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

FORM 8-K/A

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): June 10, 2008

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

NEVADA		001-33807		26-1232727
(State or other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)

90 INVERNESS CIRCLE E. ENGLEWOOD, COLORADO		80112
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: (303) 706-4000

(Former name or former address if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

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

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

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

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

Report of Friedman LLP, Independent Registered Public Accounting Firm for the years ended December 31, 2007 and 2006

Consolidated Statements of Operations for the years ended December 31, 2007, 2006 (as restated) and 2005

Consolidated Balance Sheets as of December 31, 2007 and 2006 (as restated)

Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006 (as restated) and 2005

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2007, 2006 (as restated) and 2005

Notes to Consolidated Financial Statements (as restated)

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2008 and 2007 (unaudited)

Condensed Consolidated Balance Sheets as of June 30, 2008 and December 31, 2007 (unaudited)

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2007 (unaudited)

Notes to Condensed Consolidated Financial Statements (unaudited)

Unaudited Pro Forma Condensed Combined Statement of Operations for the fiscal year ended December 31, 2007

Unaudited Pro Forma Condensed Combined Statement of Operations for the six months ended June 30, 2008

Exhibit 23.1		Consent of Independent Registered Public Accounting Firm
Exhibit 99.1		Report of Friedman LLP, Independent Registered Public Accounting Firm for the years ended December 31, 2007 and 2006 Consolidated Statements of Operations for the years ended December 31, 2007, 2006 (as restated) and 2005 Consolidated Balance Sheets as of December 31, 2007 and 2006 (as restated) Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006 (as restated) and 2005 Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2007, 2006 (as restated) and 2005 Notes to Consolidated Financial Statements (as restated)
Exhibit 99.2		Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2008 and 2007 (unaudited) Condensed Consolidated Balance Sheets as of June 30, 2008 and December 31, 2007 (unaudited) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2007 (unaudited) Notes to Condensed Consolidated Financial Statements (unaudited)
Exhibit 99.3		Unaudited Pro Forma Condensed Combined Statement of Operations for the fiscal year ended December 31, 2007 Unaudited Pro Forma Condensed Combined Statement of Operations for the six months ended June 30, 2008

		ECHOSTAR CORPORATION
Date: August 25, 2008		By:	/s/ Bernard L. Han
			Bernard L. Han Executive Vice President and Chief Financial Officer

Exhibit No.		Description
Exhibit 23.1		Consent of Independent Registered Public Accounting Firm
Exhibit 99.1		Report of Friedman LLP, Independent Registered Public Accounting Firm for the years ended December 31, 2007 and 2006 Consolidated Statements of Operations for the years ended December 31, 2007, 2006 (as restated) and 2005 Consolidated Balance Sheets as of December 31, 2007 and 2006 (as restated) Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006 (as restated) and 2005 Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2007, 2006 (as restated) and 2005 Notes to Consolidated Financial Statements (as restated)
Exhibit 99.2		Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2008 and 2007 (unaudited) Condensed Consolidated Balance Sheets as of June 30, 2008 and December 31, 2007 (unaudited) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2007 (unaudited) Notes to Condensed Consolidated Financial Statements (unaudited)
Exhibit 99.3		Unaudited Pro Forma Condensed Combined Statement of Operations for the fiscal year ended December 31, 2007 Unaudited Pro Forma Condensed Combined Statement of Operations for the six months ended June 30, 2008

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-148416) of EchoStar Corporation of our report dated March 31, 2008 relating to the consolidated financial statements of TerreStar Corporation and Subsidiaries, which appears in this Current Report on Form 8-K/A of EchoStar Corporation dated June 10, 2008.

/s/ Friedman LLP

East Hanover, New Jersey
August 25, 2008

EXHIBIT 99.1

TERRESTAR CORPORATION

Index to Consolidated Financial Statements and Financial Statement Schedule

		Page
		Reference
Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm			F-1
Consolidated Statements of Operations for the years ended December 31, 2007, 2006 (as restated) and 2005			F-2
Consolidated Balance Sheets as of December 31, 2007 and 2006 (as restated)			F-3
Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006 (as restated) and 2005			F-4
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2007, 2006 (as restated) and 2005			F-5
Notes to Consolidated Financial Statements (as restated)			F-6

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of
TerreStar Corporation:

We have audited the accompanying consolidated balance sheets of TerreStar Corporation (formerly Motient Corporation) and subsidiaries, as of December 31, 2007 and 2006 and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2007. Our audits 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 based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of TerreStar Corporation and subsidiaries as of December 31, 2007 and 2006, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2007, in conformity with U. S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 3 to the consolidated financial statements, TerreStar Corporation and subsidiaries has restated previously issued consolidated financial statements as of December 31, 2006 and for the year ended December 31, 2006.

As discussed in Notes 2 and 11 to the consolidated financial statements, TerreStar Corporation and subsidiaries changed its method of accounting for stock-based compensation during the year ended December 31, 2006 as a result of adopting Statement of Financial Accounting Standard No. 123(R), Share Based Payment.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of TerreStar Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 31, 2008 expressed an adverse opinion on the effectiveness of internal control over financial reporting.

