Terrestar 10K/A 2007 Annual report (amended)

WASHINGTON, D.C. 20549

ý		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended December 31, 2007
		OR
o		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		(I.R.S. Employer
Incorporation or Organization)		Identification No.)
12010 Sunset Hills Road, 9th Floor, Reston, VA		20190
(Address of Principal Executive Offices)		(Zip Code)

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

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

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

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes þ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. o Yes þ No

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

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

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 definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one).

Large accelerated filer o	Accelerated filer þ
Non-accelerated filer o	Smaller reporting company o
(Do not check if smaller reporting company)

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

The aggregate market value of TerreStar Corporation Common Stock held by non-affiliates as of June 30, 2007 (the last business day of the most recently completed second quarter) was approximately $651.5 million. For purposes of this calculation, affiliates represent only holders of more than 10% of TerreStar Corporation Common Stock.

There were 90,977,073 shares of TerreStar Corporation Common Stock outstanding as of May 2 , 2008.

TABLE OF CONTENTS


PART I

Cautionary Note Regarding Forward-Looking Statements

PART II

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1

PART III

Item 15.	Signatures	31
	Certifications	32

EXPLANATORY NOTE

TerreStar Corporation (“TerreStar” or the “Company”) is filing this Amendment No. 3 to its Annual Report on Form 10-K/A (“Amendment No. 3”) for the year ended December 31, 2007 to restate Item 7 to our Annual Report on Form 10-K (“Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2008 to include the amended portions of Item 7 contained in Amendment No. 2 to Annual Report on Form 10-K/A (“Amendment No. 2”) filed with the SEC May 13, 2008. This Amendment No. 3 includes the original disclosures included in Item 7 of the Form 10-K and additional disclosures set forth in Amendment No. 2 but does not include any additional information not previously filed. This Amendment No. 3 does not reflect events occurring after the filing of the Form 10-K on March 31, 2008 nor does it modify or update those disclosures presented therein, expect with regard to the specific modifications described in this Explanatory Note.

Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as a result of this Amendment No. 3, the certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002, filed and furnished, respectively, as exhibits to the Form 10-K Amendment No. 1 to Annual Report on From 10-K and Amendment No. 2, have been re-executed and re-filed as of the date of this Amendment No. 3 and are included as Exhibits 31.5, 31.6 and 32 hereto. Therefore, Part IV Item 15 of the original filing has been amended to reflect the new certifications described above.

PART II

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this report. This discussion contains forward-looking statements. Please see the “Cautionary Note Regarding Forward-Looking Information” and “Risk Factors” herein for a discussion of the uncertainties, risks and assumptions associated with these statements.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand TerreStar Corporation, formerly Motient Corporation. It is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes to the financial statements contained in this annual report.

Restatement to Previously Issued Financial Statements

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

Under the MSV Exchange Agreement, we agreed to exchange all of our shares of common stock of Mobile Satellite Ventures GP Inc. (“MSV GP”) and all of our limited partnership interests of Mobile Satellite Ventures LP (“MSV”) for approximately 44.3 million shares of non-voting common stock of SkyTerra in one or more closings. As part of the exchange, we agreed to use our commercially reasonable efforts to distribute approximately 25.5 million SkyTerra shares to our common stockholders. To date, we have been unable to distribute these shares to our stockholders because of questions surrounding our Series A Cumulative Convertible Preferred Stock (the “Series A Preferred Stock”). Until such time as the Series A Preferred Stock is no longer outstanding or questions regarding the Series A Preferred Stock have been resolved, we are unable to pay this dividend. After discussions with our Audit Committee, external auditors and the staff of the SEC, we determined that we should have recorded a liability for this dividend and shall continue to record this liability until such time as we are able to distribute these shares to our common stockholders. The error correction resulted in a decrease to additional paid in capital and a corresponding increase to establish the dividend liability at September 30, 2006. Subsequent to this change, we analyzed the value of the SkyTerra shares on a quarterly basis as prescribed under APB 18 to determine if an other than temporary impairment on the cost basis of the shares had occurred. To the extent that we recognized an impairment charge relative to the shares reserved for the dividend liability, we adjusted the dividend liability accordingly.

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

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

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


	For the Year Ended December 31, 2006
	As Reported				Adjustments			Restated
Operating Expenses
General and administrative	$	75,395			$	8,858		$	84,253
Research and development		10,549				—			10,549
Depreciation and amortization		6,796				—			6,796
Loss on impairment of intangibles		4,909				—			4,909
Total operating expenses		97,649				8,858			106,507
Operating loss from continuing operations		(97,649	)			(8,858	)		(106,507	)
Interest expense		(2,608	)			—			(2,608	)
Interest and other income		7,948				—			7,948
Equity in losses of MSV		(30,079	)			—			(30,079	)
Minority interests in losses of TerreStar Networks		20,655				—			20,655
Minority interests in losses of TerreStar Global		654				—			654
Gain on investments		41,422		(1)		(30,162	)		11,260
Decrease in dividend liability		—				—			—
Other than temporary impairment-SkyTerra		—				—			—
Loss from continuing operations before income taxes		(59,657	)			(39,020	)		(98,677	)

Income tax benefit (expense)		(4,535	)			—			(4,535	)
Net loss from continuing operations		(64,192	)			(39,020	)		(103,212	)
Loss from discontinued operations		(30,422	)			—			(30,422	)
Net loss		(94,614	)			(39,020	)		(133,634	)
Less:
Dividends on Series A and Series B Cumulative Convertible Preferred Stock		(23,627	)			—			(23,627	)
Accretion of issuance costs associated with Series A and Series B		(4,029	)			—			(4,029	)
Net loss available to Common Stockholders	$	(122,270	)		$	(39,020	)	$	(161,290	)
Basic & Diluted Loss Per Share—Continuing Operations	$	(1.41	)		$	(0.60	)	$	(2.01	)
Basic & Diluted Loss Per Share—Discontinued Operations	$	(0.47	)		$	—		$	(0.47	)
Basic & Diluted Loss Per Share	$	(1.88	)		$	(0.60	)	$	(2.48	)
Basic & Diluted Weighted-Average Common Shares Outstanding		64,966				—			64,966

(1) The table below presents a reconciliation of the gain recognized on our SkyTerra investment as reported in accordance with FAS 115 for the periods ended September 30, 2006 through December 31, 2006.

Gain on exchange recognized as of Sept. 30, 2006	$	196,904,681
Realized loss on sale of 3,573,216 shares in October, 2006		(13,399,552	)
Recognition of “other than temporary impairment” as of Dec. 31, 2006		(142,084,129	)
Gain recognized for the year ended Dec. 31, 2006	$	41,421,000

The decrease in the gain reported for the year ended December 31, 2006 of $155.5 million as compared to the gain reported on September 30, 2006 was primarily due to a combination of a loss on the sale of 3.5 million shares of common stock of SkyTerra Communications Inc. in the fourth quarter and the recognition of an other than temporary impairment on our investment. In October, 2006, we sold 3.6 million shares of SkyTerra common stock in the open market and realized a loss of $13.4 million on the sale. The recognition of an “other than temporary impairment” as of December 31, 2006 was due to a significant decline in the publicly traded stock price of SkyTerra from $15.10 at September 30, 2006 to $11.52 per share at December 31, 2006. We also reported a balance of $52.2 in other comprehensive income as of September 30, 2006 which represented an unrealized loss on our SkyTerra investment under FAS 115. This loss was subsequently realized in the quarter ended December 31, 2006 as part of the recognition of the “other than temporary impairment,” and the balance in other comprehensive income was zero as of December 31, 2006.

We did not specifically disclose this table in our original filing because we believed that the sale of the 3.6 million shares of SkyTerra common stock within 30 days of the closing of the transaction was part of the original intent of the exchange transaction and the gain should be reported as a “net” gain as of year end. The sale was an open market transaction which was publicly reported at the time of sale. The decline in the price of SkyTerra’s common stock was generally available on a daily basis because they are a publicly traded company. In addition, as we set forth in Part I, Item IA “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2006, the value of our investment in SkyTerra is subject to their successful execution of their business strategy, over which we have no control, and the value of our investment could be materially and adversely impacted.

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

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

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

STOCKHOLDERS’ EQUITY:
Common stock		737			—			737
Additional paid-in capital		886,463			(254,490	)		631,973
Common stock purchase warrants		73,200			—			73,200
Less: 3,951,202 common shares held in treasury stock at December 31, 2007 and December 31, 2006		(73,877	)		—			(73,877	)
Accumulated deficit		(474,687	)		(39,020	)		(513,707	)
Total stockholders’ equity		411,836			(293,510	)		118,326
Total liabilities and stockholders’ equity	$	1,131,449		$	(39,020	)	$	1,092,429

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

	For the Year Ended December 31, 2006
	As Reported			Adjustments			Restated
CASH FLOWS FROM CONTINUING OPERATING ACTIVITIES:
Net loss	$	(94,614	)	$	(39,020	)	$	(133,634	)
Adjustments to reconcile net loss to net cash used in continuing operating activities:
Income from discontinued operations		30,422			—			30,422
Depreciation and amortization		6,796			—			6,796
Equity in losses of MSV		30,079			—			30,079
Minority interests in losses of TerreStar Global		(654	)		—			(654	)
Minority interests in losses of TerreStar Networks		(20,655	)		—			(20,655	)
Gain (loss) on investments		(41,422	)		30,162			(11,260	)
Amortization of deferred financing costs		538			—			538
Non-cash 401(k) match		156			—			156
Stock-based compensation		35,756			—			35,756
Loss on impairment of intangibles		4,909			—			4,909
Changes in assets and liabilities:
Other current assets		(345	)		—			(345	)
Accounts payable and accrued expenses		9,155			—			9,155
Accrued interest		2,267			—			2,267
Deferred rent and other liabilities		4,242			—			4,242
Net cash used in continuing operating activities	$	(33,370	)	$	(8,858	)	$	(42,228	)
CASH FLOWS FROM CONTINUING INVESTING ACTIVITIES:
Proceeds of restricted cash and investments	$	61,511		$	—		$	61,511
Proceeds from the sale of investments		46,951			—			46,951
Proceeds from TerreStar Global rights offering		672			—			672
Accounts payable to Loral for satellite construction contract		(59,771	)		—			(59,771	)
Additions to property and equipment		(175,808	)		—			(175,808	)
Net cash used in continuing investing activities	$	(126,445	)	$	—		$	(126,445	)
CASH FLOWS FROM CONTINUING FINANCING ACTIVITIES:
Proceeds from issuance of Senior Secured Notes	$	200,000		$	—		$	200,000
Proceeds from issuance of equity securities		9,388			8,858			18,246
Purchase of treasury stock		(6,791	)		—			(6,791	)
Dividends paid on Series A and B Cumulative Convertible Preferred Stock		(21,446	)		—			(21,446	)
Debt issuance costs and other charges		(6,245	)		—			(6,245	)
Net cash provided by continuing financing activities	$	174,906		$	8,858		$	183,764
Net cash provided by continuing operations	$	15,091		$	—		$	15,091
Net cash used in discontinued operating activities	$	(18,435	)	$	—		$	(18,435	)
Net cash used in discontinued investing activities	$	(4,515	)	$	—		$	(4,515	)
Net cash used in discontinued operations		(22,950	)		—			(22,950	)
Net decrease in cash and cash equivalents		(7,859	)		—			(7,859	)
CASH AND CASH EQUIVALENTS, beginning of period		179,524			—			179,524
CASH AND CASH EQUIVALENTS, end of period	$	171,665		$	—		$	171,665

