SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2002
Commission file number 0-23044

MOTIENT 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.)

300 Knightsbridge Parkway
Lincolnshire, IL 60069
847-478-4200
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (847) 478-4200

Securities registered pursuant to Section 12(b) of the
Act: None Securities registered pursuant to Section
12(g) of the Act:
(a) Common stock, $0.01 par value per share
(b) Warrants to purchase common stock, par value $0.01 per
share, exercisable until May 1, 2004
(Title of class)

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

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 amendments to
this Form 10-K. Yes [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

The aggregate market value of shares of common stock held by non-affiliates at
June 30, 2003 was approximately $53,062,931.

Indicate by check mark whether registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes [ ] No [X]

Number of shares of common stock outstanding at March 10, 2004: 25,245,777

DOCUMENTS INCORPORATED BY REFERENCE

None

TABLE OF CONTENTS

Page

PART I

Introductory Note 3
Cautionary Note Regarding Forward-Looking Statements 6
Item 1. Business 7
Item 2. Properties 44
Item 3. Legal Proceedings 45
Item 4. Submission of Matters to a Vote of Security Holders 46

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 47
Item 6. Selected Financial Data 50
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 54
Item 8. Financial Statements and Supplementary Data 92
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 92

PART III

Item 10. Directors and Executive Officers of the Registrant 93
Item 11. Executive Compensation 96
Item 12. Stock Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters 102
Item 13. Certain Relationships and Related Transactions 105
Item 14. Controls and Procedures 112

PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K 117

Signatures
Financial Statements

PART I
------

INTRODUCTORY NOTE
-----------------

This annual report on Form 10-K relates to the year ended December 31, 2002. We
did not file a report on Form 10-K for this period previously because we have
only recently completed our financial statements for this period.

As previously disclosed in our current reports on Form 8-K dated August 19,
2002, November 14, 2002, March 14, 2003, August 6, 2003, November 4, 2003 and
February 12, 2004 we were not able to complete our financial statements for the
year ended December 31, 2002 and for the quarters ended June 30, 2002 and
September 30, 2002 until we resolved the appropriate accounting treatment with
respect to certain transactions that occurred in 2000 and 2001. We initiated a
review of the appropriate accounting treatment for these transactions following
the appointment of PricewaterhouseCoopers LLP, or PricewaterhouseCoopers, as our
independent auditors in July 2002. The transactions in question involved the
formation of and certain transactions with Mobile Satellite Ventures LP, or MSV,
in 2000 and 2001 and the sale of certain of our transportation assets to Aether
Systems, Inc. in 2000.

In November 2002 we initiated a process to seek the concurrence of the staff of
the Securities and Exchange Commission with respect to our conclusions of the
appropriate accounting for these matters. This process was completed in March
2003. The staff of the SEC did not object to certain aspects of our prior
accounting with respect to the MSV and Aether Systems transactions, but did
object to other aspects of our prior accounting for these transactions. For a
description of the material differences between our original accounting
treatment with respect to the MSV and Aether Systems transactions and the
revised accounting treatment that we concluded is appropriate as a result of
this process, please see our current report on Form 8-K dated March 14, 2003 and
Note 2, "Significant Accounting Policies - Restatement of Financial Statements,"
of notes to the consolidated financial statements herein.

On March 2, 2004, we dismissed PricewaterhouseCoopers as our independent
auditors effective immediately. The audit committee of Motient's board of
directors approved the dismissal of PricewaterhouseCoopers. As noted above,
PricewaterhouseCoopers was previously appointed to audit Motient's consolidated
financial statements for the period May 1, 2002 to December 31, 2002, and, by
its terms, such engagement was to terminate upon the completion of services
related to such audit. PricewaterhouseCoopers has not reported on Motient's
consolidated financial statements for such period or for any other fiscal
period. The audit committee appointed Ehrenkrantz Sterling & Co. LLC to replace
PricewaterhouseCoopers to audit Motient's consolidated financial statements for
the period ending May 1, 2002 to December 31, 2002. For further details, please
see the amendment to our current report on Form 8-K/A filed with the SEC on
March 9, 2004 and "Business - Recent Developments - Accounting and Auditing
Matters."

We recently completed our financial statements as of and for the twelve months
ended December 31, 2002, which are included in this report. These financial
statements give effect to the accounting treatment with respect to the MSV and
Aether Systems transactions that was agreed to be appropriate as a result of the
above-described process. In addition, as a result of the our re-audit of the
years ended December 31, 2000 and 2001 performed by our current independent
accounting firm, Ehrenkrantz Sterling & Co. LLC, certain additional financial
statement adjustments were proposed and accepted by us for the periods noted
above (See Note 2, "Significant Accounting Policies" of notes to the
consolidated financial statements). This report contains audited financial
results for the period January 1, 2002 to April 30, 2002, May 1, 2002 to
December 31, 2002 and for the years ended December 31, 2000 (restated) and
December 31, 2001 (restated). All of these periods have been audited by
Ehrenkrantz Sterling & Co. LLC (see Note 16, "Subsequent Events," of notes to
the consolidated financial statements).

Concurrently with the filing of this report, we are also filing our quarterly
reports on Form 10-Q for the quarters ended June 30, 2002 and September 30, 2002
and an amended quarterly report on Form 10-Q/A for the quarter ended March 31,
2002. Such reports also include financial statements that give effect to the
accounting treatment with respect to the MSV, Aether Systems transactions and
certain additional financial statement adjustments discussed above. The 2002 and
2001 comparative quarterly financial statements provided in each report have
been restated and have been reviewed by Ehrenkrantz Sterling & Co. LLC.

There have been a number of significant developments regarding Motient's
business, operations, financial condition, liquidity and outlook subsequent to
December 31, 2002. Information regarding such matters is contained in this
report under the caption "Item 1 -- Business -- Recent Developments" and in Note
16, "Subsequent Events," of notes to the consolidated financial statements, as
well as in our other reports that are being filed concurrently with this report.
We urge you to read our quarterly reports on Form 10-Q for the quarters ended
June 30, 2002 and September 30, 2002 and the Form 10-Q/A for the quarter ended
March 31, 2002 and our reports and filings with the SEC filed after the date
hereof for more information regarding recent developments and current matters.

On January 10, 2002, we filed for protection under Chapter 11 of the Bankruptcy
Code. Our Amended Joint Plan of Reorganization was filed with the United States
Bankruptcy Court for the Eastern District of Virginia on February 28, 2002. The
plan was confirmed on April 26, 2002, and became effective on May 1, 2002. In
the consolidated financial statements provided herein, all results for periods
prior to May 1, 2002 are referred to as those of the "Predecessor Company" and
all results for periods including and subsequent to May 1, 2002 are referred to
as those of the "Successor Company". Due to the effects of the "fresh-start"
accounting, results for the Predecessor Company and the Successor Company are
not comparable (See Note 2, "Significant Accounting Policies" of notes to the
consolidated financial statements).

References in this annual report to "Motient" and "we" or similar or related
terms refer to Motient Corporation and its wholly-owned subsidiaries together,
unless the context of such references requires otherwise.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
----------------------------------------------------

This annual report on Form 10-K contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. All statements regarding
our expected financial position and operating results, our business strategy and
our financing plans are forward-looking statements. These statements can
sometimes be identified by our use of forward-looking words such as "may",
"will", "anticipate", "estimate", "expect", "project", or "intend". These
forward-looking statements reflect our plans, expectations and beliefs and,
accordingly, are subject to certain risks and uncertainties. We cannot guarantee
that any of such forward-looking statements will be realized.

Statements regarding factors that may cause actual results to differ materially
from those contemplated by such forward-looking statements, or cautionary
statements, include, among others, those under the captions "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Overview" and "Risk Factors," and elsewhere in this report, including in
conjunction with the forward-looking statements included in this report. All of
our subsequent written and oral forward-looking statements (or statements that
may be attributed to us) are expressly qualified in their entirety by the
cautionary statements referred to above and contained elsewhere in this report.
You should carefully review the risk factors described in our other filings with
the SEC from time to time, including our quarterly reports on Form 10-Q which
will be filed in the future, as well as our other reports and filings with the
SEC.

Our forward-looking statements are based on information available to us today,
and we will not update these statements. Our actual results may differ
significantly from the results discussed.

Item 1. Business.
- -----------------

Overview

We are a nationwide provider of two-way, wireless mobile data services and
mobile Internet services. Our customers use our network and applications for
email messaging and enterprise data communications services, enabling
businesses, mobile workers and consumers to transfer electronic information and
messages and access corporate databases and the Internet. Our network is
designed to offer a broad array of wireless data services, such as:

o two-way mobile Internet services, including our eLink(SM) wireless
email service and BlackBerry(TM) by Motient wireless email, that
provide users integrated wireless access to a broad range of corporate
and Internet email and Internet-based information;

o telemetry systems that connect remote equipment, such as wireless
point-of-sale terminals, with a central monitoring facility; and

o mobile data and fleet management systems used by large field service
organizations.

Our eLink service is a two-way wireless email device and electronic organizer
that uses our terrestrial network. We provide our eLink brand two-way wireless
email service to customers accessing email through corporate servers, Internet
service providers, mail service provider accounts and paging network suppliers.
We also offer a BlackBerryTM by Motient solution specifically designed for large
corporate accounts operating in a Microsoft(R) Exchange and Lotus Notes(R)
environment. BlackBerryTM is a popular wireless email solution developed by
Research In Motion Ltd. and is being provided on the Motient(R) Network under an
agreement with Research In Motion. Motient has been providing terrestrial
wireless services to customers for several years, using a network that possesses
four key design attributes:

o two-way communication;

o superior in-building penetration;

o user mobility; and

o broad nationwide coverage.

As of March 10, 2004, Motient's fully-deployed terrestrial wireless two-way data
network covers a geographic area populated by more than 220 million people and
is comprised of over 1,400 base stations that provide service to 520 of the
nation's largest cities and towns, including virtually all metropolitan
statistical areas. Motient is in the process of rationalizing its network (See
"Management's Discussion & Aanalysis - Cost Reduction Actions"). As of December
31, 2002, there were approximately 262,000 user devices registered and 174,000
devices with active usage on Motient's network. As of December 31, 2001 and
2000, there were approximately 250,600 user devices and 206,000 user devices,
respectively, registered on Motient's network.

In addition to selling messaging services that use our own network, we are a
national premier dealer for T-Mobile USA and an authorized agent for Verizon
Wireless. Under our agreements with these providers, we sell nationwide network
subscriptions for T-Mobile's third generation global system for mobile
communications/general packet radio service, or GSM/GPRS, wireless voice and
data service, and for Verizon Wireless's third generation code division multiple
access/singular carrier radio transmission technology, or CDMA/1XRTT, wireless
voice and data service. These agreements allow us to sell and promote wireless
email and wireless Internet applications to enterprise accounts on networks with
greater capacity and speed than our own, and that are voice capable.

We are a Delaware corporation with our principal executive offices located at
300 Knightsbridge Parkway, Lincolnshire, Illinois 60069. Our telephone number is
(847) 478-4200.

Motient presently has six wholly-owned subsidiaries. Motient had a 25.5%
interest (on a fully-diluted basis) in MSV as of December 31, 2002. As of March
19, 2004, Motient's interest in MSV was 29.5% (on a fully-diluted basis). For
further details regarding Motient's interest in MSV, please see "Recent
Developments - Mobile Satellite Ventures LP". Motient Communications, Inc. owns
the assets comprising Motient's core wireless business, except for Motient's FCC
licenses, which are held in a separate subsidiary, Motient License Inc. Motient
License was formed on March 16, 2004, as part of Motient's amendment of its
credit facility, as a special purpose wholly-owned subsidiary of Motient
Communications that holds all of the FCC licenses formerly held by Motient
Communications. A pledge of the stock of Motient License, along with the other
assets of Motient Communications, secures borrowings under the term credit
facility, and a pledge of the stock of Motient License secures, on a second
priority basis, borrowings under our vendor financing facility with Motorola.
For further details regarding the formation of Motient License, please see
"Recent Developments - Credit Facility". Our other four subsidiaries hold no
material operating assets other than the stock of other subsidiaries and
Motient's interests in MSV. On a consolidated basis, we refer to Motient
Corporation and its six wholly-owned subsidiaries as "Motient."

Recent Developments

Cost Reduction Initiatives

During the fourth quarter of 2002 and the first quarter of 2003, we renegotiated
several of our key vendor and customer arrangements in order to reduce recurring
expenses and improve our liquidity position. In some cases, we were able to
negotiate a flat rate reduction for continuing services provided to us by our
vendors or a deferral of payable amounts, and in other cases we renegotiated the
scope of services provided in exchange for reduced rates or received
pre-payments for future services. For more information on our negotiations with

certain vendors and customers, please see "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Overview and Introduction --
Cost Reduction Actions."

Since December 31, 2002, we have taken a number of steps to continue to reduce
our operating and capital expenditures in order to lower our cash burn rate. In
March 2003, we reduced our total staffing levels from approximately 197 to 166.
On July 15, 2003, we substantially completed the transfer of our headquarters
from Reston, Virginia to Lincolnshire, Illinois, where we already had a facility
which houses our main operations. In February 2004, we reduced our staffing
levels from approximately 166 to 112, a reduction of approximately 32.5% of our
then-remaining workforce.

Effective January 30, 2004, we hired CTA to serve as "Chief Restructuring
Entity" and advise us on various ways to greatly reduce our cash operating
requirements. CTA's engagement is expected to last approximately six months. For
further details regarding CTA's engagement, please see "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Overview and
Introduction - CTA Arrangements."

Credit Facility

On January 27, 2003, our wholly-owned subsidiary, Motient Communications, closed
a $12.5 million term credit agreement with a group of lenders, including several
of our existing stockholders. In the credit agreement, the lenders made
commitments to lend Motient Communications up to $12.5 million. In connection
with the closing of the credit agreement, we issued warrants to the lenders to
purchase, in the aggregate, 3,125,000 shares of our common stock. The exercise
price for the warrants is $1.06 per share. The warrants were immediately
exercisable upon issuance and have a term of five years. As of December 31,
2003, we had borrowed $4.5 million under this facility. In December 2003, we
paid a commitment fee to the lenders of approximately $113,000.

For the monthly periods ended April 2003 through December 2003, we reported
events of default under the terms of the credit facility to the lenders. In each
period, the lenders waived these events of default. There can be no assurance
that we will not have to report additional events of default or that the lenders
will continue to provide waivers in such event. Borrowing availability under the
credit agreement terminated on December 31, 2003.

On March 16, 2004, we entered into an amendment to the credit facility, which
extended the borrowing availability period until December 31, 2004. As part of
this amendment, we provided the lenders a pledge of all of the stock of a
newly-formed special purpose subsidiary of Motient Communications, Motient
License, which holds all of our FCC licenses formerly held by Motient
Communications. On March 16, 2004, in connection with the execution of the
amendment to our credit agreement, we issued warrants to the lenders to
purchase, in the aggregate, 2,000,000 shares of our common stock. The number of
warrants will be reduced to an aggregate of 1,000,000 shares of common stock if,
within 60 days after March 16, 2004, we obtain at least $7.5 million of

additional debt or equity financing. The exercise price of the warrants is $4.88
per share. The warrants were immediately exercisable upon issuance and have a
term of five years. The warrants will be valued using a Black-Scholes pricing
model and will be recorded as a debt discount and will be amortized as
additional interest expense over three years, the term of the related debt. The
warrants are also subject to a registration rights agreement. Under such
agreement, we agreed to register the shares underlying the warrants upon the
request of a majority of the warrantholders, or in conjunction with the
registration of other common stock of the Company. We will bear all the expenses
of such registration. We were also required to pay a commitment fees to the
lenders of $320,000 which accrued into the principal balances of the credit
facility at closing. These fees will be recorded on our balance sheet and will
be amortized as additional interest expense over three years, the term of the
related debt. The credit facility and the amendment impose certain conditions on
our ability to make draws, including compliance with certain financial and
operating covenants. For further details, please see "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources -- Term Credit Facility."

Mobile Satellite Ventures LP

In January 2003, MSV's application with the Federal Communications Commission,
or FCC, with respect to MSV's plans for a new generation satellite system
utilizing ancillary terrestrial components, or ATCs, was approved by the FCC.
The order granting such approval, which we refer to as the ATC Order, requires
that licensees, including MSV, submit a further application with the FCC to seek
approval of the specific system incorporating the ATCs that the licensee intends
to use. MSV has filed an application for ATC authority, pending the FCC's final
rules and regulations. MSV has also filed a petition for reconsideration with
respect to certain aspects of the ATC Order. In January 2004, certain
terrestrial wireless providers petitioned the U.S. Court of Appeals for the
District of Columbia to review the FCC's decision to grant ATC to satellite
service providers. Oral arguments in this case are scheduled for May 2004.

On August 21, 2003, two investors in MSV (excluding Motient) invested an
additional $3.7 million in MSV in exchange for Class A preferred units of
limited partnership interests in MSV. MSV used the proceeds from this investment
to repay other indebtedness that is senior in its right of repayment to
Motient's promissory note. Under the terms of the amended and restated
investment agreement, these investors also had the option of investing an
additional $17.6 million in MSV by December 31, 2003; however, if, prior to this
time, the FCC had not issued a decision addressing MSV's petition for
reconsideration with respect to the ATC Order, the option will be automatically
extended to March 31, 2004. As of the closing of the initial investment on
August 21, 2003, Motient's percentage ownership of MSV is approximately 46.5% on
an undiluted basis, 32.6% on an "as converted" basis, giving effect to the
conversion of all outstanding convertible notes of MSV, and 29.5% on a fully
diluted basis, assuming certain other investors fully exercise their option to
make the $17.6 million additional investment in MSV as a result of the FCC ATC
approval process.

The proceeds from the additional $17.6 million investment described above, if
consummated, will be used to repay certain outstanding indebtedness of MSV, and,

subject to certain conditions and priorities with respect to payment of other
indebtedness, a portion of such proceeds will be used to partially repay the
$15.0 million note issued by MSV to Motient. This note will also be subject to
prepayment in certain other circumstances where MSV receives cash proceeds from
equity, debt or asset sale transactions. There can be no assurance that any such
transactions will occur, nor can there be any assurance regarding the timing of
such events or that MSV would have the ability, at that time, to pay amounts due
under the note. Any additional investment in MSV and any related repayment of
the $15.0 million note may not occur before Motient needs the funds from the
repayment of such note.

In November 2003, we engaged Communication Technology Advisors LLC, or CTA, to
perform a valuation of our equity interests in MSV as of December 31, 2002.
Concurrent with CTA's valuation, Motient reduced the book value of its equity
interest in MSV from $54 million (inclusive of our $2.5 million convertible note
from MSV) to $41 million as of May 1, 2002 to reflect certain preference rights
on liquidation of certain classes of equity holders in MSV. Including its note
receivable from MSV ($13 million at May 1, 2002), the book value of Motient's
aggregate interest in MSV as of May 1, 2002 was reduced from $67 million to
$53.9 million. Also, as a result of CTA's valuation of MSV, we determined that
the value of our equity interest in MSV was impaired as of December 31, 2002.
This impairment was deemed to have occurred in the fourth quarter of 2002.
Motient reduced the value of its equity interest in MSV by $15.4 million as of
December 31, 2002. Including its notes receivable from MSV ($19 million at
December 31, 2002), the book value of Motient's aggregate interest in MSV was
$32 million as of December 31, 2002. For additional information concerning this
valuation process, please see Note 2, "Significant Accounting Policies," of
notes to the consolidated financial statements.

Stock Option Plan

In March 2003, our board of directors approved the reduction in the exercise
price of all outstanding stock options from $5.00 per share to $3.00 per share.
The repricing will require that all options be accounted for in accordance with
variable plan accounting, which requires that the value of these options are
measured at their intrinsic value and any change in that value be charged to the
income statement each quarter based on the difference (if any) between the
intrinsic value and the then-current market value of the common stock.

In July 2003, our compensation and stock option committee, acting pursuant to
our 2002 stock option plan, granted 26 employees options to purchase an
aggregate of 495,000 shares of our common stock at a price of $5.15 per share.
One-half of each option grant vests with the passage of time and the continued
employment of the recipient, in three equal increments, on the first, second and
third anniversary of the date of grant. The other half of each grant will either
vest or be rescinded based on Motient's performance in 2003. The compensation
and stock option committee of our board of directors has not yet made a
determination regarding whether the 2003 performance criteria were satisfied. If
vested and not exercised, the options will expire on the 10th anniversary of the
date of grant.

Accounting and Auditing Matters

In March 2003, we obtained the concurrence of the staff of the SEC with respect
to our conclusions regarding the appropriate accounting relating to the
formation of and certain transactions with MSV in 2000 and 2001 and the sale of
some of our transportation assets to Aether Systems in 2000. The staff of the
SEC did not object to some aspects of our prior accounting with respect to the
MSV and Aether Systems transactions, but did object to other aspects of our
prior accounting for these transactions. For a description of the material
differences between our original accounting treatment with respect to these
transactions and the revised accounting treatment that we concluded is
appropriate as a result of this process, please see our current report on Form
8-K dated March 14, 2003 and Note 2, "Significant Accounting Policies -
Restatement of Financial Statements," of notes to the consolidated financial
statements.

On April 17, 2003, we dismissed PricewaterhouseCoopers as our independent
auditors, effective upon the completion of services related to the audit of our
consolidated financial statements for the period May 1, 2002 to December 31,
2002. On April 25, 2003, our board of directors approved the engagement of
Ehrenkrantz Sterling & Co. LLC as our independent auditors to (i) re-audit our
consolidated financial statements for the fiscal years ended December 31, 2000
and 2001 and (ii) audit our consolidated financial statements for the period
from January 1, 2002 to April 30, 2002 and the fiscal year that ended on
December 31, 2003.

On March 2, 2004, Motient dismissed PricewaterhouseCoopers as its independent
auditors. The audit committee of Motient's board of directors approved the
dismissal of PricewaterhouseCoopers. PricewaterhouseCoopers was previously
appointed to audit Motient's consolidated financial statements for the period
May 1, 2002 to December 31, 2002, and, by its terms, such engagement was to
terminate upon the completion of services related to such audit.
PricewaterhouseCoopers has not reported on Motient's consolidated financial
statements for such period or for any other fiscal period. On March 2, 2004, the
audit committee engaged Ehrenkrantz Sterling & Co. LLC as Motient's independent
auditors to audit Motient's consolidated financial statements for the period May
1, 2002 to December 31, 2002.

As discussed in the Introductory Note and in more detail in Note 2, "Significant
Accounting Policies," of notes to the consolidated financial statements, the
2000 and 2001 comparative financial statements provided herein have been
restated and have been re-audited by our current independent auditing firm,
Ehrenkrantz Sterling & Co. LLC. The 2000 and 2001 financial information and the
2002 financial results for the period January 1, 2002 to April 30, 2002 included
herein are referred to as Predecessor Company results and the financial results
for the period May 1, 2002 to December 31, 2002 included herein are referred to
as Successor Company results.

Management Changes

On July 16, 2002, W. Bartlett Snell resigned as Director, senior vice president
and chief financial officer.

On July 16, 2002, the board of directors elected Patricia Tikkala to the
position of vice president, chief financial officer and treasurer. On March 20,
2003, Patricia Tikkala resigned as vice president and chief financial officer.

On January 17, 2003, David Engvall resigned as senior vice president, general
counsel and secretary.

On March 18, 2003, Brandon Stranzl resigned from the board of directors.

On April 17, 2003, the board of directors elected Christopher W. Downie to the
position of vice president, chief financial officer and treasurer. Mr. Downie
had previously been a consultant with CTA working on Motient matters, since May
2002.

On March 18, 2004 the board of directors elected Christopher W. Downie to the
position of executive vice president, chief financial officer and treasurer, and
designated Mr. Downie as the Company's principal executive officer.

On June 20, 2003, Jared Abbruzzese resigned his position as chairman of the
board. Steven Singer was elected chairman of the board and a new director, Peter
D. Aquino, was elected to the board. Mr. Aquino is a senior managing director of
CTA.

On February 10, 2004, our Board of Directors and Walter V. Purnell, Jr. mutually
agreed to end his employment as president and chief executive officer of Motient
and all of its wholly owned subsidiaries. Concurrently, Mr. Purnell resigned as
a director of such entities and of MSV and all of its subsidiaries.

On February 18, 2004, Daniel Croft, senior vice president, marketing and
business development, and Michael Fabbri, senior vice president, sales, were
relieved of their duties as part of a reduction in force.

Product Offerings

On March 1, 2003, Motient entered into a national premier dealer agreement with
T-Mobile USA, and on May 21, 2003 Motient entered into an authorized agency
agreement with Verizon Wireless. These agreements allow Motient to sell each of
T-Mobile's third generation global system for GSM/GPRS, network subscriptions
and Verizon's third generation CDMA/1XRTT network subscriptions nationwide.
Motient is paid for each subscriber put onto either network. Each agreement
allows Motient to continue to actively sell and promote wireless email and
wireless Internet applications to enterprise accounts on networks with greater
capacity and speed, and that are voice capable.

On June 26, 2003, Research In Motion provided us with a written End of Life
Notification for the RIM 857 wireless handheld device. This means that Research
In Motion will no longer produce this model of handheld device. The last date
for accepting orders was September 30, 2003, and the last date for shipment of
devices was January 2, 2004. Motient has implemented a RIM 857 "equivalent to
new" program and expects that there will be sufficient returned RIM 857s to
satisfy demand for the foreseeable future. During the year ended December 31,
2002, a majority of our equipment revenues were attributable to sales of the RIM
857 device, and we estimate that approximately 35% of our monthly recurring
service revenues were derived from wireless messaging using RIM 857 devices.

Regulatory Matters

On March 14, 2002, the FCC adopted a notice of proposed rulemaking exploring
options and alternatives for improving the spectrum environment for public
safety operations in the 800 MHz band. This notice of proposed rulemaking was
issued by the FCC after a "white paper" proposal was submitted to the FCC by
Nextel Communications Inc. in November 2001 addressing largely the same issues.
In its white paper, Nextel proposed that certain of its wireless spectrum in the
700 MHz band, lower 800 MHz band and 900 MHz band be exchanged for spectrum in
the upper 800 MHz band and in the 2.1 GHz band. Nextel's proposal addressed the
problem of interference to public safety agencies by creating blocks of
contiguous spectrum to be shared by public safety agencies. Since the notice of
proposed rulemaking was issued, Motient has been actively participating with
other affected licensees, including Nextel, to reach agreement on a voluntary
plan to re-allocate spectrum to alleviate interference to public safety
agencies. On December 24, 2002, a group of affected licensees, including
Motient, Nextel, and several other licensees, submitted a detailed proposal to
the FCC for accomplishing the re-allocation of spectrum over a period of several
years. These parties have also been negotiating a mechanism by which Nextel
would agree to reimburse, up to $850 million, costs incurred by affected
licensees in relocating to different parts of the spectrum band pursuant to the
rebanding plan.

On February 10, 2003, approximately 60 entities filed comments to the proposal
submitted to the FCC on December 24, 2002. Several of the comments addressed the
issue of comparable 800 MHz spectrum for economic area, or EA, licensees and the
need to avoid recreating the 800 MHz interference situation when Nextel
integrates its 900 MHz spectrum into its integrated dispatch enhanced network,
or iDEN. Reply comments, which were due February 25, 2003, included comments
urging the FCC to conduct its own analysis of the adequacy of the interference
protection proposed in the plan. In mid-April 2003, the FCC's Office of
Engineering and Technology, or OET, sent a letter to several manufacturers
requesting additional practical, technical and procedural solutions or
information that may have yet to be considered. Responses were due May 8, 2003.
Upon reviewing the filed comments, OET has indicated that other technical
solutions were possible and were being reviewed by the FCC. To date, no formal
action has been taken by the FCC. We cannot assure you that our operations will
not be affected by this proceeding.

Legal Matters

A former employee who was discharged as part of a reduction in force in July
2002 asserted a claim for a year's pay and attorney's fees under a change of
control agreement this employee had with Motient. This claim was subject to
binding arbitration. Although Motient believed that it had substantial defenses
on the merits, on July 11, 2003, Motient was informed that the arbitrator ruled
in the employee's favor. In August 2003, Motient made a $200,000 payment to this
employee for the disputed pay and related benefits costs and legal fee
reimbursement.

UPS Revenue

United Parcel Service, Inc., our largest customer as of December 31, 2002, has
substantially completed its migration to next generation network technology, and
its monthly airtime usage of our network has declined significantly. There are
no minimum purchase requirements under our contract with UPS and the contract
may be terminated by UPS on 30 days' notice at which point the remaining
prepayment would be required to be repaid. While we expect that UPS will remain
a customer for the foreseeable future, over time we anticipate that the bulk of
UPS' units will migrate to another network. As of January 31, 2004, UPS had
approximately 4,300 registered units with active usage on Motient's network.

Until June 2003, UPS had voluntarily maintained its historical level of payments
to mitigate the near-term revenue and cash flow impact of its recent and
anticipated continued reduction in network usage. However, beginning in July
2003, the revenues and cash flow from UPS declined significantly. Also, due to a
separate arrangement entered into in December 2002 under which UPS prepaid for
network airtime to be used by it in 2004, we do not expect that UPS will be
required to make any cash payments to us in 2004 for service to be provided in
2004. If UPS does not make any cash payments to us in 2004, our cash flows from
operations in 2004 will decline, and our liquidity and capital resources could
be materially and negatively affected. We are planning a number of initiatives
to offset the loss of revenue and cash flow from UPS, including the following:

o further reductions in our employee and network infrastructure costs;

o growth in new revenue from our recently-announced carrier
relationships with Verizon Wireless and T-Mobile, under which we will
be selling voice and data services on each carrier's next generation
wireless networks as a master agent;

o increased revenue growth from our various telemetry applications and
initiatives; and

o enhancements to our liquidity, which are expected to involve the sale
of certain frequency assets, such as the recently announced sales of
certain specialized mobile radio, or SMR, licenses to Nextel.

Further Lane

On July 29, 2003, we entered into a letter agreement with Further Lane Asset
Management Corp. under which Further Lane is providing investment advisory
services to us. In connection with the execution of this letter agreement, we
issued Further Lane a warrant to purchase 200,000 shares of our common stock.
The exercise price of the warrant is $5.10 per share. The warrant is immediately

exercisable upon issuance and has a term of five years. The fair value of the
warrant was estimated at $927,000 using a Black-Scholes model. In September
2003, we recorded a non-cash consultant compensation charge of $927,000 based on
this valuation.

Sale of SMR Licenses to Nextel Communications, Inc.

On July 29, 2003, our wholly-owned subsidiary, Motient Communications, entered
into an asset purchase agreement with Nextel, under which Motient Communications
sold to Nextel certain of its SMR licenses issued by the FCC for $3.4 million.
The closing of this transaction occurred on November 7, 2003. On December 9,
2003, Motient Communications entered into a second asset purchase agreement,
under which Motient Communications will sell additional licenses to Nextel for
$2.75 million. In February, 2004, we closed the sale of licenses covering
approximately $2.2 million of the purchase price, and we expect to close the
sale of approximately one-half of the remaining licenses by April 2004. The
transfer of the other half of the remaining licenses has been challenged at the
FCC by a third-party. While we believe, based on the advice of counsel, that the
FCC will ultimately rule in our favor, we cannot assure you that we will
prevail, and, in any event, the timing of any final resolution is uncertain.
None of these licenses are necessary for Motient's future network requirements.
We have and expect to continue to use the proceeds of the sales to fund our
working capital requirements and for general corporate purposes. The lenders
under Motient Communications' term credit agreement have consented to the sale
of these licenses.

History

Motient was formed in 1988 under the name "American Mobile Satellite
Corporation" to construct, launch and operate a mobile satellite services system
to provide a full range of mobile voice and data services via satellite to land,
air and sea-based customers subject to local regulation. During 1995, Motient
successfully launched its first satellite and initiated commercial voice
service. In late 1996, Motient expanded its mobile data business through the
acquisition of Rockwell International Corporation's dual mode mobile messaging
and global positioning and monitoring service for commercial trucking fleets.

In March 1998, Motient acquired Motient Communications, formerly ARDIS Company,
from Motorola and combined the ARDIS terrestrial-based business with Motient's
satellite-based business to offer a broad range of integrated end-to-end
wireless solutions through two network configurations, either a "satellite-only"
service network or a "multi-mode" terrestrial and satellite service network.

Following operation of a joint network for three years, Motient decided to base
its business primarily on the terrestrial network and make the satellite
available to a joint venture. Motient's satellite and related assets and
business were sold on November 26, 2001 to MSV. For more information regarding
this sale, please see the discussion under the caption "Mobile Satellite
Ventures Transaction," below.

In connection with Motient's acquisition of Motient Communications from Motorola
in March 1998, Motient's subsidiary, Motient Holdings Inc., issued $335.0
million of 12.25% senior notes due 2008.

Motient's working capital and operational financing historically was derived
primarily from internally generated funds and, prior to 2002, from borrowings
under two bank loan facilities, a $100.0 million term loan facility and a $100.0
million revolving credit facility. Borrowings under the bank facility were
guaranteed by Hughes Electronics Corporation, Singapore Telecommunications Ltd.
and Baron Capital Partners L.P. The indebtedness under the bank facility was
also guaranteed by Motient and certain of its subsidiaries and was secured by
certain assets of Motient. Motient also was required to reimburse the bank
guarantors for any payments made by the bank guarantors pursuant to their
guarantees.

XM Radio

As of December 31, 2000, we had an equity interest of approximately 33.1% (or
21.3% on a fully diluted basis) in XM Satellite Radio Holdings Inc., a public
company that launched its satellite radio service at the end of 2001, and we
controlled XM Radio through our board of director membership and common stock
voting rights. As a result, all of XM Radio's results for the period from July
7, 1999 (the date we acquired 100% voting interest of XM Radio) through December
31, 2000 have been included in our consolidated financial statements. Prior to
July 7, 1999, our investment in XM Radio was accounted for pursuant to the
equity method of accounting.

In January 2001, pursuant to FCC approval to cease control of XM Radio, the
number of directors that we appointed to XM Radio's board of directors was
reduced to less than 50% of XM Radio's directors, and we converted a portion of
our super-voting Class B common stock of XM Radio to Class A common stock. As a
result, we ceased to control XM Radio, and as of January 1, 2001, we accounted
for our investment in XM Radio pursuant to the equity method of accounting.
During 2001, we disposed of all of our remaining shares of XM Radio and ceased
to hold any interest in XM Radio as of November 19, 2001.

Sale of Transportation Business

for the assets received at closing. Motient recognized an additional $8.3
million gain in the fourth quarter of 2001 when the additional $10 million of
proceeds were released from escrow. The $1.7 million difference between the
proceeds received and the gain recognized is a result of pricing modifications
that were made at the time of the release of the escrow related to network
capacity agreements. Motient deferred recognition of the $15 million perpetual
license payment over a four year period, which represents the life of the
network airtime agreement that Motient entered into with Aether Systems at the
time of the closing of the asset sale.

Concurrently with the closing of the asset sale, we and Aether Systems entered
into two long-term, prepaid network airtime agreements with a total value of $20
million, of which $5 million was paid at closing, pursuant to which Aether
Systems agreed to purchase airtime on our satellite and terrestrial networks.
Aether Systems also became an authorized reseller of our eLink and BlackBerry TM
by Motient wireless email service offerings.

Mobile Satellite Ventures Transaction

On June 29, 2000, we formed a joint venture subsidiary, MSV, with certain other
parties, in which we owned 80% of the membership interests. Through November
2001, MSV used our satellite network to conduct research and development
activities. The remaining 20% interests in MSV were owned by three investors
unrelated to Motient. However, the minority investors had the right to
participate in certain business decisions that were made in the normal course of
MSV's business. Therefore, in accordance with Emerging Issues Task Force Issue
No 96-16, "Investor's Accounting for an Investee When the Investor Has a
Majority of the Voting Interest but the Minority Shareholder or Shareholders
Have Certain Approval or Veto Rights", our investment in MSV has been recorded
for all periods presented in the consolidated financial statements included in
this annual report pursuant to the equity method of accounting.

On November 26, 2001, Motient sold the assets comprising its satellite
communications business to MSV. In consideration for its satellite business
assets, Motient received the following:

o a $24.0 million cash payment in June 2000;

o a $41.0 million cash payment paid at closing on November 26, 2001, net
of $4.0 million retained by MSV related to our sublease of real estate
from MSV; and

o a five-year, $15.0 million note.

In this transaction, TMI Communications and Company Limited Partnership, or TMI,
a Canadian satellite services provider, also contributed its satellite
communications business assets to MSV. In addition, Motient purchased a $2.5
million convertible note issued by MSV as part of this transaction, and certain
other investors, including a subsidiary of Rare Medium, purchased a total of
$52.5 million of MSV convertible notes. On August 12, 2002, we purchased an
additional $957,000 of MSV convertible notes. At December 31, 2002 and 2003, on
a fully diluted basis, Motient owned approximately 25.5% and 29.5%,

respectively, of the equity of MSV, assuming certain other investors fully
exercise their option to make additional investments in MSV as a result of the
FCC ATC approval process. Please see "--Recent Developments--Mobile Satellite
Ventures LP" and Note 2, "Significant Accounting Policies - Restatement of
Financial Statements," and Note 16, "Subsequent Events," of notes to the
consolidated financial statements, for further information concerning MSV.

Motient's Chapter 11 Filing

Events Leading to Chapter 11 Filing

During 2001, Motient undertook a variety of transactions to address its
liquidity needs.

In mid-2001, Motient borrowed an aggregate of $50.0 million from Rare Medium
Group, Inc., or Rare Medium. Motient's obligation to repay this loan was secured
by its aggregate pledge of five million shares of Class A common stock of XM
Radio then held by Motient.

In May 2001, Motient signed a definitive merger agreement with Rare Medium
through which Motient would have acquired 100% of the ownership of Rare Medium,
using a combination of convertible preferred stock of Motient and nine million
shares of Class A common stock of XM Radio then held by Motient.

In September 2001, Motient laid off approximately 25% of its workforce and
canceled certain of its product initiatives, in order to preserve cash.

In October 2001, Motient and Rare Medium terminated their merger agreement. One
of the principal reasons Motient pursued the Rare Medium merger was to gain
access to cash held by Rare Medium. As a result of the termination of the Rare
Medium merger, Motient did not receive the anticipated cash from that
transaction that would have allowed it to fund certain debt and interest payment
obligations. On October 12, 2001, Motient repaid approximately $26.1 million of
principal and accrued interest owed to Rare Medium by delivering to Rare Medium
five million shares of stock of XM Radio.

On October 1, 2001, Motient announced that it would not make the $20.5 million
semi-annual interest payment due on its 12.25% senior notes due 2008 issued by
Motient Holdings. On November 26, 2001, the trustee declared all amounts owed
under the senior notes immediately due and payable.

In November 2001, the agent for the bank lenders under Motient's bank financing
declared all loans immediately due and payable, due to the existence of several
events of default. The bank lenders sought payment in full from the guarantors
for the accelerated loan obligations, and the guarantors repaid all such loans
on November 14, 2001 in the amount of approximately $97.6 million. As a result,
Motient had a reimbursement obligation to the guarantors in the amount of $97.6
million, which included accrued interest and fees.

On November 19, 2001, Motient sold 500,000 shares of XM Radio common stock owned
by it for aggregate proceeds of $4.8 million. Motient used such proceeds to
reduce the amount of its reimbursement obligation to the guarantors of its bank
financing by this amount. Also on November 19, 2001, Motient delivered all of
the remaining 9,257,262 shares of XM Radio common stock owned by it to the
guarantors of its bank financing in full satisfaction of the entire remaining
amount of Motient's reimbursement obligations to the bank guarantors.

Pursuit of restructuring plan under protection of bankruptcy code - conversion
of outstanding debt

In late 2001, Motient determined that the continued viability of its business
required restructuring its highly leveraged capital structure. In October 2001,
Motient retained Credit Suisse First Boston Corporation, or CSFB, as financial
advisors to assist it in restructuring its debt.

In January 2002, Motient and an informal committee of its senior noteholders
reached an agreement in principle with respect to the primary terms of a Plan of
Reorganization of Motient and its principal subsidiaries. Accordingly, on
January 10, 2002, Motient and certain of its subsidiaries filed for protection
under Chapter 11 of the Bankruptcy Code with the United States Bankruptcy Court
for the Eastern District of Virginia. The Bankruptcy Court confirmed the Plan of
Reorganization on April 26, 2002, and the Plan became effective on May 1, 2002.

Upon effectiveness of the Plan, the ownership of Motient changed significantly,
with creditors becoming the new owners of substantially all of the equity of
Motient. Under the Plan, holders of the senior notes exchanged the principal
amount of their notes and all accrued interest thereon for shares of our common
stock. In addition, certain of our trade creditors received shares of our common
stock in settlement of their claims. All then outstanding shares of our
pre-reorganization common stock and all unexercised options and warrants were
cancelled. Holders of our pre-reorganization common stock received warrants to
purchase an aggregate of approximately 1,496,512 shares of common stock. The
warrants may be exercised to purchase shares of our common stock at a price of
$.01 per share, will expire May 1, 2004 and will not be exercisable unless and
until the average closing price of our common stock for ninety consecutive
trading days is equal to or greater than $15.44 per share. Also pursuant to our
Plan of Reorganization, we issued to Evercore Partners LP, financial advisor to
the creditors' committee in our reorganization, a warrant to purchase up to
343,450 shares of common stock, at an exercise price of $3.95 per share. The
warrant has a term of five years.

Upon effectiveness of the Plan, our certificate of incorporation and bylaws were
amended and restated. Our restated certificate of incorporation authorizes
Motient to issue up to 100 million shares of common stock and up to 5 million
shares of preferred stock.

On the effective date of our Plan of Reorganization, a new board of directors of
Motient consisting of seven members was established. Effective May 1, 2002, we

adopted "fresh-start" accounting in accordance with the American Institute of
Certified Public Accountants Statement of Position 90-7, "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code". We determined that the
selection of May 1, 2002 versus April 26, 2002 for the "fresh-start" date was
more convenient for financial statement reporting purposes and that the results
for the period from April 26, 2002 to May 1, 2002 were immaterial to our
consolidated financial statements. Under "fresh-start" accounting, a new entity
has been deemed created for financial reporting purposes.

Further details regarding the Plan of Reorganization are contained in our
disclosure statement with respect to the Plan of Reorganization, which was filed
as Exhibit 99.2 to our current report on Form 8-K dated March 4, 2002.

Effects of Chapter 11 Filing

As a result of our Chapter 11 bankruptcy filing, we saw a slower adoption rate
for our services during the first quarter of 2002. In a large customer
deployment, the upfront cost of the hardware can be significant. Because the
hardware generally is usable only on Motient's network, certain customers
delayed adoption while we were in Chapter 11. In an effort to accelerate
adoption of our services, we did, in selected instances in the first quarter of
2002, offer certain incentives for adoption of our services that were outside of
our customary contract terms, such as extended payment terms or temporary
hardware rental. None of these offers were accepted; therefore, there was no
impact to our financial statements.

Additionally, certain of our trade creditors required either deposits for future
services or shortened payment terms; however, none of these deposits or changes
in payment terms were material, and none of our key suppliers have ceased to do
business with us as a result of our reorganization.

For a fuller discussion of certain effects of the Chapter 11 filing on Motient's
business and results of operations, please read "Management's Discussion and
Analysis of Financial Condition and Results of Operations" elsewhere in this
report.

Motient's Business Strategy

Motient's objective is to increase revenues by continuing to penetrate the large
markets for mobile Internet data communications services and wireless telemetry
applications while keeping costs under control. To meet these objectives, we
intend to:

Leverage Distribution Resources of Strategic Resellers. To penetrate target
markets without significant direct sales and marketing expenses, Motient has
signed a number of strategic alliances with industry leaders. Motient intends to
leverage the marketing and distribution resources and large existing customer
bases of these resellers to address significantly more potential customers than
Motient would be able to address on its own. Motient has a roster of resellers
for its wireless email services, including SkyTel Communications, Inc.,

Metrocall Wireless, Inc., Aether Systems (which purchased our transportation
assets in November 2000), Research In Motion and Earthlink, Inc. In the market
for small to medium-sized business users, Motient has signed a sales agent
agreement with CDW Computer Centers, Inc. In the telemetry market, Motient has
entered into agreements with a number of device manufacturers, resellers and
software vendors to develop and offer a variety of customer-driven telemetry
applications, including heating, ventilation and air conditioning, or HVAC,
system monitoring, energy monitoring, office and vending machine automation and
wireless point-of-sale applications. Motient plans to continue to seek strategic
distribution channels that will enable it to more fully penetrate its existing
markets and access potential new markets on an incremental basis. In addition,
in vertical markets Motient intends to exploit cross-selling opportunities using
some of its existing large corporate customers.

Work With Vendors to Develop Less Expensive and More Functional User Devices to
Address Competition and Increase Demand for its Services. Motient plans to
continue to work with vendors to develop new generations of user devices and
applications that combine improved functionality and convenience at a lower
price. Motient plans to continue to incorporate inexpensive, off the shelf
software or free software in its services. Motient believes that lower price
points will help accelerate the acceptance and adoption of its services in its
traditional markets and will also enable Motient to better penetrate its
targeted new wireless markets. By working with suppliers and by making strategic
software and hardware investments, Motient has lowered the total cost of
ownership of its products. At the same time, Motient has improved the
functionality of its devices and made them smaller and more convenient.

Leverage Motient's Expertise in Selling and Provisioning Complete Data Solutions
for Enterprise Customers. A key strategic asset of Motient is its highly
experienced sales and technical support team. This team is qualified to sell
complete data solutions that may include network services that utilize more than
Motient's core terrestrial network. Motient recently announced relationships
with two major carriers that would enable Motient to broaden its network
services offerings to include a variety of next generation solutions, including
both voice and data solutions.

Focus Growth Efforts on Telemetry Applications. Telemetry applications have
several key attributes that make them an efficient use of the Motient network.
They typically have small bandwidth requirements and can be designed to utilize
the network on a 24 hours per day, 7 days per week basis, thus smoothing loading
requirements and optimally using our existing capacity. We believe that
telemetry market segments are poised for significant growth and that this growth
can be accommodated efficiently on the existing Motient network. The growth of
the telemetry market could also allow for some excess capacity to be removed
from our network, which would reduce our operating costs.

Develop New Wireless Applications to Increase Demand and Revenue Per Subscriber.
Motient intends to exploit the market potential of its wireless network by
working with value-added resellers and major e-business solutions providers to
develop additional innovative wireless applications and content-based services,
including future enhancements to its eLink wireless email service. As market

acceptance and demand for wireless email grows, Motient believes users will
demand an increasing variety of Internet-based content and services. Motient
currently offers content-based services for use with its eLink service provided
by GoAmerica, OracleMobile, Inc., Novarra, Inc. and Neomar, Inc.

Enhance the Technical Advantages of Motient's Network. Motient has been
providing terrestrial wireless services to customers for several years, using
the nation's largest, most fully deployed terrestrial wireless two-way data
network. Unlike many competitors who are in the process of building limited
city-wide or regional terrestrial networks, Motient has deployed a national
network that is well tested and reliable, and its future network expansion
requirements are expected to arise primarily from increased customer demand.
Motient believes that its terrestrial network provides key competitive
advantages, including:

o broad nationwide geographic coverage,

o guaranteed two-way message delivery and "always on" real-time data
communication and

o deep in-building penetration with superior performance characteristics
when compared with cellular-based architectures.

Motient also believes that its two-way messaging and wireless email products are
superior to currently available "two-way paging" services, based on the full,
two-way messaging capabilities that its network enables.

Rationalize Cost Structure & Improve Network Utilization. Motient plans to
rationalize its network infrastructure by focusing on market segments that are
most appropriate for the technology. We intend to focus on the telemetry markets
because we believe that a telemetry solution would enable us to grow our revenue
stream while also reducing the operating cost of our network because telemetry
applications are less demanding on our network.

Motient's Wireless Service Offerings

General

Motient's wireless services include Motient's eLink wireless email and
BlackBerry(TM) by Motient email. Motient targets its data applications to both
vertical and horizontal markets. Applications include wireless email, Internet
and Intranet access, fax, paging, peer-to-peer communications, asset tracking,
dispatch, point-of-sale and other telemetry applications. There are over 22
types of subscriber devices available from more than 17 manufacturers for use on
Motient's terrestrial network. These devices include Research In Motion handheld
devices, the MobileModem for use with Palm(TM) V series and IBM WorkPad
handhelds, ruggedized laptops, handheld digital assistants and wireless modems
for personal computers, or PCs. Motient has developed proprietary software and
has engaged a variety of other software firms to develop other "middleware," to
minimize its customers' development efforts in connecting their applications to

its network. Also, a number of off-the-shelf software packages enable popular
email software applications on Motient's network.

It is Motient's intent to broaden its product line through its agreements with
wireless carriers to resell data solutions on their next generation high-speed
networks. In doing so, we believe we will be able to enhance our sales
performance by offering enterprise customers a full array of technology
solutions that meet their needs, independent of the network.

In the field service market, long-standing customers such as International
Business Machines Corporation, or IBM, and Pitney Bowes, Inc. use Motient's
customized terrestrial data applications to enable their mobile field service
technicians to stay connected.

Motient's largest single terrestrial data application is in the package delivery
market. As of December 31, 2002, UPS has registered for service approximately
70,000 of its third generation package tracking devices on Motient's network
under a multi-year agreement. As of January 31, 2004, UPS had approximately
4,300 registered units active on Motient's network. For additional information
about our relationship with UPS, see "--Recent Developments--UPS Revenue" and
"-- Risk Factors - We generate a large part of our revenues and cash flows from
a small number of customers, and the loss of one or more key customers could
result in a significant reduction in revenues and cash flows."

eLink Wireless Email

Motient's eLink wireless email service provides mobile users with integrated
wireless access to a broad range of corporate and Internet email and personal
information management, or PIM, applications. Motient's eLink service can be
used on wireless handheld devices manufactured by Research In Motion, including
the RIM 850 and RIM 857 wireless handhelds. In addition, eLink can be used with
Palm V(TM) series and IBM WorkPad handhelds by using Motient's MobileModem, a
wireless modem that clips on to Palm V(TM) series and IBM WorkPad personal
digital assistants, or PDAs, to provide these devices with email and Internet
access via the Motient network. Motient currently offers two versions of eLink,
"eLink AgentSM" and "eLink MessengerSM". eLink Agent and eLink Messenger may
also be combined, offering users the functionality of both applications on a
single handheld device.

Users of Motient's eLink Agent service can send and receive email messages,
using their existing corporate or Internet email address, over Motient's
terrestrial network, as long as the user's email system is compliant with the
industry protocol known as post office protocol 3, or POP 3. Motient's eLink
service also features an Internet message access protocol 4, or IMAP 4,
solution, providing greater flexibility to customers by adding a more robust
Internet email application protocol. Outgoing mail sent from the device appears
to have come from the user's desktop PC. eLink synchronizes with a user's
desktop PC so that full calendar, task list and contact information can be
instantly swapped to and from the device. To address the security needs of
corporate customers, eLink Agent is also offered in a self-contained format so
that the corporate customer can install the network gateway software behind its
firewall on servers located on the customer's site.

Motient's eLink Messenger service assigns a unique email address (separate from
the user's corporate or Internet email address), allowing users to send and
receive wireless email messages independent of other email systems. In addition,
the Messenger service allows users to send faxes from their device, and the
device also functions as a pager. Messenger also enables users to synchronize
their device with calendar, task list and contact information from their desktop
PC.

BlackBerry(TM) by Motient

BlackBerry(TM) by Motient is a wireless solution specifically designed for
corporate environments using Microsoft Exchange. BlackBerry(TM) by Motient
operates on the Motient(R) Network and has substantially the same functionality
as Motient's eLink service, including wireless email, as well as a variety of
similar PIM functions and applications. BlackBerry(TM) integrates with Microsoft
Exchange email accounts. Motient also offers a version of BlackBerry(TM) that
integrates with the Lotus Notes email platform.

The BlackBerry(TM) desktop software installs and runs on the user's desktop PC.
It is an integrated suite of applications that provides organizer
synchronization, folder management tools, email filtering capabilities,
information backup utilities and an application loader.

BlackBerry(TM) is designed to provide a high level of security. Encryption
occurs between the handheld and corporate email system to ensure message
integrity. BlackBerry(TM) incorporates triple data encryption standard, or DES,
encryption technology to meet stringent corporate security guidelines for remote
email access.

Motient is authorized to resell BlackBerry(TM) by Motient pursuant to an
agreement with Research In Motion. Research In Motion also resells
BlackBerry(TM) by Motient on Motient's network through a variety of resellers
and value-added resellers. Motient also offers roaming services in Canada to its
eLink and BlackBerry(TM) by Motient customers through an agreement with the
Canadian network operator, Bell Mobility, a division of Bell Canada.

T-Mobile/Verizon Wireless

On March 2003, Motient entered into a national premier dealer agreement with
T-Mobile USA, and on May 21, 2003 Motient entered into an authorized agency
agreement with Verizon Wireless. These agreements allow Motient to sell each of
T-Mobile's third generation global system for GSM/GPRS network subscriptions and
Verizon's third generation CDMA/1XRTT network subscriptions nationwide. Motient
is paid for each subscriber put onto either network. Each agreement allows
Motient to continue to actively sell and promote wireless email and wireless
Internet applications to enterprise accounts on networks with greater capacity
and speed, and that are voice capable.

Telemetry

Motient has partnered with a variety of resellers, device manufacturers and
software vendors in the telemetry market. These resellers, device manufacturers
and software vendors integrate customer-specific devices and systems with
Motient's network to provide a wireless means of transmitting data from a fixed
or mobile site to a central monitoring facility. Applications include HVAC
system monitoring, wireless point-of-sale systems, energy monitoring, vending
and office machine automation and security/alarm monitoring.

Pricing of Services

Motient's customers are charged a monthly access fee. In addition to this access
fee, users pay for usage depending on the number of kilobytes of data
transmitted. Motient's pricing plans offer a wide variety of volume packaging
and discounts, consistent with customer demand and market conditions. Generally,
Motient reflects the addition of a subscriber unit upon the registration of a
unit on its network. In certain cases, primarily as it relates to strategic
resellers, a percentage of these subscriber units do not become revenue
producing for up to several months from initial registration on the network.
Motient is currently in the process of rationalizing its network (See
"Management's Discussion & Analysis - Cost Reduction Actions").

Motient's Customers

As of December 31, 2002, there were approximately 262,000 user devices
registered on Motient's network, and an established customer base of large
corporations in the following market categories:

Percentage of
Market Categories Total Units
----------------- -----------
Transportation and package delivery 35%
Field service 12
Telemetry and point of sale 12
Wireless internet or email 41
----------
Total 100%
====

For the year ended December 31, 2002, five customers accounted for approximately
47% of Motient's service revenue, with two of those customers, UPS and SkyTel,
each accounting for more than 10%. The loss of one or more of these customers,
or any event, occurrence or development, which adversely affects Motient's
relationship with one or more of these customers, could harm Motient's business.
As discussed in "Recent Developments," UPS has deregistered a substantial number
of its units as it migrates to another network provider for its next generation
solution. The contracts with these customers are generally multi-year contracts,
and the services provided pursuant to such contracts are generally customized
applications developed to work solely on Motient's network.

As of December 31, 2002, Motient's customer base included the following product
categories:

Product Categories Total Units
------------------ -----------
Wireless internet or email 41%
Package delivery, telemetry and other 59
-----------
Total 100%
====

Marketing and Distribution

Motient markets its wireless services through strategic distribution resellers
and its direct sales force.

Strategic Alliances and Resellers

To penetrate new wireless data markets with significant growth potential,
Motient has signed a variety of strategic alliances, including with industry
leaders. Motient intends to leverage the marketing and distribution resources
and large existing customer bases of these resellers to address significantly
more potential customers than Motient would be able to address on its own.
Motient has a roster of industry-leading resellers for its wireless email
services, including SkyTel, Metrocall, Aether Systems, Research In Motion and
Earthlink. Other alliances include:

o In the market for small to medium-sized business users, Motient has
signed a reseller agreement with CDW Computer Centers.

o Motient has teamed with Wynd Communications, Inc. to provide wireless
services for the hearing impaired.

o In the telemetry market, Motient has partnered with a number of device
manufacturers, resellers and software vendors to develop and offer a
variety of customer-driven telemetry applications. US Wireless
Corporation is a key partner in the wireless credit card processing
and point-of-sale segment, and USA Technologies, Inc. is developing
telemetry applications using Motient's network in the vending segment.

Motient is continuing to seek additional strategic distribution channels to help
Motient move forward with its plan to more fully penetrate its existing markets
and access potential new markets on an incremental basis.

Furthermore, Motient intends to broaden its product line by entering into
agreements with a number of wireless carriers to include their next generation
high speed data services, as well as voice, in Motient's product offerings. By
doing so, we believe that Motient would be able to market itself as a "one-stop
shop" for a full array of technology and product offerings, not just those
products operating on the Motient network.

Direct Sales Force

Motient has a direct sales force that is experienced in selling its various
wireless services. Motient's direct sales force is focused on the requirements

of business customers who need customized applications as well as promoting its
eLink and BlackBerry(TM) by Motient services to vertical markets. Motient's
corporate accounts group is focused on promoting its eLink wireless email
service to wirelessly enable enterprise-wide email systems for Fortune 500
accounts. Sales to corporate account targets generally require a sustained sales
and marketing effort lasting several months. Prior to making a buying decision,
a majority of the accounts exercise a due diligence process where competitive
alternatives are evaluated. Motient's employees often assist in developing
justification studies, application design support, hardware testing, planning
and training. In the wireless email area, Motient's internal sales force has
been key to its ability to convey customer feedback to its product management
team, enabling Motient to identify and develop new product and service features.

