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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-K







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

For the fiscal year ended December 31, 2008

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from                     
to

Commission file number: 001-33546





TERRESTAR CORPORATION

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 93-0976127                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|12010 Sunset Hills Road, Reston, VA                            |  | 20190                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

(703) 483-7800

(Registrants telephone number, including area code)

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



|                              |  |                                            
|----------------------------- |  | -------------------------------------------
|Common Stock, $0.01 par value |  | The NASDAQ Global Market                   
|(Title of each class)         |  | (Name of each exchange on which registered)

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





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

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

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

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

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



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

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

The aggregate market value of TerreStar Corporation Common Stock held by non-affiliates as of June 30, 2008 (the last business day of the most recently completed second quarter) was approximately $217.2 million.
For purposes of this calculation, affiliates represent only holders of more than 10% of TerreStar Corporation Common Stock and Common Stock held by Directors and Officers.

There were 122,628,088 shares of TerreStar Corporation Common Stock outstanding as of March 10, 2009.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrants definitive proxy statement filed under
Regulation 14A promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934 are incorporated by reference in Part III hereof.









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TABLE OF CONTENTS



|                                                     |  |                                                                                                              |  |   
|---------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------ |  | --
|PART I                                               |  |                                                                                                             
|                                                     | 
|Cautionary Note Regarding Forward-Looking Statements |  |                                                                                                             
|                                                     |  |                                                                                                             
|Item 1.                                              |  | Business                                                                                                     |  | 1 
|Item 1A.                                             |  | Risk Factors                                                                                                 |  | 22
|Item 1B.                                             |  | Unresolved Staff Comments                                                                                    |  | 41
|Item 2.                                              |  | Properties                                                                                                   |  | 41
|Item 3.                                              |  | Legal Proceedings                                                                                            |  | 42
|Item 4.                                              |  | Submission of Matters to a Vote of Security Holders                                                          |  | 44
|                                                     | 
|PART II                                              |  |                                                                                                             
|                                                     |  |                                                                                                             
|Item 5.                                              |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 45
|Item 6.                                              |  | Selected Financial Data                                                                                      |  | 47
|Item 7.                                              |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 48
|Item 7A.                                             |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 64
|Item 8.                                              |  | Financial Statements and Supplementary Data                                                                  |  | 64
|Item 9.                                              |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 64
|Item 9A.                                             |  | Controls and Procedures                                                                                      |  | 64
|Item 9B.                                             |  | Other Information                                                                                            |  | 66
|                                                     | 
|PART III                                             |  |                                                                                                             
|                                                     |  |                                                                                                             
|Item 10.                                             |  | Directors, Executive Officers and Corporate Governance                                                       |  | 69
|Item 11.                                             |  | Executive Compensation                                                                                       |  | 69
|Item 12.                                             |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 69
|Item 13.                                             |  | Certain Relationships and Related Transactions, and Director Independence                                    |  | 69
|Item 14.                                             |  | Principal Accountant Fees and Services                                                                       |  | 69
|                                                     | 
|PART IV                                              |  |                                                                                                             
|                                                     |  |                                                                                                             
|Item 15.                                             |  | Exhibits and Financial Statement Schedules                                                                   |  | 70
|                                                     |  | Signatures                                                                                                   |  | 75



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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 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 United States Securities and Exchange Commission (SEC) from time to time, including our
registration statements and 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 do not undertake any obligation to update these statements. Our actual results may differ significantly from the results discussed.

Basis of Presentation

In this report:



| |  |  | the terms we, our, and us refer to TerreStar Corporation and its subsidiaries, except where the context otherwise requires or as
otherwise indicated.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | TerreStar Networks refers to TerreStar Networks Inc., an indirect, majority-owned subsidiary of TerreStar Corporation.
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | BCE refers to BCE Inc., a Canadian corporation.
| | - |  | -------------------------------------------------



| |  |  | TerreStar Canada Holdings refers to TerreStar Networks Holdings (Canada) Inc., a Canadian corporation and parent company of TerreStar Canada.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | TerreStar Canada refers to TerreStar Networks (Canada) Inc., a Canadian corporation.
| | - |  | --------------------------------------------------------------------------------------



| |  |  | SkyTerra refers to SkyTerra Communications, Inc.
| | - |  | --------------------------------------------------



| |  |  | MSV refers to Mobile Satellite Ventures LP, now known as SkyTerra.
| | - |  | --------------------------------------------------------------------



| |  |  | TerreStar Global refers to TerreStar Global Ltd., an indirect, majority-owned subsidiary of TerreStar Corporation.
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | TerreStar Europe refers to TerreStar Europe Ltd., a wholly-owned subsidiary of TerreStar Global.
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | Harbinger refers to Harbinger Capital Partners and Harbinger Capital Management.
| | - |  | ----------------------------------------------------------------------------------



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PART I



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

General

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

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

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

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

As of December 31, 2008, we have four wholly-owned subsidiaries, MVH Holdings Inc., Motient Holdings Inc.,
CCTV Wireless I, LLC, and Port Merger Corporation. MVH Holdings Inc. and Motient Ventures Holdings Inc., a wholly owned subsidiary of MVH Holdings Inc., directly hold approximately 88% and 86% interests in TerreStar Networks and TerreStar Global,
respectively.

Narrative Description of the Business

TerreStar Networks Inc.

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



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

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

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

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

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

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



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Our Network

We believe that building a next-generation all IP-based network with flexible architecture will create significant advantages over existing wireless networks. An important element of our approach to network technology is the achievement of
transparency. Transparency means that devices on our network have similar size, weight, functionality and aesthetics as current standard wireless or emerging data devices and will be able to communicate with both terrestrial and
satellite networks without bulky external hardware. Historically, MSS-only networks have not been able to achieve transparency because the space segments lacked sufficient power and receiver sensitivity to enable communications with traditional
wireless equipment. We believe that MSS operators without ATC networks or MSS operators contemplating ATC networks without transparency may not be able to partner with large-scale manufacturers to offer appealing low-cost user devices and may not be
able to attract substantial volumes of users. As a result, these types of networks may not be able to support the device and service pricing we believe will be enabled by our network.

Our core network strategy is based on three elements:



| |  |  | the space segment;
| | - |  | ------------------



| |  |  | the terrestrial network; and
| | - |  | ----------------------------



| |  |  | a universal chipset architecture to be integrated into a wide range of mobile devices.
| | - |  | --------------------------------------------------------------------------------------

Space Segment

TerreStar-1. In 2005,
Loral commenced construction of our first multi-spot beam geostationary satellite, TerreStar-1, which was originally scheduled to be launched in November 2007, but has been subject to a series of delivery delays. In June 2008, we were notified that
Loral had revised its expected delivery date of TerreStar-1 from November 2008 to April 2009. Our remaining FCC milestones require that we launch TerreStar-1 in June 2009 and certify our network operational in August 2009, and our remaining Industry
Canada milestone requires that we successfully place the satellite into its assigned orbital position by August 2009.

TerreStar-1 is
designed to be a powerful, spectrally efficient satellite equipped with a large antenna (approximately 60 feet in diameter) that we believe will be the most powerful two-way commercial communications geostationary satellite launched into orbit at
the time of deployment. TerreStar-1 will offer up to 500 spot beams and a design life exceeding 15 years. The spot beams can be refocused dynamically to support increased network traffic in specific locations, enabling maximum network capacity as
well as providing additional short-term capacity in key locations during times of crisis.

Under the terms of the TerreStar-1 construction
contract, as amended in December 2007 (the TS-1 Agreement), the overall price for TerreStar-1 is approximately $221 million, of which our outstanding contractual obligation as of December 31, 2008 was $4.6 million. In addition to
the purchase price, we will pay orbital performance incentive, or OPI, payments of up to $38 million, not including interest, if certain performance criteria are met during the intended 15-year design life of the satellite. We have the right to
terminate our agreement with Loral for convenience in whole or in part upon thirty days notice, but if we choose to do so, certain substantial termination liability charges will apply.

TerreStar-2. In August 2006, in an effort to continue to meet our regulatory requirements and business objectives, we exercised our
contractual right with Loral to order our second satellite, TerreStar-2, under the TerreStar-2 construction contract, as amended in December 2007 (the TS-2 Agreement). TerreStar-2, which is intended to be a ground spare, is identical to
the TerreStar-1 satellite. Construction of TerreStar-2 commenced in September 2006. The firm fixed price for the TerreStar-2 satellite deliverables under the TS-2 Agreement, is $192 million, of which, we have paid Loral $149 million as of
December 31, 2008. Scheduled payments in 2009 total $33 million. In addition to the firm fixed price, the TS-2 Agreement also includes OPI payments of up to



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$33 million, not including interest, over the life of the satellite, of which $16.5 million is covered by TerreStar-2 Purchase Money Credit Agreement
(Credit Agreement). We are working with Loral to ensure that completion of the construction of TerreStar-2 is closely synchronized with our needs and resources.

Satellite launch services. In November 2006, we entered into a $138 million launch services contract with Arianespace that entitled us to a launch
window for the launch of TerreStar-1, with an option to purchase two additional satellite launches at fixed prices. As of December 31, 2008, we had contractual obligations outstanding of $28 million on this agreement. Arianespace has moved our
launch slot for TerreStar-1 to June 1, 2009 through June 30, 2009 to accommodate Lorals new scheduled delivery date.

Other components of our space segment. In 2005, we entered into a $38 million agreement with Hughes Network Systems, LLC (Hughes) for the design, development and delivery of a satellite beam access system
(SBAS) that includes ground based beam forming equipment (GBBF) and two satellite earth stations to be located in Las Vegas, Nevada and Allan Park, Ontario, Canada (the SBAS Agreement). As of December 31,
2008, we paid approximately $29 million to Hughes under this contract. The contract has been amended several times to increase its value by $8 million. As of December 31, 2008 we have paid approximately $5 million of the increased $8 million
amendment. In December 2006, we entered into a $4 million site-hosting agreement with Hughes, which provides for the physical location of, and services related to, our earth station in Las Vegas, Nevada. We also have entered into a site-hosting
agreement with Telesat, which provides for the physical location of, and services related to, our earth station in Allan Park, Ontario, Canada.

In January 2007, we entered into an agreement with Loral under which we incurred an additional obligation of $23 million for our satellite network, which includes the integration of TerreStar-1 with the SBAS (the SBN Agreement).
The SBN Agreement also incorporates the material provisions of the SBAS Agreement. In connection with the SBN Agreement, the SBAS Agreement with Hughes was replaced by a subcontract between Hughes and Loral.

Under the Hughes subcontract, Hughes will provide the SBAS and related services and deliverables (owed to us under our original agreement with Hughes)
directly to Loral. Loral will in turn deliver to us an integrated satellite network, consisting of TerreStar-1 and the SBAS.

Under our
license agreement with ATC Technologies, we have contractually committed to license to ATC Technologies certain patents and certain technologies that may be licensed or acquired by us, during a 10 year period ending in 2016 including those
technologies licensed or acquired by us under our SBAS Agreement. Under this license agreement, ATC Technologies may sublicense the licensed TerreStar patents and certain technology to MSV, our competitor, for the sole purpose of developing,
operating, implementing, providing and maintaining MSV L-band services throughout the world.

Our Terrestrial Network

We have designed and can deploy a flexible and upgradeable integrated terrestrial network with a next-generation Operational Support System
(OSS) and Business Support System (BSS) that will optimize seamless interoperability between our satellite and terrestrial network and enable us to dynamically prioritize the traffic of specific end users. Our plan is to
minimize capital expenditures in our terrestrial network roll-out through roaming agreements and strategic partnerships with existing communications providers.

Our Universal Chipset

We have entered into contracts with vendors including Elektrobit (EB) Corporation,
Comneon GmbH/Infineon Technologies AG, Hughes Network Systems LLC and Qualcomm Incorporated to provide us with a universal chipset architecture that can be incorporated into a wide range of mobile devices, including small, lightweight and
inexpensive handsets. We believe that the proximity of our spectrum frequency to that used by



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existing wireless service providers will result in certain benefits, such as lower development costs, shorter development cycles and a higher likelihood of
mass adoption at low incremental cost per device. Once fully-developed, we believe that our planned universal chipset architecture will enable a full range of off-the-shelf devices for use on our network. We believe our customers will have the
ability to develop and deploy differentiated services due to our planned open network and systems architecture, as well as the potential ability to choose from an expanded selection of end-user devices.

Intellectual Property

Our intellectual property
portfolio consists of non-patented intellectual property and license rights to over 75 patents and patent applications and other non-patented intellectual property that have been developed, acquired and licensed over a period of 15 years. We believe
that an integrated satellite and terrestrial network cannot be effectively and efficiently implemented in a commercially viable way without the benefits of licensed patents and other owned and licensed intellectual property. We are committed to
vigorously enforcing and defending these intellectual property rights. In addition to our owned intellectual property and the license rights granted to us by ATC Technologies, we currently, and expect to continue to, incorporate our technology and
software and other third-party licensed patents and unpatented technology and software into our existing and planned networks. Certain agreements between us and third parties, such as Loral and Hughes, include provisions pursuant to which we have or
will receive a non-exclusive license to use, reproduce and modify certain intellectual property developed by such third parties including, among other things, technology and related software created by such third parties for use in our existing and
planned networks for the purpose of testing, operating and maintaining our satellite program. We expect to enter into additional agreements in the normal course of business and into strategic relationships that will include licenses to third-party
intellectual property as we develop our network.

Our Relationship with TerreStar Canada and 4371585 Canada

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

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



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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 Canada. TerreStar Networks interests in TerreStar Canada and TerreStar Canada Holdings reflect the maximum foreign ownership levels currently permitted by applicable Canadian
telecommunications foreign ownership rules. Effective January 1, 2008, TerreStar Corporations consolidated financial statements include TerreStar Canada, which is considered a variable interest entity under Financial Accounting Standards
Boards Interpretation No. 46(R), Consolidation of Variable Interest Entities (FIN46R).

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

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

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

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

On January 16, 2009, TerreStar Networks entered into a master agreement (the Agreement) with Trio 2 General Partnership (Trio) and certain other parties, pursuant to which, subject to the
satisfaction of a number of conditions, including the receipt of necessary governmental approvals from Industry Canada and obtaining certain third party consents, Trio (through a wholly-owned subsidiary) will purchase the 662/3% voting equity stake in TerreStar Canada Holdings currently held by 4371585 Canada. Trio and TerreStar Networks will enter into a
series of agreements that will be materially similar to the Transfer Agreements. TerreStar Networks will retain its existing 331/3% voting equity ownership of TerreStar Canada Holdings. Trio is majority-owned by certain managing partners of Trio Capital Inc., a Canadian investment firm, including Jacques Leduc. Mr. Leduc is also a member of the board of directors
and a member of the nominating committee.

TerreStar Canada Shareholders Agreement

The TerreStar Canada Shareholders Agreement dated April 5, 2007 among TerreStar Networks, 4371585 Canada (as the assignee of TMI
Communications), TerreStar Canada and TerreStar Canada Holdings sets forth certain terms of operation for TerreStar Canada and TerreStar Canada Holdings. Under the TerreStar Canada Shareholders Agreement, the board of directors of TerreStar
Canada Holdings is composed of five directors, of whom 4371585 Canada is entitled to appoint three directors and TerreStar Networks is entitled to appoint two



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directors. The board of directors of TerreStar Canada is composed of five directors, of whom TerreStar Canada Holdings is entitled to appoint four directors
and TerreStar Networks is entitled to appoint one director. All decisions of the boards of directors of TerreStar Canada and TerreStar Canada Holdings are decided by a simple majority of directors. However, the affirmative vote of the holders of
more than 80% of the common shares of TerreStar Canada and the holders of more than 662/3% of the common shares of TerreStar
Canada Holdings is required for major corporate actions, including, but not limited to: the entering into, amendment, renewal, assignment or termination of any material agreement in excess of $500,000 Canadian; any change in the articles of
incorporation, by-laws or other documents of TerreStar Canada or TerreStar Canada Holdings; any material change in the scope and nature of TerreStar Canada Holdings or TerreStar Canadas business or operations; subject to certain
exceptions, the approval in principle, issuance, sale or grant of any securities of TerreStar Canada or TerreStar Canada Holdings; subject to certain exceptions, the incurrence of any indebtedness or the making of any capital expenditures, pledges,
or asset sales in excess of $500,000 Canadian by TerreStar Canada or TerreStar Canada Holdings; the entering into of any merger, consolidation or other corporate re-organization by TerreStar Canada or TerreStar Canada Holdings; and the declaration
of dividends by TerreStar Canada or TerreStar Canada Holdings. TerreStar Networks has no negative approval rights with respect to appointment or termination of senior officers or creation of budgets for TerreStar Canada or TerreStar Canada Holdings.

Under the TerreStar Canada Shareholders Agreement, TerreStar Networks is obligated to fund any operating cash shortfalls at
TerreStar Canada upon the request of TerreStar Canada, so long as the provision of such funding does not conflict with applicable Canadian regulatory requirements, the operating budget then in effect and for the succeeding two years is reasonably
acceptable to TerreStar Networks, and TerreStar Canada has conducted its business in material compliance with the budget then in effect and for the preceding two years. Such funding may be in the form of a contribution to TerreStar Canadas
capital in the form of non-voting common shares or a loan that may be convertible into equity of TerreStar Canada. TerreStar Networks obligation to fund any operating cash shortfalls at TerreStar Canada ceases upon a change of control of
TerreStar Canada, provided that a transfer of 4371585 Canadas interest in TerreStar Canada Holdings to certain affiliates or other entities related to BCE will not constitute a change of control for this purpose. Neither 4371585 Canada nor BCE
has any obligation to provide financial support to TerreStar Canada Holdings or TerreStar Canada.

The TerreStar Canada Shareholders
Agreement also provides that in the event that any controlling shareholder of 4371585 Canada or BCE, or any affiliate of the foregoing or any person controlled by any of the foregoing, each referred to as a BCE Group Member, wishes to transfer its
interest in 4371585 Canada or a BCE Group Member to a non-affiliated third party and, at the time of such proposed transfer such BCE Group Member owns shares of TerreStar Canada Holdings, TerreStar Networks may, subject to applicable law and
Canadian regulatory requirements, purchase or designate an eligible entity to purchase, all (but not less than all) of the shares of TerreStar Canada Holdings so owned by 4371585 Canada or the BCE Group Member at a purchase price equal to the stated
capital.

Under the TerreStar Canada Shareholders Agreement and subject to Industry Canada approval, TerreStar Networks has the
right, subject to applicable law and regulations, to purchase directly, or to designate an eligible purchaser to purchase, all (but not less than all) of 4371585 Canadas and every other BCE Group Members equity interests in TerreStar
Canada Holdings for a purchase price equal to the greater of the fair market value of such shares on the date TerreStar Networks provides notice of its election to purchase the shares and $3.5 million for each year from the Disposition Date (as
defined below) until the closing occurs, with partial years prorated, or the Designated Price.

The TerreStar Canada Shareholders
Agreement provides that, for a period of 90 days after the later of (1) the date on which 4371585 Communications no longer owns at least 90% of the shares of TerreStar Canada that it owned on June 15, 2006 (or in certain circumstances,
shares of TerreStar Corporation received by 4371585 Communications in exchange for TerreStar Networks shares), or the Disposition Date, and (2) July 31, 2008, 4371585 Communications and every other BCE Group Member then holding shares of
TerreStar Canada Holdings have the right, subject to applicable law and regulations, to require TerreStar Networks to either



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purchase directly, or to designate an eligible purchaser to purchase, all (but not less than all) of 4371585 Communications and every other BCE Group
Members interests in TerreStar Canada Holdings for a purchase price equal to the greater of (1) the fair market value of such shares on the date of notice of the exercise of such option and (2) the Designated Price for each year from
the Disposition Date. If 4371585 Canada and every other BCE Group Member do not exercise their put right within the 90-day period, they may not exercise the right again for a period of two years.

In the event applicable law or Canadian regulatory requirements are amended to allow TerreStar Networks to own a larger equity interest in TerreStar
Canada Holdings, 4371585 Canada or a BCE Group Member will be required to transfer to TerreStar Networks such shares of TerreStar Canada Holdings that it owns as are permitted under the new requirements for an amount equal to the greater of
(1) the fair market value of such shares and (2) the Designated Price.

TerreStar Networks and 4371585 Canada also will each have
the right, subject to applicable law and regulations, to purchase directly, or to designate an eligible purchaser to purchase, the other partys interests in TerreStar Canada and/or TerreStar Canada Holdings at the stated capital of such
interests upon the insolvency or bankruptcy of such other party.

Rights and Services Agreement

TerreStar Networks entered into a non-exclusive Rights and Services Agreement dated April 5, 2007 with TerreStar Canada pursuant to which TerreStar
Canada has the right to purchase backup, restoral and emergency spectrum and satellite capacity from TerreStar Networks, as well as various service bureau functions and consulting services, such as technical assistance with the network, billing
support and administration services. TerreStar Canada is required to compensate TerreStar Networks for these services quarterly, based on the total estimated expenses, as determined in accordance with GAAP, anticipated to be incurred by TerreStar
Networks in providing these services to TerreStar Canada, plus a margin of 10%. The Rights and Services Agreement extends for an initial five year term and contains automatic renewal provisions which allow the terms of the agreement to be extended
for one or five year terms depending on the service provided. In certain circumstances, such as a breach of contract or insolvency of either party, the Rights and Services Agreement is subject to early termination by either party.

TMI Guarantee

TerreStar Networks entered into the
TMI Guarantee and Share Pledge Agreement on April 5, 2007, or the TMI Guarantee, with TMI Communications pursuant to which TMI Communications guaranteed to TerreStar Networks the full and punctual performance of its obligations together with
the obligations of TerreStar Canada Holdings and TerreStar Canada, as applicable, under the TerreStar Canada Shareholders Agreement, the Rights and Services Agreement, the Satellite Delivery Agreement (as defined below), the IRU Agreement (as
defined below) and the TerreStar Canada IP License Agreement (as defined below). As noted above, the obligations of TMI Communications under the TMI Guarantee have been assumed by 4371585 Canadas liability under the TMI Guarantee will be
limited to its shareholdings in TerreStar Canada Holdings together with any dividends, distributions or other proceeds related thereto that accrue after an event of default under the TMI Guarantee. The TMI Guarantee does not guarantee payment of the
TerreStar Notes and does not guarantee that all necessary regulatory approvals will be obtained.

TerreStar Canada Guarantee

TerreStar Canada entered into the TerreStar Canada Guarantee on April 5, 2007 in TerreStar Networks favor pursuant to which TerreStar Canada
has guaranteed to TerreStar Networks the performance of its obligations, together with the obligations of TerreStar Canada Holdings and 4371585 Canada, under the TerreStar Canada Shareholders Agreement and the TMI Guarantee. As security for
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TerreStar Canada granted to TerreStar Networks a security interest in all of its tangible and intangible (to the extent assignable) personal property
pursuant to an Amended and Restated Security Agreement dated May 24, 2007, or the TerreStar Canada Security Agreement. Such security interest will be junior to the security interest granted in favor of the holders of the TerreStar Notes and the
TerreStar Exchangeable Notes. TerreStar Networks also has recourse under the TerreStar Canada Security Agreement in the event of breaches under certain of the other Transfer Agreements committed by TerreStar Canada, TerreStar Canada Holdings or
4371585 Canada.

Other Transfer Agreements

Under certain of the Transfer Agreements, TerreStar Networks is required to release 4371585 Canada (and its affiliates) from certain liabilities and provide comprehensive indemnification to 4371585 Canada (and certain of its related parties
including TerreStar Canada) in various instances including, without limitation, with respect to certain tax liabilities associated with the TerreStar Canada joint venture.

Upon TerreStar Networks receipt of all necessary approvals to effect the transfer of TerreStar-1 from TerreStar Networks to TerreStar Canada,
TerreStar Networks will enter into a Satellite Delivery Agreement, or the Satellite Delivery Agreement, an Indefeasible Right of Use Agreement, or the IRU Agreement, and an Intellectual Property License Agreement, or the TerreStar Canada IP License
Agreement. The following is a description of such agreements.

Satellite Delivery Agreement. Upon receipt of the requisite
approvals, TerreStar Networks will enter into a Satellite Delivery Agreement with TerreStar Canada pursuant to which TerreStar Networks will transfer title to TerreStar-1 to TerreStar Canada. Transfer of title to the satellite to TerreStar Canada
will be made at the time that title would otherwise have transferred to TerreStar Networks under its satellite construction contract with Loral. TerreStar Networks will use its commercially reasonable efforts to deliver TerreStar-1 to TerreStar
Canada in its assigned orbital slot. TerreStar Networks will also deliver any other satellite deliverables under the construction contract to TerreStar Canada. The purchase price for the transfer of title to TerreStar-1 from TerreStar Networks to
TerreStar Canada will be equal to all costs and expenses incurred by TerreStar Networks in connection with the construction and launch of TerreStar-1, including without limitation, financing and insurance costs and any applicable taxes, duties and
other fees or charges, plus a margin of 10% on certain of such amounts. It is expected that all amounts payable to TerreStar Networks by TerreStar Canada under the Satellite Delivery Agreement will be offset against any amounts owing by TerreStar
Networks to TerreStar Canada under the IRU Agreement as discussed below.

IRU Agreement. Upon the execution of the Satellite
Delivery Agreement and receipt of the requisite approvals, TerreStar Networks will enter into an IRU Agreement with TerreStar Canada pursuant to which TerreStar Canada will lease to TerreStar Networks the balance of the capacity on TerreStar-1, and,
if and when operational, the balance of the satellite capacity of any TerreStar Canada replacement satellite system or next-generation satellite system, and the right to use the spectrum capacity and ground facilities associated with TerreStar
Canadas satellite system(s), that is not utilized by TerreStar Canada for the purposes of fulfilling its Canadian regulatory obligations. TerreStar Networks will pay TerreStar Canada for this capacity by (1) an upfront payment payable
upon the date that TerreStar-1 becomes fully operational in its assigned orbital slot, such payment to be equal to the amount payable to TerreStar Networks by TerreStar Canada under the Satellite Delivery Agreement plus the amount, if any, incurred
by TerreStar Canada in connection with certain satellite system costs, and (2) thereafter, by quarterly payments based on a cost recovery amount basis, where the cost recovery amount is determined based on TerreStar Canadas total expenses
associated with providing such services to us as determined in accordance with Canadian GAAP plus a margin of 10%, provided that such cost recovery amount must be in accordance with TerreStar Canadas annual business plan and quarterly
forecasts to be provided to TerreStar Networks. TerreStar Networks will have the right to offset its payment obligations to TerreStar Canada under the IRU Agreement against amounts otherwise owed by TerreStar Canada to TerreStar Networks. The IRU
Agreement will extend for an initial 25-year term and contains automatic renewal provisions which allow the terms of the agreement to be extended for three successive five-year terms. In certain circumstances, the IRU Agreement will be subject to
early termination by either party.



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TerreStar Canada IP License Agreement. In connection with both the Rights and Services
Agreement and IRU Agreement described above, TerreStar Networks will enter into the TerreStar Canada IP License Agreement with TerreStar Canada pursuant to which, subject to certain limitations, TerreStar Networks will grant to TerreStar Canada a
non-exclusive license to use its intellectual property, as owned by TerreStar Networks or licensed from third parties, provided that TerreStar Networks determine such intellectual property is necessary to allow TerreStar Canada to fulfill
(1) its obligations in Canada under the Industry Canada approval in principle and (2) its obligations to TerreStar Networks to provide satellite capacity and spectrum capacity under the IRU Agreement. The TerreStar Canada IP License
Agreement will remain in effect until the expiration or termination of the Rights and Services Agreement. TerreStar Networks will also have the right to terminate the TerreStar Canada IP License Agreement in the event of the expiration or
termination of the IRU Agreement. In certain other circumstances, the TerreStar Canada IP License Agreement will be subject to early termination by either party.

In the event that TerreStar Networks is unable to affect the relevant Transfer Agreements with 4371585 Canada, TerreStar Canada and the other parties thereto, TerreStar Networks may need to enter into arrangements
with another Canadian owned and controlled entity, so that TerreStar-1 will be transferred to an entity that satisfies Canadas telecommunications foreign ownership rules. This would also require TerreStar Networks to negotiate and enter into
amendments to the Transfer Agreements.

Competition

The communications industry is highly competitive. We expect to compete with certain product and service categories of a number of other existing and future wireless providers, including other developers of integrated
satellite and terrestrial networks. We will compete primarily on the basis of coverage, quality and pricing of products and services. Many of our competitors are large domestic and international companies, and may have financial, technical,
marketing, sales, distribution, and other resources substantially greater than we have and which provide a wider range of services that we intend to provide.

We expect to compete with existing and potential integrated satellite and terrestrial network providers in United States and Canada, including MSV and its affiliates, ICO North America and its affiliates, Globalstar
LLC and its affiliates, Iridium Satellite LLC and its affiliates, and Inmarsat and its affiliates. Any of these competitors could offer an integrated satellite and terrestrial network before we do or could offer an integrated satellite and
terrestrial network that is superior to ours.

Current Years Developments

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

In June 2008, the TerreStar-1 S-band reflector sustained damage during manufacturing at Harris Corporation, the reflector sub-contractor used by
Loral. The Harris Corporation has provided a commitment to complete and ship the reflector to Loral for integration on the TerreStar-1 satellite by March 15, 2009. Based on this commitment, Loral informed us that TerreStar-1 will be
ready to ship to the launch provider, Arianespace, in April 2009. As a result, launch of TerreStar-1 has been postponed from fourth quarter 2008 to second quarter 2009. Arianespace has confirmed a new launch slot of June 1, 2009 to
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Acquisitions, Dispositions and Recent Financings

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

The EchoStar Investment Agreement provides for, among other things,



| |  |  | purchase by EchoStar of $50 million of TerreStar Notes,
| | - |  | -------------------------------------------------------



| |  |  | purchase by EchoStar of $50 million of TerreStar Networks newly issued 6.5% Senior Exchangeable PIK Notes due 2014, exchangeable for TerreStar Corporation
common stock, at a conversion price of $5.57 per share (the Exchangeable Notes) and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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

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

In connection with the foregoing
transactions, certain of our existing investors entered into separate investment agreements (Shareholder Investment Agreements) to purchase in the aggregate $50 million of the TerreStar Exchangeable Notes.

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

On May 21, 2008, we
exercised our option to acquire Port Merger Corporation. On June 10, 2008, we issued 30 million shares of our common stock to EchoStar.

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

On June 9,
2008, we issued 1.2 million shares of our Series E Junior Participating preferred stock to Harbinger, convertible into 30 million shares of our common stock for the effective purchase of CCTV Wireless, LLC, the holder of certain
1.4GHz licenses. The transaction was consummated on June 10, 2008. Our Series E preferred stock does not currently trade on the public market; therefore, we measured the costs of the 1.4GHz licenses acquired from Harbinger based on the
fair value analysis of the spectrum performance by a valuation consultant.

The EchoStar Investment Agreement, Harbinger Investment
Agreement, Shareholder Investment Agreements, EchoStar Agreement and the Harbinger Contribution Agreement contain representations, warranties, covenants and indemnities by TerreStar Corporation and TerreStar Networks customary for transactions of
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TerreStar Corporation, TerreStar Networks, EchoStar, Harbinger and the certain existing investors entered
into a Registration Rights Agreement (the Registration Rights Agreement), dated February 5, 2008, containing customary terms and conditions providing for the registration of common stock to be issued in these transactions.

Aggregate gross proceeds to TerreStar Networks from these transactions were approximately $297 million in cash, of which approximately
$197 million was made available at closing and the balance of which will be dedicated to funding the TerreStar-2 satellite under the Credit Agreement (defined below). In addition to shareholder approval, the spectrum transactions were subject to
certain government approvals.

As a result of this transaction, the Boards of Directors of both TerreStar Corporation and TerreStar
Networks were expanded to eight members and, depending on stock holdings, EchoStar and Harbinger each have the right to nominate up to two members of each board. On February 5, 2008, we entered into a $100 million Purchase Money Credit
Agreement (the Credit Agreement), among TerreStar Networks, as the borrower, the guarantors party thereto from time to time, U.S. Bank National Association, as collateral agent, and Harbinger and EchoStar, as lenders. Amounts outstanding
under the Credit Agreement bear interest at a rate of 14% per annum.

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

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

We held approximately 44.3 million shares of non-voting common stock of SkyTerra Communications as of December 31, 2007. This was accounted for under the cost method and valued at approximately $325 million. We also had
a corresponding contractual commitment with SkyTerra to distribute 25.5 million of these shares to our shareholders, and had recorded a dividend liability of $183 million as of December 31, 2007 using the same adjusted cost basis as our
investment.

On February 6, 2008, TerreStar Corporation, MVH Holdings Inc. and Harbinger Capital Partners Fund I, L.P. entered into a
Stock Purchase Agreement pursuant to which TerreStar Corporation sold 14.4 million shares of non-voting common stock of SkyTerra to Harbinger Capital Partners Fund I, L.P. for an aggregate sale price of $76.4 million. TerreStar Corporation
received the proceeds on February 28, 2008. We recognized a loss on this sale of $27 million for the three months ended March 31, 2008.

On September 16, 2008, we sold our remaining 29.9 million shares of SkyTerra for gross proceeds of $124 million. We recognized a loss of approximately $99 million on this transaction. Affiliates of Harbinger
purchased approximately 24 million shares and the remaining shares were sold to other purchasers. A portion of the shares sold to Harbinger were delivered to an escrow agent pending receipt of FCC approval of Harbingers pending
application to control up to 100% of SkyTerra.



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In order to permit TerreStar Corporation to sell these SkyTerra shares, SkyTerra agreed to waive a
contractual requirement for TerreStar to distribute 25.5 million of the SkyTerra shares to TerreStar Corporations shareholders. Consequently, we eliminated the $183 million dividend liability. We recorded a benefit to decrease
dividend liability of $78 million due to a change in value of the shares, as a corresponding offset to the loss on the sale of the SkyTerra shares, and the remaining $105 million was recorded to Additional Paid-in Capital as an offset to the
originally recorded transaction.

