchoStar, and its conditional access vendor Nagra, in the United States
District Court for the District of Delaware. The suit alleged infringement of
five patents. One patent was subsequently dropped by plaintiffs. Three of the
remaining patents disclose various systems for the implementation of features
such as impulse-pay-per view, parental control and category lock-out. The fourth
remaining patent relates to an encryption technique. The Court entered summary
judgment in our favor on the encryption patent. Plaintiffs had claimed $80
million in damages with respect to the encryption patent. On July 13, 2001, a
jury found that the remaining three patents were infringed and awarded damages
of $15 million. The jury also found that one of the patents was willfully
infringed which means that the judge is entitled to increase the award of
damages. The parties have completed briefing and oral argument of post-trial
motions. EchoStar intends to appeal any adverse decision and plaintiffs have
indicated they may appeal as well. Any final award of damages would be split
between EchoStar and Nagra in percentages to be agreed upon between EchoStar and
Nagra.

California Actions

         A purported class action was filed against EchoStar in the California
State Superior Court for Alameda County during May 2001 by Andrew A. Werby. The
complaint, relating to late fees, alleges unlawful, unfair and fraudulent
business practices in violation of California Business and Professions Code
Section 17200 et seq., false and misleading advertising in violation of
California Business and Professions Code Section 17500, and violation of the
California Consumer Legal Remedies Act. On September 24, 2001, EchoStar filed an
answer denying all






                                      F-31
<PAGE>


                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

material allegations of the Complaint. On September 27, 2001, the Court entered
an Order Pursuant to Stipulation for a provisional certification of the class,
for an orderly exchange of information and for mediation. The provisional Order
specifies that the class shall be de-certified upon notice in the event
mediation does not resolve the dispute. It is too early in the litigation to
make an assessment of the probable outcome of the litigation or to determine the
extent of any potential liability or damages. EchoStar intends to deny all
liability and to vigorously defend the lawsuit.

         A purported class action relating to the use of terms such as "crystal
clear digital video," "CD-quality audio," and "on-screen program guide", and
with respect to the number of channels available in various programming
packages, has also been filed against EchoStar in the California State Superior
Court for Los Angeles County by David Pritikin and by Consumer Advocates, a
nonprofit unincorporated association. The complaint alleges breach of express
warranty and violation of the California Consumer Legal Remedies Act, Civil Code
Sections 1750, et. seq., and the California Business & Professions Code Sections
17500, 17200. EchoStar has filed an answer and the case is currently in
discovery. Plaintiffs filed their Motion for Class Certification on January 21,
2002. EchoStar's response is due on March 7, 2002, and the Court will conduct a
hearing on class certification in early May 2002. It is too early in the
litigation to make an assessment of the probable outcome of the litigation or to
determine the extent of any potential liability or damages. EchoStar denies all
liability and intends to vigorously defend the lawsuit. See Note 14 for events
occurring subsequent to date of Auditors' Report.

Retailer Class Actions

         EchoStar has been sued by retailers in three separate purported class
actions. In two separate lawsuits filed in the District Court, Arapahoe County,
State of Colorado and the United States District Court for the District of
Colorado, respectively, Air Communication & Satellite, Inc. and John DeJong, et.
al. filed lawsuits on October 6, 2000 on behalf of themselves and a class of
persons similarly situated. The plaintiffs are attempting to certify nationwide
classes allegedly brought on behalf of persons, primarily retail dealers, who
were alleged signatories to certain retailer agreements with EchoStar Satellite
Corporation. The plaintiffs are requesting the Courts to declare certain
provisions of the alleged agreements invalid and unenforceable, to declare that
certain changes to the agreements are invalid and unenforceable, and to award
damages for lost commissions and payments, charge backs, and other compensation.
EchoStar intends to vigorously defend against the suits and to assert a variety
of counterclaims. It is too early to make an assessment of the probable outcome
of the litigation or to determine the extent of any potential liability or
damages.

         Satellite Dealers Supply, Inc. filed a lawsuit in the United States
District Court for the Eastern District of Texas on September 25, 2000, on
behalf of itself and a class of persons similarly situated. The plaintiff is
attempting to certify a nationwide class on behalf of sellers, installers, and
servicers of satellite equipment who contract with EchoStar and claims the
alleged class has been "subject to improper chargebacks." The plaintiff alleges
that EchoStar: (1) charged back certain fees paid by members of the class to
professional installers in violation of contractual terms; (2) manipulated the
accounts of subscribers to deny payments to class members; and (3)
misrepresented to class members who own certain equipment related to the
provision of satellite television service. On September 18, 2001, the Court
granted EchoStar's Motion to Dismiss for lack of personal jurisdiction.
Plaintiff Satellite Dealers Supply has moved for reconsideration of the Court's
order dismissing the case.

PrimeTime 24 Joint Venture

         PrimeTime 24 Joint Venture filed suit against EchoStar during September
1998 alleging breach of contract, wrongful termination of contract, interference
with contractual relations, trademark infringement and unfair competition.
EchoStar's motion for summary judgment was granted with respect to PrimeTime
24's claim of interference with contractual relations and unfair competition.
Plaintiff's motion for summary judgment was granted with respect to its
approximate $10 million claim of breach of contract claim for fees during the
period from May 1998 through July 19, 1998. It is too early to make an
assessment of the probable outcome of the remainder of the litigation or to
determine the extent of any additional potential liability or damages.




                                      F-32
<PAGE>


                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


         The Company is subject to various other legal proceedings and claims
which arise in the ordinary course of business. In the opinion of management,
the amount of ultimate liability with respect to those actions will not
materially affect EchoStar's financial position or results of operations.

Meteoroid Events

         Meteoroid events pose a potential threat to all in orbit geosynchronous
satellites including EchoStar's DBS satellites. While the probability that
EchoStar's satellites will be damaged by meteoroids is very small, that
probability increases significantly when the Earth passes through the
particulate stream left behind by various comets.

         Occasionally, increased solar activity poses a potential threat to all
in-orbit geosynchronous satellites including EchoStar's DBS satellites. The
probability that the effects from this activity will damage our satellites or
cause service interruptions is generally very small.

         Some decommissioned spacecraft are in uncontrolled orbits which pass
through the geostationary belt at various points, and present hazards to
operational spacecraft including EchoStar's DBS satellites. The locations of
these hazards are generally well known and may require EchoStar to perform
maneuvers to avoid collisions.

9. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS

         With the exception of certain de minimis domestic and foreign
subsidiaries (collectively, the "Non-Guarantors"), the 9 1/4% Seven Year Notes
and 9 3/8% Ten Year Notes are fully, unconditionally and jointly and severally
guaranteed by all subsidiaries of EDBS (collectively, the "Subsidiary
Guarantors").

