<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 June 30, 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)

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


       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 August 15, 2005, is to amend and restate the
Company's condensed consolidated financial statements and related notes as of
and for the three and six months ended June 30, 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 and six months ended
June 30, 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 $114.0 million as of June 30, 2005, including $2.5
million and $5.0 million recorded for the three and six months ended June 30,
2005, respectively, 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 and six months ended
June 30, 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 and six months ended June 30, 2005, the MSV Joint
Venture recognized $3.7 million and $4.3 million, respectively, of stock
compensation expense. The Company previously reported its proportionate share of
these amounts as a reduction 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 and six months ended June 30, 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. Following the restatement, for the three and six months ended
June 30, 2005, the MSV Joint Venture recognized $2.0 million and $6.4 million,
respectively, 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.




<TABLE>

                                         SKYTERRA COMMUNICATIONS, INC.
                                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                       (in thousands, except share data)
                                                  (unaudited)
<CAPTION>
                                                                           June 30,          December 31,
                                                                             2005                 2004
                                                                        ----------------    ---------------
                                                                               (Restated - see Note 3)
                                  Assets
Current assets:
<S>                                                                              <C>                <C>
   Cash and cash equivalents                                                     $8,292             $34,759
   Short-term investments                                                        27,120              59,748
                                                                        ----------------    ----------------
     Total cash, cash equivalents and short-term investments                     35,412              94,507
   Accounts receivable, net                                                          29                  29
   Prepaid expenses                                                                 231                 452
   Deferred transaction costs                                                         -               4,989
   Other current assets                                                             216                 399
                                                                        ----------------    ----------------
     Total current assets                                                        35,888             100,376

Investment in Hughes Network Systems, LLC                                        61,683                   -
Investment in Mobile Satellite Ventures LP                                       45,598              50,098
Investments in affiliates                                                         2,717               3,361
Restricted cash                                                                   3,060                   -
Property and equipment, net                                                          19                 605
Other assets                                                                        120                 130
                                                                        ----------------    ----------------
       Total assets                                                            $149,085            $154,570
                                                                        ================    ================

                        Liabilities and Stockholders' Equity
Current liabilities:
   Accounts payable                                                              $2,085              $2,210
   Accrued liabilities                                                            2,994               8,281
   Deferred revenue                                                                   -                  21
                                                                        ----------------    ----------------
     Total current liabilities                                                    5,079              10,512
                                                                        ----------------    ----------------
Commitment and contingencies

Minority interest                                                                 9,049               9,974
                                                                        ----------------    ----------------
Series A Redeemable Convertible Preferred Stock,
   $.01 par value, net of unamortized
   discount of $30,392 and $32,589, respectively                                 90,903              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
      June 30, 2005 and December 31, 2004                                             -                   -
   Common stock, $.01 par value. Authorized 200,000,000
      shares; issued and outstanding 8,714,809 shares at
      June 30, 2005 and 8,384,809 shares at December
      31, 2004                                                                       87                  84
   Non-voting common stock, $.01 par value. Authorized
      100,000,000 shares; issued and outstanding 8,990,212
      shares at each of June 30, 2005 and December 31, 2004                          90                  90
   Additional paid-in capital                                                   477,939             475,827
   Accumulated other comprehensive income (loss)                                    460                  (3)
   Accumulated deficit                                                         (434,522)           (430,620)
                                                                        ----------------    ----------------
       Total stockholders' equity                                                44,054              45,378
                                                                        ----------------    ----------------
       Total liabilities and stockholders' equity                              $149,085            $154,570
                                                                        ================    ================


                 See accompanying notes to condensed consolidated financial statements.

</TABLE>



<TABLE>

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

                                                          Three Months Ended June 30,        Six Months Ended June 30,
                                                         ------------------------------    -----------------------------
                                                             2005             2004             2005            2004
                                                         --------------    ------------    -------------   -------------
                                                          (Restated -                      (Restated -
                                                          see Note 3)                      see Note 3)
<CAPTION>

<S>                                                               <C>             <C>              <C>           <C>
Revenues                                                          $196            $543             $393          $1,360
Cost of revenues                                                   156             589              355           1,337
                                                         --------------    ------------    -------------   -------------
   Gross profit (loss)                                              40             (46)              38              23
Expenses:
   Selling, general and administrative                           2,153           2,384            4,727           4,148
   Depreciation and amortization                                    54              35              109              50
   Impairment charge                                               421               -              421               -
                                                         --------------    ------------    -------------   -------------
     Total expenses                                              2,628           2,419            5,257           4,198
                                                         --------------    ------------    -------------   -------------
Loss from operations                                            (2,588)         (2,465)          (5,219)         (4,175)
Interest income, net                                               319           5,429              860           7,590
Equity in earnings of Hughes Network Systems, LLC                6,523               -            6,523               -
Equity in loss of Mobile Satellite Ventures LP                  (1,368)              -           (5,956)              -
Loss on investments in affiliates                                 (186)           (372)          (1,642)           (523)
Other income, net                                                  276          20,868              317          20,904
Minority interest                                                  297            (159)           1,215            (459)
                                                         --------------    ------------    -------------   -------------
Net income (loss)                                                3,273          23,301           (3,902)         23,337
   Cumulative dividends and accretion of convertible
     preferred stock to liquidation value                       (2,492)         (2,473)          (4,985)         (4,934)
                                                         --------------    ------------    -------------   -------------
Net income (loss) attributable to common stockholders             $781         $20,828          $(8,887)        $18,403
                                                         ==============    ============    =============   =============
Earnings (loss) per common share:
  Basic                                                          $0.04           $1.38           $(0.51)          $1.22
                                                         ==============    ============    =============   =============
  Diluted                                                        $0.04           $1.33           $(0.51)          $1.18
                                                         ==============    ============    =============   =============
Weighted average common shares outstanding:
  Basic                                                     17,634,454      15,059,698       17,518,713      15,061,753
                                                         ==============    ============    =============   =============
  Diluted                                                   18,757,248      15,707,635       17,518,713      15,643,938
                                                         ==============    ============    =============   =============


                   See accompanying notes to condensed consolidated financial statements.