TerreStar Corporation also granted to SkyTerra the right to sell to third parties the 4,216,270 shares,
or approximately 11.1% of the total outstanding common shares, of TerreStar Networks held by SkyTerra. Subject to certain conditions, purchasers of these shares would have the right to exchange them to TerreStar Corporation for 4.37 shares of
TerreStar Corporation common stock per TerreStar Networks share, and would have registration rights with respect to these TerreStar Corporation shares. TerreStar Corporation would also receive 3,126,428 shares of Terrestar Global, another TerreStar
Corporation subsidiary, currently owned by SkyTerra in conjunction with this exchange. If consummated, this exchange would result in TerreStar Corporation owning more than 99.9% of TerreStar Networks and TerreStar Global.

Other Agreements and Contracts

On August 1,
2008, we announced that TerreStar Networks had entered into a nationwide reciprocal roaming agreement with AT&T Mobility LLC.

On
December 11, 2008, TerreStar Networks entered into a fifteen-year agreement (Agreement) with Qualcomm Incorporated (Qualcomm) for the provision by Qualcomm of satellite enabled mobile chipsets and satellite base station
components to facilitate the development of S-band mobile devices and network systems. A broad range of Qualcomm chipsets, to be available on a mass market basis, will include satellite and S-band capabilities. The Agreement also contemplates that
other operators (Operator) may enter into similar arrangements with Qualcomm. The termination by one Operator of its agreement with Qualcomm does not affect the agreement of any other Operator. TerreStar Networks has been advised that
ICO Satellite Services G.P. (ICO) and MSV have entered into similar agreements with Qualcomm. Each Operator will fund a portion of the related non-recurring engineering (NRE) expenses incurred in connection with the Agreements, which
will result in a further sharing of NRE if and when additional Operators enter into similar agreements with Qualcomm. The TerreStar Networks portion of the NRE to be paid to Qualcomm is expected to be in an amount not to exceed six million dollars,
which amount will be reduced if other Operators enter into similar agreements with Qualcomm.

TerreStar Global Limited

TerreStar Global was initially formed in 2005 as a wholly-owned subsidiary of TerreStar Networks. We have consolidated the financial results of TerreStar
Global since its inception. In late 2006, TerreStar Networks spun-off TerreStar Global to its stockholders. As a result, TerreStar Corporation became the indirect majority holder of TerreStar Global. In connection with the spin-off, TerreStar
Networks made capital contributions to TerreStar Global of $5 million. In late 2006, TerreStar Global also raised an additional $5 million through a rights offering from its shareholders, in proportion to their holdings, the majority of which
came from TerreStar Corporation. As of December 31, 2008, TerreStar Corporation owned approximately 86% of the outstanding shares of TerreStar Global.

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

On October 7, 2008, TerreStar Europe filed an
application with the European Commission for a Pan-European 2GHz MSS S-band spectrum authorization. TerreStar Europe has entered into a number of



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contracts in connection with its application, including contracts for the construction and operation of a satellite and earth station. We expect that
the European Commission will issue such authorizations in 2009. There can be no assurance that TerreStar Europe will be awarded an authorization.

Legislative and Regulatory Developments

Overview

The operation of our proposed satellite system and our development of the nationwide ATC portion of our planned network will be regulated to varying
degrees at the federal, state, provincial and local levels in both the United States and Canada. In the United States, we will be subject to the rules and regulations of the FCC. In Canada, we will be subject to the rules and regulations of Industry
Canada and, to a lesser extent, the CRTC. Various legislative and regulatory proposals under consideration from time to time by the U.S. Congress, the Parliament of Canada, the FCC, Industry Canada and the CRTC have in the past materially affected
and may in the future materially affect the communications industry in general, and our proposed wireless business and that of our potential customers and potential strategic partners in particular. We will operate pursuant to various licenses and
authorizations or approvals in principle granted or to be granted by the FCC and Industry Canada. See Item 1A. Risk FactorsGovernment regulation could adversely affect our prospects and results of operations; the FCC and state
regulatory commissions may adopt new regulations or take other actions that could adversely affect our business prospects or results of operations. Regulation in the communications industry is subject to change, which could adversely affect us
in the future. The following discussion describes some of the major communications-related regulations that affect us, but numerous other substantive areas of regulation not discussed here may also influence our business.

MSS S-band spectrum authorizations and approvals in principle in Canada and the United States

Industry Canada approval in principle for the TerreStar-1 orbital slot and 2GHz MSS S-band Spectrum

Industry Canada granted an approval in principle to TMI Communications to construct, launch and operate a satellite at the 111.1 W.L. orbital location for the purposes of providing 2GHz MSS S-band services in Canada. On April 27, 2007,
Industry Canada approved the transfer of TMI Communications Industry Canada approval to TerreStar Canada. On October 10, 2007, Industry Canada clarified that the authorization included the authority for TerreStar Canada to operate
TerreStar-1 at the 111.0 W.L. orbital slot. The Industry Canada approval in principle allows the use of a total of 20 MHz of spectrum within the 2GHz MSS S-band. This spectrum will be in two 10 MHz blocks, one in the 2000-2020 MHz band for uplink,
and the other in the 2180-2200 band for downlink, and must be harmonized with the spectrum assignments in the United States. The Industry Canada approval in principle was issued at a time when there were more than two entities authorized by the FCC
to provide 2GHz MSS S-band in the United States. Therefore, our Industry Canada approval in principle currently indicates that the amount of spectrum assigned to us could be reduced from 20 MHz to 14 MHz if Industry Canada determines that it is
necessary to apportion spectrum in order to license other MSS operators in Canada. We have asked Industry Canada to eliminate this particular condition of our approval in principle in order to reflect the fact that there are now only two entities
that are authorized by the FCC to provide 2GHz MSS S-band services in the United States.

The Industry Canada approval in principle
requires 4371585 Canada to meet three milestones: submission of final design specifications for TerreStar-1 for Industry Canada approval by June 15, 2002; signature of contract for the construction of TerreStar-1 by July 15, 2002; and
placement of TerreStar-1 into its assigned orbital position in August 2009.

The Industry Canada approval in principle requires us to make
fair and reasonable efforts to provide mobile satellite services to all regions of Canada in accordance with the coverage contour described in TMI Communications original license application to Industry Canada, to provide certain public
institution benefits in Canada, to provide and maintain lawful interception capabilities authorized or required by applicable law and to provide Industry Canada with periodic compliance and traffic reports.



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FCC reservation of spectrum in the 2GHz MSS S-band

Operators of MSS satellites that have been licensed by countries outside the United States may invoke the FCCs letter of intent
procedures in order to secure authority to serve the United States. Pursuant to these procedures, TMI Communications applied for, and the FCC has granted, a letter of intent authorization for TMI Communications 2GHz MSS S-band satellite. In a
December 2005 order, the FCC provided TMI Communications a reservation of 10 MHz of uplink spectrum and 10 MHz of downlink spectrum in the 2GHz MSS S-band. On April 27, 2007, Industry Canada approved the transfer of TMI Communications
Industry Canada approval to TerreStar Canada and on May 10, 2007, the FCC approved the transfer of TMI Communications authorization to TerreStar Networks.

The December 2005 order divided all of the available 2GHz MSS S-band spectrum (40 MHz in total) between two remaining 2GHz MSS S-band licensees, TMI Communications and ICO North America. All of the other 2GHz MSS
S-band authorizations had been either surrendered or cancelled by the FCC, and in the December 2005 order the FCC rejected proposals to make recaptured 2GHz MSS S-band spectrum available to new MSS applicants or to non-MSS services. Several parties
have challenged the December 2005 ruling and the cancellation of their 2GHz MSS S-band authorizations. We cannot predict the outcome of these challenges.

The FCC requires that certain milestones be satisfied in connection with the construction, launch and commencement of operation of satellites it has authorized to serve the United States. In February 2003, the
FCCs International Bureau adopted an order canceling TMI Communications 2GHz MSS S-band authorization due to an alleged failure to enter into a non-contingent satellite construction contract before the specified first milestone date. In
June 2004, upon review of the International Bureaus decision, the FCC agreed to waive aspects of the first milestone requirement applicable to TMI Communications S-band authorization, and therefore reinstated that authorization. The FCC
also modified the milestone schedule applicable to TMI Communications S-band authorization. TMI Communications has certified to the FCC its compliance with the second and third milestones under its MSS authorization. The remaining milestones
relate to satellite launch and operation, and are in June 2009 and August 2009, respectively.

ATC regulations in the United States and Canada

ATC operations in the United States

In February 2003, the FCC adopted an order establishing a framework under which MSS operators could apply for authority to use their assigned MSS frequencies to operate an ATC network. The FCC modified these rules on reconsideration in
February 2005 and Inmarsat has petitioned for reconsideration of the February 2005 order.

The FCCs ATC orders established the
following five gating criteria for 2GHz MSS S-band operations using GEO satellites, which are primarily intended to ensure that MSS spectrum continues to be used for satellite service:



| |  |  | The MSS ATC applicant must demonstrate that it can provide contiguous satellite coverage of all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin
Islands.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The MSS ATC licensee must make mobile satellite services commercially available throughout the mandatory geographic coverage area.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | The MSS ATC licensee must offer an integrated service of MSS and MSS ATC.
| | - |  | ---------------------------------------------------------------------------



| |  |  | This requirement can be met by the licensee making available integrated handsets that enables users to communicate both through the satellite system and through the
terrestrial network.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The MSS ATC licensee must maintain a spare satellite on the ground within one year of commencing operations, must launch it into orbit during the next commercially
reasonable launch window following
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | a satellite failure and must report, within ten days of occurrence, any satellite failures, malfunctions or outages that may require satellite replacement.
We have exercised our option to procure a spare satellite from Loral. We may need a waiver of the spare satellite gating requirement if we wish to launch TerreStar-2 instead of using it as a ground spare.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The only frequencies that may be used for MSS ATC purposes are the licensees assigned MSS frequencies.
| | - |  | -------------------------------------------------------------------------------------------------------

For each MSS band, the FCC has adopted specific technical requirements for ATC operations that are intended to prevent interference to other spectrum
users. If ATC operations nevertheless cause harmful interference to other services, the ATC operator is responsible for resolving the interference. We believe that, as a practical matter, these requirements do not limit our network deployment or our
ability to meet our business plan. TerreStar Networks filed an application for ATC authority, and the waiver of certain ATC technical rules, with the FCC on September 7, 2007.

Authority to operate ATC in Canada

In May 2004, Industry Canada adopted a policy allowing authorized
MSS operators in the L-band, 2GHz MSS S-band and the 1.6/2.4 GHz big LEO band to provide ATC on a no-protection, non-interference basis. Industry Canadas ATC policy contains gating criteria similar to those of the FCC and requires, among other
things, that a service providers ATC network be operated as an integral and indefeasible part of an MSS service and that the spectrum it uses for ATC service does not constrain the growth of MSS service offerings. Industry Canada has stated
that it intends to develop other technical and operational details applicable to ATC systems in the future. Industry Canada has also stated that it intends to establish license fees for ATC operators through a separate process.

Additional ATC-related regulatory approvals required

If and when our U.S. 2GHz MSS S-band authorization has been modified to include ATC authority, we will have blanket authority (subject to limited exception) to operate ATC base stations and ATC user terminals throughout the United States
and Canada. Before we can provide ATC service on a commercial basis, the manufacturers of ATC user terminals and base stations for our network will need to obtain FCC equipment certification, and in some cases we may need to obtain local zoning
approvals for base stations and certification from state public utility commissions. In Canada, similar approvals are required from Industry Canada and coordination with local authorities is required for the siting of base station antennae. Service
providers in most other licensed wireless and satellite bands are subject to similar regulatory approval requirements, and we believe that we should be able to fulfill the conditions required for our regulatory approvals.

Band clearing

In the United States, our
operations at the 2GHz MSS S-band are subject to successful relocation of existing broadcast auxiliary service (BAS) licensees and other terrestrial licensees in the band. Costs associated with spectrum clearing could be substantial. In
the United States, Sprint Nextel Corporation (Sprint Nextel) is obligated to relocate existing BAS and other terrestrial users in our uplink spectrum and 2GHz MSS S-band licensees must relocate microwave users in the 2GHz MSS S-band
downlink band. To the extent that Sprint Nextel complies with its BAS band clearing obligations, 2GHz MSS S-band licensees commencing operations thereafter would not have to clear the band themselves, but might be required to reimburse Sprint Nextel
for a portion of its band clearing costs in certain circumstances. Due to the complex nature of the overall 2GHz MSS S-band relocation and the need to work closely with Sprint Nextel on band clearing, we may not make sufficient progress in the
relocation effort or meet FCC requirements for relocating existing users and the start of our MSS operations in uncleared markets may be delayed. On September 4, 2007, Sprint Nextel and certain broadcaster trade associations asked the FCC for
an additional 29 months past the September 7, 2007 deadline to complete



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the relocation process. On March 5, 2008, the FCC granted Sprint Nextels request but only extended the deadline to complete the relocation process
until March 5, 2009. The FCC also permitted certain testing and trials by MSS licensees in 2008 and sought comment on ways in which BAS licensees and MSS licensees could co-exist in the band after January 2009 and before the relocation process
is concluded. On February 12, 2009, Sprint Nextel and certain broadcaster trade associations again asked the FCC for an additional 11 months past the March 5, 2009 deadline to complete the relocation process. If Sprint Nextel does not
complete clearance of the 2GHz MSS S-band within a reasonable period of time and/or appropriate sharing procedures cannot be established, our ability to implement our business plan and our financial condition could be adversely impacted. In Canada,
our operations at the 2GHz MSS S-band are subject to successful relocation of terrestrial microwave users. Although there are a small number of users in the 2GHz band, these users must be given a minimum of two years notice by Industry Canada to
relocate unless a commercial agreement is reached under which they would move earlier. Although Industry Canada has given notice to these users that they must relocate within a two year period, if these users are not relocated in sufficient time
before the launch of our services, we may not be able to offer our services in certain locations in Canada, which could impair our business plan and materially adversely affect our operations.

Orbital debris mitigation

The FCC requires
satellite licensees to have plans in place for minimizing the possibility of orbital debris during the operational phase of the satellites and in connection with post-mission disposal. TMI Communications has filed an orbital debris mitigation plan
with the FCC, and TerreStar Networks will be amending the plan when we file for modification of the letter of intent authorization. The amended plan is responsive to intervening changes in the FCCs orbital debris mitigation rules.

FCC bond requirements

The FCC requires
that licensees of GEO 2GHz MSS S-band satellites and holders of letter of intent authorizations for GEO 2GHz MSS S-band satellites post a $3 million bond that will be forfeited if the FCCs milestones are not satisfied. The amount of the bond
may be reduced pro rata as each milestone is completed. The FCC did not require TMI Communications to post a bond in connection with its S-band letter of intent authorization, because the authorization was issued before the bond requirement was
adopted. However, the FCC did require and we complied, that a bond be posted for $0.75 million in connection with the grant of the license for TerreStar Networks gateway earth station. TerreStar Networks posted this bond on December 11,
2008.

Adjacent band PCS operations

In September 2004, the FCC issued an order allowing PCS operation in the 1995-2000 MHz band and in September 2007, the FCC sought comment on proposed rules for the 2155-2175 MHz band, both of which may be adjacent to the 2GHz MSS S-band
frequencies that are ultimately assigned to us. We have commented in these proceedings. However, the FCC may issue service rules that do not adequately protect S-band operators in the 2GHz MSS S-band, including us, from adjacent band interference.

Transfers of controlUnited States

The Communications Act and the FCCs rules require us to maintain legal as well as actual control over the spectrum that the FCC authorizes us to use.

Traditionally, the FCC has determined whether a licensee retains actual control on a case-by-case basis by considering the following factors: use of facilities and equipment; control of daily operations; control and
execution of policy decisions, such as preparation and filing of applications with the FCC; control of hiring, supervision and dismissal of personnel; control of payment of financial obligations, including expenses arising out of operation; and
receipt of monies and profits from the operations of the facilities.



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Just like other licensees, our ability to enter into funding or partnering arrangements may be limited by
the requirement that we maintain actual control of our spectrum. If we are found to have relinquished actual control without approval from the FCC, we may be subject to fines, forfeitures or revocation of our licenses.

Foreign ownership restrictionsUnited States

The Communications Act limits foreign ownership of common carrier radio licenses. These limits are inapplicable to our 2GHz MSS S-band letter of intent authorization, because it is a non-common carrier authorization. The limits do apply to
our application for blanket authority to operate mobile earth terminals on a common carrier basis, and our application for authority to operate ATC user terminals.

Pursuant to these limits, a common carrier radio license may not be held by: (1) a corporation of which more than 20% of the capital stock is owned of record or voted by non-U.S. citizens or entities or their
representatives; or (2) a corporation directly or indirectly controlled by another corporation 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 would be served by the refusal or revocation of such license. Similar limits apply in the case of non-corporate organizations.

With the implementation of the Basic Telecommunications Agreement, which was negotiated under the auspices of the World Trade Organization
(WTO) the FCC presumes that indirect ownership interests in common carrier radio licensees in excess of 25% by non-U.S. citizens or entities from WTO-member countries will serve the public interest. We have notified the FCC that under
our current ownership structure we may not be in compliance with the foreign ownership limits of the Communications Act, as more than 25% of TerreStar Corporations capital stock may be owned by non-U.S. citizens or entities and have sought a
declaratory ruling that such ownership serves the public interest. There is no guarantee the FCC will grant our request and these limits could constrain our ability to seek additional equity funding from sources outside the United States.

Foreign ownership restrictions and transfers of controlCanada

TerreStar Canada must comply with certain restrictions on non-Canadian ownership that are set out
in the Telecommunications Act (Canada) and the Radiocommunication Regulations (Canada). These restrictions require among other things, that: at least 80% of the voting equity of TerreStar Canada be held by Canadians; at least 80% of the Board of
Directors of TerreStar Canada be resident Canadians; at least 662/3% of the voting equity of any parent corporation of TerreStar
Canada be held by Canadians; and TerreStar Canada cannot be otherwise controlled in fact by non-Canadians.

TerreStar Canada will
not be able to assign the Industry Canada approval in principle without the prior approval of Industry Canada. In addition, the prior approval of Industry Canada is required for any material change in the ownership or control of TerreStar Canada.

As of the date hereof, we believe TerreStar Canada is Canadian owned and controlled within the meaning of the
Telecommunications Act (Canada) and the Radiocommunication Regulations (Canada). TerreStar Networks is not required to comply with the rules on non-Canadian ownership set out in this legislation because it does not operate facilities in Canada that
would make it subject to these rules.

The Transfer Agreements are designed to comply with applicable U.S. and Canadian foreign ownership
and transfer of control restrictions.

Other applicable U.S. regulations

Common carrier regulation

The 2GHz MSS S-band authorization is a non-common carrier authorization.
As a result, after the authorization is assigned to us, we will be permitted to provide MSS services on a non-common carrier basis. To



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the extent that we offer telecommunications for a fee directly to the public, however, we could be subject to common carrier regulation. Our blanket mobile
earth terminal license will be a common carrier authorization, and our ATC authorization will be as well. Our common carrier services will not be subject to traditional public utility rate-of-return regulation or tariff filings at the federal level,
because the FCC has exercised its authority to forbear from applying such requirements. In offering common carrier services, we will nevertheless be required to: file various common carrier reports; pay certain FCC regulatory fees that
apply to common carriers; file an application for common carrier authority to the extent we wish to provide international services; and seek FCC authority prior to discontinuing any common carrier services. We also may be subject to limited common
carrier regulation at the state level, but the Communications Act preempts the states from regulating the entry of or rates charged by providers of commercial mobile services and private mobile services.

Universal service fund

As a provider of interstate
telecommunications, we will be required to contribute to the FCCs universal service fund, which 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, we would be required to contribute to this fund a percentage of the revenues we derive from providing interstate telecommunications to end users. Currently excluded from
a carriers universal service contribution base are end user revenues derived from the sale of information services and other non-telecommunications services. The FCC is currently conducting a proceeding which will reform the
universal service fund contribution methodology. The FCC may not retain the exclusions described herein or its current policy regarding the scope of a carriers contribution base. We may also be required to contribute to state universal service
programs.

Customer proprietary network information (CPNI)

To the extent we provide telecommunications services, we will be subject to the Communications Act and FCC requirements concerning CPNI. These requirements limit the circumstances in which we can make use of for
business purposes, or disclose to third parties, information concerning the usage of our telecommunications services by our customers. Violation of these requirements could subject us to fines or other penalties.

Communications Assistance for Law Enforcement Act (CALEA)

In connection with any telecommunications services that we provide, CALEA will require us to ensure that U.S. law enforcement agencies can intercept certain communications transmitted over our networks. We also will
have to ensure that law enforcement agencies are able to access certain call-identifying information relating to communications over our networks. We expect to enter into agreements with the Federal Bureau of Investigation, Department of Justice and
Department of Homeland Security regarding U.S. law enforcement agency access to our network. There is no guarantee that we will be able to meet CALEA requirements and U.S. law enforcement agency demands without expense and impact on our network
architecture.

Enhanced-911 (E911) service

MSS providers offering interconnected switched voice services are required to establish call centers for the purpose of answering subscriber 911 emergency calls, and are subject to recordkeeping and reporting
requirements in connection with the call centers. The FCC is considering the extent to which it is technically feasible to require MSS providers having ATC capabilities to offer E911 functionality for their MSS services, including the ability to
locate automatically the position of all transmitting user terminals. The FCC has stated that it expects these providers to take account of E911 considerations in the design stage. If the FCC adopts E911 requirements for MSS providers with ATC
capabilities, it could generate added costs and affect our network architecture. We will be required to offer E911 services on our terrestrial component.



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Rate integration

Under the rate integration provisions in Section 254(g) of the Communications Act and related FCC rules, providers of interstate telecommunications services must charge the same rates for these
services in every state and in U.S. territories and possessions, including Puerto Rico and the U.S. Virgin Islands.

These requirements do
not apply to our commercial mobile services, but would apply if we were to provide fixed interstate telecommunications services.

Other applicable
Canadian regulations

CRTCRegulation of telecommunications services

Companies that own or operate transmission facilities in Canada that are used to provide telecommunications services to the public for compensation are
classified as telecommunications common carriers under the Telecommunications Act (Canada) and are subject to the regulatory authority of the CRTC. The CRTC has the discretionary power to forbear from exercising certain of its regulatory
powers over Canadian carriers where it finds that a telecommunications service or class of services is, or will be, subject to competition sufficient to protect the interests of users. Some Canadian carriers, such as the existing local exchange
carriers, are classified by the CRTC as dominant in the provision of certain services because of their market power and control over the supply of local services and certain other services. Carriers classified as non-dominant
by the CRTC are subject to less regulation than dominant carriers and include mobile wireless providers and long distance service providers.

Canadas universal service or Contribution regime

The CRTC has established a revenue-based regime for the
payment of contribution. Contribution payments are used, in effect, to subsidize local services in high-cost areas in Canada. Under this regime, all telecommunications service providers (TSPs) are required to pay contribution
based on a percentage established by the CRTC on an annual basis (the percentage was 1.03% for 2006 and this rate has also been applied on an interim basis for 2007) of their total contribution-eligible revenues for the previous
yearthat is, their total Canadian telecommunications service revenues, or CTSR, less certain permitted deductions. These permitted deductions include revenues generated from the sale or rental of terminal equipment, revenues from paging
services and inter-carrier payments for services purchased from other TSPs. The CRTC has established a minimum revenue threshold that will trigger the obligation to pay contribution.

International licensing regime

Under the Telecommunications Act (Canada), all providers of basic
international telecommunications services in Canada are required to hold and keep current a basic international telecommunications service license issued by the CRTC. Such licenses are routinely issued within a few weeks of submitting an
application.

The CRTC has the authority to suspend or revoke an international telecommunications service license if it believes that the
licensee has contravened the Telecommunications Act (Canada), the regulations thereunder or any condition of its license. We intend to apply, and we expect TerreStar Canada will apply, for such licenses before offering telecommunications services to
the public.

Customer confidential information

In Canada, the CRTC requires all mobile wireless carriers, including MSS operators, to maintain almost all information relating to their customers in confidence (including customer specific usage data), and limits the circumstances under
which this information can be disclosed to third parties. In addition, satellite operators such as TerreStar Canada are subject to the Personal Information Protection and Electronic Documents Act (Canada) which establishes several rules and
limitations relating to the collection, use, storage and disclosure of customer information.



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E911 service

The CRTC has not specifically addressed the provision of 911 service by MSS providers; however, the CRTC has issued an order that requires all TSPs that offer VoIP-based local telephony services to provide their customers with 911 and E911
service capabilities. In addition, MSS providers that use conventional circuit switched technology are also potentially subject to the 911 and E911 rules that have been established by the CRTC for terrestrial wireless service providers, including
the following: the requirement to provide wireless E911 service to wireless subscribers in communities where wireless E911 network access service is available from an ILEC; the requirement to provide continuous staffing of an operations center in
order to promptly assist public safety personnel seeking subscriber information in emergency situations; and the requirement to provide notification to customers of any limitations in the wireless providers 911 service.

Lawful interception

It is a condition of the
Industry Canada 2GHz MSS S-band approval in principle that 4371585 Canada provide and maintain lawful interception capabilities as authorized by law. The requirements for lawful interception capabilities are established by the Canadian federal
department of Public Safety and Emergency Preparedness. The Canadian federal government has announced on several occasions that it would like to introduce legislation that would impose minimum lawful interception standards on most TSPs. Although
legislation to this effect was tabled in the Parliament of Canada in November 2005, Parliament dissolved before the legislation could pass and no new legislation has been tabled since that time.

Research and Development

Our research and
development efforts focus on building and developing an integrated satellite and terrestrial communications network to offer mobile satellite communication services throughout the United States and Canada.

Research and development costs represented approximately $74 million, $43 million and $11 million for the years ended December 31, 2008, 2007 and
2006, respectively.

Employee Relations

As of December 31, 2008, we had 89 full-time employees. All employees are non-union employees and we consider our employee relations to be good.

Available Information

Our website address is www.terrestarcorp.com. TerreStar Networks website address is
www.terrestar.com. The information contained on our websites is not included as a part of, or incorporated by reference into, this Annual Report on Form 10-K. We make available, free of charge on our website, our annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the Exchange Act) as soon as reasonably practicable after
we have electronically filed such material with, or furnished it to, the SEC. Also available on our website are our Corporate Governance and Ethics Guidelines, the charters of the Committees of the Board of Directors and reports filed pursuant to
Section 16 of the Exchange Act of transactions in our stock by our directors and officers.



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|Item 1A. | Risk Factors
|-------- | ------------

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

Risks Related to
Our Significant Indebtedness

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

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

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



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



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



| |  |  | place us at a disadvantage compared to our competitors that have proportionately less debt;
| | - |  | -------------------------------------------------------------------------------------------



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



| |  |  | adversely affect our relationship with customers and suppliers;
| | - |  | ---------------------------------------------------------------



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



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



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

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



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

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



| |  |  | incur additional debt;
| | - |  | ----------------------



| |  |  | repurchase or redeem equity interests and debt;
| | - |  | -----------------------------------------------



| |  |  | issue equity;
| | - |  | -------------



| |  |  | make certain investments or acquisitions;
| | - |  | -----------------------------------------



| |  |  | pay dividends or make other distributions;
| | - |  | ------------------------------------------



| |  |  | dispose of assets or merge;
| | - |  | ---------------------------



| |  |  | enter into related party transactions; and
| | - |  | ------------------------------------------



| |  |  | grant liens and pledge assets.
| | - |  | ------------------------------

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

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

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

Risks Related to our Business

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

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



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

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

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

We Will Continue To Incur Significant Losses.

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

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

As of December 31, 2008, we had aggregate contractual payment obligations of approximately $2.8 billion, consisting of $311 million for satellite
expenditures, $15 million for lease related expenditures and $384 million for terrestrial network related expenditures, as well as $2.1 billion for debt, including interest and preferred stock obligations.

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

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

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

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

We expect to require substantial funds to finance the execution of our
business strategy. In addition, subject to certain conditions and so long as the provision of such funding does not conflict with applicable Canadian regulatory requirements, TerreStar Networks will be obligated to fund any operating cash shortfalls
of TerreStar



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



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



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



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

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

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

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

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

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

The communications industry is highly regulated by governmental entities and regulatory authorities, including the FCC and Industry Canada. Our business is completely dependent upon obtaining and maintaining
regulatory authorizations to operate our planned integrated satellite and terrestrial network. For example, we could fail to obtain approval from the FCC of our September 2007 application for ATC authority in the United



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States. Failure to obtain or maintain necessary governmental approvals would impair our ability to implement our planned network and would have a material
adverse effect on our financial condition. Additional important risks relating to our regulatory framework are listed below under Regulatory Risks.

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

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



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



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



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



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



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

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

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

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



| |  |  | our ability to provide integrated wireless services that meet market demand;
| | - |  | ----------------------------------------------------------------------------



| |  |  | our ability to provide attractive service offerings to our anticipated customers;
| | - |  | ---------------------------------------------------------------------------------



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



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



| |  |  | the effectiveness of our competitors in developing and offering new or alternative technologies;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | the price of our planned service offerings; and
| | - |  | -----------------------------------------------



| |  |  | general and local economic conditions.
| | - |  | --------------------------------------



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

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

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



| |  |  | satellite services from other operators;
| | - |  | ----------------------------------------



| |  |  | conventional and emerging terrestrial wireless services;
| | - |  | --------------------------------------------------------



| |  |  | traditional wireline voice and high-speed data offerings;
| | - |  | ---------------------------------------------------------



| |  |  | terrestrial land-mobile and fixed services; and
| | - |  | -----------------------------------------------



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

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

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

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

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

We depend on third parties, such as Loral and Arianespace, to build and launch our satellites. The assembly of such satellites is
technically complex and subject to construction and delivery delays that could result from a



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variety of causes, including the failure of third-party vendors to perform as anticipated and changes in the technical specifications of the satellites.
Delivery of our satellites may not be timely, which could adversely affect our ability to meet our FCC and Industry Canada-required construction and launch milestones and the planned introduction of our network.

In 2005, Loral commenced construction of our first multi-spot beam geostationary satellite, TerreStar-1, which was originally scheduled to be launched in
November 2007, but has been subject to a series of delivery delays. In June 2008, we were notified that Loral had revised its expected delivery date of TerreStar-1 from November 2008 to April 2009. Our remaining FCC milestones require that we launch
TerreStar-1 in June 2009 and certify our network operational in August 2009, and our remaining Industry Canada milestone requires that we successfully place the satellite into its assigned orbital position by August 2009.

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

In November 2006, we signed a contract with Arianespace which entitles us
to a launch for TerreStar-1 that will meet our FCC and Industry Canada milestones and also mitigates possible impacts from delays. Arianespace has confirmed a new launch slot of June 1, 2009 to June 30, 2009.

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

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

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

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



| |  |  | defects in construction;
| | - |  | ------------------------



| |  |  | radiation induced failure of satellite parts;
| | - |  | ---------------------------------------------



| |  |  | faster than expected degradation of solar panels;
| | - |  | -------------------------------------------------



| |  |  | malfunction of component parts;
| | - |  | -------------------------------



| |  |  | loss of fuel on board;
| | - |  | ----------------------



| |  |  | higher than anticipated use of fuel to maintain the satellites orbital location;
| | - |  | ---------------------------------------------------------------------------------



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| |  |  | higher than anticipated use of fuel during orbit raising following launch;
| | - |  | --------------------------------------------------------------------------



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



| |  |  | inability to control the positioning of the satellite;
| | - |  | ------------------------------------------------------



| |  |  | electromagnetic storms, solar and other astronomical events, including solar radiation and flares; and
| | - |  | ------------------------------------------------------------------------------------------------------



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

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

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

We expect to purchase launch and in-orbit insurance policies for our satellite. The price, terms and availability of insurance can fluctuate significantly
due to various factors, including satellite failures and general market conditions. If certain material adverse changes in market conditions for in-orbit insurance were to make it commercially unreasonable for us to maintain in-orbit insurance, we
may forego such insurance. Other adverse changes in insurance market conditions may substantially increase the premiums we will have to pay for insurance or may preclude us from fully insuring our loss, therefore, it may be commercially unreasonable
to insure the entire replacement cost of TerreStar-1. If the launch of our satellite is a total or partial failure, or our satellite is damaged in orbit, our insurance may not fully cover our losses and these failures may also cause insurers to
include additional exclusions in our insurance policies when they come up for renewal. We may not be able to obtain additional financing to construct, launch and insure a replacement satellite or such financing may not be available on terms
favorable to us. Also, any insurance we obtain will likely contain certain customary exclusions and material change conditions that would limit our coverage. These exclusions typically relate to losses resulting from acts of war, insurrection or
military action and government confiscation, as well as lasers, directed energy beams, nuclear and anti-satellite devices and radioactive contamination. Any uninsured losses could have a material adverse effect on us.

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

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

We rely on contracts with third parties to design and build our satellites, as well as the
terrestrial components of our network. These include the integrated MSS and ATC systems, technology for communications between the satellite and terrestrial equipment, and the development of small, integrated MSS/ATC handsets and other devices that
will meet FCC and Industry Canada requirements, none of which exists today. We also intend to enter into relationships with third-party contractors in the future for equipment and maintenance and other services relating to our network. There are
only a few companies capable of supplying the products and services necessary to implement and maintain our network. As a result, if any third-party contractor



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relationship with us is terminated, we may not be able to find a replacement in a timely manner or on terms satisfactory to us. In addition, if any of these
third-party contractors are unable to perform on the terms of the contract due to financial reasons, other reasons specifically related to the business of these suppliers or other matters outside our control, our business would be significantly
impacted. This could lead to delays in the implementation of our network and interruptions in providing service to our customers, which would adversely affect our financial condition. This could also lead to a failure in effectively
implementing our network which would severely impact our business.

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

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

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

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

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

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

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

Our objective is to form a relationship with a significant customer, such as a U.S. federal government organization, a state or local public safety/first
responder organization or a significant commercial enterprise.



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Any significant disruption or deterioration of our relationship with our significant customer could adversely affect our business. Because we expect to
derive a significant portion of our revenue from a limited number of customers, the failure to attract such a significant customer or the loss of such a significant customer could significantly reduce our ability to generate revenue or profit and
negatively impact our financial condition and operations.

