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

                                  FORM 10-K/A
                                Amendment No. 1


 /x/ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
          Act of 1934 for the fiscal year ended December 31, 2004, or


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

                       Commission file number 000-13865

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

<TABLE>
<CAPTION>

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


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

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

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

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

                         Common Stock, $.01 par value

                               (Title of Class)

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

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

                                Yes / / No /x/


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

                         Yes / /      No /x/


The aggregate market value of the voting common stock held by non-affiliates
of the registrant, as of June 30, 2004, was $31,922,127. All non-voting common
stock was held by affiliates of the registrant.

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




Explanatory Paragraph

     The purpose of this Amendment No. 1 to the Annual Report on Form 10-K of
SkyTerra Communications, Inc. (the "Company"), filed with the Securities and
Exchange Commission on March 31, 2005, is to amend and restate the Company's
audited consolidated financial statements and related notes as of December 31,
2004 and 2003 and for each of the three years in the period ended December 31,
2004. This Form 10-K/A also amends and restates Item 9A of Part II, Controls
and Procedures. Except for the aforementioned changes, this Form 10-K/A does
not modify or update any disclosure in the Company's Form 10-K, including the
nature and character of such disclosure to reflect events occurring after the
initial filing date of the Company's Form 10-K.

     This amendment reflects the restatement of the Company's consolidated
financial statements to properly reflect, solely within the equity section of
our consolidated balance sheets, the accounting for the dividends paid on the
Company's Series A redeemable convertible preferred stock and the accretion of
the carrying amount of the Series A redeemable convertible preferred stock up
to its $100 per share face redemption amount. These dividends represent (i)
the dividend paid quarterly in additional shares of Series A securities from
the June 1999 issuance of the Series A redeemable convertible preferred stock
through June 2004 and in cash subsequent to June 2004 and (ii) the deemed
dividend relating to the beneficial conversion feature of the Series A
redeemable convertible preferred stock and pay-in kind dividends recorded in
1999 and 2000. Cumulative dividends and accretion totaling $109.0 million as
of December 31, 2004, including $9.9 million, $9.7 million and $10.9 million
recorded for the years ended December 31, 2004, 2003 and 2002, respectively,
were previously reported on the consolidated balance sheets and consolidated
statements of changes in stockholders' equity (deficit) as increases in
accumulated deficit. The consolidated balance sheets and consolidated
statements of changes in stockholders' equity (deficit) have been restated to
reflect these amounts as decreases in accumulated paid in capital. This
restatement had no impact on our net income (loss) available to common
stockholders, total assets or cash flows.

Item 8. Financial Statements and Supplementary Data

     The financial statements and supplementary financial data required by
this Item 8 are set forth in Item 15 of this report.

Item 9A. Controls and Procedures

   Evaluation of Disclosure Controls and Procedures

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

   Changes in Internal Control Over Financial Reporting

     There has been no change in our internal control over financial reporting
during the fourth quarter of 2004 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.






Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

     (a) The following is a list of certain documents filed as a part of this
report:

         (1) Financial Statements of the Registrant.

               (i) Report of Independent Registered Public Accounting Firm.
               (ii) Consolidated Balance Sheets as of December 31, 2004 and
               2003.
               (iii)Consolidated Statements of Operations for the years ended
               December 31, 2004, 2003 and 2002.
               (iv) Consolidated Statements of Cash Flows for the years ended
               December 31, 2004, 2003 and 2002.
               (v) Consolidated Statements of Changes in Stockholders' Equity
               (Deficit) for the years ended December 31, 2004, 2003 and 2002.
               (vi) Notes to Consolidated Financial Statements.
               (vii) Schedule II - Valuation and Qualifying Accounts.

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

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

  23.4     -    Consent of Deloitte & Touche LLP, Independent Registered Public
                Accounting Firm.
  31.1     -    Certification of Jeffrey A. Leddy, Chief Executive Officer
                and President of the Company, 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 the Company, 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 the Company, 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
                the Company, Pursuant to 18 U.S.C Section 1350, as adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.





            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of SkyTerra Communications, Inc.:

     We have audited the accompanying consolidated balance sheets of SkyTerra
Communications, Inc. and subsidiaries as of December 31, 2004 and 2003, and
the related consolidated statements of operations, changes in stockholders'
equity (deficit), and cash flows for each of the years in the three-year
period ended December 31, 2004. Our audits also included the consolidated
financial statement schedule, Schedule II - Valuation and Qualifying Accounts.
These consolidated financial statements and financial statement schedule are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits.

     We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

     In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of SkyTerra Communications, Inc.
and subsidiaries as of December 31, 2004 and 2003, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2004, in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.

     As discussed in Note 2, the accompanying consolidated balance sheets and
consolidated statements of changes in stockholders' equity (deficit) have been
restated.


/s/ DELOITTE & TOUCHE LLP

Baltimore, Maryland
November 10, 2005







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

                                                                                                 December 31,
                                                                                        -------------------------------
                                                                                            2004              2003
                                                                                        ------------       ------------
                                                                                           (Restated - See Note 2)
                                        Assets
Current assets:
<S>                                                                                           <C>               <C>
   Cash and cash equivalents                                                                  $34,759           $6,897
   Short-term investments                                                                      59,748           21,795
                                                                                        --------------    -------------
     Total cash, cash equivalents and short-term investments                                   94,507           28,692
   Accounts receivable, net of allowance for bad debt of $78 and $44, respectively                 29              237
   Note receivable from Verestar, Inc.                                                              -            2,500
   Prepaid expenses                                                                               452              759
   Deferred transaction costs                                                                   4,989                -
   Other current assets                                                                           399              289
                                                                                        --------------    -------------
     Total current assets                                                                     100,376           32,477

Property and equipment, net                                                                       605               57
Notes receivable from the Mobile Satellite Ventures LP, including interest receivable
   of nil and $11,520, respectively                                                                 -           62,638
Notes receivable from Motient Corporation, net of reserve of nil and $22,016,
   respectively                                                                                     -                -
Investment in Mobile Satellite Ventures LP                                                     50,098                -
Investments in and advances to affiliates                                                       3,361            2,769
Other assets                                                                                      130              158
                                                                                        --------------    -------------
       Total assets                                                                          $154,570          $98,099
                                                                                        ==============    =============

                     Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
   Accounts payable                                                                            $2,210           $1,958
   Accrued liabilities                                                                          8,281            3,950
   Deferred revenue                                                                                21              158
                                                                                        --------------    -------------
     Total current liabilities                                                                 10,512            6,066

Commitments and contingencies

Minority interest                                                                               9,974           12,467
                                                                                        --------------    -------------
Series A Redeemable Convertible Preferred Stock, $.01 par value, net of unamortized
   discount of $32,589 and $36,979, respectively                                               88,706           80,182
                                                                                        --------------    -------------
Stockholders' equity (deficit):
   Preferred stock, $.01 par value. Authorized 10,000,000 shares; issued
     1,199,007 shares as Series A Redeemable Convertible Preferred Stock at
     December 31, 2004 and 1,171,612 shares at December 31, 2003                                    -                -
   Common stock, $.01 par value.  Authorized 200,000,000 shares; issued and
     outstanding 8,384,809 shares at December 31, 2004 and 6,075,727 shares at
     December 31, 2003                                                                             84               61
   Non-voting common stock, $.01 par value.  Authorized 100,000,000 shares; issued
     and outstanding 8,990,212 shares at December 31, 2004 and 2003                                90               90
   Additional paid-in capital                                                                 475,827          447,190
   Accumulated other comprehensive loss                                                            (3)               -
   Accumulated deficit                                                                       (430,620)        (447,786)
   Treasury stock, at cost, nil shares at December 31, 2004 and 6,622 shares at
     December 31, 2003                                                                              -             (171)
                                                                                        --------------    -------------
       Total stockholders' equity (deficit)                                                    45,378             (616)
                                                                                        --------------    -------------
       Total liabilities and stockholders' equity (deficit)                                  $154,570          $98,099
                                                                                        ==============    =============
</TABLE>


         See accompanying notes to consolidated financial statements.





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

                                                                             Years Ended December 31,
                                                                 -------------------------------------------------
                                                                     2004             2003              2002
                                                                 -------------    --------------    --------------
<S>                                                                    <C>                 <C>                 <C>
Revenues                                                               $2,127              $699                $-
Cost of revenues                                                        2,072               913                 -
                                                                 -------------    --------------    --------------
   Gross margin                                                            55              (214)                -
Expenses:
   Selling, general and administrative                                 10,987             6,690             6,406
   Depreciation and amortization                                          168                43               107
   Impairment charge                                                      755                 -                 -
                                                                 -------------    --------------    --------------
     Total expenses                                                    11,910             6,733             6,513
                                                                 -------------    --------------    --------------
Loss from operations                                                  (11,855)           (6,947)           (6,513)
Interest income, net                                                   10,548             6,304             5,602
Equity in loss of Mobile Satellite Ventures LP                         (1,020)                -                 -
Equity in loss and loss on investments in affiliates                   (1,336)             (404)             (385)
Other income (expense), net                                            21,045               244           (14,716)
Minority interest                                                        (216)           (1,126)             (998)
                                                                 -------------    --------------    --------------
Income (loss) before taxes and discontinued operations                 17,166            (1,929)          (17,010)
Income tax benefit                                                          -                 -               350
                                                                 -------------    --------------    --------------
Income (loss) from continuing operations                               17,166            (1,929)          (16,660)
Gain from wind-down of discontinued operations                              -             1,211            12,632
                                                                 -------------    --------------    --------------
Net income (loss)                                                      17,166              (718)           (4,028)
   Cumulative dividends and accretion of convertible preferred
     stock to liquidation value                                        (9,918)           (9,687)          (10,937)
                                                                 -------------    --------------    --------------
Net income (loss) attributable to common stockholders                  $7,248          $(10,405)         $(14,965)
                                                                 =============    ==============    ==============
Basic earnings (loss) per common share:
  Continuing operations                                                 $0.48            $(0.76)           $(2.32)
  Discontinued operations                                                   -              0.08              1.06
                                                                 -------------    --------------    --------------
     Net earnings (loss) per share                                      $0.48            $(0.68)           $(1.26)
                                                                 =============    ==============    ==============
Diluted earnings (loss) per common share:
  Continuing operations                                                 $0.46            $(0.76)           $(2.32)
  Discontinued operations                                                   -              0.08              1.06
                                                                 -------------    --------------    --------------
     Net earnings (loss) per share                                      $0.46            $(0.68)           $(1.26)
                                                                 =============    ==============    ==============
Weighted average common shares outstanding:
  Basic                                                            15,115,895        15,341,518        11,865,291
                                                                 =============    ==============    ==============
  Diluted                                                          15,837,370        15,341,518        11,865,291
                                                                 =============    ==============    ==============
</TABLE>


         See accompanying notes to consolidated financial statements.






