Terrestar 10-Q 2009 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2009

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: 001-33546

TERRESTAR CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	93-0976127
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
12010 Sunset Hills Road, 6th Floor, Reston, VA	20190
(Address of Principal Executive Offices)	(Zip Code)

703-483-7800

(Registrant’s telephone number, including area code)

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

Common Stock, $0.01 par value	The NASDAQ Global Market
(Title of Each Class)	(Name of Each Exchange on Which Registered)

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 report(s), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

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

Number of shares of common stock outstanding at May 4, 2009: 139,199,501

TERRESTAR CORPORATION

TABLE OF CONTENTS

		Page
PART I – Financial Information
Item 1.	Condensed Financial Statements
	Consolidated Statements of Operations	1
	Consolidated Balance Sheets	2
	Consolidated Statements of Cash Flows	3
	Notes to Condensed Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	23
Item 4.	Controls and Procedures	23
PART II – Other Information
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Submission of Matters to a Vote of Security Holders	38
Item 5.	Other Information	38
Item 6.	Exhibits	38
Exhibit Index		39
Signatures		40

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Caution Regarding Forward-Looking Information

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of United States securities laws, including the United States Private Securities Litigation Reform Act of 1995. From time to time, our public filings, press releases and other communications will contain forward-looking statements. Forward-looking information is often, but not always identified by the use of words such as “anticipate”, “believe”, “expect”, “plan”, “intend”, “forecast”, “target”, “project”, “may”, “will”, “should”, “could”, “estimate”, “predict” or similar words suggesting future outcomes or language suggesting an outlook. Forward-looking statements in this quarterly report on Form 10-Q include, but are not limited to, statements with respect to expectations of our prospects, future revenues, earnings, activities and technical results.

Forward-looking statements and information are based on current beliefs as well as assumptions made by, and information currently available to us concerning anticipated financial performance, business prospects, strategies and regulatory developments. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. The forward-looking statements in this quarterly report on Form 10-Q are made as of the date it was issued and we do not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks that outcomes implied by forward-looking statements will not be achieved. We caution readers not to place undue reliance on these statements as a number of important factors could cause the actual results to differ materially from the beliefs, plans, objectives, expectations and anticipations, estimates and intentions expressed in such forward-looking statements. These risks and uncertainties may cause our actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements. When relying on our forward-looking statements to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events.

Our public filings are available atwww.terrestarcorp.com and on EDGAR atwww.sec.gov.

Please see “Part I, Item 1A—Risk Factors” of our annual report on Form 10-K for the year ended December 31, 2008, for further discussion regarding our exposure to risks. Additionally, new risk factors emerge from time to time and it is not possible for us to predict all such factors, nor to assess the impact such factors might have on our business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

Basis of Presentation

In this report:

• the terms “we”, “our”, “us”, “TerreStar”, and the “Company” refer to TerreStar Corporation and its subsidiaries, except where the context otherwise requires or as otherwise indicated.

• “TerreStar Networks” refers to TerreStar Networks Inc., an indirect, majority-owned subsidiary of TerreStar Corporation.

• “BCE” refers to BCE Inc., a Canadian corporation.

• “TerreStar Canada Holdings” refers to TerreStar Networks Holdings (Canada) Inc., a Canadian corporation and parent company of TerreStar Canada.

• “TerreStar Canada” refers to TerreStar Networks (Canada) Inc., a Canadian corporation.

• “SkyTerra” refers to SkyTerra Communications, Inc.

• “TerreStar Global” refers to TerreStar Global Ltd., an indirect, majority-owned subsidiary of TerreStar Corporation.

• “TerreStar Europe” refers to TerreStar Europe Limited, a wholly-owned subsidiary of TerreStar Global.

• “Harbinger” refers to Harbinger Capital Partners and Harbinger Capital Management.

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TERRESTAR CORPORATION

Condensed Consolidated Statements of Operations

For the Three Months Ended March 31, 2009 and 2008

(in thousands, except per share amounts)

Unaudited

	Three Months Ended March 31,
	2009			2008
Operating expenses:
General and administrative	$	16,621		$	31,598
Research and development		13,582			30,142
Depreciation and amortization		5,749			5,454
Total operating expenses		35,952			67,194
Operating loss from continuing operations		(35,952	)		(67,194	)
Interest expense		(14,039	)		(10,359	)
Interest income		134			1,132
Other income		394			91
Loss on investment in SkyTerra		—			(27,374	)
Loss from continuing operations before income taxes		(49,463	)		(103,704	)
Income tax benefit		—			754
Net loss		(49,463	)		(102,950	)
Less:
Net loss attributable to the noncontrolling interest in TerreStar Networks		4,861			8,376
Net loss attributable to the noncontrolling interest in TerreStar Global		71			—
Net loss attributable to TerreStar Corporation		(44,531	)		(94,574	)
Less:
Dividends on Series A and Series B Cumulative Convertible Preferred Stock		(6,423	)		(5,792	)
Accretion of issuance costs associated with Series A and Series B		(1,123	)		(1,133	)
Net loss available to Common Stockholders	$	(52,077	)	$	(101,499	)
Basic and Diluted Loss Per Share	$	(0.43	)	$	(1.14	)
Basic and Diluted Weighted-Average Common Shares Outstanding		121,051			88,698

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

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PART 1—FINANCIAL INFORMATION

Item 1. Financial Statements

TERRESTAR CORPORATION

Condensed Consolidated Balance Sheets

As of March 31, 2009 and December 31, 2008

(in thousands)

	March 31, 2009			December 31, 2008
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	207,363		$	236,820
Deferred issuance costs		6,575			6,575
Income tax receivable		1,477			1,477
Other current assets		9,291			3,594
Total current assets		224,706			248,466
Restricted investments		1,409			1,404
Property and equipment, net		732,158			716,602
Intangible assets, net		354,692			359,013
Deferred issuance costs		8,061			9,692
Other non-current assets		6,000			6,000
Total assets	$	1,327,026		$	1,341,177
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	17,912		$	16,668
Accrued termination costs		227			707
Deferred rent and other current liabilities		1,577			1,517
Series A and Series B Cumulative Convertible Preferred Stock dividends payable		10,891			4,468
Total current liabilities		30,607			23,360
Deferred rent and other long-term liabilities		2,725			3,175
Deferred tax liabilities		13,039			13,039
TerreStar Notes and accrued interest, thereon (net of discount as of March 31, 2009 of $44,415 and as of December 31, 2008 of $43,625)		700,067			671,884
TerreStar Exchangeable Notes and accrued interest, thereon (net of discount as of March 31, 2009 of $95,909 and as of December 31, 2008 of $95,954)		65,807			63,176
TerreStar-2 Purchase Money Credit Agreement and accrued interest, thereon		38,194			36,755
Total liabilities		850,439			811,389
Commitments and Contingencies
Series A Cumulative Convertible Preferred Stock ($0.01 par value, 450,000 shares authorized and 90,000 shares issued and outstanding at March 31, 2009 and December 31, 2008)		90,000			90,000
Series B Cumulative Convertible Preferred Stock ($0.01 par value, 500,000 shares authorized and 318,500 shares issued and outstanding at March 31, 2009 and December 31, 2008)		318,500			318,500
STOCKHOLDERS’ EQUITY:
TerreStar Corporation stockholders’ equity:
Series C Preferred Stock ($0.01 par value, 1 share authorized and 1 share issued and outstanding at March 31, 2009 and December 31, 2008)		—			—
Series D Preferred Stock ($0.01 par value, 1 share authorized and 1 share issued and outstanding at March 31, 2009 and December 31, 2008)		—			—
Series E Junior Convertible Preferred Stock ($0.01 par value, 1,900,000 shares authorized and 1,200,000 shares issued and outstanding at March 31, 2009 and December 31, 2008)		12			12
Common stock; voting (par value $0.01; 240,000,000 shares authorized, 126,567,790 and 125,869,540 shares issued, 122,616,588 and 121,918,338 shares outstanding at March 31, 2009 and December 31, 2008, respectively)		1,266			1,259
Additional paid-in capital		1,226,101			1,220,161
Common stock purchase warrants		53,250			55,809
Less: 3,951,202 common shares held in treasury stock at March 31, 2009 and December 31, 2008		(73,877	)		(73,877	)
Accumulated other comprehensive loss		(81	)		(70	)
Accumulated deficit		(1,134,083	)		(1,082,006	)
Total TerreStar Corporation stockholders' equity		72,588			121,288
Noncontrolling interest in TerreStar Networks		(4,429	)		—
Noncontrolling interest in TerreStar Global		(72	)		—
Total stockholders’ equity		68,087			121,288
Total liabilities and stockholders' equity	$	1,327,026		$	1,341,177

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

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TERRESTAR CORPORATION

Condensed Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2009 and 2008

(in thousands)

Unaudited

	Three Months Ended March 31,
	2009			2008
CASH FLOWS FROM CONTINUING OPERATING ACTIVITIES:
Net loss	$	(44,531	)	$	(94,574	)
Adjustments to reconcile net loss to net cash used in continuing operating activities:
Depreciation and amortization		5,749			5,454
Loss on investment in SkyTerra		—			27,374
Net loss attributable to the noncontrolling interest in TerreStar Networks		(4,861	)		(8,376	)
Net loss attributable to the noncontrolling interest in TerreStar Global		(71	)		—
Amortization of deferred financing and debt discount costs		(238	)		636
Stock-based compensation		3,820			2,475
Changes in assets and liabilities:
Other current assets		(5,709	)		2,364
Accounts payable and accrued expenses		6,260			(1,980	)
Accrued termination costs		(480	)		—
Other noncurrent assets		—			817
Accrued interest		14,272			9,540
Deferred rent and other liabilities		(374	)		(179	)
Net cash used in continuing operating activities		(26,163	)		(56,449	)
CASH FLOWS FROM CONTINUING INVESTING ACTIVITIES:
Proceeds from the sale of SkyTerra shares		—			76,359
Proceeds of restricted cash and investments		(5	)		(22	)
Additions to intangible assets		(141	)		—
Additions to property and equipment		(3,282	)		(30,001	)
Net cash provided by (used in) continuing investing activities		(3,428	)		46,336
CASH FLOWS FROM CONTINUING FINANCING ACTIVITIES:
Proceeds from issuance of TerreStar Notes and TerreStar Exchangeable Notes		—			195,732
Proceeds from TerreStar-2 Purchase Money Credit Agreement		150			13,375
Payments for capital lease obligations		(16	)		(13	)
Debt issuance costs and other charges		—			(2,060	)
Net cash provided by continuing financing activities		134			207,034
Net cash provided by (used in) continuing operations		(29,457	)		196,921
Net cash used in discontinued investing activities		—			(19	)
Net cash used in discontinued operations		—			(19	)
Net increase (decrease) in cash and cash equivalents		(29,457	)		196,902
CASH AND CASH EQUIVALENTS, beginning of period		236,820			89,134
CASH AND CASH EQUIVALENTS, end of period	$	207,363		$	286,036

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

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TERRESTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Organization and Description of Business

General

TerreStar Corporation (formerly Motient Corporation) was incorporated in 1988 under the laws of the State of Delaware. TerreStar Corporation is in the integrated satellite wireless communications business through its ownership of TerreStar Networks, its principal operating entity, and TerreStar Global.

TerreStar Networks, in cooperation with its Canadian partner, 4371585 Canada and Company, Limited Partnership (“4371585 Canada”), formerly TMI Communications and Company, Limited Partnership (“TMI Communications”), plans to launch an innovative wireless communications system to provide mobile coverage throughout the United States and Canada using small, lightweight and inexpensive handsets similar to today’s mobile devices. This system build out will be based on an integrated satellite and ground-based technology which will provide service in most hard-to-reach areas and will provide a nationwide interoperable, survivable and critical communications infrastructure.

By offering mobile satellite service (“MSS”) using frequencies in the 2GHz band, which are part of what is often known as the “S-band”, in conjunction with ancillary terrestrial components (“ATC”), we can effectively deploy an integrated satellite and terrestrial wireless communications network. Our network would allow a user to utilize a mobile device that would communicate with a traditional land-based wireless network when in range of that network, but communicate with a satellite when not in range of such a land-based network. We intend to provide multiple communications applications, including voice, data and video services. Through TerreStar Networks, we are in the process of building our first satellite pursuant to a construction contract with Space Systems/Loral, Inc. (“Loral”). We currently expect to launch our TerreStar-1 satellite in second quarter of 2009. Once launched, our TerreStar-1 satellite, with an antenna approximately sixty feet across, will be able to communicate with conventionally sized wireless devices currently being developed by our vendors.

Our ability to offer these services depends on TerreStar Networks’ right to receive certain regulatory authorizations allowing us to provide MSS/ATC in the S-band. These authorizations are subject to various regulatory milestones relating to the construction, launch and operational date of the satellite system required to provide this service. We may be required to obtain additional approvals from national and local authorities in connection with the services that we wish to provide in the future. For example, in order to provide ATC in the United States and Canada we must file applications separately from our satellite authorizations. In addition, the manufacturers of our ATC user terminals and base stations will need to obtain Federal Communications Commission (“FCC”) equipment certifications in the United States and similar certifications in Canada.

As of March 31, 2009, we have two wholly-owned subsidiaries, MVH Holdings Inc. and Motient Holdings Inc. Motient Ventures Holding Inc., a wholly-owned subsidiary of MVH Holdings Inc., directly holds approximately 88% and 86% interests in TerreStar Networks and TerreStar Global, respectively.

For additional information regarding the business descriptions of our wholly-owned subsidiaries, affiliates and investments, please refer to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

Going Concern, Liquidity and Capital Resources

The Condensed Consolidated Financial Statements have been prepared on a going concern basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future. Our cash on hand at March 31, 2009 was $208.8 million including restricted cash. Additionally, approximately $66.7 million remains available under our TerreStar-2 Purchase Money Credit Agreement which is expected to provide sufficient funding to complete the construction of our second satellite TerreStar-2. We incurred net losses of $44.5 million for the three months ended March 31, 2009, and our accumulated deficit as of March 31, 2009 was $1.1 billion. We expect to continue incurring losses for the foreseeable future. Based upon our current plans, we estimate that our cash and cash equivalents will not be sufficient to cover our estimated funding needs for 2010.

In assessing our liquidity, we monitor and analyze our cash on-hand and our operating and capital expenditure commitments. Our principal liquidity needs are to meet our working capital requirements, operating expenses and capital expenditure obligations. Our short-term liquidity needs are driven by our satellite system construction contracts, the development of terrestrial infrastructure and networks, the design and development of our handset and chipset, and our ongoing operating expenses. As of March 31, 2009, we have contractual obligations of $181.1 million due within one year, consisting of approximately $130.1 million related to our satellite system, $46.0 million related to our handset, chipset, and terrestrial network, and $5.0 million for operating leases. We expect to spend approximately $28 million in satellite launch insurance for our TerreStar-1 satellite. In addition, TerreStar Europe, a TerreStar Global subsidiary, recently filed an application for the award of S-band spectrum in Europe. If we are awarded this spectrum, we will need additional funds in TerreStar Global for satellite construction and terrestrial ground network development. We also have preferred stock obligations for our Series A and Series B Preferred in the amount of $408 million which, if not converted into shares of our common stock, will be due on April 15, 2010.

We will need to secure additional funding by early 2010 in order to complete the construction, deployment, and rollout of

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our planned network and to continue operations. We intend to fund our long-term liquidity needs related to operations and ongoing network deployment through the incurrence of indebtedness, equity financings or a combination of these potential sources of liquidity. While we believe that these sources will provide sufficient funding for us to meet our future liquidity and capital obligations, our ability to fund these needs will depend on our future performance, which will be subject in part to a successful satellite launch, general economic, financial, regulatory and other factors that are beyond our control, including trends in our industry and technology developments. However, we may not be able to obtain this additional financing on terms acceptable to us or at all. For a complete discussion of our risk factors see Part II, Item IA

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

Note 2. Principles of Consolidation, Significant Accounting Policies and Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted in accordance with these rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes, contained in our Annual Report on Form 10-K for the year ended December 31, 2008. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments necessary to summarize fairly our financial position, results of operations and cash flows for the interim periods presented. The operating results for the three months ended March 31, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009.

On January 1, 2009, we adopted Statement of Financial Accounting Standards (“SFAS”) No. 160,“Noncontrolling Interests in Consolidated Financial Statements” (“SFAS No. 160”). The impact of SFAS No. 160 is discussed in more detail in Note 7, Stockholders’ Equity—Noncontrolling Interests.

The condensed consolidated financial statements include our accounts, our subsidiaries, and TerreStar Canada, a variable interest entity under Financial Accounting Standards Board Financial Interpretation (“FIN”) No. 46(R), “Consolidation of Variable Interest Entities” – An Interpretation of Accounting Research Bulletin (“ARB”) No. 51. As of January 1, 2008, we consolidated the results of TerreStar Canada into our financial statements. All intercompany accounts are eliminated upon consolidation. Investments in which we do not have the ability to exercise significant influence are carried at the lower of cost or estimated realizable value. We monitor investments for other than temporary declines in value and makes reductions in value when appropriate.

Reclassifications

Certain reclassifications have been made to the prior period’s financial statements and notes thereto to conform to the current period presentation.

Use of Accounting Estimates

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States 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 during the reporting period. Actual results could differ from those estimates.

Our most significant estimates relating to our continuing operations include the valuation of stock based compensation, deferred tax assets, and long-lived assets.

Restricted Cash and Investments

At March 31, 2009, we had approximately $1.4 million in restricted cash held in money market escrow accounts. Approximately $0.8 million is held in connection with our FCC Surety Bond and approximately $0.4 million is restricted in accordance with various leases and security deposits. In addition, approximately $0.2 million is restricted in accordance with our asset purchase agreement with Geologic Solutions, Inc. and Logo Acquisition Corporation.

Concentrations of Risk

Financial instruments, which potentially subject us to concentrations of credit risk, consist principally of cash and short-term investments. We periodically invest our cash balances in temporary or overnight investments. Our short-term investments include debt securities such as commercial paper, time deposits, certificates of deposit, banker acceptances and marketable direct obligations of the United States Treasury with high credit quality financial institutions. At March 31, 2009, we had approximately $207 million of cash deposits, excluding restricted cash, in excess of amounts insured by the Federal Deposit Insurance Corporation. To date, we have not experienced any losses on cash deposits.