/s/ Friedman LLP

East Hanover, New Jersey
March 31, 2008

TERRESTAR CORPORATION

Consolidated Statements of Operations
For the Years Ended December 31, 2007, 2006 and 2005
(In thousands, except per share amounts)

						2006
						As restated -
		2007				See Note 3				2005
Operating Expenses
General and administrative (including expenses related to MSV, a related party, of $668, $313 and $1,309 and Hughes, a related party, of $1,137, $0 and $0 for the years ended December 31, 2007, 2006 and 2005, respectively)		$	114,848			$	84,253			$	29,265
Research and development			43,067				10,549				2,456
Depreciation and amortization			18,222				6,796				3,480
Loss on impairment of intangibles			6,699				4,909				—
Gain on asset disposal			(123	)			—				—
Total operating expenses			182,713				106,507				35,201
Operating loss from continuing operations			(182,713	)			(106,507	)			(35,201	)
Interest expense			(45,098	)			(2,608	)			—
Other expense			(7,543	)			—				—
Interest and other income			12,597				7,948				7,582
Equity in losses of MSV			(7,338	)			(30,079	)			(25,059	)
Minority interests in losses of TerreStar Networks			23,262				20,655				3,263
Minority interests in losses of TerreStar Global			1,198				654				—
Gain on investments			—				11,260				—
Decrease in dividend liability			71,046				—				—
Other than temporary impairment-SkyTerra			(106,800	)			—				—
Loss from continuing operations before income taxes			(241,389	)			(98,677	)			(49,415	)
Income tax benefit (expense)			2,248				(4,535	)			—
Net loss from continuing operations			(239,141	)			(103,212	)			(49,415	)
Loss from discontinued operations			—				(30,422	)			(89,866	)
Net loss			(239,141	)			(133,634	)			(139,281	)
Less:
Dividends on Series A and Series B Cumulative Convertible Preferred Stock			(23,232	)			(23,627	)			(16,717	)
Accretion of issuance costs associated with Series A and Series B			(4,542	)			(4,029	)			(2,409	)
Net loss available to Common Stockholders		$	(266,915	)		$	(161,290	)		$	(158,407	)
Basic & Diluted Loss Per Share—Continuing Operations		$	(3.22	)		$	(2.01	)		$	(1.10	)
Basic & Diluted Loss Per Share—Discontinued Operations		$	—			$	(0.47	)		$	(1.45	)
Basic & Diluted Loss Per Share		$	(3.22	)		$	(2.48	)		$	(2.55	)
Basic & Diluted Weighted-Average Common Shares Outstanding			83,016				64,966				62,072

See accompanying Notes to Consolidated Financial Statements

TERRESTAR CORPORATION

Consolidated Balance Sheets
As of December 31, 2007 and 2006
(In thousands, except per share amounts)

						2006
						As restated -
		2007				See Note 3
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	89,134			$	171,665
Cash committed for satellite construction costs			2,814				24,486
Restricted cash for Series A and Series B Cumulative convertible preferred stock dividends			—				10,723
Restricted cash for Senior Secured Notes			—				13,087
Deferred issuance costs associated with Series A and Series B Cumulative convertible preferred stock			4,447				4,255
Deferred issuance costs associated with Senior Secured Notes			—				5,708
Deferred issuance costs associated with TerreStar Notes			2,032				—
Assets held for sale			—				367
Other current assets			9,131				2,602
Total current assets			107,558				232,893
Restricted investments			2,648				6,255
Property and equipment, net (including amounts to Hughes, a related party, of $36,719 and $10,998 at December 31, 2007 and 2006, respectively)			571,151				259,169
Intangible assets, net			212,256				144,265
Investment in MSV			—				184,665
Investment in SkyTerra			103,733				—
Investment in SkyTerra—Restricted			221,575				254,490
Deferred issuance costs associated with Series A and Series B Cumulative convertible preferred stock			5,958				10,692
Deferred issuance costs associated with TerreStar Notes			10,415				—
Deferred issuance costs associated with Senior Secured PIK Notes			1,112				—
Other non-current assets			6,817				—
Total assets		$	1,243,223			$	1,092,429
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses (including amounts due to MSV, a related party, of $131 and $127 and Hughes, a related party, of $3,660 and $0 at December 31, 2007 and 2006, respectively)		$	42,720			$	12,415
Accounts payable to Loral for satellite construction contract			503				9,073
Accrued income taxes payable			—				4,641
Obligations under capital leases			59				—
Deferred rent and other current liabilities			944				1,199
Series A and Series B Cumulative Convertible Preferred Stock dividends payable			8,368				8,174
Senior Secured Notes and accrued interest, thereon			—				202,267
Current liabilities of discontinued operations			17				45
Total current liabilities			52,611				237,814
Obligations under capital leases			97				—
Deferred rent and other long-term liabilities			1,758				3,049
SkyTerra investment dividends payable			183,444				254,490
TerreStar Notes and accrued interest, thereon			567,955				—
Total liabilities			805,865				495,353
Commitments and Contingencies
Minority interest in TerreStar Networks			12,141				68,617
Minority interest in TerreStar Global			—				1,633
Series A cumulative convertible preferred stock ($0.01 par value, 450,000 shares authorized and 90,000 shares issued and outstanding at December 31, 2007 and December 31, 2006)			90,000				90,000
Series B cumulative convertible preferred stock ($0.01 par value, 500,000 shares authorized and 318,500 shares issued and outstanding at December 31, 2007 and December 31, 2006			318,500				318,500
STOCKHOLDERS’ EQUITY:
Common stock; voting (par value $0.01; 200,000,000 shares authorized, 91,378,041 and 73,663,208 shares issued, 87,426,839 and 69,712,006 shares outstanding at December 31, 2007 and December 31, 2006, respectively)			914				737
Additional paid-in capital			806,195				631,973
Common stock purchase warrants			64,097				73,200
Less: 3,951,202 common shares held in treasury stock at December 31, 2007 and December 31, 2006			(73,877	)			(73,877	)
Accumulated other comprehensive income			10				—
Accumulated deficit			(780,622	)			(513,707	)
Total stockholders’ equity			16,717				118,326
Total liabilities and stockholders’ equity		$	1,243,223			$	1,092,429

