Terrestar 8-K/A Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 1, 2008

TERRESTAR CORPORATION

(Exact Name of Registrant as Specified in Charter)

Delaware	001-33546	93-0976127
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

12010 Sunset Hills Road, 9th Floor Reston, VA	20190
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: 703-483-7800

N/A

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.

Explanatory Note. This Item 4.02 to Form 8-K/A provides further clarification and amends and restates in its entirety Item 4.02 of the Current Report on Form 8-K filed on February 21, 2008 (the “Initial Form 8-K”) to update the Item 4.02 disclosure set forth in the Initial Form 8-K for matters identified following the filing of the Initial Form 8-K. This Form 8-K/A does not amend any portion of Items 5.01, 7.01 or 9.01 of the Initial Form 8-K.

As previously announced on February 20, 2008, TerreStar Corporation and its Audit Committee concluded that our consolidated financial statements for the year ended December 31, 2006 and the quarters ended September 30, 2006, March 31, 2007, June 30, 2007, and September 30, 2007, would be restated for the correction of errors resulting from its historical accounting associated with the Exchange Agreement (the “MSV Exchange Agreement”) with SkyTerra Communications, Inc. (“SkyTerra”) which was entered in on May 6, 2006 and consummated on September 25, 2006. Details surrounding the nature of the corrections are as follows:

Under the MSV Exchange Agreement, we agreed to exchange all of our shares of common stock of Mobile Satellite Ventures GP Inc. (“MSV GP”) and all of our limited partnership interests of Mobile Satellite Ventures LP (“MSV”) for approximately 47.9 million shares of non-voting common stock of SkyTerra in one or more closings. As part of the exchange, we agreed to use our commercially reasonable efforts to distribute approximately 25.5 million SkyTerra shares to our common stockholders. To date, we have been unable to distribute these shares to our stockholders because of questions surrounding our Series A Cumulative Convertible Preferred Stock (the “Series A Preferred Stock”). Until such time as the Series A Preferred Stock is no longer outstanding or questions regarding the Series A Preferred Stock have been resolved, we are unable to pay this dividend. After discussions with our Audit Committee, external auditors and the staff of the SEC, we determined that we should have recorded a liability for this dividend and shall continue to record this liability until such time as we are able to distribute these shares to our common stockholders. The error correction resulted in a decrease to additional paid in capital and a corresponding increase to establish the dividend liability at September 30, 2006. Subsequent to this change, we analyzed the value of the SkyTerra shares on a quarterly basis as prescribed under APB 18 to determine if an other than temporary impairment on the cost basis of the shares had occurred. To the extent that we recognized an impairment charge relative to the shares reserved for the dividend liability, we adjusted the dividend liability accordingly.

We also determined, and the Audit Committee approved, that we should have used the historical cost basis of our interests in MSV and MSV GP immediately preceding the exchange to record our investment in SkyTerra as of September 30, 2006. Our historical accounting recognized a gain on the exchange which was subsequently written down to below our cost basis as a result of

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other than temporary impairment charges associated with this investment. The error correction resulted in a decrease to our investment in SkyTerra and a reversal of the gain recorded on the exchange of MSV interests for SkyTerra shares in the quarter ended September 30, 2006. In addition, our investment in SkyTerra was originally accounted for in accordance with SFAS 115,Accounting for Certain Investments in Debt and Equity Securities, and is now accounted for under the cost method as prescribed by APB 18, The Equity Method of Accounting for Investments in Common Stock. The impact of this change in accounting resulted in the reversal of several “mark to market” adjustments recorded in other comprehensive income (loss) for certain of the periods restated. In addition, in the original exchange transaction approximately $9 million of deal costs were reported as a reduction of the gain in our Statement of Operations as of September 30, 2006. As we have now determined that the gain was recorded in error, the $9 million deal costs are reflected in general and administrative expenses as a period cost. During the fourth quarter of 2006, we concluded that we were improperly reducing our basis in our investment of MSV by our proportional share of stock compensation expense, which was recorded in our line item Equity in losses of MSV. This adjustment was not material and was reflected in our Investment in MSV balance at December 31, 2006. We made this adjustment in the quarter ended September 30, 2006 to properly reflect our Investment in MSV and dividend liability as a result of the MSV Exchange Agreement.

