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

                                   FORM 10-Q


/x/ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
            Act of 1934 for the period ended September 30, 2004, or


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


                        Commission file number 0-13865


                         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 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, 2004, 6,089,809 shares of the registrant's voting common
stock and 8,990,212 shares of the registrant's non-voting common stock were
outstanding.



<PAGE>


                                     INDEX

                                                                          Page

Part I.  FINANCIAL INFORMATION

Item 1.  Consolidated Financial Statements

     Consolidated Balance Sheets as of September 30, 2004
       (Unaudited) and December 31, 2003                                    2

     Unaudited Consolidated Statements of Operations -
       Three months and nine months ended September 30, 2004 and 2003       3

     Unaudited Consolidated Statements of Cash Flows -
       Nine months ended September 30, 2004 and 2003                        4

     Notes to Unaudited Consolidated Financial Statements                   5

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                               14

Item 3.  Quantitative and Qualitative Disclosures About Market Risk        21

Item 4.  Controls and Procedures                                           21

Part II.  OTHER INFORMATION

Item 1.  Legal Proceedings                                                 22

Item 2.  Changes in Securities                                             22

Item 3.  Defaults Upon Senior Securities                                   23

Item 4.  Submission of Matters to a Vote of Security Holders               23

Item 5.  Other Information                                                 23

Item 6.  Exhibits and Reports on Form 8-K                                  23

SIGNATURES                                                                 24


<PAGE>

<TABLE>
<CAPTION>

                                           SKYTERRA COMMUNICATIONS, INC.
                                            CONSOLIDATED BALANCE SHEETS
                                          (In thousands except share data)

                                                                                       September 30,      December 31,
                                                                                           2004              2003
                                                                                      ----------------    -----------
                                                                                        (Unaudited)
                                       Assets

<S>                                                                                      <C>              <C>

Current assets:
   Cash and cash equivalents                                                             $  34,205        $   9,897
   Short-term investments                                                                   14,714           18,795
                                                                                         ---------        ---------
     Total cash, cash equivalents and short-term investments                                48,919           28,692
   Accounts receivable, net                                                                    149              237
   Note receivable and accrued interest from Motient Corporation, net                           --               --
   Note receivable from Verestar, Inc.                                                          --            2,500
   Prepaid expenses and other current assets                                                   637            1,048
                                                                                         ---------        ---------
     Total current assets                                                                   49,705           32,477

Property and equipment, net                                                                    631               57
Notes receivable and accrued interest from Mobile Satellite Venture, L.P.                   67,416           62,638
Investments in affiliates                                                                    3,219            2,769
Other assets                                                                                   695              158
                                                                                         ---------        ---------
       Total assets                                                                      $ 121,666        $  98,099
                                                                                         =========        =========

                    Liabilities and Stockholders' Equity (Deficit)

Current liabilities:
   Accounts payable                                                                      $   1,754        $   1,958
   Accrued liabilities                                                                       3,240            3,950
   Deferred revenue                                                                            121              158
                                                                                         ---------        ---------
     Total current liabilities                                                               5,115            6,066
                                                                                         ---------        ---------
Series A Convertible Preferred Stock, $.01 par value, net of unamortized
  discount of $33,687 and $36,979, respectively                                             87,608           80,182
                                                                                         ---------        ---------
Minority interest                                                                           13,521           12,467
                                                                                         ---------        ---------
Stockholders' equity (deficit):
   Preferred stock, $.01 par value. Authorized 10,000,000 shares;
     issued 1,199,007 shares as Series A Convertible Preferred Stock at
     September 30, 2004 and 1,171,612 shares at December 31, 2003                               --               --
   Common stock, $.01 par value. Authorized 200,000,000 shares; issued and
     outstanding 6,077,309 shares at September 30, 2004 and 6,075,727 shares at
     December 31, 2003                                                                          61               61
   Non-voting common stock, $.01 par value. Authorized 100,000,000 shares; issued
     and outstanding 8,990,212 shares at each of September 30, 2004 and December
     31, 2003                                                                                   90               90
   Additional paid-in capital                                                              547,228          546,243
   Accumulated other comprehensive income                                                        4               --
   Accumulated deficit                                                                    (531,961)        (546,839)
   Treasury stock, at cost, nil shares at September 30, 2004 and 6,622 shares at
     December 31, 2003                                                                          --             (171)
                                                                                         ---------        ---------
       Total stockholders' equity (deficit)                                                 15,422             (616)
                                                                                         ---------        ---------
       Total liabilities and stockholders' equity (deficit)                              $ 121,666        $  98,099
                                                                                         =========        =========


                       See accompanying notes to unaudited consolidated financial statements.

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                                           SKYTERRA COMMUNICATIONS, INC.
                                  UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
                                          (In thousands except share data)

                                                         Three Months Ended September 30,    Nine Months Ended September 30,
                                                         --------------------------------    -------------------------------
                                                              2004              2003             2004              2003
                                                         ---------------    -------------    --------------    -------------

<S>                                                        <C>               <C>               <C>               <C>

Revenues                                                   $        418      $        196      $      1,778      $        196
Cost of revenues                                                    398               219             1,735               219
                                                           -------------     -------------     -------------     -------------
  Gross profit (loss)                                                20               (23)               43               (23)
Expenses:
   Selling, general and administrative                            2,224             1,464             6,372             4,785
   Depreciation and amortization                                     45                13                95                26
                                                           -------------     -------------     -------------     -------------
     Total expenses                                               2,269             1,477             6,467             4,811
                                                           -------------     -------------     -------------     -------------
Loss from operations                                             (2,249)           (1,500)           (6,424)           (4,834)
Interest income, net                                              1,900             1,592             9,490             4,656
Loss on investments in affiliates                                  (449)              (67)             (972)             (266)
Other (expense) income, net                                         (63)                3            20,841                (2)
Minority interest                                                  (172)             (288)             (631)             (835)
                                                           -------------     -------------     -------------     -------------
(Loss) income from continuing operations                         (1,033)             (260)           22,304            (1,281)
Gain from wind-down of discontinued operations                       --               319                --               882
                                                           -------------     -------------     -------------     -------------
Net (loss) income                                                (1,033)               59            22,304              (399)
   Cumulative dividends and accretion of convertible
     preferred stock to liquidation value                        (2,492)           (2,429)           (7,426)           (7,242)
                                                           -------------     -------------     -------------     -------------
Net (loss) income attributable to common stockholders      $     (3,525)     $     (2,370)     $     14,878      $     (7,641)
                                                           =============     =============     =============     =============
Basic (loss) earnings per common share:
  Continuing operations                                    $      (0.23)     $      (0.18)     $       0.99      $      (0.55)
  Discontinued operations                                            --              0.02                --              0.06
                                                           ------------      ------------      ------------      ------------
     Net (loss) earnings per common share                  $      (0.23)     $      (0.16)     $       0.99      $      (0.49)
                                                           ============      ============      ============      ============
Diluted (loss) earnings per common share:
  Continuing operations                                    $      (0.23)     $      (0.18)     $       0.95      $      (0.55)
  Discontinued operations                                            --              0.02                --              0.06
                                                           ------------      ------------      ------------      ------------
     Net (loss) earnings per common share                  $      (0.23)     $      (0.16)     $       0.95      $      (0.49)
                                                           ============      ============      ============      ============
Weighted average common shares outstanding:
  Basic                                                      15,064,616        15,047,262        15,062,714        15,439,433
                                                           ============      ============      ============      ============
  Diluted                                                    15,064,616        15,047,262        15,713,479        15,439,433
                                                           ============      ============      ============      ============


                       See accompanying notes to unaudited consolidated financial statements.
</TABLE>



<PAGE>

<TABLE>
<CAPTION>


                                           SKYTERRA COMMUNICATIONS, INC.
                                  UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                   (In thousands)

                                                                                     Nine Months Ended September 30,
                                                                                     --------------------------------
                                                                                          2004              2003
                                                                                     -------------     --------------