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

                                                                                           Years ended December 31,
                                                                                    ---------------------------------------
                                                                                      2004          2003           2002
                                                                                    ----------    ----------     ----------
Cash flows from operating activities:
<S>                                                                                   <C>             <C>          <C>
   Net income (loss)                                                                  $17,166         $(718)       $(4,028)
   Adjustments to reconcile net income (loss) to net cash provided by (used in)
    operating activities:
     Gain from adjustment to reserve for note receivable and accrued interest
      from Motient Corporation                                                        (22,516)            -              -
     Gain from discontinued operations                                                      -        (1,211)       (12,632)
     Depreciation and amortization                                                        168            43            107
     Impairment charge                                                                    755             -              -
     Equity in loss of Mobile Satellite Ventures LP                                     1,020             -              -
     Equity in loss and loss on investments in affiliates                               1,336           404            385
     Minority interest                                                                    216         1,126            998
     Non-cash compensation charges (benefit)                                            3,095           107           (228)
     Non-cash charge for issuance of option and warrants by consolidated
      subsidiaries                                                                        447            27             56
     Loss on XM Satellite Radio common stock                                                -             -         14,864
     Changes in assets and liabilities, net of acquisitions and sale of
      businesses:
       Accounts receivable, net                                                           208           219              -
       Prepaid expenses, interest receivable, deferred transaction costs and
         other assets                                                                  10,258        (5,465)        (6,156)
       Accounts payable and accrued liabilities                                         4,230          (838)        (1,324)
       Deferred revenue                                                                  (137)          (15)             -
                                                                                    ----------    ----------     ----------
           Net cash provided by (used in) continuing operations                        16,246        (6,321)        (7,958)
           Net cash used in discontinued operations                                       (77)         (427)        (1,940)
                                                                                    ----------    ----------     ----------
           Net cash provided by (used in) operating activities                         16,169        (6,748)        (9,898)
                                                                                    ----------    ----------     ----------
Cash flows from investing activities:
   Repayments (purchases) of notes receivable                                          21,500        (2,500)        (1,118)
   Purchases of short-term investments                                                (68,602)      (23,637)        (8,663)
   Sales of short-term investments                                                     30,649         5,850         13,952
   Cash paid for investments in affiliates                                             (1,928)         (482)          (493)
   Cash received from investments in affiliates                                             -             1            365
   Purchases of property and equipment, net                                              (839)           (7)             -
   Cash paid for acquisitions, net of cash acquired and acquisition costs                (105)          125              -
   Cash received from sale of XM Satellite Radio common stock                               -             -         16,630
                                                                                    ----------    ----------     ----------
           Net cash (used in) provided by continuing operations                       (19,325)      (20,650)        20,673
           Net cash provided by discontinued operations                                     -             -            500
                                                                                    ----------    ----------     ----------
           Net cash (used in) provided by investing activities                        (19,325)      (20,650)        21,173
                                                                                    ----------    ----------     ----------
Cash flows from financing activities:
   Proceeds from contributions to a consolidated subsidiary                               450            48            177
   Distribution to minority interest of consolidated subsidiary                        (3,361)            -              -
   Proceeds from issuance of common stock, net of costs                                35,044             -         16,968
   Proceeds from issuance of common stock in connection with the exercise
    of options                                                                            284             6              3
   Payment of dividend on preferred stock                                              (1,394)            -              -
   Repurchase of common stock of consolidated subsidiary                                   (2)            -              -
   Cash paid in connection with tender offer                                                -        (1,243)             -
                                                                                    ----------    ----------     ----------
           Net cash provided by (used in) financing activities                         31,021        (1,189)        17,148
Effect of exchange rate changes on cash and cash equivalents                               (3)            -              -
                                                                                    ----------    ----------     ----------
Net increase (decrease) in cash and cash equivalents                                   27,862       (28,587)        28,423
Cash and cash equivalents, beginning of period                                          6,897        35,484          7,061
                                                                                    ----------    ----------     ----------
Cash and cash equivalents, end of period                                              $34,759        $6,897        $35,484
                                                                                    ==========    ==========     ==========

Noncash investing activities:
   Conversion of notes receivable to partnership interests in Mobile Satellite
     Ventures LP                                                                      $51,118            $-             $-
                                                                                    ==========    ==========     ==========
</TABLE>

         See accompanying notes to consolidated financial statements.




<TABLE>
<CAPTION>


                                                SKYTERRA COMMUNICATIONS, INC.
                                 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                                             (In thousands, except share data)

                                                            Voting      Non-Voting
                                                           Common        Common                     Accumulated
                                                            Stock         Stock       Additional      Other
                                              Preferred   ($.01 par      ($.01 par     Paid-In    Comprehensive  Accumulated
                                              Stock         value)        value)       Capital       Income        Deficit
                                             ---------   -----------   ------------   ---------   ------------   ----------
  Balance, January 1, 2002 (restated - see
<S>                                                <C>         <C>              <C>   <C>             <C>        <C>
     Note 2)                                       $-          $653             $-    $451,526        $60,336    $(443,040)
  Issuance of 147,893 shares of voting
    common stock and 8,990,212 shares of
    non-voting common stock in rights
    offering                                        -            15            899      16,054              -            -
  One for ten reverse stock split
    (including 154 shares of common stock
    purchased for cash in lieu of
    fractional shares)                              -          (601)          (809)      1,410              -            -
  Retirement of 286 shares of common stock
    in connection with acquired business            -             -              -           -              -            -
  Issuance of 2,666 shares of common stock
    through exercise of stock options               -             -              -           3              -            -
  Non-cash compensation benefit for option
    repricing                                       -             -              -        (228)             -            -
  Non-cash charge for issuance of warrant
    by consolidated subsidiary                      -             -              -          56              -            -
  Dividends on and accretion of preferred
    stock (restated - see Note 2)                   -             -              -     (10,937)             -            -
  Comprehensive loss:
    Net loss                                        -             -              -           -              -       (4,028)
    Net unrealized loss on investment               -             -              -           -        (60,306)           -
    Net foreign currency translation
     adjustments                                    -             -              -           -            (30)           -


       Total comprehensive loss                     -             -              -           -              -            -

                                             ---------   -----------   ------------   ---------   ------------   ----------
  Balance, December 31, 2002 (restated -
     see Note 2)                                    -            67             90     457,884              -     (447,068)
  Issuance of 357,143 shares of common
    stock in connection with the
    settlement of the class action lawsuit          -             4              -          85              -            -
  Issuance of 4,367 shares of common stock
    through exercise of stock options               -             -              -           6              -            -
  Retirement of 968,398 shares of common
    stock in connection with the tender
    offer                                           -           (10)             -      (1,233)             -            -
  Non-cash compensation charge for option
    repricing                                       -             -              -         107              -            -
  Non-cash charge for issuance of option
    by consolidated subsidiary                      -             -              -          28              -            -
  Dividends on and accretion of preferred
    stock (restated - see Note 2)                   -             -              -      (9,687)             -            -
  Comprehensive loss:
    Net loss                                        -             -              -           -              -         (718)

       Total comprehensive loss                     -             -              -           -              -            -
                                             ---------   -----------   ------------   ---------   ------------   ----------
  Balance, December 31, 2003 (restated -
     see Note 2)                                   $-           $61            $90    $447,190             $-    $(447,786)
                                             =========   ===========   ============   =========   ============   ==========

<CAPTION>

                                                             Total                    '
                                                Treasury  Stockholders   Comprehensive
                                                 Stock       Equity         (Loss)
                                                at Cost     (Deficit)       Income
                                              ----------  ------------   ------------
  Balance, January 1, 2002 (restated - see
<S>                                             <C>          <C>
     Note 2)                                    $(171)      $69,304
  Issuance of 147,893 shares of voting
    common stock and 8,990,212 shares of
    non-voting common stock in rights
    offering                                        -        16,968
  One for ten reverse stock split
    (including 154 shares of common stock
    purchased for cash in lieu of
    fractional shares)                              -             -
  Retirement of 286 shares of common stock
    in connection with acquired business            -             -
  Issuance of 2,666 shares of common stock
    through exercise of stock options               -             3
  Non-cash compensation benefit for option
    repricing                                       -          (228)
  Non-cash charge for issuance of warrant
    by consolidated subsidiary                      -            56
  Dividends on and accretion of preferred
    stock (restated - see Note 2)                   -       (10,937)
  Comprehensive loss:
    Net loss                                        -        (4,028)      $(4,028)
    Net unrealized loss on investment               -       (60,306)      (60,306)
    Net foreign currency translation
     adjustments                                    -           (30)          (30)
                                                                         ------------
       Total comprehensive loss                     -             -      $(64,364)
                                                                         ============
                                              ----------  ------------
  Balance, December 31, 2002 (restated -
     see Note 2)                                 (171)       10,802
  Issuance of 357,143 shares of common
    stock in connection with the
    settlement of the class action lawsuit          -            89
  Issuance of 4,367 shares of common stock
    through exercise of stock options               -             6
  Retirement of 968,398 shares of common
    stock in connection with the tender
    offer                                           -        (1,243)
  Non-cash compensation charge for option
    repricing                                       -           107
  Non-cash charge for issuance of option
    by consolidated subsidiary                      -            28
  Dividends on and accretion of preferred
    stock (restated - see Note 2)                   -        (9,687)
  Comprehensive loss:
    Net loss                                        -          (718)        $(718)
                                                                         ------------
       Total comprehensive loss                     -             -         $(718)
                                              ----------  ------------   ============
  Balance, December 31, 2003 (restated -
     see Note 2)                                $(171)        $(616)
                                              ==========  ============
</TABLE>





         See accompanying notes to consolidated financial statements.



<TABLE>
<CAPTION>

                                                    SKYTERRA COMMUNICATIONS, INC.
                                 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                                                   (In thousands, except share data)

                                                           Voting       Non-Voting
                                                           Common         Common                   Accumulated
                                                           Stock          Stock       Additional     Other
                                             Preferred    ($.01 par     ($.01 par     Paid-In     Comprehensive   Accumulated
                                              Stock        value)         value)       Capital        Loss          Deficit
                                             ---------   -----------   ------------   ---------   -------------   -----------
<S>                                                <C>          <C>            <C>    <C>                  <C>    <C>
  Balance, December 31, 2003 (restated -
     see Note 2)                                   $-           $61            $90    $447,190             $-    $(447,786)
  Issuance of 2,000,000 shares of common
     stock and certain warrants in private
     placement                                      -            20              -      35,024              -            -
  Issuance of 321,966 shares of common
     stock through exercise of stock
     options                                        -             3              -         281              -            -
  Retirement of 6,262 shares of common
     stock in connection with acquired
     businesses                                     -             -              -           -              -            -
  Retirement of 6,622 shares held in
     treasury                                       -             -              -        (171)             -            -
  Non-cash compensation charge for option
    repricing                                       -             -              -       2,814              -            -
  Non-cash charge for issuance of option
    and warrants by consolidated
    subsidiaries                                    -             -              -         343              -            -
  Sale of stock by consolidated subsidiary          -             -              -         264              -            -
  Dividends on and accretion of preferred
    stock (restated - see Note 2)                   -             -              -      (9,918)             -            -
  Comprehensive income:
    Net income                                      -             -              -           -              -       17,166
    Net foreign currency translation
     adjustments                                    -             -              -           -             (3)           -