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

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

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

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

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

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

MSV has assigned to ATC Technologies a significant intellectual property portfolio, including a significant number of patents. Pursuant to the agreement
by and between ATC Technologies and us, ATC Technologies granted us a perpetual, world-wide, non-exclusive, royalty-free, fully paid up, nontransferable (except for certain rights to sublicense), non-assignable, limited purpose right and license to
certain existing patents owned by ATC Technologies for the sole purpose of developing, operating, implementing, providing and maintaining S-band or MSS services with an ATC component. ATC Technologies granted back to MSV similar rights to the
same intellectual property for L-band services in any geographic territory in the entire world where MSV, one of its affiliates or a joint venture or strategic alliance into which MSV has entered, is authorized to provide L-band services. In
addition, ATC Technologies granted rights to MSV International, LLC, or MSVI, a subsidiary of MSV, in and to the same intellectual property for the purpose of providing communications services anywhere in the entire world, excluding services
relating to the S-band. We granted to ATC Technologies a perpetual, world-wide, non-exclusive, royalty-free, fully paid up, nontransferable (except for certain rights to sublicense), non-assignable, limited purpose right and license to certain
existing patents owned or licensed by us and certain technologies licensed by us for the sole purpose of developing, operating, implementing, providing and maintaining L-band services or L-band services with an ATC component. ATC Technologies
has also



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contractually committed to license to us, pursuant to the same terms as set forth above, certain additional patents that may be developed, acquired or
otherwise owned by ATC Technologies or its affiliates (including MSV and MSVI), and we have contractually committed to license to ATC Technologies, pursuant to the same terms as set forth above, certain additional patents and technologies that may
be developed, licensed, acquired or otherwise owned by us until October 1, 2016.

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

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

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

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

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

We may be unable to determine when
third parties are using our intellectual property rights without our authorization. The undetected or unremedied use of our intellectual property rights or the legitimate development or acquisition of intellectual property similar to ours by third
parties could reduce or eliminate any competitive advantage we have as a result of our intellectual property, adversely affecting our financial condition and results of operations. If we must take legal action to protect, defend or enforce our
intellectual property rights, any suits



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or proceedings could result in significant costs and diversion of our resources and our managements attention, and we may not prevail in any such suits
or proceedings. A failure to protect, defend or enforce our intellectual property rights could have an adverse effect on our business, financial condition and results of operations.

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

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

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

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

We May Be Negatively Affected By Industry Consolidation.

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

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

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



| |  |  | the time and costs associated with identifying and evaluating potential acquisition or merger partners;
| | - |  | -------------------------------------------------------------------------------------------------------



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



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| |  |  | unanticipated expenses and working capital requirements;
| | - |  | --------------------------------------------------------



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



| |  |  | diversion of managements attention from daily operations;
| | - |  | ----------------------------------------------------------



| |  |  | loss of key employees;
| | - |  | ----------------------



| |  |  | difficulty achieving sufficient revenues and cost synergies to offset increased expenses associated with acquisitions; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | risks and expenses of entering new geographic markets.
| | - |  | ------------------------------------------------------

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

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

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

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

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

We Must Attract, Integrate and Retain Key Personnel.

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

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

Certain stockholders affiliated with one of our former
directors have initiated multiple lawsuits against us. In 2006, certain stockholders sought to install a slate of directors to our board of directors, which was not



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successful. If these efforts or similar efforts that might be made in the future are successful, they may result in a change of control of TerreStar
Corporation, or interfere with our efforts to raise debt or equity capital which could adversely affect our liquidity and financial condition.

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

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

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

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

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

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

As of June 13, 2008, funds affiliated with
Harbinger Capital Partners owned a significant portion of our common stock, as reported on their Schedule 13 D/A filed with the SEC. Accordingly, these funds are able to significantly influence us through their ability to heavily
influence the outcome of election of our directors, amendments to our certificate of incorporation and by-laws and other actions requiring the vote or consent of stockholders. There is no assurance that the interest of Harbinger will be aligned with
those of our other investors, and Harbinger may make decisions that adversely impact our stockholders. In addition to Harbingers ownership interest in us, Harbinger also reports significant ownership interest in SkyTerra and Inmarsat.

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

We identified a material weakness in our internal control
over financial reporting, as described in Item 9A, Controls and Procedures of our annual report on Form 10-K for the fiscal year ended December 31, 2008. This weakness could harm our business and operating results, and could result in
adverse publicity and a loss in



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investor confidence in the accuracy and completeness of our financial reports, which in turn could have a material adverse effect on our stock price, and, if
such weakness is not properly remediated, could adversely affect our ability to report our financial results on a timely and accurate basis.

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

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

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

Regulatory Risks

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

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

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

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



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



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



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

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

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

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

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

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

The Industry Canada approval in principle to construct and operate a 2GHz
MSS S-band satellite in a Canadian orbital position is currently held by TerreStar Canada, an entity that we do not control. Upon the launch of TerreStar-1, we expect that TerreStar-1 will be transferred to TerreStar Canada. Under
theRadiocommunication Act (Canada) and theTelecommunications Act (Canada), and the regulations promulgated thereunder, TerreStar Networks may only own a 20% voting equity interest in TerreStar Canada, along with a
331/3% voting equity interest in TerreStar Canada Holdings, which is TerreStar Canadas parent and 80% voting equity owner.
4371585 Canada, a Canadian-owned and controlled third party, owns a 662/3% voting interest in TerreStar Canada Holdings. The
rules and regulations further provide that the business and operations of TerreStar Canada cannot otherwise be controlled in fact by non-Canadians.

Under the relevant transfer agreements, 4371585 Canada owns 662/3% of the shares of, and has the power to elect three out of the five members of the board of directors of, TerreStar Canada Holdings, and TerreStar



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

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

In December 2005, the FCC provided TMI Communications with a reservation of 10 MHz of uplink MSS spectrum and 10 MHz of
downlink MSS spectrum in the 2GHz MSS S-band. TMI Communications has assigned that authorization to us and on May 10, 2007 the FCC has modified the reservation to reflect that change. Two parties have challenged the December 2005 ruling, and
one party has also challenged a separate decision by the FCC to cancel its former 2GHz MSS S-band authorization. If these challenges succeed, the amount of 2GHz MSS S-band spectrum that is available to us may be reduced to a level that is
insufficient for us to implement our business plan. Furthermore, in Canada, our spectrum could be reduced from 20 MHz to 14 MHz if Industry Canada determines that it is necessary to reapportion spectrum in order to license other MSS operators in
Canada. Any reduction in the spectrum we are authorized to use could impair our business plan and materially adversely affect our financial condition.

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

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



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Our Service May Cause Or Be Subject To Interference.

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

ATC Spectrum Access Is Limited By Technological Factors.

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

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

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

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

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

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

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

We must comply with U.S. export control laws in connection with any information, products, or materials that we provide to non-U.S. persons relating to satellites, associated equipment and data and with the provision
of



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related services. These requirements may make it necessary for us to obtain export or re-export authorizations from the U.S. government in connection with
any dealings we have with 4371585 Canada, TerreStar Canada, TerreStar Canada Holdings, non-U.S. satellite manufacturing firms, launch services providers, insurers, customers and employees. We may not be able to obtain and maintain the necessary
authorizations, which could adversely affect our ability to:



| |  |  | effect the transfer agreements;
| | - |  | -------------------------------



| |  |  | procure new U.S.-manufactured satellites;
| | - |  | -----------------------------------------



| |  |  | control any existing satellites;
| | - |  | --------------------------------



| |  |  | acquire launch services;
| | - |  | ------------------------



| |  |  | obtain insurance and pursue our rights under insurance policies; or
| | - |  | -------------------------------------------------------------------



| |  |  | conduct our satellite-related operations.
| | - |  | -----------------------------------------

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

Our Strategic Relationships Will Be Subject To Government Regulations.

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

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

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

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

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



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

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



|Item 1B. | Unresolved Staff Comments
|-------- | -------------------------

None.



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

TerreStar Facilities (Offices and
Calibrated Earth Station, CES, sites) at December 31, 2008



|                                                      |  |                    |  |             |  |                     
|----------------------------------------------------- |  | ------------------ |  | ----------- |  | --------------------
|Location                                              |  | Type of Facility   |  | Square Feet |  | Lease ExpirationDate
|300 Knightsbridge Pkwy Lincolnshire, IL 60669         |  | Vacated            |  | 66,965      |  | 12/31/2010          
|                                                      |  |                    | 
|12010 Sunset Hills Road, Suite 600 Reston, VA 20190   |  | Headquarters       |  | 22,606      |  | 11/28/2011          
|                                                      |  |                    | 
|12010 Sunset Hills Road, Suite 900 Reston, VA 20190   |  | Vacated            |  | 22,606      |  | 2/28/2009           
|                                                      |  |                    | 
|2703 Telecom Parkway Suite 100 Richardson, TX 75082   |  | Remote Office      |  | 31,031      |  | 11/1/2012           
|                                                      |  |                    | 
|925 West 100 North, Suite A North Salt Lake, UT 84054 |  | Remote Office      |  | 7,123       |  | 10/15/2012          
|                                                      |  |                    | 
|42865 Burns Lake British Columbia, Canada             |  | CES 1              |  | 400*        |  | 3/31/2013           
|                                                      |  |                    | 
|23488 S. Barlow Road Canby, OR 97073                  |  | CES2               |  | 400*        |  | 2/23/2013           
|                                                      |  |                    | 
|4605 36thAvenue Valleyview, Alberta T0H 3NO           |  | CES 3              |  | 400*        |  | 1/13/2013           
|                                                      |  |                    | 
|497 Road U, NE Warden, WA 98857                       |  | CES 4              |  | 400*        |  | 11/30/2012          
|                                                      |  |                    | 
|146 Third Street Austin, NV 89310                     |  | CES 5              |  | 400*        |  | 1/9/2013            
|                                                      |  |                    | 
|1 Aerojet Way, Suite 300 North Las Vegas, NV 89310    |  | CES 6Hosting Site |  | 400*        |  | 1/5/2012            
|                                                      |  |                    | 
|8-15 & Frontage Road Paragohan, UT 84760              |  | CES 7              |  | 400*        |  | 2/28/2013           
|                                                      |  |                    | 
|86281 E. Webb Court San Manuel, AZ 85631              |  | CES 8              |  | 400*        |  | 3/30/2013           



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|                                                                     |  |                      |  |             |  |                     
|-------------------------------------------------------------------- |  | -------------------- |  | ----------- |  | --------------------
|Location                                                             |  | Type of Facility     |  | Square Feet |  | Lease ExpirationDate
|                                                                     |  |                      | 
|Village of Dafoe Dafoe, SK, S0K 1C0                                  |  | CES 9                |  | 400*        |  | Purchased Site      
|                                                                     |  |                      | 
|Sec. 24 Township 10 South, Range 17 East Tinnie, NM 88351            |  | CES 10               |  | 400*        |  | 5/31/2013           
|                                                                     |  |                      | 
|5196-83RDAvenue NE Devils Lake, ND 58301                             |  | CES 11               |  | 400*        |  | 3/24/2013           
|                                                                     |  |                      | 
|148 Roselawn Drive Junction, TX 76849                                |  | CES 12               |  | 400*        |  | 12/31/2013          
|                                                                     |  |                      | 
|15712 US 83 North Laredo, TX 78041                                   |  | CES 13               |  | 400*        |  | 1/31/2013           
|                                                                     |  |                      | 
|Pickle Lake Road Pickle Lake, Ontario, Canada                        |  | CES 14               |  | 400*        |  | 10/14/2013          
|                                                                     |  |                      | 
|1256 W. Old State Road Austin, IN 47102                              |  | CES 15               |  | 400*        |  | 3/31/2013           
|                                                                     |  |                      | 
|4814 W. Admiral Doyle Drive New Iberia, LA 70506                     |  | CES 16               |  | 560         |  | 11/30/2012          
|                                                                     |  |                      | 
|W 1065-15590 Highway 62 Madoc, Ontario, Canada                       |  | CES 17               |  | 400*        |  | 10/14/2017          
|                                                                     |  |                      | 
|280 Wolf Hill Lane Independence, VA                                  |  | CES 18               |  | 1600        |  | 4/6/2013            
|                                                                     |  |                      | 
|146 Balgra Road Merry Hill, NC                                       |  | CES 19               |  | 400         |  | 1/1/2013            
|                                                                     |  |                      | 
|8801 SW 177 Avenue Miami, FL 33196                                   |  | CES 20               |  | 400*        |  | 3/31/2013           
|                                                                     |  |                      | 
|133438 Allan Park Road West Grey Township Allan Park, Ontario Canada |  | Teleport Environment |  | 400*        |  | 12/31/2009          



|* | the square footage here are approximate measurements.
|- | -----------------------------------------------------



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

Litigation Adverse to Highland Capital
Management and James Dondero

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

The suit filed by the
Dondero Affiliates that remains on appeal was filed on August 16, 2005 in a Texas state district court in Dallas County, Texas (the Rescission Litigation). This suit challenged the validity of our Series A Preferred Stock and sought
damages and rescission of the Dondero Affiliates $90 million purchase of



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90,000 shares of Series A Preferred Stock. On November 30, 2007, the court granted our motion for summary judgment and dismissed the suit. The Dondero
Affiliates appealed the dismissal. On March 6, 2009, the Court of Appeals reversed the summary judgment and remanded most of the claims to the trial court for trial. We intend to vigorously pursue rehearing before the Court of Appeals and,
if unsuccessful in the Court of Appeals to seek review by the Supreme Court of Texas.

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

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

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

Sprint Nextel Litigation

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



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*  *  *

From time to time, we are involved in legal proceedings in the ordinary course of our business operations. Although there can be no assurance as to the outcome or effect of any legal proceedings to which we are a
party, we do not believe, based on currently available information, that the ultimate liabilities, if any, arising from any such legal proceedings not otherwise disclosed would have a material adverse impact on its business, financial condition,
results of operations or cash flows.



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

(a) An annual meeting of the stockholders of TerreStar Corporation was held on October 16, 2008.

(b)
The following matters were voted upon at such meeting:



|                                                                                                                                                            |  |             |  |           |  |              |  |                
|----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- |  | --------- |  | ------------ |  | ---------------
|                                                                                                                                                            |  | Votes For   |  | Withhold  |  | VotesAbstain |  | BrokerNon-Votes
|Election of seven directors to hold office until the next annual stockholders meeting or until their respective successors are duly
elected or appointed.  |  |             |  |           |  |              |  |                
|William Freeman                                                                                                                                             |  | 105,426,806 |  | 4,448,495 |  |              |  |                
|David Andonian                                                                                                                                              |  | 105,399,430 |  | 4,475,871 |  |              |  |                
|Eugene Davis                                                                                                                                                |  | 105,320,603 |  | 4,554,698 |  |              |  |                
|Jacques Leduc                                                                                                                                               |  | 108,878,615 |  | 996,686   |  |              |  |                
|David Meltzer                                                                                                                                               |  | 105,421,030 |  | 4,454,271 |  |              |  |                
|Dean Olmstead                                                                                                                                               |  | 109,611,509 |  | 263,792   |  |              |  |                
|David Rayner                                                                                                                                                |  | 109,498,110 |  | 377,191   |  |              |  |                
|                                                                                                                                                            |  |             |  |          
|                                                                                                                                                            |  | Votes For   |  | Against   |  | VotesAbstain |  | BrokerNon-Votes
|Ratification of the appointment of Friedman LLP as the Companys independent registered public accounting firm for the fiscal year ending
December 31, 2008 |  | 109,683,411 |  | 181,787   |  | 10,103       |  |                



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PART II



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

The NASDAQ Global Market is the principal market on which our common stock is traded. Our common stock started trading on the NASDAQ Global Market on June 20, 2007 under the trading symbol MNCP. As a
result of our name change from Motient Corporation to TerreStar Corporation, our new trading symbol is TSTR on the NASDAQ Global Market. Prior to June 20, 2007 our common stock traded on the Pink Sheets under the trading symbol
MNCP.

The tables below set forth the high and low bid prices of our common stock in 2008 and 2007 based on the closing prices
each day. The first quarter in 2007 and the second quarter through June 19, 2007 represent the high and low sales prices of our common stock as reported on the Pink Sheets. The remaining days in the second quarter of 2007, the third and fourth
quarters in 2007 and the fiscal year 2008, represent the high and low sales prices of our common stock as reported by NASDAQ.



|               |  |      |       |     |   |     
|-------------- |  | ---- | ----- | --- | - | ----
|2008           |  | High |       | Low
|First Quarter  |  | $    | 6.85  |     | $ | 4.23
|Second Quarter |  | $    | 5.14  |     | $ | 3.98
|Third Quarter  |  | $    | 3.64  |     | $ | 1.00
|Fourth Quarter |  | $    | 1.24  |     | $ | 0.28
|               |  |     
|2007           |  | High |       | Low
|First Quarter  |  | $    | 9.70  |     | $ | 7.65
|Second Quarter |  | $    | 13.99 |     | $ | 7.79
|Third Quarter  |  | $    | 12.50 |     | $ | 8.28
|Fourth Quarter |  | $    | 9.45  |     | $ | 6.53

Number of Shareholders of Record

As of March 10, 2009, there were approximately 117 holders of record of our common stock.

Dividends

We have never declared or paid any cash
dividends on our common stock and do not plan to pay dividends on our common stock for the foreseeable future. The payment of any dividend by us, other than dividends on our Series A and Series B Preferred Stock will be at the discretion of our
Board and will depend on, among other things, our earnings, capital requirements and financial condition. In addition, pursuant to the terms of our Series A and Series B Preferred Stock, no dividends may be declared or paid, and no funds shall be
set apart for payment, on shares of TerreStar Corporation common stock, unless (i) written notice of such dividend is given to each holder of shares of Series A and Series B Preferred not less than 15 days prior to the record date for such
dividend and (ii) a registration statement registering the resale of shares of common stock issuable to the holders of the Series A and Series B Preferred Stock has been filed with the SEC and is effective on the date TerreStar Corporation
declares such dividend. 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.

We are obligated to pay dividends, to the extent
we are legally able to do so on our Series A and Series B Preferred Stock. From April 15, 2005 to April 15, 2007, we were required to pay cash dividends at a rate of 5.25% per annum (the Cash Rate) on our shares of Series
A and Series B Preferred Stock. We were required to place the aggregate amount of these cash dividends, approximately $43 million, in an escrow account. On April 15, 2007, we paid the remaining portion of the dividends that were required to be
placed in escrow. Additional dividend payments after April 15, 2007 are due bi-annually in April and October, payable at our option in cash (at a 5.25% annual interest rate) or in our common stock (at a 6.25% annual interest rate)
through



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April 15, 2010. Currently, we are unable to pay the Series A dividend in common stock due to our ongoing litigation with certain investors. We
anticipate paying the Series A dividend in cash and the Series B in common stock, or cash at our Boards discretion, until such time that the Series A litigation is resolved and we satisfy the conditions required to pay the Series A dividend in
common stock.

Issuer Purchases of Equity Securities

During the year ended December 31, 2008, we did not repurchase any shares of our common stock.

Stock Performance
Graph

LOGO



|                          |  |        |  |        |  |        |  |        |  |        |  |      
|------------------------- |  | ------ |  | ------ |  | ------ |  | ------ |  | ------ |  | -----
|                          |  | 12/03  |  | 12/04  |  | 12/05  |  | 12/06  |  | 12/07  |  | 12/08
|TerreStar Corp            |  | 100.00 |  | 601.99 |  | 537.67 |  | 254.69 |  | 186.51 |  | 10.29
|NASDAQ Composite          |  | 100.00 |  | 110.06 |  | 112.92 |  | 126.61 |  | 138.33 |  | 80.65
|NASDAQ Telecommunications |  | 100.00 |  | 106.63 |  | 103.01 |  | 131.04 |  | 135.00 |  | 78.26



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

In 2005, TerreStar
Corporation became the majority owner of TerreStar Networks. TerreStar Global was initially formed in 2005 as a wholly-owned subsidiary of TerreStar Networks. In late 2006, TerreStar Networks spun-off its wholly-owned subsidiary, TerreStar Global to
TerreStar Networks stockholders. As a result, TerreStar Corporation became the indirect majority holder of TerreStar Global. TerreStar Networks and TerreStar Global financial results are included in our consolidated financial statements subsequent
to the changes noted above. Thus, the 2008, 2007, 2006 and 2005 data presented below is not comparable to that of the prior periods. The information contained in the table below is derived from our audited financial statements. We sold our two-way
terrestrial wireless data communications business in September 2006 which is shown as discontinued operations in 2006 and for all periods prior to 2006.



|                                                                   |  |                                          |           |   |      |   |           |      |  |   |           |   |  |      |          |   |  |   |         |  
|------------------------------------------------------------------ |  | ---------------------------------------- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | - |  | ---- | -------- | - |  | - | ------- | -
|                                                                   |  | For the years ended December 31,         |          
|                                                                   |  | 2008                                     |           |   | 2007 |   |           | 2006 |  |   | 2005      |   |  | 2004 |         
|                                                                   |  | (in thousands, except per share amounts) |          
|Consolidated Results of Operations:                                |  |                                          |           |   |      |   |           |      |  |   |           |   |  |      |          |   |  |   |         |  
|Revenues                                                           |  | $                                        |          |   |      | $ |          |      |  | $ |          |   |  | $    |         |   |  | $ |        |  
|Operating loss from continuing operations                          |  | $                                        | (191,343  | ) |      | $ | (182,713  | )    |  | $ | (106,507  | ) |  | $    | (35,201  | ) |  | $ | (9,798  | )
|Equity in losses of MSV                                            |  | $                                        |          |   |      | $ | (7,338    | )    |  | $ | (30,079   | ) |  | $    | (25,059  | ) |  | $ | (11,897 | )
|Minority interests in losses of TerreStar Networks                 |  | $                                        | 10,545    |   |      | $ | 23,262    |      |  | $ | 20,655    |   |  | $    | 3,263    |   |  | $ |        |  
|Loss from continuing operations before income taxes                |  | $                                        | (279,923  | ) |      | $ | (241,389  | )    |  | $ | (98,677   | ) |  | $    | (49,415  | ) |  | $ | (37,203 | )
|Income tax benefit (expense)                                       |  | $                                        | 2,231     |   |      | $ | 2,248     |      |  | $ | (4,535    | ) |  | $    |         |   |  | $ |        |  
|Net loss from continuing operations                                |  | $                                        | (277,692  | ) |      | $ | (239,141  | )    |  | $ | (103,212  | ) |  | $    | (49,415  | ) |  | $ | (37,203 | )
|Loss from discontinued operations                                  |  | $                                        |          |   |      | $ |          |      |  | $ | (30,422   | ) |  | $    | (89,866  | ) |  | $ | (35,126 | )
|Net loss                                                           |  | $                                        | (277,692  | ) |      | $ | (239,141  | )    |  | $ | (133,634  | ) |  | $    | (139,281 | ) |  | $ | (72,329 | )
|Dividends on Series A and B Cumulative Convertible Preferred Stock |  | $                                        | (19,139   | ) |      | $ | (23,232   | )    |  | $ | (23,627   | ) |  | $    | (16,717  | ) |  | $ |        |  
|Accretion of issuance costs associated with Series A and Series B  |  | $                                        | (4,553    | ) |      | $ | (4,542    | )    |  | $ | (4,029    | ) |  | $    | (2,409   | ) |  | $ |        |  
|Net loss available to Common Stockholders                          |  | $                                        | (301,384  | ) |      | $ | (266,915  | )    |  | $ | (161,290  | ) |  | $    | (158,407 | ) |  | $ | (72,329 | )
|Basic and Diluted Loss Per ShareContinuing Operations             |  | $                                        | (2.81     | ) |      | $ | (3.22     | )    |  | $ | (2.01     | ) |  | $    | (1.10    | ) |  | $ | (1.14   | )
|Basic and Diluted Loss Per ShareDiscontinued Operations           |  | $                                        |          |   |      | $ |          |      |  | $ | (0.47     | ) |  | $    | (1.45    | ) |  | $ | (1.07   | )
|Basic and Diluted Loss Per Share                                   |  | $                                        | (2.81     | ) |      | $ | (3.22     | )    |  | $ | (2.48     | ) |  | $    | (2.55    | ) |  | $ | (2.21   | )
|Basic and Diluted weighted-average common shares outstanding       |  |                                          | 107,179   |   |      |   | 83,016    |      |  |   | 64,966    |   |  |      | 62,072   |   |  |   | 32,771  |  
|                                                                   |  |                                          |           |   |     
|Consolidated Financial Position:                                   |  |                                          |           |   |      |   |           |      |  |   |           |   |  |      |          |   |  |   |         |  
|Cash and cash equivalents                                          |  | $                                        | 236,820   |   |      | $ | 89,134    |      |  | $ | 171,665   |   |  | $    | 179,524  |   |  | $ | 16,945  |  
|Property and equipment, net                                        |  | $                                        | 716,602   |   |      | $ | 571,151   |      |  | $ | 259,169   |   |  | $    | 70,986   |   |  | $ | 17,261  |  
|Total assets                                                       |  | $                                        | 1,341,177 |   |      | $ | 1,243,223 |      |  | $ | 1,092,429 |   |  | $    | 967,191  |   |  | $ | 248,080 |  
|Long-term liabilities                                              |  | $                                        | 788,029   |   |      | $ | 753,254   |      |  | $ | 257,539   |   |  | $    |         |   |  | $ | 675     |  
|Series A and B Cumulative Convertible Preferred Stock              |  | $                                        | 408,500   |   |      | $ | 408,500   |      |  | $ | 408,500   |   |  | $    | 408,500  |   |  | $ |        |  
|Shareholders equity                                               |  | $                                        | 121,288   |   |      | $ | 16,717    |      |  | $ | 118,326   |   |  | $    | 408,541  |   |  | $ | 234,731 |  



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

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

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

Business Overview

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

TerreStar Corporation, through TerreStar Networks and in cooperation with its Canadian partner, 4371585 Canada., is enabling our partners and their customers to offer a reliable and secure satellite-terrestrial mobile
broadband network that will provide mobile voice, data and video services to homeland defense and public safety organizations, rural and under-served communities, outdoor adventurers, maritime industry, (M2M) machine-to-machine communications
providers, and to power users interested in anywhere coverage throughout North America.

We continue to make
significant progress with our technology partners in the construction of TerreStar-1, our 2GHz mobile satellite service (MSS) satellite, and the development of the reference design and form-factor of our integrated satellite-terrestrial handset.
While the satellite has experienced certain delays, we are on track to launch TerreStar-1 in the second quarter of 2009 and expect to be commercially ready in late 2009 to provide a wholesale communications backbone that will permit users and
devices to seamlessly and securely access voice, data and mobile video applications through integrated satellite and terrestrial platforms. We are currently exploring many different channels and partners that will help us create value using the
capacity of our network as quickly as possible.

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

As of
December 31, 2008, we have four wholly-owned subsidiaries, MVH Holdings Inc., Motient Holdings Inc., CCTV Wireless I, LLC, and Port Merger Corporation. MVH Holdings Inc. and Motient Ventures Holdings Inc., a wholly owned subsidiary of MVH
Holdings Inc., directly hold approximately 88% and 86% interests in TerreStar Networks and TerreStar Global, respectively.

Based on our
current business plan, we believe that we have sufficient liquidity required to conduct operations through December 31, 2009 and into the first quarter of 2010. We will likely face a cash deficit in the first quarter of 2010 unless it obtains
additional capital. We cannot guarantee that financing sources will be available or available on favorable terms.



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Overview

TerreStar Networks Inc.

TerreStar Networks is our principal operating entity. In cooperation with its Canadian
partner, 4371585 Canada, 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 MSS using frequencies in the 2GHz band, which are part of what is often
known as the S-band, in conjunction with ATC, we can effectively deploy an integrated satellite and terrestrial wireless communications network. Our network would allow a user to utilize a mobile device that would communicate with a
traditional land-based wireless network when in range of that network, but communicate with a satellite when not in range of such a land-based network. We intend to provide multiple communications applications, including voice, data and video
services. TerreStar Networks is in the process of building its first satellite pursuant to a construction contract with Loral. Once launched, our TerreStar-1 satellite, with an antenna approximately sixty feet across, will be able to communicate
with conventionally sized wireless devices currently being developed by our vendors.

Our ability to offer these services depends on
TerreStar Networks right to receive certain regulatory authorizations allowing it to provide MSS/ATC in the S-band. These authorizations are subject to various regulatory milestones relating to the construction, launch and operational date of
the satellite system required to provide this service. We may be required to obtain additional approvals from national and local authorities in connection with the services that we wish to provide in the future. For example, in order to provide ATC
in the United States and Canada we must file 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 SkyTerra, formerly known as MSV, established
to, among other things, develop a satellite communications system using the S-band. On May 11, 2005, we acquired our ownership interest in TerreStar Networks when, in conjunction with a spin-off of TerreStar Networks to the owners of MSV, we
purchased an additional $200 million of newly issued TerreStar Networks common stock. In conjunction with this transaction, TerreStar Networks also entered into an agreement with MSVs wholly-owned subsidiary, ATC Technologies, LLC (ATC
Technologies) pursuant to which TerreStar Networks has a perpetual, royalty-free license to utilize ATC Technologies patent portfolio in the S-band, including those patents related to ATC, which we anticipate will allow us to deploy a
communications network that seamlessly integrates satellite and terrestrial communications, giving a user ubiquitous wireless coverage in the U.S. and Canada.

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

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



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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 Canada

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

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

TerreStar
Networks owns 20% of the voting equity of TerreStar Canada as well as 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 Canada. 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.



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

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

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

On January 16, 2009, TerreStar Networks entered into a master agreement (the Agreement) with Trio 2 General Partnership (Trio) and certain other parties, pursuant to which, subject to the
satisfaction of a number of conditions, including the receipt of necessary governmental approvals from Industry Canada and obtaining certain third party consents, Trio (through a wholly-owned subsidiary) will purchase the 662/3% voting equity stake in TerreStar Canada Holdings currently held by 4371585 Canada. Trio and TerreStar Networks will enter into a
series of agreements that will be materially similar to the Transfer Agreements. TerreStar Networks will retain its existing 331/3% voting equity ownership of TerreStar Canada Holdings. Trio is majority-owned by certain managing partners of Trio Capital Inc., a Canadian investment firm, including Jacques Leduc. Mr. Leduc is also a member of the board of directors
and a member of the nominating committee.

TerreStar Global Limited

TerreStar Global was initially formed in 2005 as a wholly-owned subsidiary of TerreStar Networks. We have consolidated the financial results of TerreStar
Global since its inception. In late 2006, TerreStar Networks spun-off TerreStar Global to its stockholders. As a result, TerreStar Corporation became the indirect majority holder of TerreStar Global. In connection with the spin-off, TerreStar
Networks made capital contributions to TerreStar Global of $5 million. In late 2006, TerreStar Global also raised an additional $5 million through a rights offering from its shareholders, in proportion to their holdings, the majority of which
came from TerreStar Corporation. As of December 31, 2008, TerreStar Corporation owned approximately 86% of the outstanding shares of TerreStar Global.

Through a wholly-owned subsidiary of TerreStar Global, TerreStar Europe, our goal is to build, own and operate a Pan-European integrated mobile satellite and terrestrial communications network to address public safety
and disaster relief as well as provide broadband connectivity in rural regions 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 October 7, 2008, TerreStar Europe filed an
application with the European Commission for a Pan-European 2GHz MSS S-band spectrum authorization. TerreStar Europe has entered into a number of contracts in connection with its application, including contracts for the construction and
operation of a satellite and earth station. We expect that the European Commission will issue such authorizations in 2009. There can be no assurance that TerreStar Europe will be awarded an authorization.



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Current Years Developments

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

In June 2008, the TerreStar-1 S-band reflector sustained damage during manufacturing at Harris Corporation, the reflector sub-contractor used by Loral.
The Harris Corporation has provided a commitment to complete and ship the reflector to Loral for integration on the TerreStar-1 satellite by March 15, 2009. Based on this commitment, Loral informed us that TerreStar-1 will be ready to ship to
the launch provider, Arianespace, in April 2009. As a result, launch of TerreStar-1 has been postponed from fourth quarter 2008 to second quarter 2009. Arianespace has confirmed a new launch slot of June 1, 2009 to June 30, 2009. We
have sought approval from the Federal Communications Commission (FCC) to extend its remaining milestones. There can be no assurance that such request will be granted. Industry Canada has granted approval of an extension of its
remaining milestone.

Acquisition, Dispositions and Recent Financings

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

The EchoStar Investment Agreement provides for, among other things,



| |  |  | purchase by EchoStar of $50 million of TerreStar Notes,
| | - |  | -------------------------------------------------------



| |  |  | purchase by EchoStar of $50 million of TerreStar Networks newly issued 6.5% Senior Exchangeable PIK Notes due 2014, exchangeable for TerreStar Corporation
common stock, at a conversion price of $5.57 per share (the TerreStar Exchangeable Notes) and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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

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

In connection with the foregoing
transactions, certain of our existing investors entered into separate investment agreements (Shareholder Investment Agreements) to purchase in the aggregate $50 million of the TerreStar Exchangeable Notes.

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

On May 21, 2008, we exercised our option to acquire
Port Merger Corporation. On June 10, 2008, we issued 30 million shares of our common stock to EchoStar.

On February 5,
2008, we also entered into a Spectrum Contribution Agreement (the Harbinger Contribution Agreement), with Harbinger, which provided that, following shareholder approval, Harbinger



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would assign to TerreStar Corporation its rights to certain 1.4GHz spectrum licenses with an option to purchase these licenses in exchange for the issuance
of 1.2 million of TerreStar Corporations Series E Junior Participating Preferred Stock, par value $0.01 per share, convertible into 30 million shares of TerreStar Corporation common stock (the Junior Preferred).

On June 9, 2008, we issued 1.2 million shares of our Series E Junior Participating preferred stock to Harbinger, convertible
into 30 million shares of our common stock for the effective purchase of CCTV Wireless, LLC, the holder of certain 1.4GHz licenses. The transaction was consummated on June 10, 2008. Our Series E preferred stock does not
currently trade on the public market; therefore, we measured the costs of the 1.4GHz licenses acquired from Harbinger based on the fair value of the underlying common shares.