Motient's Network

Motient's wireless network is one of the largest two-way terrestrial data
networks in the United States, providing service to 520 of the nation's largest
cities and towns, including virtually all metropolitan statistical areas. The
network provides a wide range of mobile data services. Users of Motient's
network access it through subscriber units that may be portable, mobile or
stationary devices.

Subscriber units receive and transmit wireless data messages to and from
terrestrial base stations. Terrestrial messages are routed to their destination
via data switches that Motient owns, which connect to the public data network.

Motient's terrestrial network delivers superior in-building penetration,
completion rates and response times compared to other wireless data networks
through the use of a patented single frequency reuse technology developed by
Motorola. Single frequency reuse technology enables multiple base stations in a
given area to use the same frequency. As a result, a message sent by a
subscriber can be received by a number of base stations. This technology
contrasts with more commonly used multiple frequency reuse systems, which
provide for only one transmission path for a given message at a particular
frequency. In comparison with multiple frequency reuse systems, Motient's
technology provides superior in-building penetration and response times and
enables it to incrementally deploy additional capacity as required, instead of
in larger increments as required by most wireless networks.

Equipment and Supplier Relationships

Motient has contracts with a variety of vendors to supply end-user devices
designed to meet the requirements of specific end-user applications. Motient
continues to pursue enhancements to these devices that will result in additional
desirable features and reduced cost of ownership. Although many of the
components of its products are available from a number of different suppliers,
Motient relies on a relatively small number of key suppliers. The devices used
with Motient's services generally are subject to various product certification
requirements and regulatory approvals before they are delivered for use by its
customers.

Motient's eLink service can be used on wireless handheld devices manufactured by
Research In Motion, including the RIM 850 and RIM 857 wireless handhelds. In
addition, eLink can be used with Palm(TM) V series and IBM WorkPad handhelds by
using Motient's MobileModem, a wireless modem that clips on to Palm(TM) V series
and IBM WorkPad PDAs to provide these devices with email and Internet access via
the Motient Network. Research In Motion also manufactures modems designed to be
integrated into handheld field service terminals, telemetry devices, utility
monitoring and security systems and certain other computing systems. Motient's
supply arrangements with Research In Motion are not exclusive, and Research In
Motion manufactures similar hardware products for other companies, including
Cingular Wireless LLC, a principal competitor in the two-way wireless email
market segment. Please see Note 16, "Subsequent Events," of notes to the
consolidated financial statements and "--Recent Developments--Product Offerings"
for more information on Research In Motion and its products.

In addition to the messaging devices manufactured by Research In Motion, there
are currently over 21 other types of subscriber units available from
approximately 16 manufacturers that can operate on Motient's terrestrial
network. Examples of portable subscriber units include ruggedized laptop
computers, small external modems, handheld or palmtop "assistants" and pen based
"tablets."

Motient is also working with other device manufacturers and software developers
to bring its network services to other existing popular PDA and wireless email
platforms.

Hewlett-Packard Company provides the terrestrial network switching computers
under a multi-year lease that extends through 2004, while AT&T Corp. provides
network telecommunications services, including a nationwide wireline data
network, and leased sites which house regional switching equipment for Motient's
terrestrial network. Motient also has a relationship with AT&T as Motient's
vendor for switched inbound and outbound public switched telephone network
services.

The terrestrial network, and certain of its competitive strengths such as deep
in-building penetration, is based upon single frequency reuse technology.
Motorola holds the patent for the single frequency reuse technology. Motient has
entered into several agreements with Motorola under which Motorola provides
certain continued support for the terrestrial network infrastructure, and
ongoing maintenance and service of the terrestrial network base stations. There
can be no assurance that Motorola will continue in the long term to be active in
this business, or that Motorola will not enter into arrangements with Motient's
competitors, or that if it does, such arrangements would not harm Motient's
business.

Competition

The wireless communications industry is highly competitive and is characterized
by constant technological innovation. Motient competes by providing broad
geographic coverage, deep in-building penetration and demonstrated reliability.

These features distinguish Motient from the competition. Motient's wireless
solutions are used by businesses that need critical customer and operational
information in a mobile environment.

Motient offers multiple business lines and competes with a variety of service
providers, from small startups to Fortune 500 companies. Motient's competitors
include service providers in several markets--dedicated mobile data, personal
communications service, or PCS, and cellular, narrowband PCS/enhanced paging and
emerging technology platforms.

Employees

On December 31, 2002, Motient had 197 employees. On March 19, 2004, Motient had
approximately 111 employees. None of Motient's employees is represented by a
labor union. Motient considers its relations with its employees to be good.

Regulation

The terrestrial two-way wireless data network used in Motient's wireless
business is regulated to varying degrees at the federal, state and local levels.
Various legislative and regulatory proposals under consideration from time to
time by Congress and the FCC have in the past materially affected and may in the
future materially affect the telecommunications industry in general, and
Motient's wireless business in particular. The following is a summary of
significant laws, regulations and policies affecting the operation of Motient's
wireless business. In addition, many aspects of regulation at the federal, state
and local level currently are subject to judicial review or are the subject of
administrative or legislative proposals to modify, repeal, or adopt new laws and
administrative regulations and policies. Neither the outcome of these
proceedings nor their impact on Motient's operations can be predicted at this
time.

The ownership and operation of Motient's terrestrial network is subject to the
rules and regulations of the FCC, which acts under authority established by the
Communications Act of 1934, as amended, and related federal laws. Among other
things, the FCC allocates portions of the radio frequency spectrum to certain
services and grants licenses to and regulates individual entities using that
spectrum. Motient operates pursuant to various licenses granted by the FCC.

Motient is a commercial mobile radio service provider and therefore is regulated
as a common carrier. Motient must offer service at just and reasonable rates on
a first-come, first-served basis, without any unjust or unreasonable
discrimination, and Motient is subject to the FCC's complaint processes. The FCC
has decided not to apply or to withhold its right, at this time, to apply
numerous common carrier provisions of the Communications Act to commercial
mobile radio service providers. In particular, Motient is not subject to
traditional public utility rate-of-return regulation, and is not required to
file tariffs with the FCC.

The FCC's universal service fund supports the provision of affordable
telecommunications to high-cost areas and the provision of advanced
telecommunications services to schools, libraries, and rural health care
providers. Under the FCC's current rules, end-user revenues derived from the

sale of information and other non-telecommunication services and certain
wholesale revenues derived from the sale of telecommunications services are not
subject to universal service fund obligations. Based on the nature of its
business, Motient is currently not required to contribute to the universal
service fund. Current rules also do not require that Motient impute to its
contribution base retail revenues derived when it uses its own transmission
facilities to provide a service that includes both information service and
telecommunications components. There can be no assurances that the FCC will
retain the exclusions described herein or its current policy regarding the scope
of a carrier's contribution base. Motient may also be required to contribute to
state universal service programs. The requirement to make these state universal
service payments, the amount of which in some cases may be subject to change and
is not yet determined, may have a material adverse impact on the conduct of
Motient's business.

Motient is subject to the Communications Assistance for Law Enforcement Act, or
CALEA. Under CALEA, Motient must ensure that law enforcement agencies can
intercept certain communications transmitted over its networks. Motient must
also ensure that law enforcement agencies are able to access certain
call-identifying information relating to communications over Motient's networks.
The deadline for complying with the CALEA requirements and any rules
subsequently promulgated was June 30, 2002. Based on discussions with Federal
law enforcement agencies regarding the applicability of CALEA's provisions to
Motient, we do not believe that our network, which uses packet data technology,
is subject to the requirements of CALEA. At the suggestion of Federal law
enforcement agencies, we have developed an alternative methodology for
intercepting certain communications over our network for the purposes of law
enforcement surveillance. We believe this alternative methodology has
substantially the same functionality as the standards provided in CALEA. It is
possible that our alternative methodology may ultimately be found not to comply
with CALEA's requirements, or that our interpretation that CALEA does not apply
to our network may ultimately be found to be incorrect.

In addition, CALEA establishes a federal fund to compensate telecommunications
carriers for all reasonable costs directly associated with modifications
performed by carriers in connection with equipment, facilities and services
installed or deployed on or before January 1, 1995. For equipment, facilities
and services deployed after January 1, 1995, the CALEA fund is intended to
compensate carriers for any reasonable costs associated with modifications
required to make compliance "reasonably achievable." It is possible that all
necessary modifications will not qualify for this compensation and that the
available funds will not be sufficient to reimburse Motient. Therefore, the
requirement to comply with CALEA could have a material adverse effect on the
conduct of Motient's business.

Motient's FCC licenses are granted for a term of 10 years, subject to renewal.
For Motient's non-market-based licenses, or non-auction licenses, renewal is
granted in the ordinary course. Motient no longer holds any auction licenses.
All such licenses were sold in November 2003 to Nextel Communications and its
affiliates.

As a matter of general regulation by the FCC, Motient is subject to, among other
things, payment of regulatory fees and restrictions on the level of radio

frequency emissions of Motient's systems' mobile terminals and base stations.
Any of these regulations may have an adverse impact on the conduct of Motient's
business.

Motient's FCC licenses are subject to restrictions in the Communications Act
that (i) some FCC licenses may not be held by a corporation of which more than
20% of its capital stock is directly owned of record or voted by non-U.S.
citizens or entities or their representatives and (ii) no such FCC license may
be held by a corporation controlled by another corporation, referred to as
indirect ownership, if more than 25% of the controlling corporation's capital
stock is owned of record or voted by non-U.S. citizens or entities or their
representatives, if the FCC finds that the public interest is served by the
refusal or revocation of such license. However, with the implementation of the
Basic Telecommunications Agreement, negotiated under the auspices of the World
Trade Organization and to which the United States is a party, the FCC will
presume that indirect ownership interests in our FCC licenses in excess of 25%
by non-U.S. citizens or entities will be permissible to the extent that the
ownership interests are from World Trade Organization-member countries. If the
25% foreign ownership limit is exceeded, the FCC could take a range of potential
actions that could harm Motient's business.

Motient's terrestrial network consists of base stations licensed in the 800 MHz
business radio and specialized mobile radio services. The terrestrial network is
interconnected with the public switched telephone network.

The FCC's licensing regime in effect when the majority of authorizations used in
the terrestrial network were issued provided for individual, site-specific
licenses. The FCC has since modified the licensing process applicable to
specialized mobile radio licenses in the band. Specialized mobile radio licenses
are now issued by auction in wide-area, multi-channel blocks. The geographic
area and number of channels within a block vary depending on whether the
frequencies are in the so-called "upper 200" specialized mobile radio channels,
the "general category," or the "lower 80." In addition, wide-area auction
winners in the upper 200 have the right to relocate incumbent licensees to other
"comparable" spectrum. Auction winners in the general category and lower 80 do
not have these same relocation rights and must afford protection to incumbent
stations. Incumbent stations may not, however, expand their service areas.

Wide-area auction winners have substantial flexibility to install any number of
base stations including, in the case of the general category and lower 80
channels, base stations that operate on the same channels as incumbent
licensees. Motient was an incumbent in the upper 200 and remains an incumbent on
certain general category channels. Although the FCC requires general category
and lower 80 geographic licensees to protect incumbents from interference, there
is some concern that such interference may occur and that practical application
of the interference-protection rules may be uncertain.

Motient believes that it has licenses for a sufficient number of channels to
meet its current capacity needs on the terrestrial network. To the extent that
additional capacity is required, Motient may participate in other upcoming
auctions or acquire channels from other licensees.

Motient operates the terrestrial network under a number of waivers involving the
FCC's technical rules, including rules on station identification, for-profit use
of excess capacity, system loading and multiple station ownership. Several of
these waivers were first obtained individually by IBM and Motorola, which
operated separate wireless data systems until forming the ARDIS joint venture in
1990. The FCC incorporated a number of these waivers into its regulations when
it implemented Congress's statutory provision creating the commercial mobile
radio service classification. As of March 3, 1999, Motient completed its planned
construction of base stations for which extended implementation was granted by
the FCC in 1996.

On March 14, 2002, the FCC adopted a notice of proposed rulemaking exploring
options and alternatives for improving the spectrum environment for public
safety operations in the 800 MHz band. This notice of proposed rulemaking was
issued by the FCC after a "white paper" proposal was submitted to the FCC by
Nextel in November 2001 addressing largely the same issues. In its white paper,
Nextel proposed that some of its wireless spectrum in the 700 MHz band, lower
800 MHz band, and 900 MHz band be exchanged for spectrum in the upper 800 MHz
band and in the 2.1 GHz band. Nextel's proposal addressed the problem of
interference to public safety agencies by creating blocks of contiguous spectrum
to be shared by public safety agencies. Since the notice of proposed rulemaking
was issued, Motient has been actively participating with other affected
licensees, including Nextel, to reach agreement on a voluntary plan to
re-allocate spectrum to alleviate interference to public safety agencies. On
December 24, 2002, a group of affected licensees, including Motient, Nextel and
several other licensees, submitted a detailed proposal to the FCC for
accomplishing the re-allocation of spectrum over a period of several years.
These parties have also been negotiating a mechanism by which Nextel would agree
to reimburse costs, up to $850.0 million, incurred by affected licensees in
relocating to different parts of the spectrum band pursuant to the rebanding
plan.

On February 10, 2003, approximately 60 entities filed comments to the proposal
submitted to the FCC on December 24, 2002. Several of the comments addressed the
issue of comparable 800 MHz spectrum for EA, licensees and the need to avoid
recreating the 800 MHz interference situation when Nextel integrates its 900 MHz
spectrum into its iDEN. Reply comments, which were due February 25, 2003,
included comments urging the FCC to conduct its own analysis of the adequacy of
the interference protection proposed in the plan. In mid-April 2003, the FCC's
OET, sent a letter to several manufacturers requesting additional practical,
technical and procedural solutions or information that may have yet to be
considered. Responses were due May 8, 2003. Upon reviewing the filed comments,
OET has indicated that other technical solutions were possible and were being
reviewed by the FCC. To date, no action has been taken by the FCC. We cannot
assure you that our operations will not be affected by this proceeding.

Risk Factors

Our business is subject to a number of significant risks and uncertainties,
including the following:

We have undergone significant organizational restructuring and we face
substantial operational challenges.

We are not cash flow positive, and our prospects will depend on our ability to
control our costs while maintaining and improving our service levels.

As a result of capital constraints imposed on our business during and following
our reorganization, we have been involved in the process of reducing our
expenditures in a variety of areas, including a reduction in the number of our
employees and the closure of our Reston facility. We also have renegotiated
several of our key vendor and customer arrangements and continue to aggressively
pursue further vendor cost reductions when opportunities arise. We continue to
use more cash than we generate from operations. Our prospects will depend in
part on our ability to reduce operating costs further and operate more
efficiently, while maintaining and improving our service levels.

We will need additional liquidity to fund our operations.

We do not expect to begin to generate cash from operations in excess of our cash
operating costs until the first quarter of 2005, at the earliest. Even after we
begin to generate cash in excess of our operating expenses, we expect to require
additional funds to meet remaining interest obligations, capital expenditures
and other non-operating cash expenses. We currently anticipate that our funding
requirements through 2004 should be met through a combination of various
sources, including:

o cash on hand,

o net cash flow from operations,

o borrowings under our $12.5 million term credit facility,

o proceeds from the sale of certain frequency assets that are not
necessary for our future network requirements (See "Business--Recent
Developments--Sale of SMR Licenses to Nextel Communications, Inc."),
and

o proceeds realized through the sale of inventory relating to eLink and
BlackBerryTM.

An additional potential funding source is the repayment of a $15.0 million note
from MSV. We also own an aggregate of approximately $3.5 million of convertible

notes from MSV, which are mandatorily convertible into equity of MSV in certain
circumstances. For information about these notes and our transactions with MSV,
please see "Management's Discussion and Analysis of Results of Operations --
Mobile Satellite Ventures LP." There can be no assurance that the foregoing
sources of liquidity will provide sufficient funds in the amounts or at the time
that funding is required. In addition, if our ability to realize such liquidity
from any such source is delayed or the proceeds from any such source are
insufficient to meet our expenditure requirements as they arise, we will seek
additional equity or debt financing, although it is unlikely under current
conditions that such additional financing will be available on reasonable terms,
if at all. If we are not able to obtain other sources of funding or obtain
relief from our creditors, we may not be able to continue as a going concern.

We may not be able to meet our debt obligations, operating expenses, working
capital and other capital expenditures.

As of December 31, 2002, we had approximately $33.1 million of debt outstanding
(including capital leases, new notes with Rare Medium and CSFB and obligations
owed to Motorola and accrued interest thereon). In January of 2003, we secured a
$12.5 million credit facility of which we have drawn $4.5 million as of December
31, 2003. Some of these debt obligations have current interest and principal
requirements. As of December 31, 2002, $4.0 million of our debt obligations were
recorded as current liabilities. We cannot assure you that our operating cash
flow will be adequate to pay the principal and interest payments on this
indebtedness when due, as well as to fund all of our contemplated capital
expenditures. Some of these debt obligations also have certain minimum covenant
requirements.

Our $12.5 million term credit facility imposes certain conditions on our ability
to make draws, including compliance with certain financial and operating
covenants. We provided notices of default and received respective waivers for
our covenant requirements in the monthly periods ended April 2003 through
December 2003 under our term credit facility. We cannot assure you that our
operating results will be adequate to meet future minimum covenant requirements,
which could lead to events of default and acceleration of these debt
obligations. Please see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources--$12.5
Million Term Credit Facility" for more information on our debt covenant
compliance, defaults and waivers.

If we are not able to make required payments under our credit facility or other
debt obligations, the lenders thereunder could seek to accelerate such
obligations and take actions to seize collateral, any of which could render us
insolvent.

We believe that the implementation of our business strategy is crucial to our
future financial viability and the ability to generate the cash flow necessary
to pay principal and interest, and our working capital and capital expenditure
needs. Although we believe our business strategy will help improve our financial
viability and our cash flow, we cannot assure you that the financial resources
available to us will be sufficient for us to achieve profitability.

We will continue to incur significant losses.

If we do not become profitable, we could have difficulty obtaining funds to
continue our operations. We have incurred net losses every year since we began
operations. These losses are due to the costs of developing and building our
network and the costs of developing, selling and providing products and
services. Although we have significantly reduced our losses, we will continue to
have losses in the future.

We generate a large part of our revenues and cash flows from a small number of
customers, and the loss of one or more key customers could result in a
significant reduction in revenues and cash flows; UPS has recently deregistered
nearly all of its units on our network.

For the year ended December 31, 2002, five customers accounted for approximately
47% of our service revenue, with two of those customers each accounting for more
than 10%. None of these significant customers are obligated to purchase any
minimum quantity of airtime, service or hardware from us. There can be no
assurance that the revenue generated from our largest customers will continue in
future periods. We may lose certain revenues from major customers due to churn
and migration to alternative technologies. The loss of one or more of our key
customers, a material reduction in such customers' use of our network, or any
other event, occurrence or development which adversely affects our relationship
with one or more of these customers, could harm our business by reducing revenue
and reducing net cash flow from operations.

In addition, UPS, our largest customer as of December 31, 2002, has
substantially completed its migration to next generation network technology, and
its monthly airtime usage of our network has declined significantly. While we
expect that UPS will remain a customer for the foreseeable future, over time we
expect that the bulk of UPS' units will migrate to another network. Our service
contract with UPS may be terminated by UPS on 30 days' notice at which point any
remaining prepayment would be required to be repaid. Until June 30, 2003, UPS
had voluntarily maintained its historical level of revenue to mitigate the
near-term revenue and cash flow impact of its reduced network usage. However,
beginning in July 2003, the revenues and cash flow from UPS declined
significantly. In addition, in December 2002 we entered into a separate
agreement with UPS under which UPS made a significant prepayment for network
airtime service to be provided beginning January 1, 2004. The prepayment will be
credited against airtime services provided to UPS beginning January 1, 2004,
until the prepayment is fully credited. Based on the current level of network
airtime usage by UPS, we do not expect that UPS will be required to make any
cash payments to us in 2004 for service provided during 2004. If UPS does not
make any cash payments to us in 2004, our cash flows from operations in 2004
will decline, and our liquidity and capital resources could be materially and
negatively affected. For a further discussion of developments regarding UPS and
our plans to offset the loss of revenue and cash flows from this customer,
please see "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

Our growth has been curtailed by funding constraints.

We have significantly decreased the amount that we are spending on the
maintenance and growth of our operations, network and subscriber base due to our
liquidity constraints. We have taken a number of steps to continue to reduce our
operating and capital expenditures in order to lower our cash burn rate;
however, our capital resources currently are not sufficient to permit us to fund
the launch of new products and services. Failure to generate or raise sufficient
funds may require us to delay or abandon some of our expenditures, which could
harm our business and competitive position.

Our internal controls may not be sufficient to ensure timely and reliable
financial information.

During the course of the fiscal 2002 year-end closing process and subsequent
audit of our financial statements for the eight month period ended December 31,
2002, our management and our then-current independent auditors,
PricewaterhouseCoopers, identified several significant deficiencies in our
internal controls. In response to these concerns, we have implemented enhanced
measures and have dedicated more resources to improve our account reconciliation
process and to further strengthen our internal controls. For a description of
these measures, see "Item 14. Controls and Procedures."

We have not yet been able to fully execute all of the salutary procedures and
actions we deem desirable to address our internal control deficiencies.
Significant supplemental resources will continue to be required to maintain
appropriate controls and procedures and to prepare our financial statements and
other disclosures. Failure to maintain such controls and procedures may increase
the risk of future errors or omissions in our financial statements or public
reports or filings and may prevent us from meeting our filing deadlines.

There can be no assurance that these actions and any other actions that we take
to improve our internal controls and procedures will be successful. Our
inability to implement these actions could adversely affect our ability to
record, process, summarize and report financial data in compliance with our
reporting obligations.

We could lose market share and revenues as a result of increasing competition
from companies in the wireless communications industry that have greater
resources and name recognition.

We expect to face intense competition in all of our markets, which could result
in a loss of customers and lower revenues and could make it more difficult for
us to enter new markets. Our competitors include service providers in several
markets -- dedicated mobile data, PCS/cellular, narrowband PCS/enhanced paging
and emerging technology platforms. The growth in wireless data opportunities has
led traditional hardware manufacturers and software developers to invest in
technologies that will allow the migration of core products and services to a
mobile environment. Companies like IBM, Oracle Corporation, Siebel Systems,
Inc., Sun Microsystems, Inc. and Lucent Technologies, Inc. have made significant
investments in the area of mobility to guarantee their place in both the desktop
and mobile/handheld computing environments.

Our eLink service competes with a variety of services that offer two-way
messaging and PDA functionality on small, portable devices. Most of these
competing services are better established in the marketplace, and many
competitors have substantially greater financial, technical, marketing, sales,
distribution and other resources than we have. We expect that we will continue
to compete primarily with Cingular Wireless, which offers wireless data services
over its network, including Research In Motion's BlackBerryTM email service. Our
agreement with Research In Motion permits us to market the BlackBerryTM service
in the United States on the Motient network. These and other firms may enter the
markets where we focus our sales efforts, which may create downward pressure on
the prices for our services and negatively impact our returns. Many of the
existing and potential competitors have financial and other resources far
greater than those of Motient. In addition, continuing consolidation in the
communications industry, including Cingular Wireless' proposed acquisition of
AT&T Wireless, may strengthen existing competitors or give rise to significant
new competitors which would threaten our business.

In addition, a variety of new technologies, devices and services will result in
new types of competition for us in the near future. The emergence of new
protocols such as the WAP and the Bluetooth protocol enable the use of the
Internet as a platform to exchange information among people with different
devices running on different networks. Also, several large wireless providers
are deploying new, so-called "2.5G" and "3G" technologies, including new forms
of CDMA, time division multiple access, or TDMA, and GSM technologies, which
will increase the data capabilities of wireless voice and data services and will
have a competitive impact on our business.

Failure to keep pace with rapidly changing markets for wireless communications
would significantly harm our business.

The technology and markets for wireless communications services change rapidly.
Our success depends, in part, on our ability to respond and adapt to change. For
example, large wireless voice carriers are in the process of expanding their
ability to offer wireless data services that may compete with our services, by
deploying "2.5G" and "3G" technologies. These technologies, which include GPRS
and 1XRTT, support both wireless voice and packet data services. While we will
endeavor to enhance the efficiency and performance of our existing data-only
network through a variety of measures, we also expect to consider, as
appropriate, alliances or other contractual arrangements with larger wireless
communications providers, so that we can continue to offer as complete an array
of data services as possible. We cannot guarantee that we will be able to
compete effectively under, or adjust our contemplated plan of development to
meet, changing market conditions. We cannot guarantee that we will be able to
implement our strategy or that our strategy will be successful in these rapidly
evolving markets. The markets for wireless communications services are also

marked by the continuous introduction of new products and services and increased
capacity for services similar to those provided by Motient. Technological
advances may also increase the efficiency of existing products or services. If a
technology becomes available that is more cost-effective or creates a superior
product, we may be unable to access this technology or finance the necessary
substantial capital expenditures that may be required. Our technology may be
rendered less profitable or less viable by existing, proposed or as yet
undeveloped technologies. We cannot guarantee that we will have the financial
and other resources available to compete effectively against companies
possessing such technologies. We are unable to predict which of the many
possible future products and services will meet evolving industry standards and
consumer demands. We cannot guarantee that we can adapt to technological changes
or offer products or services on a timely basis to establish or maintain a
competitive position.

The success of our wireless communications business depends on our ability to
enter into and maintain third party distribution relationships.

A key element of our strategy is to develop and capitalize on distribution
relationships with leading companies who can provide access to significant
numbers of potential customers in our target markets. For example, Motient has
reseller agreements with SkyTel, Metrocall, Aether Systems and Earthlink, as
well as Research In Motion. Because we are relying on these distribution
companies to enable us to acquire subscribers, our success in penetrating our
targeted markets will depend, to a large extent, on the efforts of these
distribution companies, as well as future distribution companies. The rollout of
sales efforts by these distribution companies may be subject to delays, some of
which may be outside of our control. Some of our resellers have experienced
significant financial difficulties in recent periods. Our inability to fully
capitalize on our third party distribution agreements, the termination of or
failure to renew any of these agreements, or our inability to enter into similar
distribution relationships with other leading companies could reduce our access
and exposure to potential customers.

We expect to maintain a limited inventory of devices to be used in connection
with our eLink service, and any interruption in the supply of such devices could
significantly harm our business.

We depend on independent vendors to develop and manufacture wireless
communications devices for our networks, which are significant elements of our
business plan because most of our services require these devices. Some of our
important service offering initiatives are dependent on the timely delivery of a
sufficient quantity of user devices, including the palm-sized devices used with
Motient's eLink wireless email service which are manufactured by Research In
Motion. These suppliers do not sell these devices to us on an exclusive basis.

We carry a limited inventory of these devices and generally have no guaranteed
supply arrangements. Some of these suppliers and vendors are relatively small
companies and have limited resources and production capacities. In addition,
some of our sole-source suppliers themselves rely on sole- or limited-sources of
supply for components included in their devices.

We cannot guarantee that our suppliers will be able to supply us with components
and devices in the quantities and at the times we require, or at all.

We have short-term contracts with the majority of our suppliers. We cannot
guarantee that our suppliers will continue to provide products at attractive
prices, or at all, or that we will be able to obtain products in the future from
these or other providers on the scale and within the time frames we require. On
June 26, 2003, Research In Motion provided us with a written End of Life
Notification for the RIM 857 wireless handheld device. This means that Research
In Motion will no longer be producing this model of handheld device. The last
date for accepting orders was September 30, 2003, and the last date for shipment
of devices was January 2, 2004. Motient has implemented a RIM 857 "equivalent to
new" program and expects that there will be sufficient returned RIM 857s to
satisfy demand for the foreseeable future. If we cannot obtain a sufficient
supply of RIM 857s, it may harm our business.

Additionally, some or all of our suppliers could enter into exclusive
arrangements with our competitors, or cease selling these components at
commercially reasonable prices, or at all. Research In Motion, which is our
primary supplier of devices for our eLink wireless email service, also markets
and sells BlackBerryTM, which is an alternative wireless email service offered
on the Cingular Interactive network. We also have an agreement with Research In
Motion permitting us to market the BlackBerryTM service in the United States on
our network. If we fail to obtain products on a timely basis at an affordable
cost, or experience any significant delays or interruptions of supply, our
business will be harmed.

If prices charged by suppliers for wireless devices do not decline as we
anticipate, our business may not experience the growth we expect.

Part of our growth is predicated on our suppliers reducing the cost of wireless
communications devices approved and available for use on our network. We believe
that reductions in the cost of wireless communications devices will result in
increased sales of devices, additional subscribers for our services and a
corresponding increase in our service revenues. If we fail to obtain cost
reductions on a timely basis, or experience any significant delays of these
reductions, our revenues could be diminished or fail to increase.

We may not be able to develop, acquire and maintain proprietary information and
intellectual property rights, which could limit the growth of our business and
reduce our market share.

Our wireless communications business depends on technical knowledge, and we
believe that our future success is based, in part, on our ability to keep up
with new technological developments and incorporate them in our products and
services. We own or have the right to use certain of our work products,
inventions, designs, software, systems and similar know-how. While we have taken
steps to diligently protect that information, there is no assurance that the
information will not be disclosed to others or that others will not
independently develop similar information, systems and know-how. Protection of
our information, systems and know-how may result in litigation, the cost of
which could be substantial. There is also no assurance that third parties will
not assert claims that our products or services, including our eLink and
BlackBerryTM by Motient service offerings, infringe on their proprietary rights.

If we are found to infringe or misappropriate a third party's proprietary
rights, we could be required to pay damages to the third party, alter our
products or services, obtain a license from the third party or cease activities
utilizing these proprietary rights, including making or selling products or
services utilizing the proprietary rights. Our inability to do any of the
foregoing on commercially favorable terms could have a material adverse impact
on our business, financial condition or results of operations.

We also rely on some technologies licensed from third parties. We cannot be sure
that these licenses will remain available on commercially reasonable terms or at
all. The loss of these technologies could require us to obtain substitute
technology of lower quality or performance standards or at a greater cost, which
could harm our business.

Patent infringement litigation against Research In Motion may impede our ability
to use and sell certain software and handheld devices.

Our rights to use and sell the BlackBerryTM software and Research In Motion's
handheld devices may be limited or made prohibitively expensive as a result of a
patent infringement lawsuit brought against Research In Motion by NTP Inc. (NTP
v. Research In Motion, Civ. Action No. 3:01CV767 (E.D. Va.)). In that action, a
jury concluded that certain of Research In Motion's BlackBerryTM products
infringed patents held by NTP covering the use of wireless radio frequency
information in email communications. On August 5, 2003, the judge in the case
ruled against Research In Motion, awarding NTP $53.7 million in damages and
enjoining Research In Motion from making, using, or selling the products, but
stayed the injunction pending appeal by Research In Motion. The appeal has not
yet been resolved. As a purchaser of those products, we could be adversely
affected by the outcome of that litigation.

Government regulation may increase our cost of providing services, slow our
expansion into new markets, subject our services to additional competitive
pressures and affect the value of our common stock.

Motient's ownership and operation of wireless communication systems are subject
to significant regulation by the FCC under authority granted by the
Communications Act of 1934 and related federal laws. There is no assurance that
the rules and regulations of the FCC will continue to support our operations as
presently conducted. A number of Motient's licenses are subject to renewal by
the FCC. We cannot guarantee that all existing licenses will be renewed and that
the requisite frequencies will be coordinated. Current federal law requires
prior FCC approval of greater than 25% ownership of Motient by citizens or
entities of foreign countries, which could limit the value of our common stock.

Motient's competitive position may be harmed if the wireless terrestrial network
technology it licenses from Motorola is made available to competitors.

Motient holds a non-exclusive license to use a single frequency reuse
technology. The terrestrial network, and some of its competitive strengths, such
as in-building penetration, is based upon this technology. Motient also relies
on support agreements with Motorola for support of the operations of certain
portions of the terrestrial network. Under the terms of the non-exclusive
license, Motorola could enter into arrangements to license this technology to
any of our competitors, and those agreements could harm our ability to compete.

Motient could incur substantial costs if it is required to relocate its spectrum
licenses under a pending proposal being considered by the FCC.

On March 14, 2002, the FCC adopted a notice of proposed rulemaking exploring
options and alternatives for improving the spectrum environment for public
safety operations in the 800 MHz band. In connection with this proceeding,
Nextel has proposed, in a "white paper" to the FCC, that some of its wireless
spectrum in the 700 MHz band, lower 800 MHz band, and 900 MHz band be exchanged
for spectrum in the upper 800 MHz band and in the 2.1 GHz band. Nextel's
proposal creates blocks of contiguous spectrum to be shared by public safety
agencies. The Nextel proposal, as submitted to the FCC, would require that
Motient either (i) continue to operate using its existing lower 800 MHz band
spectrum on a secondary, non-interfering basis with the public safety agencies
who would be relocated in the same spectrum, or (ii) relocate, at its own
expense, to other spectrum in the 700 MHz or 900 MHz bands. Motient believes it
is highly unlikely that it could continue to operate in the lower 800 MHz bands
on a secondary, non-interfering basis. If Motient is required to relocate to
spectrum in the 700 MHz or 900 MHz bands, it would incur substantial operational
and financial costs, including costs relating to:

o manufacturing replacement infrastructure and user hardware to operate
on Motient's network in the 700 MHz or 900 MHz bands,

o disruptions to existing customers as a result of the relocation to
other spectrum bands,

o possible diminished data speed and

o coverage gaps.

There are also potential problems with the 700 MHz and 900 MHz bands that might
make it difficult, if not impossible, for Motient to duplicate its existing
operations in the 800 MHz band.

On December 24, 2002, a group of affected licensees, including Motient, Nextel,
and several other licensees, submitted a detailed proposal to the FCC for
accomplishing the re-allocation of spectrum over a period of several years.
These parties have also been negotiating a mechanism by which Nextel would agree
to reimburse costs, up to $850 million, incurred by affected licensees in
relocating to different parts of the spectrum band pursuant to the rebanding
plan.

On February 10, 2003, approximately 60 entities filed comments to Nextel's
proposal submitted to the FCC. Reply comments, which were due February 25, 2003,
included comments urging the FCC to conduct its own analysis of the adequacy of

the interference protection proposed in the plan. In mid-April 2003, the FCC's
OET sent a letter to several manufacturers requesting additional practical,
technical and procedural solutions or information that may have yet to be
considered. Responses were due May 8, 2003. Upon reviewing the filed comments,
the OET has indicated that other technical solutions were possible and were
being reviewed by the FCC. To date, no action has been taken by the FCC. We
cannot assure you that our operations will not be affected by this proceeding.

We may not be able to secure our ordinary course trade terms.

If we are not able to obtain ordinary trade terms from our suppliers, our cash
flow may be negatively impacted. Prior to our reorganization, certain important
suppliers altered a number of ordinary trade terms, including shortening the
length of time required to pay for goods and services and the imposition of cash
deposit or letter of credit requirements. We cannot assure that our suppliers
will not impose further restrictive pricing and trade terms and policies in the
future.

Our adoption of "fresh-start" accounting may make evaluating our financial
position and results of operations, as compared to prior periods, more
difficult.

Due to our emergence from bankruptcy pursuant to the Plan of Reorganization,
effective May 1, 2002, we implemented "fresh-start" accounting. In accordance
with "fresh-start" accounting, all assets and liabilities were restated to
reflect their respective estimated fair values. As a result, the consolidated
financial statements for our reorganized company starting on and going forward
from May 1, 2002 will not be comparable to our consolidated financial statements
for the periods prior to May 1, 2002. The change in our accounting principles
may make it more difficult to compare our operations to prior periods.

Certain tax implications of our bankruptcy and reorganization may increase our
tax liability.

Certain U.S. tax attributes of Motient, including net operating loss carryovers,
or NOLs, have been reduced or eliminated as a consequence of our bankruptcy and
reorganization. The elimination or reduction of NOLs and such other tax
attributes may increase the amount of tax payable by Motient following its
reorganization as compared with the amount of tax payable had no such reduction
been required.

There is a very limited public trading market for our common stock and our
warrants to purchase common stock, and our equity securities may continue to be
illiquid or experience significant price volatility.

Our common stock is not listed on any national securities exchange or on the
Nasdaq National Market. Our common stock is quoted on the Pink Sheets under the
symbol "MNCP." Also, the warrants to purchase our common stock that we issued to
holders of our pre-reorganization common stock in our reorganization are quoted
under the symbol "MNCPW" on the Pink Sheets. On March 10, 2004, the last
reported bid prices for our common stock and our warrants to purchase common
stock were $7.00 and $0.11, respectively. Trading volumes in our equity

securities have been very light, and trades occur infrequently. We cannot assure
you that a more active trading market will develop for our common stock or our
warrants, or as to the degree of price volatility in any such market.

We do not expect to pay any dividends on our common stock for the foreseeable
future.

We have never paid cash dividends on our common stock and do not anticipated
that any cash dividends will be paid on the common stock for the foreseeable
future. The payment of any dividend by us will be at the discretion of our board
of directors and will depend on, among other things, our earnings, capital
requirements and financial condition. In addition, under Delaware law, a
corporation cannot declare or pay dividends on its capital stock unless it has
an available surplus. Furthermore, the terms of some of our financing
arrangements directly limit our ability to pay cash dividends on our common
stock. The terms of any future indebtedness of our subsidiaries also may
generally restrict the ability of some of our subsidiaries to distribute
earnings or make other payments to us.

Future sales of our common stock could adversely affect its price and/or our
ability to raise capital.

Assuming an active trading market develops for our common stock, sales of
substantial amounts of common stock, or the perception that such sales could
occur, could adversely affect the prevailing market price of the common stock
and our ability to raise capital. We may issue additional common stock in future
financing transactions or as incentive compensation for our executives and other
personnel, consultants and advisors. Issuing any equity securities would be
dilutive to the equity interests represented by our then-outstanding shares of
common stock. The market price for our common stock could decrease as the market
takes into account the dilutive effect of any of these issuances.

Finally, if Motient decides to file a registration statement to raise additional
capital, some of Motient's existing stockholders hold piggyback registration
rights that, if exercised, will require Motient to include their shares in the
registration statement, which could adversely affect Motient's ability to raise
needed capital.

Item 2. Properties.
- --------------------

Motient leases approximately 86,000 square feet for headquarters office space
and an operations center in Lincolnshire, IL, the lease for which expires
December 31, 2010. On April 1, 2003, Motient subleased approximately 8,500
square feet to a third party under a sublease agreement that expires on December
31, 2005.

Motient formerly sub-leased from MSV approximately 47,000 square feet at its
headquarters in Reston, VA for office space. This sub-lease expired in August
2003. On July 15, 2003, we substantially completed the transfer of our
headquarters to Lincolnshire, IL.

Motient also leases site space for approximately 1,400 base stations and
antennae across the country for the terrestrial network under one-to five-year
lease contracts with renewal provisions.

Motient believes that its existing facilities are adequate to meet its needs for
the foreseeable future.

Item 3. Legal Proceedings.
- ---------------------------

Motient filed a voluntary petition for relief under Chapter 11 of the United
States Bankruptcy Code on January 10, 2002. For further details regarding this
proceeding, please see "Item 1 -- Business -- Motient's Chapter 11 Filing,"
which is incorporated herein by reference.

Motient is aware of a purported class action lawsuit filed by holders of Rare
Medium common stock challenging the previously proposed merger of Motient and
Rare Medium that was terminated in Rare Medium Group, Inc. Shareholders
Litigation, C.A. No. 18879 NC (cases filed in Delaware Chancery Court between
May 15, 2001 and June 7, 2001, and consolidated by the Chancery Court on June
22, 2001). The complaint names Rare Medium, members of Rare Medium's board of
directors, the holders of Rare Medium preferred stock and certain of their
affiliated entities, and Motient as defendants. The complaint alleges that the
defendants breached duties allegedly owed to the holders of Rare Medium common
stock in connection with the merger agreement, and include allegations that: (i)
the holders of Rare Medium preferred stock engaged in self-dealing in the
proposed merger; (ii) the Rare Medium board of directors allegedly breached its
fiduciary duties by agreeing to distribute the merger consideration differently
among Rare Medium's common and preferred shares; and (iii) Motient allegedly
aided and abetted the supposed breaches of fiduciary duties. The complaint
sought to enjoin the proposed merger, and also sought compensatory damages in an
unspecified amount.

In 2002, the plaintiffs and the Rare Medium defendants reached a settlement of
the Delaware litigation, and the Chancery Court dismissed the case on December
2, 2002.

A second lawsuit challenging the previously proposed merger, Brickell Partners
v. Rare Medium Group, Inc., et al., N.Y.S. Index No. 01602694, was filed in the
New York Supreme Court on May 30, 2001. Rare Medium and the holders of Rare
Medium preferred stock filed a motion to dismiss or stay the New York lawsuit.
Motient was never served with process in the New York lawsuit, and thus filed no
motion to dismiss. However, Motient has been informed by Rare Medium that an
unopposed motion by Rare Medium to dismiss the New York lawsuit as moot was
granted on February 21, 2002, and a judgment dismissing the case was entered by
the New York Court on April 24, 2002.

A former employee who was discharged as part of a reduction in force in July
2002 asserted a claim for a year's pay and attorney's fees under a change of
control agreement this employee had with Motient. The claim was subject to
binding arbitration. Although Motient believes that it had substantial defenses
on the merits, on July 11, 2003, Motient was informed that the arbitrator ruled
in the employee's favor. In August 2003, Motient made a $200,000 payment to this
employee for the disputed pay and related benefits costs and legal fee
reimbursement.

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

No matters were submitted to a vote of our stockholders during the fourth
quarter of fiscal 2002.

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
- ------------------------------------------------------------------------------

Market Price of Common Stock

Until January 14, 2002, our pre-reorganization common stock was listed under the
symbol "MTNT" on the Nasdaq National Market. We voluntarily delisted from the
Nasdaq Stock Market on January 14, 2002 as a result of our Chapter 11 bankruptcy
filing. Our pre-reorganization common stock then was quoted until May 1, 2002
under the symbol "MTNTQ" on the OTC Bulletin Board quotation system.

Our common stock has a very limited trading history since the effective date of
our Plan of Reorganization, and there no established trading market for our
common stock or for our warrants to purchase common stock issued in our
reorganization. Our common stock is not listed on any national securities
exchange or on the Nasdaq Stock Market. Our common stock has been quoted under
the symbol "MNCP" on the Pink Sheets since May 2, 2002. Also, the warrants to
purchase our common stock that we issued to holders of our pre-reorganization
common stock in our reorganization have been quoted under the symbol "MNCPW" on
the Pink Sheets since May 2, 2002. Our common stock and warrants to purchase
common stock were traded on the OTC Bulletin Board, but due to our failure to
timely file our Exchange Act reports, our common stock and warrants to purchase
common stock are no longer traded on the OTC Bulletin Board.

The following tables set forth for the period indicated the high and low sales
prices for our pre-reorganization common stock for the periods indicated for
2001 and the high and low bid prices for our Predecessor Company's and Successor
Company's common stock and warrants to purchase common stock issued in our
reorganization for the periods indicated for 2002 and 2003. You should consider
the changes in our circumstances and capitalization as a result of our
reorganization, including the fact that our common stock is a different security
from our pre-reorganization common stock, before drawing any conclusions about
the trading price of our common stock or warrants from the information below
about our pre-reorganization common stock.

Common Stock

2004 (Successor Company) High Low
------------------------------------------------------------------- ----------------

First Quarter (through March 10, 2004) $7.95 $3.85

2003 (Successor Company) High Low
------------------------------------------------------------------- ----------------
First Quarter $4.20 $2.75
Second Quarter $6.00 $1.75
Third Quarter $6.35 $4.35
Fourth Quarter $5.55 $2.30

------------------------------------------------------------------- ----------------
2002 (Successor Company) High Low
------------------------------------------------------------------- ----------------

Second Quarter (beginning May 1, 2002) $5.90 $3.60
Third Quarter $4.45 $0.40
Fourth Quarter $3.40 $0.65

------------------------------------------------------------------- ----------------
2002 (Predecessor Company) High Low
------------------------------------------------------------------- ----------------
First Quarter $0.45 $0.40
Second Quarter (through April 30, 2002) $0.085 $0.036

2001 (Predecessor Company) High Low
------------------------------------------------------------------- ----------------
First Quarter $6.59 $1.25
Second Quarter $2.05 $0.38
Third Quarter $1.10 $0.09
Fourth Quarter $0.60 $0.05

Warrants to Purchase Common Stock

2004 (Successor Company) High Low
------------------------------------------------------------------ -----------

First Quarter (through March 10, 2004) $0.25 $0.02

2003 (Successor Company) High Low
------------------------------------------------------------------ -----------
First Quarter $0.25 $0.05
Second Quarter $0.35 $0.07
Third Quarter $0.40 $0.12
Fourth Quarter $0.20 $0.02

------------------------------------------------------------------ -----------
2002 (Successor Company) High Low
------------------------------------------------------------------ -----------
Second Quarter (beginning May 1, 2002) $3.00 $0.25
Third Quarter $0.50 $0.15
Fourth Quarter $0.38 $0.01

The high and low sales prices provided for 2001 represent the intra-day prices
in the Nasdaq National Market system, and for 2002 and 2003, on the OTC Bulletin
Board. The warrants to purchase common stock were issued as part of Motient's
reorganization. In prior periods, no warrants were quoted on any exchange or
similar service. The quotations represent inter-dealer quotations, without
retail markups, markdowns or commissions, and may not necessarily represent
actual transactions.

On March 10, 2004, the last reported bid price of our common stock was $7.00 per
share on the Pink Sheets. On March 10, 2004, the last reported bid price for our
warrants was $0.11 on the Pink Sheets. As of March 10, 2004, there were
approximately 7 record holders of our common stock and approximately 375 record
holders of our warrants to purchase common stock.

Dividend Policy

We have never declared or paid any cash dividends on our capital stock and do
not plan to pay dividends on our capital stock for the foreseeable future. Our
current credit facility and other financing documents prohibit us from paying
cash dividends.

We anticipate that all of our earnings in the foreseeable future will be
retained to finance the continued growth and development of our business, and we
have no current intention to pay dividends. Our future dividend and distribution
policy will depend on our earnings, capital requirements and financial
condition, requirements of the financing arrangements to which we are a party
and other factors considered relevant by our board of directors. There can be no
assurance that we will pay dividends on our capital stock at any time in the
future.

Recent Sales of Unregistered Securities

In July 2002, our board of directors approved the offer and sale to CTA (or its
affiliates), a consultant to Motient, of warrants to purchase an aggregate of
500,000 shares of our common stock, for an aggregate purchase price of $25,000.
The warrants have an exercise price of $3.00 per share and a term of five years.
CTA purchased their warrants in December 2002. The warrants were valued at $1.5
million and recorded as a consultant compensation expense in December of 2002.
The warrants were issued in reliance upon the exemption provided by Rule 506
under the Securities Act of 1933, as amended, and/or in reliance on the
exemption afforded by Section 4(2) of the Securities Act.

On January 27, 2003, in connection with the execution of the credit agreement,
we issued warrants at closing to the lenders to purchase, in the aggregate,
3,125,000 shares of our common stock. The exercise price for these warrants is
$1.06 per share. The warrants were immediately exercisable upon issuance and
have a term of five years. The warrants were issued in reliance upon the
exemption afforded by Section 4(2) of the Securities Act.

On July 29, 2003, in connection with the execution of the letter agreement with
Further Lane, we issued Further Lane a warrant to purchase 200,000 shares of our
common stock. The exercise price of the warrant is $5.10 per share. The warrant
was immediately exercisable upon issuance and has a term of five years. The
warrant was issued in reliance upon the exemption afforded by Section 4(2) of
the Securities Act.

On March 16, 2004, in connection with the execution of the amendment to our
credit agreement, we issued warrants to the lenders to purchase, in the
aggregate, 2,000,000 shares of our common stock. The number of warrants will be
reduced to an aggregate of 1,000,000 shares of common stock if, within 60 days
after March 16, 2004, we obtain at least $7.5 million of additional debt or
equity financing. The exercise price of the warrants is $4.88 per share. The
warrants were immediately exercisable upon issuance and have a term of five
years. The warrants were issued in reliance upon the exemption afforded by
Section 4(2) of the Securities Act. The warrants are also subject to a
registration rights agreement. Under such agreement, we agreed to register the
shares underlying the warrants upon the request of a majority of the
warrantholders, or in conjunction with the registration of other common stock of
the company. We will bear all the expenses of such registration.

No underwriters were involved in any of the foregoing distributions of
securities.

Item 6. Selected Financial Data.
- ---------------------------------

The following table summarizes our financial results as of and for the fiscal
years ended December 31, 1998 through December 31, 2001, and for the four months
ended April 30, 2002 and the eight months ended December 31, 2002. The
consolidated balance sheet data and the consolidated statement of operations
data as of and for the years ended December 31, 1998 and December 31, 1999 are
derived from the consolidated financial statements of Motient, which were
audited by Arthur Andersen LLP, independent accountants who have ceased
operations. The consolidated balance sheet data and the consolidated statement
of operations data as of and for the years ended December 31, 2000 and December
31, 2001 and the four months ended April 30, 2002 and the eight months ended
December 31, 2002 are derived from the consolidated financial statements of
Motient, which were audited by Ehrenkrantz Sterling & Co. LLC, independent
accountants, and have been restated to give effect to the accounting treatment
with respect to the MSV, Aether Systems transactions and certain additional
financial statement adjustments discussed in the Introductory Note and in
greater detail in Note 2, "Significant Accounting Policies - Restatement of
Financial Statements," of notes to the consolidated financial statements. All of
the financial information for Motient up to and including April 30, 2002 is
referred to as "Predecessor Company" results. The financial information for
Motient for the periods subsequent to April 30, 2002 are referred to as
"Successor Company" results.

You should read our selected financial data in conjunction with the information
contained in "Item 7 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our consolidated financial statements
and related notes thereto included elsewhere in this report. In reading the
following selected financial data, please note the following:

o Effective May 1, 2002, as a result of our emergence from bankruptcy,
we adopted "fresh-start" accounting in accordance with American
Institute of Certified Public Accountants Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization under the
Bankruptcy Code". "Fresh-start" accounting has resulted in material
changes to financial statements for periods beginning after May 1,
2002, to reflect adjustments required pursuant to SOP 90-7 to record
assets and liabilities at fair values in accordance with procedures
specified by Statement of Financial Accounting Standards No. 141,
"Business Combinations".

o Because the summary financial data below relates to periods prior to
May 1, 2002, the effective date we emerged from bankruptcy, we refer
to the summary financial data as that of the Predecessor Company. Due
to the reorganization and implementation of SOP 90-7, financial
statements issued for periods beginning after May 1, 2002 will not be
comparable to that of the Predecessor Company.

o In November 2002, we initiated a process to seek the concurrence of
the staff of the SEC with respect to our conclusions of the
appropriate accounting for the formation of and certain transactions
with MSV in 2000 and 2001 and the sale of certain of our
transportation assets to Aether Systems in 2000. This process was
completed in March 2003. The staff of the SEC did not object to
certain aspects of our prior accounting with respect to the MSV and
Aether Systems transactions, but did object to other aspects of our
prior accounting for these transactions. For a description of the
material differences between our original accounting treatment with
respect to the MSV and Aether Systems transactions and the revised
accounting treatment that we concluded is appropriate as a result of
this process, please see Note 2, "Significant Accounting Policies -
Restatement of Financial Statements," of notes to the consolidated
financial statements and our current report on Form 8-K dated March
14, 2003.

o As a result of our re-audit of the years ended December 31, 2000 and
2001 performed by our current independent accounting firm, Ehrenkrantz
Sterling & Co. LLC, certain additional financial statement adjustments
were proposed and accepted by us for the periods noted above (See Note
2, "Significant Accounting Policies" of notes to the consolidated
financial statements).

Selected Consolidated Financial Data
(Amounts in thousands except per share data)

Successor
Company Predecessor Company(1)(2)(3)(4)
------- -------------------------------------------------------------------------
Eight
Months Four Months (Restated) (Restated)
Ended Ended Year Ended Year Ended Year Ended Year Ended
December 31, April 30, December 31, December 31, December 31, December 31,
2002 2002 2001 2000 1999 1998
---- ---- ---- ---- ---- ----

Revenues $ 36,617 $ 22,373 $ 90,265 $ 95,756 $ 91,071 $ 87,221
Operating Loss (33,800) (21,430) (97,223) (182,914) (224,392) (87,207)
Income (loss) before
reorganization items (58,786) (24,138) (267,000) (134,851) (330,931) (150,566)

Reorganization items (772) 256,116 (2,497) (3,035) -- --

Income tax provision -- -- -- -- -- --

Net (loss) income (59,558) 231,978 (269,497) (137,886) (330,931) (150,566)

XM radio preferred stock dividend
requirement -- -- -- (5,081) -- --

XM beneficial conversion -- -- -- (44,438) -- --
----------- ----------- ----------- ----------- ----------- -----------

Net (loss) income before
cumulative effect of accounting change $ (59,558) $ 231,978 $ (269,497) $ (187,405) $ (330,931) $ (150,566)
----------- ----------- ----------- ----------- ----------- -----------

Cumulative effect of change in
accounting principle -- -- -- (4,677) -- --

Net (loss) income attributable to
common shareholders $ (59,558) $ 231,978 $ (269,497) $ (192,082) $ (330,931) $ (150,566)
----------- ----------- ----------- ----------- ----------- -----------

Basic and diluted net income
(loss) per common share $ (2.37) $ 3.98 $ (5.27) $ (3.89) $ (8.33) $ (4.94)
Weighted-average common shares
outstanding during the period -
basic and diluted 25,097 58,251 51,136 49,425 39,704 30,496
Total assets 202,221 257,401 240,465 1,572,036 809,948 489,794
Long term liabilities $ 33,913 $ 29,785 $ 30,652 738,936 470,784 469,228

(1) Motient restated certain of its financial data reflected above to
reflect certain transactions with MSV in 2000 and 2001, the sale of assets
to Aether Systems in 2000 and certain additional adjustments. For further
information, please see Note 2, "Significant Accounting Policies -
Restatement of Financial Statements," of notes to the consolidated
financial statements herein.

(2) As of December 31, 2000, we had an equity interest of approximately
33.1% (or 21.3% on a fully diluted basis) in XM Radio, a public company
that launched its satellite radio service at the end of 2001, and we
controlled XM Radio through our board of director membership and common
stock voting rights. As a result, all of XM Radio's results for the period
from July 7, 1999 (the date we acquired 100% voting interest of XM Radio)
through December 31, 2000 have been included in our consolidated financial
statements. Prior to July 7, 1999, our investment in XM Radio was accounted
for pursuant to the equity method of accounting. In January 2001, pursuant
to FCC approval to cease to control XM Radio, the number of directors that
we appointed to XM Radio's board of directors was reduced to less than 50%
of XM Radio's directors, and we converted a portion of our super-voting
Class B common stock of XM Radio to Class A common stock. As a result, we
ceased to control XM Radio, and as of January 1, 2001, we accounted for our

investment in XM Radio pursuant to the equity method of accounting. During
2001, we disposed of all of our remaining shares of XM Radio and ceased to
hold any interest in XM Radio as of November 19, 2001. For further
information, please see Note 1, "Organization and Going Concern," and Note
13, "Business Acquisitions and Dispositions--XM Radio," of notes to the
consolidated financial statements herein.

(3) In June 2000, we formed a joint venture subsidiary, MSV, in which we
owned 80% of the membership interests. The remaining 20% interests in MSV
were owned by three investors unrelated to Motient; however, the minority
investors had the right to participate in certain MSV business decisions
that were made in the normal course of business; therefore, in accordance
with EITF Issue No 96-16, "Investor's Accounting for an Investee When the
Investor Has a Majority of the Voting Interest but the Minority Shareholder
or Shareholders Have Certain Approval or Veto Rights", our investment in
MSV has been recorded for all periods presented in the consolidated
financial statements included in this annual report pursuant to the equity
method of accounting. On November 26, 2001, Motient sold the assets
comprising its satellite communications business to MSV. For further
information, please see Note 1, "Organization and Going Concern," and Note
13, "Business Acquisitions and Dispositions," of notes to the consolidated
financial statements herein.

(4) In November 2000, Motient sold assets related to its retail
transportation business to Aether Systems. Concurrently with the closing of
the asset sale, we and Aether Systems entered into two long-term, prepaid
network airtime agreements with a total value of $20 million, of which $5
million was paid at closing, pursuant to which Aether Systems agreed to
purchase airtime on Motient's satellite and terrestrial networks. Aether
Systems also became an authorized reseller of Motient's eLink and
BlackBerry TM by Motient wireless email service offerings. Aether Systems
acquired all of the assets used or useful in the retail transportation
business, and assumed the related liabilities. Aether Systems also
purchased the existing inventory in the business. For further information,
please see Note 1 "Organization and Going Concern," and Note 13, "Business
Acquisitions and Dispositions," of notes to the consolidated financial
statements herein.

