<PAGE>
                                UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                  FORM 10-Q/A
                                Amendment No. 1


/x/ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
             Act of 1934 for the period ended March 31, 2005, or


    / / Transition report pursuant to Section 13 or 15(d) of the Securities
                             Exchange Act of 1934

                       Commission file number 000-13865

                         SKYTERRA COMMUNICATIONS, INC.
            (Exact name of registrant as specified in its charter)

<TABLE>
<CAPTION>

<S>                                                                               <C>
                 Delaware                                                         23-2368845
(State or other jurisdiction of incorporation or organization)         (I.R.S. Employer Identification Number)
</TABLE>


             19 West 44th Street, Suite 507
                New York, New York                               10036
         (Address of principal executive offices)              (Zip Code)

      Registrant's telephone number, including area code: (212) 730-7540

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 periods that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.

                                Yes /x/ No / /

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

                                Yes / / No /x/


Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).

                         Yes / /      No /x/

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

As of November 9, 2005, 8,718,309 shares of the registrant's voting common
stock and 8,990,212 shares of the registrant's non-voting common stock were
outstanding.






                             EXPLANATORY PARAGRAPH

     The purpose of this Amendment No. 1 to the Quarterly Report on Form 10-Q of
SkyTerra Communications, Inc. (the "Company"), filed with the Securities and
Exchange Commission on May 16, 2005, is to amend and restate the Company's
condensed consolidated financial statements and related notes as of and for the
three months ended March 31, 2005. This amendment and restatement includes
changes to Part I, Items 1 and 2, and no other information included in the
original Form 10-Q is amended hereby. In addition, pursuant to the rules of the
SEC, Item 6 of Part II of the original filing has been amended to contain
currently dated certifications from our Chief Executive Officer and Chief
Financial Officer, as required by Sections 302 and 906 of the Sarbanes-Oxley Act
of 2002. The certifications of the Chief Executive Officer and Chief Financial
Officer are attached to this Form 10 Q/A as exhibits 31.1, 31.2, 32.1 and 32.2.
Except for the aforementioned changes, this Form 10-Q/A does not modify or
update any disclosure in the Company's Form 10-Q, including the nature and
character of such disclosure to reflect events occurring after the initial
filing date of the Company's Form 10-Q.

     This amendment reflects the restatement of the Company's condensed
consolidated financial statements as of and for the three months ended March 31,
2005 and the condensed consolidated balance sheet as of December 31, 2004 to
properly reflect, solely within the equity section of the condensed consolidated
balance sheets, the accounting for the dividends paid on its Series A redeemable
convertible preferred stock and the accretion of the carrying amount of the
Series A redeemable convertible preferred stock up to its $100 per share face
redemption amount. These dividends represent (i) the dividend paid quarterly in
additional shares of Series A securities from the issuance of the Series A
redeemable convertible preferred stock in June 1999 through June 2004 and in
cash subsequent to June 2004 and (ii) the deemed dividend relating to the
beneficial conversion feature of the Series A redeemable convertible preferred
stock and pay-in kind dividends recorded in 1999 and 2000. Cumulative dividends
and accretion totaling $111.5 million as of March 31, 2005, including $2.5
million recorded for the three months ended March 31, 2005, and $109.0 million
as of December 31, 2004 were previously reported on the condensed consolidated
balance sheets as increases in accumulated deficit. The condensed consolidated
balance sheets have been restated to reflect these amounts as decreases in
accumulated paid in capital. This restatement had no impact on the Company's net
income (loss) available to common stockholders, total assets or cash flows.

     This amendment also reflects the restatement of the Company's condensed
consolidated financial statements as of and for the three months ended March 31,
2005 to properly reflect the accounting for its proportionate share of the
non-cash stock compensation expense recorded by Mobile Satellite Ventures LP
(the "MSV Joint Venture"), including the effects of a restatement of the
unaudited interim financial statements of the MSV Joint Venture. As previously
reported, for the three months ended March 31, 2005, the MSV Joint Venture
recognized $0.6 million of stock compensation expense. The Company previously
reported its proportionate share of this amount in the equity in the loss of
Mobile Satellite Ventures LP on the condensed consolidated statements of
operations. Subsequent to the issuance of the Company's condensed consolidated
financial statements as of and for the three months ended March 31, 2005, the
Compensation Committee of the MSV Joint Venture's Board of Directors determined
that a change in control of the MSV Joint Venture, as defined in the MSV Joint
Venture's Unit Incentive Plan, had occurred during the three months ended March
31, 2005. This change in control triggered the immediate vesting of all of the
MSV Joint Venture's then outstanding unit options that were subject to
accelerated vesting and recognition of $3.8 million of deferred compensation
expense associated with these options. As restated, for the three months ended
March 31, 2005, the MSV Joint Venture recognized $4.4 million of stock
compensation expense. The condensed consolidated financial statements have been
restated to reflect the Company's proportionate share of the restated net loss
of the MSV Joint Venture and its proportionate share of the MSV Joint Venture's
restated stock compensation expense as an increase in additional paid in
capital.





                         SKYTERRA COMMUNICATIONS, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                       (in thousands, except share data)
                                  (unaudited)
<TABLE>
<CAPTION>

                                                                                           March 31,         December 31,
                                                                                             2005                2004
                                                                                        ----------------    ----------------
                                                                                               (Restated - see Note 3)

                                        Assets
Current assets:
<S>                                                                                             <C>                 <C>
   Cash and cash equivalents                                                                    $58,015             $34,759
   Short-term investments                                                                        32,424              59,748
                                                                                        ----------------    ----------------
     Total cash, cash equivalents and short-term investments                                     90,439              94,507
   Accounts receivable, net                                                                          53                  29
   Prepaid expenses                                                                                 349                 452
   Deferred transaction costs                                                                     7,244               4,989
   Other current assets                                                                             266                 399
                                                                                        ----------------    ----------------
     Total current assets                                                                        98,351             100,376

Property and equipment, net                                                                         526                 605
Investment in Mobile Satellite Ventures LP                                                       46,518              50,098
Investments in affiliates                                                                         2,280               3,361
Other assets                                                                                        126                 130
                                                                                        ----------------    ----------------
       Total assets                                                                            $147,801            $154,570
                                                                                        ================    ================

                          Liabilities and Stockholders' Equity
Current liabilities:
   Accounts payable                                                                              $1,992              $2,210
   Accrued liabilities                                                                            9,665               8,281
   Deferred revenue                                                                                   -                  21
                                                                                        ----------------    ----------------
     Total current liabilities                                                                   11,657              10,512
                                                                                        ----------------    ----------------
Commitments and contingencies

Minority interest                                                                                 9,257               9,974
                                                                                        ----------------    ----------------
Series A Redeemable Convertible Preferred Stock, $.01 par value, net of unamortized
    discount of $31,490 and $32,589, respectively                                                89,805              88,706
                                                                                        ----------------    ----------------
Stockholders' equity:
   Preferred stock, $.01 par value. Authorized 10,000,000 shares; issued
     1,199,007 shares as Series A Redeemable Convertible Preferred Stock at
     March 31, 2005 and December 31, 2004                                                             -                   -
   Common stock, $.01 par value.  Authorized 200,000,000 shares; issued and
     outstanding 8,414,809 shares at March 31, 2005 and 8,384,809 shares at December
     31, 2004                                                                                        84                  84
   Non-voting common stock, $.01 par value.  Authorized 100,000,000 shares; issued
     and outstanding 8,990,212 shares at each of March 31, 2005 and December 31, 2004                90                  90
   Additional paid-in capital                                                                   474,689             475,827
   Accumulated other comprehensive income (loss)                                                     14                  (3)
   Accumulated deficit                                                                         (437,795)           (430,620)
                                                                                        ----------------    ----------------
       Total stockholders' equity                                                                37,082              45,378
                                                                                        ----------------    ----------------
       Total liabilities and stockholders' equity                                              $147,801            $154,570
                                                                                        ================    ================
</TABLE>


    See accompanying notes to condensed consolidated financial statements.





                         SKYTERRA COMMUNICATIONS, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                       (in thousands, except share data)
                                  (unaudited)
<TABLE>
<CAPTION>

                                                                                 Three Months Ended March 31,
                                                                                 ------------------------------
                                                                                     2005             2004
                                                                                 -------------    -------------
                                                                                 (Restated -
                                                                                 see Note 3)
<S>                                                                                      <C>              <C>
Revenues                                                                                 $197             $817
Costs of revenues                                                                         199              748
                                                                                 -------------    -------------
  Gross margin                                                                             (2)              69
Expenses:
   Selling, general and administrative                                                  2,574            1,764
   Depreciation and amortization                                                           55               15
                                                                                 -------------    -------------
     Total expenses                                                                     2,629            1,779
                                                                                 -------------    -------------
Loss from operations                                                                   (2,631)          (1,710)
Interest income, net                                                                      541            2,161
Equity in loss of Mobile Satellite Ventures LP                                         (4,588)               -
Loss on investments in affiliates                                                      (1,456)            (151)
Other income, net                                                                          41               36
Minority interest                                                                         918             (300)
                                                                                 -------------    -------------
Net (loss) income                                                                      (7,175)              36
Cumulative dividends and accretion of convertible preferred stock to
  liquidation value                                                                    (2,493)          (2,461)
                                                                                 -------------    -------------
Net loss attributable to common stockholders                                          $(9,668)         $(2,425)
                                                                                 =============    =============
Basic and diluted loss per share                                                       $(0.56)          $(0.16)
                                                                                 =============    =============
Basic weighted average common shares outstanding                                   17,401,685       15,063,807
                                                                                 =============    =============
</TABLE>


    See accompanying notes to condensed consolidated financial statements.