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

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

Aggregate gross proceeds to TerreStar Networks from these transactions were approximately $297 million in cash, of which approximately $197 million was made available at closing and the balance of which will be dedicated to funding the
TerreStar-2 satellite under the Credit Agreement (defined below). In addition to shareholder approval, the spectrum transactions were subject to certain government approvals.

As a result of these transactions, the Boards of Directors of both TerreStar Corporation and TerreStar Networks were expanded to eight members and,
depending on stock holdings, EchoStar and Harbinger each have the right to nominate up to two members of each board. On February 5, 2008, we entered into a $100 million Purchase Money Credit Agreement (the Credit Agreement), among
TerreStar Networks, as the borrower, the guarantors party thereto from time to time, U.S. Bank National Association, as collateral agent, and Harbinger and EchoStar, as lenders. Amounts outstanding under the Credit Agreement bear interest at a rate
of 14% per annum.

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

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



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We held approximately 44.3 million shares of non-voting common stock of SkyTerra Communications as
of December 31, 2007. This was accounted for under the cost method and valued at approximately $325 million. We also had a corresponding contractual commitment with SkyTerra to distribute 25.5 million of these shares to our
shareholders, and had recorded a dividend liability of $183 million as of December 31, 2007 using the same adjusted cost basis as our investment.

On February 6, 2008, TerreStar Corporation, MVH Holdings Inc. and Harbinger Capital Partners Fund I, L.P. entered into a Stock Purchase Agreement pursuant to which TerreStar Corporation sold 14.4 million
shares of non-voting common stock of SkyTerra to Harbinger Capital Partners Fund I, L.P. for an aggregate sale price of $76.4 million. TerreStar Corporation received the proceeds on February 28, 2008. We recognized a loss on this sale of $27
million for the three months ended March 31, 2008.

On September 16, 2008, we sold our remaining 29.9 million shares of
SkyTerra for gross proceeds of $124 million. We recognized a loss of approximately $99 million on this transaction. Harbinger purchased approximately 24 million shares and the remaining shares were sold to other purchasers. A portion
of the shares sold to Harbinger were delivered to an escrow agent pending receipt of FCC approval of Harbingers pending application to control up to 100% of SkyTerra.

In order to permit TerreStar Corporation to sell these SkyTerra shares, SkyTerra agreed to waive a contractual requirement for TerreStar to distribute
25.5 million of the SkyTerra shares to TerreStar Corporations shareholders. Consequently, we eliminated the $183 million dividend liability. We recorded a benefit to decrease dividend liability of $78 million due to change in
value of the shares, as a corresponding offset to the loss on the sale of the SkyTerra shares, and the remaining $105 million was recorded to Additional Paid-in Capital as an offset to the originally recorded transaction.

TerreStar Corporation also granted to SkyTerra the right to sell to third parties the 4,216,270 shares, or approximately 11.1% of the total outstanding
common shares, of TerreStar Networks held by SkyTerra. Subject to certain conditions, purchasers of these shares would have the right to exchange them to TerreStar Corporation for 4.37 shares of TerreStar Corporation common stock per TerreStar
Networks share, and would have registration rights with respect to these TerreStar Corporation shares. TerreStar Corporation would also receive 3,126,428 shares of Terrestar Global, another TerreStar Corporation subsidiary, currently owned by
SkyTerra in conjuction with this exchange. If consummated, this exchange would result in TerreStar Corporation owning more than 99.9% of TerreStar Networks and TerreStar Global.

Other Agreements and Contracts

On August 1, 2008, we announced that TerreStar Networks had
entered into a nationwide reciprocal roaming agreement with AT&T Mobility LLC.

On December 11, 2008, TerreStar Networks entered
into a fifteen-year agreement (Agreement) with Qualcomm Incorporated (Qualcomm) for the provision by Qualcomm of satellite enabled mobile chipsets and satellite base station components to facilitate the development of S-band
mobile devices and network systems. A broad range of Qualcomm chipsets, to be available on a mass market basis, will include satellite and S-band capabilities. The Agreement also contemplates that other operators (Operator) may enter
into similar arrangements with Qualcomm. The termination by one Operator of its agreement with Qualcomm does not affect the agreement of any other Operator. TerreStar Networks has been advised that ICO Satellite Services G.P. (ICO) and
MSV have entered into similar agreements with Qualcomm. Each Operator will fund a portion of the related non-recurring engineering (NRE) expenses incurred in connection with the Agreements, which will result in a further sharing of NRE if and when
additional Operators enter into similar agreements with Qualcomm. The TerreStar Networks portion of the NRE to be paid to Qualcomm is expected to be in an amount not to exceed six million dollars, which amount will be reduced if other Operators
enter into similar agreements with Qualcomm.



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Critical Accounting Policies and Significant Estimates

The preparation of financial statements requires management to use judgment and make estimates. The level of uncertainty in estimates and assumptions
increases with the length of time until the underlying transactions are completed. Actual results could ultimately differ from those estimates. The accounting policies that are most critical in the preparation of our Consolidated Financial
Statements are those that are both important to the presentation of our financial condition and results of operations and require significant or complex judgments and estimates on the part of management. Our most significant estimates relating to
our continuing operations include the valuation of stock-based compensation, deferred tax assets and long-lived assets.

Valuation of Long-lived Assets
Including Intangible Assets

A significant portion of our total assets are long-lived assets primarily consisting of property and
equipment and intangible assets. Property and equipment, or P&E, consists of network, lab, office and computer equipment, internal use software and leasehold improvements. Intangible assets consists of indefinite 1.4GHz spectrum and definite
lived intangible assets related to radio spectrum and other intellectual property that were obtained in connection with several exchange transactions of our common stock for TerreStar Networks common stock with shareholders pursuant to an exchange
agreement entered into in 2006.

As of December 31, 2008, property and equipment and intangibles represented $717 million and
$359 million, respectively, of our total assets of $1.3 billion. We calculate depreciation and amortization on long-lived assets using the straight-line method based on the estimated economic useful lives as follows:



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

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

We included in our evaluation a sensitivity analysis that would address market volatility factors and credit
constraints. We evaluated our business plans and their related undiscounted cash flows and determined a probability weighting for them. As a result of our analysis, we determined that the long-lived assets as of December 31, 2008 were not
impaired.

Recently Issued Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No. 157) which defines fair value, establishes a framework for measuring fair value, and
expands disclosures about fair value measurements. SFAS No. 157 was initially effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.



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In February 2008, the FASB issued FASB Staff Position (FSP) No. 157-1,
Application of SFAS No. 157 to SFAS No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurements under Statement 13, (FSP
No. 157-1). FSP No. 157-1 amends SFAS No. 157, Fair Value Measurements, to exclude SFAS No. 13, Accounting for Leases and other accounting pronouncements that address fair value
measurements for purposes of lease classification or measurement under SFAS No. 13. The adoption of FSP No. 157-1 did not have a material impact on us.

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

In October 2008, the FASB issued FSP No. 157-3, which clarifies the application of SFAS No. 157 in a market that is not active
and provides an example to illustrate key considerations in determining the fair market value of a financial asset when the market for that financial asset is not active. The guidance emphasizes that determining fair value in an inactive market
depends on the facts and circumstances and may require the use of significant judgments. FSP No. 157-3 is effective upon issuance, including prior periods for which financial statements have not been issued, and therefore was effective for us
at September 31, 2008. The adoption of FSP No. 157-3 did not have a material impact on us.

In February 2007, the FASB issued
SFAS No. 159, The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an Amendment of SFAS No. 115 (SFAS No. 159) which provides companies with an option to
report selected financial assets and liabilities at fair value. Furthermore, SFAS No. 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 No. 159 is effective for fiscal years beginning after November 15, 2008. 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. We believe that SFAS No. 159 will not have a material impact on our financial statements.

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) which 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 May 2008, the FASB issued SFAS No. 162, The
Hierarchy of Generally Accepted Accounting Principles,(SFAS No. 162). SFAS No. 162 identifies the framework, or hierarchy for selecting accounting principles to be used in preparing financial statements
presented in conformity with U.S. GAAP. SFAS No. 162 amends the existing U.S. GAAP hierarchy established and set forth in the American Institute of Certified Public Accountants (AICPA) Statement of Auditing Standard
No. 69, The Meaning of Present Fairly in Conformity



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With Generally Accepted Accounting Principles (SAS No. 69). The framework serves as a guide in determining the appropriate accounting
treatment to be used for a transaction or event. We do not expect SFAS No. 162 to have an impact on our current accounting practices. The Standard will become effective 60 days following the SECs approval of Public Company Accounting
Oversight Board (PCAOB) amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.

In April 2008, the FASB issued FSP No. FAS 142-3, Determination of the Useful Life of Intangible Assets,(FSP No. FAS 142-3) which amends the factors considered in
developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets, (SFAS No. 142). FSP
No. 142-3 requires a consistent approach between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of an asset under SFAS No. 141(R). The FSP also
requires enhanced disclosures when an intangible assets expected future cash flows are affected by an entitys intent and/or ability to renew or extend the arrangement. FSP No. 142-3 is effective for financial statements issued for
fiscal years beginning after December 15, 2008, January 1, 2009 for us, and is to be applied prospectively. Early adoption is prohibited. We have not completed our analysis of the potential impact of FSP No. 142-3, but do not believe
the adoption will have a material impact on our financial condition, results of operations, or cash flows.

Results of OperationsConsolidated

Years Ended December 31, 2008 and 2007

Operating Expenses



|                                  |  |                         |         |      |   |         |        |  |   |         |   |  |       |   
|--------------------------------- |  | ----------------------- | ------- | ---- | - | ------- | ------ |  | - | ------- | - |  | ----- | --
|                                  |  | Year Ended December 31, |        
|                                  |  | 2008                    |         | 2007 |   |         | Change |  |   | %Change |  
|                                  |  | (in thousands)          |        
|General and administrative        |  | $                       | 88,536  |      | $ | 114,848 |        |  | $ | (26,312 | ) |  | (22.9 | )%
|Research and development          |  |                         | 73,560  |      |   | 43,067  |        |  |   | 30,493  |   |  | 70.8  | % 
|Depreciation and amortization     |  |                         | 22,479  |      |   | 18,222  |        |  |   | 4,257   |   |  | 23.4  | % 
|Loss on impairment of intangibles |  |                         |        |      |   | 6,699   |        |  |   | (6,699  | ) |  | NM    |   
|Loss (gain) on asset disposal     |  |                         | 6,768   |      |   | (123    | )      |  |   | 6,891   |   |  | NM    |   
|                                  |  |                         |         |      |   |         |        |  |   |         |   |  |       |   
|Total operating expenses          |  | $                       | 191,343 |      | $ | 182,713 |        |  | $ | 8,630   |   |  | 4.7   | % 
|                                  |  |                         |         |      |   |         |        |  |   |         |   |  |       |   



|NM: | Not Meaningful
|--- | --------------

General and administrative:Our
general and administrative expenses decreased by approximately $26.3 million or 22.9% for the year ended December 31, 2008 as compared to the same period in 2007. The change is attributed to a decrease of $17.0 million in stock option
compensation, $14.4 million in consulting expenses related to engineering, marketing and systems development costs, a decrease of $10.7 million in legal and professional fees, offset by an increase of approximately $7.0 million in data center
expense and $9.3 million in network expense.

Research and development costs: Research and development costs increased by $30.5
million or 70.8% for the year ended December 31, 2008 as compared to the same period in 2007. The increase is related to a $35.7 million increase for the development of our handset, it is partially offset by a $5.0 million decrease in the work
on our satellite system.

Depreciation and amortization: Depreciation and amortization increased by $4.3 million or 23.4% for the
year ended December 31, 2008 as compared to the same period in 2007. Depreciation expense increased by $2.1



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million driven mostly by higher asset basis in network equipment, capitalized software and lab equipment. Since January 2008, we engaged in several exchange
transactions of our common stock for TerreStar Networks common stock with minority interest shareholders. The common stock exchanges resulted in an allocation of $7.6 million to intangible assets, including the tax effect. Amortization expense
increased by $2.1 million for the year ended December 31, 2008.

Loss on impairment of intangibles: The loss on impairment of
intangibles decreased by $6.7 million for the year ended December 31, 2008 as compared to the same period in 2007. In 2007 we increased our ownership in TerreStar Networks through exchange transactions of our common stock for TerreStar Networks
common stock with minority shareholders. The amounts invested in TerreStar Networks intangible assets exceeded the fair value of the assets. As a result, we recognized a $6.7 million loss on impairment of intangibles for the year ended
December 31, 2007.

Loss (gain) on asset disposal:For the year ended December 31, 2008, we recorded a loss related to
asset disposals of approximately $6.8 million. This includes $5.5 million in assets under constructions (including capitalized interest) where the set up and installation of sites were terminated and activities were ceased. There was an additional
$1.3 million of equipment in service that was deemed obsolete and written off. In 2007, we had a gain of $0.1 million due to the sale of our spectrum frequency assets to Nextel Communications.

Years Ended December 31, 2008 and 2007

Other Expenses
and Income



|                                                   |  |                         |          |   |      |   |          |        |  |   |          |   |  |        |   
|-------------------------------------------------- |  | ----------------------- | -------- | - | ---- | - | -------- | ------ |  | - | -------- | - |  | ------ | --
|                                                   |  | Year Ended December 31, |         
|                                                   |  | 2008                    |          |   | 2007 |   |          | Change |  |   | %Change  |  
|                                                   |  | (in thousands)          |         
|Interest expense                                   |  | $                       | (54,764  | ) |      | $ | (52,584  | )      |  | $ | (2,180   | ) |  | 4.1    | % 
|Interest and other income                          |  |                         | 4,155    |   |      |   | 12,540   |        |  |   | (8,385   | ) |  | (66.9  | )%
|Equity in losses of MSV                            |  |                         |         |   |      |   | (7,338   | )      |  |   | 7,338    |   |  | (100.0 | )%
|Minority interests in losses of TerreStar Networks |  |                         | 10,545   |   |      |   | 23,262   |        |  |   | (12,717  | ) |  | (54.7  | )%
|Minority interests in losses of TerreStar Global   |  |                         |         |   |      |   | 1,198    |        |  |   | (1,198   | ) |  | (100.0 | )%
|Loss on sale of SkyTerra                           |  |                         | (126,224 | ) |      |   |         |        |  |   | (126,224 | ) |  | NM     |   
|Decrease in dividend liability                     |  |                         | 77,708   |   |      |   | 71,046   |        |  |   | 6,662    |   |  | 9.4    | % 
|Other than temporary impairment-SkyTerra           |  |                         |         |   |      |   | (106,800 | )      |  |   | (106,800 | ) |  | (100.0 | )%



|NM: | Not Meaningful
|--- | --------------

Interest expense:Interest expense
increased by $2.2 million or 4.1% for the year ended December 31, 2008 as compared to the same period in 2007. Interest expense increased by $40.6 million offset by a $33 million increase in capitalized interest and a $5.4 million reduction in
financing fees.

Interest and other income:Interest and other income (expense) decreased by $8.4 million or 66.9% mostly from a
decrease in interest income of $8.8 million due to decreasing interest rates.

Equity in losses of MSV: Equity and losses of MSV
decreased by $7.3 million for the year ended December 31, 2008 to zero. As of December 31, 2007, we no longer held an ownership interest in MSV.

Minority interest in losses of TerreStar Networks:For the year ended December 31, 2008, we recorded minority interest in TerreStar Networks of net loss of approximately $10.5 million, as a result of
minority interest in TerreStar Networks. The cumulative losses have exceeded the minority interest balances and therefore we no longer allocate net losses to our minority interest holders.



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Decrease in dividend liability:Our dividend liability decreased by $77.7 million for the year
ended December 31, 2008, due to the change in value of our SkyTerra shares prior to the sale of our investment in SkyTerra.

Loss
on Investment in SkyTerra: Our loss on our investment in SkyTerra was $126.4 million for the year ended December 31, 2008. In February 2008, we sold 14.4 million SkyTerra shares, and as a result, we recognized a loss of $27.4 million.
In September 2008, we sold the remaining 29.9 million shares of our SkyTerra investment, and we recognized a loss of $99 million.

Other than temporary impairment-SkyTerra: The other than temporary impairment-SkyTerra decreased by $106.8 million for the year ended December 31, 2008 as compared to the same period in 2007. We apply SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, to measure impairment of our investments. For the year ended December 31, 2007, we experienced declines in the fair value of our SkyTerra investment. We consider these
declines to be other than temporary based on the extent and length of time the fair values have been less than cost. We recognized an impairment of $106.8 million for the year ended December 31, 2007.

Years Ended December 31, 2007 and 2006

Operating
Expenses



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



|NM: | Not Meaningful
|--- | --------------

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

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

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



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

Years Ended
December 31, 2007 and 2006

Other Income and Expenses



|                                                   |  |                         |          |   |      |   |         |        |  |   |          |   |  |         |   
|-------------------------------------------------- |  | ----------------------- | -------- | - | ---- | - | ------- | ------ |  | - | -------- | - |  | ------- | --
|                                                   |  | Year Ended December 31, |         
|                                                   |  | 2007                    |          |   | 2006 |   |         | Change |  |   | %Change  |  
|                                                   |  | (in thousands)          |         
|Interest and other income                          |  | $                       | 12,540   |   |      | $ | 7,948   |        |  | $ | 4,592    |   |  | 57.8    | % 
|Interest expense                                   |  |                         | (52,584  | ) |      |   | (2,608  | )      |  |   | (49,976  | ) |  | 1,916.3 | % 
|Gain on sale of investments                        |  |                         |         |   |      |   | 11,260  |        |  |   | (11,260  | ) |  | (100.0  | )%
|Equity in losses of MSV                            |  |                         | (7,338   | ) |      |   | (30,079 | )      |  |   | 22,741   |   |  | (75.6   | )%
|Minority interests in losses of TerreStar Networks |  |                         | 23,262   |   |      |   | 20,655  |        |  |   | 2,607    |   |  | 12.6    | % 
|Minority interests in losses of TerreStar Global   |  |                         | 1,198    |   |      |   | 654     |        |  |   | 544      |   |  | 83.2    | % 
|Other than temporary impairment-SkyTerra           |  |                         | (106,800 | ) |      |   |        |        |  |   | (106,800 | ) |  | NM      |   
|Decrease in dividend liability                     |  |                         | 71,046   |   |      |   |        |        |  |   | 71,046   |   |  | NM      |   



|NM: | Not Meaningful
|--- | --------------

Interest and Other Income:
Interest and other income increased in 2007 by $4.6 million, primarily due to increased cash balances throughout the year and an increase in the rate of return on our invested balances.

Interest Expense: Interest expense in 2007 was $52.6 million, an increase of $49.9 million from 2006, related to interest on TerreStar Notes
issued in February 2007 for $500 million and a write off of financing fees.

Gain on Sale of Investments: In October 2006, we sold
3.6 million SkyTerra shares in the open market. As a result, we recognized a gain of $11.3 million for the year ended December 31, 2006.

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

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

Other than temporary impairment-SkyTerra: The other than temporary impairment-SkyTerra increased by $106.8 million
for the year ended December 31, 2007 as compared to the same period in 2006. We apply SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, to measure impairment of our



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investments. For the year ended December 31, 2007, we experienced declines in the fair value of our SkyTerra investment. We consider these declines to
be other than temporary based on the extent and length of time the fair values have been less than cost. We recognized an impairment of $106.8 million for the year ended December 31, 2007.

Decrease in dividend liability: The decrease in dividend liability represents $71.0 million for the year ended December 31, 2007, as compared
to zero for the same period in 2006.

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, 2009 and into
the first quarter of 2010. We will likely face a cash deficit in the first quarter of 2010 unless we obtain additional capital. We 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 and our secured $100 million Credit Agreement, of which $66.8 million is
available. As of December 31, 2008, including restricted cash; we had $238.2 million of cash on hand. After giving effect to the net proceeds available under the Credit Agreement, we have approximately $305.0 million of liquidity resources
available to fund operations.

Our short-term liquidity needs are driven by our satellite system construction contracts, the development of
terrestrial infrastructure and networks, the design and development of our handset and chipset, and our ongoing operating expenses. As of December 31, 2008, we had contractual obligations of $148 million due within one year, consisting of
approximately $120 million related to our satellite system, of which, we expect to spend between $30 and $40 million to obtain satellite launch insurance prior to the launch of our TerreStar satellite, $22 million related to our handset, chipset,
and terrestrial network, and $6 million for operating leases. In addition, TerreStar Europe, a TerreStar Global subsidiary, recently filed an application for the award of S-band spectrum in Europe. If we are awarded this spectrum, we will need
additional funds in TerreStar Global for satellite construction and terrestrial ground network development. We 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.

Our long-term liquidity needs are to fund the deployment and expansion of our terrestrial
infrastructure and networks, the design of our second generation handset and chipset, orbital incentive payments related to our satellite contracts, and settlement of our Series A and B Cumulative Redeemable Convertible Preferred Stock which mature
on April 15, 2010, if not converted. In addition, we will need funds for working capital purposes, which we anticipate will grow as our operations expand. As of December 31, 2008, we had aggregate contractual payment obligations of
approximately $710 million, consisting of approximately $311 million for the TerreStar Networks satellites and incentive payments; approximately $15 million for our operating leases in Reston, Virginia, Lincolnshire, Illinois and Richardson
Park, Texas, data centers, and site hosting agreements; and approximately $384 million for obligations related to the build out of our terrestrial network and handset and chipset costs. However, we have identified in excess of $325 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 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.



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Summary of Cash Flows:



|                                                                        |  |                         |          |   |      |   |          |  
|----------------------------------------------------------------------- |  | ----------------------- | -------- | - | ---- | - | -------- | -
|                                                                        |  | Year Ended December 31, |         
|                                                                        |  | 2008                    |          |   | 2007 |  
|                                                                        |  | (in thousands)          |         
|Net cash used in Operating Activities                                   |  | $                       | (163,350 | ) |      | $ | (119,912 | )
|Net cash provided by (used in) Investing Activities                     |  |                         | 97,219   |   |      |   | (245,422 | )
|Cash flows from Financing Activities:                                   |  |                         |          |   |      |   |          |  
|Net proceeds from issuance of debt and equity securities                |  |                         | 195,732  |   |      |   | 506,708  |  
|Proceeds from TerreStar-2 Purchase Money Credit Agreement               |  |                         | 33,175   |   |      |   |         |  
|Repayments of the Senior Secured Notes                                  |  |                         |         |   |      |   | (200,000 | )
|Dividends paid on Series A and B Cumulative Convertible Preferred Stock |  |                         | (13,086  | ) |      |   | (13,086  | )
|Debt and Equity issuance costs and other charges                        |  |                         | (4,013   | ) |      |   | (14,458  | )
|                                                                        |  |                         |          |   |      |   |          |  
|Net cash provided by Financing Activities                               |  |                         | 211,808  |   |      |   | 279,164  |  
|Net cash provided by (used in) continuing operations                    |  |                         | 145,677  |   |      |   | (86,170  | )
|Net cash used in discontinued operating activities                      |  |                         |         |   |      |   | (28      | )
|Net cash provided by discontinued investing activities                  |  |                         | 2,009    |   |      |   | 3,667    |  
|                                                                        |  |                         |          |   |      |   |          |  
|Net cash provided by discontinued operations                            |  |                         | 2,009    |   |      |   | 3,639    |  
|Net increase (decrease) in cash and cash equivalents                    |  |                         | 147,686  |   |      |   | (82,531  | )
|Cash and Cash Equivalents, beginning of period                          |  |                         | 89,134   |   |      |   | 171,665  |  
|                                                                        |  |                         |          |   |      |   |          |  
|Cash and Cash Equivalents, end of period                                |  | $                       | 236,820  |   |      | $ | 89,134   |  
|                                                                        |  |                         |          |   |      |   |          |  

Operating Activities

Net cash used in operating activities for the year ended December 31, 2008 was $163.3 million as compared to net cash used in operating activities for the year ended December 31, 2007 was $119.9 million. The
increase of $43.4 million is primarily attributable to the payment of normal operating trade payables, research and development consulting in relation to the handset, plus an increase in other operating activities.

Investing Activities

Net cash provided by
investing activities for the year ended December 31, 2008 was $97.2 million as compared to net cash used in investing activities for the year ended December 31, 2007 was $245.4 million. The increase of $342.6 million was primarily
attributable to the proceeds of $199.1 million from the sale of SkyTerra shares, a reduction of $187.1 million in payments for capital expenditures including satellite construction. These increases were offset by a decrease in restricted
cash of approximately $43.4 million relating to satellite construction, preferred stock dividend payments, and an escrow required for the senior secured notes repaid in 2007.

Financing Activities

Net cash provided by financing activities for the year ended
December 31, 2008 was $211.8 million as compared to net cash provided by financing activities for the year ended December 31, 2007 was $279.2 million. The decrease of $67.3 million was primarily attributable to a decrease in debt proceeds,
net of repayments, in the amount of $77.8 million which is offset by a reduction in debt issuance costs of approximately $10.5 million.

Discontinued
Operations

Net cash provided from discontinued operations for the year ended December 31, 2008 was $2.0 million attributable
to the release of restricted cash related to the asset sale between TerreStar Corporation and GeoLogic which occurred in September 2006.



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Debt Obligations

During 2007 and 2008, we engaged in a series of financing transactions. In 2007, we obtained $500 million by issuing Senior Secured PIK Notes which mature
on February 14, 2014 and bear interest at a rate of 15% per annum. In February 2008, we obtained an additional $50 million by issuing additional Senior Secured PIK Notes which also mature on February 14, 2014 and bear interest at a rate of 15% per
annum. As of December 31, 2008, we did not meet certain milestones and thus the interest rate on these Senior Secured PIK Notes was increased by 1.5%. Interest is payable in additional Senior Secured PIK Notes semi-annually, on February 15 and
August 15, through February 2011. Thereafter, interest will be payable in cash until maturity on February 14, 2014.

In February 2008, we
obtained $150 million by issuing Exchangeable Notes which mature on June 15, 2014 and bear interest at a rate of 6.5% per annum. Interest is payable in additional Exchangeable Notes through March 2011. Thereafter, additional interest on the
Exchangeable Notes will be payable in cash quarterly until maturity on June 15, 2014. The Exchangeable Notes are convertible into common stock at a price of $5.57. The Exchangeable Notes rank senior in right of payment to all existing and future
subordinated indebtedness, and pari-passu with all other unsubordinated indebtedness.

Also, in February 2008, we entered into a $100
million TerreStar-2 Purchase Money Credit Agreement which matures on February 5, 2013 and bears interest at 14% per annum, which accretes interest through March 2012 and is payable in cash thereafter.

For further detail discussion on Debt Obligations, please refer to Note 8, Long-Term Debt, of the notes to the financial statements.

Contractual Cash Obligations

As of December 31,
2008, TerreStar Corporation had TerreStar Notes and accrued interest, of $715.5 million, maturing on February 14, 2014, with cash interest payments commencing on February 15, 2011; Terrestar Exchangeable Notes and accrued interest, of
$159.1 million maturing on June 15, 2014, with cash interest payments commencing on June 15, 2011; and TerreStar-2 purchase money credit facility and accrued interest of $36.8 million, maturing on February 5, 2013, with cash interest
payments commencing on June 30, 2012. TerreStar Corporation had no preferred stock obligations, other than obligations with respect to the repayment of its Series A and B Preferred Stock. If not converted or repaid, the entire preferred stock
amount of $408.5 million will be due on April 15, 2010. On April 15, 2007, TerreStar Corporation paid the remaining portion of the dividends that were required to be placed in escrow. Additional dividend payments after April 15, 2007,
will be due bi-annually in April and October, payable at TerreStar Corporations option in cash (at a 5.25% annual interest rate) or common stock (at a 6.25% annual interest rate) through April 15, 2010. Currently, we are unable
to pay the Series A dividend in common stock due to our ongoing litigation with certain investors. We anticipate paying the Series A dividend in cash until such time that the Series A litigation is resolved and we satisfy the conditions required to
pay the Series A dividend in common stock. We also may pay the Series B dividend in cash from time to time if market conditions dictate.

We lease office space and equipment under operating leases expiring through 2012.

Our corporate headquarters is located in
Reston, Virginia. We lease approximately 45,000 square feet of office space for which the lease terms expire in 2009 and 2011. We lease our network operations center and engineering laboratory facility located in Richardson Park, Texas, totaling
31,031 square feet under a lease term that expires in 2012 and includes two five-year renewal options. In addition, we lease our network testing facility located in Salt Lake City, Utah, totaling approximately 7,000 square feet of office and
warehouse space under a lease term that expires in 2012. We also lease approximately 67,000 square feet of office space in Lincolnshire, IL, our former corporate headquarters, for which the lease term expires in 2010. We currently sublease
approximately 18,000 square feet of office space in Lincolnshire for which the sublease terms expires in 2010.



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For the years ended December 31, 2008, 2007 and 2006, the income related to the sublease agreements represented $0.3 million, $0.2 million and zero,
respectively. Approximately 49,000 square feet of office space in Lincolnshire is currently underutilized capacity. We plan to sublease the underutilized space in the future as demand develops.

Rent expense represented $10.8 million, $2.9 million and $6.5 million for the years ended December 31, 2008, 2007 and 2006, respectively. Rent
expense is recognized on a straight-line basis over the term of the lease agreement. Future lease obligations under the aforementioned lease agreements are more fully described in the table below.

The following are contractual commitments as of December 31, 2008:



|                                           |  |                |           |        |   |         |  |         |           |        |   |           |  |   |       
|------------------------------------------ |  | -------------- | --------- | ------ | - | ------- |  | ------- | --------- | ------ | - | --------- |  | - | ------
|                                           |  | TOTAL          |           | < 1 yr |   | 1-3 yrs |  | 4-5 yrs |           | 5+ yrs
|                                           |  | (in thousands)
|TerreStar Networks Satellites              |  | $              | 310,640   |        | $ | 120,356 |  | $       | 97,767    |        | $ | 7,974     |  | $ | 84,543
|Leases                                     |  |                | 15,319    |        |   | 6,261   |  |         | 8,820     |        |   | 190       |  |   | 48    
|Network and Capital Equipment and Services |  |                | 383,696   |        |   | 21,556  |  |         | 362,140   |        |   |          |  |   |      
|Preferred Stock Obligations                |  |                | 440,669   |        |   | 21,446  |  |         | 419,223   |        |   |          |  |   |      
|Debt Obligations                           |  |                | 1,693,653 |        |   |        |  |         | 247,201   |        |   | 1,446,452 |  |   |      
|                                           |  |                |           |        |   |         |  |         |           |        |   |           |  |   |       
|                                           |  | $              | 2,843,977 |        | $ | 169,619 |  | $       | 1,135,151 |        | $ | 1,454,616 |  | $ | 84,591

Off-Balance Sheet Financing

As of December 31, 2008, we did not have any material Off-Balance Sheet arrangements as defined in Item 303(a)(4)(ii) under Regulation S-K.



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

As of December 31, 2008, we do not have exposure to market risk associated with activities in derivative financial instruments or derivative commodity instruments. Currently, we invest our cash in short-term commercial paper,
investment-grade corporate and government obligations and money market funds.



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

The
consolidated financial statements and supplementary data required by this item are included in Part IV, Item 15, beginning on page F-1 of this annual report on Form 10-K and are incorporated herein by reference.



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

None.



|Item 9A. | Controls and Procedures
|-------- | -----------------------

Conclusions Regarding the Effectiveness
of Disclosure Controls and Procedures

We maintained disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the reports that our files or submissions under the Securities and Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the
SECs rules and forms, and that such information is accumulated and communicated to the principal executive officer (PEO) and chief accounting officer (CAO), as appropriate, to allow timely decisions regarding required
disclosures.



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We carried out the evaluation required by paragraph (b) of the Exchange Act Rules 13a-15 and 15d-15,
under the supervision and with the participation of our management, including the PEO and CAO, of the effectiveness of our disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e) ). Based on that
evaluation, and solely as a result of the material weaknesses in internal control over financial reporting described below, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures
were ineffective.

Report of Management on Internal Control over Financial Reporting

Our Management, including our PEO and CAO, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), as of December 31, 2008. Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be
disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms, and that such information is
accumulated and communicated to our management, including our PEO and CAO, to allow timely decisions regarding required disclosures.

A
material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the registrants annual or interim financial statements
will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of December 31, 2008, we determined that there was a control deficiency that constituted a material
weakness.

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

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

Management assessed the effectiveness of the internal control over financial reporting as of December 31, 2008 using the criteria established in
Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Due to its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and
presentation.

Based on that assessment, management concluded that we did not maintain effective internal controls over financial reporting
as of December 31, 2008. Friedman, LLP, an independent registered public accounting firm, as stated in their report, has issued an opinion on the effectiveness of our internal control over financial reporting as of December 31, 2008, based
on the criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. This report appears under Report of Independent Registered Public
Accounting Firm, which appears herein.



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Remediation Efforts to Address Material Weakness

We have developed and implemented remediation plans to address its material weakness. Management authorized specific remedial actions to address the
material weaknesses described above:



| |  |  | Hired a Chief Accounting Officer on October 31, 2008.
| | - |  | -----------------------------------------------------



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



| |  |  | Hired a permanent Sarbanes-Oxley compliance manager to assist us with re-establishing existing controls that may have broken down due to changes in the organization
and significant staff turnover.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Changes in Internal Controls over Financial Reporting

Remediation actions taken by the Chief Accounting Officer include:



| |  |  | Implement a monthly formal close process;
| | - |  | -----------------------------------------



| |  |  | Improved procedures to ensure accurate financial reporting;
| | - |  | -----------------------------------------------------------



| |  |  | Hired additional qualified staff to provide needed expertise within the finance department:
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | Senior Sarbanes-Oxley compliance manager on January 26, 2009
| | - |  | ------------------------------------------------------------



| |  |  | Director of Financial Planning and Analysis on January 28, 2009;
| | - |  | ----------------------------------------------------------------



| |  |  | Improved the accounts payable process to ensure timely and accurate recordation of vendor transactions;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | Established an environment of open communications;
| | - |  | --------------------------------------------------



| |  |  | Enhanced the monthly review process to ensure appropriate segregation of duties within the SAP system;
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | Required finance staff to participate in continuing professional education.
| | - |  | ---------------------------------------------------------------------------

The Chief Accounting Officer was not able to remediate fully the material weakness during 2008 because of the timing of his hiring and the need to assess
the accounting capabilities of existing personnel. Management believes that there are no material inaccuracies or omissions of material fact and, to the best of its knowledge, believes that the consolidated financial statements for the year ended
December 31, 2008 fairly present in all material respects the financial condition and results of operations for us in conformity with GAAP.



|Item 9B. | Other Information
|-------- | -----------------

None.