       Total comprehensive income                   -             -              -           -              -            -
                                             ---------   -----------   ------------   ---------   ------------   -----------
  Balance, December 31, 2004 (restated -
     see Note 2)                                   $-           $84            $90    $475,827            $(3)   $(430,620)
                                             =========   ===========   ============   =========   ============   ==========-

<CAPTION>


                                                            Total         '
                                              Treasury   Stockholders   Comprehensive
                                               Stock       Equity           (Loss)
                                              at Cost     (Deficit)         Income
                                             ----------  ------------   ------------
  Balance, December 31, 2003 (restated -
<S>                                              <C>           <C>          <C>
     see Note 2)                                 $(171)        $(616)
  Issuance of 2,000,000 shares of common
     stock and certain warrants in private
     placement                                       -        35,044
  Issuance of 321,966 shares of common
     stock through exercise of stock
     options                                         -           284
  Retirement of 6,262 shares of common
     stock in connection with acquired
     businesses                                      -             -
  Retirement of 6,622 shares held in
     treasury                                      171             -
  Non-cash compensation charge for option
    repricing                                        -         2,814
  Non-cash charge for issuance of option
    and warrants by consolidated
    subsidiaries                                     -           343
  Sale of stock by consolidated subsidiary           -           264
  Dividends on and accretion of preferred
    stock (restated - see Note 2)                    -        (9,918)
  Comprehensive income:
    Net income                                       -        17,166        $17,166
    Net foreign currency translation
     adjustments                                     -            (3)            (3)
                                                                        ------------
       Total comprehensive income                    -             -        $17,163
                                             ----------  ------------   ============
  Balance, December 31, 2004 (restated -
     see Note 2)                                    $-       $45,378
                                             ==========  ============

</TABLE>

         See accompanying notes to consolidated financial statements.






                         SKYTERRA COMMUNICATIONS, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)  Summary of Significant Accounting Policies

     (a) Description of Business and Basis of Presentation

     SkyTerra Communications, Inc. (the "Company") operates its business
through a group of complementary companies in the telecommunications industry.
The Company's consolidated financial statements include the results of
operations and financial position of the Company, its controlled
majority-owned subsidiaries and variable interest entities ("VIEs"), as
defined by Financial Accounting Standards Board ("FASB") Interpretation No.
46R ("FIN 46R"), for which the Company is deemed the primary beneficiary, as
defined by FIN 46R. As such, the consolidated financial statements of the
Company include the accounts of Electronic System Products, Inc. ("ESP"),
AfriHUB, LLC ("AfriHUB"), the Company's 80% owned subsidiary (the "MSV
Investors Subsidiary") that holds the interest in Mobile Satellite Ventures LP
(the "MSV Joint Venture"), and Miraxis, LLC ("Miraxis").

     The Company accounts for minority owned subsidiaries in which the Company
owns greater than 20% of the outstanding voting interests but less than 50%
and for which the Company possesses significant influence over their
operations under the equity method of accounting, whereby the Company records
its proportionate share of the subsidiary's operating results. As such, the
Company accounts for its interest in the MSV Joint Venture and Navigauge, Inc.
(formerly known as IQStat, Inc., "Navigauge") under the equity method.

     The Company accounts for its investments in affiliates in which it owns
less than 20% of the voting stock and does not possess significant influence
over the operations of the investee, under the cost method of accounting.

     At the end of the third quarter of 2001, a decision to discontinue the
operations of Rare Medium, Inc., along with those of its LiveMarket, Inc.
subsidiary ("LiveMarket"), was made 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 (see Note 14). The discontinuance of these businesses represents the
disposal of a business segment under Statement of Financial Accounting
Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets". Accordingly, the results of these operations have been
classified as discontinued operations, and prior period results have been
reclassified.

     All material intercompany balances and transactions have been eliminated.

     (b) Cash and Cash Equivalents

     The Company considers all highly liquid investments with maturities of
three months or less at the time of purchase to be cash equivalents. As of
December 31, 2004 and 2003, Rare Medium, Inc. had cash equivalents in the
amount of $0.3 million supporting letters of credit issued for certain real
estate leases (see Note 18).

     (c)  Short-Term Investments

     The Company considers all debt securities with maturities of more than
three months but less than one year as short-term investments and classifies
investments in such short-term debt securities as either held to maturity or
available for sale. These investments are diversified among high credit
quality securities in accordance with the Company's investment policy. Auction
rate securities, which were previously classified as either cash equivalents
or held to maturity securities due to their liquidity and pricing reset
feature, have been reclassified as available for sale given the long-term
stated maturities of 20 to 30 years. As of December 31, 2004 and 2003, the
Company had $36.2 million and $3.8 million, respectively, of auction rate
securities. The remainder of the Company's short-term investments are
classified as held to maturity as the Company has both the intent and ability
to hold them to maturity. The cost of these securities is adjusted for
amortization of premiums and accretion of discounts to maturity over the
contractual life of the security. Such amortization and accretion are included
in interest income.

     During the year ended December 31, 2004, the Company sold a debt security
with a face value of $1.0 million which was previously classified as held to
maturity. This sale occurred to ensure that all of the Company's debt
securities had a maturity less than one year in accordance with the Company's
investment policy and did not have a material impact on the Company's
financial position, results of operations or cash flow from operations.

     The Company classified its investment in XM Satellite Radio common stock
as an available-for-sale, marketable security and reported such investment at
fair value with net unrealized gains and losses recorded in stockholders'
equity. Gains and losses are recognized in the statements of operations when
realized. During 2002, the Company sold its shares of XM Satellite Radio for
$16.6 million and recognized a loss on the sale of $14.9 million.

      (d)Property and Equipment

     The Company uses the straight-line method of depreciation. The estimated
useful lives of property and equipment are as follows:
                                                                        Years
                                                                        -----
                  Computer equipment and software...................    3 to 5
                  Furniture and fixtures............................    5 to 7
                  Machinery and equipment...........................    2 to 5

     Leasehold improvements are amortized on a straight-line basis over the
term of the lease or the estimated useful life of the improvement, whichever
is shorter.

     (e) Goodwill and Intangibles

     The Company records goodwill when consideration paid in a purchase
acquisition exceeds the fair value of the net tangible assets and the
identifiable intangible assets acquired. In accordance with SFAS No. 142,
"Goodwill and Other Intangible Assets," goodwill and the identified intangible
assets with an indefinite life are not amortized but are tested for impairment
at least annually or whenever changes in circumstances indicate that the
carrying value may not be recoverable. The Company amortizes the identified
intangible assets with a finite life over their respective useful lives on a
straight-line basis.

     (f) Impairment of Long-Lived Assets

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

     As a result of AfriHUB's projected operating losses with respect to its
university initiative (see Note 4(c)), at December 31, 2004, the Company
evaluated AfriHUB's long-lived assets for recoverability and determined that
the undiscounted cash flows over the remaining expected life of the two
established centers was less than the carrying value of the long-lived assets
relating to those centers. Accordingly, the Company assessed the fair value of
these assets by using market prices for recently purchased computers and
equipment and using a discounted cash flow model for the intangible asset and
building improvements for which market prices were not available. The Company
recognized an impairment loss relating to the intangible asset and building
improvements as their carrying value exceeded the fair value by approximately
$0.8 million

     (g) Revenue Recognition

     Revenues from contracts for consulting and engineering services are
recognized using the percentage-of-completion method for fixed price contracts
and as time is incurred for time and materials contracts, provided the
collection of the resulting receivable is reasonably assured. Unbilled
receivables represent time and costs incurred on projects in process in excess
of amounts billed and are recorded as other current assets in the accompanying
balance sheets. Deferred revenue represents amounts billed in excess of
revenue recognized and are recorded as liabilities. To the extent costs
incurred and anticipated costs to complete projects in progress exceed
anticipated billings, a loss is recognized in the period such determination is
made for the excess.


     A handling and finance charge is added to materials and equipment
purchased for certain product development engagements. These charges, as well
as those relating to reimbursement of other out-of-pocket expenses billed to
clients, are included in revenues. The costs of these reimbursable items are
included in cost of revenues.

     (h) Income Taxes

     Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and for operating loss and tax credit carryforwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes
the enactment date.

     (i) 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 Financial Accounting Standards Board ("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 (see Note 15).

     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, for the years ended
December 31, 2004 and 2003, the Company recognized compensation expense of
approximately $2.8 million and $0.1 million, respectively. As a result of the
re-pricing of those certain stock options, for the year ended December 31,
2002, the Company recognized compensation contra-expense of approximately $0.2
million.

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

<TABLE>
<CAPTION>

                                                                              Years Ended December 31,
                                                                  -------------------------------------------------
                                                                      2004              2003             2002
                                                                  --------------    -------------    --------------
                                                                           (in thousands, except share data)
<S>                                                                     <C>               <C>             <C>
Net income (loss), as reported                                          $17,166            $(718)          $(4,028)
Add (Deduct):  Stock-based employee compensation expense
   (contra-expense), as reported                                          2,814              107              (228)
Deduct:  Total stock-based employee compensation expense
   determined under fair value based method for all awards                 (315)            (415)             (804)
                                                                  --------------    -------------    --------------
Pro forma net income (loss)                                             $19,665          $(1,026)          $(5,060)
                                                                  ==============    =============    ==============

Basic earnings (loss) per common share:
   As reported                                                            $0.48           $(0.68)           $(1.26)
   Pro forma                                                              $0.64           $(0.70)           $(1.35)

Diluted earnings (loss) per common share:
   As reported                                                            $0.46           $(0.68)           $(1.26)
   Pro forma                                                              $0.61           $(0.70)           $(1.35)
</TABLE>

     The per share weighted average fair value of stock options granted during
2004, 2003 and 2002 was $2.70, $0.83 and $0.56, respectively, on the date of
grant using the Black-Scholes option pricing model with the following
assumptions: (1) a risk free interest rate ranging from 1.2% to 3.2% in 2004,
1.1% to 4.0% in 2003 and 1.6% to 5.4% in 2002, (2) an expected life of three
years in 2004, 2003 and 2002, (3) volatility of approximately 172% in 2004,
175% in 2003 and 164% in 2002, and (4) an annual dividend yield of 0% for all
years.

      (j) Foreign Currency Translation

     Financial statements of AfriHUB's Nigerian operations are prepared using
the Nigerian Naira as the functional currency. Consequently, revenues and
expenses of the Nigerian operations are translated into United States dollars
using weighted average exchange rates, while assets and liabilities are
translated using period end exchange rates. Translations adjustments are
included in stockholders' equity as accumulated other comprehensive loss in
the accompanying consolidated balance sheets. Gains and losses from foreign
currency transactions are reflected in other income (expense), net on the
accompanying consolidated statements of operations. During the year ended
December 31, 2004, the Company recorded a gain of approximately $15,000
resulting from foreign currency transactions. The Company did not have any
foreign operations during the years ended December 31, 2003 or 2002.

     (k) Comprehensive Income

     Comprehensive income is defined as the change in equity during a period
from non-owner sources. Comprehensive income for the years ended December 31,
2004, 2003 and 2002 have been disclosed within the accompanying consolidated
statements of changes in stockholders' equity (deficit). As of December 31,
2004, accumulated other comprehensive loss was comprised of approximately
$3,000 of accumulated foreign currency translation adjustments. As of December
31, 2003 and 2002, the Company did not have any items of accumulated other
comprehensive income (loss).