Subsequent to our previous announcement dated February 20, 2008, we identified an error in our previously issued financial statements related to the calculation of the stock-based compensation expense during the quarter ended June 30, 2007 related to the one-time May 23, 2007 stock option exchange transaction between TerreStar Corporation and TerreStar Networks, in which we overstated expense by $8 million.

We have discussed the matters disclosed in the Initial Form 8-K and this amended Current Report on Form 8-K with Friedman LLP, the Company’s registered independent public accounting firm.

The inclusion of any statement in this Current Report on Form 8-K does not constitute an admission by the Company or any other person that the events or circumstances described in such statement are material.

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The following table presents the effect of the restatement adjustments upon our previously reported Consolidated Statement of Operations (in thousands, except per share amounts):

	For the Year Ended December 31, 2006
	As Reported			Adjustments			Restated
Operating Expenses
General and administrative	$	75,395		$	8,858		$	84,253
Research and development		10,549			—			10,549
Depreciation and amortization		6,796			—			6,796
Loss on impairment of intangibles		4,909			—			4,909
Total operating expenses		97,649			8,858			106,507
Operating loss from continuing operations		(97,649	)		(8,858	)		(106,507	)
Interest expense		(2,608	)		—			(2,608	)
Interest and other income		7,948			—			7,948
Equity in losses of MSV		(30,079	)		—			(30,079	)
Minority interests in losses of TerreStar Networks		20,655			—			20,655
Minority interests in losses of TerreStar Global		654			—			654
Gain on investments		41,422			(30,162	)		11,260
Decrease in dividend liability		—			—			—
Other than temporary impairment-SkyTerra		—			—			—
Loss from continuing operations before income taxes		(59,657	)		(39,020	)		(98,677	)
Income tax benefit (expense)		(4,535	)		—			(4,535	)
Net loss from continuing operations		(64,192	)		(39,020	)		(103,212	)
Loss from discontinued operations		(30,422	)		—			(30,422	)

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	For the Year Ended December 31, 2006
	As Reported			Adjustments			Restated
Net loss		(94,614	)		(39,020	)		(133,634	)
Less:
Dividends on Series A and Series B Cumulative Convertible Preferred Stock		(23,627	)		—			(23,627	)
Accretion of issuance costs associated with Series A and Series B		(4,029	)		—			(4,029	)
Net loss available to Common Stockholders	$	(122,270	)	$	(39,020	)	$	(161,290	)
Basic & Diluted Loss Per Share—Continuing Operations	$	(1.41	)	$	(0.60	)	$	(2.01	)
Basic & Diluted Loss Per Share—Discontinued Operations	$	(0.47	)	$	—		$	(0.47	)
Basic & Diluted Loss Per Share	$	(1.88	)	$	(0.60	)	$	(2.48	)
Basic & Diluted Weighted-Average Common Shares Outstanding		64,966			—			64,966

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The following table presents the effect of the restatement adjustments upon our previously reported Consolidated Balance Sheet (in thousands):

	December 31, 2006
	As Reported		Adjustments			Restated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	171,665	$	—		$	171,665
Cash committed for satellite construction costs		24,486		—			24,486
Restricted cash for Series A and Series B Cumulative convertible preferred stock dividends		10,723		—			10,723
Restricted cash for Senior Secured Notes		13,087		—			13,087
Deferred issuance costs associated with Series A and Series B Cumulative convertible preferred stock		4,255		—			4,255
Deferred issuance costs associated with Senior Secured Notes		5,708		—			5,708
Assets held for sale		367		—			367
Other current assets		2,602		—			2,602
Total current assets		232,893		—			232,893
Restricted investments		6,255		—			6,255
Property and equipment, net		259,169		—			259,169
Intangible assets, net		144,265		—			144,265
Investment in MSV		184,665		—			184,665
Investment in SkyTerra		293,510		(293,510	)		—
Investment in SkyTerra—Restricted		—		254,490			254,490
Deferred issuance costs associated with Series A and Series B Cumulative convertible preferred stock		10,692		—			10,692
Total assets	$	1,131,449	$	(39,020	)	$	1,092,429