See accompanying Notes to Consolidated Financial Statements

TERRESTAR CORPORATION

Consolidated Statements of Cash Flows
For the Years Ended December 31, 2007, 2006 and 2005
(In thousands, except per share amounts)

						2006
						As restated -
		2007				See Note 3				2005
CASH FLOWS FROM CONTINUING OPERATING ACTIVITIES:
Net loss		$	(239,141	)		$	(133,634	)		$	(139,281	)
Adjustments to reconcile net loss to net cash used in continuing operating activities:
Loss from discontinued operations			—				30,422				89,866
Depreciation and amortization			18,222				6,796				3,480
Write off of financing fees			5,708				—				—
Equity in losses of MSV			7,338				30,079				25,059
Minority interests in losses of TerreStar Global			(1,198	)			(654	)			—
Minority interests in losses of TerreStar Networks			(23,262	)			(20,655	)			(3,263	)
Loss on investments			—				(11,260	)			—
Gain on asset disposal			(133	)			—				—
Loss on capital lease disposal			10				—				—
Amortization of deferred financing costs			1,778				538				—
Non-cash 401(k) match			—				156				254
Stock-based compensation			25,111				35,756				11,937
Loss on impairment of intangibles			6,699				4,909				—
Restricted stock forfeited			(42	)			—				—
Interest income			482				—				—
Other than temporary impairment-cost method investment			106,800				—				—
Decrease in dividend liability			(71,046	)			—				—
Changes in assets and liabilities:
Other current assets			(7,065	)			(345	)			(1,413	)
Accounts payable and accrued expenses (including payments to MSV, a related party, of $536, $1,949, and $3,948 and Hughes, a related party, of $920, $0 and $0 for the years ended December 31, 2007, 2006 and 2005, respectively)			20,088				9,155				2,493
Other noncurrent assets			(6,000	)			—				—
Accrued interest			38,035				2,267				—
Deferred rent and other liabilities			(1,546	)			4,242				(4	)
Net cash used in continuing operating activities		$	(119,162	)		$	(42,228	)		$	(10,872	)
CASH FLOWS FROM CONTINUING INVESTING ACTIVITIES:
Cash acquired in TerreStar Networks asset purchase		$	—			$	—			$	6,165
(Purchase) Proceeds of restricted cash and investments			45,423				61,511				(110,116	)
Proceeds from the sale of investments			—				46,951				—
Proceeds from TerreStar Global rights offering			—				672				—
Proceeds from assets held for sale			500				—				—
Accounts payable to Loral for satellite construction contract			(9,073	)			(59,771	)			—
Notes receivable—TerreStar Canada			(750	)			—				—
Additions to intangible assets			(734	)			—				—
Additions to property and equipment (including payments to Hughes, a related party, of $33,276, $10,998 and $3,820 for the years ended December 31, 2007, 2006, and 2005, respectively)			(281,538	)			(175,808	)			(7,804	)
Net cash used in continuing investing activities		$	(246,172	)		$	(126,445	)		$	(111,755	)
CASH FLOWS FROM CONTINUING FINANCING ACTIVITIES:
Proceeds from issuance of Series A Cumulative Convertible Preferred Stock		$	—			$	—			$	408,500
Issuance costs associated with Series A and Series B Cumulative Convertible Preferred Stock			—				—				(17,570	)
Proceeds from issuance of Senior Secured Notes			—				200,000				—
Proceeds from issuance of TerreStar Notes			500,000				—				—
Proceeds from issuance of equity securities			6,708				18,246				3,525
Repayment of notes payable			—				—				(8,739	)
Repayments of the Senior Secured Notes			(200,000	)			—				—
Payments for capital lease obligations			(37	)			—				—
Purchase of treasury stock			—				(6,791	)			(67,086	)
Dividends paid on Series A and B Cumulative Convertible Preferred Stock			(13,086	)			(21,446	)			(10,723	)
Debt issuance costs and other charges			(14,421	)			(6,245	)			—
Net cash provided by continuing financing activities		$	279,164			$	183,764			$	307,907
Net cash provided by (used in) continuing operations		$	(86,170	)		$	15,091			$	185,280
Net cash used in discontinued operating activities		$	(28	)		$	(18,435	)		$	(21,335	)
Net cash provided by discontinued investing activities		$	3,667			$	(4,515	)		$	(116	)
Net cash provided by (used in) discontinued operations			3,639				(22,950	)			(21,451	)
Net increase (decrease) in cash and cash equivalents			(82,531	)			(7,859	)			163,829
CASH AND CASH EQUIVALENTS, beginning of period			171,665				179,524				15,695
CASH AND CASH EQUIVALENTS, end of period		$	89,134			$	171,665			$	179,524