         The combined assets, stockholder's equity, net loss and operating cash
flows of the Non-Guarantors represent less than 1% of the combined and
consolidated assets, stockholder's equity, net loss and operating cash flows of
the combined Subsidiary Guarantors for the years ended December 31, 1999, 2000
and 2001. As a result, the Subsidiary Guarantors and Non-Guarantors are combined
in the following tables. Consolidating financial information is presented for
the following entities (in thousands):

         EDBS Parent Company Only (referred to as "EDBS - PC")
         Subsidiary Guarantors and Other Subsidiaries
         Consolidating and Eliminating Adjustments (referred to as "C&E")
         Consolidated EDBS (referred to as "EDBS")




                                      F-33
<PAGE>



                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED



 Consolidating Balance Sheets - As of December 31, 2000

<Table>
<Caption>
                                                                        SUBSIDIARY
                                                                        GUARANTORS
                                                         EDBS - PC       AND OTHER          C&E            EDBS
                                                        ------------    ------------    ------------    ------------
<S>                                                     <C>             <C>             <C>             <C>
ASSETS
Current Assets:
   Cash and cash equivalents ........................   $    (79,319)   $    170,891    $         --    $     91,572
   Marketable investment securities .................          4,992              --              --           4,992
   Trade accounts receivable, net of allowance
    for uncollectible accounts of $19,934 ...........             --         275,321              --         275,321
   Insurance receivable .............................        106,000              --              --         106,000
   Inventories ......................................             --         159,665              --         159,665
   Other current assets .............................             66          25,135              --          25,201
                                                        ------------    ------------    ------------    ------------
Total current assets ................................         31,739         631,012              --         662,751
Cash reserved for satellite insurance ...............         82,393              --              --          82,393
Property and equipment, net .........................             --       1,329,181              --       1,329,181
FCC authorizations, net .............................             --         709,817              --         709,817
Investment in subsidiaries ..........................        220,148             189        (220,337)             --
Other noncurrent assets .............................         24,974          61,275              --          86,249
                                                        ------------    ------------    ------------    ------------
     Total assets ...................................   $    359,254    $  2,731,474    $   (220,337)   $  2,870,391
                                                        ============    ============    ============    ============

LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current Liabilities:
   Trade accounts payable ...........................   $         58    $    144,205    $         --    $    144,263
   Deferred revenue .................................             --         282,939              --         282,939
   Accrued expenses .................................         80,890         534,803              --         615,693
   Advances (to) from affiliates, net ...............       (703,043)      1,461,857              --         758,814
   Current portion of long-term debt ................             --          19,642              --          19,642
                                                        ------------    ------------    ------------    ------------
Total current liabilities ...........................       (622,095)      2,443,446              --       1,821,351

Long-term obligations, net of current portion:
   9 1/4% Seven Year Notes ..........................        375,000              --              --         375,000
   9 3/8% Ten Year Notes ............................      1,625,000              --              --       1,625,000
   Mortgages and other notes payable, net of
    current portion .................................             --          11,644              --          11,644
   Long-term deferred distribution and carriage
    revenue and other long-term liabilities .........             --          56,047              --          56,047
                                                        ------------    ------------    ------------    ------------
Total long-term obligations, net of current
portion .............................................      2,000,000          67,691              --       2,067,691
                                                        ------------    ------------    ------------    ------------
     Total liabilities ..............................      1,377,905       2,511,137              --       3,889,042

Stockholder's Equity (Deficit):
   Common Stock, $.01 par value, 3,000 shares
    authorized, issued and outstanding ..............             --          15,405         (15,405)             --
   Additional paid-in capital .......................      1,440,252       1,469,059      (1,469,059)      1,440,252
   Deferred stock-based compensation ................        (58,193)        (58,193)         58,193         (58,193)
   Accumulated other comprehensive loss .............             (7)             --              --              (7)
   Accumulated deficit ..............................     (2,400,703)     (1,205,934)      1,205,934      (2,400,703)
                                                        ------------    ------------    ------------    ------------
Total stockholder's equity (deficit) ................     (1,018,651)        220,337        (220,337)     (1,018,651)
                                                        ------------    ------------    ------------    ------------
     Total liabilities and stockholder's equity
     (deficit) ......................................   $    359,254    $  2,731,474    $   (220,337)   $  2,870,391
                                                        ============    ============    ============    ============
</Table>




                                      F-34
<PAGE>



                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


Consolidating Balance Sheets - As of December 31, 2001

<Table>
<Caption>
                                                                           SUBSIDIARY
                                                                           GUARANTORS
                                                            EDBS - PC       AND OTHER         C&E             EDBS
                                                          ------------    ------------    ------------    ------------
<S>                                                       <C>             <C>             <C>             <C>
ASSETS
Current Assets:
   Cash and cash equivalents ..........................   $     36,253    $      2,799    $         --    $     39,052
   Marketable investment securities ...................         89,019              --              --          89,019
   Trade accounts receivable, net of allowance
    for uncollectible accounts of $8,848 ..............             --         313,580              --         313,580
   Insurance receivable ...............................        106,000              --              --         106,000
   Inventories ........................................             --         189,665              --         189,665
   Other current assets ...............................            (21)         38,284              --          38,263
                                                          ------------    ------------    ------------    ------------
Total current assets ..................................        231,251         544,328              --         775,579
Cash reserved for satellite insurance .................        122,068              --              --         122,068
Property and equipment, net ...........................             --       1,502,221              --       1,502,221
FCC authorizations, net ...............................             --         696,242              --         696,242
Investment in subsidiaries ............................        457,358             189        (457,547)             --
Other noncurrent assets ...............................         40,948          50,681              --          91,629
                                                          ------------    ------------    ------------    ------------
     Total assets .....................................   $    851,625    $  2,793,661    $   (457,547)   $  3,187,739
                                                          ============    ============    ============    ============

LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current Liabilities:
   Trade accounts payable .............................   $         --    $    203,685    $         --    $    203,685
   Deferred revenue ...................................             --         356,903              --         356,903
   Accrued expenses ...................................         83,966         681,212              --         765,178
   Advances (to) from affiliates, net .................       (972,781)        972,839              --              58
   Current portion of long-term debt ..................             --          13,444              --          13,444
                                                          ------------    ------------    ------------    ------------
Total current liabilities .............................       (888,815)      2,228,083              --       1,339,268

Long-term obligations, net of current portion:
   9 1/4% Seven Year Notes ............................        375,000              --              --         375,000
   9 3/8% Ten Year Notes ..............................      1,625,000              --              --       1,625,000
   10 3/8% Seven Year Notes ...........................      1,000,000              --              --       1,000,000
   9 1/8% Seven Year Notes ............................        700,000              --              --         700,000
   Mortgages and other notes payable, net of
    current portion ...................................             --           5,577              --           5,577
   Long-term deferred distribution and carriage
    revenue and other long-term liabilities ...........             --         102,454              --         102,454
                                                          ------------    ------------    ------------    ------------
Total long-term obligations, net of current
portion ...............................................      3,700,000         108,031              --       3,808,031
                                                          ------------    ------------    ------------    ------------
     Total liabilities ................................      2,811,185       2,336,114              --       5,147,299