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Property and Equipment

We record property and equipment (“P&E”), including leasehold improvements at cost. P&E consists of network equipment, lab equipment, office and computer equipment, internal use software and leasehold improvements. The satellite and terrestrial network assets under construction primarily include materials, labor, equipment and interest related to the construction and development of our satellite and terrestrial network. Assets under construction are not depreciated until placed into service. Repair and maintenance costs are expensed as incurred.

In accordance with Statement of Position 98-1, “Accounting for Costs of Computer Software Developed or Obtained for Internal Use” (“SOP 98-1”), we capitalize software developed or obtained for internal use during the application development stage. These costs are included in property and equipment and, when the software is placed in service, are depreciated over an estimated useful life of three years. Costs incurred during the preliminary project stage, as well as maintenance and training costs are expensed as incurred.

The cost of P&E is depreciated on a straight-line basis over the estimated economic useful lives as follows:

Long-Lived Assets	Estimated Useful Life
Network, lab and office equipment	5 years
Computers, software and equipment	3 years
Leasehold improvements	Lesser of lease term or estimated useful life
Definite lived intangible assets	15 years
Satellite and Terrestrial Network Assets Under Construction	15 years (after launch)

Intangible Assets

Intangible assets primarily consist of intangible assets related to FCC spectrum frequencies and other intellectual property. Definite lived intangible assets are amortized over an estimated economic useful life of fifteen years. Indefinite lived assets are not amortized.

Valuation of Long-Lived and Intangible Assets

We evaluate whether long-lived and intangible assets have been impaired when circumstances indicate the carrying value of those assets may not be recoverable. For such assets, impairment exists when its carrying value exceeds the sum of estimates of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. When alternative courses of action to recover the carrying amount of an asset are under consideration, a probability-weighted approach is used for developing estimates of future undiscounted cash flows. If the carrying value of the asset is not recoverable based on these estimated future undiscounted cash flows, the impairment loss is measured as the excess of the asset’s carrying value over its fair value, such that the asset’s carrying value is adjusted to its estimated fair value.

In April 2008, the FASB issued FSP No. 142-3, “Determination of the Useful Life of Intangible Assets”(“SFAS No. 142-3”) which amends the factors considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). FSP No. 142-3 requires a consistent approach between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of an asset under SFAS No. 141(R),“Business Combinations”.The FSP also requires enhanced disclosures when an intangible asset’s expected future cash flows are affected by an entity’s intent and/or ability to renew or extend the arrangement. FSP No. 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and is to be applied prospectively. We adopted in the first quarter of 2009 and there is no material impact on our financial statements.

Income Taxes

We, together with our U.S. subsidiaries, file consolidated income tax returns in the U.S. federal jurisdiction. We, along with our U.S. subsidiaries, also file tax returns in various state and local jurisdictions. We have no periods under audit by the Internal Revenue Service (“IRS”). The statutes of limitation open for our returns are 2004, 2005, 2006 and 2007. We are not aware of any issues for open years that upon examination by a taxing authority are expected to have a material adverse effect on results of operations. As of March 31, 2009, we have fully reserved our deferred income tax balance.

Fair Value of Financial Instruments

In accordance with the reporting requirements of SFAS No. 107, “Disclosures About Fair Value of Financial Instruments”, we calculate the fair value of our assets and liabilities which qualify as financial instruments under this statement and include this additional information in the notes to the financial statements when the fair value is different than the carrying value of those financial instruments. We value our investments, debt and preferred equity instruments under SFAS No. 157, “Fair Value Measurements”.

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The fair value of our investments in marketable debt and equity securities is generally based on quoted market prices or other observable market data such as interest rate indices.

Research and Development Costs

All costs of research and development activities are expensed when incurred. Research and development activities consist of costs related to the development of our integrated satellite and terrestrial communications network, salaries, wages and other related costs of personnel engaged in research and development activities, and the costs of intangible assets that are purchased from others for use in research and development activities that have alternative future uses. Costs that are not clearly related to research and development activities or routine in nature are excluded from research and development costs.

Earnings (Loss) per Common Share

We account for earnings per share in accordance with SFAS No. 128, “Earnings Per Share”. Basic earnings (loss) per common share is calculated by dividing income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. This includes the reported net income (loss) attributable to TerreStar Corporation plus the loss attributable to preferred stock dividends and accretion. Diluted earnings (loss) per common share adjusts basic earnings (loss) per common share for the effects of potentially dilutive common shares. Potentially dilutive common shares include the dilutive effects of shares issuable under our equity plans computed using the treasury stock method, and the dilutive effects of shares issuable upon the conversion of our convertible preferred stock computed using the if-converted method. Shares issuable under our equity plans were anti-dilutive in 2009 and 2008 because we incurred a net loss from continuing operations.

Recently Issued Accounting Pronouncements

In February 2008, the FASB issued FSP No. 157-2, “Effective Date of SFAS No. 157”(“FSP No. 157-2”). FSP No. 157-2 provides a one-year deferral of the effective date of Statement 157 for non-financial assets and non-financial liabilities, except those that are recognized or disclosed in financial statements at fair value at least annually. For non-financial assets and non-financial liabilities subject to the deferral, SFAS No. 157 will be effective in fiscal years beginning after November 15, 2008 and in interim periods within those fiscal years. The adoption of FSP No. 157-2 did not have a material impact on us.

In December 2007, the FASB issued EITF Issue No. 07-1 (EITF No. 07-1), “Accounting for Collaborative Arrangements” which is effective for financial statements issued for fiscal years beginning after December 15, 2008. EITF No. 07-1 defines collaborative arrangements and establishes reporting requirements for transactions between participants in a collaborative arrangement and between participants in the arrangement and third parties. The adoption of EITF No. 07-1 did not have a material impact on us.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS No. 141R”). SFAS No. 141R establishes principles and requirements for how an acquirer in a business combination (i) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree, (ii) recognizes and measures the goodwill acquired in a business combination or a gain from a bargain purchase, and (iii) determines what information to disclose to enable users of financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141R will be applied prospectively to business combinations that have an acquisition date on or after January 1, 2009. The impact of SFAS No. 141R on our consolidated financial statements will depend on the nature and size of acquisitions, if any, subsequent to the effective date.

Note 3. Property and Equipment

The components of property and equipment as of March 31, 2009 and December 31, 2008 are presented in the table below.

	March 31, 2009			December 31, 2008
	(In thousands)
Assets Under Construction
Satellite construction in progress	$	670,287		$	655,510
Terrestrial Network under Construction		46,655			44,776
		716,942			700,286
Assets In Service
Network equipment		2,420			2,420
Lab equipment		11,588			11,401
Office equipment		6,549			6,549
Leasehold improvements		2,963			2,963
		23,520			23,333
Less accumulated depreciation		(8,304	)		(7,017	)
Property and equipment, net	$	732,158		$	716,602

We capitalized $18.6 million and $13.9 million of interest expense related to assets under construction for the three months ended March 31, 2009 and 2008, respectively.

Depreciation expense was $1.3 million and $1.0 million for the three months ended March 31, 2009 and 2008, respectively.

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Note 4. Intangible Assets

	March 31, 2009			December 31, 2008
	(In thousands)
Indefinite lived intangibles
1.4GHz spectrum license	$	156,520		$	156,520
Definite lived intangibles
2GHz spectrum licenses		209,262			209,143
Intellectual property		36,929			36,907
		246,191			246,050
Less accumulated amortization		(48,019	)		(43,557	)
Intangible assets, net	$	354,692		$	359,013

Amortization expense was $4.5 million and $4.4 million for the three months ended March 31, 2009 and 2008, respectively. We do not amortize our 1.4GHz spectrum licenses.

Note 5. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses of continuing operations consist of the following:

	March 31, 2009		December 31, 2008
	(In thousands)
Accounts payable	$	10,921	$	10,886
Accrued development expenses		3,707		1,581
Accrued consulting expenses		696		274
Accrued compensation and benefits		1,516		2,591
Accrued legal expenses		719		861
Accrued operating and other expenses		353		475
	$	17,912	$	16,668

Note 6. Long-Term Debt

February 2008 Financing Transactions

On February 7, 2008, TerreStar Corporation and TerreStar Networks entered into a series of separate agreements with EchoStar Corporation, Harbinger and other investors constituting a commitment of $300 million in investments in TerreStar Corporation and TerreStar Networks, with $200 million made available at closing and the balance dedicated to funding the TerreStar-2 satellite.

On February 5, 2008, we entered into Spectrum Agreement with EchoStar to acquire certain 1.4GHz spectrum licenses in exchange for 30 million shares of common stock.

On February 5, 2008, we entered into a Spectrum Contribution Agreement with Harbinger to assign its rights to certain other 1.4GHz spectrum licenses in exchange for 1.2 million of our Series E Junior Participating Preferred Stock, convertible into 30 million shares of common stock.

We recorded these transactions as an integrated transaction for accounting purposes. In exchange for the net proceeds received of $191 million and spectrum licenses received of $156.5 million, we issued common stock of $265.8 million, issued debt of $200 million, recorded a debt discount of $142.5 million, recorded additional paid-in capital of $10.9 million related to a beneficial conversion feature and recorded deferred tax liability of $13 million.

TerreStar Notes

On February 14, 2007, TerreStar Networks issued $500 million aggregate principal amount of Senior Secured Paid-in-Kind (“PIK”) Notes due 2014 (the “TerreStar Notes”) pursuant to an Indenture (the “Indenture”), among TerreStar Networks, as issuer, the guarantors from time to time party thereto (the “Guarantors”) and U.S. Bank National Association, as trustee.

On February 5, 2008, TerreStar Corporation and TerreStar Networks entered into a Master Investment Agreement (the “EchoStar Investment Agreement”), with EchoStar Corporation (“EchoStar”). The EchoStar Investment Agreement provided for, among other things, the purchase by EchoStar of $50 million of TerreStar Notes in accordance with the First Supplemental Indenture dated February 7, 2008.

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The additional $50 million TerreStar Notes were issued at an issue price of 93%. As part of the acquisition accounting related to the $50 million TerreStar Notes and in conjunction with the acquisition of the 1.4GHz spectrum, a debt discount was recorded for approximately $42.5 million dollars. The debt discount is being accreted using the effective interest method over the six year term of the TerreStar Notes. For the three months ended March 31, 2009 and 2008, we accreted approximately $0.8 million and $60,000, respectively, of debt discount related to the TerreStar Notes.

The TerreStar Notes bear interest from the date of issuance at a rate of 15% per annum. If certain milestones are not met, additional interest of up to 1.5% per annum will accrue on the TerreStar Notes. Until and including February 15, 2011, interest on the TerreStar Notes will be payable in additional TerreStar Notes on each February 15 and August 15, starting August 15, 2007. Thereafter, interest on the TerreStar Notes will be payable in cash on February 15 and August 15, starting August 15, 2011. As of December 31, 2008, we did not meet certain milestones, so the interest rate increased by 1.5% from that date forward until these milestones are met.

The TerreStar Notes are secured by a first priority security interest in the assets of TerreStar Networks, subject to certain exceptions, pursuant to a U.S. Security Agreement (the “Security Agreement”), dated as of February 14, 2007, among TerreStar Networks, as issuer, and any entities that may become Guarantors (as defined in the Indenture) in the future under the Indenture in favor of U.S. Bank National Association, as collateral agent. The assets of TerreStar Networks that collateralize the TerreStar Notes amount to $845 million as of March 31, 2009, consisting primarily of satellites under construction, property and equipment, and cash and cash equivalents.

On February 15, 2009, $54 million of interest was converted into additional TerreStar Notes in accordance with the Indenture. As of March 31, 2009 and December 31, 2008, the carrying value of the TerreStar Notes, net of discount including accrued interest, was $700.1 million and $671.9 million, respectively.

TerreStar Exchangeable Notes

The EchoStar Investment Agreement also provided for the purchase by EchoStar of $50 million of TerreStar Networks’ newly issued 6.5% Senior Exchangeable PIK Notes due 2014, exchangeable for TerreStar Corporation common stock, at a conversion price of $5.57 per share (the “TerreStar Exchangeable Notes”). In addition, on February 5, 2008, TerreStar Corporation and TerreStar Networks entered into a Master Investment Agreement (the “Harbinger Investment Agreement”), with certain affiliates of Harbinger. The Harbinger Investment Agreement provided for, among other things, purchase by Harbinger of $50 million of TerreStar Exchangeable Notes. In connection with the foregoing transactions, certain of our existing investors entered into separate investment agreements (“Shareholder Investment Agreements”) to purchase in the aggregate $50 million of the TerreStar Exchangeable Notes.

On February 7, 2008, TerreStar Networks issued $150 million aggregate principal amount of TerreStar Exchangeable Notes due 2014 pursuant to an Indenture (the “Exchangeable Note Indenture”), among TerreStar Networks, TerreStar Corporation and certain subsidiaries, as issuer, the guarantors from time to time party thereto (the “Exchangeable Note Guarantors”) and U.S. Bank National Association, as trustee.

The TerreStar Exchangeable Notes bear interest from February 7, 2008 at a rate of 6.5 % per annum, payable quarterly. Until and including June 15, 2011, interest on the TerreStar Exchangeable Notes will be payable in additional TerreStar Exchangeable Notes quarterly, starting March 15, 2008. Thereafter, interest on the TerreStar Exchangeable Notes will be payable in cash quarterly, starting June 15, 2011. The TerreStar Exchangeable Notes are scheduled to mature on June 15, 2014.

The TerreStar Exchangeable Notes rank senior in right of payment to all existing and future subordinated indebtedness, and pari-passu with all other unsubordinated indebtedness. The TerreStar Exchangeable Notes are guaranteed by subsidiaries of TerreStar Networks.

As part of the acquisition accounting related to the TerreStar Exchangeable Notes and in conjunction with the acquisition of the 1.4GHz spectrum, a debt discount was recorded for approximately $100 million dollars. The debt discount is being accreted using the effective interest method over the six year term of the TerreStar Exchangeable Notes. For the three months ended March 31, 2009, we accreted approximately $45,000 of debt discount related to the TerreStar Exchangeable Notes. No accretion was recognized for the three months ended March 31, 2008.

On March 15, 2009, $2.6 million of interest was converted into additional TerreStar Exchangeable Notes in accordance with the Exchangeable Note Indenture. As of March 31, 2009 and December 31, 2008, the carrying value of the TerreStar Exchangeable Notes, net of discount including interest, was $65.8 million and $63.2 million, respectively.

Beneficial Conversion Feature

The effective conversion rate of the TerreStar Exchangeable Notes after considering the discount, as compared to the fair market value of our common stock on the date of commitment, represents an additional beneficial conversion value. Thus, we recorded an additional discount to the TerreStar Exchangeable Notes, with a corresponding increase in additional paid-in capital, of $10.9 million. In accordance with EITF No. 00-27,“Accounting For Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios”, the aforesaid discount is amortized to interest expense over six years from the date of commitment, the earliest redemption date of the notes.

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TerreStar-2 Purchase Money Credit Agreement

On February 5, 2008, we entered into a $100 million TerreStar-2 Purchase Money Credit Agreement (“Credit Agreement”) among TerreStar Networks, as the borrower, the guarantor’s party thereto from time to time, U.S. Bank National Association, as collateral agent, and Harbinger and EchoStar, as lenders.

Amounts outstanding under the Credit Agreement bear interest at a rate of 14% per annum and mature on February 5, 2013. This interest is payable in additional notes through February 2012 and payable in cash thereafter.

The Credit Agreement contains restrictive covenants customary for credit facilities of this type, including, but not limited to the following: limitations on incurrence of additional indebtedness; a limitation on liens; a limitation on asset sales of collateral and limitation on transactions with affiliates. The Credit Agreement also contains certain events of default customary for credit facilities of this type (with customary grace periods, as applicable). If any events of default occur and are not cured within the applicable grace periods or waived, the outstanding loans may be accelerated. The financing will be advanced as required and used to fund the completion of the TerreStar-2 Satellite.

As of March 31, 2009 and December 31, 2008, the carrying value of the Credit Agreement, including accrued interest, was $38.2 million and $36.8 million, respectively.

Leases

As of March 31, 2009, we had non-cancelable leases for office space, co-location sites, calibration earth stations, towers and furniture and equipment under operating leases expiring through 2018.

Rent expense totaled approximately $1.6 million and $1.5 million for the three months ended March 31, 2009 and 2008, respectively. Rent expense is recognized on a straight-line basis over the term of the lease agreement. We also had sublease income which totaled approximately $78,000 and $77,000 for the three months ended March 31, 2009 and 2008, respectively.

Note 7. Stockholders’ Equity

Preferred Stock

We account for the Series A and Series B Cumulative Redeemable Convertible Preferred Stock (“Series A and B Preferred”) under Accounting Series Release 268, “Redeemable Preferred Stocks”. As of March 31, 2009, we had 5.0 million authorized shares of preferred stock, consisting of 0.45 million Series A shares, 0.5 million Series B shares, 1 Series C share, 1 Series D share, 1.9 million Series E shares and approximately 2.1 million shares undesignated.

Dividends on Series A and B Preferred Shares

From April 15, 2005 to April 15, 2007, TerreStar Corporation paid cash dividends at a rate of 5.25% per annum on the Series A and Series B Preferred shares. These cash dividends of approximately $42.9 million were placed in an escrow account and were paid in four semi-annual payments to the holders of Series A and B Preferred. Additional dividend payments after April 15, 2007, are due bi-annually in April and October, payable at TerreStar Corporation’s option in cash at a rate of 5.25% per annum or in common stock at a rate of 6.25% per annum through April 15, 2010. Currently, we are unable to pay the Series A dividend in common stock due to our ongoing litigation with certain investors.

If any shares of Series A and B Preferred remain outstanding on April 15, 2010, TerreStar Corporation is required to redeem such shares for an amount equal to the purchase price paid per share plus any accrued but unpaid dividends on such shares.