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	December 31, 2006
	As Reported		Adjustments			Restated
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	12,415	$	—		$	12,415
Accounts payable to Loral for satellite construction contract		9,073		—			9,073
Accrued income taxes payable		4,641		—			4,641
Deferred rent and other current liabilities		1,199		—			1,199
Series A and Series B Cumulative Convertible Preferred Stock dividends payable		8,174		—			8,174
Senior Secured Notes and accrued interest, thereon		202,267		—			202,267
Current liabilities of discontinued operations		45		—			45
Total current liabilities		237,814		—			237,814
Deferred rent and other long-term liabilities		3,049		—			3,049
SkyTerra investment dividends payable		—		254,490			254,490
Total liabilities		240,863		254,490			495,353
Commitments and Contingencies
Minority interest in TerreStar Networks		68,617		—			68,617
Minority interest in TerreStar Global		1,633		—			1,633
Series A cumulative convertible preferred stock		90,000		—			90,000
Series B cumulative convertible preferred stock		318,500		—			318,500
STOCKHOLDERS’ EQUITY:
Common stock		737		—			737
Additional paid-in capital		886,463		(254,490	)		631,973

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	December 31, 2006
	As Reported			Adjustments			Restated
Common stock purchase warrants		73,200			—			73,200
Less: 3,951,202 common shares held in treasury stock at December 31, 2006		(73,877	)		—			(73,877	)
Accumulated deficit		(474,687	)		(39,020	)		(513,707	)
Total stockholders’ equity		411,836			(293,510	)		118,326
Total liabilities and stockholders’ equity	$	1,131,449		$	(39,020	)	$	1,092,429

The following table presents the effect of the restatement adjustments upon our previously reported Consolidated Statement of Cash Flows (in thousands):

	For the Year Ended December 31, 2006
	As Reported			Adjustments			Restated
CASH FLOWS FROM CONTINUING OPERATING ACTIVITIES:
Net loss	$	(94,614	)	$	(39,020	)	$	(133,634	)
Adjustments to reconcile net loss to net cash used in continuing operating activities:
Income from discontinued operations		30,422			—			30,422
Depreciation and amortization		6,796			—			6,796
Equity in losses of MSV		30,079			—			30,079
Minority interests in losses of TerreStar Global		(654	)		—			(654	)
Minority interests in losses of TerreStar Networks		(20,655	)		—			(20,655	)
Gain (loss) on investments		(41,422	)		30,162			(11,260	)
Amortization of deferred financing costs		538			—			538
Non-cash 401(k) match		156			—			156
Stock-based compensation		35,756			—			35,756

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	For the Year Ended December 31, 2006
	As Reported			Adjustments			Restated
Loss on impairment of intangibles		4,909			—			4,909
Changes in assets and liabilities:
Other current assets		(345	)		—			(345	)
Accounts payable and accrued expenses		9,155			—			9,155
Accrued interest		2,267			—			2,267
Deferred rent and other liabilities		4,242			—			4,242
Net cash used in continuing operating activities	$	(33,370	)	$	(8,858	)	$	(42,228	)
CASH FLOWS FROM CONTINUING INVESTING ACTIVITIES:
Proceeds of restricted cash and investments	$	61,511		$	—		$	61,511
Proceeds from the sale of investments		46,951			—			46,951
Proceeds from TerreStar Global rights offering		672			—			672
Accounts payable to Loral for satellite construction contract		(59,771	)		—			(59,771	)
Additions to property and equipment		(175,808	)		—			(175,808	)
Net cash used in continuing investing activities	$	(126,445	)	$	—		$	(126,445	)
CASH FLOWS FROM CONTINUING FINANCING ACTIVITIES:
Proceeds from issuance of Senior Secured Notes	$	200,000		$	—		$	200,000
Proceeds from issuance of equity securities		9,388			8,858			18,246
Purchase of treasury stock		(6,791	)		—			(6,791	)

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	For the Year Ended December 31, 2006
	As Reported			Adjustments		Restated
Dividends paid on Series A and B Cumulative Convertible Preferred Stock		(21,446	)		—		(21,446	)
Debt issuance costs and other charges		(6,245	)		—		(6,245	)
Net cash provided by continuing financing activities	$	174,906		$	8,858	$	183,764
Net cash provided by continuing operations	$	15,091		$	—	$	15,091
Net cash used in discontinued operating activities	$	(18,435	)	$	—	$	(18,435	)
Net cash used in discontinued investing activities	$	(4,515	)	$	—	$	(4,515	)
Net cash used in discontinued operations		(22,950	)		—		(22,950	)
Net decrease in cash and cash equivalents		(7,859	)		—		(7,859	)
CASH AND CASH EQUIVALENTS, beginning of period		179,524			—		179,524
CASH AND CASH EQUIVALENTS, end of period	$	171,665		$	—	$	171,665