<S>                                                                                      <C>              <C>

Cash flows from operating activities:
   Net income (loss)                                                                     $ 22,304         $   (399)
   Adjustments to reconcile net income (loss) to net cash used
   in operating activities:
     Gain from adjustment to reserve for note receivable and accrued
       interest from Motient Corporation                                                  (22,516)              --
     Gain from discontinued operations                                                         --             (882)
     Depreciation and amortization                                                             95               26
     Loss on investments in affiliates                                                        972              266
     Minority interest                                                                        631              835
     Non-cash compensation expense                                                            935              419
     Non-cash charge for issuance of warrants by consolidated subsidiaries                    392               28
     Changes in assets and liabilities (excluding effects of acquisitions):
       Accounts receivable, net                                                                88              260
       Prepaid expenses, interest receivable and other assets                                (836)          (3,426)
       Accounts payable and accrued liabilities                                            (1,183)            (563)
       Deferred revenue                                                                       (37)             (59)
                                                                                         --------         --------
           Net cash provided by (used in) continuing operations                               845           (3,495)
           Net cash used in discontinued operations                                            (9)            (358)
                                                                                         --------         --------
           Net cash provided by (used in) operating activities                                836           (3,853)
                                                                                         --------         --------
Cash flows from investing activities:
   Sales and maturities of short-term investments                                          18,949            2,000
   Purchases of short-term investments                                                    (14,868)         (18,798)
   Repayments (purchase) of notes receivable                                               21,500           (2,500)
   Cash paid for investments in affiliates, net of cash received from an investment        (1,422)            (389)
   Purchases of property and equipment                                                       (603)              (7)
   Cash paid for acquisitions, net of cash acquired and acquisition costs                    (105)             115
                                                                                         --------         --------
           Net cash provided by (used in) investing activities                             23,451          (19,579)
                                                                                         --------         --------
Cash flows from financing activities:
   Proceeds from issuance of common stock in connection with the exercise
     of options                                                                                17                6
   Cash paid in connection with tender offer                                                   --           (1,243)
   Proceeds from contributions to a consolidated subsidiary                                    --               48
                                                                                         --------         --------
           Net cash provided by (used in) financing activities                                 17           (1,189)
                                                                                         --------         --------
Effect of exchange rate changes on cash and cash equivalents                                    4               --
                                                                                         --------         --------
Net increase (decrease) in cash and cash equivalents                                       24,308          (24,621)
Cash and cash equivalents, beginning of period                                              9,897           37,484
                                                                                         --------         --------
Cash and cash equivalents, end of period                                                 $ 34,205         $ 12,863
                                                                                         ========         ========


                       See accompanying notes to unaudited consolidated financial statements.

</TABLE>


<PAGE>


                        SKYTERRA COMMUNICATIONS, INC.
             NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(1)  Description of the Business

     SkyTerra Communications, Inc. (the "Company") operates its business
through a group of complementary companies in the telecommunications industry,
including the Mobile Satellite Venture, L.P. joint venture ("MSV Joint
Venture"), currently a provider of mobile digital voice and data
communications services via satellite in North America; Electronic System
Products, Inc. ("ESP"), a product development and engineering services firm
that creates products for and provides consulting and related services to
customers in the telecommunications, broadband, satellite communications, and
wireless industries; AfriHUB, LLC ("AfriHUB"), an early stage company that
intends to provide the Nigerian market with instructor led and distance based
technical training and satellite based broadband Internet access and domestic
and international calling services; Navigauge, Inc. (formerly known as IQStat,
Inc., "Navigauge"), a media and marketing research firm that collects data on
in-car radio usage and driving habits of consumers and markets the aggregate
data to radio broadcasters, advertisers and advertising agencies in the United
States; and Miraxis, LLC ("Miraxis"), a telecommunications company that has
access to a Ka-band license with which it is striving to provide satellite
based multi-channel, broadband data and video services in North America.

     On February 10, 2003, the Federal Communications Commission (the "FCC")
released an order relating to an application submitted by the MSV Joint
Venture and certain of its competitors that could greatly expand the scope of
the MSV Joint Venture's business by permitting the incorporation of ancillary
terrestrial base stations (which we refer to as an "ancillary terrestrial
component" or "ATC") into its mobile satellite network (the "ATC Order"). A
similar application to the ATC Order was approved by Industry Canada, the
FCC's counterpart in Canada, on May 22, 2004. With these ATC orders, the MSV
Joint Venture entered a new stage of development which requires significant
future funding requirements and/or a need for one or more strategic partners.

     In July 2003, the MSV Joint Venture filed a request for reconsideration
of the ATC Order which asked the FCC for clarification on some of the
requirements and definitions contained in the ATC Order and also to consider
relaxing certain of the technical requirements stipulated in the order. Also
in July 2003, certain terrestrial wireless providers petitioned the U.S. Court
of Appeals for the District of Columbia to review the FCC's decision to grant
ATC. The petition has been held in abeyance until the FCC rules on the request
for reconsideration filed by the MSV Joint Venture.

     In the ATC Order, the FCC established certain requirements with which a
mobile satellite service provider must comply in order to operate an ATC. In
November 2003, the MSV Joint Venture filed an application demonstrating its
compliance with the requirements. On November 8, 2004, the FCC approved the
MSV Joint Venture's application, granting the MSV Joint Venture authority to
operate an ATC, subject to certain conditions. Further, the FCC approved
certain of the technical requirement waiver requests requested by the MSV
Joint Venture and deferred ruling on certain other waiver requests until
acting on other pending clarifications submitted in the request for
reconsideration filed in July 2003.

     The Company is headquartered in New York, New York.

(2)  Basis of Presentation

     The accompanying unaudited 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 unaudited 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 unaudited consolidated financial statements
should be read in conjunction with the audited financial statements and
related notes for the year ended December 31, 2003 which are contained in the
Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission. The results of the three and nine months ended September 30, 2004
are not necessarily indicative of the results to be expected for the full
year. Certain prior year amounts in the consolidated financial statements have
been reclassified to conform to the current year's presentation. The results
of AfriHUB have been included in the consolidated financial statements
beginning on April 19, 2004, the date of acquisition.

(3)  Interest in the MSV Joint Venture

     On November 26, 2001, through its 80% owned MSV Investors, LLC subsidiary
("MSV Investors Subsidiary"), the Company purchased an interest in the MSV
Joint Venture in the form of a convertible note with a principal amount of
$50.0 million. Immediately prior to the purchase of the convertible note, the
Company contributed $40.0 million to the MSV Investors Subsidiary and a group
of unaffiliated third parties collectively contributed $10.0 million. The note
bears interest at a rate of 10% per year, has a maturity date of November 26,
2006, and is convertible at any time at the option of the MSV Investors
Subsidiary into equity interests in the MSV Joint Venture.

     On August 13, 2002, the MSV Joint Venture completed a rights offering
allowing its investors to purchase their pro rata share of an aggregate $3.0
million of newly issued convertible notes with terms similar to the
convertible note already held by the MSV Investors Subsidiary. The MSV
Investors Subsidiary exercised its basic and over subscription rights and
purchased approximately $1.1 million of the convertible notes. The group of
unaffiliated third parties collectively contributed $0.2 million to the MSV
Investors Subsidiary in connection with the MSV Joint Venture rights offering.

     Pursuant to the joint venture agreement among the partners of the MSV
Joint Venture (the "MSV Joint Venture Agreement"), in the event that the MSV
Joint Venture had received final regulatory approval from the FCC, as that
phrase is defined in the MSV Joint Venture Agreement, by March 31, 2003 for
its ATC applications, the certain other investors in the MSV Joint Venture
(the "Other MSV Investors") would have been obligated to invest an additional
$50.0 million in the MSV Joint Venture. As the final regulatory approval from
the FCC, as defined in the MSV Joint Venture Agreement, was not received by
March 31, 2003, the additional investment was not required. However, the Other
MSV Investors retained the option to invest the $50.0 million on the same
terms and conditions until June 30, 2003. Prior to its expiration, the option
was extended until August 2003. On August 8, 2003, the MSV Joint Venture
Agreement was amended and certain of the Other MSV Investors agreed to invest
$3.7 million in the MSV Joint Venture and retain the option to invest an
additional $17.6 million under certain terms and conditions. On April 2, 2004,
those certain Other MSV Investors exercised the option in full.

