##### Table of Contents





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, 2009

OR



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

For the transition period from
                     to

Commission file number: 001-33546





TERRESTAR CORPORATION

(Exact name of registrant as
specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 93-0976127                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|12010 Sunset Hills Road, 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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by check mark 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, 2009 (the last business day of
the most recently completed second quarter) was approximately $86.7 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 139,726,285 shares of TerreStar Corporation Common Stock outstanding as of March 10, 2010.

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

TABLE OF CONTENTS



|                                                     |  |                                                                                                              |  |   
|---------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------ |  | --
|PART I                                               |  |                                                                                                             
|                                                     | 
|Cautionary Note Regarding Forward-Looking Statements |  |                                                                                                             
|                                                     |  |                                                                                                             
|Item 1.                                              |  | Business                                                                                                     |  | 1 
|Item 1A.                                             |  | Risk Factors                                                                                                 |  | 11
|Item 1B.                                             |  | Unresolved Staff Comments                                                                                    |  | 27
|Item 2.                                              |  | Properties                                                                                                   |  | 27
|Item 3.                                              |  | Legal Proceedings                                                                                            |  | 28
|Item 4.                                              |  | Submission of Matters to a Vote of Security Holders                                                          |  | 30
|                                                     | 
|PART II                                              |  |                                                                                                             
|                                                     |  |                                                                                                             
|Item 5.                                              |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 31
|Item 6.                                              |  | Selected Financial Data                                                                                      |  | 33
|Item 7.                                              |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 34
|Item 7A.                                             |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 47
|Item 8.                                              |  | Financial Statements and Supplementary Data                                                                  |  | 47
|Item 9.                                              |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 47
|Item 9A.                                             |  | Controls and Procedures                                                                                      |  | 48
|Item 9B.                                             |  | Other Information                                                                                            |  | 51
|                                                     | 
|PART III                                             |  |                                                                                                             
|                                                     |  |                                                                                                             
|Item 10.                                             |  | Directors, Executive Officers and Corporate Governance                                                       |  | 52
|Item 11.                                             |  | Executive Compensation                                                                                       |  | 52
|Item 12.                                             |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters               |  | 52
|Item 13.                                             |  | Certain Relationships and Related Transactions, and Director Independence                                    |  | 52
|Item 14.                                             |  | Principal Accountant Fees and Services                                                                       |  | 52
|                                                     | 
|PART IV                                              |  |                                                                                                             
|                                                     |  |                                                                                                             
|Item 15.                                             |  | Exhibits and Financial Statement Schedules                                                                   |  | 53
|                                                     |  | Signatures                                                                                                   |  | 60



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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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##### Table of Contents

PART I



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

General

Business Overview

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

TerreStar Networks, in cooperation with its Canadian partner, 4491165 Canada Inc, a
majority-owned subsidiary of Trio 2 General Partnership (Trio), plans to launch an innovative wireless communications system to provide mobile coverage throughout the United States and Canada using integrated satellite-terrestrial smartphones. This
system build out will be based on an integrated satellite and ground-based technology intended to provide communication service in most hard-to-reach areas and will provide a nationwide interoperable, survivable and critical communications
infrastructure. We intend to provide multiple communications applications, including voice, data and video services.

As of
December 31, 2009, we had three wholly-owned subsidiaries, MVH Holdings Inc., Motient Holdings Inc., and TerreStar Holdings Inc. Motient Ventures Holding Inc., a wholly-owned subsidiary of MVH Holdings Inc., directly holds approximately 89.0%
and 86.5% interest in TerreStar Networks and TerreStar Global, respectively.

Description of the Business

TerreStar Networks Inc.

TerreStar Networks is our principal operating subsidiary. TerreStar Networks, in cooperation with its Canadian partner, 4491165 Canada Inc, a majority-owned subsidiary of Trio 2 General Partnership (Trio), plans to launch an
innovative wireless communications system to provide mobile coverage throughout the United States and Canada using integrated satellite-terrestrial smartphones.

We successfully launched our first satellite TerreStar-1 on July 1, 2009 and placed it into its assigned orbital slot in the geosynchronous arc, marking a significant milestone in
offering the mobile satellite service (MSS) using frequencies in the 2GHz band. When our MSS service is offered in conjunction with ancillary terrestrial component (ATC) service, we will provide an integrated satellite and
terrestrial wireless communications network. The network will also allow a user to utilize a mobile device that can communicate with a traditional land-based wireless network when in range of that network, but communicate with TerreStar-1 when not
in range of such a land-based network or when such network is unavailable.

Our ability to offer MSS/ATC services depends on
TerreStar Networks ability to maintain certain regulatory authorizations allowing it to provide MSS/ATC in the S-band. We also 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.

TerreStar Networks, initially created as a subsidiary of SkyTerra, entered into an
agreement with SkyTerras wholly-owned subsidiary, ATC Technologies, LLC (ATC Technologies) pursuant to which TerreStar Networks has a perpetual, royalty-free license to utilize ATC Technologies patent portfolio in the S-band,
including those patents related to ATC, which allows 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.



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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. On January 13, 2010, TerreStar Networks was granted authority by the FCC to operate dual-mode
mobile terminals that can be used to communicate either via TerreStars geosynchronous-orbit MSS satellite or ancillary terrestrial component base stations. ATC base station operations were also authorized. These ATC authorizations provide 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. This may
be achieved through a strategic partnership with one or more other communications providers.

In September 2009, we
entered into a Mobile Satellite Services and Support Agreement with AT&T Mobility under which AT&T will offer certain of our satellite communications services initially to its government and enterprise customers. 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.

As of December 31, 2009, we owned approximately 89.0% of the
outstanding shares of TerreStar Networks and have included the financial results of TerreStar Networks for the purpose of consolidated financial statements.

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 our network has such transparency and
will be able to support devices and service pricing that will make it attractive to a broad base of customers.

Our network
consists of three major 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.TerreStar-1 was successfully launched on July 1, 2009 and certified as operational on July 20, 2009. On August 27, 2009, we announced the completion of in-orbit testing. TerreStar-1 is the largest, most
powerful commercial communications satellite ever placed into service. With its 18 meter reflector, powerful S-band feed array, and next generation ground based beam forming (GBBF) technology, TerreStar-1 is capable of generating over
500 spot beams over North America and has a useful life of over 15 years.



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TerreStar-2. Our ground spare, TerreStar-2, is identical to the TerreStar-1
satellite. TerreStar-2 is currently under construction at SpaceSystems/Loral (Loral) and is approximately 85% complete. Completion is currently scheduled for October 2011 and we continue to work with Loral to ensure that completion of
the construction of TerreStar-2 is closely synchronized with our needs and resources.

Other components of our space
segment. In 2005, we entered into an agreement with Hughes Network Systems, LLC (Hughes) for the design, development and delivery of a satellite beam access system (SBAS) that includes GBBF and two satellite earth
stations to be located in Las Vegas, Nevada and Allan Park, Ontario, Canada (the SBAS Agreement). In December 2006, we entered into a 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 that 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.

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.

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 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.

Our Relationship with TerreStar Canada and 4491165 Canada

TerreStar Canada Holdings owns 80% of the voting
equity of TerreStar Canada, which in turn holds the Industry Canada approvals needed to operate TerreStar-1 for the purposes of providing mobile satellite services in Canada. We maintain our existing 20% of the voting equity of TerreStar
Canada. TerreStar Canada holds legal title to the TerreStar-1 satellite and under the terms of an amended and restated Indefeasible Right of Use Agreement dated August 11, 2009 between TerreStar Networks and TerreStar Canada, TerreStar
Networks has been granted a right to use ninety percent of the capacity, on the TerreStar-1 satellite.

In
July 2009, Trio through 4491165 Canada Inc., a then wholly-owned subsidiary of Trio, completed its acquisition of a 662/3% voting equity stake in TerreStar Canada Holdings previously held by 4371585 Canada Inc., a wholly-owned subsidiary of BCE Inc. We retain our existing
331/3% voting equity ownership in TerreStar Canada
Holdings.



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Our Relationship with 4491190 Canada

4491190 Canada Inc. (RetailCo) is a Canadian registered entity established for the purpose of providing commercial MSS/ATC
services in Canada using the TerreStar-1 satellite and 2GHz terrestrial spectrum. On August 11, 2009, TerreStar Networks and 4491181 Canada Inc. (4491181 Canada) entered into a Shareholders Agreement pursuant to which
TerreStar Networks became the 20% holder of RetailCo Class A stock and 100% owner of RetailCo non-voting Class B stock. 4491181 Canada is under common ownership with 4491165 Canada. The Shareholders agreement grants TerreStar Networks
some limited minority shareholder rights and the ability to nominate one of five directors. In the event of a dilutive event including issuing a debt instrument, a share issuance or a share transfer or sale, TerreStar Networks has various options to
maintain its relative percentage ownership amounts. Such options include pre-emptive rights, right of first offer, co-sale, and drag along.

RetailCo has entered a Wholesale Satellite Capacity Agreement with TerreStar Canada whereby RetailCo has the right to use up to 10% of the capacity of TerreStar-1 on a per minute/per megabyte basis.
RetailCo intends to enter into various agreements to allow for the use of TerreStar Networks handsets in Canada and for the sale of end user devices in the Canadian market.

RetailCo has entered into a Rights and Services agreement under which it is expected to procure some network and technical services from
TerreStar Networks to facilitate the development and integration of its network with TerreStar Canada and TerreStar Networks.

TerreStar
Global Ltd.

TerreStar Global was initially formed in 2005 as a wholly-owned subsidiary of TerreStar Networks. We have
consolidated the financial results of TerreStar Global since its inception. In late 2006, TerreStar Corporation became the indirect majority holder of TerreStar Global. As of December 31, 2009, we owned approximately 86.5% 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.

While TerreStar Europe was not awarded a 2 GHz MSS S-band spectrum authorization in the recent European Commission proceeding, TerreStar
Global continues to explore ways in which it can participate in the European market.

TerreStar Holdings Inc.

TerreStar Holdings was formed in September 2009 as a wholly-owned subsidiary of TerreStar Corporation. TerreStar 1.4 Holdings LLC, a Delaware
limited liability company and wholly-owned subsidiary of TerreStar Holdings, holds the FCC licenses for certain 1.4GHz terrestrial spectrum and has entered into a lease of that spectrum with an entity controlled by Harbinger. At December 31,
2009, TerreStar Corporations consolidated financial statements include TerreStar Holdings and its wholly-owned subsidiary TerreStar 1.4 Holdings LLC.

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 than we intend to provide.



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Current Year and other Recent Developments

Our first satellite was launched and is operational.

In July 2009, our TerreStar-1 satellite was successfully launched, reaching its assigned orbital slot, and its 18 meter S-band reflector has been successfully deployed. We have completed in-orbit testing,
and on February 22, 2010 we announced that the initial on-orbit testing phase of the ground based beam forming system was complete.

We received FCC approval for ATC.

On January 13, 2010, the FCC granted us authority to integrate
terrestrial use of our 20 MHz S-band spectrum into our next generation mobile wireless network. This approval was a critical step in our ability to be able to operate a combined satellite and terrestrial network.

We have a new Canadian joint venture partner.

In August 2009, the Trio 2 General Partnership purchased the 66 2/3% voting equity stake in TerreStar Canada Holdings previously held by a wholly-owned subsidiary of BCE, while we retained the remaining
331/3% voting equity ownership. The Trio 2 General
Partnership 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 TerreStars Board of Directors and a member of the Nominating Committee.

TerreStar Canada Holdings owns 80% of the voting equity of TerreStar Canada, which in turn holds title to the
TerreStar-1 satellite, but which has granted us a right to use capacity on the TerreStar-1 satellite under an Indefeasible Right of Use Agreement. We own the remaining 20% of the voting equity of TerreStar Canada. TerreStar Canada also holds the
Industry Canada approvals for the launch and operation of TerreStar-1 for purposes of providing mobile satellite services in Canada. We have entered into arrangements with Trio or its affiliates to carry on the business of developing and deploying
integrated mobile satellite and terrestrial services in Canada.

We entered into additional agreements regarding our terrestrial network
and components.

Infineon Technologies software-defined-radio chipset agreement. In March 2009, we entered into
an agreement with Infineon Technologies for the design and development of a multi-standard mobile platform based on Infineons innovative software-defined-radio technology. Infineons chipset technology will enable satellite-terrestrial
handsets to operate with multiple cellular and satellite-based communications technologies including GSM, GPRS, EDGE, WCDMA, HSDPA, HSUPA and GMR-2G/3G. The Infineon Agreement also contemplates that we could share the cost of the Infineon
technology with additional operators who would bear their proportionate share of the costs of the total contract price. SkyTerra also entered into the Infineon Agreement with us, which should reduce our share of the development and software
costs under the Infineon Agreement to approximately $21.7 million. The agreement also allows us to add up to two additional operators to further reduce the cost per operator.

GMR1-3G technology development agreement with Hughes. In conjunction with the Infineon Agreement, also in March 2009, we entered
into an agreement with Hughes for additional software development work with respect to a satellite base subsystem Hughes was already developing for us based on the GMR1-3G technology. Our agreements with Hughes now contemplate delivery of the full
satellite base subsystem development required with respect to the GMR1-3G air interface to be included in connection with the Infineon software-defined-radio technology. SkyTerra also entered into the GMR1-3G software components agreement with
Hughes, which should reduce our share of the development and software costs incurred under the GMR1-3G software components agreement to approximately $8 million.



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Both the Infineon Agreement and the Hughes GMR1-3G software components agreement contain
provisions for the recovery of certain contract costs through royalties and discounts, and potentially more than half of the costs we will incur may be subject to later reimbursement.

Technology development agreement with Alcatel-Lucent. As previously reported, we entered into a technology development agreement with
Qualcomm in December 2008 for the development of a satellite air-interface to be included in certain of its device chipsets. In March 2009, we entered into an agreement with Alcatel-Lucent to develop a production satellite base station subsystem
designed to work with the chipsets produced under the Qualcomm Agreement. The Alcatel-Lucent Agreement contemplates that other operators, including SkyTerra, may share in the non-recurring expenses. Our portion of the development and software costs
under the Alcatel-Lucent Agreement is approximately $11.1 million dollars.

AT&T has entered into a marketing agreement with us.

In September 2009, we entered into a Mobile Satellite Services and Support Agreement with AT&T Mobility under which
AT&T will offer certain of our satellite communications services initially to its government and enterprise customers.

We have leased
our 1.4GHz terrestrial spectrum to Harbinger.

In September 2009, we entered into a Spectrum Manager Lease Agreement
with an affiliate of Harbinger Capital Partners Master Fund I, Ltd. under which the Harbinger affiliate is leasing our rights to use certain 1.4GHz terrestrial spectrum. The lease has an initial term through April 2017, renewable at the
lessees option for two additional terms of ten years each subject to FCC renewal of the licenses. The lease payments are initially $1 million per month and will increase to $2 million per month no later than July 2010, and could increase
earlier depending upon the satisfaction of certain conditions. Under certain conditions the lessee has an option, but not the obligation, to purchase the licenses, subject to the approval of our board. The lessee also has a right of first refusal to
match the price (less credit for certain amounts paid under the agreement) in any potential transfer of the licenses to a third party.

In January 2010, in exchange for a $30 million prepayment of amounts due under the lease, we entered into further agreements with Harbinger. We agreed to negotiate with Harbinger, on an exclusive basis, for a period of 90 days towards an
agreement under which our S-band spectrum would be pooled with other spectrum to provide mobile communications services. As part of this exclusivity agreement, we have agreed that we would not enter into any agreement relating to the S-band spectrum
other than with Harbinger, nor grant any third party rights with respect to the S-band spectrum that would interfere with use of the S-band spectrum by Harbinger or limit our ability to enter into a transaction with Harbinger regarding the S-band
spectrum.

We also have agreed that any remaining unamortized portion of the $30 million prepayment that would not otherwise
have been paid under the lease will be refunded by us under certain circumstances, including termination or breach by us of the lease, termination or breach by us of the exclusivity agreement or if we cannot obtain consents necessary to enter into
and perform the S-band spectrum agreement or we cease to have rights to substantially all the S-band spectrum.

Our exchange offers are in
progress.

We have launched offers to exchange our Series A and B Preferred Stock for new Series F preferred stock of our
new wholly-owned subsidiary, TerreStar Holdings. The new Series F preferred stock of TerreStar Holdings would not be redeemable until April 2014. The exchange offers and consent solicitation, originally launched in November 2009, are currently
scheduled to expire on April 2, 2010.



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Our common stock may be delisted.

On March 9, 2010, we received notification from The NASDAQ Stock Markets Listing Qualifications Department (NASDAQ)
that for the last 30 consecutive business days the bid price of our common stock on The NASDAQ Global Market has closed below the minimum $1.00 per share required for continued inclusion under NASDAQ Marketplace Rule 5450(a)(1) (Minimum Share
Price Rule). In accordance with NASDAQ Marketplace Rule 5810(c)(3)(A), we have 180 calendar days, or until September 7, 2010, to regain compliance. The NASDAQ Listing Qualifications Department informed the Company that if, at any time
before September 7, 2010, the bid price of our common stock closes at $1.00 per share or more for a minimum of 10 consecutive business days, NASDAQ will provide written notification that we have achieved compliance with the Minimum Share Price
Rule.

In the event we do not regain compliance with the Minimum Share Price Rule by September 7, 2010, NASDAQ will
provide written notification that our common stock will be delisted from The NASDAQ Global Market. At that time, we may appeal NASDAQs determination to delist our common stock to a NASDAQ Listing Qualifications Panel.

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 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

TerreStar Canada holds a radio license and a spectrum license from Industry Canada for the purposes of operating a satellite at the 111 W.L.
orbital location for and providing MSS S-band services in Canada.

The Industry Canada licenses require TerreStar Canada to
make fair and reasonable efforts to provide mobile satellite services to all regions of Canada in accordance with the coverage contour described in the 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.

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



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procedures, TMI Communications applied for, and the FCC 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 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 (now doing business as DBSD). 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.

ATC regulations in the United States and Canada

ATC operations in the United States

The FCCs ATC orders established 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.

For each MSS band, the FCC has also 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 was granted ATC authority and the waiver of certain ATC technical rules on January 13, 2010.

Authority to operate ATC in Canada

In May 2004, Industry Canada adopted a
policy allowing authorized MSS operators 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.

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. 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 Industry
Canada has given notice to the small number of these users that they must relocate within a two year period, if these users are not relocated in sufficient time before the launch of TerreStar Canadas services, it may not be able to offer our
services in certain locations in Canada.



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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.

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.

We 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 sought a declaratory ruling that such ownership serves the public interest. On December 23, 2009, the FCC
granted our request.

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.

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.



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Other applicable U.S. regulations

Common carrier regulation

The 2GHz MSS S-band authorization is a non-common carrier authorization. Our blanket mobile earth terminal license and our ATC authorization are common carrier authorizations. 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 that may 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 requires us to ensure that U.S. law enforcement agencies can intercept certain communications transmitted over our networks. We also have to ensure that law enforcement agencies
are able to access certain call-identifying information relating to communications over our network. In December 2009 we entered 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.

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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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 $69.9 million, $73.6 million and $43.1 million for the years ended December 31, 2009, 2008 and 2007, respectively.

Employee Relations

As of December 31, 2009, we had 104 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.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.



|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 note holders 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;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



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



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



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

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

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

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



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



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



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



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



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



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



| |  |  | 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



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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 and convertible preferred stock. 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.

Our Series A and B Preferred Stock is Potentially Redeemable in April 2010

Our Series A and B Preferred
Stock has a maturity date of April 15, 2010. We have an exchange offer outstanding that would among other things exchange the Series A and B Preferred Stock for securities with different terms, including the redemption date. If the Series A and
B Preferred Stock is not exchanged, converted into shares of our common stock, or if the holders have not been given the right to elect a majority of our Board of Directors, we could incur a redemption liability of approximately $429.9 million,
including accrued dividends, on April 15, 2010.

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. During 2009, we earned 1.4 GHz
spectrum lease revenue of $2.4 million. We do not expect to generate significant revenues prior to 2010, if at all. If we obtain sufficient financing and successfully develop and construct a network, our ability to transition to an operating company
will depend on, among other things: successful execution of our business plan; market acceptance of the services we intend to offer; and attracting, training and motivating highly skilled satellite and network operations personnel, a sales force and
customer service personnel. We may not be able to successfully complete the transition to an operating company or generate sufficient cash from operations to cover our expenses. If we do not become profitable, we will have difficulty obtaining funds
to continue our operations.

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

We do not generate sufficient cash from operations to cover our operating
expenses, and it is unclear when, or if, we will be able to do so. Even if we begin to generate cash in excess of our operating expenses, we expect to require additional funds to meet capital expenditures and other non-operating cash expenses,
including but not limited to capital expenditures required to complete and launch our satellite currently under construction. Based on our current business plan, there is substantial doubt that we have sufficient liquidity required to conduct
operations into 2010. We will likely face a cash deficit beyond the second quarter of 2010 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 incurred losses in 2009 and do not expect to generate any significant revenues until at least mid 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.



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TerreStar Networks will Require Significant Funding to Finance the Execution of its Business Strategy,
Including Funds for the Development of our Handsets and Chipsets and for the Network Buildout.

As of December 31,
2009, we had aggregate contractual payment obligations of approximately $2.4 billion, consisting of $119.2 million for satellite expenditures, $9.0 million for lease related expenditures and $83.9 million for terrestrial network related
expenditures, as well as $2.2 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 sometime after the commencement of commercial operations.

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 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 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.



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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. 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;
| | - |  | ---------------------------------------------------------------------------------



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



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



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



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



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

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

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

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



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



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



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



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



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

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

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



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

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

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



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



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



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



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



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



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



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



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



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



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



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

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

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

We have purchased launch and in-orbit insurance policies for our satellite. If 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.



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

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

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

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

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

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

We have entered into an agreements with a third party to market products using our network. We
intend to enter into additional such agreements with other third parties. 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



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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.

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 SkyTerra.

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

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



| |  |  | 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.



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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.

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. 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.



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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.

Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the
Sarbanes-Oxley Act of 2002, have created some uncertainty for companies such as ours. We are committed to maintaining high standards of corporate governance and public disclosure. As a result, we intend to invest reasonably necessary resources to
comply with evolving standards, and this investment may result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities, which could harm our
business prospects.

Our common stock is currently trading below $1.00 per share.

We have received notice from the The NASDAQ Global Market that our common stock has traded below $1.00 for 30 consecutive trading days. If
our common stock does not trade above $1.00 for ten consecutive business days before September 7, 2010, 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 comply with complex and changing FCC and Industry Canada rules and regulations to maintain our authorizations to use our assigned
spectrum and orbital slot. We are 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 provide an integrated MSS service offering in all locations where our ATC is made available. 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.

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, 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,
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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 was 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, 4491165 Canada Inc., 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 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. 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



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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. 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 (which expired in October 2009), if these users are not relocated in sufficient time before the launch of our services, we may
not be able to offer our services in certain locations in Canada, which could impair our business plan and materially adversely affect our operations.

Our Service May Cause Or Be Subject To Interference.

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

ATC Spectrum Access Is Limited By Technological Factors.

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

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

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

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

The provision of communications services is highly regulated. As a provider of communications services in the United States and Canada, we
will be subject to the laws and regulations of both the United States and



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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 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 4491165 Canada, 4506901 Canada Inc, 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, the Radiocommunication 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.



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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.