                         SKYTERRA COMMUNICATIONS, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (in thousands)
                                  (unaudited)
<TABLE>
<CAPTION>

                                                                                      Three Months Ended March 31,
                                                                                     -------------------------------
                                                                                         2005              2004
                                                                                     -------------     -------------
                                                                                     (Restated -
                                                                                     see Note 3)
Cash flows from operating activities:
<S>                                                                                      <C>                    <C>
   Net (loss) income                                                                     $(7,175)               $36
   Adjustments to reconcile net loss to net cash used in operating activities:
     Depreciation and amortization                                                             55                15
     Equity in loss of Mobile Satellite Ventures LP                                         4,588                 -
     Loss on investments in affiliates                                                      1,456               151
     Minority interest                                                                       (918)              300
     Gain on sale of property and equipment                                                   (49)                -
     Non-cash compensation expense                                                            699               263
     Non-cash charge for issuance of warrants by consolidated subsidiary                       53                 -
     Changes in assets and liabilities:
       Accounts receivable, net                                                               (24)              (68)
       Prepaid expenses, deferred transaction costs and other assets                       (2,019)           (2,451)
       Accounts payable, accrued and other liabilities                                        885              (324)
       Deferred revenue                                                                       (21)              (86)
                                                                                     -------------     -------------
           Net cash used in operating activities                                           (2,470)           (2,164)
                                                                                     -------------     -------------
Cash flows from investing activities:
   Sales of short-term investments                                                         39,404             5,150
   Purchases of short-term investments                                                    (12,080)           (6,581)
   Cash paid for investments in affiliates                                                   (375)             (334)
   Sales of property and equipment                                                             74                 -
   Purchases of property and equipment                                                         (9)               (3)
                                                                                     -------------     -------------
           Net cash provided by (used in) investing activities                             27,014            (1,768)
                                                                                     -------------     -------------
Cash flows from financing activities:
   Payment of dividend on preferred stock                                                  (1,394)                -
   Proceeds from issuance of common stock in connection with the exercise
     of options                                                                                77                 6
                                                                                     -------------     -------------
           Net cash (used in) provided by financing activities                             (1,317)                6
Effect of exchange rate changes on cash and cash equivalents                                   29                 -
                                                                                     -------------     -------------
Net increase (decrease) in cash and cash equivalents                                       23,256            (3,926)
Cash and cash equivalents, beginning of period                                             34,759             6,897
                                                                                     -------------     -------------
Cash and cash equivalents, end of period                                                  $58,015            $2,971
                                                                                     =============     =============
</TABLE>


    See accompanying notes to condensed consolidated financial statements.





                          SKYTERRA COMMUNICATIONS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (unaudited)

(1)  Description of the Business

     SkyTerra Communications, Inc. (the "Company") operates its business
through a group of complementary companies in the telecommunications industry.
These companies include: (i) the Mobile Satellite Ventures LP joint venture
("MSV Joint Venture"), a joint venture which provides mobile digital voice and
data communications services via satellite; (ii) Electronic System Products,
Inc. ("ESP"), a product development and engineering services firm and (iii)
AfriHUB, LLC ("AfriHUB"), an early stage company that provides a limited
amount of satellite based Internet access and domestic and international
calling services through exclusive partnerships with certain Nigerian based
universities while it actively pursues opportunities to provide technical
training in the Nigerian market. Further, in April 2005, the Company completed
its acquisition of 50% of the equity interests of Hughes Network Systems, LLC
("HNS"), a leading provider of broadband satellite networks and services to
the enterprise market and satellite Internet access to the North American
consumer market. Following the acquisition, the Company serves as the managing
member of HNS.

     The Company is headquartered in New York, New York.

(2)  Basis of Presentation

     The accompanying condensed consolidated financial statements have been
prepared by the Company in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
the accompanying condensed consolidated financial statements contain all
adjustments, consisting only of those of a normal recurring nature, necessary
for a fair presentation of the Company's financial position, results of
operations and cash flows at the dates and for the periods indicated. While
the Company believes that disclosures presented are adequate to make the
information not misleading, these condensed consolidated financial statements
should be read in conjunction with the audited financial statements and
related notes for the year ended December 31, 2004 which are contained in the
Company's Annual Report on Form 10-K/A (Amendment No. 1) filed with the
Securities and Exchange Commission. The results of the three months ended
March 31, 2005 are not necessarily indicative of the results to be expected
for the full year. Certain prior year amounts in the accompanying condensed
consolidated financial statements have been reclassified to conform to the
current year's presentation.

(3)  Restatement

     Subsequent to the issuance of the Company's condensed consolidated
financial statements as of and for the three months ended March 31, 2005, the
Company determined that it would restate its condensed consolidated financial
statements to properly reflect the accounting for the dividends paid on its
Series A redeemable convertible preferred stock and the accretion of the
carrying amount of the Series A redeemable convertible preferred stock up to its
$100 per share face redemption amount. These dividends represent (i) the
dividend paid quarterly in additional shares of Series A securities from the
issuance of the Series A redeemable convertible preferred stock in June 1999
through June 2004 and in cash subsequent to June 2004 and (ii) the deemed
dividend relating to the beneficial conversion feature of the Series A
redeemable convertible preferred stock and pay-in kind dividends recorded in
1999 and 2000. Cumulative dividends and accretion totaling $111.5 million as of
March 31, 2005, including $2.5 million recorded for the three months ended March
31, 2005, and $109.0 million as of December 31, 2004 were previously reported on
the accompanying condensed consolidated balance sheets as increases in
accumulated deficit. The accompanying condensed consolidated balance sheets have
been restated to reflect these amounts as decreases in accumulated paid in
capital. This restatement had no impact on the Company's net income (loss)
available to common stockholders, total assets or cash flows.

     The Company has also restated its condensed consolidated financial
statements for the three months ended March 31, 2005 to properly reflect the
accounting for its proportionate share of the non-cash stock compensation
expense recorded by the MSV Joint Venture, including the effects of a
restatement of the unaudited interim financial statements of the MSV Joint
Venture. As previously reported, for the three months ended March 31, 2005,
the MSV Joint Venture recognized $0.6 million of stock compensation expense.
The Company previously reported its proportionate share of this amount in the
equity in the loss of Mobile Satellite Ventures LP on the accompanying condensed
consolidated statements of operations. Subsequent to the issuance of the
Company's condensed consolidated financial statements as of and for the three
months ended March 31, 2005, the Compensation Committee of the MSV Joint
Venture's Board of Directors determined that a change in control of the MSV
Joint Venture, as defined in the MSV Joint Venture's Unit Incentive Plan, had
occurred during the three months ended March 31, 2005. This change in control
triggered the immediate vesting of all of the MSV Joint Venture's then
outstanding unit options that were subject to accelerated vesting and
recognition of $3.8 million of deferred compensation expense associated with
these options. As restated, for the three months ended March 31, 2005, the MSV
Joint Venture recognized $4.4 million of stock compensation expense. The
accompanying condensed consolidated financial statements have been restated to
reflect the Company's proportionate share of the restated net loss of the MSV
Joint Venture and its proportionate share of the MSV Joint Venture's restated
stock compensation expense as an increase in additional paid in capital.