</TABLE>



<TABLE>

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

                                                                                   Six Months Ended June 30,
                                                                                -------------------------------
                                                                                    2005              2004
                                                                                -------------     -------------
                                                                                (Restated -
                                                                                see Note 3)
<CAPTION>

Cash flows from operating activities:
<S>                                                                                <C>               <C>
  Net (loss) income                                                                $(3,902)          $23,337
  Adjustments to reconcile net (loss) income to net
    cash used in operating activities:
     Gain from adjustment to reserve for note receivable and
       accrued interest from Motient Corporation                                         -           (22,516)
     Depreciation and amortization                                                     109                50
     Impairment charge                                                                 421                 -
     Equity in earnings of Hughes Network Systems, LLC                              (6,523)                -
     Equity in loss of Mobile Satellite Ventures LP                                  5,956                 -
     Loss on investments in affiliates                                               1,642               523
     Minority interest                                                              (1,215)              459
     Gain on sale of property and equipment                                            (19)                -
     Non-cash compensation expense                                                     726               996
     Non-cash charge for issuance of warrants by consolidated subsidiary                20               338
     Changes in assets and liabilities:
       Accounts receivable, net                                                          -                94
       Prepaid expenses, deferred transaction costs and other assets                 5,393            (4,563)
       Accounts payable, accrued and other liabilities                              (5,460)           (1,352)
       Deferred revenue                                                                (21)              (90)
                                                                                -------------     -------------
           Net cash used in operating activities                                    (2,873)           (2,724)
                                                                                -------------     -------------
Cash flows from investing activities:
   Purchase interest in Hughes Network Systems, LLC                                (50,000)                -
   Sales of short-term investments                                                  44,804            12,123
   Purchases of short-term investments                                             (12,176)          (15,190)
   Restricted cash                                                                  (3,060)                -
   Proceeds from the repayment of the note receivable from Verestar                      -             2,500
   Cash paid for investments in affiliates                                            (562)           (1,210)
   Sales of property and equipment                                                      74                 -
   Purchases of property and equipment                                                  (9)             (170)
   Cash paid for acquisitions, net of cash acquired and acquisition costs                -              (105)
                                                                                -------------     -------------
           Net cash used in investing activities                                   (20,929)           (2,052)
                                                                                -------------     -------------
Cash flows from financing activities:
   Payment of dividend on preferred stock                                           (2,788)                -
   Proceeds from issuance of common stock in connection with
     the exercise of options                                                            77                12
                                                                                -------------     -------------
           Net cash (used in) provided by financing activities                      (2,711)               12
Effect of exchange rate changes on cash and cash equivalents                            46                 -
                                                                                -------------     -------------
Net decrease in cash and cash equivalents                                          (26,467)           (4,764)
Cash and cash equivalents, beginning of period                                      34,759             6,897
                                                                                -------------     -------------
Cash and cash equivalents, end of period                                            $8,292            $2,133
                                                                                =============     =============


                    See accompanying notes to condensed consolidated financial statements.

</TABLE>

                         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) 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; (ii) the
Mobile Satellite Venture, L.P. joint venture ("MSV Joint Venture"), a joint
venture which provides mobile digital voice and data communications services
via satellite; (iii) Electronic System Products, Inc. ("ESP"), a product
development and engineering services firm and (iv) 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. The Company
completed its acquisition of 50% of the equity interests of HNS in April 2005
and serves as its managing member.

     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 and six months ended June 30,
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 and six months ended June 30, 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 $114.0 million as of
June 30, 2005, including $2.5 million and $5.0 million recorded for the three
and six months ended June 30, 2005, respectively, 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 as of and for the three and six months ended June 30, 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 and six months ended
June 30, 2005, the MSV Joint Venture recognized $3.7 million and $4.3 million,
respectively, of stock compensation expense. The Company previously reported its
proportionate share of these amounts as a reduction 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 and six months ended
June 30, 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. Following the
restatement, for the three and six months ended June 30, 2005, the MSV Joint
Venture recognized $2.0 million and $6.4 million, respectively, 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>

                                                                               June 30,        December 31,
                                                                                 2005              2004
                                                                             --------------    --------------
                                                                                     (in thousands)
<S>                                                                          <C>               <C>
Additional paid in capital, as previously reported                              $ 590,729         $ 584,798
Impact of restatement of dividends and accretion                                 (113,956)         (108,971)
Impact of restatement of the operating results of the MSV Joint Venture             1,166                 -
                                                                             --------------    --------------
Additional paid in capital, as restated                                         $ 477,939         $ 475,827
                                                                             ==============    ==============
Accumulated deficit, as previously reported                                     $(547,312)        $(539,591)
Impact of restatement of dividends and accretion                                  113,956           108,971
Impact of restatement of the operating results of the MSV Joint Venture            (1,166)                -
                                                                             --------------    --------------
Accumulated deficit, as restated                                                $(434,522)        $(430,620)
                                                                             ==============    ==============
</TABLE>