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

	Three Months Ended September 30, 2006
	As Reported			Adjustments			Restated
Operating Expenses
General and administrative	$	30,605		$	9,000		$	39,605
Research and development		2,399			—			2,399
Depreciation and amortization		1,454			—			1,454
Loss on impairment of intangibles		—			—			—
Gain on asset disposal		—			—			—
Total operating expenses		34,458			9,000			43,458
Operating loss from continuing operations		(34,458	)		(9,000	)		(43,458	)
Interest expense		—			—			—
Other expense		—			—			—
Interest and other income		1,441			—			1,441
Equity in losses of MSV		(8,423	)		1,283			(7,140	)
Minority interests in losses of TerreStar Networks		9,397			—			9,397
Minority interests in losses of TerreStar Global		—			—			—
Gain (Loss) on investments		196,905			(196,905	)		—
Decrease in dividend liability		—			—			—
Other than temporary impairment-SkyTerra		—			—			—
Loss from continuing operations before income taxes		164,862			(204,622	)		(39,760	)
Income tax benefit (expense)		(17,100	)		—			(17,100	)
Net loss from continuing operations		147,762			(204,622	)		(56,860	)
Loss from discontinued operations		(9,600	)		—			(9,600	)
Net income (loss)		138,162			(204,622	)		(66,460	)
Less:
Dividends on Series A and Series B Cumulative Convertible Preferred Stock		(5,960	)		—			(5,960	)
Accretion of issuance costs associated with Series A and Series B		(1,020	)		—			(1,020	)
Net income (loss) available to Common Stockholders	$	131,182		$	(204,622	)	$	(73,440	)
Basic Loss Per Share—Continuing Operations	$	2.21		$	(3.21	)	$	(1.00	)
Basic Loss Per Share—Discontinued Operations	$	(0.15	)	$	—		$	(0.15	)
Basic Loss Per Share	$	2.06		$	(3.21	)	$	(1.15	)
Basic Weighted-Average Common Shares Outstanding		63,782			—			63,782

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

		September 30, 2006
		As Reported			Adjustments			Restated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	46,471		$	—		$	46,471
Cash committed for satellite construction costs			33,709			—			33,709
Restricted cash for Series A and Series B Cumulative convertible preferred stock dividends			21,446			—			21,446
Deferred issuance costs associated with Series A and Series B Cumulative convertible preferred stock			4,197			—			4,197
Deferred issuance costs associated with Senior Secured Notes			—			—			—
Deferred issuance costs associated with TerreStar Notes			—			—			—
Assets held for sale			628			—			628
Other current assets			822			—			822
Total current assets			107,273			—			107,273
Restricted investments			7,505			—			7,505
Property and equipment, net			177,769			—			177,769
Intangible assets, net			138,162			—			138,162
Investment in MSV			185,340			3,326			188,666
Investment in SkyTerra			438,677			(148,496	)		290,181
Deferred issuance costs associated with Series A and Series B Cumulative convertible preferred stock			11,785			—			11,785
Deferred issuance costs associated with TerreStar Notes			—			—			—
Notes receivable and accrued interest, thereon			—			—			—
Deferred issuance costs associated with Senior Secured PIK Notes			—			—			—
Total assets		$	1,066,511		$	(145,170	)	$	921,341

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses		$	36,218		$	—		$	36,218
Accounts payable to Loral for satellite construction contract			17,671			—			17,671
Accrued income taxes payable			—			—			—
Obligations under capital leases			—			—			—
Deferred rent and other current liabilities			91			—			91
Series A and Series B Cumulative Convertible Preferred Stock dividends payable			12,924			—			12,924
Current liabilities of discontinued operations			3,177			—			3,177
Total current liabilities	��		70,081			—			70,081
Obligations under capital leases			—			—			—
Deferred rent and other long-term liabilities			108			—			108
SkyTerra investment dividends payable			—			254,490			254,490
TerreStar Notes and accrued interest, thereon			—			—			—
Total liabilities			70,189			254,490			324,679
Commitments and Contingencies
Minority interest in TerreStar Networks			75,922			—			75,922
Minority interest in TerreStar Global			—			—			—
Series A cumulative convertible preferred stock			90,000			—			90,000
Series B cumulative convertible preferred stock			318,500			—			318,500
STOCKHOLDERS’ EQUITY:
Common stock			735			—			735
Additional paid-in capital			860,879			(247,331	)		613,548
Common stock purchase warrants			73,487			—			73,487
Less: 3,951,202 common shares held in treasury stock			(73,877	)		—			(73,877	)
Accumulated other comprehensive income			(52,293	)		52,293			—
Accumulated deficit			(297,031	)		(204,622	)		(501,653	)
Total stockholders’ equity			511,900			(399,660	)		112,240
Total liabilities and stockholders’ equity		$	1,066,511		$	(145,170	)	$	921,341

	Three Months Ended March 31, 2007
	As Reported			Adjustments			Restated
Operating Expenses
General and administrative	$	18,306		$	—		$	18,306
Research and development		11,158			—			11,158
Depreciation and amortization		3,298			—			3,298
Loss on impairment of intangibles		6,200			—			6,200
Gain on asset disposal		—			—			—
Total operating expenses		38,962			—			38,962
Operating loss from continuing operations		(38,962	)		—			(38,962	)
Interest expense		(19,155	)		—			(19,155	)
Other expense		—			—			—
Interest and other income		5,360			—			5,360
Equity in losses of MSV		(3,016	)		—			(3,016	)
Minority interests in losses of TerreStar Networks		7,529			—			7,529
Minority interests in losses of TerreStar Global		368			—			368
Gain (Loss) on investments		(99,575	)		99,575			—
Decrease in dividend liability		—			40,473			40,473
Other than temporary impairment-SkyTerra		—			(58,937	)		(58,937	)
Loss from continuing operations before income taxes		(147,451	)		81,111			(66,340	)
Income tax benefit (expense)		(1,250	)		—			(1,250	)
Net loss from continuing operations		(148,701	)		81,111			(67,590	)
Loss from discontinued operations		—			—			—
Net income (loss)		(148,701	)		81,111			(67,590	)
Less:
Dividends on Series A and Series B Cumulative Convertible Preferred Stock		(5,856	)		—			(5,856	)
Accretion of issuance costs associated with Series A and Series B		(1,030	)		—			(1,030	)
Net income (loss) available to Common Stockholders	$	(155,587	)	$	81,111		$	(74,476	)
Basic Loss Per Share—Continuing Operations	$	(2.11	)	$	1.10		$	(1.01	)
Basic Loss Per Share—Discontinued Operations	$	—		$	—		$	—
Basic Loss Per Share	$	(2.11	)	$	1.10		$	(1.01	)
Basic Weighted-Average Common Shares Outstanding		73,622			—			73,622

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

	March 31, 2007
	As Reported			Adjustments			Restated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	343,427		$	—		$	343,427
Cash committed for satellite construction costs		12,682			—			12,682
Restricted cash for Series A and Series B Cumulative convertible preferred stock dividends		10,723			—			10,723
Deferred issuance costs associated with Series A and Series B Cumulative convertible preferred stock		4,305			—			4,305
Deferred issuance costs associated with Senior Secured Notes		2,059			—			2,059
Deferred issuance costs associated with TerreStar Notes		—			—			—
Assets held for sale		367			—			367
Other current assets		3,723			—			3,723
Total current assets		377,286			—			377,286
Restricted investments		5,897			—			5,897
Property and equipment, net		378,621			—			378,621
Intangible assets, net		200,948			—			200,948
Investment in MSV		40,704			1,618			42,322
Investment in SkyTerra		335,039			—			335,039
Deferred issuance costs associated with Series A and Series B Cumulative convertible preferred stock		9,612			—			9,612
Deferred issuance costs associated with TerreStar Notes		—			—			—
Notes receivable and accrued interest, thereon		—			—			—
Deferred issuance costs associated with Senior Secured PIK Notes		12,097			—			12,097
Total assets	$	1,360,204		$	1,618		$	1,361,822


LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	15,103		$	—		$	15,103
Accounts payable to Loral for satellite construction contract		20,758			—			20,758
Accrued income taxes payable		1,339			—			1,339
Obligations under capital leases		—			—			—
Deferred rent and other current liabilities		1,029			—			1,029
Series A and Series B Cumulative Convertible Preferred Stock dividends payable		14,030			—			14,030
Current liabilities of discontinued operations		36			—			36
Total current liabilities		52,295			—			52,295
Obligations under capital leases		—			—			—
Deferred rent and other long-term liabilities		3,060			—			3,060
SkyTerra investment dividends payable		—			214,017			214,017
TerreStar Notes and accrued interest, thereon		509,414			—			509,414
Total liabilities		564,769			214,017			778,786
Commitments and Contingencies
Minority interest in TerreStar Networks		30,222			—			30,222
Minority interest in TerreStar Global		1,264			—			1,264
Series A cumulative convertible preferred stock		90,000			—			90,000
Series B cumulative convertible preferred stock		318,500			—			318,500
STOCKHOLDERS’ EQUITY:
Common stock		864			—			864
Additional paid-in capital		985,828			(254,490	)		731,338
Common stock purchase warrants		72,908			—			72,908
Less: 3,951,202 common shares held in treasury stock		(73,877	)		—			(73,877	)
Accumulated other comprehensive income		—			—			—
Accumulated deficit		(630,274	)		42,091			(588,183	)
Total stockholders’ equity		355,449			(212,399	)		143,050
Total liabilities and stockholders’ equity	$	1,360,204		$	1,618		$	1,361,822