Series C and D Preferred Stock

On February 7, 2008, we issued one share of non-voting Series C preferred stock, $0.01 par value (“Series C preferred”) to EchoStar and one share of non-voting Series D preferred stock, $0.01 par value (“Series D preferred”) to Harbinger for a purchase price equal to par value of $0.01. Issuance of these shares was exempt from the registration requirements of the Securities Act of 1933.

The rights, preferences and privileges of the Series C and Series D preferred are contained in Certificates of Designations of the Series C and D preferred stock as discussed in our Annual report on Form 10-K.

Series E Junior Participating Preferred Stock

Series E Junior Participating preferred stock (the “Junior Preferred Shares”) was issued to Harbinger and its affiliates under the Harbinger Spectrum Agreement. Except as otherwise required under Delaware law, the holders of Junior Preferred Shares are not entitled to vote on any matter required or permitted to be voted on by the stockholders. The holders of Junior Preferred Shares are entitled to participate ratably in any dividends paid on the shares of common stock. In the event of a liquidation, the holders of Junior Preferred Shares will be entitled to be paid out of the assets of the Company available for distribution to its stockholders an amount in cash equal to $0.0001 per share (subject to adjustment), before any distribution may be made or any assets distributed in respect of the shares of common stock. Subject to certain restrictions related to the change of control provisions under the existing indenture and existing preferred stock, each Junior Preferred Share may be converted into 25 shares of common stock

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(subject to adjustment). There is no restriction in the Certificate of Designations governing the Junior Preferred Shares on the repurchases or redemption of shares by the Company while there is any arrearage in the payment of dividends or sinking fund installments.

On June 9, 2008, we issued 1.2 million shares of our Series E Junior Participating preferred stock to Harbinger, convertible into 30 million shares of our common stock for the effective purchase of CCTV Wireless, LLC, the holder of certain 1.4 GHz licenses. The transaction was consummated on June 10, 2008.

Common Stock Purchase Warrants

As of March 31, 2009, there were approximately 2.9 million fully vested warrants exercisable for our common stock outstanding.

The following table summarizes our warrant activity as of March 31, 2009:

TerreStar Corporation	Warrants		Weighted- average exercise price per share
Outstanding at January 1, 2009	3,238,477		$	10.22
Granted	—			—
Canceled	(380,000	)		4.88
Exercised	—			—
Outstanding at March 31, 2009	2,858,477		$	10.93

Noncontrolling Interests

On January 1, 2009, we adopted SFAS No. 160, which changed the accounting and reporting for minority interests by recharacterizing them as noncontrolling interests and classifying them as a component of equity in our consolidated balance sheet. As required by SFAS No. 160, our condensed consolidated statements of operations is adjusted to include the net loss attributed to the noncontrolling interest.

Prior to the adoption of SFAS No. 160, we had to report more than our proportionate share of the partially-owned subsidiaries’ losses. Adopting SFAS No. 160 requires us to report less of a loss because the noncontrolling interests will be allocated their share of the losses even if their equity is in a deficit position. If we continued to apply paragraph 15 of ARB 51, the net loss attributable to TerreStar Corporation for the three months ended March 31, 2009 would have been $49.5 million with a basic and diluted loss per share of ($0.47).

Note 8. Employee Stock Benefit Plans

Stock Options

We account for stock-based compensation in accordance with the provisions of SFAS No. 123 (R),“Share-Based Payment”, an amendment of FASB Statements No. 123 (“SFAS 123(R)”). Accordingly, compensation costs for our stock option plans recognized as expensed are measured at the grant date and over the vesting period.

As of March 31, 2009, the total unrecognized stock compensation expense was approximately $7.5 million.

Our equity-based compensation expense of $3.8 million and $2.5 million for the three months ended March 31, 2009 and 2008, respectively, is included in the condensed consolidated statement of operations for the awards outstanding under the 2002 TerreStar Networks Plan, the 2006 TerreStar Corporation Equity Incentive Plan and the TerreStar Global Ltd. 2007 Share Incentive Plan.

Restricted Stock Awards

During 2009, we issued approximately 0.7 million shares of restricted stock awards to our employees and certain executives, of TerreStar Networks, respectively, under the 2006 Plan. The fair value of restricted stock awards is based on the stock price at the date of grant. Restricted stock awards are settled in shares of our common stock after the vesting period.

The following table summarizes our restricted stock activity as of March 31, 2009.

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TerreStar Corporation	Restricted Shares		Weighted- average grant date fair value
Non-vested at January 1, 2009	901,060		$	4.23
Granted	749,750			.47
Cancelled	(51,500	)		.47
Vested	(24,000	)		3.00
Non-vested at March 31, 2009	1,575,310		$	2.67

TerreStar Networks 2002 Stock Incentive Plan

In July 2002, the TerreStar Networks stockholders approved the 2002 TerreStar Networks Plan (as amended) with 7,707,458 authorized shares of common stock, of which options to purchase 213,763 and 213,763 shares of TerreStar Networks’ common stock were outstanding at March 31, 2009 and 2008, respectively. All of the outstanding options under the 2002 TerreStar Networks Plan have vested. Pursuant to the terms of the adoption of the 2006 Plan (discussed below) no additional options will be issued pursuant to the 2002 TerreStar Networks Plan, and the plan will terminate upon the exercise or termination of the outstanding options.

The following tables summarize our stock option activity for the 2002 TerreStar Networks Plan:

	Options to acquire shares	Weighted- average exercise price per share		Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2009	213,763	$	7.38	$	3,232
Granted	—		—		—
Cancelled	—		—		—
Exercised	—		—		—
Outstanding at March 31, 2009	213,763	$	7.38	$	3,349
Exercisable at March 31, 2009	213,763	$	7.38	$	3,349

2002 TerreStar Corporation Plan

The 2002 Plan was initially adopted by the Board of Directors in May 2002 with 5,493,024 authorized shares of common stock, of which options to purchase 231,664 shares of the our common stock were outstanding at March 31, 2009.

2006 TerreStar Corporation Equity Incentive Plan

In April 2006, our stockholders approved the 2006 Plan which was designed to replace both the 2002 Plan, and the 2004 Restricted Stock Plan. No additional shares were granted under either the 2002 Plan or the 2004 Restricted Stock Plan. The 2006 Plan initially authorized the issuance of a total of 10,000,000 (and was later amended in October 2007 to increase to 11,000,000) incentive stock options, non-qualified stock options, restricted shares, performance shares and performance units. As of March 31, 2009, approximately 2.5 million shares remain available to be issued under the 2006 Plan.

The following tables summarize our stock option activity for the TerreStar Corporation 2002 and 2006 Plans.

	Options to acquire shares		Weighted- average exercise price per share		Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2009	8,664,732		$	11.69		—
Granted	—			—		—
Cancelled	(1,486,902	)		13.09		—
Exercised	—			—		—
Outstanding at March 31, 2009	7,177,830		$	11.40	$	—
Exercisable at March 31, 2009	6,421,203		$	11.58	$	—

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	Options to acquire shares		Weighted- Average Grant Date Fair Value
Non-vested at January 1, 2009	1,188,511		$	6.41
Granted	—			—
Cancelled	(11,393	)		11.30
Vested	(436,473	)		11.30
Non-vested at March 31, 2009	740,645		$	9.75

TerreStar Global Ltd. 2007 Share Incentive Plan

Pursuant to the terms of the TerreStar Global Ltd. 2007 Share Incentive Plan (the “Global Plan”), TerreStar Global may issue up to an aggregate of 3.75 million shares of common stock in the form of options or other equity-based incentive awards to directors, officers, employees and service providers.

The following tables summarize our stock option activity under the Global Plan.

	Options to acquire shares	Weighted- average exercise price per share		Aggregate Intrinsic Value
Outstanding at January 1, 2009	1,625,000	$	0.42	—
Granted	—		—	—
Cancelled	—		—	—
Exercised	—		—	—
Outstanding at March 31, 2009	1,625,000	$	0.42	—
Exercisable at March 31, 2009	1,080,000	$	0.42	—

	Options to acquire shares		Weighted- Average Grant Date Fair Value
Non-vested at January 1, 2009	885,000		$	0.22
Granted	—			—
Cancelled	—			—
Exercised	—			—
Vested	(340,000	)		0.22
Non-vested at March 31, 2009	545,000		$	0.22

Warrants—TerreStar Global

On July 9, 2007, TerreStar Global issued warrants to its board and former board members. These warrants vested immediately and expire on July 9, 2012, or earlier if fully exercised or otherwise cancelled per the warrant agreement’s terms.

The fair value of each warrant was calculated using a Black-Sholes option pricing model. The risk-free rates were developed using Daily Treasury Yield Curve Rates from the U.S. Treasury, adjusted for continuous compounding. The expected volatility was estimated using TerreStar Global and peer company historical average annual volatility. The July 9, 2007 warrants contain a provision that violates the basic characteristics of “plain vanilla” options. Specifically, with certain limitations, the warrants are freely transferable. As the warrants are likely to remain outstanding for the entirety of their contractual term, the expected term was determined to equal the contractual term for the July 9, 2007 warrants. As the July 9, 2007 warrants are vested upon issuance, it is expected that none of these shares would be forfeited prior to vesting.

The following table summarizes the TerreStar Global warrants that are outstanding and exercisable as of March 31, 2009.

Warrants Outstanding				Warrants Exercisable
Exercise Prices		As of March 31, 2009	Weighted Average Contractual Life Remaining	As of March 31, 2009
$	0.42	553,100	4 years	553,100

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Note 9. Charges Related to Cost Reduction Actions

In April 2008, we announced that TerreStar Networks would implement certain cost reduction measures which included costs for employee terminations. Additionally, certain contracts and leases were evaluated under SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS No. 146”), for their remaining economic benefit and we have established the cease-use date, and recorded the liability accordingly. We accounted for these costs in accordance with SFAS No. 112, “Employers’ Accounting for Postemployment Benefits—An Amendment of SFAS No. 5 and 43” (“SFAS No. 112”), and SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”. Employee termination benefits costs were accounted for under SFAS No. 112. We included employee severance, health insurance, and other related payroll benefit costs as employee termination benefit costs. Contract termination costs are accounted for under SFAS 146 which includes costs to terminate the contract before the end of its term or costs that will continue to be incurred under the contract for its remaining term without economic benefit to the entity.

The details of these charges are presented in the following table.

	(in thousands)
Beginning Liability, January 1, 2009	$	4,947
Reduction in deferred rent		(344	)
Total incurred expenses		(344	)
Cash expenditures through March 31, 2009		(480	)
Ending Liability, March 31, 2009(1)	$	4,123

⁽¹⁾ This total liability is included in current and long term deferred rent of $1.4 million and $2.5 million, respectively, and accrued termination costs in the amount of $0.2 million.

Note 10. Commitments and Contingencies

As of March 31, 2009, TerreStar has preferred stock obligations for its Series A and Series B preferred stock. If not converted into shares of our common stock, the entire Series A and Series B Preferred stock amount of $408.5 million will be due on April 15, 2010. Dividend payments on the Series A and Series B are due semi-annually in April and October, payable in cash (at a 5.25% annual interest rate) or in common stock (at a 6.25% annual interest rate) through April 15, 2010. Additionally, we have the following contractual commitments and debt obligations as of March 31, 2009:

	TOTAL		<1YR		1 to 3 YRS		4-5 YRS		>5 yrs
	in thousands
TerreStar Satellites(1,2)	$	296,298	$	130,105	$	74,567	$	8,221	$	83,405
Leases		12,638		4,996		7,510		132		—
Network Equipment and Services		420,658		45,993		374,665		—		—
Preferred Stock Obligations		440,669		21,446		419,223		—		—
Debt Obligations(3)		1,693,654		—		323,183		1,370,471		—
Total	$	2,863,917	$	202,540	$	1,199,148	$	1,378,824	$	83,405

(1) Includes approximately $3.3 million remaining of construction payments and approximately $127.2 million of orbital incentive payments for TerreStar-1 if the satellite operates properly over its expected life. Additionally, includes approximately $65.8 million remaining of construction payments and approximately $63.2 million of orbital incentives for TerreStar-2.

(2) We expect to pay $28 million for satellite launch insurance.

(3) Debt Obligations are composed of our $550 million TerreStar Notes due 2014, our $150 million TerreStar Exchangeable Notes due 2014, and our current borrowing under our TerreStar-2 Purchase Money Credit Agreement due 2013 for our second satellite, plus accrued interest.

Note 11. Legal Matters

Litigation Adverse to Highland Capital Management and James Dondero

Since August 2005, we have been engaged in litigation adverse to Highland Capital Management, L.P. (“Highland Capital”), as well as certain investment funds managed by Highland Capital and James Dondero, who is the principal owner of Highland Capital and one of our former directors (Highland Capital, its investment funds, and Mr. Dondero collectively, the “Dondero Affiliates”). Seven of the suits were filed by the Dondero Affiliates against us or related parties. Of those seven suits, four have been resolved in our favor (and are not further discussed herein); two have been dismissed on our motions and are being appealed by the Dondero Affiliates, and one is in the pleading stage. In addition, we have filed two suits against Mr. Dondero and the Dondero Affiliates; both were dismissed on the defendants’ motions, although one has been remanded to the trial court following our successful appeal.

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The suit filed by the Dondero Affiliates that remains on appeal was filed on August 16, 2005 in a Texas state district court in Dallas County, Texas (the “Rescission Litigation”). This suit challenged the validity of our Series A Preferred Stock and sought damages and rescission of the Dondero Affiliates’ $90 million purchase of 90,000 shares of Series A Preferred Stock. On November 30, 2007, the court granted our motion for summary judgment and dismissed the suit. The Dondero Affiliates appealed the dismissal. On March 6, 2009, the Court of Appeals reversed the summary judgment and remanded most of the claims to the trial court for trial. We intend to vigorously pursue rehearing before the Court of Appeals and, if unsuccessful in the Court of Appeals to seek review by the Supreme Court of Texas.

The Dondero Affiliates suit that was most recently dismissed was filed on February 1, 2008 in the Commercial Division of the New York Supreme Court. In this suit, the Dondero Affiliates contend that certain transactions, including the September 2005 exchange offer by virtue of which we exchanged our outstanding shares of Series A Preferred Stock for a new class of Series B Preferred Stock, caused the occurrence of the Senior Security Trigger Date, supposedly requiring us to issue a Senior Security Notice, that would entitle the Dondero Affiliates to redeem their Series A Preferred Stock. We moved to dismiss this action. On October 14, 2008, the court granted the motion to dismiss and denied the plaintiffs’ request for leave to amend their complaint. The Dondero Affiliates have filed a notice of appeal. We intend to vigorously defend the judgment on appeal.

The Dondero Affiliates suit that is in the pleading stage was filed on December 31, 2008 in the Court of Chancery of the State of Delaware. In this lawsuit, the Dondero Affiliates contend that certain financing transactions entered into by us in February 2008 with Harbinger Capital Partners Master Fund I, Ltd. and Harbinger Capital Partners Special Situations Fund LP (collectively, “Harbinger”), EchoStar and other investors constituted a change in control of TerreStar Corporation under the Series A Preferred Stock. The Dondero Affiliates allege that this change of control occurred in at least two ways: (i) Harbinger acquired control of 58% of TerreStar Corporation’s voting stock; and (ii) Harbinger and EchoStar constitute a group that together acquired control of more than 50% of TerreStar Corporation’s voting stock. The Dondero Affiliates ask the court to require us to issue a notice of change of control under the Certificate of Designation for the Series A Preferred Stock and redeem such stock for $90 million plus dividends and escrow premiums. In the alternative, they seek unspecified damages. We believe that these claims are without merit and intend to vigorously defend against this suit.

On October 19, 2005, we filed two lawsuits against Mr. Dondero, one in the United States District Court for the Northern Division of Texas and one in Texas state district court in Dallas County, Texas. The complaint filed in the United States District Court was dismissed on the motion of Mr. Dondero and his affiliates, and the dismissal is now final. The petition filed in state court alleges that Mr. Dondero seriously and repeatedly breached his fiduciary duties as a director in order to advance his own personal interests. The state court, on Mr. Dondero’s motion, entered summary judgment dismissing the fiduciary suit on the ground that the United States District Court’s dismissal of the federal securities lawsuit had a res judicata effect precluding the continued prosecution of state law breach-of-fiduciary-duty claims. However, on appeal, the Court of Appeals reversed the dismissal and remanded the case to the state district court, where we anticipate that it will now be set for trial.

Sprint Nextel Litigation

On June 25, 2008, Sprint Nextel Corporation (“Sprint”) filed a lawsuit in the United States District Court for the Eastern District of Virginia naming TerreStar Networks as a defendant. New ICO Satellite Services, G.P. was also named as a defendant (together with TerreStar Networks, the “Defendants”). In this lawsuit, Sprint contends that Defendants owe them reimbursement for certain spectrum relocation costs Sprint has incurred or will incur in connection with relocating incumbent licensees from certain frequencies in the 2GHz spectrum band. Sprint seeks, among other things, enforcement of certain Federal Communications Commission orders and reimbursement of not less than $100 million from each Defendant. On our motion, the United States District Court for the Eastern District of Virginia has stayed Sprint’s suit on the ground that primary jurisdiction of the dispute resides in the Federal Communications Commission; the case has been administratively closed.

Note 12. Fair Value of Financial Instruments

The carrying amount for debt issues that are not quoted on an exchange, interest rates currently available to us for issuance of debt with similar terms and remaining maturities are used to estimate fair values.

We determined that for our debt and preferred stock financial instruments there is not an active market. Thus, under SFAS No. 157, we have utilized Level 3 in valuing many of our financial instruments.

Our chief objective of the valuation model used was to obtain a realistic exit price at the current measurement date from the perspective of an arms-length buyer and seller.

We utilized a discounted cash flow model to calculate the fair market value of each instrument, based on the yield inputs from the JP Morgan CCC High Yield Index. The primary assumption is these observable yields are reliable proxies for investor required yield, and reflect the appropriate risk and reflect market information. Additional inputs to our valuation model included contractual cash payments and the principal repayment at the maturity date.