     The following is a summary of the significant effects of the restatements
on the accompanying condensed consolidated balance sheets:

<TABLE>
<CAPTION>
                                                                              March 31,      December 31,
                                                                                2005             2004
                                                                           --------------   -------------
                                                                                    (in thousands)
<S>                                                                            <C>             <C>
Investment in Mobile Satellite Ventures LP, as previously reported             $   46,375      $   50,098
Impact of restatement of the operating results of the MSV Joint Venture               143               -
                                                                           --------------   -------------
Investment in Mobile Satellite Ventures LP, as restated                        $   46,518      $   50,098
                                                                           ==============   =============

Minority interest, as previously reported                                      $    9,229      $    9,974
Impact of restatement of the operating results of the MSV Joint Venture                28               -
                                                                           --------------   -------------
Minority interest, as restated                                                 $    9,257      $    9,974
                                                                           ==============   =============

Additional paid in capital, as previously reported                             $  585,345      $  584,798
Impact of restatement of dividends and accretion                                 (111,464)       (108,971)
Impact of restatement of the operating results of the MSV Joint Venture               808               -
                                                                           --------------   -------------
Additional paid in capital, as restated                                        $  474,689      $  475,827
                                                                           ==============   =============

Accumulated deficit, as previously reported                                    $ (548,566)     $ (539,591)
Impact of restatement of dividends and accretion                                  111,464         108,971
Impact of restatement of the operating results of the MSV Joint Venture              (693)              -
                                                                           --------------   -------------
Accumulated deficit, as restated                                               $ (437,795)     $ (430,620)
                                                                           ==============   =============
</TABLE>

     The following is a summary of the significant effects of the restatements
on the accompanying condensed consolidated statements of operations:

<TABLE>
<CAPTION>

                                                                              Three Months Ended March 31, 2005
                                                                             ---------------------------------
                                                                                  As
                                                                              Previously
                                                                               Reported          As Restated
                                                                             --------------     --------------
                                                                                      (in thousands)
<S>                                                                               <C>                <C>
Equity in loss of Mobile Satellite Ventures LP                                     $(3,723)           $(4,588)
Minority interest                                                                      746                918
Net loss                                                                            (6,482)            (7,175)
Net loss attributable to common stockholders                                        (8,975)            (9,668)
Basic and diluted loss per share                                                     (0.52)             (0.56)
</TABLE>

(4)  Interest in the MSV Joint Venture

     The Company's 80% owned MSV Investors, LLC subsidiary (the "MSV Investors
Subsidiary") owns approximately 23% of the limited partnership interests (on
an undiluted basis) of the MSV Joint Venture, a joint venture that also
includes TMI Communications, Inc. ("TMI"), Motient Corporation ("Motient") and
certain other investors (the "Other MSV Investors"). The Company accounts for
its interest in the MSV Joint Venture under the equity method and,
accordingly, records its proportionate share of the net income (loss) of the
MSV Joint Venture, subject to certain adjustments. These adjustments relate
primarily to the amortization of the excess of the Company's carrying amount
over its proportionate share of the MSV Joint Venture's net assets on the date
of conversion. This excess is being amortized over the remaining useful life
of certain MSV Joint Venture long-lived assets on a straight line basis. As of
March 31, 2005, the Company's book investment exceeded its proportionate share
of the MSV Joint Venture's net assets by approximately $1.5 million.

     The following table presents summarized consolidated financial
information for the MSV Joint Venture for the periods indicated:

<TABLE>
<CAPTION>

                                                                                 March 31, 2005     December 31, 2004
                                                                                 ---------------    ------------------
                                                                                            (in thousands)
Consolidated balance sheet information:
<S>                                                                                    <C>                   <C>
     Current assets                                                                    $129,476              $139,978
     Noncurrent assets                                                                  102,246               106,245
     Current liabilities                                                                 11,899                11,772
     Noncurrent liabilities                                                              22,570                21,386
     Minority interest                                                                      237                   101
     Partners' equity                                                                   197,016               212,964

                                                                                  Three Months
                                                                                     Ended
                                                                                 March 31, 2005
                                                                                 ---------------
                                                                                 (in thousands)
Consolidated statement of operations:
     Revenues                                                                            $7,190
     Loss from operations                                                               (21,360)
     Net loss                                                                           (19,981)
</TABLE>

     The MSV Investors Subsidiary and the other partners of the MSV Joint
Venture have agreed that the acquisition or disposition by the MSV Joint
Venture of its assets, certain acquisitions or dispositions of a limited
partner's interest in the MSV Joint Venture, subsequent investment into the
MSV Joint Venture by any person, and any merger or other business combination
of the MSV Joint Venture, are subject to the control restrictions contained in
the Amended and Restated Limited Partnership Agreement, the Amended and
Restated Stockholders Agreement and the Voting Agreement. The control
restrictions include, but are not limited to, rights of first refusal, tag
along rights and drag along rights. Many of these actions, among others,
cannot occur without the consent of the majority of the ownership interests of
the MSV Joint Venture. In addition, pursuant to the Voting Agreement, the MSV
Investors Subsidiary and two of the three other joint venture partner groups
have agreed that three of the four joint venture partner groups must consent
to certain transactions involving the MSV Joint Venture or the partners or
none of the parties to the Voting Agreement will support such actions,
including permitting any partner to acquire control of the MSV Joint Venture.

     In December 2004, the MSV Joint Venture issued rights (the "TerreStar
Rights") to receive all of the shares of common stock of TerreStar Networks
Inc. ("TerreStar"), then a wholly-owned subsidiary of the MSV Joint Venture,
to the limited partners of the MSV Joint Venture, pro rata in accordance with
each limited partner's percentage ownership. TerreStar was formed by the MSV
Joint Venture to develop business opportunities related to the proposed
receipt of certain licenses in the 2 GHz band. The TerreStar Rights were to
automatically be exchanged for shares of TerreStar common stock on May 20,
2005. In connection with the distribution of the TerreStar Rights, TerreStar
issued warrants to purchase shares of its common stock representing 3% of the
outstanding equity for an exercise price of $0.21 per share to certain of the
Other MSV Investors. These warrants were exercised in March 2005. On May 11,
2005, TerreStar raised $200.0 million in cash by selling common stock to
Motient at a purchase price of $24.42 per share (the "TerreStar Private
Placement"), raising Motient's ownership of TerreStar to approximately 61% on
an undiluted basis. In connection with the TerreStar Private Placement, the
TerreStar Rights were exchanged for shares of TerreStar common stock.
Following these transactions, the Company's MSV Investors Subsidiary owns
5,303,315 shares of TerreStar common stock, or approximately 17% of TerreStar
on an undiluted basis, and will account for its interest in TerreStar under
the cost method.

     In connection with the TerreStar Private Placement, the minority
shareholders of TerreStar, including the Company's MSV Investors Subsidiary,
TMI and the Other MSV Investors, entered into certain agreements with
TerreStar and Motient providing the MSV Investors Subsidiary (and the other
minority shareholders) with certain protections, including tag along rights,
pre-emptive rights and representation on the TerreStar Board of Directors. In
addition, the TerreStar shares held by the minority shareholders, including
the MSV Investors Subsidiary, under certain conditions, may be subject to drag
along rights of Motient. In connection with the TerreStar Private Placement,
the MSV Joint Venture licensed TerreStar certain intellectual property and
agreed to provide TerreStar with certain services. Also, in connection with
the transaction, Motient agreed, subject to satisfaction of certain
conditions, to waive certain rights in order to facilitate a transaction in
which one of the minority shareholders in TerreStar acquires all of the
interests in the MSV Joint Venture held by the other minority shareholders in
TerreStar, resulting in control of the MSV Joint Venture being held by such
party. The minority shareholders have not agreed to such a transaction or
committed to consummate such a transaction. There can be no assurance that any
such discussions will take place among the minority shareholders or otherwise
result in a definitive binding agreement.

(5)  Business Transactions

     (a)  Interest in Hughes Network Systems

     In April 2005, the Company completed its acquisition of 50% of the equity
interests of HNS from Hughes Network Systems, Inc. ("HNSI"), a wholly owned
subsidiary of The DIRECTV Group, Inc. ("DIRECTV"), for $50.0 million in cash
and 300,000 shares of the Company's common stock. The acquisition occurred
pursuant to an agreement among the Company, DIRECTV, HNSI and HNS, dated
December 3, 2004, as amended. Immediately prior to the acquisition, HNSI
contributed substantially all of the assets and certain liabilities of its
very small aperture terminal, mobile satellite and carrier businesses, as well
as the certain portions of its SPACEWAY Ka-band satellite communications
platform that is under development, to HNS, which at the time was a
wholly-owned subsidiary of HNSI. In consideration for the contribution of
assets by HNSI, HNS paid HNSI $190.7 million of cash. This payment represents
the $201.0 million stated in the agreement less an estimated purchase price
adjustment of $10.3 million, which is subject to further adjustment depending
principally upon the closing value of HNS' working capital (as defined in the
agreement). Concurrently, HNS incurred $325.0 million of term indebtedness and
obtained a $50.0 million revolving credit facility. The Company and HNSI have
each granted a security interest in their respective equity interest in HNS to
secure the obligations of HNS under the term indebtedness. Following the
acquisition, the Company serves as the managing member of HNS. The Company
will account for its interest in HNS under the equity method in accordance
with Financial Accounting Standards Board Interpretation No. 46R,
"Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51"
("FIN 46R"), as HNS is a variable interest entity as defined in FIN 46R and
the Company is not the primary beneficiary as defined in FIN 46R.

     As of March 31, 2005 and December 31, 2004, the Company had incurred
approximately $7.2 million and $5.0 million, respectively, of transaction
costs, including legal, accounting and other costs directly related to the
transaction. These costs are included in deferred transaction costs on the
accompanying condensed consolidated balance sheets. At closing of the
acquisition, HNS paid $6.6 million of these costs directly and reimbursed the
Company for the remaining $0.6 million.