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 the Radiocommunication 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, 2009



|                                                      |  |                  |  |             |  |                     
|----------------------------------------------------- |  | ---------------- |  | ----------- |  | --------------------
|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          
|                                                      |  |                  | 
|2703 Telecom Parkway Suite 100 Richardson, TX 75082   |  | Remote Office    |  | 31,031      |  | 7/31/2012           
|                                                      |  |                  | 
|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            



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|                                                                     |  |                      |  |             |  |                     
|-------------------------------------------------------------------- |  | -------------------- |  | ----------- |  | --------------------
|Location                                                             |  | Type of Facility     |  | Square Feet |  | Lease ExpirationDate
|                                                                     |  |                      | 
|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           
|                                                                     |  |                      | 
|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          



|* | Square footage is approximate.
|- | ------------------------------



|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 are referred to collectively as 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). Of the remaining three lawsuits, the first was dismissed by the trial court, reinstated by the court of appeals, and is currently proceeding before the trial court; the second has been
stayed;



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and the third is in the discovery stage. In addition, we have filed two suits against Mr. Dondero and the Dondero Affiliates. One was dismissed on the defendants motion (and is
not further discussed herein), and the other is scheduled for trial in May 2010.

The suit filed by the Dondero Affiliates,
that was reinstated, 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 ordered most of the claims remanded to the trial court. We filed a petition for review with the Supreme Court of Texas, which was denied on
September 25, 2009. We believe that these claims are without merit, and we intend vigorously to defend against this suit, which is set for trial in October 2010.

The Dondero Affiliates suit that was stayed is 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. On October 14, 2008, the court granted our motion to dismiss based on res judicata (due to the Texas trial courts dismissal of
the Rescission Litigation) and denied the plaintiffs request for leave to amend their complaint. On May 7, 2009, in light of the Texas Court of Appeals March 2009 decision in the Rescission Litigation that reversed, in part,
the trial courts summary judgment, the court granted the Dondero Affiliates motion to renew its opposition to our motion to dismiss and reinstated the lawsuit. However, at a June 18, 2009 hearing, the court stayed proceedings in the
lawsuit until certain proceedings conclude in the Rescission Litigation in Texas that are related to the claims in this lawsuit. We believe that these claims are without merit, and, if the court revives the lawsuit in the future, we intend
vigorously to defend against this suit.

The Dondero Affiliates suit that is in the discovery 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 Corporation (EchoStar), and other investors constituted a change in control of TerreStar Corporation under the Series A Preferred
Stocks certificate of designations. The Dondero Affiliates allege that this change of control occurred in at least two ways: (i) they allege that Harbinger acquired control of 58% of TerreStar Corporations voting stock;
and (ii) they allege that Harbinger and EchoStar constitute a group that together acquired control of more than 50% of TerreStar Corporations voting stock. The Dondero Affiliates asked 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. The parties are currently engaged in
discovery. We believe that these claims are without merit and intend vigorously to defend against this suit.

On
October 19, 2005, we filed a petition in a Texas state court in Dallas County, alleging that Mr. Dondero seriously and repeatedly breached his fiduciary duties as a director 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 dismissal of a federal securities lawsuit filed by us had a res judicata effect that precluded 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 trial court, where it has now been set for trial in December 2010.

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



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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
FCC; the case has been administratively closed. The case remains stayed pending a final decision by the FCC.

*  *  *

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. | (Removed and ReservedSee Item 9B)
|------- | ----------------------------------



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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.

The tables below set forth the high and low bid prices of our common stock in 2009 and 2008 based on the closing prices each day.



|               |  |      |      |     |   |     
|-------------- |  | ---- | ---- | --- | - | ----
|2009           |  | High |      | Low
|First Quarter  |  | $    | 0.96 |     | $ | 0.39
|Second Quarter |  | $    | 1.83 |     | $ | 0.48
|Third Quarter  |  | $    | 2.29 |     | $ | 1.02
|Fourth Quarter |  | $    | 2.20 |     | $ | 0.94
|               |  |     
|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

Number of Shareholders of Record

As of March 10, 2010, there were approximately 120 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, 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 April 15, 2010. Currently, we are unable to pay the Series A dividend in common stock due to our ongoing litigation with certain investors. For more information on the exchange offer, see Part I,
Item 1, BusinessCurrent Year and Other Recent Developments.

Issuer Purchases of Equity Securities

During the fiscal quarter ended December 31, 2009, we did not repurchase any shares of our common stock.



31



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Equity Compensation Plan

The equity compensation plan information required under this Item is incorporated by reference to the information provided under the heading
Equity Compensation Plan Information in our proxy statement to be filed within 120 days after the fiscal year end of December 31, 2009.

Stock Performance Graph

LOGO



|                          |  |        |  |        |  |        |  |        |  |       |  |       
|------------------------- |  | ------ |  | ------ |  | ------ |  | ------ |  | ----- |  | ------
|                          |  | 12/04  |  | 12/05  |  | 12/06  |  | 12/07  |  | 12/08 |  | 12/09 
|TerreStar Corp            |  | 100.00 |  | 89.32  |  | 42.31  |  | 30.98  |  | 1.71  |  | 4.02  
|NASDAQ Composite          |  | 100.00 |  | 101.33 |  | 114.01 |  | 123.71 |  | 73.11 |  | 105.61
|NASDAQ Telecommunications |  | 100.00 |  | 91.66  |  | 119.67 |  | 132.55 |  | 77.09 |  | 107.17



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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. Effective January 1, 2008, we consolidated the results of TerreStar Canada, a
variable interest entity where TerreStar Corporation is considered primary beneficiary under the applicable accounting standards. 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. The 2009 data includes TerreStar Holdings Inc., a newly formed 100% subsidiary of TerreStar
Corporation.



|                                                                                                         |  |                                          |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |          |  
|-------------------------------------------------------------------------------------------------------- |  | ---------------------------------------- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | - |  | ---- | --------- | - |  | - | -------- | -
|                                                                                                         |  | For the years ended December 31,         |          
|                                                                                                         |  | 2009                                     |           |   | 2008 |   |           | 2007 |  |   | 2006      |   |  | 2005 |          
|                                                                                                         |  | (in thousands, except per share amounts) |          
|Consolidated Results of Operations:                                                                      |  |                                          |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |          |  
|Revenue                                                                                                  |  | $                                        | 2,384     |   |      | $ |          |      |  | $ |          |   |  | $    |          |   |  | $ |         |  
|Operating loss from continuing operations                                                                |  | $                                        | (158,894  | ) |      | $ | (191,343  | )    |  | $ | (182,713  | ) |  | $    | (106,507  | ) |  | $ | (35,201  | )
|Equity in losses of MSV                                                                                  |  | $                                        |          |   |      | $ |          |      |  | $ | (7,338    | ) |  | $    | (30,079   | ) |  | $ | (25,059  | )
|Loss from continuing operations before income taxes                                                      |  | $                                        | (222,116  | ) |      | $ | (290,468  | )    |  | $ | (265,849  | ) |  | $    | (119,986  | ) |  | $ | (52,678  | )
|Income tax (provision) benefit                                                                           |  | $                                        | (2,369    | ) |      | $ | 2,231     |      |  | $ | 2,248     |   |  | $    | (4,535    | ) |  | $ |         |  
|Loss from continuing operations                                                                          |  | $                                        | (224,485  | ) |      | $ | (288,237  | )    |  | $ | (263,601  | ) |  | $    | (124,521  | ) |  | $ | (52,678  | )
|Loss from discontinued operations                                                                        |  | $                                        |          |   |      | $ |          |      |  | $ |          |   |  | $    | (30,422   | ) |  | $ | (89,866  | )
|Net loss                                                                                                 |  | $                                        | (224,485  | ) |      | $ | (288,237  | )    |  | $ | (263,601  | ) |  | $    | (154,943  | ) |  | $ | (142,544 | )
|Net loss attributable to the noncontrolling interest in TerreStar Networks                               |  | $                                        | 18,935    |   |      | $ | 10,545    |      |  | $ | 23,262    |   |  | $    | 20,655    |   |  | $ | 3,263    |  
|Net loss attributable to the noncontrolling interest in TerreStar Global                                 |  | $                                        | 313       |   |      | $ |          |      |  | $ | 1,198     |   |  | $    | 654       |   |  | $ |         |  
|Dividends on Series A and Series B cumulative convertible preferred stock                                |  | $                                        | (25,293   | ) |      | $ | (19,139   | )    |  | $ | (23,232   | ) |  | $    | (23,627   | ) |  | $ | (16,717  | )
|Accretion of issuance costs associated with Series A and Series B cumulative convertible preferred stock |  | $                                        | (4,542    | ) |      | $ | (4,553    | )    |  | $ | (4,542    | ) |  | $    | (4,029    | ) |  | $ | (2,409   | )
|Net loss attributable to common stockholders                                                             |  | $                                        | (235,072  | ) |      | $ | (301,384  | )    |  | $ | (266,915  | ) |  | $    | (161,290  | ) |  | $ | (158,407 | )
|Basic and Diluted Loss Per ShareContinuing Operations                                                   |  | $                                        | (1.76     | ) |      | $ | (2.81     | )    |  | $ | (3.22     | ) |  | $    | (2.01     | ) |  | $ | (1.10    | )
|Basic and Diluted Loss Per ShareDiscontinued Operations                                                 |  | $                                        |          |   |      | $ |          |      |  | $ |          |   |  | $    | (0.47     | ) |  | $ | (1.45    | )
|Basic and Diluted Loss Per Share                                                                         |  | $                                        | (1.76     | ) |      | $ | (2.81     | )    |  | $ | (3.22     | ) |  | $    | (2.48     | ) |  | $ | (2.55    | )
|Basic and Diluted weighted-average common shares outstanding                                             |  |                                          | 133,476   |   |      |   | 107,179   |      |  |   | 83,016    |   |  |      | 64,966    |   |  |   | 62,072   |  
|                                                                                                         |  |                                          |           |   |     
|Consolidated Financial Position:                                                                         |  |                                          |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |          |  
|Cash and cash equivalents                                                                                |  | $                                        | 45,125    |   |      | $ | 236,820   |      |  | $ | 89,134    |   |  | $    | 171,665   |   |  | $ | 179,524  |  
|Property and equipment, net                                                                              |  | $                                        | 947,129   |   |      | $ | 716,602   |      |  | $ | 571,151   |   |  | $    | 259,169   |   |  | $ | 70,986   |  
|Total assets                                                                                             |  | $                                        | 1,375,662 |   |      | $ | 1,341,177 |      |  | $ | 1,243,223 |   |  | $    | 1,092,429 |   |  | $ | 967,191  |  
|Long-term liabilities                                                                                    |  | $                                        | 987,428   |   |      | $ | 788,029   |      |  | $ | 753,254   |   |  | $    | 257,539   |   |  | $ |         |  
|Series A and Series B Cumulative Convertible Preferred Stock                                             |  | $                                        | 408,500   |   |      | $ | 408,500   |      |  | $ | 408,500   |   |  | $    | 408,500   |   |  | $ | 408,500  |  
|Shareholders (deficit) equity                                                                           |  | $                                        | (100,997  | ) |      | $ | 121,288   |      |  | $ | 16,717    |   |  | $    | 118,326   |   |  | $ | 408,541  |  



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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 mobile communications business through its ownership of TerreStar Networks, its principal operating subsidiary, and TerreStar Global.

TerreStar Networks, in cooperation with its Canadian partner, 4491165 Canada Inc, a majority-owned subsidiary of Trio 2 General Partnership
(Trio), plans to launch an innovative wireless communications system to provide mobile coverage throughout the United States and Canada using integrated satellite-terrestrial smartphones. This system build out will be based on an integrated
satellite and ground-based technology intended to provide communication service in most hard-to-reach areas and will provide a nationwide interoperable, survivable and critical communications infrastructure. We intend to provide multiple
communications applications, including voice, data and video services.

As of December 31, 2009, we had three
wholly-owned subsidiaries, MVH Holdings Inc., Motient Holdings Inc., and TerreStar Holdings Inc. Motient Ventures Holding Inc., a wholly-owned subsidiary of MVH Holdings Inc., directly holds approximately 89.0% and 86.5% interest in TerreStar
Networks and TerreStar Global, respectively.

Based on the current plans, we have substantial doubt that cash, investments and
available borrowing capacity as of December, 31, 2009 will be sufficient to cover the projected funding needs for all of 2010. We will likely face a cash deficit in the second quarter of 2010 unless we obtain additional capital. We cannot guarantee
that financing sources will be available or available on favorable terms.

Overview

TerreStar Networks Inc.

TerreStar Networks is our principal operating subsidiary. TerreStar Networks, in cooperation with its Canadian partner, 4491165 Canada Inc, a majority-owned subsidiary of Trio 2 General Partnership (Trio), plans to launch an
innovative wireless communications system to provide mobile coverage throughout the United States and Canada using integrated satellite-terrestrial smartphones.

We successfully launched our first satellite TerreStar-1 on July 1, 2009 and placed it into its assigned orbital slot in the geosynchronous arc, marking a significant milestone in
offering the mobile satellite service (MSS) using frequencies in the 2GHz band. When our MSS service is offered in conjunction with ancillary terrestrial component (ATC) service, we will provide an integrated satellite and
terrestrial wireless communications network. The network will also allow a user to utilize a mobile device that can communicate with a traditional land-based wireless network when in range of that network, but communicate with TerreStar-1 when not
in range of such a land-based network or when such network is unavailable.



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Our ability to offer MSS/ATC services depends on TerreStar Networks ability to
maintain certain regulatory authorizations allowing it to provide MSS/ATC in the S-band. We also 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.

TerreStar Networks, initially created as a subsidiary of SkyTerra, entered into an agreement with SkyTerras
wholly-owned subsidiary, ATC Technologies, LLC (ATC Technologies) pursuant to which TerreStar Networks has a perpetual, royalty-free license to utilize ATC Technologies patent portfolio in the S-band, including those patents
related to ATC, which allows 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.

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. On January 13, 2010, TerreStar Networks was granted authority by the FCC to operate dual-mode mobile terminals that can be used to
communicate either via TerreStars geosynchronous-orbit MSS satellite or ancillary terrestrial component base stations. ATC base station operations were also authorized. These ATC authorizations provide 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. This may be achieved through a strategic
partnership with one or more other communications providers.

In September 2009, we entered into a Mobile Satellite
Services and Support Agreement with AT&T Mobility under which AT&T will offer certain of our satellite communications services initially to its government and enterprise customers. 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.

As of December 31, 2009, we owned approximately 89.0% of the outstanding shares of TerreStar Networks
and have included the financial results of TerreStar Networks for the purpose of consolidated financial statements.

Our Relationship
with TerreStar Canada and 4491165 Canada

TerreStar Canada Holdings owns 80% of the voting equity of TerreStar Canada,
which in turn holds the Industry Canada approvals needed to operate TerreStar-1 for the purposes of providing mobile satellite services in Canada. We maintain our existing 20% of the voting equity of TerreStar Canada. TerreStar Canada
holds legal title to the TerreStar-1 satellite and under the terms of an amended and restated Indefeasible Right of Use Agreement dated August 11, 2009 between TerreStar Networks and TerreStar Canada, TerreStar Networks has been granted a right
to use up to ninety percent of the capacity, on the TerreStar-1 satellite.

In July 2009, Trio through
4491165 Canada Inc, a then wholly-owned subsidiary of Trio, completed its acquisition of a 662/3% voting equity stake in TerreStar Canada Holdings previously held by 4371585 Canada Inc., a wholly-owned subsidiary of BCE Inc. We retain our existing 331/3% voting equity ownership in TerreStar Canada Holdings.



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Our Relationship with 4491190 Canada

4491190 Canada Inc. ("RetailCo") is a Canadian registered entity established for the purpose of providing commercial MSS/ATC services in
Canada using the TerreStar-1 satellite and 2GHz terrestrial spectrum. On August 11, 2009, TerreStar Networks and 4491181 Canada Inc. (4491181 Canada) entered into a Shareholders Agreement pursuant to which TerreStar Networks
became the 20% holder of RetailCo Class A stock and 100% owner of RetailCo non-voting Class B stock. 4491181 Canada is under common ownership with 4491165 Canada. The Shareholders agreement grants TerreStar Networks some limited minority
shareholder rights and the ability to nominate one of five directors. In the event of a dilutive event including issuing a debt instrument, a share issuance or a share transfer or sale, TerreStar Networks has various options to maintain its relative
percentage ownership amounts. Such options include pre-emptive rights, right of first offer, co-sale, and drag along.

RetailCo has entered a Wholesale Satellite Capacity Agreement with TerreStar Canada whereby RetailCo has the right to use up to 10% of the capacity of TerreStar-1 on a per minute/per megabyte basis. RetailCo intends to enter into various
agreements to allow for the use of TerreStar Networks handsets in Canada and for the sale of end user devices in the Canadian market.

RetailCo has entered a Rights and Services agreement under which it is expected to procure some network and technical services from TerreStar Networks to facilitate the development and integration of its network with TerreStar Canada and
TerreStar Networks.

TerreStar Global Ltd.

TerreStar Global was initially formed in 2005 as a wholly-owned subsidiary of TerreStar Networks. We have consolidated the financial results of TerreStar Global since its inception. In late 2006,
TerreStar Corporation became the indirect majority holder of TerreStar Global. As of December 31, 2009, we owned approximately 86.5% 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.

While TerreStar Europe was not awarded a 2 GHz MSS S-band spectrum authorization in the recent European Commission proceeding, TerreStar Global continues to explore ways in which it can participate in the
European market.

TerreStar Holdings Inc.

TerreStar Holdings was formed in September 2009 as a wholly-owned subsidiary of TerreStar Corporation. TerreStar 1.4 Holdings LLC, a Delaware
limited liability company and wholly-owned subsidiary of TerreStar Holdings, holds the FCC licenses for certain 1.4GHz terrestrial spectrum and has entered into a lease of that spectrum with an entity controlled by Harbinger. At December 31,
2009, TerreStar Corporations consolidated financial statements include TerreStar Holdings and its wholly-owned subsidiary TerreStar 1.4 Holdings LLC.

Current Year and other Recent Developments

Our first satellite was launched and
is operational.

In July 2009, our TerreStar-1 satellite was successfully launched, reaching its assigned orbital slot, and
its 18 meter S-band reflector has been successfully deployed. We have completed in-orbit testing, and on February 22, 2010 we announced that the initial on-orbit testing phase of the ground based beam forming system was complete.



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We received FCC approval for ATC.

On January 13, 2010, the FCC granted us authority to integrate terrestrial use of our 20 MHz S-band spectrum into our next generation
mobile wireless network. This approval was a critical step in our ability to be able to operate a combined satellite and terrestrial network.

We have a new Canadian joint venture partner.

In August 2009, the Trio 2 General
Partnership purchased the 662/3% voting equity
stake in TerreStar Canada Holdings previously held by a wholly-owned subsidiary of BCE, while we retained the remaining 331/3% voting equity ownership. The Trio 2 General Partnership 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 TerreStars board of directors and a member of the nominating committee.

TerreStar Canada Holdings owns 80% of the voting equity of TerreStar Canada, which in turn holds title to the TerreStar-1 satellite, but which has granted us a right to use capacity on the TerreStar-1
satellite under an Indefeasible Right of Use Agreement. We own the remaining 20% of the voting equity of TerreStar Canada. TerreStar Canada also holds the Industry Canada approvals for the launch and operation of TerreStar-1 for purposes of
providing mobile satellite services in Canada. We have entered into arrangements with Trio or its affiliates to carry on the business of developing and deploying integrated mobile satellite and terrestrial services in Canada.

We entered into additional agreements regarding our terrestrial network and components.

Infineon Technologies software-defined-radio chipset agreement. In March 2009, we entered into an agreement with Infineon
Technologies for the design and development of a multi-standard mobile platform based on Infineons innovative software-defined-radio technology. Infineons chipset technology will enable satellite-terrestrial handsets to operate with
multiple cellular and satellite-based communications technologies including GSM, GPRS, EDGE, WCDMA, HSDPA, HSUPA and GMR-2G/3G. The Infineon Agreement also contemplates that we could share the cost of the Infineon technology with additional
operators who would bear their proportionate share of the costs of the total contract price. SkyTerra also entered into the Infineon Agreement with us, which should reduce our share of the development and software costs under the Infineon
Agreement to approximately $21.7 million. The agreement also allows us to add up to two additional operators to further reduce the cost per operator.

GMR1-3G technology development agreement with Hughes. In conjunction with the Infineon Agreement, also in March 2009, we entered into an agreement with Hughes Network Systems for additional
software development work with respect to a satellite base subsystem Hughes was already developing for us based on the GMR1-3G technology. Our agreements with Hughes now contemplate delivery of the full satellite base subsystem development required
with respect to the GMR1-3G air interface to be included in connection with the Infineon software-defined-radio technology. SkyTerra also entered into the GMR1-3G software components agreement with Hughes, which should reduce our share of the
development and software costs incurred under the GMR1-3G software components agreement to approximately $8 million.

Both the
Infineon Agreement and the Hughes GMR1-3G software components agreement contain provisions for the recovery of certain contract costs through royalties and discounts, so potentially more than half of the costs we will incur may be subject to later
reimbursement.

Technology development agreement with Alcatel-Lucent. As previously reported, we entered into a
technology development agreement with Qualcomm in December 2008 for the development of a satellite air-interface to be included in certain of its device chipsets. In March 2009, we entered into an agreement with Alcatel-Lucent to develop a
production satellite base station subsystem designed to work with the chipsets



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produced under the Qualcomm Agreement. The Alcatel-Lucent Agreement contemplates that other operators, including SkyTerra, may share in the non-recurring expenses. Our portion of the development
and software costs under the Alcatel-Lucent Agreement is approximately $11.1 million dollars.

AT&T has entered into a marketing
agreement with us.

In September 2009, we entered into a Mobile Satellite Services and Support Agreement with AT&T
Mobility under which AT&T will offer certain of our satellite communications services to government and enterprise customers.

We have
leased our 1.4GHz terrestrial spectrum to Harbinger.

In September 2009, we entered into a Spectrum Manager Lease
Agreement with an affiliate of Harbinger Capital Partners Master Fund I, Ltd. under which the Harbinger affiliate is leasing our rights to use certain 1.4GHz terrestrial spectrum. The lease has an initial term through April 2017, renewable at
the lessees option for two additional terms of ten years each subject to FCC renewal of the licenses. The lease payments are initially $1 million per month and will increase to $2 million per month no later than July 2010, and could
increase earlier depending upon the satisfaction of certain conditions. Under certain conditions the lessee has an option, but not the obligation, to purchase the licenses, subject to the approval of our board. The lessee also has a right of first
refusal to match the price (less credit for certain amounts paid under the agreement) in any potential transfer of the licenses to a third party.

In January 2010, in exchange for a $30 million prepayment of amounts due under the lease, we entered into further agreements with Harbinger. We agreed to negotiate with Harbinger on an exclusive basis for
a period of 90 days towards an agreement under which our S-band spectrum would be pooled with other spectrum to provide mobile communications services. As part of this exclusivity agreement, we have agreed that we would not enter into any agreement
relating to the S-band spectrum other than with Harbinger, nor grant any third party rights with respect to the S-band spectrum that would interfere with use of the S-band spectrum by Harbinger or limit our ability to enter into a transaction with
Harbinger regarding the S-band spectrum.

We also have agreed that any remaining unamortized portion of the $30 million
prepayment that would not otherwise have been paid under the lease will be refunded by us under certain circumstances, including termination or breach by us of the lease, termination or breach by us of the exclusivity agreement or if we cannot
obtain consents necessary to enter into and perform the S-band spectrum agreement or we cease to have rights to substantially all the S-band spectrum.

Our exchange offers are in progress.

We have launched offers to exchange our Series A and B Preferred Stock
for new Series F preferred stock of our new wholly-owned subsidiary, TerreStar Holdings. The new Series F preferred stock of TerreStar Holdings would not be redeemable until April 2014. The exchange offers and consent solicitation, originally
launched in November 2009, are currently scheduled to expire on April 2, 2010.