	Three Months Ended June 30, 2007
	As Reported			Adjustments			Restated
Operating Expenses
General and administrative	$	42,212		$	(5,639	)	$	36,573
Research and development		9,907			(1,324	)		8,583
Depreciation and amortization		4,643			—			4,643
Loss on impairment of intangibles		499			—			499
Gain on asset disposal		—			—			—
Total operating expenses		57,261			(6,963	)		50,298
Operating loss from continuing operations		(57,261	)		6,963			(50,298	)
Interest expense		(11,905	)		—			(11,905	)
Other expense		(507	)		—			(507	)
Interest and other income		2,226			—			2,226
Equity in losses of MSV		(1,594	)		—			(1,594	)
Minority interests in losses of TerreStar Networks		4,744			—			4,744
Minority interests in losses of TerreStar Global		346			—			346
Gain (Loss) on investments		—			—			—
Decrease in dividend liability		—			—			—
Other than temporary impairment-SkyTerra		—			—			—
Loss from continuing operations before income taxes		(63,951	)		6,963			(56,988	)
Income tax benefit (expense)		820			—			820
Net loss from continuing operations		(63,131	)		6,963			(56,168	)
Loss from discontinued operations		—			—			—
Net income (loss)		(63,131	)		6,963			(56,168	)
Less:
Dividends on Series A and Series B Cumulative Convertible Preferred Stock		(5,933	)		—			(5,933	)
Accretion of issuance costs associated with Series A and Series B		(1,054	)		—			(1,054	)
Net income (loss) available to Common Stockholders	$	(70,118	)	$	6,963		$	(63,155	)
Basic Loss Per Share—Continuing Operations	$	(0.83	)	$	0.08		$	(0.75	)
Basic Loss Per Share—Discontinued Operations	$	—		$	—		$	—
Basic Loss Per Share	$	(0.83	)	$	0.08		$	(0.75	)
Basic Weighted-Average Common Shares Outstanding		84,581			—			84,581

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

	June 30, 2007
	As Reported			Adjustments			Restated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	267,762		$	—		$	267,762
Cash committed for satellite construction costs		2,748			—			2,748
Restricted cash for Series A and Series B Cumulative convertible preferred stock dividends		—			—			—
Deferred issuance costs associated with Series A and Series B Cumulative convertible preferred stock		4,346			—			4,346
Deferred issuance costs associated with Senior Secured Notes		—			—			—
Deferred issuance costs associated with TerreStar Notes		2,030			—			2,030
Assets held for sale		317			—			317
Other current assets		3,940			—			3,940
Total current assets		281,143			—			281,143
Restricted investments		3,516			—			3,516
Property and equipment, net		441,014			—			441,014
Intangible assets, net		217,353			—			217,353
Investment in MSV		39,157			1,618			40,775
Investment in SkyTerra		347,005			(11,966	)		335,039
Deferred issuance costs associated with Series A and Series B Cumulative convertible preferred stock		8,517			—			8,517
Deferred issuance costs associated with TerreStar Notes		11,419			—			11,419
Notes receivable and accrued interest, thereon		757			—			757
Deferred issuance costs associated with Senior Secured PIK Notes		—			—			—
Total assets	$	1,349,881		$	(10,348	)	$	1,339,533

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	20,299		$	—		$	20,299
Accounts payable to Loral for satellite construction contract		3,125			—			3,125
Accrued income taxes payable		89			—			89
Obligations under capital leases		—			—			—
Deferred rent and other current liabilities		1,044			—			1,044
Series A and Series B Cumulative Convertible Preferred Stock dividends payable		9,240			—			9,240
Current liabilities of discontinued operations		34			—			34
Total current liabilities		33,831			—			33,831
Obligations under capital leases		—			—			—
Deferred rent and other long-term liabilities		2,884			—			2,884
SkyTerra investment dividends payable		—			214,017			214,017
TerreStar Notes and accrued interest, thereon		528,757			—			528,757
Total liabilities		565,472			214,017			779,489
Commitments and Contingencies
Minority interest in TerreStar Networks		23,890			—			23,890
Minority interest in TerreStar Global		432			—			432
Series A cumulative convertible preferred stock		90,000			—			90,000
Series B cumulative convertible preferred stock		318,500			—			318,500
STOCKHOLDERS’ EQUITY:
Common stock		899			—			899
Additional paid-in capital		1,048,892			(261,453	)		787,439
Common stock purchase warrants		64,097			—			64,097
Less: 3,951,202 common shares held in treasury stock		(73,877	)		—			(73,877	)
Accumulated other comprehensive income		11,968			(11,968	)		—
Accumulated deficit		(700,392	)		49,056			(651,336	)
Total stockholders’ equity		351,587			(224,365	)		127,222
Total liabilities and stockholders’ equity	$	1,349,881		$	(10,348	)	$	1,339,533

	Three Months Ended September 30, 2007
	As Reported			Adjustments			Restated
Operating Expenses
General and administrative	$	29,594		$	(1,327	)	$	28,267
Research and development		1,405			—			1,405
Depreciation and amortization		5,018			—			5,018
Loss on impairment of intangibles		—			—			—
Gain on asset disposal		(133	)		—			(133	)
Total operating expenses		35,884			(1,327	)		34,557
Operating loss from continuing operations		(35,884	)		1,327			(34,557	)
Interest expense		(11,333	)		—			(11,333	)
Other expense		(518	)		—			(518	)
Interest and other income		2,893			—			2,893
Equity in losses of MSV		(1,595	)		—			(1,595	)
Minority interests in losses of TerreStar Networks		4,513			—			4,513
Minority interests in losses of TerreStar Global		375			—			375
Gain (Loss) on investments		(47,863	)		47,863			—
Decrease in dividend liability		—			30,574			30,574
Other than temporary impairment-SkyTerra		—			(47,863	)		(47,863	)
Loss from continuing operations before income taxes		(89,412	)		31,901			(57,511	)
Income tax benefit (expense)		3,376			—			3,376
Net loss from continuing operations		(86,036	)		31,901			(54,135	)
Loss from discontinued operations		—			—			—
Net income (loss)		(86,036	)		31,901			(54,135	)
Less:
Dividends on Series A and Series B Cumulative Convertible Preferred Stock		(6,011	)		—			(6,011	)
Accretion of issuance costs associated with Series A and Series B		(1,078	)		—			(1,078	)
Net income (loss) available to Common Stockholders	$	(93,125	)	$	31,901		$	(61,224	)
Basic Loss Per Share—Continuing Operations	$	(1.08	)	$	0.37		$	(0.71	)
Basic Loss Per Share—Discontinued Operations	$	—		$	—		$	—
Basic Loss Per Share	$	(1.08	)	$	0.37		$	(0.71	)
Basic Weighted-Average Common Shares Outstanding		86,128			—			86,128

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

	September 30, 2007
	As Reported			Adjustments			Restated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	197,558		$	—		$	197,558
Cash committed for satellite construction costs		2,783			—			2,783
Restricted cash for Series A and Series B Cumulative convertible preferred stock dividends		—			—			—
Deferred issuance costs associated with Series A and Series B Cumulative convertible preferred stock		4,388			—			4,388
Deferred issuance costs associated with Senior Secured Notes		—			—			—
Deferred issuance costs associated with TerreStar Notes		2,032			—			2,032
Assets held for sale		—			—			—
Other current assets		18,617			—			18,617
Total current assets		225,378			—			225,378

Restricted investments		3,569			—			3,569
Property and equipment, net		507,068			—			507,068
Intangible assets, net		215,797			—			215,797
Investment in MSV		37,606			1,618			39,224
Investment in SkyTerra		287,176			—			287,176
Deferred issuance costs associated with Series A and Series B Cumulative convertible preferred stock		7,397			—			7,397
Deferred issuance costs associated with TerreStar Notes		—			—			—
Notes receivable and accrued interest, thereon		787			—			787
Deferred issuance costs associated with Senior Secured PIK Notes		10,923			—			10,923
Total assets	$	1,295,701		$	1,618		$	1,297,319

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	27,289		$	—		$	27,289
Accounts payable to Loral for satellite construction contract		19,791			—			19,791
Accrued income taxes payable		89			—			89
Obligations under capital leases		288			—			288
Deferred rent and other current liabilities		1,060			—			1,060
Series A and Series B Cumulative Convertible Preferred Stock dividends payable		15,252			—			15,252
Current liabilities of discontinued operations		25			—			25
Total current liabilities		63,794			—			63,794

Obligations under capital leases		316			—			316
Deferred rent and other long-term liabilities		2,685			—			2,685
SkyTerra investment dividends payable		—			183,444			183,444
TerreStar Notes and accrued interest, thereon		547,790			—			547,790
Total liabilities		614,585			183,444			798,029
Commitments and Contingencies
Minority interest in TerreStar Networks		18,610			—			18,610
Minority interest in TerreStar Global		105			—			105
Series A cumulative convertible preferred stock		90,000			—			90,000
Series B cumulative convertible preferred stock		318,500			—			318,500
STOCKHOLDERS’ EQUITY:
Common stock		903			—			903
Additional paid-in capital		1,056,285			(262,781	)		793,504
Common stock purchase warrants		64,097			—			64,097
Less: 3,951,202 common shares held in treasury stock		(73,877	)		—			(73,877	)
Accumulated other comprehensive income		10			—			10
Accumulated deficit		(793,517	)		80,955			(712,562	)
Total stockholders’ equity		253,901			(181,826	)		72,075
Total liabilities and stockholders’ equity	$	1,295,701		$	1,618		$	1,297,319

Business Overview

TerreStar 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 Inc., its principal operating entity, and TerreStar Global Ltd. We changed our name from Motient Corporation to TerreStar Corporation in August 2007.

Our primary business is TerreStar Networks, a Reston, Virginia based future provider of advanced mobile satellite services for the North American market. Previously, we operated a two-way terrestrial wireless data communications service. On September 14, 2006, we sold most of the assets and liabilities relating to that business. Our historical financial statements present this terrestrial wireless business as a discontinued operation. Pursuant to such presentation, our current period continuing operations are reflected as a single operating unit.

As of December 31, 2007, we had two wholly-owned subsidiaries, MVH Holdings Inc. and Motient Holdings Inc., an 86% interest in TerreStar Networks and an 85% interest in TerreStar Global. Additionally, we held approximately 42% non-voting interest in SkyTerra, a mobile satellite communications company. As of December 31, 2007, SkyTerra owned approximately 11% of TerreStar Networks common stock.

Overview

TerreStar Networks Inc.

TerreStar Networks is our principal operating entity. In cooperation with its Canadian partner, 4371585 Communications and Company, Limited Partnership (“4371585 Communications”), formerly TMI Communications and Company, Limited Partnership, we plan to launch an innovative wireless communications system to provide mobile coverage throughout the U.S. 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. TerreStar Networks is in the process of building its first satellite pursuant to a construction contract with Space Systems/Loral, Inc. (“Loral”). Once launched, our TerreStar-1 satellite, with an antenna approximately sixty feet across, will be able to communicate with standard wireless devices.