     Under the amended MSV Joint Venture Agreement, the convertible notes held
by the MSV Investors Subsidiary will automatically convert into equity
interests in the MSV Joint Venture upon the repayment of (i) the outstanding
principal and accrued interest on certain outstanding debt of the MSV Joint
Venture and (ii) the accrued interest on all outstanding convertible notes of
the MSV Joint Venture, including the convertible notes held by the MSV
Investors Subsidiary. Such principal and accrued interest totaled
approximately $44.0 million as of September 30, 2004 and will need to increase
thereafter by an amount equal to the additional interest accrued on the
certain outstanding debt and convertible notes. Any additional equity
investments used to repay these obligations must be made at a valuation of the
MSV Joint Venture equal to or greater than the valuation at the time the MSV
Investors Subsidiary purchased the notes. Currently, the MSV Investors
Subsidiary would own, upon conversion, approximately 27.4% of the equity
interests in the MSV Joint Venture.

     On May 7, 2004, in connection with services being provided which support
the regulatory effort of the MSV Joint Venture, an unaffiliated consultant was
issued an option to purchase a less than one percent ownership interest in the
MSV Investors Subsidiary. The option is immediately exercisable and will
expire on the earlier of the dissolution of the MSV Investors Subsidiary or
December 31, 2010. During the three months ended June 30, 2004, the Company
recognized expense of approximately $0.3 million related to the issuance of
the option, which is the approximate fair value of the option using the
Black-Scholes option valuation model. To provide additional incentive to the
consultant, the MSV Investors Subsidiary agreed to pay the consultant a
one-time fee of $0.4 million upon a liquidity event, as defined in the
agreement. The Company would recognize an expense related to this fee when a
liquidity event becomes probable.

     The $10.2 million received from unaffiliated persons as an investment
into the MSV Investors Subsidiary, as well as their share of the equity in
earnings of the MSV Investors Subsidiary, is reflected in the accompanying
consolidated financial statements as minority interest.

(4)  Business Transactions

     (a)  Verestar Transactions

     On August 29, 2003, the Company signed a securities purchase agreement to
acquire, through a newly formed subsidiary, approximately 66.7% (on a
fully-diluted basis) of Verestar, Inc. ("Verestar"). Concurrent with the
signing of the securities purchase agreement, the Company purchased a 10%
senior secured note with a principal balance of $2.5 million and a due date of
August 2007. The Company terminated the securities purchase agreement on
December 22, 2003. Subsequently, Verestar filed for bankruptcy protection
under Chapter 11 of the United States Bankruptcy Code.

     On March 8, 2004, the Company executed an asset purchase agreement to
acquire, through a newly formed subsidiary, substantially all of the assets
and business of Verestar pursuant to Section 363 of the Bankruptcy Code. The
transaction was subject to a number of contingencies, including an auction on
March 30, 2004 at which Verestar considered higher and better offers. At the
auction, a bid was accepted from a strategic buyer at a price higher than the
Company was willing to offer.

     In connection with the Verestar bankruptcy, the Company entered into a
stipulation with Verestar pursuant to which the parties agreed to, among other
things, the validity and enforcement of the obligation under the senior
secured note and the Company's security interest in Verestar's assets. On
April 30, 2004, Verestar paid the Company approximately $2.9 million
representing the $2.5 million outstanding principal amount of the senior
secured note and approximately $0.4 million as a break-up fee in connection
with the termination of the March 2004 asset purchase agreement.

     On July 9, 2004, the Company settled its dispute with Verestar's parent
company regarding the break-up fee in connection with the termination of the
August 2003 securities purchase agreement. As consideration for the
settlement, Verestar's parent company paid the Company $1.5 million. This
amount was reflected in the consolidated statement of operations as other
income in the three months ended June 30, 2004.

     On July 29, 2004, the Company entered into a stipulated settlement with
Verestar and its Creditor Committee pursuant to which Verestar agreed to pay
the Company approximately $0.4 million representing certain amounts owed,
including unpaid accrued interest, in connection with the senior secured note.
On August 13, 2004, the Bankruptcy Court approved the stipulated settlement.
This settlement amount was reflected in the consolidated statement of
operations as interest income in the three months ended June 30, 2004.

     (b)  Interest in AfriHUB

     On April 19, 2004, the Company signed an agreement to acquire 80% of the
outstanding membership interests of AfriHUB for an aggregate purchase price of
$1.5 million. Through exclusive partnerships with certain Nigerian based
universities, AfriHUB intends to provide instructor led and distance based
technical training and satellite based broadband Internet access and domestic
and international calling services. From August 2004 through November 2004,
the Company purchased promissory notes from AfriHUB with an aggregate
principal amount of approximately $0.2 million. On October 8, 2004, AfriHUB
sold membership interests to an unaffiliated third party for $0.3 million. In
addition, if AfriHUB meets certain operating and financial milestones, certain
employees will be issued warrants to purchase ownership interests of AfriHUB.
Following the October 2004 sale of the membership interests and including the
effect of the warrants, the Company owns approximately 60.5% of AfriHUB's
membership interests.

     In connection with the allocation of the purchase price to the fair value
of the identifiable net assets acquired, the Company ascribed approximately
$0.6 million to a significant contract. This intangible asset is included in
other assets on the accompanying consolidated balance sheets and is being
amortized over the approximate five-year minimum life of the contract.

     (c)  Interest in Miraxis

     On May 28, 2002, the Company acquired Series B Preferred Shares and a
warrant from Miraxis for approximately $0.4 million, representing an ownership
of approximately 30%. Miraxis is a development stage, privately held
telecommunications company that has access to a Ka-band license with which it
is striving to provide satellite based multi-channel, broadband data and video
services in North America. The Company has the right to appoint two of the
five directors of the manager of Miraxis. Additionally, the Company entered
into a management support agreement with Miraxis under which the Company's
current Chief Executive Officer and President provided certain services to
Miraxis through February 2003 in exchange for additional Series B Preferred
Shares and warrants being issued to the Company. In addition, on December 20,
2002, the Company acquired Series C Preferred Shares and warrants from Miraxis
for approximately $0.1 million.

     In February 2003, the Company entered into a consulting agreement with
Miraxis pursuant to which Miraxis personnel provided services to the Company
through May 2003. In addition, Miraxis extended the management support
agreement whereby the Company's current Chief Executive Officer and President
continued to provide certain services to Miraxis through May 2003. In
connection with these agreements, the Company paid Miraxis approximately
$40,000 but also received additional Series C Preferred Shares and warrants.

     In April 2003, the Company acquired additional Series C Preferred Shares
and warrants for approximately $40,000. Between June 2003 and September 2003,
the Company purchased promissory notes from Miraxis with an aggregate
principal amount of approximately $0.1 million. In November 2003, the
promissory notes were converted to Series D Preferred Shares. From January
2004 through September 2004, the Company purchased additional promissory notes
with an aggregate principal balance of approximately $0.1 million. Currently,
the Company holds approximately 40% of the ownership interests of Miraxis. The
Company's President and Chief Executive Officer currently holds an approximate
1% interest in Miraxis.

     Miraxis License Holdings, LLC ("MLH"), an entity unaffiliated with
Miraxis, other than as described herein, holds the rights to certain orbital
slots for which Miraxis has acquired access to one slot in order to implement
its business plan. Miraxis issued 10% of its outstanding common equity on a
fully diluted basis to MLH as partial consideration for access to that slot.
In addition, Miraxis expects to pay certain royalties to MLH for use of the
slot should it ever launch satellites. Prior to becoming affiliated with the
Company, its Chief Executive Officer and President acquired a 2% interest in
MLH. In addition, prior to the Company acquiring an interest in Miraxis, an
affiliate of the Company's preferred stockholders acquired an approximate 70%
interest in MLH.