Critical Accounting Policies and Significant Estimates

Our significant accounting policies are more fully described in Note 2 of Notes to Consolidated Financial Statements. The
preparation of financial statements requires management to use judgment and make estimates. 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, fair value of derivatives, legal contingencies, intangible assets and long-lived assets.



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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, software and leasehold improvements. Intangible assets consists of the indefinite lived 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, 2009, property and equipment and intangibles represented approximately $947.1 million and
$362.3 million, respectively, of our total assets of $1.4 billion. Intangible assets that have finite useful lives are amortized over their estimated useful life of 15 years. As of December 31, 2009, we have not commenced the depreciation of
TerreStar-1 as it is determined not yet ready for intended use. 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
|Satellite and Terrestrial Network |  | 15 years                                    

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.

Additionally, we completed the annual impairment test for our indefinite lived intangible assets consisting of 1.4 GHz spectrum licenses and noted no impairment as of December 31, 2009.

Recently Issued Accounting Pronouncements

On January 1, 2009 we adopted authoritative guidance on fair value measurements for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value
in the financial statements on a recurring basis (at least annually). The adoption of new guidance did not have a material impact on our consolidated financial statements.

Effective January 1, 2009, we adopted the FASB accounting standard update which provided guidance for determining whether an
equity-linked financial instrument (or embedded feature) is indexed to an entitys own stock. This update applies to any freestanding financial instrument or embedded feature that has all the characteristics of a derivative instrument or an
instrument which may be potentially settled in an entitys own stock regardless of whether the instrument possesses derivative characteristics and provides a two-step approach to assist in making these determinations. The adoption of this
guidance did not have any impact on our consolidated financial statements.

Effective January 1, 2009, we adopted the
FASB accounting standard update which addresses whether unvested instruments granted in share-based payment transactions that contain non forfeitable rights to dividends



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or dividend equivalents are participating securities subject to the two-class method of computing earnings per share under the FASB authoritative guidance. The adoption of this update did not
have a material impact on our consolidated financial statements.

Effective April 1, 2009, we adopted three accounting
standard updates which were intended to provide additional application guidance and enhanced disclosures regarding fair value measurements and impairments of securities. The first update provides additional guidelines for estimating fair value in
accordance with fair value accounting. The second accounting update changes accounting requirements for other-than-temporary-impairment for debt securities by replacing the current requirement that a holder have the positive intent and ability to
hold an impaired security to recovery in order to conclude an impairment was temporary with a requirement that an entity conclude it does not intend to sell an impaired security and it will not be required to sell the security before the recovery of
its amortized cost basis. The third accounting update requires disclosure about fair value of financial instruments for interim reporting periods as well as in the annual financial statements. The adoption of these accounting updates did not have
any impact on our consolidated financial statements.

Effective April 1, 2009, we adopted a new accounting standard
issued by the FASB for subsequent events which establishes general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular,
this statement sets forth (1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements;
(2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and (3) the disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. In February 2010, the FASB amended this new accounting standard to eliminate the disclosure requirement regarding the date through which subsequent events have been evaluated. The adoption of the new
accounting standard did not have a material impact on our consolidated financial statements.

In June 2009, the FASB issued an
accounting standard which requires an enterprise to perform an analysis to determine whether the enterprises variable interest or interests give it a controlling financial interest in a variable interest entity and to continuously assess
whether they must consolidate VIEs. This standard is effective for us beginning January 1, 2010. We are currently evaluating the impact, if any, of this standard on our consolidated financial statements.

In October 2009, the FASB issued an accounting guidance update related to revenue arrangements with multiple deliverables. The guidance
relates to the determination of when the individual deliverables included in a multiple-element arrangement may be treated as separate units of accounting and modifies the manner in which the consideration under the arrangement is allocated across
the individual deliverables. The guidance will be effective for us beginning on January 1, 2011, and may be applied retrospectively for all periods presented or prospectively to arrangements entered into or materially modified after the
adoption date. Early adoption is permitted provided that the guidance is retroactively applied to the beginning of the year of adoption. We are currently assessing the impact, if any, on our consolidated financial statements.



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Results of OperationsConsolidated

Years Ended December 31, 2009 and 2008

Operating Expenses



|                              |  |                         |         |      |   |         |  |   |         |   |  |       |   
|----------------------------- |  | ----------------------- | ------- | ---- | - | ------- |  | - | ------- | - |  | ----- | --
|                              |  | Year Ended December 31, |        
|                              |  | 2009                    |         | 2008 |   | Change  |  |   | %Change |  
|                              |  | (in thousands)          |        
|General and administrative    |  | $                       | 67,359  |      | $ | 88,536  |  | $ | (21,177 | ) |  | (23.9 | )%
|Research and development      |  |                         | 69,882  |      |   | 73,560  |  |   | (3,678  | ) |  | (5.0  | )%
|Depreciation and amortization |  |                         | 24,028  |      |   | 22,479  |  |   | 1,549   |   |  | 6.9   | % 
|Loss on asset disposal        |  |                         | 9       |      |   | 6,768   |  |   | (6,759  | ) |  | NM    |   
|                              |  |                         |         |      |   |         |  |   |         |   |  |       |   
|Total operating expenses      |  | $                       | 161,278 |      | $ | 191,343 |  | $ | (30,065 | ) |  | (15.7 | )%
|                              |  |                         |         |      |   |         |  |   |         |   |  |       |   



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

General and
administrative:Our general and administrative expenses decreased by approximately $21.2 million or 23.9% for the year ended December 31, 2009 as compared to the same period in 2008. The change is attributed to a decrease of
approximately $8.6 million in salaries and wages, bonuses and employee benefits, a decrease of $6.5 million in lab and network equipment expense, a decrease of $3.4 million in collocation, tower, CES and gateway site expenses, a decrease of $5.6
million in consulting expenses and other administrative expenses, partially offset by an increase of $2.9 million related to stock based compensation.

Research and development costs: Research and development costs decreased by $3.7 million or 5.0% for the year ended December 31, 2009 as compared to the same period in 2008. The decrease is
related to a $5.2 million decrease in satellite research and development and a reduction of $2.5 million in research and development headcount, which is offset by a $4.0 million increase in research and development related to handset design and
development.

Depreciation and amortization: Depreciation and amortization increased by $1.5 million or 6.9% for the
year ended December 31, 2009 as compared to the same period in 2008. The increase is primarily driven by a higher asset base in network equipment, capitalized software and lab equipment.

Loss on asset disposal:Asset disposal expenses decreased by approximately $6.8 million for the year ended December 31, 2009 as
compared to the same period in 2008. In 2008, the loss related to the write-off of $5.5 million in assets under construction as the assets were abandoned in addition to $1.3 million of equipment in service that was deemed obsolete and written off.

Years Ended December 31, 2009 and 2008

Other (Expenses) and Income



|                               |  |                         |         |   |      |   |          |        |  |   |         |   |  |       |   
|------------------------------ |  | ----------------------- | ------- | - | ---- | - | -------- | ------ |  | - | ------- | - |  | ----- | --
|                               |  | Year Ended December 31, |        
|                               |  | 2009                    |         |   | 2008 |   |          | Change |  |   | %Change |  
|                               |  | (in thousands)          |        
|Interest expense               |  | $                       | (64,275 | ) |      | $ | (54,764  | )      |  | $ | (9,511  | ) |  | 17.4  | % 
|Interest income                |  |                         | 221     |   |      |   | 3,328    |        |  |   | (3,107  | ) |  | (93.4 | )%
|Other Income                   |  |                         | 832     |   |      |   | 827      |        |  |   | 5       |   |  | 0.6   | % 
|Loss on investment in SkyTerra |  |                         |        |   |      |   | (126,224 | )      |  |   | 126,224 |   |  | NM    |   
|Decrease in dividend liability |  |                         |        |   |      |   | 77,708   |        |  |   | (77,708 | ) |  | NM    |   



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



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Interest expense:Interest expense increased by $9.5 million or 17.4% for the year
ended December 31, 2009 as compared to the same period in 2008. Interest cost increased by $42.3 million driven by higher balances on our debt and interest, additional borrowings through credit facility during 2009 and as a result of
paid-in-kind interest added back to the principal offset by a $32.8 million increase in capitalized interest.

Interest
Income:Interest income decreased by $3.1 million for the year ended December 31, 2009 as compared to the same period in 2008 that was caused by lower interest rates earned on our investments in addition to decreased investment balances.

Loss on investment in SkyTerra: There were no sales of SkyTerra shares for the year ended December 31, 2009. 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.

Decrease in dividend liability:There was no dividend liability in 2009; we divested our SkyTerra shares in 2008.

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 million, driven mostly by a higher asset base 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.



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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 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. 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 income                          |  |                         | 3,328    |   |      |   | 12,215   |        |  |   | (8,887   | ) |  | (72.8 | )%
|Other income                             |  |                         | 827      |   |      |   | 325      |        |  |   | 502      |   |  | 154.5 | % 
|Equity in losses of MSV                  |  |                         |         |   |      |   | (7,338   | )      |  |   | 7,338    |   |  | NM    |   
|Loss on investment in SkyTerra           |  |                         | (126,224 | ) |      |   |         |        |  |   | (126,224 | ) |  | NM    |   
|Other than temporary impairment-SkyTerra |  |                         |         |   |      |   | (106,800 | )      |  |   | 106,800  |   |  | NM    |   
|Decrease in dividend liability           |  |                         | 77,708   |   |      |   | 71,046   |        |  |   | 6,662    |   |  | 9.4   | % 



|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 income:Interest income decreased by $8.9 million or 72.8%
for the year ended December 31, 2008 primarily due to 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.

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. 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:Our dividend liability decreased by $6.7 million or 9.4% 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.



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Going Concern, Liquidity and Capital Resources

In assessing our liquidity, we analyze our cash, our investments, anticipated revenue streams and our financing, operating and capital
expenditure commitments, including preferred stock redemption obligations. Our principal liquidity needs are to satisfy working capital requirements, operating expenses, capital expenditure, debt and preferred stock redemption obligations. Based on
our current plans, there is substantial doubt that the available cash balance, investments and available borrowing capacity as of December 31, 2009 will be sufficient to satisfy the projected funding needs for all of 2010. We will likely
require additional funding in the second quarter of 2010 unless we are able to extend our obligations and commitments to future periods. We cannot guarantee that financing will be available or available on favorable terms. If we fail to obtain
necessary financing on a timely basis, we may be forced to curtail operations or take other actions that will impact our ability to conduct our operations as planned. Our 2009 financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets and liabilities that may result from this uncertainty.

We are currently considering various alternatives to extend our liquidity and raise capital. The redemption obligation under the Series A and Series B preferred stock may be satisfied by permitting the holders of such preferred stock,
voting as a class, to elect a majority of our Board of Directors. We have also commenced an exchange offer for our outstanding preferred stock as more fully described in Note 18. Further, we are evaluating other potential sources of funding
including those described in Note 18.

Our principal sources of liquidity consist of our current cash balances, which includes
advances of $30.0 million from our 1.4GHz terrestrial spectrum lease agreement (Lease Agreement) received in January 2010, investments and credit available through our secured borrowing under TerreStar-2 Purchase Money Credit
Agreement (Credit Agreement), of which $42.5 million is available as of December 31, 2009 and which is available solely for construction and completion of our second satellite, TerreStar-2. As of December 31, 2009, we had $45.1 million
of cash and cash equivalents and $0.5 million of restricted cash. After giving effect to the net proceeds and advances available under the Lease Agreement and Credit Agreement, we have approximately $118.1 million of liquid resources available to
fund operations.

Our short-term liquidity needs are principally related to our operating expenses, continuing commitments
related to the design and development of our handset and chipset, development of our ground based satellite infrastructure and the potential redemption obligation under our Series A and B Preferred Stock. As of December 31, 2009, we had
contractual obligations of $562.2 million due within one year, consisting of approximately $429.9 million related to the redemption of Series A and B Preferred Stock, which if not previously converted into shares of our common stock or if the
holders have not been given the right to elect a majority of our Board of Directors, will be due on April 15, 2010, $51.5 million related to our satellite system, $0.2 million related to interest or debt obligations, $76.1 million related to our
handset, chipset, terrestrial network and orbital incentive payments related to our satellite contract and $4.5 million for operating leases.

We will require additional financing to fund operations and ongoing network development. As of December 31, 2009, we had aggregate operational contractual payment obligations of approximately
$212.2 million, consisting of approximately $119.2 million for the TerreStar Networks satellites and incentive payments; approximately $9.1 million for our operating leases in Reston, Virginia, Lincolnshire, Illinois and Richardson Park,
Texas, data centers, and site hosting agreements and approximately $83.9 million for obligations related to the build out of our terrestrial network and handset and chipset costs. The ability to fund these costs will depend on our future
performance, which is subject in part to the execution of post satellite launch activities, general economic, financial and regulatory conditions and other factors that are beyond our control, including trends in the industry and technology
developments. Also, we may not be able to obtain this additional financing on acceptable terms or at all. Additionally, the terms of our current financing and contractual arrangements include significant limitations, among other factors, on our
ability to incur additional debt, collateralize any additional new financing with our assets and the structure of any new financing transaction.



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Summary of Cash Flows:



|                                                                  |  |                         |          |   |      |   |          |  
|----------------------------------------------------------------- |  | ----------------------- | -------- | - | ---- | - | -------- | -
|                                                                  |  | Year Ended December 31, |         
|                                                                  |  | 2009                    |          |   | 2008 |  
|                                                                  |  | (in thousands)          |         
|Net cash used in Operating Activities                             |  | $                       | (113,347 | ) |      | $ | (163,310 | )
|Net cash (used in) provided by Investing Activities               |  |                         | (100,361 | ) |      |   | 99,228   |  
|Cash flows from Financing Activities:                             |  |                         |          |   |      |   |          |  
|Net proceeds from issuance of debt and equity securities          |  |                         |         |   |      |   | 195,732  |  
|Proceeds from TerreStar-2 Purchase Money Credit Agreement         |  |                         | 24,350   |   |      |   | 33,175   |  
|Dividends paid on Series A cumulative convertible preferred stock |  |                         | (2,362   | ) |      |   | (13,086  | )
|Payments for capital lease obligations                            |  |                         | (70      | ) |      |   | (59      | )
|Debt issuance costs and other charges                             |  |                         |         |   |      |   | (3,954   | )
|                                                                  |  |                         |          |   |      |   |          |  
|Net cash provided by Financing Activities                         |  |                         | 21,918   |   |      |   | 211,808  |  
|                                                                  |  |                         |          |   |      |   |          |  
|Foreign exchange effect on cash and cash equivalents              |  |                         | 95       |   |      |   | (40      | )
|                                                                  |  |                         |          |   |      |   |          |  
|                                                                  |  |                        
|Net increase (decrease) in cash and cash equivalents              |  |                         | (191,695 | ) |      |   | 147,686  |  
|Cash and Cash Equivalents, beginning of period                    |  |                         | 236,820  |   |      |   | 89,134   |  
|                                                                  |  |                         |          |   |      |   |          |  
|Cash and Cash Equivalents, end of period                          |  | $                       | 45,125   |   |      | $ | 236,820  |  
|                                                                  |  |                         |          |   |      |   |          |  

Operating Activities

Net cash used in operating activities for the year ended December 31, 2009 was $113.3 million as compared to net cash used in operating activities for the year ended December 31, 2008 of $163.3
million. The decrease of $50.0 million is primarily attributable to a decrease in operating losses, partially offset by the loss on investment in SkyTerra that occurred in 2008.

Investing Activities

Net cash used in investing activities for the
year ended December 31, 2009 was $100.4 million as compared to net cash provided by investing activities for the year ended December 31, 2008 of $99.2 million. The change of $199.6 million is primarily attributable to the proceeds of
$199.1 million from the sale of SkyTerra shares received in 2008.

Financing Activities

Net cash provided by financing activities for the year ended December 31, 2009 was $21.9 million as compared to net cash provided by
financing activities for the year ended December 31, 2008 of $211.8 million. The decrease of $189.9 million was primarily attributable to a decrease in debt proceeds in the amount of $204.6 million which is offset by a reduction of
dividends paid of approximately $10.7 million and in debt issuance costs of approximately $4.0 million.

Debt Obligations

During 2009, we borrowed $24.4 million under the TerreStar-2 Purchase Money Credit Agreement.

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, 2009, we had TerreStar Notes and accrued interest, of $837.5 million, maturing on February 14, 2014, with cash interest payments commencing on February 15, 2011;
TerreStar Exchangeable



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Notes and accrued interest, of $169.7 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 $67.8 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, given certain voting rights, or repaid, the entire preferred stock amount of $429.9 million, including accrued dividends, will be due on April 15, 2010 or we may provide the holders
with the right to elect a majority of our Board of Directors. 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.

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

Our corporate headquarters is located in Reston, Virginia. We lease approximately 23,000 square feet of office space for which the lease
terms expire in 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. For the
years ended December 31, 2009, 2008 and 2007, the income related to the sublease agreements represented $0.3 million, $0.3 million and $0.2 million, respectively. Approximately 49,000 square feet of office space in Lincolnshire is
currently unused capacity. We plan to sublease the unused space in the future as demand develops.

TerreStar has contractual
commitments of $119.2 million related to the completion of our TerreStar 2 satellite, performance incentives and completion of the ground network related to the satellite and a $4.5 million payment to our launch vendor if we do not schedule a launch
by the end of 2010. We also have commitments of $83.9 million related to the completion of our handset and development of future chipset technologies and the build-out of our terrestrial network. In 2007, pursuant to our plan to establish
national-wide terrestrial network build-out, we entered into equipment and service agreement related to network build-out. Under the contract we were obligated to purchase certain minimum amounts of equipment related to network build-out with
certain fixed time frames, largely starting from December 2010, failure to make such purchases would result in liquidated damages payable to the vendor. As of December 31, 2009, we are currently evaluating various alternatives under the
contract to reduce potential liquidated damage liabilities upon our failure to meet the contractual obligation. As of result, we currently disclose the maximum potential liquidating damages of $38.6 million as commitment related to Network, Capital
Equipment and Services. We also have commitments of $8.8 million related to the completion of our handset that will be completed this year and $33.1 million related to the development of next generation chipsets which should be completed by the end
of 2011.



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The following are contractual commitments as of December 31, 2009:



|                                           |  |                |           |        |   |         |  |         |         |        |   |           |  |   |       
|------------------------------------------ |  | -------------- | --------- | ------ | - | ------- |  | ------- | ------- | ------ | - | --------- |  | - | ------
|                                           |  | TOTAL          |           | < 1 yr |   | 1-3 yrs |  | 4-5 yrs |         | 5+ yrs
|                                           |  | (in thousands)
|Satellites(a)                              |  | $              | 119,249   |        | $ | 51,540  |  | $       | 32,219  |        | $ | 4,121     |  | $ | 31,369
|Leases                                     |  |                | 9,053     |        |   | 4,465   |  |         | 4,540   |        |   | 48        |  |   |      
|Network, capital equipment and services(b) |  |                | 83,905    |        |   | 76,101  |  |         | 7,804   |        |   |          |  |   |      
|Preferred stock obligations                |  |                | 429,947   |        |   | 429,947 |  |         |        |        |   |          |  |   |      
|Debt obligations                           |  |                | 1,776,654 |        |   | 150     |  |         | 520,063 |        |   | 1,256,441 |  |   |      
|                                           |  |                |           |        |   |         |  |         |         |        |   |           |  |   |       
|                                           |  | $              | 2,418,808 |        | $ | 562,203 |  | $       | 564,626 |        | $ | 1,260,610 |  | $ | 31,369



|(a) | The amount excludes in-orbit incentives.
|--- | ----------------------------------------

|(b) | The cost of
certain development efforts are shared with other operators. We could incur additional commitments related to those efforts in the event that one or more of those operators discontinued their participation.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Off-Balance Sheet Financing

As of December 31, 2009, 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
|-------- | ----------------------------------------------------------

Our earnings and cash flows are exposed to market risk and can be affected by, among other things, general economic conditions, interest rate changes, foreign currency fluctuations, and changes in the
market values of investments.

Interest Rate Risk

Our exposure to market risks associated with changes in interest rates relates primarily to the increase or decrease in the amount of interest income earned on our investment portfolio. We ensure the
safety and preservation of invested funds by primarily investing in highly rated short-term commercial paper, investment-grade corporate and government obligations and money market funds. A hypothetical one percentage point decline in interest rates
would not have materially affected the fair value of our interest-sensitive financial instruments as of December 31, 2009. We do not use derivative financial instruments for trading or speculative purposes. However, we regularly invest excess
cash in overnight repurchase agreements that are subject to changes in short-term interest rates. We believe that the market risk arising from holding these financial instruments is minimal.

We do not have a cash flow exposure to changing interest rates on our 15% Senior Secured PIK Notes, 6.5% Exchangeable Notes and 14%
TerreStar-2 Purchase Money Credit Agreement other than additional interest contingent upon not meeting certain milestones according to the terms of indentures.

Foreign Currency Risk

Our foreign subsidiaries generally use their
domestic currency as their functional currency. Based on the current volume of transactions, the fluctuation in the exchange rates of these currencies against the U.S. dollar does not have a material impact on our results of operations.



|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.



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##### Table of Contents

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

Evaluation of
Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief
financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2009. Management recognizes that any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the
evaluation of our disclosure controls and procedures as of December 31, 2009, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable
assurance level.

Managements Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over
financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the Companys principal executive and principal financial officers 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 U.S. generally
accepted accounting principles. Such internal control includes those policies and procedures that:



| |  |  | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the
Company;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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. 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.

Our management assessed the effectiveness of our
internal control over financial reporting as of December 31, 2009. In making this assessment, our management used the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). Based on its assessment, our management has determined that, as of December 31, 2009, our internal control over financial reporting is effective based on those criteria.

Ernst & Young LLP has issued an attestation report on our internal control over financial reporting as of December 31, 2009.
This report is included in the report of independent registered public accounting firm herein.

Remediation Activities and Changes in
Internal Control over Financial Reporting

Management has evaluated whether any changes in our internal control over
financial reporting that occurred during our last fiscal quarter have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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As described in our annual report on Form 10-K for the year ended December 31, 2008,
managements assessment of our internal control over financial reporting as of December 31, 2008 identified five material weaknesses in our internal control over financial reporting as of that date. During the fourth quarter of 2009, we
continued to implement and tested several changes in our internal control over financial reporting to remediate the material weaknesses described above. Management believes that the measures implemented during 2009 to remediate these material
weaknesses, which were tested in the fourth quarter of 2009, positively affected our internal control over financial reporting. Changes in our internal control over financial reporting that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting are described below.

Description of Remediation Actions:



| |  |  | Strengthened finance department with key staff additions and replacements during 2009;
| | - |  | --------------------------------------------------------------------------------------



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



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



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



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



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



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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 internal control over financial reporting as of
December 31, 2009, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). TerreStar Corporation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 included in the accompanying Managements Report on Internal Control over Financial
Reporting. Our responsibility is to express an opinion on 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 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 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.

In our opinion, TerreStar Corporation maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2009, based on the COSO criteria.

We also have audited, in accordance
with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of TerreStar Corporation as of December 31, 2009 and the related consolidated statement of operations, changes in stockholders
equity, and cash flows for the year then ended of TerreStar Corporation and our report dated March 16, 2010 expressed an unqualified opinion thereon that included an explanatory paragraph regarding TerreStar Corporations ability to continue as
a going concern.