     (l) Use of Estimates

     The preparation of these consolidated financial statements in conformity
with accounting principles generally accepted in the United States of America
requires the use of management estimates and assumptions that affect reported
amounts and related disclosures. These estimates are based on historical
experience and information that is available to management about current
events and actions the Company may take in the future. Significant items
subject to estimates and assumptions include the carrying value of long-lived
assets (including the impairment charge), valuation allowances for accounts
and notes receivable and deferred income tax assets, accrued restructuring
charges and other contingent obligations. Actual results could differ from
those estimates and assumptions.

     (m) 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>

                                                                          Years Ended December 31,
                                                                ---------------------------------------------
                                                                   2004             2003            2002
                                                                ------------    -------------    ------------
<S>                                                              <C>              <C>             <C>
Weighted average common shares outstanding - basic               15,115,895       15,341,518      11,865,291
Common shares issuable upon exercise of stock options               721,475                -               -
                                                                ------------    -------------    ------------
Weighted average common shares outstanding - diluted             15,837,370       15,341,518      11,865,291
                                                                ============    =============    ============
</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 years ended December 31, 2004, 2003 and 2002, stock
options and warrants exercisable for 1,722,976, 2,405,168 and 2,139,190 shares
of common stock, respectively, were excluded from the computation of diluted
earnings per common share, as they were either antidilutive or their exercise
price exceeded the average trading price of the Company's common stock during
the year.

     During all periods presented, the conversion of the preferred stock could
potentially dilute basic earnings (loss) per common share in the future, but
the shares issuable upon the conversion were excluded from the computation of
diluted earnings (loss) per common share in such periods, as their effect
would have been antidilutive. For the years ended December 31, 2004, 2003 and
2002, there were 1,912,484, 1,710,423 and 1,633,147 shares of common stock,
respectively, issuable upon the conversion of the preferred stock were
excluded from the computation of diluted earnings per common share, as they
were either antidilutive or their conversion price exceeded the average
trading price of the Company's common stock during the year.

      (n) Fair Value of Financial Instruments

     The Company's financial instruments include cash, cash equivalents,
short-term investments, accounts receivable, notes receivable, accounts
payable and a letter of credit. The fair value of these instruments, other
than the notes receivable, approximates book value due to their short-term
duration. As of December 31, 2003, the fair value of the convertible notes
receivable from the MSV Joint Venture approximated book value based on the
equity value of the MSV Joint Venture's 2002 and 2003 funding transactions
(see Note 3). As of December 31, 2003, the fair value of the promissory note
from Motient Corporation ("Motient") approximated book value due to the
uncertainty with respect to the collection (see Note 5). As of December 31,
2003, the fair value of the senior secured notes from Verestar, Inc.
("Verestar") approximated book value due to the sufficiency of Verestar's
assets in which the Company held a security interest despite Verestar having
filed for bankruptcy protection (see Note 4(f)).

      (o)Concentration of Credit Risk

     Financial instruments which potentially subject the Company to a
concentration of credit risk consist of cash, cash equivalents and short-term
investments. Although the Company maintains cash balances at financial
institutions that exceed federally insured limits, these balances are placed
with various high credit quality financial institutions. Further, in
accordance with an investment policy, the Company diversifies its short-term
investments among debt instruments that are believed to be low risk.

     ESP's revenues are generated principally from customers located in the
United States. AfriHUB's revenues are generated principally from customers
located in Nigeria. For the year ended December 31, 2004 and for the period
from the August 25, 2003 acquisition of ESP through December 31, 2003, three
and two customers, respectively, individually accounted for more than 10% of
the Company's consolidated revenues. Combined, these customers account for
approximately $1.1 million of consolidated revenues for the year ended
December 31, 2004 and $0.4 million for the period from the August 25, 2003
acquisition of ESP through December 31, 2003. As of December 31, 2004 and
2003, accounts receivable from these significant customers was approximately
$14,000 and $0.1 million, respectively.

      (p) Sales of Stock by a Subsidiary

     The Company accounts for the sale of stock by a consolidated subsidiary
as a capital transaction whereby the change in the Company's proportionate
share of the subsidiary equity resulting from the additional equity raised by
the subsidiary is reflected in stockholders' equity on the accompanying
consolidated balance sheets.

     In October 2004, AfriHUB agreed to sell membership interests to an
unaffiliated third party for approximately $0.5 million in cash (see Note
4(c)). The Company increased additional paid in capital on the accompanying
consolidated balance sheets by approximately $0.3 million related to this
transaction.

     (q) Recently Issued Accounting Standards

     In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity"
("SFAS No. 150"). SFAS No. 150 establishes standards for how a company
classifies and measures certain financial instruments with characteristics of
both liabilities and equity. It requires the classification of certain
financial instruments as a liability (or in certain circumstances an asset)
because that instrument embodies an obligation of the company. SFAS No. 150 is
effective immediately for instruments entered into or modified after May 31,
2003 and in the first interim period beginning after June 15, 2003 for all
instruments entered into before May 31, 2003. The adoption of SFAS No. 150 did
not have an impact on the Company's financial position or results of
operations.

     In December 2003, the FASB issued Interpretation No. 46R, "Consolidation
of Variable Interest Entities, an Interpretation of ARB No. 51" ("FIN No.
46R"). FIN No. 46R provides clarification on the consolidation of certain
entities that do not have sufficient equity at risk for the entity to finance
its activities without additional subordinated financial support from other
parties or in which equity investors do not have certain characteristics of a
controlling financial interest ("variable interest entities" or "VIEs"). FIN
No. 46R requires that VIEs be consolidated by the entity considered to be the
primary beneficiary of the VIE and is effective immediately for VIEs created
after January 31, 2003 and in the first fiscal year or interim period
beginning after December 15, 2003 for any VIEs created prior to January 31,
2003. In accordance with FIN No. 46R, the Company has included the operating
results and financial position of Miraxis in its consolidated financial
statements. The consolidation of Miraxis did not have a material impact on the
Company's financial position or results of operations.

     In December 2003, the staff of the Securities and Exchange Commission
(the "SEC") issued Staff Accounting Bulletin ("SAB") No. 104, "Revenue
Recognition" ("SAB No. 104"), which supersedes SAB No. 101, "Revenue
Recognition in Financial Statements." SAB No. 104 primarily rescinds the
accounting guidance contained in SAB No. 101 related to multiple-element
revenue arrangements, which was superseded as a result of the issuance of EITF
Issue No. 00-21, "Accounting for Revenue Arrangements with Multiple
Deliverables." Additionally, SAB No. 104 rescinds the SEC's "Revenue
Recognition in Financial Statements Frequently Asked Questions and Answers"
issued with SAB No. 101, which had been codified in SEC Topic 13, "Revenue
Recognition." SAB No. 104 was effective upon issuance. The issuance of SAB No.
104 did not have a material impact on the Company's financial position or
results of operations.

     In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment"
("SFAS No. 123R"), a revision of SFAS No. 123. SFAS No. 123R requires entities
to recognize compensation expense for all share-based payments to employees,
including stock options, based on the estimated fair value of the instrument
on the date it is granted. The expense will be recognized over the vesting
period of the award. SFAS No. 123R is effective for periods beginning after
June 15, 2005 and provides entities two transition methods. Under the modified
prospective method, compensation expense is recognized beginning with the
effective date for all awards granted to employees prior to the effective date
that are unvested on the effective date. The modified retrospective method is
a variation of the modified prospective method, except entities can restate
all prior periods presented or prior interim period in the year of adoption
using the amounts previously presented in the pro forma disclosure required by
SFAS No. 123. As the Company currently accounts for share-based payments using
the intrinsic value method as allowed by APB Opinion No. 25, the adoption of
the fair value method under SFAS No. 123R will have an impact on the Company's
results of operations. However, the extent of the impact cannot be predicted
at this time because it will depend on levels of share-based payments granted
in the future. Had the Company adopted SFAS No. 123R in prior periods, the
impact of that standard would have approximated the impact of SFAS No. 123 as
described in the disclosure of pro forma net income (loss) and earnings (loss)
per share described above in Note 1(i).

      In December 2004, the FASB issued SFAS No. 153, "Exchanges of
Nonmonetary Assets - an amendment of APB Opinion No. 29" ("SFAS No. 153").
SFAS No. 153 eliminates the exception for nonmonetary exchanges of similar
productive assets of APB Opinion No. 29 and replaces it with a general
exception for exchanges of nonmonetary assets that do not have commercial
substance. A nonmonetary exchange has commercial substance if the future cash
flows of the entity are expected to change significantly as a result of the
exchange. SFAS No. 153 is effective for nonmonetary asset exchanges occurring
in fiscal periods beginning after June 15, 2005. The adoption of SFAS No. 153
is not expected to have a material impact on the Company's financial position
or results of operations.

     (r) Reclassifications

     Certain reclassifications have been made to the prior years' consolidated
financial statements to conform to the current year's presentation. Auction
rate securities totaling $36.2 million, $3.0 million and $2.0 million as of
December 31, 2004, 2003 and 2002, respectively, which were previously reported
on the accompanying consolidated balance sheets and consolidated statements of
cash flows as cash equivalents, have been reclassified as short-term
investments. These reclassifications had no impact on the Company's results of
operations, total assets or changes in shareholders' equity.

     The following is a summary of the impact of the reclassification of the
auction rate securities on the accompanying consolidated balance sheets and
consolidated statements of cash flows:

<TABLE>
<CAPTION>

                                                                                              December 31,
                                                                                      -----------------------------
                                                                                         2003             2002
                                                                                      ------------     ------------
                                                                                             (in thousands)
Impact on consolidated balance sheets:
<S>                                                                                        <C>             <C>
   Cash and cash equivalents, as previously reported                                       $9,897          $37,484
   Cash and cash equivalents, as reclassified                                               6,897           35,484
                                                                                      ------------     ------------
     Net change                                                                           $(3,000)         $(2,000)
                                                                                      ============     ============
   Short-term investments, as previously reported                                         $18,795           $2,008
   Short-term investments, as reclassified                                                 21,795            4,008
                                                                                      ------------     ------------
     Net change                                                                            $3,000           $2,000
                                                                                      ============     ============
Impact on consolidated cash flow statements:
   Net cash (used in) provided by investing activities, as previously reported           $(19,650)         $23,173
   Net cash (used in) provided by investing activities, as reclassified                   (20,650)          21,173
                                                                                      ------------     ------------
     Net change                                                                           $(1,000)          $2,000
                                                                                      ============     ============
   Net (decrease) increase in cash and cash equivalents, as previously reported          $(27,587)         $30,423
   Net (decrease) increase in cash and cash equivalents, as reclassified                  (28,587)          28,423
                                                                                      ------------     ------------
     Net change                                                                           $(1,000)          $2,000
                                                                                      ============     ============
</TABLE>

(2)  Restatement

     Subsequent to the issuance of the Company's consolidated financial
statements as of and for the year ended December 31, 2004, the Company
determined that it would restate its consolidated financial statements to
properly reflect the accounting for the dividends paid on its Series A
redeemable convertible preferred stock and the accretion of the carrying
amount of the Series A redeemable convertible preferred stock up to its $100
per share face redemption amount. These dividends represent (i) the dividend
paid quarterly in additional shares of Series A redeemable securities from the
issuance of the Series A redeemable convertible preferred stock in June 1999
through June 2004 and in cash subsequent to June 2004 and (ii) the deemed
dividend relating to the beneficial conversion feature of the Series A
redeemable convertible preferred stock and pay-in kind dividends recorded in
1999 and 2000. Cumulative dividends and accretion totaling $109.0 million as
of December 31, 2004, including $9.9 million, $9.7 million and $10.9 million
recorded for the years ended December 31, 2004, 2003 and 2002, respectively,
were previously reported on the consolidated balance sheets and consolidated
statements of changes in stockholders' equity (deficit) as increases in
accumulated deficit. The accompanying consolidated balance sheets and
consolidated statements of changes in stockholders' equity (deficit) have been
restated to reflect these amounts as decreases in accumulated paid in capital.
This restatement had no impact on the Company's net income (loss) available to
common stockholders, total assets or cash flows.