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

<TABLE>

                                                                   Three Months Ended                 Six Months Ended
                                                                     June 30, 2005                     June 30, 2005
                                                            -------------------------------    -------------------------------
                                                                 As                                 As
                                                             Previously                         Previously
                                                              Reported         As Restated      Reported           As Restated
                                                            -------------    --------------    --------------    -------------
                                                                                     (in thousands)
<CAPTION>

<S>                                                               <C>             <C>               <C>             <C>
Equity in loss of Mobile Satellite Ventures LP                    $(777)          $(1,368)          $(4,500)        $ (5,956)
Minority interest                                                   179               297               925            1,214
Net income (loss)                                                 3,746             3,273            (2,736)          (3,902)
Net income (loss) attributable to common stockholders             1,254               781            (7,721)          (8,887)
Basic earnings (loss) per share                                    0.07              0.04             (0.44)           (0.51)
Diluted earnings (loss) per share                                  0.06              0.04             (0.44)           (0.51)

</TABLE>

(4)  Interest in the MSV Joint Venture

     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 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
June 30, 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. Certain reclassifications
have been made to the MSV Joint Venture's consolidated balance sheet
information as of December 31, 2004 and consolidated statement of operation
information for the six months ended June 30, 2005 to reflect TerreStar
Networks, Inc. ("TerreStar") as a discontinued operation which resulted from
the exchange of the TerreStar Rights as discussed below.

<TABLE>

                                                       June 30, 2005      December 31, 2004
                                                       ---------------    ------------------
                                                                  (in thousands)
<CAPTION>

Consolidated balance sheet information:
<S>                                                          <C>                 <C>
     Current assets                                          $123,277            $139,978
     Noncurrent assets                                        101,110             106,245
     Current liabilities                                        9,553              11,772
     Noncurrent liabilities                                    21,763              21,386
     Minority interest                                              -                 101
     Partners' equity                                         193,071             212,964

                                                        Three Months        Six Months
                                                           Ended              Ended
                                                       June 30, 2005      June 30, 2005
                                                       ---------------    ---------------
                                                                (in thousands)
Consolidated statement of operations:
     Revenues                                                 $7,460            $14,650
     Loss from continuing operations                          (7,388)           (19,822)
     Net loss                                                 (6,723)           (26,704)

</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.

   TerreStar Networks

     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. In December 2004, the MSV Joint Venture issued rights (the "TerreStar
Rights") to receive all of the shares of common stock of 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. 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 is
accounting for its interest in TerreStar under the cost method. In accordance
with Accounting Principles Board Opinion No. 29, "Accounting for Nonmonetary
Transactions," the Company's carrying value for its interest in TerreStar is
based on its pro rata share of the MSV Joint Venture's carrying value for
TerreStar before the distribution. As the MSV Joint Venture had no carrying
value for its interest in TerreStar, the Company has not recorded any carrying
value for its interest in TerreStar on the accompanying condensed consolidated
balance sheets.

     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)  Interest in Hughes Network Systems

     In April 2005, the Company completed its acquisition of 50% of the Class A
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 pledged
their respective equity interest in HNS to secure the obligations of HNS under
the term indebtedness. The indebtedness is otherwise non-recourse to the
Company or HNSI. Following the acquisition, the Company serves as the managing
member of HNS.

     The HNS limited liability agreement allows for the issuance of Class B
equity interests which are entitled to receive a pro rata share of any capital
gains upon, among other things, a sale of HNS. In April 2005, Class B equity
interests were issued to certain members of HNS' senior management and the
Company's chief executive officer and president entitling the holders to
approximately 4% of any capital gains resulting from a qualifying transaction.
These Class B equity interests are subject to certain vesting requirements,
with 50% of the Class B equity interests subject to time vesting over five
years and the other 50% vesting based upon certain performance milestones. If
the Company acquires the remaining 50% of the outstanding Class A equity
interests, then one year following such a transaction, at the holders'
election, vested Class B equity interests could be exchanged for common stock
of the Company. The number of shares of the Company's common stock to be issued
upon such exchange would be based upon the fair market value of such vested
Class B equity interest divided by the value of the Company's common stock at
such time.

     In addition, in July 2005, HNS adopted an incentive plan pursuant to which
bonus units representing up to approximately 4% of the increase in the value of
HNS are available for grant to its employees. The bonus units provide for time
vesting over five years subject to a participant's continued employment with
HNS and reflect a right to receive a cash payment upon a change of control of
HNS (but excluding the acquisition by the Company of the remaining 50% of the
outstanding Class A equity interests) or a sale of substantially all of the
assets of HNS. Pursuant to the plan, if the Company acquires the remaining 50%
of the outstanding Class A equity interests and a participant in the plan is
still employed by HNS at such time, then the participant's vested bonus units
would be exchanged for common stock of the Company. The number of shares of the
Company's common stock to be issued upon such exchange would be based upon the
fair market value of such vested bonus unit divided by the value of the
Company's common stock at such time.

     The Company accounts 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. Accordingly, the
Company records its proportionate share of the net income of HNS, subject to
certain adjustments. These adjustments relate primarily to the amortization of
the excess of the Company's proportionate share of HNS' net assets over the
Company's carrying amount on the date of acquisition. This excess is being
amortized over the remaining useful life of certain HNS long-lived assets on a
straight line basis. As of June 30, 2005, the Company's proportionate share of
HNS' net assets exceeded its book investment by approximately $11.8 million.