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	As of March 31, 2009				As of December 31, 2008
(In thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets
Restricted Cash	$	1,409	$	1,409	$	1,404	$	1,404
Debt
TerreStar Notes and accrued interest, thereon	$	700,067	$	281,750	$	671,884	$	333,145
TerreStar Exchangeable Notes and accrued interest, thereon	$	65,807	$	29,146	$	63,176	$	30,757
TerreStar-2 Purchase Money Credit Agreement and accrued interest, thereon	$	38,194	$	29,150	$	36,755	$	27,537
Preferred Stock
Series A Cumulative Convertible Preferred Stock	$	90,000	$	79,422	$	90,000	$	74,458
Series B Cumulative Convertible Preferred Stock	$	318,500	$	229,624	$	318,500	$	215,271

Note 13. Supplemental Cash Flow Information

Supplemental cash flow information for the three months ended March 31, 2009 and 2008 is presented in the table below.

	Three Months Ended March 31,
	2009			2008
	(in thousands)
Non-cash investing and financing activities
Accrued property and equipment	$	(3,713	)	$	22,838
Interest capitalized on satellites and terrestrial network under construction	$	18,577		$	13,908
Acquisition of intangible assets by issuance of common stock	$	—		$	7,313
Deferred financing fees accrued	$	—		$	1,326
Accretion of issuance costs on Series A and Series B Preferred	$	1,123		$	1,132
Paid-in-kind interest	$	57,900		$	41,555
Discount on TerreStar Notes	$	—		$	3,500
Amortization of discount on TerreStar Notes	$	—		$	60
Dividend liability not paid	$	6,423		$	5,792
Debt issuance cost withheld from TerreStar Exchangeable Notes proceeds	$	—		$	768
Expiration of common stock warrants	$	2,559		$	—
Acquisition of Noncontrolling interest funded by issuance of common stock	$	—		$	1,604
Supplemental Cash Flows Information
Interest paid	$	—		$	—
Income taxes paid	$	—		$	14

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

Forward-Looking Statements

Certain statements in Management’s Discussion and Analysis (“MD&A”), other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believe”, “project”, “expect”, “anticipate”, “estimate”, “intend”, “plan”, “may”, “should”, “will”, “would”, “will be”, “will continue”, “will likely result”, and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

The following discussion and analysis of financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes thereto included elsewhere in this report. This discussion contains forward-looking statements. Please see “Caution Regarding Forward-Looking Information; Risk Factors” above and “Risk Factors” below and in our Annual Report on Form 10-K for the year ended December 31, 2008, for a discussion of the uncertainties, risks and assumptions associated with these statements.

The interim financial statements filed on this quarterly report on Form 10-Q and the discussion contained herein should be read in conjunction with our Annual report on Form 10-K for the fiscal year ending December 31, 2008.

Business Overview

TerreStar Corporation (formerly Motient Corporation) was incorporated in 1988 under the laws of the State of Delaware. TerreStar Corporation is in the integrated satellite wireless communications business through its ownership of TerreStar Networks, its principal operating entity, and TerreStar Global.

Our primary business is TerreStar Networks, a Reston, VA based provider of advanced mobile satellite services for the North American market.

As of March 31, 2009, we have two wholly-owned subsidiaries, MVH Holdings Inc. and Motient Holdings Inc. Motient Ventures Holding Inc., a wholly-owned subsidiary of MVH Holdings Inc., directly holds approximately 88% and 86% interests in TerreStar Networks and TerreStar Global, respectively.

Overview

TerreStar Networks Inc.

TerreStar Networks is our principal operating entity. In cooperation with its Canadian partner, 4371585 Canada, we plan to launch an innovative wireless communications system to provide mobile coverage throughout the United States and Canada using small, lightweight and inexpensive handsets similar to today’s mobile devices. This system build out will be based on an integrated satellite and ground-based technology which will provide service in most hard-to-reach areas and will provide a nationwide interoperable, survivable and critical communications infrastructure.

By offering MSS using frequencies in the 2GHz band, which are part of what is often known as the “S-band”, in conjunction with ATC, we can effectively deploy an integrated satellite and terrestrial wireless communications network. Our network would allow a user to utilize a mobile device that would communicate with a traditional land-based wireless network when in range of that network, but communicate with a satellite when not in range of such a land-based network. We intend to provide multiple communications applications, including voice, data and video services. Through TerreStar Networks, we are in the process of building our first satellite pursuant to a construction contract with Loral. Once launched, our TerreStar-1 satellite, with an antenna approximately sixty feet across, will be able to communicate with conventionally sized wireless devices currently being developed by our vendors.

Our ability to offer these services depends on TerreStar Networks’ right to receive certain regulatory authorizations allowing it to provide MSS/ATC in the S-band. These authorizations are subject to various regulatory milestones relating to the construction, launch and operational date of the satellite system required to provide this service. We may be required to obtain additional approvals from national and local authorities in connection with the services that we wish to provide in the future. For example, in order to provide ATC in the United States and Canada we must file applications separately from our satellite authorizations. In addition, the manufacturers of our ATC user terminals and base stations will need to obtain FCC equipment certifications and similar certifications in Canada.

TerreStar Networks was initially created as a subsidiary of SkyTerra established to, among other things, develop a satellite communications system using the S-band. On May 11, 2005, we acquired our ownership interest in TerreStar Networks when, in conjunction with a spin-off of TerreStar Networks to the owners of MSV, we purchased an additional $200 million of newly issued TerreStar Networks common stock. In conjunction with this transaction, TerreStar Networks also entered into an agreement

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with SkyTerra’s wholly-owned subsidiary, ATC Technologies, LLC (“ATC Technologies”) pursuant to which TerreStar Networks has a perpetual, royalty-free license to utilize ATC Technologies’ patent portfolio in the S-band, including those patents related to ATC, which we anticipate will allow us to deploy a next-generation communications network that seamlessly integrates satellite and terrestrial communications, giving a user ubiquitous wireless coverage in the U.S. and Canada.

Since May 11, 2005, we have consolidated TerreStar Networks financial results in our financial statements.

We have the right to use two 10 MHz blocks of contiguous and unshared MSS S-band spectrum covering a population of over 330 million throughout the United States and Canada. Our entire spectrum is eligible for ATC status. ATC authorization provides the ability to integrate terrestrial mobile services with MSS. We anticipate using this ATC authorization to create a two-way wireless communications network providing coverage, services and applications to mobile and portable wireless users. Our planned network is designed to allow an end user to seamlessly communicate with a terrestrial wireless network or our satellite through a conventional mobile device, optimizing service quality, continuity and geographic coverage. On June 24, 2009, we plan to launch our first multi-spot beam geostationary satellite, TerreStar-1, which is designed so that the beams can be refocused dynamically. We are also working with vendors to develop our next-generation network.

We believe our network’s satellite and terrestrial mobile capabilities will serve the needs of various users, such as U.S. and Canadian government and emergency first responder personnel who require reliable, uninterrupted and interoperable connectivity that can be provided by an integrated satellite and terrestrial network. In October 2006, we entered into a Cooperative Research and Development Agreement (“CRADA”) with the U.S. Defense Information System Agency to jointly develop a North American emergency response communications network. On October 3, 2008 the CRADA was extended for an additional two years. We expect the CRADA to result in the development of products that will mutually benefit us and the U.S. government. We also believe that our planned network will appeal to a broad base of potential end users, customers and strategic partners, including those in the media, technology and communications sectors, logistics and distribution sectors and other sectors requiring uninterrupted wireless service.

Our Relationship with TerreStar Canada and 4371585 Canada

SkyTerra formed TerreStar Networks in 2002 as a wholly-owned subsidiary and subsequently spun TerreStar Networks off to SkyTerra’s owners, which included TMI Communications (now known as 4371585 Canada) and TerreStar Corporation or entities controlled by each. As part of the spin-off of TerreStar Networks, TMI Communications became contractually obligated to assign, subject to necessary regulatory approvals, its Industry Canada approval in principle to TerreStar Networks, or to an entity designated by TerreStar Networks that is eligible under Canadian law to hold the approval in principle. TerreStar Networks negotiated and committed, pursuant to a master agreement, to enter into certain transfer agreements with TMI Communications (TMI Communications’ outstanding obligations under the transfer agreements were assumed by 4371585 Canada on December 20, 2007 as the transferee of TMI Communications’ interest in TerreStar Canada Holdings), TerreStar Canada, TerreStar Canada Holdings and certain other related parties (the “Transfer Agreements”) pursuant to which TerreStar Networks agreed to transfer TerreStar-1 to TerreStar Canada and TMI Communications agreed in principle to transfer its Industry Canada approval to TerreStar Canada and FCC authorization to TerreStar Networks. TMI Communications’ assignment of its Industry Canada approval to TerreStar Canada was authorized by Industry Canada on April 27, 2007. This authorization transferred the necessary approvals for TerreStar Canada to launch and operate a satellite at the 111.1 degrees west longitude orbital position in order to provide MSS in Canada. On October 10, 2007, Industry Canada clarified that the authorization as transferred included the authority to operate at 111.0 degrees west longitude. In order to comply with Canada’s telecommunications foreign ownership rules, title to TerreStar-1 is expected to be transferred to TerreStar Canada at the time that title would have otherwise transferred to TerreStar Networks under the terms of its satellite construction contract with Loral, as amended.

The Transfer Agreements also provide for, among other things, the license of certain intellectual property rights to TerreStar Canada, the grant to TerreStar Networks of an indefeasible right to use capacity on TerreStar-1, and the provision by TerreStar Networks to TerreStar Canada of various consulting and other services.

TerreStar Networks owns 20% of the voting equity of TerreStar Canada as well as 33 ¹/3% of the voting equity of TerreStar Canada Holdings, TerreStar Canada’s parent company. The remaining 80% of the voting equity of TerreStar Canada is held by TerreStar Canada Holdings and the remaining 66 ²/3% of the voting equity of TerreStar Canada Holdings is held by 4371585 Canada. TerreStar Networks’ interests in TerreStar Canada and TerreStar Canada Holdings reflect the maximum foreign ownership levels currently permitted by applicable Canadian telecommunications foreign ownership rules. Effective January 1, 2008, TerreStar Corporation’s consolidated financial statements include TerreStar Canada, which is considered a variable interest entity under Financial Accounting Standards Boards Interpretation No. 46(R), “Consolidation of Variable Interest Entities” (“FIN46R”).

Upon the receipt of approval from Industry Canada to transfer the Industry Canada approval in principle from TMI Communications to TerreStar Canada on April 27, 2007, (1) TerreStar Networks entered into a Shareholders’ Agreement, or the TerreStar Canada Shareholders’ Agreement, a Rights and Services Agreement, or the Rights and Services Agreement, a Guarantee and Share Pledge Agreement, or the TMI Guarantee and certain other Transfer Agreements, (2) TerreStar Canada executed a Guarantee in favor of TerreStar Networks, referred to as the TerreStar Canada Guarantee, and (3) TerreStar Networks and certain other parties entered into certain other Transfer Agreements. Set out below is a description of certain of the Transfer Agreements.

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Effective December 20, 2007, BCE completed a restructuring which resulted in TMI Communications, a wholly-owned subsidiary of BCE, transferring all of its shares of TerreStar Canada Holdings to 4371585 Canada. 4371585 Canada is also a wholly-owned subsidiary of BCE.

In connection with the restructuring, TMI Communications entered into an Agreement to be Bound and Release dated December 20, 2007 pursuant to which TMI Communications agreed to transfer to 4371585 Canada its 66 ²/3% interest in TerreStar Canada Holdings and 4371585 Canada agreed to become bound by the terms and conditions of the TerreStar Canada Shareholders’ Agreement. Further, pursuant to the Agreement to be Bound and Release, each of the parties to the TerreStar Canada Shareholders’ Agreement released and discharged TMI Communications from its obligations under the TerreStar Canada Shareholders’ Agreement.

TMI Communications also entered into a Joinder Agreement dated December 20, 2007 with 4371585 Canada, TerreStar Networks, TerreStar Canada and TerreStar Corporation, pursuant to which 4371585 Canada agreed to be bound by the terms and conditions of the Transfer Agreements to which TMI Communications was a party including, but not limited to, the TMI Guarantee, and the parties thereto agreed to release and discharge TMI Communications from its obligations under such Transfer Agreements.

On January 16, 2009, TerreStar Networks entered into a master agreement with Trio 2 General Partnership (“Trio”) and certain other parties, pursuant to which, subject to the satisfaction of a number of conditions, including the receipt of necessary governmental approvals from Industry Canada and obtaining certain third party consents, Trio (through a wholly-owned subsidiary) will purchase the 66 ²/3% voting equity stake in TerreStar Canada Holdings currently held by 4371585 Canada. Trio and TerreStar Networks will enter into a series of agreements that will be materially similar to the Transfer Agreements. TerreStar Networks will retain its existing 33 ¹/3% voting equity ownership of TerreStar Canada Holdings. Trio is majority-owned by certain managing partners of Trio Capital Inc., a Canadian investment firm, including Jacques Leduc. Mr. Leduc is also a member of our board of directors and serves as a member of the nominating committee.

TerreStar Global Limited

TerreStar Global was initially formed in 2005 as a wholly-owned subsidiary of TerreStar Networks. We have consolidated the financial results of TerreStar Global since its inception. In late 2006, TerreStar Networks spun-off TerreStar Global to its stockholders. As a result, TerreStar Corporation became the indirect majority holder of TerreStar Global. In connection with the spin-off, TerreStar Networks made capital contributions to TerreStar Global of $5 million. In late 2006, TerreStar Global also raised an additional $5 million through a rights offering from its shareholders, in proportion to their holdings, the majority of which came from TerreStar Corporation. As of March 31, 2009, TerreStar Corporation owned approximately 86% of the outstanding shares of TerreStar Global.

Through a wholly-owned subsidiary of TerreStar Global, TerreStar Europe (“TerreStar Europe”), our goal is to build, own and operate a Pan-European integrated mobile satellite and terrestrial communications network to address public safety and disaster relief as well as provide broadband connectivity in rural regions. As Europe’s first next-generation integrated mobile satellite and terrestrial communication network, TerreStar Europe plans to deliver universal access and tailored applications over a fully-optimized IP network.

On October 7, 2008, TerreStar Europe filed an application with the European Commission for a Pan-European 2GHz MSS S-band spectrum authorization. TerreStar Europe has entered into a number of contracts in connection with its application, including contracts for the construction and operation of a satellite and earth station. We expect that the European Commission will issue such authorizations in 2009. There can be no assurance that TerreStar Europe will be awarded an authorization.

Current Year’s Developments

Satellite Construction

The TerreStar-1 satellite main body has successfully completed its Thermal Vacuum testing and High Power and Passive Intermodulation testing of the flight model feed array for its 2GHz mobile S-band satellite service satellite. TerreStar-1 is now in the final demonstration phase, followed by final assembly and performance testing. Arianespace, TerreStar-1’s launch provider, has confirmed a launch day of June 24, 2009.

Other Events

On January 16, 2009, TerreStar Networks entered into a master agreement with Trio and certain other parties, pursuant to which, subject to the satisfaction of a number of conditions, including the receipt of necessary governmental approvals from Industry Canada and obtaining certain third party consents, Trio (through a wholly-owned subsidiary) will purchase the 66  ²/3% voting equity stake in TerreStar Canada Holdings currently held by 4371585 Canada . Trio and TerreStar Networks will enter into a series of agreements that will be materially similar to the existing agreements with BCE relating to TerreStar Canada Holdings and TerreStar Canada. TerreStar Networks will retain its existing 33  ¹/3% voting equity ownership of TerreStar Canada Holdings. Trio is majority-owned by certain managing partners of Trio Capital Inc., a Canadian investment firm, including Jacques Leduc. Mr. Leduc is also a member of our board of directors and serves as a member of the nominating committee.

TerreStar Canada Holdings owns 80% of the voting equity of TerreStar Canada, which in turn holds the Industry Canada approvals needed to launch and operateTerreStar-1 for the purposes of providing mobile satellite services in Canada. TerreStar

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Networks owns the remaining 20% of the voting equity of TerreStar Canada. TerreStar-1 is currently under construction and owned by TerreStar Networks, but will be transferred to TerreStar Canada after launch. TerreStar Networks will be granted a right to use capacity on the TerreStar-1 satellite once it is transferred to TerreStar Canada.

Additionally, upon approval by Industry Canada of the transfer of the 66  ²/3% voting equity stake in TerreStar Canada Holdings from BCE to Trio and the satisfaction of certain other conditions, TerreStar Networks or its affiliates will enter into other arrangements with Trio or its affiliates to carry on the business of developing and deploying integrated mobile satellite and terrestrial services in Canada.

Entry into Material Definitive Agreements

As previously reported, TerreStar Networks has entered into an agreement with Hughes Network Systems, LLC (“Hughes”) with respect to a satellite base subsystem (“S-BSS”) based on the GMR1-3G technology (the “Hughes S-BSS Agreement”) and a technology development agreement with Qualcomm Incorporated (“Qualcomm”) for the development of the GMSA satellite air-interface to be included in certain of its device chipsets based on Qualcomm's EV-DO standard.

On March 31, 2009, TerreStar Networks entered into an agreement with Infineon Technologies AG (“Infineon”) for the design and development of a multi-standard mobile platform based on Infineon’s innovative software-defined-radio (“SDR”) technology that would be compatible with the Hughes S-BSS system (the “Infineon Agreement”). This SDR chipset technology will enable satellite-terrestrial handsets to operate with multiple cellular and satellite-based communications technologies including GSM, GPRS, EDGE, WCDMA, HSDPA, HSUPA and GMR-2G/3G. The Infineon Agreement also contemplates that up to two additional operators (together with TerreStar, each an “Operator”) may enter into the Infineon Agreement without any increase in the total contract price (assuming the scope and functionality are not changed), and bearing their proportionate share of costs of the total contract price. SkyTerra has jointly entered into the Infineon Agreement with Infineon and TerreStar, such that four Operators in total could enter into the Infineon Agreement. Based on the continued participation of the current Operators, the cost to TerreStar of its portion of the development and software costs incurred under the Infineon Agreement is approximately $19.7 million. Of that amount, TerreStar Networks expects to pay between $5 million and $6 million during the remainder of 2009.