Stockholder's Equity (Deficit):
   Common Stock, $.01 par value, 3,000 shares
    authorized, issued and outstanding ................             --          14,379         (14,379)             --
   Additional paid-in capital .........................        435,590       1,454,087      (1,454,087)        435,590
   Deferred stock-based compensation ..................        (25,456)        (25,456)         25,456         (25,456)
   Accumulated other comprehensive loss ...............           (642)             --              --            (642)
   Accumulated deficit ................................     (2,369,052)       (985,463)        985,463      (2,369,052)
                                                          ------------    ------------    ------------    ------------
Total stockholder's equity (deficit) ..................     (1,959,560)        457,547        (457,547)     (1,959,560)
                                                          ------------    ------------    ------------    ------------
     Total liabilities and stockholder's equity
     (deficit) ........................................   $    851,625    $  2,793,661    $   (457,547)   $  3,187,739
                                                          ============    ============    ============    ============
</Table>




                                      F-35
<PAGE>


                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Consolidating Statements of Operations - Year Ended December 31, 1999

<Table>
<Caption>
                                                                                    SUBSIDIARY
                                                                                    GUARANTORS
                                                                      EDBS - PC      AND OTHER          C&E             EDBS
                                                                    ------------    ------------    ------------    ------------
<S>                                                                 <C>             <C>             <C>             <C>
REVENUE:
   DISH Network:
     Subscription television services ...........................   $         --    $  1,343,234    $         --    $  1,343,234
     Other ......................................................             --          10,374          (1,005)          9,369
                                                                    ------------    ------------    ------------    ------------
   Total DISH Network ...........................................             --       1,353,608          (1,005)      1,352,603
   DTH equipment sales and integration services .................             --         178,409             (84)        178,325
   Other ........................................................            500          74,863              --          75,363
                                                                    ------------    ------------    ------------    ------------
Total revenue ...................................................            500       1,606,880          (1,089)      1,606,291

COSTS AND EXPENSES:
   DISH Network Operating Expenses:
     Subscriber-related expenses ................................             --         580,979              --         580,979
     Customer service center and other ..........................             --         117,684            (435)        117,249
     Satellite and transmission .................................             --          40,083              --          40,083
                                                                    ------------    ------------    ------------    ------------
   Total DISH Network operating expenses ........................             --         738,746            (435)        738,311
   Cost of sales - DTH equipment and integration services .......             --         149,541             (14)        149,527
   Cost of sales - other ........................................             --          17,076              --          17,076
   Marketing:
     Subscriber promotion subsidies .............................             --         677,508              19         677,527
     Advertising and other ......................................             --          65,309            (649)         64,660
                                                                    ------------    ------------    ------------    ------------
   Total marketing expenses .....................................             --         742,817            (630)        742,187
   General and administrative ...................................           (424)        142,099              (7)        141,668
   Non-cash, stock-based compensation ...........................             --          61,060              --          61,060
   Depreciation and amortization ................................          2,663         107,371              (3)        110,031
                                                                    ------------    ------------    ------------    ------------
Total costs and expenses ........................................          2,239       1,958,710          (1,089)      1,959,860
                                                                    ------------    ------------    ------------    ------------

Operating loss ..................................................         (1,739)       (351,830)             --        (353,569)

Other Income (Expense):
   Interest income ..............................................          7,774           4,792              --          12,566
   Interest expense .............................................       (191,477)         (4,913)             --        (196,390)
   Equity in loss of subsidiaries ...............................       (376,974)             --         376,974              --
   Other ........................................................             --         (24,892)             --         (24,892)
                                                                    ------------    ------------    ------------    ------------
Total other income (expense) ....................................       (560,677)        (25,013)        376,974        (208,716)
                                                                    ------------    ------------    ------------    ------------

Loss before income taxes ........................................       (562,416)       (376,843)        376,974        (562,285)
Income tax provision, net .......................................             --            (131)             --            (131)
                                                                    ------------    ------------    ------------    ------------
Loss before extraordinary charges ...............................       (562,416)       (376,974)        376,974        (562,416)
Extraordinary charge for early retirement of debt, net of tax ...       (228,733)             --              --        (228,733)
                                                                    ------------    ------------    ------------    ------------
Net loss ........................................................   $   (791,149)   $   (376,974)   $    376,974    $   (791,149)
                                                                    ============    ============    ============    ============
</Table>




                                      F-36
<PAGE>



                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


Consolidating Statements of Operations - Year Ended December 31, 2000

<Table>
<Caption>
                                                                                  SUBSIDIARY
                                                                                  GUARANTORS
                                                                   EDBS - PC       AND OTHER         C&E             EDBS
                                                                 ------------    ------------    ------------    ------------
<S>                                                              <C>             <C>             <C>             <C>
REVENUE:
   DISH Network:
     Subscription television services ........................   $         --    $  2,342,358    $         --    $  2,342,358
     Other ...................................................             --           8,663            (181)          8,482
                                                                 ------------    ------------    ------------    ------------
   Total DISH Network ........................................             --       2,351,021            (181)      2,350,840
   DTH equipment sales and integration services ..............             --         255,936             (11)        255,925
   Other .....................................................             --         102,149              --         102,149
                                                                 ------------    ------------    ------------    ------------
Total revenue ................................................             --       2,709,106            (192)      2,708,914

COSTS AND EXPENSES:
   DISH Network Operating Expenses:
     Subscriber-related expenses .............................             --         981,403              --         981,403
     Customer service center and other .......................             --         250,854            (182)        250,672
     Satellite and transmission ..............................             --          36,178              --          36,178
                                                                 ------------    ------------    ------------    ------------
   Total DISH Network operating expenses .....................             --       1,268,435            (182)      1,268,253
   Cost of sales - DTH equipment and integration services ....            300         196,606               2         196,908
   Cost of sales - other .....................................             --          32,978              --          32,978
   Marketing:
     Subscriber promotion subsidies ..........................             --       1,037,193              24       1,037,217
     Advertising and other ...................................             --         138,222             (20)        138,202
                                                                 ------------    ------------    ------------    ------------
   Total marketing expenses ..................................             --       1,175,415               4       1,175,419
   General and administrative ................................             56         233,926             (16)        233,966
   Non-cash, stock-based compensation ........................             --          51,465              --          51,465
   Depreciation and amortization .............................             --         174,607              --         174,607
                                                                 ------------    ------------    ------------    ------------
Total costs and expenses .....................................            356       3,133,432            (192)      3,133,596
                                                                 ------------    ------------    ------------    ------------

Operating loss ...............................................           (356)       (424,326)             --        (424,682)