/s/ Ernst & Young LLP

McLean, Virginia

March 16, 2010



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

Submission of
Matters to a Vote of Security Holders

In connection with an exchange offer and consent solicitation that we commenced on
November 16, 2009, we filed a Consent Solicitation Statement dated December 7, 2009 with the Securities and Exchange Commission on Schedule 14A. We solicited the written consents and approval from the holders of our outstanding shares
of common stock to take Actions by Written Consent of Stockholders in Lieu of a Special Meeting authorizing the following: (i) an amendment to our Restated Certificate of Incorporation to increase its previously authorized 240,000,000
shares of common stock to 800,000,000; (ii) an amendment to our Restated Certificate of Incorporation by an amendment to the Certificate of Designations of our Series B Cumulative Convertible Preferred Stock, including without limitation
the amendment of the conversion price in respect of the securities issuable upon conversion of the Series B Preferred and the maturity date; and (iii) an amendment to our Restated Certificate of Incorporation by an amendment to the Certificate
of Designations of our Series E Junior Participating Preferred Stock, including without limitation the amendment of the exchange ratio and anti-dilution protections in respect of the securities issuable upon conversion of the Series E Preferred.

The results of the solicitation are as follows:



|                                                                                                                                                                                                                                                                                       |  |            |  |            |  |             |  |                
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------- |  | ---------- |  | ----------- |  | ---------------
|                                                                                                                                                                                                                                                                                       |  | Votes For  |  | Against    |  | Abstentions |  | BrokerNon Votes
|1) The proposal to amend our Restated Certificate of Incorporation to increase its previously authorized 240,000,000 shares of
common stock to 800,000,000 was approved                                                                                                                |  | 93,710,687 |  | 15,475,017 |  | 265,804     |  |               
|2) The proposal to amend our Restated Certificate of Incorporation by an amendment to the Certificate of Designations of our
Series B Cumulative Convertible Preferred Stock was not approved because a majority of outstanding shares did not vote on the proposal                    |  | 57,653,441 |  | 1,178,910  |  | 107,226     |  | 50,511,931     
|3) The proposal to amend the Companys Restated Certificate of Incorporation by an amendment to the Certificate of
Designations of the Companys Series E Junior Participating Preferred Stock, was not approved because a majority of outstanding shares did not vote on the proposal |  | 57,625,709 |  | 1,216,697  |  | 97,171      |  | 50,511,931     

We have not yet
taken the necessary steps to amend our Restated Certificate of Incorporation pursuant to Proposal 1 but plan to do so in the future.



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##### Table of Contents

PART III

Items 10 through 14 will be included in our Proxy Statement for our 2010 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 2010 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 2010 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 2010 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 2010 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 2010 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
|Reports of Independent Registered Public Accounting Firm  |  | F-2 
|Consolidated Balance Sheets                               |  | F-4 
|Consolidated Statements of Operations                     |  | F-5 
|Consolidated Statements of Cash Flows                     |  | F-6 
|Consolidated Statements of Stockholders (Deficit) Equity |  | F-7 
|Notes to Consolidated Financial Statements                |  | F-9 



| | 2) | Financial Statement Schedules
| | -- | -----------------------------

Financial Statement Schedules 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.



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



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|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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).                                                                                                                                                                                                                                                                                                                            
|      | 
|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)).                                                                                                                                          



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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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).                                                                                                                                                                                                                                                                                                       
|        | 
|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).                                                                                                                                                 



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|        |  |                                                                                                                                                                                                                                                                                                                                                              
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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).                                                                                                                                                                               
|        | 
|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)).                                                                



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|        |  |                                                                                                                                                                                                                                                                                                                                                                     
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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).                                                                                          
|        | 
|10.48   |  | Amendment to Statement of Work dated January 22, 2008 under the Master Development & Licensing Agreement dated August 10, 2007 by and between Networks and Elektrobit, Inc.
(incorporated by reference to Exhibit 10.1 to the Companys Form 10-Q dated May 6, 2009 (the Q1 2009 10-Q)).                                                                          
|        | 
|10.49** |  | Statement of Work dated October 22, 2008 (SBSS Integration Support) under the Master Development & Licensing Agreement dated August 10, 2007 by and between Networks and
Elektrobit, Inc. (incorporated by reference to Exhibit 10.2 to the Companys Q1 2009 10-Q).                                                                                                
|        | 
|10.50** |  | Statement of Work dated January 02, 2009 (Commercial PDA Phone Specification) under the Master Development & Licensing Agreement dated August 10, 2007 by and between Networks
and Elektrobit, Inc. (incorporated by reference to Exhibit 10.3 to the Companys Q1 2009 10-Q).                                                                                      
|        | 
|10.51** |  | Statement of Work dated January 02, 2009 (Mininet Campaign Testing) under the Master Development & Licensing Agreement dated August 10, 2007 by and between Networks and
Elektrobit, Inc. (incorporated by reference to Exhibit 10.4 to the Companys Q1 2009 10-Q).                                                                                                
|        | 
|10.52** |  | Statement of Work dated January 02, 2009 (Antenna Feasibility Study) under the Master Development & Licensing Agreement dated August 10, 2007 by and between Networks and
Elektrobit, Inc. (incorporated by reference to Exhibit 10.5 to the Companys Q1 2009 10-Q).                                                                                               
|        | 
|10.53** |  | Amendment to Statement of Work dated January 02, 2009 (SBSS Integration Support) under the Master Development & Licensing Agreement dated August 10, 2007 by and between Networks
and Elektrobit, Inc. (incorporated by reference to Exhibit 10.6 to the Companys Q1 2009 10-Q).                                                                                   



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|         |  |                                                                                                                                                                                                                                                                                                                           
|-------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.54**  |  | Amendment No. 2 to Statement of Work (SBSS Integration Support) dated February 05, 2009 under the Master Development & Licensing Agreement dated August 10, 2007 by and between
Networks and Elektrobit, Inc. (incorporated by reference to Exhibit 10.7 to the Companys Q1 2009 10-Q).                                  
|         | 
|10.55**  |  | Amendment No. 3 dated March 28, 2009 under the Master Development & Licensing Agreement dated August 10, 2007 by and between Networks and Elektrobit, Inc. (incorporated by
reference to Exhibit 10.8 to the Companys Q1 2009 10-Q).                                                                                     
|         | 
|10.56    |  | Contract for Design and Development of SDR Modem Platforms dated March 31, 2009 by and among TerreStar Networks Inc., SkyTerra LP and Infineon Technologies AG (incorporated by
reference to Exhibit 10.9 to the Companys Q1 2009 10-Q).                                                                                 
|         | 
|10.57**  |  | Statement of Work dated April 6, 2009 under the Master Development & Licensing Agreement dated August 10, 2007 by and between Networks and Elektrobit, Inc. (incorporated by
reference to Exhibit 10.1 to the Companys Form 10-Q dated August 7, 2009 (the Q2 2009 10-Q)).                                             
|         | 
|10.58**  |  | Statement of Work dated April 15, 2009 under the Master Development & Licensing Agreement dated August 10, 2007 by and between Networks and Elektrobit, Inc. (incorporated by
reference to Exhibit 10.2 to the Companys Q2 2009 10-Q).                                                                                   
|         | 
|10.59**  |  | Amendment dated July 10, 2009 to Statement of Work 2 dated April 15, 2009 to the Master Development & Licensing Agreement dated August 10, 2007 by and between TerreStar Networks
and Elektrobit, Inc. (incorporated by reference to Exhibit 10.1 to the Companys Form 10-Q dated November 9, 2009 (the Q3 2009 10-Q)).
|         | 
|10.60**  |  | Statement of Work dated September 3, 2009 to the Master Development & Licensing Agreement dated August 10, 2007 by and between TerreStar Networks and Elektrobit, Inc.
(incorporated by reference to Exhibit 10.2 to the Companys Q3 2009 10-Q).                                                                         
|         | 
|10.61**  |  | Spectrum Manager Lease Agreement dated September 17, 2009 by and between TerreStar 1.4 Holdings LLC and One Dot Four Corp. (incorporated by reference to Exhibit 10.3 to the
Companys Q3 2009 10-Q).                                                                                                                     
|         | 
|10.62    |  | Amendment 1 dated October 9, 2009 to the Spectrum Manager Lease Agreement dated September 17, 2009 by and between TerreStar 1.4 Holdings LLC and One Dot Four Corp. (incorporated by
reference to Exhibit 10.4 to the Companys Q3 2009 10-Q).                                                                            
|         | 
|10.63**  |  | Mobile Satellite Services and Support Agreement dated September 25, 2009 by and between Networks and AT&T Mobility II, LLC. (incorporated by reference to Exhibit 10.5 to the
Companys Q3 2009 10-Q).                                                                                                                    
|         | 
|10.64+** |  | Master Supply Agreement dated December 1, 2009 by and between the Company and certain of its affiliated companies, including TerreStar Networks Inc., a majority owned subsidiary of
the Company (the Subsidiary), and Elektrobit, Inc. (the Master Supply Agreement).                                                
|         | 
|10.65+** |  | Product Supplement A under the Master Supply Agreement between the Company and Elektrobit, Inc.                                                                                                                                                                                                                           
|         | 
|10.66+** |  | Product Supplement B under the Master Supply Agreement between the Company and Elektrobit, Inc.                                                                                                                                                                                                                           
|         | 
|10.67+** |  | Statement of Work 3, dated October 20, 2009, between the Subsidiary and Elektrobit, Inc. under the Master Development and Licensing Agreement between the Subsidiary and Elektrobit,
Inc., dated August 10, 2007, as amended (the Elektrobit Master Agreement).                                                         
|         | 
|10.68+** |  | Amendment of Statement of Work 3, dated October 20, 2009, between the Subsidiary and Elektrobit, Inc.                                                                                                                                                                                                                     
|         | 
|10.69+** |  | Statement of Work, dated December 7, 2009, between the Subsidiary and Elektrobit, Inc. under the Elektrobit Master Agreement.                                                                                                                                                                                             



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|      |  |                                                                                                                                                                                                                                            
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|21+   |  | Subsidiaries of the Company.                                                                                                                                                                                                               
|      | 
|23.1+ |  | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.                                                                                                                                                               
|      | 
|23.2+ |  | 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 Chief Executive Officer (principal executive officer).                                                                                                                          
|      | 
|31.2+ |  | Certification Pursuant to Rule 13a-14(a)/15d-14(a), of the Chief Financial 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 Chief Executive Officer (principal executive officer) and
Chief Financial 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 16, 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   |  | Chief Executive Officer (principal executive officer) & Director |  | March 16, 2010
|                                         |  |                                                                 
|/s/    VINCENT
LOIACONO Vincent Loiacono |  | Chief Financial Officer (principal accounting officer)           |  | March 16, 2010
|                                         |  |                                                                 
|/s/    DAVID
ANDONIAN David Andonian     |  | Director                                                         |  | March 16, 2010
|                                         |  |                                                                 
|/s/    EUGENE
DAVIS Eugene Davis         |  | Director                                                         |  | March 16, 2009
|                                         |  |                                                                 
|/s/    WILLIAM
FREEMAN William Freeman   |  | Director                                                         |  | March 16, 2009
|                                         |  |                                                                 
|/s/    JACQUES
LEDUC Jacques Leduc       |  | Director                                                         |  | March 16, 2009
|                                         |  |                                                                 
|/s/    DAVID
MELTZER David Meltzer       |  | Director                                                         |  | March 16, 2009



60



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##### Table of Contents

TERRESTAR CORPORATION

Index to Consolidated Financial Statements and Financial Statement Schedule



|                                                                                                                           |  |              
|-------------------------------------------------------------------------------------------------------------------------- |  | -------------
|                                                                                                                           |  | PageReference
|Consolidated Financial Statements                                                                                          |  |              
|Reports of Independent Registered Public Accounting Firm                                                                   |  | F-2          
|Consolidated Balance Sheets as of December 31, 2009 and 2008                                                               |  | F-4          
|Consolidated Statements of Operations for the years ended December 31, 2009, 2008 and
2007                                 |  | F-5          
|Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and
2007                                 |  | F-6          
|Consolidated Statements 
of Changes in Stockholders (Deficit) Equity for the years ended December 31, 2009, 2008 and 2007 |  | F-7          
|Notes to Consolidated Financial Statements                                                                                 |  | F-9          



F-1



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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 sheet
of TerreStar Corporation as of December 31, 2009, and the related consolidated statement of operations, changes in stockholders equity, and cash flows for the year then ended. 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 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 the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of TerreStar Corporation at December 31, 2009, and the consolidated
results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that TerreStar Corporation will continue as a going concern. As more fully described in Note 1, the Company has incurred recurring
operating losses and will require additional financing in 2010 to meet its obligations. The Companys ability to obtain the needed additional financing on acceptable terms, or at all, is uncertain. These conditions raise substantial doubt about
the Companys ability to continue as a going concern. The 2009 financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.

As discussed in Note 2 to the consolidated financial
statements, the Company changed its method of accounting for noncontrolling interests effective January 1, 2009.

We also have
audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), TerreStar Corporations internal control over financial reporting as of December 31, 2009, 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 16, 2010 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

McLean, Virginia

March 16, 2010



F-2



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

/s/ Friedman LLP

East Hanover, New Jersey

March 12, 2009



F-3



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##### Table of Contents

TERRESTAR CORPORATION

Consolidated Balance Sheets

As of December 31, 2009 and 2008

(In thousands)



|                                                                                                                                                                                                                          |  |      |            |   |      |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                                                                                                                                                                                          |  | 2009 |            |   | 2008 |  
|ASSETS                                                                                                                                                                                                                    |  |      |            |   |      |   |            |  
|CURRENT ASSETS:                                                                                                                                                                                                           |  |      |            |   |      |   |            |  
|Cash and cash equivalents                                                                                                                                                                                                 |  | $    | 45,125     |   |      | $ | 236,820    |  
|Deferred issuance costs                                                                                                                                                                                                   |  |      | 3,342      |   |      |   | 6,575      |  
|Income tax receivable                                                                                                                                                                                                     |  |      |           |   |      |   | 1,477      |  
|Prepaid and other current assets                                                                                                                                                                                          |  |      | 4,939      |   |      |   | 3,594      |  
|                                                                                                                                                                                                                          |  |      |            |   |      |   |            |  
|Total current assets                                                                                                                                                                                                      |  |      | 53,406     |   |      |   | 248,466    |  
|                                                                                                                                                                                                                          |  |     
|Property and equipment, net                                                                                                                                                                                               |  |      | 947,129    |   |      |   | 716,602    |  
|Intangible assets, net                                                                                                                                                                                                    |  |      | 362,304    |   |      |   | 359,013    |  
|Restricted cash                                                                                                                                                                                                           |  |      | 472        |   |      |   | 1,404      |  
|Deferred issuance costs                                                                                                                                                                                                   |  |      | 6,351      |   |      |   | 9,692      |  
|Other assets                                                                                                                                                                                                              |  |      | 6,000      |   |      |   | 6,000      |  
|                                                                                                                                                                                                                          |  |      |            |   |      |   |            |  
|Total assets                                                                                                                                                                                                              |  | $    | 1,375,662  |   |      | $ | 1,341,177  |  
|                                                                                                                                                                                                                          |  |      |            |   |      |   |            |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                      |  |      |            |   |      |   |            |  
|CURRENT LIABILITIES:                                                                                                                                                                                                      |  |      |            |   |      |   |            |  
|Accounts payable and accrued expenses                                                                                                                                                                                     |  | $    | 42,204     |   |      | $ | 17,375     |  
|Deferred rent and other current liabilities                                                                                                                                                                               |  |      | 1,730      |   |      |   | 1,517      |  
|Accrued satellite performance incentives                                                                                                                                                                                  |  |      | 19,350     |   |      |   |           |  
|Series A and Series B cumulative convertible preferred stock dividends payable                                                                                                                                            |  |      | 17,447     |   |      |   | 4,468      |  
|                                                                                                                                                                                                                          |  |      |            |   |      |   |            |  
|Total current liabilities                                                                                                                                                                                                 |  |      | 80,731     |   |      |   | 23,360     |  
|                                                                                                                                                                                                                          |  |     
|Deferred rent and other long-term liabilities                                                                                                                                                                             |  |      | 1,429      |   |      |   | 3,175      |  
|Accrued satellite performance incentives, net of current portion                                                                                                                                                          |  |      | 8,062      |   |      |   |           |  
|Deferred income taxes                                                                                                                                                                                                     |  |      | 23,364     |   |      |   | 13,039     |  
|TerreStar Notes including contingent interest derivative and accrued interest, thereon (net of discount as of December 31,
2009 of $48,528 and as of December 31, 2008 of $43,625)                                        |  |      | 791,930    |   |      |   | 671,884    |  
|TerreStar Exchangeable Notes and accrued interest, thereon (net of discount as of December 31, 2009 of $75,000 and as of
December 31, 2008 of $95,954)                                                                    |  |      | 94,729     |   |      |   | 63,176     |  
|TerreStar-2 Purchase Money Credit Agreement including contingent interest derivative and accrued interest,
thereon                                                                                                        |  |      | 67,914     |   |      |   | 36,755     |  
|                                                                                                                                                                                                                          |  |      |            |   |      |   |            |  
|Total liabilities                                                                                                                                                                                                         |  |      | 1,068,159  |   |      |   | 811,389    |  
|                                                                                                                                                                                                                          |  |      |            |   |      |   |            |  
|Commitments and Contingencies                                                                                                                                                                                             |  |      |            |   |      |   |            |  
|Series A Cumulative Convertible Preferred Stock ($0.01 par value, 450,000 shares authorized and 90,000 shares issued and
outstanding at December 31, 2009 and December 31, 2008)                                          |  |      | 90,000     |   |      |   | 90,000     |  
|Series B Cumulative Convertible Preferred Stock ($0.01 par value, 500,000 shares authorized and 318,500 shares issued and
outstanding at December 31, 2009 and December 31, 2008)                                         |  |      | 318,500    |   |      |   | 318,500    |  
|                                                                                                                                                                                                                          |  |     
|STOCKHOLDERS EQUITY:                                                                                                                                                                                                     |  |      |            |   |      |   |            |  
|TerreStar Corporation stockholders (deficit) equity:                                                                                                                                                                     |  |      |            |   |      |   |            |  
|Series C preferred stock ($0.01 par value, 1 share authorized and 1 share issued and outstanding at December 31, 2009 and
December 31, 2008)                                                                              |  |      |           |   |      |   |           |  
|Series D preferred stock ($0.01 par value, 1 share authorized and 1 share issued and outstanding at December 31, 2009 and
December 31, 2008)                                                                              |  |      |           |   |      |   |           |  
|Series E junior Convertible Preferred Stock ($0.01 par value, 1,900,000 shares authorized and 1,200,000 shares issued and
outstanding at December 31, 2009 and December 31, 2008)                                         |  |      | 12         |   |      |   | 12         |  
|Common stock; voting (par value $0.01; 240,000,000 shares authorized, 143,718,237 and 125,869,540 shares issued, 139,767,035 and
121,918,338 shares outstanding at December 31, 2009 and December 31, 2008, respectively) |  |      | 1,437      |   |      |   | 1,259      |  
|Additional paid-in capital                                                                                                                                                                                                |  |      | 1,292,425  |   |      |   | 1,220,161  |  
|Common stock purchase warrants                                                                                                                                                                                            |  |      | 11,999     |   |      |   | 55,809     |  
|Treasury stock (3,951,202 common shares held in treasury stock at December 31, 2009 and December 31,
2008)                                                                                                                |  |      | (73,877    | ) |      |   | (73,877    | )
|Accumulated other comprehensive income (loss)                                                                                                                                                                             |  |      | 2,300      |   |      |   | (70        | )
|Accumulated deficit                                                                                                                                                                                                       |  |      | (1,317,078 | ) |      |   | (1,082,006 | )
|                                                                                                                                                                                                                          |  |      |            |   |      |   |            |  
|Total TerreStar Corporation stockholders (deficit) equity                                                                                                                                                                |  |      | (82,782    | ) |      |   | 121,288    |  
|                                                                                                                                                                                                                          |  |      |            |   |      |   |            |  
|Noncontrolling interest in TerreStar Networks                                                                                                                                                                             |  |      | (17,925    | ) |      |   |           |  
|Noncontrolling interest in TerreStar Global                                                                                                                                                                               |  |      | (290       | ) |      |   |           |  
|                                                                                                                                                                                                                          |  |      |            |   |      |   |            |  
|Total stockholders (deficit) equity                                                                                                                                                                                      |  |      | (100,997   | ) |      |   | 121,288    |  
|                                                                                                                                                                                                                          |  |      |            |   |      |   |            |  
|Total liabilities and stockholders equity                                                                                                                                                                                |  | $    | 1,375,662  |   |      | $ | 1,341,177  |  
|                                                                                                                                                                                                                          |  |      |            |   |      |   |            |  

See accompanying Notes to Consolidated Financial Statements



F-4



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##### Table of Contents

TERRESTAR CORPORATION

Consolidated Statements of Operations

For the Years Ended December 31, 2009, 2008 and 2007

(In thousands,
except per share amounts)



|                                                                                                         |  |      |          |   |      |   |          |      |  |   |          |  
|-------------------------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                                                         |  | 2009 |          |   | 2008 |   |          | 2007 | 
|Revenue (including revenue-related party $2,290)                                                         |  | $    | 2,384    |   |      |   |         |      |  |   |         |  
|                                                                                                         |  |      |          |   |      |   |          |      |  |   |          |  
|Operating expenses:                                                                                      |  |      |          |   |      |   |          |      |  |   |          |  
|General and administrative (exclusive of depreciation and amortization)                                  |  |      | 67,359   |   |      | $ | 88,536   |      |  | $ | 114,848  |  
|Research and development (exclusive of depreciation and amortization)                                    |  |      | 69,882   |   |      |   | 73,560   |      |  |   | 43,067   |  
|Depreciation and amortization                                                                            |  |      | 24,028   |   |      |   | 22,479   |      |  |   | 18,222   |  
|Loss on impairment of intangibles                                                                        |  |      |         |   |      |   |         |      |  |   | 6,699    |  
|Loss (gain) on asset disposal                                                                            |  |      | 9        |   |      |   | 6,768    |      |  |   | (123     | )
|                                                                                                         |  |      |          |   |      |   |          |      |  |   |          |  
|Total operating expenses                                                                                 |  |      | 161,278  |   |      |   | 191,343  |      |  |   | 182,713  |  
|                                                                                                         |  |      |          |   |      |   |          |      |  |   |          |  
|Loss from operations                                                                                     |  |      | (158,894 | ) |      |   | (191,343 | )    |  |   | (182,713 | )
|                                                                                                         |  |      |         
|Other income (expense):                                                                                  |  |      |          |   |      |   |          |      |  |   |          |  
|Interest expense                                                                                         |  |      | (64,275  | ) |      |   | (54,764  | )    |  |   | (52,584  | )
|Interest income                                                                                          |  |      | 221      |   |      |   | 3,328    |      |  |   | 12,215   |  
|Other income                                                                                             |  |      | 832      |   |      |   | 827      |      |  |   | 325      |  
|Equity in losses of MSV                                                                                  |  |      |         |   |      |   |         |      |  |   | (7,338   | )
|Loss on investment in SkyTerra                                                                           |  |      |         |   |      |   | (126,224 | )    |  |   |         |  
|Other than temporary impairmentSkyTerra                                                                 |  |      |         |   |      |   |         |      |  |   | (106,800 | )
|Decrease in dividend liability                                                                           |  |      |         |   |      |   | 77,708   |      |  |   | 71,046   |  
|                                                                                                         |  |      |          |   |      |   |          |      |  |   |          |  
|Loss before income taxes                                                                                 |  |      | (222,116 | ) |      |   | (290,468 | )    |  |   | (265,849 | )
|Income tax (provision) benefit                                                                           |  |      | (2,369   | ) |      |   | 2,231    |      |  |   | 2,248    |  
|                                                                                                         |  |      |          |   |      |   |          |      |  |   |          |  
|Net loss                                                                                                 |  |      | (224,485 | ) |      | $ | (288,237 | )    |  | $ | (263,601 | )
|Less:                                                                                                    |  |      |          |   |      |   |          |      |  |   |          |  
|Net loss attributable to the noncontrolling interest in TerreStar Networks                               |  |      | 18,935   |   |      |   | 10,545   |      |  |   | 23,262   |  
|Net loss attributable to the noncontrolling interest in TerreStar Global                                 |  |      | 313      |   |      |   |         |      |  |   | 1,198    |  
|                                                                                                         |  |      |          |   |      |   |          |      |  |   |          |  
|Net loss attributable to TerreStar Corporation                                                           |  |      | (205,237 | ) |      |   | (277,692 | )    |  |   | (239,141 | )
|                                                                                                         |  |      |          |   |      |   |          |      |  |   |          |  
|Dividends on Series A and Series B cumulative convertible preferred stock                                |  |      | (25,293  | ) |      |   | (19,139  | )    |  |   | (23,232  | )
|Accretion of issuance costs associated with Series A and Series B cumulative convertible preferred stock |  |      | (4,542   | ) |      |   | (4,553   | )    |  |   | (4,542   | )
|                                                                                                         |  |      |          |   |      |   |          |      |  |   |          |  
|Net loss attributable to common stockholders                                                             |  | $    | (235,072 | ) |      | $ | (301,384 | )    |  | $ | (266,915 | )
|                                                                                                         |  |      |          |   |      |   |          |      |  |   |          |  
|Basic & Diluted Loss Per Share                                                                           |  | $    | (1.76    | ) |      | $ | (2.81    | )    |  | $ | (3.22    | )
|                                                                                                         |  |      |          |   |      |   |          |      |  |   |          |  
|Basic & Diluted Weighted-Average Common Shares Outstanding                                               |  |      | 133,476  |   |      |   | 107,179  |      |  |   | 83,016   |  
|                                                                                                         |  |      |          |   |      |   |          |      |  |   |          |  