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of

TerreStar Corporation

We have audited TerreStar Corporations (the Company) internal control over financial reporting as of December 31,
2008, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Companys management is responsible for maintaining
effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on the effectiveness of the Companys internal control
over financial reporting based on our audit.

We conducted our audit 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 effective internal control over financial reporting was maintained in all material respects. Our audit included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing
such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A companys internal control over financial reporting is a process designed by, or under the supervision of, the companys principal executive and principal financial officers, or persons performing similar functions, and effected
by the companys board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

Because of
its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness to future periods are subject to the risk that the controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is
a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the companys annual financial statements will not be prevented or detected.
The following material weakness has been identified and included in managements assessment:

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



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This material weakness was considered in determining the nature, timing, and extent of audit tests
applied in our audit of the 2008 consolidated financial statements, and this report does not affect our report dated March 12, 2009 on those consolidated financial statements.

In our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, TerreStar
Corporation has not maintained effective control over financial reporting as of December 31, 2008, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission.

/s/ Friedman LLP

East Hanover, New Jersey

March 12, 2009



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PART III

Items 10 through 14 will be included in our Proxy Statement for our 2009 Annual Meeting of the Stockholders, and are incorporated herein by reference.



|Item 10. | Directors, Executive Officers and Corporate Governance
|-------- | ------------------------------------------------------

The information required by this Item relating to our directors, executive officers, audit committee and audit committee financial expert and information regarding our compliance with Section 16(a) of the Exchange Act and corporate
governance is incorporated herein by reference to our Proxy Statement for the 2009 Annual Meeting to be filed within 120 days of the first end of our fiscal year.



|Item 11. | Executive Compensation
|-------- | ----------------------

The information required by
this Item is incorporated by reference to the information set forth under the sections captioned Executive Compensation and Certain Relationships and Related Transactions is incorporated herein by reference to our Proxy
Statement for the 2009 Annual Meeting of Stockholders.



|Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|-------- | ----------------------------------------------------------------------------------------------

The information required by this Item is included under the section captioned Security Ownership of Certain Beneficial Owners and Management
is incorporated herein by reference to our Proxy Statement for the 2009 Annual Meeting of Stockholders, to be filed within 120 days of the end of our fiscal year.



|Item 13. | Certain Relationships and Related Transactions, and Director Independence
|-------- | -------------------------------------------------------------------------

The information required by this Item is incorporated by reference to the information set forth under the captions Certain Relationships and Other Transactions and Election of
DirectorsIndependence of Directors in our Proxy Statement for the 2009 Annual Meeting of Stockholders to be filed within 120 days of the end of our fiscal year.



|Item 14. | Principal Accountant Fees and Services
|-------- | --------------------------------------

Information
required by this Item is incorporated by reference to the information set forth under the caption Ratification of Independent Registered Public Accounting Firm is incorporated herein by reference to our Proxy Statement for the 2009
Annual Meeting of Stockholders.



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PART IV



|Item 15. | Exhibits and Financial Statement Schedules
|-------- | ------------------------------------------



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



| | 1) | The following consolidated financial statements of TerreStar Corporation are included as follows:
| | -- | -------------------------------------------------------------------------------------------------



|                                                        |  |     
|------------------------------------------------------- |  | ----
|                                                        |  | Page
|Report of Independent Registered Public Accounting Firm |  | F-1 
|Consolidated Balance Sheets                             |  | F-2 
|Consolidated Statements of Operations                   |  | F-3 
|Consolidated Statements of Cash Flows                   |  | F-4 
|Consolidated Statements of Shareholders Equity         |  | F-5 
|Notes to Consolidated Financial Statements              |  | F-7 



| | 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 II-Valuation and Qualifying Accounts



| | 3) | Exhibits.
| | -- | ---------



3.1

Restated Certificate of Incorporation of TerreStar Corporation (as restated effective May 1, 2002) (incorporated by reference to Exhibit 3.1 to the Companys Amendment No. 2 to
Registration Statement on Form 8-A, filed May 1, 2002).3.2

Amended and Restated Bylaws of TerreStar Corporation (incorporated by reference to Exhibit 3.1 to the Companys Current Report on Form 8-K, dated August 10, 2007).3.3

Certificate of Correction filed to correct a certain error in the Certificate of Designations of the Series A Cumulative Convertible Preferred Stock of Motient Corporation (incorporated by
reference to Exhibit 3.2 to the Companys Current Report on Form 8-K/A filed on August 3, 2005).3.4

Certificate of Designations of the Series B Cumulative Convertible Preferred Stock (incorporated by reference to Exhibit 31 to the Companys Current Report on Form 8-K filed on
October 31, 2005).3.5

Amendment to Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.4 to the Companys Registration Statement on Form S-1, filed June 24, 2005).3.6

Amendment to Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.6 to the Companys Registration Statement on Form S-3, filed August 7,
2006).3.7

Certificate of Amendment to the Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.4 to the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2007 (the Q3 2007 10-Q).3.8

Certificate of Designations of Series E Junior Participating Preferred Stock, Series C Preferred Stock and Series D Preferred Stock of TerreStar Corporation (incorporated by reference to Exhibit
3.8 to the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2008 (the Q2 2008 10-Q).3.9

Certificate of Amendment of the Restated Certificate of Incorporation of TerreStar Corporation (incorporated by reference to Exhibit 3.9 to the Q2 2008 10-Q).




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4.1

Specimen of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Q3 2007 10-Q).4.2

First Supplemental Indenture, Dated February 7, 2008, among TerreStar Networks Inc., as the issuer, certain guarantors party hereto and U.S. Bank National Association, as trustee
(incorporated by reference to Exhibit 4.2 to the Companys Current Report on Form 8-K dated February 8, 2008 (the February 2008 8-K)).4.3

Second Supplement Indenture, dated February 7, 2008, among TerreStar Networks Inc., as the issuer, certain guarantors party thereto and U.S. Bank National Association, as trustee
(incorporated by reference to Exhibit 4.3 to the February 2008 8-K).4.4

Indenture dated February 7, 2008, among TerreStar Networks Inc., as the issuer, the Company, certain subsidiaries of TerreStar Networks Inc. and U.S. Bank National Association, as trustee
(incorporated by reference to Exhibit 4.4 to the February 2008 8-K).4.5

Indenture, dated November 28, 2006 among the Company, as issuer, TerreStar Networks Inc., Motient License Inc., MVH Holdings, Inc., Motient Services Inc., Motient Communications Inc.,
Motient Ventures Holding Inc. and Motient Holdings Inc., as guarantors, and U.S. Bank National Association, as trustee (including form of Senior Secured Note due 2007) (incorporated by reference to Exhibit 4.1 to the Companys Current Report on
Form 8-K dated November 30, 2006).4.6

Purchase Money Credit Agreement, dated February 5, 2008, among TerreStar Network Inc., as the borrower, the guarantors party thereto from time to time and U.S. Bank National Association, as
collateral agent, Harbinger Capital Partners Master Fund I, Ltd., Harbinger Capital Partners Special Situations Fund, L.P. and EchoStar Corporation, as lenders. (incorporated by reference to Exhibit 4.1 to the February 2008 8-K).10.1*

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)).10.2

Form of Warrant to purchase shares of the Companys common stock issued to lenders under Amendment No. 1 to Amended and Restated Term Credit Agreement, dated March 16, 2004
(incorporated by reference to Exhibit 10.34 to the Companys Annual Report on Form 10-K for the year ended December 31, 2002).10.3

Registration Rights Agreement, dated as of November 12, 2004, by and among the Company and the investors listed therein (incorporated by reference to Exhibit 10.44 to the Companys
Quarterly Report on Form 10-Q for the quarter ended September 30, 2004).10.4

Form of Common Stock Purchase Warrant, dated as of November 12, 2004 (incorporated by reference to Exhibit 10.45 to the Companys Quarterly Report on Form 10-Q for the quarter ended
September 30, 2004).10.5

Registration Rights Agreement, dated February 9, 2005 by and among the Company, Telcom Satellite Ventures Inc., et al (incorporated by reference to Exhibit 10.59 to the Companys
Registration Statement on Form S-1/A filed on February 14, 2005 (the 2005 S-1).10.6

Form of Warrant to purchase the Companys common stock, dated February 9, 2005 (incorporated by reference to Exhibit 10.60 to the 2005 S-1).10.7

Amended and Restated Registration Rights Agreement dated October 26, 2005 by and among the Company and the Investors listed therein (incorporated by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K dated October 31, 2005).10.8

Form of Common Stock Purchase Warrant (incorporated by reference to Exhibit 10.3 to the Companys Current Report on Form 8-K dated April 15, 2005).




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10.9

Registration Rights Agreement dated May 6, 2006 by and among the Company, SkyTerra Communications, Inc., each of the Blocker Corporations and each of the stockholders of the Blocker
Corporation (incorporated by reference to Exhibit 99.3 to the Current Report on Form 8-K initially filed on May 11, 2006 (the May 2006 8-K)).10.10

Registration Rights Agreement dated May 6. 2006 by and among the Company and certain funds affiliated with Columbia Capital and Spectrum Equity Investors (incorporated by reference to
Exhibit 99.5 to the May 2006 8-K).10.11

TerreStar Networks Inc. Amended and Restated Stockholders Agreement (incorporated by reference to Exhibit 99.7 to the May 2006 8-K).10.12

Registration Rights Agreement by and between the Company and SkyTerra Communications, Inc. dated September 25, 2006 (incorporated by reference to Exhibit 10.1 to the Companys Current
Report on Form 8-K dated September 25, 2006).10.13

Second Amended and Restated Intellectual Property Assignment and License Agreement by and between TerreStar Networks Inc. and ATC Technologies, LLC (incorporated by reference to
Exhibit 99.1 to the Companys Current Report on Form 8-K dated November 28, 2006).10.14

Securities Purchase Agreement, dated November 27, 2006, by and among the Company, TerreStar Networks Inc., Motient License Inc., MVH Holdings, Inc., Motient Services Inc., Motient
Communications Inc., Motient Ventures Holding Inc. and Motient Holdings Inc., as the Guarantors, and the purchasers identified on Schedule of Buyers attached thereto. (incorporated by reference to Exhibit 10.1 to the Companys Current Report on
Form 8-K dated November 30, 2006 (the November 2006 8-K)).10.15

Security Agreement, dated as of November 28, 2006, among the Company, TerreStar Networks Inc., Motient License Inc., MVH Holdings, Inc., Motient Services Inc., Motient Communications Inc.,
Motient Ventures Holding Inc. and Motient Holdings Inc., and U.S. Bank National Association, as the collateral agent. (incorporated by reference to Exhibit 10.2 to the November 2006 8-K).10.16

Exchange Agreement dated January 15, 2007 by and among the Company, MVH Holdings Inc. and BCE Inc. (incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form
8-K dated January 22, 2007 (the January 2007 8-K).10.17

Registration Rights Agreement dated January 15, 2007 by and between the Company and BCE Inc. (incorporated by reference to Exhibit 10.2 to the January 2007 8-K).10.18**

Launch Services Agreement dated November 8, 2006 by and between TerreStar Networks Inc. and Arianespace (incorporated by reference to Exhibit 10.46 to the Companys Annual Report on
Form 10-K filed March 30, 2007 (the 2007 10-K)).10.19**

Contract between TerreStar Networks Inc. and Space Systems/Loral, Inc. for the TerreStar Space-Based Network, effective January 25, 2007(incorporated by reference to Exhibit 10.47 to the
2007 10-K).10.20

Indenture, dated as of February 14, 2007, among TerreStar Networks Inc., as issuer, the guarantors party thereto and U.S. Bank National Association, as trustee (including form of Senior
Secured PIK Note due 2014) (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K dated February 15, 2007 (the February 2007 8-K)).10.21

U.S. Security Agreement, dated as of February 14, 2007, among TerreStar Networks Inc. and the future guarantors party thereto in favor of U.S. Bank National Association, as collateral agent
(incorporated by reference to Exhibit 10.2 to the February 2007 8-K).10.22

Funding Agreement, dated February 14, 2007, among the Company, Motient Ventures Holding Inc. and TerreStar Networks Inc. (incorporated by reference to Exhibit 10.3 to the February 2007
8-K).




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10.23

Registration Rights Agreement dated March 8, 2007 by and between the Company and Harbinger Capital Partners Master Fund I, Ltd., Harbinger Capital Partners Special Situations Fund, L.P. and
Stanfield Offshore Leveraged Assets, Ltd. (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K dated March 8, 2007).10.24

Purchase Agreement dated February 8, 2007 by and among TerreStar and JPMorgan Securities Inc., Lehman Brothers Inc. and UBS Securities LLC, as Representatives of the several initial
purchasers listed in Schedule 1 thereto (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K dated February 14, 2007).10.25**

Contract between TerreStar Networks Inc. and Hughes Network Systems, LLC for the Design, Development and Supply of Satellite Base Station Subsystem, effective February 6, 2007 (incorporated
by reference to Exhibit 10.52 to the Companys Form 10-Q dated May 10, 2007).10.26

Shareholders Agreement dated April 5, 2007 between TMI Communications and Company, Limited Partnership, and TerreStar Networks Inc., and TerreStar Networks Holdings (Canada) Inc., and
TerreStar Networks (Canada) Inc. (incorporated by reference to Exhibit 10.53 to the Companys Form 10-Q dated August 9, 2007 (the Q2 2007 10-Q).10.27

Rights and Services Agreement dated April 5, 2007 by and between TerreStar Networks (Canada) Inc. and TerreStar Networks Inc. (incorporated by reference to Exhibit 10.54 to the Q2 2007
10-Q).10.28

Guarantee dated April 5, 2007 by and between TerreStar Networks (Canada) Inc. and TerreStar Networks Inc. (incorporated by reference to Exhibit 10.55 to the Q2 2007 10-Q).10.29**

Contract between TerreStar Networks Inc. and Nokia Siemens Networks US LLC for a Network Equipment and Services Agreement, effective August 22, 2007 (incorporated by reference to Exhibit
10.56 to the Companys Form 10-Q dated November 9, 2007 (the Q3 2007 10-Q).10.30

Contract between TerreStar Networks Inc. and Elektrobit, Inc. for a Master Development & Licensing Agreement, effective August 10, 2007 (incorporated by reference to Exhibit 10.57 to
the Q3 2007 10-Q).10.31

Registration Rights Agreement, dated February 5, 2008, among the Company, TerreStar Network Inc., EchoStar Corporation, Harbinger Capital Partners Master Fund I, Ltd., Harbinger Capital
Partners Special Situations Fund, L.P. and other institutional investors party thereto. (incorporated by reference to Exhibit 4.5 to the to the February 2008 8-K).10.32

Master Investment Agreement, dated February 5, 2008, among the Company, TerreStar Network Inc. and EchoStar Corporation (incorporated by reference to Exhibit 10.1 to the to the February
2008 8-K).10.33

Master Investment Agreement, dated February 5, 2008, among the Company, TerreStar Network Inc. and Harbinger Capital Partners Master Fund I, Ltd. and Harbinger Capital Partners Special
Situations Fund, L.P. (incorporated by reference to Exhibit 10.2 to the to the February 2008 8-K).10.34

Spectrum Agreement, dated February 5, 2008, among the Company, TerreStar Network Inc. and EchoStar Corporation (incorporated by reference to Exhibit 10.4 to the February 2008
8-K).10.35

Spectrum Contribution Agreement, dated February 5, 2008, among the Company and Harbinger Capital Partners Master Fund I, Ltd. and Harbinger Capital Partners Special Situations Fund, L.P.
(incorporated by reference to Exhibit 10.5 to the February 2008 8-K).10.36*

Employment Agreement dated January 15, 2008 by and between TerreStar Networks Inc. and Dennis Matheson (incorporated by reference to Exhibit 10.4 to the Companys Current Report on
Form 8-K dated January 22, 2008 (the January 2008 8-K)).10.37*

Employment Agreement dated January 15, 2008 by and between TerreStar Networks Inc. and Jeffrey W. Epstein (incorporated by reference to Exhibit 10.6 to the January 2008
8-K).




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10.38*

Contract by and between TerreStar Networks Inc. and Bechtel Communications, Inc. for a Master Services Agreement, effective October 18, 2007 (incorporated by reference to Exhibit 10.65 to
the Companys Annual Report on Form 10-K for the year ended December 31, 2007 (the 2007 10-K)).10.39*

Amended and Restated Contract for Terrestar-1 by and between TerreStar Networks Inc. and Space Systems/Loral, Inc. for the TerreStar Satellite Program, effective December 12, 2007
(incorporated by reference to Exhibit 10.65 to the 2007 10-K).10.40*

Amended and Restated Contract for Terrestar-2 by and between TerreStar Networks Inc. and Space Systems/Loral, Inc. for the TerreStar Satellite Program, effective December 12, 2007
(incorporated by reference to Exhibit 10.65 to the 2007 10-K).10.41

Stock Purchase Agreement dated February 6, 2008, by and among the Company, Motient Ventures Holding Inc. and Harbinger Capital Partners Master Fund I L.P. (incorporated by reference to
Exhibit 10.13 to the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended March 30, 2008).10.42

Letter Agreement dated May 20, 2008 Amending Terms of Employment Agreement by and between TerreStar Networks Inc. and Jeffrey Epstein (incorporated by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K dated May 20, 2008 (the May 2008 8-K).10.43

Letter Agreement dated May 20, 2008 Amending Terms of Employment Agreement by and between TerreStar Networks Inc. and Dennis Matheson (incorporated by reference to Exhibit 10.2 to the May
2008 8-K).10.44

Stock Purchase Agreement dated September 12, 2008 by and among Harbinger Capital Partners Master Fund I, LTD, Harbinger Capital Partners Special Situations Fund, L.P. and Motient Ventures
Holding Inc. (incorporated by reference to Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for fiscal quarter ended September 30, 2008 (the Q3 2008 10-Q).10.45

Form of Agreement for Transfer and Exchange dated September 12, 2008 between TerreStar Corporation and SkyTerra Communications (incorporated by reference to Exhibit 10.2 to the Q3 2008
10-Q).10.46**

Addendum and Amendment to Contract between TerreStar Networks Inc. and Hughes Network Systems, LLC for Design, Development and Supply of Satellite Base Station Subsystem (S-BSS) dated as of
May 3, 2007 (incorporated by reference to Exhibit 10.3 to the Q3 2008 10-Q).10.47**

Addendum and Amended dated August 1, 2008 to the Contract between TerreStar Networks Inc. and Hughes Network Systems, LLC for Design, Development and Supply of Satellite Base Station
Subsystem (S-BSS) (incorporated by reference to Exhibit 10.4 to the Q3 2008 10-Q).21+

Subsidiaries of the Company.23+

Consent of Friedman LLP, Independent Registered Public Accounting Firm.24+

Power of Attorney (Included on Signature Page)31.1+

Certification Pursuant to Rule 13a-14(a)/15d-14(a), of the President (principal executive officer).31.2+

Certification Pursuant to Rule 13a-14(a)/15d-14(a), of the Chief Accounting Officer (principal financial officer).32+

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of President (principal executive officer) and Chief Accounting Officer
(principal financial officer).




|+ | Filed herewith.
|- | ---------------

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

|** | Filed pursuant to a confidential treatment request for certain portions of this document.
|-- | -----------------------------------------------------------------------------------------



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.



TERRESTAR CORPORATIONBy:

/s/    VINCENT
LOIACONOPrincipal Financial OfficerDate: March 12, 2009


POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Vincent Loiacono and Jeffrey Epstein, and
each of them, acting individually, as his or her attorney-in-fact, each with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this
annual report on Form 10-K and other documents in connection herewith and therewith, and to file the same, with all exhibits thereto, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection herewith and therewith and about the premises, as fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

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/    JEFFREY
EPSTEIN Jeffrey Epstein   |  | President (principal executive officer)                |  | March 12, 2009
|                                         |  |                                                       
|/s/    VINCENT
LOIACONO Vincent Loiacono |  | Chief Accounting Officer (principal financial officer) |  | March 12, 2009
|                                         |  |                                                       
|/s/    DAVID
ANDONIAN David Andonian     |  | Director                                               |  | March 12, 2009
|                                         |  |                                                       
|/s/    EUGENE
DAVIS Eugene Davis         |  | Director                                               |  | March 12, 2009
|                                         |  |                                                       
|/s/    WILLIAM
FREEMAN William Freeman   |  | Director                                               |  | March 12, 2009
|                                         |  |                                                       
|/s/    JACQUES
LEDUC Jacques Leduc       |  | Director                                               |  | March 12, 2009
|                                         |  |                                                       
|/s/    DAVID
MELTZER David Meltzer       |  | Director                                               |  | March 12, 2009
|                                         |  |                                                       
|/s/    DEAN
OLMSTEAD Dean Olmstead       |  | Director                                               |  | March 12, 2009
|                                         |  |                                                       
|/s/    DAVID
RAYNER David Rayner         |  | Director                                               |  | March 12, 2009



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TERRESTAR CORPORATION

Index to Consolidated Financial Statements and Financial Statement Schedule



|                                                                                                      |  |              
|----------------------------------------------------------------------------------------------------- |  | -------------
|                                                                                                      |  | PageReference
|Consolidated Financial Statements                                                                     |  |              
|Report of Independent Registered Public Accounting Firm                                               |  | F-1          
|Consolidated Balance Sheets as of December 31, 2008 and 2007                                          |  | F-2          
|Consolidated Statements of Operations for the years ended December 31, 2008, 2007 and 2006            |  | F-3          
|Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006            |  | F-4          
|Consolidated Statements of Shareholders Equity for the years ended 
December 31, 2008, 2007 and 2006 |  | F-5          
|Notes to Consolidated Financial Statements                                                            |  | F-7          



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##### Table of Contents

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 (the
Company) as of December 31, 2008 and 2007, and the related statements of operations, stockholders equity and cash flows for the three years in the period ended December 31, 2008. These financial statements 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 audits 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, and 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 financial position of TerreStar Corporation and subsidiaries as of December 31, 2008 and 2007, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.

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, 2008, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission, and our report dated March 12, 2009 expressed an adverse opinion on the effectiveness of internal control over financial reporting.

/s/
Friedman LLP

East Hanover, New Jersey

March 12, 2009



F-1



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##### Table of Contents

TERRESTAR CORPORATION

Consolidated Balance Sheets

As of
December 31, 2008 and 2007

(In thousands)



|                                                                                                                                                                                                                        |  |      |            |   |      |   |           |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | --------- | -
|                                                                                                                                                                                                                        |  | 2008 |            |   | 2007 |  
|ASSETS                                                                                                                                                                                                                  |  |      |            |   |      |   |           |  
|CURRENT ASSETS:                                                                                                                                                                                                         |  |      |            |   |      |   |           |  
|Cash and cash equivalents                                                                                                                                                                                               |  | $    | 236,820    |   |      | $ | 89,134    |  
|Cash committed for satellite construction costs                                                                                                                                                                         |  |      |           |   |      |   | 2,814     |  
|Deferred issuance costs                                                                                                                                                                                                 |  |      | 6,575      |   |      |   | 6,479     |  
|Income tax receivable                                                                                                                                                                                                   |  |      | 1,477      |   |      |   | 380       |  
|Other current assets                                                                                                                                                                                                    |  |      | 3,594      |   |      |   | 8,751     |  
|                                                                                                                                                                                                                        |  |      |            |   |      |   |           |  
|Total current assets                                                                                                                                                                                                    |  |      | 248,466    |   |      |   | 107,558   |  
|                                                                                                                                                                                                                        |  |     
|Restricted cash                                                                                                                                                                                                         |  |      | 1,404      |   |      |   | 2,648     |  
|Property and equipment, net                                                                                                                                                                                             |  |      | 716,602    |   |      |   | 571,151   |  
|Intangible assets, net                                                                                                                                                                                                  |  |      | 359,013    |   |      |   | 212,256   |  
|Investment in SkyTerra                                                                                                                                                                                                  |  |      |           |   |      |   | 103,733   |  
|Investment in SkyTerraRestricted                                                                                                                                                                                       |  |      |           |   |      |   | 221,575   |  
|Deferred issuance costs                                                                                                                                                                                                 |  |      | 9,692      |   |      |   | 17,485    |  
|Other non-current assets                                                                                                                                                                                                |  |      | 6,000      |   |      |   | 6,817     |  
|                                                                                                                                                                                                                        |  |      |            |   |      |   |           |  
|Total assets                                                                                                                                                                                                            |  | $    | 1,341,177  |   |      | $ | 1,243,223 |  
|                                                                                                                                                                                                                        |  |      |            |   |      |   |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                    |  |      |            |   |      |   |           |  
|CURRENT LIABILITIES:                                                                                                                                                                                                    |  |      |            |   |      |   |           |  
|Accounts payable and accrued expenses                                                                                                                                                                                   |  | $    | 16,668     |   |      | $ | 43,223    |  
|Accrued termination costs                                                                                                                                                                                               |  |      | 707        |   |      |   |          |  
|Deferred rent and other current liabilities                                                                                                                                                                             |  |      | 1,517      |   |      |   | 1,020     |  
|Series A and Series B Cumulative Convertible Preferred Stock dividends payable                                                                                                                                          |  |      | 4,468      |   |      |   | 8,368     |  
|                                                                                                                                                                                                                        |  |      |            |   |      |   |           |  
|Total current liabilities                                                                                                                                                                                               |  |      | 23,360     |   |      |   | 52,611    |  
|                                                                                                                                                                                                                        |  |     
|Deferred rent and other long-term liabilities                                                                                                                                                                           |  |      | 3,175      |   |      |   | 1,855     |  
|Deferred tax liabilities                                                                                                                                                                                                |  |      | 13,039     |   |      |   |          |  
|SkyTerra investment dividends payable                                                                                                                                                                                   |  |      |           |   |      |   | 183,444   |  
|TerreStar Notes and accrued interest, thereon (net of discount as of December 31, 2008 of $43,625)                                                                                                                      |  |      | 671,884    |   |      |   | 567,955   |  
|TerreStar Exchangeable Notes and accrued interest, thereon (net of discount as of December 31, 2008 of $95,954)                                                                                                         |  |      | 63,176     |   |      |   |          |  
|TerreStar-2 Purchase Money Credit Agreement and accrued interest, thereon                                                                                                                                               |  |      | 36,755     |   |      |   |          |  
|                                                                                                                                                                                                                        |  |      |            |   |      |   |           |  
|Total liabilities                                                                                                                                                                                                       |  |      | 811,389    |   |      |   | 805,865   |  
|                                                                                                                                                                                                                        |  |      |            |   |      |   |           |  
|Commitments and Contingencies                                                                                                                                                                                           |  |      |            |   |      |   |           |  
|Minority interest in TerreStar Networks                                                                                                                                                                                 |  |      |           |   |      |   | 12,141    |  
|Series A Cumulative Convertible Preferred Stock ($0.01 par value, 450,000 shares authorized and 90,000 shares issued and outstanding at
December 31, 2008 and December 31, 2007)                                        |  |      | 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, 2008 and December 31, 2007)                                       |  |      | 318,500    |   |      |   | 318,500   |  
|                                                                                                                                                                                                                        |  |     
|STOCKHOLDERS EQUITY:                                                                                                                                                                                                   |  |      |            |   |      |   |           |  
|Series C preferred stock ($0.01 par value, 1 share authorized and 1 share issued and outstanding at December 31, 2008 and 0 shares
authorized at December 31, 2007)                                                     |  |      |           |   |      |   |          |  
|Series D preferred stock ($0.01 par value, 1 share authorized and 1 share issued and outstanding at December 31, 2008 and 0 shares
authorized at December 31, 2007)                                                     |  |      |           |   |      |   |          |  
|Series E junior Convertible Preferred Stock ($0.01 par value, 1,900,000 shares authorized and 1,200,000 shares issued and outstanding at
December 31, 2008 and 0 shares authorized at December 31, 2007)                |  |      | 12         |   |      |   |          |  
|Common stock; voting (par value $0.01; 240,000,000 shares authorized, 125,869,540 and 91,378,041 shares issued, 121,918,338 and 87,426,839
shares outstanding at December 31, 2008 and December 31, 2007, respectively) |  |      | 1,259      |   |      |   | 914       |  
|Additional paid-in capital                                                                                                                                                                                              |  |      | 1,220,161  |   |      |   | 806,195   |  
|Common stock purchase warrants                                                                                                                                                                                          |  |      | 55,809     |   |      |   | 64,097    |  
|Less: 3,951,202 common shares held in treasury stock at December 31, 2008 and December 31, 2007                                                                                                                         |  |      | (73,877    | ) |      |   | (73,877   | )
|Accumulated other comprehensive income                                                                                                                                                                                  |  |      | (70        | ) |      |   | 10        |  
|Accumulated deficit                                                                                                                                                                                                     |  |      | (1,082,006 | ) |      |   | (780,622  | )
|                                                                                                                                                                                                                        |  |      |            |   |      |   |           |  
|Total stockholders equity                                                                                                                                                                                              |  |      | 121,288    |   |      |   | 16,717    |  
|                                                                                                                                                                                                                        |  |      |            |   |      |   |           |  
|Total liabilities and stockholders equity                                                                                                                                                                              |  | $    | 1,341,177  |   |      | $ | 1,243,223 |  
|                                                                                                                                                                                                                        |  |      |            |   |      |   |           |  

See accompanying Notes to Consolidated Financial Statements



F-2



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##### Table of Contents

TERRESTAR CORPORATION

Consolidated Statements of Operations

For the Years Ended December 31, 2008, 2007 and 2006

(In thousands, except per share amounts)



|                                                                          |  |      |          |   |      |   |          |      |  |   |          |  
|------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                          |  | 2008 |          |   | 2007 |   |          | 2006 | 
|Operating Expenses                                                        |  |      |          |   |      |   |          |      |  |   |          |  
|General and administrative                                                |  | $    | 88,536   |   |      | $ | 114,848  |      |  | $ | 84,253   |  
|Research and development                                                  |  |      | 73,560   |   |      |   | 43,067   |      |  |   | 10,549   |  
|Depreciation and amortization                                             |  |      | 22,479   |   |      |   | 18,222   |      |  |   | 6,796    |  
|Loss on impairment of intangibles                                         |  |      |         |   |      |   | 6,699    |      |  |   | 4,909    |  
|(Gain) loss on asset disposal                                             |  |      | 6,768    |   |      |   | (123     | )    |  |   |         |  
|                                                                          |  |      |          |   |      |   |          |      |  |   |          |  
|Total operating expenses                                                  |  |      | 191,343  |   |      |   | 182,713  |      |  |   | 106,507  |  
|                                                                          |  |      |          |   |      |   |          |      |  |   |          |  
|Operating loss from continuing operations                                 |  |      | (191,343 | ) |      |   | (182,713 | )    |  |   | (106,507 | )
|Interest expense                                                          |  |      | (54,764  | ) |      |   | (52,584  | )    |  |   | (2,608   | )
|Other income                                                              |  |      | 827      |   |      |   | 325      |      |  |   |         |  
|Interest income                                                           |  |      | 3,328    |   |      |   | 12,215   |      |  |   | 7,948    |  
|Equity in losses of MSV                                                   |  |      |         |   |      |   | (7,338   | )    |  |   | (30,079  | )
|Minority interests in losses of TerreStar Networks                        |  |      | 10,545   |   |      |   | 23,262   |      |  |   | 20,655   |  
|Minority interests in losses of TerreStar Global                          |  |      |         |   |      |   | 1,198    |      |  |   | 654      |  
|Gain (loss) on investment in SkyTerra                                     |  |      | (126,224 | ) |      |   |         |      |  |   | 11,260   |  
|Other than temporary impairmentSkyTerra                                  |  |      |         |   |      |   | (106,800 | )    |  |   |         |  
|Decrease in dividend liability                                            |  |      | 77,708   |   |      |   | 71,046   |      |  |   |         |  
|                                                                          |  |      |          |   |      |   |          |      |  |   |          |  
|Loss from continuing operations before income taxes                       |  |      | (279,923 | ) |      |   | (241,389 | )    |  |   | (98,677  | )
|Income tax benefit (expense)                                              |  |      | 2,231    |   |      |   | 2,248    |      |  |   | (4,535   | )
|                                                                          |  |      |          |   |      |   |          |      |  |   |          |  
|Net loss from continuing operations                                       |  |      | (277,692 | ) |      |   | (239,141 | )    |  |   | (103,212 | )
|Loss from discontinued operations                                         |  |      |         |   |      |   |         |      |  |   | (30,422  | )
|                                                                          |  |      |          |   |      |   |          |      |  |   |          |  
|Net loss                                                                  |  | $    | (277,692 | ) |      | $ | (239,141 | )    |  | $ | (133,634 | )
|Less:                                                                     |  |      |          |   |      |   |          |      |  |   |          |  
|Dividends on Series A and Series B Cumulative Convertible Preferred Stock |  |      | (19,139  | ) |      |   | (23,232  | )    |  |   | (23,627  | )
|Accretion of issuance costs associated with Series A and Series B         |  |      | (4,553   | ) |      |   | (4,542   | )    |  |   | (4,029   | )
|                                                                          |  |      |          |   |      |   |          |      |  |   |          |  
|Net loss available to Common Stockholders                                 |  | $    | (301,384 | ) |      | $ | (266,915 | )    |  | $ | (161,290 | )
|                                                                          |  |      |          |   |      |   |          |      |  |   |          |  
|Basic & Diluted Loss Per ShareContinuing Operations                      |  | $    | (2.81    | ) |      | $ | (3.22    | )    |  | $ | (2.01    | )
|                                                                          |  |      |          |   |      |   |          |      |  |   |          |  
|Basic & Diluted Loss Per ShareDiscontinued Operations                    |  | $    |         |   |      | $ |         |      |  | $ | (0.47    | )
|                                                                          |  |      |          |   |      |   |          |      |  |   |          |  
|Basic & Diluted Loss Per Share                                            |  | $    | (2.81    | ) |      | $ | (3.22    | )    |  | $ | (2.48    | )
|                                                                          |  |      |          |   |      |   |          |      |  |   |          |  
|Basic & Diluted Weighted-Average Common Shares Outstanding                |  |      | 107,179  |   |      |   | 83,016   |      |  |   | 64,966   |  
|                                                                          |  |      |          |   |      |   |          |      |  |   |          |  