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

Overview and Introduction

As previously disclosed in our current reports on Form 8-K dated August 19,
2002, November 14, 2002, March 14, 2003, August 6, 2003, November 4, 2003 and
February 12, 2004, we were not able to complete our financial statements for the
year ended December 31, 2002 and for the quarters ended June 30, 2002 and
September 30, 2002 until we resolved the appropriate accounting treatment with
respect to certain transactions that occurred in 2000 and 2001. We initiated a
review of the appropriate accounting treatment for these transactions following
the appointment of PricewaterhouseCoopers as our independent auditors in July
2002. The transactions in question involved the formation of and certain
transactions with MSV in 2000 and 2001 and the sale of certain of our
transportation assets to Aether Systems in 2000.

In November 2002, we initiated a process to seek the concurrence of the staff of
the SEC with respect to our conclusions of the appropriate accounting for these
matters. This process was completed in March 2003. The staff of the SEC did not
object to certain aspects of our prior accounting with respect to the MSV and
Aether Systems transactions, but did object to other aspects of our prior
accounting for these transactions. For a description of the material differences
between our original accounting treatment with respect to the MSV and Aether
Systems transactions and the revised accounting treatment that we concluded is
appropriate as a result of this process, please see Note 2, "Significant
Accounting Policies - Restatement of Financial Statements," of notes to the
consolidated financial statements and our current report on Form 8-K dated March
14, 2003.

On March 2, 2004, we dismissed PricewaterhouseCoopers as our independent
auditors effective immediately. The audit committee of Motient's board of
directors approved the dismissal of PricewaterhouseCoopers.
PricewaterhouseCoopers was previously appointed to audit Motient's consolidated
financial statements for the period May 1, 2002 to December 31, 2002, and, by
its terms, such engagement was to terminate upon the completion of services
related to such audit. PricewaterhouseCoopers has not reported on Motient's
consolidated financial statements for such period or for any other fiscal
period. On March 2, 2004, our audit committee engaged Ehrenkrantz Sterling & Co.
LLC to replace PricewaterhouseCoopers to audit Motient's consolidated financial
statements for the period May 1, 2002 to December 31, 2002.

Note 2, "Significant Accounting Policies" of notes to the consolidated financial
statements). Our financial statements for the years ended December 31, 2000
(restated) and December 31, 2001 (restated) and the period from January 1, 2002
to April 30, 2002 (restated) and May 1, 2002 to December 31, 2002 have been
audited by our current independent accounting firm, Ehrenkrantz Sterling & Co.
LLC (see "Business--Recent Developments--Accounting and Auditing Matters").

Motient's Chapter 11 Filing

On January 10, 2002, Motient and three of its wholly-owned subsidiaries filed
voluntary petitions for reorganization under Chapter 11 of the Federal
Bankruptcy Code. Motient's Plan of Reorganization was confirmed on April 26,
2002 and became effective on May 1, 2002. For a more detailed description of
Motient's Chapter 11 filing and its Plan of Reorganization, please see
"Liquidity and Capital Resources" below.

General - The Current and Former Components of Motient's Business

This section provides information regarding the various current and prior
components of Motient's business which we believe are relevant to an assessment
and understanding of our financial condition and consolidated results of
operations. The sale of our satellite assets to MSV in 2001 makes period to
period comparison of our financial results less meaningful, and therefore, you
should not rely on such comparisons as an indication of future operating
performance. Additionally, on April 26, 2002, our Plan of Reorganization was
confirmed by the United States Federal Bankruptcy Court and we emerged from
bankruptcy on May 1, 2002. As a result of the reorganization and the recording
of the restructuring transaction and implementation of "fresh-start" reporting,
our results of operations after April 30, 2002 are not comparable to results
reported in prior periods. See Notes 1 and 2 of notes to the consolidated
financial statements for information on consummation of the Plan of
Reorganization and implementation of "fresh-start" reporting. The discussion
should be read in conjunction with our consolidated financial statements and
notes thereto.

Motient has presently six wholly-owned subsidiaries. Motient had a 25.5%
interest (on a fully-diluted basis) in MSV as of December 31, 2002. As of March
19, 2004 Motient's interest in MSV was 29.5% (on a fully-diluted basis). For
further details regarding Motient's interest in MSV, please see "Business -
Recent Developments - Mobile Satellite Ventures LP". Motient Communications Inc.
owns the assets comprising Motient's core wireless business, except for
Motient's FCC licenses, which are held in a separate subsidiary, Motient
License. Motient License was formed on March 16, 2004, as part of Motient's
amendment of its credit facility, as a special purpose wholly-owned subsidiary
of Motient Communications and holds all of the FCC licenses formerly held by
Motient Communications. A pledge of the stock of Motient License, along with the
other assets of Motient Communications, secures borrowings under our term credit
facility, and a pledge of the stock of Motient License secures, on a second
priority basis, borrowings under our vendor financing facility with Motorola.
For further details regarding the formation of Motient License Co., please see
"Business - Recent Developments - Credit Facility". Our other four subsidiaries

hold no material operating assets other than stock of other subsidiaries and
Motient's interest in MSV. On a consolidated basis, we refer to Motient
Corporation and its six wholly-owned subsidiaries as "Motient." Our indirect,
less-than 50% voting interest in MSV is not consolidated with Motient for
financial statement purposes. Rather, we account for our interest in MSV under
the equity method of accounting.

Core Wireless Business

We are a nationwide provider of two-way, wireless mobile data services and
mobile Internet services. Our customers use our network for a variety of
wireless data communications services, including email messaging and other
services that enable businesses, mobile workers and consumers to transfer
electronic information and messages and access corporate databases and the
Internet.

Our eLink service is a two-way wireless email device and electronic organizer
that uses our terrestrial network. We provide our eLink brand two-way wireless
email service to customers accessing email through corporate servers, Internet
service providers, mail service provider accounts and paging network suppliers.
We also offer a BlackBerry TM by Motient solution specifically designed for
large corporate accounts operating in a Microsoft Exchange and Lotus Notes
environment. BlackBerry TM is a popular wireless email solution developed by
Research In Motion and is being provided on the Motient network under an
agreement with Research In Motion.

In addition to selling messaging services that use our own network, we are a
national premier dealer for T-Mobile USA and an authorized agent for Verizon
Wireless. Under our agreements with these providers, we sell nationwide network
subscriptions for T-Mobile's third generation GSM/GPRS wireless voice and data
service, and for Verizon Wireless's third generation CDMA/1XRTT wireless voice
and data service. These agreements allow us to sell and promote wireless email
and wireless Internet applications to enterprise accounts on networks with
greater capacity and speed than our own, and that are voice capable.

XM Radio

As of December 31, 2000, we had an equity interest of approximately 33.1% (or
21.3% on a fully diluted basis) in XM Satellite Radio Holdings Inc. ("XM
Radio"), a public company that launched its satellite radio service at the end
of 2001, and we controlled XM Radio through our board of director membership and
common stock voting rights. As a result, all of XM Radio's results for the
period from July 7, 1999 (the date we acquired 100% voting interest of XM Radio)
through December 31, 2000 have been included in our consolidated financial
statements. Prior to July 7, 1999, our investment in XM Radio was accounted for
pursuant to the equity method of accounting. In January 2001, pursuant to FCC
approval authorizing us to relinquish control of XM Radio, the number of
directors appointed by us to XM Radio's Board of Directors was reduced to less
than 50% of XM Radio directors, and we converted a portion of its super-voting
Class B Common Stock of XM Radio to Class A Common Stock. As a result, we ceased
to control XM Radio.

XM Radio was incorporated on December 15, 1992 for the purpose of procuring a
digital audio radio service license. During 20000, XM Radio management had
devoted its time primarily to securing financing and constructing its satellite
system. XM Radio launched its first satellite on March 18, 2001. XM Radio did
not generate revenues for the period ended December 31, 2000 and planned
principal operations did not commence as of December 31, 2000.

Throughout 2001, we disposed of our equity interest in XM Radio, and as of
November 19, 2001, we did not hold any interest in XM Radio. For the period from
January 1, 2001 through November 19, 2001, we accounted for our investment in XM
Radio pursuant to the equity method of accounting. In November 2001, as a result
of a series of transaction to cure defaults under our Bank Financing and to the
Bank Facility Guarantors, we sold and/or delivered all of our shares of XM Radio
common stock to the Bank Facility Guarantors in full satisfaction of the entire
remaining amount of our reimbursement obligations to the Bank Facility
Guarantors. The agent for the bank lenders under the Bank Financing declared all
loans under the Bank Financing immediately due and payable, due to the existence
of several events of default under the Bank Financing. On the same date, the
bank lenders sought payment in full from the Bank Financing Guarantors for the
accelerated loan obligations. For the year ended December 31, 2001, we recorded
proceeds of approximately $38.3 million from the sale in 2001 of two million
shares of its XM Radio stock. For the year ended December 31, 2001, we recorded
equity in losses of XM Radio of $48.5 million.

The operations and financing of XM Radio, a public company, were maintained
separate and apart from our operations and financing.

Sale of Retail Transportation Business in November 2000

In November 2000, Motient sold assets relating to its retail transportation
business to Aether Systems and received approximately $45 million. This
consisted of $30 million for the assets, of which $10 million was held in an
escrow account which was subsequently released in the fourth quarter of 2001
upon the satisfaction of certain conditions, and $15 million for a perpetual
license to use and modify any intellectual property owned or licensed by Motient
in connection with the retail transportation business. Aether Systems acquired
all of the assets used or useful in the retail transportation business, and
assumed the related liabilities. Aether Systems also purchased the existing
inventory in the business. In the fourth quarter of 2000, Motient recognized a
gain of $6.6 million, which represented the difference between the net book
value of the assets sold and the $20 million cash portion of the purchase price
for the assets received at closing. Motient recognized an additional $8.3
million gain in the fourth quarter of 2001 when the additional $10 million of
proceeds were released from escrow. The $1.7 million difference between the
proceeds received and the gain recognized is a result of pricing modifications
that were made at the time of the release of the escrow related to certain
network capacity arrangements. Motient deferred the $15 million perpetual
license payment over a four year period, which represents the life of the
network airtime agreement that Motient entered into with Aether Systems at the
time of the closing of the asset sale.

Following the asset sale, Motient has been selling network capacity to Aether
Systems as a distributor, on a wholesale basis.

Mobile Satellite Ventures LP

On June 29, 2000, we formed a joint venture subsidiary, MSV, in which we owned
80% of the membership interests. The remaining 20% interests in MSV were owned
by three investors unrelated to Motient; however, the minority investors had
certain participating rights which provided for their participation in certain
business decisions that were made in the normal course of business; therefore,
in accordance with Emerging Issues Task Force Issue No 96-16, "Investor's
Accounting for an Investee When the Investor Has a Majority of the Voting
Interest but the Minority Shareholder or Shareholders Have Certain Approval or
Veto Rights", our investment in MSV has been recorded for all periods presented
in the consolidated financial statements included in this annual report pursuant
to the equity method of accounting.

Through November 26, 2001, MSV used our satellite network to conduct research
and development activities. On November 26, 2001, we sold the assets comprising
our satellite communications business to MSV, as part of a transaction in which
certain other parties joined MSV, including TMI, a Canadian satellite services
provider. In consideration for our satellite business assets, we received the
following: (i) a $24.0 million cash payment in June 2000, (ii) a $45.0 million
cash payment paid at closing, of which $4.0 million was held by MSV related to
our sublease of real estate from MSV, and (iii) a five-year $15.0 million note.
Motient has recorded the $15.0 million note receivable from MSV, plus accrued
interest thereon at its fair value, estimated to be approximately $13.0 million
at the May 1, 2002 fresh-start accounting date, after giving effect to
discounted future cash flows at market interest rates. In this transaction, TMI
also contributed its satellite communications business assets to MSV. In
addition, we purchased a $2.5 million convertible note issued by MSV, and
certain other investors, including a subsidiary of Rare Medium, purchased a
total of $52.5 million of MSV convertible notes. In July 2002, MSV commenced a
rights offering seeking total funding in the amount of $3.0 million. While we
were not obligated to participate in the offering, our board determined that it
was in our best interests to participate so that our interest in MSV would not
be diluted. On August 12, 2002, we funded an additional $957,000 to MSV pursuant
to this offering, and received a new convertible note in such amount. As of
December 31, 2002, we had an equity interest, on an undiluted basis, of
approximately 48% in MSV. Assuming that all of MSV's convertible notes issued in
such transaction are converted into limited partnership units of MSV, we would
have a 33.3% equity interest in MSV as of December 31, 2002. On a fully diluted
basis, Motient would own approximately 25.5% of the equity of MSV as of December
31, 2002, assuming certain other investors fully exercise their option to make
additional investments in MSV as a result of the FCC ATC approval process, as
discussed below.

In January 2003, MSV's application with the FCC with respect to MSV's plans for
a new generation satellite system utilizing ATC was approved by the FCC. The ATC
Order requires that licensees, including MSV, submit a further application with
the FCC to seek approval of the specific system incorporating ATC that the
licensee intends to use. MSV has filed an application for ATC authority, pending
the FCC's final rules and regulations. MSV has also filed a petition for
reconsideration with respect to certain aspects of the ATC Order. In January
2004, certain terrestrial wireless providers petitioned the U.S. Court of
Appeals for the District of Columbia to review the FCC's decision to grant ATC
to satellite service providers. Oral arguments in this case are scheduled for
May 2004.

On August 21, 2003, two investors in MSV (excluding Motient) invested an
additional $3.7 million in MSV in exchange for Class A preferred units of
limited partnership interests in MSV. MSV used the proceeds from this investment
to repay other indebtedness that is senior in its right of repayment to
Motient's promissory note. Under the terms of the amended and restated
investment agreement, these investors also had the option of investing an
additional $17.6 million in MSV by December 31, 2003; however, if, prior to this
time, the FCC had not issued a decision addressing MSV's petition for
reconsideration with respect to the ATC order, the option will be automatically
extended to March 31, 2004. As of the closing of the initial investment,
Motient's percentage ownership of MSV is approximately 46.5% on an undiluted
basis, 32.6% on an "as converted" basis giving effect to the conversion of all
outstanding convertible notes of MSV and 29.5% on a fully diluted basis,
assuming certain other investors fully exercise their option to make the $17.6
million additional investment in MSV as a result of the FCC ATC approval
process.

The proceeds from the additional $17.6 million investment described above, if
consummated, will be used to repay certain outstanding indebtedness of MSV, and,
subject to certain conditions and priorities with respect to payment of other
indebtedness, a portion of such proceeds will be used to partially repay the
$15.0 million note issued by MSV to Motient. This note will also be subject to
prepayment in certain other circumstances where MSV receives cash proceeds from
equity, debt or asset sale transactions. There can be no assurance that any such
transactions will occur, nor can there be any assurance regarding the timing of
such events or that MSV would have the ability, at that time, to pay amounts due
under the note. Any additional investment in MSV and any related repayment of
the $15.0 million note may not occur before Motient needs the funds from the
repayment of such note. In addition, 25% of the proceeds of any repayment of the
$15.0 million note from MSV must be allocated to prepay pro-rata both the Rare
Medium and CSFB notes. The allocation of the 25% of the proceeds will be made in
accordance with Rare Medium's and CSFB's relative outstanding balance at the
time of prepayment. If not repaid earlier, the $15.0 million note from MSV,
including accrued interest thereon, becomes due and payable on November 25,
2006; however, there can be no assurance that MSV would have the ability, at
that time, to pay the amounts due under the note.

In November 2003, we engaged CTA to perform a valuation of our equity interests
in MSV as of December 31, 2002. Concurrent with CTA's valuation, Motient reduced
the book value of its equity interest in MSV from $54 million (inclusive of our

$2.5 million convertible note from MSV) to $41 million as of May 1, 2002 to
reflect certain preference rights on liquidation of certain classes of equity
holders in MSV. Including its notes receivable from MSV ($13 million at May 1,
2002), the book value of Motient's aggregate interest in MSV as of May 1, 2002
was reduced from $67 million to $53.9 million. Also, as a result of CTA's
valuation of MSV, we determined that the value of our equity interest in MSV was
impaired as of December 31, 2002. This impairment was deemed to have occurred in
the fourth quarter of 2002. Motient reduced the value of its equity interest in
MSV by $15.4 million as of December 31, 2002. Including its notes receivable
from MSV ($19 million at December 31, 2002), the book value of Motient's
aggregate interest in MSV was $32 million as of December 31, 2002. For
additional information concerning this valuation process, please see Note 2,
"Significant Accounting Policies," of notes to the consolidated financial
statements.

Cost Reduction Actions

Since emerging from bankruptcy in May 2002, several factors have restrained our
ability to grow revenue at the rate we previously anticipated. These factors
include the weak economy generally and the weak telecommunications and wireless
sector specifically, the financial difficulty of several of our key resellers,
on whom we rely for a majority of our new revenue growth, and our continued
limited liquidity.

We have taken a number of steps since emerging from bankruptcy in May 2002 to
improve our liquidity and reduce operating and capital expenditures in order to
maintain our cash and lower our cash burn rate:

Reductions in Workforce. We undertook reductions in our workforce in July 2002,
September 2002, March 2003 and February 2004. These actions eliminated
approximately 29% (95 employees), 13% (26 employees), 10% (19 employees) and
32.5% (54 employees), respectively, of our then-remaining workforce. We recorded
restructuring charges of $282,000, $228,000, $161,000 and $873,000,
respectively, related entirely to employee severance obligations for these
reductions in workforce. Approximately $62,000 of the September 2002 severance
liability was unpaid as of December 31, 2002. In the aggregate, we have reduced
our work force by approximately 68% since July 2002 and reduced employee and
related expenditures by approximately $1.5 million per month.

Network Rationalization. The Company is in the process of restructuring its
wireless data network in a coordinated effort to reduce network operating costs.
One aspect of this rationalization encompasses reducing unneeded capacity across
the network by deconstructing un-profitable base stations. In certain instances,
the geographic area that the network serves may be reduced by this process. The
full extent of the changes to network coverage have yet to be determined.

Closure of Reston, VA Facility. On July 15, 2003, we substantially completed the
transfer of our headquarters to Lincolnshire, IL, where we already had a

facility. This action reduced our monthly operating expenses by an amount of
approximately $65,000 per month or $780,000 per year.

Refinancing of Vendor Obligations and Certain Customer Arrangements. During the
fourth quarter of 2002 and the first quarter of 2003, we renegotiated several of
our key vendor and customer arrangements in order to reduce recurring expenses
and improve our liquidity position. In some cases, we were able to negotiate a
flat rate reduction for continuing services provided to us by our vendors or a
deferral of payable amounts, and in other cases we renegotiated the scope of
services provided in exchange for reduced rates or received pre-payments for
future services. We continue to aggressively pursue further vendor cost
reductions where opportunities arise.

In the case of operating expenses, we negotiated, among other things, reductions
of recurring monthly expense of approximately $380,000 per month, or $4.6
million in annual costs.

In the case of financing arrangements, we negotiated, among other things, a
deferral of approximately $2.6 million of accounts payable that was owed for
services provided for which we issued a promissory note for such amount, with
the note to be paid off ratably over a two-year period beginning in January
2004. We also restructured certain of our vendor and capital lease obligations
to significantly reduce the monthly amortization requirements of these
facilities on an on-going basis. As part of such negotiations, we agreed to fund
a letter of credit in twelve monthly installments during 2003, in the aggregate
amount of $1.125 million, to secure certain payment obligations. This letter of
credit will be released to us in fifteen monthly installments beginning in July
2004, assuming no defaults have occurred and are occurring. As part of these
negotiations, the total amount of our remaining principal obligations under
these financing arrangements were not reduced. In March 2004, we further
restructured our vendor financing facility and an outstanding promissory note to
the same vendor by extending the repayment schedule, thereby reducing the
combined monthly amortization requirements under these obligations. Please see
"--Liquidity and Capital Resources - Summary of Liquidity and Financing" for
further details on these facilities.

On December 1, 2002, we entered into a letter agreement with UPS, under which
UPS agreed to make a series of eight prepayments to us totaling $5 million for
future services we are obligated to provide to it after January 1, 2004. In
addition to any other rights it has under its network services agreement with
us, the letter agreement provides that UPS may terminate the network services
agreement, in whole or in part, by providing 30 days' notice to us at which
point the remaining prepayment would be required to be repaid. As of July 31,
2003, all eight prepayments had been made. The $5 million prepayment will be
credited against airtime services provided to UPS beginning January 1, 2004,
until the prepayment is fully credited. Based on UPS' current level of network
airtime usage, we do not expect that UPS will be required to make any cash
payments to us in 2004 for service provided during 2004.

Despite these initiatives, we continue to be cash flow negative, and there can
be no assurances that we will ever be cash flow positive.

$12.5 Million Term Credit Facility

On January 27, 2003, our wholly-owned subsidiary, Motient Communications Inc.,
closed a $12.5 million term credit agreement with a group of lenders, including
several of our existing stockholders. As of December 31, 2003, we have borrowed
$4.5 million under the credit agreement to fund general working capital
requirements.

For the monthly periods ended April 2003 through December 2003, we reported
events of default under the terms of the credit facility to the lenders. In each
period, the lenders waived these events of default. There can be no assurance
that Motient will not have to report additional events of default or that the
lenders will continue to provide waivers in such event.

Borrowing availability under our $12.5 million term credit facility terminated
on December 31, 2003. On March 16, 2004, we entered into an amendment to the
credit facility which extended the borrowing availability period until December
31, 2004. As part of this amendment, Motient provided the lenders with a pledge
of all of the stock of a newly-formed subsidiary of Motient Communications,
Motient License, which holds all of our FCC licenses formerly held by Motient
Communications. The credit facility imposes certain conditions on our ability to
make draws, including compliance with certain financial and operating covenants.
For further details, please see "-- Liquidity and Capital Resources -- Term
Credit Facility."

CTA Arrangements

In November 2003, we engaged CTA to provide a valuation of our equity interest
in MSV as of December 31, 2002. CTA was paid $150,000 for this valuation.

On January 30, 2004, we engaged CTA to act as chief restructuring entity. The
term of CTA's engagement is currently scheduled to end on August 1, 2004. As
consideration for this work, we agreed to pay to CTA a monthly fee of $60,000,
one-half of which is paid monthly in cash and one-half of which will be
deferred. The new agreement modifies our existing consulting arrangement with
CTA.

Stock Option Plan

In May 2002, our board approved a new employee stock option plan with 2,993,024
authorized shares of common stock, of which options to purchase 1,631,025 shares
of our common stock were outstanding at December 31, 2002. The plan was approved
by our stockholders on July 11, 2002.

the market price of stock over the exercise price of the options, if any, at the
time that both the exercise price and the number of options are known be
recorded as deferred compensation and amortized over the option vesting period.
As of the date of grant, the option price per share was in excess of the market
price; therefore, these options are not deemed to have any value and no expense
has been recorded to date.

In March 2003, our board of directors approved the reduction in the exercise
price of all of the then outstanding stock options from $5.00 per share to $3.00
per share. The repricing will require that all options be accounted for in
accordance with variable plan accounting, which requires that the value of these
options are measured at their intrinsic value and any change in that value be
charged to the income statement each quarter based on the difference (if any)
between the intrinsic value and the then-current market value of the common
stock.

In July 2003, our compensation and stock option committee, acting pursuant to
our 2002 stock option plan, granted 26 employees and officers options to
purchase an aggregate of 495,000 shares of our common stock at a price of $5.15
per share. One-half of each option grant vests with the passage of time and the
continued employment of the recipient, in three equal increments, on the first,
second and third anniversary of the date of grant. The other half of each grant
was to either vest or be rescinded based on Motient's performance in 2003. The
compensation and stock option committee of our board of directors has not yet
made a determination regarding whether the 2003 performance criteria were
satisfied. If vested and not exercised, the options will expire on the 10th
anniversary of the date of grant.

Research In Motion Matters

Our rights to use and sell the BlackBerryTM software and Research In Motion's
handheld devices may be limited or made prohibitively expensive as a result of a
patent infringement lawsuit brought against Research In Motion by NTP Inc. (NTP
v. Research In Motion, Civ. Action No. 3:01CV767 (E.D. Va.)). In that action, a
jury concluded that certain of Research In Motion's BlackBerryTM products
infringe patents held by NTP covering the use of wireless radio frequency
information in email communications. On August 5, 2003, the judge in the case
ruled against Research In Motion, awarding NTP $53.7 million in damages and
enjoining Research In Motion from making, using, or selling the products, but
stayed the injunction pending appeal by Research In Motion. The appeal has not
yet been resolved. As a purchaser of those products, we could be adversely
affected by the outcome of that litigation.

On June 26, 2003 Research In Motion provided us with a written End of Life
Notification for the RIM 857 wireless handheld device. This means that Research
In Motion will no longer produce this model of handheld device. The last date
for accepting orders was September 30, 2003, and the last date for shipment of
devices was January 2, 2004. Motient has implemented a RIM 857 "equivalent to
new" program and expects that there will be sufficient returned RIM 857s to
satisfy demand for the foreseeable future. During the year ended December 31,

2002, a majority of our equipment revenues were attributable to sales of the RIM
857 device, and we estimate that approximately 35% of our monthly recurring
service revenues were derived from wireless messaging using RIM 857 devices.

Results of Operations

Due to the consummation of our bankruptcy and the application of our
"fresh-start" accounting, results of operations for the periods after April 30,
2002 are not comparable to the results for previous periods. However, for the
discussion of results of operations, the four months ended April 30, 2002
(Predecessor Company) has been combined with the eight months ended December 31,
2002 (Successor Company) and then compared to the year ended December 31, 2001.
Differences between periods due to "fresh-start" accounting adjustments are
explained when necessary.

Years Ended December 31, 2002 and 2001

Revenue and Subscriber Statistics

The tables below summarize our revenue and subscriber base for 2002 and 2001. An
explanation of certain changes in revenue and subscribers is set forth below
under the caption "Summary of Year-over-Year Revenue."

Successor Predecessor Predecessor
Company Company Company
------- ------- -------

Eight Months Combined Year (Restated)
Ended Four Months Year Ended Year Ended
December 31, Ended April 30, December 31, December 31,
Summary of Revenue 2002 2002 2002 2001 Change % Change
- ------------------ ---- ---- ---- ---- ------ -------

(in millions)
Wireless internet $15.5 $ 5.6 $21.1 $11.4 $ 9.7 85%
Field services 10.5 5.6 16.1 19.4 (3.3) (17)
Transportation 7.4 4.1 11.5 15.9 (4.4) (28)
Telemetry 1.8 0.8 2.6 2.6 (0.0) (0)
Maritime and other 0.3 0.7 1.0 18.8 (17.8) (95)
--- --- --- ---- ------ ----
Service revenue 35.5 16.8 52.3 68.1 (15.8) (23)
Equipment revenue 1.1 5.6 6.7 22.2 (15.5) (70)
--- --- --- ---- ------ ----
Total revenue $36.6 $22.4 $59.0 $90.3 $(31.3) (35)%
===== ===== ===== ===== ======= =====

The make up of our subscriber base was as follows:

As of December 31,
-----------------------------
2002 2001 Change % Change
---- ---- ------ --------

Wireless internet 106,082 102,258 3,824 4%
Field services 30,263 36,752 (6,489) (18)
Transportation 94,825 88,128 6,697 8
Telemetry 30,171 22,616 7,555 33
Maritime and other 653 890 (237) (27)
--- --- ----- ----
Total 261,994 250,644 11,350 5%
======= ======= ====== ===

Expenses

Successor Predecessor Predecessor
Company Company Company
------- ------- -------

Eight Months Four Months Combined Year (Restated)
Ended Ended Year Ended Year Ended
December 31, April 30, December 31, December 31,
Summary of Expense 2002 2002 2002 2001 Change % Change
- ------------------ ---- ---- ---- ---- ------ -------

(in millions)
Cost of service and operations $38.1 $21.9 $ 60.0 $ 73.1 $(13.1) (18)%
Cost of equipment sales 2.2 6.0 8.2 34.1 (25.9) (76)
Sales and advertising 4.8 4.3 9.1 22.6 (13.5) (60)
General and administration 9.7 4.1 13.8 20.5 (6.7) (33)
Restructuring charges 0.0 0.6 0.6 4.7 (4.1) (87)
Depreciation and amortization 15.5 6.9 22.4 32.4 (10.0) (30)
---- --- ---- ---- ------ ----
Total expenses $70.4 $43.8 $114.1 $187.4 $(73.3) (39)%
===== ===== ====== ====== ======= =====

Summary of Year-over-Year Revenue

Service revenue approximated $52.3 million for the year ended December 31, 2002,
which was a $15.8 million reduction as compared to the year ended December 31,
2001. The majority of the decrease in revenue year-over-year was primarily the
result of the sale of satellite assets to MSV in November 2001, offset by an
increase in revenue in the wireless internet segment. We experienced a 5% growth
in total subscribers, with growth in the wireless internet, transportation and
telemetry segments offsetting decreases in other market segments.

Wireless internet revenue grew $9.7 million from the year ended December 31,
2001 to the year ended December 31, 2002. While our wireless subscribers only
grew 4% from 102,258 to 106,082, the active, revenue-producing units grew from
approximately 31,500 units to 56,400 units, or a 79% year-over-year increase.
Resellers of our eLink and BlackBerryTM products purchased units to stock their
inventory in 2000 and 2001; these units became revenue-producing as resellers
moved from initial end-user pilots trials to full deployments.

Field service revenue decreased by $3.3 million from the year ended December 31,
2001 to the year ended December 31, 2002. The decrease in revenue from field

services primarily reflects the churn of units as a result of contract
terminations and corporate downsizings. Additionally, certain contract renewals
resulted in rate reductions.

Transportation revenue decreased by $4.4 million from the year ended December
31, 2001 to the year ended December 31, 2002. The decrease in revenue from our
transportation product was primarily the result of the sale of our satellite
assets to MSV in November 2001. The remaining reduction was due to the change in
accounting treatment for the amortization of certain software licensing revenue
related to the sales of our transportation business to Aether Systems in
November 2000. These decreases were partially off-set by an increase in units
and usage for our largest customer.

Telemetry revenues remained virtually flat from the year ended December 31, 2001
to the year ended December 31, 2002. Although subscriber units grew by 7,555 or
33% year-over-year, this growth was offset by contractual pricing reductions for
one of our largest telemetry customers.

Maritime and other revenue decreased $17.8 million from the year ended December
31, 2001 to the year ended December 31, 2002. This decrease in revenue was due
entirely to the sale of the satellite assets to MSV in November 2001, partially
offset by satellite capacity revenues paid by MSV as it pursued its research and
development program.

The decrease in equipment revenue is primarily a result of the sale of our
satellite business in November 2001 and the loss of equipment sales from that
business. These reductions in equipment revenue were offset by an increase in
equipment sales for our eLink product lines. This reduction was also a result of
write-downs of deferred equipment revenue.

For the year ended December 31, 2002, five customers accounted for approximately
47% of Motient's service revenue, with two customers, UPS and SkyTel, each
accounting for more than 10%. As of December 31, 2002, SkyTel represented
approximately 14% of our net accounts receivable, all of which was current. The
revenue attributable to such customers varies with the level of network airtime
usage consumed by such customers, and none of the service contracts with such
customers requires that the customers use any specified quantity of network
airtime, nor do such contracts specify any minimum level of revenue. There can
be no assurance that the revenue generated from these customers will continue in
future periods. As discussed in "Business -- Recent Developments," UPS has
deregistered a substantial number of its units as it migrates to another network
provider for its next generation solution.

Due to the bankruptcy of WorldCom, beginning in the quarter ended June 30, 2002,
we reserved 100% of all amounts then due from Skytel, a wholly-owned subsidiary
of WorldCom. In October 2002, we received payment from SkyTel of a significant
portion of the amount of our pre-petition claim amount. We have received full,
timely payments thereafter and believe that amounts from SkyTel are currently
fully collectible.

Expenses

o decreases in communication charges associated with reductions in the
cost of usage as a result of the sale of the satellite and
transportation assets and rate reductions in certain telecommunication
contracts,
o cost reductions associated with reduced headcount levels, primarily as
a result of the sale of our satellite assets and cost control efforts
undertaken in the second half 2001, and
o the operational restructurings in July and September 2002,
o reductions in research and development spending and
o decreases in costs associated with the sale of the satellite business
to MSV, including a reduction in in-orbit insurance costs for the
year.

These decreases were offset by:

o increases in base station maintenance costs associated with an
increase in the number of base stations,
o increases in site rental costs associated with the increase in base
stations year-over-year
and
o an increase in the average lease rate, increases in licensing and
commission payments to third parties with whom we have partnered to
provide certain eLink and BlackBerry(TM) by Motient services, and fees
incurred as a result of Motient's withdrawal from certain frequency
auctions.

The decrease in cost of equipment sold for the year ended December 31, 2002, as
compared to 2001, was a result of reduced terrestrial hardware sales prices
during 2002, and no hardware sales in 2002 were associated with the satellite
voice business that was sold to MSV in November 2001. These decreases were
offset by $4.4 million of write downs in April 2002. These write-downs compared
to $7.5 million inventory valuation charges in 2001 associated with our
early-generation eLink inventory. This reduction was also a result of
write-downs of deferred equipment costs.

Sales and advertising expenses as a percentage of total revenue were
approximately 15% for 2002, compared to 25% for 2001. The 60% decrease in sales
and advertising expenses year over year was primarily attributable to reductions
in spending on advertising and trade shows, and decreases in headcount costs,
primarily as a result of the sale of our satellite assets, cost control efforts
undertaken in the second half 2001, and the operational restructurings in July
and September 2002.

General and administrative expenses for the core wireless business as a
percentage of total revenue were approximately 23% for 2002 as compared to 23%
for 2001. The 33% decrease in 2002 costs over 2001 costs in the general and
administrative expenses of our core wireless business was primarily attributable
to savings associated with having fewer employees throughout 2002, primarily as
a result of the sale of our satellite assets and cost control efforts undertaken
in the second half 2001, and the operational restructurings in July and
September 2002, reductions associated with various savings from the sales of our
satellite business, and reductions in regulatory expenditures in 2002 as
compared to 2001.

Operational restructuring costs in 2002 of $0.6 million are associated with our
staff reductions. Operational restructuring costs in 2001 of $4.7 million
represent those costs associated with the restructuring program that we
announced and implemented on September 26, 2001. Of these costs, approximately
$1.6 million are cash charges that are associated with severance packages for
approximately 16% of our direct work force that was laid off. These cash
expenditures did, in some cases, carry into the first quarter of 2002.
Additional charges were associated with the termination of a product initiative,
and represent primarily non-cash charges associated with the write off of
prepaid advertising costs.

Depreciation and amortization for the core wireless business was approximately
38% of total revenue for 2002, as compared to 36% for 2001. The $10.0 million
decrease in depreciation and amortization expense in 2002 was primarily
attributable to the sale of our satellite assets to MSV in late November 2001,
and the associated depreciation on those assets.

Interest income was $0.1 million for the year ended December 31, 2002, as
compared to $1.1 million for the year ended December 31, 2001. Due to our
reorganization efforts, we were limited in our ability to invest excess
available cash.

We incurred $3.8 million of interest expense in 2002, compared to $61.7 million
during 2001. The $57.9 million decrease was primarily a result of the
elimination of the majority of our debt as a result of the bankruptcy
reorganization in 2002 and the retirement of a term loan. Interest expenses in
2002 are primarily associated with our Rare Medium and CSFB notes, capital
leases and vendor financing.

We recorded equity in losses for MSV in 2002 of $24.2 million (after giving
effect to the impairment of our investment in MSV in the fourth quarter of 2002
in the amount of $15 million). In 2001, we recorded equity losses for XM Radio
of $48.5 million. In 2001, we also recorded our XM Radio equity investment
impairment charge of $81.5 million as a result of the sale or exchange of all of
our shares of XM Radio stock for cash or debt extinguishment, which resulted in
mark-to-market losses of $81.5 million on the shares disposed of, and a gain of
$10.1 million on the extinguishment of debt exchanged for these shares.

Additionally, we recorded a number of other non-recurring charges in 2002 and
2001 as a result of our various financing transactions. For additional
information concerning these non-recurring charges, please see "-- Liquidity and
Capital Resources."

In 2002:

o As a result of our debt restructuring efforts, we recorded costs of
$23.1 million.

o We recorded a gain on the sale of our transportation and satellite
assets of $0.8 million.

o We recorded a loss on the sale of certain assets of $1.2 million.

o Related to our reorganization in May of 2002, we recorded a gain on
fair market adjustment of $94.7 million and a gain on the
restructuring of debt of $183.7 million.

In 2001:

o As noted below in "-- Derivatives," we purchased $50.0 million of
notes from Rare Medium that were secured and exchangeable into up to
five million of our shares of XM Radio stock. The embedded call
options included in these notes were deemed to be a derivative, and we
recorded a net gain of $1.5 million on the mark-to-market adjustment
of these securities.

o We sold or exchanged all of our shares of XM Radio stock for cash or
debt extinguishment. As a result of these various transactions, we
recorded a mark-to-market loss of $81.5 million on the shares disposed
of, and a gain of $10.1 million on the extinguishment of debt
exchanged for these shares.

o As a result of the permanent reductions in our bank facility, we also
recorded a loss on the extinguishment of debt in the amount of $11.3
million, representing the write off of fees and unamortized warrants
associated with the original placement of this debt.

o We recorded a gain of approximately $23.2 million on the sale of our
satellite assets to MSV.

o We incurred approximately $4.1 million of costs associated with the
Rare Medium merger, which was terminated in October 2001.

Net capital expenditures for the year ended December 31, 2002 for property and
equipment were $1.1 million compared to $13.8 million for 2001. Expenditures
consisted primarily of assets necessary to continue the build out of our
terrestrial network.

Years Ended December 31, 2001 and 2000

The tables below summarize our revenue and subscriber base for 2001 and 2000. An
explanation of certain changes in revenue and subscribers is set forth below
under the caption "Summary of Year over Year Revenue."

Predecessor Company
-------------------

(Restated) (Restated)
Year Ended Year Ended
December 31, December 31,
2001 2000 Change % Change
---- ---- ------ --------

Summary of Revenue
(in millions)
Wireless Internet $11.4 $2.8 $8.6 307%
Field services 19.4 25.1 (5.7) (23)
Transportation 15.9 21.6 (5.7) (26)
Telemetry 2.6 4.5 (1.9) (42)
Maritime and other 18.8 17.7 1.1 6
------------- --------------- ------------ ---------
Service revenue 68.1 71.7 (3.6) (5)
Equipment revenue 22.2 24.1 (1.9) (8)%
------------- --------------- ------------- -----------
Total $ 90.3 $95.8 $(5.5) (6)%
============= =============== ============= ===========

The make up of our subscriber base was as follows:

As of December 31,
--------------------------------
2001 2000 Change % Change
---- ---- ------ --------

Wireless internet 102,258 45,402 56,856 125%
Field services 36,752 45,465 (8,713) (19)
Transportation 88,128 73,044 15,084 21
Telemetry 22,616 16,052 6,564 41
Maritime and other 890 25,912 (25,022) (97)
------- -------- -------- ----
Total 250,644 205,875 44,769 22%
======= ======== ======= ====

Expenses

Predecessor Company
-------------------
(Restated) (Restated)
Year Ended Year Ended
December 31, December 31,
Summary of Expense 2001 2000 Change % Change
- ------------------ ---- ---- ------ --------

(in millions)
Cost of service and operations $73.1 $75.9 $ (2.8) (4)%
Cost of equipment sales 34.1 29.2 4.9 17
Sales and advertising 22.6 36.6 (14.0) (38)
General and administration-core wireless 20.5 22.1 (1.6) (7)
General and administration-XM Radio -- 76.1 (76.1) (100)
Operational restructuring charge 4.7 -- 4.7 100
Depreciation and amortization-core wireless 32.4 35.4 (3.0) (8)
Depreciation and amortization-XM Radio -- 3.4 (3.4) (100)
------ ---------- ----------- -----------
Total expenses $187.4 $ 278.7 $ (91.3) (33)%
======= ========== =========== ============

Summary of Year- over-Year Revenue

Service revenue, which includes our data, voice and capacity reseller services
as well as royalty income, approximated $68.1 million for the year ended
December 31, 2001, which was a $3.2 million reduction as compared to the year
ended December 31, 2000. We experienced a 125% growth in subscribers within our
wireless internet sector. In the other segments, we also saw decreases in
revenue, primarily as a result of our sale of satellite assets to MSV in
November 2001, and our sale of the majority of the retail transportation assets
to Aether Systems in November 2000.

The growth in wireless internet revenue reflects the overall growth in the
number of units. Our eLink and BlackBerryTM products were introduced in late
1999 and early 2000 and did not begin to achieve a significant growth rate until
the middle of 2000 as certain reseller initiatives were launched. Additionally,
a number of our resellers had units in inventory that have not yet become
revenue-producing units.

The decrease in revenue from field services reflects primarily rate reductions
that occurred in connection with the renewal of a significant customer contract
in the first quarter of 2001. Additionally, as part of this contract renewal,
the customer upgraded to one of our new devices, which greatly reduced their
requirement for spare units, for which we had previously received revenue. We
also experienced churn in registrations for several customers primarily as a
result of contract terminations or their corporate downsizings.

The decrease in revenue from our transportation product was primarily the result
of a shift from retail rates for our direct customers to wholesale rates through
Aether following the sale of our transportation assets to Aether in November
2000. This decrease was partially offset by the increase in the number of units
under our UPS contract.

The decrease in telemetry revenue reflects the change from a take or pay
agreement to a usage based agreement with one customer.

The growth in maritime and other revenue was primarily the result of more
revenue earned in 2001 as compared to 2000 from our contract to provide MSV with
satellite capacity as it pursued its research and development program and a
royalty payment from the one-time licensing of our network software.

The decrease in equipment revenue is primarily a result of the loss of revenue
from equipment sales associated with the sale of our transportation business and
a decrease in revenue from voice equipment sales. These reductions in equipment
revenue were offset by an increase of revenue from equipment sales for our eLink
product lines.

Cost of service and operations includes costs to support subscribers, such as
network telecommunications charges and site rent for network facilities, among
other things. The 4% year-over-year decrease is made up a decrease in
communication charges, associated with reductions in the cost of usage as a
result of the sale of the satellite and transportation assets and the
renegotiation of our telecommunications contract, offset by cost increases

associated with a 10% increase in the number of terrestrial base stations in
service as compared to 2000; an increase in base station maintenance costs
associated with an increase in the average cost per base station primarily as a
result of new rates under our maintenance contract, as well as an increase in
the number of base stations; an increase for site rental costs associated with
an increase in base stations year over year and an increase in the average lease
rate; and licensing and commission payments to third parties with whom we have
partnered to provide certain eLink and BlackBerry(TM) by Motient services.

The increases in costs of service and operations were offset by reduced costs
associated with lower headcount levels, primarily as a result of our sale of the
transportation and satellite assets, as well as our cost control efforts
undertaken in 2001, a reduction in research and development spending, and a
decrease in costs associated with the sale of the satellite business to MSV,
including a reduction in in-orbit insurance costs for the year.

The increase in cost of equipment sold for the year ended December 31, 2001, as
compared to 2000, was a result of inventory valuation charges in 2001 associated
with our early-generation eLink inventory as compared to inventory charges in
2000. These charges were taken as a result of evaluating our current sales
trends, as well as pricing announcements made by certain of our competitors.
This was offset by a shift from the higher-cost products associated with our
transportation business, as compared to the lower-cost eLink product line.

Sales and advertising expenses as a percentage of total revenue were
approximately 25% for 2001, compared to 38% for 2000. The decrease in sales and
advertising expenses period over period was primarily attributable to a
reduction in spending on advertising and trade shows, a decrease in headcount
costs, primarily as a result of the sale of our transportation and satellite
assets, costs associated with our name change in 2000 and savings associated
with reductions in various components of costs incurred to acquire customers.

General and administrative expenses for the core wireless business as a
percentage of total revenue were approximately 23% in 2001 and 2000. Our 2001
costs as compared to our 2000 costs in our core wireless business general and
administrative expenses consisted of savings associated with having fewer
employees throughout 2001, primarily as a result of the April 2001 cost-saving
initiatives as well as the sale of the transportation assets in late 2000, a
reduction of costs associated with a reduction in general and administrative
staff, reductions in regulatory expenditures, and reduced bad debt expense as a
result of the sale of the transportation assets. These costs reductions were
offset a charge associated with the vesting of certain restricted stock grants
in 2001.

The results for the year ended December 31, 2000, included expenses incurred by
XM Radio, as we were required to consolidate their results. As of January 1,
2001, we ceased consolidating the results of XM Radio.

Operational restructuring costs represent those costs associated with the
restructuring program that we announced and implemented on September 26, 2001.

Of these costs, approximately $1.6 million are cash charges that are associated
with severance packages for approximately 16% of our direct work force that was
laid off. These cash expenditures did, in some cases, carry into the first
quarter of 2002. Additional charges were associated with the termination of a
product initiative, and represent primarily non-cash charges associated with the
write off of prepaid advertising costs.

Depreciation and amortization for the core wireless business was approximately
36% of total revenue for 2001, as compared to 37% for 2000. The decrease in
depreciation and amortization expense in 2001 was primarily attributable to the
sale of our transportation assets in the fourth quarter of 2000 and their
associated depreciation, as well as the sale of our satellite assets to MSV in
late November 2001.

Interest income was $1.1 million for the year ended December 31, 2001, as
compared to $31.4 million (of which $27.6 million was earned by XM Radio) for
the year ended December 31, 2000. Excluding interest earned by XM Radio, the
decrease in interest earned by the core wireless business reflects reduced
interest earned on our escrow established for the senior notes as a result of a
lower escrow balance. The final payment was made out of the escrow in April
2001.

We incurred $61.7 million of interest expense in 2001, compared to $62.5 million
during 2000. The decrease was a result of a decrease in amortization of warrants
and prepaid interest and debt offering costs due to the debt discount costs that
were written off in 2000 and 2001 when we extinguished debt under the bank
facilities and lower average outstanding debt balances on the bank facilities as
a result of repayments made to the bank facilities in the second half of 2000
and throughout 2001. These decreases were offset by increased interest as a
result of the $50 million Rare Medium notes issued in 2001 and interest charges
associated with the amortization of the Rare Medium notes' discount.

Additionally, we recorded a number of other non-recurring charges in 2001 and
2000 as a result of our various financing transactions:

In 2001:
o As noted above, we purchased $50.0 million of notes from Rare Medium
that were secured and exchangeable into up to 5.0 million of our
shares of XM Radio stock. The embedded call options included in these
notes were deemed to be a derivative, and we recorded a net gain of
$1.5 million on the mark-to-market adjustment of these securities.

o We recorded a net gain of approximately $23.2 million on the sale of
our satellite, transportation and certain others assets.

o We recorded equity in losses in XM Radio of $48.5 million.

o We incurred approximately $4.1 million of costs associated with the
Rare Medium merger, which was terminated.

In 2000:
o We recorded a net gain of approximately $8.9 million on the sale of
our satellite, transportation and certain others assets.

o We recorded a gain of approximately $36.8 on a note payable to a
related party.

o We recorded a loss on the extinguishment of debt in the amount of $3.0
million.

o We incurred approximately $82,000 of costs associated with Aether
Systems' employee options.

o We recorded minority interest of approximately $33.4 million.

Net capital expenditures for the year ended December 31, 2001 for property and
equipment were $13.8 million compared to $73.6 million, including $51.4 million
of XM Radio related capital expenditures for 2000. Expenditures consisted
primarily of assets necessary to continue the build out of our terrestrial
network.

Liquidity and Capital Resources

As of December 31, 2002, we had approximately $5.8 million of cash on hand and
short-term investments. As of February 29, 2004, we had approximately $2.7
million of cash on hand and short-term investments.

Since emerging from bankruptcy protection in May 2002, we have undertaken a
number of actions to reduce our operating expenses and cash burn rate. Our
liquidity constraints have been exacerbated by weak revenue growth since
emerging from bankruptcy protection, due to a number of factors including the
weak economy generally and the weak telecommunications and wireless sector
specifically, the financial difficulty of several of our key resellers, on whom
we rely for a majority of our new revenue growth and our continued limited
liquidity which has hindered efforts at demand generation.

For a description of our significant cost reduction initiatives since emerging
from bankruptcy, please see "-- Overview and Introduction -- Cost Reduction
Actions."

In addition to cash generated from operations, we own a $15.0 million promissory
note issued by MSV in November 2001. This note matures in November 2006, but may
be fully or partially repaid prior to maturity in certain circumstances, subject
to certain conditions and priorities with respect to payment of other
indebtedness, involving the consummation of additional investments in MSV. Under
the terms of our $19.8 million of notes issued to Rare Medium and CSFB in
connection with our Plan of Reorganization, in certain circumstances we must use
25% of any proceeds from the repayment of the $15.0 million note from MSV to
repay the Rare Medium and CSFB notes, on a pro-rata basis. For a discussion of
certain recent developments regarding MSV, please see "-- Overview and
Introduction -- Mobile Satellite Ventures LP" above.

Subsequent to the end of the period covered by this report, we entered into a
$12.5 million term credit facility. For further details on this credit facility
and related defaults and waivers, please see "-- $12.5 Million Term Credit
Facility" below.

Our future financial performance will depend on our ability to continue to
reduce and manage operating expenses, as well as our ability to grow revenue. We
may lose certain revenues from major customers due to churn and migration to
alternative technologies. Our future financial performance also could be
negatively affected by unforeseen factors and unplanned expenses.

As described above under "Business-- Overview -- Recent Cost Reduction Actions,"
in December 2002 we entered into an agreement with UPS pursuant to which UPS
prepaid an aggregate of $5 million in respect of network airtime service to be
provided beginning January 1, 2004. The $5 million prepayment will be credited
against airtime services provided to UPS beginning January 1, 2004, until the
prepayment is fully credited. Based on UPS' current level of network airtime
usage, we do not expect that UPS will be required to make any cash payments to
us in 2004 for service provided during 2004. If UPS does not make any cash
payments to us in 2004, our cash flows from operations in 2004 will decline, and
our liquidity and capital resources could be materially and negatively affected.

As described above under "Business -- Recent Developments -- UPS Revenue," UPS
has substantially completed its migration to next generation network technology,
and its monthly airtime usage of our network has declined significantly. There
are no minimum purchase requirements under our contract with UPS, and the
contract may be terminated by UPS on 30 days' notice. While we expect that UPS
will remain a customer for the foreseeable future, over time we expect that the
bulk of UPS' units will migrate to another network.

o further reductions in employee and our network infrastructure costs;

o growth in new revenue from our recently-announced carrier
relationships with Verizon Wireless and T-Mobile, under which we will
be selling voice and data services on such carrier's next generation
wireless networks as a master agent;

o increased revenue growth from our various telemetry applications and
initiatives; and

o enhancements to our liquidity which are expected to involve the sale
of certain frequency assets, such as the recently announced sales of
certain SMR licenses to Nextel.

We continue to pursue all potential funding alternatives. Among the alternatives
for raising additional funds are issuances of debt or equity securities, other
borrowings under secured or unsecured loan arrangements, and sales of assets.
There can be no assurance that additional funds will be available to us on
acceptable terms or in a timely manner.

We expect to continue to require significant additional funds before we begin to
generate cash in excess of our operating expenses, and do not expect to begin to
generate cash from operations in excess of our cash operating results until the
first quarter of 2005, at the earliest. Also, even if we begin to generate cash
in excess of our operating expenses, we expect to continue to require
significant additional funds to meet remaining interest obligations, capital
expenditures and other non-operating cash expenses.

We are in the process of evaluating our future strategic direction. We have been
forced to take drastic actions to reduce operating costs and preserve our
remaining cash. For example, in February 2004 we effected a reduction in force
that reduced our workforce from approximately 166 to 112 employees. The
substantial elimination of sales and other personnel may have a negative effect
on our future revenues and growth prospects and our ability to support new
product initiatives and generate customer demand. Cash generated from operations
may not be sufficient to pay all of our obligations and liabilities, and if we
are not able to obtain other sources of funding or obtain relief from our
creditors, we may not be able to continue as a going concern.

Our projected cash requirements are based on certain assumptions about our
business model, including, specifically, assumed rates of growth in subscriber
activations and assumed rates of growth of service revenue. While we believe
these assumptions are reasonable, these growth rates continue to be difficult to
predict, and there is no assurance that the actual results that are experienced
will meet the assumptions included in our business model and projections. If the
future results of operations are significantly less favorable than currently
anticipated, our cash requirements will be more than projected, and we may
require additional financing in amounts that will be material. The type, timing
and terms of financing that we select will be dependent upon our cash needs, the
availability of financing sources and the prevailing conditions in the financial
markets. We cannot guarantee that additional financing sources will be available
at any given time or available on favorable terms.

Our consolidated financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. The successful implementation of
our business plan requires substantial funds to finance the maintenance and
growth of our operations, network and subscriber base and to expand into new
markets. We have an accumulated deficit and have historically incurred losses
from operations, which are expected to continue for additional periods in the
future. There can be no assurance that our operations will become profitable.
These factors, along with our negative operating cash flows have placed
significant pressures on our financial condition and liquidity position.

Motient's Chapter 11 Filing and Plan of Reorganization

Under our Plan of Reorganization, all then-outstanding shares of our
pre-reorganization common stock and all unexercised options and warrants to
purchase our pre-reorganization common stock were cancelled. The holders of
$335.0 million in senior notes exchanged their notes plus accrued interest for
25,000,000 shares of our new common stock. Some of our other creditors received
an aggregate of 97,256 shares of our new common stock in settlement for amounts
owed to them. These shares were issued upon completion of the bankruptcy claims
process; however, the value of these shares has been recorded in the financial
statements as if they had been issued on the effective date of the
reorganization. Holders of our pre-reorganization common stock received
warrants to purchase an aggregate of approximately 1,496,512 shares of new
common stock. The warrants may be exercised to purchase shares of our common
stock at a price of $0.01 per share, will expire May 1, 2004, or two years after
the effective date of reorganization, and will not be exercisable unless and
until the average closing price of our common stock over a period of ninety
consecutive trading days is equal to or greater than $15.44 per share. All
warrants issued to the holders of our pre-reorganization common stock, including
those shares held by our 401(k) savings plan, have been recorded in the
financial statements as if they had been issued on the effective date of the
reorganization. Also, in July 2002, we issued to Evercore
Partners LP, financial advisor to the creditors' committee in our
reorganization, a warrant to purchase up to 343,450 shares of common stock, at
an exercise price of $3.95 per share. The warrant was dated May 1, 2002, and has
a term of five years. If the average closing price of our common stock for
thirty consecutive trading days is equal to or greater than $20.00, we may
require Evercore to exercise the warrant, provided that our common stock is then
trading in an established public market. The value of this warrant has been
recorded in the financial statements as if it had been issued on May 1, 2002.

As a result of our Chapter 11 bankruptcy filing, we saw a slower adoption rate
for our services in the periods following emergence from bankruptcy. In a large

customer deployment, the upfront cost of the hardware can be significant.
Because the hardware generally is usable only on Motient's network, some of our
customers delayed adoption while we were in Chapter 11 proceedings. In an effort
to accelerate adoption of our services, we did, in selected instances in the
first quarter of 2002, offer certain incentives for adoption of our services
that were outside of our customary contract terms, such as extended payment
terms or temporary hardware rental. None of these offers were accepted;
therefore, these changes in terms were not material to our cash flow or
operations. Additionally, certain of our trade creditors required either
deposits for future services or shortened payment terms; however, none of these
deposits or changes in payment terms were material and none of our key suppliers
have ceased to do business with us as a result of our reorganization.

Effective May 1, 2002, we adopted "fresh-start" accounting, which required that
the $221 million of reorganization value of our assets be allocated in
accordance with procedures specified by Statement of Financial Accounting
Standards No. 141, "Business Combinations". The bankruptcy court originally set
a reorganization value for our assets of $234 million. In November of 2003,
Motient engaged CTA to perform a valuation of its equity interests in MSV as of
December 31, 2002. Concurrent with CTA's valuation, Motient reduced the book
value of its equity interest in MSV from $54 million (inclusive of Motient's
$2.5 million convertible notes from MSV) to $41 million as of May 1, 2002 to
reflect certain preference rights on liquidation of certain classes of equity
holders in MSV. Motient's reorganization value was reduced by $13 million to
$221 million as a result of this valuation revision.

Further details regarding the plan are contained in our disclosure statement
with respect to the plan, which was filed as Exhibit 99.2 to our current report
on Form 8-K dated March 4, 2002.

Summary of Liquidity and Financing

We have the following sources of financing in place:

o MSV issued a $15.0 million note to Motient as part of the November 26,
2001 asset sale. The note matures in November 2006, but is payable
sooner in certain circumstances, subject to certain conditions and
priorities with respect to payment of other indebtedness, involving
the consummation of additional investments in MSV. There can be no
assurances that this note will be repaid prior to its stated maturity
date, or that MSV will have the resources to repay such note when due.
Of the $15.0 million of proceeds from this note, $3.75 million would
be required to be used to prepay a pro-rata portion of the $19.0
million note payable to Rare Medium and a $750,000 note payable to
CSFB. Motient also owns an aggregate of approximately $3.5 million of
convertible notes issued by MSV. The convertible notes mature on
November 26, 2006, bear interest at 10% per annum, compounded
semiannually, and are payable at maturity. The convertible notes are
convertible at any time at Motient's discretion, and automatically in
certain circumstances, into class A preferred units of limited
partnership interests of MSV. For a discussion of certain recent
developments relating to MSV, please see " -- Overview and
Introduction -- Mobile Satellite Ventures LP" above.

o Motient entered into a $12.5 million term credit facility in January
2003. The borrowing availability period under this facility ended on
December 31, 2003. In March 2004, the borrowing availability period
was extended to December 31, 2004. Please see "-- $12.5 Million Term
Credit Facility" below for a discussion of this facility and certain
defaults and waivers.