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The following table presents the effect of the restatement adjustments upon our previously reported quarterly (unaudited) Consolidated Statement of Operations (in thousands, except per share amounts):

	Three Months Ended September 30, 2006
	As Reported			Adjustments			Restated
Operating Expenses
General and administrative	$	30,605		$	9,000		$	39,605
Research and development		2,399			—			2,399
Depreciation and amortization		1,454			—			1,454
Loss on impairment of intangibles		—			—			—
Gain on asset disposal		—			—			—
Total operating expenses		34,458			9,000			43,458
Operating loss from continuing operations		(34,458	)		(9,000	)		(43,458	)
Interest expense		—			—			—
Other expense		—			—			—
Interest and other income		1,441			—			1,441
Equity in losses of MSV		(8,423	)		1,283			(7,140	)
Minority interests in losses of TerreStar Networks		9,397			—			9,397
Minority interests in losses of TerreStar Global		—			—			—
Gain (Loss) on investments		196,905			(196,905	)		—
Decrease in dividend liability		—			—			—
Other than temporary impairment-SkyTerra		—			—			—
Loss from continuing operations before income taxes		164,862			(204,622	)		(39,760	)
Income tax benefit (expense)		(17,100	)		—			(17,100	)

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	Three Months Ended September 30, 2006
	As Reported			Adjustments			Restated
Net loss from continuing operations		147,762			(204,622	)		(56,860	)
Loss from discontinued operations		(9,600	)		—			(9,600	)
Net income (loss)		138,162			(204,622	)		(66,460	)
Less:
Dividends on Series A and Series B Cumulative Convertible Preferred Stock		(5,960	)		—			(5,960	)
Accretion of issuance costs associated with Series A and Series B		(1,020	)		—			(1,020	)
Net income (loss) available to Common Stockholders	$	131,182		$	(204,622	)	$	(73,440	)
Basic Loss Per Share—Continuing Operations	$	2.21		$	(3.21	)	$	(1.00	)
Basic Loss Per Share—Discontinued Operations	$	(0.15	)	$	—		$	(0.15	)
Basic Loss Per Share	$	2.06		$	(3.21	)	$	(1.15	)
Basic Weighted-Average Common Shares Outstanding		63,782			—			63,782

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The following table presents the effect of the restatement adjustments upon our previously reported quarterly (unaudited) Consolidated Balance Sheet (in thousands):

	September 30, 2006
	As Reported		Adjustments			Restated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	46,471	$	—		$	46,471
Cash committed for satellite construction costs		33,709		—			33,709
Restricted cash for Series A and Series B Cumulative convertible preferred stock dividends		21,446		—			21,446
Deferred issuance costs associated with Series A and Series B Cumulative convertible preferred stock		4,197		—			4,197
Deferred issuance costs associated with Senior Secured Notes		—		—			—
Deferred issuance costs associated with TerreStar Notes		—		—			—
Assets held for sale		628		—			628
Other current assets		822		—			822
Total current assets		107,273		—			107,273
Restricted investments		7,505		—			7,505
Property and equipment, net		177,769		—			177,769
Intangible assets, net		138,162		—			138,162
Investment in MSV		185,340		3,326			188,666
Investment in SkyTerra		438,677		(148,496	)		290,181
Deferred issuance costs associated with Series A and Series B Cumulative convertible preferred stock		11,785		—			11,785
Deferred issuance costs associated with TerreStar Notes		—		—			—
Notes receivable and accrued interest, thereon		—		—			—
Deferred issuance costs associated with Senior Secured PIK Notes		—		—			—

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	September 30, 2006
	As Reported		Adjustments			Restated
Total assets	$	1,066,511	$	(145,170	)	$	921,341
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	36,218	$	—		$	36,218
Accounts payable to Loral for satellite construction contract		17,671		—			17,671
Accrued income taxes payable		—		—			—
Obligations under capital leases		—		—			—
Deferred rent and other current liabilities		91		—			91
Series A and Series B Cumulative Convertible Preferred Stock dividends payable		12,924		—			12,924
Current liabilities of discontinued operations		3,177		—			3,177
Total current liabilities		70,081		—			70,081
Obligations under capital leases		—		—			—
Deferred rent and other long-term liabilities		108		—			108
SkyTerra investment dividends payable		—		254,490			254,490
TerreStar Notes and accrued interest, thereon		—		—			—
Total liabilities		70,189		254,490			324,679
Commitments and Contingencies
Minority interest in TerreStar Networks		75,922		—			75,922
Minority interest in TerreStar Global		—		—			—
Series A cumulative convertible preferred stock		90,000		—			90,000
Series B cumulative convertible preferred stock		318,500		—			318,500