     The following is a summary of the impact of the restatement on the
accompanying consolidated balance sheets and consolidated statements of
changes in stockholders' equity:

<TABLE>
<CAPTION>

                                                                        December 31,
                                                        ----------------------------------------------    January 1,
                                                            2004            2003             2002            2002
                                                        -------------    ------------    -------------   -------------
                                                                               (in thousands)
<S>                                                         <C>             <C>              <C>             <C>
Additional paid in capital, as previously reported          $584,798        $546,243         $547,250        $529,955
Additional paid in capital, as restated                      475,827         447,190          457,884         451,526
                                                        -------------    ------------    -------------   -------------
   Net change                                              $(108,971)       $(99,053)        $(89,366)       $(78,429)
                                                        =============    ============    =============   =============
Accumulated deficit, as previously reported                $(539,591)      $(546,839)       $(536,434)      $(521,469)
Accumulated deficit, as restated                            (430,620)       (447,786)        (447,068)       (443,040)
                                                        -------------    ------------    -------------   -------------
   Net change                                               $108,971         $99,053          $89,366         $78,429
                                                        =============    ============    =============   =============
</TABLE>

(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
yielded interest at a rate of 10% per year, had a maturity date of November
26, 2006, and was 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.

     Under the joint venture agreement among the partners of the MSV Joint
Venture, the convertible notes held by the MSV Investors Subsidiary would
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. On November 12, 2004,
the MSV Joint Venture raised $145.0 million in cash by selling partnership
units for $29.45 per unit and exchanged or converted approximately $84.9
million of debt securities and accrued interest. In connection with this
financing, the convertible notes held by the MSV Investors Subsidiary
converted into approximately 23% of the limited partnership interests of the
MSV Joint Venture on an undiluted basis, at their original conversion price of
$6.45 per unit. As a result of these transactions, the MSV Investors
Subsidiary also received approximately $17.1 million in cash from the MSV
Joint Venture to pay the accrued interest on the convertible notes. The MSV
Investors Subsidiary distributed approximately $13.6 million of this cash to
the Company and $3.4 million of cash to the unaffiliated third parties who own
the 20% minority interest.

     Following the November 12, 2004 conversion of its notes receivable into
limited partnership interests, the Company accounts for its interest in the
MSV Joint Venture under the equity method. Accordingly, on the date of
conversion, the remaining $51.1 million carrying amount of the notes
receivable was reclassified to investment in Mobile Satellite Venture LP and
will be adjusted thereafter for the Company's proportionate share of the net
income (loss) of the MSV Joint Venture, subject to certain adjustments. These
adjustments relate primarily to the amortization of the excess of the
Company's $51.1 million carrying amount over the Company's proportionate share
of the MSV Joint Venture's net assets on the date of conversion. This excess
will be amortized over the remaining useful life of certain MSV Joint Venture
long-lived assets on a straight line basis. As of December 31, 2004, the
Company's book investment exceeded its proportionate share of the MSV Joint
Venture's net assets by approximately $1.6 million.

     The following table presents summarized consolidated financial
information for the MSV Joint Venture as of and for the year ended December
31, 2004 and are derived from the MSV Joint Venture's audited consolidated
financial statements (in thousands):

Consolidated balance sheet:
     Current assets                                            $139,978
     Noncurrent assets                                          106,245
     Current liabilities                                         11,772
     Noncurrent liabilities                                      21,386
     Minority interest                                              101
     Partners' equity                                           212,964

Consolidated statement of operations:
     Revenues                                                   $29,007
     Loss from operations                                       (28,692)
     Net loss                                                   (33,455)

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

     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 2004, the Company recognized expense of
approximately $0.3 million related to the issuance of the option, which was
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 MSV Investors
Subsidiary would recognize an expense related to this fee when a liquidity
event becomes probable.

     On December 20, 2004, the MSV Joint Venture issued rights to receive all
of the shares of common stock of TerreStar Networks Inc. ("TerreStar"), a
wholly-owned subsidiary of the MSV Joint Venture, to the limited partners of
the MSV Joint Venture, pro rata in accordance with each limited partner's
percentage ownership. TerreStar was formed by the MSV Joint Venture to develop
business opportunities related to the proposed receipt of certain licenses in
the 2 GHz band. The rights will be exchanged into shares of TerreStar common
stock automatically on May 20, 2005. In connection with the distribution of
the rights, TerreStar issued warrants to purchase shares of TerreStar common
stock representing 3% of the outstanding equity to one of the Other MSV
Investors. These warrants have an exercise price of $0.21491 per share and
expire on December 20, 2006. Following the exchange of the rights and
considering this warrant, the MSV Investors Subsidiary would own approximately
22% of TerreStar on an undiluted basis.

(4)  Business Transactions

     (a)  Interest in Hughes Network Systems

     On December 3, 2004, the Company signed an agreement to acquire a 50%
interest in the business of Hughes Network Systems, Inc. ("HNSI"), a leading
developer, manufacturer, installer and provider of advanced satellite based
networking solutions and services for businesses, governments and consumers
worldwide. Pursuant to the terms of the agreement, HNSI will contribute to
Hughes Network Systems, LLC ("HNS LLC"), a newly formed entity, substantially
all of the assets and certain liabilities of its very small aperture terminal
("VSAT"), mobile satellite and carrier businesses, as well as the certain
portions of its SPACEWAY Ka-band satellite communications platform that is
under development. In consideration of this contribution, HNS LLC will pay
HNSI $201.0 million of cash, subject to adjustment depending principally upon
the closing value of HNSI's working capital (as defined in the agreement). In
order to finance the asset purchase, HNS LLC intends to incur $325.0 million
of term indebtedness and obtain a $50.0 million revolving credit facility
which is expected to be undrawn at closing.

     Upon the consummation of the foregoing transactions, the Company will
purchase 50% of the equity interests of HNS LLC for $50.0 million in cash and
300,000 shares of the Company's common stock. Following this purchase, the
Company will serve as the managing member of HNS LLC. Closing of the Company's
purchase is subject to HNS LLC completing the issuance of the senior notes,
regulatory approvals and other customary closing conditions.

     The Company has incurred approximately $5.0 million in transaction costs,
including legal, accounting and other costs directly related to the
transaction. As of December 31, 2004, these costs are included in deferred
transaction costs on the accompanying consolidated balance sheets. If the
transaction closes as expected in April 2005, these costs will be paid by HNS
LLC. However, if the transaction does not close, the Company expects to
negotiate a discount on such amounts owed.

     (b) Interest in Electronic System Products

     On August 25, 2003, for nominal consideration, the Company acquired all
of the outstanding common stock of ESP, a product development and engineering
services firm that has historically created products for and provides
consulting and engineering services to the telecommunications, broadband,
satellite communications, and wireless industries. ESP is currently focused on
exploiting its existing intellectual property portfolio. In November 2003, ESP
made restricted stock grants to its employees representing an aggregate of 30%
of ESP's outstanding equity, diluting the Company's ownership to 70%. In
October 2004, ESP repurchased shares of its common stock from terminated
employees for an aggregate of approximately $2,000, raising the Company's
ownership to approximately 78%.

     The following table summarizes the estimated fair value of the
identifiable assets acquired and liabilities assumed at the date of
acquisition:

                                                                 August 25,
                                                                    2003
                                                               --------------
                                                               (in thousands)
Current assets                                                          $666
Property and equipment                                                    54
Investment in affiliates                                                 349
                                                               --------------
     Total assets acquired                                             1,069
Current liabilities                                                     (983)
                                                               --------------
Net assets acquired                                                      $86
                                                               ==============

     The following unaudited pro forma information is presented as if the
Company had completed the acquisition of ESP as of January 1, 2002. The pro
forma information is not necessarily indicative of what the results of
operations would have been had the acquisitions taken place at those dates or
of the future results of operations.

<TABLE>
<CAPTION>

                                                                                     2003               2002
                                                                                 --------------    ---------------
                                                                                   (in thousands, except share
                                                                                              data)
<S>                                                                                     <C>                <C>
Revenues                                                                               $2,543             $3,799
Net loss                                                                               (2,983)           (13,510)
Loss per share attributable to common stockholders - basic and diluted                  (0.83)             (2.06)
</TABLE>

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

     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 was being
amortized over the approximate five-year minimum life of the contract, and for
the year ended December 31, 2004, such amortization was approximately $34,000.
As a result of AfriHUB's strategy shift, the Company recognized an impairment
loss of approximately $0.8 million relating to this intangible asset and
certain building improvements (see Note 1(f)).

     In accordance with their employment contracts, certain employees will be
issued warrants to purchase ownership interests of AfriHUB if AfriHUB meets
any five operating and financial milestones. Pursuant to APB Opinion No. 25,
the warrants qualify for variable accounting, as the number of shares to be
issued has not been determined yet. As such, in accordance with FASB
Interpretation No. 28, "Accounting for Stock Appreciation Rights and Other
Variable Stock Option or Award Plans," compensation expense equal to the
intrinsic value of the number warrants expected to be issued will be recorded
over the service period, which the Company has determined to be the period
through which the milestone must be achieved. Until the date the milestone is
achieved, compensation expense shall be adjusted for changes (either increases
or decreases) in the fair market value of the underlying units. If
circumstances indicate that a milestone is not expected to be achieved,
compensation contra-expense will be recognized in the period such circumstance
occurs. As of December 31, 2004, the Company determined that two of the five
milestones were not likely to be achieved, and the compensation expense
associated with the warrants underlying these milestones was reversed. For the
year ended December 31, 2004, the Company recognized non-cash expense totaling
approximately $0.2 million relating to the remaining warrants. The Company
will continue monitoring the likelihood as to whether the remaining three
milestones will be achieved.

     On October 8, 2004, AfriHUB agreed to sell membership interests to an
unaffiliated third party for approximately $0.5 million in cash (see Note
1(p)). As a result of this sale of membership units, the Company's ownership
of AfriHUB's outstanding membership interests decreased to approximately 70%.
Including the effect of the warrants underlying the remaining milestones, the
Company held approximately 62% of the ownership interests of AfriHUB as of
December 31, 2004.