See accompanying Notes to Consolidated Financial Statements

TERRESTAR CORPORATION

Consolidated Statements of Changes in Stockholders’ Equity
For the Years Ended December 31, 2007, 2006 and 2005
(In thousands, except per share amounts)

														Common												Accumulated
		Common Stock								Additional				Stock												Other
						Par				Paid-In				Purchase				Treasury Stock								Comprehensive				Accumulated
		Shares				Value				Capital				Warrants				Shares				Amount				Income				Deficit				Total
BALANCE, December 31, 2004			51,544,596			$	516			$	399,635			$	28,589				—			$	—			$	—			$	(194,009	)		$	234,731
Common Stock issued under the 401(k) Savings and Stock Purchase Plan			14,127				—				254				—				—				—				—				—				254
Sales of Common Stock, Net of Expenses			12,704,782				127				370,853				—				—				—				—				—				370,980
Common Stock issued for exercise of stock options			447,535				4				1,339				—				—				—				—				—				1,343
Issuance of Common Stock Warrants			—				—				(48,908	)			61,071				—				—				—				—				12,163
Common Stock issued for exercise of common stock purchase warrants			1,717,678				17				17,160				(15,060	)			—				—				—				—				2,117
Compensatory stock options issued to employees and consultants			—				—				7,754				—				—				—				—				—				7,754
Restricted Stock			177,786				2				4,690				—				—				—				—				—				4,692
Treasury Stock			—				—				—				—				(3,487,202	)			(67,086	)			—				—				(67,086	)
Net loss			—				—				—				—				—				—				—				(139,281	)			(139,281	)
Dividends on Series A and Series B Cumulative Convertible Preferred Stock			—				—				—				—				—				—				—				(16,717	)			(16,717	)
Accretion of issuance costs on Series A and Series B Cumulative Convertible Preferred Stock			—				—				—				—				—				—				—				(2,409	)			(2,409	)
BALANCE, December 31, 2005			66,606,504				666				752,777				74,600				(3,487,202	)			(67,086	)			—				(352,416	)			408,541
Common Stock issued under the 401(k) Savings and Stock Purchase Plan			7,806				—				156				—				—				—				—				—				156
Sales of Common Stock, Net of Expenses			6,252,721				63				93,455				—				—				—				—				—				93,518
Common Stock issued for exercise of stock options			121,165				1				494				—				—				—				—				—				495
Common Stock issued for exercise of common stock purchase warrants			145,012				2				1,843				(1,400	)			—				—				—				—				445
Exercise of TerreStar stock options			—				—				(1,715	)			—				—				—				—				—				(1,715	)
Stock option compensation expense			—				—				32,674				—				—				—				—				—				32,674
Restricted Stock issued			530,000				5				6,423				—				—				—				—				—				6,428
Treasury Stock acquired			—				—				—				—				(464,000	)			(6,791	)			—				—				(6,791	)
Net loss			—				—				—				—				—				—				—				(133,635	)			(133,635	)
Distribution of TerreStar Global			—				—				356				—				—				—				—				—				356
Dividends on Series A and Series B Cumulative Convertible Preferred Stock			—				—				—				—				—				—				—				(23,627	)			(23,627	)
Accretion of issuance costs on Series A and Series B Cumulative Convertible Preferred Stock			—				—				—				—				—				—				—				(4,029	)			(4,029	)
Dividend Liability			—				—				(254,490	)			—				—				—				—				—				(254,490	)
BALANCE, December 31, 2006, As restated—See Note 3			73,663,208				737				631,973				73,200				(3,951,202	)			(73,877	)			—				(513,707	)			118,326
Common stock issued under the 401(k) savings and stock purchase plan			834				—				10				—				—				—				—				—				10
Exchange of Common Stock (See Note 10)			15,128,642				151				123,273				—				—				—				—				—				123,424
Common Stock issued for exercise of stock options			44,393				—				2,179				—				—				—				—				—				2,179
Common Stock issued for exercise of common stock purchase warrants			1,500,045				15				13,607				(9,103	)			—				—				—				—				4,519
Stock option compensation expense							—				25,253				—				—				—				—				—				25,253
Restricted Stock forfeited			(20,000	)			—				(42	)			—				—				—				—				—				(42	)
Net loss			—				—				—				—				—				—				—				(239,141	)			(239,141	)
Dividends on Series A and Series B Cumulative Convertible Preferred Stock			1,060,919				11				9,942				—				—				—				—				(23,232	)			(13,279	)
Accretion of issuance costs on Series A and Series B Cumulative Convertible Preferred Stock			—				—				—				—				—				—				—				(4,542	)			(4,542	)
Translation Adjustments			—				—				—				—				—				—				10				—				10
BALANCE, December 31, 2007			91,378,041			$	914			$	806,195			$	64,097				(3,951,202	)		$	(73,877	)		$	10			$	(780,622	)		$	16,717

See accompanying Notes to Consolidated Financial Statements

TERRESTAR CORPORATION

Notes to Consolidated Financial Statements

Note 1. Organization and Description of Business

General

TerreStar Corporation was incorporated in 1988 under the laws of the State of Delaware. TerreStar Corporation is in the integrated satellite wireless communications business through its ownership of TerreStar Networks, its principal operating entity, and TerreStar Global. We changed our name from Motient Corporation to TerreStar Corporation in 2007.