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	September 30, 2006
	As Reported			Adjustments			Restated
STOCKHOLDERS’ EQUITY:
Common stock		735			—			735
Additional paid-in capital		860,879			(247,331	)		613,548
Common stock purchase warrants		73,487			—			73,487
Less: 3,951,202 common shares held in treasury stock		(73,877	)		—			(73,877	)
Accumulated other comprehensive income		(52,293	)		52,293			—
Accumulated deficit		(297,031	)		(204,622	)		(501,653	)
Total stockholders’ equity		511,900			(399,660	)		112,240
Total liabilities and stockholders’ equity	$	1,066,511		$	(145,170	)	$	921,341

The following table presents the effect of the restatement adjustments upon our previously reported quarterly (unaudited) Consolidated Statement of Operations (in thousands, except per share amounts):

	Three Months Ended March 31, 2007
	As Reported			Adjustments		Restated
Operating Expenses
General and administrative	$	18,306		$	—	$	18,306
Research and development		11,158			—		11,158
Depreciation and amortization		3,298			—		3,298
Loss on impairment of intangibles		6,200			—		6,200
Gain on asset disposal		—			—		—
Total operating expenses		38,962			—		38,962
Operating loss from continuing operations		(38,962	)		—		(38,962	)
Interest expense		(19,155	)		—		(19,155	)

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	Three Months Ended March 31, 2007
	As Reported			Adjustments			Restated
Other expense		—			—			—
Interest and other income		5,360			—			5,360
Equity in losses of MSV		(3,016	)		—			(3,016	)
Minority interests in losses of TerreStar Networks		7,529			—			7,529
Minority interests in losses of TerreStar Global		368			—			368
Gain (Loss) on investments		(99,575	)		99,575			—
Decrease in dividend liability		—			40,473			40,473
Other than temporary impairment-SkyTerra		—			(58,937	)		(58,937	)
Loss from continuing operations before income taxes		(147,451	)		81,111			(66,340	)
Income tax benefit (expense)		(1,250	)		—			(1,250	)
Net loss from continuing operations		(148,701	)		81,111			(67,590	)
Loss from discontinued operations		—			—			—
Net income (loss)		(148,701	)		81,111			(67,590	)
Less:
Dividends on Series A and Series B Cumulative Convertible Preferred Stock		(5,856	)		—			(5,856	)
Accretion of issuance costs associated with Series A and Series B		(1,030	)		—			(1,030	)
Net income (loss) available to Common Stockholders	$	(155,587	)	$	81,111		$	(74,476	)
Basic Loss Per Share—Continuing Operations	$	(2.11	)	$	1.10		$	(1.01	)
Basic Loss Per Share—Discontinued Operations	$	—		$	—		$	—
Basic Loss Per Share	$	(2.11	)	$	1.10		$	(1.01	)

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	Three Months Ended March 31, 2007
	As Reported	Adjustments	Restated
Basic Weighted-Average Common Shares Outstanding	73,622	—	73,622

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The following table presents the effect of the restatement adjustments upon our previously reported quarterly (unaudited) Consolidated Balance Sheet (in thousands):

	March 31, 2007
	As Reported		Adjustments		Restated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	343,427	$	—	$	343,427
Cash committed for satellite construction costs		12,682		—		12,682
Restricted cash for Series A and Series B Cumulative convertible preferred stock dividends		10,723		—		10,723
Deferred issuance costs associated with Series A and Series B Cumulative convertible preferred stock		4,305		—		4,305
Deferred issuance costs associated with Senior Secured Notes		2,059		—		2,059
Deferred issuance costs associated with TerreStar Notes		—		—		—
Assets held for sale		367		—		367
Other current assets		3,723		—		3,723
Total current assets		377,286		—		377,286
Restricted investments		5,897		—		5,897
Property and equipment, net		378,621		—		378,621
Intangible assets, net		200,948		—		200,948
Investment in MSV		40,704		1,618		42,322
Investment in SkyTerra		335,039		—		335,039
Deferred issuance costs associated with Series A and Series B Cumulative convertible preferred stock		9,612		—		9,612
Deferred issuance costs associated with TerreStar Notes		—		—		—
Notes receivable and accrued interest, thereon		—		—		—
Deferred issuance costs associated with Senior Secured PIK Notes		12,097		—		12,097