Other Income (Expense):
   Interest income ...........................................          2,562          10,504              --          13,066
   Interest expense ..........................................       (190,580)         (3,105)             --        (193,685)
   Equity in loss of subsidiaries ............................       (417,483)             --         417,483              --
   Other .....................................................         (1,808)           (431)             --          (2,239)
                                                                 ------------    ------------    ------------    ------------
Total other income (expense) .................................       (607,309)          6,968         417,483        (182,858)
                                                                 ------------    ------------    ------------    ------------

Loss before income taxes .....................................       (607,665)       (417,358)        417,483        (607,540)
Income tax provision, net ....................................             --            (125)             --            (125)
                                                                 ------------    ------------    ------------    ------------
Net loss .....................................................   $   (607,665)   $   (417,483)   $    417,483    $   (607,665)
                                                                 ============    ============    ============    ============
</Table>




                                      F-37
<PAGE>


                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


Consolidating Statements of Operations - Year Ended December 31, 2001

<Table>
<Caption>
                                                                                   SUBSIDIARY
                                                                                   GUARANTORS
                                                                    EDBS - PC       AND OTHER         C&E             EDBS
                                                                  ------------    ------------    ------------    ------------
<S>                                                               <C>             <C>             <C>             <C>
REVENUE:
   DISH Network:
     Subscription television services .........................   $         --    $  3,583,698    $         --    $  3,583,698
     Other ....................................................             --         107,447         (85,704)         21,743
                                                                  ------------    ------------    ------------    ------------
   Total DISH Network .........................................             --       3,691,145         (85,704)      3,605,441
   DTH equipment sales and integration services ...............             --         266,746              (3)        266,743
   Other ......................................................             --         114,699              --         114,699
                                                                  ------------    ------------    ------------    ------------
Total revenue .................................................             --       4,072,590         (85,707)      3,986,883

COSTS AND EXPENSES:
   DISH Network Operating Expenses:
     Subscriber-related expenses ..............................             --       1,448,617              --       1,448,617
     Customer service center and other ........................             --         370,573         (85,704)        284,869
     Satellite and transmission ...............................             --          37,555              --          37,555
                                                                  ------------    ------------    ------------    ------------
   Total DISH Network operating expenses ......................             --       1,856,745         (85,704)      1,771,041
   Cost of sales - DTH equipment and integration services .....           (300)        188,113              (3)        187,810
   Cost of sales - other ......................................             --          75,385              --          75,385
   Marketing:
     Subscriber promotion subsidies ...........................             --         944,513              --         944,513
     Advertising and other ....................................             --         144,724              --         144,724
                                                                  ------------    ------------    ------------    ------------
   Total marketing expenses ...................................             --       1,089,237              --       1,089,237
   General and administrative .................................           (147)        361,776              --         361,629
   Non-cash, stock-based compensation .........................             --          20,173              --          20,173
   Depreciation and amortization ..............................             --         265,912              --         265,912
                                                                  ------------    ------------    ------------    ------------
Total costs and expenses ......................................           (447)      3,857,341         (85,707)      3,771,187
                                                                  ------------    ------------    ------------    ------------

Operating income ..............................................            447         215,249              --         215,696

Other Income (Expense):
   Interest income ............................................          7,297           3,024              --          10,321
   Interest expense, net of amounts capitalized ...............       (190,840)         (2,060)             --        (192,900)
   Equity in earnings (loss)  of subsidiaries .................        214,044              --        (214,044)             --
   Other ......................................................            703          (1,323)             --            (620)
                                                                  ------------    ------------    ------------    ------------
Total other income (expense) ..................................         31,204            (359)       (214,044)       (183,199)
                                                                  ------------    ------------    ------------    ------------

Income (loss) before income taxes .............................         31,651         214,890        (214,044)         32,497
Income tax provision, net .....................................             --            (846)             --            (846)
                                                                  ------------    ------------    ------------    ------------
Net income (loss) .............................................   $     31,651    $    214,044    $   (214,044)   $     31,651
                                                                  ============    ============    ============    ============
</Table>




                                      F-38
<PAGE>


                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


Consolidating Statements of Cash Flows - Year Ended December 31, 1999

<Table>
<Caption>
                                                                                     SUBSIDIARY
                                                                                     GUARANTORS
                                                                      EDBS - PC      AND OTHER          C&E            EDBS
                                                                   ------------    ------------    ------------    ------------
<S>                                                                <C>             <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .......................................................   $   (791,149)   $   (376,974)   $    376,974    $   (791,149)
Adjustments to reconcile net loss to net cash flows
from operating activities:
   Equity in losses of subsidiaries ............................        376,974            (189)       (376,785)             --
   Extraordinary charge for early retirement of debt ...........         66,910         161,823              --         228,733
   Loss on impairment of satellite .............................             --          13,741              --          13,741
   Deferred stock-based compensation recognized ................             --          61,060              --          61,060
   Depreciation and amortization ...............................          2,663         107,372              (4)        110,031
   Interest on notes payable to ECC added to principal .........             --             330              --             330
   Amortization of debt discount and deferred financing costs ..          3,066          10,374              --          13,440
   Change in long-term deferred satellite services revenue and
     other long-term liabilities ...............................             --          10,173              --          10,173
   Other, net ..................................................             --          (1,455)             --          (1,455)
   Changes in current assets and current liabilities:
     Trade accounts receivable, net ............................             --         (50,201)             --         (50,201)
     Inventories ...............................................             --         (45,175)             --         (45,175)
     Other current assets ......................................           (598)          2,971              --           2,373
     Trade accounts payable ....................................          2,667          94,474              --          97,141
     Deferred revenue ..........................................             --          48,177              --          48,177
     Accrued expenses ..........................................          9,930         207,982            (185)        217,727
                                                                   ------------    ------------    ------------    ------------
Net cash flows from operating activities .......................       (329,537)        244,483              --         (85,054)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable investment securities ..................       (186,866)             --              --        (186,866)
Sales of marketable investment securities ......................        162,092           7,000              --         169,092
Funds released from escrow and restricted cash and marketable
investment securities ..........................................         77,657              --              --          77,657
Purchases of property and equipment ............................             --         (87,597)             --         (87,597)
Advances and payments under in-orbit satellite contract ........             --          67,804              --          67,804
Other ..........................................................             --          (1,318)             --          (1,318)
                                                                   ------------    ------------    ------------    ------------
Net cash flows from investing activities .......................         52,883         (14,111)             --          38,772