We currently anticipate that our funding requirements through 2004 should be met
through a combination of cash on hand, net cash flow from operations, borrowings
under our term credit facility described above, proceeds from the sale of
certain frequency assets, and the proceeds from the sale of certain inventory.
There can be no assurances that such sources of liquidity will provide
sufficient funds in the amounts or at the time that funding is required.

Motient has the following financing obligations outstanding:

o Note payable to Rare Medium in the amount of $19.0 million. The note
was issued by a subsidiary of Motient Corporation, MVH Holdings Inc.,
that owns 100% of Motient Ventures Holdings, Inc., which owns all of
our interests in MSV. The note matures on May 1, 2005 and carries
annual interest at 9%. The note allows us to elect to add interest to
the principal or pay interest in cash. The note requires that it be
prepaid using 25% of the proceeds of any repayment of the $15.0
million note from MSV.

o Note payable to CSFB in the amount of $750,000. The note was also
issued by MVH Holdings Inc. The note matures on May 1, 2005 and
carries annual interest at 9%. The note allows us to elect to add
interest to the principal or pay interest in cash. The note requires
that it be prepaid using 25% of the proceeds of any repayment of the
$15.0 million note from MSV.

o A capital lease for network equipment. The lease has an effective
interest rate of 12.2%. In January 2003, this agreement was
restructured to provide for a modified payment schedule. We also
negotiated a further extension of the repayment schedule that became
effective upon the satisfaction of certain conditions, including our
funding of a letter of credit in twelve monthly installments beginning
in 2003, in the aggregate amount of $1.125 million, to secure our
payment obligations. The letter of credit will be released in fifteen
equal installments beginning in July 2004, assuming no defaults have
occurred or are occurring.

o Obligations under a vendor financing facility and promissory note.
Loans under our vendor financing facility with Motorola, which are
held by Motient Communications, bear interest at a rate equal to LIBOR
plus 7.0% and are guaranteed by Motient Corporation and Motient
Holdings. No additional amounts may be drawn under this facility. In
January 2003, we restructured the then-outstanding principal under
this facility of $3.5 million, with such amount to be paid off in
equal monthly installments over a three-year period from January 2003
to December 2005. In January 2003, we negotiated a deferral of
approximately $2.6 million that was owed for maintenance services
provided pursuant to a separate service agreement with Motorola, and
we issued a promissory note for such amount, with the note to be paid
off over a two-year period beginning in January 2004. The interest
rate on this promissory note is LIBOR plus 4%. In March 2004, we
further restructured both the vendor financing facility and the
promissory note, primarily to extend the amortization periods for both
the vendor financing facility and the promissory note. We will
amortize the combined balances in the amount of $100,000 per month
beginning in March 2004. We also agreed that interest would accrue on
the vendor financing facility at LIBOR plus 4%. As part of this

restructuring, we agreed to grant Motorola a second lien (junior to
the lien held by the lenders under our term credit facility) on the
stock of Motient License. This pledge secures our obligations under
both the vendor financing facility and the promissory note.

$12.5 Million Term Credit Facility

On January 27, 2003, our wholly-owned subsidiary, Motient Communications, closed
a $12.5 million term credit agreement with a group of lenders, including several
of our existing stockholders. The lenders include the following entities or
their affiliates: M&E Advisors, L.L.C., Bay Harbour Partners, York Capital and
Lampe Conway & Co. York Capital is affiliated with James G. Dinan. Bay Harbour
Management and James G. Dinan each hold 5% or more of our common stock. The
lenders also include Gary Singer, directly or through one or more entities. Gary
Singer is the brother of Steven G. Singer, one of our directors.

The table below shows, as of March 10, 2004, the number of shares of Motient
common stock beneficially owned by the following parties to the term credit
agreement, based solely on filings made by such parties with the SEC:

Name of Beneficial Owner Number of Shares
------------------------ ----------------
Bay Harbour Management, L.C. 3,217,396
James G. Dinan 2,593,045

In the credit agreement, the lenders have made commitments to lend Motient
Communications up to $12.5 million. The commitments are not revolving in nature
and amounts repaid or prepaid may not be reborrowed. Borrowing availability
under our $12.5 million term credit facility terminated on December 31, 2003. On
March 16, 2004, we entered into an amendment to the credit facility which
extended the borrowing availability period until December 31, 2004. As part of
this amendment, we provided the lenders with a pledge of all of the stock of a
newly-formed special purpose subsidiary of Motient Communications, Motient
License, which holds all of Motient's FCC licenses formerly held by Motient
Communications. On March 16, 2004, in connection with the execution of the
amendment to our credit agreement, we issued warrants to the lenders to
purchase, in the aggregate, 2,000,000 shares of our common stock. The number of
warrants will be reduced to an aggregate of 1,000,000 shares of common stock if,
within 60 days after March 16, 2004, we obtain at least $7.5 million of
additional debt or equity financing. The exercise price of the warrants is $4.88
per share. The warrants were immediately exercisable upon issuance and have a
term of five years. The warrants will be valued using a Black-Scholes pricing

model and will be recorded as a debt discount and will be amortized as
additional interest expense over three years, the term of the related debt. The
warrants are also subject to a registration rights agreement. Under such
agreement, we agreed to register the shares underlying the warrants upon the
request of a majority of the warrantholders, or in conjunction with the
registration of other common stock of the company. We will bear all the expenses
of such registration. We are also required to pay a commitment fees to the
lenders of $320,000 which accrued into the principal of the credit facility at
closing. These fees will be recorded on our balance sheet and will be amortized
as additional interest expense over three years, the term of the related debt.

Under this facility, the lenders have agreed to make loans to Motient
Communications through December 31, 2004 upon Motient Communications' request no
more often than once per month, in aggregate principal amounts not to exceed
$1.5 million for any single loan, and subject to satisfaction of other
conditions to borrowing, including certain financial and operating covenants,
contained in the credit agreement. As of December 31, 2003, we had borrowed $4.5
million under this facility.

Each loan borrowed under the credit agreement has a term of three years. Loans
carry interest at 12% per annum. Interest accrues, compounding annually, from
the first day of each loan term, and all accrued interest is payable at each
respective loan maturity, or, in the case of mandatory or voluntary prepayments,
at the point at which the respective loan principal is repaid. Loans may be
prepaid at any time without penalty.

The obligations of Motient Communications under the credit agreement are secured
by a pledge of all the assets owned by Motient Communications that can be
pledged as security and are not already pledged under certain other existing
credit arrangements, including under Motient Communications' credit facility
with Motorola and Motient Communications' equipment leasing agreement with
Hewlett-Packard. Motient Communications, directly or indirectly, owns all of our
assets relating to our terrestrial wireless communications business. In
addition, we and our wholly-owned subsidiary, Motient Holdings, have guaranteed
Motient Communications' obligations under the credit agreement, and we have
delivered a pledge of the stock of Motient Holdings, Motient Communications,
Motient Services Inc. and Motient License to the lenders. Upon the repayment in
full of the outstanding $19,750,000 in senior notes due 2005 issued by MVH
Holdings to Rare Medium and CSFB in connection with our approved Plan of
Reorganization, we will pledge the stock of MVH Holdings to the lenders.

In connection with the signing of the credit agreement in Janury 2003, we issued
warrants at closing to the lenders to purchase, in the aggregate, 3,125,000
shares of our common stock. The exercise price for the warrants is $1.06 per
share. The warrants were immediately exercisable upon issuance and have a term
of five years. The warrants were valued at $10 million using a Black-Scholes
pricing model and have been recorded as a debt discount and are being amortized
as additional interest expense over three years, the term of the related debt.
Upon closing of the credit agreement, we paid closing and commitment fees to the
lenders of $500,000. These fees have been recorded on our balance sheet and are
being amortized as additional interest expense over three years, the term of the
related debt. Under the credit agreement, we must pay an annual commitment fee

of 1.25% of the daily average of undrawn amounts of the aggregate commitments
from the period from the closing date to December 31, 2003. In December 2003, we
paid a commitment fee to the lenders of approximately $113,000.

In each of April, June and August 2003, we made draws under the credit agreement
in the amount of $1.5 million, for an aggregate amount of $4.5 million. We used
such funds to fund general working capital requirements of operations.

For the monthly periods ended April 2003 through December 2003, we reported
events of default under the terms of the credit facility to the lenders. These
events of default related to non-compliance with covenants requiring minimum
monthly revenue, earnings before interest, depreciation and amortization and
taxes, and free cash flow performance. In each period, the lenders waived these
events of default. There can be no assurance that Motient will not have to
report additional events of default or that the lenders will continue to provide
waivers in such event. Ultimately, there can be no assurances that the liquidity
provided by the credit facility will be sufficient to fund our ongoing
operations. For further details, please see "Risk Factors - We will need
additional liquidity to fund our operations."

Commitments

As of December 31, 2002, we had the following outstanding cash contractual
commitments:

Total <1 year 1-4 years After 5 years
----- ------- --------- -------------

(in thousands)
Operating leases $ 41,585 $ 13,472 $ 24,017 $ 4,096
Capital lease obligations, including interest thereon $ 7,288 $ 3,640 $ 3,648 --
Notes Payables $ 20,943 $ 1,193 $ 19,750 --
Equipment financing commitment $ 5,947 $ 1,020 $ 4,927 --
-------- -------- -------- -------
Total Contractual Cash Obligations $ 75,763 $ 19,325 $ 52,342 $ 4,096
======= ======== ======== =======

In May 2002, the FCC filed a proof of claim with the United States Bankruptcy
Court, asserting a pre-petition claim in the approximate amount of $1.0 million
in fees incurred as a result of our withdrawal from certain auctions. Under our
court-approved Plan of Reorganization, subsequent to June 30, 2002 the FCC's
claim was classified as an "other unsecured" claim, and the FCC was issued a
pro-rata portion of 97,256 shares of common stock issued to creditors with
allowed claims in such class. We recorded a $1.0 million expense in April 2002
for this claim.

At April 30 2002, we had certain contingent and/or disputed obligations under
our satellite construction contract entered into in 1995, which contained flight
performance incentives payable by us to the contractor if the satellite
performed according to the contract. Upon the implementation of the Plan of
Reorganization, this contract was terminated, and in satisfaction of all amounts
alleged to be owed by us under this contract, the contractor received a pro-rata
portion of the 97,256 shares issued to creditors holding allowed unsecured
claims. The shares were issued upon closure of the bankruptcy claims process.

On December 1, 2002, we entered into a letter agreement with UPS under which UPS
agreed to make a series of eight prepayments to us totaling $5 million for
future services we are obligated to provide to it after January 1, 2004. In
addition to any other rights it has under its network services agreement with
us, the letter agreement provides that UPS may terminate the network services
agreement, in whole or in part, by providing 30 days' notice to us at which
point the remaining prepayment would be required to be repaid. As of July 31,
2003, all eight prepayments had been made. The $5 million prepayment will be
credited against airtime services provided to UPS beginning January 1, 2004,
until the prepayment is fully credited. Based on UPS' current level of network
airtime usage, we do not expect that UPS will be required to make any cash
payments to us in 2004 for service provided during 2004.

MSV Investment

In July 2002, MSV commenced a rights offering seeking total funding in the
amount of $3.0 million. While we were not obligated to participate in the
offering, our board determined that it was in our best interests to participate
so that our interest in MSV would not be diluted. On August 12, 2002, we funded
an additional $957,000 to MSV pursuant to this offering, and received a new
convertible note in such amount. At December 31, 2002, our percentage ownership
of MSV was approximately 48% on an undiluted basis, 33.3% on an "as converted"
basis giving effect to the conversion of all outstanding convertible notes of
MSV and 25.5% on a fully-diluted basis assuming certain other investors exercise
their right to make additional investment in MSV as a result of the FCC ATC
application process. For a discussion of certain recent developments relating to
MSV, please see " -- Overview and Introduction-- Mobile Satellite Ventures LP"
above.

Summary of Cash Flow for the eight months ended December 31, 2002 (Successor
Company), and the four months ended April 30, 2002 (Predecessor Company) and the
year ended December 31, 2001 (Predecessor Company, restated)

Successor Company Predecessor Company
----------------- -------------------

(Restated)
Eight Months Ended Four Months Ended Year Ended
December 31, 2002 April 30, 2002 December 31, 2001
----------------- -------------- -----------------

Cash (Used In) Provided by Operating Activities $ (8,908) $ (14,546) $ (98,848

Cash (Used In) Provided by Investing Activities (1,173) (122) 108,848

Cash (Used In) Provided by Financing Activities:
Equity issuances -- 17 354
Debt payments on capital leases and (1,425) (1,273) (8,758)
vendor financing
Net proceeds from debt issuances -- -- 30,500
Other (117) -- (1,229)
----- -- ------

Cash Provided (Used) in Financing Activities (1,542) (1,256) 20,867
------- ------- ------

Total Change in Cash (11,623) (15,924) 30,867
======== ======== =======

Cash and Cash Equivalents, end of period $5,840 $17,463 $33,387
======== ======== =======

Cash used in operating activities decreased period over period as a result of a
decrease in operating losses and a significant decrease in our cash interest
expense.

We continue to work on reducing our operating expenses and working capital
requirements. We expect that cash used in operating activities will be reduced
going forward as a result of the cost saving measures that we have put into
place.

The decrease in cash provided by (used in) investing activities was primarily
attributable to the sale in 2001 of two million shares of our XM Radio stock for
proceeds of approximately $38.3 million, the funding of the $20.5 million second
quarter 2001 high yield interest payment out of the escrow account, offset by
proceeds from the sale of MSV of $42.5 million and the sale of certain
transportation assets for $10.0 million, the receipts from the sale of certain
restricted investments of $11.3 million, and a decrease in capital spending.

The decrease in cash used in financing activities was a result of a net decrease
in borrowings and related issuance costs of $30.5 million and a net decrease in
payments of vendor debt and capital lease repayments.

Other

On May 1, 2002, the effective date of our Plan of Reorganization, the financing
agreements that included restrictions on our ability to pay dividends were
terminated as part of the implementation of our Plan of Reorganization; however,
our current credit facility and other financing documents prohibit us from
paying cash dividends. We have never paid dividends and do not expect to do so
in the near future.

Derivatives

In September 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", which requires
the recognition of all derivatives as either assets or liabilities measured at
fair value, with changes in value reflected as current period income (loss).

The effective date of SFAS No. 133, as amended by SFAS 138, is for fiscal years
beginning after September 15, 2000. Except for the Rare Medium note embedded
call options and the bank financing swap agreement discussed in the following
paragraphs, SFAS No. 133 was not material to our financial position or results
of operations as of or for the periods ended December 31, 2001 and December 31,
2002.

In April and July 2001, we sold notes to Rare Medium totaling $50.0 million. The
notes were collateralized by up to five million of our XM Radio shares, and,
until maturity, which was extended until October 12, 2001, Rare Medium had the
option to exchange the note for a number of XM Radio shares equivalent to the
principal of the note plus any accrued interest thereon. We determined the
embedded call options in the notes, which permit Rare Medium to convert the
borrowings into shares of XM Radio, were derivatives which were accounted for in
accordance with SFAS No. 133 and accordingly we recorded a gain in the amount of
$1.5 million in 2001 related to the Rare Medium note call options. On October
12, 2001, the embedded call options in the Rare Medium notes expired
unexercised.

In connection with our bank financing in March 1998, we entered into an interest
rate swap agreement, with an implied annual rate of 6.51%. The swap agreement
reduced the impact of interest rate increases on our then-existing term loan
facility. We paid a fixed fee of approximately $17.9 million for the swap
agreement. In return, the counter-party was obligated to pay a variable rate
equal to LIBOR plus 50 basis points, paid on a quarterly basis directly to the
respective banks on our behalf, on a notional amount of $100 million until the
termination date of March 31, 2001. In connection with the pay down of a portion
of the term loan facility during 1999, we reduced the notional amount of our
swap agreement from $100 million to $41 million and realized net proceeds of
approximately $6 million due to early termination of a portion of the swap
agreement. The interest rate swap agreement expired in March 2001, and our bank
financing credit facility was extinguished in 2001.

Critical Accounting Policies and Significant Estimates

Below are our accounting policies which are both important to our financial
condition and operating results, and require management's most difficult,
subjective and complex judgments in determining the underlying estimates and
assumptions. The estimates and assumptions affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates as they require assumptions that are inherently uncertain.

"Fresh-Start" Accounting

In accordance with SOP No. 90-7, effective May 1, 2002, we adopted "fresh-start"
accounting and allocated the reorganization value of $221.0 million to our net
assets in accordance with procedures specified by Statement of Financial
Standards No. 141, "Business Combinations".

We allocated the $221.0 million reorganization value among our net assets based
upon our estimates of the fair value of our assets and liabilities. In the case
of current assets, we concluded that their carrying values approximated fair
values. The values of our frequencies and its investment in and notes receivable
from MSV were based on independent analyses presented to the bankruptcy court
and subsequently modified as part of our valuation process in November 2003.
Please see "--Recent Developments--Mobile Satellite Ventures LP" and Note 2,
"Significant Accounting Policies - Restatement of Financial Statements," and
Note 16, "Subsequent Events," of notes to the consolidated financial statements
for further information concerning MSV. The value of our fixed assets was based
upon a valuation of our software and estimates of replacement cost for network
and other equipment, for which we believe that our recent purchases represent a
valid data point. The value of our other intangible assets was based on third
party valuations as of May 1, 2002.

For a complete description of the application of "fresh-start" accounting,
please refer to Note 2, "Significant Accounting Policies", of notes to the
consolidated financial statements.

Inventory

Inventory, which consists primarily of communication devices, are stated at the
lower of cost or market. Cost is determined using the weighted average cost
method. We periodically assess the market value of our inventory, based on sales
trends and forecasts and technological changes and record a charge to current
period income when such factors indicate that a reduction to net realizable
value is appropriate. We consider both inventory on hand and inventory that we
have committed to purchase, if any. Periodically, we will offer temporary
discounts on equipment purchases. In cases where this causes a write-down of the
inventory basis to the lower of cost or market, the write-down is recorded in
the period of the offer.

Investment in MSV and Note Receivable from MSV

As reported in our current report on Form 8-K dated March 14, 2003 and detailed
in Note 2, "Significant Accounting Policies - Restatement of Financial
Statements", of notes to the consolidated financial statements we have
determined that certain adjustments to our historical financial information for
2000, 2001 and 2002 are required to reflect the effects of several complex
transactions, including the formation of and transactions with MSV.

As a result of the application of "fresh-start" accounting and as subsequently
modified by our valuation process in November 2003 (please see "--Recent
Developments--Mobile Satellite Ventures LP," and Note 2, "Significant Accounting
Policies - Restatement of Financial Statements," and Note 16, "Subsequent
Events," of notes to the consolidated financial statements for further
information concerning MSV), the notes and investment in MSV were valued at fair
value, and we recorded an asset in the amount of approximately $53.9 million
representing the estimated fair value of our investment in and note receivable
from MSV. Included in this investment is the historical cost basis of our
approximately 48% of common equity ownership as of May 1, 2002, or approximately
$19.3 million. In accordance with the equity method of accounting, we recorded
our approximately 48% share of MSV losses against this basis.

Of the $53.9 million, approximately $21.6 million of the $40.9 million value
attributed to MSV is the excess of fair value over cost basis and is amortized
over the estimated lives of the underlying MSV assets that gave rise to the
basis difference. We are amortizing this excess basis in accordance with the
pro-rata allocation of various components of MSV's intangible assets as
determined by MSV through recent independent valuations. Such assets consist of
FCC licenses, intellectual property and customer contracts.

Of the $53.9 million, we have recorded the $15.0 million note receivable from
MSV, plus accrued interest thereon at its fair value, estimated to be
approximately $13.0 million as of the "fresh-start" accounting date, after
giving affect to discounted future cash flows at market interest rates. This
note matures in November 2006, but may be fully or partially repaid prior to
maturity in certain circumstances, subject to certain conditions and priorities
with respect to payment of other indebtedness, involving the consummation of
additional investments in MSV. We also recorded the $2.5 million convertible
note issued to the Company from MSV.

In November 2003, Motient engaged CTA to perform a valuation of our equity
interests in MSV as of December 31, 2002. Concurrent with CTA's valuation,
Motient reduced the book value of its equity interest in MSV from $54 million
(inclusive of Motient's $2.5 million convertible note from MSV) to $41 million
as of May 1, 2002 to reflect certain preference rights on liquidation of certain
classes of equity holders in MSV. Including its note receivable from MSV ($13
million at May 1, 2002), the book value of Motient's aggregate interest in MSV
as of May 1, 2002 was reduced from $67 million to $53.9 million. Also, as a
result of CTA's valuation of MSV, we determined that the value of our equity
interest in MSV was impaired as of December 31, 2002. This impairment was deemed
to have occurred in the fourth quarter of 2002. Motient reduced the value of its
equity interest in MSV by $15.4 million as of December 31, 2002. Including its
notes receivable from MSV ($19 million at December 31, 2002), the book value of
Motient's aggregate interest in MSV was $32 million as of December 31, 2002. For
additional information concerning this valuation process, please see Note 2,
"Significant Accounting Policies," of notes to the consolidated financial
statements.

The valuation of our investment in MSV and our note receivable from MSV are
ongoing assessments that are, by their nature, judgmental given that MSV is not
traded on a public market and is in the process of developing certain next
generation technologies, which depend on approval by the FCC. While the
financial statements currently assume that there is value in our investment in
MSV and that the MSV note is collectible, there is the inherent risk that this
assessment will change in the future and we will have to write down the value of
this investment and note.

Deferred Taxes

We have generated significant net operating losses for tax purposes as of
December 31, 2002. We have had our ability to utilize these losses limited on
two occasions as a result of transactions that caused a change of control in
accordance with the Internal Revenue Service Code Section 382. Additionally,
since we have not yet generated taxable income, we believe that our ability to
use any remaining net operating losses has been greatly reduced; therefore, we
have provided a full valuation allowance for any benefit that would have been
available as a result of our net operating losses. See Note 2, "Significant
Accounting Policies - Deferred Taxes," of notes to the consolidated financial
statements for further details.

Revenue Recognition

We generate revenue principally through equipment sales and airtime service
agreements. In 2000, we adopted SAB 101, which provides guidance on the
recognition, presentation and disclosure of revenue in financial statements. In
certain circumstances, SAB 101 requires us to defer the recognition of revenue
and costs related to equipment sold as part of a service agreement. Revenue is
recognized as follows:

Service revenue: Revenues from our wireless services are recognized when the
services are performed, evidence of an arrangement exists, the fee is fixed and
determinable and collectibility is probable. Service discounts and incentives
are recorded as a reduction of revenue when granted, or ratably over a contract
period. We defer any revenue and costs associated with activation of a
subscriber on our network over an estimated customer life of two years.

To date, the majority of our business has been transacted with
telecommunications, field services, natural resources, professional service and
transportation companies located throughout the United States. We grant credit
based on an evaluation of the customer's financial condition, generally without
requiring collateral or deposits. We establish a valuation allowance for
doubtful accounts receivable for bad debt and other credit adjustments.
Valuation allowances for revenue credits are established through a charge to
revenue, while valuation allowances for bad debts are established through a
charge to general and administrative expenses. We assess the adequacy of these
reserves quarterly, evaluating factors such as the length of time individual
receivables are past due, historical collection experience, the economic
environment and changes in credit worthiness of our customers. As of December
31, 2002 and December 31, 2001, we had a valuation allowance of approximately
9.7% and 7.7% of our accounts receivable, respectively. We believe that our
established valuation allowance was adequate as of December 31, 2002 and 2001.
If circumstances related to specific customers change or economic conditions
worsen such that our past collection experience and assessments of the economic
environment are no longer relevant, our estimate of the recoverability of our
trade receivables could be further reduced.

Equipment and service sales: We sell equipment to resellers who market our
terrestrial product and airtime service to the public. We also sell our product
directly to end-users. Revenue from the sale of the equipment as well as the

cost of the equipment, are initially deferred and are recognized over a period
corresponding to our estimate of customer life of two years. Equipment costs are
deferred only to the extent of deferred revenue.

Long-lived Assets

On January 1, 2002, we adopted the provisions of SFAS No. 141, "Business
Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No.
141 requires business combinations initiated after June 30, 2001 to be accounted
for using the purchase method of accounting, and broadens the criteria for
recording intangible assets separate from goodwill. Recorded goodwill and
intangibles will be evaluated against this new criteria and may result in
certain intangibles being subsumed into goodwill, or alternatively, amounts
initially recorded as goodwill may be separately identified and recognized apart
from goodwill. SFAS No. 142 requires the use of a nonamortization approach to
account for purchased goodwill and certain intangibles. Under a nonamortization
approach, goodwill and certain intangibles will not be amortized into results of
operations, but instead will be reviewed for impairment and written down and
charged to results of operations only in the periods in which the recorded value
of goodwill and certain intangibles is more than its fair value. As of January
1, 2002, we had approximately $5.0 million of recorded goodwill. However, as
part of our adoption of "fresh-start" accounting, our recorded goodwill was
reduced to zero.

We account for our frequencies as finite-lived intangibles and amortize them
over a 20-year estimated life. As described in note 5 of notes to consolidated
financial statements, we are monitoring a pending FCC rulemaking proposal that
may affect our 800 MHz spectrum, and we may change our accounting policy for FCC
frequencies in the future as new information is available.

On January 1, 2002, we also adopted SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets", which supercedes SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed
Of". The statement requires that all long-lived assets be measured at the lower
of carrying amount or fair value less cost to sell, whether reported in
continuing operations or in discontinued operations. Therefore, discontinued
operations will no longer be measured on a net realizable value basis and will
not include amounts for future operating losses. The statement also broadens the
reporting requirements for discontinued operations to include disposal
transactions of all components of an entity (rather than segments of a
business). Components of an entity include operations and cash flows that can be
clearly distinguished from the rest of the entity that will be eliminated from
the ongoing operations of the entity in a disposal transaction. Subsequent to
the period covered by this report, we engaged a financial advisor to value
certain of our assets as of December 31, 2002, among other things, to test for
potential impairment of certain of our long-lived assets under SFAS No. 144.

This testing included valuations of software and customer-related intangibles.
Based on these tests, no recording of impairment charges was required. The
adoption of SFAS No. 144 had no material impact on our financial statements.

Recent Accounting Standards

In February, 2002, EITF No. 01-09, "Accounting for Consideration Given by a
Vendor to a Customer (Including a Reseller of the Vendor's Products)", was
issued to provide guidance on whether consideration paid by a vendor to a
reseller should be recorded as expenses or against revenues. We have reviewed
EITF No. 01-09 and believe that all such consideration is properly recorded by
us as operating expenses. We adopted the provisions of this consensus on January
1, 2002, and it had no material impact on our consolidated financial statements.

In May 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4,
44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections.". SFAS
No. 145 rescinded three previously issued statements and amended SFAS No. 13,
"Accounting for Leases". The statement provides reporting standards for debt
extinguishments and provides accounting standards for certain lease
modifications that have economic effects similar to sale-leaseback transactions.
We adopted SFAS No. 145 as of our "fresh-start" accounting date of May 1, 2002.
In accordance with SFAS No. 145, we have reclassified all prior period
extraordinary losses on extinguishment of debt as ordinary non-operating losses
on extinguishment of debt.

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". The standard requires companies to recognize
costs associated with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan. Examples of costs
covered by the standard include lease termination costs and certain employee
severance costs that are associated with a restructuring, discontinued
operation, plant closing or other exit or disposal activity. Previous accounting
guidance was provided by EITF No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)". SFAS No. 146 replaces EITF No.
94-3. SFAS No. 146 is to be applied prospectively to exit or disposal activities
initiated after December 31, 2002. We adopted SFAS No. 146 as of January 1,
2003, and this adoption had no material impact on our consolidated financial
statements.

In November 2002, the EITF reached consensus on EITF No. 00-21, "Accounting for
Revenue Arrangements with Multiple Deliverables". This consensus requires that
revenue arrangements with multiple deliverables be divided into separate units
of accounting if the deliverables in the arrangement meet specific criteria. In
addition, arrangement consideration must be allocated among the separate units
of accounting based on their relative fair values, with certain limitations. The
sale of our equipment with related services constitutes a revenue arrangement
with multiple deliverables. We will be required to adopt the provisions of this
consensus for revenue arrangements entered into after June 30, 2003, and we have
decided to apply it on a prospective basis. Motient does not have any revenue
arrangements that would have a material impact on our financial statements with
respect to EITF No. 00-21.

In November 2002, the FASB issued FASB Interpretation, or FIN No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others". FIN No. 45 elaborates on the
disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it has issued. It
also clarifies that a guarantor is required to recognize, at the inception of a
guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee. However, a liability does not have to be recognized for a
parent's guarantee of its subsidiary's debt to a third party or a subsidiary's
guarantee of the debt owed to a third party by either its parent or another
subsidiary of that parent. The initial recognition and measurement provisions of
FIN No. 45 are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002 irrespective of the guarantor's fiscal year
end. The disclosure requirements of FIN No. 45 are effective for financial
statements with annual periods ending after December 15, 2002. Motient does not
have any guarantees that would require disclosure under FIN No. 45.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-based
Compensation - Transition and Disclosure - an Amendment to SFAS No. 123". SFAS
No. 148 provides alternative methods of transition for a voluntary change to the
fair value-based method of accounting for stock-based employee compensation. In
addition, this statement amends the disclosure requirements of SFAS No. 123 for
public companies. This statement is effective for fiscal years beginning after
December 15, 2002. We will adopt the disclosure requirements of SFAS No. 148 as
of January 1, 2003 and plan to continue to follow the provisions of APB Opinion
No. 25 for accounting for stock based compensation.

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest
Entities -- An Interpretation of ARB No. 51", which clarifies the application of
Accounting Research Bulletin No. 51, "Consolidated Financial Statements," to
certain entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. FIN No. 46 provides guidance related to identifying
variable interest entities (previously known generally as special purpose
entities, or SPEs) and determining whether such entities should be consolidated.
FIN No. 46 must be applied immediately to variable interest entities created or
interests in variable interest entities obtained, after January 31, 2003. For
those variable interest entities created or interests in variable interest
entities obtained on or before January 31, 2003, the guidance in FIN No. 46 must
be applied in the first fiscal year or interim period beginning after June 15,
2003. We have reviewed the implications that adoption of FIN No. 46 would have
on our financial position and results of operations and do not expect it to have
a material impact.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity". This statement
establishes standards for how an issuer classifies and measures in its statement
of financial position certain financial instruments with characteristics of both
liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some
circumstances) because that financial instrument embodies the characteristics of

an obligation of the issuer. This standard is effective for financial
instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after June 15,
2003. We have determined that we do not have any financial instruments that are
impacted by SFAS No. 150.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
- ---------------------------------------------------------------------

Prior to our reorganization, we were exposed to the impact of interest rate
changes related to our credit facilities and we managed interest rate risk
through the use of fixed rate debt. Currently, we are only exposed to the impact
of interest rate changes related to our capital lease and vendor financing
obligations. We do not use derivative financial instruments to manage our
interest rate risk. We invest our cash in short-term commercial paper,
investment-grade corporate and government obligations and money market funds.

Effective May 1, 2002, Motient's senior notes and accrued interest thereon were
eliminated in exchange for new common stock of the company. All of Motient's
remaining debt obligations, excluding its vendor financing, are fixed rate
obligations. We do not believe that we have any material cash flow exposure due
to general interest rate changes on these debt obligations.

Item 8. Financial Statements and Supplementary Data.
- -----------------------------------------------------

The financial statements and supplementary data required by this item are found
at the end of this annual report, beginning on page F-1.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
- --------------------------------------------------------------------------------

Matters required by this item were previously reported in our current reports on
Form 8-K filed with the SEC on June 4, 2002 and April 23, 2003 and the amendment
to our current report on Form 8-K/A filed with the SEC on March 9, 2004.

PART III

Item 10. Directors and Executive Officers of Motient.
- ------------------------------------------------------

The following table sets forth certain information about our executive officers,
directors and key employees.

Name Title Age Began Service
- ---- ----- --- -------------

Christopher W. Downie Executive Vice President, Chief Financial 34 2003
Officer and Treasurer
Dennis W. Matheson Senior Vice President and Chief 43 1993
Technology Officer
Gerald S. Kittner Director 51 2002
Steven G. Singer Director, Chairman 43 2002
Peter D. Aquino Director 42 2003
Jonelle St. John Director 50 2000
James D. Dondero Director 41 2002

Christopher W. Downie, 34. Mr. Downie was appointed vice president, chief
financial officer and treasurer in April 2003. In March 2004, Mr. Downie was
subsequently appointed to the position of executive vice president, chief
financial officer and treasurer, and designated the Company's principal
executive officer. From May 2002 to April 2003, Mr. Downie worked as a
consultant for CTA, a communications consulting firm. While with CTA, Mr. Downie
was primarily engaged on Motient-related and other telecom-related matters. From
February 2000 to May 2002, Mr. Downie served as a senior vice president and
chief financial officer of BroadStreet Communications, Inc. From August 1993 to
February 2000, Mr. Downie was a vice president in the Investment Banking
Division of Daniels & Associates, LP, an investment bank focused on
communications. From 1991 to 1993, Mr. Downie served as a financial analyst at
Bear Stearns & Co. Inc.

Dennis W. Matheson, 43. Mr. Matheson has been Motient's senior vice president
and chief technology officer since March 2000. From 1993 to March 2000, Mr.
Matheson held other technical positions within Motient, most recently as vice
president of engineering and advanced technology. Before joining Motient, Mr.
Matheson was senior manager of systems architecture for Bell Northern Research,
a subsidiary of Nortel Networks Corporation (formerly known as Northern Telecom
Limited). Prior to that, he held various positions with Northern Telecom and
Bell Northern Research within the design and product management organizations
and held various engineering positions with Texas Instruments Incorporated.

Mr. Matheson was an executive officer of Motient at the time it filed for
Chapter 11 protection. Information regarding Motient's filing under Chapter 11
of the Bankruptcy Code is provided in "Business - Motient's Chapter 11 Filing,"
and is incorporated herein by reference.

Gerald S. Kittner, 50. Mr. Kittner has been a Motient director since May 2002.
Since October 2001, Mr. Kittner has been an advisor and consultant for CTA. From
1996 to 1999, Mr. Kittner was a senior vice president for legislative and
regulatory affairs with CAI Wireless Systems. When CAI Wireless Systems was
acquired by WorldCom, Inc. (then MCI) in 1999, Mr. Kittner remained with
WorldCom as a senior vice president for approximately one year. From 1996 to
2000, Mr. Kittner served on the board of directors of the Wireless
Communications Association, and was a member of its executive and government
affairs committees. Previously, Mr. Kittner was a partner with the law firm
Arter & Hadden and worked with a variety of telecommunications clients.

Mr. Kittner was involved with CAI Wireless Systems, Inc. when it filed for
protection under Chapter 11 of the Bankruptcy Code in 1998. During all relevant
time periods relating to the Chapter 11 proceeding captioned In re CAI Wireless
Systems, Inc., Debtor, Chapter 11 Case No. 98-1766 (JJF) and In re Philadelphia
Choice Television, Inc., Debtor, Chapter 11 Case No. 98-1765 (JJF), commenced in
the United States Bankruptcy Court for the District of Delaware on July 30,
1998, Mr. Kittner was a senior vice president of CAI Wireless Systems. CAI
Wireless Systems and Philadelphia Choice Television consummated their joint plan
of reorganization and emerged from bankruptcy on October 14, 1998.

Steven G. Singer, 43. Mr. Singer has been a Motient director since May 2002 and
chairman of the board since June 2003. Since November 2000, Mr. Singer has
served as chairman and chief executive officer of American Banknote Corporation,
a public company providing documents of value (such as currency, checks,
passports, and credit cards) and related services. Since 1994, Mr. Singer has
also been chairman and chief executive officer of Pure 1 Systems, a privately
held drinking water treatment company. From 1994 to 2000, Mr. Singer was
executive vice president and chief operating officer of Romulus Holdings, Inc.,
a family-owned investment fund. Mr. Singer also currently serves as the
non-executive chairman of Globix Corporation, a public company.

Peter D. Aquino, 42. Mr. Aquino has been a Motient director since June 2003. Mr.
Aquino has been a senior managing director of CTA since February 2002. From July
1995 to January 1998, Mr. Aquino was a partner of Wave International, Inc., a
telecommunications investment firm. From January 1998 to February 2002, Mr.
Aquino was the chief operating officer of, and a board advisor to, Veninfotel,
LLC, one of Wave International's private telecom holdings in Venezuela. From
1983 to 1995, Mr. Aquino held various positions in finance, regulatory and
corporate development at Bell Atlantic Corporation (now Verizon). Mr. Aquino is
a director of Neon Communications, Inc., a private company.

Jonelle St. John, 49. Ms. St. John has been a Motient director since November
2000. Ms. St. John was the chief financial officer of MCI WorldCom International
in London from 1998 through 2000 following her positions as the treasurer of MCI
Communications Corporation from 1993 to 1998. Prior to working with WorldCom,
Ms. St. John was the vice president and treasurer and the vice president and
controller of Telecom*USA, which she joined in 1985. Before 1985, Ms. St. John
held various positions at Arthur Andersen LLP.

James D. Dondero, 41. Mr. Dondero has been a Motient director since July 2002.
Mr. Dondero has been president of Highland Capital Management, L.P. since 1993.
Mr. Dondero is also a director of Audio Visual Services Corp., Genesis Health
Ventures, Inc. and American Banknote Corporation, all of which are public
companies.

Board Compensation

Effective as of May 1, 2002, each non-employee member of the board of directors
is entitled to receive $2,000 per month, and each member of the audit committee
(currently Ms. St. John, Mr. Aquino and Mr. Kittner) and the compensation and
stock option committee (currently Mr. Aquino, Mr. Singer and Mr. Kittner) are
entitled to receive an additional $500 and $250 per month, respectively. Such
amounts are currently being accrued but not paid by Motient. Each non-employee
member of the board of directors also is entitled to receive an additional
$1,000 for each board or committee meeting that is in excess of four meetings
per year. In calculating the number of meetings held with respect to which this
additional fee is to be paid, multiple meetings held on the same day are
regarded as a single meeting. Further, each non-employee member of our board is
eligible to receive grants of stock options under our 2002 stock option plan. No
options have been granted to non-employee directors.

Section 16(a) Beneficial Ownership Reporting Compliance

Under the securities laws of the United States, our directors, executive
officers and any persons holding more than ten percent of our common stock are
required to report their ownership of the common stock and any changes in that
ownership to the SEC. Specific due dates for these reports have been established
by the SEC, and we are required to report in this annual report any failure to
file by these dates. Based on our review of these reports filed during and in
connection with the year ended December 31, 2002, and on certain written
representations, we do not believe that any of our directors, officers or
beneficial owners of more than ten percent of our common stock failed to file a
form or report a transaction on a timely basis other than a Form 4 for Bay
Harbour Management L.C., which was not filed on a timely basis.

Item 11. Executive Compensation.

The following tables set forth (a) the compensation paid or accrued by Motient
to Motient's chief executive officer and its four other most highly compensated
executive officers receiving over $100,000 per year, all of whom are referred to
herein as the "named executive officers" for services rendered during the fiscal
years ended December 31, 2000, 2001, and 2002 and (b) certain information
relating to options granted to such individuals.

Summary Compensation Table
All Other
Annual Compensation Long-Term Compensation Compensation
---------------------------------------------------------------------------------

Restricted Securities
Name and Other Annual Stock Underlying
Principal Position Year Salary Bonus Compensation(1) Awards(2) $ Options/SARs(3)
------------------ ---- ------ ------ --------------- ----------- ---------------

Walter V. Purnell, Jr. (4) 2002 $280,763 $50,000 $774 $0 500,000
Former President and 2001 $286,953 $83,000 $774 $46,508 100,000
Chief Executive Officer 2000 $275,300 $101,725 $774 $0 200,000

David H. Engvall(5) 2002 $186,709 $25,000 $457 $0 120,000
Former Senior Vice 2001 $183,031 $36,234 $143 $3,413 25,000
President, General
Counsel and Secretary

Dennis W. Matheson(6) 2002 $177,923 $25,000 $476 $0 120,000
Senior Vice President 2001 $182,355 $51,940 $158 $15,609 40,000
And Chief Technology Officer 2000 $169,889 $34,508 $143 $0 50,000

Daniel Croft(7) 2002 $173,184 $20,000 $40,146 $0 120,000
Former Senior Vice President, 2001 $177,145 $14,892 $19,319 $5,850 15,000
Business Development 2000 $170,075 $36,815 $28,385 $0 15,000

Michael Fabbri(7) 2002 $176,515 $30,000 $29,539 $0 120,000
Former Senior Vice 2001 $184,220 $22,423 $41,175 $9,604 40,000
President, Sales 2000 $153,273 $21,450 $35,291 $0 30,000

(1) Includes group term life insurance premiums. For Mr. Croft, also includes
commissions in 2000, 2001 and 2002 in the amounts of $28,152, $19,086, and
$39,913, respectively. For Mr. Fabbri, also includes commissions in 2000, 2001
and 2002 in the amounts of $35,058, $40,942, and $29,062, respectively.

(2) In September 2001, Motient completed an option exchange program in which
holders of previously-granted options, including the named executive officers,
were entitled to exchange such options for a number of shares of restricted
stock equal to 75% of the number of shares covered by the exchanged options. The
amounts shown in this column for 2001 represent such restricted stock awarded in
September 2001. Under Motient's Plan of Reorganization, all shares of restricted
stock were cancelled as of May 1, 2002, the effective date of the Plan. On that
date, holders of restricted stock received warrants to purchase 0.02613 shares
of common stock at a price of $0.01 per share for each vested share of

restricted stock held. Holders did not receive anything in exchange for their
canceled unvested shares. The warrants will expire May 1, 2004, and will not be
exercisable unless and until the average closing price of our common stock for
ninety consecutive trading days is equal to or greater than $15.44 per share.
The shares of restricted stock issued in the exchange program were to vest
according to the vesting schedule of the options that were exchanged, except
that no shares of restricted stock vested before May 1, 2002. These shares of
restricted stock were to have vested as follows:

Name Total Number of Shares Vesting Schedule
---- ---------------------- ----------------

Walter V. Purnell, Jr. 357,750 182,750 shares on March 25, 2002
25,000 shares on January 25, 2003
12,500 shares on January 27, 2003
25,000 shares on January 25, 2004
112,500 shares on January 27, 2007

David H. Engvall 26,250 13,750 shares on March 25, 2002
1,250 shares on April 5, 2002
3,750 shares on January 25, 2003
2,500 shares on January 27, 2003
1,250 shares on April 5, 2003
3,750 shares on January 25, 2004

Dennis W. Matheson 120,073 72,573 shares on March 25, 2002
10,000 shares on January 25, 2003
2,500 shares on January 27, 2003
2,500 shares on March 23, 2003
10,000 shares on January 25, 2004
22,500 shares on January 27, 2007

Daniel Croft 45,000 33,750 shares on March 25, 2002
3,750 shares on January 25, 2003
3,750 shares on January 27, 2003
3,750 shares on January 25, 2004

Michael Fabbri 73,875 46,375 shares on March 25, 2002
10,000 shares on January 25, 2003
7,500 shares on January 27, 2003
10,000 shares on January 25, 2004

As of December 31, 2001, the dollar value of restricted stock held by each of
Messrs. Purnell, Engvall, Matheson, Croft, and Fabbri was $150,255, $11,025,
$50,431, $18,900 and $31,028 respectively, and the total number of shares of
restricted stock held by each of Messrs. Purnell, Engvall, Matheson, Croft and
Fabbri was 357,750, 26,250, 120,073, 45,000 and 73,875, respectively.

(3) For 2000 and 2001, the numbers reflect grants of options to purchase shares
of common stock under Motient's former stock award plan, which was terminated in
conjunction with Motient's Plan of Reorganization in 2002. Under Motient's Plan
of Reorganization, all unexercised options outstanding as of May 1, 2002 were
cancelled on May 1, 2002, the effective date of the Plan. For 2002, the numbers
reflect grants of options to purchase shares of common stock under Motient's
2002 stock option plan. Motient has not granted stock appreciation rights, or
SARs.

(4) Mr. Purnell's employment terminated in March 2004.

(5) Mr. Engvall assumed his position in May 2001, and resigned his position in
January 2003.

(6) Mr. Matheson assumed his position in March 2000.

(7) Mr. Croft's and Mr. Fabbri's employment terminated in February 2004.

The following table sets forth each grant of stock options made during fiscal
year 2002 to each of the named executive officers.

Option/SAR Grants in Last Fiscal Year

Individual Grants
---------------------------------------------------------------- Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Number of % of Total Appreciation for
Securities Options/SARs Option Term(1)
Underlying Granted to Exercise or --------------
Options/SARs Employees/ Base Price
Name Granted Fiscal Year ($/Share) Expiration Date 5% 10%
----- --------------- --------------- ------------- ----------------- ------------------------

Walter V. Purnell, Jr. (3) 500,000(2) 22.3% $5.00 May 31, 2012 $1,575,000 $3,985,000
David H. Engvall(4) 120,000(2) 5.3% $5.00 May 31, 2012 $ 378,000 $ 956,400
Dennis W. Matheson 120,000(2) 5.3% $5.00 May 31, 2012 $ 378,000 $ 956,400
Daniel Croft(5) 120,000(2) 5.3% $5.00 May 31, 2012 $ 378,000 $ 956,400
Michael Fabbri(5) 120,000(2) 5.3% $5.00 May 31, 2012 $ 378,000 $ 956,400

(1) Based on actual option term and annual compounding.

(2) One-half of these options become exercisable in three annual installments,
vesting at the rate of 33-1/3 % per year for three years. The other one-half of
these options become exercisable only upon the attainment of specified operating
and performance targets for each of the three fiscal years ending December 31,
2002, 2003 and 2004. The compensation and stock option committee of our board of
directors has not yet made a determination regarding whether the 2003
performance criteria were satisfied.

(3) Mr. Purnell's vested options will terminate on June 9, 2004, 90 days after
the last day of his employment.

(4) Mr. Engvall's options terminated effective with his resignation in January
2003.

(5) Mr. Croft's and Mr. Fabbri's vested options will terminate on May 18, 2004,
90 days after the last day of their employment.

In March 2003, the board of directors approved a reduction in the exercise price
of all of Motient's then-outstanding stock options, including the options
described above, from $5.00 per share to $3.00 per share.

The following table sets forth, for each of the named executive officers, the
value of unexercised options at fiscal year-end.

Aggregated Option/SAR Exercises in Last Fiscal Year and
Fiscal Year-End Option/SAR Values (1)

Value of Unexercised
Number of Securities in-the-Money
Underlying Unexercised Options/SARs at
Shares Options at Fiscal Fiscal Year-End($)
Acquired on Year-End Exercisable/ Exercisable/
Name Exercise (#) Value-Realized ($) Unexercisable Unexercisable
---- ------------ ------------------ ------------- -------------

Walter V. Purnell, Jr. -- -- 0/500,000 0/0
David H. Engvall -- -- 0/120,000 0/0
Dennis W. Matheson -- -- 0/120,000 0/0
Daniel Croft -- -- 0/120,000 0/0
Michael Fabbri -- -- 0/120,000 0/0

(1) Motient has not granted SARs.

Change of Control Agreements

Pursuant to the Plan of Reorganization, Motient entered into a change of control
agreement, effective May 1, 2002, with each of Messrs. Purnell, Matheson and
Engvall and seven other vice presidents of Motient. Under the agreements, each
officer is eligible to receive one year of their annual base salary (excluding
cash bonus) in the event that both (x) a "change in control" or an anticipated
"change in control," as defined in the change of control agreement, has occurred
and (y) the employee is terminated or his or her compensation or
responsibilities are reduced. The events constituting a "change of control"
generally involve the acquisition of greater than 50% of the voting securities
of Motient, as well as certain other transactions or events with a similar
effect. In July 2002, Mr. Purnell's change of control agreement was superseded
by the executive retention agreement described below.

Executive Retention Agreement for Mr. Purnell

On July 16, 2002, we entered into an executive retention agreement with Mr.
Purnell, which was amended in connection with the termination of Mr. Purnell's
employment in March 2004. Pursuant to the terms of the amended agreement, we
will pay Mr. Purnell a severance payment equal to one-half of his base salary
through September 2005. Additionally, we agreed to make a lump sum severance
payment to Mr. Purnell in September 2005 equal to the other half of his base
salary through such period. Mr. Purnell is entitled to receive certain medical
benefits until September 2005. As part of these severance arrangements, Mr.
Purnell entered into a waiver and release agreement and a non-compete agreement.

Compensation of Directors

Information about compensation of directors appears in Item 10 of this annual
report on Form 10-K and is incorporated herein by reference.

2002 Stock Option Plan

Our 2002 stock option plan was adopted by the board of directors on May 31, 2002
and received stockholder approval on July 11, 2002. A total of 2,993,024 shares
of common stock have been reserved for issuance under the 2002 stock option

plan. Under the 2002 stock option plan, we are authorized to grant options to
purchase shares of common stock intended to qualify as incentive stock options,
as defined under section 422 of the Internal Revenue Code of 1986, as amended,
and non-qualified stock options to any employees, outside directors,
consultants, advisors and individual service providers whose participation in
the 2002 stock option plan is determined by our compensation and stock option
committee to be in our best interests. The term of each stock option is fixed by
the board of directors or the compensation committee, and each stock option is
exercisable within ten years of the original grant date. Generally, an option is
not transferable by the recipient except by will or the laws of descent and
distribution. Some change of control transactions, such as a sale of Motient,
may cause awards granted under the 2002 stock option plan to vest. As of
December 31, 2002, options to purchase 2,993,024 shares of common stock had been
authorized under the 2002 stock option plan, of which options to purchase
1,631,025 shares of our common stock were outstanding at December 31, 2002. In
March 2003, the board of directors approved a reduction in the exercise price of
all of our then-outstanding stock options from $5.00 per share to $3.00 per
share.

Compensation and Stock Option Committee Interlocks and Insider Participation

From January 1, 2002 to May 1, 2002, the compensation and stock option committee
of Motient's board of directors consisted of Ms. St. John and Messrs. Parrott,
Parsons, Purnell and Quartner. During this time, Messrs. Parsons and Purnell
were executive officers of Motient. From May 1, 2002 to December 31, 2002, the
compensation and stock option committee of Motient's board of directors
consisted of Messrs. Singer, Kittner and Stranzl. During this time, none of
these individuals were executive officers of Motient.

Mr. Kittner is an advisor and consultant for CTA. During 2002, Motient and/or
certain of its subsidiaries were party to certain contracts and/or transactions
with CTA. All of these contracts and transactions were approved by Motient's
board of directors, and Motient believes that the contracts and transactions
were made on terms substantially as favorable to Motient as could have been
obtained from unaffiliated third parties. The following is a description of such
contracts and transactions. In addition, this section describes the relationship
between Steven Singer and one of the lenders under our $12.5 million credit
facility. For additional information concerning these relationships, see "Item
13 -- Certain Relationships and Related Transactions."

In May 2002, we entered into a consulting agreement with CTA under which CTA
provided consulting services to us. CTA is a consulting and private advisory
firm specializing in the technology and telecommunications sectors. Our
agreement with CTA had an initial term of three months ending August 15, 2002,
and was extended by mutual agreement for several additional terms of two or
three months each. For the first three months of the agreement, CTA was paid a
flat fee of $60,000 per month, and for the period August 2002 to May 2003, the
monthly fee was $55,000. We also agreed to reimburse CTA for CTA's out-of-pocket
expenses incurred in connection with rendering services during the term of the
agreement.

100

Beginning in May 2003, the monthly fee was reduced to $39,000. This agreement
was modified on January 30, 2004.

In November 2003, CTA was engaged to provide valuation of Motient's equity
interest in MSV as of December 31, 2002. CTA was paid $150,000 for this
valuation.

On January 30, 2004, Motient engaged CTA to act as chief restructuring entity.
The term of CTA's engagement is currently scheduled to end on August 1, 2004. As
consideration for this work, we agreed to pay to CTA a monthly fee of $60,000,
one-half of which will be paid in cash on a monthly basis and one-half of which
will be deferred. The new agreement modifies the consulting arrangement
discussed above.

CTA had previously acted as the spectrum and technology advisor to the official
committee of unsecured creditors in connection with our Chapter 11 case. CTA
received a total of $475,000 in fees for such advice and was reimbursed a total
of $4,896 for expenses in connection with the rendering of such advice.

Except for the warrant offered to CTA described below, neither CTA, nor any of
its principals or affiliates is a stockholder of Motient, nor does it hold any
debt of Motient (other than indebtedness as a result of consulting fees and
expense reimbursement owed to CTA in the ordinary course under our existing
agreement with CTA). CTA has informed us that in connection with the conduct of
its business in the ordinary course, (i) it routinely advises clients in and
appears in restructuring cases involving telecommunications companies throughout
the country, and (ii) certain of our stockholders and bondholders and/or certain
of their respective affiliates or principals, may be considered to be (A)
current clients of CTA in matters unrelated to Motient; (B) former clients of
CTA in matters unrelated to Motient; and (C) separate affiliates of clients who
are (or were) represented by CTA in matters unrelated to Motient.

In July 2002, our board of directors approved the offer and sale to CTA (or
affiliates thereof) of a warrant (or warrants) for 500,000 shares of our common
stock, for an aggregate purchase price of $25,000. The warrant (or warrants) has
an exercise price of $3.00 per share and a term of five years. These warrants
were valued at $1.5 million and were recorded as a consultant compensation
expense in December of 2002. Certain affiliates of CTA purchased the warrants in
December 2002.

In addition, on January 27, 2003, our wholly-owned subsidiary, Motient
Communications, closed a $12.5 million term credit agreement with a group of
lenders, including several of our existing stockholders. The lenders include
Gary Singer, directly or through one or more entities. Gary Singer is the
brother of Steven G. Singer, one of our directors serving on the compensation
and stock option committee. Steven Singer has, and continues to recuse himself
from all discussions of the credit agreement and has abstained from voting on
all matters regarding the credit agreement.

101

Item 12. Stock Ownership Of Certain Beneficial Owners and Management and Related
Shareholder Matters.
- --------------------------------------------------------------------------------

The following table and the accompanying notes set forth certain information, as
of March 10, 2004 (or any other date that is indicated) concerning the
beneficial ownership of Motient's common stock by (i) each person who is known
by Motient to own beneficially more than five percent of Motient's common stock,
(ii) each director, (iii) each executive officer named in the summary
compensation table and (iv) all directors and executive officers as a group.
Except as otherwise indicated, each person listed in the table has informed
Motient that such person has sole voting and investment power with respect to
such person's shares of common stock and record and beneficial ownership with
respect to such person's shares of common stock.

Number of % of Class
Name of Beneficial Owner Shares (1) (1)
- ------------------------ ----------- ---

Highland Capital Management, L.P. (2)
13445 Noel Road
Suite 3300
Dallas, TX 75240 2,797,014 11.1%

Bay Harbour Management, L.C. (3)
885 Third Avenue
34th Floor
New York, NY 10022 3,217,396 12.8%

George W. Haywood (4)
c/o Cronin & Vris, LLP
380 Madison Avenue
24th Floor 3,314,500 13.2%
New York, NY 10017

James G. Dinan (5)
York Capital Management & affiliates
350 Park Avenue
4th Floor 2,593,045 10.3%
New York, NY 10022

John C. Waterfall
c/o Morgens, Waterfall, Vintiadis & Co., Inc. (6)
600 Fifth Avenue 2,610,000 10.4%
27th Floor
New York, NY 10020

102

Directors and Executive Officers

David H. Engvall (7) 0 *
Dennis W. Matheson (8) 40,000 *
Christopher W. Downie (9) 140,000 *
Walter V. Purnell, Jr. (10) 166,667 *
Daniel Croft (11) 40,000 *
Michael Fabbri (11) 40,000 *
Peter D. Aquino 0 *
Gerald S. Kittner 0 *
Steven G. Singer 0 *
Jonelle St. John 0 *
James D. Dondero (2) 2,797,014 11.1%
All directors and named executive officers as a group 3,223,681 12.6%
( 11 persons)

* Less than 1% of the outstanding shares.

(1) The information regarding beneficial ownership of our common stock has been
presented in accordance with the rules of the SEC and is not necessarily
indicative of beneficial ownership for any other purpose. Under these rules,
beneficial ownership of common stock includes any shares as to which a
person, directly or indirectly, has or shares voting power or investment
power and also any shares as to which a person has the right to acquire such
voting or investment power within 60 days through the exercise of any stock
option or other right. The percentage of beneficial ownership as to any
person as of a particular date is calculated by dividing the number of
shares beneficially owned by such person by the sum of the number of shares
outstanding as of such date and the number of shares as to which such person
has the right to acquire voting or investment power within 60 days. As used
in this report, "voting power" is the power to vote or direct the voting of
shares and "investment power" is the power to dispose or direct the
disposition of shares. Except as noted, each stockholder listed has sole
voting and investment power with respect to the shares shown as beneficially
owned by such stockholder.