     The following table presents summarized consolidated financial information
for HNS for the periods indicated:

                                                        June 30, 2005
                                                        ---------------
                                                        (in thousands)
Consolidated balance sheet information:
     Current assets                                           $453,009
     Noncurrent assets                                         280,847
     Current liabilities                                       203,187
     Noncurrent liabilities                                    379,466
     Minority interest                                           7,236
     Owners' equity                                            143,967

                                                       April 23, 2005
                                                              to
                                                        June 30, 2005
                                                        ---------------
                                                        (in thousands)
Consolidated statement of operations:
     Revenues                                                 $154,719
     Income from operations                                     16,808
     Net income                                                 12,402

     As of December 31, 2004, the Company had incurred approximately $5.0
million 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 sheet as
of December 31, 2004. At closing of the acquisition, HNS either paid these
costs directly or reimbursed the Company for amounts paid by the Company.

(6)  Variable Interest Entities

     (a) Interest in Navigauge

     As of June 30, 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 June 2005, the Company purchased
additional short-term promissory notes from Navigauge with an aggregate
principal amount of approximately $0.6 million. As of June 30, 2005, the Company
holds short-term promissory notes from Navigauge with an aggregate principal
amount of approximately $1.1 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 each
of the three and six months ended June 30, 2005, the Company's share of
Navigauge's loss was $0.3 million. For the three and six months ended June 30,
2004, the Company's share of Navigauge's loss was $0.4 million and $0.5
million, respectively.

     As Navigauge was unsuccessful in raising the capital necessary to expand
its service beyond the Atlanta market and in light of its prospects, during the
six months ended June 30, 2005, the Company recognized a loss of approximately
$1.3 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. In July 2005, Navigauge
entered into a non-binding letter of intent to sell substantially all of its
assets. The sale of the assets is subject to, among other things, completion of
the buyer's due diligence and negotiation and execution of definitive
documentation satisfactory to the parties. If the sale of the assets occurs on
the terms set forth in the non-binding letter of intent, the Company would
recover a certain amount on the short-term promissory notes with such amount
being recorded as a gain in the Company's condensed consolidated statements
of operations.

     (b) Interest in Miraxis

     As of June 30, 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.

(7)  Earnings (Loss) Per Common Share

     Basic earnings (loss) per common share is computed by dividing net income
(loss) attributable to the common stockholders by the weighted average number
of common shares outstanding for the period. Diluted earnings (loss) per common
share reflects the potential dilution from the exercise or conversion of
securities into common stock. The potential dilutive effect of outstanding
stock options and warrants is calculated using the "treasury stock" method, and
the potential dilutive effect of the convertible preferred stock is calculated
using the "if-converted" method.

     The following table provides a reconciliation of the shares used in
calculating earnings (loss) per common share:

<TABLE>

                                                       Three Months Ended June 30,          Six Months Ended June 30,
                                                     ---------------------------------    -------------------------------
                                                          2005               2004              2005             2004
                                                     --------------    ---------------    --------------   --------------
<CAPTION>

<S>                                                     <C>                <C>               <C>              <C>
Weighted average common shares outstanding - basic      17,634,454         15,059,698        17,518,713       15,061,753
Common shares issuable upon exercise of stock
   options and warrants                                  1,122,794            647,937                 -          582,185
                                                     --------------    ---------------    --------------   --------------
Weighted average common shares outstanding -
   diluted                                              18,757,248         15,707,635        17,518,713       15,643,938
                                                     ==============    ===============    ==============   ==============

</TABLE>

     During all periods presented, the Company had certain stock options and
warrants outstanding, which could potentially dilute basic earnings (loss) per
common share in the future, but were excluded in the computation of diluted
earnings (loss) per common share in such periods, as their effect would have
been antidilutive. For the three and six months ended June 30, 2005, stock
options and warrants exercisable for 1,556,609 shares and 3,260,476 shares of
common stock, respectively, were excluded from the computation of diluted
earnings (loss) per common share, as they were antidilutive. For each of the
three and six months ended June 30, 2004, stock options and warrants
exercisable for 1,734,650 shares of common stock were excluded from the
computation of diluted earnings per common share, as they were antidilutive.

     During each of the three and six months ended June 30, 2005, 1,912,485
shares of common stock issuable upon the conversion of the preferred stock were
excluded from the computation of diluted earnings (loss) per common share, as
their effect would have been antidilutive. During each of the three and six
months ended June 30, 2004, 1,750,374 shares of common stock issuable upon the
conversion of the preferred stock were excluded from the computation of diluted
earnings (loss) per common share, as their effect would have been antidilutive.

(8)  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 in 2001 and 2002, the Company recognized compensation contra-expense of
approximately $0.1 million for the three months ended June 30, 2005 and
compensation expense of approximately $0.3 million for the six months ended
June 30, 2005. As a result of the re-pricing of those certain stock options,
for the three and six months ended June 30, 2004, the Company recognized
compensation expense of approximately $0.7 million and $1.0 million,
respectively.