See accompanying Notes to Consolidated Financial Statements



F-5



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##### Table of Contents

TERRESTAR CORPORATION

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2009, 2008 and 2007

(In thousands)



|                                                                                       |  |      |          |   |      |   |          |      |  |   |          |  
|-------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                                       |  | 2009 |          |   | 2008 |   |          | 2007 | 
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                  |  |      |          |   |      |   |          |      |  |   |          |  
|Net loss                                                                               |  | $    | (224,485 | ) |      | $ | (288,237 | )    |  | $ | (263,601 | )
|Adjustments to reconcile net loss to net cash used in continuing operating activities: |  |      |          |   |      |   |          |      |  |   |          |  
|Depreciation and amortization                                                          |  |      | 24,028   |   |      |   | 22,479   |      |  |   | 18,222   |  
|Write-off of deferred financing fees                                                   |  |      |         |   |      |   |         |      |  |   | 5,708    |  
|Equity in losses of MSV                                                                |  |      |         |   |      |   |         |      |  |   | 7,338    |  
|Loss on investment in SkyTerra                                                         |  |      |         |   |      |   | 126,224  |      |  |   |         |  
|Other than temporary impairment- SkyTerra                                              |  |      |         |   |      |   |         |      |  |   | 106,800  |  
|Loss (gain) on asset disposal                                                          |  |      | 9        |   |      |   | 6,768    |      |  |   | (123     | )
|Amortization of deferred issuance costs                                                |  |      | 6,418    |   |      |   | 5,029    |      |  |   | 1,778    |  
|Stock-based compensation                                                               |  |      | 7,086    |   |      |   | 4,480    |      |  |   | 25,069   |  
|Impairment of intangibles                                                              |  |      |         |   |      |   |         |      |  |   | 6,699    |  
|Deferred income taxes                                                                  |  |      | 2,369    |   |      |   |         |      |  |   |         |  
|Decrease in dividend liability                                                         |  |      |         |   |      |   | (77,708  | )    |  |   | (71,046  | )
|Changes in assets and liabilities:                                                     |  |      |          |   |      |   |          |      |  |   |          |  
|Income tax receivable                                                                  |  |      | 1,477    |   |      |   | (1,097   | )    |  |   | (380     | )
|Prepaid and other current assets                                                       |  |      | (1,382   | ) |      |   | 5,117    |      |  |   | (6,136   | )
|Accounts payable and accrued expenses                                                  |  |      | 14,751   |   |      |   | (18,597  | )    |  |   | 20,088   |  
|Other assets                                                                           |  |      |         |   |      |   | 817      |      |  |   | (6,817   | )
|Accrued interest                                                                       |  |      | 57,845   |   |      |   | 49,539   |      |  |   | 38,035   |  
|Deferred rent and other liabilities                                                    |  |      | (1,463   | ) |      |   | 1,876    |      |  |   | (1,546   | )
|Adjustment related to discontinued operating activities                                |  |      |         |   |      |   |         |      |  |   | (28      | )
|                                                                                       |  |      |          |   |      |   |          |      |  |   |          |  
|Net cash used in continuing operating activities                                       |  |      | (113,347 | ) |      |   | (163,310 | )    |  |   | (119,940 | )
|                                                                                       |  |      |          |   |      |   |          |      |  |   |          |  
|CASH FLOWS FROM CONTINUING INVESTING ACTIVITIES:                                       |  |      |          |   |      |   |          |      |  |   |          |  
|Proceeds from the sale of SkyTerra shares                                              |  |      |         |   |      |   | 199,083  |      |  |   |         |  
|Decrease in restricted cash and investments, net                                       |  |      | 932      |   |      |   | 2,049    |      |  |   | 45,423   |  
|Proceeds from assets held for sale                                                     |  |      |         |   |      |   |         |      |  |   | 500      |  
|Purchases of intangible assets                                                         |  |      | (187     | ) |      |   | (367     | )    |  |   | (734     | )
|Purchases of property and equipment                                                    |  |      | (101,106 | ) |      |   | (103,546 | )    |  |   | (290,611 | )
|Net cash provided by discontinued investing activities                                 |  |      |         |   |      |   | 2,009    |      |  |   | 3,667    |  
|                                                                                       |  |      |          |   |      |   |          |      |  |   |          |  
|Net cash (used in) provided by investing activities                                    |  |      | (100,361 | ) |      |   | 99,228   |      |  |   | (241,755 | )
|                                                                                       |  |      |          |   |      |   |          |      |  |   |          |  
|CASH FLOWS FROM CONTINUING FINANCING ACTIVITIES:                                       |  |      |          |   |      |   |          |      |  |   |          |  
|Proceeds from issuance of TerreStar notes and TerreStar exchangeable notes             |  |      |         |   |      |   | 195,732  |      |  |   | 500,000  |  
|Proceeds from TerreStar-2 purchase money credit agreement                              |  |      | 24,350   |   |      |   | 33,175   |      |  |   |         |  
|Proceeds from issuance of equity securities                                            |  |      |         |   |      |   |         |      |  |   | 6,708    |  
|Repayment of the Senior Secured Notes                                                  |  |      |         |   |      |   |         |      |  |   | (200,000 | )
|Payments for capital lease obligations                                                 |  |      | (70      | ) |      |   | (59      | )    |  |   | (37      | )
|Dividends paid on Series A and Series B cumulative convertible preferred stock         |  |      | (2,362   | ) |      |   | (13,086  | )    |  |   | (13,086  | )
|Debt issuance costs and other charges                                                  |  |      |         |   |      |   | (3,954   | )    |  |   | (14,421  | )
|                                                                                       |  |      |          |   |      |   |          |      |  |   |          |  
|Net cash provided by financing activities                                              |  |      | 21,918   |   |      |   | 211,808  |      |  |   | 279,164  |  
|                                                                                       |  |      |          |   |      |   |          |      |  |   |          |  
|Foreign exchange effect on cash and cash equivalents                                   |  |      | 95       |   |      |   | (40      | )    |  |   |         |  
|                                                                                       |  |      |          |   |      |   |          |      |  |   |          |  
|Net (decrease) increase in cash and cash equivalents                                   |  |      | (191,695 | ) |      |   | 147,686  |      |  |   | (82,531  | )
|CASH AND CASH EQUIVALENTS, beginning of period                                         |  |      | 236,820  |   |      |   | 89,134   |      |  |   | 171,665  |  
|                                                                                       |  |      |          |   |      |   |          |      |  |   |          |  
|CASH AND CASH EQUIVALENTS, end of period                                               |  |      | 45,125   |   |      | $ | 236,820  |      |  | $ | 89,134   |  
|                                                                                       |  |      |          |   |      |   |          |      |  |   |          |  

See accompanying Notes to Consolidated Financial Statements



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TERRESTAR CORPORATION

Consolidated Statements of Changes in Stockholders (Deficit) Equity

For the Years Ended December 31, 2009, 2008 and 2007

(In thousands, except per share amounts)



|                                                                                            |  |                                         |  |              |    |                          |            |   |                             |   |     |                |        |         |                                      |        |   |                    |   |  |                                            |   |  |                                          |         |   |       |   |     |   |  |   |          |   |  |   |         |   |  |   |        |   |  |   |          |  
|------------------------------------------------------------------------------------------- |  | --------------------------------------- |  | ------------ | -- | ------------------------ | ---------- | - | --------------------------- | - | --- | -------------- | ------ | ------- | ------------------------------------ | ------ | - | ------------------ | - |  | ------------------------------------------ | - |  | ---------------------------------------- | ------- | - | ----- | - | --- | - |  | - | -------- | - |  | - | ------- | - |  | - | ------ | - |  | - | -------- | -
|                                                                                            |  | Series EJuniorConvertiblePreferredStock |  | Common Stock |    | AdditionalPaid-InCapital |            |   | CommonStockPurchaseWarrants |   |     | Treasury Stock |        |         | AccumulatedOtherCompre-hensiveIncome |        |   | AccumulatedDeficit |   |  | NoncontrollingInterest inTerreStarNetworks |   |  | NoncontrollingInterest inTerreStarGlobal |         |   | Total |  
|                                                                                            |  | Shares                                  |  | ParValue     |    | Shares                   |            |   | ParValue                    |   |     |                | Shares |         |                                      | Amount |   |                    |   |  |                                            |  
|BALANCE, December 31, 2006                                                                  |  |                                        |  | $            |   |                          | 73,663,208 |   |                             | $ | 737 |                | $      | 631,973 |                                      |        | $ | 73,200             |   |  | (3,951,202                                 | ) |  | $                                        | (73,877 | ) |       | $ |     |   |  | $ | (513,707 | ) |  | $ | 68,617  |   |  | $ | 1,633  |   |  | $ | 188,576  |  
|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   |                                      |        |   |                   |   |  |                                           |   |  |                                          |        |   |       |   |    |   |  |   |         |   |  |   | (33,315 | ) |  |   | (486   | ) |  |   | (31,622  | )
|Common Stock issued for exercise of common stock purchase warrants                          |  |                                        |  |              |   |                          | 1,500,045  |   |                             |   | 15  |                |        | 13,607  |                                      |        |   | (9,103             | ) |  |                                           |   |  |                                          |        |   |       |   |    |   |  |   |         |   |  |   |        |   |  |   |       |   |  |   | 4,519    |  
|Stock based compensation expense                                                            |  |                                        |  |              |   |                          |           |   |                             |   |    |                |        | 25,253  |                                      |        |   |                   |   |  |                                           |   |  |                                          |        |   |       |   |    |   |  |   |         |   |  |   | 101     |   |  |   | 49     |   |  |   | 25,403   |  
|Restricted Stock forfeitures                                                                |  |                                        |  |              |   |                          | (20,000    | ) |                             |   |    |                |        | (42     | )                                    |        |   |                   |   |  |                                           |   |  |                                          |        |   |       |   |    |   |  |   |         |   |  |   |        |   |  |   |       |   |  |   | (42      | )
|Net loss                                                                                    |  |                                        |  |              |   |                          |           |   |                             |   |    |                |        |        |                                      |        |   |                   |   |  |                                           |   |  |                                          |        |   |       |   |    |   |  |   | (239,141 | ) |  |   | (23,262 | ) |  |   | (1,198 | ) |  |   | (263,601 | )
|Dividends on Series A and Series B Cumulative 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   | )
|Foreign Currency translation Adjustments                                                    |  |                                        |  |              |   |                          |           |   |                             |   |    |                |        |        |                                      |        |   |                   |   |  |                                           |   |  |                                          |        |   |       |   | 10  |   |  |   |         |   |  |   |        |   |  |   | 2      |   |  |   | 12       |  
|                                                                                            |  |                                         |  |              |    |                          |            |   |                             |   |     |                |        |         |                                      |        |   |                    |   |  |                                            |   |  |                                          |         |   |       |   |     |   |  |   |          |   |  |   |         |   |  |   |        |   |  |   |          |  
|BALANCE, December 31, 2007                                                                  |  |                                        |  |              |   |                          | 91,378,041 |   |                             |   | 914 |                |        | 806,195 |                                      |        |   | 64,097             |   |  | (3,951,202                                 | ) |  |                                          | (73,877 | ) |       |   | 10  |   |  |   | (780,622 | ) |  |   | 12,141  |   |  |   |       |   |  |   | 28,858   |  
|Dividends on Series A and Series B Cumulative 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 based compensation expense                                                            |  |                                        |  |              |   |                          |           |   |                             |   |    |                |        | 4,396   |                                      |        |   |                   |   |  |                                           |   |  |                                          |        |   |       |   |    |   |  |   |         |   |  |   | 85      |   |  |   |       |   |  |   | 4,481    |  
|Expiration of warrants                                                                      |  |                                        |  |              |   |                          |           |   |                             |   |    |                |        | 8,288   |                                      |        |   | (8,288             | ) |  |                                           |   |  |                                          |        |   |       |   |    |   |  |   |         |   |  |   |        |   |  |   |       |   |  |   |         |  
|Beneficial conversion feature                                                               |  |                                        |  |              |   |                          |           |   |                             |   |    |                |        | 10,923  |                                      |        |   |                   |   |  |                                           |   |  |                                          |        |   |       |   |    |   |  |   |         |   |  |   |        |   |  |   |       |   |  |   | 10,923   |  
|Exchange of Common Stock                                                                    |  |                                        |  |              |   |                          | 1,725,545  |   |                             |   | 17  |                |        | 9,211   |                                      |        |   |                   |   |  |                                           |   |  |                                          |        |   |       |   |    |   |  |   |         |   |  |   | (1,681  | ) |  |   |       |   |  |   | 7,547    |  
|Restricted Stock issued net of forfeitures                                                  |  |                                        |  |              |   |                          | 867,060    |   |                             |   | 9   |                |        | (9      | )                                    |        |   |                   |   |  |                                           |   |  |                                          |        |   |       |   |    |   |  |   |         |   |  |   |        |   |  |   |       |   |  |   |         |  
|Foreign currency 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 | ) |  |   | (10,545 | ) |  |   |       |   |  |   | (288,237 | )
|                                                                                            |  |                                         |  |              |    |                          |            |   |                             |   |     |                |        |         |                                      |        |   |                    |   |  |                                            |   |  |                                          |         |   |       |   |     |   |  |   |          |   |  |   |         |   |  |   |        |   |  |   |          |  



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##### Table of Contents

TERRESTAR CORPORATION

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

For the Years Ended December 31, 2009, 2008 and 2007

(In thousands,
except per share amounts)



|                                                                                            |  |                                         |  |              |    |                          |             |          |                             |       |  |                |           |   |                                      |   |         |                    |  |            |                                            |  |   |                                          |   |  |       |       |   |  |   |            |   |  |   |         |   |  |   |      |   |  |   |          |  
|------------------------------------------------------------------------------------------- |  | --------------------------------------- |  | ------------ | -- | ------------------------ | ----------- | -------- | --------------------------- | ----- |  | -------------- | --------- | - | ------------------------------------ | - | ------- | ------------------ |  | ---------- | ------------------------------------------ |  | - | ---------------------------------------- | - |  | ----- | ----- | - |  | - | ---------- | - |  | - | ------- | - |  | - | ---- | - |  | - | -------- | -
|                                                                                            |  | Series EJuniorConvertiblePreferredStock |  | Common Stock |    | AdditionalPaid-InCapital |             |          | CommonStockPurchaseWarrants |       |  | Treasury Stock |           |   | AccumulatedOtherCompre-hensiveIncome |   |         | AccumulatedDeficit |  |            | NoncontrollingInterest inTerreStarNetworks |  |   | NoncontrollingInterest inTerreStarGlobal |   |  | Total |      
|                                                                                            |  | Shares                                  |  | ParValue     |    | Shares                   |             | ParValue |                             |       |  | Shares         |           |   | Amount                               |   |         |                    |  |            |                                           
|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  |  
|Dividends on Series A and Series B Cumulative Preferred Stock                               |  |                                        |  |              |   |                          | 16,025,006  |          |                             | 160   |  |                | 9,791     |   |                                      |   |        |                    |  |           |                                            |  |   |                                         |   |  |       |      |   |  |   | (25,293    | ) |  |   |        |   |  |   |     |   |  |   | (15,342  | )
|Accretion of issuance costs on Series A and Series B Cumulative Convertible Preferred Stock |  |                                        |  |              |   |                          |             |          |                             |      |  |                |          |   |                                      |   |        |                    |  |           |                                            |  |   |                                         |   |  |       |      |   |  |   | (4,542     | ) |  |   |        |   |  |   |     |   |  |   | (4,542   | )
|Stock based compensation expense                                                            |  |                                        |  |              |   |                          |             |          |                             |      |  |                | 6,352     |   |                                      |   |        |                    |  |           |                                            |  |   |                                         |   |  |       |      |   |  |   |           |   |  |   | 723     |   |  |   | 11   |   |  |   | 7,086    |  
|Expiration of warrants                                                                      |  |                                        |  |              |   |                          |             |          |                             |      |  |                | 43,810    |   |                                      |   | (43,810 | )                  |  |           |                                            |  |   |                                         |   |  |       |      |   |  |   |           |   |  |   |        |   |  |   |     |   |  |   |         |  
|Beneficial conversion feature adjustment                                                    |  |                                        |  |              |   |                          |            |          |                             |      |  |                | 12,329    |   |                                      |   |        |                    |  |           |                                            |  |   |                                         |   |  |       |      |   |  |   |           |   |  |   |        |   |  |   |     |   |  |   | 12,329   |  
|Restricted Stock issued net of forfeitures                                                  |  |                                        |  |              |   |                          | 1,823,691   |          |                             | 18    |  |                | (18       | ) |                                      |   |        |                    |  |           |                                            |  |   |                                         |   |  |       |      |   |  |   |           |   |  |   |        |   |  |   |     |   |  |   |         |  
|Foreign currency translation Adjustments                                                    |  |                                        |  |              |   |                          |             |          |                             |      |  |                |          |   |                                      |   |        |                    |  |           |                                            |  |   |                                         |   |  |       | 2,370 |   |  |   |           |   |  |   | 287     |   |  |   | 12   |   |  |   | 2,669    |  
|Net loss                                                                                    |  |                                        |  |              |   |                          |             |          |                             |      |  |                |          |   |                                      |   |        |                    |  |           |                                            |  |   |                                         |   |  |       |      |   |  |   | (205,237   | ) |  |   | (18,935 | ) |  |   | (313 | ) |  |   | (224,485 | )
|                                                                                            |  |                                         |  |              |    |                          |             |          |                             |       |  |                |           |   |                                      |   |         |                    |  |            |                                            |  |   |                                          |   |  |       |       |   |  |   |            |   |  |   |         |   |  |   |      |   |  |   |          |  
|BALANCE, December 31, 2009                                                                  |  | 1,200,000                               |  | $            | 12 |                          | 143,718,237 |          | $                           | 1,437 |  | $              | 1,292,425 |   |                                      | $ | 11,999  |                    |  | (3,951,202 | )                                          |  | $ | (73,877                                  | ) |  | $     | 2,300 |   |  | $ | (1,317,078 | ) |  | $ | (17,925 | ) |  | $ | (290 | ) |  | $ | (100,997 | )
|                                                                                            |  |                                         |  |              |    |                          |             |          |                             |       |  |                |           |   |                                      |   |         |                    |  |            |                                            |  |   |                                          |   |  |       |       |   |  |   |            |   |  |   |         |   |  |   |      |   |  |   |          |  



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TERRESTAR CORPORATION

Notes to Consolidated Financial Statements

Note 1. Organization and Description of Business

General

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

TerreStar Networks, in cooperation with its Canadian partner, 4491165 Canada Inc, a majority-owned subsidiary of Trio 2 General Partnership (Trio), plans to launch an innovative wireless communications
system to provide mobile coverage throughout the United States and Canada using integrated satellite-terrestrial smartphones. This system build out will be based on an integrated satellite and ground-based technology intended to provide
communication service in most hard-to-reach areas and will provide a nationwide interoperable, survivable and critical communications infrastructure. We intend to provide multiple communications applications, including voice, data and video
services.

As of December 31, 2009, we had three wholly-owned subsidiaries, MVH Holdings Inc., Motient Holdings Inc., and
TerreStar Holdings Inc. Motient Ventures Holding Inc., a wholly-owned subsidiary of MVH Holdings Inc., directly holds approximately 89.0% and 86.5% interest in TerreStar Networks and TerreStar Global, respectively.

Going Concern, Liquidity and Capital Resources

In assessing our liquidity, we analyze our cash, our investments, anticipated revenue streams and our financing, operating and capital expenditure commitments, including preferred stock redemption
obligations. Our principal liquidity needs are to satisfy working capital requirements, operating expenses, capital expenditure, debt and preferred stock redemption obligations. Based on our current plans, there is substantial doubt that the
available cash balance, investments and available borrowing capacity as of December, 31, 2009 will be sufficient to satisfy the projected funding needs for all of 2010. We will likely require additional funding in the second quarter of 2010 unless
we are able to extend our obligations and commitments to future periods. We cannot guarantee that financing will be available or available on favorable terms. If we fail to obtain necessary financing on a timely basis, we may be forced to curtail
operations or take other actions that will impact our ability to conduct our operations as planned. Our 2009 financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of
assets and liabilities that may result from this uncertainty.

We are currently considering various alternatives to extend our
liquidity and raise capital. The redemption obligation under the Series A and Series B preferred stock may be satisfied by permitting the holders of such preferred stock, voting as a class, to elect a majority of our Board of Directors. We have also
commenced an exchange offer for our outstanding preferred stock as more fully described in Note 18. Further, we are evaluating other potential sources of funding including those described in Note 18.

Our principal sources of liquidity consist of our current cash balances, which includes advances of $30.0 million from our 1.4GHz
terrestrial spectrum lease agreement (Lease Agreement) received in January 2010, investments and credit available through our secured borrowing under TerreStar-2 Purchase Money Credit Agreement (Credit Agreement), of which
$42.5 million is available as of December 31, 2009 and which is available solely for construction and completion of our second satellite, TerreStar-2. As of December 31, 2009, we had $45.1 million of cash and cash equivalents and $0.5 million of
restricted cash. After giving effect to the net proceeds and advances available under the Lease Agreement and Credit Agreement, we have approximately $118.1 million of liquid resources available to fund operations.

Our short-term liquidity needs are principally related to our operating expenses, continuing commitments related to the design and
development of our handset and chipset, development of our ground based satellite infrastructure and the potential redemption obligation under our Series A and B Preferred Stock. As of



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December 31, 2009, we had contractual obligations of $562.2 million due within one year, consisting of approximately $429.9 million related to the redemption of Series A and B Preferred
Stock, which if not previously converted into shares of our common stock or if the holders have not been given the right to elect a majority of our Board of Directors, will be due on April 15, 2010, $51.5 million related to our satellite system,
$0.2 million related to interest or debt obligations, $76.1 million related to our handset, chipset, terrestrial network and orbital incentive payments related to our satellite contract and $4.5 million for operating leases.