     (d) 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 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. During 2004, the
Company purchased additional promissory notes with an aggregate principal
balance of approximately $0.1 million. As of December 31, 2004, the Company
held approximately 40% of the ownership interests of Miraxis. The Company's
President and Chief Executive Officer currently holds an approximate 1%
interest in Miraxis.

     In accordance with 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 equity in loss and 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.

     (e) 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 outstanding 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
intercompany promissory notes.

     On August 16, 2004, the Company purchased additional Series A Preferred
Shares for approximately $0.2 million. Furthermore, from October 2004 through
December 2004, the Company purchased short-term promissory notes from
Navigauge with an aggregate principal amount of $0.5 million. As of December
31, 2004, the Company owned approximately 39% of the outstanding equity of
Navigauge on an undiluted basis.

     Although Navigauge is a variable interest entity as defined by FIN 46R,
the Company is not the primary beneficiary. Accordingly, 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 equity in loss and loss on
investments in affiliates on the accompanying consolidated statements of
operations.

     (f) Verestar Transactions

     On August 29, 2003, the Company signed a securities purchase agreement to
acquire, through a newly formed subsidiary, approximately 67% (on a
fully-diluted basis) of 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 is included in other income (expense), net on the accompanying
consolidated statements of operations.

     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 is included in interest income, net on the accompanying
consolidated statements of operations.

(5)  Notes Receivable from Motient

     On April 2, 2001, the Company agreed to purchase from Motient 12.5%
secured promissory notes, issuable in two tranches, each in the principal
amount of $25.0 million. The notes were collateralized by five million shares
of XM Satellite Radio common stock owned by Motient. The first tranche was
purchased on April 4, 2001, and the second tranche was purchased on July 16,
2001. The principal of and accrued interest on the notes were payable on
October 1, 2001 in either cash, shares of XM Satellite Radio, or any
combination thereof at Motient's option, as set forth in the agreement. At the
option of the Company, the notes were exchangeable for a number of XM
Satellite Radio shares based on a formula, as set forth in the agreement.

     On May 14, 2001, the Company entered into an agreement to merge with a
subsidiary of Motient. By a letter agreement dated October 1, 2001, Motient
and the Company terminated the planned merger. As a result of the termination,
neither the Company nor Motient had any obligation to the other party with
respect to the merger, except for repayment by Motient to the Company of
amounts outstanding under the promissory notes.

     On October 1, 2001, and again on October 8, 2001, the Company extended
the maturity date of the notes. On October 12, 2001, in accordance with the
terms of the notes, the Company received five million shares of XM Satellite
Radio as payment for $26.2 million of the notes and accrued interest. The
maturity date for the remaining balance of the Motient Notes in the principal
amount of approximately $26.2 million, and interest thereon, was extended for
60 days. On January 10, 2002, Motient and its subsidiaries filed for
protection under Chapter 11 of the United States Bankruptcy Code. As part of
its filing, Motient indicated that it would likely challenge the Company's
right to the $26.2 million outstanding principal balance and accrued interest
thereon, as well as the delivery of the shares of XM Satellite Radio common
stock as partial repayment of the aggregate $50.0 million principal amount of
the notes. As a result of uncertainty with respect to the ultimate collection
on the notes, a reserve was recognized for the entire amount. This loss of
approximately $26.9 million was partially offset by a gain of $5.3 million
that resulted from the difference between the value of the XM Satellite Radio
common stock received in connection with the partial repayment of the Motient
notes in accordance with their terms and the value of the XM Satellite Radio
common stock using its closing price on the date of the partial repayment. The
results of these transactions are reflected in other income (expense), net on
the accompanying consolidated statements of operations.

     On May 1, 2002, to mitigate the risk, uncertainties and expenses
associated with Motient's 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. The New
Motient Note was due on May 1, 2005 and yielded 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.
Following several financings by Motient, on July 15, 2004, Motient paid the
Company approximately $22.6 million representing all outstanding principal and
accrued interest due on the New Motient Note. Accordingly, the reserve was
adjusted resulting in the recognition of $23.1 million of income which is
reflected in the accompanying consolidated statements of operations as $19.0
million in other income (expense), net and $4.1 million in interest income,
net.

 (6) Investments in and advances to Affiliates

     The following is a summary of the carrying value of investments held by
the Company at December 31:

                                                 2004              2003
                                             -------------     -------------
                                                     (in thousands)
Cost method investments                            $2,280            $2,250
Equity method investments                           1,081               519
                                             -------------     -------------
                                                   $3,361            $2,769
                                             =============     =============

     For the years ended December 31, 2004, 2003 and 2002, the Company
recognized losses on investments in affiliates of approximately $1.3 million,
$0.4 million and $0.4 million, respectively, consisting primarily of its
proportionate share of affiliates' operating losses for those affiliates
accounted for under the equity method.

     The aggregate carrying value of the Company's cost method investments
totaled approximately $2.3 million as of December 31, 2004. Cost method
investments with an aggregate cost of approximately $1.9 million were not
evaluated for impairment because (i) the Company did not identify any events
or changes in circumstances that may have had a significant adverse effect on
the fair value of those investments and (ii) the Company did not estimate the
fair value of those investments in accordance with SFAS No. 107, "Disclosures
about Fair Value of Financial Instruments" as the cost to make such estimation
was prohibitive. The Company estimated that the fair value approximated or
exceeded the carrying amount of the remaining $0.4 million of cost method
investments.

(7)  Sale of Investment in XM Satellite Radio

     The Company classified its investment in XM Satellite Radio common stock
as an available-for-sale, marketable security and reported such investment at
fair value with net unrealized gains and losses recorded in stockholders'
equity. Gains and losses are recognized in the accompanying consolidated
statements of operations when realized or when a decline in value is
considered to be other than temporary. During the year ended December 31,
2002, the Company sold its 5,000,000 shares of XM Satellite Radio common stock
at an average price of $3.36 per share, resulting in net proceeds of $16.6
million. These sales resulted in a loss of approximately $14.9 million which
is included in other income (expense), net on the accompanying consolidated
statements of operations.

(8)  Short-Term Investments

     Short-term investments consisted of the following debt securities:

                                                   December 31,
                                          -------------------------------
                                              2004              2003
                                          -------------     -------------
                                                  (in thousands)
Auction rate securities                        $36,150            $3,800
Government agencies securities                  19,356            11,979
Municipal bonds                                  4,242             6,016
                                          -------------     -------------
                                               $59,748           $21,795
                                          =============     =============



     The government agencies securities and municipal bonds are classified as
held to maturity. The amortized cost of these securities approximated fair
value as of December 31, 2004 and 2003. Auction rate securities are classified
as available for sale. As of December 31, 2004 and 2003, there were no
unrealized gains or losses associated with these investments and the adjusted
fair market value equaled the adjusted costs. Auction rate securities, which
were previously recorded in cash and cash equivalents due to their liquidity
and pricing reset feature, have been included as short-term investments in the
accompanying consolidated balance sheets. Prior period information was
reclassified to conform to the current year presentation. There was no impact
on the Company's results of operations or cash flow from operations as a
result of the reclassification (see Note 1(c)).

(9)  Property and Equipment

     Property and equipment is stated at cost less accumulated depreciation
and consisted of the following:

                                                       December 31,
                                              -------------------------------
                                                  2004              2003
                                              -------------     -------------
                                                      (in thousands)
Computer equipment and software                       $817              $247
Furniture and fixtures                                  54                29
Machinery and equipment                                 21                 4
Leasehold improvements                                  21                21
                                              -------------     -------------
                                                       913               301
Less accumulated depreciation                         (308)             (244)
                                              -------------     -------------
Property and equipment, net                           $605               $57
                                              =============     =============

     Depreciation expense for the years ended December 31, 2004, 2003 and 2002
was approximately $0.1 million, $28,000 and $0.1 million, respectively. During
the year ended December 31, 2004, $0.2 million of the AfriHUB impairment
charge was allocated to leasehold improvements relating to AfriHUB's two
service centers.

(10)   Accrued Liabilities

     Accrued liabilities consisted of the following:

                                                       December 31,
                                              -------------------------------
                                                  2004              2003
                                              -------------     -------------
                                                      (in thousands)
Accrued transaction costs                           $4,647                $-
Accrued restructuring charges                        1,550             1,580
Accrued professional fees                            1,231             1,461
Accrued compensation                                   662               402
Other accrued liabilities                              191               507
                                              -------------     -------------
                                                    $8,281            $3,950
                                              =============     =============


(11)   Stockholders' Equity

     On December 23, 2004, the Company sold 2,000,000 shares of its common
stock for gross proceeds of $36.5 million (net proceeds of $35.1 million) in a
private placement to a group of institutional investors. In connection with
this sale, the Company entered into a registration rights agreement with the
investors requiring that, among other things, the Company register the resale
of the shares. If the Company does not meet certain deadlines between June 30,
2005 and December 31, 2005 with respect to making the registration effective,
then warrants, which were issued to the investors in connection with the
transaction, to purchase up to an additional 600,000 shares of common stock at
an exercise price of $18.25 per share will vest and be exercisable at any time
through December 23, 2009. The number of warrants that vest, if any, will
depend on when the registration statement becomes effective. If the Company
meets the June 30, 2005 deadline and otherwise complies with certain
registration obligations, none of the warrants will vest. As part of the
placement fees incurred in connection with the transaction, the Company also
issued a warrant to purchase 110,000 shares at an exercise price of $18.25 per
share to the placement agent. This warrant is exercisable at any time through
December 23, 2009 and had an estimated fair value of approximately $2.2
million using the Black-Scholes option valuation model with the following
assumptions: $21.50 price per share on date of grant, an expected life of five
years, a risk free interest rate of 3.6%, volatility of 166% and an annual
dividend yield of 0%.

     On March 13, 2003, the Company commenced a cash tender offer at a price
of $1.00 per share for up to 2,500,000 shares of its outstanding voting common
stock. The tender offer expired on April 23, 2003 with 968,398 shares
purchased for an aggregate cost, including all fees and expenses applicable to
the tender offer, of approximately $1.2 million. The primary purpose of the
tender offer was to provide public stockholders with additional liquidity for
their shares of common stock, particularly in light of decreased liquidity
arising from the decision of Nasdaq to delist the Company's common stock, and
to do so at a premium over the stock price before the tender offer and without
the usual transaction costs associated with open market sales. The Apollo
Stockholders (as defined in Note 12) did not sell any shares of common stock
in the tender offer.

     On January 10, 2003, as part of the settlement of the class action
lawsuit, the Company issued 357,143 shares of the Company's common stock to
the plaintiff's counsel as attorney's fees. During the year ended December 31,
2002, the Company recognized a charge of $0.3 million relating to this
settlement based on the $0.25 trading price of the common stock on January 2,
2003, the date the shares were issuable. The charge is included in accrued
liabilities at December 31, 2002.