(2) Highland Capital Management, L.P., Strand Advisors, Inc. and James Dondero
are deemed to beneficially own 2,797,014 shares of our common stock, which
include 1,155,224 shares owned by Prospect Street High Income Portfolio
Inc., 1,082,090 shares owned by Highland Crusader Offshore Partners, L.P.,
223,880 shares owned by Highland Legacy, Limited, 223,880 shares owned by
Pamco Cayman Limited and 111,940 shares owned by Prospect Street Income
Shares Inc. Highland Capital Management is the investment advisor of the
above-named entities, and Strand Advisors is the general partner of Highland
Capital Management. As such, Highland Capital Management and Strand Advisors
has shared voting and investment power over these shares and accordingly is
deemed to beneficially own them. Mr. Dondero is the president of Highland
Capital Management and the president and a director of Strand Advisors,
Inc., Prospect Street High Income Portfolio Inc. and Prospect Street Income
Shares Inc. and may be deemed to share voting and investment power with
respect to all shares held by the Highland Capital Management entities named
above. Mr. Dondero disclaims beneficial ownership of such shares except to
the extent of his pecuniary interest. Share ownership is based on a Schedule
13D/A filed with the SEC on October 20, 2003.

(3)Tower Investment Group, Inc. is a parent holding company of Bay Harbor
Management, L.C. Steven A. Van Dyke, Douglas P. Teitelbaum and John D. Stout
are controlling stockholders of Tower Investment Group. Tower Investment
Group and each of Messrs. Van Dyke, Teitelbaum and Stout have indirect
voting and investment power over the shares of common stock owned by Bay
Harbour Management. Accordingly, Tower Investment Group and each of Messrs.
Van Dyke, Teitelbaum and Stout are deemed to beneficially own these shares.

103

Share ownership is based on a Schedule 13G filed with the SEC on February
18, 2004. Each of Bay Harbour 90-1, Ltd and Bay Harbour Partners, Ltd
received warrants to purchase 312,500 shares of our common stock in January
2003 upon the closing of a $12.5 million term credit facility. These
warrants are fully vested and exercisable.

(4) Does not includes 50,000 shares of our common stock beneficially owned by
Mr. Haywood's spouse and 36,000 shares of our common stock beneficially
owned by Mr. Haywood's children. Share ownership is based on the latest
publicly available information, a Form 4 filed with the SEC on March 2,
2004, 2003.

(5) James G. Dinan beneficially owns the 2,593,045 shares of our common stock,
which includes 784,589 shares owned by York Investment Limited, 365,440
shares owned by York Capital Management L.P., 280,800 shares owned by York
Select L.P., 169,200 shares owned by York Select Unit Trust, 340,810 shares
owned by York Distressed Opportunities Fund, L.P., 427,912 shares owned by
York Offshore Investment Unit Trust and 224,288 shares held by certain other
funds and accounts over which Mr. Dinan has discretionary investment
authority. Mr. Dinan is the senior managing member and holder of a
controlling interest in Dinan Management, L.L.C., York Select Domestic
Holdings, LLC, York Select Offshore Holdings, LLC, York Offshore Holdings
L.L.C. and York Distressed Domestic Holdings, LLC. Mr. Dinan is also a
director and holder of a controlling interest in York Offshore Holdings,
Limited. York Offshore Holdings is the investment manager of York
Investment. Dinan Management is the general partner of York Capital
Management. York Select Domestic Holdings is the general partner of York
Select. York Select Offshore Holdings is the investment manager of York
Select Unit Trust. York Distressed Domestic Holdings is the investment
manager of York Distressed Opportunities Fund. York Offshore Holdings is the
investment manager of York Offshore Investors. Mr. Dinan is the president
and sole shareholder of JGD Management Corp., which manages the other funds
and accounts that hold our common stock over which Mr. Dinan has
discretionary investment authority. Share ownership is based on a Schedule
13G/A and a Form 3 filed with the SEC on March 10, 2004. York Capital
Management, York Investment Limited, York Distressed Opportunities Fund and
York Offshore Investors Unit Trust received warrants to purchase 52,500,
118,750, 72,500 and 68,750 shares of our common stock, respectively, in
January 2003 upon the closing of a $12.5 million term credit facility. These
warrants are fully vested and exercisable.

(6) John C. Waterfall is the president and treasurer of Morgens, Waterfall,
Vintiadis & Co., Inc. and beneficially owns 2,610,000 shares of common
stock, which includes 200,000 shares of common stock for his own account and
10,000 shares of common stock held in trust for his children. Morgens,
Waterfall, Vintiadis & Co. beneficially owns 2,400,000 shares of common
stock, which includes 967,200 shares held by Phaeton International (BVI)
Ltd., 1,101,600 shares Morgens, the vice president and secretary of Morgens,
Waterfall, Vintiadis & Co. beneficially owns 2,410,000 shares of our common
stock. Share ownership is based on a Form 3 and a Schedule 13G/A filed with
the SEC on March 10, 2004.

(7) Mr. Engvall resigned his position in January 2003.

(8) Comprised of shares underlying stock options that have vested or will vest
within 60 days of March 10, 2004.

(9) Comprised of shares underlying options and a warrant that are fully vested
and exercisable.

(10) Mr. Purnell's employment terminated on March 11, 2004.

(11) Messrs. Croft and Fabbri's employment terminated on February 18, 2004.

104

Securities Issued Under Equity Compensation Plans

The following table provides information regarding equity compensation plans
under which our equity securities were authorized for issuance as of December
31, 2002.

Equity Compensation Plan Information

Number of
securities
Number of remaining available
securities to be for future issuance
issued upon Weighted-average under equity
exercise of exercise price of compensation plans
outstanding outstanding excluding
options, warrants options, warrants securities reflected
and rights and rights in column(a))
Plan Category (a) (b) (c)
- ------------- --- --- ---

Equity compensation plans approved by security holders 2,993,024 $5.00(1) 1,361,999

Equity compensation plans not approved by security 0 0 0
holders

Total 2,993,024 $5.00(1) 1,361,999

(1) In March 2003, our board of directors approved the reduction in the exercise
price of all of the outstanding stock options from $5.00 per share to $3.00 per
share.

Item 13. Certain Relationships and Related Transactions.
- ---------------------------------------------------------

This section describes agreements and transactions between Motient and one or
more of the following: Motorola, XM Ventures, AT&T Wireless, Hughes Electronics
Corporation, Hughes Aircraft, Hughes Network Systems, Hughes Space &
Communications Company, Baron Capital Partners L.P. and Singapore
Telecommunications, Ltd. Each of such other parties, at the time of the
transactions or shortly thereafter, held or was affiliated with an entity that
held in excess of 5% of our pre-reorganization common stock and/or was then or
shortly thereafter affiliated with one or more of our directors. As a result of
our reorganization that became effective on May 1, 2002, none of these parties
is currently a holder of 5% percent or more of our common stock or affiliated
with any of our directors.

This section also describes arrangements with CTA, an entity in which (i) Jared
E. Abbruzzese, a director until June 20, 2003, is the chairman, (ii) Gerald S.
Kittner, a Motient director, is an advisor and consultant, (iii) Christopher W.
Downie, Motient's executive vice president, chief financial officer and
treasurer, was formerly affiliated and (iv) Peter Aquino, a Motient director, is
a senior managing director. Additionally, this section describes related party
transactions concerning our $12.5 million credit facility.

105

Motorola Agreement

In connection with our acquisition of ARDIS from Motorola on March 31, 1998, and
pursuant to the stock purchase agreement dated as of December 31, 1997, as
amended March 31, 1998, Motient, Motorola and Motient's then principal
stockholders, Hughes Electronics and AT&T Wireless, agreed to registration
rights with respect to Motient, pre-reorganization common stock. Pursuant to the
terms of the participation rights agreement entered into on December 31, 1997,
Motorola, then a greater than 5% beneficial owner of Motient, was entitled to
demand and piggyback registration rights with respect to the shares of
pre-reorganization common stock issued to Motorola as part of the ARDIS
acquisition. Motorola's registration rights were extinguished under the terms of
Motient's Plan of Reorganization.

XM Ventures Agreements

Motient entered into an exchange agreement, dated July 7, 1999, by and among
Motient, XM Radio and WorldSpace, Inc., pursuant to which Motient granted
certain registration rights, with respect to its pre-reorganization common stock
to XM Ventures, formerly a principal stockholder of Motient. These registration
rights included the right to demand registration twice and "piggyback" rights to
register shares on other registration statements filed by Motient. XM Ventures'
registration rights were extinguished under the terms of Motient's Plan of
Reorganization.

Pre-reorganization Stockholders' Agreement

Motient and each holder of shares of its pre-reorganization common stock who
acquired shares prior to Motient's initial public offering were parties to a
stockholders' agreement, amended and restated as of December 1, 1993. The
remaining parties to the stockholders' agreement immediately prior to the
effectiveness of Motient's reorganization, AT&T Wireless and Hughes Electronics,
at that time held approximately 23.5% of our outstanding pre-reorganization
common stock on a fully diluted basis. These parties are no longer significant
stockholders of Motient. The stockholders' agreement included provisions
relating to certain corporate governance matters, as well as the voting and
transferability of shares of Motient common stock held by the parties to such
agreement, and provisions intended to ensure compliance with applicable laws and
FCC regulations. This agreement terminated by its terms upon the disposition of
the pre-reorganization common stock by the parties to the agreement in
connection with the Plan of Reorganization.

Hughes

Motient's satellite construction contract with Hughes Aircraft required Motient
to make ongoing payments to Hughes based on the performance of the satellite
after launch. In 1997, Motient and Hughes agreed to reduce the amount of some of

106

these performance payments. Thereafter, Motient raised additional contractual
payment issues. As part of the Plan of Reorganization, this contract was
terminated, and The Boeing Company, as the successor in interest to Hughes under
the contract, received 32,398 shares of common stock in full settlement of all
amounts owed by Motient under the contract.

Motient entered into a reseller agreement with Hughes Space & Communications
Company, through its Hughes Government Services business unit, whereby Motient
agreed to sell its services to Hughes Government Services for resale by Hughes
Government Services to federal government subscribers at rates to be established
by Hughes Government Services. Like Motient's other government resellers, Hughes
Government Services was to set rates and prices for services and equipment,
respectively, and would be responsible for billing and collecting amounts due
from its customers. For 1999, the total amount of sales to Hughes Government
Services were $24,637. There has been little or no activity under this contract.
The contract was transferred to MSV in November 2001.

Pre-reorganization Bank Financing Facilities

On November 19, 2001, Motient sold 500,000 shares of XM Radio common stock owned
by it for aggregate proceeds of $4.8 million, and used such proceeds to reduce
the amount of Motient's reimbursement obligation to the guarantors of its bank
financing by this amount. In this transaction, Hughes Electronics received $3.6
million, and each of Baron Capital and Singapore Telecommunications received
$0.6 million.

Also on November 19, 2001, Motient delivered all of the remaining 9,257,262
shares of XM Radio common stock owned by it to the guarantors of its bank
financing in full satisfaction of the entire remaining amount of Motient's
reimbursement obligations to the bank guarantors. Motient delivered 7,108,184
shares to Hughes Electronics, 964,640 shares to Singapore Telecommunications and
1,184,438 shares to Baron Capital. Upon delivery of these shares, the bank
guarantors released Motient from all of its remaining obligations to the bank
guarantors under the bank financing and the related guarantees and reimbursement
and security agreements.

At the time of these transactions, in addition to guaranteeing Motient's
obligations under its bank financing agreements, each of Hughes Electronics and
Baron Capital owned shares of pre-reorganization common stock of Motient, and
each of the three bank guarantors also owned warrants to purchase shares of
common stock of Motient. At the time of these transactions, Hughes Electronics
owned 6,692,108 shares of common stock and warrants to purchase 4,969,688 shares
of common stock, Baron Capital owned 1,286,275 shares of common stock and
warrants to purchase 828,281 shares of common stock and Singapore
Telecommunications owned warrants to purchase 300,000 shares of common stock.

The following section describes certain historical events and transactions with
the lenders and bank guarantors prior to the extinguishment of the bank
facilities and the transactions described in the previous paragraphs.

107

In exchange for the additional risks undertaken by Hughes Electronics, Singapore
Telecommunications and Baron Capital in connection with the bank financing
facilities, Motient agreed, pursuant to a guaranty issuance agreement dated
March 31, 1998, to compensate Hughes Electronics, Singapore Telecom and Baron
Capital, principally in the form of one million additional warrants and
repricing of 5.5 million warrants previously issued. As originally issued, the
warrants had an exercise price of $12.51. Further, in connection with the
guarantees, Motient agreed to reimburse Hughes Electronics, Singapore
Telecommunications and Baron Capital in the event that any of them were required
to make payment under the guarantees and, in connection with this reimbursement
commitment, provided Hughes Electronics, Singapore Telecommunications and Baron
Capital a junior security interest with respect to the assets of Motient,
principally its stockholdings in XM Radio, Motient Holdings and MSV. As a result
of these transactions, Hughes Electronics owned warrants to purchase 4,969,688
shares of common stock, and each of Baron Capital and Singapore
Telecommunications owned warrants to purchase 828,281 shares of common stock.

Hughes Electronics, Singapore Telecommunications and Baron Capital also obtained
certain demand and piggy-back registration rights with regard to the
unregistered shares of Motient's common stock held by them or issuable upon
exercise of their warrants. Pursuant to the terms of the amended and restated
registration rights agreement among Hughes Electronics, Singapore
Telecommunications, Baron Capital and Motient, Motient agreed to (i) extend the
expiration date for demand registration rights with respect to Hughes
Electronics', Singapore Telecommunications' and Baron Capital's existing
warrants, (ii) provide registration rights for the warrants issued pursuant to
the guaranty issue agreement and (iii) provide registration rights for other
restricted securities held by Hughes Electronics, Singapore Telecommunications
and Baron Capital. Under the registration rights agreement, Hughes Electronics,
Singapore Telecommunications and Baron Capital were entitled to up to three
demand registrations with respect to their shares of Motient's common stock,
subject to certain registration priorities and postponement rights of Motient.
In addition Hughes Electronics, Singapore Telecommunications and Baron Capital
were entitled to piggyback registration in connection with any registration of
securities by Motient, whether or not for its own account, subject to priorities
for sale under the registration rights agreements between Motient and some of
its other stockholders. These parties' registration rights were extinguished
under the terms of Motient's Plan of Reorganization.

On March 22, 1999, Motient, Hughes Electronics, Singapore Telecommunications and
Baron Capital agreed to amend the registration rights agreement to (i) extend
the expiration date for exercise of the demand registration rights granted
thereunder to March 31, 2007, (ii) clarify that the rights provided in the
registration rights agreement are assignable by Hughes Electronics, Singapore
Telecommunications and Baron Capital provided that the prospective assignee
agrees to become a party to that agreement and (iii) provide one additional
demand registration right that may be exercised only by Hughes Electronics or
its assignee.

108

On March 29, 1999, the bank facility guarantors agreed to eliminate certain
covenants contained in the guaranty issuance agreement relating to Motient's
earnings before interest, depreciation, amortization and taxes and service
revenue. In exchange for this waiver, Motient agreed to amend the exercise price
of the warrants from $12.51 per share to $7.50 per share. As a result of the
automatic application of certain adjustment provisions following the issuance of
7.0 million shares of common stock in Motient's public offering in August 1999,
the exercise price of the warrants was further reduced to $7.36 per share, and
the warrants became exercisable for an additional 129,246 shares.

On June 29, 2000, Hughes Electronics and Baron Capital, the only bank facility
guarantors who still owned warrants as of such date, agreed with Motient to
amend the exercise price of the warrants from $7.36 per share to $6.25 per
share, in consideration of Hughes Electronics' and Baron Capital's agreements to
waive Motient's obligation to prepay a portion of the bank facility guaranteed
by Hughes Electronics and Baron Capital in connection with Motient's receipt of
certain funds at the time of MSV's formation.

On April 2, 2001, the exercise price of the warrants was further reduced to
$1.31 per share, in consideration of Hughes Electronics' and Baron Capital's
agreement to consent to Motient's issuance of a $25.0 million note to Rare
Medium, which note was secured by a pledge of 3,000,000 shares of common stock
of XM Radio owned by Motient. In connection with this waiver and in
consideration of Singapore Telecommunications' agreement to consent to such
transaction, Motient also agreed to issue a new warrant to Singapore
Telecommunications, exercisable for 300,000 shares of Motient common stock, at
$1.31 per share.

Communication Technology Advisors LLC

Jared E. Abbruzzese, a director until June 20, 2003, is the chairman of CTA.
Gerald S. Kittner, a Motient director, is an advisor and consultant for CTA.
Peter D. Aquino, also a Motient director, is a senior managing director of CTA.
Christopher W. Downie was formerly affiliated with CTA and is now our executive
vice president, chief financial officer and treasurer.

Beginning in May 2003, the monthly fee was reduced to $39,000. This agreement
was modified on January 30, 2004.

109

In November 2003, CTA was engaged to provide valuation of Motient's equity
interest in MSV as of December 31, 2002. CTA was paid $150,000 for this
valuation.

On January 30, 2004, we engaged CTA to act as chief restructuring entity. The
term of CTA's engagement is currently scheduled to end on August 1, 2004. As
consideration for this work, Motient agreed to pay to CTA a monthly fee of
$60,000, one-half of which will be paid monthly in cash and one-half of which
will be deferred. The new agreement amends the consulting arrangement discussed
above.

Mr. Abbruzzese did not participate in the deliberations or vote of the board of
directors with respect to the foregoing matters.

$12.5 Million Credit Facility

On January 27, 2003, our wholly-owned subsidiary, Motient Communications, closed
a $12.5 million term credit agreement with a group of lenders, including several
of our existing stockholders. For more information regarding the term credit
agreement, please see "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources -- Term
Credit Facility". The lenders include the following entities or their
affiliates: M&E Advisors, L.L.C, Bay Harbour Partners, York Capital, and Lampe

110

Conway & Co. York Capital is affiliated with James G. Dinan. Bay Harbour
Management and James G. Dinan each hold 5% or more of our common stock. The
lenders also include Gary Singer, directly or through one or more entities. Gary
Singer is the brother of Steven G. Singer, one of our directors.

Name of Beneficial Owner Number of Shares
------------------------ ----------------
Bay Harbour Management, L.C. 3,217,396
James G. Dinan 2,593,045

111

Item 14. Controls and Procedures.
- ----------------------------------

Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15 and
15d-15 under the Securities Exchange Act of 1934, as amended) that are designed
to ensure that information required to be disclosed in our filings and reports
under the Exchange Act is recorded, processed, summarized and reported within
the periods specified in the rules and forms of the SEC. Such information is
accumulated and communicated to our management, including our principal
executive officer (currently our executive vice president, chief financial
officer and treasurer) and chief financial officer (or persons performing such
functions), as appropriate, to allow timely decisions regarding required
disclosure. Our management, including the principal executive officer (currently
our executive vice president, chief financial officer and treasurer) and the
chief financial officer (or persons performing such functions), recognizes that
any set of disclosure controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives.

Within 90 days prior to the filing date of this annual report on Form 10-K, we
carried out an evaluation, under the supervision and with the participation of
our management, including our principal executive officer (currently our
executive vice president, chief financial officer and treasurer), chief
financial officer and chief accounting officer (or persons performing such
functions), of the effectiveness of our disclosure controls and procedures.
Based on this evaluation, we concluded that our disclosure controls and
procedures required improvement.

As a result of our evaluation, we have taken a number of steps to improve our
disclosure controls and procedures.

o First, we have established a disclosure committee comprised of senior
management and other officers and employees responsible for, or
involved in, various aspects of our financial and non-financial
reporting and disclosure functions. Although we had not previously
established a formal disclosure committee, the functions performed by
such committee were formerly carried out by senior management and
other personnel who now comprise the disclosure committee.

o Second, we have instituted regular bi-quarterly meetings to review
each department's significant activities and respective disclosure
controls and procedures.

o Third, department managers have to document their own disclosure
controls and procedures.

o Fourth, department managers have been tasked with tracking relevant
non-financial operating metrics such as network statistics, headcount
and other pertinent operating information. Quarterly reports
summarizing this information will be prepared and presented to the

112

disclosure committee and the principal executive officer (currently
our executive vice president, chief financial officer and treasurer),
chief financial officer and corporate controller.

o Fifth, department heads prepare weekly activities reviews, which are
shared with the members of the disclosure committee as well as the
principal executive officer (currently executive vice president, chief
financial officer and treasurer), chief financial officer and
corporate controller. These weekly reviews and the bi-quarterly
disclosure committee meetings and associated reports are intended to
help inform senior management of material developments that affect our
business, thereby facilitating consideration of prompt and accurate
disclosure.

As a result of these improvements, management believes that its disclosure
controls and procedures, though not as mature or as formal as management intends
them ultimately to be, are adequate and effective under the circumstances, and
that there are no material inaccuracies or omissions in this annual report on
Form 10-K. Any issues that arise out of the disclosure controls and procedures
described would ultimately be reviewed by Motient's audit committee.

In addition to the initiatives outlined above, we have taken the following steps
to further strengthen our disclosure controls and procedures:

o We conduct and document quarterly reviews of the effectiveness of our
disclosure controls and procedures;

o We circulate drafts of our public filings and reports for review to
key members of the senior management team representing each functional
area;

o In conjunction with the preparation of each quarterly and annual
report to be filed with the SEC, each senior vice president and
department head is required to complete and execute an internal
questionnaire and disclosure certification designed to ensure that all
material disclosures are reported.

Internal Controls

During the course of the fiscal 2002 year-end closing process and subsequent
audit of the financial statements for the eight month period ended December 31,
2002, our management and our then-current independent auditors,
PricewaterhouseCoopers, identified several matters related to internal controls
that needed to be addressed. Several of these matters were classified by the
auditors as "reportable conditions" in accordance with the standards of the
American Institute of Certified Public Accountants, or AICPA. Reportable
conditions involve matters coming to management's or our auditor's attention
relating to significant deficiencies in the design or operation of internal
control that, in the judgment management and the auditors, could adversely
affect our ability to record, process, summarize and report financial data in

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the financial statements. Our chief technology officer, chief financial officer,
chief accounting officer (or persons performing such functions) and audit
committee are aware of these conditions and of our responses thereto, and
consider them to be significant deficiencies as defined in the applicable
literature embodying generally accepted auditing standards, or GAAS. On March 2,
2004, we dismissed PricewaterhouseCoopers as our independent auditors.
PricewaterhouseCoopers has not reported on Motient's consolidated financial
statements for any fiscal period. On March 2, 2004, we engaged Ehrenkrantz
Sterling & Co. LLC as our independent auditors to replace PricewaterhouseCoopers
and audit our consolidated financial statements for the period May 1, 2002 to
December 31, 2002.

The following factors contributed to the significant deficiencies identified by
PricewaterhouseCoopers:

o Rapid shifts in strategy following our emergence from bankruptcy
on May 1, 2002, particularly with respect to a sharply increased
focus on cost reduction measures;

o Significant reductions in workforce following our emergence from
bankruptcy and over the course of 2002 and 2003, in particular
layoffs of accounting personnel, which significantly reduced the
number and experience level of our accounting staff;

o Turnover at the chief financial officer position during the 2002
audit period and subsequently in March of 2003; and

o The closure in mid-2003 of our Reston, VA facility, which
required a transition of a large number of general and
administrative personnel to our Lincolnshire, IL facility.

Set forth below are the significant deficiencies identified by management and
PricewaterhouseCoopers, together with a discussion of our corrective actions
with respect to such deficiencies through March 15, 2004.

PricewaterhouseCoopers recommended several adjustments to the financial
statements for the periods ended April 30, June 30, September 30 and December
31, 2002. During the 2002 audit period, PricewaterhouseCoopers noted several
circumstances where our internal controls were not operating effectively.
Although these circumstances continued in 2003, management began to address
these issues formally in March 2003.

Specifically, PricewaterhouseCoopers noted that:

o Timely reconciliation of certain accounts between the general
ledger and subsidiary ledger, in particular accounts receivable
and fixed assets, was not performed;

114

o Review of accounts and adjustments by supervisory personnel on
monthly cut-off dates, in particular fixed assets clearing
accounts, accounts receivable reserve and inventory reserve
calculations, was not performed;

o Cut-off of accounts at balance sheet dates related to accounts
payables, accrued expenses and inventories was not achieved; and

o No formal policy existed to analyze impairment of long-lived
assets on a recurring basis.

PricewaterhouseCoopers recommended that management institute a thorough
close-out process, including a detailed review of the financial statements,
comparing budget to actual and current period to prior period to determine any
unusual items. They also recommended that we prepare an accounting policy and
procedures manual for all significant transactions to include procedures for
revenue recognition, inventory allowances, accounts receivable allowance, and
accruals, among other policies.

In response to these comments, we have taken the following actions:

o In June 2003, we initiated a process of revising, updating and
improving our month-end closing process and created a checklist
containing appropriate closing procedures.

o We have increased our efforts to perform monthly account
reconciliations on all balance sheet accounts in a timely
fashion.

o Beginning in July 2003, on a monthly basis the corporate
controller began reviewing balance sheet account reconciliations.

o We have implemented and distributed a written credit and
collections policy, which includes reserve calculations and
write-off requirements.

o All accounts receivable sub-ledgers are reconciled to the general
ledger monthly, and on a monthly basis inventory reports are
produced, sub-ledgers are reconciled to the general ledger and
the reserve account is analyzed.

o Since September 2003, the fixed assets clearing account is no
longer being used, and all asset additions are reviewed by the
corporate controller to determine proper capitalization and
balance sheet classification.

o As of July 2003, all monthly income statement accounts are
analyzed by the corporate controller prior to release of the
financial statements.

115

o We are preparing an accounting policy and procedures manual to
include procedures for all significant policies, business
practices, and routine and non-routine procedures performed by
each functional area. Our goal is to finalize this manual by
April 30, 2004.

o Over the course of the third quarter of 2003, we updated our
procedures for the preparation of a monthly financial reporting
package to include management's discussion and analysis of
results of operations, financial statements, cash and investments
reporting and month-to-month variances. Under these procedures,
departmental results of operations are also prepared and provided
to appropriate department managers on a monthly basis.

In addition to the above, since April 2003 we have reevaluated our staffing
levels, reorganized the finance and accounting organization and replaced ten
accounting personnel with more experienced accounting personnel, including,
among others, a new chief financial officer, chief accounting officer and
corporate controller, a manager of revenue assurance and a manager of financial
services.

While management has moved expeditiously and committed considerable resources to
address the identified internal control deficiencies, management has not been
able to fully execute all of the salutary procedures and actions it deems
desirable. It will take some additional time to realize all of the benefits of
management's initiatives, and we are committed to undertaking ongoing periodic
reviews of our internal controls to assess the effectiveness of such controls.
We believe the effectiveness of our internal controls is improving and we
further believe that the financial statements included in this annual report on
Form 10-K are fairly stated in all material respects. However, new deficiencies
may be identified in the future. Management expects to continue its efforts to
improve internal controls with each passing quarter.

Our current auditors, Ehrenkrantz Sterling & Co. LLC, agree with the reportable
conditions identified by our management and PricewaterhouseCoopers and have
communicated this to our audit committee.

116

PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
- ---------------------------------------------------------------------------

1 (a). The following documents are filed as part of this Form 10-K:

1) The following consolidated financial statements are included as follows:

Page

Independent Auditors' Report....................................................................................F-1

Report of KPMG LLP, Independent Auditors to XM Satellite Radio Holdings Inc.....................................F-3

Consolidated Statements of Operations...........................................................................F-4

Consolidated Balance Sheets.....................................................................................F-6

Consolidated Statements of Changes in Stockholders' (Deficit) Equity ...........................................F-7

Consolidated Statements of Cash Flows...........................................................................F-9

Notes to Consolidated Financial Statements.....................................................................F-11

Quarterly Financial Data.......................................................................................F-76

117

2. Financial Statement Schedules

Financial Statement Schedules not included below have been omitted because they
are not required or not applicable, or because the required information is shown
in the financial statements or notes thereto.

Schedule I - Valuation and Qualifying Accounts

3. Exhibits

3.1 - Restated Certificate of Incorporation of the Company (as restated effective
May 1, 2002) (incorporated by reference to Exhibit 3.1 of the Company's
Amendment No. 2 to Registration Statement on Form 8-A, filed May 1, 2002).

3.2 - Amended and Restated Bylaws of the Company (as amended and restated effective May 1,
2002) (incorporated by reference to Exhibit 3.1 of the Company's Amendment No. 2 to
Registration Statement on Form 8-A, filed May 1, 2002).

4.1 - Specimen of Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the
Company's Amendment No. 2 to Registration Statement on Form 8-A, filed May 1, 2002).

4.2 - Warrant Agreement between the Registrant and Equiserve Trust Company, N.A., as warrant
agent, dated May 1, 2002 (incorporated by reference to Exhibit 4.1 of the Company's
Registration Statement on Form 8-A, filed May 1, 2002).

4.2a - Specimen of Warrant Certificate of the Company (incorporated by reference to Exhibit 4.2 of the
Company's Registration Statement on Form 8-A, filed May 1, 2002).

10.1 - Deed of Lease at Reston, Virginia, dated February 4, 1993 and amended June 21, 1993,
between Motient Services Inc. and Trust Company of the West as Trustee (incorporated
by reference to Exhibit 10.20 to the Company's Registration Statement on Form S-1
(Reg. No. 33-70468)).

10.1a - Amendment No. 4 to Deed of Lease, dated October 7, 1994, between Motient Services Inc.
and Trust Company of the West as Trustee (incorporated by reference to Exhibit 10.20a
to the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1994 (File No. 0-23044)).

10.1b - Sub-lease Agreement, dated as of November 26, 2001 between Motient Services Inc. and Mobile Satellite
Ventures LP (incorporated by reference to Exhibit 10.14b to the Company's Annual Report on Form 10-K
for the year ended December 31, 2001 (File No. 0-23044)).

10.1c - Assignment and Assumption of Deed of Lease for Reston Premises, dated November 8, 2001 (incorporated
by reference to Exhibit 10.14c to the Company's Annual Report on Form 10-K for the year ended
December 31, 2001 (File No. 0-23044)).

118

10.2 - Credit Agreement by and between Motorola Inc. and ARDIS Company dated June 17, 1998
(incorporated by reference to Exhibit 10.61 to the Company's Current Report on Form
10-Q dated June 30, 1998 (File No. 0-23044)).

10.2a - Amendment No. 2, dated September 1, 2000, to the Credit Agreement, dated as of June 17, 1998, by and
between Motorola, Inc. and Motient Communications Company (formerly known as ARDIS Company)
(incorporated by reference to Exhibit 10.22a to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2000 (File No. 0-23044)).

10.2b - Assumption, Release, Amendment and Waiver Agreement by and among Motorola, Inc.,
Motient Communications Inc. and Motient Communications Company, dated as of December
29, 2000 (incorporated by reference to Exhibit 10.22b to the Company's Annual Report
on Form 10-K for the year ended December 31, 2001 (File No. 0-23044)).

10.3 - Investment Agreement dated as of June 22, 2000, by and among the Company, Motient
Satellite Ventures LLC, and certain other investors (incorporated by reference to
Exhibit 10.41 to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2000 (File No. 0-23044)).

10.4 - Asset Sale Agreement between Motient Satellite Ventures LLC and Motient Services Inc.
dated as of June 29, 2000 (incorporated by reference to Exhibit 10.42 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 (File No. 0-23044)).

10.4a - Amendment No. 1, dated as of November 29, 2000, to Asset Sale Agreement, dated as of June 29, 2000,
between Motient Satellite Ventures LLC and Motient Services Inc. (incorporated by reference to Exhibit
10.42a to the Company's annual report on Form 10-K for the year ended December 31, 2000
(File No. 0-23044)).

10.4b - Amended and Restated Asset Sale Agreement, dated as of January 8, 2001, between Mobile Satellite Ventures
LLC and Motient Services Inc. (incorporated by reference to Exhibit 10.42b to the Company's annual
report on Form 10-K for the year ended December 31, 2000 (File No. 0-23044)).

10.4c - Amendment, dated as of October 12, 2001, to the Amended and Restated Asset Sale Agreement, dated as
of January 8, 2001, by and between Motient Services Inc. and Mobile Satellite Ventures LLC
(incorporated by reference to Exhibit 10.42c to the Company's
quarterly report on Form 10-Q for the quarter ended September 30, 2001 (File No. 0-23044)).

10.5 - Asset Sale Agreement, dated November 29, 2000, by and among the Company, Motient
Services Inc. and Aether Systems, Inc. (incorporated by reference to Exhibit 10.46 to
the Company's Annual Report on Form 10-K for the year ended December 31, 2000 (File
No. 0-23044)).

10.6 - January 2001 Investment Agreement, dated as of January 8, 2001, by and among the
Company, Mobile Satellite Ventures LLC, TMI Communications and Company, Limited
Partnership, and the other investors named therein (incorporated by reference to
Exhibit 10.48 to the Company's Annual Report on Form 10-K for the year ended
December 31, 2000 (File No. 0-23044)).

119

10.7 - Document Standstill and Termination Agreement, dated as of January 8, 2001, by and
among the Company, Mobile Satellite Ventures LLC, Motient Services Inc., and certain
investors named therein (incorporated by reference to Exhibit 10.50 to the Company's
annual report on Form 10-K for the year ended December 31, 2000 (File No. 0-23044)).

10.7a - Amended and Restated Document Standstill and Termination Agreement, dated as of October 12, 2001
(incorporated by reference to Exhibit 10.50a to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2001 (File No. 0-23044)).

10.8 - Amended and Restated Investment Agreement, dated October 12, 2001, by and among
Motient Corporation, Mobile Satellite Ventures LLC, TMI Communications and Company,
Limited Partnership, and the other investors named therein (incorporated by reference
to Exhibit 10.55 to the Company's quarterly report on Form 10-Q for the quarter ended
September 30, 2001 (File No. 0-23044)).

10.9 - Form of Stockholders' Agreement of Mobile Satellite Ventures GP Inc. (incorporated by
reference to Exhibit 10.56 to the Company's quarterly report on Form 10-Q for the
quarter ended September 30, 2001 (File No. 0-23044)).

10.9a - Stockholders' Agreement, dated as of November 26, 2001, of Mobile Satellite Ventures GP Inc.
(incorporated by reference to Exhibit 10.56a of the Company's Current Report on Form 8-K dated
November 19, 2001 (File No. 0-23044)).

10.10 - Form of Limited Partnership Agreement of Mobile Satellite Ventures LP (incorporated by
reference to Exhibit 10.57 to the Company's quarterly report on Form 10-Q for the
quarter ended September 30, 2001 (File No. 0-23044)).

10.11 - Form of Convertible Note of Mobile Satellite Ventures LP, in the amount of $50.0
million issued to MSV Investors LLC (incorporated by reference to Exhibit 10.58 to the
Company's quarterly report on Form 10-Q for the quarter ended September 30, 2001 (File
No. 0-23044)).

10.12 - Form of Promissory Note of Mobile Satellite Ventures LP, in the amount of $15.0
million issued to Motient Services Inc. (incorporated by reference to Exhibit 10.59 to
the Company's quarterly report on Form 10-Q for the quarter ended September 30, 2001
(File No. 0-23044)).

10.13 - Registration Rights Agreement between the Company and Highland Capital Management,
L.P., and Morgan Stanley Investment Management, dated May 1, 2002 (incorporated by
reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2002) (File No. 0-23044)).

120

10.14* - Form of Change of Control Agreement for Officers of the Company (incorporated by
reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2002 (File No. 0-23044)).

10.15 - Senior Indebtedness Note of MVH Holdings Inc., in the amount of $19.0 million issued
to Rare Medium Group, Inc., dated May 1, 2002 (incorporated by reference to Exhibit
10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
2002 (File No. 0-23044)).

10.16 - Senior Indebtedness Note of MVH Holdings Inc., in the amount of $750,000 issued to
Credit Suisse First Boston, dated May 1, 2002 (incorporated by reference to Exhibit
10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
2002 (File No. 0-23044)).

10.17 - Settlement Agreement by and among the Registrant and Rare Medium Group, Inc., dated
March 28, 2002 (incorporated by reference to Exhibit 10.5 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2002 (File No. 0-23044)).

10.18 - Form of Warrant to purchase 343,450 shares of the Company's common stock at an
exercise price of $3.95 per share issued to Evercore Partners, L.P. (incorporated by
reference to Exhibit 10.28 to Amendment No. 1 to the Company's Registration Statement
on Form S-1 (File No. 333-87844)).

10.19 - Debtors' Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code,
dated February 27, 2002 (incorporated by reference to Exhibit 99.2 to the Registrant's
Current Report on Form 8-K dated March 4, 2002 (File No. 0-23044)).

10.20* - Motient Corporation 2002 Stock Option Plan (incorporated by reference to Exhibit 99.1
to the Company's registration statement on Form S-8 (File No. 333-92326)).

10.21* - Form of Stock Option Agreement (incorporated by reference to Exhibit 99.2 to the
Company's registration statement on Form S-8 (File No. 333-92326)).

10.22 - Form of Warrant to purchase up to 500,000 shares of the Company's common stock at an
exercise price of $3.00 per share issued to certain affiliates of Communication
Technology Advisors LLC (incorporated by reference to Exhibit 10.22 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2002).

10.23* - Executive Retention Agreement, dated as of July 16, 2002, by and between Walter V.
Purnell, Jr. and the Company (incorporated by reference to Exhibit 10.23 to the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2002).

10.24 - Amended and Restated Term Credit Agreement, dated January 27, 2003, by and among the
Company, Motient Communications Inc., Motient Holdings Inc., the Lenders named
therein, and M&E Advisors, L.L.C., as Administrative Agent and Collateral Agent (filed
herewith).

121

10.25 - Security Agreement, dated as of January 27, 2003, between Motient Communications Inc.
and M&E Advisors L.L.C. as Collateral Agent (filed herewith).

10.26 - First Amendment to Security Agreement, dated as of January 30, 2003, between Motient
Communications Inc. and M&E Advisors L.L.C. as Collateral Agent (filed herewith).

10.27 - Motient Corporation Share Pledge Agreement, dated as of January 27, 2003, between
Motient Corporation and M&E Advisors L.L.C., as Collateral Agent (filed herewith).

10.28 - Motient Holdings Share Pledge Agreement, dated as of January 27, 2003, between Motient
Holdings Inc. and M&E Advisors L.L.C., as Collateral Agent (filed herewith).

10.29 - Form of Warrant to purchase shares of common stock of Motient Corporation issued to
lenders under the Amended and Restated Term Credit Agreement dated as of January 27,
2003 (filed herewith).

10.30* - Letter amendment to Executive Retention Agreement, dated as of February 10, 2004, by
and between Walter V. Purnell, Jr. and the Company (filed herewith).

10.31 - Amendment No. 1 to Amended and Restated Term Credit Agreement, dated March 16, 2004,
by and among Motient Communications Inc., Motient License Inc., the Required Lenders
party thereto, and M&E Advisors, L.L.C., as Administrative Agent and Collateral Agent
(filed herewith).

10.32 - Omnibus Amendment to SLA Note and Credit Facility, dated as of March 16, 2004, by and
among Motient Communications Inc., Motient Corporation, Motient Holdings Inc., Motient
Services Inc., and Motorola, Inc. (filed herewith).

10.33 - Share Pledge Agreement, dated as of March 16, 2004, by and between Motient
Communications Inc. and M&E Advisors, L.L.C. (filed herewith).

10.34 - Warrant to purchase shares of common stock of Motient Corporation, issued to lenders
under Amendment No. 1 to Amended and Restated Term Credit Agreement, dated March 16,
2004 (filed herewith).

10.35 - Registration Rights Agreement, dated March 16, 2004, by and between Motient
Corporation and M&E Advisors, L.L.C. in its capacity as Administrative and Collateral
Agent under Amendment No. 1 to Amended and Restated Term Credit Agreement (filed herewith).

10.36 - Collateral Agency, Subordination and Intercreditor Agreement, dated as of March 16,
2004, by and among Motient Communications Inc., Motient License Inc., M&E Advisors
L.L.C., and Motorola, Inc. (filed herewith).

10.37 - Subordinate Motient Communications Share Pledge Agreement, dated as of March 16, 2004,
by and between Motient Communications Inc. and Motorola, Inc. (filed herewith).

21.1 - Subsidiaries of the Company (filed herewith).

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23.1 - Consent of Ehrenkrtanz Sterling & Co. LLC (filed herewith)

23.2 - Consent of KPMG LLP (filed herewith)

31.1 - Certification Pursuant to Rule 13a-14(a)/15d-14(a), of the Executive Vice President,
Chief Financial Officer and Treasurer (principal executive officer) (incorporated by
reference to the signature page of this Annual Report on Form 10-K).

31.2 - Certification Pursuant to Rule 13a-14(a)/15d-14(a), of the Executive Vice President,
Chief Financial Officer and Treasurer (incorporated by reference to the signature page
of this Annual Report on Form 10-K).

32.1 - Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, of the Executive Vice President, Chief Financial
Officer and Treasurer (principal executive officer) (incorporated by reference to
Exhibit 99.1 filed herewith).

32.2 - Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, of the Executive Vice President, Chief Financial
Officer and Treasurer (incorporated by reference to Exhibit 99.1 filed herewith).

99.1 - Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, of the Executive Vice President, Chief Financial
Officer and Treasurer (principal executive officer) (filed herewith).

99.2 - Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, of the Executive Vice President, Chief Financial
Officer and Treasurer (incorporated by reference to Exhibit 99.1 filed herewith).

----------------------------------

* Management contract or compensatory plan or arrangement
required to be filed as an exhibit to this report pursuant to
Item 14(c) of this report.

(b) Reports on Form 8-K:

On November 14, 2002, the Company filed a Current Report on
Form 8-K, in response to Item 5, reporting that the Company
would not be filing its third quarter report on Form 10-Q by
the filing deadline.

On January 28, 2003, the Company filed a Current Report on
Form 8-K, in response to Item 5, reporting that the Company
had entered into a new $12.5 million term credit facility.

On March 14, 2003, the Company filed a Current Report on Form
8-K, in response to Item 5, to provide an update on the status
of certain unresolved accounting matters.

123

On April 23, 2003, the Company filed a Current Report on Form
8-K, in response to Item 4, reporting that the Company had
dismissed its independent auditors, PricewaterhouseCoopers
LLP, and engaged Ehrenkrantz Sterling & Co. LLC as its
independent auditors.

On July 29, 2003, the Company filed a Current Report on Form
8-K, in response to Item 5, reporting certain director
resignations and elections.

On August 6, 2003, the Company filed a Current Report on Form
8-K, in response to Item 5, to report a recent transaction
with Nextel and to provide an update on the status of its
periodic SEC reports.

On November 4, 2003, the Company filed a Current Report on
Form 8-K, in response to Item 5, to report an update of recent
transaction with Nextel, to report the loss of its largest
customer, UPS, and to provide an update on the status of its
periodic SEC reports.

On December 11, 2003, the Company filed a Current Report on
Form 8-K, in response to Item 5, to report a recent
transaction with Nextel.

On February 13, 2004, the Company filed a Current Report on
Form 8-K, in response to Item 5, to report that the
termination of employment of Walter V. Purnell, Jr. as the
Company's president and chief executive officer, and to
provide an update on the status of its periodic SEC reports.

On February 20, 2004, the Company filed a Current Report on
Form 8-K, in response to Item 5, to report a reduction in
personnel.

On March 9, 2004, the Company filed an amendment to Current
Report on Form 8-K/A, in response to Item 4, to report the
dismissal of PricewaterhouseCoopers as its independent
auditors for the period May 1, 2002 to December 31, 2002 and
the engagement of Ehrenkrantz Sterling & Co. LLC as the
Company's independent auditors for the period May 1, 2002 to
December 31, 2002.

124

Certification

The undersigned, in his capacity as the Executive Vice President, Chief
Financial Officer and Treasurer of Motient Corporation, being the principal
executive officer and the principal financial officer, as the case may be,
provides the following certifications required by 18 U.S.C. Section 1350, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Executive Vice President, Chief Financial Officer and Treasurer

I, Christopher W. Downie, hereby certify that:

1. I have reviewed this annual report on Form 10-K of Motient
Corporation, a Delaware corporation (the "Company");

2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Company as of, and for, the periods presented in this report;

4. The Company's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have:

(a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the Company, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report
is being prepared;

(b) Evaluated the effectiveness of the Company's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of a date within 90 days prior to the
filing date of this annual report; and

(d) Disclosed in this report any change in the Company's
internal control over financial reporting that occurred during
the Company's fourth fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting; and

5. The Company's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the Company's auditors and the audit committee of the Company's board of
directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in
the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
Company's ability to record, process, summarize and report
financial information; and

(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in
the Company's internal control over financial reporting.

/s/ Christopher W. Downie
----------------------------------------
Executive Vice President, Chief Financial
Officer and Treasurer

Date:March 19, 2004

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.

MOTIENT CORPORATION

By /s/ Christopher W. Downie
-------------------------------
Christopher W. Downie
Executive Vice President
Chief Financial Officer and Treasurer

Date: March 19, 2004

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 and
in the capacities and on the dates indicated.

/s/ Christopher W. Downie Executive Vice President, Chief Financial March 19, 2004
- ------------------------------- Officer and Treasurer
Christopher W. Downie (principal executive, financial and
accounting officer)

/s/ Peter D. Aquino Director March 19, 2004
- -------------------------------
Peter D. Aquino

/s/ Steven G. Singer Chairman of the Board March 19, 2004
- -------------------------------
Steven G. Singer

/s/ Jonelle St. John Director March 19, 2004
- -------------------------------
Jonelle St. John

Director March 19, 2004
- -------------------------------
Gerald S. Kittner

/s/ James D. Dondero Director March 19, 2004
- -------------------------------
James D. Dondero

INDEX TO FINANCIAL STATEMENTS

MOTIENT CORPORATION AND SUBSIDIARIES

Independent Auditors' Report ................................................................. F-1

Report of KPMG LLP, Independent Auditors to XM Satellite Radio Holdings, Inc. ........................... F-3

Consolidated Statements of Operations ................................................................. F-4

Consolidated Balance Sheets ................................................................. F-6

Consolidated Statements of Changes in Stockholders' (Deficit) Equity .................................... F-7

Consolidated Statements of Cash Flows ................................................................. F-9

Notes to Consolidated Financial Statements .............................................................. F-11

Quarterly Financial Data ................................................................. F-76

Independent Auditors' Report

To the Board of Directors and Stockholders of
Motient Corporation:

We have audited the accompanying consolidated balance sheets of Motient
Corporation (a Delaware Corporation) and Subsidiaries (together the "Company")
as of December 31, 2002 (Successor Company) , 2001 (Predecessor Company) and
2000 (Predecessor Company), and the related consolidated statements of
operations, changes in stockholders' equity (deficit) and cash flows for the
eight months ended December 31, 2002 (Successor Company), the four months ended
April 30, 2002 (Predecessor Company) and the years ended December 31, 2001 and
2000 (Predecessor Company). Our audit also included the financial statement
schedule listed in the index at Item 15 (a). These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits. We did not audit the financial statements of XM Satellite Radio Holdings
Inc. and subsidiaries (together "XM Radio"), the investment in which is
reflected in the accompanying consolidated financial statements using the equity
method of accounting for the year ended December 31, 2001 and consolidated in
December 31, 2000. The investment in XM Radio represents 0 percent of total
assets at December 31, 2001, and the equity in XM Radio's net loss represents 0
percent of consolidated net losses in 2001. The investment in XM Radio
represents 79 percent of consolidated total assets at December 31, 2000 and 0
percent of consolidated total revenues in 2000. XM Radio's financial statements
were audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to the amounts included for XM Radio, is based
solely on the report of the other auditors.

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

In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Motient Corporation and Subsidiaries as of December
31, 2002 (Successor Company) and December 31, 2001 and 2000 (Predecessor
Company) and the results of their operations and their cash flows for the eight
months ended December 31, 2002 (Successor Company) each of the two years in the
period ended December 31, 2001 (Predecessor Company) and the four months ended
April 30, 2002 (Predecessor Company), in conformity with accounting principles
generally accepted in the United States of America. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.

As discussed in Note 2 to the consolidated financial statements, the United
States Bankruptcy Court for the Eastern District of Virginia confirmed the
Company's Plan of Reorganization on April 26, 2002 and the Company emerged from
Bankruptcy. In connection with its emergence from Bankruptcy, the Company
adopted fresh start accounting as of May 1, 2002. In accordance with the
requirements of fresh start accounting, the Successor Company has been accounted

F-1

for as a new entity with assets, liabilities and a capital structure having
carrying values not comparable with any prior periods of the Predecessor
Company.

As disclosed in Note 2 to the consolidated financial statements, in fiscal year
2001 the Company changed its method of accounting for revenue recognition in
accordance with guidance provided in Securities and Exchange Commission Staff
Accounting Bulletin No.101, "Revenue Recognition in Financial Statements."

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
and will require significant additional funds before it begins to generate cash
in excess of its operating expenses, which raises substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also discussed in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

Ehrenkrantz Sterling & Co., LLC
Livingston, NJ
March 17, 2004

F-2

Independent Auditors' Report

To the Board of Directors and Stockholders
XM Satellite Radio Holdings Inc. and Subsidiaries:

We have audited the consolidated balance sheets of XM Satellite Radio Holdings
Inc. and subsidiaries as of December 31, 2000 and 2001, and the related
consolidated statements of operations, stockholders' equity (deficit), and cash
flows for each of the years in the three-year period ended December 31, 2001,
which are not included herein. These consolidated financial statements are the
responsibility of the XM Satellite Radio Holdings Inc. and subsidiaries'
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

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

The consolidated financial statements have been prepared assuming that XM
Satellite Radio Holdings Inc. and subsidiaries will continue as a going concern.
As discussed in note 2 to the consolidated financial statements, XM Satellite
Radio Holdings Inc. and subsidiaries is dependent upon additional debt or equity
financing, which raises substantial doubt about its ability to continue as a
going concern. Management's plan in regard to these matters is also described in
note 2. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

/s/ KPMG LLP

McLean, VA
January 23, 2002

F-3

Motient Corporation and Subsidiaries
Consolidated Statements of Operations
For the Eight Months Ended December 31, 2002,
The Four Months Ended April 30, 2002
and the Years Ended December 31, 2001 and 2000
(in thousands, except per share data)

Successor
Company Predecessor Company
------- -------------------

Eight Months Four Months (Restated) (Restated)
Ended Ended Year Ended Year Ended
December 31, April 30, December 31, December 31,
2002 2002 2001 2000
---- ---- ---- ----

REVENUES
Services and related revenues $ 35,501 $ 16,809 $ 68,063 $ 71,615
Sales of equipment 1,116 5,564 22,202 24,141
----- ----- ------ ------
Total revenues 36,617 22,373 90,265 95,756
------ ------ ------ ------
COSTS AND EXPENSES
Cost of services and operations (exclusive of 38,141 21,909 73,064 75,853
depreciation and amortization)
Cost of equipment sold (exclusive of depreciation 2,226 5,980 34,116 29,241
and amortization)
Sales and advertising 4,825 4,287 22,618 36,585
General and administrative 9,691 4,130 20,543 98,179
Restructuring charges 25 584 4,739 --
Depreciation and amortization 15,509 6,913 32,408 38,812
------ ----- ------ ------
Total Costs and Expenses 70,417 43,803 187,488 278,670
------ ------ ------- -------

Operating loss (33,800) (21,430) (97,223) (182,914)
-------- -------- -------- ---------

Interest and other income (expense) (89) 145 1,128 31,379
Interest expense (1,910) (1,850) (61,675) (62,455)
Other income from Aether/MSV 1,017 1,125 -- --
Gain (loss) on disposal of assets (2,116) (591) 67 --
Gain (loss) on sale of transportation and 385 372 23,201 8,931
satellite assets
Gain on Rare Medium Note call option -- -- 1,511 --
Rare Medium merger costs -- -- (4,054) --
XM Radio equity investment impairment charge -- -- (81,467) --
Gain on convertible note payable to related party -- -- -- 36,779
Minority interest -- -- -- 33,429
Equity in losses of XM Radio and MSV (22,273) (1,909) (48,488) --
-------- ------- -------- --------
Income (loss) before reorganization items (58,786) (24,138) (267,000) (134,851)
-------- -------- --------- ---------
Reorganization items:
Costs associated with debt restructuring (772) (22,324) (1,254) --
Gain (loss) on extinguishment of debt -- 183,725 (1,243) (3,035)
Gain on fair market adjustment of -- 94,715 -- --
assets/liabilities

(Loss) income before income taxes (59,558) 231,978 (269,497) (137,886)
-------- ------- --------- ---------
Income tax provision -- -- -- --
-- -- -- --

Net (loss) income before cumulative effect of $(59,558) $231,978 $(269,497) $(137,886)
accounting change --------- -------- ---------- ----------

XM Radio Preferred Stock Dividend Requirement -- -- -- (5,081)
XM Radio Beneficial Conversion -- -- -- (44,438)
--------- --------- ---------- ---------
Net (Loss) income attributable to common
shareholders before cumulative effect of $(59,558) $231,978 $(269,497) $(187,405)
accounting change ========= ======== ========== ==========

Cumulative effect of change in accounting -- -- -- (4,677)
principle --------- -------- --------- --------

Net (loss) income attributable to common $(59,558) $231,978 $(269,497) $(192,082)
shareholders ========= ======== ========== ==========

F-4

Net (loss) income attributable to common
shareholders before cumulative effect of accounting
change $(2.37) $3.98 $(5.27) $(3.79)
======= ===== ======= =======
Cumulative effect of change in accounting -- -- -- (0.10)
principle ------- ----- ------- -------
Net (loss) income attributable to common $(2.37) $3.98 $(5.27) $(3.89)
shareholders ======= ===== ======= =======

Weighted-Average Common Shares Outstanding - 25,097 58,251 51,136 49,425
basic and diluted

Net (loss) income attributable to common
shareholders - Basic and diluted

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

F-5

Motient Corporation and Subsidiaries
Consolidated Balance Sheets
as of December 31, 2002, 2001 and 2000
(in thousands, except share and per share data)

Successor Predecessor Predecessor
Company Company Company
2002 2001 2000
---- ---- ----
(Restated) (Restated)
ASSETS ---------- ----------

CURRENT ASSETS:
Cash and cash equivalents (including $224,903 in 2000 related to XM Radio) $ 5,840 $ 33,387 $ 227,423
Accounts receivable-trade, net of allowance for doubtful accounts of $1,003 at
December 31, 2002, $964 at December 31, 2001 and $1,317
at December 31, 2000 9,339 11,491 14,421
Inventory 1,077 6,027 16,054
Due from Mobile Satellite Ventures LP, nt 234 521 502
Deferred equipment costs 2,755 13,662 16,173
Other current assets 6,796 16,566 31,095

Restricted cash and short-term investments (including $85,277 in 2000 related to
XM Radio) 604 -- 115,986
-------- -------- ---------
Total current assets 26,645 81,654 421,654

PROPERTY AND EQUIPMENT, net 46,405 64,001 175,706
XM RADIO SYSTEM UNDER CONSTRUCTION -- -- 800,482
FCC LICENSES AND OTHER INTANGIBLES, net 94,921 51,631 62,468
INVESTMENT IN AND NOTES RECEIVABLE FROM MSV 32,493 30,126 --
RESTRICTED INVESTMENTS (including $65,889 in 2000 related to XM Radio) -- -- 77,106
DEFERRED CHARGES AND OTHER ASSETS 1,757 13,053 34,620
----- ------ ------
Total assets $202,221 $240,465 $1,572,036
======== ======== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 13,040 $ 50,274 $ 106,882
Deferred equipment revenue 2,861 13,662 16,173

Deferred revenue and other current liabilities (including $7,300 in 2000 related
to MSV) 5,308 12,054 15,660
Senior Notes, net of discount -- 329,371 --
Rare Medium note payable -- 26,910 --
Obligations under capital leases, current 3,031 8,691 4,590
Vendor financing commitment, current 1,020 -- 4,246
Deferred trade payables, current -- -- 2,212
--------- --------- -----
Total current liabilities 25,260 440,962 149,763
LONG-TERM LIABILITIES:
Notes payable, including accrued interest thereon 20,943 -- --
Senior Notes, net of discount -- -- 328,474
Senior Secured Notes of XM Radio, net of discount -- -- 261,298
Obligations Under Bank Financing -- -- 111,250
Capital lease obligations, net of current portion 3,219 257 9,230
Vendor financing commitment, net of current portion 4,927 3,316 4,246
Other long-term liabilities 4,824 27,079 38,878
----- ------ ------
Total long-term liabilities 33,913 30,652 753,376
------ ------ -------
Total liabilities 59,173 471,614 903,139
------ ------- -------
MINORITY INTEREST -- -- 648,313
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred Stock; par value $0.01; authorized 5,000,000 shares and no shares -- -- --
outstanding at December 31, 2002; authorized 200,000 shares in 2000 and 2001 and no
shares outstanding in 2000 and 2001
Common Stock; voting, par value $0.01; authorized 100,000,000 shares; 25,097,256
shares issued and outstanding at December 31, 2002 and; authorized 150,000,000; 251 557 495
55,717,257 shares issued and outstanding in 2001 and; authorized 150,000,000;
49,539,222 shares issued and outstanding in 2000
Additional paid-in capital 197,814 988,355 984,532
Deferred stock compensation -- (433) (1,327)
Common stock purchase warrants 4,541 93,730 92,249
Unamortized guarantee warrants -- -- (11,504)
Accumulated deficit (59,558) (1,313,358) (1,043,861)
-------- ----------- ----------
STOCKHOLDERS' EQUITY (DEFICIT) 143,048 (231,149) 20,584
------- --------- ------
Total liabilities, and stockholders' equity (deficit) $202,221 $240,465 $1,572,036
======== ======== ==========

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

F-6

Motient Corporation and Subsidiaries
Consolidated Statements of Changes In Stockholders' Equity (Deficit)
For the Eight Months Ended December 31, 2002,
the Four Months Ended April 30, 2002
and the Years Ended December 31, 2001 (Restated) and 2000 (Restated)
(dollars in thousands)