     (b) Interest in Navigauge

     As of March 31, 2005, the Company owned approximately 39% of the
outstanding equity interests of Navigauge, Inc. ("Navigauge") on an undiluted
basis. Navigauge is a privately held media and marketing research firm that
collects data on in-car radio usage and driving habits of consumers and intends
to market the aggregate data to radio broadcasters, advertisers and advertising
agencies in the United States. From January 2005 through March 2005, the Company
purchased additional short-term promissory notes from Navigauge with an
aggregate principal amount of approximately $0.4 million. As of March 31, 2005,
the Company holds short-term promissory notes from Navigauge with an aggregate
principal amount of approximately $0.9 million and, following the impairment
discussed below, the promissory notes have no carrying amount on the
accompanying condensed consolidated balance sheets.

     Although Navigauge is a variable interest entity as defined in FIN 46R,
the Company is not the primary beneficiary as defined in FIN 46R. Accordingly,
prior to the impairment discussed below, this investment was included in
investments in affiliates on the accompanying condensed consolidated balance
sheets and was being accounted for under the equity method with the Company's
share of Navigauge's loss being recorded in loss on investments in affiliates
on the accompanying condensed consolidated statements of operations. For the
three months ended March 31, 2005 and 2004, the Company's share of Navigauge's
loss was $0.3 million and $0.2 million, respectively.

     As Navigauge has been unsuccessful in raising the capital necessary to
expand its service beyond the Atlanta market and in light of its prospects, as
of March 31, 2005, the Company recognized a loss of $1.2 million relating to
the impairment of the aggregate remaining carrying amount of its equity
interest in Navigauge and the short-term promissory notes. This loss is
included in loss on investments in affiliates on the accompanying condensed
consolidated statements of operations.

     (c) Interest in Miraxis

     As of March 31, 2005, the Company owned approximately 40% of the
ownership interests of Miraxis on an undiluted basis. Miraxis is a development
stage company that has access to a Ka-band license so long as it implements
its business plan to provide satellite based multi-channel, broadband data and
video services in North America. The Company's President and Chief Executive
Officer holds an approximate 1% interest in Miraxis. As Miraxis is a variable
interest entity as defined in FIN 46R and the Company is the primary
beneficiary as defined in FIN 46R, the operating results and financial
position of Miraxis have been included in the condensed consolidated financial
statements.

 (6) Stock Option Plans

     The Company accounts for its stock option plan in accordance with SFAS
No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"), which
allows entities to continue to apply the provisions of APB Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB Opinion No. 25"), as
clarified by FASB Interpretation No. 44, "Accounting For Certain Transactions
Involving Stock Compensation," and provides pro forma net income and pro forma
earnings per share disclosures for employee stock option grants as if the
fair-value-based method, as defined in SFAS No. 123, had been applied. The
Company has elected to apply the provisions of APB Opinion No. 25 and provide
the pro forma disclosure required by SFAS No. 123.

     APB Opinion No. 25 does not require the recognition of compensation
expense for stock options granted to employees at fair market value. However,
any modification to previously granted awards generally results in
compensation expense or contra-expense recognition using the cumulative
expense method, calculated based on quoted prices of the Company's common
stock and vesting schedules of underlying awards. As a result of the
re-pricing of certain stock options, for the three months ended March 31, 2005
and 2004, the Company recognized compensation expense of approximately $0.4
million and $0.3 million, respectively.

     The following table provides a reconciliation of net (loss) income to pro
forma net (loss) income as if the fair value method had been applied to all
employee awards:
<TABLE>
<CAPTION>

                                                                              Three Months Ended March 31,
                                                                              -----------------------------
                                                                                  2005            2004
                                                                              -------------    ------------
                                                                              (in thousands, except share
                                                                                         data)
<S>                                                                               <C>                  <C>
Net (loss) income, as reported                                                     $(7,175)            $36
Add:  Stock-based employee compensation expense, as reported                           418             263
Deduct:  Total stock-based employee compensation expense determined under
   fair value based method for all awards                                             (213)            (65)
                                                                              -------------    ------------
Pro forma net (loss) income                                                        $(6,970)           $234
                                                                              =============    ============
Basic and diluted net loss attributable to common stockholders per share:
   As reported                                                                      $(0.56)         $(0.16)
   Pro forma                                                                        $(0.54)         $(0.15)
</TABLE>

     For the three months ended March 31, 2005, the Company issued options to
purchase 80,000 shares of common stock at a weighted average fair value of
$17.77 using the Black-Scholes option pricing model. For the three months
ended March 31, 2004, the Company issued options to purchase 145,000 shares of
common stock at a weighted average fair value of $1.77 using the Black-Scholes
option pricing model.

(7)    Segment Information

     The segment information is reported along the same lines that the Company's
chief operating decision maker reviews the operating results in assessing
performance and allocating resources. Accordingly, the Company's consolidated
operations have been classified into four reportable segments: the MSV Joint
Venture, ESP, AfriHUB and Parent and other. The MSV Joint Venture, which became
a reportable segment following the November 2004 conversion of the notes
receivable into limited partnership interests of the MSV Joint Venture, provides
mobile digital voice and data communications services via satellite. ESP, which
became a reportable segment following the August 2003 acquisition by the
Company, is an engineering services firm with expertise in the design and
manufacturing of electronic products and systems across many disciplines of
electrical engineering. AfriHUB, which became a reportable segment following the
April 2004 acquisition by the Company, provides a limited amount of satellite
based Internet access and domestic and international calling services through
exclusive partnerships with certain Nigerian based universities while it
explores opportunities to provide technical training in the Nigerian market.
Parent and other includes the Company, other consolidated entities other than
ESP and AfriHUB and eliminations.

     The following table presents certain financial information on the
Company's reportable segments as of or for the three months ended March 31,
2005. Since our 23% share of the results MSV Joint Venture's operations is
already included in the Parent and Other column, the MSV Joint Venture
Elimination column removes the results of the MSV Joint Venture shown in the
MSV Joint Venture column.

<TABLE>
<CAPTION>
                                                                                                   Eliminate
                                      MSV Joint                                      Parent        MSV Joint
                                       Venture           ESP          AfriHUB       and Other       Venture       Consolidated
                                     ------------    -----------    -----------    -----------    -----------    -------------
                                                                          (in thousands)
<S>                                       <C>              <C>             <C>             <C>      <C>                  <C>
Revenues                                  $7,190           $135            $62             $-        $(7,190)            $197
Operating expenses                       (28,550)          (256)          (537)        (2,035)        28,550           (2,828)
                                     ------------    -----------    -----------    -----------    -----------    -------------
Loss from operations                     (21,360)          (121)          (475)        (2,035)        21,360           (2,631)
Interest income (expense), net               635            (15)           (14)           570           (635)             541
Equity in loss of Mobile Satellite
  Ventures LP                                  -              -              -         (4,588)             -           (4,588)
Loss on investments in affiliates              -              -              -         (1,456)             -           (1,456)
Other income (expense), net                  738             52            (26)            15           (738)              41
Minority interest                              6              -              -            918             (6)             918
                                     ------------    -----------    -----------    -----------    -----------    -------------
Net (loss) income                       $(19,981)          $(84)         $(515)       $(6,576)       $19,981          $(7,175)
                                     ============    ===========    ===========    ===========    ===========    =============

Total assets                            $231,722           $124           $631       $147,046      $(231,722)        $147,801
                                     ============    ===========    ===========    ===========    ===========    =============
</TABLE>

     The following table presents certain financial information on the
Company's reportable segments as of or for the three months ended March 31,
2004:

<TABLE>
<CAPTION>

                                                                          Parent
                                                           ESP         and Other      Consolidated
                                                        -----------    -----------    -------------
                                                                      (in thousands)
<S>                                                           <C>              <C>            <C>
Revenues                                                      $817             $-             $817
Operating expenses                                          (1,076)        (1,451)          (2,527)
                                                        -----------    -----------    -------------
Loss from operations                                          (259)        (1,451)          (1,710)
Interest (expense) income, net                                 (17)         2,178            2,161
Loss on investments in affiliates                              (75)           (76)            (151)
Other income, net                                               19             17               36
Minority interest                                                -           (300)            (300)
                                                        -----------    -----------    -------------
Net (loss) income                                            $(332)          $368              $36
                                                        ===========    ===========    =============

Total assets                                                  $582        $97,712          $98,294
                                                        ===========    ===========    =============
</TABLE>

     As of March 31, 2005 and December 31, 2004, all of the Company's
long-lived assets were located in the United States, excluding $0.5 million
located in Nigeria.