In conjunction with the Infineon Agreement, on March 31, 2009, TerreStar Networks entered into an agreement with Hughes for additional software development work (the “GMR1-3G Software Components Agreement”) that will, with the existing Hughes S-BSS Agreement, allow Hughes to deliver the full S-BSS development required with respect to the GMR1-3G air interface to be included in connection with the Infineon SDR technology. SkyTerra has also entered into the GMR1-3G Software Components Agreement. Based on the continued participation of the current Operators, the cost to TerreStar Networks of its portion of the development and software costs incurred under the GMR1-3G Software Components Agreement is approximately $7.9 million. Of that amount, TerreStar Networks expects to pay between $1 million and $2 million during the remainder of 2009.

Both the Infineon Agreement and the GMR1-3G Software Components Agreement contain provisions for the recovery of the certain contract costs through royalties and discounts, such that more than half of the costs to be incurred by TerreStar Networks may be subject to later reimbursement.

Results of Operations—Consolidated

Three Months Ended March 31, 2009 and 2008

Operating Expenses:

	Three Months Ended March 31,
	2009		2008		Change			% Change
	(in thousands)
General and administrative(1)	$	16,621	$	31,598	$	(14,977	)	(47.3	)%
Research and development		13,582		30,142		(16,560	)	(54.9	)%
Depreciation and amortization		5,749		5,454		295		5.4	%
Total operating expenses	$	35,952	$	67,194	$	(31,242	)	(46.5	)%

(1) For the three months ended March 31, 2009 and 2008, general and administrative expense include approximately $3.8 million and $2.4 million, respectively, of stock compensation expense related to employee stock options and director’s compensation expense.

General and administrative:Our general and administrative expenses decreased by approximately $15.0 million or 47.3% for the three months ended March 31, 2009 as compared to the same period in 2008. There was a $3.0 million reduction in Salaries and Benefits resulting from cost reduction efforts implemented in 2008, a $7.0 million reduction in consulting expense, and a $3.6 million reduction in network expenses related to the cancellation of the network buildout.

Research and development costs: Research and development costs decreased by $16.6 million or 54.9%, for the three

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months ended March 31, 2009 as compared to the same periods in 2008. The decreases are mostly due to an $11.0 million decrease in spending on TerreStar’s terrestrial handset development program due to the advanced nature of the program and a $2.9 million decrease in the satellite program costs as we move closer to launch, combined with a $1.9 million decrease in consultant costs mostly associated with the handset program.

Other Expenses and Income:

	Three Months Ended March 31,
	2009			2008			Change			% Change
	(in thousands)
Interest expense	$	(14,039	)	$	(10,359	)	$	(3,680	)	35.5	%
Interest income		134			1,132			(998	)	(88.2	)%
Other income		394			91			303		333.0	%
Loss on investment in SkyTerra		—			(27,374	)		27,374		(100.0	)%
Noncontrolling interests in losses of TerreStar Networks		4,861			8,376			(3,515	)	(42.0	)%
Noncontrolling interests in losses of TerreStar Global		71			—			71		NM
NM: Not Meaningful

Interest expense:Interest expense increased by $3.7 million or 35.5% for the three months ended March 31, 2009 as compared to the same period in 2008. The change is primarily attributable to the issuance of additional TerreStar Notes, Exchangeable Notes, and TerreStar-2 Purchase Money Credit Agreement during 2008.

Interest income: Interest income decreased by $1.0 million, or 88.2%, for the three months ended March 31, 2009 as compared to the same period in 2008 due to decreasing interest rates.

Other income:Other income increased by $0.3 million, or 333.0%, for the three months ended March 31, 2009 as compared to the same period in 2008 from an increase in professional services revenue.

Loss on investment in SkyTerra: Loss on investment in SkyTerra decreased by $27.3 million, or 100%, for the three months ended March 31, 2009 as compared to the same period in 2008. In September 2008, we sold the remaining 29.9 million shares of our SkyTerra investment.

Noncontrolling interest in losses of TerreStar Networks: For the three months ended March 31, 2009, we reduced our net loss by approximately $4.9 million as compared to $8.4 million in 2008, as a result of noncontrolling interest in TerreStar Networks. This was due to lower overall losses in TerreStar Networks this year.

Going Concern, Liquidity and Capital Resources

The Condensed Consolidated Financial Statements have been prepared on a going concern basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future. Our cash on hand at March 31, 2009 was $208.8 million including restricted cash. Additionally, approximately $66.7 million remains available under our TerreStar-2 Purchase Money Credit Agreement which is expected to provide sufficient funding to complete the construction of our second satellite TerreStar-2. We incurred net losses of $44.5 million for the three months ended March 31, 2009, and our accumulated deficit as of March 31, 2009 was $1.1 billion. We expect to continue incurring losses for the foreseeable future. Based upon our current plans, we estimate that our cash and cash equivalents will not be sufficient to cover our estimated funding needs for 2010.

In assessing our liquidity, we monitor and analyze our cash on-hand and our operating and capital expenditure commitments. Our principal liquidity needs are to meet our working capital requirements, operating expenses and capital expenditure obligations. Our short-term liquidity needs are driven by our satellite system construction contracts, the development of terrestrial infrastructure and networks, the design and development of our handset and chipset, and our ongoing operating expenses. As of March 31, 2009, we have contractual obligations of $181.1 million due within one year, consisting of approximately $130.1 million related to our satellite system, $46.0 million related to our handset, chipset, and terrestrial network, and $5.0 million for operating leases. We expect to spend approximately $28 million in satellite launch insurance for our TerreStar-1 satellite. In addition, TerreStar Europe, a TerreStar Global subsidiary, recently filed an application for the award of S-band spectrum in Europe. If we are awarded this spectrum, we will need additional funds in TerreStar Global for satellite construction and terrestrial ground network development. We also have preferred stock obligations for our Series A and Series B Preferred in the amount of $408 million which, if not converted into shares of our common stock, will be due on April 15, 2010.

We will need to secure additional funding by early 2010 in order to complete the construction, deployment, and rollout of our planned network and to continue operations. We intend to fund our long-term liquidity needs related to operations and ongoing network deployment through the incurrence of indebtedness, equity financings or a combination of these potential

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sources of liquidity. While we believe that these sources will provide sufficient funding for us to meet our future liquidity and capital obligations, our ability to fund these needs will depend on our future performance, which will be subject in part to a successful satellite launch, general economic, financial, regulatory and other factors that are beyond our control, including trends in our industry and technology developments. However, we may not be able to obtain this additional financing on terms acceptable to us or at all. For a complete discussion of our risk factors see Part II, Item IA

Summary of Cash Flows:

	Three Months Ended
	March 31,
	2009			2008
	(in thousands)
Net cash used in Operating Activities	$	(26,163	)	$	(56,449	)
Net cash provided by (used in) Investing Activities		(3,428	)		46,336
Cash flows from Financing Activities:
Net proceeds from issuance of debt and equity securities		—			195,732
Proceeds from TerreStar-2 Purchase Money Credit Agreement		150			13,375
Payments for capital lease obligations		(16	)		(13	)
Debt and equity issuance costs and other charges		—			(2,060	)
Net cash provided by Financing Activities		134			207,034
Net cash provided by (used in) continuing operations		(29,457	)		196,921
Net cash used in discontinued investing activities		—			(19	)
Net cash used in discontinued operations		—			(19	)
Net increase (decrease) in cash and cash equivalents		(29,457	)		196,902
Cash and Cash Equivalents, beginning of period		236,820			89,134
Cash and Cash Equivalents, end of period	$	207,363		$	286,036

Operating Activities

Net cash used in operating activities for the three months ended March 31, 2009 was $26.2 million as compared to net cash used in operating activities for the three months ended March 31, 2008 was $56.4 million. The decrease of $30.2 million is primarily attributable to a decrease in operating losses offset by the loss on investment in SkyTerra that occurred in 2008.

Investing Activities

Net cash used in investing activities for the three months ended March 31, 2009 was $3.4 million as compared to net cash provided by investing activities for the three months ended March 31, 2008 was $46.3 million. The decrease of $49.7 million was primarily attributable to the proceeds of $76.4 million from the sale of SkyTerra shares received in 2008 offset by a reduction of $26.7 million in payments for capital expenditures including satellite construction.

Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2009 was $0.1 million as compared to net cash provided by financing activities for the three months ended March 31, 2008 was $207.0 million. The decrease of $206.9 million was primarily attributable to a decrease in debt proceeds in the amount of $208.9 million which is offset by a reduction in debt issuance costs of approximately $2.0 million.

Debt Obligations

On February 11, 2009, we accessed $0.2 million of the TerreStar-2 Purchase Money Credit Agreement.

Contractual Cash Obligations

As of March 31, 2009, TerreStar has preferred stock obligations for its Series A and Series B preferred stock. If not

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converted, the entire Series A and Series B Preferred stock amount of $408.5 million will be due on April 15, 2010. Dividend payments on the Series A and Series B are due semi-annually in April and October, payable in cash (at a 5.25% annual interest rate) or in common stock (at a 6.25% annual interest rate) through April 15, 2010. Additionally, we have the following contractual commitments and debt obligations as of March 31, 2009:

	TOTAL		<1YR		1 to 3 YRS		4-5 YRS		>5 yrs
	in thousands
TerreStar Satellites(1,2)	$	296,298	$	130,105	$	74,567	$	8,221	$	83,405
Leases		12,638		4,996		7,510		132		—
Network Equipment and Services		420,658		45,993		374,665		—		—
Preferred Stock Obligations		440,669		21,446		419,223		—		—
Debt Obligations(3)		1,693,654		—		323,183		1,370,471		—
Total	$	2,863,917	$	202,540	$	1,199,148	$	1,378,824	$	83,405

(1) Includes approximately $3.3 million remaining of construction payments and approximately $127.2 million of orbital incentive payments for TerreStar-1 if the satellite operates properly over its expected life. Additionally, includes approximately $65.8 million remaining of construction payments and approximately $63.2 million of orbital incentives for TerreStar-2.

(2) We expect to pay $28 million for satellite launch insurance.

(3) Debt Obligations are composed of our $550 million TerreStar Notes due 2014, our $150 million TerreStar Exchangeable Notes due 2014, and our current borrowing under our TerreStar-2 Purchase Money Credit Agreement due 2013 for our second satellite, plus accrued interest.

Off-Balance Sheet Financing

As of March 31, 2009, we did not have any material off-balance sheet arrangements as defined in Item 303(a) (4) (ii) under Regulation S-K.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. We have discussed those estimates that we believe are critical and require the use of complex judgment in their application in our Annual Report on Form 10-K for the year ended December 31, 2008. Since the date of the Annual Report, there have been no material changes to our critical accounting policies or the methodologies or assumptions we apply under them.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

As of March 31, 2009, we do not have exposure to market risk associated with activities in derivative financial instruments or derivative commodity instruments. Currently, we invest our cash in short-term commercial paper, investment-grade corporate and government obligations and money market funds.

Item 4. Controls and Procedures

Management, in assessing its review and approval procedures, identified a lack of sufficient control in the area of technical competency in review and approval of financial reporting processes. This control weakness allowed for reconciliations, reports and other documents to be insufficiently reviewed prior to being approved by management and audit adjustments to be identified by our auditors as part of their year-end audit work. A breakdown in controls, specifically with regards to the review and approval of documentation, calculations, reconciliations and disclosures, occurred during the year ended December 31, 2008. We believe that this breakdown is attributable to the changes in the organization and significant staff turnover during 2008. This material weakness resulted in a significant number of errors in the recording of routine and non-routine transactions and complex accounting transactions for the preparation of annual consolidated financial statements and disclosures.

This material weakness, if not remediated, has the potential to cause material misstatements in the future, with regard to non-routine and complex accounting transactions.

Based on criteria established inInternal Control—Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission, and as previously disclosed in our Annual Report on Form 10K we have concluded that as of December 31, 2008, internal control over financial reporting was not effective. The remediation plans previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2008 and summarized below, have not been fully implemented as of March 31, 2009. Accordingly, the internal control over financial reporting continues to be ineffective as of March 31, 2009.

Remediation Efforts to Address Material Weakness

We are in the process of developing and implementing remediation plans to address our material weakness. Management has identified the following remedial actions to address the material weaknesses described above:

• Improve the effectiveness of the accounting group by (a) providing appropriate training and guidelines to ensure personnel understand how to perform an effective review, and (b) assessing the technical accounting capabilities of existing personnel to ensure the appropriate complement of knowledge, skills, and training are available.

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Changes in Internal Controls over Financial Reporting

Remediation actions taken by the Chief Accounting Officer include:

• Implemented a monthly formal close process;

• Improved procedures to ensure accurate financial reporting;

• Hired additional qualified staff to provide needed expertise within the finance department:

• Senior Sarbanes-Oxley compliance manager on January 26, 2009

• Director of Financial Planning and Analysis on January 28, 2009;

• Improved the accounts payable process to ensure timely and accurate recordation of vendor transactions;

• Established an environment of open communications;

• Enhanced the monthly review process to ensure appropriate segregation of duties within the SAP system;

• Required finance staff to participate in continuing professional education.

The Chief Accounting Officer will continue to remediate fully the material weakness and is continuing to assess the accounting capabilities of existing personnel and implement the remediation plans.

Management believes that there are no material inaccuracies or omissions of material fact and, to the best of its knowledge, believes that the consolidated financial statements for the quarter ended March 31, 2009 fairly present in all material respects the financial condition and results of operations for us in conformity with GAAP.

Other than as described above, there have been no other changes in our internal control over financial reporting that occurred during the period covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, such internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

For information regarding legal proceedings, please refer to Note 11 to the Condensed Consolidated Financial Statements contained in this quarterly report.

Item 1A. Risk Factors

Any of the following risks, as well as other risks and uncertainties, could harm our business and financial results and cause the value of our securities to decline, which in turn could cause investors to lose all or part of their investment in us. The risks below are not the only ones we face. Additional risks not currently known to us, or that we currently deem immaterial also may impair our business.

Risks Related to Our Significant Indebtedness

We Have A Significant Amount Of Debt And May Incur Significant Additional Debt, Including Secured Debt, In The Future, Which Could Adversely Affect Our Financial Health And Our Ability To React To Changes In Our Business.

We and our subsidiaries have a significant amount of debt and may (subject to applicable restrictions in our debt instruments) incur additional debt in the future. Because of our significant indebtedness and adverse changes in the capital markets, our ability to raise additional capital at reasonable rates, or at all, is uncertain. If we need to raise additional capital through the issuance of equity or find it necessary to engage in a recapitalization or other similar transaction, our shareholders could suffer significant dilution, including potential loss of the entire value of their investment, and in the case of a recapitalization or other similar transaction, our noteholders might not receive principal and interest payments to which they are contractually entitled.

Our significant amount of debt could have other important consequences. For example, the debt will or could:

• require us to dedicate a significant portion of our cash flow from operating activities to make payments on our debt, reducing our funds available for working capital, capital expenditures, and other general corporate expenses;

• limit our flexibility in planning for, or reacting to, changes in our business, the integrated satellite wireless communications industries, and the economy at large;

• place us at a disadvantage compared to our competitors that have proportionately less debt;

• expose us to increased interest expense to the extent we refinance existing debt with higher cost debt;

• adversely affect our relationship with customers and suppliers;

• limit our ability to borrow additional funds in the future, due to applicable financial and restrictive covenants in our debt;

• make it more difficult for us to satisfy our obligations to the holders of our notes and to satisfy our obligations to the lenders under our credit facilities; and

• limit future increases in the value, or cause a decline in the value of our equity, which could limit our ability to raise additional capital by issuing equity.

A default by us under one of our debt obligations could result in the acceleration of those obligations, which in turn could trigger cross defaults under other agreements governing our long-term indebtedness. Any default under our TerreStar-2 Purchase Money Credit Agreement, or the indentures governing the TerreStar Notes and the TerreStar Exchangeable Notes could adversely affect our growth, our financial condition, our results of operations, the value of our equity and our ability to make payments on our debt, and could force us to seek the protection of the bankruptcy laws. We may incur significant additional debt in the future. If current debt amounts increase, the related risks that we now face will intensify.

The Agreements And Instruments Governing Our Debt Contain Restrictions And Limitations That Could Significantly Affect Our Ability To Operate Our Business, As Well As Significantly Affect Our Liquidity, And Adversely Affect You, As A Shareholder.

Our TerreStar-2 Purchase Money Credit Agreement and the indentures governing the TerreStar Notes and the TerreStar Exchangeable Notes contain a number of significant covenants that could adversely affect our ability to operate our business, as well as significantly affect our liquidity, and therefore could adversely affect our results of operations. These covenants restrict, among other things, our ability to:

• incur additional debt;

• repurchase or redeem equity interests and debt;

• issue equity;

• make certain investments or acquisitions;

• pay dividends or make other distributions;

• dispose of assets or merge;

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• enter into related party transactions; and

• grant liens and pledge assets.

The breach of any covenants or obligations, not otherwise waived or amended, could result in a default under the applicable debt obligations and could trigger acceleration of those obligations, which in turn could trigger cross defaults under other agreements governing our long-term indebtedness. Any default could adversely affect our growth, our financial condition, our results of operations and our ability to make payments, and could force us to seek the protection of the bankruptcy laws.

Our Debt and Equity Is Subject To Change Of Control Provisions. We May Not Have The Ability To Raise The Funds Necessary To Fulfill Our Obligations Under Our Indebtedness Following A Change Of Control, Which Would Place Us In Default.

We may not have the ability to raise the funds necessary to fulfill our obligations under our TerreStar Exchangeable Notes and TerreStar Notes following a change of control. Under the indentures, upon the occurrence of specified change of control events, TerreStar Networks is required to offer to repurchase all of the outstanding TerreStar Exchangeable Notes, TerreStar Notes, or our Series A and B Cumulative Convertible Preferred Stock. However, we and TerreStar Networks may not have sufficient funds at the time of the change of control event to make the required repurchase of notes. Our failure to make or complete a change of control offer would place TerreStar Networks in default and would have a material adverse impact on our financial condition.

Risks Related to our Business

TerreStar Networks Is A Development Stage Company With No Operating Revenues.