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

<TABLE>

                                                          Three Months Ended June 30,       Six Months Ended June 30,
                                                          -----------------------------    -----------------------------
                                                              2005            2004             2005            2004
                                                          -------------    ------------    -------------   -------------
                                                                      (in thousands, except per share data)
<CAPTION>

<S>                                                            <C>            <C>             <C>              <C>
Net income (loss), as reported                                 $3,273         $23,301         $(3,902)         $23,337
(Deduct) Add: Stock-based employee compensation
   (contra-expense) expense, as reported                          (77)            730             341              993
Deduct: Total stock-based employee compensation
   expense determined under fair value based method for
   all awards                                                    (307)            (69)           (520)            (134)
                                                          -------------    ------------    -------------   -------------
Pro forma net income (loss)                                    $2,889         $23,962         $(4,081)         $24,196
                                                          =============    ============    =============   =============

Basic earnings (loss) per common share:
   As reported                                                  $0.04           $1.38          $(0.51)           $1.22
   Pro forma                                                    $0.02           $1.43          $(0.52)           $1.28

Diluted earnings (loss) per common share:
   As reported                                                  $0.04           $1.33          $(0.51)           $1.18
   Pro forma                                                    $0.02           $1.37          $(0.52)           $1.23

</TABLE>

     For the three months ended June 30, 2005, the Company issued options to
purchase 72,500 shares of common stock at a weighted average fair value of
$15.78 using the Black-Scholes option pricing model. For the six months ended
June 30, 2005, the Company issued options to purchase 152,500 shares of common
stock at a weighted average fair value of $16.82 using the Black-Scholes option
pricing model. For the three months ended June 30, 2004, the Company issued
options to purchase 35,000 shares of common stock at a weighted average fair
value of $3.63 using the Black-Scholes option pricing model. For the six months
ended June 30, 2004, the Company issued options to purchase 180,000 shares of
common stock at a weighted average fair value of $2.13 using the Black-Scholes
option pricing model.

(9)  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 five reportable segments: the MSV Joint
Venture, HNS, 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. HNS, which
became a reportable segment following the April 2005 acquisition by the Company,
is a provider of broadband satellite networks and services to the enterprise
market and satellite Internet access to the North American consumer market. 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 for the three months ended June 30, 2005. The HNS
column represents the results of operations for the period following the April
22, 2005 acquisition through June 30, 2005. Since our 23% share of the results
of MSV Joint Venture's operations and our 50% share of the results of HNS'
operations are already included in the Parent and Other column, the Eliminate
MSV Joint Venture and HNS column removes the results of the MSV Joint Venture
and HNS shown in the MSV Joint Venture and HNS columns.

<TABLE>
                                                                                                       Eliminate
                                       MSV                                                             MSV Joint
                                      Joint                                               Parent        Venture
                                      Venture        HNS          ESP        AfriHUB     and Other      and HNS     Consolidated
                                    ----------   -----------   ---------   ----------   ----------   ------------   -------------
                                                                           (in thousands)
<CAPTION>

<S>                                    <C>         <C>             <C>           <C>           <C>    <C>                <C>
Revenues                              $7,460      $154,719        $112          $84           $-      $(162,179)           $196
Operating expenses                   (14,848)     (137,911)       (144)        (734)      (1,906)       152,759          (2,784)
                                    ----------   -----------   ---------   ----------   ----------   ------------   -------------
(Loss) income from continuing         (7,388)       16,808         (32)        (650)      (1,906)        (9,420)         (2,588)
  operations
Interest income (expense), net           737        (3,820)        (15)         (23)         357          3,083             319
Equity in earnings of Hughes
  Network Systems, LLC                     -             -           -            -        6,523              -           6,523
Equity in loss of Mobile Satellite
  Ventures LP                              -             -           -            -       (1,368)             -          (1,368)
Loss on investments in affiliates          -             -           -            -         (186)             -            (186)
Other income (expense), net              595          (447)         (7)         (45)         328           (148)            276
Minority interest                         25          (139)          -            -          297            114             297
Loss from discontinued operations       (692)            -           -            -            -            692               -
                                    ----------   -----------   ---------   ----------   ----------   ------------   -------------
Net (loss) income                    $(6,723)      $12,402        $(54)       $(718)      $4,045        $(5,679)         $3,273
                                    ==========   ===========   =========   ==========   ==========   ============   =============

</TABLE>

     The following table presents certain financial information on the
Company's reportable segments for the six months ended June 30, 2005. The HNS
column represents the results of operations for the period following the April
22, 2005 acquisition through June 30, 2005. Since our 23% share of the results
of MSV Joint Venture's operations and our 50% share of the results of HNS'
operations are already included in the Parent and Other column, the Eliminate
MSV Joint Venture and HNS column removes the results of the MSV Joint Venture
and HNS shown in the MSV Joint Venture and HNS columns.

<TABLE>
                                                                                                       Eliminate
                                       MSV                                                             MSV Joint
                                      Joint                                               Parent        Venture
                                      Venture        HNS          ESP        AfriHUB     and Other      and HNS     Consolidated
                                    ----------   -----------   ---------   ----------   ----------   ------------   -------------
                                                                           (in thousands)
<CAPTION>