(8)  Discontinued Operations

     From 1998 through the third quarter of 2001, the Company's principal
business was conducted through Rare Medium, Inc., which developed Internet
e-commerce strategies, business processes, marketing communications, branding
strategies and interactive content using Internet-based technologies and
solutions. As a result of the weakening of general economic conditions that
caused many companies to reduce spending on Internet-focused business
solutions and in light of their performance and prospects, a decision to
discontinue Rare Medium, Inc.'s operations, along with those of its
LiveMarket, Inc. subsidiary ("LiveMarket"), was made at the end of the third
quarter of 2001. As of March 31, 2005, cash of approximately $14,000
(excluding the $0.3 million of cash collateralizing a letter of credit) was
the remaining asset of Rare Medium, Inc. and LiveMarket. The liabilities of
these subsidiaries totaled approximately $2.3 million, consisting of accounts
payable and accrued expenses. Included in the total liabilities of these
subsidiaries is $1.0 million related to a lease obligation which is guaranteed
by the Company. The total maximum potential liability of this guarantee is
approximately $3.7 million, subject to certain defenses by the Company. Rare
Medium, Inc. holds $0.3 million of cash in a certificate of deposit which is
maintained as collateral for a letter of credit supporting the lease
obligation. For the three months ended March 31, 2005 and 2004, the Company
did not recognized any gains or losses as a result of the settlement of Rare
Medium, Inc. liabilities at amounts less than or greater than their recorded
amounts.

(9)  Related Party Transactions

     During the three months ended March 31, 2005 and 2004, ESP recognized
revenues totaling approximately $11,000 and $0.4 million, respectively, for
certain services provided to Navigauge and the MSV Joint Venture.

(10)  Contingencies

   Litigation

     On November 19, 2001, five of the Company's former shareholders filed a
complaint against the Company, certain of its subsidiaries and certain of the
then current and former officers and directors in the United States District
Court for the Southern District of New York, Dovitz v. Rare Medium Group, Inc.
et al., No. 01 Civ. 10196. Plaintiffs became owners of restricted Company
stock when they sold the company that they owned to the Company. Plaintiffs
assert the following four claims against defendants: (1) common-law fraud; (2)
violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule
10b-5 promulgated thereunder; (3) violation of the Michigan Securities Act;
and (4) breach of fiduciary duty. These claims arise out of alleged
representations by defendants to induce plaintiffs to enter into the
transaction. The complaint sought compensatory damages of approximately $5.6
million, exemplary and/or punitive damages in the same amount, as well as
attorney fees. On January 25, 2002, the Company filed a motion to dismiss the
complaint in its entirety. On June 3, 2002, the Court dismissed the matter
without prejudice. On or about July 17, 2002, the plaintiffs filed an amended
complaint asserting similar causes of action to those asserted in the original
complaint. On September 12, 2002, the Company filed a motion to dismiss the
amended complaint. On March 7, 2003, the Court denied the motion to dismiss,
and discovery commenced. Following the completion of discovery, the Company
filed a motion for summary judgment on July 30, 2004. Plaintiffs opposed the
motion (the "Plaintiffs' Opposition"), and the Company responded.

     On September 14, 2004 and again on November 1, 2004, the Company notified
the plaintiffs that, upon a final adjudication of the matter, it intended to
seek sanctions pursuant to Rule 11 of the Federal Rules of Civil Procedure,
based upon what were believed to be numerous falsehoods contained in the
plaintiffs' complaint and various other filings in the case, including the
Plaintiffs' Opposition. In response, on November 12, 2004, the plaintiffs
withdrew certain of the assertions contained in Plaintiffs' Opposition. The
Company then filed the motion for sanctions (the "Sanctions Motion") against
the plaintiffs seeking attorney's fees and expenses incurred in connection
with the action. The plaintiffs opposed the sanctions motion on December 17,
2004 and the Company replied. On January 13, 2005, the case was dismissed by
the Court with prejudice, subject to reinstatement by either party within 30
days of the order, in light of an agreement in principle to resolve the
matter. On February 11, 2005, the parties executed a settlement agreement
pursuant to which all parties denied liability relating to all matters,
including but not limited to the original complaint and the Sanctions Motion,
exchanged mutual releases, and the Company agreed to transfer to the
plaintiffs an indirect nominal interest in a former subsidiary of the Company.
The Company did not recognize a charge in connection with this settlement as
the interest in the former subsidiary had no carrying value on the
accompanying condensed consolidated balance sheets.

     The Company and certain of its subsidiaries (along with the Engelhard
Corporation) are parties to an arbitration relating to certain agreements that
existed between or among the claimant and ICC Technologies, Inc., the
Company's former name, and the Engelhard/ICC ("E/ICC") joint venture arising
from the desiccant air conditioning business that the Company and its
subsidiaries sold in 1998. The claimant has sought $8.5 million for (1) its
alleged out of pocket losses in investing in certain of E/ICC's technology;
(2) unjust enrichment resulting from the reorganization of E/ICC in 1998; and
(3) lost profits arising from the fact that it was allegedly forced to leave
the air conditioning business when the E/ICC joint venture was dissolved. The
Company intends to vigorously dispute this action.

     In August 2003, a former employee of the Company's discontinued services
subsidiary, filed a putative class action against Rare Medium, Inc. and the
Company, and certain other former subsidiaries that were merged into Rare
Medium, Inc., in Los Angeles County Superior Court captioned Joe Robuck,
individually and on behalf of all similarly situated individuals v. Rare
Medium Group, Inc., Rare Medium L.A., Inc., Rare Medium, Inc., and Rare Medium
Dallas, Inc., Los Angeles County Superior Court Case No. BC300310. The
plaintiff filed the action as a putative class action and putative
representative action asserting that: (i) certain payments were purportedly
due and went unpaid for overtime for employees with five job titles; (ii)
certain related violations of California's overtime statute were committed
when these employees were not paid such allegedly due and unpaid overtime at
the time of their termination; and (iii) certain related alleged violations of
California's unfair competition statute were committed. Plaintiff seeks to
recover for himself and all of the putative class, alleged unpaid overtime,
waiting time penalties (which can be up to 30 days' pay for each person not
paid all wages due at the time of termination), interest, attorneys' fees,
costs and disgorgement of profits garnered as a result of the alleged failure
to pay overtime. The plaintiff has served discovery requests and all of the
defendants have submitted objections and do not intend to provide substantive
responses until the Court determines whether the plaintiff must arbitrate his
individual claims. In February 2005, the Company and Rare Medium, Inc. reached
an agreement in principle with the plaintiff pursuant to which the class
action will be dismissed without prejudice. As part of the agreement, the
Company and Rare Medium, Inc. will receive releases from certain individuals
and the certain individuals will each receive an immaterial settlement
payment. Should the settlement agreement not be finalized, the Company and
Rare Medium, Inc. intend to vigorously dispute this action.

     Though it intends to continue to vigorously contest each of the
aforementioned cases to the extent not settled, the Company is unable to
predict their respective outcomes, or reasonably estimate a range of possible
losses, if any, given the current status of these cases. Additionally, from
time to time, the Company is subject to litigation in the normal course of
business. The Company is of the opinion that, based on information presently
available, the resolution of any such additional legal matters will not have a
material adverse effect on the Company's financial position or results of its
operations.

(11)   Subsequent Events

     On April 22, 2005, the Company completed its acquisition of 50% of the
equity interests of HNS from HNSI, a wholly owned subsidiary of DIRECTV, for
$50.0 million in cash and 300,000 shares of the Company's common stock. The
acquisition occurred pursuant to an agreement among the Company, DIRECTV, HNSI
and HNS, dated December 3, 2004, as amended. Immediately prior to the
acquisition, HNSI contributed substantially all of the assets and certain
liabilities of its very small aperture terminal, mobile satellite and carrier
businesses, as well as the certain portions of its SPACEWAY Ka-band satellite
communications platform that is under development, to HNS, which at the time
was a wholly-owned subsidiary of HNSI. In consideration for the contribution
of assets by HNSI, HNS paid HNSI $190.7 million of cash. This payment
represents the $201.0 million stated in the agreement less an estimated
purchase price adjustment of $10.3 million, which is subject to further
adjustment depending principally upon the closing value of HNS' working
capital (as defined in the agreement). Concurrently, HNS incurred $325.0
million of term indebtedness and obtained a $50.0 million revolving credit
facility. The Company and HNSI have each granted a security interest in their
respective equity interest in HNS to secure the obligations of HNS under the
term indebtedness. Following the acquisition, the Company serves as the
managing member of HNS. The Company will account for its interest in HNS under
the equity method in accordance with FIN 46R, as HNS is a variable interest
entity as defined in FIN 46R and the Company is not the primary beneficiary,
as defined in FIN 46R.