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	March 31, 2007
	As Reported		Adjustments		Restated
Total assets	$	1,360,204	$	1,618	$	1,361,822
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	15,103	$	—	$	15,103
Accounts payable to Loral for satellite construction contract		20,758		—		20,758
Accrued income taxes payable		1,339		—		1,339
Obligations under capital leases		—		—		—
Deferred rent and other current liabilities		1,029		—		1,029
Series A and Series B Cumulative Convertible Preferred Stock dividends payable		14,030		—		14,030
Current liabilities of discontinued operations		36		—		36
Total current liabilities		52,295		—		52,295
Obligations under capital leases		—		—		—
Deferred rent and other long-term liabilities		3,060		—		3,060
SkyTerra investment dividends payable		—		214,017		214,017
TerreStar Notes and accrued interest, thereon		509,414		—		509,414
Total liabilities		564,769		214,017		778,786
Commitments and Contingencies
Minority interest in TerreStar Networks		30,222		—		30,222
Minority interest in TerreStar Global		1,264		—		1,264
Series A cumulative convertible preferred stock		90,000		—		90,000
Series B cumulative convertible preferred stock		318,500		—		318,500

-19-

	March 31, 2007
	As Reported			Adjustments			Restated
STOCKHOLDERS’ EQUITY:
Common stock		864			—			864
Additional paid-in capital		985,828			(254,490	)		731,338
Common stock purchase warrants		72,908			—			72,908
Less: 3,951,202 common shares held in treasury stock		(73,877	)		—			(73,877	)
Accumulated other comprehensive income		—			—			—
Accumulated deficit		(630,274	)		42,091			(588,183	)
Total stockholders’ equity		355,449			(212,399	)		143,050
Total liabilities and stockholders’ equity	$	1,360,204		$	1,618		$	1,361,822

The following table presents the effect of the restatement adjustments upon our previously reported quarterly (unaudited) Consolidated Statement of Operations (in thousands, except per share amounts):

	Three Months Ended June 30, 2007
	As Reported			Adjustments			Restated
Operating Expenses
General and administrative	$	42,212		$	(5,639	)	$	36,573
Research and development		9,907			(1,324	)		8,583
Depreciation and amortization		4,643			—			4,643
Loss on impairment of intangibles		499			—			499
Gain on asset disposal		—			—			—
Total operating expenses		57,261			(6,963	)		50,298
Operating loss from continuing operations		(57,261	)		6,963			(50,298	)
Interest expense		(11,905	)		—			(11,905	)

-20-

	Three Months Ended June 30, 2007
	As Reported			Adjustments		Restated
Other expense		(507	)		—		(507	)
Interest and other income		2,226			—		2,226
Equity in losses of MSV		(1,594	)		—		(1,594	)
Minority interests in losses of TerreStar Networks		4,744			—		4,744
Minority interests in losses of TerreStar Global		346			—		346
Gain (Loss) on investments		—			—		—
Decrease in dividend liability		—			—		—
Other than temporary impairment-SkyTerra		—			—		—
Loss from continuing operations before income taxes		(63,951	)		6,963		(56,988	)
Income tax benefit (expense)		820			—		820
Net loss from continuing operations		(63,131	)		6,963		(56,168	)
Loss from discontinued operations		—			—		—
Net income (loss)		(63,131	)		6,963		(56,168	)
Less:
Dividends on Series A and Series B Cumulative Convertible Preferred Stock		(5,933	)		—		(5,933	)
Accretion of issuance costs associated with Series A and Series B		(1,054	)		—		(1,054	)
Net income (loss) available to Common Stockholders	$	(70,118	)	$	6,963	$	(63,155	)
Basic Loss Per Share—Continuing Operations	$	(0.83	)	$	0.08	$	(0.75	)
Basic Loss Per Share—Discontinued Operations	$	—		$	—	$	—
Basic Loss Per Share	$	(0.83	)	$	0.08	$	(0.75	)

-21-

	Three Months Ended June 30, 2007
	As Reported	Adjustments	Restated
Basic Weighted-Average Common Shares Outstanding	84,581	—	84,581

-22-

The following table presents the effect of the restatement adjustments upon our previously reported quarterly (unaudited) Consolidated Balance Sheet (in thousands):