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 additional 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 MSV 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 with MSV’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 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.

Through TerreStar Networks, we plan to develop, build and operate an all IP-based 4G integrated satellite and terrestrial communications network to provide mobile communication services throughout the United States and Canada. Our network will address the growing demand for wireless mobile services across the government, commercial, and consumer segments. We plan to market these services on a wholesale basis to government agencies and commercial enterprises.

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.

We believe our planned all IP-based 4G network design will improve on existing network architecture and components to deliver greater network capacity, more efficiently and at a lower cost, than existing wireless networks. In December 2008, 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 currently developing a next-generation terrestrial network, which we believe will enable us to offer our integrated satellite/terrestrial service by the end of 2009. We are working with several vendors to develop a universal chipset architecture that can be incorporated into a wide range of mobile devices, including small, lightweight and inexpensive handsets.

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 (“DISA”) to jointly develop a North American emergency response communications network. 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 Communications

MSV formed TerreStar Networks in 2002 as a wholly-owned subsidiary and subsequently spun TerreStar Networks off to MSV’s owners, which included TMI Communications and Company, Limited Partnership (now known as “4371585 Communications”) 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 the Transfer Agreements with TMI Communications (TMI Communications’ outstanding obligations under the Transfer Agreements were assumed by 4371585 Communications 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 will transfer TerreStar-1 to TerreStar Canada and TMI Communications effectuated the transfer of its Industry Canada approval in principle to TerreStar Canada and FCC authorization to TerreStar Networks. TMI Communications’ assignment of its Industry Canada approval to TerreStar Networks 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 Communications. TerreStar Networks’ interests in TerreStar Canada and TerreStar Canada Holdings reflect the maximum ownership levels currently permitted by applicable Canadian telecommunications foreign ownership rules.

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.

Effective December 20, 2007, BCE completed a restructuring which resulted in TMI Communications transferring all of its shares of TerreStar Canada Holdings to 4371585 Communications. 4371585 Communications is 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 Communications its 66 2/3% interest in TerreStar Canada Holdings and 4371585 Communications 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 Communications, TerreStar Networks, TerreStar Canada and TerreStar Corporation, pursuant to which 4371585 Communications 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 May 29, 2007 and June 15, 2007, pursuant to our Master Services Agreement with TerreStar Canada, we loaned TerreStar Canada $0.4 million and $0.35 million, respectively. Each note pays interest at 15.15%, and both mature on January 1, 2009.

TerreStar Global Ltd.

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 December 31, 2007, TerreStar Corporation owned approximately 85% of the outstanding shares of TerreStar Global.

Through TerreStar Global, 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 to help narrow the digital divide. As Europe’s first next-generation integrated mobile satellite and terrestrial communication network, TerreStar Global plans to deliver universal access and tailored applications over a fully-optimized IP network.

On August 13, 2007, TerreStar Global issued a press release announcing that it intends to offer securities in a private offering. Neither the terms of the securities nor the amount of the proposed financing have been determined. As of December 31, 2007 this financing has not been completed. There can be no assurance that the financing will be completed. TerreStar Global intends to use the net proceeds from the offering to commence the construction of its satellite, to secure European 2GHz MSS S-band spectrum, and for general corporate purposes.

Current Year’s Developments

At the TerreStar Corporation 2007 Annual Meeting of Stockholders held on July 12, 2007, the stockholders of TerreStar Corporation approved an amendment to the Certificate of Incorporation of Motient Corporation to change its name to TerreStar Corporation. On August 10, 2007, we filed the amendment to our Certificate of Incorporation with the Secretary of State of the State of Delaware to effectuate the name change. On August 7, 2007, our Board of Directors approved our Amended and Restated Bylaws, which was effective upon filing the amendment to the Certificate of Incorporation.

As a result of our name change from Motient Corporation to TerreStar Corporation, our new trading symbol is “TSTR” on the NASDAQ Global Market. Prior to June 20, 2007, our common stock traded on the Pink Sheets under the trading symbol “MNCP”.

Acquisitions and Dispositions

Since January 2007, we have exchanged approximately 15 million shares of our common stock for approximately 9 million shares of TerreStar Networks common stock and approximately 2 million shares of TerreStar Global common stock with holders of TerreStar Networks common stock or options to purchase shares of TerreStar Networks common stock that were exercised immediately prior to the exchange. On June 12, 2007, we filed a resale registration statement with the SEC to register the resale of these shares.

The exchange transactions resulted in an allocation of $83 million to intangible assets and an impairment of $7 million for the year ended December 31, 2007. As of December 31, 2007, our ownership interests in TerreStar Networks and TerreStar Global was approximately 86% and 85%, respectively, on a non-diluted basis.

On February 12, 2007, we exchanged approximately 5 million limited partnership units of MSV for approximately 14.4 million shares of SkyTerra non-voting common stock. As a result, a basis of $140 million transferred from our investment in MSV to our investment in SkyTerra.

On July 26, 2007, we sold our spectrum frequency assets held for sale to Nextel Communications for approximately $0.5 million pursuant to an asset purchase agreement executed between Motient Communications Inc., Motient License Inc., and Nextel dated April 13, 2007. We recognized a $0.1 million gain for the year ended December 31, 2007.

On November 30, 2007, we exchanged all of our remaining MSV ownership interests representing approximately 1.6 million limited partnership units for approximately 4.4 million SkyTerra non-voting common shares pursuant to an exchange agreement dated May 6, 2006. As a result, a basis of $38 million transferred from our investment in MSV to our investment in SkyTerra.

As of December 31, 2007, we have restricted $222 million of our SkyTerra investment to represent the portion of our SkyTerra shares we plan to distribute as a dividend to our common shareholders and a reservation in the event that our preferred holders convert to common stock. The remaining unrestricted portion of our SkyTerra investment represented $104 million as of December 31, 2007.

High Yield Offering

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

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entry into a bona fide binding agreement with the U.S. government to which TerreStar Networks will provide telecommunications services during a multi-year period and receive compensation;

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entry into a bona fide binding agreement with a non-governmental entity to which TerreStar Networks will provide telecommunications services during a multi-year period and receive compensation; and

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authorization by the FCC for TerreStar Networks to provide ATC in combination with our MSS by December 31, 2008.

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. The TerreStar Notes are scheduled to mature on February 15, 2014.

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.

In connection with the issuance of the TerreStar Notes, TerreStar Corporation (then Motient Corporation) and its indirect wholly-owned subsidiary, Motient Venture Holdings Inc. (“MVH”), and TerreStar Networks entered into a letter agreement dated February 14, 2007 (the “Motient Funding Agreement”), pursuant to which MVH agreed to contribute to TerreStar Networks, at MVH’s option, either (i) 8.6 million shares of common stock issued by SkyTerra (such shares, the “SkyTerra Shares”) or (ii) cash in an amount equal to the proceeds (net of selling expenses and taxes) from the sale of the SkyTerra Shares to one or more third party buyers, in either case in exchange for a number of shares of common stock of TerreStar Networks equal to the product of (A) (x) the average of the bid and ask prices for one SkyTerra Share at the close of trading on the last trading day prior to the day of such contribution divided by (y) the fair market value of one share of TerreStar Networks common stock at the close of trading on such last trading day prior to the day of such contribution (as determined in good faith by the Board of Directors of TerreStar Networks) multiplied by (B) 8,644,406. Such contribution will be made either (i) upon TerreStar Networks’ demand at any time after the earlier of the date on which MVH’s equity interest in TerreStar Networks equals or exceeds 80% or October 31, 2007 or (ii) at any time at MVH’s option.

The Motient Funding Agreement also provides for the grant by MVH of a security interest in the SkyTerra Shares and the proceeds thereof to TerreStar Networks. TerreStar Networks’ interest under the Motient Funding Agreement is pledged under the U.S. Security Agreement.

The TerreStar Notes are guaranteed (the “Guarantees”) on a senior secured basis by TerreStar Canada Holdings and TerreStar Canada. The Guarantees are secured by a first priority security interest in the assets of TerreStar Canada Holdings and TerreStar Canada, subject to certain exceptions, pursuant to a Canadian Security Agreement, dated as of February 14, 2007, among TerreStar Canada Holdings, TerreStar Canada and U.S. Bank National Association, as collateral agent.

The TerreStar Notes are the senior secured obligations of TerreStar Networks and will rank senior to its future debt that is expressly subordinated in right of payment to the TerreStar Notes. The TerreStar Notes rank equally with all of TerreStar Networks’ future liabilities, and would be structurally subordinated to all the liabilities of any of TerreStar Networks’ future subsidiaries that do not guarantee the TerreStar Notes.

The Guarantees are the senior secured obligations of TerreStar Canada Holdings and TerreStar Canada and rank senior to all of their existing and future debt that is expressly subordinated in right of payment to the Guarantees. The Guarantees rank equally with all of the existing and future liabilities of TerreStar Canada Holdings and TerreStar Canada that are not so subordinated.

Other Agreements and Contracts

On August 28, 2007, TerreStar Networks entered into a Network Equipment and Services Agreement with Nokia Siemens Networks US LLC. The agreement has an effective date of August 22, 2007 and expires on December 31, 2010. The agreement allows TerreStar Networks, its affiliates and certain other entities the right to purchase terrestrial network equipment from Nokia Siemens Networks. The network equipment offered under the agreement includes the Nokia Siemens Networks Flexi WCDMA base station, as part of an integrated Internet High Speed Packet Access (I-HSPA) flat architecture solution. Nokia Siemens will also provide engineering, design and optimization services for the TerreStar Network deployment.

TerreStar Networks expects to purchase approximately 5,500 base stations for an aggregate price of approximately $400 million. TerreStar Networks has a minimum purchase commitment of 700 base stations and the right to terminate the agreement for convenience following the purchase of the initial 700 base stations upon the payment of an agreed amount. The cost of the minimum purchase commitment and termination fee is approximately $78 million.

On September 19, 2007, TerreStar Networks signed a Statement of Work under a Master Development & Licensing Agreement entered into by TerreStar Networks and Elektrobit, Inc. on August 10, 2007. Under this Statement of Work, Elektrobit will assign a multi-disciplined engineering team to perform reference design and development programs, software development for satellite and terrestrial chipset integration, and provide reference design for production handsets. Elektrobit is performing the work on a time and materials basis and the anticipated value of the contract is approximately $54 million over three years. TerreStar Networks can terminate the Agreement and the Statement of Work at any time during the Agreement by paying for the work completed plus an early termination fee. TerreStar and Elektrobit will jointly own the technology developed under this Statement of Work.