See accompanying Notes to Consolidated Financial Statements



F-3



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##### Table of Contents

TERRESTAR CORPORATION

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2008, 2007 and 2006

(In thousands)



|                                                                                       |  |      |          |   |      |   |          |      |  |   |          |  
|-------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                                       |  | 2008 |          |   | 2007 |   |          | 2006 | 
|CASH FLOWS FROM CONTINUING OPERATING ACTIVITIES:                                       |  |      |          |   |      |   |          |      |  |   |          |  
|Net loss                                                                               |  | $    | (277,692 | ) |      | $ | (239,141 | )    |  | $ | (133,634 | )
|Adjustments to reconcile net loss to net cash used in continuing operating activities: |  |      |          |   |      |   |          |      |  |   |          |  
|Loss from discontinued operations                                                      |  |      |          |   |      |   |         |      |  |   | 30,422   |  
|Depreciation and amortization                                                          |  |      | 22,479   |   |      |   | 18,222   |      |  |   | 6,796    |  
|Write off of financing fees                                                            |  |      |         |   |      |   | 5,708    |      |  |   |         |  
|Equity in losses of MSV                                                                |  |      |         |   |      |   | 7,338    |      |  |   | 30,079   |  
|Minority interests in losses of TerreStar Global                                       |  |      |         |   |      |   | (1,198   | )    |  |   | (654     | )
|Minority interests in losses of TerreStar Networks                                     |  |      | (10,545  | ) |      |   | (23,262  | )    |  |   | (20,655  | )
|Loss (gain) on asset disposal                                                          |  |      | 6,768    |   |      |   | (123     | )    |  |   |         |  
|Amortization of deferred financing costs and debt discount costs                       |  |      | 5,029    |   |      |   | 1,778    |      |  |   | 538      |  
|Non-cash 401(k) match                                                                  |  |      |         |   |      |   |         |      |  |   | 156      |  
|Stock-based compensation                                                               |  |      | 4,480    |   |      |   | 25,069   |      |  |   | 35,756   |  
|Loss on impairment of intangibles                                                      |  |      |         |   |      |   | 6,699    |      |  |   | 4,909    |  
|Loss (gain) on investment in SkyTerra                                                  |  |      | 126,224  |   |      |   |         |      |  |   | (11,260  | )
|Other than temporary impairment- SkyTerra                                              |  |      |          |   |      |   | 106,800  |      |  |   |         |  
|Decrease in dividend liability                                                         |  |      | (77,708  | ) |      |   | (71,046  | )    |  |   |         |  
|Changes in assets and liabilities:                                                     |  |      |          |   |      |   |          |      |  |   |          |  
|Income tax receivable                                                                  |  |      | (1,097   | ) |      |   | (380     | )    |  |   |         |  
|Other current assets                                                                   |  |      | 5,077    |   |      |   | (6,136   | )    |  |   | (345     | )
|Accounts payable and accrued expenses                                                  |  |      | (19,304  | ) |      |   | 20,088   |      |  |   | 9,155    |  
|Accrued termination costs                                                              |  |      | 707      |   |      |   |         |      |  |   |         |  
|Other noncurrent assets                                                                |  |      | 817      |   |      |   | (6,817   | )    |  |   |         |  
|Accrued interest                                                                       |  |      | 49,539   |   |      |   | 38,035   |      |  |   | 2,267    |  
|Deferred rent and other liabilities                                                    |  |      | 1,876    |   |      |   | (1,546   | )    |  |   | 4,242    |  
|                                                                                       |  |      |          |   |      |   |          |      |  |   |          |  
|Net cash used in continuing operating activities                                       |  |      | (163,350 | ) |      |   | (119,912 | )    |  |   | (42,228  | )
|                                                                                       |  |      |          |   |      |   |          |      |  |   |          |  
|CASH FLOWS FROM CONTINUING INVESTING ACTIVITIES:                                       |  |      |          |   |      |   |          |      |  |   |          |  
|Proceeds from the sale of SkyTerra shares                                              |  |      | 199,083  |   |      |   |         |      |  |   |         |  
|Proceeds of restricted cash and investments                                            |  |      | 2,049    |   |      |   | 45,423   |      |  |   | 61,511   |  
|Proceeds from the sale of investments                                                  |  |      |         |   |      |   |         |      |  |   | 46,951   |  
|Proceeds from TerreStar Global rights offering                                         |  |      |         |   |      |   |         |      |  |   | 672      |  
|Proceeds from assets held for sale                                                     |  |      |         |   |      |   | 500      |      |  |   |         |  
|Additions to intangible assets                                                         |  |      | (367     | ) |      |   | (734     | )    |  |   |         |  
|Additions to property and equipment                                                    |  |      | (103,546 | ) |      |   | (290,611 | )    |  |   | (235,579 | )
|                                                                                       |  |      |          |   |      |   |          |      |  |   |          |  
|Net cash provided by (used in) continuing investing activities                         |  |      | 97,219   |   |      |   | (245,422 | )    |  |   | (126,445 | )
|                                                                                       |  |      |          |   |      |   |          |      |  |   |          |  
|CASH FLOWS FROM CONTINUING FINANCING ACTIVITIES:                                       |  |      |          |   |      |   |          |      |  |   |          |  
|Proceeds from issuance of Senior Secured Notes                                         |  |      |         |   |      |   |         |      |  |   | 200,000  |  
|Proceeds from TerreStar-2 Purchase Money Credit Agreement                              |  |      | 33,175   |   |      |   |         |      |  |   |         |  
|Proceeds from issuance of TerreStar Notes and TerreStar Exchangeable Notes             |  |      | 195,732  |   |      |   | 500,000  |      |  |   |         |  
|Proceeds from issuance of equity securities                                            |  |      |         |   |      |   | 6,708    |      |  |   | 18,246   |  
|Repayment of the Senior Secured Notes                                                  |  |      |         |   |      |   | (200,000 | )    |  |   |         |  
|Payments for capital lease obligations                                                 |  |      | (59      | ) |      |   | (37      | )    |  |   |         |  
|Purchase of treasury stock                                                             |  |      |         |   |      |   |         |      |  |   | (6,791   | )
|Dividends paid on Series A and B Cumulative Convertible Preferred Stock                |  |      | (13,086  | ) |      |   | (13,086  | )    |  |   | (21,446  | )
|Debt issuance costs and other charges                                                  |  |      | (3,954   | ) |      |   | (14,421  | )    |  |   | (6,245   | )
|                                                                                       |  |      |          |   |      |   |          |      |  |   |          |  
|Net cash provided by continuing financing activities                                   |  |      | 211,808  |   |      |   | 279,164  |      |  |   | 183,764  |  
|                                                                                       |  |      |          |   |      |   |          |      |  |   |          |  
|Net cash provided by (used in) continuing operations                                   |  |      | 145,677  |   |      |   | (86,170  | )    |  |   | 15,091   |  
|                                                                                       |  |      |          |   |      |   |          |      |  |   |          |  
|Net cash used in discontinued operating activities                                     |  |      |         |   |      |   | (28      | )    |  |   | (18,435  | )
|Net cash provided by (used in) discontinued investing activities                       |  |      | 2,009    |   |      |   | 3,667    |      |  |   | (4,515   | )
|                                                                                       |  |      |          |   |      |   |          |      |  |   |          |  
|Net cash provided by (used in) discontinued operations                                 |  |      | 2,009    |   |      |   | 3,639    |      |  |   | (22,950  | )
|                                                                                       |  |      |          |   |      |   |          |      |  |   |          |  
|Net increase (decrease) in cash and cash equivalents                                   |  |      | 147,686  |   |      |   | (82,531  | )    |  |   | (7,859   | )
|CASH AND CASH EQUIVALENTS, beginning of period                                         |  |      | 89,134   |   |      |   | 171,665  |      |  |   | 179,524  |  
|                                                                                       |  |      |          |   |      |   |          |      |  |   |          |  
|CASH AND CASH EQUIVALENTS, end of period                                               |  | $    | 236,820  |   |      | $ | 89,134   |      |  | $ | 171,665  |  
|                                                                                       |  |      |          |   |      |   |          |      |  |   |          |  

See accompanying Notes to Consolidated Financial Statements



F-4



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##### Table of Contents

TERRESTAR CORPORATION

Consolidated Statements of Changes in Stockholders Equity

For the Years Ended December 31, 2008, 2007 and 2006

(In thousands, except per share amounts)



|                                                                                            |  |                                         |  |              |   |                          |            |   |                             |   |     |                |        |          |                                      |        |                    |        |   |       |            |   |  |   |         |   |  |   |    |  |   |          |   |  |   |          |  
|------------------------------------------------------------------------------------------- |  | --------------------------------------- |  | ------------ | - | ------------------------ | ---------- | - | --------------------------- | - | --- | -------------- | ------ | -------- | ------------------------------------ | ------ | ------------------ | ------ | - | ----- | ---------- | - |  | - | ------- | - |  | - | -- |  | - | -------- | - |  | - | -------- | -
|                                                                                            |  | Series EJuniorConvertiblePreferredStock |  | Common Stock |   | AdditionalPaid-InCapital |            |   | CommonStockPurchaseWarrants |   |     | Treasury Stock |        |          | AccumulatedOtherCompre-hensiveIncome |        | AccumulatedDeficit |        |   | Total |           
|                                                                                            |  | Shares                                  |  | ParValue     |   | Shares                   |            |   | ParValue                    |   |     |                | Shares |          |                                      | Amount |                    |        |   |      
|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                                                                  |  |                                        |  |              |  |                          | 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                                                                    |  |                                        |  |              |  |                          | 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       |  
|                                                                                            |  |                                         |  |              |   |                          |            |   |                             |   |     |                |        |          |                                      |        |                    |        |   |       |            |   |  |   |         |   |  |   |    |  |   |          |   |  |   |          |  



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TERRESTAR CORPORATION

Consolidated Statements of Changes in Stockholders Equity(Continued)

For the Years Ended December 31, 2008, 2007 and 2006

(In thousands,
except per share amounts)



|                                                                                            |  |                                         |  |              |    |                          |             |          |                             |       |  |                |           |   |                                      |   |        |                    |  |            |       |  |   |         |   |  |   |     |   |  |   |            |   |  |   |          |  
|------------------------------------------------------------------------------------------- |  | --------------------------------------- |  | ------------ | -- | ------------------------ | ----------- | -------- | --------------------------- | ----- |  | -------------- | --------- | - | ------------------------------------ | - | ------ | ------------------ |  | ---------- | ----- |  | - | ------- | - |  | - | --- | - |  | - | ---------- | - |  | - | -------- | -
|                                                                                            |  | Series EJuniorConvertiblePreferredStock |  | Common Stock |    | AdditionalPaid-InCapital |             |          | CommonStockPurchaseWarrants |       |  | Treasury Stock |           |   | AccumulatedOtherCompre-hensiveIncome |   |        | AccumulatedDeficit |  |            | Total | 
|                                                                                            |  | Shares                                  |  | ParValue     |    | Shares                   |             | ParValue |                             |       |  | Shares         |           |   | Amount                               |   |        |                    | 
|BALANCE, December 31, 2007                                                                  |  |                                        |  |              |   |                          | 91,378,041  |          |                             | 914   |  |                | 806,195   |   |                                      |   | 64,097 |                    |  | (3,951,202 | )     |  |   | (73,877 | ) |  |   | 10  |   |  |   | (780,622   | ) |  |   | 16,717   |  
|Dividends on Series A and Series B Cumulative Convertible Preferred Stock                   |  |                                        |  |              |   |                          | 1,898,894   |          |                             | 19    |  |                | 9,934     |   |                                      |   |       |                    |  |           |       |  |   |        |   |  |   |    |   |  |   | (19,139    | ) |  |   | (9,186   | )
|Accretion of issuance costs on Series A and Series B Cumulative Convertible Preferred Stock |  |                                        |  |              |   |                          |            |          |                             |      |  |                |          |   |                                      |   |       |                    |  |           |       |  |   |        |   |  |   |    |   |  |   | (4,553     | ) |  |   | (4,553   | )
|Release of Dividend Liability                                                               |  |                                        |  |              |   |                          |            |          |                             |      |  |                | 105,735   |   |                                      |   |       |                    |  |           |       |  |   |        |   |  |   |    |   |  |   |           |   |  |   | 105,735  |  
|Stock option compensation expense                                                           |  |                                        |  |              |   |                          |            |          |                             |      |  |                | 4,396     |   |                                      |   |       |                    |  |           |       |  |   |        |   |  |   |    |   |  |   |           |   |  |   | 4,396    |  
|Expiration of warrants                                                                      |  |                                        |  |              |   |                          |            |          |                             |      |  |                | 8,288     |   |                                      |   | (8,288 | )                  |  |           |       |  |   |        |   |  |   |    |   |  |   |           |   |  |   |         |  
|Beneficial conversion feature                                                               |  |                                        |  |              |   |                          |            |          |                             |      |  |                | 10,923    |   |                                      |   |       |                    |  |           |       |  |   |        |   |  |   |    |   |  |   |           |   |  |   | 10,923   |  
|Exchange of Common Stock                                                                    |  |                                        |  |              |   |                          | 1,725,545   |          |                             | 17    |  |                | 9,211     |   |                                      |   |       |                    |  |           |       |  |   |        |   |  |   |    |   |  |   |           |   |  |   | 9,228    |  
|Restricted Stock issued net of forfeits                                                     |  |                                        |  |              |   |                          | 867,060     |          |                             | 9     |  |                | (9        | ) |                                      |   |       |                    |  |           |       |  |   |        |   |  |   |    |   |  |   |           |   |  |   |         |  
|Translation Adjustments                                                                     |  |                                        |  |              |   |                          |            |          |                             |      |  |                |          |   |                                      |   |       |                    |  |           |       |  |   |        |   |  |   | (80 | ) |  |   |           |   |  |   | (80      | )
|Stock issued for Spectrum Acquisition                                                       |  | 1,200,000                               |  |              | 12 |                          | 30,000,000  |          |                             | 300   |  |                | 265,488   |   |                                      |   |       |                    |  |           |       |  |   |        |   |  |   |    |   |  |   |           |   |  |   | 265,800  |  
|Net loss                                                                                    |  |                                        |  |              |   |                          |            |          |                             |      |  |                |          |   |                                      |   |       |                    |  |           |       |  |   |        |   |  |   |    |   |  |   | (277,692   | ) |  |   | (277,692 | )
|                                                                                            |  |                                         |  |              |    |                          |             |          |                             |       |  |                |           |   |                                      |   |        |                    |  |            |       |  |   |         |   |  |   |     |   |  |   |            |   |  |   |          |  
|BALANCE, December 31, 2008                                                                  |  | 1,200,000                               |  | $            | 12 |                          | 125,869,540 |          | $                           | 1,259 |  | $              | 1,220,161 |   |                                      | $ | 55,809 |                    |  | (3,951,202 | )     |  | $ | (73,877 | ) |  | $ | (70 | ) |  | $ | (1,082,006 | ) |  | $ | 121,288  |  
|                                                                                            |  |                                         |  |              |    |                          |             |          |                             |       |  |                |           |   |                                      |   |        |                    |  |            |       |  |   |         |   |  |   |     |   |  |   |            |   |  |   |          |  

See accompanying Notes to Consolidated Financial Statements



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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, 2008, we have four wholly-owned
subsidiaries, MVH Holdings Inc., Motient Holdings Inc., CCTV Wireless I, LLC, and Port Merger Corporation. MVH Holdings Inc. and Motient Ventures Holdings Inc., a wholly owned subsidiary of MVH Holdings Inc., directly hold approximately 88% and 86%
interests in TerreStar Networks and TerreStar Global, respectively.

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, 2009 and into the first quarter of 2010. We will likely face a cash deficit in the first quarter of 2010 unless we obtain additional capital. We 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 and our secured $100
million TerreStar-2 Purchase Money Credit Agreement (Credit Agreement) of which $66.8 million is available. As of December 31, 2008, including restricted cash; we had $238.2 million of cash on hand. After giving effect to the net
proceeds available under the Credit Agreement, we have approximately $305 million of liquidity resources available to fund operations.

Our
short-term liquidity needs are driven by our satellite system construction contracts, the development of terrestrial infrastructure and networks, the design and development of our handset and chipset, and our ongoing operating expenses. As of
December 31, 2008, we had contractual obligations of $148 million due within one year, consisting of approximately $120 million related to our satellite system, of which, we expect to spend between $30 and $40 million to obtain satellite launch
insurance prior to the launch of our TerreStar-1 satellite, $22 million related to our handset, chipset, and terrestrial network, and $6 million for operating leases. In addition, TerreStar Europe, a TerreStar Global subsidiary, recently filed an
application for the award of S-band spectrum in Europe. If we are awarded this spectrum, we will need additional funds in TerreStar Global for satellite construction and terrestrial ground network development. We 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.

Our long-term liquidity needs are to fund the deployment and expansion of our terrestrial infrastructure and networks, the design of our second generation handset and chipset, orbital incentive payments related to our satellite contracts,
and settlement of our Series A and B Cumulative Redeemable Convertible Preferred Stock



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which mature on April 15, 2010, if not converted. In addition, we will need funds for working capital purposes, which we anticipate will grow as our
operations expand. As of December 31, 2008, we had aggregate contractual payment obligations of approximately $710 million, consisting of approximately $311 million for the TerreStar Networks satellites and incentive payments;
approximately $15 million for our operating leases in Reston, Virginia, Lincolnshire, Illinois and Richardson Park, Texas, data centers, and site hosting agreements; and approximately $384 million for obligations related to the build out of our
terrestrial network and handset and chipset costs. However, we have identified in excess of $325 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 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.

Narrative
Description of the Business

TerreStar Networks Inc.

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

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

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

TerreStar Networks was initially
created as a subsidiary of SkyTerra, formerly known as MSV, established to, among other things, develop a satellite communications system using the S-band. On May 11, 2005, we acquired our ownership interest in TerreStar Networks when, in
conjunction with a spin-off of TerreStar Networks to the owners of MSV, we purchased an additional $200 million of newly issued TerreStar Networks common stock. In conjunction with this transaction, TerreStar Networks also entered into an agreement
with MSVs wholly-owned subsidiary, ATC Technologies, LLC (ATC Technologies) pursuant to which TerreStar Networks has a perpetual, royalty-free license to utilize ATC Technologies patent portfolio in the S-band,



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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.

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

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

Our remaining FCC milestones require that we launch TerreStar-1 in June 2009 and certify our network operational in August 2009, and our remaining
Industry Canada milestone requires that we successfully place TerreStar-1 into its assigned orbital position by August 2009. If we encounter a delay in construction, delivery or launch of TerreStar-1, we could have difficulty meeting these
milestones and may need to seek extensions. There can be no guarantee that such extension requests would be granted. We also would continue to have significant cash requirements that could materially increase the aggregate amount of funding we need.
We may not be able to obtain additional financing on favorable terms, or at all, during periods of delay. Delays could also make it more difficult for us to secure customers and could force us to reschedule our anticipated satellite launch date.
Likewise should we encounter a launch failure, a failure to deploy key elements of TerreStar-1, or should TerreStar-1 malfunction or to fail prematurely, we will suffer significant delays that will damage our business, cause us to incur significant
additional costs, impact the carrying value of our long-lived assets, and adversely affect our ability to generate revenues.

Our Relationship with
TerreStar Canada and 4371585 Canada

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 (now known as 4371585 Canada) and TerreStar Corporation or entities controlled by each. As part of the spin-off of TerreStar Networks, TMI Communications became
contractually obligated to assign, subject to necessary regulatory approvals, its Industry Canada approval in principle to TerreStar Networks, or to an entity designated by TerreStar Networks that is eligible under Canadian law to hold the approval
in principle. TerreStar Networks negotiated and committed, pursuant to a master agreement, to enter into certain transfer agreements with TMI Communications (TMI Communications outstanding obligations under the transfer agreements were assumed
by 4371585 Canada on December 20, 2007 as the transferee of TMI Communications interest in TerreStar Canada Holdings), TerreStar Canada, TerreStar Canada Holdings and certain other related parties (the Transfer Agreements)
pursuant to which TerreStar Networks 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



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Networks. TMI Communications assignment of its Industry Canada approval to TerreStar Canada was authorized by Industry Canada on April 27, 2007.
This authorization transferred the necessary approvals for TerreStar Canada to launch and operate a satellite at the 111.1 degrees west longitude orbital position in order to provide MSS in Canada. On October 10, 2007, Industry Canada clarified
that the authorization as transferred included the authority to operate at 111.0 degrees west longitude. In order to comply with Canadas telecommunications foreign ownership rules, title to TerreStar-1 is expected to be transferred to
TerreStar Canada at the time that title would have otherwise transferred to TerreStar Networks under the terms of its satellite construction contract with Loral, as amended.

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

TerreStar Networks owns 20% of the voting equity of TerreStar Canada as well as 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 Canada. TerreStar Networks interests in TerreStar Canada and TerreStar Canada Holdings reflect the maximum foreign ownership levels currently permitted by applicable Canadian telecommunications foreign ownership
rules. Effective January 1, 2008, TerreStar Corporations consolidated financial statements include TerreStar Canada, which is considered a variable interest entity under Financial Accounting Standards Boards Interpretation No. 46(R),
Consolidation of Variable Interest Entities (FIN46R).

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

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

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

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

On January 16, 2009, TerreStar Networks entered into a master agreement (the Agreement) with Trio 2 General Partnership (Trio) and certain other parties, pursuant to which, subject to the
satisfaction of a number of conditions, including the receipt of necessary governmental approvals from Industry Canada and obtaining certain third party consents, Trio (through a wholly-owned subsidiary) will purchase the 662/3% voting equity stake in TerreStar Canada Holdings currently held by 4371585 Canada. Trio and TerreStar Networks will enter into a
series of agreements that will be materially similar to the Transfer Agreements. TerreStar Networks will



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retain its existing 331/3% voting
equity ownership of TerreStar Canada Holdings. Trio is majority-owned by certain managing partners of Trio Capital Inc., a Canadian investment firm, including Jacques Leduc. Mr. Leduc is also a member of the board of directors and a member of
the nominating committee.

TerreStar Global Limited

TerreStar Global was initially formed in 2005 as a wholly-owned subsidiary of TerreStar Networks. We have consolidated the financial results of TerreStar Global since its inception. In late 2006, TerreStar Networks
spun-off TerreStar Global to its stockholders. As a result, TerreStar Corporation became the indirect majority holder of TerreStar Global. In connection with the spin-off, TerreStar Networks made capital contributions to TerreStar Global of $5
million. In late 2006, TerreStar Global also raised an additional $5 million through a rights offering from its shareholders, in proportion to their holdings, the majority of which came from TerreStar Corporation. As of December 31, 2008,
TerreStar Corporation owned approximately 86% of the outstanding shares of TerreStar Global.

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

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

MSV and SkyTerra

On June 29, 2000, we formed a joint venture subsidiary, Motient Satellite Ventures LP (MSV), with certain other parties, in
which we 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 our 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 our 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, 2008 and 2007, our SkyTerra ownership interests were zero and 42%, respectively.



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Note 2. Significant Accounting Policies

Basis of Presentation

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

In the opinion of management, the accompanying consolidated financial statements reflect all adjustments necessary to summarize fairly our
financial position, results of operations and cash flows for the periods presented. The operating results for the periods presented are not necessarily indicative of the results that may be expected for future periods.

Our investment in MSV was accounted for under the equity method since 2001. Accordingly, the investment in MSV was carried at cost, adjusted for our
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.

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

Cash and Cash Equivalents

We consider 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

At December 31, 2008, we had
approximately $1.4 million in restricted cash held in money market escrow accounts. Approximately $0.8 million is held in connection with our Federal Communications Commission (FCC) Surety Bond and approximately $0.4 million is
restricted in accordance with various leases and security deposits. In addition, approximately $0.2 million is restricted in accordance with our asset purchase agreement with Geologic Solutions, Inc. and Logo Acquisition Corporation.

At December 31, 2007, we had $5.5 million of restricted cash held in money market escrow accounts. Included in that amount is approximately $2.8
million restricted in accordance with our satellite construction contract. In addition, approximately $2.3 million is restricted in accordance with our 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.



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Fair Value of Financial Instruments

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

We use valuation techniques and methodologies that maximize the use of observable
inputs and minimize the use of unobservable inputs. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are
applied. The valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments complexity.

To increase consistency and enhance disclosure of the fair value of financial instruments, SFAS No. 157 creates a fair value hierarchy to prioritize
the inputs used to measure fair value into three categories. A financial instruments level within the fair value hierarchy is based on the lowest level of input significant to the fair value measurement, where Level 1 is the highest and
Level 3 is the lowest. The three levels are defined as follows:

Level 1unadjusted quoted prices in active markets accessible by
the reporting entity for identical assets or liabilities. Active markets are those in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2pricing inputs other than quoted market prices included in Level 1 that are based on observable market data, that are directly or
indirectly observable for substantially the full term of the asset or liability. These include quoted market prices for similar assets or liabilities, quoted market prices for identical or similar assets in markets that are not active, adjusted
quoted market prices, inputs from observable data such as interest rate and yield curves, volatilities or default rates observable at commonly quoted intervals or inputs derived from observable market data by correlation or other means.

Level 3pricing inputs that are unobservable or less observable, from objective sources. Unobservable inputs should only be used to the extent
observable inputs are not available. These inputs maintain the concept of an exit price from the perspective of a market participant and should reflect assumptions of other market participants. An entity should consider all market participant
assumptions that are available without unreasonable cost and effort. These are given the lowest priority and are generally used in internally developed methodologies to generate managements best estimate of the fair value when no observable
market data is available.

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

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



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related to the construction and development of our satellite and terrestrial network. Assets under construction are not depreciated until placed into
service. Repair and maintenance costs are expensed as incurred. Interest capitalized in connection with the satellite and terrestrial network assets under construction totaled $60.6 million and $27.6 million in 2008 and 2007, respectively.

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

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



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

Intangible Assets

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. Intangible assets that have finite useful lives are
amortized over their estimated useful lives. We have also determined that certain of our FCC licenses have indefinite useful lives, and as such, are not amortized.

Valuation of Long-Lived and Intangible Assets

We evaluate whether long-lived assets and finite lived intangible assets,
excluding goodwill, have been impaired when circumstances indicate the carrying value of those assets may not be recoverable in accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets (SFAS No. 144). 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.

We account for our indefinite-lived intangible assets in accordance with the provisions of Statement
of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets(SFAS 142), which requires goodwill and indefinite lived intangible assets with indefinite useful lives not be amortized, but to be tested
for impairment annually or whenever indicators of impairments arise. Intangible assets that have finite lives are amortized over their estimated useful lives and tested for impairment as described above for long-lived assets. Our intangible assets
with indefinite lives primarily consist of 1.4GHz licenses. Generally, we have determined that our 1.4GHz licenses have indefinite useful lives due to the fact that we believe our 1.4GHz spectrum is a non-depleting asset.

We included in our evaluation a sensitivity analysis that would address market volatility factors and credit constraints. We evaluated our business plans
and their related undiscounted cash flows and determined a



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probability weighting for them. As a result of our analysis, we determined that the long-lived and intangible assets as of December 31, 2008 were not
impaired.

Investment in SkyTerra

We
have accounted for our investment in SkyTerra at cost in accordance with APB No. 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

We adopted the provisions of FASB Interpretation No. 48 (FIN No. 48) Accounting for Uncertainty in Income
Taxesan interpretation of SFAS Statement No. 109, Accounting for Income Taxes, on August 1, 2007. FIN No. 48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.
The amount recognized is measured as the largest benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The impact of adopting FIN No. 48 was not material to our financial position or results of
operations.

We, together with our U.S. subsidiaries, file consolidated income tax returns in the U.S. federal jurisdiction. We, along
with our U.S. subsidiaries, also file tax returns in various state and local jurisdictions. We have no periods under audit by the Internal Revenue Service (IRS). The statutes of limitation open for our returns are 2004, 2005,
2006 and 2007. We are not aware of any issues for open years that upon examination by a taxing authority are expected to have a material adverse effect on results of operations. As of December 31, 2008, we have fully reserved our
deferred income tax balance.

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

We adopted
the fair value recognition provisions of SFAS No. 123(R), Share Based Payment on January 1, 2006. We elected the modified prospective transition method provided under SFAS No. 123(R) and consequently
prior period results have not been restated to reflect, and do not include, the impact of SFAS No. 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 our 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



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network, salaries, wages and other related costs of personnel engaged in research and development activities, and the costs of intangible assets that are
purchased from others for use in research and development activities that have alternative future uses. Costs that are not clearly related to research and development activities or routine in nature are excluded from research and development costs.

Earnings (Loss) per Common Share

We
account for earnings per share in accordance with SFAS No. 128, Earnings Per Share.Basic earnings (loss) per common share is calculated by dividing income (loss) available to common shareholders by the weighted
average number of common shares outstanding during the period. This includes the reported net income (loss) 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 2008, 2007 and 2006 because we incurred a net loss from continuing operations. For the years ended 2008, 2007 and 2006 we had approximately zero, 690,000 and 758,000 options and warrants respectively that were
exercisable because the average market price was greater than the exercise price. We also had 408,500 preferred shares convertible into 12.3 million common shares and debt convertible into 27 million common shares at December 31, 2008,
none of which were included since their effects were antidilutive.

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 us, the only item other than net loss that is included in
comprehensive income is foreign currency translation adjustments. Comprehensive loss was approximately $278 million, $239 million and $134 million for the years ended December 31, 2008, 2007 and 2006 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 issued SFAS No. 157, Fair Value Measurements
(SFAS No. 157) which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS No. 157 was initially effective for financial statements issued for fiscal
years beginning after November 15, 2007, and interim periods within those fiscal years.

In February 2008, the FASB issued FASB Staff
Position (FSP) No. 157-1, Application of SFAS No. 157 to SFAS No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurements under
Statement 13, (FSP No. 157-1). FSP No. 157-1 amends SFAS No. 157, Fair Value Measurements, to exclude SFAS No. 13, Accounting for Leases and other accounting
pronouncements that address fair value measurements for purposes of lease classification or measurement under SFAS No. 13. The adoption of FSP No. 157-1 did not have a material impact on us.



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

In October 2008, the
FASB issued FSP No. 157-3, which clarifies the application of SFAS No. 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair market value of a financial asset when the market
for that financial asset is not active. The guidance emphasizes that determining fair value in an inactive market depends on the facts and circumstances and may require the use of significant judgements. FSP No. 157-3 is effective upon
issuance, including prior periods for which financial statements have not been issued, and therefore was effective for us at September 31, 2008. The adoption of FSP No. 157-3 did not have a material impact on us.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding
an Amendment of SFAS No. 115 (SFAS No. 159) which provides companies with an option to report selected financial assets and liabilities at fair value. Furthermore, SFAS No. 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 No. 159 is effective for fiscal years beginning after November 15,
2008. 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. We believe that SFAS
No. 159 will not have a material impact on our financial statements.

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) which 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 May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles,(SFAS No. 162). SFAS No. 162 identifies the
framework, or hierarchy for selecting accounting principles to be used in preparing financial statements presented in conformity with U.S. GAAP. SFAS No. 162 amends the existing U.S. GAAP hierarchy established and set forth in the
American Institute of Certified Public Accountants (AICPA) Statement of Auditing Standard No. 69, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles (SAS No. 69). The
framework serves as a guide in determining the appropriate accounting treatment to be used for a transaction or event. We do not expect SFAS No. 162 to have an impact on our current accounting practices. The Standard will become effective
60 days following the SECs approval of Public Company Accounting Oversight Board (PCAOB) amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.



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In April 2008, the FASB issued FSP No. FAS 142-3, Determination of the Useful Life of
Intangible Assets,(FSP No. FAS 142-3) which amends the factors considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142,
Goodwill and Other Intangible Assets, (SFAS No. 142). FSP No. 142-3 requires a consistent approach between the useful life of a recognized intangible asset under SFAS No. 142 and the period of
expected cash flows used to measure the fair value of an asset under SFAS No. 141(R). The FSP also requires enhanced disclosures when an intangible assets expected future cash flows are affected by an entitys intent and/or ability
to renew or extend the arrangement. FSP No. 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, January 1, 2009 for us, and is to be applied prospectively. Early adoption is
prohibited. We have not completed our analysis of the potential impact of FSP No. 142-3, but do not believe the adoption will have a material impact on our financial condition, results of operations, or cash flows.

Concentrations of Risk

Financial instruments, which
potentially subject us to concentrations of credit risk, consist principally of cash and short-term investments. We periodically invest our cash balances in temporary or overnight investments. Our short-term investments include debt securities such
as commercial paper, time deposits, certificates of deposit, banker acceptances and marketable direct obligations of the United States Treasury with high credit quality financial institutions. At December 31, 2008, we had approximately $237
million of cash deposits, excluding restricted cash, in excess of amounts insured by the Federal Deposit Insurance Corporation. To date, we have not experienced any losses on cash deposits.

Note 3. Sale of SkyTerra Investment

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. We held approximately 44.3 million shares of non-voting common stock
of SkyTerra Communications as of December 31, 2007. This was accounted for under the cost method and valued at approximately $325 million. We also had a corresponding contractual commitment with SkyTerra to distribute
25.5 million of these shares to our shareholders, and had recorded a dividend liability of $183 million as of December 31, 2007 using the same adjusted cost basis as our investment. In the first quarter of 2008, we sold
14.4 million of our SkyTerra shares to Harbinger for an aggregate sales price of $76 million. We recognized a loss on this sale of $27 million.