<S>                                   <C>          <C>             <C>          <C>            <C>    <C>                 <C>
Revenues                              $14,650      $154,719        $247         $146           $-     $(169,369)          $393
Operating expenses                    (34,472)     (137,911)       (400)      (1,271)      (3,941)      172,383         (5,612)
                                    ----------   -----------   ---------   ----------   ----------   ------------   -------------
(Loss) income from continuing
  operations                          (19,822)       16,808        (153)      (1,125)      (3,941)        3,014         (5,219)
Interest income (expense), net          1,338        (3,820)        (30)         (37)         927         2,482            860
Equity in earnings of Hughes
  Network Systems, LLC                      -             -           -            -        6,523             -          6,523
Equity in loss of Mobile Satellite
  Ventures LP                               -             -           -            -       (5,956)            -         (5,956)
Loss on investments in affiliates           -             -           -            -       (1,642)            -         (1,642)
Other income (expense), net             1,333          (447)         45         (71)          343          (886)           317
Minority interest                          31          (139)          -            -        1,215           108          1,215
Loss from discontinued operations      (9,584)            -           -            -            -         9,584              -
                                    ----------   -----------   ---------   ----------   ----------   ------------   -------------
Net (loss) income                    $(26,704)      $12,402       $(138)     $(1,233)     $(2,531)      $14,302         $(3,902)
                                    ==========   ===========   =========   ==========   ==========   ============   =============

</TABLE>

     The following table presents certain financial information on the
Company's reportable segments for the three months ended June 30, 2004:

<TABLE>
                                                                           Parent
                                                ESP          AfriHUB      and Other      Consolidated
                                            -----------    -----------    -----------    -------------
                                                                 (in thousands)
<CAPTION>

<S>                                              <C>              <C>            <C>            <C>
Revenues                                         $543             $-             $-             $543
Operating expenses                               (858)          (462)        (1,688)          (3,008)
                                            -----------    -----------    -----------    -------------
Loss from operations                             (315)          (462)        (1,688)          (2,465)
Interest (expense) income, net                    (18)             -          5,447            5,429
Loss on investments in affiliates                 (89)             -           (283)            (372)
Other income, net                                 722              -         20,146           20,868
Minority interest                                   -             92           (251)            (159)
                                            -----------    -----------    -----------    -------------
Net income (loss)                                $300          $(370)       $23,371          $23,301
                                            ===========    ===========    ===========    =============
</TABLE>

     The following table presents certain financial information on the
Company's reportable segments for the six months ended June 30, 2004:

<TABLE>
                                                                           Parent
                                                ESP          AfriHUB      and Other      Consolidated
                                            -----------    -----------    -----------    -------------
                                                                 (in thousands)
<CAPTION>

<S>                                             <C>                <C>            <C>          <C>
Revenues                                        $1,360             $-             $-           $1,360
Operating expenses                              (1,934)          (462)        (3,139)          (5,535)
                                            -----------    -----------    -----------    -------------
Loss from operations                              (574)          (462)        (3,139)          (4,175)
Interest (expense) income, net                     (35)             -          7,625            7,590
Loss on investments in affiliates                 (164)             -           (359)            (523)
Other income, net                                  741              -         20,163           20,904
Minority interest                                    -             92           (551)            (459)
                                            -----------    -----------    -----------    -------------
Net (loss) income                                 $(32)         $(370)       $23,739          $23,337
                                            ===========    ===========    ===========    =============

</TABLE>

(10) Impairment of Long-Lived Assets

     Long-lived assets are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of an asset to
future net undiscounted cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying value of the assets exceeds the
fair value of the assets.

     As a result of the Company's decision to cease providing funding to
AfriHUB, as of June 30, 2005, we evaluated AfriHUB's long-lived assets for
recoverability and determined that the undiscounted cash flows over the
remaining expected life of the two established centers was less than the
carrying value of the assets relating to those centers. Accordingly, the
Company assessed the fair value of these assets by estimating the
recoverability of the computers and equipment upon a sale. The Company
recognized a non-cash impairment loss relating to the computers and equipment
as their carrying value exceeded the fair value by approximately $0.4 million.

(11) 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 June
30, 2005, cash of approximately $10,000 (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 and six months ended June 30, 2005 and 2004, the Company did not
recognize 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.

(12) Related Party Transactions

     During the three and six months ended June 30, 2005, ESP recognized
revenues totaling nil and $11,000, respectively, for certain services provided
to the MSV Joint Venture. During the three and six months ended June 30, 2004,
ESP recognized revenues totaling approximately $0.1 million and $0.4 million,
respectively, for certain services provided to Navigauge and the MSV Joint
Venture.

(13) Commitments and Contingencies

   Regulatory

     In April 2005, the Federal Communications Commission ("FCC") approved a
license application submitted by the Company which provides the Company with
access to a satellite orbital slot. To ensure that the Company complies with
certain milestones with respect to the construction, launch and initial
operation of a satellite in the orbital slot, the FCC requires the Company to
maintain a surety bond with an initial amount of $3.0 million. As the
milestones are achieved over a five year schedule, the amount of the surety
bond will be reduced. To secure the insurance company's obligation under the
surety bond, the Company must maintain a letter of credit in an amount equal to
the value of the surety bond. The letter of credit agreement requires the
Company to maintain a restricted cash account for 102% of the amount of the
letter of credit. As of June 30, 2005, the Company had approximately $3.1
million in the restricted cash account.

   Litigation

     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 thirteen individuals, each of whom will each receive an
immaterial settlement payment. The agreements are subject to the Court's
dismissal of the action without prejudice. Should Court approval not be
received, the Company and Rare Medium, Inc. expect to continue to vigorously
dispute this action.

     The Company's discontinued services subsidiary is currently a defendant in
an action brought by a former landlord in New York State Supreme Court titled
Forty Four Eighteen Joint Venture v. Rare Medium, Inc., Index 602632/03. The
landlord claimed unspecified amounts for breach of the lease. In August 2005,
Rare Medium, Inc. reached an agreement in principle to settle the matter for
approximately $0.3 million which is payable in October 2005. If Rare Medium,
Inc. fails to make such payment on time, the landlord's claim against Rare
Medium, Inc. would be increased to $0.6 million.