We will require additional financing to fund operations and ongoing network development. As of December 31, 2009, we had aggregate
operational contractual payment obligations of approximately $212.2 million, consisting of approximately $119.2 million for the TerreStar Networks satellites and incentive payments; approximately $9.1 million for our operating leases in
Reston, Virginia, Lincolnshire, Illinois and Richardson Park, Texas, data centers, and site hosting agreements and approximately $83.9 million for obligations related to the build out of our terrestrial network and handset and chipset costs. The
ability to fund these costs will depend on our future performance, which is subject in part to the execution of post satellite launch activities, general economic, financial and regulatory conditions and other factors that are beyond our control,
including trends in the industry and technology developments. Also, we may not be able to obtain this additional financing on acceptable terms or at all. Additionally, the terms of our current financing and contractual arrangements include
significant limitations, among other factors, on our ability to incur additional debt, collateralize any additional new financing with our assets and the structure of any new financing transaction.

Description of the Business

TerreStar Networks Inc.

TerreStar Networks is our principal operating subsidiary. TerreStar Networks,
in cooperation with its Canadian partner, 4491165 Canada Inc, a majority-owned subsidiary of Trio 2 General Partnership (Trio), plans to launch an innovative wireless communications system to provide mobile coverage throughout the United
States and Canada using integrated satellite-terrestrial smartphones.

We successfully launched our first satellite
TerreStar-1 on July 1, 2009 and placed it into its assigned orbital slot in the geosynchronous arc, marking a significant milestone in offering the mobile satellite service (MSS) using frequencies in the 2GHz band. When
our MSS service is offered in conjunction with ancillary terrestrial component (ATC) service, we will provide an integrated satellite and terrestrial wireless communications network. The network will also allow a user to utilize a mobile
device that can communicate with a traditional land-based wireless network when in range of that network, but communicate with TerreStar-1 when not in range of such a land-based network or when such network is unavailable.

Our ability to offer MSS/ATC services depends on TerreStar Networks ability to maintain certain regulatory authorizations allowing it
to provide MSS/ATC in the S-band. We also 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.

TerreStar Networks, initially created as a subsidiary of SkyTerra, entered into an agreement with SkyTerras wholly-owned subsidiary,
ATC Technologies, LLC (ATC Technologies) pursuant to which TerreStar Networks has a perpetual, royalty-free license to utilize ATC Technologies patent portfolio in the S-band, including those patents related to ATC, which allows 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.

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. On January 13, 2010, TerreStar Networks was granted authority by the FCC to operate dual-mode mobile terminals that can be used to communicate either via TerreStars geosynchronous-orbit MSS satellite or
ancillary



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terrestrial component base stations. ATC base station operations were also authorized. These ATC authorizations provide 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. This may be achieved through a strategic partnership with one or more
other communications providers.

In September 2009, we entered into a Mobile Satellite Services and Support Agreement
with AT&T Mobility under which AT&T will offer certain of our satellite communications services initially to its government and enterprise customers. 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.

As of December 31, 2009, we owned approximately 89.0% of the outstanding shares of TerreStar Networks and have included the financial
results of TerreStar Networks for the purpose of consolidated financial statements.

Our Relationship with TerreStar Canada and 4491165
Canada

TerreStar Canada Holdings owns 80% of the voting equity of TerreStar Canada, which in turn holds the Industry
Canada approvals needed to operate TerreStar-1 for the purposes of providing mobile satellite services in Canada. We maintain our existing 20% of the voting equity of TerreStar Canada. TerreStar Canada holds legal title to the TerreStar-1
satellite and under the terms of an amended and restated Indefeasible Right of Use Agreement dated August 11, 2009 between TerreStar Networks and TerreStar Canada, TerreStar Networks has been granted a right to use up to ninety percent of the
capacity on the TerreStar-1 satellite.

In July 2009, Trio through 4491165 Canada Inc, a then wholly-owned
subsidiary of Trio, completed its acquisition of a 662/3% voting equity stake in TerreStar Canada Holdings previously held by 4371585 Canada Inc., a wholly-owned subsidiary of BCE Inc. We retain our existing 331/3% voting equity ownership in TerreStar Canada Holdings.

Our Relationship with 4491190 Canada

4491190 Canada Inc. ("RetailCo") is a Canadian registered entity established for the purpose of providing commercial MSS/ATC services in
Canada using the TerreStar-1 satellite and 2GHz terrestrial spectrum. On August 11, 2009, TerreStar Networks and 4491181 Canada Inc. (4491181 Canada) entered into a Shareholders Agreement pursuant to which TerreStar Networks
became the 20% holder of RetailCo Class A stock and 100% owner of RetailCo non-voting Class B stock. 4491181 Canada is under common ownership with 4491165 Canada. The Shareholders agreement grants TerreStar Networks some limited minority
shareholder rights and the ability to nominate one of five directors. In the event of a dilutive event including issuing a debt instrument, a share issuance or a share transfer or sale, TerreStar Networks has various options to maintain its relative
percentage ownership amounts. Such options include pre-emptive rights, right of first offer, co-sale, and drag along.

RetailCo has entered a Wholesale Satellite Capacity Agreement with TerreStar Canada whereby RetailCo has the right to use up to 10% of the capacity of TerreStar-1 on a per minute/per megabyte basis. RetailCo intends to enter into various
agreements to allow for the use of TerreStar Networks handsets in Canada and for the sale of end user devices in the Canadian market.



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RetailCo has entered a Rights and Services agreement under which it is expected to procure
some network and technical services from TerreStar Networks to facilitate the development and integration of its network with TerreStar Canada and TerreStar Networks.

TerreStar Global Ltd.

TerreStar Global was initially formed in 2005
as a wholly-owned subsidiary of TerreStar Networks. We have consolidated the financial results of TerreStar Global since its inception. In late 2006, TerreStar Corporation became the indirect majority holder of TerreStar Global. As of
December 31, 2009, we owned approximately 86.5% 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.

While TerreStar Europe was not awarded a 2 GHz MSS S-band spectrum authorization in the recent European Commission
proceeding, TerreStar Global continues to explore ways in which it can participate in the European market.

TerreStar Holdings
Inc.

TerreStar Holdings was formed in September 2009 as a wholly-owned subsidiary of TerreStar
Corporation. TerreStar 1.4 Holdings LLC, a Delaware limited liability company and wholly-owned subsidiary of TerreStar Holdings, holds the FCC licenses for certain 1.4GHz terrestrial spectrum and has entered into a lease of that spectrum with an
entity controlled by Harbinger. At December 31, 2009, TerreStar Corporations consolidated financial statements include TerreStar Holdings and its wholly-owned subsidiary TerreStar 1.4 Holdings LLC.

Note 2. Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements are prepared in accordance with
generally accepted accounting principles in the United States of America (GAAP). The consolidated financial statements include the accounts of TerreStar Corporation, the accounts of our majority-owned subsidiaries and TerreStar Canada, a
variable interest entity (VIE) for which we are the primary beneficiary. We consolidated the results of TerreStar Canada into our financial statements effective January 1, 2008. 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.

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.

In June 2009, the Financial Accounting Standards Board (FASB) established the Accounting Standards Codification as the source of authoritative GAAP recognized by the FASB. The
Codification is effective in the first interim and annual periods ending after September 15, 2009 and had no effect on our financial position or results of operations.



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Reclassifications

Certain reclassifications have been made to the prior years financial statements and notes thereto to conform to the current year presentation primarily relating to property and equipment
disclosures.

Use of Accounting Estimates

The preparation of financial statements in conformity with GAAP 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. The most significant estimates relate to the fair value of derivatives, stock-based
compensation, income taxes, long-lived assets, intangible assets and legal contingencies. Due to the inherent uncertainty involved in using estimates, actual results reported in future periods could differ from those estimates.

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

Our restricted cash at December 31, 2009, $0.5 million, primarily pertains to various operating lease and related security deposits. The restricted cash balance at December 31, 2008, $1.4 million, related to cash held in money
market escrow accounts in connection with our FCC Surety Bond and various leases and security deposits and asset purchase agreements. The carrying amount of the restricted cash approximates fair value due to short term maturities.

Fair Value Measurements

The carrying amounts of certain of our financial instruments, such as cash and cash equivalents, restricted cash, investments, receivables, accounts payable and accrued liabilities, approximate their fair values based on their short
maturities. The fair value of certain financial instruments such as our notes, exchangeable notes and related long-term debt, whose carrying value differs from the fair value are disclosed as additional information in the notes to the financial
statements. Refer Note 14 for details.

We adopted the FASBs accounting standard guidance for fair value measurements as
of January 1, 2008 for financial assets and liabilities and for certain non-financial assets and liabilities as of January 1, 2009. The standard establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring
fair value. These tiers include:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs other than quoted prices in active markets that are either directly or indirectly observable;

Level 3: Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions and
methodologies that result in managements best estimate of fair value.

Property and Equipment

We record property and equipment (P&E), including leasehold improvements at cost. P&E consists of costs associated with
our satellites and associated ground network infrastructure, lab, office and computer



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equipment, software, and leasehold improvements. The satellite and terrestrial network assets under construction primarily include materials, labor, equipment, satellite launch insurance premium
and interest related to the construction and development of our satellite and terrestrial network. Assets under construction are not depreciated until placed into service. As of December 31, 2009, we have not commenced the depreciation of
TerreStar-1 as it is determined not yet ready for its intended use. Repairs and maintenance costs that do not improve or extend the life of an asset are expensed as incurred. Interest capitalized in connection with the satellite and terrestrial
network assets under construction totaled $96.7 million and $60.6 million in 2009 and 2008, respectively.

We capitalize costs
incurred for software developed internally or purchased for internal use during the application development stage including design, installation and testing. 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, upgrades or modification costs that do not result in additional functionality are expensed as
incurred.

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
|Satellite and Terrestrial Network |  | 15 years                                     

Intangible Assets

Intangible assets primarily consist of Federal Communications Commission (FCC) spectrum licenses 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 and
financing transaction we entered in February 2008. Intangible assets that have finite useful lives are amortized over their estimated useful life of 15 years. We have also determined that certain of our FCC licenses have indefinite useful lives, and
as such, are not amortized.

Impairment of Long-Lived and Intangible Assets

We evaluate whether long-lived assets and finite-lived intangible assets are impaired, at least annually or whenever events or circumstances
indicate the carrying value of those assets may not be recoverable. For such assets, the 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.

Indefinite lived intangibles are not amortized and tested for impairment when circumstances indicate
the carrying value may not be recoverable, or at least annually. Our intangible assets with indefinite lives consist of 1.4GHz licenses. 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 determined that our 1.4GHz spectrum licenses, as of December 31, 2009, were not impaired.



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Income Taxes

We use the asset and liability method of accounting for income taxes. In 2007, we adopted the provisions of amendments to accounting standard guidance which clarify the accounting for uncertain tax
positions recognized in the financial statements. This amendment 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. We accrue interest and penalties related to unrecognized tax benefits in our provision for income taxes.

Deferred tax assets and liabilities recognized are measured using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to reverse. Significant accounting judgment is required in determining the provision for income taxes and deferred tax assets and liabilities. The actual result may differ from these estimates.

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 are open for our 2005, 2006,
2007 and 2008 returns. We are not aware of any issues for open years that upon examination by a taxing authority are expected to have a material effect on results of operations. As of December 31, 2009, we have fully reserved our deferred
income tax assets.

Revenue Recognition

On September 17, 2009, we entered into a Spectrum Manager Lease Agreement leasing the rights to use certain 1.4GHz terrestrial spectrum. The lease has an initial term through April 23, 2017,
renewable, at the lessees option, for two additional terms of ten years each, subject to FCC renewal of the licenses and no earlier termination. The lease payments due from the lessee are initially $1 million per month and will increase to $2
million per month no later than eight months after lease commencement and could increase to $2 million per month earlier depending upon the satisfaction of certain conditions. Subject to certain conditions, the lessee has an option, but not the
obligation, to purchase the licenses, subject to the approval of our Board and other necessary consents. The lessee also has a right of first refusal to match the price (less credit for certain amounts paid under the Spectrum Manager Lease
Agreement) in any potential transfer of the licenses to a third party.

In January 2010, we entered into an Exclusivity
Agreement with Harbinger wherein we received $30 million prepayment of lease payments under the Lease Agreement and in exchange, for a period of 90 days from the date of the Exclusivity Agreement, we would negotiate in good faith on an agreement to
lease our S-band spectrum. Additionally, the agreement imposes on us, certain solicitation restrictions for entering into any transaction regarding the S-band Spectrum with a third party during the 90 day period.

We recognize revenue when the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred; the sales
price is fixed or determinable; and collectability is reasonably assured. We recognize spectrum lease revenue over the term of the lease.

Research and Development Costs

The costs of research and development activities are expensed when incurred.
Research and development activities consist of time and material costs related to the development of our handset technology, integrated satellite and terrestrial communications network, salaries, wages and other related costs of personnel engaged in
research and development activities, and the costs of intangible assets that are purchased from others for use in research and development activities that have no alternative future uses.



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Loss per Share

Basic loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the reporting period. Diluted loss per share reflects the conversion of obligations
and the assumed issuing of securities computed using the if-converted method and the effects of shares issuable under our equity plans and warrants computed using the treasury method, if dilutive. We considered certain unvested restricted stock
which has non-forfeitable dividend rights as participating securities for the purpose of calculating basic loss per share.

Translation of
Foreign Currencies

The assets and liabilities of foreign subsidiaries are translated into U.S. dollars at year-end
exchange rates. Income and expense items are translated into U.S. dollars at average rates of exchange prevailing during the period. The gains and losses that result from this process are accumulated in a separate component of shareholders
equity.

Comprehensive Loss

Accumulated other comprehensive loss, consists solely of cumulative foreign currency translation adjustments. Reconciliation of comprehensive loss (net of taxes) for the year ended December 31, 2009
and 2008 are as follows:



|                                                                  |  |                |          |   |      |   |          |  
|----------------------------------------------------------------- |  | -------------- | -------- | - | ---- | - | -------- | -
|                                                                  |  | 2009           |          |   | 2008 |  
|                                                                  |  | (in thousands) |         
|Net Loss                                                          |  | $              | (224,485 | ) |      | $ | (288,237 | )
|Foreign currency translation adjustment                           |  |                | 2,669    |   |      |   | 70       |  
|                                                                  |  |                |          |   |      |   |          |  
|Comprehensive Loss                                                |  |                | (221,816 | ) |      |   | (288,167 | )
|                                                                  |  |                |          |   |      |   |          |  
|Less: Comprehensive loss attributable to noncontrolling interests |  |                | 18,949   |   |      |   | 10,545   |  
|                                                                  |  |                |          |   |      |   |          |  
|Comprehensive loss attributable to TerreStar Corporation          |  | $              | (202,867 | ) |      | $ | (277,622 | )
|                                                                  |  |                |          |   |      |   |          |  

Recently Issued Accounting Pronouncements

On January 1, 2009 we adopted authoritative guidance on fair value measurements for nonfinancial assets and nonfinancial liabilities,
except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The adoption of new guidance did not have a material impact on our consolidated financial statements.

Effective January 1, 2009, we adopted the FASB accounting standard update which provided guidance for determining whether an
equity-linked financial instrument (or embedded feature) is indexed to an entitys own stock. This update applies to any freestanding financial instrument or embedded feature that has all the characteristics of a derivative instrument or an
instrument which may be potentially settled in an entitys own stock regardless of whether the instrument possesses derivative characteristics and provides a two-step approach to assist in making these determinations. The adoption of this
guidance did not have any impact on our consolidated financial statements.

Effective January 1, 2009, we adopted the
FASB accounting standard update which addresses whether unvested instruments granted in share-based payment transactions that contain non forfeitable rights to dividends or dividend equivalents are participating securities subject to the two-class
method of computing earnings per share under the FASB authoritative guidance. The adoption of this update did not have a material impact on our consolidated financial statements.



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Effective April 1, 2009, we adopted three accounting standard updates which were
intended to provide additional application guidance and enhanced disclosures regarding fair value measurements and impairments of securities. The first update provides additional guidelines for estimating fair value in accordance with fair value
accounting. The second accounting update changes accounting requirements for other-than-temporary-impairment for debt securities by replacing the current requirement that a holder have the positive intent and ability to hold an impaired security to
recovery in order to conclude an impairment was temporary with a requirement that an entity conclude it does not intend to sell an impaired security and it will not be required to sell the security before the recovery of its amortized cost basis.
The third accounting update requires disclosure about fair value of financial instruments for interim reporting periods as well as in the annual financial statements. The adoption of these accounting updates did not have any impact on our
consolidated financial statements.

Effective April 1, 2009, we adopted a new accounting standard issued by the FASB for
subsequent events which establishes general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, this statement sets
forth (1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (2) the
circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and (3) the disclosures that an entity should make about events or transactions that occurred after
the balance sheet date. In February 2010, the FASB amended this new accounting standard to eliminate the disclosure requirement regarding the date through which subsequent events have been evaluated. The adoption of the new accounting standard
did not have a material impact on our consolidated financial statements.

In June 2009, the FASB issued an accounting standard
which requires an enterprise to perform an analysis to determine whether the enterprises variable interest or interests give it a controlling financial interest in a variable interest entity and to continuously assess whether they must
consolidate VIEs. This standard is effective for us beginning January 1, 2010. We are currently evaluating the impact, if any, of this standard on our consolidated financial statements.

In October 2009, the FASB issued an accounting guidance update related to revenue arrangements with multiple deliverables. The guidance
relates to the determination of when the individual deliverables included in a multiple-element arrangement may be treated as separate units of accounting and modifies the manner in which the consideration under the arrangement is allocated across
the individual deliverables. The guidance will be effective for us beginning on January 1, 2011, and may be applied retrospectively for all periods presented or prospectively to arrangements entered into or materially modified after the
adoption date. Early adoption is permitted provided that the guidance is retroactively applied to the beginning of the year of adoption. We are currently assessing the impact, if any, on our consolidated financial statements.

Concentrations of Credit Risk

Financial instruments, which potentially subject us to concentrations of credit risk, consist principally of cash and investments. We periodically invest our cash balances in temporary or overnight investments. Our short-term investments
have included 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,
2009, we had approximately $44.6 million in money market funds. To date, we have not experienced any losses on cash or investments.



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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.

In order to permit us to sell these SkyTerra shares, SkyTerra agreed to waive the 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 the dividend liability of $78 million due to a change in value of the shares, and 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 in the consolidated balance sheets 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.

Note 4. Property and Equipment

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



|                                       |  |                  |         |   |                  |   |         |  
|-------------------------------------- |  | ---------------- | ------- | - | ---------------- | - | ------- | -
|                                       |  | December 31,2009 |         |   | December 31,2008 |  
|                                       |  | (in thousands)   |        
|Assets Under Construction:             |  |                  |         |   |                  |   |         |  
|TerreStar-1                            |  | $                | 488,251 |   |                  | $ | 398,775 |  
|Satellite construction in progress     |  |                  | 234,619 |   |                  |   | 177,816 |  
|Terrestrial network under construction |  |                  | 205,793 |   |                  |   | 123,695 |  
|                                       |  |                  |         |   |                  |   |         |  
|                                       |  |                  | 928,663 |   |                  |   | 700,286 |  
|                                       |  |                  |         |   |                  |   |         |  
|Assets in Service:                     |  |                  |         |   |                  |   |         |  
|Network equipment                      |  |                  | 2,446   |   |                  |   | 2,420   |  
|Lab equipment                          |  |                  | 19,098  |   |                  |   | 11,401  |  
|Office equipment and software          |  |                  | 7,140   |   |                  |   | 6,549   |  
|Leasehold improvements                 |  |                  | 2,963   |   |                  |   | 2,963   |  
|                                       |  |                  |         |   |                  |   |         |  
|                                       |  |                  | 31,647  |   |                  |   | 23,333  |  
|Less accumulated depreciation          |  |                  | (13,181 | ) |                  |   | (7,017  | )
|                                       |  |                  |         |   |                  |   |         |  
|Property and equipment, net            |  | $                | 947,129 |   |                  | $ | 716,602 |  
|                                       |  |                  |         |   |                  |   |         |  

The asset under construction includes $185.3 million and $88.6 million respectively, of interest capitalized
as of December 31, 2009 and 2008.



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Depreciation expense for the years ended December 31, 2009, 2008 and 2007 was $6.2
million, $4.7 million and $2.6 million, respectively.

Note 5. Orbital Performance Incentives

Our contract with the TerreStar-1 manufacturer requires us to make future in-orbit performance incentive payments over the design life of
TerreStar-1 effective upon our acceptance of TerreStar-1 on August 31, 2009. These satellite performance incentives are payable in future periods ranging from one to fifteen years dependent on the continued satisfactory performance of the
satellite. We recorded the net present value of these expected future payments as a liability and as a component of the cost of the satellite. As of December 31, 2009, we have a liability of $27.4 million recorded relating to satellite
performance incentives, of which $19.3 million and $8.1 has been classified as current and non-current, respectively.

Note 6.
Intangible Assets

Intangible assets as of December 31, 2009 and 2008 are presented in the table below.



|                                      |  |                  |         |   |                  |   |         |  
|------------------------------------- |  | ---------------- | ------- | - | ---------------- | - | ------- | -
|                                      |  | December 31,2009 |         |   | December 31,2008 |  
|                                      |  | (in thousands)   |        
|Indefinite lived intangibles          |  |                  |         |   |                  |   |         |  
|1.4GHz spectrum licenses              |  | $                | 177,480 |   |                  | $ | 156,520 |  
|Definite lived intangibles            |  |                  |         |   |                  |   |         |  
|2GHz licenses                         |  |                  | 209,302 |   |                  |   | 209,143 |  
|Intellectual Property                 |  |                  | 36,935  |   |                  |   | 36,907  |  
|                                      |  |                  |         |   |                  |   |         |  
|                                      |  |                  | 246,237 |   |                  |   | 246,050 |  
|Less accumulated amortization         |  |                  | (61,413 | ) |                  |   | (43,557 | )
|                                      |  |                  |         |   |                  |   |         |  
|Definite lived intangible assets, net |  |                  | 184,824 |   |                  |   | 202,493 |  
|                                      |  |                  |         |   |                  |   |         |  
|Intangible assets, net                |  | $                | 362,304 |   |                  | $ | 359,013 |  
|                                      |  |                  |         |   |                  |   |         |  

Amortization expense related to our definite lived intangibles for the years ended December 31, 2009,
2008 and 2007 was $17.9 million, $17.7 million and $15.7 million, respectively. Based on the current intangibles subject to amortization, the estimated amortization expense for each of the succeeding years from 2010 to 2014 is $17.9 million; and
cumulatively thereafter $95.5 million.

Note 7. Accounts Payable and Accrued Expenses

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



|                                     |  |                |        |      |   |       
|------------------------------------ |  | -------------- | ------ | ---- | - | ------
|                                     |  | December 31,  
|                                     |  | 2009           |        | 2008
|                                     |  | (In thousands)
|Accounts payable                     |  | $              | 34,931 |      | $ | 10,886
|Accrued compensation and benefits    |  |                | 2,065  |      |   | 2,591 
|Accrued consulting expenses          |  |                | 2,815  |      |   | 1,855 
|Accrued legal expenses               |  |                | 664    |      |   | 861   
|Accrued operating and other expenses |  |                | 1,729  |      |   | 1,182 
|                                     |  |                |        |      |   |       
|                                     |  | $              | 42,204 |      | $ | 17,375
|                                     |  |                |        |      |   |       



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Note 8. Long-Term Debt

February 2008 Financing Transactions

On February 7, 2008, TerreStar
Corporation and TerreStar Networks entered into a series of separate agreements with EchoStar Corporation, Harbinger and other investors constituting a commitment of $300 million in investments in TerreStar Corporation and TerreStar Networks, with
$200 million made available at the close of the transaction and the balance made available to fund the construction of the TerreStar-2 satellite as required. Additionally, in June 2008, we consummated the purchase of 1.4 GHz spectrum licenses from
EchoStar and Harbinger.