CASH FLOWS FROM FINANCING ACTIVITIES:
Non-interest bearing advances from affiliates ..................       (871,231)      1,088,866              --         217,635
Proceeds from issuance of 9 1/4% Seven Year Notes ..............        375,000              --              --         375,000
Proceeds from issuance of 9 3/8% Ten Year Notes ................      1,625,000              --              --       1,625,000
Debt issuance costs and prepayment premiums ....................        (88,508)       (145,213)             --        (233,721)
Retirement of 1994 Notes .......................................             --        (575,674)             --        (575,674)
Retirement of 1996 Notes .......................................             --        (501,350)             --        (501,350)
Retirement of 1997 Notes .......................................       (374,985)         (3,125)             --        (378,110)
Capital contribution to ECC ....................................       (268,588)             --              --        (268,588)
Repayment of note payable to ECC ...............................             --         (60,142)             --         (60,142)
Repayments of mortgage indebtedness and other notes payable ....             --         (22,180)             --         (22,180)
Other ..........................................................             --           2,865              --           2,865
                                                                   ------------    ------------    ------------    ------------
Net cash flows from financing activities .......................        396,688        (215,953)             --         180,735
                                                                   ------------    ------------    ------------    ------------

Net increase (decrease) in cash and cash equivalents ...........        120,034          14,419              --         134,453
Cash and cash equivalents, beginning of year ...................             99          25,209              --          25,308
                                                                   ------------    ------------    ------------    ------------
Cash and cash equivalents, end of year .........................   $    120,133    $     39,628    $         --    $    159,761
                                                                   ============    ============    ============    ============
</Table>




                                      F-39
<PAGE>


                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


         Consolidating Statements of Cash Flows - Year Ended December 31, 2000

<Table>
<Caption>
                                                                                    SUBSIDIARY
                                                                                    GUARANTORS
                                                                      EDBS - PC      AND OTHER          C&E             EDBS
                                                                    ------------    ------------    ------------    ------------
<S>                                                                 <C>             <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ........................................................   $   (607,665)   $   (417,483)   $    417,483    $   (607,665)
Adjustments to reconcile net loss to net cash flows from
operating activities:
   Equity in losses of subsidiaries .............................        417,483              --        (417,483)             --
   Deferred stock-based compensation (forfeitures) recognized ...         (8,072)         59,537              --          51,465
   Depreciation and amortization ................................             --         173,233              --         173,233
   Amortization of debt discount and deferred financing costs ...          3,276               4              --           3,280
   Change in long-term deferred satellite services revenue and
     other long-term liabilities ................................             --          37,236              --          37,236
   Other, net ...................................................             --          10,512              --          10,512
   Changes in current assets and current liabilities:
     Trade accounts receivable, net .............................             --        (117,377)             --        (117,377)
     Inventories ................................................             --         (41,160)             --         (41,160)
     Other current assets .......................................            532           3,530              --           4,062
     Trade accounts payable .....................................         (2,609)        (40,831)             --         (43,440)
     Deferred revenue ...........................................             --         101,905              --         101,905
     Accrued expenses ...........................................          1,020         176,982              --         178,002
                                                                    ------------    ------------    ------------    ------------
Net cash flows from operating activities ........................       (196,035)        (53,912)             --        (249,947)

CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of marketable investment securities .......................         19,775              --              --          19,775
Cash reserved for satellite insurance ...........................        (82,393)             --              --         (82,393)
Purchases of property and equipment .............................             --        (175,313)             --        (175,313)
Advances and payments under in-orbit satellite contract .........             --         (48,894)             --         (48,894)
                                                                    ------------    ------------    ------------    ------------
Net cash flows from investing activities ........................        (62,618)       (224,207)             --        (286,825)

CASH FLOWS FROM FINANCING ACTIVITIES:
Non-interest bearing advances from affiliates ...................         61,816         424,558              --         486,374
Repayments of mortgage indebtedness and other notes payable .....             --         (15,176)             --         (15,176)
Other ...........................................................         (2,615)             --              --          (2,615)
                                                                    ------------    ------------    ------------    ------------
Net cash flows from financing activities ........................         59,201         409,382              --         468,583
                                                                    ------------    ------------    ------------    ------------

Net increase (decrease) in cash and cash equivalents ............       (199,452)        131,263              --         (68,189)
Cash and cash equivalents, beginning of year ....................        120,133          39,628              --         159,761
                                                                    ------------    ------------    ------------    ------------
Cash and cash equivalents, end of year ..........................   $    (79,319)   $    170,891    $         --    $     91,572
                                                                    ============    ============    ============    ============
</Table>



                                      F-40
<PAGE>
                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Consolidating Statements of Cash Flows - Year Ended December 31, 2001

<Table>
<Caption>
                                                                                     SUBSIDIARY
                                                                                     GUARANTORS
                                                                      EDBS - PC      AND OTHER          C&E            EDBS
                                                                   ------------    ------------    ------------    ------------
<S>                                                                <C>             <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .......................................................   $     31,651    $    214,044    $   (214,044)   $     31,651
Adjustments to reconcile net loss to net cash flows from
  operating activities:
   Equity in losses of subsidiaries ............................       (214,044)             --         214,044              --
   Deferred stock-based compensation (forfeitures) recognized ..             --          20,173              --          20,173
   Depreciation and amortization ...............................             --         265,912              --         265,912
   Amortization of debt discount and deferred financing costs ..          3,277               4              --           3,281
   Change in long-term deferred satellite services revenue and
     other long-term liabilities ...............................             --          46,266              --          46,266
   Other, net ..................................................             --          25,751              --          25,751
   Changes in current assets and current liabilities:
     Trade accounts receivable, net ............................             --         (38,259)             --         (38,259)
     Inventories ...............................................             --         (25,665)             --         (25,665)
     Other current assets ......................................         (2,906)         (3,263)             --          (6,169)
     Trade accounts payable ....................................            (58)         59,480              --          59,422
     Deferred revenue ..........................................             --          73,964              --          73,964
     Accrued expenses ..........................................          1,676         144,100              --         145,776
                                                                   ------------    ------------    ------------    ------------
Net cash flows from operating activities .......................       (180,404)        782,507              --         602,103

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable investment securities ..................       (586,648)             --              --        (586,648)
Sales of marketable investment securities ......................        501,986              --              --         501,986
Cash reserved for satellite insurance ..........................        (59,488)             --              --         (59,488)
Change in cash reserved for satellite insurance due to
   depreciation on related satellites ..........................         19,813              --              --          19,813
Purchases of property and equipment ............................             --        (441,874)             --        (441,874)
Advances and payments under in -orbit satellite contract .......             --          (8,441)             --          (8,441)
                                                                   ------------    ------------    ------------    ------------
Net cash flows from investing activities .......................       (124,337)       (450,315)             --        (574,652)

CASH FLOWS FROM FINANCING ACTIVITIES:
Non-interest bearing advances from affiliates ..................       (270,237)       (488,519)             --        (758,756)
Proceeds from issuance of 9 1/8% Seven Year Notes ..............        700,000              --              --         700,000
Debt issuance costs and prepayment premiums ....................         (9,450)             --              --          (9,450)
Repayments of mortgage indebtedness and other notes payable ....             --         (11,765)             --         (11,765)
                                                                   ------------    ------------    ------------    ------------
Net cash flows from financing activities .......................        420,313        (500,284)             --         (79,971)
                                                                   ------------    ------------    ------------    ------------