On September 16, 2008, we sold our remaining 29.9 million shares of SkyTerra for gross proceeds of $124 million. We recognized a loss of approximately $99 million on this
transaction. Harbinger purchased approximately 24 million shares and the remaining shares were sold to other purchasers. A portion of the shares sold to Harbinger were delivered to an escrow agent pending receipt of FCC approval of
Harbingers pending application to control up to 100% of SkyTerra.

In order to permit us to sell these SkyTerra shares, SkyTerra
agreed to waive a contractual requirement for TerreStar to distribute 25.5 million of the SkyTerra shares to our shareholders. We eliminated the $183 million dividend liability. We recorded a benefit to decrease dividend liability of
$78 million due to a change in value of the shares, as a corresponding offset to the loss on the sale of the SkyTerra shares, and the remaining $105 million was recorded to Additional Paid-in Capital as an offset to the originally recorded
transaction.

We also granted to SkyTerra the right to sell to third parties the 4,216,270 shares, or approximately 11.1% of the total
outstanding common shares, of TerreStar Networks held by SkyTerra. Subject to certain conditions, purchasers of these shares would have the right to exchange them for 4.37 shares of our common stock per TerreStar Networks share, and would have
registration rights with respect to these shares. We would also receive 3,126,428 shares of Terrestar Global, another TerreStar Corporation subsidiary, currently owned by SkyTerra in conjunction with this exchange. If consummated, this exchange
would result in us owning more than 99.9% of TerreStar Networks and TerreStar Global.



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Note 4. Property and Equipment

The components of property and equipment as of December 31, 2008 and 2007 are presented in the table below.



|                                       |  |                  |         |   |                  |   |         |  
|-------------------------------------- |  | ---------------- | ------- | - | ---------------- | - | ------- | -
|                                       |  | December 31,2008 |         |   | December 31,2007 |  
|                                       |  | (in thousands)   |        
|Assets Under Construction              |  |                  |         |   |                  |   |         |  
|Satellite construction in progress     |  | $                | 655,510 |   |                  | $ | 526,140 |  
|Terrestrial Network under Construction |  |                  | 44,776  |   |                  |   | 28,866  |  
|                                       |  |                  |         |   |                  |   |         |  
|                                       |  |                  | 700,286 |   |                  |   | 555,006 |  
|                                       |  |                  |         |   |                  |   |         |  
|Assets in Service                      |  |                  |         |   |                  |   |         |  
|Network equipment                      |  |                  | 2,420   |   |                  |   | 2,385   |  
|Lab equipment                          |  |                  | 11,401  |   |                  |   | 7,905   |  
|Office equipment                       |  |                  | 6,549   |   |                  |   | 5,525   |  
|Leasehold improvements                 |  |                  | 2,963   |   |                  |   | 2,963   |  
|                                       |  |                  |         |   |                  |   |         |  
|                                       |  |                  | 23,333  |   |                  |   | 18,778  |  
|Less accumulated depreciation          |  |                  | (7,017  | ) |                  |   | (2,633  | )
|                                       |  |                  |         |   |                  |   |         |  
|Property and equipment, net            |  | $                | 716,602 |   |                  | $ | 571,151 |  
|                                       |  |                  |         |   |                  |   |         |  

The satellite construction in progress and terrestrial network under construction includes $88.6
million and $28.0 million respectively, of interest capitalized as of December 31, 2008 and 2007.

Depreciation expense for the years
ended December 31, 2008, 2007 and 2006 was $4.7 million, $2.6 million and $0.1 million, respectively.

During 2008, we recorded a loss
related to asset disposals of approximately $6.8 million. This includes $5.5 million in assets under construction (including capitalized interest) where the set up and installation of sites were terminated and activities were ceased. There was an
additional $1.3 million of equipment in service that was deemed obsolete and written off.

Note 5. Intangible Assets

Intangible assets as of December 31, 2008 and 2007 are presented in the table below.



|                              |  |                  |         |   |                  |   |         |  
|----------------------------- |  | ---------------- | ------- | - | ---------------- | - | ------- | -
|                              |  | December 31,2008 |         |   | December 31,2007 |  
|                              |  | (in thousands)   |        
|Indefinite lived intangibles  |  |                  |         |   |                  |   |         |  
|1.4GHz spectrum licenses      |  | $                | 156,520 |   |                  | $ |        |  
|Definite lived intangibles    |  |                  |         |   |                  |   |         |  
|2GHz licenses                 |  |                  | 209,143 |   |                  |   | 202,324 |  
|Intellectual Property         |  |                  | 36,907  |   |                  |   | 35,704  |  
|                              |  |                  |         |   |                  |   |         |  
|                              |  |                  | 246,050 |   |                  |   | 238,028 |  
|Less accumulated amortization |  |                  | (43,557 | ) |                  |   | (25,772 | )
|                              |  |                  |         |   |                  |   |         |  
|Intangible assets, net        |  | $                | 359,013 |   |                  | $ | 212,256 |  
|                              |  |                  |         |   |                  |   |         |  

On June 9, 2008, we consummated our acquisition of Port Merger Corporation which was
previously owned by Echostar. Port Merger Corporation holds certain 1.4GHz licenses. We issued 30 million shares of our common stock to EchoStar for this acquisition.



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Additionally on February 5, 2008, we entered into an agreement with certain affiliates of Harbinger,
which provided for the effective purchase of CCTV Wireless I, LLC the holder of certain 1.4GHz licenses and related intellectual property for the issuance of 1.2 million shares of our Series E junior participating preferred
stock, convertible into 30 million shares of our common stock. On June 9, 2008, we consummated this agreement.

We retained
an outside consultant to perform a fair value analysis of the spectrum as of June 10, 2008. An income approach, The Greenfield Method, a form of a discounted cash flow model, was utilized and included a sensitivity analysis that
would address market volatility factors and credit constraints. As a result of the valuation, the 1.4GHz spectrum licenses were recorded at $156.5 million and no value was attributed to the related intellectual property.

Amortization expense for the years ended December 31, 2008, 2007 and 2006 was $17.7 million, $15.7 million and $6.7 million, respectively.

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

Our initial valuation of TerreStar
Networks intellectual property rights was determined utilizing a form of the income approach referred to as the relief from royalty valuation method. We assumed a 10% to 12% royalty rate applied to a projected revenue stream generated by a
hypothetical licensee utilizing such intellectual property rights.

Note 6. Accounts Payable and Accrued Expenses

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



|                                     |  |                |        |      |   |       
|------------------------------------ |  | -------------- | ------ | ---- | - | ------
|                                     |  | December 31,  
|                                     |  | 2008           |        | 2007
|                                     |  | (In thousands)
|Accounts payable                     |  | $              | 10,886 |      | $ | 18,823
|Accrued development expenses         |  |                | 1,581  |      |   | 13,613
|Accrued consulting expense           |  |                | 274    |      |   | 5,078 
|Accrued compensation and benefits    |  |                | 2,591  |      |   | 2,519 
|Accrued legal expense                |  |                | 861    |      |   | 2,122 
|Accrued operating and other expenses |  |                | 475    |      |   | 1,068 
|                                     |  |                |        |      |   |       
|                                     |  | $              | 16,668 |      | $ | 43,223
|                                     |  |                |        |      |   |       

Note 7. February 2008 Financing Transactions

On February 7, 2008, TerreStar Corporation and TerreStar Networks entered into a series of separate agreements with EchoStar Corporation, Harbinger
and other investors constituting a commitment of $300 million in investments in TerreStar Corporation and TerreStar Networks, with $200 million made available at closing and the balance dedicated to funding the TerreStar-2 satellite. For further
details on the debt transactions, please refer to Note 8 Long-Term Debt.

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



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

The transactions involving the 1.4 GHz spectrum licenses were consummated on June 10, 2008. We retained an outside consultant to perform a fair
value analysis of the 1.4 GHz spectrum. We recorded $156.5 million to indefinite lived intangible assets as a result of the valuation.

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

Note 8. Long-Term Debt

TerreStar Notes

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

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

The additional $50 million TerreStar Notes
were issued at an issue price of 93%. As part of the acquisition accounting related to the $50 million TerreStar Notes and in conjunction with the acquisition of the 1.4GHz spectrum, a debt discount was recorded for approximately $42.5 million
dollars. The debt discount is being accreted using the effective interest method over the six year term of the TerreStar Notes. For the year ended December 31, 2008, we accreted approximately $1 million of debt discount related to the TerreStar
Notes. No accretion was recognized in 2007.

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

The
TerreStar Notes are secured by a first priority security interest in the assets of TerreStar Networks, subject to certain exceptions, pursuant to a U.S. Security Agreement (the Security Agreement), dated as of February 14, 2007,
among TerreStar Networks, as issuer, and any entities that may become Guarantors (as defined in the Indenture) in the future under the Indenture in favor of U.S. Bank National Association, as collateral agent. The assets of TerreStar Networks that
collateralize the TerreStar Notes amount to $850.2 million as of December 31, 2008, consisting primarily of satellites under construction, property and equipment and cash and cash equivalents.

During 2008, $87.7 million of interest were converted into additional TerreStar Notes in accordance with covenants under the Indenture. As of
December 31, 2008 and 2007, the carrying value of the TerreStar Notes, net of discount including accrued interest, was $671.9 million and $568.0 million, respectively.



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TerreStar Exchangeable Notes

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

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

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

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

As part of the
acquisition accounting related to the TerreStar Exchangeable Notes and in conjunction with the acquisition of the 1.4GHz spectrum, a debt discount was recorded for approximately $100 million dollars. The debt discount is being accreted using the
effective interest method over the six year term of the TerreStar Exchangeable Notes. For the year ended December 31, 2008, we accreted approximately $4 million of debt discount related to the TerreStar Exchangeable Notes. No accretion was
recognized in 2007.

During 2008, $8.7 million of interest was converted into additional TerreStar Exchangeable Notes in accordance with
the TerreStar Exchangeable Notes Indenture. As of December 31, 2008, the carrying value of the TerreStar Exchangeable Notes, net of discount including accrued interest, was $63.2 million.

Beneficial Conversion Feature

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

TerreStar-2 Purchase Money Credit Agreement

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



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

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

As of December 31, 2008, the carrying value of the Credit Agreement, including accrued interest, was $36.8 million.

Leases

As of December 31, 2008, we had
non-cancelable leases for office space, co-location sites, calibration earth stations, towers and furniture and equipment under operating leases expiring through 2018.

Rent expense totaled approximately $10.8 million, $2.9 million and $6.5 million for the years ended December 31, 2008, 2007 and 2006, respectively. Rent expense is recognized on a straight-line basis over the
term of the lease agreement. We also had sublease income which totaled approximately $0.3 million, $0.2 million and zero for the years ended December 31, 2008, 2007 and 2006, respectively.

Note 9. Stockholders Equity

As of
December 31, 2008, we authorized 5 million shares of preferred stock and 240 million shares of common stock. For each share of common stock 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.

Common Stock

On September 7, 2006, we completed a rights offering for our common stock. In the offering, we sold 2,133,335 shares of common stock at a price of $8.157 per share for net proceeds of $18.2 million. The rights
offering was open to our stockholders of record as of December 17, 2004 who had not participated in our private placement of common stock in November 2004. Each eligible record holder received a right to purchase 0.103 shares of our common
stock for each share of common stock held on the record date.

In September 2006, we issued 4,119,386 shares of TerreStar Corporation
common stock in exchange for 2,314,462 shares of common stock of TerreStar Networks previously owned by Columbia Capital (Columbia), Spectrum Equity Investors (Spectrum) and TSTR Investors LLC.

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



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Under the purchase method of accounting, the above common stock exchanges were recorded at fair values as
of the exchange date. As of December 31, 2007 and 2006, the excess of the fair values of the common stock exchanged resulted in an allocation of $82.9 million and $53.0 million, respectively, to intangible assets. The impairment for the twelve
months ended December 31, 2007 and 2006 was $6.7 million and $4.9 million, respectively. As of December 31, 2007, our ownership interest in TerreStar Networks and TerreStar Global was approximately 86% and 85%, respectively, on a
non-diluted basis.

During 2008, we exchanged approximately 1.7 million shares of our common stock for approximately 0.9 million
shares of TerreStar Networks common stock and approximately 0.3 million shares of TerreStar Global common stock with minority share holders. Accordingly, our ownership interests in TerreStar Networks and TererStar Global is approximately 88%
and 86%, respectively, on a non-diluted basis as of December 31, 2008. In addition, the exchanges resulted in an allocation of approximately $7.7 million to intangible assets for the year ended December 31, 2008.

On June 9, 2008, we issued approximately 30 million shares of our common stock pursuant to the closing of the EchoStar Spectrum Purchase
Agreement.

Share Reserved for Future Issuances

As of December 31, 2008, we reserved common stock for future issuance, as detailed below:



|                                                                                                  |  |            
|------------------------------------------------------------------------------------------------- |  | -----------
|Shares issuable upon exercise of warrants                                                         |  | 3,238,477  
|Shares issuable upon conversion of preferred stock                                                |  | 42,255,956 
|Shares issuable upon exercise of options                                                          |  | 8,664,732  
|Shares issuable for Exchangeable Notes                                                            |  | 33,051,620 
|Shares issuable in connection with SkyTerra transaction exchangeable for TerreStar Networks stock |  | 19,094,343 
|                                                                                                  |  |            
|Total                                                                                             |  | 106,305,128
|                                                                                                  |  |            

Preferred Stock

We account for the Series A and Series B Cumulative Redeemable Convertible Preferred Stock (Series A and B Preferred) under Accounting Series Release 268 Redeemable Preferred
Stocks. As of December 31, 2008, we had 5.0 million authorized shares of preferred stock, consisting of 0.45 million Series A shares, 0.5 million Series B shares, 1 Series C share, 1 Series D share,
1.9 million Series E shares and approximately 2.1 million shares undesignated.

On April 15, 2005, we sold 408,500 shares of
non-voting Series A Cumulative Convertible Preferred Stock (Series A Preferred), $0.01 par value in a private placement exempt from the registration requirements of the Securities Act of 1933. We received cash proceeds, net of $17.6
million in placement agent commissions of which approximately $11.5 million was paid to Tejas Securities Group, Inc., a related party and Deutsche Bank Securities Inc., (before escrowing a portion of the proceeds as required under the terms of the
preferred stock described below) of approximately $391 million.

In connection with
the sale of the Series A Preferred stock, we granted warrants exercisable for an aggregate of 154,109 shares of our common stock to the purchasers. The warrants have a term of five years and an exercise price equal to $26.51 per share. Since we were
unable to meet certain registration deadlines with respect to the shares of preferred stock, each warrant vested as to 1/365thof the shares of
common stock underlying the warrant for each day after September 7, 2005. The fair value of the warrants was estimated at $3.9 million using a Black-Scholes model with volatility of 757%, risk free rate of 2.72% and a current stock price on the
date of issue of $25 and recorded as additional deferred issuance costs.



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The rights, preferences and privileges of the Series A Preferred are contained in Certificates of
Designations of the Series A Cumulative Convertible Preferred Stock. The following is a summary of these rights, preferences and privileges:



| |  |  | The Series A Preferred Stock has voting rights limited to those listed below, or except as required by applicable law. Upon (a) the accumulation of accrued and
unpaid dividends on the outstanding shares of Series A Preferred for two or more six month periods, whether or not consecutive; (b) our failure to properly redeem the Series A Preferred Stock, or (c) our failure to comply with any of the
other covenants or agreements set forth in the continuance of such failure for 30 consecutive days or more after receipt of notice of such failure from the holders of at least 25% of the Series A preferred then-outstanding shares of Series A
Preferred, with the holders of shares of any parity securities issued after April 15, 2005 upon which like voting rights have been conferred and are exercisable, voting as a single class, will be entitled to elect two directors to our Board of
Directors for successive one-year terms until such defect listed above has been cured. In addition, we must obtain approval of the holders of a majority of the then outstanding shares of Series A Preferred to modify the rights, preferences or
privileges of the Series A Preferred in a manner adverse to the holders of Series A Preferred.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | From April 15, 2005 to April 15, 2007 we were required to pay dividends in cash at a rate of 5.25% per annum (the Cash Rate) on the
shares of Series A Preferred. We were required to place the aggregate amount of these cash dividends, $42,892,500, in an escrow account. These cash dividends will be paid to the holders of Series A Preferred from this escrow account in four
semi-annual payments, unless earlier paid pursuant to the terms described below. The first of these dividend payments was made on October 15, 2005.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | From April 15, 2007 to April 15, 2010, we are required to pay dividends on each share of Series A Preferred either in cash at the Cash Rate or in shares
of our common stock at a rate of 6.25% per annum.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | If any shares of Series A Preferred remain outstanding on April 15, 2010, we are required to redeem such shares for an amount equal to the purchase price paid
per share plus any accrued but unpaid dividends on such shares.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Each holder of shares of the Series A Preferred shall be entitled to convert their shares into shares of our common stock at any time. Each share of Series A
Preferred will initially be convertible into 30 shares of our common stock. Upon conversion, any accrued but unpaid dividends on such shares will also be issued as shares of common stock, in a number of shares determined by dividing the aggregate
value of such dividend by $33.33. Upon conversion all amounts paid to holders of Series A Preferred will be paid in shares of our common stock.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Upon a change in our control, each holder of Series A Preferred shall be entitled to require us to redeem such holders shares of Series A Preferred for an
amount in cash equal to $1,080 per share plus all accrued and unpaid dividends on such shares.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | No dividends may be declared or paid, and no funds shall be set apart for payment, on shares of our common stock, unless (i) written notice of such dividend is
given to each holder of shares of Series A Preferred not less than 15 days prior to the record date for such dividend and (ii) a registration statement registering the resale of the Conversion Shares has been filed with the SEC and is effective
on the date we declare such dividend.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Upon our liquidation, dissolution or winding up, the holders of Series A Preferred
are entitled to receive, prior and in preference to any distributions to holders of shares of our common stock, an amount equal to $1,000 per share plus all accrued and unpaid dividends on such shares.

On October 26, 2005, we completed an exchange offer in which we allowed each holder of Series A Preferred the opportunity to exchange their shares
of Series A Preferred and a release of any claims relating to the issuance of the Series A Preferred for shares of Series B Preferred, which will have rights, preferences and privileges substantially identical to the Series A Preferred, except that
upon (a) the accumulation of accrued and



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unpaid dividends on the outstanding shares of Series B Preferred for two or more six month periods, whether or not consecutive; (b) our failure to
properly redeem the Series B Preferred Stock, or (c) our failure to comply with any of the other covenants or agreements set forth in the Certificate of Designations for the Series B Preferred Stock, and the continuance of such failure for 30
consecutive days or more after receipt of notice of such failure from the holders of at least 25% of the Series B Preferred then outstanding, then the holders of at least a majority of the then-outstanding shares of Series B Preferred, with the
holders of shares of any parity securities upon which like voting rights have been conferred and are exercisable, voting as a single class, will be entitled to elect a majority of the members of our Board of Directors for successive on-year terms
until such defect listed above has been cured. All of the holders of the Series A Preferred except for those affiliated with Highland Capital Management exchange their shares in this offer. Accordingly, approximately $318.5 million in the face
amount of Series A Preferred shares were exchanged for Series B Preferred shares of the same face amounts and on $90 million in face amount of Series A Preferred shares remain outstanding.

Dividends on Series A and B Preferred Shares

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

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

Series C and D Preferred Stock

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

The rights, preferences and privileges of the Series C and Series D preferred are
contained in Certificates of Designations of the Series C and D preferred stock. The following is a summary of these rights, preferences and privileges:



| |  |  | The Series C and Series D holders are not entitled to or permitted to vote on any matter required or permitted to be voted upon by the stockholders of the
Corporation.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Series C and Series D Preferred are not convertible into any other class of our capital stock.
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | Series C and Series D preferred stock rank senior and prior to our common stock and each other class or series of our equity securities whether issued or issued in
the future with respect to payment of dividends, redemption payments, rights upon our liquidation, dissolution or winding up of affairs. Additionally, the Series C and Series D rank junior to the Series A and Series B Cumulative Convertible
Preferred Stock.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In the event of any voluntary or involuntary liquidation, dissolution or winding-up of our affairs, no distribution shall be made (a) to the holders of any
shares of our capital stock ranking junior (with respect to rights upon liquidation, dissolution or winding up) to the Series C and Series D preferred stock, unless the Series C and Series D holders shall have received $1,000 per share each, or
(b) to the holders of shares of capital stock of the Company ranking on a parity (with respect to rights upon
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | liquidation, dissolution or winding up) with the Series C and Series D preferred stock, except for distributions made ratably on the Series C and Series D
preferred stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | By virtue of their ownership of shares of Series C and Series D preferred stock, EchoStar and Harbinger have consent rights for, among other things, certain sales
of assets, making any material change in our line of business, amending or permitting the amendment of our certificate of incorporation, by-laws, or our other organizational documents or any of our subsidiaries, certain acquisitions of assets,
certain capital expenditures and consolidations and mergers and rights to appoint directors.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Series E Junior Participating
Preferred Stock

Series E preferred stock was issued to Harbinger and its affiliates under the Harbinger Spectrum Agreement. Except
as otherwise required under Delaware law, the holders of Series E Preferred Shares are not entitled to vote on any matter required or permitted to be voted on by the stockholders. The holders of Series E Preferred Shares are entitled to
participate ratably in any dividends paid on the shares of common stock. In the event of a liquidation, the holders of Series E Preferred Shares will be entitled to be paid out of the assets of the Company available for distribution to its
stockholders an amount in cash equal to $0.0001 per share (subject to adjustment), before any distribution may be made or any assets distributed in respect of the shares of common stock. Subject to certain restrictions related to the change of
control provisions under the existing indenture and existing preferred stock, each Series E Preferred Share may be converted into 25 shares of common stock (subject to adjustment). There is no restriction in the Certificate of Designations governing
the Series E Preferred Shares on the repurchases or redemption of shares by the Company while there is any arrearage in the payment of dividends or sinking fund installments.

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

Common Stock Purchase Warrants

As of December 31, 2008, there were approximately
3 million fully vested warrants exercisable for our common stock outstanding.

The following table summarizes our warrant activity as
of December 31, 2008.



|                                 |  |           |   |  |                                          |      
|-------------------------------- |  | --------- | - |  | ---------------------------------------- | -----
|TerreStar Corporation            |  | Warrants  |   |  | Weighted-average exerciseprice per share
|Outstanding at January 1, 2008   |  | 4,213,400 |   |  | $                                        | 9.35 
|Granted                          |  |          |   |  |                                          |     
|Canceled                         |  | (974,923  | ) |  |                                          | 5.92 
|Exercised                        |  |          |   |  |                                          |     
|                                 |  |           |   |  |                                          |      
|Outstanding at December 31, 2008 |  | 3,238,477 |   |  | $                                        | 10.22
|                                 |  |           |   |  |                                          |      

Note 10. Employee Stock Benefit Plans

Stock Options

Effective January 1, 2006,
we adopted Statement of Financial Accounting Standards No. 123 (revised), Share-Based Payment, an amendment of SFAS Nos. 123 (SFAS No. 123(R)), applying the modified prospective method. As a result of
our decision to adopt using the modified prospective method, prior period



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results have not been restated. Prior to the adoption of SFAS No. 123(R), we applied the provisions of Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25) in accounting for its stock-based awards, and accordingly, recognized no compensation costs for its stock option plans other than for instances where APB
25 required variable plan accounting related to performance-based stock options, stock option modifications and restricted stock awards. Under the modified prospective method, SFAS No. 123(R) applies to new awards and to awards that were
outstanding as of December 31, 2005 that are subsequently vested, modified, repurchased or cancelled. Compensation expense recognized during 2006 includes the portion vesting during the period for (1) all share-based payments granted prior
to, but not yet vested, as of December 31, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123 and (2) all share-based payments granted subsequent to December 31, 2005,
based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123(R). Such estimates are made using the Black-Scholes option pricing model. Included in continuing operations for the year ended December 31, 2006
is the impact of revising the requisite service period related to stock compensation awards previously-granted to TerreStar Networks employees, certain Company executives and the Companys former directors. This revised estimate was a
shortening of the service period from previous estimates to September 25, 2006, the closing date of the TerreStar Networks and MSV ownership exchanges. In accordance with the stock compensation awards, that transaction qualified as an event
which triggered automatic acceleration of all the outstanding unvested awards.

Similarly, included in discontinued operations for the year
ended December 31, 2006 is the impact of shortening the requisite service period related to stock compensation awards previously-granted to certain of our employees due to the automatic acceleration which occurred upon the closing of the sale
of our terrestrial wireless business on September 14, 2006.

Summary

Through 2007, TerreStar Corporation and TerreStar Networks offered stock options and other long term equity based incentive awards under their respective
equity plans to their employees, directors and other service providers. During 2006, TerreStar Corporation adopted the 2006 TerreStar Corporation Equity Incentive Plan (the 2006 Plan) which replaced the 2002 TerreStar Corporation Plan
(the 2002 Plan). During 2007, the TerreStar Corporation and TerreStar Networks respective Board of Directors and Compensation Committees decided to cease issuing options and other awards under the TerreStar Networks 2002 Stock Incentive
Plan (the 2002 TerreStar Networks Plan) and exchange certain outstanding options under the 2002 TerreStar Networks Plan for options to purchase common stock of TerreStar Corporation under the 2006 Plan. As of December 31, 2008, we
now offer stock options and other long-term incentive awards under the following two plans to eligible persons:



| |  |  | the 2006 Plan; and
| | - |  | ------------------



| |  |  | the TerreStar Global Ltd. 2007 Share Incentive Plan (the Global Plan).
| | - |  | ------------------------------------------------------------------------

Our equity-based compensation expense is included in the following areas in the consolidated statement of operations for the periods indicated (in
thousands) for the awards outstanding under the 2002 TerreStar Networks Plan, the 2006 Plan, the 2002 Plan, the Global Plan, and warrants issued to purchase TerreStar Global common shares:



|                               |  |      |       |      |   |        |  |   |       
|------------------------------ |  | ---- | ----- | ---- | - | ------ |  | - | ------
|                               |  | 2008 |       | 2007 |   | 2006  
|General and administrative     |  | $    | 4,195 |      | $ | 23,814 |  | $ | 35,756
|Research and development       |  |      | 285   |      |   | 1,297  |  |   |      
|Discontinued operations        |  |      |      |      |   |       |  |   | 4,862 
|                               |  |      |       |      |   |        |  |   |       
|Total stock-based compensation |  | $    | 4,480 |      | $ | 25,111 |  | $ | 40,618
|                               |  |      |       |      |   |        |  |   |       

For the year ended December 31, 2008, the total unrecognized stock compensation expense was
approximately $6.6 million.



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Restricted Stock Awards

During 2008, we issued approximately 0.1 million and 0.6 million shares of restricted stock awards to its employees and approximately 0.3 million shares to certain executives of TerreStar Networks under the
2006 Plan. Fifty percent of the shares vest ninety days following the successful launch and in orbit test check-in of TerreStar-1 satellite and the remaining fifty percent vest upon the first anniversary of the initial vesting date. The
fair value of restricted stock awards is based on the stock price at the date of grant. Restricted stock awards are settled in our shares of common stock after the vesting period.

The fair value of restricted stock awards is based on the stock price at the date of grant. Restricted stock awards generally vest over four years and
are settled in shares of TerreStar Corporation common stock after the vesting period.

The following table summarizes our restricted stock
activity as of December 31, 2008.



|                               |  |                   |   |  |                                       |      
|------------------------------ |  | ----------------- | - |  | ------------------------------------- | -----
|TerreStar Corporation          |  | Restricted Shares |   |  | Weighted-average grantdate fair value
|Nonvested at January 1, 2008   |  | 69,000            |   |  | $                                     | 13.35
|Granted                        |  | 927,110           |   |  |                                       | 3.76 
|Canceled                       |  | (60,050           | ) |  |                                       | 4.22 
|Vested                         |  | (35,000           | ) |  |                                       | 9.80 
|                               |  |                   |   |  |                                       |      
|Nonvested at December 31, 2008 |  | 901,060           |   |  | $                                     | 4.23 
|                               |  |                   |   |  |                                       |      

TerreStar Networks 2002 Stock Incentive Plan

In July 2002, the TerreStar Networks shareholders approved the 2002 TerreStar Networks Plan (as amended) with 7,707,458 authorized shares of common
stock, of which options to purchase 213,763 shares of TerreStar Networks common stock were outstanding at December 31, 2008 and 2007, respectively. All of the outstanding options under the 2002 TerreStar Networks Plan have vested.
Pursuant to the terms of the adoption of the 2006 Plan (discussed above) no additional options will be issued pursuant to the 2002 TerreStar Networks Plan, and the plan will terminate upon the exercise or termination of the outstanding options.

The fair value of each option award was estimated on the grant date using the Black-Scholes option pricing model. The risk-free interest
rate was based on the daily treasury yield curve rates from the U.S. Treasury, adjusted for continuous compounding. The expected-volatility was estimated using TerreStar Networks and peer company historical volatility and implied volatility. The
expected term was estimated using the average of the vesting date and the contractual term of the options.

The following table summarizes
the fair values and weighted average assumptions related to the grants under the 2002 TerreStar Networks Plan.



|                                       |  |      |      |  
|-------------------------------------- |  | ---- | ---- | -
|                                       |  | 2006 |     
|Weighted average grant date fair value |  | $    | 7.00 |  
|Weighted average assumptions:          |  |      |      |  
|Risk-free interest rate                |  |      | 4.62 | %
|Expected volatility                    |  |      | 62   | %
|Expected dividend yield                |  |      |     |  
|Expected term (years)                  |  |      | 2.5  |  



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##### Table of Contents

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



|                                 |  |                         |  |                                          |      |                                       |   |      
|-------------------------------- |  | ----------------------- |  | ---------------------------------------- | ---- | ------------------------------------- | - | -----
|                                 |  | Options toacquireshares |  | Weighted-average exerciseprice per share |      | AggregateIntrinsicValue(in thousands)
|Outstanding at January 1, 2008   |  | 213,763                 |  | $                                        | 7.38 |                                       |   |     
|Granted                          |  |                        |  |                                          |     |                                       |   |     
|Canceled                         |  |                         |  |                                          |      |                                       |   |      
|Exercised                        |  |                         |  |                                          |      |                                       |   |      
|                                 |  |                         |  |                                          |      |                                       |   |      
|Outstanding at December 31, 2008 |  | 213,763                 |  | $                                        | 7.38 |                                       | $ | 3,232
|                                 |  |                         |  |                                          |      |                                       |   |      
|Exercisable at December 31, 2008 |  | 213,763                 |  | $                                        | 7.38 |                                       | $ | 3,232
|                                 |  |                         |  |                                          |      |                                       |   |      

The following table provides information about options under the 2002 TerreStar Networks Plan that
are outstanding and exercisable as of December 31, 2008:



|                |  |                       |  |                                          |  |                      
|--------------- |  | --------------------- |  | ---------------------------------------- |  | ---------------------
|                |  | Options Outstanding   |  | Options Exercisable                     
|Exercise Prices |  | As ofDecember 31,2008 |  | WeightedAverageContractual LifeRemaining |  | As ofDecember 31,2008
|$0.21           |  | 52,070                |  | 6 years                                  |  | 52,070               
|$0.70           |  | 100,435               |  | 4 years                                  |  | 100,435              
|$24.42          |  | 61,258                |  | 7 years                                  |  | 61,258               
|                |  |                       |  |                                          |  |                      
|                |  | 213,763               |  |                                          |  | 213,763              
|                |  |                       |  |                                          |  |                      

2002 TerreStar Corporation Plan

The 2002 Plan was initially adopted by the Board of Directors in May 2002 with 5,493,024 authorized shares of common stock, of which options to purchase
231,664 shares of the our common stock were outstanding at December 31, 2008.

2006 TerreStar Corporation Equity Incentive Plan

In April 2006, our shareholders approved the 2006 Plan which was designed to replace both the 2002 Plan and the 2004 Restricted
Stock Plan. No additional shares were granted under either the 2002 Plan or the 2004 Restricted Stock Plan. The 2006 Plan initially authorized to issue a total of 10,000,000 (and was later amended in October 2007 to increase to 11,000,000) Incentive
Stock Options, Non-Qualified Stock Options, Restricted Shares, Performance Shares and Performance Units. As of December 31, 2008, approximately 1.2 million shares remain available to be issued under the Plan.

Under the 2006 Plan, we granted 35,600 non-qualified options to purchase our common stock to a board member on March 14, 2007. These options vest on
March 14, 2008 and expire on March 14, 2017, unless fully exercised or terminated earlier.

Under the 2006 Plan, we granted
3.8 million non-qualified options to purchase our common stock to TerreStar Networks employees on May 1, 2007. One-third of the options vest each year over three years starting January 1, 2008 and expires on January 1, 2017,
unless fully exercised or terminated earlier.

On May 23, 2007, we cancelled approximately 2.5 million fully vested non-qualified
options to purchase TerreStar Networks common stock in exchange for the issuance of approximately 5.3 million fully vested non-qualified options to purchase our common stock. These options were granted to TerreStar Networks



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##### Table of Contents

employees on May 23, 2007. These options were fully vested and we recognized $14.7 million of total incremental compensation cost related to this
exchange for the year ended December 31, 2007. Fifty percent of the options became exercisable on January 1, 2008 and the remaining fifty percent become exercisable on January 1, 2009. The options expire on May 23, 2017, unless
fully exercised earlier.

On April 16, 2008, in connection with the departure of certain executives and their severance agreements, we
accelerated the vesting date for those options not yet vested of approximately .9 million and 1.2 million options which were initially granted on May 1 and May 23, 2007, respectively, and extended the exercise period of these
options by 12 months. Additionally, we granted an additional 145,175 fully vested options to one of the executives.

The fair
value of each option and modified award was estimated on the grant date using the Black-Scholes option pricing model. The risk-free interest rate was based on the daily treasury yield curve rates from the U.S. Treasury, adjusted for continuous
compounding. The expected-volatility was estimated using TerreStar Corporation and peer company historical volatility and implied volatility. The expected term was estimated using the average of the vesting date and the contractual term of the
options.