We recorded these transactions as an integrated transaction for accounting purposes. In exchange for
the net cash proceeds received of $191.0 million and the spectrum licenses, we issued common stock of $265.8 million and debt with a face value of $200.0 million. The accounting for these transactions resulted in an aggregate debt discount of $141.9
million, a beneficial conversion feature of $23.6 million and a deferred tax liability of $21.0 million for the book and tax basis differences on the spectrum licenses. These amounts reflect the adjustments recorded in 2009 related to this
transaction as described below.

During the fourth quarter of 2009, we identified certain errors in the initial recording of
the integrated transaction that impacted prior periods. The cumulative effect of correcting these errors was recorded in the three months ended December 31, 2009. The correction of these errors resulted in an increase to the spectrum licenses and
deferred tax liability of $21.0 million and $7.9 million, respectively. The correction of these errors also increased the beneficial conversion feature by $12.3 million and decreased the aggregate debt discount by $3.5 million. In connection with
this adjustment, we also corrected certain errors in the capitalization of interest related to this transaction which resulted in an increase in assets under construction (for capitalized interest) of $1.4 million. The correction of these errors had
the effect of understating interest expense by $1.4 million and overstating interest expense by $1.3 million for the three and twelve months ended December 31, 2009, respectively. We believe that the effects of these errors was not material to the
consolidated financial statements for any prior interim or annual period nor was the impact material to the consolidated financial statements for the three months and year ended December 31, 2009. Accordingly, the retroactive adjustment of
previously issued financial statements is unnecessary.

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
$41.9 million dollars. The debt discount is being accreted using the effective interest method over the six year term of the TerreStar Notes.

The TerreStar Notes bear interest from the date of issuance at a rate of 15% per annum. Per the provisions of the TerreStar Notes, additional interest of up to 1.5% per annum may accrue if
certain milestones are not met by TerreStar. We are required to account for the potential interest rate adjustments, in accordance with FASB authoritative guidance relating to derivatives. Accordingly, we estimated the value of the contingent
interest derivative using a discounted cash flow analysis considering the probability of different scenarios for satisfying



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the milestone requirements under the terms of the TerreStar Notes, to estimate the interest rate to be incurred, compared to the stated base interest rate of 15.0% per annum. At
December 31, 2009 the carrying amount of TerreStar Notes includes $3.0 million relating to the fair value of the contingent interest derivative.

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 semi-annually, 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, 2009, certain milestones continue to not be met under the
Notes agreement and, accordingly, our current interest rate is 16% per annum.

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 $972.1 million as of December 31, 2009, consisting primarily of satellites under construction, property and equipment and cash and cash equivalents.

During 2009 and 2008, $114.2 and $87.7 million of interest was paid-in-kind as additional TerreStar Notes, respectively, in accordance with covenants under the Indenture. As of December 31, 2009 and
2008, the carrying value of the TerreStar Notes, net of discount including the contingent interest derivative and accrued interest, was $791.9 million and $671.9 million, respectively.

During the third quarter of 2009, we identified and recorded adjustments to recognize contingent interest derivatives that should have been
recognized in financial statements for prior periods. The cumulative effect of correcting this error was recorded in the financial statements for the three months ended September 30, 2009. The adjustment to correct the error had the effect of
overstating interest expense by $2.8 million and $4.8 million for the three months ended September 30, 2009 and the twelve months ended December 31, 2009, respectively. The adjustment also resulted in an increase in assets under construction of $2.6
million (for capitalized interest) and an increase in debt by $4.5 million as of September 30, 2009. We believe that the effects of this error was not material to the consolidated financial statements for any prior interim or annual period, nor was
the impact material to the consolidated financial statements for the three months ended September 30, 2009 or the year ended December 31, 2009. Accordingly, the retroactive adjustment of previously issued financial statements is unnecessary.

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.



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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 integrated transaction accounting related to the TerreStar Exchangeable Notes, a debt discount was recorded that is being accreted over the six year term of the TerreStar Exchangeable Notes.

During 2009 and 2008, $10.6 million and $8.7 million of interest was paid-in-kind as additional TerreStar Exchangeable Notes, respectively,
in accordance with the TerreStar Exchangeable Notes Indenture. As of December 31, 2009 and 2008, the carrying value of the TerreStar Exchangeable Notes, net of discount including accrued interest, was $94.7 million and $63.2 million,
respectively.

Beneficial Conversion Feature

The effective conversion rate of the TerreStar Exchangeable Notes after considering the debt discount, as compared to the fair market value of the common stock on the date of commitment, represents a
beneficial conversion feature. Thus, as part of integrated transaction, we recorded an additional discount to the TerreStar Exchangeable Notes, with a corresponding increase in additional paid-in capital.

TerreStar-2 Purchase Money Credit Agreement

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

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

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

According to the provisions of the
Credit Agreement, additional interest of up to 3% may accrue if certain milestones are not met by TerreStar Networks. The interest rate adjustment was recorded as contingent interest derivative. As of December 31, 2009 and 2008, the
carrying value of the Credit Agreement, net of discount, including the contingent interest derivative and accrued interest, was $67.9 million and $36.8 million, respectively. At December 31, 2009, certain milestones continue to not be met under
the Credit Agreement accordingly our current interest rate was 17% per annum. On January 13, 2010, we met these milestones under the Credit Agreement, thereby reducing the interest rate to 14% per annum prospectively from this date.

Leases

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



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Rent expense totaled approximately $6.1 million, $10.8 million and $2.9 million for the
years ended December 31, 2009, 2008 and 2007, 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, $0.3 million and $0.2
million for the years ended December 31, 2009, 2008 and 2007, respectively.

Note 9. Stockholders Equity

As of December 31, 2009, we had 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

In 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. In 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 TerreStar Global was approximately 89% and 86.5%, respectively, as of
December 31, 2009.

Shares Reserved for Future Issuances

As of December 31, 2009, we reserved common stock for future issuance, as detailed below:



|                                                   |  |           
|-------------------------------------------------- |  | ----------
|Shares issuable upon exercise of warrants          |  | 433,364   
|Shares issuable upon conversion of preferred stock |  | 42,255,956
|Shares issuable for Exchangeable Notes             |  | 33,051,620
|Shares issuable upon exercise of options           |  | 6,164,785 
|                                                   |  |           
|Total                                              |  | 81,905,725
|                                                   |  |           

Preferred Stock

As of December 31, 2009, we had 5.0 million authorized shares of preferred stock, consisting of 0.5 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. See Note 18 for Subsequent Events concerning our preferred Stock.

Series A and B Preferred Stock

We account for the Series A and Series B Redeemable Convertible Preferred Stock (Series A and B Preferred) as temporary equity. In April 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. 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
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | 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, 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.

In October 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 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 exchanged their shares in this offer. Accordingly, approximately $318.5 million in the face amount



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of Series A Preferred shares were exchanged for Series B Preferred shares of the same face amounts and $90 million in face amount of Series A Preferred shares remain outstanding.

Dividends on Series A and B Preferred Shares

Dividends on Series A and B Preferred 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 the ongoing litigation with certain investors. We recorded dividends amounting to $25.3 million, $19.1 million and $23.2
million for the year ended December 31, 2009, 2008 and 2007 respectively, towards the Series A and B Preferred Stock. Per the terms of the issuance, on April 15, 2010, we have a redemption obligation of $408.5 million in principal plus
unpaid dividends, if the Series A and B Preferred are not converted into shares of our common stock on or before the redemption date or we may provide the holders with the right to elect a majority of our Board of Directors.

Series C and D Preferred Stock

In February 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 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.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Series E Junior Participating Preferred Stock

In June 2008, we issued 1.2 million shares of our Series E preferred stock to Harbinger, convertible into 30 million shares of our
common stock. 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).

Exchange Offer

On
October 9, 2009, we, commenced an offer to exchange our Series A, B, C, D and E preferred stock for newly issued Series F Preferred Stock and Series G Junior Preferred Stock of TerreStar Holdings Inc., our 100% owned subsidiary, subject to
certain conditions. In connection with this offer, we are soliciting consents to certain proposed amendments to the certificate of designation of our Series B preferred stock. The initial offer was amended for certain provisions in the offer
and currently the exchange offer will expire on April 2, 2010, unless extended or terminated prior to such date.

Common Stock
Purchase Warrants

As of December 31, 2009, there were approximately 0.4 million fully vested warrants
exercisable for our common stock outstanding.

The following table summarizes our warrant activity as of December 31,
2009.



|                                 |  |            |   |  |                                          |      
|-------------------------------- |  | ---------- | - |  | ---------------------------------------- | -----
|TerreStar Corporation            |  | Warrants   |   |  | Weighted-average exerciseprice per share
|Outstanding at January 1, 2009   |  | 3,210,039  |   |  | $                                        | 10.23
|Granted                          |  |           |   |  |                                          |     
|Canceled                         |  | (2,776,675 | ) |  |                                          | 8.11 
|Exercised                        |  |           |   |  |                                          |     
|                                 |  |            |   |  |                                          |      
|Outstanding at December 31, 2009 |  | 433,364    |   |  | $                                        | 23.86
|                                 |  |            |   |  |                                          |      

The outstanding warrants as of December 31, 2009
have a term of five years and expire in April 2010.

Variable Interest Entities

In July 2009, Trio through 4491165 Canada Inc., a then wholly-owned subsidiary of Trio, completed its acquisition of a 662/3% voting equity stake in TerreStar Canada Holdings previously held
by 4371585 Canada Inc., a wholly-owned subsidiary of BCE Inc., (a Canadian corporation). We retain our existing 331/3% voting equity ownership in TerreStar Canada Holdings.

TerreStar Canada Holdings owns 80% of the
voting equity of TerreStar Canada, which in turn holds the Industry Canada approvals needed to launch and operate TerreStar-1 for the purposes of providing mobile satellite services in Canada. We also maintain our existing 20% holding of the
voting equity of TerreStar Canada. TerreStar Canada holds legal title to TerreStar-1 and under the terms of an amended and restated Indefeasible Right of Use Agreement dated August 11, 2009 between TerreStar Networks and TerreStar Canada,
TerreStar Networks has been granted a right to use capacity on the TerreStar-1 satellite.



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As per the terms of TerreStar Canada Shareholders Agreement, we do not have ability to
make unilateral decisions regarding operation of TerreStar Canada or the utilization of its assets or incurrence of indebtedness. We have no negative approval rights with respect to appointment or termination of senior officers or creation of
budgets for TerreStar Canada or TerreStar Canada Holdings. Also per the agreement, subject to certain change of control provisions, we are 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. Neither 4491165 Canada Inc nor Trio has any obligation to provide financial support to TerreStar Canada Holdings or TerreStar Canada.

TerreStar Canada is subject to foreign ownership restrictions imposed by the Telecommunications Act (Canada) and the
Radiocommunication Act (Canada) and regulations made pursuant to these Acts. The shareholders agreement relating to TerreStar Canada permits its shareholders to transfer their shares in certain circumstances, provided that all such share
transfers are made to parties that are eligible to hold such shares under the restrictions or are otherwise carried out in accordance with the restrictions. Although we believe that TerreStar Canada is in compliance with the relevant legislation,
there can be no assurance that a future determination by regulatory authorities, or events beyond its control, will not result in TerreStar Canada ceasing to comply with the relevant legislation. If such a development were to occur, the ability of
TerreStar Canada to operate as a Canadian carrier under the Telecommunications Act (Canada) or to maintain, renew or secure its Industry Canada approval could be jeopardized and our business could be materially adversely affected.

We consider TerreStar Canada a variable interest entity under the FASBs authoritative guidance for VIE. We determine TerreStar
Networks to be the primary beneficiary of TerreStar Canada, in which we hold an effective 46.6% interest, based on our historical and contractual obligation to fund the operations of TerreStar Canada and accordingly include TerreStar Canada in the
consolidated financial statements.

Our current maximum direct financial exposure to loss includes the historical investment
in TerreStar Canada and intercompany receivables from TerreStar Canada. Creditors of TerreStar Canada have no recourse or rights to our assets or general credit. As of December 31, 2009 TerreStar Canada has no debt or financing arrangements
with any third parties. Subject to certain limitations, we can exercise our contractual rights to prevent TerreStar Canada from undertaking business activities that may expose them to undue financial or other business risks.

Non-Controlling Interests

On January 1, 2009, we adopted the accounting standard issued by the FASB which required reporting for minority interests by re-characterizing them as non-controlling interests and classifying them as a component of equity in the
consolidated balance sheet. As required by this standard, the consolidated statements of operations are adjusted to include the net loss attributed to the non-controlling interest and the prior year consolidated financial statements have been
reclassified to conform to the current years presentation. Prior to the January 1, 2009 the noncontrolling interest had been reduced to zero, therefore we had no beginning balance of the noncontrolling interests at January 1,
2009. The adoption of this standard did not have a material impact on our consolidated financial statements.

Note 10. Employee
Benefit Plans

Summary

We offer stock options and other long-term equity based incentive awards to the employees, directors and other service providers. We account for stock-based compensation based on fair value measured at
the grant date and recognize as expense over the related service period. 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



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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, 2009, we now offer stock options and other long-term incentive
awards under the following two plans to eligible persons:



| |  |  | the 2006 TerreStar Corporation Equity Incentive Plan (the 2006 Plan); and
| | - |  | ---------------------------------------------------------------------------



| |  |  | the TerreStar Global Ltd. 2007 Share Incentive Plan (the Global Plan).
| | - |  | ------------------------------------------------------------------------

Our stock based compensation expense is included in the following line items in the consolidated statement of operations for the periods
indicated (in thousands) for the awards outstanding under the 2006 Plan and the Global Plan:



|                               |  |      |       |      |   |       |  |   |       
|------------------------------ |  | ---- | ----- | ---- | - | ----- |  | - | ------
|                               |  | 2009 |       | 2008 |   | 2007 
|General and administrative     |  | $    | 7,086 |      | $ | 4,195 |  | $ | 23,772
|Research and development       |  |      |      |      |   | 285   |  |   | 1,297 
|                               |  |      |       |      |   |       |  |   |       
|Total stock-based compensation |  | $    | 7,086 |      | $ | 4,480 |  | $ | 25,069
|                               |  |      |       |      |   |       |  |   |       

As of December 31, 2009, the total unrecognized stock
compensation expense was approximately $3.5 million. The weighted average contractual remaining life of our outstanding stock options is 7.62 years.

2006 TerreStar Corporation Equity Incentive 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, 2009, approximately
2.6 million shares remain available to be issued under the Plan.

The fair value of each option was estimated on the
grant date using the Black-Scholes option pricing model. The expected volatility was based on the historical volatility of our common stock for a period of time commensurate with the expected term of the options. We determined the expected life
based on an analysis of historical exercise and forfeiture behavior as well as expectations about future behavior. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the grant date for a period of time commensurate
with the expected term of the options.

The following table summarizes the fair values and weighted average assumptions
related to the stock option grants under the 2006 Plan.



|                        |  |      |              |   |      |   |              |      |  |   |             |  
|----------------------- |  | ---- | ------------ | - | ---- | - | ------------ | ---- |  | - | ----------- | -
|Grant dates             |  | 2009 |              |   | 2008 |   |              | 2007 | 
|Grant date fair value   |  | $    | 0.42  $1.01 |   |      | $ | 0.33  $1.78 |      |  | $ | 5.09  6.68 |  
|Assumptions:            |  |      |              |   |      |   |              |      |  |   |             |  
|Risk-free interest rate |  |      | 2.2%  3.0   | % |      |   | 1.6%  3.4   | %    |  |   | 4.3%  4.6  | %
|Expected volatility     |  |      | 81.3%  90.5 | % |      |   | 57%  70     | %    |  |   | 60.0        | %
|Expected dividend yield |  |      |             |   |      |   |             |      |  |   |            |  
|Expected term (years)   |  |      | 6.5          |   |      |   | 1.0  6.0    |      |  |   | 5.50  5.83 |  



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##### Table of Contents

Stock Option Awards

The following tables summarize our stock option activity under the 2006 Plan for 2009:



|                                 |  |                         |   |  |                                          |       |                                        |  
|-------------------------------- |  | ----------------------- | - |  | ---------------------------------------- | ----- | -------------------------------------- | -
|                                 |  | Options toacquireshares |   |  | Weighted-average exerciseprice per share |       | AggregateIntrinsic Value(in thousands)
|Outstanding at January 1, 2009   |  | 8,037,385               |   |  | $                                        | 11.23 |                                        | 
|Granted                          |  | 1,198,207               |   |  |                                          | 1.31  |                                        | 
|Cancelled/Forfeited              |  | (2,749,302              | ) |  |                                          | 11.07 |                                        | 
|Exercised                        |  |                        |   |  |                                          |      |                                        | 
|                                 |  |                         |   |  |                                          |       |                                        |  
|Outstanding at December 31, 2009 |  | 6,486,290               |   |  |                                          | 9.46  |                                        | 
|                                 |  |                         |   |  |                                          |       |                                        |  
|Exercisable at December 31, 2009 |  | 4,744,892               |   |  | $                                        | 11.48 |                                        | 
|                                 |  |                         |   |  |                                          |       |                                        |  



|                               |  |                         |   |  |                                       |     
|------------------------------ |  | ----------------------- | - |  | ------------------------------------- | ----
|                               |  | Options toacquireshares |   |  | Weighted-Average GrantDate Fair Value
|Nonvested at January 1, 2009   |  | 1,158,142               |   |  | $                                     | 0.38
|Granted                        |  | 1,198,207               |   |  |                                       | 0.57
|Cancelled                      |  | (30,875                 | ) |  |                                       | 6.68
|Vested                         |  | (584,076                | ) |  |                                       | 5.86
|                               |  |                         |   |  |                                       |     
|Nonvested at December 31, 2009 |  | 1,741,398               |   |  | $                                     | 2.22
|                               |  |                         |   |  |                                       |     

Restricted Stock Awards

The fair value of restricted stock awards is based on the stock price at the date of grant. Restricted stock awards generally vest over three
years and are settled in shares of TerreStar Corporation common stock.

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



|                               |  |                   |   |  |                                       |     
|------------------------------ |  | ----------------- | - |  | ------------------------------------- | ----
|TerreStar Corporation          |  | Restricted Shares |   |  | Weighted-average grantdate fair value
|Nonvested at January 1, 2009   |  | 889,060           |   |  | $                                     | 4.15
|Granted                        |  | 1,895,833         |   |  |                                       | 0.75
|Cancelled                      |  | (72,142           | ) |  |                                       | 2.09
|Vested                         |  | (425,822          | ) |  |                                       | 4.33
|                               |  |                   |   |  |                                       |     
|Nonvested at December 31, 2009 |  | 2,286,929         |   |  | $                                     | 1.35
|                               |  |                   |   |  |                                       |     

The following table provides information about options
under the 2006 Plan that are outstanding and exercisable as of December 31, 2009:



|                      |  |                       |  |                                          |  |                      
|--------------------- |  | --------------------- |  | ---------------------------------------- |  | ---------------------
|                      |  | Options Outstanding   |  | Options Exercisable                     
|Exercise Prices Range |  | As ofDecember 31,2009 |  | WeightedAverageContractual LifeRemaining |  | As ofDecember 31,2009
|$0.21  0.77          |  | 1,064,614             |  | 8.4 years                                |  | 192,505              
|$1.31  4.26          |  | 406,098               |  | 9.6 years                                |  |                     
|$8.85  11.95         |  | 4,726,578             |  | 7.4 years                                |  | 4,272,387            
|$12.03  13.35        |  | 120,000               |  | 7.2 years                                |  | 111,000              
|$23.15  28.70        |  | 169,000               |  | 5.3 years                                |  | 169,000              
|                      |  |                       |  |                                          |  |                      
|                      |  | 6,486,290             |  |                                          |  | 4,744,892            
|                      |  |                       |  |                                          |  |                      



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##### Table of Contents

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 3.8 million shares of common stock in the form of options or other equity-based incentive awards to directors, officers, employees and service providers. Under this plan, as of December 31, 2009, there were 1.6 million
options outstanding, of which 1.1 million options were exercisable. The weighted average exercise price of options outstanding and exercisable was $0.42 and the weighted average grant date fair value of options outstanding and exercisable was
$0.29. There were no options granted, cancelled or exercised during the year ended December 31, 2009. The Stock based compensation expense recorded during 2009 pertaining to the Global plan was $0.1 million.

WarrantsTerreStar Global

During 2009, no additional warrants were issued under TerreStar Global. The outstanding warrants-TerreStar Global as on December 31, 2009 related to July 2007 TerreStar Global warrants issued to its
board and former board members. These warrants vested immediately and expire in July 2012, or earlier if fully exercised or otherwise cancelled per the warrant agreements terms.

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



|                |  |                       |  |                                          |  |                      
|--------------- |  | --------------------- |  | ---------------------------------------- |  | ---------------------
|                |  | Warrants Outstanding  |  | Exercisable                             
|Exercise Prices |  | As ofDecember 31,2009 |  | WeightedAverageContractual LifeRemaining |  | As ofDecember 31,2009
|$0.42           |  | 553,100               |  | 2.52 years                               |  | 553,100              

Defined Contribution Plan

In March 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 was approximately $478,000, $677,000, and $700,000 for 2009, 2008 and 2007, respectively.



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Note 11. Income Taxes

The provision (benefit) for income taxes is comprised of:



|                            |  |                |       |      |   |        |      |  |   |        |  
|--------------------------- |  | -------------- | ----- | ---- | - | ------ | ---- |  | - | ------ | -
|                            |  | December 31    |      
|                            |  | 2009           |       | 2008 |   |        | 2007 | 
|                            |  | (in thousands) |      
|Current                     |  |                |       |      |   |        |      |  |   |        |  
|Federal                     |  | $              |      |      | $ | (2,231 | )    |  | $ | (2,248 | )
|State                       |  |                |      |      |   |       |      |  |   |       |  
|                            |  |                |      
|Deferred                    |  |                |       |      |   |        |      |  |   |        |  
|Federal                     |  |                | 2,033 |      |   |       |      |  |   |       |  
|State                       |  |                | 336   |      |   |       |      |  |   |       |  
|                            |  |                |       |      |   |        |      |  |   |        |  
|Total tax expense (benefit) |  | $              | 2,369 |      | $ | (2,231 | )    |  | $ | (2,248 | )
|                            |  |                |       |      |   |        |      |  |   |        |  

The income tax expense for the year ended December 31, 2009 mainly pertains to a change in the deferred
tax liability established in 2008 related to the indefinite lived intangible spectrum license asset. We recorded income tax benefit 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 full amount of the tax asset related to AMT credits as a result of a capital loss carryback.