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

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

Liquidity and Capital Resources

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

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

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

Our principal long-term liquidity needs are to fund the deployment and expansion of our terrestrial network, the design of our second generation handset and chipset, and orbital incentive payments related to our satellite contracts. In addition, we will need funds for working capital purposes, which we anticipate will grow as our operations expand. As of December 31, 2007, we had aggregate contractual payment obligations of approximately $753 million, consisting of approximately $186 million for the TerreStar Networks’ satellites, approximately $21 million for our operating leases in Reston, Virginia, Lincolnshire, Illinois, Richardson Park, Texas, data centers, site hosting agreements and approximately $546 million for obligations related to the build out of our terrestrial network. However, we have identified in excess of $400 million of these contractual obligations that can be eliminated or deferred. We intend to fund our long-term liquidity needs related to operations and ongoing network deployment through proceeds from the sale of investment securities, the incurrence of indebtedness, equity financings or a combination of these potential sources of liquidity. Although we believe that these sources will provide sufficient liquidity for us to meet our future liquidity and capital obligations, our ability to fund these needs will depend on our future performance, which will be subject in part to general economic, financial, regulatory and other factors that are beyond our control, including trends in our industry and technology developments. However, we may not be able to obtain this additional financing on terms acceptable to us or at all.

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

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

Narrative Description of the Business

TerreStar Networks Inc.

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

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

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

TerreStar Networks was initially created as a subsidiary of MSV established to, among other things, develop a satellite communications system using the S-band. On May 11, 2005, we began to increase our ownership interest in TerreStar Networks when, in conjunction with a spin-off of TerreStar Networks to the owners of MSV, we purchased an additional $200 million of newly issued TerreStar Networks common stock. In conjunction with this transaction, TerreStar Networks also entered into an agreement with MSV’s wholly-owned subsidiary, ATC Technologies, LLC (“ATC Technologies”) pursuant to which TerreStar Networks has a perpetual, royalty-free license to utilize ATC Technologies’ patent portfolio in the S-band, including those patents related to ATC, which we anticipate will allow us to deploy a communications network that seamlessly integrates satellite and terrestrial communications, giving a user ubiquitous wireless coverage in the U.S. and Canada.

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

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

We have the right to use two 10 MHz blocks of contiguous and unshared MSS S-band spectrum covering a population of over 330 million throughout the United States and Canada. All of our spectrum is eligible for ATC status. ATC authorization provides the ability to integrate terrestrial mobile services with MSS. We anticipate using this ATC authorization to create a two-way wireless communications network providing coverage, services and applications to mobile and portable wireless users. Our planned network is designed to allow an end user to seamlessly communicate with a terrestrial wireless network or our satellite through a conventional mobile device, optimizing service quality, continuity and geographic coverage.

We believe our planned all IP-based 4G network design will improve on existing network architecture and components to deliver greater network capacity, more efficiently and at a lower cost, than existing wireless networks. In December 2008, we plan to launch our first multi-spot beam geostationary satellite, TerreStar-1, which is designed so that the beams can be refocused dynamically. We are also currently developing a next-generation terrestrial network, which we believe will enable us to offer our integrated satellite/terrestrial service by the end of 2009. We are working with several vendors to develop a universal chipset architecture that can be incorporated into a wide range of mobile devices, including small, lightweight and inexpensive handsets.

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

Our Relationship with TerreStar Canada and 4371585 Communications

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

The Transfer Agreements also provide for, among other things, the license of certain intellectual property rights to TerreStar Canada, the grant to TerreStar Networks of an indefeasible right to use capacity on TerreStar-1, and the provision by TerreStar Networks to TerreStar Canada of various consulting and other services. In addition, we are required to fund TerreStar Canada’s operating losses.

TerreStar Networks owns 20% of the voting equity of TerreStar Canada as well as 33¹/₃% of the voting equity of TerreStar Canada Holdings, TerreStar Canada’s parent company. The remaining 80% of the voting equity of TerreStar Canada is held by TerreStar Canada Holdings and the remaining 66²/₃% of the voting equity of TerreStar Canada Holdings is held by 4371585 Communications. TerreStar Networks’ interests in TerreStar Canada and TerreStar Canada Holdings reflect the maximum ownership levels currently permitted by applicable Canadian telecommunications foreign ownership rules.

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

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

In connection with the restructuring, TMI Communications entered into an Agreement to be Bound and Release dated December 20, 2007 pursuant to which TMI Communications agreed to transfer to 4371585 Communications its 66²/₃% interest in TerreStar Canada Holdings and 4371585 Communications agreed to become bound by the terms and conditions of the TerreStar Canada Shareholders’ Agreement. Further, pursuant to the Agreement to be Bound and Release, each of the parties to the TerreStar Canada Shareholders’ Agreement released and discharged TMI Communications from its obligations under the TerreStar Canada Shareholders’ Agreement.