Net increase (decrease) in cash and cash equivalents ...........        115,572        (168,092)             --         (52,520)
Cash and cash equivalents, beginning of year ...................        (79,319)        170,891              --          91,572
                                                                   ------------    ------------    ------------    ------------
Cash and cash equivalents, end of year .........................   $     36,253    $      2,799    $         --    $     39,052
                                                                   ============    ============    ============    ============
</Table>




                                      F-41
<PAGE>
                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

10. SEGMENT REPORTING

Financial Data by Business Unit (in thousands)

         Statement of Financial Accounting Standard No. 131, "Disclosures About
Segments of an Enterprise and Related Information" ("FAS No. 131") establishes
standards for reporting information about operating segments in annual financial
statements of public business enterprises and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. Operating segments are components of an
enterprise about which separate financial information is available and regularly
evaluated by the chief operating decision maker(s) of an enterprise. During
2000, under this definition, we were operating as three separate business units.
However, beginning 2001, it was determined that EchoStar's chief operating
decision maker regularly evaluates only the following two separate business
units. All prior year amounts have been adjusted to conform to the current year
presentation. The All Other column consists of revenue and expenses from other
operating segments for which the disclosure requirements of FAS No. 131 do not
apply.

<Table>
<Caption>
                                                                                              ECHOSTAR       OTHER         EDBS
                                       DISH                        ALL                      CONSOLIDATED    ECHOSTAR        AND
                                      NETWORK         ETC         OTHER      ELIMINATIONS       TOTAL       ACTIVITY    SUBSIDIARIES
                                    -----------   -----------   -----------   -----------   -----------   -----------   -----------
<S>                                 <C>           <C>           <C>           <C>           <C>           <C>           <C>
YEAR ENDED DECEMBER 31, 1999
  Revenue ........................  $ 1,390,074   $   160,276   $    53,876   $    (1,385)  $ 1,602,841   $     3,450   $ 1,606,291
  Depreciation and amortization ..       97,150         4,434        11,648            (4)      113,228        (3,197)      110,031
  Total expenses .................    1,634,251       165,238       155,440        (4,997)    1,949,932         9,928     1,959,860
  EBITDA .........................     (147,026)         (528)      (28,857)        3,608      (172,803)       (9,675)     (182,478)
  Interest income ................       26,506             1           143          (471)       26,179       (13,613)       12,566
  Interest expense ...............     (201,356)         (253)         (475)          471      (201,613)        5,223      (196,390)
  Income tax provision, net ......           --           (46)         (108)           --          (154)           23          (131)
  Net income (loss) ..............     (765,925)      (31,883)        4,961            --      (792,847)        1,698      (791,149)

YEAR ENDED DECEMBER 31, 2000
  Revenue ........................  $ 2,417,533   $   207,945   $    93,183   $    (3,441)  $ 2,715,220   $    (6,306)  $ 2,708,914
  Depreciation and amortization ..      160,910         5,338        19,108            --       185,356       (10,749)      174,607
  Total expenses .................    2,755,965       197,073       194,363        (8,115)    3,139,286        (5,690)    3,133,596
  EBITDA .........................     (177,522)       16,210       (30,607)        4,674      (187,245)      (11,365)     (198,610)
  Interest income ................       79,724            --           340          (331)       79,733       (66,667)       13,066
  Interest expense ...............     (267,650)         (233)         (438)          331      (267,990)       74,305      (193,685)
  Income tax benefit
    (provision), net .............          (48)          (32)         (475)           --          (555)          430          (125)
  Net loss .......................     (703,229)         (155)       53,267          (209)     (650,326)       42,661      (607,665)

YEAR ENDED DECEMBER 31, 2001
  Revenue ........................  $ 3,683,156   $   189,150   $   133,426   $    (4,594)  $ 4,001,138   $   (14,255)  $ 3,986,883
  Depreciation and amortization ..      243,810         6,682        28,160            --       278,652       (12,740)      265,912
  Total expenses .................    3,273,670       188,699       331,061        (4,594)    3,788,836       (17,649)    3,771,187
  EBITDA .........................      653,296         7,134      (149,303)           --       511,127        (9,346)      501,781
  Interest income ................       96,372            --         1,571          (272)       97,671       (87,350)       10,321
  Interest expense ...............     (370,331)         (211)       (1,095)          272      (371,365)      178,465      (192,900)
  Income tax benefit
    (provision), net .............          (51)           --        (1,403)           --        (1,454)          608          (846)
  Net income (loss) ..............     (231,053)       (7,478)       23,033            --      (215,498)      247,149        31,651
</Table>




                                      F-42
<PAGE>

                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


Geographic Information (in thousands) and Transaction with Major Customers

<Table>
<Caption>
                           UNITED STATES      EUROPE          TOTAL
                           -------------   ------------   ------------

1999
<S>                         <C>            <C>            <C>
Total revenue ...........   $  1,583,442   $     22,849   $  1,606,291
Long-lived assets .......      2,033,142          3,099      2,036,241

2000
Total revenue ...........   $  2,660,827   $     48,087   $  2,708,914
Long-lived assets .......      2,035,452          3,546      2,038,998

2001
Total revenue ...........   $  3,889,352   $     97,531   $  3,986,883
Long-lived assets .......      2,193,584          4,879      2,198,463
</Table>

         Revenues are attributed to geographic regions based upon the location
from which the sale originated. United States revenue includes transactions made
to both United States and International customers. Europe revenue includes
transactions made customers in Europe, Africa and the Middle East. During the
years ended December 31, 1999, 2000 and 2001, United States revenue included
export sales to two international customers which totaled $126 million, $187
million and $176 million, respectively. These international sales accounted for
approximately 8%, 7% and 4% of EchoStar's total revenue during each of the three
years ended December 31, 2001, respectively. Revenues from these customers are
included within the EchoStar Technologies Corporation business unit.