     In accordance with Financial Accounting Standards Board ("FASB")
Interpretation No. 46R, "Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51" ("FIN No. 46R"), beginning January 1, 2004, the
operating results and financial position of Miraxis have been included in the
consolidated financial statements. Prior to January 1, 2004, this investment
was included in "Investments in Affiliates" on the accompanying consolidated
balance sheets and was accounted for under the equity method with the
Company's share of Miraxis' loss being recorded in "Loss on Investments in
Affiliates" on the accompanying consolidated statements of operations. The
consolidation of Miraxis did not have a material impact on the Company's
operating results or financial position.

     (d)  Interest in Navigauge

     On April 21, 2003, the Company acquired Series B Preferred Shares from
Navigauge, formerly known as IQStat, for approximately $0.3 million,
representing an ownership interest of approximately 5%. Navigauge is a
privately held media and marketing research firm that collects data on in-car
radio usage and driving habits of consumers and markets the aggregate data to
radio broadcasters, advertisers and advertising agencies in the United States.

     In connection with the acquisition of ESP in August 2003, the Company
obtained indirect ownership of Series A Preferred Shares representing an
additional 16% ownership interest in Navigauge. In December 2003, the Company
acquired additional Series B Preferred Shares and warrants for approximately
$0.1 million. From January 2004 through April 2004, the Company acquired
additional Series B Preferred Shares and warrants from Navigauge for
approximately $0.5 million. Furthermore, from April 2004 through June 2004,
the Company purchased short-term promissory notes from Navigauge with an
aggregate principal amount of approximately $0.4 million.

     On June 14, 2004, Navigauge completed a recapitalization in which all
outstanding Series A Preferred Shares and Series B Preferred Shares were
converted to new Series A Preferred Shares with substantially similar rights
as the old Series B Preferred Shares. Following the exchange, the Company
converted the short-term promissory notes into new Series A Preferred Shares
and purchased additional Series A Preferred Shares for approximately $0.4
million. The Company also obtained direct ownership of the old Series A
Preferred shares held by ESP in exchange for the forgiveness of an aggregate
of approximately $0.8 million of senior secured promissory notes.

     On August 16, 2004, the Company purchased additional Series A Preferred
Shares for approximately $0.2 million. Furthermore, on October 13, 2004, the
Company purchased a short-term promissory note from Navigauge with a principal
amount of approximately $0.3 million. Currently, the Company owns
approximately 39.3% of the outstanding equity of Navigauge on an undiluted
basis.

     This investment is included in "Investments in Affiliates" on the
accompanying consolidated balance sheets and is 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 consolidated
statements of operations.

(5)  Note Receivable from Motient Corporation

     On May 1, 2002, to mitigate the risk, uncertainties and expenses
associated with Motient Corporation's ("Motient") plan of reorganization, the
Company cancelled the outstanding amounts due under the original promissory
notes issued by Motient and accepted a new note in the principal amount of
$19.0 million (the "New Motient Note") that was issued by a new, wholly-owned
subsidiary of Motient that owns 100% of Motient's interests in the MSV Joint
Venture ("MSV Holdings Inc."). The New Motient Note was due on May 1, 2005 and
bore interest at a rate of 9% per annum. As a result of the uncertainty with
respect to the ultimate collection on the remaining amounts due on the New
Motient Note, a reserve was maintained for the entire principal amount of the
note and unpaid interest accrued thereon.

     On April 7, 2004, as a result of a payment received by Motient pursuant
to a promissory note from the MSV Joint Venture, Motient paid the Company
approximately $0.5 million of interest accrued on the New Motient Note. This
amount was reflected in the consolidated statement of operations as interest
income in the three months ended March 31, 2004. Following several successful
financings by Motient, on July 15, 2004, Motient paid approximately $22.6
million representing all outstanding principal and accrued interest due on the
New Motient Note as of that date. Accordingly, the reserve was adjusted in the
three months ended June 30, 2004 resulting in the recognition of $19.0 million
in other income and $3.5 million in interest income. The remaining $0.1
million represents interest earned during July 2004 and was recognized in the
accompanying consolidated statement of operations in the three months ended
September 30, 2004.

(6)  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>
<CAPTION>

                                                     Three Months Ended September 30,      Nine Months Ended September 30,
                                                     ---------------------------------    -------------------------------
                                                         2004               2003              2004             2003
                                                     --------------    ---------------    --------------   --------------

<S>                                                     <C>                <C>               <C>              <C>

Weighted average common shares outstanding - basic      15,064,616         15,047,262        15,062,714       15,439,433
Common shares issuable upon exercise of stock
   options                                                      --                 --           650,765               --
                                                     --------------    ---------------    --------------   --------------
Weighted average common shares outstanding -
   diluted                                              15,064,616         15,047,262        15,713,479       15,439,433
                                                     ==============    ===============    ==============   ==============

</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 nine months ended September 30, 2004,
stock options and warrants exercisable for 2,662,950 and 1,727,903 shares of
common stock, respectively, were excluded from the computation of diluted
earnings per common share, as they were antidilutive. For each of the three
and nine months ended September 30, 2003, stock options and warrants
exercisable for 2,320,663 shares of common stock were excluded from the
computation of diluted loss per common share, as they were antidilutive.

     During each of the three and nine months ended September 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 per common share,
as they were antidilutive. During each of the three and nine months ended
September 30, 2003, 1,690,729 shares of common stock issuable upon the
conversion of the preferred stock were excluded from the computation of
diluted loss per common share, as they were antidilutive.

(7)  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 made in 1995
and future years 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 September 30, 2004 and compensation expense of approximately $0.9
million for the nine months ended September 30, 2004. As a result of the
re-pricing of those certain stock options, for the three and nine months ended
September 30, 2003, the Company recognized compensation expense of
approximately $0.3 million and $0.4 million, respectively.

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

<TABLE>
<CAPTION>

                                                      Three Months Ended September 30,    Nine Months Ended September 30,
                                                      --------------------------------    -------------------------------
                                                          2004              2003              2004             2003
                                                      --------------    --------------    --------------   --------------

<S>                                                        <C>                    <C>           <C>               <C>

Net (loss) income, as reported                             $(1,033)               $59           $22,304           $(399)
(Deduct) Add: Stock-based compensation
   (contra-expense) expense, as reported                       (61)               297               935             419
Deduct: Total stock-based compensation expense
   determined under fair value based method for all
   awards                                                     (121)               (68)             (258)           (314)
                                                      --------------    --------------    --------------   --------------
Pro forma net income (loss)                                $(1,215)              $288           $22,981           $(294)
                                                      ==============    ==============    ==============   ==============

Basic earnings (loss) per common share:
   As reported                                              $(0.23)            $(0.16)            $0.99          $(0.49)
   Pro forma                                                $(0.25)            $(0.14)            $1.03          $(0.49)

Diluted earnings (loss) per common share:
   As reported                                              $(0.23)            $(0.16)            $0.95          $(0.49)
   Pro forma                                                $(0.25)            $(0.14)            $0.98          $(0.49)

</TABLE>


     For the three months ended September 30, 2004, the Company issued options
to purchase 40,000 shares of common stock at a weighted average fair value of
$5.29 using the Black-Scholes option pricing model. For the nine months ended
September 30, 2004, the Company issued options to purchase 220,000 shares of
common stock at a weighted average fair value of $2.70 using the Black-Scholes
option pricing model. For the three months ended September 30, 2003, the
Company issued options to purchase 40,000 shares of common stock at a weighted
average fair value of $1.26 using the Black-Scholes option pricing model. For
the nine months ended September 30, 2003, the Company issued options to
purchase 235,000 shares of common stock at a weighted average fair value of
$0.83 using the Black-Scholes option pricing model.