     On May 11, 2005, TerreStar raised $200.0 million in cash by selling
common stock to Motient at a purchase price of $24.42 per share (the
"TerreStar Private Placement"), raising Motient's ownership of TerreStar to
approximately 61% on an undiluted basis (see Note 4). In connection with the
TerreStar Private Placement, the TerreStar Rights were exchanged for shares of
TerreStar common stock. Following these transactions, the Company's MSV
Investors Subsidiary owns 5,303,315 shares of TerreStar common stock, or
approximately 17% of TerreStar on an undiluted basis, and will account for its
interest in TerreStar under the cost method.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

     This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 that involve risks and uncertainties, including statements
regarding our capital needs, business strategy, expectations and intentions. We
urge you to consider that statements that use the terms "believe," "do not
believe," "anticipate," "expect," "plan," "estimate," "intend" and similar
expressions are intended to identify forward-looking statements. These
statements reflect our current views with respect to future events and because
our business is subject to numerous risks, uncertainties and risk factors, our
actual results could differ materially from those anticipated in the
forward-looking statements, including those set forth below under this "Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and elsewhere in this report. Actual results will most likely differ
from those reflected in these statements, and the differences could be
substantial. We disclaim any obligation to publicly update these statements, or
disclose any difference between our actual results and those reflected in these
statements. The information constitutes forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.

     The following discussion has been amended to reflect the impact of the
restatement of our financial statements for the three months ended March 31,
2005 as discussed in Note 3 to the unaudited condensed consolidated financial
statements included elsewhere herein.


Overview

     We operate our business through a group of complementary companies in the
telecommunications industry, including the MSV Joint Venture, ESP and AfriHUB.
Consistent with this approach, in April 2005, we acquired a 50% interest in HNS,
a leading provider of broadband satellite networks and services to the
enterprise market and satellite Internet access to the North American consumer
market. Furthermore, we are currently engaged in a number of other separate and
unrelated preliminary discussions concerning possible joint ventures and other
transactions. We are in the early stages of such discussions and have not
entered into any definitive agreements with respect to any material transaction,
other than what has been described in this Form 10-Q. Prior to consummating any
transaction, we will have to, among other things, initiate and satisfactorily
complete a due diligence investigation, negotiate the financial and other terms
(including price) and conditions of such transaction, obtain appropriate board
of directors', regulatory and other necessary consents and approvals and secure
financing, to the extent deemed necessary.

     In November 2004, the FCC granted the MSV Joint Venture's application to
operate an ancillary terrestrial component ("ATC") in the L-Band, subject to
certain conditions. This authorization was the first license for ATC operation
granted by the FCC, allowing the MSV Joint Venture to offer an ATC with its
commercial service. In February 2005, the FCC issued an order (the "February
2005 Order") which set forth new rules for the deployment and operation of an
ATC and provided the MSV Joint Venture with substantial additional flexibility
in its system implementation. Furthermore, the February 2005 Order allows the
MSV Joint Venture to significantly lower the cost of deploying an ATC and
increases the capacity of the MSS/ATC hybrid system. This additional flexibility
provided by the FCC's decision is expected to allow the MSV Joint Venture to
offer users affordable and reliable voice and high-speed data communications
service from virtually anywhere on the North American continent.

     As a result of the FCC's authorizations, the value of our stake in the MSV
Joint Venture has significantly increased; however, even with ATC authority, the
ability of the MSV Joint Venture to succeed is subject to significant risks and
uncertainties, including the ability of the MSV Joint Venture to raise the
capital necessary for the implementation of the next generation satellite system
including ATC or to identify and reach an agreement with one or more strategic
partners. Additional risks include the ability of the MSV Joint Venture to
attract and retain customers, the increased potential competition from other
satellite and wireless service providers, as well as the uncertainty with
respect to the outcome of the court challenges to the FCC's ATC orders.

     During 2004, our consolidated revenues were primarily derived from fees
generated from services performed by ESP. During the fourth quarter of 2004, ESP
experienced a significant decline in demand for its services, including from its
existing customers. As a result, in January 2005, ESP reduced its workforce from
21 employees to four employees to compensate for the reduced cash inflows. ESP
is still performing services for a limited number of clients, including the MSV
Joint Venture and Navigauge; however, it is no longer seeking new client
engagements and is instead focusing on exploiting its intellectual property
portfolio.

     In April 2004, we acquired a controlling interest in AfriHUB. AfriHUB's
plan was to provide instructor led and distance based technical training and
satellite based broadband Internet access and domestic and international calling
services through exclusive partnerships with certain Nigerian based
universities. While establishing centers which provide these services on two
university campuses during the fourth quarter of 2004, AfriHUB experienced
significant unanticipated delays and costs in opening these facilities, as well
as greater price sensitivity within the university communities. As a result,
AfriHUB has suspended its planned roll out of service to additional campuses and
is actively pursuing other opportunities to provide technical training in the
Nigerian market.

     Since October 2004, Navigauge has been attempting to raise capital to
expand its data measurement capabilities beyond the Atlanta market. Other than
an aggregate of $1.0 million of short-term promissory notes purchased by us from
October 2004 through April 2005 and an aggregate of $1.0 million of short-term
promissory notes purchased by other existing investors during the same time
period, Navigauge has been unsuccessful in raising such capital. Accordingly, in
light of its prospects, Navigauge's board of directors is evaluating whether to
cease the operations of the company. Accordingly, as of March 31, 2005, we
recognized a loss of $1.2 million relating to the impairment of the aggregate
remaining carrying amount of our equity interest in Navigauge and the short-term
promissory notes. This loss is included in loss on investments in affiliates on
the condensed consolidated statements of operations.

     To execute its business plan, Miraxis needed to raise significant amounts
of capital in order to launch several satellites. Other than an aggregate of
$0.1 million of promissory notes purchased by us from January 2004 through March
2005, Miraxis has been unsuccessful in raising capital. Accordingly, Miraxis'
board of directors is expected to dissolve the company in the near future. The
dissolution of Miraxis would not have a material impact on our financial
position or results of operations.

     Following our April 2005 acquisition of a 50% interest in HNS, we will
account for our interest in HNS under the equity method in accordance with FIN
46R, as HNS is a variable interest entity as defined in FIN 46R and we are not
the primary beneficiary as defined in FIN 46R.

Results of Operations for the Three Months Ended March 31, 2005 Compared to the
Three Months Ended March 31, 2004

   Revenues

     Revenues are derived primarily from fees generated from (i) contracts for
product development, consulting and engineering services performed by ESP,
including reimbursable travel and other out-of pocket expenses, (ii) licensing
the right to use certain intellectual property owned by ESP and (iii) the sale
of prepaid cards for Internet access and calling services by AfriHUB. Revenues
from services performed by ESP are recognized using the percentage-of-completion
method for fixed price contracts and as time is incurred for time and materials
contracts, provided the collection of the resulting receivable is reasonably
assured. Revenues from licensing the right to use intellectual property are
recognized as the licensee manufactures products incorporating or using the
licensed intellectual property. Licensees typically pay a nonrefundable license
issuance fee which is recognized as revenue upon receipt. Revenues from the sale
of prepaid cards for Internet access and calling services are recognized as the
customer utilizes the card or when the card expires.

     Revenues for the three months ended March 31, 2005 decreased to $0.2
million from $0.8 million for the three months ended March 31, 2004, a decrease
of $0.6 million. This decrease was due to a significant decline in demand for
ESP's services in the fourth quarter of 2004, partially offset by revenues from
license fees generated by ESP's intellectual property portfolio and services
provided by AfriHUB at centers opened on two university campuses in Nigeria
during the fourth quarter of 2004. As ESP is no longer seeking new client
engagements and continues to focus on exploiting its intellectual property
portfolio and AfriHUB has suspended its planned roll out of service to
additional campuses, we expect revenues in the remaining quarters of 2005 to
remain relatively unchanged.

   Cost of Revenues

     Cost of revenues includes the salaries and related employee benefits for
ESP employees that provide billable product development, consulting and
engineering services, as well as the cost of reimbursable expenses. Cost of
revenues also includes the costs incurred by AfriHUB to provide Internet access
and calling services. Cost of revenues for the three months ended March 31, 2005
decreased to $0.2 million from $0.7 million for the three months ended March 31,
2004, a decrease of $0.5 million. This decrease was due to the reduction in
ESP's workforce in January 2005, partially offset by costs incurred by AfriHUB
following the opening of two centers at two university campuses in Nigeria
during the fourth quarter of 2004. As these costs relate to our current
operations, we expect cost of revenues to remain relatively unchanged in future
period as ESP has substantially completed the reduction in its workforce and
AfriHUB has suspended its planned roll out of service to additional campuses.

   Selling, General and Administrative Expense

     Selling, general and administrative expense includes facilities costs,
finance, legal and other corporate costs, as well as the salaries and related
employee benefits for those employees that support such functions. Selling,
general and administrative expense for the three months ended March 31, 2005
increased to $2.6 million from $1.8 million for the three months ended March 31,
2004, an increase of $0.8 million. This increase relates primarily to the
recognition of non-cash expense in the three months ended March 31, 2005 for the
following items:

          .    approximately $0.4 million of compensation expense related to the
               2002 and 2001 repricing of certain options;
          .    approximately $0.3 million of compensation expense related to an
               option to purchase our common stock issued to a consultant in
               June 2004; and
          .    approximately $0.1 million of compensation expense related to
               warrants contingently issuable to certain employees of AfriHUB if
               certain operating and financial milestones are achieved.