11. VALUATION AND QUALIFYING ACCOUNTS

         The Company's valuation and qualifying accounts as of December 31,
1999, 2000 and 2001 are as follows (in thousands):

<Table>
<Caption>
                                                   BALANCE AT     CHARGED TO
                                                  BEGINNING OF    COSTS AND                     BALANCE AT
                                                      YEAR         EXPENSES      DEDUCTIONS     END OF YEAR
                                                  ------------   ------------   ------------    ------------
<S>                                               <C>            <C>            <C>             <C>
YEAR ENDED DECEMBER 31, 1999:
  Assets:
    Allowance for doubtful accounts ...........   $      2,996   $     23,481   $    (13,368)   $     13,109
    Reserve for inventory .....................          5,181          1,718         (3,019)          3,880
  Liabilities:
    Reserve for warranty costs and other ......            275             --            (65)            210

YEAR ENDED DECEMBER 31, 2000:
  Assets:
    Allowance for doubtful accounts ...........   $     13,109   $     45,091   $    (38,266)   $     19,934
    Reserve for inventory .....................          3,880          6,357           (395)          9,842
  Liabilities:
    Reserve for warranty costs and other ......            210             --             --             210

YEAR ENDED DECEMBER 31, 2001:
  Assets:
    Allowance for doubtful accounts ...........   $     19,934   $     59,076   $    (70,162)   $      8,848
    Reserve for inventory .....................          9,842         12,174         (8,829)         13,187
  Liabilities:
    Reserve for warranty costs and other ......            210            773           (316)            667
</Table>




                                      F-43
<PAGE>

                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED



12.  QUARTERLY FINANCIAL DATA (UNAUDITED)

         The Company's quarterly unaudited results of operations are summarized
as follows (in thousands, except per share amounts):

<Table>
<Caption>
                                                           THREE MONTHS ENDED
                                      ------------------------------------------------------------
                                        MARCH 31        JUNE 30       SEPTEMBER 30     DECEMBER 31
                                      ------------    ------------    ------------    ------------
                                                               (Unaudited)
<S>                                   <C>             <C>             <C>             <C>
  Year Ended December 31, 2000:
    Total revenue .................   $    568,058    $    642,199    $    694,227    $    804,430
    Operating loss ................       (145,456)        (90,115)        (82,717)       (106,394)
    Net loss ......................       (191,183)       (137,931)       (128,563)       (149,988)

  Year Ended December 31, 2001:
    Total revenue .................   $    858,306    $    962,600    $  1,019,335    $  1,146,642
    Operating income (loss) .......        (12,462)         67,184          77,496          83,478
    Net income (loss) .............        (57,905)         25,107          30,318          34,131
</Table>

13. SUBSEQUENT EVENTS

EchoStar III

         During January 2002, a transponder pair on EchoStar III failed,
resulting in a temporary interruption of service. The operation of the satellite
was quickly restored. Including the five transponders pairs that malfunctioned
in prior years, these anomalies have resulted in the failure of a total of
twelve transponders on the satellite to date. While a maximum of 32 transponders
can be operated at any time, the satellite was equipped with a total of 44
transponders to provide redundancy. In addition, EchoStar is only licensed by
the FCC to operate 11 transponders at the 61.5 degree orbital location (together
with an additional six leased transponders).

EchoStar VII

         EchoStar VII was launched on February 21, 2002 from Cape Canaveral,
Florida. EchoStar VII will be tested at the 129 degree orbital location and will
then be moved to the 119 degree orbital location for commercial service.
Assuming successful completion of in-orbit testing, EchoStar VII is expected to
commence commercial service at the 119 degree orbital location during the second
quarter of 2002. EchoStar VII is planned to replace the capacity of the EchoStar
IV satellite, which has experienced a series of anomalies materially impacting
its functionality. Operating from the 119 degree orbital location, EchoStar VII,
assuming successful completion of in-orbit testing, will also provide local
channels by satellite to consumers in Alaska and Hawaii. EchoStar VII, together
with EchoStar VIII which is expected to launch this summer, will also improve
spectrum efficiency, enhance the quality of video channels for all DISH Network
customers, provide a broader array of programming choices to consumers in Alaska
and Hawaii, and increase in-orbit backup capacity.

14. EVENTS OCCURRING SUBSEQUENT TO DATE OF AUDITORS' REPORT

Matters Pertaining to Arthur Andersen

         The Company's independent certified public accountants, Arthur
Andersen, has informed the Company that on March 14, 2002, it was indicted on
federal obstruction of justice charges arising from the government's
investigation of Enron. Arthur Andersen has indicated that it intends to contest
vigorously the indictment. EchoStar's Audit Committee has been carefully
monitoring this situation. As a public company, the Company is required to file
with the SEC periodic financial statements audited or reviewed by an
independent, certified public accountant. The SEC has said that it will continue
accepting financial statements audited by Arthur Andersen, and interim financial
statements reviewed by it, so long as Arthur Andersen is able to make certain
representation to its







                                      F-44
<PAGE>


                            ECHOSTAR DBS CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


clients. The Company's access to the capital markets and its ability to make
timely SEC filings could be impaired if the SEC ceases accepting financial
statements audited by Arthur Andersen, if Arthur Andersen becomes unable to make
the required representations to the Company or if for any other reason Arthur
Andersen is unable to perform required audit-related services for the Company.
In such a case, the Company would promptly seek to engage new independent
certified public accountants or take such other actions as may be necessary to
enable the Company to maintain access to the capital markets and timely
financial reporting.

Gemstar

         Subsequent to the date of the auditors' report, the United States
District Court for the District of Colorado denied GemStar's Motion to Dismiss
EchoStar's antitrust claims related to its antitrust suit against Gemstar.

         In addition, on March 19, 2002, the ITC administrative judge extended
the date by which he would issue an initial violation determination in the
Gemstar alleged patent infringement case from March 21, 2002 to June 21, 2002. A
final ruling by the full ITC is now expected on or about September 23, 2002.

California Actions

         On March 11, 2002, the purported class action filed against EchoStar in
the California State Superior Court for Alameda County by Andrew A. Werby was
mediated. Mediation will continue until March 27, 2002.

         In addition, subsequent to the date of the auditors' report, EchoStar
filed its opposition to the purported class action filed against EchoStar in the
California State Superior Court for Los Angeles County by David Pritikin and by
Consumer Advocates.




                                      F-45
<PAGE>


                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
      Exhibit No. Description
      ----------- -----------
      <S>         <C>
         3.1(a)*  Articles of Incorporation of the Company (incorporated by
                  reference to Exhibit 3.4(a) to the Company's Registration
                  Statement on Form S-4, Registration No. 333-31929).

         3.1(b)*  Bylaws of the Company (incorporated by reference to Exhibit
                  3.4(b) to the Company's Registration Statement on Form S-4,
                  Registration No. 333-31929).

         4.1*     Indenture relating to the EchoStar DBS Corporation 9 1/4%
                  Senior Notes ("Seven Year Notes"), dated as of January 25,
                  1999, by and among EDBS, the Guarantors and U.S. Bank Trust
                  National Association, as trustee.(incorporated by reference to
                  Exhibit 4.1 to EDBS' Registration Statement on Form S-4,
                  Registration No. 333-71345).

         4.2*     Indenture relating to the EchoStar DBS Corporation 9 3/8%
                  Senior Notes ("Ten Year Notes"), dated as of January 25, 1999,
                  by and among EDBS, the Guarantors and U.S. Bank Trust National
                  Association, as trustee. (incorporated by reference to Exhibit
                  4.3 to EDBS' Registration Statement on Form S-4, Registration
                  No. 333-71345).