On October 22, 2007, TerreStar Networks entered into a Master Services Agreement with Bechtel Communications, Inc. (“Bechtel”). Under the agreement, Bechtel will provide services related to site acquisition and construction of TerreStar Networks’ terrestrial network (“Radio Access Network” or “RAN”) in the Baltimore, Maryland and Washington, District of Columbia area. Bechtel will also provide program management services coordinating the overall installation and commissioning activities of TerreStar Networks’ other vendors involved in the RAN deployment. As of December 31, 2007, TerreStar Networks expects to purchase approximately $72 million worth of Bechtel’s services under this agreement over the next 24 months. TerreStar Networks has the right to terminate this agreement at anytime by paying for the work completed at the time of termination and reimbursing Bechtel certain out-of-pocket expenses.

Recent Financing

On February 5, 2008, TerreStar Corporation and TerreStar Networks entered into a Master Investment Agreement (the “EchoStar Investment Agreement”), with EchoStar Corporation (“EchoStar”). In addition, TerreStar Corporation and TerreStar Networks entered into a Master Investment Agreement (the “Harbinger Investment Agreement”), with certain affiliates of Harbinger Capital Partners (“Harbinger”).

The EchoStar Investment Agreement provides for, among other things,

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purchase by EchoStar of $50 million of TerreStar Notes,

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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 “Exchangeable Notes”) and

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a commitment to lend $50 million to TerreStar Networks pursuant to the Credit Agreement described below.

The Harbinger Investment Agreement provides for, among other things, purchase by Harbinger of $50 million of Exchangeable Notes and a commitment to lend $50 million to TerreStar Networks pursuant to the Credit Agreement described below.

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 Exchangeable Notes.

On February 5, 2008, EchoStar, TerreStar Corporation and TerreStar Networks also entered into a Spectrum Agreement (the “EchoStar Agreement”), which provides for the lease to TerreStar Corporation of EchoStar’s current holdings of 1.4GHz spectrum with an option to acquire the special purpose company through which EchoStar holds these licenses in exchange for the issuance of 30 million shares of common stock of TerreStar Corporation.

On February 5, 2008, we also entered into a Spectrum Contribution Agreement (the “Harbinger Contribution Agreement”), with Harbinger, which provides that, following shareholder approval, Harbinger will assign to TerreStar Corporation its rights to certain 1.4GHz spectrum with an option to purchase these licenses in exchange for the issuance of 1.2 million of TerreStar Corporation’s Series E Junior Participating Preferred Stock, par value $0.01 per share, convertible into 30 million shares of TerreStar Corporation common stock (the “Junior Preferred”).

As a result of this transaction, the Boards of Directors of both TerreStar Corporation and TerreStar Networks were expanded to eight members and, depending on stock holdings, EchoStar and Harbinger each have the right to nominate up to two members of each board.

The EchoStar Investment Agreement, Harbinger Investment Agreement, Shareholder Investment Agreements, EchoStar Agreement and the Harbinger Contribution Agreement contain representations, warranties, covenants and indemnities by TerreStar Corporation and TerreStar Networks customary for transactions of this nature.

TerreStar Corporation, TerreStar Networks, EchoStar, Harbinger and the certain existing investors entered into a Registration Rights Agreement (the “Registration Rights Agreement”), dated February 5, 2008, containing customary terms and conditions providing for the registration of common stock to be issued in these transactions.

Aggregate gross proceeds to TerreStar Networks from these transactions are expected to be $297 million in cash, of which approximately $197 million was made available at closing and the balance of which will be dedicated to funding the TerreStar-2 satellite under the Purchase Money Credit Agreement (defined below).

In addition to shareholder approval, the spectrum transactions are also subject to certain government approvals.

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

The indentures governing our Exchangeable Notes and Credit Agreement require certain shareholder approvals by July 23, 2008 or we may be forced to accelerate repayment of these notes.

In connection with the closing of the transaction, we obtained required shareholder consents approving the issuance of Common Stock and Junior Preferred (and the common stock issuable upon conversion of such Junior Preferred) issuable in connection with the EchoStar Agreement and Harbinger Contribution Agreement and upon exchange of the Exchangeable Notes and to increase the number of shares of common stock authorized under our Certificate of Incorporation from 200 million shares to 240 million shares. Such shareholder approvals are not effective until 20 days after the mailing of an information statement to our shareholders.

Amounts outstanding under the Credit Agreement will bear interest at a rate of 14% per annum. Such interest rate will be increased by 1% from May 1, 2008 until the necessary shareholder approvals are effective if TerreStar Corporation does not mail an information statement in connection with obtaining shareholder approval to the shareholders on or prior to April 30, 2008. This information statement was filed with the SEC on February 29, 2008.

The Credit Agreement contains several restrictive covenants customary for credit facilities of this type, including, but not limited to the following: limitations on incurrence of additional indebtedness, limitation on liens, 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.

On February 6, 2008, TerreStar Corporation, MVH and Harbinger Capital Partners Fund I, L.P. entered into a Stock Purchase Agreement pursuant to which TerreStar Corporation sold 14.4 million shares of non-voting common stock of SkyTerra to Harbinger Capital Partners Fund I, L.P. for an aggregate sale price of $76.4 million. TerreStar Corporation received the proceeds on February 28, 2008. Following this transaction, we hold approximately 30 million shares of SkyTerra non-voting common stock.

In connection with the foregoing transactions, we also issued one share of our Series C Preferred Stock and Series D Preferred Stock (the “Series C and D Preferred Stock”) to EchoStar and Harbinger, respectively. By virtue of their ownership of shares of the Series C and D Preferred Stock, EchoStar and Harbinger have consent rights for, among other things, certain sales of assets, making any material change in our line of business, amending or permitting the amendment of our certificate of incorporation, by-laws, or our other organizational documents or any of our subsidiaries, certain acquisitions of assets, certain capital expenditures and consolidations and mergers and rights to appoint directors. Each share of Series C and D Preferred Stock has a $1,000 liquidation preference. The Series C and D Preferred Stock rank junior to the Series A Preferred Stock and Series B Preferred Stock, on a parity basis with one another and senior to both our junior preferred and our common shares. The Series C and D Preferred Stock are non-transferable.

Investments

We have historically accounted for our investment in MSV using the equity method. The Company has analyzed the impairment and has concluded that an impairment of $106.8 million has occurred for the year ended December 31, 2007.

In 2007, we exchanged approximately 6.7 million limited partnership units of MSV for approximately 18.8 million shares of SkyTerra non-voting common stock. As a result of this exchange the historical cost basis of $177.6 million transferred from our investment in MSV to our investment in SkyTerra in accordance with APB 29.

As of December 31, 2007, we have restricted $221.6 million of our SkyTerra investment to represent the portion of our SkyTerra shares we plan to distribute as a dividend to our shareholders. The remaining unrestricted portion of our SkyTerra investment represented $103.7 million as of December 31, 2007. On February 6, 2008 we sold 14.4 million shares of non-voting common stock of SkyTerra to Harbinger Capital Fund I L.P. for an aggregate sales price of $76.4 million.

As of December 31, 2007, our SkyTerra and MSV ownership interests were 42% and zero, respectively.

Discontinued Operations—Two-Way Terrestrial Wireless Data Communications Business

In September 2006, various wholly-owned subsidiaries of TerreStar Corporation sold, pursuant to an asset purchase agreement (the “Agreement”) with Geologic Solutions, Inc.(“GeoLogic”) and Logo Acquisition Corporation, a wholly-owned subsidiary of GeoLogic (“Logo”), to Logo most of the assets relating to TerreStar Corporation’s terrestrial DataTac network and its TerreStar Corporation platform (the “Terrestrial Wireless Business”). Logo assumed most of the post-closing liabilities relating to the Terrestrial Wireless Business. The assets and liabilities being transferred were limited to those that relate to the current operations of TerreStar Corporation’s terrestrial wireless network, and do not include any assets or liabilities related to TerreStar Networks or MSV. Under the Agreement, Logo paid TerreStar Corporation the sum of $1 in cash, plus assumed most of the post-closing liabilities associated with the purchased assets, as well as certain of the costs of the employees that Logo transitioned from TerreStar Corporation Also, GeoLogic guaranteed Logo’s performance of any indemnification obligations to TerreStar Corporation under the Agreement. Our historical financial statements reflect this business as a discontinued operation.

Critical Accounting Policies and Significant Estimates

The preparation of financial statements requires management to use judgment and make estimates. The level of uncertainty in estimates and assumptions increases with the length of time until the underlying transactions are completed. Actual results could ultimately differ from those estimates. The accounting policies that are most critical in the preparation of the Company’s Consolidated Financial Statements are those that are both important to the presentation of the Company’s financial condition and results of operations and require significant or complex judgments and estimates on the part of management.

Valuation of Long-lived Assets Including Intangible Assets

A significant portion of our total assets are long-lived assets primarily consisting of property and equipment and intangible assets. Property and equipment, or P&E, consists of network, lab, office and computer equipment, internal use software and leasehold improvements. Intangible assets consists of definite lived intangible assets related to Federal Communications Commission (“FCC”) spectrum clearing frequencies and other intellectual property that were obtained in connection with several exchange transactions of the Company’s common stock for TerreStar Networks common stock with shareholders pursuant to an exchange agreement entered into in 2006.

As of December 31, 2007, property and equipment and intangibles represented $571 million and $212 million, respectively, of our total assets of $1.2 billion. We calculate depreciation and amortization on long-lived assets using the straight-line method based on 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	(to begin at launch)

We evaluate whether long-lived assets have been impaired when circumstances indicate the carrying value of those assets may not be recoverable. For such long-lived 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 a long-lived asset are under consideration, a probability-weighted approach is used for developing estimates of future undiscounted cash flows. If the carrying value of the long-lived asset is not recoverable based on these estimated future undiscounted cash flows, the impairment 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.

We utilized numerous assumptions and estimates in applying our valuation methodologies and in projecting future operating characteristics for our business enterprise. In general, we considered population, market penetration, products and services offered, unit prices, operating expenses, depreciation, taxes, capital expenditures and working capital. We also considered competition, satellite and wireless communications industry projections and trends, regulations and general economic conditions. In the application of our valuation methodologies, we apply certain royalty and discount rates that are based on analyses of public company information, assessment of risk and other factors and estimates.

Our initial valuation of our intellectual property rights was determined utilizing a form of the income approach referred to as the relief from royalty valuation method. We assumed a 10% to 12% royalty rate applied to a projected revenue stream generated by a hypothetical licensee utilizing such intellectual property rights. The projected revenue was based on a business case for the operations and consisted of the following principal assumptions and estimates:

A 20 year forecast period.

Specific cash outflows in the first four years of the forecast period to account for our portion of satellite design, construction and launch expenditures.

Annual population growth of 1.6% based on U.S. Census Bureau estimates of the U.S. population in 2004.

Market penetration assumptions of zero to 7% to 12% over the forecast period, depending on the specific market and when the market is launched.