For the three months ended March 31, 2004, we recognized $0.3 million of
non-cash expense relating to the option repricing.

     Other factors contributing to the increase include the approximately $0.4
million of expenses incurred by AfriHUB in the three months ended March 31, 2005
(excluding the non-cash expense related to the contingently issuable warrants
described above), partially offset by a $0.2 million decrease in expenses
incurred by ESP in the three months ended March 31, 2005 as compared to the
three months ended March 31, 2004. As these costs relate to our current
operations, we expect our selling, general and administrative expense, excluding
fluctuations arising from the non-cash items noted above, to decrease in future
periods as ESP has significantly reduced the size of its operations and AfriHUB
has suspended the planned roll out of its service to additional university
campuses.

   Depreciation and Amortization Expense

     Depreciation and amortization expense consists of the depreciation of
property and equipment and the amortization of the financing costs associated
with the issuance of our Series A redeemable convertible preferred stock.
Depreciation and amortization expense for the three months ended March 31, 2005
increased to approximately $55,000 from approximately $15,000 for the three
months ended March 31, 2004, an increase of approximately $40,000. This increase
is primarily the result of the capital expenditures made by AfriHUB to build the
network infrastructure necessary for it to launch its service. Given the
reduction in ESP's workforce and the suspension of AfriHUB's planned roll out to
additional university campuses, we anticipate that our capital expenditures with
respect to these two entities will remain nominal in future periods.

   Interest Income, Net

     Interest income, net for the three months ended March 31, 2005 is comprised
primarily of the interest earned on our cash, cash equivalents, and short-term
investments. Interest income, net for the three months ended March 31, 2004 is
comprised primarily of the interest earned on our cash, cash equivalents, and
short-term investments and on our notes receivable from the MSV Joint Venture,
Verestar and Motient. Interest income, net for the three months ended March 31,
2005 decreased to $0.5 million from $2.2 million for the three months ended
March 31, 2004, a decrease of $1.7 million. This decrease relates primarily to
the conversion of our notes receivable from the MSV Joint Venture in November
2004 and the collection of all amounts due under the notes receivable from
Motient and Verestar in 2004.

   Equity in Loss of Mobile Satellite Ventures LP

     In November 2004, our notes receivable from the MSV Joint Venture, held
through our 80% owned MSV Investors Subsidiary, converted into approximately 23%
of the outstanding limited partnership interests in the MSV Joint Venture.
Following the conversion, we account for our interest in the MSV Joint Venture
under the equity method and record expense relating to our proportionate share
of the MSV Joint Venture's net loss. For the three months ended March 31, 2005,
we recorded expense of approximately $4.6 million. We do not expect the MSV
Joint Venture to be profitable in the near future.

   Loss on Investment in Affiliates

     For the three months ended March 31, 2005, we recorded a loss on
investments in affiliates of approximately $1.5 million consisting of $1.2
million relating to the impairment of the aggregate remaining carrying value of
our equity interest in Navigauge and short-term promissory notes purchased from
Navigauge and $0.3 million relating to our proportionate share of Navigauge's
net loss. For the three months ended March 31, 2004, recorded a loss on
investments in affiliates of approximately $0.2 million relating to our
proportionate share of Navigauge's net loss. We will continue to monitor the
carrying value of our remaining investments in affiliates.

   Minority Interest

     For the three months ended March 31, 2005, we recorded minority interest of
approximately $0.9 million relating to the equity in loss, primarily the equity
in loss of the MSV Joint Venture, which is attributable to the group of
unaffiliated third parties who own approximately 20% of our MSV Investors
Subsidiary. For the three months ended March 31, 2004, we recorded minority
interest of approximately $0.3 million relating to the equity in earnings,
primarily the interest income earned on the convertible notes from the MSV Joint
Venture, which is attributable to the group of unaffiliated third parties who
invested in our MSV Investors Subsidiary.

   Net Loss Attributable to Common Stockholders

     For the three months ended March 31, 2005, we recorded net loss
attributable to common stockholders of approximately $9.7 million. For the three
months ended March 31, 2004, we recorded a net loss attributable to common
stockholders of approximately $2.4 million. Included in net loss attributable to
common stockholders for each of the three months ended March 31, 2005 and 2004
was $2.5 million of dividends and accretion related to our Series A redeemable
convertible preferred stock. Dividends were accrued related to amounts payable
quarterly on our Series A redeemable convertible preferred stock and to the
accretion of the carrying amount of the Series A redeemable convertible
preferred stock up to its $100 per share face redemption amount over 13 years.

Liquidity and Capital Resources

     We had approximately $90.4 million in cash, cash equivalents and short-term
investments as of March 31, 2005. Cash used in operating activities was
approximately $2.5 million for the three months ended March 31, 2005 and
resulted primarily from cash used for general corporate overhead including
payroll and professional fees.

     For the three months ended March 31, 2005, cash used in investing
activities, excluding purchases and sales of short-term investments, was $0.3
million and resulted primarily from the $0.4 million used to purchase
investments in Navigauge. Other than the $50.0 million of cash consideration
payable in connection with the HNS transaction, we do not have any future
funding commitments with respect to any of our investments. However, we expect
that the MSV Joint Venture, AfriHUB, Miraxis and Navigauge will require
additional funding from time to time, and we may choose to provide additional
funding, subject to our liquidity and capital resources at the time.

   Hughes Network System Transaction

     On April 22, 2005, we completed the acquisition of 50% of the equity
interests of HNS for $50.0 million in cash and 300,000 shares of the Company's
common stock. Immediately prior to the acquisition, HNSI, a wholly-owned
subsidiary of DIRECTV, contributed substantially all of the assets and certain
liabilities of its very small aperture terminal, mobile satellite and carrier
businesses, as well as the certain portions of its SPACEWAY Ka-band satellite
communications platform that is under development, to HNS, which at the time was
a wholly-owned subsidiary of HNSI. In consideration for the contribution of
assets by HNSI, HNS paid HNSI $190.7 million of cash. This payment represents
the $201.0 million stated in the agreement less an estimated purchase price
adjustment of $10.3 million, which is subject to further adjustment depending
principally upon the closing value of HNS' working capital (as defined in the
agreement). Concurrently, HNS incurred $325.0 million of term indebtedness and
obtained a $50.0 million revolving credit facility. We and HNSI have each
granted a security interest in our respective equity interest in HNS to secure
the obligations of HNS under the term indebtedness. Following the acquisition,
we serve as the managing member of HNS. We will account for our interest in HNS
under the equity method in accordance with FIN 46R, as we will not be the
primary beneficiary, as defined in FIN 46R, of HNS.

   Series A Redeemable Convertible Preferred Stock Dividend

     In accordance with the terms of our preferred stock, the holders are
entitled to receive quarterly cash dividends commencing on July 1, 2004. The
quarterly payment of approximately $1.4 million, for the three months ended
December 31, 2004, was declared and paid on January 13, 2005. The quarterly
payment of approximately $1.4 million, for the three months ended March 31,
2005, was declared on April 18, 2005 and paid on April 22, 2005. The aggregate
annual dividend payment will be approximately $5.6 million through the mandatory
redemption on June 30, 2012 or such earlier time as the terms of the preferred
stock are renegotiated.

Recently Issued Accounting Standards

     In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment"
("SFAS No. 123R"), a revision of SFAS No. 123. SFAS No. 123R requires entities
to recognize compensation expense for all share-based payments to employees,
including stock options, based on the estimated fair value of the instrument on
the date it is granted. The expense will be recognized over the vesting period
of the award. SFAS No. 123R is effective for annual periods beginning after June
15, 2005 and provides entities two transition methods. Under the modified
prospective method, compensation expense is recognized beginning with the
effective date for all awards granted to employees prior to the effective date
that are unvested on the effective date. The modified retrospective method is a
variation of the modified prospective method, except entities can restate all
prior periods presented or prior interim period in the year of adoption using
the amounts previously presented in the pro forma disclosure required by SFAS
No. 123. As we currently account for share-based payments using the intrinsic
value method as allowed by APB Opinion No. 25, the adoption of the fair value
method under SFAS No. 123R will have an impact on our results of operations.
However, the extent of the impact cannot be predicted at this time because it
will depend on levels of share-based payments granted in the future. Had we
adopted SFAS No. 123R in prior periods, the impact of that standard would have
approximated the impact of SFAS No. 123 as described in the disclosure of pro
forma net (loss) income and loss per share in Note 6 to our condensed
consolidated financial statements.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

   Interest Rate Risk

     As of March 31, 2005, we had $90.4 million of cash, cash equivalents and
short-term cash investments. These cash, cash equivalents and short-term cash
investments are subject to market risk due to changes in interest rates. In
accordance with our investment policy, we diversify our investments among United
States Treasury securities and other high credit quality debt instruments that
we believe to be low risk. We are averse to principal loss and seek to preserve
our invested funds by limiting default risk and market risk.