Common
Common Stock Additional Deferred Stock Unamortized
Par Paid-In Stock Purchase Guarantee Accumulated
Shares Value Capital Compensation Warrants Warrants Deficit Total
------ ----- ------- ---------- -------- -------- ------- -----

Predecessor Company
- -------------------
BALANCE, December 31, 1999 48,539,316 $485 $845,217 $(6,536) $63,290 $(18,384) $(901,298) $(17,226)
Change in accounting principle (See Note 2) -- -- -- -- -- -- (4,677) (4,677)
---------- -------- -------- ------- ------- -------- --------- -------
BALANCE, December 31, 1999, as restated 48,539,316 485 845,217 (6,536) 63,290 (18,384) (905,975) (21,903)
Common Stock issued under the 401(k)
Savings & Stock Purchase Plan 87,717 1 1,551 -- -- -- -- 1,552
Common Stock issued for exercise of stock
options and award of bonus stock 403,467 4 4,445 -- -- -- -- 4,449
Common Stock issued for exercise of Stock
Purchase Warrants 558,722 6 8,349 -- (7,611) -- -- 744
Cancellation of Restricted Stock (50,000) (1) (1,052) 1,053 -- -- -- --
Change in deferred compensation on -- -- (4,074) 4,156 -- -- -- 82
non-cash compensation
Compensatory stock options issued to employees -- -- 551 -- -- -- -- 551
Reduction of Guarantee Warrants for
extinguishment of debt -- -- -- -- -- 2,390 -- 2,390
Amortization of Guarantee Warrants -- -- -- -- -- 5,842 -- 5,842
Issuance of MSV investors' option to
convert into Motient Common Stock -- -- -- -- 30,368 -- -- 30,368
Capital gain in connection with sale of
stock by XM Radio -- -- 129,545 -- -- -- -- 129,545
Guarantee Warrants revaluation -- -- -- -- 1,352 (1,352) -- --
Issuance of Common Stock Purchase Warrants -- -- -- -- 4,850 -- -- 4,850
Net Loss -- -- -- -- -- (137,886) (137,886)
------------------------------------------------------------------------------------
BALANCE, December 31, 2000 49,539,222 495 984,532 (1,327) 92,249 (11,504) (1,043,861) 20,584
Common Stock issued under the 401(k)
Savings & Stock Purchase Plan 3,006,756 30 1,475 -- -- -- -- 1,505
Common Stock issued for exercise of stock
options and award of bonus stock 2,015 -- 1 -- -- -- -- 1
Common Stock issued for exercise of Stock 38,228 -- 845 -- (845) -- -- --
Purchase Warrants
Capital Gain in connection with sale of -- -- 12,883 -- -- -- 12,883
stock by MSV --
Change in deferred compensation on -- -- 539 1,048 -- -- -- 1,587
non-cash compensation
Cancellation of restricted stock (88,200) -- (264) 264 -- -- -- --
Reduction of Guarantee Warrants for -- -- -- -- -- 8,837 -- 8,837
extinguishment of debt
Compensatory stock options issued to -- -- 138 -- -- -- -- 138
employees
Amortization of Guarantee Warrants -- -- -- -- -- 4,993 -- 4,993
Loss in connection with sale of stock by -- -- (12,180) -- -- -- -- (12,180)
XM Radio
Guarantee Warrants revaluation -- -- -- -- 2,326 (2,326) -- --
Issuance of Restricted Stock 3,219,236 32 386 (418) -- -- -- --
Net Loss -- -- -- -- -- -- (269,497) (269,497)
----------------------------------------------------------------------------------

F-7

-------------------------------------------------------------------------------------
BALANCE, December 31, 2001 55,717,257 557 988,355 (433) 93,730 -- (1,313,358) (231,149)
Common Stock issued under the 401(k)
Savings & Stock Purchase Plan 2,718,041 27 176 -- -- -- -- 203
Change in deferred compensation on
non-cash compensation -- -- -- 97 -- -- -- 97
Net Income - Predecessor Company -- -- -- -- -- -- 231,978 231,978
Balance before fresh-start-Predecessor 58,435,298 $584 $988,531 $(336) $93,730 -- $(1,081,380) $1,129
Company ---------- ---- -------- ------ ------- -- ---------- ------

Successor Company
-----------------
Issuance of New Equity through bankruptcy 25,097,256 $251 $197,814 -- -- -- -- $198,065

Issuance of Common Stock Warrants -- -- -- -- 1,948 -- -- 1,948
Issuance of Common Stock Warrants -- -- -- -- 1,129 -- -- 1,129

------------------------------------------------------------------------------------
BALANCE, April 30, 2002 25,097,256 251 197,814 -- 3,077 -- -- 201,142

Issuance of Warrants -- -- -- -- 1,464 -- -- 1,464
Net Loss -- -- -- -- -- -- (59,558) (59,558)

------------------------------------------------------------------------------------
BALANCE, December 31, 2002 25,097,256 $251 $197,814 -- $4,541 -- $(59,558) $143,048

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

F-8

Motient Corporation and Subsidiaries
Consolidated Statements of Cash Flows
For the Eight Months Ended December 31, 2002,
the Four Months Ended April 30, 2002 and
the Years Ended December 31, 2001 and 2000
(in thousands)

Successor
Company Predecessor Company
------- ---------------------------------------------

Eight Months Four Months (Restated) (Restated)
Ended Ended Year Ended Year Ended
December 31, April 30, December 31, December 31,
2002 2002 2001 2000
---- ---- ---- ----

CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income before cumulative effect of accounting $(59,558) $231,978 $(269,497) $(137,886)
change
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Amortization of Guarantee Warrants and debt related costs -- 5,629 11,499 11,994
Depreciation and amortization 15,509 6,913 32,408 38,812
Provision for inventory write-downs -- -- 7,891 4,623
Equity in loss of XM Radio and MSV 22,319 1,909 48,488 --
(Gain) loss on disposal of assets 2,116 591 (67) --
Impairment loss on XM Radio common stock held for sale -- -- 81,467 --
(Gain) on Rare Medium Note call option -- -- (1,511) --
Gain on sale of transportation assets (385) (372) (23,201) (8,931)
Gain on note payable to related party -- -- -- (36,779)
(Gain) loss on extinguishment of debt -- (183,725) 1,243 3,035
Fresh-Start valuation and other non-cash adjustments -- (94,715) -- --
Non cash stock compensation -- -- 1,150 3,296
Minority interest -- -- -- (33,429)
Changes in assets and liabilities, net of acquisitions
and dispositions:
Inventory 2,765 (2,167) (1,118) (2,389)
Accounts receivable-- trade 782 1,370 462 1,388
Other current assets 4,263 15,833 10,764 (15,074)
Accounts payable and accrued expenses (217) 7,619 (10,327) 14,523
Accrued interest 1,193 1,320 20,810 31
Deferred trade payables -- -- (2,212) (2,455)
Deferred revenue and other deferred items 2,305 (6,729) (7,097) 24,020
----- ------- ------- ------
Net cash (used in) provided by operating activities (8,908) (14,546) (98,848) (135,221)
------- -------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets 616 -- -- --
Proceeds from sale of satellite assets to MSV -- -- 42,500 --
Proceeds from sale of transportation assets 385 372 10,000 20,000
Proceeds (purchase) of restricted investments (604) -- 11,307 (2,906)
Proceeds from the sale of XM Radio common stock -- -- 38,289 --
Purchase of restricted investments by XM Radio -- -- -- (106,338)
Receipt of Senior Note Interest from escrow -- -- 20,503 41,006
Investment in MSV (957) -- -- --
(Purchase)/maturity of short term investments by XM Radio -- -- -- 69,472
System under construction by XM Radio -- -- -- (414,889)
Proceeds from MSV Asset Purchase Agreement -- -- -- 7,718
Other XM Radio investing activities -- -- -- (56,268)
Additions to property and equipment (613) (494) (13,751) (73,564)
----- ----- -------- --------
Net cash (used in) provided by investing activities (1,173) (122) 108,848 (515,769)
------- ----- ------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of equity securities -- 17 354 5,614
Proceeds from Rare Medium note -- -- 50,000 --
Proceeds from issuance of equity securities-XM Radio -- -- -- 456,529
Proceeds from Senior Secured Notes and Stock Purchases
Warrants issued by XM Radio -- -- -- 322,889
Principal payments under capital leases (1,425) (1,273) (3,582) (3,467)
Principal payments under vendor financing -- -- (5,176) (2,957)
Repayment from Term Loan -- -- (25,500) (36,000)
Proceeds from Bank Financing -- -- 6,000 62,250
Proceeds from issuance of conversion option to MSV investors -- -- -- 30,368
Debt issuance costs and other charges (117) -- (1,229) (8,287)
----- -- ------- ------

F-9

Net cash provided by (used in) financing activities (1,542) (1,256) 20,867 826,939
------- ------- ------ -------
Net (decrease) increase in cash and cash equivalents (11,623) (15,924) 30,867 175,949
-------- -------- ------ -------
CASH AND CASH EQUIVALENTS, beginning of period 17,463 33,387 227,423 51,474
Less XM Radio cash included in 2000 consolidated cash
total -- -- 224,903 --
=======
CASH AND CASH EQUIVALENTS, end of period $5,840 $17,463 $33,387 $227,423
====== ======= ======= ========

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

F-10

MOTIENT CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

1. ORGANIZATION AND GOING CONCERN

Motient Corporation (with its subsidiaries, "Motient" or the "Company") provides
two-way mobile communications services principally to business-to-business
customers and enterprises. Motient serves a variety of markets including mobile
professionals, telemetry, transportation and field service. Motient provides its
eLinkSM brand two-way wireless email services to customers accessing email
through corporate servers, Internet Service Providers, Mail Service Provider
accounts and paging network service providers. Motient also offers BlackBerry TM
by Motient, a wireless email solution developed by Research In Motion Ltd.
("RIM") and licensed to operate on Motient's network. BlackBerry TM by Motient
is designed for large corporate accounts operating in a Microsoft Exchange or
Lotus Notes environment. The Company considers the two-way mobile communications
service described in this paragraph to be its core wireless business.

Motient is devoting its efforts to expanding its core wireless business, while
also focusing on cost-cutting efforts. These efforts involve substantial risk.
Future operating results will be subject to significant business, economic,
regulatory, technical and competitive uncertainties and contingencies. Depending
on their extent and timing, these factors, individually or in the aggregate,
could have an adverse effect on the Company's financial condition and future
results of operations. In recent periods, certain factors have placed
significant pressures on Motient's financial condition and liquidity position.
These factors also have restrained Motient's ability to accelerate revenue
growth at the pace required to enable it to generate cash in excess of its
operating expenses. These factors include competition from other wireless data
suppliers and other wireless communications providers with greater resources,
cash constraints have limited Motient's ability to generate greater demand,
unanticipated technological and development delays and general economic factors.
Motient's results in recent periods, including the period covered by this
report, have also been hindered by the downturn in the economy and capital
markets. These factors contributed to the Company's decision in January 2002 to
file a voluntary petition for reorganization under Chapter 11 of the United
States Federal Bankruptcy Code. Motient's Plan of Reorganization was confirmed
on April 26, 2002 and became effective on May 1, 2002. Please see Note 2
("Significant Accounting Policies -- Motient's Chapter 11 Filing and Plan of
Reorganization and "Fresh-start" Accounting") below.

For a discussion of certain significant recent developments and trends in
Motient's business after the end of the period covered by this report, please
see Note 16 ("Subsequent Events"). As discussed in more detail in Note 2
("Significant Accounting Policies"), the 2000 and 2001 comparative financial
statements provided herein have been restated and have been audited by the
Company's current independent accounting firm, Ehrenkrantz Sterling & Co. LLC.

F-11

The financial results for the years ended December 31, 2001 and 2000 and the
financial results for the period January 1, 2002 to April 30, 2002 are herein
referred to as Predecessor Company results and the financial results for the
period May 1, 2002 to December 31, 2002 included herein are referred to as
Successor Company results. Due to the effects of the "fresh-start" accounting,
results for the periods defined above are not comparable to periods beginning
after May 1, 2002. In the opinion of management, all adjustments (consisting of
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows for all periods presented have
been made.

XM Radio

XM Radio was incorporated on December 15, 1992 for the purpose of procuring a
digital audio radio service license. During 2000, XM Radio management had
devoted its time primarily to securing financing and constructing its satellite
system. XM Radio launched its first satellite on March 18, 2001. XM Radio did
not generate revenues for the period ended December 31, 2000 and planned
principal operations did not commence as of December 31, 2000. The operations
and financing of XM Radio, a public company, are maintained separate and apart
from the operations and financing of Motient.

As of December 31, 2000, Motient had an equity interest of approximately 33.1%
(or 21.3% on a fully diluted basis) in XM Satellite Radio Holdings Inc. ("XM
Radio"), a public company that launched its satellite radio service at the end
of 2001, and Motient controlled XM Radio through its board of director
membership and common stock voting rights. As a result, all of XM Radio's
results for the period from July 7, 1999 (the date Motient acquired 100% voting
interest of XM Radio) through December 31, 2000 have been included in its
consolidated financial statements. Prior to July 7, 1999, Motient's investment
in XM Radio was accounted for pursuant to the equity method of accounting. In
January 2001, pursuant to FCC approval authorizing Motient to relinquish control
of XM Radio, the number of directors appointed by the Company to XM Radio's
Board of Directors was reduced to less than 50% of XM Radio directors, and the
Company converted a portion of its super-voting Class B Common Stock of XM Radio
to Class A Common Stock. As a result, the Company ceased to control XM Radio.

Throughout 2001, Motient disposed of its equity interest in XM Radio, and as of
November 19, 2001, Motient did not hold any interest in XM Radio. For the period
from January 1, 2001 through November 19, 2001, the Company accounted for its
investment in XM Radio pursuant to the equity method of accounting.

Mobile Satellite Ventures LP

On June 29, 2000, the Company formed a joint venture subsidiary, Mobile
Satellite Ventures LP (formerly known as Mobile Satellite Ventures LLC) ("MSV"),
in which it owned, until November 26, 2001, 80% of the membership interests, in

F-12

order to conduct research and development activities. In June 2000, the other
20% interest in MSV was purchased by three investors unrelated to Motient. The
minority investors had certain participating rights which provided for their
participation in certain business decisions that were made in the normal course
of business; therefore, in accordance with EITF No 96-16, "Investor's Accounting
for an Investee When the Investor Has a Majority of the Voting Interest but the
Minority Shareholder or Shareholders Have Certain Approval or Veto Rights", the
Company's investment in MSV has been recorded for all periods presented in the
consolidated financial statements pursuant to the equity method of accounting.

GOING CONCERN

Effects of the Chapter 11 Filing

As a result of the Company's Chapter 11 bankruptcy filing, the Company saw a
slower adoption rate for its services during the first quarter of 2002. In a
large customer deployment, the upfront cost of the hardware can be significant.
Because the hardware generally is usable only on Motient's network, certain
customers delayed adoption while Motient was in Chapter 11.

Additionally, certain of the Company's trade creditors required either deposits
for future services or shortened payment terms; however, none of these deposits
or changes in payment terms were material, and none of the Company's key
suppliers has ceased to do business with the Company as a result of its
reorganization.

Since emerging from bankruptcy protection in May 2002, the Company has
undertaken a number of actions to reduce its operating expenses and cash burn
rate. The Company's liquidity constraints have been exacerbated by weak revenue
growth since emerging from bankruptcy protection, due to a number of factors
including the weak economy generally and the weak telecommunications and
wireless sector specifically, the financial difficulty of several of its key
resellers, on whom it relies for a majority of its new revenue growth, and its
continued limited liquidity which has hindered efforts at demand generation.

Cost Reduction Actions

Predecessor Company reductions in workforce. On September 26, 2001, the Company
announced a plan to restructure its business. As part of this restructuring, the
Company laid off 25% of its workforce, or 50, 22 and 13 employees in the
Company's operations, sales and marketing and general and administrative
functions, respectively, and cancelled certain of its product initiatives. The
Company recorded a restructuring charge in 2001 of $4.75 million. This charge
represents $1.6 million of costs directly associated with employee severance
packages, $3.0 million of costs associated with product initiative cancellations
and $0.1 of costs associated with capital assets that were no longer in service.
Of the $4.7 million charge, approximately $1.7 million represented cash outlays
made over the last quarter of 2001 and the first quarter of 2002. The balance
represents the write down of assets previously acquired. As of December 31,
2001, the Company had a remaining operational restructuring liability of
approximately $0.5 million, which was fully utilized in 2002.

F-13

Successor Company reductions in workforce. The Company undertook reductions in
its workforce in July 2002, September 2002, March 2003 and February 2004. These
actions eliminated approximately 29% (95 employees), 13% (26 employees), 10% (19
employees) and 32.5% (54 employees), respectively, of its then-remaining
workforce. The Company recorded restructuring charges of $282,000, $228,000,
$161,000 and $873,000, respectively, related entirely to employee severance
obligations for these reductions in workforce. Approximately $62,000 of the
September 2002 severance liability was unpaid as of December 31, 2002. In the
aggregate, the Company has reduced its work force by approximately 68% since
July 2002 and reduced employee and related expenditures by approximately $1.5
million per month.

Closure of Reston, VA Facility. On July 15, 2003, the Company substantially
completed the transfer of its headquarters from Reston, VA to Lincolnshire, IL,
where it already had a facility. This action reduced the Company's monthly
operating expenses by a net amount of approximately $65,000 per month, or
$780,000 per year.

Refinancing of Vendor Obligations. During the fourth quarter of 2002 and the
first quarter of 2003, the Company renegotiated several of its key vendor and
customer arrangements in order to reduce recurring expenses and improve its
liquidity position. In some cases, the Company was able to negotiate a flat rate
reduction for continuing services provided to it by its vendors or a deferral of
payable amounts, and in other cases the Company renegotiated the scope of
services provided in exchange for reduced rates or received pre-payments for
future services. The Company continues to aggressively pursue further vendor
cost reductions where opportunities arise.

In the case of operating expenses, the Company negotiated, among other things,
reductions of recurring monthly expense of approximately $380,000 per month, or
$4.6 million in annual costs.

In the case of financing arrangements, the Company negotiated, among other
things, a deferral of approximately $2.6 million of accounts payable that was
owed for services provided for which the Company issued a promissory note for
such amount, with the note to be paid off ratably over a two-year period
beginning in January 2004. The Company also restructured certain of its vendor
and capital lease obligations to significantly reduce the monthly amortization
requirements of these facilities on an on-going basis. As part of such
negotiations, the Company agreed to fund a letter of credit in twelve monthly
installments during 2003, in the aggregate amount of $1.125 million, to secure
certain payment obligations. This letter of credit will be released to us in
fifteen monthly installments beginning in July 2004, assuming no defaults have
occurred or are occurring. As part of these negotiations, the total amount of
our remaining principal obligations under these financing arrangements were not
reduced. In March, 2004, Motient further restructured its vendor financing
facility and an outstanding promissory note to the same vendor by extending the
repayment schedule, thereby reducing the combined monthly amortization

F-14

requirements under these facilities. Please see "Management's Discussion and
Analysis of Financial Condition and Results of Operations"--Liquidity and
Capital Resources - Summary of Liquidity and Financing" for further details on
these facilities.

UPS Revenue

On December 1, 2002, Motient entered into a letter agreement with UPS under
which UPS agreed to make a series of eight prepayments to Motient totaling $5
million for future services Motient is obligated to provide after January 1,
2004. In addition to any other rights it has under its network services
agreement with Motient, the letter agreement does not contain any minimum
purchase requires and provides that UPS may terminate the network services
agreement, in whole or in part, by providing 30 days' notice to Motient at which
point any remaining prepayment would be required to be returned. As of July 31,
2003, all eight prepayments had been made. The $5 million prepayment will be
credited against airtime services provided to UPS beginning January 1, 2004,
until the prepayment is fully credited.

UPS, the Company's largest customer as of December 31, 2002, has substantially
completed its migration to next generation network technology, and its monthly
airtime usage of the Company's network has declined significantly. While the
Company expects that UPS will remain a customer for the foreseeable future, over
time the Company expects that the bulk of UPS' units will migrate to another
network. Until June of 2003, UPS had voluntarily maintained its historical level
of payments to mitigate the near-term revenue and cash flow impact of its recent
and anticipated continued reduced network usage. However, beginning in July of
2003, the revenues and cash flow from UPS declined significantly.

The Company does not expect that UPS will be required to make any cash payments
to the Company in 2004 for service to be provided in 2004. If UPS does not make
any cash payments to the Company in 2004, the Company's cash flows from
operations in 2004 will decline, and its liquidity and capital resources could
be materially and negatively affected. The Company is planning a number of
initiatives to offset the loss of revenue and cash flow from UPS, including the
following:

o further reductions in the Company's employee and network infrastructure
costs;

o growth in new revenue from the Company's recently-announced carrier
relationships with Verizon Wireless and T-Mobile, under which the Company
will be selling voice and data services on such carrier's next generation
wireless networks as a master agent;

o increased revenue growth from the Company's various telemetry applications
and initiatives; and

o enhancements to the Company's liquidity which are expected to involve the
sale of unneeded frequency assets, such as the recently announced sales of
certain SMR licenses to Nextel.

Despite these initiatives, we continue to be cash flow negative, and there can
be no assurances that we will ever be cash flow positive.

F-15

Liquidity and Financing Requirements

The Company's future financial performance will depend on its ability to
continue to reduce and manage operating expenses, as well as its ability to grow
revenue. The Company's future financial performance could be negatively affected
by unforeseen factors and unplanned expenses.

The Company expects to continue to require significant additional funds before
it begins to generate cash in excess of its operating expenses, and does not
expect to generate cash from operations in excess of its operating costs until
the first quarter of 2005, at the earliest. Also, even if the Company begins to
generate cash in excess of its operating expenses, it expects to continue to
require significant additional funds to meet remaining interest obligations,
capital expenditures and other non-operating cash expenses.

In March 2004, the Company amended its $12.5 million term credit facility. As of
December 31, 2003, the Company had borrowed $4.5 million under this term credit
facility. Please see Note 16 ("Subsequent Events"). The Company continues to
pursue all potential funding alternatives. Among the alternatives for raising
additional funds are the issuances of debt or equity securities, other
borrowings under secured or unsecured loan arrangements and sales of assets.
There can be no assurance that additional funds will be available to the Company
on acceptable terms or in a timely manner.

The Company's projected cash requirements are based on certain assumptions about
its business model and projected growth rate, including, specifically, assumed
rates of growth in subscriber activations and assumed rates of growth of service
revenue. While the Company believes these assumptions are reasonable, these
growth rates continue to be difficult to predict and there is no assurance that
the actual results that are experienced will meet the assumptions included in
the Company's business model and projections. If the future results of
operations are significantly less favorable than currently anticipated, the
Company's cash requirements will be more than projected, and it may require
additional financing in amounts that will be material. The type, timing and
terms of financing that the Company obtains will be dependent upon its cash
needs, the availability of financing sources and the prevailing conditions in
the financial markets. The Company cannot guarantee that additional financing
sources will be available at any given time or available on favorable terms.

The Company's consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. The successful implementation of
the Company's business plan requires substantial funds to finance the
maintenance and growth of its operations, network and subscriber base and to
expand into new markets. The Company has an accumulated deficit and has
historically incurred losses from operations which are expected to continue for
additional periods in the future. There can be no assurance that its operations
will become profitable. These factors, along with the Company's negative
operating cash flows have placed significant pressures on the Company's
financial condition and liquidity position.

F-16

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated statements of operations for the years ended December 31, 2001
and 2000 have been restated to give effect to the accounting treatment with
respect to the MSV and Aether transactions as described in Note 2 ("Significant
Accounting Policies -- Restatement of Financial Statements") and our current
report on Form 8-K dated March 14, 2003. In addition, as a result of the
Company's re-audit of the years ended December 31, 2001 and 2000 performed by
the Company's independent accounting firm, Ehrenkrantz Sterling & Co. LLC,
certain additional financial statement adjustments were proposed and accepted by
the Company for these periods as described in Note 2, "Significant Accounting
Policies -- Restatement of Financial Statements".

In connection with the Company's acquisition of Motient Communications on March
31, 1998, the Company formed a new wholly-owned subsidiary, Motient Holdings.
The Company contributed all of its inter-company notes receivables and
transferred all of its rights, title and interest in Motient Services, Inc. and
Motient Communications Inc. to Motient Holdings, and Motient Holdings was the
acquirer of Motient Communications Inc. and issuer of the Company's Senior
Notes. Motient Corporation was a guarantor of the Senior Notes. The Senior Notes
were jointly and severally guaranteed on a full and unconditional basis by
Motient Services Inc. and Motient Communications Inc.

Motient's Chapter 11 Filing and Plan of Reorganization and "Fresh-Start"
Accounting

On October 1, 2001, the Company announced that it would not make a $20.5 million
semi-annual interest payment due on the Senior Notes on such date. On November
26, 2001, the Senior Notes trustee declared all amounts owed under the senior
notes immediately due and payable. Following these events, the Company
determined that the continued viability of its business required restructuring
its highly leveraged capital structure. In October 2001, the Company retained
Credit Suisse First Boston ("CSFB") as its financial advisor to assist in the
restructuring the Company's debt. Shortly thereafter, the Company and CSFB began
meeting with the principal creditor constituencies.

On January 10, 2002, the Company filed for protection under Chapter 11 of the
Bankruptcy Code. The Company's Amended Joint Plan of Reorganization was filed
with the United States Bankruptcy Court for the Eastern District of Virginia on
February 28, 2002. The cases were jointly administered under the case name "In
Re Motient Corporation, et. al.," Case No. 02-80125. The Company's Plan of
Reorganization was confirmed on April 26, 2002 and the Company's emergence from
bankruptcy became effective on May 1, 2002 (the "Effective Date"). The Company
adopted "fresh start" accounting as of May 1, 2002 in accordance with procedures
specified by AICPA Statement of Position ("SOP") No. 90-7, "Financial Reporting

F-17

by Entities in Reorganization under the Bankruptcy Code." The Company determined
that its selection of May 1, 2002 versus April 26, 2002 for the "fresh start"
date was more convenient for financial reporting purposes and that the results
for the period from April 26, 2002 to May 1, 2002 were immaterial to the
consolidated financial statements. All results for periods prior to the
Effective Date are referred to as those of the "Predecessor Company" and all
results for periods including and subsequent to the Effective Date are referred
to as those of the "Successor Company".

In accordance with SOP No. 90-7, the reorganized value of the Company was
allocated to the Company's assets based on procedures specified by SFAS No. 141,
"Business Combinations". Each liability existing at the plan confirmation date,
other than deferred taxes, was stated at the present value of the amounts to be
paid at appropriate market rates. It was determined that the Company's
reorganization value computed immediately before the Effective Date was $234
million. Subsequent to the determination of this value, the Company determined
that the reorganization value ascribed to MSV did not reflect certain preference
rights on liquidation available to certain equity holders in MSV. Therefore, the
reorganization value of MSV was reduced by $13 million and the Company's
reorganization value was reduced to $221 million. The Company adopted
"fresh-start" accounting because holders of existing voting shares immediately
before filing and confirmation of the plan received less than 50% of the voting
shares of the emerging entity and its reorganization value is less than its
postpetition liabilities and allowed claims, as shown below:

Postpetition current liabilities $49.9 million
Liabilities deferred pursuant to Chapter 11 401.1 million
-------------
Proceedings
Total postpetition liabilities and allowed claims 451.0 million
Reorganization value (221.0 million)
----------------
Excess of liabilities over reorganization value $(230.0 million)
================

The reorganization value of Motient was determined by considering of several
factors and by reliance on various valuation methods. For the valuation of the
core wireless business, consideration was given to discounted cash flows and
price/earnings and other applicable ratios, a liquidation value analysis,
comparable company trading multiples and comparable acquisition multiple
analysis. The factors considered by Motient included the following:

o Forecasted operating cash flow results which gave effect to the
estimated impact of limitations on the use of available net operating
loss carryovers and other tax attributes resulting from the Plan of
Reorganization and other events,
o The discounted residual value at the end of the forecast period based
on the capitalized cash flows for the last year of that period,
o Market share and position,
o Competition and general economic considerations,
o Projected sales growth, and
o Working capital requirements.

F-18

For the valuation of the Company's investment in MSV, consideration was given to
the valuation of MSV's equity reflected by recent arms-length investments in
MSV, subsequently adjusted as discussed above.

After consideration of the Company's debt capacity, and after extensive
negotiations among parties in interest, it was agreed that Motient's
reorganization capital structure should be as follows:

Notes payable to Rare Medium and CSFB $19.8 million
Shareholders' Equity 201.2 million
$221.0 million

The Company allocated the $221.0 million reorganization value among its net
assets based upon its current estimates of the fair value of its assets. In the
case of current assets, with the exception of inventory, the Company concluded
that their carrying values approximated fair values. The values of the Company's
frequencies and its investment in and note receivable from MSV were based on
independent analyses presented to the bankruptcy court and subsequently adjusted
as discussed above. The value of the Company's fixed assets was based upon a
valuation of the Company's software and estimates of replacement cost for
network and other equipment, for which the Company believes that its recent
purchases represent a valid data point. The value of the Company's other
intangible assets was based on third party valuations as of May 1, 2002.

In February 2003, the Company engaged a financial advisory firm to prepare a
valuation of software and customer intangibles. Software and customer
intangibles were not taken into consideration when the original fresh-start
balance sheet was determined at May 1, 2002. The changes for the software and
customer contracts are reflected below and in the financial statements and notes
herein.

The effect of the plan of reorganization and application of "fresh-start"
accounting on the Predecessor Company's balance sheet as of April 30, 2002, is
as follows:

Debt
Discharge
Preconfirmation and Reorganized
Predecessor Exchange Fresh Start Successor
(in thousands) Company(j) of Stock Adjustments Company
---------- -------- ----------- -------

Assets:
Current assets
Cash $17,463 $17,463
Receivables 10,121 10,121
Inventory 8,194 $(4,352) 3,842
Deferred equipment costs 11,766 (11,766) (e) --
Other current assets 11,443 11,443
------ ------ ------
Total current assets 58,987 (16,118) 42,869
Property and equipment 58,031 ( 1,553) (i) 56,478
FCC Licenses and other intangibles 45,610 56,866 (f)(i) 102,476
Goodwill 4,981 (4,981) (i) --
Investment in and notes receivable
from MSV 27,262 26,593 (f) 53,855
Other long-term assets 2,864 (1,141) (e) 1,723
----- ------- ------
Total Assets $197,735 $59,666 $257,401
======== ======= ========

F-19

Liabilities & Stockholders' (Deficit) Equity
Liabilities Not Subject to Compromise:
Current liabilities:
Current maturities of
capital leases $4,096 $4,096
Accounts payable - trade 1,625 1,625
Vendor financing 655 655
Accrued expenses 15,727 15,727
Deferred revenue 23,284 (18,913) (g)(e) 4,371
------ ------- ------
45,387 (18,913) 26,474
Long term liabilities:
Vendor financing 2,661 2,661
Capital lease obligation 3,579 3,579
Deferred revenue 19,931 (16,136) (e)(g) 3,795

Liabilities Subject to Compromise:
Prepetition liabilities 8,785 (8,785) (a) --
Senior note, including
accrued interest thereon 367,673 (367,673) (b) --
Rare Medium Note, including
accrued interest thereon 27,030 (27,030) (c) --
------ ------- ------
403,488 (403,488) --
Rare Medium and CSFB Notes -- 19,750 (a)(c) 19,750
------- ------ ------- ------

Total liabilities 475,046 (383,738) (35,049) 56,259

Stockholders' (deficit) equity:
Common stock - old 584 (584) (h) --
Common stock - new 251 (d) 251
Additional paid-in capital 988,531 (988,531) 197,814
197,814 (d)(h)
Common stock purchase
warrants - old 93,730 (93,730) (h)
Common stock purchase
warrants - new 3,077 (d) 3,077

Deferred stock compensation (336) 336 (h) --

Retained (deficit) earnings (1,359,820) 1,359,820 94,715 --
---------- (183,725) ------ -------
(94,715) (d)(h)
183,725 (h)
-------

Stockholders' Equity (Deficit) (277,311) 383,738 94,715 201,142
--------- ------- ------ -------
Total Liabilities & Stockholders' Equity
(Deficit) $197,735 $ -- $59,666 $257,401
======== ========= ======= ========

(a) Represents the cancellation of the following liabilities:

i. Amounts due to Boeing $1,533
ii. Amounts due to CSFB 2,000
iii. Amounts due to JP Morgan Chase 1,550
iv. Amounts due to Evercore Partners LP ("Evercore") 1,948
v. Amounts due to the FCC 1,003 vi. Other amounts 751
------
$8,785

F-20

Liabilities were cancelled in exchange for the following:

a. 97,256 shares of new Motient common stock,
b. a note to CSFB in the amount of $750 and
c. a warrant to Evercore Partners to purchase 343,450 shares of new
Motient common stock, and
d. a note to Rare Medium in the amount of $19,000.
(b) Represents the cancellation of the senior notes in the amount of $367,673,
including interest threron, in exchange for 25,000,000 shares of new
Motient common stock. Certain of the Company's other creditors received an
aggregate of 97,256 shares of the Company's common stock in settlement for
amounts owed to them.
(c) Represents the cancellation of $27,030 of notes due to Rare Medium,
including accrued interest thereon, in exchange for a new note in the
amount of $19,000. The Company also issued CSFB a note in the principal
amount of $750 for certain investment banking services.
(d) Represents the issuance of the following:
i. 25,097,256 shares of new Motient common stock.
ii. warrants to the holders of pre-reorganization common stock to
purchase an aggregate of approximately 1,496,512 shares of common
stock, with such warrants being valued at approximately $1,100.
iii. a warrant to purchase up to 343,450 share of common stock to
Evercore, valued at approximately $1,900.
The retained earnings adjustment includes the gain on the discharge of
debt of $183,725.
(e) Represents the write off of deferred equipment costs of $12,907 and
deferred equipment revenue of $12,907 since there is no obligation to
provide future service post-"fresh start".
(f) To reflect the step-up in assets in accordance with the reorganization
value and valuations performed.
(g) Represents the write off of the deferred gain associated with the Company's
sale of its satellite assets to MSV in November 2001 and the write-off of
the unamortized balance of the $15,000 perpetual license sold to Aether
in November 2000, both of which total approximately $22,142, since there is
no obligation to provide future service post-"fresh start".
(h) To record the cancellation of the Company's pre-reorganization equity and
to reverse the gain on extinguishment of debt of $183,725 and the gain on
fair market adjustment of $94,715.
(i) To record the valuation and resulting increase of customer intangibles of
approximately $11,501 and frequencies of $45,365. The reduction of $4,981
is due to a write-off of goodwill. The reduction of property and equipment
relates to a subsequent reduction in the carrying value of certain software
from $4,942 to $3,389, reduction to inventory from $8,194 to $3,842 to its
net realizable value.
(j) The balances do not match the balances in the Company's Plan of
Reorganization due to subsequent re-audit adjustments.

Under the Plan of Reorganization, all then-outstanding shares of the Company's
pre-reorganization common stock and all unexercised options and warrants to
purchase the Company's pre-reorganization common stock were cancelled. The
holders of $335 million in senior notes exchanged their notes for 25,000,000
shares of the Company's new common stock. Certain of the Company's other
creditors received an aggregate of 97,256 shares of the Company's new common
stock in settlement for amounts owed to them. These shares were issued following
completion of the bankruptcy claims process; however, the value of these shares
has been recorded in the financial statements as if they had been issued on the
effective date of the reorganization. Holders of the Company's
pre-reorganization common stock received warrants to purchase an aggregate of
approximately 1,496,512 shares of common stock. The warrants may be exercised to
purchase shares of Motient common stock at a price of $.01 per share, will
expire May 1, 2004, or two years after the Effective Date, and will not be
exercisable unless and until the average closing price of Motient's common stock

F-21

over a period of ninety consecutive trading days is equal to or greater than
$15.44 per share. All warrants issued to the holders of the Company's
pre-reorganization common stock, including those shares held by the Company's
401(k) savings plan, have been recorded in the financial statements as if they
had been issued on the effective date of the reorganization. Also, in July 2002,
Motient issued to Evercore, financial advisor to the creditors' committee in
Motient's reorganization, a warrant to purchase up to 343,450 shares of common
stock, at an exercise price of $3.95 per share. The warrant was dated May 1,
2002, and has a term of five years. If the average closing price of Motient's
common stock for thirty consecutive trading days is equal to or greater than
$20.00, Motient may require Evercore to exercise the warrant, provided the
common stock is then trading in an established public market. The value of this
warrant has been recorded in the financial statements as if it had been issued
on May 1, 2002, given the perfunctory nature of the warrant issuance process
related to bankruptcy emergence.

Cash (used) provided by reorganization items were as follows:

Successor Predecessor
Company Company
Eight Months Four Months
Ended Ended
December 31, April 30,
2002 2002
---- ----
(in thousands)

Professional Fees $(3,434) $(5,892)
Interest Income -- 145
------- -------
$(3,434) $(5,747)
======= =======

Further details regarding the plan are contained in Motient's Disclosure
Statement with respect to the plan, which was filed as Exhibit 99.2 to the
Company's current report on Form 8-K dated March 4, 2002.

Accounting Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles ("GAAP") requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. The Company's most significant estimates relate to the valuation of
its net assets and assets in "fresh-start" accounting, the valuation on its
investment in MSV, the valuation of inventory, the allowance for doubtful
accounts receivable, the valuation of deferred tax assets and the realizability
of long-lived assets.

Reclassifications

Certain amounts in prior periods have been reclassified to conform with the 2002
presentation.

F-22

Consolidation

The consolidated financial statements include the accounts of Motient and its
wholly-owned subsidiaries, and XM Radio for the period ended December 31, 2000.
All significant inter-company transactions and accounts have been eliminated.

For the period from January 1, 2001, through November 19, 2001, the Company's
investment in XM Radio was recorded pursuant to the equity method of accounting.
For the year ended December 31, 2001, XM Radio recorded $0.5 million of revenue,
incurred $282.1 million of operating expenses and had a net loss attributable to
common stockholders of $307.5 million.

As noted above (please see Note 1, "Organization and Going Concern"), the
results of MSV have been accounted for pursuant to the equity method of
accounting.

Cash Equivalents

The Company considers highly liquid investments with original or remaining
maturities at the time of purchase of three months or less at the time of
acquisition to be cash equivalents.

Short-term Investments

The Company considers highly liquid investments with original or remaining
maturities at the time of purchase of between three months and a year to be
short-term investments.

Restricted Investments

At December 31, 2002, the Company had $0.5 million of restricted investments.
The Company had no restricted investments at December 31, 2001. Restricted
investments at December 31, 2000 totaled $116 million and represented
investments made by the Company to fund customer obligations, milestone payments
under certain of XM Radio's construction contracts, certificates of deposit to
collateralize letters of credit required by facility leases, or required
interest payments associated with the senior notes and XM Radio's senior secured
notes. The securities included in restricted investments were classified as
held-to-maturity under the provision of SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". The Company classified restricted
investment amounts which would mature within one year as current assets in the
accompanying balance sheet. The Company accounted for these investments at their
amortized cost.

Inventory

Inventory, which consists primarily of communication devices and accessories,
such as power supplies and documentation kits, is stated at the lower of cost or
market. Cost is determined using the weighted average cost method. The Company
periodically assesses the market value of its inventory, based on sales trends
and forecasts and technological changes and records a charge to current period

F-23

income when such factors indicate that a reduction to net realizable value is
appropriate. The Company considers both inventory on hand and inventory which it
has committed to purchase, if any. The Company recorded inventory write-downs to
cost of equipment sold to reduce inventory amounts to its net realizable value,
in the amount of $4.4 million in 2002, $7.9 million in 2001 and $4.5 million in
2000.

The Company has no further plans or commitments to purchase any additional older
generation inventory.

Periodically, the Company will offer temporary discounts on equipment purchases.

The Company's eLink and BlackBerry TM by Motient wireless services use handheld
devices manufactured primarily by RIM and Wavenet Technology Pty. Ltd.
("Wavenet"). RIM and Wavenet also manufacture modems designed to be integrated
into mobile terminals manufactured by other vendors and used for other wireless
communications services sold by the Company. The Company's supply arrangements
with RIM and Wavenet are not exclusive, and RIM and Wavenet manufacture similar
hardware products for other companies. There are a limited number of
manufacturers of similar wireless devices, and a change in suppliers or delays
in deliveries from RIM or Wavenet could result in loss of sales, which would
adversely affect operating results. See Note 14 ("Legal and Regulatory Matters")
for further discussion of RIM supply arrangements.

Other Current Assets

Other current assets consist of the following:

December 31,
-------------------------------------------
Successor
Company Predecessor Company
2002 2001 2000
---- ---- ----
(in thousands)

Interest rate swap $-- $-- $611
Prepaid site rent 4,175 4,688 4,176
Prepaid maintenance 289 5,371 423
Prepaid advertising -- -- 5,162
Prepaid expenses - other 1,802 3,936 13,112
Deposits 55 1,241 175
Non-trade receivables and other 475 1,330 7,436
------ ------- -------
$6,796 $16,566 $31,095
====== ======= =======

Fair Value of Financial Instruments

SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," requires
disclosures of the fair value of certain financial instruments. The carrying
amount for cash and cash equivalents, short-term investments, accounts
receivable, non-trade receivables included in other assets, lease receivables
included in non-current deferred charges and other assets, accounts payable and
accrued expenses, deferred revenues and XM Radio accrued royalty payments

F-24

approximate fair value because of the short maturity of these instruments. The
fair value of the senior notes was estimated using quoted market prices. The
fair value of the interest rate swap was the estimated amount that the Company
would receive to terminate the swap agreement based on quoted market prices,
taking into account current interest rates and the current creditworthiness of
the swap counter parties. As a result of the guarantees that were associated
with the Bank Financing, it was not practicable to estimate the fair value of
this facility. For debt issues that are not quoted on an exchange, interest
rates currently available to the Company for issuance of debt with similar terms
and remaining maturities are used to estimate fair value. The fair value of the
Company's equity investment in MSV was determined by an independent third-party
valuation. The fair value of the notes receivable from MSV approximates its
carrying value.

As of December 31, 2002 As of December 31, 2001 As of December 31, 2000
Successor Company Predecessor Company Predecessor Company
----------------- ------------------- -------------------
Carrying Carrying Carrying
Amount Fair Value Amount Fair Value Amount Fair Value
------ ---------- ------ ---------- ------ ----------

(in thousands)
Assets:
Restricted investments $-- $-- $-- $-- $193,092 $192,697
Interest rate swap -- -- -- -- 611 708
Investment in and notes $ 32,493 $ 32,493 $ 30,126 $ 30,126 -- --
receivable from MSV

Liabilities:
Senior Notes -- -- 329,371 100,500 328,474 111,681
XM Radio Senior Secured -- -- -- -- 261,298 179,563
Note
Rare Medium Note 20,148 20,148 26,910 26,910 -- --
CSFB Note 795 795 -- -- --
Vendor financing 6,096 6,096 3,316 3,316 8,492 8,492
commitment
Capital leases $ 6,250 $ 6,250 $ 8,948 $ 8,948 $ 13,820 $ 13,820

Concentrations of Credit Risk

Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of cash, short term investments, and accounts
receivable. The Company periodically invests its cash balances in temporary or
overnight investments. The Company's short term investments included debt
securities such as commercial paper, time deposits, certificates of deposit,
bankers acceptances, and marketable direct obligations of the United States
Treasury.

F-25

Motient's rights to use and sell the BlackBerryTM software and RIM's handheld
devices may be limited or made prohibitively expensive as a result of a patent
infringement lawsuit brought against RIM by NTP Inc. As a purchaser of those
products, Motient could be adversely affected by the outcome of that litigation.
Please see Note 14, "Legal and Regulatory Matters"

For the year ended December 31, 2002, five customers accounted for approximately
47% of the Company's service revenue, with two of those customers, SkyTel and
UPS, each accounting for more than 10% of the Company's service revenue. For the
four months ended April 1, 2002 and the eight months ended December 31, 2002,
SkyTel and UPS accounted for approximately 11% and 16%, respectively, and 15%
and 18%, respectively of the Company's service revenue. As of December 31, 2002,
SkyTel represented approximately 14% of the Company's net accounts receivable,
all of which was current.

The revenue attributable to such customers varies with the level of network
airtime usage consumed by such customers, and none of the service contracts with
such customers requires that the customers use any specified quantity of network
airtime, nor do such contracts specify any minimum level of revenue. There can
be no assurance that the revenue generated from these customers will continue in
future periods.

For the year ended December 31, 2001, revenue from the MSV research and
development efforts accounted for approximately 9% of the Company's service
revenue. Excluding revenue earned from MSV, six other customers accounted for
approximately 41% of the Company's service revenue, with one customer
individually accounting for more than 10% of such revenue. For the year ended
December 31, 2000, four customers accounted for approximately 31% of the
Company's service revenue, with two customers individually accounting for 10%
each.

Due to the bankruptcy of WorldCom, beginning in the two months ended June 30,
2002, the Company reserved 100% of all amounts then due from Skytel, a
wholly-owned subsidiary of WorldCom. In October 2002, the Company received
payment from SkyTel of a significant portion of the amount of the Company's
pre-petition claim amount. The Company has received full and timely payments
thereafter and believes that amounts from SkyTel are currently fully
collectible.

Software Development Costs

During 1998, the Company adopted SOP No. 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." As of December 31,
2002, 2001 and 2000, net capitalized internal use software costs were $3.5
million, $9.3 million and $6.4 million, respectively, are included in property
and equipment in the accompanying consolidated balance sheets and are amortized
over three years.

Deferred Charges and Other Assets

Deferred charges and other assets as of December 31, 2002 primarily consist of
the long-term portion of deferred equipment costs and certain financing fees
relative to our credit facility entered into in January 2003. Deferred charges

F-26

and other assets as of December 31, 2001 primarily consist of the long-term
portion of deferred equipment costs, the unamortized financing costs and debt
issue costs associated with the senior notes, and the long-term portion of the
amounts prepaid to MSV for the funding of certain operating expenses. Deferred
charges and other assets as of December 31, 2000, also included unamortized
financing costs and debt issue costs associated with the Bank Financing and the
long-term portion of prepaid expenses of XM Radio.

December 31,
---------------------------------------
Successor
Company Predecessor Company
2002 2001 2000
---- ---- ----
(in thousands)

Deferred financing costs, net $ -- $7,403 $19,915
Deferred equipment costs 1,640 3,480 11,720
Prepaid expenses - long-term portion -- 2,000 --
Prepaid expenses of XM Radio - long-term portion -- -- 1,203
Other long term assets 117 170 1,782
--- --- -----
$1,757 $13,053 $34,620
====== ======= =======

Financing costs are amortized over the term of the related facility using the
straight-line method, which approximates the effective interest method.

Other Long-Term Liabilities

Other long-term liabilities consist of the following:

December 31,
---------------------------------------
Successor
Company Predecessor Company
2002 2001 2000
---- ---- ----
(in thousands)

Deferred revenue, Aether, RIM and MSV $3,115 $ 7,188 $12,355
Asset purchase deposit, MSV -- -- 7,717
Deferred gain on sale of satellite assets to MSV -- 14,092 --
Deferred equipment revenue 1,709 2,317 11,720
XM Royalty payable and other long term liabilities -- -- 7,086
Other long-term deferred revenue -- 3,482 --
-- ------- --
$4,824 $27,079 $38,878
====== ======= =======

Commitments

As of December 31, 2002, we had the following outstanding cash contractual
commitments:

F-27

Less then
Total 1 year 1-4 years After 5 years
----- ------ --------- -------------

(in thousands)
Operating leases $41,585 $13,472 $24,017 $4,096
Capital lease obligations, including interest thereon $ 7,288 $ 3,640 $ 3,648 --
Notes Payables $ 20,943 $ 1,193 $ 19,750 --
Equipment financing commitment $ 5,947 $ 1,020 $ 4,927 --
-------- -------- -------- ------
Total Contractual Cash Obligations $75,763 $19,325 $52,342 $4,096
======= ======= ======= ======

In May 2002, the FCC filed a proof of claim with the United States Bankruptcy
Court, asserting a pre-petition claim in the approximate amount of $1.0 million
in fees incurred as a result of Motient's withdrawal from certain auctions.
Under Motient's court-approved Plan of Reorganization, subsequent to June 30,
2002 the FCC's claim was classified as an "other unsecured" claim, and the FCC
was issued a pro-rata portion of 97,256 shares of common stock issued to
creditors with allowed claims in such class. Motient recorded a $1.0 million
expense in April 2002 for this claim.

At April 30 2002, the Company had certain contingent and/or disputed obligations
under its satellite construction contract entered into in 1995, which contained
flight performance incentives payable by the Company to the contractor if the
satellite performed according to the contract. Upon the implementation of the
Plan of Reorganization, this contract was terminated, and in satisfaction of all
amounts alleged to be owed by the Company under this contract, the contractor
received a pro-rata portion of the 97,256 shares issued to creditors holding
allowed unsecured claims. The shares were issued upon closure of the bankruptcy
claims process.

On December 1, 2002, the Company entered into a letter agreement with UPS under
which UPS agreed to make a series of prepayments to the Company totaling $5
million for future services the Company is obligated to provide to it after
January 1, 2004. In the event that the agreement is terminated, any remaining
prepayment would be required to be returned. Please see Note 1, "Organization
and Going Concern - - UPS Revenue"

Revenue Recognition

The Company generates revenue through equipment sales, airtime service
agreements and consulting services. In 2000, the Company adopted SAB 101, which
provides guidance on the recognition, presentation and disclosure of revenue in
financial statements. In certain circumstances, SAB 101 requires the Company to
defer the recognition of revenue and costs related to equipment sold as part of
a service agreement. Revenue is recognized as follows:

Service revenue: Revenues from the Company's wireless services are recognized
when the services are performed, evidence of an arrangement exists, the fee is
fixed and determinable and collectibility is probable. Service discounts and
incentives are recorded as a reduction of revenue when granted, or ratably over
a contract period. The Company defers any revenue and costs associated with
activation of a subscriber on the Company's network over an estimated customer
life of two years.

F-28

To date, the majority of the Company's business has been transacted with
telecommunications, field services, natural resources, professional service and
transportation companies located throughout the United States. The Company
grants credit based on an evaluation of the customer's financial condition,
generally without requiring collateral or deposits. The Company establishes a
valuation allowance for doubtful accounts receivable for bad debt and other
credit adjustments. Valuation allowances for revenue credits are established
through a charge to revenue, while valuation allowances for bad debts are
established through a charge to general and administrative expenses. The Company
assesses the adequacy of these reserves quarterly, evaluating factors such as
the length of time individual receivables are past due, historical collection
experience, the economic environment and changes in credit worthiness of the
Company's customers. If circumstances related to specific customers change or
economic conditions worsen such that the Company's past collection experience
and assessments of the economic environment are no longer relevant, the
Company's estimate of the recoverability of its trade receivables could be
further reduced.

Equipment and service sales: The Company sells equipment to resellers who market
its terrestrial product and airtime service to the public. The Company also
sells its product directly to end-users. Revenue from the sale of the equipment,
as well as the cost of the equipment, are initially deferred and are recognized
over a period corresponding to the Company's estimate of customer life of two
years. Equipment costs are deferred only to the extent of deferred revenue.

As of December 31, 2002, 2001 and 2000, the Company had capitalized a total of
$4.4 million, $16 million and $12.9 million of deferred equipment revenue,
respectively, and had deferred equipment costs of $4.3 million, $16 million and
$12.9 million, respectively.

Research and Development Costs

Research and development costs are expensed as incurred. Such costs include
internal research and development activities and expenses associated with
external product development agreements. The Company's core wireless business
incurred research and development costs of approximately $30,000 for the four
months ended April 30, 2002, $30,000 for the eight months ended December 31,
2002, $0.4 million in 2001 and $2.1 million in 2000. The Company's consolidated
results also included research and development costs incurred by XM Radio in the
amount of $7.4 million in 2000.

Advertising Costs

Advertising costs are charged to operations as incurred and totaled $2.5 million
for the four months ended April 30, 2002, $4.3 million for the eight months
ended December 31, 2002, $10.0 million in 2001 and $13.6 million in 2000. In
2001, a portion of the advertising costs associated with certain of the
Company's Internet promotions, were prepaid in the form of warrants to acquire
common stock issued by the Company, valued at $4.8 million. The warrants were
expensed as the associated page views were delivered. The Company recognized
advertising expense associated with the warrants issued for this Internet
promotion in the amount of $1.4 million in 2001 and $0.7 million in 2000. In
September 2001, the Company cancelled the Internet promotion, and the $2.9
million of remaining prepaid advertising was written off as part of the
operational restructuring.

F-29

Capitalized Interest

XM Radio System Under Construction included capitalized interest cost as a
component of the cost of the digital audio radio service license and satellite
system under construction. XM Radio capitalized interest in the amount of $39.1
million in 2000.

Stock-Based Compensation

The Company accounts for employee stock options using the method of accounting
prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees". Generally, no expense is recognized related to
the Company's stock options because the option's exercise price is set at the
stock's fair market value on the date the option is granted. In cases where the
Company has issued shares of restricted stock, the Company has recorded an
expense based on the value of the restricted stock on the measurement date. Had
compensation cost been determined based on the fair value at the grant dates for
awards under the Company's stock plans in accordance with SFAS No. 123,
"Accounting for Stock Based Compensation," the net loss would have been
increased by $567,205 for the eight months ended December 31, 2002 ($0.02 per
share) and $56,989 for the four months ended April 30, 2002 ($0.00 per share),
and the net loss would have been increased by $5.9 million ($0.12 per share) in
2001 and $7.3 million ($0.15 per share) in 2000. As required by SFAS No. 123,
the fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions for 2002, 2001
and 2000: no historical dividend yield; an expected life of 10 years; historical
volatility of 173% for the eight months ended December 31, 2002, 197% for the
four months ended April 30, 2002, 197% in 2001 and 135% in 2000, and risk-free
rates of return ranging from 1.71% to 5.82%.

In May 2002, the Company approved a new employee stock option program (the "2002
Stock Option Plan") and authorized a total of 2,993,024 shares available for
grant. The plan was approved by the shareholders of the Company on July 11,
2002. Please see Note 16 ("Subsequent Events").

A portion of the 1,631,025 options granted as of December 31, 2002 (net of
forfeitures) under the 2002 stock option plan will either vest or be rescinded
based on Motient's performance. These options are accounted for in accordance
with variable plan accounting, which requires that the value of these options be
measured at their intrinsic value and any change in that value be charged to the
income statement upon the determination that the fulfillment of the Company
performance criteria is probable. The other options are accounted for as a fixed
plan and in accordance with intrinsic value accounting, which requires that the
excess of the market price of stock over the exercise price of the options, if
any, at the time that both the exercise price and the number of options are
known be recorded as deferred compensation and amortized over the option vesting
period. As of the date of grant, the option price per share was in excess of the
market price; therefore, these options are not deemed to have any value and no
expense has been recorded to date.

F-30

Assessment of Asset Impairment

The Company follows the provisions of SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of,"
which requires that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
an asset to future undiscounted net cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the assets
exceeds the fair value of the assets. Assets to be disposed of are reported at
the lower of the carrying amount or their fair value less costs to sell. On
January 1, 2002, the Company also adopted SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which supercedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of". The statement requires that all long-lived assets be measured at
the lower of carrying amount or fair value less cost to sell, whether reported
in continuing operations or in discontinued operations. Therefore, discontinued
operations will no longer be measured on a net realizable value basis and will
not include amounts for future operating losses. The statement also broadens the
reporting requirements for discontinued operations to include disposal
transactions of all components of an entity (rather than segments of a
business). Components of an entity include operations and cash flows that can be
clearly distinguished from the rest of the entity that will be eliminated from
the ongoing operations of the entity in a disposal transaction. The adoption of
SFAS No. 144 had no material impact on the Company's consolidated financial
statements.

Deferred Taxes

The Company accounts for income taxes under the liability method as required in
SFAS No. 109, "Accounting for Income Taxes". Under the liability method,
deferred income taxes are recognized for the tax consequences of "temporary
differences" by applying enacted statutory tax laws and rates applicable to
future years to differences between the financial statement carrying amounts and
the tax bases of existing assets and liabilities. Under this method, the effect
on deferred taxes of a change in tax rates is recognized in income in the period
that includes the enactment date. A valuation reserve is established for
deferred tax assets if the realization of such benefits cannot be sufficiently
assured.

Property and Equipment

Property and equipment are recorded at cost for the Predecessor Company and
adjusted for impairment, and includes "fresh start" adjustments for the
Successor Company and depreciated over their useful life using the straight-line
method. All identifiable assets recognized in accordance with "fresh start"
accounting were recorded at the effective date based upon independent appraisal.
Assets recorded as capital leases are amortized over the shorter of their useful
lives or the term of the lease. The estimated useful lives of office furniture
and equipment vary from two to ten years, and the network equipment is
depreciated over seven years. The Company has also capitalized certain costs to

F-31

develop and implement its computerized billing system. These costs are included
in property and equipment and are depreciated over three years. Repairs and
maintenance do not significantly increase the utility or useful life of an asset
and are expensed as incurred.