         4.3*     Registration Rights Agreement relating to the Seven Year Notes
                  by and among EDBS, the Guarantors and the parties named
                  therein. (incorporated by reference to Exhibit 4.5 to EDBS'
                  Registration Statement on Form S-4, Registration No.
                  333-71345).

         4.4*     Registration Rights Agreement relating to the Ten Year Notes
                  by and among EDBS, the Guarantors and the parties named
                  therein. (incorporated by reference to Exhibit 4.6 to EDBS'
                  Registration Statement on Form S-4, Registration No.
                  333-71345).

         4.5*     Indenture, relating to the EchoStar DBS Corporation 9 1/8%
                  Senior Notes Due 2009, dated as of December 28, 2001 between
                  EchoStar DBS Corporation and U.S. Bank Trust National
                  Association, as Trustee (incorporated by reference to Exhibit
                  4.17 to the Annual Report on Form 10-K of ECC for the year
                  ended December 31, 2001, Commission File No. 0-26176).
</TABLE>
<PAGE>


                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
      Exhibit No. Description
      ----------- -----------
      <S>         <C>
         4.6*     Registration Rights Agreement, relating to the EchoStar DBS
                  Corporation 9 1/8% Senior Notes Due 2009, dated as of December
                  28, 2001, by and among EchoStar DBS Corporation and Deutsche
                  Banc Alex. Brown, Inc., Credit Suisse First Boston
                  Corporation, Lehman Brothers Inc. and UBS Warburg LLC
                  (incorporated by reference to Exhibit 4.18 to the Annual
                  Report on Form 10-K of ECC for the year ended December 31,
                  2001, Commission File No.0-26176).

         10.1*    Key Employee Bonus Plan, dated as of January 1, 1994
                  (incorporated by reference to Exhibit 10.7 to the Registration
                  Statement on Form S-1 of Dish, Registration No. 33-76450).

         10.2*    Consulting Agreement, dated as of February 17, 1994, between
                  ESC and Telesat Canada (incorporated by reference to Exhibit
                  10.8 to the Registration Statement on Form S-1 of Dish,
                  Registration No. 33-76450).

         10.3*    Form of Satellite Launch Insurance Declarations (incorporated
                  by reference to Exhibit 10.10 to the Registration Statement on
                  Form S-1 of Dish, Registration No. 33-81234).

         10.4*    Dish 1994 Stock Incentive Plan (incorporated by reference to
                  Exhibit 10.11 to the Registration Statement on Form S-1 of
                  Dish, Registration No. 33-76450).

         10.5*    Form of Tracking, Telemetry and Control Contract between AT&T
                  Corp. and ESC (incorporated by reference to Exhibit 10.12 to
                  the Registration Statement on Form S-1 of Dish, Registration
                  No. 33-81234).

         10.6*    Manufacturing Agreement, dated as of March 22, 1995, between
                  Houston Tracker Systems, Inc. and SCI Technology, Inc.
                  (incorporated by reference to Exhibit 10.12 to the
                  Registration Statement on Form S-1 of Dish, Commission File
                  No. 33-81234).

         10.7*    Statement of Work, dated January 31, 1995 from ESC to Divicom
                  Inc. (incorporated by reference to Exhibit 10.14 to the
                  Registration Statement on Form S-1 of ECC, Registration No.
                  33-91276).

         10.8*    EchoStar 1995 Stock Incentive Plan (incorporated by reference
                  to Exhibit 10.16 to the Registration Statement on Form S-1 of
                  ECC, Registration No. 33-91276).

         10.9*    Satellite Construction Contract, dated as of July 18, 1996,
                  between EDBS and Lockheed Martin Corporation (incorporated by
                  reference to Exhibit 10.18 to the Quarterly Report on Form
                  10-Q of ECC for the quarter ended June 30, 1996, Commission
                  File No. 0-26176).

         10.10*   Confidential Amendment to Satellite Construction Contract
                  between DBSC and Martin Marietta, dated as of May 31, 1995
                  (incorporated by reference to Exhibit 10.14 to the
                  Registration Statement of Form S-4 of ECC, Registration No.
                  333-03584).

         10.11*   Agreement between HTS, ESC and ExpressVu Inc., dated January
                  8, 1997, as amended (incorporated by reference to Exhibit
                  10.18 to the Annual Report on Form 10-K of ECC for the year
                  ended December 31, 1996, as amended, Commission file No.
                  0-26176).

         10.12*   Amendment No. 9 to Satellite Construction Contract, effective
                  as of July 18, 1996, between Direct Satellite Broadcasting
                  Corporation, a Delaware corporation ("DBSC") and Martin
                  Marietta Corporation (incorporated by reference to Exhibit
                  10.1 to the Quarterly Report on Form 10-Q of ECC for the
                  quarterly period ended June 30, 1997, Commission File No.
                  0-26176).

         10.13*   Amendment No. 10 to Satellite Construction Contract, effective
                  as of May 31, 1996, between DBSC and Lockheed Martin
                  Corporation (incorporated by reference to Exhibit 10.2 to the
                  Quarterly Report on Form 10-Q of ECC for the quarterly period
                  ended June 30, 1997, Commission File No. 0-26176).
</TABLE>
<PAGE>


                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
      Exhibit No. Description
      ----------- -----------
      <S>         <C>
         10.14*   OEM Manufacturing, Marketing and Licensing Agreement, dated as
                  of February 17, 1998, by and among HTS, ESC and Philips
                  Electronics North America Corporation (incorporated by
                  reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q
                  of ECC for the quarterly period ended March 31, 1998,
                  Commission File No. 0-26176).

         10.15*   Licensing Agreement, dated as of February 23, 1998, by and
                  among HTS, ESC and VTech Communications Ltd. (incorporated by
                  reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q
                  of ECC for quarterly period ended March 31, 1998, Commission
                  File No. 0-26176).

         10.16*   Purchase Agreement by and among American Sky Broadcasting,
                  LLC, The News Corporation Limited, MCI Telecommunications
                  Corporation and EchoStar Communications Corporation, dated
                  November 30, 1998. (incorporated by reference to Exhibit 10.1
                  to the Form 8-K filed by ECC on November 30, 1998, Commission
                  File No. 0-26176).

         10.17*   Voting Agreement dated November 30, 1998, among EchoStar
                  Communications Corporation, American Sky Broadcasting, LLC,
                  The News Corporation Limited and MCI Telecommunications
                  Corporation (incorporated by reference to Exhibit 10.3 to the
                  Current Report on Form 8-K of EchoStar, filed as of December
                  1, 1998).

         99.1+    Letter regarding representation of Arthur Andersen LLP.
</TABLE>

----------
*        Incorporated by reference.

**       Constitutes a management contract or compensatory plan or arrangement.

+        Filed herewith.