The components of the net deferred tax liability are as follows:



|                                                               |  |                |          |   |      |   |          |  
|-------------------------------------------------------------- |  | -------------- | -------- | - | ---- | - | -------- | -
|                                                               |  | December 31,   |         
|                                                               |  | 2009           |          |   | 2008 |  
|                                                               |  | (in thousands) |         
|Deferred tax assets:                                           |  |                |          |   |      |   |          |  
|Net operating loss, capital loss and AMT credit carry forwards |  | $              | 223,157  |   |      | $ | 526,151  |  
|Stock-based compensation                                       |  |                | 12,724   |   |      |   | 17,721   |  
|Capitalized expenses                                           |  |                | 102,134  |   |      |   | 98,876   |  
|High yield debt interest                                       |  |                | 76,186   |   |      |   | 44,759   |  
|Other                                                          |  |                | 13,144   |   |      |   | 2,132    |  
|                                                               |  |                |          |   |      |   |          |  
|Total deferred tax assets                                      |  |                | 427,345  |   |      |   | 689,639  |  
|                                                               |  |                |          |   |      |   |          |  
|Less valuation allowance                                       |  |                | (231,901 | ) |      |   | (513,861 | )
|                                                               |  |                |          |   |      |   |          |  
|Deferred tax assets, net of valuation allowance                |  |                | 195,444  |   |      |   | 175,778  |  
|                                                               |  |               
|Deferred tax liabilities:                                      |  |                |          |   |      |   |          |  
|Tangible asset basis, lives and depreciation methods           |  |                | 75,948   |   |      |   | 50,377   |  
|Definite lived intangibles                                     |  |                | 71,444   |   |      |   | 75,354   |  
|Indefinite lived intangible                                    |  |                | 23,364   |   |      |   | 13,039   |  
|Debt discount                                                  |  |                | 48,052   |   |      |   | 50,047   |  
|                                                               |  |                |          |   |      |   |          |  
|Total deferred tax liabilities                                 |  |                | 218,808  |   |      |   | 188,817  |  
|                                                               |  |                |          |   |      |   |          |  
|Total net deferred tax liability                               |  | $              | (23,364  | ) |      | $ | (13,039  | )
|                                                               |  |                |          |   |      |   |          |  

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income
during the periods in which those temporary differences become deductible. Our net deferred tax assets, excluding the indefinite lived intangible deferred tax liability, at December 31, 2009 and 2008, 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, 2009, we
had estimated net operating loss carry forwards (NOLs) of $583 million. In 2002, due to the debt restructuring and reorganization, and also in 2004 and 2006, we triggered a change of



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control for tax purposes, which limits the availability and utilization of the NOLs. As a result of this limitation, approximately $702 million of our NOLs will expire unused and have been
excluded from the ending NOL balance in deferred taxes as of December 31, 2009. In addition, $15 million of our NOLs expired as of December 31, 2009 due to the carry forward period limitation. Our remaining NOLs expire between 2010 and
2029. We realized a capital loss of $198.9 million in 2008. A portion of the capital loss recorded in 2008 was carried back to offset capital gains recorded in 2006. The remaining capital loss carry forward of approximately $124 million as of
December 31, 2009, will expire in 2013.

The reconciliation between our effective tax rate on income from continuing
operations and the statutory tax rate is as follows:



|                                  |  |       |    |  |       |   |  |       |  
|--------------------------------- |  | ----- | -- |  | ----- | - |  | ----- | -
|                                  |  | 2009  |    |  | 2008  |   |  | 2007  |  
|Statutory federal income tax rate |  | 35.0  | %  |  | 35.0  | % |  | 35.0  | %
|Permanent differences             |  | (7.2  | )  |  | 6.1   |   |  | (5.4  | )
|Valuation allowance               |  | (28.4 | )  |  | (36.8 | ) |  | (29.9 | )
|Other                             |  | (0.4  | )  |  | (3.5  | ) |  | 1.2   |  
|                                  |  |       |    |  |       |   |  |       |  
|Effective income tax rate         |  | (1.0  | )% |  | 0.8   | % |  | 0.9   | %
|                                  |  |       |    |  |       |   |  |       |  

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 carry forward position in the U.S., the tax years from 1994 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 state and local tax statutes of limitation.

The change in unrecognized tax benefits under relevant
accounting standard guidance is shown in the table below (in thousands).



|                                                                 |  |      |   |      |   |         |      |  |   |       
|---------------------------------------------------------------- |  | ---- | - | ---- | - | ------- | ---- |  | - | ------
|                                                                 |  | 2009 |   | 2008 |   |         | 2007
|Opening balance                                                  |  | $    |  |      | $ | 12,100  |      |  | $ |      
|Increase (decrease) related to positions taken in current period |  |      |  |      |   | (12,100 | )    |  |   | 12,100
|                                                                 |  |      |   |      |   |         |      |  |   |       
|Ending balance of unrecognized tax benefits                      |  | $    |  |      | $ |        |      |  | $ | 12,100
|                                                                 |  |      |   |      |   |         |      |  |   |       

We accrue interest and penalties related to
unrecognized benefits in our provision for incomes taxes. We do not expect a significant change in the unrecognized tax liabilities in the next 12 months.

Note 12. Loss per Share

The computation of net loss per share for the year
ended December 31, 2009, 2008 and 2007 is shown below:



|                                           |  |                                      |          |   |      |   |          |      |  |   |          |  
|------------------------------------------ |  | ------------------------------------ | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                           |  | 2009                                 |          |   | 2008 |   |          | 2007 | 
|                                           |  | (In thousands except per share data) |         
|Loss per Share (Basic and Diluted):        |  |                                      |          |   |      |   |          |      |  |   |          |  
|Net Loss available to Common Stockholders  |  | $                                    | (235,072 | ) |      | $ | (301,384 | )    |  | $ | (266,915 | )
|Weighted-Average Common Shares Outstanding |  |                                      | 133,476  |   |      |   | 107,179  |      |  |   | 83,016   |  
|Basic and Diluted net loss per share       |  | $                                    | (1.76    | ) |      | $ | (2.81    | )    |  | $ | (3.22    | )

For the year ended
December 31, 2009, 72.7 million dilutive shares calculated on an if converted basis for the Series A and B Preferred, Series E preferred stock and TerreStar Exchangeable Notes and 2.3 million shares of unvested restricted stock
were excluded from the calculation of diluted loss per share since their effect would have been anti-dilutive. Shares issuable under the equity plans and upon exercise of warrants outstanding were also anti-dilutive, since we incurred a net loss for
the year ended December 31, 2009, 2008 and 2007.



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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, 2009, TerreStar Corporation had $408.5 million of its Series A and B preferred stock
principal amount outstanding. If not converted or repaid, the entire preferred stock redemption amount will be due on April 15, 2010. Dividend payments 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. We anticipate paying the Series A and Series B dividends in common stock.

We had the following contractual commitments as of December 31, 2009.



|                                           |  |                |           |        |   |         |  |         |         |        |   |           |  |   |       
|------------------------------------------ |  | -------------- | --------- | ------ | - | ------- |  | ------- | ------- | ------ | - | --------- |  | - | ------
|                                           |  | TOTAL          |           | < 1 yr |   | 1-3 yrs |  | 4-5 yrs |         | 5+ yrs
|                                           |  | (in thousands)
|Satellites(a)                              |  | $              | 119,249   |        | $ | 51,540  |  | $       | 32,219  |        | $ | 4,121     |  | $ | 31,369
|Leases                                     |  |                | 9,053     |        |   | 4,465   |  |         | 4,540   |        |   | 48        |  |   |      
|Network, capital equipment and services(b) |  |                | 83,905    |        |   | 76,101  |  |         | 7,804   |        |   |          |  |   |      
|Preferred stock obligations                |  |                | 429,947   |        |   | 429,947 |  |         |        |        |   |          |  |   |      
|Debt obligations                           |  |                | 1,776,654 |        |   | 150     |  |         | 520,063 |        |   | 1,256,441 |  |   |      
|                                           |  |                |           |        |   |         |  |         |         |        |   |           |  |   |       
|                                           |  | $              | 2,418,808 |        | $ | 562,203 |  | $       | 564,626 |        | $ | 1,260,610 |  | $ | 31,369



|(a) | The amount excludes in-orbit incentives.
|--- | ----------------------------------------

|(b) | The cost of certain development efforts are shared with other operators. We could incur additional commitments related to those efforts in the event
that one or more of those operators discontinued their participation.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 are referred to collectively as 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). Of the remaining three lawsuits, the first was dismissed by the trial court, reinstated by the court of appeals, and is currently proceeding before the trial court; the second has been stayed; and the third is in
the discovery stage. In addition, we have filed two suits against Mr. Dondero and the Dondero Affiliates. One was dismissed on the defendants motion (and is not further discussed herein), and the other is scheduled for trial in May
2010.

The suit filed by the Dondero Affiliates that was reinstated 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 ordered most of the claims remanded to the trial court. We filed a petition for review with the Supreme Court of Texas, which was denied on September 25, 2009. We believe that these claims are without merit, and we intend
vigorously to defend against this suit, which is set for trial in October 2010.

The Dondero Affiliates suit that
was stayed is 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. On October 14, 2008, the court granted our motion to dismiss based on res judicata (due to the



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Texas trial courts dismissal of the Rescission Litigation) and denied the plaintiffs request for leave to amend their complaint. On May 7, 2009, in light of the Texas Court
of Appeals March 2009 decision in the Rescission Litigation that reversed, in part, the trial courts summary judgment, the court granted the Dondero Affiliates motion to renew its opposition to our motion to dismiss and reinstated
the lawsuit. However, at a June 18, 2009 hearing, the court stayed proceedings in the lawsuit until certain proceedings conclude in the Rescission Litigation in Texas that are related to the claims in this lawsuit. We believe that these claims
are without merit, and, if the court revives the lawsuit in the future, we intend vigorously to defend against this suit.

The
Dondero Affiliates suit that is in the discovery 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 Corporation (EchoStar), and other investors constituted a
change in control of TerreStar Corporation under the Series A Preferred Stocks certificate of designations. The Dondero Affiliates allege that this change of control occurred in at least two ways: (i) they allege that Harbinger
acquired control of 58% of TerreStar Corporations voting stock; and (ii) they allege that 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. The parties are currently engaged in discovery. We believe that these claims are without merit and intend vigorously to defend against this suit.

On October 19, 2005, we filed a petition in a Texas state court in Dallas County, alleging that Mr. Dondero seriously and
repeatedly breached his fiduciary duties as a director 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 dismissal of a federal
securities lawsuit filed by us had a res judicata effect that precluded 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 trial court,
where it has now been set for trial in December 2010.

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 FCC; the case has been administratively closed. The case remains stayed pending a final decision by the FCC.

*    *    *



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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.

Note 14. Fair Value of Financial Instruments

We record certain financial
assets and liabilities at fair value. Our financial assets and liabilities measured at fair value on a recurring basis, which are subject to the disclosure requirements under the fair value measurement standard, at December 31, 2009 were as
follows:



|                                         |  |                                                         |        |                                             |   |                                        |   |                             |  |   |       
|---------------------------------------- |  | ------------------------------------------------------- | ------ | ------------------------------------------- | - | -------------------------------------- | - | --------------------------- |  | - | ------
|                                         |  | Fair Value Measurements at Reporting Date Using        
|(In thousands)                           |  | Quoted Prices inActive MarketsIdentical Assets(Level 1) |        | Significant OtherObservable Inputs(Level 2) |   | SignificantUnobservableInputs(Level 3) |   | Total as ofDecember 31,2009
|Financial assets:                        |  |                                                         |        |                                             |   |                                        |   |                             |  |   |       
|Money market funds                       |  | $                                                       | 40,610 |                                             |  |                                        |   |                            |  | $ | 40,610
|                                         |  |                                                         |        |                                             |   |                                        |   |                             |  |   |       
|Total assets measured at fair value      |  | $                                                       | 40,610 |                                             |  |                                        |   |                            |  | $ | 40,610
|                                         |  |                                                         |        |                                             |   |                                        |   |                             |  |   |       
|Financial liabilities:                   |  |                                                         |        |                                             |   |                                        |   |                             |  |   |       
|Contingent interest derivatives          |  |                                                         |       |                                             |  |                                        | $ | 3,040                       |  | $ | 3,040 
|                                         |  |                                                         |        |                                             |   |                                        |   |                             |  |   |       
|Total liabilities measured at fair value |  |                                                         |       |                                             |  |                                        | $ | 3,040                       |  | $ | 3,040 
|                                         |  |                                                         |        |                                             |   |                                        |   |                             |  |   |       

The following table represents our financial assets
and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during 2009:



|                                                                     |  |                              |        |  
|-------------------------------------------------------------------- |  | ---------------------------- | ------ | -
|(In thousands)                                                       |  | ContingentInterestDerivative |       
|Balance at December 31, 2008                                         |  | $                            |       |  
|Recognition of contingent interest derivative liability (See Note 8) |  |                              | 6,907  |  
|Changes in fair value of contingent interest derivative liability    |  |                              | (3,867 | )
|                                                                     |  |                              |        |  
|Balance at December 31, 2009                                         |  | $                            | 3,040  |  

The following are the
financial instruments recorded in the consolidated financial statements at carrying value as of the reporting periods presented, for which the fair value was determined based on the authoritative guidance for fair value measurements:



|                                                                                                                   |  |                         |         |                         |   |                 |  |            |         |  |   |        
|------------------------------------------------------------------------------------------------------------------ |  | ----------------------- | ------- | ----------------------- | - | --------------- |  | ---------- | ------- |  | - | -------
|                                                                                                                   |  | As of December 31, 2009 |         | As of December 31, 2008
|(In thousands)                                                                                                     |  | Carrying Amount         |         | Fair Value              |   | Carrying Amount |  | Fair Value
|TerreStar Notes including contingent interest derivative and accrued interest, thereon (net of discounts)          |  | $                       | 791,930 |                         | $ | 770,488         |  | $          | 671,884 |  | $ | 333,145
|TerreStar Exchangeable Notes and accrued interest, thereon (net of discounts)                                      |  | $                       | 94,729  |                         | $ | 135,597         |  | $          | 63,176  |  | $ | 30,757 
|TerreStar-2 Purchase Money Credit Agreement including contingent interest derivative and accrued interest,
thereon |  | $                       | 67,914  |                         | $ | 62,418          |  | $          | 36,755  |  | $ | 27,537 

We hold money market
fund investments that are classified as either cash equivalents or restricted cash that are measured at fair value on a recurring basis, based on quoted prices in active markets for identical assets. We



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determined that there exists no active market for the TerreStar Notes, Exchangeable Notes and debt under the TerreStar-2 Purchase Money Credit Agreement. Therefore, we used the discounted cash
flow (DCF) model as the primary quantitative valuation technique for disclosing fair value of debt as of December 31, 2009.

In developing the valuation model, we determined expected cash flows, expected period coupon rate, market yield, and principal repayments as key inputs. Under the model, the fair market value of each instrument was 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. In addition, the model also considered the
factors applicable to take into account the credit risk underlying the debt.

Note 15. Related Party Transactions

One Dot Four Corp.

During September 2009, we entered into a Spectrum Manager Lease Agreement with One Dot Four Corp., an affiliate of Harbinger Capital Partners Master Fund I, Ltd., which, along with its affiliates, is a significant investor in the Company,
to lease certain 1.4GHz spectrum for use throughout the United States. The initial lease term continues through April 2017, renewable, at lessees option, for two additional terms of ten years each, subject to FCC renewal of the licenses and to
early termination under various conditions. We received $3.0 million towards spectrum lease payments during 2009 and recorded $2.3 million as spectrum lease revenue in the consolidated statement of operations.

In January 2010, we entered into an Exclusivity Agreement with Harbinger where we received $30 million prepayment of lease payments under
the Spectrum Manager Lease Agreement and in exchange, for a period of 90 days from the date of the Exclusivity Agreement, we would negotiate in good faith on an agreement for our S-band spectrum. Additionally, the agreement imposes on us, certain
solicitation restrictions for entering into any transaction regarding the S-band Spectrum with third party during the 90 days period.

ATC Technologies, LLC

ATC Technologies is a subsidiary of SkyTerra. We sold our remaining interest in
SkyTerra in September 2008. For the years ended December 31, 2008 and 2007, we recorded costs of $0.6 million and $0.6 million, respectively, to related parties. All of those costs were paid to ATC Technologies for intellectual property related
services.



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Note 16. Supplemental Cash Flows Information

Supplemental cash flow information for the years ended December 31, 2009, 2008 and 2007 is presented in the table below.



|                                                                              |  |                |         |      |   |         |  |   |        
|----------------------------------------------------------------------------- |  | -------------- | ------- | ---- | - | ------- |  | - | -------
|                                                                              |  | 2009           |         | 2008 |   | 2007   
|                                                                              |  | (in thousands)
|Non-cash investing and financing activities                                   |  |                |         |      |   |         |  |   |        
|Accrued property and equipment purchases                                      |  | $              | 14,025  |      | $ | 1,303   |  | $ | 8,554  
|Accrued satellite performance incentives                                      |  |                | 26,206  |      |   |        |  |   |       
|Interest capitalized on satellites and terrestrial network under construction |  |                | 96,673  |      |   | 60,618  |  |   | 27,652 
|Assets acquired under capital lease                                           |  |                |        |      |   |        |  |   | 193    
|Acquisition of intangible assets                                              |  |                |        |      |   | 164,175 |  |   | 89,621 
|Acquisition of SkyTerra shares through exchange of MSV                        |  |                |        |      |   |        |  |   | 177,618
|Deferred financing fees accrued                                               |  |                |        |      |   |        |  |   | 916    
|Accretion of issuance costs on Series A and Series B Preferred Stock          |  |                | 4,542   |      |   | 4,553   |  |   | 4,542  
|Paid-in-kind interest                                                         |  |                | 131,521 |      |   | 99,978  |  |   | 37,708 
|Stock dividend to Series B Preferred Shareholders                             |  |                | 9,951   |      |   | 9,953   |  |   | 9,953  
|Dividend liability accrued but not paid                                       |  |                | 12,979  |      |   | 3,900   |  |   | 193    
|Expiration of common stock warrants                                           |  |                | 43,810  |      |   |        |  |   |       
|Acquisition of noncontrolling interest funded by issuance of common stock     |  |                |        |      |   | 1,573   |  |   | 33,801 
|                                                                              |  |                |        
|Supplemental Cash Flows Information                                           |  |                |         |      |   |         |  |   |        
|Interest paid                                                                 |  | $              |        |      | $ |        |  | $ | 7,034  
|Income taxes paid                                                             |  | $              |        |      | $ |        |  | $ | 5,713  

Note 17. Quarterly and Other
Financial Data (unaudited)

The following tables present selected quarterly financial data for 2009 and 2008:



|                                                             |              |                                              |         |               |  |   |              |   |  |               |         |   |  |   |         |  
|------------------------------------------------------------ | ------------ | -------------------------------------------- | ------- | ------------- |  | - | ------------ | - |  | ------------- | ------- | - |  | - | ------- | -
|                                                             |              | 2009                                         |        
|                                                             | FirstQuarter |                                              |         | SecondQuarter |  |   | ThirdQuarter |   |  | FourthQuarter |        
|                                                             |              | (In thousands, except for per share amounts) |        
|Revenue                                                      |              | $                                            |        |               |  | $ |             |   |  | $             |        |   |  | $ | 2,384   |  
|Operating expenses                                           |              | $                                            | 35,952  |               |  | $ | 41,932       |   |  | $             | 39,326  |   |  | $ | 44,068  |  
|Loss before income taxes                                     |              |                                              | (49,463 | )             |  |   | (57,543      | ) |  |               | (56,714 | ) |  |   | (58,396 | )
|Net loss                                                     |              |                                              | (49,463 | )             |  |   | (58,544      | ) |  |               | (57,479 | ) |  |   | (58,999 | )
|Net loss attributable to TerreStar Corporation               |              |                                              | (44,531 | )             |  |   | (52,624      | ) |  |               | (52,019 | ) |  |   | (56,063 | )
|Net loss attributable to common stockholders                 |              |                                              | (52,077 | )             |  |   | (60,002      | ) |  |               | (59,585 | ) |  |   | (63,408 | )
|Basic and Diluted loss per share                             |              | $                                            | (0.43   | )             |  | $ | (0.44        | ) |  | $             | (0.43   | ) |  | $ | (0.46   | )
|Basic and Diluted weighted-average common shares outstanding |              |                                              | 121,051 |               |  |   | 134,611      |   |  |               | 137,154 |   |  |   | 138,329 |  



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|                                                             |  |                                              |          |   |               |   |         |              |  |   |               |   |  |   |         |  
|------------------------------------------------------------ |  | -------------------------------------------- | -------- | - | ------------- | - | ------- | ------------ |  | - | ------------- | - |  | - | ------- | -
|                                                             |  | 2008                                         |         
|                                                             |  | FirstQuarter                                 |          |   | SecondQuarter |   |         | ThirdQuarter |  |   | FourthQuarter |  
|                                                             |  | (In thousands, except for per share amounts) |         
|Operating expenses                                           |  | $                                            | 67,194   |   |               | $ | 57,280  |              |  | $ | 31,876        |   |  | $ | 34,993  |  
|Loss before income taxes                                     |  |                                              | (103,704 | ) |               |   | (68,884 | )            |  |   | (64,220       | ) |  |   | (53,660 | )
|Net loss                                                     |  |                                              | (102,950 | ) |               |   | (68,884 | )            |  |   | (64,220       | ) |  |   | (52,183 | )
|Net loss attributable to TerreStar Corporation               |  |                                              | (94,574  | ) |               |   | (66,715 | )            |  |   | (64,220       | ) |  |   | (52,183 | )
|Net loss attributable to common stockholders                 |  |                                              | (101,499 | ) |               |   | (73,640 | )            |  |   | (71,219       | ) |  |   | (55,026 | )
|Basic and Diluted loss per share                             |  | $                                            | (1.14    | ) |               | $ | (0.75   | )            |  | $ | (0.59         | ) |  | $ | (0.45   | )
|Basic and Diluted weighted-average common shares outstanding |  |                                              | 88,698   |   |               |   | 97,676  |              |  |   | 121,051       |   |  |   | 121,051 |  



|(1) | Loss per share calculations for each of the quarters in 2009 and 2008 is based on the weighted average number of shares outstanding for each of the
periods.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | See Note 8 for discussion of the correction of certain immaterial errors relating to prior periods recorded during the three months ended September 30,
2009 and December 31, 2009.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Note 18. Subsequent Events

We evaluated all material events or transactions that occurred after the consolidated balance sheet date as of December 31, 2009. During
this period, we did not have any material subsequent events except as noted below:

On October 9, 2009, we, commenced an
offer to exchange our Series A, B, C D & E preferred stock for newly issued Series F Preferred Stock and Series G Junior Preferred Stock of TerreStar Holdings Inc., our 100% owned subsidiary, subject to certain conditions. In connection
with this offer, we are soliciting consents to certain proposed amendments to the certificate of designation of our Series B preferred stock. The initial offer was amended for certain provisions in the offer and currently the exchange offer will
expire on April 2, 2010, unless extended or terminated prior to such date.

On January 13, 2010, the FCC granted us
authority to integrate terrestrial use of TerreStar's 20 MHz S Band spectrum into its next generation mobile wireless network. We intend to use this authority to enhance coverage, capacity and throughput in its integrated mobile satellite and
terrestrial communications network that will provide ubiquitous North American access to voice and data services through conventional wireless devices. The FCC also granted a number of technical waivers requested by us that will permit us to
integrate ATC capability more efficiently.

In January 2010, we entered into an Exclusivity Agreement with Harbinger wherein
we received $30 million prepayment of lease payments under the Lease Agreement and in exchange, for a period of 90 days from the date of the Exclusivity Agreement, we would negotiate in good faith on an agreement for our S-band spectrum.
Additionally, the agreement imposes on us, certain solicitation restrictions for entering into any transaction with third party regarding the S-band Spectrum during the 90 days period.

On March 9, 2010, we received notification from The NASDAQ Stock Markets Listing Qualifications Department (NASDAQ)
that for the last 30 consecutive business days the bid price of our common stock on The NASDAQ Global Market has closed below the minimum $1.00 per share required for continued inclusion under NASDAQ Marketplace Rule 5450(a)(1) (Minimum Share
Price Rule). In the event we do not regain compliance with the Minimum Share Price Rule by September 7, 2010, NASDAQ will provide written notification that our common stock will be delisted from The NASDAQ Global Market. At that time, we
may appeal NASDAQs determination to delist our common stock to a NASDAQ Listing Qualifications Panel.



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