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

On May 29, 2007 and June 15, 2007, pursuant to our Master Services Agreement with TerreStar Canada, we loaned TerreStar Canada $0.4 million and $0.35 million, respectively. Each note pays interest at 15.15%, and both mature on January 1, 2009.

TerreStar Global Ltd.

TerreStar Global was initially formed in 2005 as a wholly-owned subsidiary of TerreStar Networks. We have consolidated the financial results of TerreStar Global since its inception. In late 2006, TerreStar Networks spun-off TerreStar Global to its stockholders. As a result, TerreStar Corporation became the indirect majority holder of TerreStar Global. In connection with the spin-off, TerreStar Networks made capital contributions to TerreStar Global of $5 million. In late 2006, TerreStar Global also raised an additional $5 million through a rights offering from its shareholders, in approximate proportion to their holdings, the majority of which came from TerreStar Corporation. As of December 31, 2007, TerreStar Corporation owned approximately 85% of the outstanding shares of TerreStar Global.

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

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

MSV and SkyTerra

On June 29, 2000, we formed a joint venture subsidiary, Mobile Satellite Ventures LP (“MSV”), with certain other parties, in which it owned 80% of the membership interests. Three investors unrelated to us owned the remaining 20% interests in MSV. The minority investors had certain participating rights which provided for their participation in certain major 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”, our investment in MSV has been recorded for all periods presented in the consolidated financial statements pursuant to the equity method of accounting. As a result of MSV’s capital transactions through 2004, our ownership interest decreased to 30%.

Through a series of transactions in 2005, we issued 12.7 million shares of our common stock and warrants to purchase common stock in exchange for 3.6 million MSV limited partnership units. In connection with these transactions, we allocated $100 million and $270 million of the excess of the purchase price to the proportionate underlying equity of MSV to identifiable intangibles (spectrum rights and intellectual property) and goodwill, respectively.

In 2006, we entered into the MSV Exchange Agreement, pursuant to which we agreed to exchange all of its interests in MSV and all of our shares of Mobile Satellite Ventures GP Inc. (“MSV GP”) for approximately 47.9 million shares of non-voting common stock of SkyTerra Communications, Inc. (“SkyTerra”) in one or more closings. As part of the agreement, we agreed to use its commercially reasonable efforts to distribute approximately 25.5 million SkyTerra shares to our common stockholders and approximately 4.4 million to preferred stockholders, to the extent the preferred holders convert to common stock. In September 2006, we exchanged approximately 60% of our MSV interests for approximately 29.1 million shares of SkyTerra non-voting common stock, of which 3.6 million were sold shortly thereafter. During 2007, we exchanged our remaining interests in MSV for approximately 18.9 million SkyTerra non-voting shares.

As of December 31, 2007 and 2006, our SkyTerra and MSV ownership interests were 42% and zero, respectively.

Note 2. Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany accounts are eliminated upon consolidation. Investments in which the company does not have the ability to exercise significant influence are carried at the lower of cost or estimated realizable value. The Company monitors investments for other than temporary declines in value and makes reductions in value when appropriate.

The Company’s investment in MSV was accounted for under the equity method since 2001. Accordingly, the investment in MSV was carried at cost, adjusted for the Company’s proportionate share of earnings or losses.

Reclassifications

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

Use of Accounting Estimates

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

The Company’s most significant estimates relating to its continuing operations include the valuation of stock based compensation, the valuation of deferred tax assets and long-lived assets. In addition, significant estimates related to the Company’s discontinued operations included its valuation for doubtful accounts and the valuation of long-lived terrestrial wireless assets.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The carrying amount of cash and cash equivalents approximates fair value because of the short maturity of those instruments.

Restricted Cash and Investments

At December 31, 2007, the Company had $5.5 million of restricted cash and investments held in money market escrow accounts. Included in that amount is approximately $2.8 million restricted in accordance with the Company’s satellite construction contract. In addition, approximately $2.3 million is restricted in accordance with the Company’s asset purchase agreement with Geologic Solutions, Inc. and Logo Acquisition Corporation, and approximately $0.4 million is restricted in accordance with various leases and security deposits.

The Company had $54.6 million of restricted cash and investments at December 31, 2006 held in money market escrow accounts and Certificates of Deposit. This amount is comprised of $24.5 million restricted in accordance with the Company’s satellite construction contract, $10.7 million restricted in accordance with the Company’s preferred stock agreements, which was paid in April 2007, and $13.1 million restricted in accordance with the TerreStar Corporation’s Senior Secured Notes and were reflected as current assets, which was also paid during 2007. Restricted investments of $6.3 million were reflected as non-current, of which $5.9 million was restricted in accordance with the Company’s assets purchase agreement with Geologic Solutions, Inc. and Logo Acquisition Corporation and $0.4 million was restricted in accordance with various lease and security deposits.

Allowance for Doubtful Accounts

We establish an allowance for doubtful accounts receivable sufficient to cover probable and reasonably estimable losses related to non-trade receivables. Our estimate of the allowance for doubtful accounts related to non-trade receivables is based on historical collection experience and known disputes. Accounts are written off as uncollectible at the discretion of management. This policy, while it currently relates to TerreStar Corporation’s discontinued operations, is the same policy TerreStar Corporation will use when its operations produce revenues.