Average monthly revenue per customer of $40.00 when services are launched, increasing to $44.50 over the forecast period. This increase equates to a compound annual growth rate of 0.6%. A substantial portion of this revenue is generated by the terrestrial component (rather than the satellite component) of the ATC network.

Tax rate of 40% after the consumption of net operating losses.

A 25% discount rate based on a weighted average cost of capital (WACC) determined by analyzing and weighting the cost of capital for a peer group of publicly traded satellite service providers, wireless communications companies and telecommunications companies in general.

Our initial valuation of our spectrum assets is based on a form of the income approach known as the "Build-Out Method". The method applies a discounted cash flow framework to our "build-out" business case. This build-out approach is intended to incorporate all of historical and future development costs, as well as projected revenues, operating expenses and cash flows generated from the build-out of a hybrid satellite and terrestrial communications systems utilizing our frequency assets. This "build-out method" business case and the applied discounted cash flow valuation consisted of the following principal assumptions and estimates:

A 20-year forecast period, comprised of a high growth period for the first 10 years and a declining growth period beginning in year 11, and a terminal period to perpetuity.

Development cash outflows and capital expenditures related to the design and construction of two satellites in the first 3 years of the forecast period and the launch of one of these satellites in the fourth year of the forecast period. Replacement costs for the construction and launch of one satellite are included in the declining growth period.

Satellite only revenues based on market size data for traditional satellite segments (maritime, fleet management, public safety, telematics and aeronautical) compiled generally by third party research groups and penetration estimates of 10% to 40% of our potential customer base, depending on the specific market segment addressed over the 20 year forecast period.

Terrestrial revenues calculated as eleven percent of the total revenues generated by a joint or strategic partner with whom TerreStar would intend to deploy a terrestrial infrastructure and launch terrestrial services. Total partnership revenues are based on (i) market penetration assumptions of zero to 7 to 12% over the forecast period depending on the specific city and when the city is launched, (ii) average monthly revenue per customer of $40.00 when services are launched, increasing to $44.50 over the forecast period. This increase equates to a compound annual growth rate of 0.6%.

Operating expenses covering the operation of satellite facilities. These include a network operations center, tracking, telemetry and command systems, interconnect costs, in-orbit insurance, technical staff, and general and administrative personnel Under the projected expense structure, EBITDA margins grow to 60% early in the forecast period and expand to 70% later in the forecast period.

All capital expenditures required to design and construct two satellites and launch one satellite during the first four years of the forecast period. Additional capital expenditures for constructing ground station segments and investing in handset development.

Tax rate of 40% after the consumption of net operating losses generated in the early years of the forecast period.

A 19 to 21% discount rate based on a weighted average cost of capital, or WACC, determined by analyzing and weighting the cost of capital for a peer group of publicly traded satellite service providers, wireless communications companies and telecommunications companies in general, with more weight given to traditional satellite service providers. A terminal value calculated using a WACC of 12% and a perpetuity growth rate of 2.5%.

As we stated in the footnotes to our consolidated financial statements we evaluate whether long-lived and intangible assets, excluding goodwill, have been impaired when circumstances indicate the carrying value of those assets may not be recoverable. For such assets, an impairment exists when its carrying value exceeds the sum of estimates of the undiscounted cash flows expense to result from the use and eventual disposition of the assets. When alternative course of action to recover the carrying value amount of an assets under consideration, a probability-weighted approach is used for developing estimates of future undiscounted cash flows.

We continue to rely on our “build-out” business case for the purpose of determining fair value as it relates to our property and equipment and our intangible assets. This build-out methodology incorporates historical and currently estimated future development costs, as well as projected revenues, operating expenses and cash flows generated from an integrated satellite and terrestrial communications systems utilizing the Company's frequency assets. Our future estimates are evolving with our understanding of market conditions, vendor platform availability, changes in product offerings, and industry standards. These projections continue to take into account general mobile communications business factors such as population, market penetration, product features, unit prices, operating expenses, depreciation, taxes, capital expenditures, and working capital, as well as general economic factors such as wireless industry trends and macroeconomic conditions.

We have also incorporated a number of company-specific factors in our current analysis. These include prospects for a wider and more rapid acceptance of our satellite only product offering, investments in our handset allowing a more gradual roll-out of our next-generation terrestrial network, and the ability to partner with carriers to leverage existing terrestrial network infrastructure. In addition, the dominance of incumbent wireless carriers in the recently concluded 700MHz auction changes the nature and scope of partnership discussions with companies seeking to enter the mobile communications market.

We have historically accounted for our investment in MSV using the equity method, and our investment in SkyTerra under APB 18 using the cost method. At each reporting period, we evaluate our investment in SkyTerra and the related dividend liability for other than temporary impairment. Although our investment in common stock of SkyTerra is non-voting, we determine fair value of our investment based on the trading prices of SkyTerra shares as listed on the OTC Bulletin Board (“OTCBB: SKYT”). If an “other than temporary impairment” is found to exist at the end of each reporting period, we reduce the carrying value of both our investment in SkyTerra and the amount of the liability that we have recorded for the dividend of those shares.

Recently Issued Accounting Pronouncements

In September 2006, the FASB issues SFAS No. 157, “Fair Value Measurements.” SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The FASB agreed to issue as a final FSP FAS 157-b, “Effective Date of FASB Statement 157” at its February 6, 2008 meeting. The FSP provided 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, Statement 157 will be effective in fiscal years beginning after November 15, 2008 and in interim periods within those fiscal years.

Since SFAS 157 was deferred until January 1, 2009 for non-financial assets and liabilities, there will be no impact on any fair value measurement related to recurring impairment tests on these non-financial assets for the year ending December 31, 2007.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment of FASB Statement No. 115.” SFAS 159 provides companies with an option to report selected financial assets and liabilities at fair value. Furthermore, SFAS 159 establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS 159 is effective for fiscal years beginning after November 15, 2007. At the effective date, an entity may elect the fair value option for eligible items that exist at that date. The effect of the re-measurement is reported as a cumulative-effect adjustment to opening retained earnings. SFAS 159 is not applicable to the Company’s financial statements for the year ending December 31, 2007.

In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements—An Amendment of ARB No. 51”. SFAS No. 160 requires the recognition of a non-controlling interest (minority interest) as equity in the consolidated financial statements and separate from the parent’s equity. The amount of net income attributable to the non-controlling interest will be included in consolidated net income on the face of the income statement. SFAS No. 160 clarifies that changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation are equity transactions if the parent retains its controlling financial interest. In addition, this statement requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. Such gain or loss will be measured using the fair value of the non-controlling equity investment on the deconsolidation date. SFAS No. 160 also includes expanded disclosure requirements regarding the interests of the parent and its non-controlling interest. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Early adoption is prohibited. The potential impact, if any, of the adoption of SFAS No. 160 on our consolidated financial statements is currently not determined.

In December 2007, the FASB issued Statement No. 141 (revised), “Business Combinations” which replaces FASB Statement No. 141, and applies to all business entities, including mutual entities that previously used the pooling-of-interests method of accounting for certain business combinations. This Statement makes significant amendments to other Statements and other authoritative guidance, and applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. This statement is not expected to have a material impact on the Company’s consolidated financial statements.

Results of Operations—Consolidated

Years Ended December 31, 2007 and 2006

Operating Expenses

	Year Ended December 31,
	2007			2006 Restated		Change 2007 vs. 2006			% Change 2007 vs. 2006
	(in thousands)
General and administrative (1)	$	114,848		$	84,253	$	30,595			36.3	%
Research and development		43,067			10,549		32,518			308.3	%
Depreciation and amortization		18,222			6,796		11,426			168.1	%
Loss on impairment of intangibles		6,699			4,909		1,790			36.5	%
Gain on asset disposal		(123	)		—		(123	)	NM
Total operating expenses	$	182,713		$	106,507	$	76,206			71.6	%

NM:	Not Meaningful

(1)	For the year ended December 31, 2007, general and administrative expense includes $20.6 million and $3.2 million of stock compensation expense related to employee stock options and director’s compensation expense, respectively.

General and administrative: Our general and administrative expenses increased by $30.6 million or 36.3% for the year ended December 31, 2007 as compared to the same period in 2006. The change is attributed to an increase of $23.4 million in consulting fees related to engineering, marketing and systems development costs, an increase of $13.0 million related to salaries and benefits, and other employee related costs, an increase of $2.1 million in network deployment costs, an increase of $1.5 million in audit, taxes and accounting fees, and an increase of $1.6 million in legal costs, offset by a decrease of approximately $12 million of stock based compensation expense.

Research and development costs: Research and development costs increased by $32.5 million or 308.3% for the year ended December 31, 2007 as compared to the same period in 2006. The increase is primarily to support the development of our satellite and terrestrial systems. In addition, $1.3 million relates to stock based compensation expense. We expect these costs to increase as we continue to develop our handset, satellite, and terrestrial capabilities.

Depreciation and amortization: Depreciation and amortization increased by $11.4 million or 168.1% for the year ended December 31, 2007 as compared to the same period in 2006. Since January 2007, we engaged in several exchange transactions of our common stock for TerreStar Networks common stock with minority interest shareholders. The common stock exchanges resulted in an allocation of $82.9 million to intangible assets, including the tax effect. Thus, amortization expense increased by $9.0 million for the year ended December 31, 2007.

Loss on impairment of intangibles: The loss on impairment of intangibles increased by $1.8 million or 36.5% for the year ended December 31, 2007 as compared to the same period in 2006. For the year ended December 31, 2007, we increased our ownership in TerreStar Networks to 85.9% from 69.5% at December 31, 2006 through exchange transactions of our common stock for TerreStar Networks common stock with minority shareholders. The amounts invested in TerreStar Networks’ intangible assets exceeded the fair value of the assets. As a result, we recognized a $6.7 million loss on impairment of intangibles for the year ended December 31, 2007.

Years Ended December 31, 2007 and 2006

Other Expenses and Income

	Year Ended December 31,
	2007			2006 Restated			Change 2007 vs. 2006			% Change 2007 vs. 2006
	(in thousands)
Interest expense	$	(45,098	)	$	(2,608	)	$	(42,490	)		1629.2	%
Other expense		(7,543	)		—			(7,543	)	NM
Interest and other income		12,597			7,948			4,649			58.5	%
Equity in losses of MSV		(7,338	)		(30,079	)		22,741			-75.6	%
Minority interests in losses of TerreStar Networks		23,262			20,655			2,607			12.6	%
Minority interests in losses of TerreStar Global		1,198			654			544		NM
Gain on investments		—			11,260			(11,260	)		-100.0	%
Decrease in dividend liability		71,046			—			71,046		NM
Other than temporary impairment-SkyTerra		(106,800	)		—			(106,800	)	NM

NM:	Not Meaningful

Interest expense: Interest expense increased by $42.5 million for the year ended December 31, 2007 as compared to the same period in 2006. The increase is related to the $500.0 million TerreStar Notes issued in February 2007, our $200.0 million aggregate principal amount of Senior Secured Notes issued in November 2006 and the write-off of financing fees related to the payoff of the $200.0 million.