(8)  Segment Information

     The Company's consolidated operations have been classified into three
reportable segments: ESP, AfriHUB and Parent and other. ESP is a product
development and engineering services firm that creates products for and
provides consulting and engineering services to the telecommunications,
broadband, satellite communications, and wireless industries. Through
exclusive partnerships with certain Nigerian based universities, AfriHUB
intends to provide instructor led and distance based technical training and
satellite based broadband Internet access and domestic and international
calling services. Parent and other includes the Company, other consolidated
entities other than ESP and AfriHUB, and eliminations.

     The segment information is reported along the same lines that our chief
operating decision maker reviews the operating results in assessing
performance and allocating resources. For each period presented, all reported
revenues were attributable to ESP. For the nine months ended September 30,
2004, two customers individually accounted for more than 10% of the revenues
and, combined, accounted for approximately $0.7 million of revenues and
approximately $0.1 million of accounts receivable as of September 30, 2004.

     The following tables present certain other financial information on the
Company's reportable segments (in thousands):

<TABLE>
<CAPTION>

                                                  Three Months Ended September 30,     Nine Months Ended September 30,
                                                  --------------------------------    --------------------------------
                                                       2004              2003              2004              2003
                                                  -------------     --------------    --------------    --------------

<S>                                                     <C>                <C>               <C>               <C>

Loss from operations:
  ESP                                                   $(197)             $(185)            $(771)            $(185)
  AfriHUB                                                (630)                --            (1,092)               --
  Parent and other                                     (1,422)            (1,315)           (4,561)           (4,649)
                                                  -------------     --------------    --------------    --------------
                                                       (2,249)            (1,500)           (6,424)           (4,834)
Interest income, net                                    1,900              1,592             9,490             4,656
Loss on investments in affiliates                        (449)               (67)             (972)             (266)
Other (expense) income, net                               (63)                 3            20,841                (2)
Minority interest                                        (172)              (288)             (631)             (835)
                                                  -------------     --------------    --------------    --------------
(Loss) income from continuing operations               (1,033)              (260)           22,304            (1,281)
Gain from wind-down of discontinued operations             --                319                --               882
                                                  -------------     --------------    --------------    --------------
Net (loss) income                                     $(1,033)               $59           $22,304             $(399)
                                                  =============     ==============    ==============    ==============

                                                                          September 30,      December 31,
                                                                              2004               2003
                                                                          --------------    ---------------
Total assets:
  ESP                                                                              $193               $555
  AfriHUB                                                                         1,134                 --
  Parent and other                                                              120,339             97,544
                                                                          --------------    ---------------
                                                                               $121,666            $98,099
                                                                          ==============    ===============

</TABLE>


(9)  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 September 30, 2004, cash of approximately $40,000
(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
$3.4 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 nine months ended September 30, 2003, the Company recognized a gain
of approximately $0.3 million and $0.9 million, respectively, as a result of
the settlement of Rare Medium, Inc. liabilities at amounts less than their
recorded amounts.

(10) Related Party Transactions

     During the three and nine months ended September 30, 2004, ESP recognized
revenues totaling approximately $0.1 million and $0.5 million, respectively,
for certain services provided to Navigauge and the MSV Joint Venture.

(11) Contingencies

     Litigation

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

     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.

     On July 26, 2002, plaintiffs James D. Loeffelbein, Terrie L. Pham and
certain related parties filed suit against the Company, certain of its current
and former officers, its former investor relations firm and a former employee
of plaintiff Loeffelbein in the District Court of Johnson County, Kansas,
Loeffelbein v. Milberg Weiss Bershad Hynes & Lerach, LLP, et al., 02 CV 04867.
The plaintiffs asserted claims for fraud, negligence and breach of fiduciary
duty against all of the Company and certain of its current and former officers
in connection with allegedly false statements purportedly made to the
plaintiffs. As a result of a court ordered mediation conducted as part of the
appeals process, on September 28, 2004, the Company and the plaintiffs settled
the matter. The settlement amount was paid in full by the Company's insurer.

     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. Discovery has commenced. On October 1, 2004, the Company
filed a motion for summary judgment. Both the Company and Rare Medium, Inc.
expect to vigorously dispute class certification and all other aspects of the
action.

     Though it intends to continue to vigorously contest each of the
aforementioned cases, 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.

(12) Subsequent Events

     The terms of the Company's Series A convertible preferred stock provide
for dividends of 4.65% of the then current face value to be paid quarterly in
arrears commencing with the three months ended September 30, 2004. The first
such payment of approximately $1.4 million was declared by the Company's board
of directors and paid on October 14, 2004. The net loss attributable to common
stockholders for the three months ended September 30, 2004 reflects the
accrual of this dividend.

     On October 8, 2004, AfriHUB sold membership interests to an unaffiliated
third party for $0.3 million. Following this sale of membership interests and
including the effect of the warrants issuable to certain employees if AfriHUB
meets certain operating and financial milestones, the Company owns
approximately 60.5% of AfriHUB's membership interests.

     On November 8, 2004, the FCC approved the MSV Joint Venture's
application, granting the MSV Joint Venture authority to operate an ATC,
subject to certain conditions. Further, the FCC approved certain of the
technical requirement waiver requests requested by the MSV Joint Venture and
deferred ruling on certain other waiver requests until acting on other pending
clarifications submitted in the request for reconsideration filed in July
2003.

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,"
"strive," "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.

Overview

     We operate our business through a group of complementary companies in the
telecommunications industry, including the MSV Joint Venture, ESP, AfriHUB,
Navigauge (formerly known as IQStat) and Miraxis.

     On April 19, 2004, we signed an agreement to acquire 80% of the
outstanding membership interests of AfriHUB for an aggregate purchase price of
up to $1.5 million. Our ownership interest is subject to dilution if AfriHUB
meets certain operating and financial metrics. Through exclusive partnerships
with certain Nigerian based universities, AfriHUB intends to provide
instructor led and distance based technical training and satellite based
broadband Internet access and domestic and international calling services. The
first two campus facilities are expected to be operational during the fourth
quarter of 2004.

     We continue to evaluate a number of other business opportunities and are
currently engaged in a number of 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.

     As a result of the decision made at the end of the third quarter of 2001
to discontinue the operations of Rare Medium, Inc. and its LiveMarket
subsidiary, the results of operations of these businesses have been accounted
for as discontinued operations. Accordingly, our discussion in the section
entitled "Results of Operations" focuses on our continuing operations and
includes our results and those of our MSV Investors Subsidiary, ESP, AfriHUB
(from the date of acquisition) and Miraxis.

Results of Operations for the Three Months Ended September 30, 2004 Compared
to the Three Months Ended September 30, 2003

     Revenues

     Revenues are derived from fees generated for product development,
consulting and engineering services performed by ESP, including reimbursable
travel and other out-of-pocket expenses, and the sales of its electronic
database of parts commonly used in printed circuit design. ESP provides
services to its clients pursuant to both time-and-materials and fixed price
contracts. Revenues from time-and-materials service contracts are recognized
as the services are provided. For fixed price contracts, revenue is recognized
under the percentage-of-completion basis, and accordingly revenues recognized
in excess of billings would be recorded as work in progress on the
accompanying balance sheet. Billings in excess of revenues recognized are
recorded as deferred revenue. Losses on contracts are recognized during the
period in which the loss first becomes probable and reasonably estimable.
Contract losses are determined to be the amount by which the estimated costs
of the contract exceed the estimated total revenues that will be generated by
the contract.

     Revenues for the three months ended September 30, 2004 increased to $0.4
million from $0.2 million for the three months ended September 30, 2003. This
increase was due to the acquisition of ESP on August 25, 2003, and
accordingly, our inclusion of ESP's operating results from that date. In
future periods, we also expect to report revenues of AfriHUB as it expects to
begin offering its services on two university campuses in Nigeria during the
fourth quarter of 2004.