Property and Equipment

We record property and equipment, or P&E, including leasehold improvements at cost. P&E consists of network, lab, office and computer equipment, internal use software, and leasehold improvements. The satellite and terrestrial network assets under construction primarily include materials, labor, equipment and interest related to the construction and development of our satellite and billing system. The satellite and terrestrial network assets under construction are not depreciated until placed into service. Interest capitalized in connection with the satellite and terrestrial network assets under construction totaled $27.6 million and $0.3 million in 2007 and 2006 respectively. Repair and maintenance costs are expensed as incurred.

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

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

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

Intangible Assets

Definite lived intangible assets primarily consist of intangible assets related to Federal Communications Commission (“FCC”) spectrum clearing frequencies and other intellectual property that were obtained in connection with several exchange transactions of TerreStar Corporation common stock for TerreStar Networks common stock with shareholders pursuant to an exchange agreement entered into in 2006. Definite lived intangible assets are amortized over an estimated economic useful life of fifteen years.

Valuation of Long-Lived and Intangible Assets

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

Investment in SkyTerra

We have accounted for our investment in SkyTerra at cost in accordance with APB 18, “The Equity Method of Accounting for Investments in Common Stock”. Our investment in SkyTerra was obtained as a result of the MSV Exchange Agreement in 2006. Our MSV partnership units were exchanged for shares in SkyTerra in both 2006 and 2007. Although our investment in common stock is non-voting, we determined the fair value of our investment based on the trading sales prices of SkyTerra shares as listed on the OTC Bulletin Board (“SKYT”).

Income Taxes

Income taxes are accounted for under the liability method whereby deferred tax asset and liability account balances are calculated at the balance sheet date using current tax laws and rates for the year in which the differences are expected to affect taxable income. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets if it is more likely that such assets will not be realized.

Fair Value of Financial Instruments

The fair value of certain of the Company’s financial instruments, including cash and cash equivalents and other accrued expenses approximate cost because of their short maturities. We value our debt instruments at cost. The fair value of investments is determined using quoted market prices for those securities or similar financial instruments.

Treasury Stock

We account for the purchase of treasury stock at cost. Upon reissuance of shares of treasury stock, we record any difference between the weighted-average cost of such shares and any proceeds received as additional paid-in-capital.

Stock Based Compensation

The Company adopted the fair value recognition provisions of SFAS No. 123(R), “Share Based Payment” on January 1, 2006. The Company elected the modified prospective transition method provided under SFAS 123(R) and consequently prior period results have not been restated to reflect, and do not include, the impact of SFAS 123(R). Under this transition method, compensation cost associated with stock-based awards recognized beginning in 2006 now includes compensation expense related to the grant date fair value for the remaining unvested portion of stock-based awards granted prior to December 31, 2005 and compensation expenses related to stock-based awards granted subsequent to December 31, 2005.

The fair value of options is estimated using the Black-Scholes option-pricing model which considers, among many factors, the expected life of the award and the expected volatility of the Company’s stock price.

Research and Development Costs

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

Earnings (Loss) per Common Share

The Company accounts for earnings per share in accordance with SFAS No. 128, “Earnings Per Share”. Basic earnings (loss) per common share is calculated by dividing income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. This includes the reported net income (loss) plus the loss attributable to preferred stock dividends and accretion. Diluted earnings (loss) per common share adjusts basic earnings (loss) per common share for the effects of potentially dilutive common shares. Potentially dilutive common shares include the dilutive effects of shares issuable under our equity plans computed using the treasury stock method, and the dilutive effects of shares issuable upon the conversion of our convertible Preferred Stock computed using the if-converted method.

Shares issuable under our equity plans were antidilutive in 2007, 2006 and 2005 because we incurred a net loss from continuing operations. For the years ended 2007, 2006, and 2005 we had approximately 690,000, 758,000 and 6.7 million options and warrants respectively that were exercisable because the average market price was greater than the exercise price. We also had 408,500 shares of preferred stock convertible into 12.3 million common shares which were not included since their effects were antidilutive for the years ended 2007, 2006 and 2005.

Translation of Foreign Currencies

The assets and liabilities of foreign subsidiaries are translated into U.S. dollars at year-end exchange rates, with resulting translation gains and losses accumulated in a separate component of shareholders’ equity. Income and expense items are translated into U.S. dollars at average rates of exchange prevailing during the period.

Comprehensive Income

Comprehensive income refers to the change in an entity’s equity during a period resulting from all transactions and events other than capital contributed by and distributions to the entity’s owners. For the Company, the only item other than net loss that is included in comprehensive income is foreign currency translation adjustments. Comprehensive loss was approximately $239 million, $134 million and $139 million for the years ended December 31, 2007, 2006 and 2005 respectively. Accumulated other comprehensive income as reflected in the Consolidated Balance Sheets, consists of cumulative foreign currency translation adjustments.

Recently Issued Accounting Pronouncements

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

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

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

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

In December 2007, the FASB issued Statement No. 141 (revised), “Business Combinations” which replaces FASB Statement No. 141, and applies to all business entities. This Statement makes significant amendments to other Statements and other authoritative guidance, and applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date.