TerreStar Networks is a development stage company and has never generated any revenues from operations. We sold our two-way terrestrial wireless and data communications service in September 2006. We do not expect to generate significant revenues prior to 2010, if at all. If we obtain sufficient financing and successfully develop and construct a network, our ability to transition to an operating company will depend on, among other things: successful execution of our business plan; market acceptance of the services we intend to offer; and attracting, training and motivating highly skilled satellite and network operations personnel, a sales force and customer service personnel. We may not be able to successfully complete the transition to an operating company or generate sufficient cash from operations to cover our expenses. If we do not become profitable, we will have difficulty obtaining funds to continue our operations.

We Are Not Cash Flow Positive, And We Will Need Additional Liquidity To Fund Our Operations And Fully Fund All Of Our Necessary Capital Expenditures.

We do not generate sufficient cash from operations to cover our operating expenses, and it is unclear when, or if, we will be able to do so. Even if we begin to generate cash in excess of our operating expenses, we expect to require additional funds to meet capital expenditures and other non-operating cash expenses, including but not limited to capital expenditures required to complete and launch our satellite currently under construction. Based on our current business plan, we believe that we have sufficient liquidity required to conduct operations into 2010. We will likely face a cash deficit beyond this unless we obtain additional capital.

There can be no assurance that the foregoing sources of liquidity will provide sufficient funds in the amounts or at the time that funding is required. In addition, if our ability to realize such liquidity from any such source is delayed or the proceeds from any such source are insufficient to meet our expenditure requirements as they arise, we will seek additional equity or debt financing, although such additional financing may not be available on reasonable terms, if at all.

We Will Continue To Incur Significant Losses.

We will incur losses in 2009 and do not expect to generate any revenues until at least 2010, if at all. If we do not become profitable, we could have difficulty obtaining funds to continue our operations. We have incurred net losses every year since we began operations. These losses are due to the costs of developing and building our network and the costs of developing, selling and providing products and services.

TerreStar Networks will Require Significant Funding to Finance the Execution of its Business Strategy, Including Funds for the Construction and Launch of Satellites and for the Terrestrial Network Buildout.

As of March 31, 2009, we had aggregate contractual payment obligations of approximately $2.9 billion, consisting of $296 million for satellite expenditures, $12.6 million for lease related expenditures and $421 million for terrestrial network related expenditures, as well as $2.1 billion for debt, including interest and preferred stock obligations.

We expect to make substantial capital expenditures for the development of our handsets and chipsets, and for building our terrestrial network. We will also require funds for selling, general and administrative expenses, working capital, interest on borrowings, financing costs and operating expenses until some time after the commencement of commercial operations. In addition, the final payments for our satellite launch and insurance will be due prior to launch of our TerreStar-1 satellite.

The cost of building and deploying our integrated satellite and terrestrial network and developing the handsets and chipsets could exceed our estimates. For example, the costs for the build out of the terrestrial component of our network could be greater, perhaps significantly, than our current estimates due to changing costs of supplies, market conditions and other factors over which we have no control. The rate at which we build out the terrestrial component of our network will also depend on customer requirements.

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If we require more funding than we currently anticipate, or we cannot meet our financing needs, our ability to operate our business, our financial condition and our results of operation could be adversely affected.

We May Not Obtain The Financing Needed To Develop And Construct Our Network And Meet Our Funding Obligations.

We expect to require substantial funds to finance the execution of our business strategy. In addition, subject to certain conditions and so long as the provision of such funding does not conflict with applicable Canadian regulatory requirements, TerreStar Networks will be obligated to fund any operating cash shortfalls of TerreStar Canada upon the request of TerreStar Canada. If we are required to provide such funds to TerreStar Canada, we will need to reallocate existing, or raise additional, funds. We plan to seek to raise funds in the future through various means, including by selling debt and equity securities, by obtaining loans or other credit lines, through vendor financing or through strategic relationships. The type, timing and terms of financing we may select will depend upon our cash needs, the availability of alternatives, our success in securing significant customers for our network, the prevailing conditions in the financial markets and the restrictions contained in any of our outstanding debt and any future indebtedness. In addition, our ability to attract funding is based in part on the value ascribed to our spectrum. Valuations of spectrum in other frequency bands have historically been volatile, and we cannot predict at what amount a future source of funding may be willing to value our spectrum and other assets. The FCC and/or Industry Canada could allocate additional spectrum, through auction, lease or other means, that could be used to compete with us, or that could decrease the perceived market value of our wireless capacity. The FCC and Industry Canada may take other action to promote the availability or more flexible use of existing satellite or terrestrial spectrum allocations. The acquisition by our competitors of rights to use additional spectrum could have a material adverse effect on the value of our spectrum authorizations, which, in turn, could adversely affect our ability to obtain necessary financing. We may not be able to obtain financing when needed, on favorable terms, or at all. If we fail to obtain any necessary financing on a timely basis, then any of the following could occur:

• construction and launch of our satellites, or other events necessary to conduct our business could be materially delayed, or the associated costs could materially increase;

• we could default on our commitments under our satellite construction agreements or our launch agreement, or to creditors or third parties, leading to the termination of such agreements; and

• we may not be able to deploy our network as planned, and may have to discontinue operations or seek a purchaser for our business or assets.

Any of these factors could cause us to miss required performance milestones under our FCC authorization or Industry Canada approval in principle and could result in our loss of those authorizations. See “—Regulatory Risks”.

If we are successful in raising additional financing, we anticipate that a significant portion of future financing will consist of debt securities. As a result, we will likely become even more highly leveraged. If additional funds are raised through the incurrence of indebtedness, we may incur significant interest charges, and we will become subject to additional restrictions and covenants that could further limit our ability to respond to market conditions, provide for unanticipated capital investments or take advantage of business opportunities.

Funding Requirements For TerreStar Networks May Jeopardize Our Investment In, And Control Over, TerreStar Networks.

The implementation of TerreStar Networks’ business plan, including the construction and launch of a satellite system and the necessary terrestrial components of an ancillary terrestrial component, or ATC, based communications system, will require significant additional funding. If we do not provide such funding to TerreStar Networks, then TerreStar Networks may be forced to seek funding from third parties that may dilute our equity investment in TerreStar Networks. Such dilution, if sufficiently severe, may limit our control over TerreStar Networks.

Our Business Is Subject To A High Degree Of Government Regulation.

The communications industry is highly regulated by governmental entities and regulatory authorities, including the FCC and Industry Canada. Our business is completely dependent upon obtaining and maintaining regulatory authorizations to operate our planned integrated satellite and terrestrial network. For example, we could fail to obtain approval from the FCC of our September 2007 application for ATC authority in the United States. Failure to obtain or maintain necessary governmental approvals would impair our ability to implement our planned network and would have a material adverse effect on our financial condition. Additional important risks relating to our regulatory framework are listed below under “—Regulatory Risks”.

Our Network Will Depend On The Development And Integration Of Complex And Untested Technologies.

We must integrate a number of sophisticated satellite, terrestrial and wireless technologies that typically have not been integrated in the past, and some of which are not yet fully developed, before we can offer our planned network. The technologies we must integrate include, but are not limited to:

• satellites that have significantly larger antennas and are substantially more powerful than any satellites currently in use;

• use of dynamic spot-beam technology to allocate signal strength among different geographic areas, including the ability to concentrate signal strength in specific geographic locations;

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• development of chipsets for mobile handsets and other devices that are capable of receiving satellite and ground-based signals;

• development of integrated satellite and terrestrial-capable mobile handsets with attractive performance, functionality and price; and

• development of ground infrastructure hardware and software capable of supporting our communication system and the demands of our customers.

As a result, unanticipated technological problems or delays relating to the development and use of our technology may prove difficult, time consuming, expensive or impossible to solve. Any of these may result in delays in implementing, or make inoperable, our infrastructure and would adversely affect our financial condition.

Our Success Will Depend On Market Acceptance Of New And Unproven Technology, Which May Never Occur.

Other than satellite radio, we are not aware of any integrated satellite and terrestrial wireless network in commercial operation. As a result, our proposed market is new and untested and we cannot predict with certainty the potential demand for the services we plan to offer or the extent to which we will meet that demand. There may not be sufficient demand in general for the services we plan to offer, or in particular geographic markets, for particular types of services or during particular time periods, to enable us to generate positive cash flow, and our cost structure may not permit us to meet our obligations. Among other things, end user acceptance of our network and services will depend upon:

• our ability to provide integrated wireless services that meet market demand;

• our ability to provide attractive service offerings to our anticipated customers;

• the cost and availability of handsets and other user equipment that are similar in size, weight and cost to existing standard wireless devices, but incorporate the new technology required to operate on our planned network;

• federal, state, provincial, local and international regulations affecting the operation of satellite networks and wireless systems;

• the effectiveness of our competitors in developing and offering new or alternative technologies;

• the price of our planned service offerings; and

• general and local economic conditions.

We cannot successfully implement our business plan if we cannot gain market acceptance for our planned products and services. A lack of demand could adversely affect our ability to sell our services, enter into strategic relationships or develop and successfully market new services. In addition, demand patterns shift over time, and user preferences may not favor the services we plan to offer. Any material miscalculation with respect to our service offerings or operating strategy will adversely affect our ability to operate our business, our financial condition and our results of operations.

We May Be Unable To Achieve Our Business And Financial Objectives Because The Communications Industry Is Highly Competitive.

The global communications industry is highly competitive and characterized by rapid change. In seeking market acceptance for our network, we will encounter competition in many forms, including:

• satellite services from other operators;

• conventional and emerging terrestrial wireless services;

• traditional wireline voice and high-speed data offerings;

• terrestrial land-mobile and fixed services; and

• next-generation integrated services that may be offered in the future by other networks operating in the S-band or the L-band.

Participants in the communications industry include major domestic and international companies, many of which have financial, technical, marketing, sales, distribution and other resources substantially greater than we have and which provide a wider range of services than we will provide. There currently are several other satellite companies that provide or are planning to provide services similar to ours. In addition to facing competition from our satellite-based competitors, we are subject to competition from terrestrial voice and data service providers in several markets and with respect to certain services, particularly from those that are expanding into rural and remote areas and providing the same general types of services and products that we intend to provide. Land- based telecommunications service capabilities have been expanded into underserved areas more quickly than we anticipated, which could result in less demand for our services than we anticipated in formulating our business plan. These ground-based communications companies may have certain advantages over us because of the general perception among consumers that wireless voice communication products and services are cheaper and more convenient than satellite-based ones. Furthermore, we may also face competition from new competitors or emerging technologies with which we may be unable to compete effectively.

With many companies targeting many of the same clients, if any of our competitors succeeds in offering services that compete with ours before we do, or develops a network that is, or that is perceived to be, superior to ours, then we may not be able to execute our business plan, which would materially adversely affect our business, financial condition and results of operations.

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Our system may not function as intended, and we will not know whether it will function as intended until we have deployed a substantial portion of our network. Hardware or software errors in space or on the ground may limit or delay our service, and therefore reduce anticipated revenues and the viability of our services. There could also be delays in the planned development, integration and operation of the components of our network. The strength of the signal from our satellite could cause ground-based interference or other unintended effects. If the technological integration of our network is not completed in a timely and effective manner, our business will be harmed.

Our Satellites Are Subject To Construction, Delivery And Launch Delays.

We depend on third parties, such as Loral and Arianespace, to build and launch our satellites. The assembly of such satellites is technically complex and subject to construction and delivery delays that could result from a variety of causes, including the failure of third-party vendors to perform as anticipated and changes in the technical specifications of the satellites. Delivery of our satellites may not be timely, which could adversely affect our ability to meet our FCC and Industry Canada-required construction and launch milestones and the planned introduction of our network.

During any period of delay in construction, delivery or launch of our satellite, we would continue to have significant cash requirements that could materially increase the aggregate amount of funding we need. We may not be able to obtain additional financing on favorable terms, or at all, during periods of delay. Delays could also make it more difficult for us to secure customers and could force us to reschedule our anticipated satellite launch dates.

In November 2006, we signed a contract with Arianespace which entitles us to a launch for TerreStar-1 that will meet our FCC and Industry Canada milestones and also mitigates possible impacts from delays. Arianespace has confirmed a launch day of June 24, 2009.

Our Satellites Could Be Damaged Or Destroyed During Launch Or Deployment Or Could Fail To Achieve Their Designated Orbital Location.

Our satellite launches and deployments may not be successful. A percentage of satellites never become operational because of launch failures, satellite destruction or damage during launch or improper orbital placement, among other factors. Launch failure rates vary depending on the chosen launch vehicle and contractor. Even launch vehicles with good track records experience some launch failures, and these vehicles may experience launch failures when launching our satellites despite their track records. Even if successfully launched into orbit, a satellite may use more fuel than planned to enter into its orbital location, which could reduce the overall useful life of the satellite, or may never enter or remain in its designated orbital location, which could render it inoperable. Deployment and use of the antennas on our satellites are subject to additional risks because our antennas will be larger than those currently on most commercial satellites. If one or more of the launches or deployments fail, we will suffer significant delays that will damage our business, cause us to incur significant additional costs and adversely affect our ability to generate revenues.

Satellites Have A Limited Useful Life And Premature Failure Of Our Satellites Could Damage Our Business.

During and after their launch, all satellites are subject to equipment failures, malfunctions (which are commonly referred to as anomalies) and other problems. A number of factors could decrease the expected useful lives or the utility of our satellites, including:

• defects in construction;

• radiation induced failure of satellite parts;

• faster than expected degradation of solar panels;

• malfunction of component parts;

• loss of fuel on board;

• higher than anticipated use of fuel to maintain the satellite’s orbital location;

• higher than anticipated use of fuel during orbit raising following launch;

• random failure of satellite components not protected by back-up units;

• inability to control the positioning of the satellite;

• electromagnetic storms, solar and other astronomical events, including solar radiation and flares; and

• collisions with other objects in space, including meteors and decommissioned spacecrafts in uncontrolled orbits that pass through the geostationary belt at various points.

We may experience failures, anomalies and other problems, whether of the types described above or arising from the failure of other systems or components, despite extensive precautionary measures taken to determine and eliminate the cause of anomalies in our satellites and provide redundancy for many critical components in our satellites. The interruption of our business caused by the loss or premature degradation of a satellite would continue until we either extended service to end users on another satellite or built and launched additional satellites. If any of our satellites were to malfunction or to fail prematurely, it could affect the quality of our service, substantially delay the commencement or interrupt the continuation of our service, harm our reputation, cause our insurance costs to increase and adversely affect our business and our financial condition.

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Damage To, Or Caused By, Our Satellites May Not Be Fully Covered By Insurance.

We have purchased launch and in-orbit insurance policies for our satellite. If certain material adverse changes in market conditions for in-orbit insurance were to make it commercially unreasonable for us to maintain in-orbit insurance, we may forego such insurance. If the launch of our satellite is a total or partial failure, or our satellite is damaged in orbit, our insurance may not fully cover our losses and these failures may also cause insurers to include additional exclusions in our insurance policies when they come up for renewal. We may not be able to obtain additional financing to construct, launch and insure a replacement satellite or such financing may not be available on terms favorable to us. Also, the insurance we have obtained contains certain customary exclusions and material change conditions that limit our coverage. These exclusions relate to losses resulting from acts of war, insurrection or military action and government confiscation, as well as lasers, directed energy beams, nuclear and anti-satellite devices and radioactive contamination. Any uninsured losses could have a material adverse effect on us.

We do not expect to buy insurance to cover, and would not have protection against, business interruption, loss of business or similar losses. Furthermore, we expect to maintain third-party liability insurance. Such insurance may not be adequate or available to cover all third-party damages that may be caused by our satellites, and we may not be able to obtain or renew our third-party liability insurance on reasonable terms and conditions, or at all.

We Depend On A Limited Number Of Suppliers And Service Providers To Design, Construct And Maintain Our Network.

We rely on contracts with third parties to design and build our satellites, as well as the terrestrial components of our network. These include the integrated MSS and ATC systems, technology for communications between the satellite and terrestrial equipment, and the development of small, integrated MSS/ATC handsets and other devices that will meet FCC and Industry Canada requirements, none of which exists today. We also intend to enter into relationships with third-party contractors in the future for equipment and maintenance and other services relating to our network. There are only a few companies capable of supplying the products and services necessary to implement and maintain our network. As a result, if any third-party contractor relationship with us is terminated, we may not be able to find a replacement in a timely manner or on terms satisfactory to us. In addition, if any of these third-party contractors are unable to perform on the terms of the contract due to financial reasons, other reasons specifically related to the business of these suppliers or other matters outside our control, our business would be significantly impacted. This could lead to delays in the implementation of our network and interruptions in providing service to our customers, which would adversely affect our financial condition. This could also lead to a failure in effectively implementing our network which would severely impact our business.

Failure To Develop, Manufacture And Supply Handsets And Other Devices That Incorporate Our Universal Chipset Architecture In A Timely Manner, Or At All, Will Delay Or Materially Reduce Our Revenues.

We will rely on third-party manufacturers and their distributors to manufacture and distribute devices incorporating our universal chipset architecture. Such devices will have the same form, function and aesthetics as a standard wireless device, and will be able to communicate with both the terrestrial and satellite components of our planned network without requiring external hardware. These devices are not yet available, and we and third-party vendors may be unable to develop and produce them in a timely manner, or at all, to permit the introduction of our service. If we, our vendors or our manufacturers fail to develop, manufacture and supply devices incorporating our universal chipset architecture for timely commercial sale at affordable prices, the launch of our service will be delayed, our revenues will be adversely affected and our business will suffer.

We May Rely On Third Parties To Identify, Develop And Market Products Using Our Network.

We intend to enter into agreements with third parties to identify, develop and market products using our network. We may be unable to identify, or to enter into agreements with, suitable third parties to perform these activities. If we do not form satisfactory relationships with third parties, or if any such third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to successfully identify, develop and sell products using our network, which would adversely affect our financial condition and results of operations.

We May Not Be Able To Identify, Develop And Market Innovative Products And Therefore We May Not Be Able To Compete Effectively.