     On July 16, 2002, the Company sold 9,138,105 shares of common stock for
gross proceeds of $18.4 million (net proceeds of $17.0 million) in a rights
offering. In connection with the settlement of the class action lawsuit, the
Company distributed to each holder of record of common stock, warrants and
preferred stock, as of the close of business on May 16, 2002, one
non-transferable right to purchase one additional share of common stock, for
each share held, at a purchase price of $2.01 per share. As part of the rights
offering, the Apollo Stockholders purchased 3,876,584 shares of non-voting
common stock in April 2002 and an additional 5,113,628 shares of non-voting
common stock in July 2002 pursuant to their over subscription privilege.

     Pursuant to an April 2002 investment agreement, the Apollo Stockholders
may exchange shares of non-voting common stock for an equal number of shares
of voting common stock if, after giving effect to such exchange, they
collectively will own no more than 29.9% of the outstanding voting power of
the Company. Following the issuance of common stock in the December 2004
private placement, the Apollo Stockholders' voting power declined below 29.9%.
Accordingly, as of December 31, 2004, the Apollo Stockholders may exchange
552,634 shares of non-voting common stock for an equal number of shares of
voting common stock.

     In connection with certain acquisitions made in 1999, the former
shareholders agreed to indemnify the Company for any losses resulting from a
breach of, among other things, their respective representations, warranties
and covenants. To secure the indemnification obligations of these shareholders
thereunder, 1,336 shares of the Company's common stock delivered to these
shareholders, included as part of the consideration, remain in escrow at
December 31, 2004, and the liability of these shareholders under such
indemnification obligations is expressly limited to the value of such shares
held in escrow. During the year ended December 31, 2004, the Company retired
6,262 shares of its common stock as a reduction of consideration for
acquisitions made during 1999 and 2000. During the year ended December 31,
2002, the Company retired 286 shares of its common stock as a reduction of
consideration for a 2000 acquisition.

(12)  Redeemable Preferred Stock

     On June 4, 1999, the Company issued and sold to Apollo Investment Fund
IV, LP, Apollo Overseas Partners IV, LP and AIF IV/RRRR LLC (collectively with
AP/RM Acquisition LLC, the "Apollo Stockholders"), for an aggregate purchase
price of $87.0 million, 126,000 shares of the Company's Series A Redeemable
Convertible Preferred Stock (the "Series A Preferred Stock"), 126,000 Series
1-A Warrants (the "Series 1-A Warrants"), 1,916,994 Series 2-A Warrants (the
"Series 2-A Warrants"), 744,000 shares of the Company's Series B Preferred
Stock (the "Series B Preferred Stock"), 744,000 Series 1-B Warrants (the
"Series 1-B Warrants") and 10,345,548 Series 2-B Warrants (the "Series 2-B
Warrants"). As approved at the Company's 1999 annual meeting of stockholders,
all Series B securities were converted to Series A securities.

     The Series A Preferred Stock is subject to mandatory and optional
redemption. On June 30, 2012, the Company will be required to redeem all
Series A Preferred Stock plus any accrued and unpaid dividends. At the option
of the Company, the Series A Preferred Stock can be redeemed after June 30,
2002 provided that the trading price of the Company's common stock for each of
the preceding 30 trading days is greater than $120.00 per share, or after June
30, 2004 at a price of 103% of the face value of the Series A Preferred Stock
plus any accrued and unpaid dividends. In the event of a change of control, as
defined, at the option of the holders of the majority of the then outstanding
shares of the Series A Preferred Stock, the Company is required to redeem all
or any number of such holders' shares of Series A Preferred Stock plus any
accrued and unpaid dividends. As a result of the July 2002 rights offering,
the conversion price of the Series A Preferred Stock was adjusted, pursuant to
certain anti-dilution provisions as defined, from $70.00 to $68.50 per share.
As a result of the December 2004 private placement, the conversion price of
the Series A Preferred Stock was further adjusted to $62.69 per share. The
conversion price is subject to further adjustment pursuant to the
anti-dilution provisions.

     From the date of issuance to June 30, 2002, the quarterly dividends on
the Series A securities were based on a rate of 7.5% per annum and were paid
in additional shares of Series A securities. Under the terms of the securities
purchase agreement, from July 1, 2002 through June 30, 2004, the quarterly
dividend was based on a rate of 4.65% per annum and was payable, at the option
of the holder, in additional shares of Series A securities or cash. As part of
the settlement of the class action lawsuit, the Apollo Stockholders agreed to
accept payment in additional shares of Series A securities. Dividends paid
from July 1, 2004 through the date of redemption will be based on a rate of
4.65% per annum and will be payable quarterly in arrears in cash. The first
such payment, for the three months ended September 30, 2004, of approximately
$1.4 million was declared by the Company's board of directors and paid on
October 14, 2004. The quarterly payment of approximately $1.4 million, for the
three months ended December 31, 2004, was declared and paid on January 13,
2005 and is reflected in the accompanying consolidated financial statements in
the carrying amount of the Series A Preferred Stock and in net loss
attributable to common stockholders.

     The Series 1-A and Series 2-A warrants are exercisable at any time and
expire ten years from the date issued. The holders of the Series 1-A and
Series 2-A warrants have the option to pay the exercise price of the warrants
in cash, Company common stock previously held, or instructing the Company to
withhold a number of Company shares with an aggregate fair value equal to the
aggregate exercise price. Pursuant to the original terms of the Series 1-A
warrants, each warrant was exercisable into 1.35 shares of the Company's
common stock, and the exercise price was dependent on the trading price of the
Company's common stock. The exercise price ranged from $0.10, if the trading
price is equal to or greater than $70.00 per share, to $42.00 if the trading
price is equal to or less than $40.00 per share. Pursuant to their original
terms, each Series 2-A warrant was exercisable into 0.1 share of the Company's
common stock at an exercise price of $70.00.

     The exercise price and the number of shares for which the Series 1-A and
Series 2-A warrants are exercisable for is subject to adjustment under certain
anti-dilution and other provisions as defined. As such, as a result of the
issuance of additional shares of common stock in the July 2002 rights offering
to shareholders other than the Apollo Stockholders at a price below the
exercise price of the warrants at the time of the offering, the highest
exercise price of the Series 1-A warrants was adjusted from $42.00 to $41.12,
and the number of shares of the Company's common stock issuable upon the
exercise of each Series 1-A warrant became a range dependent on the trading
price of the Company's common stock. The number of shares issuable upon the
exercise of each Series 1-A warrant ranged from 1.35 shares, if the trading
price is equal to or greater than $70.00 per share to 1.379 shares if the
trading price was less than or equal to $40.00 per share. The exercise price
of the Series 2-A warrants was adjusted from $70.00 to $68.50, and the number
of shares of the Company's common stock issuable upon the exercise of each
Series 2-A warrant was adjusted from 0.1 to 0.1022 shares.

     As a result of the December 2004 private placement in which additional
shares of common stock were sold at a price below the exercise price of the
warrants at the time of the placement, the highest exercise price of the
Series 1-A warrants was adjusted from $41.12 to $38.48, and the highest number
of shares of the Company's common stock issuable upon the exercise of each
Series 1-A warrant was adjusted from 1.379 shares to 1.4737 shares. The
exercise price of the Series 2-A warrants was adjusted from $68.50 to $62.69,
and the number of shares of the Company's common stock issuable upon the
exercise of each Series 2-A warrant was further adjusted to 0.111665 shares.

     On January 2, 2003, pursuant to the settlement of the class action
lawsuit, 22,218 Series 1-A warrants and 2,452,509 Series 2-A warrants were
cancelled. As of December 31, 2004, the 1,199,007 shares of Series A Preferred
Stock are convertible into 1,912,485 shares of common stock, and the 234,633
Series 1-A warrants and the 9,810,033 Series 2-A warrants are exercisable for
345,776 shares and 1,095,436 shares of common stock, respectively. Assuming
all the Series A securities are either converted or exercised, as of December
31, 2004, the Apollo Stockholders would own approximately 65% of the Company's
outstanding common stock and 36% of the Company's outstanding voting power on
a fully diluted basis.

     At the time of issuance, the Company ascribed value to the Series A
securities based on their relative fair value. As such, $29.9 million was
allocated to Series A Preferred Stock and the remaining $57.1 million was
allocated to the related Series 1-A and Series 2-A warrants. This transaction
was accounted for in accordance with FASB Emerging Issues Task Force 98-5
"Accounting for Convertible Securities with Beneficial Conversion Features."
Subsequently, dividends have been recorded representing the accrual of the
quarterly paid-in-kind dividends and the accretion of the carrying value up to
the face redemption over 13 years.

(13)   Segment Information

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

     The following table presents certain financial information on the
Company's reportable segments as of or for the year ended December 31, 2004.
Although the MSV Joint Venture became a reportable segment in November 2004
following the conversion of the notes receivable, the MSV Joint Venture column
represents the results of operations for the full year ended December 31, 2004
due to the significance to the Company's operations. Since our 23% share of
the results MSV Joint Venture's operations for the period following the
conversion is already included in the Parent and Other column, the MSV Joint
Venture Elimination column removes the full year results of the MSV Joint
Venture shown in the MSV Joint Venture column.




<TABLE>
<CAPTION>

                                                                                                   Eliminate
                                       MSV Joint                                     Parent        MSV Joint
                                        Venture          ESP          AfriHUB       and Other       Venture      Consolidated
                                     ------------    -----------    -----------    -----------    -----------    -------------
                                                                          (in thousands)
<S>                                      <C>             <C>               <C>             <C>      <C>                <C>
Revenues                                 $29,007         $2,117            $10             $-       $(29,007)          $2,127
Operating expenses                       (57,699)        (2,932)        (2,475)        (8,575)        57,699          (13,982)
                                     ------------    -----------    -----------    -----------    -----------    -------------
Loss from operations                     (28,692)          (815)        (2,465)        (8,575)        28,692          (11,855)
Interest (expense) income, net            (8,112)           (56)            (7)        10,611          8,112           10,548
Equity in loss of Mobile Satellite
  Ventures LP                                  -              -              -         (1,020)             -           (1,020)
Equity in loss and loss on
  investments in affiliates                 (275)          (164)             -         (1,172)           275           (1,336)
Other income (expense), net                3,624            866             15         20,164         (3,624)          21,045
Minority interest                              -              -            594           (810)             -             (216)
                                     ------------    -----------    -----------    -----------    -----------    -------------
Net (loss) income before taxes and
   discontinued operations              $(33,455)         $(169)       $(1,863)       $19,198        $33,455          $17,166
                                     ============    ===========    ===========    ===========    ===========    =============

Total assets                            $246,223           $268           $646       $153,656      $(246,223)        $154,570
                                     ============    ===========    ===========    ===========    ===========    =============
</TABLE>

     The following table presents certain financial information on the
Company's reportable segments as of or for the year ended December 31, 2003:

<TABLE>
<CAPTION>


                                                                         Parent
                                                           ESP          and Other     Consolidated
                                                        -----------    -----------    -------------
<S>                                                           <C>              <C>            <C>
Revenues                                                      $699             $-             $699
Operating expenses                                          (1,412)        (6,234)          (7,646)
                                                        -----------    -----------    -------------
Loss from operations                                          (713)        (6,234)          (6,947)
Interest (expense) income, net                                 (11)         6,315            6,304
Equity in loss and loss on investments in affiliates          (112)          (292)            (404)
Other income (expense), net                                     24            220              244
Minority interest                                                -         (1,126)          (1,126)
                                                        -----------    -----------    -------------
Net loss before taxes and discontinued operations            $(812)       $(1,117)         $(1,929)
                                                        ===========    ===========    =============

Total assets                                                  $555        $97,544          $98,099
                                                        ===========    ===========    =============
</TABLE>

     For the year ended December 31, 2002, the Company operated in only the
Parent and other segment. As of December 31, 2004 and 2003, all of the
Company's long-lived assets were located in the United States, excluding $0.5
million located in Nigeria as of December 31, 2004.