     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.

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 and six months ended
June 30, 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 HNS, the MSV Joint Venture, ESP and
AfriHUB. Our acquisition of 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, was completed in April
2005. 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; 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 recorded an impairment charge of approximately $0.8 million in December
2004 and suspended its planned roll out of service to additional campuses. While
AfriHUB is actively pursuing other opportunities to provide technical training
in the Nigerian market, including establishing a facility on a single additional
campus, we have decided to cease providing funding to AfriHUB. AfriHUB's
management is exploring alternate financing opportunities, including third party
funding. However, given the uncertainty with respect to AfriHUB's future
prospects, we have recorded an impairment charge of approximately $0.4 million
during the three months ended June 30, 2005 relating to the remaining value of
AfriHUB's long-lived assets.

     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, during the six months ended
June 30, 2005, we recognized a loss of $1.3 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. In July 2005, Navigauge entered into a non-binding letter of intent
to sell substantially all of its assets. The sale of the assets is subject to,
among other things, completion of the buyer's due diligence and negotiation and
execution of definitive documentation satisfactory to the parties. If the sale
of the assets occurs on the terms set forth in the non-binding letter of intent,
the Company would recover a certain amount on the short-term promissory notes
with such amount being recorded as a gain 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 June
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.

Results of Operations for the Three Months Ended June 30, 2005 Compared to the
Three Months Ended June 30, 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 June 30, 2005 decreased to $0.2 million
from $0.5 million for the three months ended June 30, 2004, a decrease of $0.3
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 suspended its planned roll out of service to several
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 June 30, 2005
decreased to $0.2 million from $0.6 million for the three months ended June 30,
2004, a decrease of $0.4 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 several 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 June 30, 2005
decreased to $2.1 million from $2.4 million for the three months ended June 30,
2004, a decrease of $0.3 million. This decrease relates primarily to the $0.7
million decrease in non-cash compensation expense related to the 2002 and 2001
repricing of certain stock options and a $0.2 million decrease in expenses
incurred by each of AfriHUB and ESP in the three months ended June 30, 2005 as
compared to the three months ended June 30, 2004. Partially offsetting these
decreases were a $0.6 million increase in professional fees related primarily to
the registration of the common stock sold in the December 2004 private placement
and several transactions which were not consummated and a $0.1 million increase
in non-cash compensation expense related to an option to purchase our common
stock issued to a consultant in June 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 several 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 June 30, 2005
increased to approximately $54,000 from approximately $35,000 for the three
months ended June 30, 2004, an increase of approximately $19,000. 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
several additional university campuses, we anticipate that our capital
expenditures with respect to these two entities will remain nominal in future
periods, except to the extent AfriHUB is able to secure third party funding to
finance the establishment of a single additional campus.

   Impairment Charge

     As a result of our decision to cease providing funding to AfriHUB, as of
June 30, 2005, we evaluated AfriHUB's long-lived assets for recoverability and
determined that the undiscounted cash flows over the remaining expected life of
the two established centers was less than the carrying value of the assets
relating to those centers. Accordingly, we assessed the fair value of these
assets by estimating the recoverability of the computers and equipment upon a
sale. We recognized a non-cash impairment loss relating to the computers and the
equipment as their carrying value exceeded the fair value by approximately $0.4
million.

   Interest Income, Net

     Interest income, net for the three months ended June 30, 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 June 30, 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 June 30,
2005 decreased to $0.3 million from $5.4 million for the three months ended June
30, 2004, a decrease of $5.1 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 Earnings of Hughes Network Systems, LLC

     Following our April 2005 acquisition of a 50% interest in HNS, we 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. Accordingly, we record income
relating to our proportionate share of HNS' net income. For the period following
the April 22, 2005 acquisition through June 30, 2005, we recorded income of
approximately $6.5 million.

   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 June 30, 2005,
we recorded expense of approximately $1.4 million.

   Loss on Investment in Affiliates

     For the three months ended June 30, 2005, we recorded a loss on investments
in affiliates of approximately $0.2 million relating to the impairment of the
short-term promissory notes purchased from Navigauge. For the three months ended
June 30, 2004, recorded a loss on investments in affiliates of approximately
$0.4 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 June 30, 2005, we recorded minority interest of
approximately $0.3 million relating to 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
June 30, 2004, we recorded minority interest of approximately $0.2 million
relating to the $0.3 million of 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 own approximately
20% of our MSV Investors Subsidiary, partially offset by the $0.1 million of
equity in loss attributable to the other shareholders in AfriHUB.

   Net Income Attributable to Common Stockholders

     For the three months ended June 30, 2005 and 2004, we recorded net income
attributable to common stockholders of approximately $0.8 million and $20.8
million, respectively. Included in net income attributable to common
stockholders for each of the three months ended June 30, 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.