     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 for the three months ended September 30, 2004 increased to $0.4
million from $0.2 million for the three months ended September 30, 2003. This
increase was due to the acquisition of ESP on August 25, 2003, and
accordingly, our inclusion of ESP's operating results from that date. In
future periods, we expect to report an increase in cost of revenues as AfriHUB
expects to begin offering its services on two university campuses in Nigeria
during the fourth quarter of 2004.

     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 September 30,
2004 increased to $2.2 million from $1.5 million for the three months ended
September 30, 2003, an increase of $0.7 million. This increase relates
primarily to approximately $0.6 million of expenses incurred by AfriHUB in the
three months ended September 30, 2004 and a $0.3 million insurance claim
payment received in the three months ended September 30, 2003, partially
offset by a $0.4 million decrease in non-cash compensation expense relating to
the repricing of certain options in 2002 and 2001. As our selling, general and
administrative expense relates to our current operations, including ESP and
AfriHUB, we expect these costs, excluding any non-cash compensation expense
arising from fluctuations in the price of our common stock in association with
the repricing of those certain stock options in 2001 and 2002, to increase in
future periods as AfriHUB continues to hire employees and build its business.

     Interest Income, Net

     Interest income, net is comprised of the interest earned on the notes
receivable from the MSV Joint Venture and Motient and on our cash, cash
equivalents, and short-term investments. Interest income, net for the three
months ended September 30, 2004 increased to $1.9 million from $1.6 million
for the three months ended September 30, 2003, an increase of $0.3 million.
This increase relates primarily to the $0.1 million of interest earned on the
New Motient Note during the three months ended September 30, 2004 and a $0.1
million increase in interest earned on the note receivable from the MSV Joint
Venture.

     Loss on Investment in Affiliates

     For the three months ended September 30, 2004, we recorded a loss on
investments in affiliates of approximately $0.4 million relating to our
proportionate share of Navigauge's operating loss. For the three months ended
September 30, 2003, we recorded a loss on investments in affiliates of
approximately $0.1 million for our proportionate share of each of Miraxis' and
Navigauge's respective operating loss. We will continue to monitor the
carrying value of our remaining investments in affiliates.

     Minority Interest

     For the three months ended September 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. For the three months ended September 30, 2003,
we recorded minority interest of approximately $0.3 million relating to the
equity in earnings attributable to the group of unaffiliated third parties who
invested in our MSV Investors Subsidiary.

     Gain from Discontinued Operations

     At the end of the third quarter of 2001, a decision to discontinue the
operations of Rare Medium, Inc. and its LiveMarket subsidiary was made in
light of their performance and prospects. For the three months ended September
30, 2004 and 2003, we recognized a gain of nil and $0.3 million, respectively,
as a result of the settlement of Rare Medium, Inc. liabilities at amounts less
than their recorded amounts.

     Net Loss Attributable to Common Stockholders

     For the three months ended September 30, 2004 and 2003, we recorded a net
loss attributable to common stockholders of approximately $3.5 million and
$2.4 million, respectively. Included in the net loss attributable to common
stockholders for the three months ended September 30, 2004 and 2003 was $2.5
million and $2.4 million, respectively, of dividends and accretion related to
our Series A convertible preferred stock. Dividends were accrued related to
amounts payable quarterly on the Series A convertible preferred stock and to
the accretion of the carrying amount of the Series A convertible preferred
stock up to its $100 per share face redemption amount over 13 years.

Results of Operations for the Nine Months Ended September 30, 2004 Compared
to the Nine Months Ended September 30, 2003

     Revenues

     Revenues are derived from fees generated for product development,
consulting and engineering services performed by ESP, including reimbursable
travel and other out-of-pocket expenses, and the sales of its electronic
database of parts commonly used in printed circuit design. ESP provides
services to its clients pursuant to both time-and-materials and fixed price
contracts. Revenues from time-and-materials service contracts are recognized
as the services are provided. For fixed price contracts, revenue is recognized
under the percentage-of-completion basis, and accordingly revenues recognized
in excess of billings would be recorded as work in progress on the
accompanying balance sheet. Billings in excess of revenues recognized are
recorded as deferred revenue. Losses on contracts are recognized during the
period in which the loss first becomes probable and reasonably estimable.
Contract losses are determined to be the amount by which the estimated costs
of the contract exceed the estimated total revenues that will be generated by
the contract.

     Revenues for the nine months ended September 30, 2004 increased to $1.8
million from $0.2 million for the nine months ended September 30, 2003. This
increase was due to the acquisition of ESP on August 25, 2003, and
accordingly, our inclusion of ESP's operating results from that date. In
future periods, we expect to also report revenues of AfriHUB as it expects to
begin offering its services on two university campuses in Nigeria during the
fourth quarter of 2004.

     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 for the nine months ended September 30, 2004 increased to $1.7
million from $0.2 million for the nine months ended September 30, 2003. This
increase was due to the acquisition of ESP on August 25, 2003, and
accordingly, our inclusion of ESP's operating results from that date. In
future periods, we expect to report an increase in cost of revenues as AfriHUB
expects to begin offering its services on two university campuses in Nigeria
during the fourth quarter of 2004.

     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 nine months ended September 30,
2004 increased to $6.4 million from $4.8 million for the nine months ended
September 30, 2003, an increase of $1.6 million. This increase relates
primarily to the recognition of non-cash expense of approximately $1.2 million
in the nine months ended September 30, 2004 relating to the repricing of
certain options in 2002 and 2001 and the issuance of an option to purchase a
less than one percent ownership interest in our MSV Investors Subsidiary to an
unaffiliated consultant. For the nine months ended September 30, 2003, we
recognized $0.3 million of non-cash expense relating to the option repricing.
Also included in the increase are approximately $0.5 million and $1.0 million
of additional expenses incurred by ESP and AfriHUB, respectively, in the nine
months ended September 30, 2004, partially offset by the approximately $0.7
million charge recognized in the nine months ended September 30, 2003 relating
to bonuses for certain executive officers for services provided during the
year ended December 31, 2002 and the severance and benefits for our former
Controller and former Treasurer. As our selling, general and administrative
expense relates to our current operations, including ESP and AfriHUB, we
expect these costs, excluding any non-cash compensation expense arising from
fluctuations in the price of our common stock in association with the
repricing of certain stock options in 2001 and 2002, to increase in future
periods as AfriHUB continues to hire employees and build its business.

     Interest Income, Net

     Interest income, net is comprised of the interest earned on the notes
receivable from the MSV Joint Venture, Verestar and Motient and on our cash,
cash equivalents, and short-term investments. Interest income, net for the
nine months ended September 30, 2004 increased to $9.5 million from $4.7
million for the nine months ended September 30, 2003, an increase of $4.8
million. This increase relates primarily to the adjustment of the reserve for
the unpaid interest on the New Motient Note in the nine months ended September
30, 2004. The reserve was adjusted because Motient paid approximately $0.5
million of outstanding interest in April 2004 and approximately $22.6 million
representing the entire outstanding principal and remaining interest due under
the New Motient Note in July 2004. As there was no longer any uncertainty with
respect to the ultimate collection on the principal or interest due under the
New Motient Note, we recognized approximately $4.1 million in interest income
in the nine months ended September 30, 2004, representing all interest earned
from the May 2002 issuance of the note through the July 2004 repayment. Also
contributing to the increase in interest income, net is the recognition of
$0.3 million of interest in the nine months ended September 30, 2004 related
to the senior secured note from Verestar.

     Loss on Investment in Affiliates

     For the nine months ended September 30, 2004, we recorded a loss on
investments in affiliates of approximately $1.0 million relating to our
proportionate share of Navigauge's operating loss. For the nine months ended
September 30, 2003, we recorded a loss on investments in affiliates of
approximately $0.3 million for our proportionate share of each of Miraxis' and
Navigauge's respective operating loss. We will continue to monitor the
carrying value of our remaining investments in affiliates.