	June 30, 2007
	As Reported		Adjustments			Restated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	267,762	$	—		$	267,762
Cash committed for satellite construction costs		2,748		—			2,748
Restricted cash for Series A and Series B Cumulative convertible preferred stock dividends		—		—			—
Deferred issuance costs associated with Series A and Series B Cumulative convertible preferred stock		4,346		—			4,346
Deferred issuance costs associated with Senior Secured Notes		—		—			—
Deferred issuance costs associated with TerreStar Notes		2,030		—			2,030
Assets held for sale		317		—			317
Other current assets		3,940		—			3,940
Total current assets		281,143		—			281,143
Restricted investments		3,516		—			3,516
Property and equipment, net		441,014		—			441,014
Intangible assets, net		217,353		—			217,353
Investment in MSV		39,157		1,618			40,775
Investment in SkyTerra		347,005		(11,966	)		335,039
Deferred issuance costs associated with Series A and Series B Cumulative convertible preferred stock		8,517		—			8,517
Deferred issuance costs associated with TerreStar Notes		11,419		—			11,419
Notes receivable and accrued interest, thereon		757		—			757
Deferred issuance costs associated with Senior Secured PIK Notes		—		—			—

-23-

	June 30, 2007
	As Reported		Adjustments			Restated
Total assets	$	1,349,881	$	(10,348	)	$	1,339,533
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	20,299	$	—		$	20,299
Accounts payable to Loral for satellite construction contract		3,125		—			3,125
Accrued income taxes payable		89		—			89
Obligations under capital leases		—		—			—
Deferred rent and other current liabilities		1,044		—			1,044
Series A and Series B Cumulative Convertible Preferred Stock dividends payable		9,240		—			9,240
Current liabilities of discontinued operations		34		—			34
Total current liabilities		33,831		—			33,831
Obligations under capital leases		—		—			—
Deferred rent and other long-term liabilities		2,884		—			2,884
SkyTerra investment dividends payable		—		214,017			214,017
TerreStar Notes and accrued interest, thereon		528,757		—			528,757
Total liabilities		565,472		214,017			779,489
Commitments and Contingencies
Minority interest in TerreStar Networks		23,890		—			23,890
Minority interest in TerreStar Global		432		—			432
Series A cumulative convertible preferred stock		90,000		—			90,000
Series B cumulative convertible preferred stock		318,500		—			318,500

-24-

	June 30, 2007
	As Reported			Adjustments			Restated
STOCKHOLDERS’ EQUITY:
Common stock		899			—			899
Additional paid-in capital		1,048,892			(261,453	)		787,439
Common stock purchase warrants		64,097			—			64,097
Less: 3,951,202 common shares held in treasury stock		(73,877	)		—			(73,877	)
Accumulated other comprehensive income		11,968			(11,968	)		—
Accumulated deficit		(700,392	)		49,056			(651,336	)
Total stockholders’ equity		351,587			(224,365	)		127,222
Total liabilities and stockholders’ equity	$	1,349,881		$	(10,348	)	$	1,339,533

The following table presents the effect of the restatement adjustments upon our previously reported quarterly (unaudited) Consolidated Statement of Operations (in thousands, except per share amounts):

	Three Months Ended September 30, 2007
	As Reported			Adjustments			Restated
Operating Expenses
General and administrative	$	29,594		$	(1,327	)	$	28,267
Research and development		1,405			—			1,405
Depreciation and amortization		5,018			—			5,018
Loss on impairment of intangibles		—			—			—
Gain on asset disposal		(133	)		—			(133	)
Total operating expenses		35,884			(1,327	)		34,557
Operating loss from continuing operations		(35,884	)		1,327			(34,557	)
Interest expense		(11,333	)		—			(11,333	)