Results of Operations for the Six Months Ended June 30, 2005 Compared to the Six
Months Ended June 30, 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 six months ended June 30, 2005 decreased to $0.4 million
from $1.4 million for the six months ended June 30, 2004, a decrease of $1.0
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 several
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 six months ended June 30, 2005
decreased to $0.4 million from $1.3 million for the six months ended June 30,
2004, a decrease of $0.9 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 several 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 six months ended June 30, 2005
increased to $4.7 million from $4.1 million for the six months ended June 30,
2004, an increase of $0.6 million. This increase relates primarily to the $0.6
million increase in professional fees related primarily to the registration of
the common stock sold in the December 2004 private placement and several
transactions which were not consummated, a $0.4 million increase in non-cash
compensation expense related to an option to purchase our common stock issued to
a consultant in June 2004 and a $0.3 million increase in expenses incurred be
AfriHUB in the six months ended June 30, 2005 as compared to the three months
ended June 30, 2004. Partially offsetting these increases were a $0.6 million
decrease in non-cash compensation expense related to the 2002 and 2001 repricing
of certain stock options and a $0.4 million decrease in expenses incurred by ESP
in the three months ended June 30, 2005 as compared to the three months ended
June 30, 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 several 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 six months ended June 30, 2005
increased to approximately $0.1 million from approximately $50,000 for the six
months ended June 30, 2004, an increase of approximately $59,000. 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
several additional university campuses, we anticipate that our capital
expenditures with respect to these two entities will remain nominal in future
periods, except to the extent AfriHUB is able to secure third party funding to
finance the establishment of a single additional campus.

   Impairment Charge

     As a result of our decision to cease providing funding to AfriHUB, as of
June 30, 2005, we evaluated AfriHUB's long-lived assets for recoverability and
determined that the undiscounted cash flows over the remaining expected life of
the two established centers was less than the carrying value of the assets
relating to those centers. Accordingly, we assessed the fair value of these
assets by estimating the recoverability of the computers and equipment upon a
sale. We recognized a non-cash impairment loss relating to the computers and
equipment as their carrying value exceeded the fair value by approximately $0.4
million.

   Interest Income, Net

     Interest income, net for the six months ended June 30, 2005 is comprised
primarily of the interest earned on our cash, cash equivalents, and short-term
investments. Interest income, net for the six months ended June 30, 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 six months ended June 30,
2005 decreased to $0.9 million from $7.6 million for the six months ended June
30, 2004, a decrease of $6.7 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 Earnings of Hughes Network Systems, LLC

     Following our April 2005 acquisition of a 50% interest in HNS, we 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. Accordingly, we record income
relating to our proportionate share of HNS' net income. For the period following
the April 22, 2005 acquisition through June 30, 2005, we recorded income of
approximately $6.5 million.

   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 six months ended June 30, 2005, we
recorded expense of approximately $6.0 million.

   Loss on Investment in Affiliates

     For the six months ended June 30, 2005, we recorded a loss on investments
in affiliates of approximately $1.6 million consisting of $1.3 million relating
to the impairment of the short-term promissory notes purchased from Navigauge
and $0.3 million relating to our proportionate share of Navigauge's net loss.
For the six months ended June 30, 2004, recorded a loss on investments in
affiliates of approximately $0.5 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 six months ended June 30, 2005, we recorded minority interest of
approximately $1.2 million relating to 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 six months ended June
30, 2004, we recorded minority interest of approximately $0.5 million relating
to the $0.6 million of 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 own approximately 20% of our MSV
Investors Subsidiary, partially offset by the $0.1 million of equity in loss
attributable to the other shareholders in AfriHUB.

   Net Income (Loss) Attributable to Common Stockholders

     For the six months ended June 30, 2005, we recorded net loss attributable
to common stockholders of approximately $8.9 million. For the six months ended
June 30, 2004, we recorded net income attributable to common stockholders of
approximately $18.4 million. Included in net (loss) income attributable to
common stockholders for the six months ended June 30, 2005 and 2004 was $5.0
million and $4.9 million, respectively, 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 $35.4 million in cash, cash equivalents and short-term
investments as of June 30, 2005. Cash used in operating activities was
approximately $2.9 million for the six months ended June 30, 2005 and resulted
primarily from cash used for general corporate overhead including payroll and
professional fees.

     For the six months ended June 30, 2005, cash used in investing activities,
excluding purchases and sales of short-term investments, was $53.6 million and
resulted primarily from the $50.0 million used to purchase our 50% interest in
HNS. We do not have any future funding commitments with respect to any of our
investments.

   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
pledged 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 account for our interest in HNS under the equity method in
accordance with FIN 46R, as we are not 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 quarterly
payment of approximately $1.4 million, for the three months ended June 30, 2005,
was declared and paid on July 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 8 to our condensed
consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

   Interest Rate Risk

     As of June 30, 2005, we had $38.5 million of cash, cash equivalents,
restricted cash and short-term cash investments. These cash, cash equivalents,
restricted cash 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 June 30, 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 less than $0.1 million as of June 30,
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 quarter ended June 30, 2005 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.

                                     PART II

Item 1. Legal Proceedings

     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 thirteen individuals, each of whom will
each receive an immaterial settlement payment. The agreements are subject to the
Court's dismissal of the action without prejudice. Should Court approval not be
received, we expect to continue to vigorously dispute this action.

     Our discontinued services subsidiary is currently a defendant in an action
brought by a former landlord in New York State Supreme Court titled Forty Four
Eighteen Joint Venture v. Rare Medium, Inc., Index 602632/03. The landlord
claimed unspecified amounts for breach of the lease. In August 2005, Rare
Medium, Inc. reached an agreement in principle to settle the matter for
approximately $0.3 million which is payable in October 2005. If Rare Medium,
Inc. fails to make such payment on time, the landlord's claim against Rare
Medium, Inc. would be increased to $0.6 million.

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       - Hughes Network Systems, LLC Bonus Unit Plan, which
                          was filed as exhibit 10.1 to the Company's Form 10-Q
                          for the period ended June 30, 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)