Our ability to implement our business plan depends in part on our ability to gauge the direction of commercial and technological progress in key markets and to fund and successfully develop and market products in our targeted markets. Our competitors may have access to technologies not available to us, which may enable them to provide communications services of greater interest to end users, or at a more competitive price. We may not be able to develop new products or technology, either alone or with third parties, or license any additional necessary intellectual property rights from third parties on a commercially competitive basis. The satellite and wireless industries are both characterized by rapid technological change, frequent new product innovations, changes in customer requirements and expectations and evolving industry standards. If we are unable to keep pace with these changes, our business may be unsuccessful. Products using new technologies, or emerging industry standards, could make our technologies obsolete. If we fail to keep pace with the evolving technological innovations in our markets on a competitive basis, our financial condition and results of operation could be adversely affected. In particular, if existing wireless providers improve their coverage of terrestrial-based systems to make them more ubiquitous, demand for products and services utilizing our network could be adversely affected or fail to materialize.

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We Plan To Execute Our Initial Development Through A Relationship With A Significant Customer, And The Failure To Establish, Or Impairment Of, This Relationship Could Have Severe Consequences On Our Business.

Our objective is to form a relationship with a significant customer, such as a U.S. federal government organization, a state or local public safety/first responder organization or a significant commercial enterprise. Any significant disruption or deterioration of our relationship with our significant customer could adversely affect our business. Because we expect to derive a significant portion of our revenue from a limited number of customers, the failure to attract such a significant customer or the loss of such a significant customer could significantly reduce our ability to generate revenue or profit and negatively impact our financial condition and operations.

We May Depend On The U.S. Government For A Significant Portion Of Our Revenues, And The Impairment Of This Relationship Or Changes In Government Spending Could Have Severe Consequences On Our Business.

Our objective is to form a relationship with a significant customer, potentially a U.S. federal government organization such as the Department of Defense, the Federal Emergency Management Agency or the Department of Homeland Security. Future sales under U.S. government contracts are conditioned upon the availability of Congressional appropriations. The strength of our relationship with any federal government organization is subject to the overall U.S. government budget and appropriation decisions and processes. U.S. government budget decisions, including defense and emergency response spending, are based on changing government priorities and objectives, which are driven by numerous factors, including geopolitical events and macroeconomic conditions, and are beyond our control. Significant changes to U.S. defense and emergency response spending could have long-term consequences for our size and structure, and could negatively impact our results of operations and financial condition.

The Current Weakening of U.S. and Canadian Economic Conditions As Well As Any Future Downturns Or Changes In Consumer Spending Could Adversely Affect Our Financial Condition.

The United States and Canada have experienced an economic downturn and spending by consumers has dropped. If this downturn and decrease in spending continues our business may be adversely affected. Demand for the services we plan to offer may not grow or be accepted generally, or in particular geographic markets, for particular types of services, or during particular time periods. A lack of demand could adversely affect our ability to sell our services, enter into strategic relationships or develop and successfully market new services.

We Depend On Licenses Of Critical Intellectual Property From ATC Technologies, A Wholly-Owned Subsidiary Of MSV.

We license the majority of the technology we plan to use to operate our network from ATC Technologies, a wholly-owned subsidiary of SkyTerra. SkyTerra has rights to approximately 30 MHz of spectrum in the L-band, is positioned to achieve device transparency and plans to offer services that compete with the services that we plan to offer.

SkyTerra has assigned to ATC Technologies a significant intellectual property portfolio, including a significant number of patents. Pursuant to the agreement by and between ATC Technologies and us, ATC Technologies granted us a perpetual, world-wide, non-exclusive, royalty-free, fully paid up, nontransferable (except for certain rights to sublicense), non-assignable, limited purpose right and license to certain existing patents owned by ATC Technologies for the sole purpose of developing, operating, implementing, providing and maintaining S-band or MSS services with an ATC component. ATC Technologies granted back to SkyTerra similar rights to the same intellectual property for L-band services in any geographic territory in the entire world where SkyTerra, one of its affiliates or a joint venture or strategic alliance into which SkyTerra has entered, is authorized to provide L-band services. In addition, ATC Technologies granted rights to a subsidiary of SkyTerra in and to the same intellectual property for the purpose of providing communications services anywhere in the entire world, excluding services relating to the S-band. We granted to ATC Technologies a perpetual, world-wide, non-exclusive, royalty-free, fully paid up, nontransferable (except for certain rights to sublicense), non-assignable, limited purpose right and license to certain existing patents owned or licensed by us and certain technologies licensed by us for the sole purpose of developing, operating, implementing, providing and maintaining L-band services or L-band services with an ATC component. ATC Technologies has also contractually committed to license to us, pursuant to the same terms as set forth above, certain additional patents that may be developed, acquired or otherwise owned by ATC Technologies or its affiliates (including SkyTerra), and we have contractually committed to license to ATC Technologies, pursuant to the same terms as set forth above, certain additional patents and technologies that may be developed, licensed, acquired or otherwise owned by us until October 1, 2016.

The license agreement between us and ATC Technologies may be terminated: (1) by mutual written consent of both parties; (2) by either party in the event that the other party fails to perform or otherwise breaches any material obligations under the license agreement and fails to cure such breach within 90 days of receiving notice thereof; or (3) in the event that the other party files a petition for bankruptcy or insolvency or upon certain other insolvency events. In the event that our license agreement with ATC Technologies is terminated, we may not be able to obtain future licenses for alternative technologies on terms as favorable to us as those obtained through the license agreement with ATC Technologies, if at all. However, even in the event that our license agreement with ATC Technologies is terminated, we will retain our perpetual license to all ATC Technologies intellectual property licensed to us on a license-by-license basis, until the date of the expiration of the applicable patent under which the license was granted. If ATC Technologies terminates or breaches its agreements with us or if we and ATC Technologies have a significant dispute regarding the licensed intellectual property, such termination, breach or significant dispute could have a material adverse effect on our business.

The intellectual property we license from ATC Technologies includes issued patents and technology included in patent applications. The patents for which we or ATC Technologies have applied may not be issued or, if they are issued, such patents may be insufficient to protect fully the technology we own or license. Moreover, if such patents prove to be inadequate to protect fully the technology we own or license, our ability to implement our business plan and, consequently, our financial condition, may be adversely affected. In addition, any patents that may be issued to us and any patents licensed to us from ATC Technologies may be challenged, invalidated or circumvented.

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We also rely upon unpatented proprietary technology and other trade secrets. Our failure to protect such proprietary technology and trade secrets or the lack of enforceability or breach by third parties of agreements into which we have entered could also adversely affect our ability to implement our business plan and our financial condition.

We May Incur Costs, And May Not Be Successful, Defending Our Rights To Intellectual Property Upon Which We Depend.

In developing and implementing our network, we will need to develop or obtain rights to additional technology that is not currently owned by us or licensed to us. We may be unsuccessful in developing additional technologies required to develop and implement our network, and we may not be able to protect intellectual property associated with technologies we develop from infringement by third parties. In addition, if we are able to develop or license such technologies, there can be no assurance that any patents issued or licensed to us will not be challenged, invalidated or circumvented. Litigation to defend and enforce these intellectual property rights could result in substantial costs and diversion of resources and could have a material adverse effect on our financial condition and results of operations, regardless of the final outcome of such litigation. Despite our efforts to safeguard and maintain our proprietary rights, we may not be successful in doing so, and our competitors may independently develop or patent technologies equivalent or superior to our technologies. It is possible that third parties may infringe upon our intellectual property now and in the future.

We may be unable to determine when third parties are using our intellectual property rights without our authorization. The undetected or unremedied use of our intellectual property rights or the legitimate development or acquisition of intellectual property similar to ours by third parties could reduce or eliminate any competitive advantage we have as a result of our intellectual property, adversely affecting our financial condition and results of operations. If we must take legal action to protect, defend or enforce our intellectual property rights, any suits or proceedings could result in significant costs and diversion of our resources and our management’s attention, and we may not prevail in any such suits or proceedings. A failure to protect, defend or enforce our intellectual property rights could have an adverse effect on our business, financial condition and results of operations.

Third Parties May Claim That Our Products Or Services Infringe Their Intellectual Property Rights.

Other parties may have patents or pending patent applications relating to integrated wireless technology that may later mature into patents. Such parties may bring suit against us for patent infringement or other violations of intellectual property rights. The development and operation of our system may also infringe or otherwise violate as-yet unidentified intellectual property rights of others. If our products or services are found to infringe or otherwise violate the intellectual property rights of others, we may need to obtain licenses from those parties or substantially re-engineer our products or processes in order to avoid infringement. We may not be able to obtain the necessary licenses on commercially reasonable terms, if at all, or be able to re-engineer our products successfully. Moreover, if we are found by a court of law to infringe or otherwise violate the intellectual property rights of others, we could be required to pay substantial damages or be enjoined from making, using or selling the infringing products or technology. We also could be enjoined from making, using or selling the allegedly infringing products or technology, pending the final outcome of the suit. Our financial condition could be adversely affected if we are required to pay damages or are enjoined from using critical technology.

Wireless Devices May, Or May Be Perceived To, Pose Health And Safety Risks And, As A Result, We May Be Subject To New Regulations, Demand For Our Services May Decrease And We Could Face Liability Or Reputational Harm Based On Alleged Health Risks.

There has been adverse publicity concerning alleged health risks associated with radio frequency transmissions from portable hand-held telephones that have transmitting antennae, similar to devices that may incorporate our universal chipset architecture. Lawsuits have been filed against participants in the wireless industry alleging various adverse health consequences, including cancer, as a result of wireless phone usage. If courts or governmental agencies find that there is valid scientific evidence that the use of portable hand-held devices poses a health risk, or if consumers’ health concerns over radio frequency emissions increase for any reason, use of wireless handsets may decline. Further, government authorities might increase regulation of wireless handsets as a result of these health concerns. The actual or perceived risk of radio frequency emissions could have an adverse effect on our business, financial condition and results of operations.

We May Be Negatively Affected By Industry Consolidation.

Consolidation in the communications industry could adversely affect us by increasing the scale or scope of our competitors, or creating a competitor that is capable of providing services similar to those we intend to offer, thereby making it more difficult for us to compete. Industry consolidation also may impede our ability to identify acquisition, joint venture or other strategic opportunities.

Future Acquisitions May Be Costly And Difficult To Integrate And May Divert And Dilute Management Resources.

As part of our business strategy, we may make acquisitions of, or investments in, companies, products or technologies that we believe complement our services, augment our market coverage or enhance our technical capabilities or that we believe may otherwise offer growth opportunities. Acquisitions and mergers involve a number of risks, including, but not limited to:

• the time and costs associated with identifying and evaluating potential acquisition or merger partners;

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• difficulties in assimilating operations of the acquired business and implementing uniform standards, controls, procedures and policies;

• unanticipated expenses and working capital requirements;

• the inability to finance an acquisition on acceptable terms, or at all, and to maintain adequate capital;

• diversion of management’s attention from daily operations;

• loss of key employees;

• difficulty achieving sufficient revenues and cost synergies to offset increased expenses associated with acquisitions; and

• risks and expenses of entering new geographic markets.

Any of these acquisition risks could result in unexpected losses or expenses and thereby reduce the expected benefits of the acquisition. Our failure to successfully integrate future acquisitions and manage our growth could adversely affect our business, results of operations, financial condition and future prospects.

We may also pursue acquisitions, joint ventures or other strategic transactions. If we do so, we may face costs and risks arising from any such transaction, including integrating a new business into our business or managing a joint venture. These may include legal, organizational, financial and other costs and risks.

If We Are Unable To Manage Our Growth, We May Not Be Able To Execute Our Business Plan And Achieve Profitability.

In 2006, TerreStar Networks began to experience rapid growth, growing from four employees at December 31, 2005 to 175 employees at December 31, 2007. In April 2008 we announced the implementation of cost cutting measures including a headcount reduction of 79 management and non-management positions across TerreStar. We believe that these cost-cutting measures will allow us to continue our operations under our current business plan and meet our capital requirements into 2010. While we believe that the workforce reductions will not impact our ability to execute our updated business plan, the loss of employee and management resources from our cost-cutting measures may impact our operations.

In addition, in 2006, TerreStar Networks completed the spin-off of its wholly-owned subsidiary, TerreStar Global. TerreStar Global intends to offer an integrated satellite and terrestrial network outside of North America. Some of our employees, including some of our executive officers, perform services for TerreStar Global, which may reduce the time they can devote to our business. Our failure to manage growth effectively could significantly impede our ability to execute our business strategy and achieve profitability.

We Must Attract, Integrate and Retain Key Personnel.

Our success depends, in large part, upon the continuing contributions of our key technical and management personnel and integrating new personnel into our business. Employment agreements with our employees are terminable at-will by the employees, and we do not maintain “key-man” insurance on any of our employees. In April 2008, we announced certain cost-cutting measures including a significant headcount reduction. Although we believe we will be able to execute our business plan with our current workforce, the loss of the services of a significant number of our remaining key employees could harm our business and our future prospects. Our future success will also depend on our ability to attract and retain additional management and technical personnel required in connection with the implementation of our business plan. In addition, our recent cost-cutting measures may make it more difficult to attract and retain personnel. Competition for such personnel is intense, and if we fail to retain or attract such personnel and integrate those personnel who we hire, our business could suffer. We have entered into arrangements with certain of our officers that provide for payments upon a change of control, as defined in those agreements.

We Are Involved In Ongoing Litigation, Which Could Have A Negative Impact on Us.

Certain stockholders affiliated with one of our former directors have initiated multiple lawsuits against us. In 2006, certain stockholders sought to install a slate of directors to our board of directors, which was not successful. If these efforts or similar efforts that might be made in the future are successful, they may result in a change of control of TerreStar Corporation, or interfere with our efforts to raise debt or equity capital which could adversely affect our liquidity and financial condition.

We Do Not Expect To Pay Any Cash Dividends On Our Common Stock For The Foreseeable Future.

We have never paid cash dividends on our common stock and do not anticipate that any cash dividends will be paid on the common stock for the foreseeable future. The payment of any dividend by us will be at the discretion of our board of directors and will depend on, among other things, our earnings, capital requirements and financial condition. In addition, pursuant to the terms of the Series A and Series B Preferred, no dividends may be declared or paid, and no funds shall be set apart for payment, on shares of TerreStar Corporation common stock, unless (i) written notice of such dividend is given to each holder of shares of Series A and Series B Preferred not less than 15 days prior to the record date for such dividend and (ii) a registration statement registering the resale of shares of common stock issuable to the holders of the Series A and Series B Preferred has been filed with the SEC and is effective on the date TerreStar Corporation declares such dividend. Also, under Delaware law, a corporation cannot declare or pay dividends on its capital stock unless it has an available surplus. Furthermore, the terms of some of our financing arrangements directly limit our ability to pay cash dividends on our common stock. The terms of any future indebtedness of our subsidiaries also may generally restrict the ability of some of our subsidiaries to distribute earnings or make other payments to us.

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Future Sales Of Our Common Stock Could Adversely Affect Its Price And/Or Our Ability To Raise Capital.

Sales of substantial amounts of our common stock, or the perception that such sales could occur, could adversely affect the prevailing market price of our common stock and our ability to raise capital.

We may issue additional common stock in future financing transactions or as incentive compensation for our executives and other personnel, consultants and advisors. Issuing any equity securities would be dilutive to the equity interests represented by our then-outstanding shares of common stock. The market price for our common stock could decrease as the market takes into account the dilutive effect of any of these issuances. Finally, if we decide to file a registration statement to raise additional capital, some of our existing stockholders hold piggyback registration rights that, if exercised, will require us to include their shares in certain registration statements. Any of these conditions could adversely affect our ability to raise needed capital.

Funds Affiliated With Harbinger Capital Partners Own A Significant Percentage Of Our Voting Shares And Have A Significant Economic Interest In Several Of Our Competitors.

As of April 20, 2009, funds affiliated with Harbinger Capital Partners owned a significant portion of our common stock, as reported on their Schedule 13 D filed with the SEC. Accordingly, these funds are able to significantly influence us through their ability to heavily influence the outcome of election of our directors, amendments to our certificate of incorporation and by-laws and other actions requiring the vote or consent of stockholders. There is no assurance that the interest of Harbinger will be aligned with those of our other investors, and Harbinger may make decisions that adversely impact our stockholders. In addition to Harbinger’s ownership interest in us, Harbinger also reports significant ownership interest in SkyTerra and Inmarsat.

Failure to Achieve and Maintain Effective Internal Control Over Financial Reporting in Accordance With Rules of the Securities and Exchange Commission Promulgated Under Section 404 of the Sarbanes-Oxley Act.

We identified a material weakness in our internal control over financial reporting, as described in Item 4, Controls and Procedures of our annual report on Form 10-K for the fiscal year ended December 31, 2008. This weakness could harm our business and operating results, and could result in adverse publicity and a loss in investor confidence in the accuracy and completeness of our financial reports, which in turn could have a material adverse effect on our stock price, and, if such weakness is not properly remediated, could adversely affect our ability to report our financial results on a timely and accurate basis.

Although we believe that we have taken steps to remediate this material weakness we cannot assure you that this remediation will be successful or that additional deficiencies or weaknesses in our controls and procedures will not be identified.

Our common stock is currently trading below $1.00 per share. Nasdaq has suspended its rules requiring its listed companies to maintain a closing bid price of at least $1.00 until July 20, 2009. In the event the closing bid price of our common stock is below $1.00 per share for more than 30 consecutive trading days following the lifting of this suspension, our stock could be at risk of being delisted from The Nasdaq Global Market.

In the event that the closing bid price of our stock were to fall below $1.00 for 30 consecutive trading days following July 20, 2009, we would be in danger of having our stock delisted from The Nasdaq Global Market. Delisting could make our stock more difficult to trade, reduce the trading volume of our stock and further depress our stock price. In addition, delisting or the threat of delisting could impair our ability to raise funds in the capital markets, which could materially impact our business, results of operations and financial condition.

Regulatory Risks

We Could Lose Our FCC Authorization And Industry Canada Approval In Principle And Be Subject To Fines Or Other Penalties.