Segment Disclosures

In accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information", the Company has one operating segment: its core
wireless business. Since January 1, 2001, the Company had one operating segment:
its core wireless business. During 2000, as a result of the Company's
consolidation of the results of XM Radio, the Company reported an additional
segment for XM Radio's satellite-based digital radio audio service. The Company
provides its core wireless business to the continental United States, Alaska,
Hawaii and Puerto Rico. The following summarizes the Company's core wireless
business revenue by major market segments:

Successor Predecessor Predecessor Predecessor
Company Company Company Company
Eight Months Four Months (Restated) (Restated)
Ended Ended April 30, Year Ended Year Ended
December 31, 30, December 31, December 31,
2002 2002 2001 2000
---- ---- ---- ----

Summary of Revenue
- ------------------
(in millions)
Wireless Internet $15.5 $5.6 $11.4 $2.8
Field services 10.5 5.6 19.4 25.1
Transportation 7.4 4.1 15.9 21.6
Telemetry 1.8 0.8 2.6 4.5
Maritime and other 0.3 0.7 18.8 17.7
--- --- ---- ----
Service Revenue 35.5 16.8 68.1 71.7
----
Equipment 1.1 5.6 22.2 24.1
--- --- ---- ----
Total $36.6 $22.4 $90.3 $95.8
===== ===== ===== =====

The Company does not measure ultimate income or loss or track its assets by
these market segments.

(Loss) Income Per Share

Basic and diluted (loss) income per common share is computed by dividing income
available to common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity.

Options and warrants to purchase shares of common stock were not included in the
computation of loss per share as the effect would be antidilutive for the years
ended December 31, 2000 and 2001 and for the four and eight months ended
December 31, 2002. As a result, the basic and diluted earnings per share amounts
for all periods presented are the same. As of December 31, 2002, there were
warrants to acquire approximately 2,339,962 shares of common stock and 1,631,025

F-32

options outstanding that were not included in this calculation because of their
antidilutive effect. For the four months ended April 30, 2002, no options or
warrants had exercise prices in excess of the fair market value of the Company's
common stock and thus were not factored into the per share calculation. As of
December 31, 2001 and December 31, 2000 there were options outstanding for
approximately 393,353 shares and 3,920,605 shares, respectively, of common stock
that were not included in this calculation because of their antidilutive effect.

Derivatives

In September 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities", which
requires the recognition of all derivatives as either assets or liabilities
measured at fair value, with changes in value reflected as current period income
(loss) unless specific hedge accounting criteria are met. The effective date of
SFAS No. 133, as amended by SFAS No. 138, is for fiscal years beginning after
September 15, 2000. The Company adopted SFAS No. 133 as of January 1, 2001,
resulting in no material impact upon adoption. SFAS No. 133 did not have a
material impact on the financial results for the four months ended April 1, 2002
and eight months ended December 31, 2002, and for the years 2001 and 2000.

In April and July 2001, the Company sold notes to Rare Medium totaling $50
million. The notes were collateralized by up to 5,000,000 of the Company's XM
Radio shares, and, until maturity, which was extended until October 12, 2001,
Rare Medium had the option to exchange the notes for a number of XM Radio shares
equivalent to the principal of the note plus any accrued interest thereon (see
Note 8, "Debt and Capital Leases"). The Company determined the embedded call
options in the notes, which permitted Rare Medium to convert the borrowings into
shares of XM Radio, were derivatives which were accounted for in accordance with
SFAS No. 133 and accordingly recorded a gain in the amount of $1.5 million in
2001 related to the Rare Medium note call options. On October 12, 2001, the
embedded call options in the Rare Medium notes expired unexercised. The Rare
Medium note was cancelled and replaced by a new Rare Medium note in the amount
of $19.0 million as part of the Company's reorganization.

In connection with the bank financing in March 1998, the Company entered into an
interest rate swap agreement, with an implied annual rate of 6.51%. The swap
agreement reduced the impact of interest rate increases on then-existing term
loan facility. The Company paid a fixed fee of approximately $17.9 million for
the swap agreement. In return, the counter-party was obligated to pay a variable
rate equal to LIBOR plus 50 basis points, paid on a quarterly basis directly to
the respective banks on behalf of the Company, on a notional amount of $100
million until the termination date of March 31, 2001. In connection with the pay
down of a portion of the term loan facility during 1999, the Company reduced the
notional amount of its swap agreement from $100 million to $41 million and
realized net proceeds of approximately $6 million due to early termination of a
portion of the swap agreement. The interest rate swap agreement expired in March
2001.

F-33

Investment in MSV and Notes Receivable from MSV

As a result of the application of "fresh-start" accounting, restatements and the
subsequent modifications described below, the notes and investment in MSV were
valued at fair value and the Company recorded an asset in the amount of
approximately $53.9 million representing the estimated fair value of our
investment in and note receivable from MSV. Included in this investment is the
historical cost basis of the Company's common equity ownership of approximately
48% as of May 1, 2002, or approximately $19.3 million. In accordance with the
equity method of accounting, we recorded our approximate 48% share of MSV losses
against this basis.

Approximately $21.6 million of the $40.9 million value attributed to the equity
interest in MSV is the excess of fair value over cost basis and is amortized
over the estimated lives of the underlying MSV assets that gave rise to the
basis difference. The Company is amortizing the excess basis in accordance with
the pro-rata allocation of various components of MSV's intangible assets as
determined by MSV through recent independent valuations. Such assets consist of
FCC licenses, intellectual property and customer contracts, which are being
amortized over a weighted-average life of approximately 12 years.

Additionally, Motient has recorded the $15.0 million note receivable from MSV,
plus accrued interest thereon at its fair value, estimated to be approximately
$13.0 million, after giving affect to discounted future cash flows at market
interest rates. This note matures in November 2006 and is subject to certain
conditions and priorities with respect to payment of other indebtedness.

In November 2003, Motient engaged CTA to perform a valuation of its equity
interests in MSV as of December 31, 2002. Concurrent with CTA's valuation,
Motient reduced the book value of its equity interest in MSV from $53.9 million
(inclusive of Motient's $2.5 million convertible notes from MSV) to $40.9
million as of May 1, 2002 to reflect certain preference rights on liquidation of
certain classes of equity holders in MSV.

Also, as a result of CTA's valuation of MSV, Motient determined that the value
of its equity interest in MSV was impaired as of December 31, 2002. This
impairment was deemed to have occurred in the fourth quarter of 2002 and the
Company reduced the value of its equity interest in MSV by $15.4 million as of
December 31, 2002.

The valuation of Motient's investment in MSV and its note receivable from MSV
are ongoing assessments that are, by their nature, judgmental given that MSV is
not traded on a public market and is in the process of developing certain next
generation technologies, which depend on approval by the FCC. There is the
inherent future risk that due to the uncertainties described above, Motient may
have to write down the value of this investment and note. For information
regarding recent developments involving MSV, please see Note 16 ("Subsequent
Events").

For the eight-month period ended December 31, 2002, MSV had revenues of $19.1
million, operating expenses of $17.5 million and a net loss of $15.7 million.
For the four-month period ended April 30, 2002, MSV had revenues of $9.1
million, operating expenses of $9.3 million and a net loss of $9.2 million. For
the eight-month period ended December 31, 2002, our equity in losses of MSV were
$6.9 million, and for the four-month period ended April 30, 2002, our equity in
losses of MSV were $1.9 million. Results for MSV for these periods and for the
years ended December 31, 2001 and 2000 are outlined below.

F-34

Eight Months Four Months
Ended Ended Year Ended Year Ended
December 31, April 30, December 31, December 31,

2002 2002 2001 2000
---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
(in thousands)

Revenue $19,145 $9,088 $2 $0
Income (loss) from continuing
operations 1,599 (175) (16,156) (8,005)
Net Loss (15,698) (9,203) (16,525) (7,834)

Current Assets 15,172 14,292 14,335 5,064
Non-current assets 131,058 142,081 148,328 19,880
Current liabilities 11,783 14,801 11,999 1,838
Non-current liabilities $109,921 $101,348 $101,238 $0

Recent Accounting Pronouncements

In January 2002, the Company adopted SFAS No. 141, "Business Combinations," and
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires
business combinations initiated after June 30, 2001 to be accounted for using
the purchase method of accounting, and broadens the criteria for recording
intangible assets separate from goodwill. Recorded goodwill and intangibles will
be evaluated against this new criteria and may result in certain intangibles
being subsumed into goodwill, or alternatively, amounts initially recorded as
goodwill may be separately identified and recognized apart from goodwill. SFAS
No. 142 requires the use of a nonamortization approach to account for purchased
goodwill and certain intangibles. Under a nonamortization approach, goodwill and
indefinite-lived intangibles will not be amortized into results of operations,
but instead will be reviewed for impairment and written down and charged to
results of operations only in the periods in which the recorded value of
goodwill and indefinite-lived intangibles is more than its fair value. The
Company had approximately $5.0 million of recorded goodwill as of January 1,
2002. However, as part of the Company's adoption of "fresh-start" accounting,
the Company's recorded goodwill was reduced to zero.

On August 16, 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". This statement addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. Specifically, this standard
requires entities to record the fair value of a liability for an asset
retirement obligation in the period in which it is incurred. The entity is
required to capitalize the cost by increasing the carrying amount of the related
long-lived asset. The capitalized cost is then depreciated over the useful life
of the related asset and the liability is accreted, with changes to the
operating expense, to the estimated settlement obligation amount. Upon
settlement of the liability, an entity either settles the obligation for its
recorded amount or incurs a gain or loss. The standard is effective for fiscal
years beginning after June 15, 2002. The Company adopted SFAS No. 143 as of its

F-35

"fresh-start" accounting date of May 1, 2002. This adoption had no material
impact on the Company's consolidated financial statements.

In February, 2002, EITF No. 01-09, "Accounting for Consideration Given by a
Vendor to a Customer (Including a Reseller of the Vendor's Products)", was
issued to provide guidance on whether consideration paid by a vendor to a
reseller should be recorded as expenses or against revenues. The Company has
reviewed EITF 01-09 and believes that all such consideration is properly
recorded by the Company as operating expenses. The Company adopted the
provisions of this consensus on January 1, 2002, and it had no material impact
on the Company's consolidated financial statements.

In May 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4,
44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections." SFAS
No. 145 rescinded three previously issued statements and amended SFAS No. 13,
"Accounting for Leases". The statement provides reporting standards for debt
extinguishments and provides accounting standards for certain lease
modifications that have economic effects similar to sale-leaseback transactions.
The Company adopted SFAS No. 145 as of its "fresh-start" accounting date of May
1, 2002. In accordance with SFAS No. 145, the Company has reclassified all prior
period extraordinary losses on extinguishment of debt as ordinary non-operating
losses on extinguishment of debt.

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". The standard requires companies to recognize
costs associated with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan. Examples of costs
covered by the standard include lease termination costs and certain employee
severance costs that are associated with a restructuring, discontinued
operation, plant closing or other exit or disposal activity. Previous accounting
guidance was provided by EITF No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)". SFAS No. 146 replaces EITF No.
94-3. SFAS No. 146 is to be applied prospectively to exit or disposal activities
initiated after December 31, 2002. The Company adopted SFAS No. 146 as of
January 1, 2003, and this adoption is not expected to have a material impact on
the Company's consolidated financial statements.

In November 2002, the EITF reached consensus on EITF No. 00-21, "Accounting for
Revenue Arrangements with Multiple Deliverables". This consensus requires that
revenue arrangements with multiple deliverables be divided into separate units
of accounting if the deliverables in the arrangement meet specific criteria. In
addition, arrangement consideration must be allocated among the separate units
of accounting based on their relative fair values, with certain limitations. The
sale of the Company's equipment with related services constitutes a revenue
arrangement with multiple deliverables. The Company will be required to adopt
the provisions of this consensus for revenue arrangements entered into after
June 30, 2003, and the Company has decided to apply it on a prospective basis.
Motient does not expect to have any revenue arrangements that would have a
material impact on its financial statements with respect to EITF No. 00-21.

F-36

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-based
Compensation - Transition and Disclosure - an Amendment to SFAS No. 123". SFAS
No. 148 provides alternative methods of transition for a voluntary change to the
fair value-based method of accounting for stock-based employee compensation. In
addition, this statement amends the disclosure requirements of SFAS No. 123 for
public companies. This statement is effective for fiscal years beginning after
December 15, 2002. The Company will adopt the disclosure requirements of SFAS
No. 148 as of January 1, 2003 and plans to continue to follow the provisions of
APB Opinion No. 25 for accounting for stock based compensation.

In January 2003, the FASB issued FASB Interpretation No. 46 or FIN No. 46,
"Consolidation of Variable Interest Entities -- An Interpretation of ARB No.
51", which clarifies the application of Accounting Research Bulletin No. 51,
"Consolidated Financial Statements", to certain entities in which equity
investors do not have the characteristics of a controlling financial interest or
do not have sufficient equity at risk for the entity to finance its activities
without additional subordinated financial support from other parties. FIN No. 46
provides guidance related to identifying variable interest entities (previously
known generally as special purpose entities, or SPEs) and determining whether
such entities should be consolidated. FIN No. 46 must be applied immediately to
variable interest entities created or interests in variable interest entities
obtained, after January 31, 2003. For those variable interest entities created
or interests in variable interest entities obtained on or before January 31,
2003, the guidance in FIN No. 46 must be applied in the first fiscal year or
interim period beginning after June 15, 2003. The Company has reviewed the
implications that adoption of FIN No. 46 would have on its financial position
and results of operations and does not expect it to have a material impact.

F-37

instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after June 15,
2003. The Company has determined that it does not have any financial instruments
that are impacted by SFAS No. 150.

Restatement of Financial Statements

Subsequent to the issuance of the Company's financial statements for the quarter
ended March 31, 2002 and years ended December 31, 2000 and 2001, the Company
became aware that certain accounting involving the effects of several complex
transactions from these years, including the formation of and transactions with
a joint venture, MSV, in 2000 and 2001 and the sale of certain of our
transportation assets to Aether in 2000, required revision. These transactions
were described in more detail in Note 13 ("Business Acquisitions and
Dispositions") of notes to consolidated financial statements in each of
Motient's annual reports on Form 10-K for the fiscal years ended December 31,
2000 and 2001. In addition, as a result of the Company's re-audit of the years
ended December 31, 2001 and 2000 performed by the Company's current independent
accounting firm, Ehrenkrantz Sterling & Co. LLC, certain accounting adjustments
were proposed and accepted by the Company. A description of these adjustments is
provided below.

Summary of Adjustments to Prior Period Financial Statements with respect to MSV
and Aether Transactions

The following is a brief description of the material differences between our
original accounting treatment with respect to the MSV and Aether transactions
and the revised accounting treatment that we have concluded was appropriate and
has been reflected in the accompanying financial statements for the respective
periods.

Allocation of initial proceeds from MSV formation transactions in June 2000. In
the June 2000 transaction with MSV, Motient Services received $44 million from
MSV. This amount represented payments due under a research and development
agreement, a deposit on the purchase of certain of Motient's assets at a future
date, and payment for a right for certain of the investors in MSV to convert
their ownership in MSV into shares of common stock of Motient. Since the
combined fair value of the three components exceeded $44 million, based on
valuations of each component, Motient initially allocated the $44 million of
proceeds first to the fair value of the research and development agreement and
then the remaining value to the asset deposit and investor conversion option
based on their relative fair values. Upon review, Motient revised its intial
accounting treatment and allocated the $44 million of proceeds first to the
investor conversion option based on its fair value, and the remainder to the
research and development agreement and asset deposit based on their relative
fair values. The effect of this reallocation increased shareholders' equity at
the time of the initial recording by $12 million, as well as reduced subsequent
service revenue by $2.3 million and $4 million in 2000 and 2001, respectively,
as a result of the lower recorded value allocated to the research and
development agreement. All remaining unamortized balances were written off as
part of the gain on the sale of the satellite assets.

F-38

Recording of suspended losses associated with MSV in fourth quarter of 2001. In
November 2001, when the asset sale described in Note 13 was consummated, Motient
and MSV amended the asset purchase agreement, with Motient agreeing to take a
$15 million note as part of the consideration for the sale of the assets to MSV.
Additionally, at the time of this transaction, Motient purchased a $2.5 million
convertible note issued by MSV. As Motient had no prior basis in its investment
in MSV, Motient had not recorded any prior equity method losses associated with
its investment in MSV. When Motient agreed to take the $15 million note as
partial consideration for the assets sold to MSV, Motient recorded its share of
the MSV losses that had not been previously recognized by Motient ($17.5
million), having the effect of completely writing off the notes receivable in
2001.

Upon review, Motient determined that it should not have recorded any suspended
losses of MSV, since those losses should have been absorbed by certain of the
senior equity holders in MSV. As a result, Motient concluded that it should not
have written off its portion ($17.5 million) of the prior MSV losses against the
value of both notes in 2001.

Recording of increase in Motient's investment in MSV in November 2001. Also in
the November 2001 transaction, MSV acquired assets from another company, TMI, in
exchange for cash, a note and equity in MSV. Motient initially considered
whether or not a step-up in the value of its investment in MSV was appropriate
for the value allocated to TMI for its equity interest, and determined that a
step-up was not appropriate. Upon review, Motient determined that it should have
recognized a step-up in value of the MSV investment of $12.9 million under Staff
Accounting Bulletin No. 51, "Accounting for Sales of Stock of a Subsidiary"
("SAB 51"), with an offsetting gain recorded directly to shareholders' equity.

Recognition of gain on sale of assets to MSV in November 2001. Upon the
completion of the November 2001 transactions, Motient determined that 80% of its
gain from the sale of the assets should be deferred, since that was Motient's
equity ownership percentage in MSV at the time the assets were sold to MSV. Upon
review, Motient has determined that it was appropriate to apply Motient's
ownership percentage at the completion of all of the related transactions that
occurred on the same day as the asset sale transaction, since the transactions
were dependent upon one another and effectively closed simultaneously.
Accordingly, Motient should have deferred approximately 48% of the gain
(Motient's equity ownership percentage in MSV following the completion of such
transactions) as opposed to 80%. This change resulted in an increased gain on
the sale of MSV of $7.9 million in 2001.

Allocation of proceeds from the sale of the transportation business to Aether in
November 2000. Motient received approximately $45 million for the sale of its
retail transportation business assets and assumption of its liabilities to
Aether. This consisted of $30 million for the assets, of which $10 million was
held in an escrow account that was subsequently released in the fourth quarter
of 2001 upon the satisfaction of certain conditions, and $15 million for a
perpetual license to use and modify any intellectual property owned or licensed
by Motient in connection with the retail transportation business. In the fourth
quarter of 2000, Motient recognized a gain of $8.9 million, which represented
the difference between the net book value of the assets sold and the $20 million
cash portion of the purchase price for the assets received at closing. Motient

F-39

recognized an additional $8.3 million gain in the fourth quarter of 2001 when
the additional $10 million of proceeds were released from escrow. The $1.7
million difference between the proceeds received and the gain recognized is a
result of pricing modifications that were made at the time of the release of the
escrow plus certain compensation paid to former employees of the transportation
business as a result of the certain performance criteria having been met.

Motient deferred the $15 million perpetual license payment, which was then
amortized into revenue over a five-year period, the estimated life of the
customer contracts sold to Aether at the time of the transaction. Upon review,
Motient determined that the $15 million in deferred revenue should be recognized
over a four year period, which represents the life of a network airtime
agreement that Motient entered into with Aether at the time of the closing of
the asset sale. The decrease in the amortization period resulted in increased
revenue of $63,000 and $750,000 in 2000 and 2001, respectively.

Recognition of costs associated with certain options granted to Motient
employees who were subsequently transferred to Aether upon consummation of the
sale of Motient's transportation business to Aether in November 2000. Motient
valued the vested options based on their fair value at the date of the
consummation of the asset sale and recorded that value against the gain on the
sale of the assets to Aether. Upon review, Motient has determined to value these
vested options as a repricing under the intrinsic value method, with any charge
recorded as an operating expense. In addition, for each subsequent quarter for
which the unvested options continued to vest, Motient had valued these options
on a fair value basis and recorded any adjustment in value as an operating
expense. Upon review, we have determined that any adjustments in value should
have been reflected as an increase or reduction of the gain on the sale of the
assets to Aether. The revised accounting resulted in a reduction in expenses of
$0.8 million in 2000 and an increase in expenses of $1.0 million in 2001.

Summary of Adjustments to Prior Period Financial Statements as a result of
re-audit of years ended December 31, 2000 and 2001

The following is a brief description of the differences between Motient's
original accounting treatment and the revised accounting treatment that it has
concluded was appropriate and has been reflected in the accompanying financial
statements for the respective periods.

Recognition of difference between strike price and fair market value at
measurement date for options issued to ARDIS employees. Motient has restated its
consolidated financial statements to recognize compensation expense related to
the issuance of stock options with an exercise price below fair market value.
The revised accounting resulted in a decrease in net income and a corresponding
increase in additional paid in capital of $1.0 million, $0.6 million and $0.01
million for the years ended December 31, 1999, 2000 and 2001, respectively.

Recognition of adoption of SAB 101,"Revenue Recognition in Financial
Statements". Motient has restated its consolidated financial statements as of
January 1, 2000, based on guidance provided in Securities and Exchange
Commission Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements", as amended ("SAB101"). Motient's adoption of SAB101 resulted in a

F-40

change of accounting for certain product shipments and activation fees. The
cumulative effect of the change to retained earnings as of January 1, 2000 was
$4.6 million. The cumulative effect was recognized as income in 2001 as the
amounts were amortized into revenue and ultimately recognized as additional gain
on the sale of the Company's satellite, transportation and certain other assets.

Accrual of advertising expense in December 2000. Motient has restated its
consolidated financial statements in 2000 to recognize an additional $1.1
million in advertising expense previously recognized in 2001.

Recognition of costs associated with inventory write-downs. Motient has restated
its consolidated financial statements in 2000 to recognize an additional $1
million in Cost of Goods Sold for inventory write-downs previously recognized in
2001. In addition, Motient has restated its consolidated financial statements
for the three-months ended March 31, 2002 to recognize an additional $0.4
million in Cost of Goods Solds for inventory write-downs not previously
recorded.

Summary of Impact of the Restatement

The revised accounting treatment described above required that certain
adjustments be made to the income statements and balance sheets for the years
ended December 31, 2000 and 2001 and the quarter ended March 31, 2002. The
effect of these adjustments is illustrated in the table below. Certain of the
adjustments are based on assumptions that we have made about the fair value of
certain assets.

Quarter Ended Year Ended Year Ended
March 31, December 31, December 31,
2002 2001 2000
---- ---- ----

(in thousands)
Statement of operations data
Net Revenue, as previously reported $ 16,495 $ 93,293 $ 99,851
Adjustments 188 (3,028) (4,095)
----------- ----------- -----------
As restated $ 16,683 $ 90,265 $ 95,756
=========== =========== ===========

Net Operating Loss, as previously reported $ (15,970) $ (94,996) $ (180,412)
Adjustments 208 (2,227) (2,502)
----------- ----------- -----------
As restated $ (15,762) $ (97,223) $ (182,914)
=========== =========== ===========

Net Loss, as previously reported $ (32,885) $ (292,089) $ (138,624)
Adjustments (2,545) 22,592 (3,939)
----------- ----------- -----------
As restated - inclusive of the cumulative
effect of $4,677 $ (35,429) $ (269,497) $ (142,563)
=========== =========== ===========

Basic and Fully Diluted Loss Per Share of
Common Stock (1), as previously reported $ (0.56) $ (5.71) $ (3.81)
Adjustments (0.05) 0.44 (0.08)
----------- ----------- -----------
As restated $ (0.61) $ (5.27) $ (3.89)
=========== =========== ===========

F-41

Balance sheet data
Total Assets, as previously reported $ 177,628 $ 209,617 $ 1,571,714
Adjustments 27,654 30,848 322
----------- ----------- -----------
As restated $ 205,282 $ 240,465 $ 1,572,036
=========== =========== ===========

Total Liabilities, as previously reported $ 485,681 $ 485,086 $ 910,517
Adjustments (14,122) (13,472) (7,378)
----------- ----------- -----------
As restated $ 471,559 $ 471,614 $ 903,139
=========== =========== ===========

Stockholders' Equity, as previously
reported $ (308,053) $ (275,469) $ 12,884
Adjustments 41,776 44,320 7,700
----------- ----------- -----------
As restated $ (266,277) $ (231,149) $ 20,584
=========== =========== ===========

Total Liabilities & Stockholders' Equity,
as previously reported $ 177,628 $ 209,617 $ 1,571,714
Adjustments 27,654 30,848 322
----------- ----------- -----------
As restated $ 205,282 $ 240,465 $ 1,572,036
=========== =========== ===========

(1) Basic and fully diluted loss per common share excludes XM Radio preferred
stock dividend and XM Radio beneficial conversion charge in 2000.

3. STOCKHOLDERS' (DEFICIT) EQUITY

As of December 31, 2002, the Company has authorized 5,000,000 shares of
preferred stock and 100,000,000 shares of common stock. As of December 31, 2001
and 2000, the Company had authorized 200,000 shares of preferred stock and
150,000,000 shares of common stock. The par value per share is $0.01 for each
class of stock. For each share held, common stockholders are entitled to one
vote on matters submitted to the stockholders.

The Preferred Stock may be issued in one or more series at the discretion of the
Board of Directors (the "Board"), without stockholder approval. The Board is
authorized to determine the number of shares in each series and all
designations, rights, preferences, and limitations on the shares in each series,
including, but not limited to, determining whether dividends will be cumulative
or non-cumulative.

As of December 31, 2002, the Company had reserved common stock for future
issuance as detailed below.

Shares issuable upon exercise of warrants 2,339,962
2002 Stock Option Plan 1,361,999
Defined Contribution Plan 200,000
---------
Total 3,901,961
=========

XM Radio

During 2000 and 2001, XM Radio executed certain equity transactions that
affected the Company's ownership percentage in XM Radio. As a result of these
transactions, and in accordance with SAB 51, the Company recorded a decrease to
its investment in XM Radio of $12.2 million in 2001, and an increase to its

F-42

investment in XM Radio of $129.5 million in 2000. SAB 51 addresses the
accounting for sales of stock by a subsidiary. Because XM Radio was a
development stage company until November 12, 2001, SAB 51 required the
difference in the carrying amount of the Company's investment in XM Radio and
the net book value of XM Radio after the stock issuances be reflected in the
financial statements of the Company as a capital transaction in the accompanying
consolidated statements of stockholders' (deficit) equity. As of November 19,
2001, the Company did not hold any interest in XM Radio.

Mobile Satellite Ventures LP

During 2001, MSV executed certain equity transactions that affected the
Company's ownership percentage in MSV. As a result of these transactions, and in
accordance with SAB 51, the Company recorded an increase to its investment in
MSV of $12.9 million in 2001, with an offsetting gain recorded directly to
shareholders' equity.

4. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

December 31,
Successor ------------
Company Predecessor Company
2002 2001 2000
---- ---- ----
(in thousands)

Space and Ground Segment, XM Radio $-- $-- $ 200,145
Network equipment 47,384 97,136 83,638
Office equipment and furniture 3,951 13,668 48,448
Leasehold improvements, XM Radio -- -- 26,481
Construction in progress 1,409 5,682 20,492
--------- --------- ---------
52,744 116,486 379,204
Less accumulated depreciation and amortization (6,339) (52,485) (203,498)
--------- --------- ---------
Property and equipment, net $ 46,405 $ 64,001 $ 175,706
========= ========= =========

Prior to 1999, the Company was depreciating its satellite, MSAT-2, over its
estimated useful life of 10 years, which was based on several factors, including
the then-current conditions and the estimated remaining fuel of MSAT-2. The
original estimated useful life was periodically reviewed using then-current
Telemetry Tracking and Control data. The Company's ground segment was
depreciated over eight years. As discussed in Note 2, during 1999, the Company
wrote down the value of the space and ground segment assets to their estimated
fair value.

XM Radio System Under Construction, separately stated on the Balance Sheet,
consisted of the following:

F-43

December 31,
2000
--------------
(in thousands)
License $135,139
Satellite System 533,154
Terrestrial System 84,715
Spacecraft control facilities 13,046
Broadcast facilities and other 27,970
System under development 6,458
--------
Total $800,482
========

The balances at December 31, 2000 included capitalized interest of $65,176.

5. FCC LICENSES AND OTHER INTANGIBLE ASSETS

FCC licenses and other intangible assets consist of the following:

December 31,
Successor
Company Predecessor Company
2002 2001 2000
---- ---- ----
(in thousands)

FCC Licenses $ 99,457 $ 56,340 $ 53,437
Customer contracts 11,501 --
XM Radio Acquisition agreements -- -- 10,624
Goodwill-Motient Communications Acquisition -- 6,154 6,154
Less accumulated amortization (16,037) (10,863) (7,747)
-------- -------- --------
Goodwill and other intangible assets, net $ 94,921 $ 51,631 $ 62,468
======== ======== ========

Motient accounts for its frequencies as finite-lived intangibles and amortizes
them over a 20-year estimated life. Motient's FCC licenses are granted for a
term of 10 years, subject to renewal. Renewal of Motient's current licenses are
granted in the ordinary course. Motient has amortized its goodwill on a
straight-line basis over 20 years however this goodwill was eliminated as part
of Motient's "fresh-start" accounting. As part of its "fresh-start" accounting,
Motient valued its long-term customer contracts and amortizes these contracts
over a four-year life. For the period ended December 31, 2000, the XM Radio
acquisition agreements were amortized upon commencement of commercial operations
of XM Radio over the life of each respective contract.

The table below outlines Motient's amortization requirements for the five year
period from December 31, 2002.

December 31,
2003 2004 2005 2006 2007 Thereafter
---- ---- ---- ---- ---- ----------

FCC Licenses 5,469 5,174 5,174 5,174 5,174 26,720
Customer contracts 2,875 2,875 2,875 958 --

6. STOCK OPTIONS AND RESTRICTED STOCK

Prior to its reorganization, the Company had several active stock option plans.
The Motient Corporation Award Plan (the "Award Plan") permitted the grant of
non-statutory options and stock-based awards up to a total of 7.3 million shares
of common stock. Under the Award Plan, the exercise price and vesting schedule
for options was determined by the compensation and stock option committee of the
Board, which was established to administer the Award Plan. Generally, options

F-44

vested over a three year period and had an exercise price of not less than the
fair market value of a share on the date the option was granted or have a term
greater than ten years. In May 2000, the Company's stockholders approved certain
amendments to the Award Plan, including permitting non-employee directors to be
eligible for option grants under the Award Plan. The Company also had a Stock
Plan for Non-Employee Directors (the "Director Plan") which provided for the
grant of the options up to a total of 100,000 shares of common stock. Effective
March 25, 1999, Directors received an initial option to purchase 5,000 shares of
common stock, with annual option grants to purchase 2,500 shares of common
stock. In addition, the Board was allowed to grant discretionary options at such
time and on such terms and conditions as it deemed appropriate. Options under
the Director Plan were excercisable at a price equal to the fair market value of
the stock on the date of grant and were fully vested and immediately
excercisable on the date of grant. Each Director Plan option expired on the
earlier of (i) ten years from the date of grant or (ii) seven months after the
Director's termination.

In January 1998, the Board granted restricted stock to certain members of senior
management. These grants included both a three year vesting schedule as well as
specific corporate performance targets. The Company did not record any
compensation expense associated with these shares during 1999 or 2000 however in
January 2001, in recognition of employee services in entering into the second
MSV transaction, the Board lifted the remaining restrictions, and the shares
were released upon vesting. Accordingly, the Company recorded compensation
expense in the amount of $1.4 million in 2001 associated with the vesting of
these shares.

On September 25, 2001, the Company issued approximately 3.2 million shares of
restricted stock to employees, with a price on the date of issuance of $0.13 per
share, in exchange for approximately 4.3 million outstanding employee stock
options, which were cancelled. With the exception of restricted stock issued to
an employee terminated on September 26, 2001, which shares vested immediately
based on the terminated employees' then-vested exchanged options, all other
shares of restricted stock issued on September 25, 2001 were subject to a six
month holding period, at which time the shares of restricted stock vested in
accordance with the vesting schedule of the options for which the restricted
stock was exchanged. The Company recorded a deferred compensation charge as of
December 31, 2001 in the amount of $419,000 associated with the issuance of
these shares. This compensation was charged expense over the employees' service
period.

All of the above mentioned plans and the respective authorized and issued stock
options were cancelled as part of the Company's reorganization on May 1, 2002.

In May 2002, the Company's Board approved the 2002 Stock Option Plan with
2,993,024 authorized shares of common stock, of which options to purchase
1,631,025 shares of the Company's common stock were outstanding at December 31,
2002. The plan was approved by the Company's stockholders on July 11, 2002. The
2002 options are subject to vesting in two parts - 50% of the shares vest in
three equal parts on the first, second and third anniversary of the date of
grant, and the other 50% vest in three equal parts, or are rescinded, based on a
comparison of the Company's performance in 2002, 2003, and 2004 to certain
objectives established by the compensation and stock option committee of the
Board following the availability of the annual results. No options vested in

F-45

2002. The compensation and stock option committee of the Company's Board has not
yet made a determination regarding whether the 2003 performance criteria were
satisfied.

A portion of the options granted under the 2002 Stock Option Plan have a
performance-based component. These options will be accounted for in accordance
with variable plan accounting, which requires that the value of these options
are measured at their intrinsic value and any change in that value be charged to
the income statement upon the determination that the fulfillment of the
performance criteria is probable. The other options are accounted for as a fixed
plan and in accordance with intrinsic value accounting, which requires that the
excess of the market price of stock over the exercise price of the options, if
any, at the time that both the exercise price and the number of options are
known be recorded as deferred compensation and amortized over the option vesting
period. As of the date of grant, the option price per share was in excess of the
market price; therefore, these options are not deemed to have any value and no
expense has been recorded.

Information regarding the Company's stock option plan is summarized below:

Restricted
Stock and
Options Options Granted Weighted Average
Available and Option Price
For Grant Outstanding Per Share
--------- ----------- ---------

Predecessor Company
Balance, December 31, 1999 567,306 3,101,198 8.73
Restricted stock cancelled 50,000 -- --
Additional shares authorized for grant 2,800,000 -- --
Options granted (1,570,294) 1,570,294 15.98
Exercised -- (403,467) 11.03
Forfeited 347,420 (347,420) 13.42
------- ---------
Balance, December 31, 2000 2,194,432 3,920,605 11.65
Options granted (1,274,336) 1,274,336 5.88
Restricted stock granted (3,219,236) -- --
Restricted stock cancelled 88,200 -- --
Exercised -- (2,015) 0.68
Forfeited 4,799,573 (4,799,573) 10.28
--------- -----------
Balance, December 31, 2001 2,588,633 393,353 $9.65
MTNT Restricted stock and options available
for grant cancelled (2,588,633) (393,353)
----------- ---------
Balance, April 30, 2002 (Predecessor Company) -- -- --

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

Successor Company
-----------------
Reorganized MNCP shares authorized for grant 2,993,024 -- 5.00(1)
MNCP options granted (2,244,250) 2,244,250
Exercised --
Forfeited -- -- 5.00
Balance, December 31, 2002 613,225 (613,225) $5.00
------- ----------
1,361,999 1,631,025
========= =========

(1) In March 2003, our board of directors approved the reduction in the
exercise price of all of the outstanding stock options from $5.00 per share to
$3.00 per share.

F-46

Options exercisable at December 31:

Average
Options Exercise Price
------- --------------
2002 0 N/A
2001 231,844 $10.08
2000 1,658,044 $10.40

The Company accounts for stock compensation costs in accordance with the
provisions of APB No. 25, "Accounting for Stock Issued to Employees." Had
compensation cost been determined based on the fair value at the grant dates for
awards under the Company's stock plans in accordance with SFAS No. 123,
"Accounting for Stock Based Compensation," the net loss would have been
increased by $567,205 for the eight months ended December 31, 2002 ($0.02 per
share) and $56,989 for the four months ended April 30, 2002 ($0.00 per share),
and the net loss would have been increased by $5.9 million ($0.12 per share) in
2001 and $7.3 million ($0.15 per share) in 2000. As required by SFAS No. 123,
the fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions for 2002, 2001
and 2000: no historical dividend yield; an expected life of 10 years; historical
volatility of 173% for the eight months ended December 31, 2002, 197% for the
four months ended April 30, 2002, 197% in 2001 and 135% in 2000, and risk-free
rates of return ranging from 1.71% to 5.82%.

Exercise prices for options outstanding as of December 31, 2002, were as
follows:

Options Outstanding Options Exercisable
------------------- -------------------

Number Weighted Number
Outstanding Average Weighted Exercisable Weighted
as of Contractual Average as of Average
Range of December 31, Life Exercise December 31, Exercise
Exercise Prices 2002 Remaining Price 2002 Price
- --------------- ---- --------- ----- ---- -----

$ 5.00(1) 1,631,025 9.5 years $5.00 -- --

(1) In March 2003, our board of directors approved the reduction in the exercise
price of all of the outstanding stock options from $5.00 per share to $3.00
per share.

7. INCOME TAXES

The following is a summary of the Company's net deferred tax assets.

December 31,
Successor
Company Predecessor Company
2002 2001 2000
---- ---- ----
(in thousands)

Net Operating Loss Carryforwards $129,244 $461,401 $409,379
Deferred Taxes Related to Temporary Differences:
Tangible asset bases, lives and depreciation (14,555) (9,906) (49,483)
methods
Other (14,328) 78,308 67,698
-------- ------ ------
Total deferred tax asset, net 100,561 529,803 427,594
Less valuation allowance (100,561) (529,803) (427,594)
--------- ----------- - --------
Net deferred tax asset $ -- $ -- $ --
====== ====== ======

F-47

Potential tax benefits, related to net operating losses and temporary
differences, have been recorded as an asset, and a valuation allowance for the
same amount has been established. The Company has paid no income taxes since
inception.

As of December 31, 2002, 2001 and 2000, the Company had estimated net operating
loss carryforwards ("NOLs") of $322 million, $1.1 billion and $1.0 billion,
respectively. In April 2002, due to the debt restructuring and reorganization,
the Company has triggered a change of control, which has limited the
availability and utilization of the NOLs. Significant timing differences
affecting deferred taxes in 2001 reflect the treatment of the sale of the
satellite assets and XM Radio stock for financial reporting purposes compared to
tax purposes. In July 1999, as a result of the Company's investment in XM Radio,
which triggered a change in control as defined by the Internal Revenue Code,
utilization of the Company's NOLs were limited to approximately $42.1 million
per year. The Company's NOL's expire between 2004 and 2022.

8. DEBT & CAPITAL LEASES

Debt and capital leases consists of the following:

December 31,
Successor
Company Predecessor Company
------- -------------------
2002 2001 2000
---- ---- ----
(in thousands)

Senior Notes, net of discount $ -- $329,371 $328,474
Senior Notes, net of discount - XM Radio -- -- 261,298
Bank Financing -- -- 111,250
Rare Medium note payable, including accrued 20,148 26,910 --
interest
CSFB note payable, including accrued interest 795
-- --
Vendor financing, including accrued interest 5,947 3,316 8,492
Deferred trade payables -- -- 2,212
Capital leases 6,250 8,948 13,820
----- ----- ------
33,140 368,545 725,546
Less current maturities 4,051 364,972 11,048
----- ------- ------
Long-term debt $29,089 $3,573 $714,498
======= ====== ========

On January 27, 2003, the Company's wholly-owned subsidiary, Motient
Communications Inc. ("Motient Communications") closed a $12.5 million term
credit agreement (the "Credit Agreement") with a group of lenders, including
several of the Company's existing stockholders. For further information about
this Credit Agreement and related defaults and waivers and the borrowing
availability period, please see Note 16 ("Subsequent Events").

F-48

$335 Million Unit Offering

On March 31, 1998, Motient Holdings Inc., a wholly-owned subsidiary of Motient,
issued $335 million of Units (the "Units") consisting of 12 1/4% Senior Notes
due 2008 (the "Senior Notes"), and one warrant to purchase 3.75749 shares of
common stock of the Company for each $1,000 principal amount of Senior Notes
(the "Warrants") at an exercise price of $12.51 per share. The Warrants were
valued at $8.5 million and were recorded as a debt discount. A portion of the
net proceeds of the sale of the Units were used to finance the Motient
Communications acquisition in 1998. In connection with the Senior Notes, Motient
Holdings Inc. purchased approximately $112.3 million of restricted investments
that were restricted for the payment of the first six interest payments on the
Senior Notes. Interest payments are due semi-annually, in arrears, beginning
October 1, 1998. As a result of the automatic application of certain adjustment
provisions following the issuance of 7.0 million shares of common stock in a
public offering in 1999, the exercise price of the warrants associated with the
Senior Notes was reduced to $12.28 per share, the number of shares per warrant
was increased to 3.83 shares for each $1,000 principal amount of Senior Notes,
and the aggregate number of shares issuable upon exercise of such warrants was
increased by 24,294. The additional Senior Note warrants and re-pricing were
valued at $440,000. This was recorded as additional debt discount in the third
quarter of 1999. The Senior Notes were jointly and severally guaranteed on a
full and unconditional basis by Motient Corporation and all of its subsidiaries.

The Company failed to make a semi-annual interest payment due October 1, 2001,
which failure constituted an event of default under the Senior Notes. As a
result of the Company's failure to make the required semi-annual interest
payment, the missed interest payment accrued interest at the annual rate of
13.25%. As a result of this event of default, the Company classified the Senior
Notes as current liabilities in the Consolidated Balance Sheet as of December
31, 2001.

As discussed above (please see Note 1, "Organization and Going Concern"), as
part of the Company's Plan of Reorganization, the Senior Notes, including
accrued interest thereon, and related warrants were exchanged in full for new
equity of the reorganized Company.

Rare Medium Notes

In 2001 Motient issued two notes to Rare Medium in the aggregate principal
amount of $50 million, at 12.5% annual interest. These notes were collateralized
by five million of the Company's XM Radio shares. On October 12, 2001, in
accordance with the terms of the notes, the Company exchanged $26.2 million of
the Rare Medium notes, representing $23.8 million in principal and $2.4 million
of accrued interest, for five million of its XM Radio shares. The $26.9 million
of principal and accrued interest remaining outstanding at December 31, 2001 was
unsecured.

As a result of the delivery of the shares of XM Radio common stock described
above (see Note 13, "Business Acquisitions and Dispositions"), the maturity of
the Rare Medium notes was accelerated to November 19, 2001. As of December 31,
2001, the Rare Medium notes were in default; and, therefore, the Company
classified the Rare Medium notes as current liabilities in the Consolidated
Balance Sheet as of December 31, 2001.

F-49

Under the Company's Plan of Reorganization, the Rare Medium notes were cancelled
and replaced by a new note in the principal amount of $19.0 million. The new
note was issued by a new subsidiary of Motient Corporation that owns 100% of
Motient Ventures Holding Inc., which owns all of the Company's interests in MSV.
The new note has a term of three years and carries interest at 9%. The note
allows the Company to elect to accrue interest and add it to the principal,
instead of paying interest in cash. The note requires that it be prepaid using
25% of the proceeds of any repayment of the $15 million note receivable from
MSV.

CSFB $750,000 Note

Under the Company's Plan of Reorganization, the Company issued a note to CSFB,
in satisfaction of certain claims by CSFB against Motient, in the principal
amount of $750,000. The new note was issued by a new subsidiary of Motient
Corporation that owns 100% of Motient Ventures Holding Inc., which owns all of
the Company's interests in MSV. The new note has a term of three years and
carries interest at 9%. The note allows the Company to elect to accrue interest
and add it to the principal, instead of paying interest in cash. The note
requires that it be prepaid using 25% of the proceeds of any repayment of the
$15 million note receivable from MSV.

Bank Financing

In March 1998, the Company entered into a $200 million bank financing (the "Bank
Financing") consisting of two facilities: (i) the revolving credit facility
("Revolving Credit Facility"), a $100 million unsecured five-year reducing
revolving credit facility maturing March 31, 2003, and (ii) the term loan
facility ("Term Loan Facility"), a $100 million five-year, term loan facility
with up to three additional one-year extensions subject to the lenders'
approval. In 1999, the Term Loan Facility was reduced to $41 million. In 2000,
the Term Loan Facility was reduced to $40 million, and the Revolving Credit
Facility was reduced to $71.3 million. During 2001, the Bank Financing was
completely extinguished.

The Term Loan Facility

The Term Loan Facility bore an interest rate, generally, of 100 basis points
above London Interbank Offered Rate ("LIBOR"). The Term Loan Agreement did not
include any scheduled amortization until maturity, but did contain certain
provisions for prepayment based on certain proceeds received by the Company,
unless otherwise waived by the banks and the Bank Facility Guarantors (as
defined below). During 2001, the Term Loan Facility was completely extinguished.

The Revolving Credit Facility

The Revolving Credit Facility bore an interest rate, generally, of 100 basis
points above LIBOR and was unsecured, with a negative pledge on the assets of
Motient Holdings and its subsidiaries and ranked pari passu with the Senior
Notes. Certain proceeds received by Motient Holdings were required to repay and
reduce the Revolving Credit Facility, unless otherwise waived by the banks and

F-50

the Bank Facility Guarantors (as defined below). During 2001, the Revolving
Credit Facility was completely extinguished.

The Guarantees

In connection with the Bank Financing, Hughes Electronics Corporation, Singapore
Telecommunications, Ltd. and Baron Capital Partners, L.P. (collectively, the
"Bank Facility Guarantors"), extended separate guarantees of the obligations of
each of Motient Holdings and the Company to the banks, which on a several basis
aggregated to $200 million. In their agreement with each of Motient Holdings and
the Company (the "Guarantee Issuance Agreement"), the Bank Facility Guarantors
agreed to make their guarantees available for the Bank Financing. In exchange
for the additional risks undertaken by the Bank Facility Guarantors in
connection with the Bank Financing, the Company agreed to compensate the Bank
Facility Guarantors, principally in the form of one million additional warrants
and re-pricing of 5.5 million warrants previously issued in connection with the
original Bank Facility (together, the "Guarantee Warrants"). The Guarantee
Warrants were issued with an exercise price of $12.51 and were valued at
approximately $17.7 million. The amounts initially assigned to the Guarantee
Warrants and subsequent repricings are recorded as Common Stock Purchase
Warrants and Unamortized Guarantee Warrants in the accompanying consolidated
balance sheets. The amount assigned to Unamortized Guarantee Warrants was
amortized to interest expense over the life of the related debt. On March 29,
1999, the Bank Facility Guarantors agreed to eliminate certain covenants
contained in the Guarantee Issuance Agreement relating to earnings before
interest, depreciation, amortization and taxes and service revenue. In exchange
for this elimination of covenants, the Company agreed to re-price their
Guarantee Warrants, effective April 1,1999, from $12.51 to $7.50. The value of
the re-pricing was approximately $1.5 million.

As a result of the automatic application of certain adjustment provisions
following the issuance of the 7.0 million shares in the August 1999 public
offering, the exercise price of the Guarantee Warrants was reduced to $7.3571
per share and the Guarantee Warrants became exercisable for an additional
126,250 shares. The additional Guarantee Warrants and re-pricing were valued at
$2.4 million. Additionally, in June 2000, the Bank Facility Guarantors agreed to
partially reduce the debt repayment requirements associated with the MSV
transaction. In exchange, the Company further reduced the price of the Guarantee
Warrants to $6.25, which was valued at $1.4 million. In 2001, the Bank Facility
Guarantors agreed to waive certain repayment obligations under the Bank
Financing. In exchange for these waivers, the Company re-priced the warrants
held by certain of the Bank Facility Guarantors from $6.25 to $1.31 per share,
and issued new warrants to one Bank Facility Guarantor with an exercise price of
$1.31 per share. The value of the re-pricing and warrant issuance was $2.3
million.

Further, in connection with the Guarantee Issuance Agreement, the Company had
agreed to reimburse the Bank Facility Guarantors in the event that the
Guarantors were required to make payment under the Bank Financing guarantees,
and, in connection with this reimbursement commitment it provided the Bank
Facility Guarantors a junior security interest with respect to the assets of the
Company, principally its stockholdings in XM Radio and Motient Holdings.

F-51

Debt Extinguishments

In 1999, the Company raised $116 million, net of underwriting discounts and
expenses, through the issuance of 7.0 million shares of common stock in a public
offering. Of the net proceeds, Motient used $59 million to pay down a portion of
the Term Loan Facility. In 2000, the Company paid down and permanently reduced
the Term Loan Facility by an additional $1 million with proceeds from stock and
warrant exercises, and the Revolving Credit Facility was permanently reduced by
$22.8 million with a portion of the proceeds of the MSV and Aether transactions.
In 2001, the Company sold 2.0 million shares of XM Radio stock and used $8.5
million of the proceeds to permanently reduce the Term Loan Facility.
Additionally, $12.25 million of proceeds from the Rare Medium note were used to
pay down and permanently reduce the Term Loan Facility.

On November 6, 2001, the agent for the bank lenders under the Bank Financing
declared all loans under the Bank Financing immediately due and payable, due to
the existence of several events of default under the Bank Financing. On the same
date, the bank lenders sought payment in full from the Bank Financing Guarantors
for the accelerated loan obligations. The Bank Facility Guarantors repaid all
such loans on November 14, 2001 in the amount of approximately $97.6 million. As
a result, the Company had a reimbursement obligation to the Bank Guarantors in
the amount of $97.6 million, which included accrued interest and fees.

On November 19, 2001, the Company sold 500,000 shares of its XM Radio common
stock through a broker for $9.50 per share, for aggregate proceeds of $4.75
million. The net proceeds from this sale were paid to the Bank Facility
Guarantors, thereby reducing the amount of the Company's reimbursement
obligation to the Bank Facility Guarantors by such amount. Also on November 19,
2001, the Company delivered all of its remaining 9,257,262 shares of XM Radio
common stock to the Bank Facility Guarantors in full satisfaction of the entire
remaining amount of its reimbursement obligations to the Bank Facility
Guarantors. Upon delivery of these shares, the Bank Facility Guarantors released
the Company from all of its remaining obligations to the Bank Facility
Guarantors under the Bank Financing and the related guarantees and reimbursement
and security agreements. The Company delivered 7,108,184 shares to Hughes
Electronics Corporation, 964,640 shares to Singapore Telecommunications, Ltd.,
and 1,184,438 shares to Baron Capital Partners, L.P.

As a result of the permanent reductions of the Term Facility and the Revolving
Credit Facility, the Company recorded a loss on extinguishment of debt of
approximately $1.2 million in 2001 and $3.0 million in 2000, which reflects the
write-down, on a pro-rata basis, of unamortized guarantee warrants and deferred
financing fees associated with the placement of the Bank Financing.

Interest Rate Swap Agreement

In connection with the Bank Financing in March 1998, the Company entered into an
interest rate swap agreement, with an implied annual rate of 6.51%. The swap

F-52

agreement reduced the impact of interest rate increases on the Term Loan
Facility. The Company paid a fixed fee of approximately $17.9 million for the
swap agreement. In return, the counter-party was obligated to pay a variable
rate equal to LIBOR plus 50 basis points, paid on a quarterly basis directly to
the respective banks on behalf of the Company, on a notional amount of $100
million until the termination date of March 31, 2001. In connection with the pay
down of a portion of the Term Loan Facility during 1999, the Company reduced the
notional amount of its swap agreement from $100 million to $41 million and
realized net proceeds of approximately $6 million due to early termination of a
portion of the swap agreement. The interest rate swap agreement expired in March
2001.

Motorola Vendor Financing

In June 1998, Motorola had entered into an agreement with the Company to provide
up to $15 million of vendor financing, to finance up to 75% of the purchase
price of network base stations. Loans under this facility bear interest at a
rate equal to LIBOR plus 7.0% and are guaranteed by the Company and each
subsidiary of Motient Holdings. The terms of the facility require that amounts
borrowed be secured by the equipment purchased therewith. Advances made during a
quarter constitute a loan, which is then amortized on a quarterly basis over
three years. As of December 31, 2002, $6.1 million was outstanding, including
accrued interest, under this facility at an interest rate of 9%. As of December
31, 2001, $3.3 million was outstanding under this facility at an interest rate
of 9.6%. As of December 31, 2000, $8.5 million was outstanding under this
facility at interest rates ranging from 13.0% to 13.8%. No additional amounts
are available for borrowing under this facility. In January 2003 and
subsequently in March 2004, the Company restructured this liability, please see
Note 16, "Subsequent Events".

Hewlett-Packard Capital Lease

The Company has a capital lease for network equipment with Hewlett-Packard, now
Compaq Corporation. The lease has an effective interest rate of 12.2%. This
capital lease was in default for non-payment at December 31, 2002, however, in
January 2003, this agreement was restructured to provide for a modified payment
schedule.

Deferred Trade Payables

The Company has arranged the financing of certain trade payables, which are
included in current maturities in the accompanying consolidated balance sheets.
No amounts were outstanding as of December 31, 2002 and 2001. As of December 31,
2000, $2.2 million of deferred trade payables were outstanding at rate ranging
from 5.9% to 7.2%.

Baron XM Radio Convertible Note

In January 1999 the Company issued to Baron Asset Fund ("Baron"), a stockholder
and guarantor of its bank facility, a $21.5 million note convertible into shares
of common stock of XM Radio (the "Convertible Note Payable to Related Party" or
"Baron XM Radio Convertible Note".) The Company subsequently loaned
approximately $21.4 million to XM Radio in exchange for XM Radio common stock
and a note convertible into XM Radio shares (the "XM Radio Note Receivable"). On
October 8, 1999 XM Radio completed its initial public offering of 10.2 million

F-53

shares of Class A common stock, which triggered the conversion of the XM Radio
Note receivable into approximately 1.5 million shares of XM Radio Class B common
stock.

On January 13, 2000, Baron notified the Company of its intention to exchange the
Baron XM Radio Convertible Note for 1,314,914 shares of XM Radio Class B common
stock. The exchange of the convertible note resulted in a gain in 2000 of
approximately $36.8 million computed as the difference in the carrying value of
the Baron XM Radio Convertible Note and the Company's cost basis in XM Radio
stock exchanged upon conversion of this note.

Assets Pledged and Secured

Prior to the Company's reorganization in May 2002, all wholly-owned subsidiaries
of the Company were subject to financing agreements that limited the amount of
cash dividends and loans that could be advanced to the Company. At December 31,
2001, all of the subsidiaries' net assets were restricted under these
agreements. At December 31, 2002 and 2000, the Company was subject to financing
agreements with Rare Medium, CSFB, Motorola and Compaq that continued to limit
the amount of cash dividends and loans that could be advanced to the Company.
Subsequent to the end of the period covered by this report, the Company entered
into a $12.5 million term credit facility that also restricted the Company's
ability to pay cash dividends and receive additional loans that could be
advanced to the Company. These restrictions will have an impact on Motient's
ability to pay dividends. Please see Note 16, "Subsequent Events".

Covenants

The Company's historical and current debt agreements contain various
restrictions, covenants, defaults, and requirements customarily found in such
financing agreements. Among other restrictions, these provisions include
limitations on cash dividends, restrictions on transactions between Motient and
its subsidiaries, restrictions on capital acquisitions, material adverse change
clauses, and maintenance of specified insurance policies. See Note 16
("Subsequent Events").

9. RELATED PARTIES

Prior to its reorganization, the Company had entered into transactions with
various entities of Hughes Electronics Corporation, which included primarily the
purchase by Motient of services, computer hardware and software, and computer
maintenance agreements.

Before and after its reorganization, the Company has also entered into various
transactions and agreements with Motorola, a Motient stockholder during 2000,
which include the purchase by Motient of services, network hardware and software
maintenance services, facility rentals, and network gateway fees. Additionally,
Motorola has provided a vendor financing commitment, which had been available to
finance up to 75% of the purchase price of additional network base stations (see
Note 8, "Debt and Capital Leases"). As a result of Motorola's divestiture of a
portion of its shares of Motient stock, it ceased to be a related party in 2000.

F-54

The following table represents a summary of all related party transactions.

Successor Predecessor
Company Company Year Ended
Eight Months Four Months 2001 Year Ended
Ended Ended ---- 2000
December 31, 2002 April 30, 2002 (Restated) (Restated)
----------------- -------------- ---------- ----------

Payments made to (from) related parties:
Proceeds from the sale of assets to MSV $ -- $ -- $(42,500) $--
Additions to property and equipment -- -- -- 1,662
Payment on debt obligations -- -- -- 3,629
Operating expenses -- 49 125 3,433
Additional investment in MSV 957 -- -- --
Funding of future sub-lease
obligations to MSV -- 361 4,000 --
-------- -------- -------- -------
Net payments to (from) related parties $ 957 $ 410 $(38,375) $ 8,724
-------- -------- -------- -------

Due to (from) related parties:
Operating expenses $ (234) $ 618 $ (521) $ 163
Vendor financing -- -- -- 8,756
-------- -------- -------- -------
Capital Acquisitions -- -- -- 1,095
-------- -------- -------- -------
Note Receivable from MSV (18,732) (12,345) (15,000) --
-------- -------- -------- -------
Net amounts due (from) to related parties $(18,975) $(11,727) $(15,521) $10,014
-------- -------- -------- -------

For the periods ended four months ended April 30, 2002, eight months ended
December 31, 2002, and for the years ended December 31, 2001 and 2000, the
Company recorded revenue related to the MSV research and development agreement
in the amount of $0, $0, $2.6 million and $1.4 million, respectively.

Communication Technology Advisors LLC

In May 2002, the Company entered into a consulting agreement with Communication
Technology Advisors LLC ("CTA") under which CTA provided consulting services to
the Company. CTA's chairman, Jared E. Abbruzzese, was a director of the Company
until June 20, 2003. Peter Aquino, elected to the Company's Board on June 20,
2003, is a managing director of CTA. Gerry S. Kittner, also a Motient director,
is an advisor and consultant for CTA.