On June 25, 2008, under the 2006 Plan, we granted 75,000 shares to certain directors as partial compensation for their
service on the board of directors. The $1.25 fair value of the award was estimated as of the grant date using the Black-Scholes option pricing model. The risk-free interest rate of 3.48% was based on the daily treasury yield curve rates
from the U.S. Treasury, adjusted for continuous compounding. The expected-volatility of 57% was estimated using TerreStar Corporation and peer company historical volatility and implied volatility. The expected term representing 6 years was estimated
using the average of the vesting date and the contractual term of the options.

The following table summarizes the fair values and weighted
average assumptions related to the grants under the 2006 Plan.



|                                       |  |               |   |  |              |   |  |         |  
|-------------------------------------- |  | ------------- | - |  | ------------ | - |  | ------- | -
|Grant dates                            |  | 2008          |   |  | 2007         |   |  | 2006    |  
|Weighted average grant date fair value |  | $0.33  $1.78 |   |  | $5.09  6.68 |   |  | $7.32   |  
|Weighted average assumptions:          |  |               |   |  |              |   |  |         |  
|Risk-free interest rate                |  | 1.64%  3.48  | % |  | 4.34%  4.68 | % |  | 4.55    | %
|Expected volatility                    |  | 57%  70      | % |  | 60.0         | % |  | 84.0    | %
|Expected dividend yield                |  |              |   |  |             |   |  |        |  
|Expected term (years)                  |  | 1.0  6.0     |   |  | 5.50  5.83  |   |  | 4.83    |  
|Options granted                        |  | 332,675       |   |  | 9,138,403    |   |  | 407,500 |  

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



|                                  |  |                         |   |  |                                          |       |                                        |   |  
|--------------------------------- |  | ----------------------- | - |  | ---------------------------------------- | ----- | -------------------------------------- | - | -
|                                  |  | Options toacquireshares |   |  | Weighted-average exerciseprice per share |       | AggregateIntrinsic Value(in thousands)
|Outstanding at January 1, 2008    |  | 9,568,911               |   |  | $                                        | 11.73 |                                        | $ | 
|Granted                           |  | 332,675                 |   |  |                                          | 9.33  |                                        | $ | 
|Canceled                          |  | (1,236,854              | ) |  |                                          | 11.31 |                                        | $ | 
|Exercised                         |  |                        |   |  |                                          |      |                                        | $ | 
|                                  |  |                         |   |  |                                          |       |                                        |   |  
|Outstanding at December 31, 2008  |  | 8,664,732               |   |  |                                          | 11.69 |                                        | $ | 
|                                  |  |                         |   |  |                                          |       |                                        |   |  
|Exercisable at December 31, 20085 |  | 5,007,770               |   |  | $                                        | 11.93 |                                        | $ | 
|                                  |  |                         |   |  |                                          |       |                                        |   |  



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##### Table of Contents

|                               |  |                         |   |  |                                       |     
|------------------------------ |  | ----------------------- | - |  | ------------------------------------- | ----
|                               |  | Options toacquireshares |   |  | Weighted-Average GrantDate Fair Value
|Nonvested at January 1, 2008   |  | 3,942,055               |   |  | $                                     | 6.72
|Granted                        |  | 332,675                 |   |  |                                       | 3.80
|Canceled                       |  | (897,926                | ) |  |                                       | 6.68
|Vested                         |  | (2,188,293              | ) |  |                                       | 6.46
|                               |  |                         |   |  |                                       |     
|Nonvested at December 31, 2008 |  | 1,188,511               |   |  | $                                     | 6.41
|                               |  |                         |   |  |                                       |     

The following table provides information about options under the 2002 TerreStar Corporation Plan
and the 2006 Plan that are outstanding and exercisable as of December 31, 2008:



|                |  |                       |  |                                          |  |                      
|--------------- |  | --------------------- |  | ---------------------------------------- |  | ---------------------
|                |  | Options Outstanding   |  | Options Exercisable                     
|Exercise Prices |  | As ofDecember 31,2008 |  | WeightedAverageContractual LifeRemaining |  | As ofDecember 31,2008
|$3.00           |  | 214                   |  | 3 years                                  |  | 214                  
|$5.00           |  | 112,500               |  | 1 years                                  |  | 112,500              
|$8.85           |  | 35,600                |  | 8 years                                  |  | 35,600               
|$11.30          |  | 3,040,259             |  | 6 years                                  |  | 1,963,401            
|$11.35          |  | 4,962,209             |  | 7 years                                  |  | 2,481,105            
|$11.95          |  | 37,500                |  | 8 years                                  |  | 37,500               
|$12.03          |  | 75,000                |  | 9 years                                  |  |                     
|$12.50          |  | 110,000               |  | 8 years                                  |  | 110,000              
|$13.35          |  | 45,000                |  | 8 years                                  |  | 27,000               
|$17.94          |  | 15,000                |  | 7 years                                  |  | 9,000                
|$23.15          |  | 86,450                |  | 7 years                                  |  | 86,450               
|$28.70          |  | 145,000               |  | 6 years                                  |  | 145,000              
|                |  |                       |  |                                          |  |                      
|                |  | 8,664,732             |  |                                          |  | 5,007,770            
|                |  |                       |  |                                          |  |                      

TerreStar Global Ltd. 2007 Share Incentive Plan

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

On July 9, 2007, TerreStar Global granted 1.1 million non-qualified options under the Global Plan, to purchase its common stock to TerreStar Global employees, directors and service providers. One-half of the
options vest each year over two years starting January 1, 2008 and expires on July 8, 2017, unless fully exercised or terminated earlier. As of December 31, 2008, approximately 2.6 million shares remain available to be issued
under the Global Plan.

The fair value of each option award was estimated on the grant date using the Black-Scholes option pricing model.
The risk-free interest rate was based on the daily treasury yield curve rates from the U.S. Treasury, adjusted for continuous compounding. The expected-volatility was estimated using TerreStar Global and peer company historical volatility and
implied volatility. The expected term was estimated using the average of the vesting date and the contractual term of the options.

As
disclosed in our Form 8-K filed April 18, 2008 in connection with the departure of certain executives and their severance agreements, we accelerated the vesting date of approximately 162,500 options granted under the Global Plan which were
initially granted on July 9, 2007. Additionally, the exercise period for these executives options were extended by 12 months.



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The following tables summarize the fair values and weighted average assumptions related to options issued
under the Global Plan.



|                                       |  |             |   |  |                |   |  |                  |  
|-------------------------------------- |  | ----------- | - |  | -------------- | - |  | ---------------- | -
|Grant date                             |  | July 9,2007 |   |  | October 1,2008 |   |  | December 17,2008 |  
|Weighted average grant date fair value |  | $0.29       |   |  | $0.27          |   |  | $0.17            |  
|Weighted average assumptions:          |  |             |   |  |                |   |  |                  |  
|Risk-free interest rate                |  | 4.95        | % |  | 1.96           | % |  | 1.96             | %
|Expected volatility                    |  | 80.0        | % |  | 75.0           | % |  | 75.0             | %
|Expected dividend yield                |  |            |   |  |                |   |  |                 |  
|Expected term (years)                  |  | 5.50        |   |  | 5.50           |   |  | 5.50             |  
|Options granted                        |  | 1,105,000   |   |  | 65,000         |   |  | 480,000          |  

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



|                                 |  |                         |   |  |                                          |      |                          |  
|-------------------------------- |  | ----------------------- | - |  | ---------------------------------------- | ---- | ------------------------ | -
|                                 |  | Options toacquireshares |   |  | Weighted-average exerciseprice per share |      | AggregateIntrinsic Value
|Outstanding at January 1, 2008   |  | 1,105,000               |   |  | $                                        | 0.42 |                          | 
|Granted                          |  | 545,000                 |   |  |                                          | 0.42 |                          | 
|Canceled                         |  | (25,000                 | ) |  |                                          | 0.42 |                          | 
|Exercised                        |  |                        |   |  |                                          |     |                          | 
|                                 |  |                         |   |  |                                          |      |                          |  
|Outstanding at December 31, 2008 |  | 1,625,000               |   |  | $                                        | 0.42 |                          | 
|                                 |  |                         |   |  |                                          |      |                          |  
|Exercisable at December 31, 2008 |  | 740,000                 |   |  | $                                        | 0.42 |                          | 
|                                 |  |                         |   |  |                                          |      |                          |  



|                               |  |                         |   |  |                                       |     
|------------------------------ |  | ----------------------- | - |  | ------------------------------------- | ----
|                               |  | Options toacquireshares |   |  | Weighted-Average GrantDate Fair Value
|Nonvested at January 1, 2008   |  | 1,105,000               |   |  | $                                     | 0.29
|Granted                        |  | 545,000                 |   |  |                                       | 0.18
|Canceled                       |  | (25,000                 | ) |  |                                       | 0.29
|Exercised                      |  |                        |   |  |                                       |    
|Vested                         |  | (740,000                | ) |  |                                       | 0.29
|                               |  |                         |   |  |                                       |     
|Nonvested at December 31, 2008 |  | 885,000                 |   |  | $                                     | 0.22
|                               |  |                         |   |  |                                       |     



|                |  |                       |  |                                          |  |                      
|--------------- |  | --------------------- |  | ---------------------------------------- |  | ---------------------
|                |  | Options Outstanding   |  | Options Exercisable                     
|Exercise Prices |  | As ofDecember 31,2008 |  | WeightedAverageContractual LifeRemaining |  | As ofDecember 31,2008
|$0.42           |  | 1,625,000             |  | 9.10 years                               |  | 740,000              

WarrantsTerreStar Global

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

The fair value of each warrant was
calculated using a Black-Sholes option pricing model. The risk-free rates were developed using Daily Treasury Yield Curve Rates from the U.S. Treasury, adjusted for continuous compounding. The expected volatility was estimated using TerreStar Global
and peer company historical average annual volatility. The July 9, 2007 warrants contain a provision that violates the basic characteristics of plain vanilla options. Specifically, with certain limiting, the warrants are freely
transferable. As the warrants are



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##### Table of Contents

likely to remain outstanding for the entirety of their contractual term, the expected term was determined to equal the contractual term for the July 9,
2007 warrants. As the July 9, 2007 warrants are vested upon issuance, it is expected that none of these shares would be forfeited prior to vesting.

The following table summarizes the fair values and weighted average assumptions related to warrants.



|                                       |  |              |  
|-------------------------------------- |  | ------------ | -
|TerreStar Global                       |  |              |  
|Grant date                             |  | July 9, 2007 |  
|Weighted average grant date fair value |  | $0.28        |  
|Weighted average assumptions:          |  |              |  
|Risk-free interest rate                |  | 5.03         | %
|Expected volatility                    |  | 80.0         | %
|Expected dividend yield                |  |             |  
|Expected term (years)                  |  | 5.00         |  
|Warrants granted                       |  | 553,100      |  

The following table summarizes the TerreStar Global warrants that are outstanding and exercisable
as of December 31, 2008.



|                |  |                       |  |                                          |  |                      
|--------------- |  | --------------------- |  | ---------------------------------------- |  | ---------------------
|                |  | Warrants Outstanding  |  | Exercisable                             
|Exercise Prices |  | As ofDecember 31,2007 |  | WeightedAverageContractual LifeRemaining |  | As ofDecember 31,2008
|$0.42           |  | 553,100               |  | 3.52 years                               |  | 553,100              

Note 11. Income Taxes

The expense (benefit) for income taxes is comprised of:



|                  |  |      |        |   |      |   |        |      |  |   |      
|----------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | -----
|                  |  | 2008 |        |   | 2007 |   |        | 2006
|Current           |  |      |       |   |      |   |       |      |  |   |     
|Federal           |  | $    | (2,231 | ) |      | $ | (2,248 | )    |  | $ | 4,535
|State             |  |      |       |   |      |   |       |      |  |   |     
|                  |  |      |       
|Deferred          |  |      |       |   |      |   |       |      |  |   |     
|Federal           |  |      |       |   |      |   |       |      |  |   |     
|State             |  |      |       |   |      |   |       |      |  |   |     
|Total tax expense |  | $    | (2,231 | ) |      | $ | (2,248 | )    |  | $ | 4,535



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##### Table of Contents

The components of net deferred tax assets and net deferred tax liabilities are as follows:



|                                                     |  |                |          |   |      |   |          |  
|---------------------------------------------------- |  | -------------- | -------- | - | ---- | - | -------- | -
|                                                     |  | December 31,   |         
|                                                     |  | 2008           |          |   | 2007 |  
|                                                     |  | (in thousands) |         
|Deferred tax assets, net:                            |  |                |          |   |      |   |          |  
|Net operating loss and AMT credit carryforwards      |  | $              | 526,151  |   |      | $ | 430,134  |  
|                                                     |  |                |          |   |      |   |          |  
|Deferred taxes related to temporary differences:     |  |                |          |   |      |   |          |  
|Share based compensation                             |  |                | 17,721   |   |      |   | 21,355   |  
|SkyTerra investment                                  |  |                |         |   |      |   | 1,430    |  
|TerreStar capitalized expenses                       |  |                | 98,876   |   |      |   | 61,587   |  
|High Yield Debt Interest                             |  |                | 44,759   |   |      |   |         |  
|Other                                                |  |                | 2,132    |   |      |   | 12,471   |  
|                                                     |  |                |          |   |      |   |          |  
|Total deferred tax assets                            |  |                | 689,639  |   |      |   | 526,977  |  
|                                                     |  |                |          |   |      |   |          |  
|Less valuation allowance                             |  |                | (513,861 | ) |      |   | (441,369 | )
|                                                     |  |                |          |   |      |   |          |  
|Deferred tax assets, net of valuation allowance      |  |                | 175,778  |   |      |   | 85,608   |  
|                                                     |  |               
|Deferred tax liabilities:                            |  |                |          |   |      |   |          |  
|Tangible asset basis, lives and depreciation methods |  |                | 50,377   |   |      |   | 3,385    |  
|TerreStaracquisition intangibles                    |  |                | 75,354   |   |      |   | 82,223   |  
|Intangible Spectrum 1.4GHz                           |  |                | 13,039   |   |      |   |         |  
|Debt Discount                                        |  |                | 50,047   |   |      |   |         |  
|                                                     |  |                |          |   |      |   |          |  
|Total Deferred tax liability                         |  |                | 188,817  |   |      |   | 85,608   |  
|                                                     |  |                |          |   |      |   |          |  
|Total Net Deferred liability                         |  | $              | (13,039  | ) |      | $ |         |  
|                                                     |  |                |          |   |      |   |          |  

The ultimate realization of deferred tax assets is dependant upon the generation of future taxable
income during the periods in which those temporary differences become deductible. A benefit was recorded for the year ended December 31, 2008, due to the fact that the estimated tax expense accrued in 2007 ultimately proved to be lower when we
filed our final 2007 Income Tax Returns. In addition, we realized the deferred tax asset related to AMT credits as a result of anticipated capital loss carrybacks. We recorded a deferred tax liability of $13,039 related to indefinite lived
intangible spectrum assets acquired as part of the financing transactions entered into February 2008 with Harbinger and EchoStar. The deferred tax liability relates to the difference between the book carrying value of spectrum acquired in the
transaction and the estimate tax basis on the date of acquisition. As the liability was recorded in accounting for the transaction, it does not affect deferred income tax expense. Further, it does not offset our deferred tax asset because it has an
indefinite life. Our net deferred tax assets, excluding the spectrum deferred tax liability, were offset by a full valuation allowance because it is not considered more likely than not that these tax benefits will be realized.

As of December 31, 2008 and 2007, we had estimated net operating loss carryforwards (NOLs) of $1.3 billion and $1.1 billion,
respectively. In 2002, due to the debt restructuring and reorganization, and also in 2004 and 2006, we triggered a change of control, which limits the availability and utilization of the NOLs. Our NOLs expire between 2013 and 2028. We realized a
capital loss of $198.9 million in 2008. The capital loss recorded in 2008 will be carried back to offset capital gains recorded in 2006. The remaining capital loss carryforward will expire in 2013.

The aggregate provisions for income taxes for the periods below differs for both continuing and discontinued operations from the amount computed by
applying the Federal statutory rate due to the following:



|                                                  |  |       |   |  |       |   |  |       |   
|------------------------------------------------- |  | ----- | - |  | ----- | - |  | ----- | --
|                                                  |  | 2008  |   |  | 2007  |   |  | 2006  |   
|Statutory Federal income tax rate                 |  | 35.0  | % |  | 35.0  | % |  | 35.0  | % 
|State and local taxes, net of Federal tax benefit |  |      |   |  |      |   |  | 6.2   |   
|Permanent Differences                             |  | 6.1   |   |  | (5.4  | ) |  |      |   
|Valuation Allowance                               |  | (36.8 | ) |  | (29.9 | ) |  | (41.7 | ) 
|Other                                             |  | (3.5  | ) |  | 1.2   |   |  |      |   
|                                                  |  |       |   |  |       |   |  |       |   
|Effective income tax rate                         |  | 0.8   | % |  | 0.9   | % |  | (0.5  | )%
|                                                  |  |       |   |  |       |   |  |       |   



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##### Table of Contents

On January 1, 2007, we adopted the provisions of FASB Interpretation No. 48 (FIN
48), Accounting for Uncertainties in Income Taxes, which applies to all tax positions related to income taxes subject to SFAS No. 109, Accounting for Income Taxes. FIN 48
requires a new evaluation process for all tax positions taken. If the probability for sustaining a tax position is greater than 50%, then the tax position is warranted and the recognition should be the highest amount which would be expected to be
realized upon settlement. The adoption of FIN 48 had no material impact. We accrue interest and penalties related to unrecognized tax benefits in its provision for income taxes.

We and our subsidiaries filed income tax returns in the U.S. and in various state, local, and foreign jurisdictions. Due to our net operating loss
carryforward position in the U.S., its tax years from 1999 forward may be adjusted by the Internal Revenue Service even though the general three year statute of limitations has expired for certain years. We are subject to various sate and local tax
statutes of limitation.

A change in unrecognized tax benefits under FIN 48 is shown in the table below (in thousands).



|                                                                 |  |      |         |   |      |   |       
|---------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------
|                                                                 |  | 2008 |         |   | 2007
|Opening balance                                                  |  | $    | 12,100  |   |      | $ |      
|Increase (decrease) related to positions taken in current period |  |      | (12,100 | ) |      |   | 12,100
|Increase (decrease) related to settlement with tax authorities   |  |      |        |   |      |   |      
|Reductions related to expiration of statue of limitations        |  |      |        |   |      |   |      
|Unrecognized tax benefits at December 31, 2008 and 2007          |  | $    |        |   |      | $ | 12,100

The change in unrecognized tax benefits resulted in a decrease to our alternative minimum tax
liability in 2008. We do not expect a significant change in the FIN 48 liability in the next 12 months.

Note 12. Charges Related to Cost Reduction
Actions

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

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



|                                            |  |                |         |  
|------------------------------------------- |  | -------------- | ------- | -
|                                            |  | (in thousands) |        
|Beginning Liability, Jan 1, 2008            |  | $              | 2,332   |  
|                                            | 
|Employee termination benefit costs          |  |                | 6,490   |  
|Contract termination costs                  |  |                | 7,945   |  
|Reduction in deferred rent                  |  |                | (1,018  | )
|Lease exit costs                            |  |                | 3,311   |  
|                                            |  |                |         |  
|Total incurred expenses                     |  |                | 16,728  |  
|                                            | 
|Cash expenditures through December 31, 2008 |  |                | (14,113 | )
|                                            |  |                |         |  
|Ending Liability, December 31, 2008(1)      |  | $              | 4,947   |  
|                                            |  |                |         |  



|(1) | This total liability is included in current and long term deferred rent of $1.4 million and $2.9 million, respectively,
and accrued termination costs in the amount of $0.7 million.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Note 13. Commitments and Contingencies

We lease office space, equipment, collocation, cell sites and office furniture under non-cancelable operating and capital leases expiring through 2018.

As of December 31, 2008, TerreStar Corporation had $408.5 million of its Series A and B preferred stock outstanding. If not converted
or repaid, the entire preferred stock amount will be due on April 15, 2010. On April 15, 2007, TerreStar Corporation paid the remaining portion of the dividends that were required to be placed in escrow. Additional dividend payments after
April 15, 2007, will be due bi-annually in April and October, payable at TerreStar Corporations option in cash at a rate of 5.25% per annum or in common stock at a rate of 6.25% per annum through April 15, 2010.
Currently, we are unable to pay the Series A dividend in common stock due to our ongoing litigation with certain investors. We anticipate paying the Series A dividend in cash and the Series B in common stock until such time that the Series A
litigation is resolved and we satisfy the conditions required to pay the Series A dividend in common stock.

Additionally, we had the
following contractual commitments as of December 31, 2008.



|                                           |  |                |           |        |   |         |  |         |           |        |   |           |  |   |       
|------------------------------------------ |  | -------------- | --------- | ------ | - | ------- |  | ------- | --------- | ------ | - | --------- |  | - | ------
|                                           |  | TOTAL          |           | < 1 yr |   | 1-3 yrs |  | 4-5 yrs |           | 5+ yrs
|                                           |  | (in thousands)
|TerreStar Networks Satellites              |  | $              | 310,640   |        | $ | 120,356 |  | $       | 97,767    |        | $ | 7,974     |  | $ | 84,543
|Leases                                     |  |                | 15,319    |        |   | 6,261   |  |         | 8,820     |        |   | 190       |  |   | 48    
|Network and Capital Equipment and Services |  |                | 383,696   |        |   | 21,556  |  |         | 362,140   |        |   |          |  |   |      
|Preferred Stock Obligations                |  |                | 440,669   |        |   | 21,446  |  |         | 419,223   |        |   |          |  |   |      
|Debt Obligations                           |  |                | 1,693,653 |        |   |        |  |         | 247,201   |        |   | 1,446,452 |  |   |      
|                                           |  |                |           |        |   |         |  |         |           |        |   |           |  |   |       
|                                           |  | $              | 2,843,977 |        | $ | 169,619 |  | $       | 1,135,151 |        | $ | 1,454,616 |  | $ | 84,591

Litigation Adverse to Highland Capital Management and James Dondero

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

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

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



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##### Table of Contents

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

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

Sprint Nextel Litigation

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

*     *     *

From time to time, we are
involved in legal proceedings in the ordinary course of our business operations. Although there can be no assurance as to the outcome or effect of any legal proceedings to which we are a party, we do not believe, based on currently available
information, that the ultimate liabilities, if any, arising from any such legal proceedings not otherwise disclosed would have a material adverse impact on its business, financial condition, results of operations or cash flows.

Note 14. Fair Value of Financial Instruments

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

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

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



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##### Table of Contents

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



|                                                                          |  |                         |         |                         |   |                 |  |            |         |  |   |        
|------------------------------------------------------------------------- |  | ----------------------- | ------- | ----------------------- | - | --------------- |  | ---------- | ------- |  | - | -------
|                                                                          |  | As of December 31, 2008 |         | As of December 31, 2007
|(in thousands)                                                            |  | Carrying Amount         |         | Fair Value              |   | Carrying Amount |  | Fair Value
|Assets:                                                                   |  |                         |         |                         |   |                 |  |            |         |  |   |        
|Restricted Cash                                                           |  | $                       | 1,404   |                         | $ | 1,404           |  | $          | 5,462   |  | $ | 5,462  
|Investment in SkyTerra                                                    |  |                         |        |                         |   |                |  |            | 325,308 |  |   | 301,467
|Debt:                                                                     |  |                         |         |                         |   |                 |  |            |         |  |   |        
|TerreStar Notes and accrued interest, thereon                             |  | $                       | 671,884 |                         | $ | 333,145         |  | $          | 567,955 |  | $ | 567,955
|TerreStar Exchangeable Notes and accrued interest, thereon                |  |                         | 63,176  |                         |   | 30,757          |  |            |        |  |   |       
|TerreStar-2 Purchase Money Credit Agreement and accrued interest, thereon |  |                         | 36,755  |                         |   | 27,537          |  |            |        |  |   |       
|Preferred Stock:                                                          |  |                         |         |                         |   |                 |  |            |         |  |   |        
|Series A Cumulative Convertible Preferred Stock                           |  | $                       | 90,000  |                         | $ | 74,458          |  | $          | 90,000  |  | $ | 90,000 
|Series B Cumulative Convertible Preferred Stock                           |  | $                       | 318,500 |                         | $ | 215,271         |  | $          | 318,500 |  | $ | 318,500

Note 15. Employee Benefits

Defined Contribution Plan

On March 7, 2007, the Board of Directors approved termination of the
Motient Corporation 401(k) Plan. Concurrently, the Board approved the formation of the TerreStar Networks Inc. 401(k) Savings Plan as a participating employer. The Motient Corporation 401(k) Savings Plan provided for (i) a TerreStar Networks
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.

The TerreStar Networks 401 (k) Plan provides for: (i) TerreStar Networks match of employee contributions at a rate of $1 for every $1 an
employees contribution not to exceed 4% of an employees eligible compensation and (ii) the option to have plan benefits distributed in the form of installment payments. The TerreStar Network match of employee contributions is
100 % vested to the employee.

TerreStar Networks matching expense related to continuing operations employees was approximately
$677,000, $700,000 and $30,000 for 2008, 2007 and 2006, respectively.

Note 16. Related Party Transactions

ATC Technologies, LLCATC Technologies is a subsidiary of MSV which is owned by SkyTerra. We sold our remaining interest in SkyTerra in September
2008.

Capital & Technology Advisors (CTA)a consulting and private advisory firm specializing in the technology
and telecommunications sectors owned by Jared Abbruzzese, who previously served on the Board of Directors of TerreStar Networks and TerreStar Global. The agreement with Mr. Abbruzzese expired November 30, 2006 and was not renewed.

For the year ended December 31, 2008 and 2007, we recorded costs of $0.6 million and $0.6 million, to related parties. All of those
costs were paid to ATC Technologies for intellectual property related services.



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##### Table of Contents

For the year ended December 31, 2006, we recorded costs of $2.8 million to related parties for
service-related obligations. Of that amount, approximately $1.3 million was paid to ATC Technologies for intellectual property related services. Also in 2006, $1.1 million in cash was paid to CTA. All of the amounts paid to CTA in 2006 are presented
within discontinued operations. We also incurred costs of $0.4 million to CTAs founder, Jared Abbruzzese, for his service as Chairman of the Board of TerreStar Corporation.

Note 17. Supplemental Cash Flows Information

Supplemental cash flow information for the years ended
December 31, 2008, 2007 and 2006 is presented in the table below.



|                                                                              |  |                |         |      |   |         |  |   |         |  
|----------------------------------------------------------------------------- |  | -------------- | ------- | ---- | - | ------- |  | - | ------- | -
|                                                                              |  | 2008           |         | 2007 |   | 2006    | 
|                                                                              |  | (in thousands) |        
|Non-cash investing and financing activities                                   |  |                |         |      |   |         |  |   |         |  
|Accrued property and equipment                                                |  | $              | 1,303   |      | $ | 8,554   |  | $ | 12,462  |  
|Interest capitalized on satellites and terrestrial network under construction |  |                | 60,618  |      |   | 27,652  |  |   | 336     |  
|Assets acquired under capital lease                                           |  |                |        |      |   | 193     |  |   |        |  
|Acquisition of intangible assets funded by issuance of common stock           |  |                | 164,175 |      |   | 89,621  |  |   | 57,919  |  
|Investment in TerreStar Networks intangible assets                            |  |                |        |      |   |        |  |   | (48,539 | )
|Acquisition of SkyTerra shares through exchange of MSV                        |  |                |        |      |   | 177,618 |  |   | 290,181 |  
|Deferred financing fees accrued                                               |  |                |        |      |   | 916     |  |   |        |  
|Accretion of issuance costs on Series A and Series B Preferred                |  |                | 4,553   |      |   | 4,542   |  |   | 4,029   |  
|Paid-in-kind interest                                                         |  |                | 99,978  |      |   | 37,708  |  |   |        |  
|Stock dividend to Series B Preferred Shareholders                             |  |                | 9,953   |      |   | 9,953   |  |   |        |  
|Dividend liability not paid                                                   |  |                | 3,900   |      |   | 193     |  |   | 2,181   |  
|Dividend payableSkyTerra Investment                                          |  |                |        |      |   |        |  |   | 254,490 |  
|Exercise of common stock warrants                                             |  |                |        |      |   |        |  |   | 820     |  
|Investment in consolidated subsidiary                                         |  |                |        |      |   |        |  |   | 66,376  |  
|Acquisition of Minority interest funded by issuance of common stock           |  |                | 1,573   |      |   | 33,801  |  |   | 13,474  |  
|                                                                              |  |                |        
|Supplemental Cash Flows Information                                           |  |                |         |      |   |         |  |   |         |  
|Interest paid                                                                 |  | $              |        |      | $ | 7,034   |  | $ |        |  
|Income taxes paid                                                             |  | $              |        |      | $ | 5,713   |  | $ |        |  

Note 18. Quarterly and Other Financial Data (unaudited)

The following tables present selected quarterly financial data for 2008 and 2007. Because certain of the data set forth in the following tables has been
restated from amounts previously reported in our Quarterly Reports on Form 10-Q for the applicable periods, the following tables and the accompanying footnotes reconcile the quarterly information presented with that previously reported.



|                                                             |              |                                              |          |               |  |   |              |   |  |               |         |   |  |   |         |  
|------------------------------------------------------------ | ------------ | -------------------------------------------- | -------- | ------------- |  | - | ------------ | - |  | ------------- | ------- | - |  | - | ------- | -
|                                                             |              | 2008                                         |         
|                                                             | FirstQuarter |                                              |          | SecondQuarter |  |   | ThirdQuarter |   |  | FourthQuarter |        
|                                                             |              | (In thousands, except for per share amounts) |         
|Operating expenses                                           |              | $                                            | 67,194   |               |  | $ | 57,280       |   |  | $             | 31,876  |   |  | $ | 34,993  |  
|Net loss from continuing operations                          |              |                                              | (94,574  | )             |  |   | (66,715      | ) |  |               | (64,220 | ) |  |   | (52,183 | )
|Net income (loss)                                            |              |                                              | (94,574  | )             |  |   | (66,715      | ) |  |               | (64,220 | ) |  |   | (52,183 | )
|Net loss available to common stockholders                    |              |                                              | (101,499 | )             |  |   | (73,640      | ) |  |               | (71,219 | ) |  |   | (55,026 | )
|Basic and Diluted loss per common share(1)                   |              | $                                            | (1.14    | )             |  | $ | (0.75        | ) |  | $             | (0.59   | ) |  | $ | (0.45   | )
|Basic and Diluted weighted-average common shares outstanding |              |                                              | 88,698   |               |  |   | 96,676       |   |  |               | 121,051 |   |  |   | 121,051 |  



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##### Table of Contents

|                                                             |  |                                              |         |   |               |   |         |              |  |   |               |   |  |   |         |  
|------------------------------------------------------------ |  | -------------------------------------------- | ------- | - | ------------- | - | ------- | ------------ |  | - | ------------- | - |  | - | ------- | -
|                                                             |  | 2007                                         |        
|                                                             |  | FirstQuarter                                 |         |   | SecondQuarter |   |         | ThirdQuarter |  |   | FourthQuarter |  
|                                                             |  | (In thousands, except for per share amounts) |        
|Operating expenses                                           |  | $                                            | 38,962  |   |               | $ | 50,298  |              |  | $ | 34,557        |   |  | $ | 58,896  |  
|Net loss from continuing operations                          |  |                                              | (67,590 | ) |               |   | (56,168 | )            |  |   | (54,135       | ) |  |   | (61,248 | )
|Net income (loss)                                            |  |                                              | (67,590 | ) |               |   | (56,168 | )            |  |   | (54,135       | ) |  |   | (61,248 | )
|Net loss available to common stockholders                    |  |                                              | (74,476 | ) |               |   | (63,155 | )            |  |   | (61,224       | ) |  |   | (68,060 | )
|Basic and Diluted loss per common share(1)                   |  | $                                            | (1.01   | ) |               | $ | (0.75   | )            |  | $ | (0.71         | ) |  | $ | (0.78   | )
|Basic and Diluted weighted-average common shares outstanding |  |                                              | 73,622  |   |               |   | 84,581  |              |  |   | 86,128        |   |  |   | 87,263  |  



|(1) | Loss per share calculations for each of the quarters in 2008 and 2007 is 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 common share amount due to rounding.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Note 19. Schedule IIValuation and Qualifying Accounts

SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS

Years Ended December 31, 2006, 2007 and 2008

(in millions)



|                                        |  |                              |     |                             |   |            |  |                        |     |  |   |    
|--------------------------------------- |  | ---------------------------- | --- | --------------------------- | - | ---------- |  | ---------------------- | --- |  | - | ---
|Description                             |  | Balance atBeginningof Period |     | Charged toCosts andExpenses |   | Deductions |  | Balance atEnd ofPeriod
|Year Ended December 31, 2006            |  |                              |     |                             |   |            |  |                        |     |  |   |    
|Allowance for doubtful accounts         |  | $                            |    |                             | $ |           |  | $                      |    |  | $ |   
|Valuation allowance deferred tax assets |  | $                            | 194 |                             | $ |           |  | $                      | 191 |  | $ | 385
|                                        |  |                              |     |                             |   |            |  |                        |     |  |   |    
|Year Ended December 31, 2007            |  |                              |     |                             |   |            |  |                        |     |  |   |    
|Allowance for doubtful accounts         |  | $                            |    |                             | $ |           |  | $                      |    |  | $ |   
|Valuation allowance deferred tax assets |  | $                            | 385 |                             | $ |           |  | $                      | 56  |  | $ | 441
|                                        |  |                              |     |                             |   |            |  |                        |     |  |   |    
|Year Ended December 31, 2008            |  |                              |     |                             |   |            |  |                        |     |  |   |    
|Allowance for doubtful accounts         |  | $                            |    |                             | $ | 1          |  | $                      |    |  | $ | 1  
|Valuation allowance deferred tax assets |  | $                            | 441 |                             | $ |           |  | $                      | 73  |  | $ | 514
|                                        |  |                              |     |                             |   |            |  |                        |     |  |   |    



F-41