Concentrations of Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and short-term investments. The Company periodically invests its cash balances in temporary or overnight investments. The Company’s short-term investments include debt securities such as commercial paper, time deposits, certificates of deposit, banker acceptances and marketable direct obligations of the United States Treasury with high credit quality financial institutions. At December 31, 2007, the Company had approximately $89 million of cash deposits, excluding restricted cash, in excess of amounts insured by the Federal Deposit Insurance Corporation. To date, the Company has not experienced any losses on cash deposits.

Note 3. Restatement to Previously Issued Financial Statements

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

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

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

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

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

		For the Year Ended December 31, 2006
		As Reported				Adjustments				Restated
Operating Expenses
General and administrative		$	75,395			$	8,858			$	84,253
Research and development			10,549				—				10,549
Depreciation and amortization			6,796				—				6,796
Loss on impairment of intangibles			4,909				—				4,909
Total operating expenses			97,649				8,858				106,507
Operating loss from continuing operations			(97,649	)			(8,858	)			(106,507	)
Interest expense			(2,608	)			—				(2,608	)
Interest and other income			7,948				—				7,948
Equity in losses of MSV			(30,079	)			—				(30,079	)
Minority interests in losses of TerreStar Networks			20,655				—				20,655
Minority interests in losses of TerreStar Global			654				—				654
Gain on investments			41,422				(30,162	)			11,260
Decrease in dividend liability			—				—				—
Other than temporary impairment-SkyTerra			—				—				—
Loss from continuing operations before income taxes			(59,657	)			(39,020	)			(98,677	)
Income tax benefit (expense)			(4,535	)			—				(4,535	)
Net loss from continuing operations			(64,192	)			(39,020	)			(103,212	)
Loss from discontinued operations			(30,422	)			—				(30,422	)
Net loss			(94,614	)			(39,020	)			(133,634	)
Less:
Dividends on Series A and Series B Cumulative Convertible Preferred Stock			(23,627	)			—				(23,627	)
Accretion of issuance costs associated with Series A and Series B			(4,029	)			—				(4,029	)
Net loss available to Common Stockholders		$	(122,270	)		$	(39,020	)		$	(161,290	)
Basic & Diluted Loss Per Share—Continuing Operations		$	(1.41	)		$	(0.60	)		$	(2.01	)
Basic & Diluted Loss Per Share—Discontinued Operations		$	(0.47	)		$	—			$	(0.47	)
Basic & Diluted Loss Per Share		$	(1.88	)		$	(0.60	)		$	(2.48	)
Basic & Diluted Weighted-Average Common Shares Outstanding			64,966				—				64,966

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

		December 31, 2006
		As Reported				Adjustments				Restated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	171,665			$	—			$	171,665
Cash committed for satellite construction costs			24,486				—				24,486
Restricted cash for Series A and Series B Cumulative convertible preferred stock dividends			10,723				—				10,723
Restricted cash for Senior Secured Notes			13,087				—				13,087
Deferred issuance costs associated with Series A and Series B Cumulative convertible preferred stock			4,255				—				4,255
Deferred issuance costs associated with Senior Secured Notes			5,708				—				5,708
Assets held for sale			367				—				367
Other current assets			2,602				—				2,602
Total current assets			232,893				—				232,893
Restricted investments			6,255				—				6,255
Property and equipment, net			259,169				—				259,169
Intangible assets, net			144,265				—				144,265
Investment in MSV			184,665				—				184,665
Investment in SkyTerra			293,510				(293,510	)			—
Investment in SkyTerra—Restricted			—				254,490				254,490
Deferred issuance costs associated with Series A and Series B Cumulative convertible preferred stock			10,692				—				10,692
Total assets		$	1,131,449			$	(39,020	)		$	1,092,429
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses		$	12,415			$	—			$	12,415
Accounts payable to Loral for satellite construction contract			9,073				—				9,073
Accrued income taxes payable			4,641				—				4,641
Deferred rent and other current liabilities			1,199				—				1,199
Series A and Series B Cumulative Convertible Preferred Stock dividends payable			8,174				—				8,174
Senior Secured Notes and accrued interest, thereon			202,267				—				202,267
Current liabilities of discontinued operations			45				—				45
Total current liabilities			237,814				—				237,814
Deferred rent and other long-term liabilities			3,049				—				3,049
SkyTerra investment dividends payable			—				254,490				254,490
Total liabilities			240,863				254,490				495,353
Commitments and Contingencies
Minority interest in TerreStar Networks			68,617				—				68,617
Minority interest in TerreStar Global			1,633				—				1,633
Series A cumulative convertible preferred stock			90,000				—				90,000
Series B cumulative convertible preferred stock			318,500				—				318,500
STOCKHOLDERS’ EQUITY:
Common stock			737				—				737
Additional paid-in capital			886,463				(254,490	)			631,973
Common stock purchase warrants			73,200				—				73,200
Less: 3,951,202 common shares held in treasury stock at December 31, 2007 and December 31, 2006			(73,877	)			—				(73,877	)
Accumulated deficit			(474,687	)			(39,020	)			(513,707	)
Total stockholders’ equity			411,836				(293,510	)			118,326
Total liabilities and stockholders’ equity		$	1,131,449			$	(39,020	)		$	1,092,429

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

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