We must meet significant construction and implementation milestones and comply with complex and changing FCC and Industry Canada rules and regulations to maintain our authorizations to use our assigned spectrum and orbital slot. The remaining milestones in the United States are a successful satellite launch by us by June 2009 and certification that the system is operational by August 2009. The remaining milestone in Canada is successfully placing the satellite into its assigned orbital position by August 2009. Once the system is operational, we will be required to maintain satellite coverage of all 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands and all regions of Canada that are within the coverage contour described in our Industry Canada approval in principle and, to the extent that we have been granted ATC authority, to provide an integrated MSS service offering in all locations where our ATC is made available. We may not meet these milestones, satisfy these service requirements or comply with other applicable rules and regulations. Non-compliance with these or other conditions, including other FCC or Industry Canada gating or ongoing service criteria, could result in fines, additional conditions, revocation of the authorizations, or other adverse FCC or Industry Canada actions. The loss of our spectrum authorizations would prevent us from implementing our business plan and have a material adverse effect on our financial condition and the amount and value of the collateral pledged to support the TerreStar Notes or Exchangeable Notes.

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If We Fail To Secure Or Maintain Certain Approvals, We Will Default Under Our Credit Agreement.

Our TerreStar-2 Purchase Money Credit Agreement contains certain events of default that can be triggered upon our failure to secure or maintain certain regulatory approvals, including the following (in each case subject to certain exceptions):

• a denial, revocation, cancellation or relinquishment of any material license held by TerreStar Networks, TerreStar Canada or a guarantor to operate satellite component or ATC facilities;

• TerreStar Networks’ failure to secure the FCC ATC authorization within six months following TerreStar Networks’ certification to the FCC that the TerreStar-1 satellite system is operational and that it has satisfied the final FCC milestone conditioning the FCC MSS S-band Spectrum reservation held by TerreStar Networks; and

• failure to satisfy the FCC’s implementation milestone to launch the TerreStar—1 Satellite on or prior to June 30, 2009, the FCC’s implementation milestone to certify that the satellite system is operational on or prior to August 30, 2009, or Industry Canada’s implementation milestone to place the TerreStar—1 Satellite into its assigned orbital position on or prior to August 30, 2009, or failure to satisfy any extended deadline issued by the applicable governmental authority of these implementation milestones.

If any of these events of default under our TerreStar-2 Purchase Money Credit Agreement occurs and is continuing, our lenders can terminate their commitments and declare the amounts outstanding immediately due and payable. In addition, the acceleration of our repayment obligation would constitute an event of default under cross-default provisions in the indenture governing our TerreStar Exchangeable Notes and TerreStar Notes, in each case permitting the trustee or holders thereunder to accelerate the notes and declare them immediately due and payable.

We Have Not Yet Applied For, And May Not Receive, Certain Regulatory Approvals That Are Necessary To Our Business Plan.

We may be required to obtain additional approvals from national and local authorities in connection with the services that we wish to provide in the future. For example, we have applied for and have not yet been granted authorization to provide ATC in the United States and have not been granted waivers we requested from the FCC of certain ATC technical rules, which would allow us to use commercially standard equipment in our ATC base stations. TerreStar Canada has not yet made such an application with Industry Canada. We cannot be granted ATC authorization until we can show that we will comply in the near future with the FCC’s and Industry Canada’s ATC gating criteria, which we may not be able to satisfy. Further, the manufacturers of our ATC user terminals and base stations will need to obtain FCC equipment certifications and similar certifications in Canada. In addition, our future customers, or our business strategy, may require us to launch additional satellites, including TerreStar-2, in order to increase redundancy and decrease the risk of having only one satellite in orbit. In order to do so, we must obtain regulatory approval for one or more additional orbital slots, or permission from Industry Canada to launch additional satellites into our orbital slot for TerreStar-1, and may need a waiver of the FCC requirement for a ground spare satellite.

Either Industry Canada or the FCC may refuse to grant these and other necessary regulatory approvals in the future, or they may impose conditions on these approvals that we are unable to satisfy. Failure to obtain or retain any necessary regulatory approvals would impair our ability to execute our business plan, and would materially adversely affect our financial condition.

The Industry Canada Approval In Principle To Construct And Operate A Satellite In A Canadian Orbital Slot Is Held, And Upon The Launch Thereof Will Be Held, By A Canadian Entity Over Which Neither We Nor TerreStar Exercises Control.

The Industry Canada approval in principle to construct and operate a 2GHz MSS S-band satellite in a Canadian orbital position is currently held by TerreStar Canada, an entity that we do not control. Upon the launch of TerreStar-1, we expect that TerreStar-1 will be transferred to TerreStar Canada. Under the Radiocommunication Act (Canada) and the Telecommunications Act (Canada), and the regulations promulgated thereunder, TerreStar Networks may only own a 20% voting equity interest in TerreStar Canada, along with a 33 ¹/3% voting equity interest in TerreStar Canada Holdings, which is TerreStar Canada’s parent and 80% voting equity owner. 4371585 Canada, a Canadian-owned and controlled third party, owns a 66 ²/3% voting interest in TerreStar Canada Holdings. The rules and regulations further provide that the business and operations of TerreStar Canada cannot otherwise be controlled in fact by non-Canadians.

Under the relevant transfer agreements, 4371585 Canada owns 66 ²/3% of the shares of, and has the power to elect three out of the five members of the board of directors of, TerreStar Canada Holdings, and TerreStar Canada Holdings owns 80% of the shares of, and has the power to elect four out of the five members of the board of directors of, TerreStar Canada. TerreStar Networks has certain contractual rights with respect to the business and operations of, and certain negative protections as a minority shareholder of, both TerreStar Canada and TerreStar Canada Holdings. With certain exceptions, TerreStar Networks has no ability to control the business or operations of TerreStar Canada, which holds the Industry Canada approval in principle and will own TerreStar-1. Under the IRU, TerreStar Network’s rights to satellite capacity are limited by TerreStar Canada’s capacity needs to satisfy its regulatory obligations. TerreStar Networks does not have negative approval rights with respect to appointment or termination of senior officers or creation of budgets for TerreStar Canada or TerreStar Canada Holdings.

FCC And Industry Canada Decisions Affecting The Amount Of 2GHz MSS S-band Spectrum Assigned To Us Are Subject To Reconsideration And Review.

In December 2005, the FCC provided TMI Communications with a reservation of 10 MHz of uplink MSS spectrum and 10 MHz of downlink MSS spectrum in the 2GHz MSS S-band. TMI Communications has assigned that authorization to us and on May 10, 2007 the FCC has modified the reservation to reflect that change. Two parties have challenged the December 2005 ruling, and one party has also challenged a separate decision by the FCC to cancel its former 2GHz MSS S-band authorization. If

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these challenges succeed, the amount of 2GHz MSS S-band spectrum that is available to us may be reduced to a level that is insufficient for us to implement our business plan. Furthermore, in Canada, our spectrum could be reduced from 20 MHz to 14 MHz if Industry Canada determines that it is necessary to reapportion spectrum in order to license other MSS operators in Canada. Any reduction in the spectrum we are authorized to use could impair our business plan and materially adversely affect our financial condition.

Our Use Of The 2GHz MSS S-band Is Subject To Successful Relocation Of Existing Users.

In the United States, our operations at the 2GHz MSS S-band are subject to successful relocation of existing broadcast auxiliary service, or BAS, licensees and other terrestrial licensees in the band. Costs associated with spectrum clearing could be substantial. In the United States, Sprint Nextel Corporation, or Sprint Nextel, is obligated to relocate existing BAS and other terrestrial users in our uplink spectrum and 2GHz MSS S-band licensees must relocate microwave users in the 2GHz MSS S-band downlink band. To the extent that Sprint Nextel complies with its BAS band clearing obligations, 2GHz MSS S-band licensees commencing operations thereafter would not have to clear the band themselves, but might be required to reimburse Sprint Nextel for a portion of its band clearing costs. Due to the complex nature of the overall 2GHz MSS S-band relocation and the need to work closely with BAS licensees on band clearing, we may not make sufficient progress in the relocation effort or meet FCC requirements for relocating existing users and the start of our MSS operations in uncleared markets may be delayed. On September 4, 2007, Sprint Nextel and certain broadcaster trade associations asked the FCC for an additional 29 months past the September 7, 2007 deadline to complete the relocation process. On March 5, 2008, the FCC granted Sprint Nextel’s request but only extended the deadline to complete the relocation process until March 5, 2009. The FCC also permitted certain testing and trials by MSS licensees in 2008 and sought comment on ways in which BAS licensees and MSS licensees could co-exist in the band after January 2009 and before the relocation process is concluded. On February 12, 2009, Sprint Nextel and certain broadcaster trade associations again asked the FCC for an additional 11 months past the March 5, 2009 deadline to complete the relocation process. If Sprint Nextel does not complete clearance of the 2GHz MSS S-band within a reasonable period of time and/or appropriate sharing procedures cannot be established, our ability to implement our business plan, and our financial condition could be adversely impacted. In Canada, our operations at the 2GHz MSS S-band are subject to successful relocation of terrestrial microwave users. Although there are a small number of users in the 2GHz band, these users must be given a minimum of two years notice by Industry Canada to relocate unless a commercial agreement is reached under which they would move earlier. Although Industry Canada has given notice to these users that they must relocate within a two year period (expiring in October 2009), if these users are not relocated in sufficient time before the launch of our services, we may not be able to offer our services in certain locations in Canada, which could impair our business plan and materially adversely affect our operations.

Our Service May Cause Or Be Subject To Interference.

We will be required to provide our ATC service without causing harmful interference. In addition, we must accept some interference from certain other spectrum users. For example, the FCC may adopt rules for an adjacent band that do not adequately protect us against interference. In September 2004, the FCC issued an order allowing PCS operation in the 1995-2000 MHz and in June 2008 sought comment on proposed rules. In September 2007 and June 2008, the FCC sought comment on proposed rules for the 2155-2180 MHz bands. Both bands are adjacent to the 2GHz MSS S-band. If the rules that the FCC adopts for the 1995-2000 MHz and 2155-2180 MHz bands do not adequately protect us against adjacent band interference, our reputation and our ability to compete effectively could be adversely affected. Requirements that we limit the interference we cause, or that we accept certain levels of interference, may hinder satellite operations within our system and may, in certain cases, subject our users to a degradation in service quality, which may adversely affect our reputation and financial condition.

ATC Spectrum Access Is Limited By Technological Factors.

We will operate with the authority to use a finite quantity of radio spectrum. Spectrum used for communication between the satellite and the ground will not be available for use in the ATC component of our network. In addition, communications with the satellite may interfere with portions of the spectrum that would otherwise be available for ATC use, further diminishing the availability of spectrum for the ATC component to an extent that cannot be quantified at this time.

Technical Challenges Or Regulatory Requirements May Limit The Attractiveness Of Our Spectrum For Providing Mobile Services.

We believe our 2GHz MSS S-band spectrum with ATC capability must be at least functionally equivalent to the PCS/cellular spectrum in order to be attractive to parties with which we may enter into strategic relationships. The FCC and Industry Canada require us to make satellite service available throughout the United States and Canada. This requirement may limit the availability of some of our spectrum for terrestrial service in some markets at some times. If we are not able to develop technology that allows the entities with which we enter into strategic relationships to use our spectrum in a manner comparable to PCS/cellular operators, we may not be successful in entering into strategic arrangements with these parties.

We May Face Unforeseen Regulations With Which We Find It Difficult, Costly Or Impossible To Comply.

The provision of communications services is highly regulated. As a provider of communications services in the United States and Canada, we will be subject to the laws and regulations of both the United States and Canada. Violations of laws or regulations of these countries may result in various sanctions including fines, loss of authorizations and the denial of applications for new authorizations or for the renewal of existing authorizations.

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From time to time, governmental entities may impose new or modified conditions on our authorizations, which could adversely affect our ability to generate revenues and implement our business plan. For example, from time to time, the U.S. federal government has considered imposing substantial new fees on the use of frequencies, such as the ones we plan to use to provide our service. In the U.S. and Canada, the FCC and Industry Canada, respectively, already collect fees from space and terrestrial spectrum licensees. We are currently required to pay certain fees, and it is possible that we may be subject to increased fees in the future.

Export Control And Embargo Laws May Preclude Us From Obtaining Necessary Satellites, Parts Or Data Or Providing Certain Services In The Future.

We must comply with U.S. export control laws in connection with any information, products, or materials that we provide to non-U.S. persons relating to satellites, associated equipment and data and with the provision of related services. These requirements may make it necessary for us to obtain export or re-export authorizations from the U.S. government in connection with any dealings we have with 4371585 Canada, TerreStar Canada, TerreStar Canada Holdings, non-U.S. satellite manufacturing firms, launch services providers, insurers, customers and employees. We may not be able to obtain and maintain the necessary authorizations, which could adversely affect our ability to:

• effect the transfer agreements;

• procure new U.S.-manufactured satellites;

• control any existing satellites;

• acquire launch services;

• obtain insurance and pursue our rights under insurance policies; or

• conduct our satellite-related operations.

In addition, if we do not properly manage our internal compliance processes and, as a result, violate U.S. export laws, the terms of an export authorization or embargo laws, the violation could make it more difficult, or even impossible, to maintain or obtain licenses and could result in civil or criminal penalties.

Our Strategic Relationships Will Be Subject To Government Regulations.

We must ensure that parties with which we enter into strategic relationships comply with the FCC’s and Industry Canada’s ATC rules. This may require us to seek agreements in connection with potential strategic relationships that provide for a degree of control by us in the operation of their business that they may be unwilling or unable to grant us.

In addition, the U.S. Communications Act of 1934, as amended, or the Communications Act, and the FCC’s rules require us to maintain legal as well as actual control over the spectrum for which we are licensed. Our ability to enter into strategic arrangements may be limited by the requirement that we maintain de facto control of the spectrum for which we are licensed. If we are found to have relinquished control without approval from the FCC, we may be subject to fines, forfeitures, or revocation of our licenses.

Similarly, theRadiocommunication Act (Canada), the Telecommunications Act (Canada) and Industry Canada’s rules require that Canadians maintain legal as well as actual control over TerreStar Canada and certain of its licensed facilities. Our ability to enter into strategic arrangements may be limited by the requirement that Canadians maintain control over TerreStar Canada and these licensed facilities in Canada. If TerreStar Canada is found to have relinquished control to non-Canadians, TerreStar Canada may be subject to fines, forfeitures or revocation of its licenses and may not lawfully continue to carry on its business in Canada.

FCC And Industry Canada Regulations And Approval Processes Could Delay Or Impede A Transfer Of Control Of TerreStar Corporation.

Any investment that could result in a transfer of control of TerreStar Corporation could be subject to prior FCC approval and in some cases could involve a lengthy FCC review period prior to its consummation. The prior approval of Industry Canada is also required before any material change in the ownership or control of TerreStar Canada can take effect. We may not be able to obtain any such FCC or Industry Canada approvals on a timely basis, if at all, and the FCC or Industry Canada may impose new or additional license conditions as part of any review of such a request. If we are unable to implement our business plan and generate revenue to meet our financial commitments, including under the TerreStar-2 Purchase Money Credit Agreement, the TerreStar Notes and the TerreStar Exchangeable Notes, these regulations could impede or prevent a transfer of control or sale of our company to a third party with greater financial resources.

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Rules Relating To Canadian Ownership And Control Of TerreStar Canada Are Subject To Interpretation And Change.

TerreStar Canada is subject to foreign ownership restrictions imposed by the Telecommunications Act (Canada) and theRadiocommunication Act (Canada) and regulations made pursuant to the these acts. Future determinations by Industry Canada or the Canadian Radio-Television and Telecommunications Commission, or CRTC, or events beyond our control, may result in TerreStar Canada ceasing to comply with the relevant legislation. If such a development were to occur, the ability of TerreStar Canada to operate as a Canadian carrier under the Telecommunications Act (Canada) or to maintain, renew or secure its Industry Canada approval in principle could be jeopardized and our business could be materially adversely affected.

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

None.

Item 3. Defaults Upon Senior Securities

None.

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

None.

Item 5. Other Information

None.

Item 6. Exhibits

The Exhibit Index filed herewith is incorporated herein by reference.

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EXHIBIT INDEX

Number	Description
10.1†	Amendment to Statement of Work dated January 22, 2008 under the Master Development & Licensing Agreement dated August 10, 2007 by and between Networks and Elektrobit, Inc.
10.2**	Statement of Work dated October 22, 2008 (SBSS Integration Support) under the Master Development & Licensing Agreement dated August 10, 2007 by and between Networks and Elektrobit, Inc.
10.3**	Statement of Work dated January 02, 2009 (Commercial PDA Phone Specification) under the Master Development & Licensing Agreement dated August 10, 2007 by and between Networks and Elektrobit, Inc.
10.4**	Statement of Work dated January 02, 2009 (Mininet Campaign Testing) under the Master Development & Licensing Agreement dated August 10, 2007 by and between Networks and Elektrobit, Inc.
10.5**	Statement of Work dated January 02, 2009 (Antenna Feasibility Study) under the Master Development & Licensing Agreement dated August 10, 2007 by and between Networks and Elektrobit, Inc.
10.6**	Amendment to Statement of Work dated January 02, 2009 (SBSS Integration Support) under the Master Development & Licensing Agreement dated August 10, 2007 by and between Networks and Elektrobit, Inc.
10.7**	Amendment No. 2 to Statement of Work (SBSS Integration Support) dated February 05, 2009 under the Master Development & Licensing Agreement dated August 10, 2007 by and between Networks and Elektrobit, Inc.
10.8**	Amendment No. 3 dated March 28, 2009 under the Master Development & Licensing Agreement dated August 10, 2007 by and between Networks and Elektrobit, Inc.
10.9†	Contract for Design and Development of SDR Modem Platforms dated March 31, 2009 by and among TerreStar Networks Inc., SkyTerra LP and Infineon Technologies AG.
31.1†	Certification Pursuant to Rule 13a-14(a)/15d-14(a), of President (principal executive officer).
31.2†	Certification Pursuant to Rule 13a-14(a)/15d-14(a), of Chief Accounting Officer (principal financial officer).
32†	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of President, (principal executive officer) and Chief Accounting Officer (principal financial officer).

† Filed herewith.

** Filed herewith and pursuant to a confidential treatment request for certain portions of this document

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SIGNATURES

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

TERRESTAR CORPORATION

(Registrant)

/s/ JEFFREY EPSTEIN

Jeffrey Epstein

President

(Principal Executive Officer)

Dated: May 6, 2009

/s/ VINCENT LOIACONO

Vincent Loiacono

Chief Accounting Officer

(Principal Financing and Accounting Officer)

Dated: May 6, 2009

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