     Other Income, Net

     For the nine months ended September 30, 2004, we recorded other income,
net of approximately $20.8 million relating primarily to one-time items,
including the $19.0 million adjustment to the reserve for the New Motient
Note, the $1.5 million settlement with Verestar's parent company in connection
with the termination of the August 2003 securities purchase agreement, and the
approximately $0.4 million representing a break-up fee in connection with the
termination of the March 2004 Verestar asset purchase agreement.

     Minority Interest

     For the nine months ended September 30, 2004, we recorded minority
interest of approximately $0.6 million relating to the $0.8 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 $0.2 million of equity in loss attributable to the
other shareholders in AfriHUB. For the nine months ended September 30, 2003,
we recorded minority interest of approximately $0.8 million relating to the
equity in earnings attributable to the group of unaffiliated third parties who
invested in our MSV Investors Subsidiary.

     Gain from Discontinued Operations

     At the end of the third quarter of 2001, a decision to discontinue the
operations of Rare Medium, Inc. and its LiveMarket subsidiary was made in
light of their performance and prospects. For the nine months ended September
30, 2004 and 2003, we recognized a gain of nil and $0.9 million, respectively,
as a result of the settlement of Rare Medium, Inc. liabilities at amounts less
than their recorded amounts.

     Net Income (Loss) Attributable to Common Stockholders

     For the nine months ended September 30, 2004, we recorded net income
attributable to common stockholders of approximately $14.9 million. For the
nine months ended September 30, 2003, we recorded a net loss attributable to
common stockholders of approximately $7.6 million. Included in net income
(loss) attributable to common stockholders for the nine months ended September
30, 2004 and 2003 was $7.4 million and $7.2 million, respectively, of
dividends and accretion related to our Series A convertible preferred stock.
Dividends were accrued related to amounts payable quarterly on the Series A
convertible preferred stock and to the accretion of the carrying amount of the
Series A convertible preferred stock up to its $100 per share face redemption
amount over 13 years.

Liquidity and Capital Resources

     We had approximately $48.9 million in cash, cash equivalents and
short-term investments as of September 30, 2004. Cash provided by operating
activities from continuing operations was approximately $0.8 million for the
nine months ended September 30, 2004 and resulted primarily from the
collection of approximately $3.9 million of accrued interest earned on the
notes receivable from Motient and Verestar and the approximately $1.9 million
received in connection with the Verestar transactions, partially offset by
cash used for general corporate overhead including payroll and professional
fees. Cash used by discontinued operations was approximately $9,000 for the
nine months ended September 30, 2004 and resulted from cash used for
settlement of vendor liabilities and legal and advisory fees.

     For the nine months ended September 30, 2004, cash provided by investing
activities, excluding purchases and sales of short-term investments, was $19.4
million and resulted primarily from the $21.5 million repayment of the notes
receivable from Motient and Verestar, partially offset by approximately $1.4
million used to purchase investments in Navigauge. We do not have any future
funding commitments with respect to any of our investments. However, we expect
that the MSV Joint Venture, AfriHUB, Miraxis, and Navigauge will require
additional funding from time to time, and we may choose to provide additional
funding, subject to our liquidity and capital resources at the time.

     Motient Promissory Note

     On May 1, 2002, to mitigate the risk, uncertainties and expenses
associated with Motient's plan of reorganization, we cancelled the outstanding
amounts due under the original promissory notes issued by Motient and accepted
a new note in the principal amount of $19.0 million that was issued by MSV
Holding, Inc., a new, wholly-owned subsidiary of Motient that owns 100% of
Motient's interests in the MSV Joint Venture. The New Motient Note is due on
May 1, 2005 and bears interest at a rate of 9% per annum. Although the New
Motient Note is unsecured, there are material restrictions placed on the use
of MSV Holdings Inc.'s assets, and MSV Holdings Inc. is prohibited from
incurring or guarantying any debt in excess of $21.0 million (including the
New Motient Note). Additionally, there are events of default (e.g., a
bankruptcy filing by Motient) that would accelerate the due date of the New
Motient Note. As a result of the uncertainty with respect to the ultimate
collection on the remaining amounts due on the New Motient Note, a reserve was
maintained for the entire principal amount of the note and unpaid interest
accrued thereon.

     On April 7, 2004, as a result of a payment received by Motient pursuant
to a promissory note from the MSV Joint Venture, Motient paid us approximately
$0.5 million of interest accrued on the New Motient Note. This amount was
reflected in the consolidated statement of operations as interest income in
the three months ended March 31, 2004. Following several successful financings
by Motient, on July 15, 2004, Motient paid approximately $22.6 million
representing all outstanding principal and accrued interest due on the New
Motient Note as of that date. Accordingly, the reserve was adjusted in the
three months ended June 30, 2004 resulting in the recognition of $19.0 million
in other income and $3.5 million in interest income. The remaining $0.1
million represents interest earned during July 2004 and was recognized in the
accompanying consolidated statement of operations in the three months ended
September 30, 2004.

     MSV Joint Venture Convertible Notes Receivable

     Through our 80% owned MSV Investors Subsidiary, we are an active
participant in the MSV Joint Venture, a joint venture that also includes TMI
Communications, Inc., Motient and the Other MSV Investors. The MSV Joint
Venture is currently a provider of mobile digital voice and data
communications services via satellite in North America. On November 26, 2001,
through our MSV Investors Subsidiary, we purchased a $50.0 million interest in
the MSV Joint Venture in the form of a convertible note. Immediately prior to
the purchase of the convertible note, we contributed $40.0 million to the MSV
Investors Subsidiary and a group of unaffiliated third parties collectively
contributed $10.0 million. The note bears interest at a rate of 10% per year,
has a maturity date of November 26, 2006, and is convertible at any time at
the option of our MSV Investors Subsidiary into equity interests in the MSV
Joint Venture.

     On August 13, 2002, the MSV Joint Venture completed a rights offering
allowing its investors to purchase their pro rata share of an aggregate $3.0
million of newly issued convertible notes with terms similar to the
convertible note already held by our MSV Investors Subsidiary. The MSV
Investors Subsidiary exercised its basic and over subscription rights and
purchased approximately $1.1 million of the convertible notes. The group of
unaffiliated third parties collectively contributed $0.2 million to the MSV
Investors Subsidiary in connection with the MSV Joint Venture rights offering.

     Pursuant to the MSV Joint Venture Agreement, in the event that the MSV
Joint Venture had received final regulatory approval from the FCC, as that
phrase is defined in the MSV Joint Venture Agreement, by March 31, 2003 for
its ATC applications, the Other MSV Investors would have been obligated to
invest an additional $50.0 million in the MSV Joint Venture. As the final
regulatory approval from the FCC, as defined in the MSV Joint Venture
Agreement, was not received by March 31, 2003, the additional investment was
not required. However, the Other MSV Investors retained the option to invest
the $50.0 million on the same terms and conditions until June 30, 2003. Prior
to its expiration, the option was extended until August 2003. On August 8,
2003, the MSV Joint Venture Agreement was amended and certain of the Other MSV
Investors agreed to invest $3.7 million in the MSV Joint Venture and retained
the option to invest an additional $17.6 million under certain terms and
conditions. On April 2, 2004, those certain Other MSV Investors exercised the
option in full.

     Under the amended MSV Joint Venture Agreement, the convertible notes held
by our MSV Investors Subsidiary will automatically convert into equity
interests in the MSV Joint Venture upon the repayment of (i) the outstanding
principal and accrued interest on certain outstanding debt of the MSV Joint
Venture and (ii) the accrued interest on all outstanding convertible notes of
the MSV Joint Venture, including the convertible notes held by the MSV
Investors Subsidiary. Such principal and accrued interest totaled
approximately $44.0 million as of September 30, 2004 and will need to increase
thereafter by an amount equal to the additional interest accrued on the
certain outstanding debt and convertible notes. Any additional equity
investments used to repay these obligations must be made at a valuation of the
MSV Joint Venture equal to or greater than the valuation at the time the MSV
Investors Subsidiary purchased the notes. Currently, the MSV Investors
Subsidiary would own, upon conversion, approximately 27.4% of the equity
interests in the MSV Joint Venture.