CTA is a consulting and private advisory firm specializing in the technology and
telecommunications sectors. The Company's agreement with CTA had an initial term
of three months ending August 15, 2002, and was extended by mutual agreement for
several additional terms of two or three months each. For the first three months
of the agreement, CTA was paid a flat fee of $60,000 per month, and for the
period August 2002 to May 2003, the monthly fee was $55,000. Beginning in May
2003, the monthly fee was reduced to $39,000. The Company also agreed to
reimburse CTA for CTA's out-of-pocket expenses incurred in connection with
rendering services during the term of the agreement. This agreement was
modified on January 30, 2004.

F-55

CTA had previously acted as the spectrum and technology advisor to the official
committee of unsecured creditors in connection with the Company's Chapter 11
case. CTA received a total of $475,000 in fees for such advice and was
reimbursed a total of $4,896 for expenses in connection with the rendering of
such advice.

Except for the warrant offered to CTA described below, neither CTA, nor any of
its principals or affiliates is a stockholder of Motient, nor does it hold any
debt of Motient (other than indebtedness as a result of consulting fees and
expense reimbursement owed to CTA in the ordinary course under the Company's
existing agreement with CTA). CTA has informed the Company that in connection
with the conduct of its business in the ordinary course, (i) it routinely
advises clients in and appears in restructuring cases involving
telecommunications companies throughout the country, and (ii) certain of the
Company's stockholders and bondholders and/or certain of their respective
affiliates or principals, may be considered to be (a) current clients of CTA in
matters unrelated to Motient; (b) former clients of CTA in matters unrelated to
Motient; and (c) separate affiliates of clients who are (or were) represented by
CTA in matters unrelated to Motient.

In July 2002, the Company's Board approved the offer and sale to CTA (or
affiliates thereof) of a warrant (or warrants) for 500,000 shares of the
Company's common stock, for an aggregate purchase price of $25,000. The warrant
has an exercise price of $3.00 per share and a term of five years. These
warrants were valued at $1.5 million and were recorded as a consultant
compensation expense in December of 2002. Certain affiliates of CTA purchased
the warrants in December 2002.

In November 2003, CTA was engaged to provide valuation of Motient's equity
interest in MSV as of December 31, 2002. CTA was paid $150,000 for this
valuation.

On January 30, 2004, the Company engaged CTA to act as chief restructuring
entity. The term of CTA's engagement is currently scheduled to end on August 1,
2004. As consideration for this work, Motient agreed to pay to CTA a monthly fee
of $60,000, one-half of which will be paid monthly in cash and one-half of which
will deferred. The new agreement amends the consulting arrangement discussed
above.

Mr. Abbruzzese, Mr. Kittner and Mr. Aquino did not participate in the
deliberations or vote of the Board with respect to the foregoing matters while
serving as a member of the Board.

10. LEASES

Capital Leases

The Company leases certain office equipment and switching equipment under
agreements accounted for as capital leases. Assets recorded as capital leases in
the accompanying balance sheets include the following:

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December 31,
--------------------------------------
Successor
Company Predecessor Company
------- -------------------
2002 2001 2000
---- ---- ----
(in thousands)

Ground segment equipment $-- $-- $7,263
Switch equipment 9,795 9,795 16,740
Office equipment 2,501 2,501 6,434
Less accumulated depreciation (5,669) (3,353) (16,116)
------- ------- --------
Total $ 6,627 $ 8,943 $14,321
======= ======= =======

Subsequent to the end of the period covered by this report, the Company
restructured certain of its existing lease obligations. Please see Note 16
("Subsequent Events").

Operating Leases

The Company leases substantially all of its base station sites through
cancelable operating leases. The majority of these leases provide for renewal
options for various periods at their fair rental value at the time of renewal.
In the normal course of business, the operating leases are generally renewed or
replaced by other leases. Additionally, the Company leases certain facilities
and equipment under arrangements accounted for as operating leases. Certain of
these arrangements have renewal terms. Total rent expense, under all operating
leases, and excluding amounts related to the consolidation of XM Radio in 2000,
approximated $10.5 million for the eight months ended December 31, 2002, $5.6
million for the four months ended April 30, 2002, and $15.2 million, and $13.4
million in for the years ended December 31 2001, and 2000, respectively.

At December 31, 2002, minimum future lease payments under noncancelable
operating and capital leases are as follows:

Operating Capital
--------- -------
(in thousands)

2003 $13,472 $3,640
2004 11,382 1,824
2005 8,534 1,824
2006 4,101 --
2007 and thereafter 4,096 --
------- --
Total $41,585 7,288
-------
Less: Interest (1,038)
-------
Present value of minimum lease payments $6,250
Less: Current maturities, including those amounts
deemed to be in default (3,031)
-------
Non current capital lease obligation $3,219
------

11. COMMITMENTS AND CONTINGENCIES

At December 31, 2000, the Company had remaining contractual commitments to
purchase eLink and other subscriber inventory in the amount of $21.5 million
during 2001. At December 31, 2001, the Company had remaining contractual
commitments to purchase eLink and other subscriber inventory in the amount of
$0.8 million during 2002. At December 31, 2002, the Company had no remaining
contractual commitments to purchase eLink and other subscriber equipment
inventory outside of what was required to satisfy monthly inventory requirements
of approximately $0.5 million.

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In May 2002, the FCC filed a proof of claim with the United States Bankruptcy
Court, asserting a pre-petition claim in the approximate amount of $1.0 million
for fees incurred as a result of the Company withdrawing from certain auctions.
Under the Company's court-approved Plan of Reorganization, the FCC's claim was
classified as an "other unsecured" claim and the FCC received a pro rata portion
of the 97,256 shares of common stock issued to creditors with allowed claims in
such class. The Company recorded an expense in the amount of $1.0 million for
this claim in April 2002.

At April 30, 2002, the Company had certain contingent and/or disputed
obligations under a satellite construction contract entered into by the
Predecessor Company, which contained flight performance incentives payable by
the Predecessor Company to the contractor if the satellite performed according
to the contract. As a result of the sale of the satellite assets to MSV, any
liabilities under this contract in respect of the period after November 26, 2001
are the responsibility of MSV; however, the Predecessor Company was responsible
for any incentive payments deemed to have been earned prior to such date. All
amounts due under this contract had been recorded in full in the periods in
which these incentives were deemed to have been earned, all of which was prior
to April 30, 2002. Upon the implementation of the Plan of Reorganization, this
contract was terminated, and in satisfaction of all amounts alleged to be owed
by the Predecessor Company under this contract, the contractor received a
pro-rata portion of the 97,256 shares issued to creditors holding allowed
unsecured claims.

On December 1, 2002, Motient entered into a letter agreement with UPS under
which UPS agreed to make a series of eight prepayments to Motient totaling $5
million for future services Motient is obligated to provide after January 1,
2004. In addition to any other rights it has under its network services
agreement with Motient, the letter agreement provides that UPS may terminate the
network services agreement, in whole or in part, by providing 30 days notice to
Motient at which point any remaining prepayment would be required to be
refunded. As of July 31, 2003, all eight prepayments had been made. The $5
million prepayment will be credited against airtime services provided to UPS
beginning January 1, 2004, until the prepayment is fully credited. Based on UPS'
current level of network airtime usage, Motient does not expect that UPS will be
required to make any cash payments to Motient in 2004 for service provided
during 2004.

12. EMPLOYEE BENEFITS

Prior to the Company's reorganization, the Company had several active stock
plans. All of these plans and the respective authorized and issued stock options
were cancelled as part of the Company's reorganization on May 1, 2002.

Defined Contribution Plan

The Company sponsored a 401(k) defined contribution plan ("401(k) Savings Plan")
in which all employees of Motient could participate. The 401(k) Savings Plan

F-58

provided for (i) a Company match of employee contributions, in the form of
common stock, at a rate of $1 for every $1 of an employee's contribution not to
exceed 4% of an employee's eligible compensation, (ii) a discretionary annual
employer non-elective contribution, (iii) the option to have plan benefits
distributed in the form of installment payments, and (iv) the reallocation of
forfeitures, if any, to active participants. In 2001, effective January 2002,
the Company amended its 401(k) Savings Plan to make the matching contributions
discretionary, as well as to allow the match to be made in either cash or shares
of common stock, at the Company's sole discretion. The Company's matching
expense was $0 for 2002, $1.1 million for 2001 and $1.4 million for 2000. During
2001, the Company authorized an additional 5,025,000 shares for the 401(k)
Savings Plan, and authorized an additional 268,000 shares in January 2002. As
part of Company's plan of reorganization, all of the outstanding shares of the
Company's common stock were cancelled. During 2002, the Company authorized
200,000 shares for the 401(K) Savings Plan.

Employee Stock Purchase Plan

The Company had an Employee Stock Purchase Plan ("Stock Purchase Plan") to allow
eligible employees to purchase shares of the Company's common stock at 85% of
the lower of market value on the first and last business day of the six-month
option period. An aggregate of 217,331 shares and 30,687 shares of common stock
were issued under the Stock Purchase Plan in 2001 and 2000, respectively.

Effective January 2002, the Company discontinued the Stock Purchase Plan.

2002 Stock Option Plan

The Company's 2002 stock option plan was adopted by the Board on May 31, 2002
and received stockholder approval on July 11, 2002. A total of 2,993,024 shares
of common stock have been reserved for issuance under the 2002 stock option
plan. Under the 2002 stock option plan, the Company is authorized to grant
options to purchase shares of common stock intended to qualify as incentive
stock options, as defined under section 422 of the Internal Revenue Code of
1986, as amended, and non-qualified stock options to any employees, outside
directors, consultants, advisors and individual service providers whose
participation in the 2002 stock option plan is determined by the Company's
compensation and stock option committee to be in the Company's best interests.
The term of each stock option is fixed by the Board or the compensation and
stock option committee, and each stock option is exercisable within ten years of
the original grant date. Some change of control transactions involving the
Company, such as a sale of Motient, may cause awards granted under the 2002
stock option plan to vest. Generally, an option is not transferable by the
recipient except by will or the laws of descent and distribution. As of December
31, 2002, options to purchase 2,993,024 shares of common stock had been
authorized under the 2002 stock option plan at a price of $5.00 per share, of
which options to purchase 1,631,025 shares of the Company's common stock were
outstanding at December 31, 2002. In March 2003, the Board approved the
reduction in the exercise price of all of the outstanding stock options from
$5.00 per share to $3.00 per share.

F-59

A portion of the options granted under the plan will either vest or be rescinded
based on Motient's performance. These options are accounted for in accordance
with variable plan accounting, which requires that the value of these options be
measured at their intrinsic value and any change in that value be charged to the
income statement upon the determination that the fulfillment of the Company
performance criteria is probable. The other options are accounted for as a fixed
plan and in accordance with intrinsic value accounting, which requires that the
excess of the market price of stock over the exercise price of the options, if
any, at the time that both the exercise price and the number of options are
known be recorded as deferred compensation and amortized over the option vesting
period. As of the date of grant, the option price per share was in excess of the
market price; therefore, these options are not deemed to have any value and no
expense has been recorded to date.

The 2002 options are subject to vesting is in two parts - 50% of the shares vest
in three equal parts on the first, second and third anniversary of the date of
grant, and the other 50% vest in three equal parts, or are rescinded, based on a
comparison of the Company's performance in 2002, 2003, and 2004 to certain
objectives established by the compensation and stock option committee of the
Board following the availability of the annual results. No options vested in
2002. The compensation and stock option committee of the Company's Board has not
yet made a determination regarding whether the 2003 performance criteria were
satisfied.

13. BUSINESS ACQUISITIONS AND DISPOSITIONS

Sale of Retail Transportation Business to Aether

In November 2000, Motient sold assets relating to its retail transportation
business to Aether Systems, Inc. ("Aether") and received approximately $45
million. This consisted of $30 million for the assets, of which $10 million was
held in an escrow account which was subsequently released in the fourth quarter
of 2001 upon the satisfaction of certain conditions, and $15 million for a
perpetual license to use and modify any intellectual property owned by or
licensed by Motient in connection with the retail transportation business.
Aether acquired all of the assets used or useful in the retail transportation
business, and assumed the related liabilities. Aether also purchased the
existing inventory in the business. In the fourth quarter of 2000, Motient
recognized a gain of $8.9 million, which represented the difference between the
net book value of the assets sold and the $20 million cash portion of the
purchase price for the assets received at closing.

Motient recognized an additional $8.3 million gain in the fourth quarter of 2001
when the additional $10 million of proceeds were released from escrow. The $1.7
million difference between the proceeds received and the gain recognized is a
result of pricing modifications that were made at the time of the release of the
escrow related to network capacity agreements. Motient amortized the $15 million
perpetual license payment, as restated, over a four year period through the
adoption of "fresh start", which represented the life of the network airtime
agreement that Motient entered into with Aether at the time of the closing of
the asset sale.

Concurrent with the closing of the asset sale, the Company and Aether entered
into two long-term, prepaid network airtime agreements valued at $20 million, of
which $5 million was paid at closing, pursuant to which Aether agreed to

F-60

purchase airtime on the Company's satellite and terrestrial networks. Aether
also became an authorized reseller of the Company's eLink and BlackBerry TM by
Motient wireless email service offerings.

MSV

On June 29, 2000, the Company formed a joint venture subsidiary, MSV, in which
it owned until November 26, 2001, 80% of the membership interests in order to
conduct research and development activities. The remaining 20% interests in MSV
were owned by three investors unrelated to Motient. The other investors paid $50
million to MSV (in the aggregate), in exchange for their 20% interest. Motient
Services Inc. ("Motient Services") owned the Company's satellite and related
assets.

Of the $50 million payment received by MSV, $6.0 million was retained by MSV to
fund certain research and development activities, $24 million was paid to
Motient Services as a deposit on the purchase of the satellite assets, and $20
million was also paid to Motient Services for the use of the satellite and
frequency under a research and development agreement.

On November 26, 2001, Motient sold the assets comprising its satellite
communications business to MSV, as part of a transaction in which certain other
parties joined MSV, including TMI, a Canadian satellite services provider. In
consideration for its satellite business assets, Motient Services received the
following: (i) a $24 million cash payment in June 2000, (ii) a $41 million cash
payment paid at closing on November 26, 2001, net of $4 million retained by MSV
to fund the Company's future sublease obligations to MSV for rent and utilities
through August 2003 and (iii) a five-year $15 million note. In this transaction,
TMI also contributed its satellite communications business assets to MSV. In
addition, Motient purchased a $2.5 million convertible note issued by MSV, and
certain other investors, including a subsidiary of Rare Medium, purchased a
total of $52.5 million of convertible notes. The Company realized a gain of
approximately $29.8 million on the sale of its net assets; however, 48% of the
gain, or $14.3 million, was deferred and amortized over five years though the
adoption of "fresh-start".

MSV has also filed a separate application with the FCC with respect to MSV's
plans for a new generation satellite system utilizing ancillary terrestrial base
stations. For further information on the FCC approval process, see Note 16
("Subsequent Events").

In July 2002, MSV commenced a rights offering seeking total funding in the
amount of $3.0 million. While the Company was not obligated to participate in
the offering, the Company's board determined that it was in the Company's best
interests to participate so that its interest in MSV would not be diluted. On
August 12, 2002, the Company funded an additional $957,000 to MSV pursuant to
this offering, and received a new convertible note in such amount. This rights
offering did not impact the Company's ownership position in MSV.

As of December 31, 2002, the Company had an ownership percentage, on an
undiluted basis, of approximately 48% of the common and preferred units of MSV,
and approximately 55% of the common units. Assuming that all of MSV's
outstanding convertible notes are converted into limited partnership units of

F-61

MSV, as of December 31, 2002 Motient had a 33.3% partnership interest in MSV on
an "as converted" basis giving effect to the conversion of all outstanding
convertible notes of MSV, and 25.5% on a fully-diluted basis, assuming certain
other investors exercise their right to make additional investment in MSV as a
result of the FCC ancillary terrestrial components ("ATC") application process.

On August 21, 2003, two investors in MSV (excluding Motient) invested an
additional $3.7 million in MSV in exchange for Class A preferred units of
limited partnership interests in MSV. MSV used the proceeds from this investment
to repay other indebtedness that is senior in its right of repayment to
Motient's promissory note. Under the terms of the amended and restated
investment agreement, these investors also have the option of investing an
additional $17.6 million in MSV by December 31, 2003; however, if, prior to this
time, the FCC does not issue a decision addressing MSV's petition for
reconsideration with respect to the ATC Order (as hereinafter defined), the
option will be automatically extended to March 31, 2004. As of the closing of
the initial investment on August 21, 2003, Motient's percentage ownership of MSV
is approximately 46.5% on an undiluted basis, 32.6% on an "as converted" basis
giving effect to the conversion of all outstanding convertible notes of MSV and
29.5% on a fully diluted basis assuming certain other investors exercise their
right to make additional investment in MSV as a result of the FCC's ATC
application process.

In addition, 25% of the proceeds of any repayment of the $15.0 million note from
MSV must be allocated to prepay pro-rata both the Rare Medium and Credit Suisse
First Boston ("CSFB") notes. The allocation of the 25% of the proceeds will be
made in accordance with Rare Medium's and CSFB's relative outstanding balance at
the time of prepayment. If not repaid earlier, the $15.0 million note from MSV,
including accrued interest thereon, becomes due and payable on November 25,
2006.

Please see note 2, "Significant Accounting Policies - Investment in MSV and
Notes Receivable from MSV" and note 16, "Subsequent Events - Developments
Relating to MSV."

XM Radio

In January 2001, pursuant to FCC approval for Motient to cease to control XM
Radio, the number of directors that the Company appointed to XM Radio's Board of
Directors was reduced to less than 50% of XM Radio's directors, and the Company
converted a portion of its super-voting Class B common stock of XM Radio to
Class A common stock. As a result, the Company ceased to control XM Radio, and
as of January 1, 2001, the Company accounted for its investment in XM Radio
pursuant to the equity method of accounting.

In January and February 2001, the Company sold, in two separate transactions,
two million shares of its XM Radio Class A common stock, at an average price of
$16.77 per share, for total proceeds of $33.5 million. In October 2001, as noted
above, the Company repaid $26.2 million of the Rare Medium notes in exchange for
five million of its XM Radio shares. On November 19, 2001, the Company sold
500,000 shares of its XM Radio common stock through a broker for $9.50 per
share, for aggregate proceeds of $4.75 million. Also on November 19, 2001, as a
result of a series of transaction to cure defaults under its Bank Financing and
to the Bank Facility Guarantors, the Company sold and/or delivered all of its of
its remaining 9,257,262 shares of XM Radio common stock to the Bank Facility

F-62

Guarantors in full satisfaction of the entire remaining amount of its
reimbursement obligations to the Bank Facility Guarantors. The agent for the
bank lenders under the Bank Financing declared all loans under the Bank
Financing immediately due and payable, due to the existence of several events of
default under the Bank Financing. On the same date, the bank lenders sought
payment in full from the Bank Financing Guarantors for the accelerated loan
obligations. For the year ended December 31, 2001, the Company recorded proceeds
of approximately $38.3 million from the sale in 2001 of two million shares of
its XM Radio stock. For the year ended December 31, 2001, the Company recorded
equity in losses of XM Radio of $48.5 million. As of November 19, 2001, the
Company ceased to have any interest in XM Radio.

In anticipation of the exchange of the XM Radio shares for debt, the Company
recorded an impairment loss of $81.5 million in 2001. This loss represents the
write down of the Company's investment in XM Radio to the fair value on the date
of the exchange. Upon the actual exchange of shares, the Company recognized a
net extraordinary gain of $10.0 million, which represented the difference
between the fair market value of the XM Radio stock as compared to the value of
the debt cancelled in exchange for the shares. For the twelve months December
31, 2001, the Company recorded equity in losses of XM Radio of $48.5 million.

Merger Agreement with Rare Medium Group, Inc.

On May 14, 2001, the Company signed a definitive merger agreement with Rare
Medium pursuant to which the Company would acquire Rare Medium. On October 1,
2001, the Company and Rare Medium announced their mutual termination of the
merger. The Company recorded a charge of $4.1 million in 2001 representing costs
incurred by the Company to pursue this transaction.

14. LEGAL AND REGULATORY MATTERS

Legal

Motient filed a voluntary petition for relief under Chapter 11 of the Bankruptcy
Code on January 10, 2002. The Bankruptcy Court confirmed Motient's Plan of
Reorganization on April 26, 2002, and Motient emerged from bankruptcy on May 1,
2002. For further details regarding this proceeding, please see Note 2
("Significant Accounting Policies -- Motient's Chapter 11 Filing and Plan of
Reorganization and "Fresh-Start" Accounting").

Motient is aware of a purported class action lawsuit filed by holders of Rare
Medium common stock challenging the previously proposed merger of Motient and
Rare Medium Group, Inc. that was terminated in Rare Medium Group, Inc.
Shareholders Litigation, C.A. No. 18879 NC (cases filed in Delaware Chancery
Court between May 15, 2001 and June 7, 2001, and consolidated by the Court on
June 22, 2001). The complaint names Rare Medium, members of Rare Medium's board
of directors, the holders of Rare Medium preferred stock and certain of their
affiliated entities, and Motient as defendants. The complaint alleges that the
defendants breached duties allegedly owed to the holders of Rare Medium common
stock in connection with the merger agreement, and include allegations that: (1)
the holders of Rare Medium preferred stock engaged in self-dealing in the

F-63

proposed merger; (2) the Rare Medium board of directors allegedly breached its
fiduciary duties by agreeing to distribute the merger consideration differently
among Rare Medium's common and preferred shares; and (3) Motient allegedly aided
and abetted the supposed breaches of fiduciary duties. The complaint sought to
enjoin the proposed merger, and also sought compensatory damages in an
unspecified amount. In 2002, the plaintiffs and the Rare Medium defendants
reached a settlement of the Delaware litigation, and the Court dismissed the
case on December 2, 2002.

A former employee who was discharged as part of a reduction in force in July
2002 asserted a claim for a year's pay and attorney's fees under a Change of
Control Agreement that the employee had with the Company. This claim was subject
to binding arbitration. Although the Company believed that it had substantial
defenses on the merits, on July 11, 2003, the Company was informed that the
arbitrator ruled in the employee's favor. In August 2003, the Company made a
$200,000 payment to this employee for the disputed pay and related benefits
costs and legal fee reimbursement.

Motient's rights to use and sell the BlackBerryTM software and RIM's handheld
devices may be limited or made prohibitively expensive as a result of a patent
infringement lawsuit brought against RIM by NTP Inc. (NTP v. Research In Motion,
Civ. Action No. 3:01CV767 (E.D. Va.)). In that action, a jury concluded that
certain of RIM's BlackBerryTM products infringe patents held by NTP covering the
use of wireless radio frequency information in email communications. On August
5, 2003, the judge in the case ruled against RIM, awarding NTP $53.7 million in
damages and enjoining RIM from making, using, or selling the products, but
stayed the injunction pending appeal by RIM. The appeal has not yet been
resolved. As a purchaser of those products, Motient could be adversely affected
by the outcome of that litigation.

Regulatory

The terrestrial two-way wireless data network used in Motient's wireless
business is regulated to varying degrees at the federal, state, and local
levels. Various legislative and regulatory proposals under consideration from
time to time by Congress and the FCC have in the past materially affected and
may in the future materially affect the telecommunications industry in general,
and Motient's wireless business in particular. The following is a summary of
significant laws, regulations and policies affecting the operation of Motient's
wireless business. In addition, many aspects of regulation at the federal, state
and local level currently are subject to judicial review or are the subject of
administrative or legislative proposals to modify, repeal, or adopt new laws and
administrative regulations and policies. Neither the outcome of these
proceedings nor their impact on Motient's operations can be predicted at this
time.

F-64

Motient is a commercial mobile radio service provider and therefore is regulated
as a common carrier. Motient must offer service at just and reasonable rates on
a first-come, first-served basis, without any unjust or unreasonable
discrimination, and Motient is subject to the FCC's complaint processes. The FCC
has forborne from applying numerous common carrier provisions of the
Communications Act to commercial mobile radio service providers. In particular,
Motient is not subject to traditional public utility rate-of-return regulation,
and is not required to file tariffs with the FCC.

The FCC's universal service fund supports the provision of affordable
telecommunications to high-cost areas, and the provision of advanced
telecommunications services to schools, libraries, and rural health care
providers. Under the FCC's current rules, end-user revenues derived from the
sale of information and other non-telecommunication services and certain
wholesale revenues derived from the sale of telecommunications services are not
subject to universal service fund obligations. Based on the nature of its
business, Motient is currently not required to contribute to the universal
service fund. Current rules also do not require that Motient impute to its
contribution base retail revenues derived when it uses its own transmission
facilities to provide a service that includes both information service and
telecommunications components. There can be no assurances that the FCC will
retain the exclusions described herein or its current policy regarding the scope
of a carrier's contribution base. Motient may also be required to contribute to
state universal service programs. The requirement to make these state universal
service payments, the amount of which in some cases may be subject to change and
is not yet determined, may have a material adverse effect on the conduct of
Motient's business.

Motient is subject to the Communications Assistance for Law Enforcement Act, or
CALEA. Under CALEA, Motient must ensure that law enforcement agencies can
intercept certain communications transmitted over its networks. Motient must
also ensure that law enforcement agencies are able to access certain
call-identifying information relating to communications over Motient's networks.
The deadline for complying with the CALEA requirements and any rules
subsequently promulgated was June 30, 2002. Based on discussions with Federal
law enforcement agencies regarding the applicability of CALEA's provisions to
the Company, the Company does not believe that its network, which uses packet
data technology, is subject to the requirements of CALEA. At the suggestion of
Federal law enforcement agencies, the Company has developed an alternative
methodology for intercepting certain communications over its network for the
purposes of law enforcement surveillance. The Company believes this alternative
methodology has substantially the same functionality as the standards provided
in CALEA. It is possible that the Company's alternative methodology may
ultimately be found not to comply with CALEA's requirements, or the Company's
interpretation that CALEA does not apply to its network may ultimately be found
to be incorrect. Should these events occur, the requirement to comply with CALEA
could have a material adverse effect on the conduct of the Company's business.

F-65

In addition, CALEA establishes a federal fund to compensate telecommunications
carriers for all reasonable costs directly associated with modifications
performed by carriers in connection with equipment, facilities, and services
installed or deployed on or before January 1, 1995. For equipment, facilities,
and services deployed after January 1, 1995, the CALEA fund is intended to
compensate carriers for any reasonable costs associated with modifications
required to make compliance "reasonably achievable." It is possible that all
necessary modifications will not qualify for this compensation and that the
available funds will not be sufficient to reimburse Motient. Therefore, the
requirement to comply with CALEA could have a material adverse effect on the
conduct of Motient's business.

As a matter of general regulation by the FCC, Motient is subject to, among other
things, payment of regulatory fees and restrictions on the level of radio
frequency emissions of Motient's systems' mobile terminals and base stations.
Any of these regulations may have an adverse impact on the conduct of Motient's
business.

Motient's FCC licenses are subject to restrictions in the Communications Act
that (i) certain FCC licenses may not be held by a corporation of which more
than 20% of its capital stock is directly owned of record or voted by non-U.S.
citizens or entities or their representatives and (ii) that no such FCC license
may be held by a corporation controlled by another corporation, referred to as
indirect ownership, if more than 25% of the controlling corporation's capital
stock is owned of record or voted by non-U.S. citizens or entities or their
representatives, if the FCC finds that the public interest is served by the
refusal or revocation of such license. However, with the implementation of the
Basic Telecommunications Agreement, negotiated under the auspices of the World
Trade Organization and to which the United States is a party, the FCC will
presume that indirect ownership interests in the Company's FCC licenses in
excess of 25% by non-U.S. citizens or entities will be permissible to the extent
that the ownership interests are from World Trade Organization-member countries.
If the 25% foreign ownership limit is exceeded, the FCC could take a range of
potential actions, which could harm Motient's business.

F-66

are now issued by auction in wide-area, multi-channel blocks. The geographic
area and number of channels within a block vary depending on whether the
frequencies are in the so-called "Upper 200" specialized mobile radio channels,
the "General Category," or the "Lower 80." In addition, wide-area auction
winners in the Upper 200 have the right to relocate incumbent licensees to other
"comparable" spectrum. Auction winners in the General Category and Lower 80 do
not have these same relocation rights and must afford protection to incumbent
stations. Incumbent stations may not, however, expand their service areas.

Wide-area auction winners have substantial flexibility to install any number of
base stations including, in the case of the General Category and Lower 80
channels, base stations that operate on the same channels as incumbent
licensees. Motient was an incumbent in the Upper 200 and remains an incumbent on
certain General Category channels. Although the FCC requires General Category
and Lower 80 geographic licensees to protect incumbents from interference, there
is some concern that such interference may occur and that practical application
of the interference-protection rules may be uncertain.

Motient believes that it has licenses for a sufficient number of channels to
meet its current capacity needs on the terrestrial network.

Motient operates the terrestrial network under a number of waivers involving the
FCC's technical rules, including rules on station identification, for-profit use
of excess capacity, system loading, and multiple station ownership. Several of
these waivers were first obtained individually by IBM and Motorola, which
operated separate wireless data systems until forming the ARDIS joint venture in
1990. The FCC incorporated a number of these waivers into its regulations when
it implemented Congress's statutory provision creating the commercial mobile
radio service classification. As of March 3, 1999, Motient completed its planned
construction of base stations for which extended implementation was granted by
the FCC in 1996.

On March 14, 2002, the FCC adopted a notice of proposed rulemaking exploring
options and alternatives for improving the spectrum environment for public
safety operations in the 800 MHz band. This notice of proposed rulemaking was
issued by the FCC after a "white paper" proposal was submitted to the FCC by
Nextel Communications Inc. in November 2001 addressing largely the same issues.
In its white paper, Nextel proposed that certain of its wireless spectrum in the
700 MHz band, lower 800 MHz band, and 900 MHz band be exchanged for spectrum in
the upper 800 MHz band and in the 2.1 GHz band. Nextel's proposal addressed the
problem of interference to public safety agencies by creating blocks of
contiguous spectrum to be shared by public safety agencies. Since the notice of
proposed rulemaking was issued, Motient has been actively participating with
other affected licensees, including Nextel, to reach agreement on a voluntary
plan to re-allocate spectrum to alleviate interference to public safety
agencies. On December 24, 2002, a group of affected licensees, including
Motient, Nextel, and several other licensees, submitted a detailed proposal to
the FCC for accomplishing the re-allocation of spectrum over a period of several
years. These parties have also been negotiating a mechanism by which Nextel
would agree to reimburse costs, up to $850 million, incurred by affected
licensees in relocating to different parts of the spectrum band pursuant to the
rebanding plan.

F-67

On February 10, 2003, approximately 60 entities filed comments to the proposal
submitted to the FCC on December 24, 2002. Several of the comments addressed the
issue of comparable 800 MHz spectrum for Economic Area ("EA") licensees and the
need to avoid recreating the 800 MHz interference situation when Nextel
integrates its 900 MHz spectrum into its Integrated Dispatch Enhanced Network,
or iDEN. Reply comments, which were due February 25, 2003, included comments
urging the FCC to conduct its own analysis of the adequacy of the interference
protection proposed in the plan. In mid-April 2003, the FCC's Office of
Engineering and Technology ("OET") sent a letter to several manufacturers
requesting additional practical, technical and procedural solutions or
information that may have yet to be considered. Responses were due May 8, 2003.
Upon reviewing the filed comments, OET has indicated that other technical
solutions were possible and were being reviewed by the FCC. To date, no action
has been taken by the FCC. We cannot assure you that our operations will not be
affected by this proceeding.

15. SUPPLEMENTAL CASH FLOW INFORMATION

Successor Company Predecessor Company
----------------- -------------------
Years Ended December 31,

Eight Months Ended Four Months
December 31, Ended April 30, (Restated) (Restated)
------------- ---------------- ---------- ----------
2002 2002 2001 2000
---- ---- ---- ----
(in thousands)

Cash payments for interest $396 $427 $26,240 $52,568
Cash payment for income taxes -- -- -- --
Noncash investing and financing activities:

Leased asset and related obligations -- -- 632 1,238
Issuance of restricted stock -- -- 419 --
Cancellation of restricted stock -- -- (264) (1,053)
Additional deferred compensation on
non-cash compensation -- 97 1,587 82
Issuance and repricing of common stock
purchase warrants 1,464 -- 2,326 6,202
Capital (loss) gain in connection with
the sale of stock by XM Radio -- -- (12,180) 129,545
Capital gain in connection with the sale
of stock by MSV -- -- 12,883 --
Non-cash interest capitalized by XM Radio -- -- -- 16,302
XM Radio accrued system milestone payments -- -- -- 30,192
Vendor financing for property in service -- -- -- 6,937
Vendor financing under maintenance
agreement 2,631 -- -- --
Use of deposit for XM Radio terrestrial
repeater contract -- -- -- 3,422
Issuance of Common Stock under the
Defined Contribution Plan -- (203) 1,151 1,131

In connection with the pay downs of the Term Loan Facility and Revolver Loan
Facilities, the Company's loss on extinguishment of debt includes the write off
of all unamortized deferred financing fees associated with the placement of the
Bank Facility and of the unamortized portion of the Guarantee Warrants that were
held by shareholder guarantors of the Bank Facility.

F-68

16. SUBSEQUENT EVENTS

$12.5 Million Term Credit Facility

On January 27, 2003, the Company's wholly-owned subsidiary, Motient
Communications Inc., closed a $12.5 million term credit agreement with a group
of lenders, including several of the Company's existing stockholders.

In connection with the signing of the credit agreement, the Company issued
warrants at closing to the lenders to purchase, in the aggregate, 3,125,000
shares of its common stock. The exercise price for these warrants is $1.06 per
share. The warrants were immediately exercisable upon issuance and have a term
of five years. The warrants were valued at $10 million using a Black-Scholes
pricing model and have been recorded as a debt discount and are being amortized
as additional interest expense over three years, the term of the related debt.
Upon closing of the Credit Agreement, the Company paid closing and commitment
fees to the lenders of $500,000. These fees have been recorded on the Company's
balance sheet and are being amortized as additional interest expense over three
years, the term of the related debt. Under the Credit Agreement, the Company
must pay an annual commitment fee of 1.25% of the daily average of undrawn
amounts of the aggregate commitments from the period from the closing date to
December 31, 2003. In December 2003, we paid the lenders a commitment fee of
approximately $113,000.

For the monthly periods ended April 2003 through December 2003, the Company
reported events of default under the terms of the credit facility to the
lenders. These events of default related to non-compliance with covenants
requiring minimum monthly revenue, earnings before interest, taxes and
depreciation and amortization and free cash flow performance. In each period,
the lenders waived these events of default. There can be no assurance that
Motient will not have to report additional events of default or that the lenders
will continue to provide waivers in such event. Ultimately, there can be no
assurances that the liquidity provided by the credit facility will be sufficient
to fund our ongoing operations. For further details, please see "Risk Factors -
We will need additional liquidity to fund our operations."

Under the original Credit Agreement, the lenders made commitments to lend
Motient Communications up to $12.5 million. The commitments were not revolving
in nature and amounts repaid or prepaid could not be reborrowed. Borrowing
availability under Motient's $12.5 million term credit facility terminated on
December 31, 2003.

The lenders include the following entities or their affiliates: M&E Advisors,
L.L.C., Bay Harbour Partners, York Capital and Lampe Conway & Co. York Capital
is affiliated with James G. Dinan. Bay Harbour Management and James G. Dinan
each hold 5% or more of Motient's common stock. The lenders also include Gary
Singer, directly or through one or more entities. Gary Singer is the brother of
Steven G. Singer, one of our directors and Chairman of the Board.

F-69

The table below shows, as of March 16, 2004 the number of shares of Motient
common stock beneficially owned by the following parties to the term credit
agreement, based solely on filings made by such parties with the SEC:

Name of Beneficial Owner Number of Shares
------------------------ ----------------
Bay Harbour Management, L.C. 3,217,396
James G. Dinan 2,593,045

On March 16, 2004, Motient entered into an amendment to the credit facility
which extended the borrowing availability period until December 31, 2004. As
part of this amendment, Motient provided the lenders with a pledge of all of the
stock of a newly-formed special purpose subsidiary of Motient Communications,
Inc., Motient License Inc. ("Motient License") which holds all of Motient's FCC
licenses formerly held by Motient Communications. On March 16, 2004, in
connection with the execution of the amendment to our credit agreement, the
Company issued warrants to the lenders to purchase, in the aggregate, 2,000,000
shares of our common stock. The number of warrants will be reduced to an
aggregate of 1,000,000 shares of common stock if, within 60 days after March 16,
2004, the Company obtains at least $7.5 million of additional debt or equity
financing. The exercise price of the warrants is $4.88 per share. The warrants
were immediately exercisable upon issuance and have a term of five years. The
warrants will be valued using a Black-Scholes pricing model and will be recorded
as a debt discount and will be amortized as additional interest expense over
three years, the term of the related debt. The warrants are also subject to a
registration rights agreement. Under such agreement, we agreed to register the
shares underlying the warrants upon the request of a majority of the
warrantholders, or in conjunction with the registration of other common stock of
the company. We will bear all the expenses of such registration. The Company is
also required to pay a commitment fees to the lenders of $320,000 which accrued
into the principal balance at closing. These fees will be recorded on our
balance sheet and will be amortized as additional interest expense over three
years, the term of the related debt.

Under this facility, the lenders have agreed to make loans to Motient
Communications through December 31, 2004 upon Motient Communications' request no
more often than once per month, in aggregate principal amounts not to exceed
$1.5 million for any single loan, and subject to satisfaction of other
conditions to borrowing, including certain financial and operating covenants,
contained in the Credit Agreement. As of December 31, 2003, the Company had
borrowed $4.5 million under this facility.

Each loan borrowed under the Credit Agreement has a term of three years. Loans
carry interest at 12% per annum. Interest accrues, compounding annually, from
the first day of each loan term, and all accrued interest is payable at each
respective loan maturity, or, in the case of mandatory or voluntary prepayment,
at the point at which the respective loan principal is repaid. Loans may be
prepaid at any time without penalty.

The obligations of Motient Communications under the Credit Agreement are secured
by a pledge of all the assets owned by Motient Communications that can be

F-70

pledged as security and are not already pledged under certain other existing
credit arrangements, including under Motient Communications' credit facility
with Motorola and Motient Communications' equipment leasing agreement with
Hewlett-Packard. Motient Communications owns, directly or indirectly, all of the
Company's assets relating to its terrestrial wireless communications business.
In addition, Motient and its wholly-owned subsidiary, Motient Holdings Inc.,
have guaranteed Motient Communications' obligations under the Credit Agreement,
and the Company has delivered a pledge of the stock of Motient Holdings Inc.,
Motient Communications, Motient Services and Motient License to the lenders. In
addition, upon the repayment in full of the outstanding $19,750,000 in senior
notes due 2005 issued by MVH Holdings Inc. to Rare Medium and CSFB in connection
with the Company's approved Plan of Reorganization, the Company will pledge the
stock of MVH Holdings Inc. to the lenders.

Research In Motion Matters

Our rights to use and sell the BlackBerryTM software and RIM's handheld devices
may be limited or made prohibitively expensive as a result of a patent
infringement lawsuit brought against RIM by NTP Inc. (NTP v. Research In Motion,
Civ. Action No. 3:01CV767 (E.D. Va.)). In that action, a jury concluded that
certain of RIM's BlackBerryTM products infringe patents held by NTP covering the
use of wireless radio frequency information in email communications. On August
5, 2003, the judge in the case ruled against Research In Motion, awarding NTP
$53.7 million in damages and enjoining Research In Motion from making, using, or
selling the products, but stayed the injunction pending appeal by Research In
Motion. The appeal has not yet been resolved. As a purchaser of those products,
Motient could be adversely affected by the outcome of that litigation.

On June 26, 2003 RIM provided us with a written End of Life Notification for the
RIM 857 wireless handheld device. This means that RIM will no longer produce
this model of handheld device. The last date for accepting orders was September
30, 2003, and the last date for shipment of devices was January 2, 2004. Motient
has implemented a RIM 857 "equivalent to new" program and expects that there
will be sufficient returned RIM 857s to satisfy demand for the foreseeable
future. During the year ended December 31, 2002, a majority of Motient's
equipment revenues were attributable to sales of the RIM 857 device, and Motient
estimates that approximately 35% of its monthly recurring service revenues were
derived from wireless messaging that use RIM 857 devices.

New Network Offerings

On March 1, 2003 Motient entered into a National Premier Dealer Agreement with
T-Mobile USA, and on May 21, 2003 Motient entered into an Authorized Agency
Agreement with Verizon Wireless. These agreements allow Motient to sell each of
T-Mobile's third generation global system for mobile communications/general
packet radio service, or GSM/GPRS, network subscriptions and Verizon's third
generation code division multiple access/singular carrier radio transmission
technology, or CDMA/1XRTT, network subscriptions nationwide. Motient is paid for
each subscriber put on to either network. Each agreement allows Motient to
continue to actively sell and promote wireless email and wireless Internet
applications to enterprise accounts on networks with greater capacity and speed,
and that are voice capable.

F-71

Sale of SMR Licenses to Nextel Communications, Inc.

On July 29, 2003, our wholly-owned subsidiary, Motient Communications, entered
into an asset purchase agreement with Nextel, under which Motient Communications
sold to Nextel certain of its SMR licenses issued by the FCC for $3.4 million.
The closing of this transaction occurred on November 7, 2003. On December 9,
2003, Motient Communications entered into a second asset purchase agreement,
under which Motient Communications will sell additional licenses to Nextel for
$2.75 million. In February, 2004, the Company closed the sale of licenses
covering approximately $2.2 million of the purchase price, and the Company
expects to close the sale of approximately one-half of the remaining licenses by
April 2004. The transfer of the other half of the remaining licenses has been
challenged at the FCC by a third-party. While the Company believes, based on the
advice of counsel, that the FCC will ultimately rule in its favor, the Company
cannot be assured that it will prevail, and, in any event, the timing of any
final resolution is uncertain. None of these licenses are necessary for
Motient's future network requirements. Motient has and expects to continue to
use the proceeds of the sales to fund its working capital requirements and for
general corporate purposes. The lenders under Motient Communications' term
Credit Agreement have consented to the sale of these licenses.

Developments Relating to MSV

In January 2003, MSV's application with the FCC with respect to MSV's plans for
a new generation satellite system utilizing ATC was approved by the FCC. The
order granting such approval (the "ATC Order") requires that licensees,
including MSV, submit a further application with the FCC to seek approval of the
specific system incorporating ATC that the licensee intends to use. MSV has
filed an application for ATC authority, pending the FCC's final rules and
regulations. MSV has also filed a petition for reconsideration with respect to
certain aspects of the ATC Order. In January 2004, certain terrestrial wireless
providers filed petitioned the U.S. Court of Appeals for the District of
Columbia to review the FCC's decision to grant ATC to satellite service
providers. Oral arguments in this case are scheduled for May 2004.

Please see Note 2, "Significant Accouniting Policies - - Investment in MSV and
Notes Receivable from MSV"; Note 13, "Business Acquisitions and Dispositions - -
MSV" for additional developments relating to MSV.

Option Repricing and New Options

In March 2003, the Company's board of directors approved the reduction in the
exercise price of all of the outstanding stock options from $5.00 per share to
$3.00 per share. The re-pricing will require that all options be accounted for
in accordance with variable plan accounting, which requires that the value of
these options are measured at their intrinsic value and any change in that value
be charged to the income statement each quarter based on the difference (if any)
between the intrinsic value and the then-current market value of the common
stock.

In July 2003, the compensation and stock option committee of the Company's
Board, acting pursuant to the Company's 2002 stock option plan, granted 26
employees and officers options to purchase an aggregate of 495,000 shares of the
Company's common stock at a price of $5.15 per share. One-half of each option
grant vests with the passage of time and the continued employment of the

F-72

recipient, in three equal increments, on the first, second and third anniversary
of the date of grant. The other half of each grant will either vest or be
rescinded based on the performance of the Company in 2003. The compensation and
stock option committee of the Company's Board has not yet made a determination
regarding whether the 2003 performance criteria were satisfied. If vested and
not exercised, the options will expire on the 10th anniversary of the date of
grant.

Further Lane

On July 29, 2003, Motient entered into a letter agreement with Further Lane
Asset Management Corp. under which Further Lane is providing investment advisory
services to Motient. In connection with the execution of this letter agreement,
Motient issued Further Lane a warrant to purchase 200,000 shares of its common
stock. The exercise price of the warrant is $5.10 per share. The warrant is
immediately exercisable upon issuance and has a term of five years. The fair
value of the warrant was estimated at $927,000 using a Black-Scholes model. In
September 2003, we recorded a non-cash consultant compensation charge of
$927,000 based on this valuation.

Further Cost Reduction Actions

Please see Note 1, "Organization and Going Concern - - Cost Reduction Actions".

UPS Revenue

Please see Note 1, "Organization and Going Concern - - UPS Revenue".

Management and Board Changes

On July 16, 2002, W. Bartlett Snell resigned as Director, senior vice president
and chief financial officer.

On January 17, 2003, David Engvall resigned as senior vice president, general
counsel and secretary.

On March 18, 2003, Brandon Stranzl resigned from the Board of Directors.

On April 17, 2003, the board of directors elected Christopher W. Downie to the
position of Vice President, Chief Financial Officer and Treasurer. Mr. Downie
had previously been a consultant with CTA, working on Motient matters, since May
2002.

On June 20, 2003, Jared Abbruzzese resigned his position as Chairman of the
Board. Steven Singer was elected Chairman of the Board and a new director, Peter
Aquino, was elected to the Board. Mr. Aquino is a senior managing director for
CTA.

F-73

On February 10, 2004, the Company and Walter V. Purnell, Jr. mutually agreed to
end his employment as President and Chief Executive Officer of Motient and all
of its wholly owned subsidiaries. Concurrently, Mr. Purnell resigned as a
director of such entities and of MSV and all of its subsidiaries.

On February 18, 2004, Daniel Croft, Senior Vice President, Marketing and
Business Development, and Michael Fabbri, Senior Vice President, Sales, were
relieved of their duties as part of a reduction in force.

Change in Accountants

On May 31, 2002, the Company dismissed Arthur Anderson as its independent
auditors. On July 10, 2002 the Company engaged PricewaterhouseCoopers as its
independent auditors.

On April 17, 2003, the Company dismissed PricewaterhouseCoopers as its
independent auditors, effective upon the completion of services related to the
audit of the Company's consolidated financial statements for the period May 1,
2002 to December 31, 2002.

On April 25, 2003, the Company's Board approved the engagement of Ehrenkrantz
Sterling & Co. LLC as its independent auditors to (i) re-audit the Company's
consolidated financial statements for the fiscal year ended December 31, 2000
and the fiscal year ended December 31, 2001, and (ii) audit the Company's
consolidated financial statements for the interim period from January 1, 2002 to
April 30, 2002, and the fiscal year that will end on December 31, 2003.

On March 2, 2004, Motient dismissed PricewaterhouseCoopers as its independent
auditors effective immediately. The audit committee of the Company's Board
approved the dismissal of PricewaterhouseCoopers. PricewaterhouseCoopers was
previously appointed to audit Motient's consolidated financial statements for
the period May 1, 2002 to December 31, 2002, and, by its terms, such engagement
was to terminate upon the completion of services related to such audit.
PricewaterhouseCoopers has not reported on Motient's consolidated financial
statements for such period or for any other fiscal period. On March 2, 2004, the
audit committee engaged Ehrenkrantz Sterling & Co. LLC as Motient's independent
auditors to replace PricewaterhouseCoopers to audit Motient's consolidated
financial statements for the period May 1, 2002 to December 31, 2002.

For further details regarding the change in accountants, please see the
Company's current report on Form 8K filed with the SEC on April 23, 2003 and the
Company's amendment to its current report on Form 8-K/A filed with the SEC on
April 23, 2003 and March 9, 2004.

F-74

CTA Arrangements

In November 2003, the Company engaged CTA to provide a valuation of its equity
interest in MSV as of December 31, 2002. CTA was paid $150,000 for this
valuation.

On January 30, 2004, the Company engaged CTA to act as chief restructuring
entity. The term of CTA's engagement is currently scheduled to end on August 1,
2004. As consideration for this work, Motient agreed to pay to CTA a monthly fee
of $60,000, one-half of which will be paid monthly in cash and one-half of which
will be deferred. The new agreement amends our existing consulting arrangement
with CTA.

F-75

QUARTERLY FINANCIAL DATA
(dollars in thousands, except for per share data)
(unaudited)

Predecessor Company through April 30, 2002 and
Successor Company from May 1, 2002 to December 31, 2002 Predecessor Company
------------------------------------------------------- -------------------
2002-Quarters 2001-Quarters (restated)
------------- ------------------------

Predecessor (Successor
Company) Company)
1 Month 2 Months
(Predecessor Ended Ended (Successor (Successor
Company) April June 30, Company) Company)
3/31/02 30, 2002 2002 9/30/02 12/31/02 3/31/01 6/30/01 9/30/01 12/31/01
------- -------- ---- ------- -------- ------- ------- ------- --------

Revenues $ 16,683 $ 5,690 $ 8,719 $ 13,297 $ 14,601 $ 22,565 $ 22,641 $ 23,547 $ 21,513
Operating expenses (1) 32,445 11,358 19,796 25,426 25,195 48,225 47,832 50,342 41,092
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Loss from operations (15,762) (5,668) (11,077) (12,129) (10,954) (25,660) (25,191) (26,795) (19,579)
Net Income (loss) $ (35,429) $ 267,408 $ (13,010) $ (16,644) $ (29,904) (54,948) (65,317) (49,636) (99,597)
Basic and Diluted Loss Per
Share of common stock $ (0.61) $ 4.58 $ (0.52) $ (0.66) $ (1.19) $ (1.11) $ (1.32) $ (0.99) $ (1.81)
Weighted-average common
shares outstanding
during the period 58,256 58,366 25,097 25,097 25,097 49,639 49,654 50,175 55,027
Market price per share (3)
High $ 0.45 $ 0.040 $ 5.90 $ 4.45 $ 3.40 $ 6.59 $ 2.05 $ 1.10 $ 0.60
Low $ 0.055 $ 0.080 $ 3.60 $ 0.40 $ 0.65 $ 1.25 $ 0.38 $ 0.09 $ 0.05

Predecessor Company
2000-Quarters (restated)
3/31/00 6/30/00 9/30/00 12/31/00
------- ------- ------- --------

Revenues $22,425 $23,945 $25,036 $24,350
Operating expenses (1) 60,324 60,026 79,841 78,480
------ ------ ------ ------
Loss from operations (37,899) (36,081) (54,805) (54,130)
Net Income (loss) (8,234) (39,235) (47,677) (47,419)
Basic and Diluted Loss Per
Share of common stock $(0.17) $(0.79) $(0.96) $(0.96)
Weighted-average common
shares outstanding
during the period 49,094 49,502 49,532 49,564
Market price per share (3)
High $41.50 $24.31 $16.06 $14.31
Low $14.25 $7.88 $10.25 $3.31

(1) Operating expenses include restructuring charges of approximately $25,000
in the second quarter of 2002, $4.7 million in the third quarter of 2001.
Of the $4.7 million restructuring expense in 2001, $3.8 million was paid in
2001. Of the $0.6 million restructuring expense in 2002, $0.5 million was
paid in 2002.
(2) Loss per share calculations for each of the quarters are based on the
weighted average number of shares outstanding for each of the periods, and
the sum of the quarters is not equal to the full year loss per share amount
due to rounding.
(3) Until January 14, 2002, the Company's common stock was listed under the
symbol MTNT on the Nasdaq Stock Market. The Company voluntarily delisted
from the Nasdaq Stock Market on January 14, 2002 as a result of its Chapter
11 bankruptcy filing. The Company's common stock is currently traded under
the symbol MNCP on the Pink Sheets. The quarterly high and low sales price
represents the intra-day prices in the Nasdaq Stock Market for the
Company's pre-reorganization common stock for the periods indicated for
2001 and the high and low bid prices for our pre- and post-reorganization
common stock for the periods indicated. The quotations represent
inter-dealer quotations, without retail markups, markdowns or commissions,
and may not necessarily represent actual transactions. As of December 31,
2003, there were 11 stockholders of record of the Company's common stock.

F-76

Summary of Impact of the Restatement of Financial Statements

The revised accounting treatment described in Note 2 ("Significant Accounting
Policies -- Restatement of Financial Statements") requires that certain
adjustments be made to the income statements and balance sheets for the
respective quarters of 2000, 2001 and the quarter ended March 31, 2002. The
effect of these adjustments is illustrated in the table below. The adjustments
reflected in the table below were reviewed by our independent auditor,
Ehrenkrantz Sterling & Co. LLC. Certain of the adjustments are based on
assumptions that we have made about the fair value of certain assets.

Quarter Ended March 31, Quarter Ended June 30, Quarter Ended September 30,
2000 2000 2000
---- ---- ----
(Unaudited) (Unaudited) (Unaudited)
As reported As restated As reported As restated As reported As restated
----------- ----------- ----------- ----------- ----------- -----------

(in thousands)

Net Revenue $22,170 $22,425 $25,689 $23,945 $26,657 $25,036
Loss from Operations (38,336) (37,899) (36,513) (36,081) (54,111) (54,805)
Net Loss (3,994) (8,234) (39,667) (39,235) (46,983) (47,677)
Basic and Fully Diluted EPS $(0.08) $(0.07) $(0.80) $(0.79) $(0.95) $(0.96)
Total Assets 1,379,595 1,424,392 1,391,860 1,438,970 1,577,864 1,626,038
Total Liabilities 817,674 866,569 741,883 891,064 879,221 919,523
Stockholders' Equity (Deficit ) 48,189 44,091 29,492 37,920 47,927 55,798
Total Liabilities &
Stockholders' Deficit 1,379,595 1,424,392 1,391,860 1,438,970 1,577,864 1,626,038

Quarter Ended March 31, Quarter Ended June 30, Quarter Ended September 30,
2001 2001 2001
---- ---- ----
(Unaudited) (Unaudited) (Unaudited)
As reported As restated As reported As restated As reported As restated
----------- ----------- ----------- ----------- ----------- -----------

(in thousands)

Net Revenue $23,407 $22,565 $23,657 $22,641 $24,447 $23,547
Loss from Operations (25,217) (25,660) (25,224) (25,191) (25,933) (26,795)
Net Loss (54,006) (54,948) (65,324) (65,317) (48,707) (49,636)
Basic and Fully
Diluted EPS $(1.09) $(1.11) $(1.32) $(1.32) $(0.97) $(0.99)
Total Assets 536,608 536,772 485,682 486,694 448,542 449,474
Total Liabilities 588,579 580,840 599,931 593,032 610,106 604,055
Stockholders' Deficit (51,971) (44,068) (114,249) (106,338) (161,564) (154,582)
Total Liabilities &
Stockholders' Deficit 536,608 536,772 485,682 486,694 448,542 449,474

F-77

Quarter Ended December 31, Year Ended December 31, Quarter Ended March 31,
2001 2001 2001
---- ---- ----
(Unaudited) (Unaudited) (Unaudited)
As reported As restated As reported As restated As reported As restated
----------- ----------- ----------- ----------- ----------- -----------

(in thousands)

Net Revenue $21,782 $21,513 $93,293 $90,265 $16,495 $16,683
Loss from Operations (18,622) (19,579) (94,996) (97,223) (15,970) (15,763)
Net Loss (124,052) (99,597) (292,089) (269,497) (32,885) (35,430)
Basic and Fully
Diluted EPS $(2.25) $(1.81) $(5.71) $(5.27) $(0.56) $(0.61)
Total Assets 209,617 240,465 209,617 240,465 177,628 205,283
Total Liabilities 485,086 471,614 485,086 471,614 485,681 471,559
Stockholders' Deficit (275,469) (231,149) (275,469) (231,149) (308,053) (266,277)
Total Liabilities &
Stockholders' Deficit 209,617 240,465 209,617 240,465 177,628 205,283

F-78

SCHEDULE I
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 2000 (restated) AND 2001(restated),
FOUR MONTHS ENDED APRIL 30, 2002 AND EIGHT MONTHS ENDED DECEMBER 31, 2002

Charged
Balance at to Costs
Beginning and Balance at End
Description of Period Expenses Deductions of Period
---------- -------- ---------- ---------

Predecessor Company
- -------------------
Year Ended December 31, 2000
Allowance for doubtful accounts $1,225 $1,668 $(1,576) $1,317
Year Ended December 31, 2001
Allowance for doubtful accounts $1,317 $1,375 $(1,728) $964
Four Months Ended April 30, 2002
Allowance for doubtful accounts $964 $(52) $(139) $773
================================================================================================================
Successor Company
- -----------------
Eight Months Ended December 31, 2002
Allowance for doubtful accounts $773 $994 $(764) $1,003

Charged
Balance at to Costs
Beginning and Balance at End
Description of Period Expenses Deductions of Period
--------- -------- ---------- ---------
Predecessor Company
- -------------------
Year Ended December 31, 2000
Allowance for Obsolescence $-- $4,623 $(2,990) $1,633
Year Ended December 31, 2001
Allowance for Obsolescence $1,633 $7,891 $(2,451) $7,073
Four Months Ended April 30, 2002
Allowance for Obsolescence $7,073 $4,687 $(797) $10,963
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Successor Company
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Eight Months Ended December 31, 2002
Allowance for Obsolescence $10,963 $287 $(1,699) $9,551

F-79