Other expense: Other expense increased by $7.5 million for the year ended December 31, 2007 as compared to the same period in 2006. The change is attributed to $5.7 million in the write-off of financing fees related to the Company’s repayment of its Senior Secured Notes and $1.7 million of financing fees related to our TerreStar Notes.

Interest and other income: Interest and other income increased by $4.6 million for the year ended December 31, 2007 as compared to the same period in 2006. The increase primarily relates to interest earned on our cash and cash equivalent accounts.

Equity in losses of MSV: Equity losses of MSV decreased by $22.7 million for the year ended December 31, 2007 as compared to the same period in 2006. As of December 31, 2007, our ownership interest in MSV represented 0% as compared to 19.1% as of December 31, 2006. On February 12, 2007, we exchanged approximately 5.1 million limited partnership units of our MSV investment for approximately 14.4 million shares of our SkyTerra investment non-voting common stock. Additionally, on November 30, 2007, we exchanged all of our remaining MSV ownership interests representing approximately 1.6 million limited partnership units for approximately 4.4 million SkyTerra non-voting common shares pursuant to an exchange agreement dated May 6, 2006.

Minority interest in losses of TerreStar Networks: For the year ended December 31, 2007, we recorded approximately $162 million net loss for TerreStar Networks. The $23.3 million minority interest in TerreStar Networks represents the 30.8% to 14.0% investment in TerreStar Networks that was not owned by us throughout 2007.

Gain on sale of investments: The gain on sale of investments decreased by $11.3 million for the year ended December 31, 2007 as compared to the same period in 2006. In October 2006, we sold 3.6 million SkyTerra shares in the open market. As a result, we recognized a gain of $11.3 million for the year ended December 31, 2006.

Decrease in dividend liability: The decrease in dividend liability represents $71.0 million for the year ended December 31, 2007, as compared to zero for the same period in 2006. This change is reflective of the decrease in the historical cost basis of our SkyTerra investment, as also discussed in more detail below, in the Caption titled “Other than temporary impairment-SkyTerra”.

Other than temporary impairment-SkyTerra: The other than temporary impairment-SkyTerra increased by $106.8 million for the year ended December 31, 2007 as compared to the same period in 2006. We apply SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, to measure impairment of our investments. For the year ended December 31, 2007, we experienced declines in the fair value of our SkyTerra investment. We consider these declines to be other than temporary based on the extent and length of time the fair values have been less than cost. We recognized an impairment of $106.8 million for the year ended December 31, 2007.

Years Ended December 31, 2006 and 2005

Operating Expenses

	Year Ended December 31,
	2006 Restated		2005		Change 2006 vs. 2005		% Change 2006 vs. 2005
	(in thousands)
General and administrative (1)	$	84,253	$	29,265	$	54,988		187.9	%
Research and development		10,549		2,456		8,093		329.5	%
Depreciation and amortization		6,796		3,480		3,316		95.3	%
Loss on impairment of intangibles		4,909		—		4,909	NM
Total operating expenses	$	106,507	$	35,201	$	71,306		202.6	%

(1)	For the year ended December 31, 2006, general and administrative expense include $32.1 million and $3.6 million of stock compensation expense related to employee stock options and directors and consultants compensation expense, respectively.

For the year ended December 31, 2005, general and administrative expense include $0.2 million and $11.7 million of stock compensation expense related to employee stock options and directors and consultants compensation expense, respectively.

General and Administrative: Our aggregate expenses, including corporate and TerreStar Networks expenses, in this area increased $55.0 million or 187.9%, including an increase of non-cash stock-based compensation expense of $23.8 million. The change in general and administrative expenses was primarily attributable to:

•

An increase in TerreStar Networks expenses of $45.3 million in 2006, consisting of a $7.7 million increase in salaries, benefits and employee related expenses as TerreStar Networks employees increased from 5 at December 31, 2005 to 83 employees at December 31, 2006, $26.9 million in non-cash stock based compensations expense due to the vesting of all outstanding TerreStar Networks stock options upon the closing of the exchange transaction in September 2006, an increase in travel and related expenses of $1.3 million, an increase in consulting fees of $2.9 million, an increase in office supplies and equipment of $1.1 million, increased legal fees of $3.5 million, a $1.0 million increase attributable to facilities and related expenses, $0.2 million in auditor fees, $0.3 million for communications and $0.4 million for other miscellaneous expenses.

•

General corporate expenses increased $9.7 million primarily due to $9.0 million in deal costs associated with the MSV Exchange Agreement, an increase in legal fees of $2.8 million as a result of our corporate finance and mergers and acquisitions activity, our litigation support requirements, increased salary and bonus expense of $0.7 million related to the retention of key corporate employees and an increase of $0.7 million related to the continuing operations portion of our Lincolnshire facility which was expensed under FASB 146, offset by lower stock-based compensation expense of $3.1 million and a decrease in audit fees of $0.1 million.

Research and Development: Research and development related entirely to our TerreStar Networks business. These costs have increased due to development efforts on its satellite and terrestrial systems.

Depreciation and Amortization: Depreciation and amortization expense related entirely to our TerreStar Networks business. The 95% increase consists of $6.7 million of intangible asset amortization related to TerreStar Networks’ 2GHz licenses and intellectual property rights and $0.1 million of depreciation.

Loss on Impairment of Intangible Assets: During 2006 our ownership of TerreStar Networks increased approximately 10% through cash and stock investments. The amounts invested in TerreStar Networks’ intangible assets exceeded the fair value of the assets. Therefore we recognized a $4.9 million loss on impairment of intangibles for the year ended December 31, 2006.

Years Ended December 31, 2006 and 2005

Other Income and Expenses

	Year Ended December 31,
	2006 Restated			2005			Change 2006 vs. 2005			% Change 2006 vs. 2005
	(in thousands)
Gain on sale of investments	$	11,260		$	—			11,260		NM
Interest and other income		7,948			7,582			366			4.8	%
Interest expense		(2,608	)		—			(2,608	)	NM
Equity in losses of MSV		(30,079	)		(25,059	)		(5,020	)		20.0	%
Minority interests in losses of TerreStar Networks		20,655			3,263			17,392			533.0	%
Minority interests in losses of TerreStar Global		654			—			654		NM
Discontinued operations		(30,422	)		(89,866	)		59,444			-66.1	%

NM:	Not Meaningful

Gain on Sale of Investments: The gain on sale of investments increased by $11.3 million for the year ended December 31, 2006 as compared to the same period in 2005. In October 2006, we sold 3.6 million SkyTerra shares in the open market. As a result, we recognized a gain of $11.3 million for the year ended December 31, 2006.

Interest and Other Income: Interest and other income increased in 2006, as compared to 2005 as a result of increased cash balances primarily due to increased cash balances throughout the year and an increase in the rate of return on our invested balances.

Interest Expense: Interest expense in 2006, related entirely to our Senior Secured Notes issued in November, 2006.

Equity in Losses of Mobile Satellite Ventures: Effective May 1, 2002 we were required to reflect our equity share of the losses of MSV. We recorded equity in losses of MSV of $30.1 million and $25.1 million for the years ended December 31, 2006 and 2005. The MSV losses for the year ended December 31, 2006 are our 48.84% share for the period January 1 through September 24, 2006 and our 19.1% share of MSV’s losses for the period September 25 through December 31, 2006. The MSV losses for the year ended December 31, 2005 are our 38.60% share for the period January 1 through February 8, 2005 and 48.84% share of MSV’s losses for the period February 9 through December 31, 2005. Our equity in losses of MSV increased in 2006 as MSV’s expenditures on its next generation network increased.

Minority Interest in Losses of TerreStar Networks: For the year ended December 31, 2006, we recorded approximately a $56.5 million net loss for TerreStar Networks. The $20.7 million minority interest in TerreStar Networks represents the 39.4% to 30.8% investment in TerreStar Networks that was not owned by us throughout 2006.

Minority Interest in Losses of TerreStar Global: For the year ended December 31, 2006, we recorded approximately a $2.9 million net loss for TerreStar Global. The $0.7 million minority interest in TerreStar Global represents the 32.3% to 22.9% investment in TerreStar Global that was not owned by us throughout 2006.

Discontinued Operations: Discontinued operations include revenues from our DataTac and iMotient networks of $5.6 million for 2006, as compared to $13.8 million for 2005. Loss from discontinued operations decreased $59.4 million for the comparative year, primarily due to $36.2 million of lower impairment charges to our 800 MHz frequencies, $4.8 million in lower telecommunications and site lease costs related to our base stations, $8.6 million in lower depreciation and amortization expenses as a result of a reduced number of base stations and lower frequency value, $14.4 million less in asset disposals due to the base stations taken out of service in 2005, $5.7 million less of network rationalization restructuring expense and approximately $2.3 million of reduced selling, general and administrative costs. These decreases were partially offset by lower revenues of $8.2 million and an increase in non-cash stock compensation expense of approximately $4.4 million as a result of the vesting of all outstanding employee stock options upon the closing of the asset sale transaction.

Liquidity and Capital Resources

In assessing our liquidity, we monitor and analyze our cash on-hand, after-tax liquidation value of our investment securities, and our operating and capital expenditure commitments. Our principal liquidity needs are to meet our working capital requirements, operating expenses and capital expenditure obligations. Based on our current business plan, we believe that we have sufficient liquidity required to conduct operations through December 31, 2008 and into the first quarter of 2009. The Company will likely face a cash deficit in the first quarter of 2009 unless it obtains additional capital. The Company cannot guarantee that financing sources will be available or available on favorable terms.

Our principal sources of liquidity consist of our existing cash on hand, the cash proceeds of recently completed capital raising transactions, and our recently secured $100 million Credit Agreement. As of December 31, 2007, including restricted cash; we had $92 million of cash on hand. After giving effect to the net proceeds from the offering of the newly issued TerreStar Notes, Exchangeable Notes, and the Credit Agreement, which were completed on February 5, 2008; as well as the sale of SkyTerra common stock on February 6, 2008, we have approximately $459 million of liquidity resources available to fund operations.