     On May 7, 2004, in connection with services being provided which support
the regulatory effort of the MSV Joint Venture, an unaffiliated consultant was
issued an option to purchase a less than one percent ownership interest in the
MSV Investors Subsidiary. The option is immediately exercisable and will
expire on the earlier of the dissolution of the MSV Investors Subsidiary or
December 31, 2010. During the three months ended June 30, 2004, we recognized
expense of approximately $0.3 million related to the issuance of the option,
which is the approximate fair value of the option using the Black-Scholes
option valuation model. To provide additional incentive to the consultant, the
MSV Investors Subsidiary agreed to pay the consultant a one-time fee of $0.4
million upon a liquidity event, as defined in the agreement. We would
recognize an expense related to this fee when a liquidity event becomes
probable.

     The fair value of the convertible notes approximates book value based on
the equity value of the MSV Joint Venture's April 2004 funding transaction
assuming conversion of such note.

     Verestar Transactions

     On August 29, 2003, we signed a securities purchase agreement to acquire,
through a newly formed subsidiary, approximately 66.7% (on a fully-diluted
basis) of Verestar. Concurrent with the signing of the securities purchase
agreement, we purchased a 10% senior secured note with a principal balance of
$2.5 million and a due date of August 2007. We terminated the securities
purchase agreement on December 22, 2003. Subsequently, Verestar filed for
bankruptcy protection under Chapter 11 of the United States Bankruptcy Code.

     On March 8, 2004, we executed an agreement to acquire, through a newly
formed subsidiary, substantially all of the assets and business of Verestar
pursuant to Section 363 of the Bankruptcy Code. The transaction was subject to
a number of contingencies, including an auction on March 30, 2004 at which
Verestar considered higher and better offers. At the auction, a bid was
accepted from a strategic buyer at a price higher than we were willing to
offer.

     In connection with the Verestar bankruptcy, we entered into a stipulation
with Verestar pursuant to which the parties agreed to, among other things, the
validity and enforcement of the obligation under the senior secured note and
our security interest in Verestar's assets. On April 30, 2004, Verestar repaid
the $2.5 million principal amount of the senior secured note, along with an
additional approximately $0.4 million representing a break-up fee in
connection with the termination of the March 2004 asset purchase agreement.

     On July 9, 2004, we settled our dispute with Verestar's parent company
regarding the break-up fee in connection with the termination of the August
2003 securities purchase agreement. As consideration for the settlement,
Verestar's parent company paid us $1.5 million. This amount has been reflected
in the accompanying consolidated statement of operations as other income in
the nine months ended September 30, 2004.

     On July 29, 2004, we entered into a stipulated settlement with Verestar
and its Creditor Committee pursuant to which Verestar agreed to pay us
approximately $0.4 million representing certain amounts owed, including unpaid
accrued interest, in connection with the senior secured note. On August 13,
2004, the Bankruptcy Court approved the stipulated settlement. This settlement
amount has been reflected in the accompanying consolidated statement of
operations as interest income in the nine months ended September 30, 2004.

     ESP Senior Secured Promissory Notes

     On August 25, 2003, for nominal consideration, we acquired all of the
outstanding common stock of ESP, a product development and engineering
services firm that creates products for and provides consulting and
engineering services to the telecommunications, broadband, satellite
communications, and wireless industries. Subsequent to the stock purchase, we
purchased an aggregate of approximately $1.4 million of senior secured
promissory notes from ESP. On June 9, 2004, we forgave approximately $0.8
million of outstanding principal and accrued interest of the promissory notes
in exchange for the Series A Preferred Shares of Navigauge held by ESP. On
September 28, 2004, we purchased an additional senior secured promissory note
with a principal balance of approximately $0.1 million. As of September 30,
2004, principal and accrued interest of these senior secured notes totaled
approximately $0.7 million.

     AfriHUB Commitment

     On April 19, 2004, we signed an agreement to acquire 80% of the
outstanding membership interests of AfriHUB for an aggregate purchase price of
up to $1.5 million. Through exclusive partnerships with certain Nigerian based
universities, AfriHUB intends to provide instructor led and distance based
technical training and satellite based broadband Internet access and domestic
and international calling services. From August 2004 through November 2004, we
purchased promissory notes from AfriHUB with an aggregate principal amount of
approximately $0.2 million. On October 8, 2004, AfriHUB sold membership
interests to an unaffiliated third party for $0.3 million. In addition, if
AfriHUB meets certain operating and financial milestones, certain employees
will be issued warrants to purchase ownership interests of AfriHUB. Following
the October 2004 sale of the membership interests and including the effect of
the warrants, we own approximately 60.5% of AfriHUB's membership interests.

     Series A 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
first such quarterly payment of approximately $1.4 million, for the three
months ended September 30, 2004, was declared and paid on October 14, 2004.
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.


Item 3.  Quantitative and Qualitative Disclosures About Market Risk

     As of September 30, 2004, we had approximately $48.9 million of cash,
cash equivalents and short-term cash investments. These cash, cash equivalents
and short-term cash investments are subject to market risk due to changes in
interest rates. In accordance with our investment policy, we diversify our
investments among United States Treasury securities and other high credit
quality debt instruments that we believe to be low risk. We are averse to
principal loss and seek to preserve our invested funds by limiting default
risk and market risk.

Item 4.  Controls and Procedures

     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 Securities Exchange Act of 1934, as amended (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.

     Internal Control Over Financial Reporting

     There have not been any changes in our internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the fiscal quarter to which this report relates that have
materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.


<PAGE>


                                    PART II

Item 1.  Legal Proceedings

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

     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 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.

     On July 26, 2002, plaintiffs James D. Loeffelbein, Terrie L. Pham and
certain related parties filed suit against the Company, certain of its current
and former officers, its former investor relations firm and a former employee
of plaintiff Loeffelbein in the District Court of Johnson County, Kansas,
Loeffelbein v. Milberg Weiss Bershad Hynes & Lerach, LLP, et al., 02 CV 04867.
The plaintiffs asserted claims for fraud, negligence and breach of fiduciary
duty against all of the Company and certain of its current and former officers
in connection with allegedly false statements purportedly made to the
plaintiffs. As a result of a court ordered mediation conducted as part of the
appeals process, on September 28, 2004, the Company and the plaintiffs settled
the matter. The settlement amount was paid in full by the Company's insurer.

     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. Discovery has commenced. On October 1, 2004, the Company
filed a motion for summary judgment. Both the Company and Rare Medium, Inc.
expect to vigorously dispute class certification and all other aspects of this
action.


Item 2.  Changes in Securities

(a)      Not applicable
(b)      Not applicable
(c)      Not applicable
(d)      Not applicable


Item 3.  Defaults Upon Senior Securities

     Not applicable


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

     None


Item 5.  Other Information

     None


Item 6.  Exhibits and Reports on Form 8-K

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

      Exhibit
      Number                    Description
      --------                  -----------

        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.

     (b)  The following sets forth the Company's reports on Form 8-K that have
          been filed during the quarter for which this report is filed:

          On July 16, 2004, the Company filed a report on Form 8-K announcing
          its receipt of payment of all principal and interest outstanding on
          the note issued by a subsidiary of the Motient Corporation.

          On August 17, 2004, the Company filed a report on Form 8-K
          announcing its earnings results for the quarter ended June 30, 2004.


<PAGE>


                                  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, 2004                By:   /s/ JEFFREY A. LEDDY
                                              ------------------------------
                                              Jeffrey A. Leddy
                                              Chief Executive Officer and
                                              President Principal Executive
                                              Officer and Principal Financial
                                              Officer)


Date:  November 10, 2004                By:   /s/ CRAIG J. KAUFMANN
                                              ------------------------------
                                              Craig J. Kaufmann
                                              Controller and Treasurer
                                              (Principal Accounting Officer)