-25-

	Three Months Ended September 30, 2007
	As Reported			Adjustments			Restated
Other expense		(518	)		—			(518	)
Interest and other income		2,893			—			2,893
Equity in losses of MSV		(1,595	)		—			(1,595	)
Minority interests in losses of TerreStar Networks		4,513			—			4,513
Minority interests in losses of TerreStar Global		375			—			375
Gain (Loss) on investments		(47,863	)		47,863			—
Decrease in dividend liability		—			30,574			30,574
Other than temporary impairment-SkyTerra		—			(47,863	)		(47,863	)
Loss from continuing operations before income taxes		(89,412	)		31,901			(57,511	)
Income tax benefit (expense)		3,376			—			3,376
Net loss from continuing operations		(86,036	)		31,901			(54,135	)
Loss from discontinued operations		—			—			—
Net income (loss)		(86,036	)		31,901			(54,135	)
Less:
Dividends on Series A and Series B Cumulative Convertible Preferred Stock		(6,011	)		—			(6,011	)
Accretion of issuance costs associated with Series A and Series B		(1,078	)		—			(1,078	)
Net income (loss) available to Common Stockholders	$	(93,125	)	$	31,901		$	(61,224	)
Basic Loss Per Share—Continuing Operations	$	(1.08	)	$	0.37		$	(0.71	)
Basic Loss Per Share—Discontinued Operations	$	—		$	—		$	—
Basic Loss Per Share	$	(1.08	)	$	0.37		$	(0.71	)

-26-

	Three Months Ended September 30, 2007
	As Reported	Adjustments	Restated
Basic Weighted-Average Common Shares Outstanding	86,128	—	86,128

-27-

The following table presents the effect of the restatement adjustments upon our previously reported quarterly (unaudited) Consolidated Balance Sheet (in thousands):

	September 30, 2007
	As Reported		Adjustments		Restated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	197,558	$	—	$	197,558
Cash committed for satellite construction costs		2,783		—		2,783
Restricted cash for Series A and Series B Cumulative convertible preferred stock dividends		—		—		—
Deferred issuance costs associated with Series A and Series B Cumulative convertible preferred stock		4,388		—		4,388
Deferred issuance costs associated with Senior Secured Notes		—		—		—
Deferred issuance costs associated with TerreStar Notes		2,032		—		2,032
Assets held for sale		—		—		—
Other current assets		18,617		—		18,617
Total current assets		225,378		—		225,378
Restricted investments		3,569		—		3,569
Property and equipment, net		507,068		—		507,068
Intangible assets, net		215,797		—		215,797
Investment in MSV		37,606		1,618		39,224
Investment in SkyTerra		287,176		—		287,176
Deferred issuance costs associated with Series A and Series B Cumulative convertible preferred stock		7,397		—		7,397
Deferred issuance costs associated with TerreStar Notes		—		—		—
Notes receivable and accrued interest, thereon		787		—		787
Deferred issuance costs associated with Senior Secured PIK Notes		10,923		—		10,923

-28-

	September 30, 2007
	As Reported		Adjustments		Restated
Total assets	$	1,295,701	$	1,618	$	1,297,319
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	27,289	$	—	$	27,289
Accounts payable to Loral for satellite construction contract		19,791		—		19,791
Accrued income taxes payable		89		—		89
Obligations under capital leases		288		—		288
Deferred rent and other current liabilities		1,060		—		1,060
Series A and Series B Cumulative Convertible Preferred Stock dividends payable		15,252		—		15,252
Current liabilities of discontinued operations		25		—		25
Total current liabilities		63,794		—		63,794
Obligations under capital leases		316		—		316
Deferred rent and other long-term liabilities		2,685		—		2,685
SkyTerra investment dividends payable		—		183,444		183,444
TerreStar Notes and accrued interest, thereon		547,790		—		547,790
Total liabilities		614,585		183,444		798,029
Commitments and Contingencies
Minority interest in TerreStar Networks		18,610		—		18,610
Minority interest in TerreStar Global		105		—		105
Series A cumulative convertible preferred stock		90,000		—		90,000
Series B cumulative convertible preferred stock		318,500		—		318,500
STOCKHOLDERS’ EQUITY:
Common stock		903		—		903

-29-

	September 30, 2007
	As Reported			Adjustments			Restated
Additional paid-in capital		1,056,285			(262,781	)		793,504
Common stock purchase warrants		64,097			—			64,097
Less: 3,951,202 common shares held in treasury stock		(73,877	)		—			(73,877	)
Accumulated other comprehensive income		10			—			10
Accumulated deficit		(793,517	)		80,955			(712,562	)
Total stockholders’ equity		253,901			(181,826	)		72,075
Total liabilities and stockholders’ equity	$	1,295,701		$	1,618		$	1,297,319

The inclusion of any statement in this Current Report on Form 8-K does not constitute an admission by the Company or any other person that the events or circumstances described in such statement are material.

-30-

SIGNATURES

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

TERRESTAR CORPORATION
By:	/s/ Neil Hazard
	Neil Hazard, Executive Vice President,
	Chief Financial Officer and Treasurer

Date: April 1, 2008