Our principal short-term liquidity needs will depend on: (i) The successful and timely completion of our satellite system construction contracts; (ii) the development of certain related ground infrastructure; (iii) the design and development of our first generation handset and chipset; and (iv) the initial roll-out of our terrestrial network. As of December 31, 2007, we had contractual obligations of $341 million due within one year, consisting of approximately $173 million related to our satellite system, $160 million related our handset, chipset, and terrestrial network, and $8 million for operating leases. We have the ability to preserve cash by deferring certain operating and capital expenditures related to the deployment of our satellite and terrestrial network into future periods. We have identified in excess of $100 million of these contractual obligations that can be eliminated or deferred beyond 2008.

Our principal long-term liquidity needs are to fund the deployment and expansion of our terrestrial network, the design of our second generation handset and chipset, and orbital incentive payments related to our satellite contracts. In addition, we will need funds for working capital purposes, which we anticipate will grow as our operations expand. As of December 31, 2007, we had aggregate contractual payment obligations of approximately $753 million, consisting of approximately $186 million for the TerreStar Networks’ satellites, approximately $21 million for our operating leases in Reston, Virginia, Lincolnshire, Illinois, Richardson Park, Texas, data centers, site hosting agreements and approximately $546 million for obligations related to the build out of our terrestrial network. However, we have identified in excess of $400 million of these contractual obligations that can be eliminated or deferred. We intend to fund our long-term liquidity needs related to operations and ongoing network deployment through proceeds from the sale of investment securities, the incurrence of indebtedness, equity financings or a combination of these potential sources of liquidity. Although we believe that these sources will provide sufficient liquidity 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 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.

Historically, we have relied on external funding through the issuance of debt and equity securities to fund operations. The existing indentures relating to our outstanding debt securities contain covenants that may impact our liquidity needs or limit our ability to incur future indebtedness. Specifically, the indentures governing our Exchangeable Notes and Credit Agreement, which were completed in early February 2008, require certain shareholder approvals by late July 2008 or we may be forced to accelerate repayment of the notes.

As part of the closing conditions of the sales of the Exchangeable Notes, we obtained the requisite shareholder consents to approve the required corporate actions in connection with the foregoing transactions from Harbinger and the other institutional investors who purchased the notes. As of February 7, 2008 Harbinger and such institutional investors who were also our shareholders held 53.4% of our common shares. We believe that such shareholder approval will be effective on or before the July 23, 2008 milestone date.

Summary of Cash Flows:

	Year Ended December 31,
	2007			2006 Restated
	(in thousands)
Net cash used in Operating Activities	$	(119,162	)	$	(42,228	)
Net cash used in Investing Activities		(246,172	)		(126,445	)
Cash flows from Financing Activities:
Net proceeds from issuance of debt and equity securities		506,708			218,246
Repayments of the Senior Secured Notes		(200,000	)		—
Dividends paid on Series A and B Cumulative Convertible Preferred Stock		(13,086	)		(21,446	)
Debt and Equity issuance costs and other charges		(14,458	)		(6,245	)
Purchase of treasury stock		—			(6,791	)
Net cash provided by Financing Activities		279,164			183,764
Net cash provided by (used in) continuing operations		(86,170	)		15,091
Net cash used in discontinued operating activities		(28	)		(18,435	)
Net cash provided by (used in) discontinued investing activities		3,667			(4,515	)
Net cash provided by (used in) discontinued operations		3,639			(22,950	)
Net decrease in cash and cash equivalents		(82,531	)		(7,859	)
Cash and Cash Equivalents, beginning of period	��	171,665			179,524
Cash and Cash Equivalents, end of period	$	89,134		$	171,665

Operating Activities

Net cash used in operating activities totaled $119.2 million for the year ended December 31, 2007 as compared to $42.2 million for the same period in 2006. The $77.0 million increase in net cash used in operating activities is primarily due to an increase of $23.4 million in consulting fees related to engineering, marketing and systems development, an increase of $32.5 million in research and development, and an increase of $13.0 million in salaries and benefits.

Investing Activities

Net cash used for investing activities for the year ended December 31, 2007 totaled $246.2 million as compared to $126.4 million for the same period in 2006. The increase of $119.8 million in net cash used for investing activities was primarily attributable to capital expenditures related to the satellite construction and equipment for our Dallas laboratory.

Financing Activities

Net cash provided by financing activities totaled $279.2 million for the twelve months ended December 31, 2007 as compared to $183.8 million for the same period in 2006. The increase of $95.4 million in net cash provided by financing activities is primarily a result of the issuance of TerreStar Notes for $500.0 million in 2007 and $200 million in 2006 offset by our repayment of the $200.0 million Senior Secured Notes which were issued in November 2006.

Discontinued Operations

Net cash provided from discontinued operations for the twelve months ended 2007 was $3.6 million attributable to the release of restricted cash related to the asset sale between TerreStar Corporation and GeoLogic which occurred in September 2006.

Debt Obligations

On February 14, 2007, TerreStar Networks issued $500.0 million aggregate principal amount of Senior Secured PIK Notes due 2014 (the “TerreStar Notes”) pursuant to an Indenture (the “Indenture”), dated as of February 14, 2007, among TerreStar Networks, as issuer, the guarantors from time to time party thereto (the “Guarantors”) and U.S. Bank National Association, as trustee.

The TerreStar Notes bear interest from the date of issue 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. The TerreStar Notes are scheduled to mature on February 15, 2014.

On August 15, 2007, $37.7 million of interest was converted into additional TerreStar Notes in accordance with the Indenture agreement. As of December 31, 2007, the carrying value of the TerreStar Notes was $568.0 million including accrued interest.

Contractual Cash Obligations

As of December 31, 2007, TerreStar Corporation had no outstanding debt or preferred stock obligations, other than obligations with respect to the repayment of its Series A and B Preferred Stock. If not converted or repaid, the entire preferred stock amount of $408.5 million will be due on April 15, 2010. On April 15, 2007, TerreStar Corporation paid the remaining portion of the dividends that were required to be placed in escrow. Additional dividend payments after April 15, 2007, will be due bi-annually in April and October, payable at TerreStar Corporation’s option in cash (at a 5.25% annual interest rate) or common stock (at a 6.25% annual interest rate) 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. We anticipate paying the Series A dividend in cash and the Series B in common stock until such time that the Series A litigation is resolved and we satisfy the conditions required to pay the Series A dividend in common stock.

The Company leases office space and equipment under operating leases expiring through 2012.

Our corporate headquarters is located in Reston, Virginia. We lease approximately 45,000 square feet of office space for which the lease terms expire in 2009 and 2011. Additionally, we lease approximately 1,066 square feet of office space in Washington, District of Columbia for which the lease term expires in 2008 and includes a one year renewal option. We lease our network operations center and engineering laboratory facility located in Richardson Park, Texas, totaling 31,031 square feet under a lease term that expires in 2012 and includes two five-year renewal options. In addition, we lease our network testing facility located in Salt Lake City, Utah, totaling approximately 7,000 square feet of office and warehouse space under a lease term that expires in 2012. We also lease approximately 67,000 square feet of office space in Lincolnshire, IL, our former corporate headquarters, for which the lease term expires in 2010. We currently sublease approximately 18,000 square feet of office space in Lincolnshire for which the sublease terms expire in 2008 and 2010. For the years ended December 31, 2007, 2006 and 2005, the income related to the sublease agreements represented $0.2 million, zero and zero, respectively. Approximately 49,000 square feet of office space in Lincolnshire is currently underutilized capacity. We plan to sublease the underutilized space in the future as demand develops.

Rent expense represented $2.9 million, $1.2 million and $1.3 million for the years ended December 31, 2007, 2006 and 2005, respectively. Rent expense is recognized on a straight-line basis over the term of the lease agreement. Future lease obligations under the aforementioned lease agreements are more fully described in the table below.

The following are contractual commitments as of December 31, 2007:

	TOTAL		< 1 yr		1 - 3 yrs		3 - 5 yrs		5+ yrs
	(in thousands)
TerreStar Networks Satellites	$	186,596	$	172,412	$	14,184	$	—	$	—
Operating Leases		20,864		7,683		9,131		3,666		384
Network Equipment and Services		545,709		160,476		207,887		177,346		—
	$	753,169	$	340,571	$	231,202	$	181,012	$	384

Other

On August 16, 2005, Highland Equity Focus Fund, L.P., Highland Crusader Offshore Partners, L.P., Highland Capital Management Services, Inc., and Highland Capital Management, L.P., affiliates of James Dondero (the “Dondero Affiliates”), a former director of the Company, filed a lawsuit in Dallas County, Texas, (the “Rescission Litigation”), against us challenging the validity of the Series A Preferred Stock on the basis of the confusion regarding the voting rights of our Series A Preferred Stock and seeking rescission of their purchase of shares of Series A Preferred Stock. These entities acquired 90,000 shares of Series A Preferred Stock for a purchase price of $90.0 million in the April 2005 private placement. Later, the Dondero Affiliates amended their suit to assert other grounds for rescission and damages. On November 30, 2007, the court granted TerreStar Corporation’s motion for summary judgment and dismissed the suit. The Dondero Affiliates have appealed the dismissal. We intend to vigorously contest the Dondero Affiliates’ efforts to reinstate the rescission litigation through the appeal process.

On February 1, 2008, the same four of Mr. Dondero’s Highland affiliates who filed the Rescission Litigation filed suit against TerreStar Corporation in the Commercial Division of the Supreme Court of the State of New York. In this most recent suit, the Dondero Affiliates contend that the September 2005 exchange offer by virtue of which TerreStar Corporation exchanged TerreStar Corporation’s outstanding Series A Preferred Stock for a new class of Series B Preferred Stock caused the occurrence of a Senior Security Trigger Date, supposedly requiring the Company to issue a Senior Security Notice entitling the Dondero Affiliates to redeem their Series A Preferred Stock. The Company intends to vigorously defend this action.

Please see Part I, Item 3—“Legal Proceedings”.

Off-Balance Sheet Financing

As of December 31, 2007, we did not have any material off-balance sheet arrangements as defined in Item 303(a)(4)(ii) under Regulation S-K.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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


	By:	/s/ Neil L. Hazard
		Neil L. Hazard
		Executive Vice President, Chief Financial Officer

	Date: May 12 , 2008

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities as of May 12 , 2008.

/s/ Jeffrey W. Epstein		President
Jeffrey W. Epstein		(principal executive officer)

/s/ Neil Hazard		Executive Vice President, Chief Financial Officer
Neil Hazard		(principal financial officer)

*		Director
David Andonian

*		Director
Eugene Davis

*		Director
William Freeman

*		Director
Jacques Leduc

*		Director
David B. Meltzer

*		Director
Dean Olmstead

*		Director
David Rayner

* By Power of Attorney.

EXHIBIT INDEX

31.5	-	Certification of the principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.6	-	Certification of the principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32	-	Certification of the principal financial officer and principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Terrestar Inactive 10-K/A2007 FY Annual report (amended)