   Foreign Currency Risk

     Through March 31, 2005, our results of operations, financial condition and
cash flows have not been materially affected by changes in the relative value of
non-U.S. currencies to the U.S. dollars. Financial statements of AfriHUB's
Nigerian operations are prepared using the Nigerian Naira as the functional
currency. As we do not use derivative financial instruments to limit our
exposure to fluctuations in the exchange rate with the Naira, we may experience
gains or losses in future periods. The impact of a hypothetical 10% adverse
change in exchange rates on the fair value of Naira denominated assets and
liabilities would be an estimated loss of $0.1 million as of March 31, 2005.

Item 4.  Controls and Procedures

   Evaluation of Disclosure Controls and Procedures

     Our management, with the participation of our chief executive officer and
principal accounting officer, has evaluated the effectiveness of our disclosure
controls and procedures (as such term is defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act) as of the end of the period covered by this
report. Based on such evaluation, our chief executive officer and principal
accounting officer have concluded that, as of the end of such period, our
disclosure controls and procedures are effective in recording, processing,
summarizing and reporting, on a timely basis, information required to be
disclosed by us in the reports that we file or submit under the Exchange Act.

   Changes in Internal Control Over Financial Reporting

     There has been no change in our internal control over financial reporting
during the first quarter of 2005 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.

                                     PART II

Item 1.  Legal Proceedings

     On November 19, 2001, five of our former shareholders filed a complaint
against us, certain of our subsidiaries and certain of the then current and
former officers and directors in the United States District Court for the
Southern District of New York, Dovitz v. Rare Medium Group, Inc. et al., No. 01
Civ. 10196. Plaintiffs became owners of restricted stock when they sold the
company that they owned to us. Plaintiffs assert the following four claims
against defendants: (1) common-law fraud; (2) violation of Section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder; (3)
violation of the Michigan Securities Act; and (4) breach of fiduciary duty.
These claims arise out of alleged representations by defendants to induce
plaintiffs to enter into the transaction. The complaint sought compensatory
damages of approximately $5.6 million, exemplary and/or punitive damages in the
same amount, as well as attorney fees. On January 25, 2002, we filed a motion to
dismiss the complaint in its entirety. On June 3, 2002, the Court dismissed the
matter without prejudice. On or about July 17, 2002, the plaintiffs filed an
amended complaint asserting similar causes of action to those asserted in the
original complaint. On September 12, 2002, we filed a motion to dismiss on
behalf of our self and our current and former officers and directors. On March
7, 2003, the Court denied the motion to dismiss, and discovery commenced.
Following the completion of discovery, we filed a motion for summary judgment on
July 30, 2004. Plaintiffs opposed the motion (the "Plaintiffs' Opposition"), and
we responded.

     On September 14, 2004 and again on November 1, 2004, we notified the
plaintiffs that, upon a final adjudication of the matter, we intended to seek
sanctions pursuant to Rule 11 of the Federal Rules of Civil Procedure, based
upon what were believed to be numerous falsehoods contained in the plaintiffs'
complaint and various other filings in the case, including the Plaintiffs'
Opposition. In response, on November 12, 2004, the plaintiffs withdrew certain
of the assertions contained in Plaintiffs' Opposition. We then filed a motion
for sanctions (the "Sanctions Motion") against the plaintiffs seeking attorney's
fees and expenses incurred in connection with the action. The plaintiffs opposed
the sanctions motion on December 17, 2004, and we replied. On January 13, 2005,
the case was dismissed by the Court with prejudice, subject to reinstatement by
either party within 30 days of the order, in light of an agreement in principle
to resolve the matter. On February 11, 2005, the parties executed a settlement
agreement pursuant to which all parties denied liability relating to all
matters, including but not limited to the original complaint and the Sanctions
Motion, exchanged mutual releases, and we agreed to transfer to the plaintiffs
an indirect nominal interest in a former subsidiary of ours. We did not
recognize a charge in connection with this settlement as the interest in the
former subsidiary had no carrying value on our condensed consolidated balance
sheets.

     We and certain of our subsidiaries (along with the Engelhard Corporation)
are parties to an arbitration relating to certain agreements that existed
between or among the claimant and ICC Technologies, Inc., our former name, and
the Engelhard/ICC ("E/ICC") joint venture arising from the desiccant air
conditioning business that we and our subsidiaries sold in 1998. The claimant
has sought $8.5 million for (a) its alleged out of pocket losses in investing in
certain of E/ICC's technology, (b) unjust enrichment resulting from the
reorganization of E/ICC in 1998, and (c) lost profits arising from the fact that
it was allegedly forced to leave the air conditioning business when the E/ICC
joint venture was dissolved. We intend to vigorously dispute this action.

     In August 2003, a former California employee of our discontinued services
subsidiary, filed a putative class action against Rare Medium, Inc. and the
Company, and certain other former subsidiaries that were merged into Rare
Medium, Inc., in Los Angeles County Superior Court captioned Joe Robuck,
individually and on behalf of all similarly situated individuals v. Rare Medium
Group, Inc., Rare Medium L.A., Inc., Rare Medium, Inc., and Rare Medium Dallas,
Inc., Los Angeles County Superior Court Case No. BC300310. The plaintiff filed
the action as a putative class action and putative representative action
asserting that: (i) certain payments were purportedly due and went unpaid for
overtime for employees with five job titles; (ii) certain related violations of
California's overtime statute were committed when these employees were not paid
such allegedly due and unpaid overtime at the time of their termination; and
(iii) certain related alleged violations of California's unfair competition
statute were committed. Plaintiff seeks to recover for himself and all of the
putative class, alleged unpaid overtime, waiting time penalties (which can be up
to 30 days' pay for each person not paid all wages due at the time of
termination), interest, attorneys' fees, costs and disgorgement of profits
garnered as a result of the alleged failure to pay overtime. In February 2005,
we reached an agreement in principle with the plaintiff's counsel pursuant to
which the class action will be dismissed without prejudice. As part of the
agreement, we will receive releases from certain individuals in exchange for an
immaterial settlement payment to each of the individuals. The effectiveness of a
settlement agreement will be subject to court approval. Should the settlement
agreement not be finalized, we intend to vigorously dispute this action.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

     None

Item 3.  Defaults Upon Senior Securities

     None

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

     None

Item 5.  Other Information

     None

Item 6.  Exhibits


     The following sets forth those exhibits filed pursuant to Item 601 of
Regulation S-K:

           Exhibit
            Number                          Description
           -------                          -----------
             10.1      -  Stockholders Agreement, dated as of May 11, 2005, by
                          and among TerreStar Networks, Inc., MSV Investors,
                          LLC, et al., which was filed as exhibit 10.1 to the
                          Company's Form 10-Q for the period ended March 31,
                          2005 and is hereby incorporated by reference.
             10.2      -  Parent Transfer/Drag Along Agreement, dated as of May
                          11, 2005, by and among TerreStar Networks, Inc., the
                          Company, et al., which was filed as exhibit 10.2 to
                          the Company's Form 10-Q for the period ended March
                          31, 2005 and is hereby incorporated by reference.
             10.3      -  Conditional Waiver and Consent Agreement, dated as of
                          May 11, 2005, by and among the Company, Motient
                          Corporation, et al., which was filed as exhibit 10.3
                          to the Company's Form 10-Q for the period ended March
                          31, 2005 and is hereby incorporated by reference.
             31.1      -  Certification of Jeffrey A. Leddy, Chief Executive
                          Officer and President of SkyTerra Communications,
                          Inc., required by Rule 13a-14(a) of the Securities
                          Exchange Act of 1934, as adopted pursuant to Section
                          302 of the Sarbanes-Oxley Act of 2002.
             31.2      -  Certification of Craig J. Kaufmann, Controller and
                          Treasurer of SkyTerra Communications, Inc., required
                          by Rule 13a-14(a) of the Securities Exchange Act of
                          1934, as adopted pursuant to Section 302 of the
                          Sarbanes-Oxley Act of 2002.
             32.1      -  Certification of Jeffrey A. Leddy, Chief Executive
                          Officer and President of SkyTerra Communications,
                          Inc., Pursuant to 18 U.S.C Section 1350, as adopted
                          pursuant to Section 906 of the Sarbanes-Oxley Act of
                          2002.
             32.2      -  Certification of Craig J. Kaufmann, Controller and
                          Treasurer of SkyTerra Communications, Inc., Pursuant
                          to 18 U.S.C Section 1350, as adopted pursuant to
                          Section 906 of the Sarbanes-Oxley Act of 2002.








                                  SIGNATURES

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


Date:  November 10, 2005             By:   /s/ JEFFREY A. LEDDY
                                          ----------------------------------
                                          Jeffrey A. Leddy
                                          Chief Executive Officer and President
                                          (Principal Executive Officer and
                                          Principal Financial Officer)

Date:  November 10, 2005             By:   /s/ CRAIG J. KAUFMANN
                                          ----------------------------------
                                          Craig J. Kaufmann
                                          Controller and Treasurer
                                          (Principal Accounting Officer)