(14)   Discontinued Operations

     At the end of the third quarter of 2001, a decision to discontinue the
operations of Rare Medium, Inc. and the LiveMarket subsidiary was made 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. As of December 31, 2004 and 2003,
the remaining assets of Rare Medium, Inc. and LiveMarket totaled approximately
$15,000 and $0.1 million, respectively, consisting of cash (excluding the $0.3
million of cash collateralizing a letter of credit) and other assets. As of
December 31, 2004 and 2003, the liabilities of these subsidiaries totaled
approximately $2.3 million and $2.4 million, respectively, consisting of
accounts payable and accrued expenses. Included in the total liabilities of
these subsidiaries is $1.0 million related to a lease obligation which is
guaranteed by the Company. The total maximum potential liability of this
guarantee is approximately $3.7 million, subject to certain defenses by the
Company. Rare Medium, Inc. holds $0.3 million of cash in a certificate of
deposit which is maintained as collateral for a letter of credit supporting
the lease obligation. For the years ended December 31, 2004 and 2003, the
Company recognized a gain of approximately nil and $1.2 million, respectively,
as a result of the settlement of Rare Medium, Inc. liabilities at amounts less
than their recorded amounts.

     In 2000, Rare Medium, Inc. entered into a strategic alliance agreement,
as amended, with a software company (the "Partner") to assist in the training
of personnel and development and delivery by Rare Medium, Inc. of solutions
built utilizing the Partner's technology. Under the terms of the alliance, the
Partner was to provide Rare Medium, Inc. with refundable advances of
approximately $17.1 million, on an interest-free basis, to be paid to Rare
Medium, Inc. over the term of the two-year agreement, subject to Rare Medium,
Inc.'s compliance with certain requirements set forth in the agreement. The
amount and timing of the repayment of the advances were adjustable based on
Rare Medium, Inc.'s achievement of certain milestones in accordance with the
terms of the agreement. The Partner and Rare Medium, Inc. had a dispute as to
whether certain milestones were achieved. Efforts at renegotiating the payment
schedule and milestones were not successful. In July 2001, the Partner
commenced an arbitration against Rare Medium, Inc. seeking the return of the
approximately $8.6 million, plus interest, that had been advanced by the
Partner. On May 6, 2002, Rare Medium, Inc. and the Partner settled this
dispute and certain related disputes with an affiliate of the Partner, with
Rare Medium, Inc. agreeing to pay the affiliate of the Partner $0.9 million.

 (15)  Stock-Based Compensation Plans

     The Company provides incentive and nonqualified stock option plans for
directors, officers, and key employees of the Company and others. The Company
has reserved a total of 2.3 million shares of authorized common stock for
issuance under the 1998 Long-Term Incentive Plan ("Stock Incentive Plan"). The
Company has options outstanding under the Nonqualified Stock Option Plan, but
no new grants are being made under this plan. The number of options to be
granted and the option prices are determined by the Compensation Committee of
the Board of Directors in accordance with the terms of the plans. Options
generally expire five to ten years after the date of grant.

     During 1998, the Board of Directors approved the Stock Incentive Plan
under which "non-qualified" stock options ("NQSOs") to acquire shares of
common stock may be granted to non-employee directors and consultants of the
Company, and "incentive" stock options ("ISOs") to acquire shares of common
stock may be granted to employees. The Stock Incentive Plan also provides for
the grant of stock appreciation rights, shares of restricted stock, deferred
stock awards, dividend equivalents, and other stock-based awards to the
Company's employees, directors, and consultants. Under the Stock Incentive
Plan, the option price of any ISO may not be less than the fair market value
of a share of common stock on the date on which the option is granted. The
option price of an NQSO may be less than the fair market value on the date the
NQSO is granted if the Board of Directors so determines. An ISO may not be
granted to a "ten percent stockholder" (as such term is defined in section
422A of the Internal Revenue Code) unless the exercise price is at least 110%
of the fair market value of the common stock and the term of the option may
not exceed five years from the date of grant. Common stock subject to a
restricted stock purchase or a bonus agreement is transferable only as
provided in such agreement. The maximum term of each stock option granted to
persons other than ten percent stockholders is ten years from the date of
grant.

     Under the Nonqualified Stock Option Plan, which provided for the issuance
of up to 510,000 shares, the option price as determined by the Compensation
Committee was permitted to be greater or less than the fair market value of
the common stock as of the date of the grant, and the options were generally
exercisable for three to five years subsequent to the grant date. The
Nonqualified Stock Option Plan expired on July 18, 2000, and thereafter, no
new options can be granted under the plan.

     On October 5, 2001, the compensation committee of the Company's board of
directors determined that because the outstanding options held by certain
executive officers and employees were exercisable at prices that were
significantly above prevailing market prices for the Company's common stock,
they no longer provided an adequate level of incentive. Accordingly, to
reincentivize certain executive officers and employees of the Company and in
recognition of their service to the Company, the compensation committee
approved the repricing of the exercise prices of options to purchase an
aggregate of 32,833 shares of common stock to $1.30 per share, the fair market
value at the date of the repricing. On December 21, 2001, the compensation
committee approved an additional repricing of the exercise prices of options
to purchase an aggregate of 40,000 shares of common stock held by
non-management directors to $6.00 per share, the fair market value at the date
of the repricing. On October 15, 2002, in recognition of the former Chief
Executive Officer's contribution to the Company, among other things, the
compensation committee of the Company's board of directors approved the
repricing of the exercise price of the former Chief Executive Officer's
outstanding options to purchase 140,000 shares of common stock to $0.85, the
fair market value at the date of the repricing. As a result of these actions,
the Company recorded non-cash compensation expense during the year ended
December 31, 2004 and 2003 of approximately $2.8 million and $0.1 million,
respectively, and non-cash compensation contra-expense during the year ended
December 31, 2002 of approximately $0.2 million.

     Stock option activity under the various option plans is shown below:

<TABLE>
<CAPTION>

                                                                    Weighted
                                                                     Average
                                                                    Exercise           Number of
                                                                     Prices             Shares
                                                                  --------------    --------------
<S>                                                                      <C>              <C>
Outstanding at January 1, 2002                                           $32.45           449,495
     Granted                                                               0.89           630,000
     Forfeited                                                            33.12          (153,005)
     Exercised                                                             1.30            (2,666)
                                                                                    --------------
Outstanding at December 31, 2002                                          10.91           923,824
     Granted                                                               1.02           235,000
     Forfeited                                                            19.38           (37,650)
     Exercised                                                             1.30            (4,367)
                                                                                    --------------
Outstanding at December 31, 2003                                           8.58         1,116,807
     Granted                                                               3.35           220,000
     Forfeited                                                            62.01           (28,081)
     Exercised                                                             0.88          (321,966)
                                                                                    --------------
Outstanding at December 31, 2004                                          $8.40           986,760
                                                                                    ==============
</TABLE>

     The following table summarizes weighted-average option price information:

<TABLE>
<CAPTION>

                                 Number          Weighted      Weighted          Number         Weighted
                               Outstanding       Average        Average        Exercisable       Average
                               at December       Remaining     Exercise       at December       Exercise
Range of Exercise Prices        31, 2004           Life          Price          31, 2004         Price
-------------------------    --------------     ----------    ----------    ---------------    ---------
      <S>                          <C>            <C>             <C>              <C>            <C>
     $0.85 - $0.85                 310,000        7.22            $0.85            231,670        $0.85
     $0.91 - $1.55                 232,500        8.25            $1.02             75,836        $1.04
     $1.80 - $4.50                 205,000        8.95            $2.53             25,000        $1.80
     $6.00 - $51.10                229,910        4.66           $27.82            189,910       $32.29
    $72.50 - $95.00                  9,350        4.50           $93.56              9,350       $93.56
                             --------------                                 ---------------
                                   986,760        7.20            $8.40            531,766       $13.78
                             ==============                                 ===============
</TABLE>

(16)   Income Taxes

     The difference between the statutory federal income tax rate and the
Company's effective tax rate for the years ended December 31, 2004 and 2003 is
principally due to the Company incurring net operating losses for which no tax
benefit was recorded.

     For Federal income tax purposes, the Company has unused net operating
loss carryforwards ("NOL") of approximately $210.0 million expiring in 2008
through 2024, including various foreign subsidiaries, and a capital loss of
approximately $85.5 million expiring in 2006 through 2009. As a result of
various equity transactions, the Company may have experienced at least one
"ownership change" as defined by Section 382 of the Internal Revenue Code
("Section 382") since 1999. If the Company has experienced an ownership change
as defined by Section 382, then the utilization of its net operating loss
carryforwards is subject to a significant annual limitation in offsetting
future taxable income.

     The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets are as follows:

<TABLE>
<CAPTION>

                                                                  December 31,
                                                         -------------------------------
                                                             2004              2003
                                                         -------------     -------------
                                                                 (in thousands)
Deferred tax assets:
<S>                                                           <C>               <C>
   Net operating loss carryforwards                           $79,804           $76,487
   Capital loss carryforwards                                  32,475            29,900
   Impairment loss on investments in affiliates                 9,639            11,455
   Reserve for notes receivable from Motient                        -             8,366
   Other assets                                                 1,035               605
                                                         -------------     -------------
     Total gross deferred tax assets                          122,953           126,813
Less valuation allowance                                     (122,953)         (126,813)
                                                         -------------     -------------
     Total deferred tax assets                                     $-                $-
                                                         =============     =============
</TABLE>

     In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during
the periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected future
taxable income, and tax planning in making these assessments.

     Due to the Company's operating losses, there is uncertainty surrounding
whether the Company will ultimately realize its deferred tax assets.
Accordingly, these assets have been fully reserved. During the year ended
December 31, 2004, the valuation allowance decreased by approximately $3.9
million, and during the year ended December 31, 2003, the valuation allowance
increased by approximately $4.0 million. Of the total valuation allowance of
$123.0 million, subsequently recognized tax benefits, if any, in the amount of
approximately $7.4 million will be applied directly to contributed capital.
This amount relates to the tax effect of employee stock option deductions
included in the Company's net operating loss carryforward.

     Due to changes in the Federal tax code, the Company received a refund of
approximately $0.4 million during the year ended December 31, 2002 relating to
alternate minimum tax paid in 1998.

 (17)  Related Party Transactions

     During the year ended December 31, 2004 and from the August 25, 2003
acquisition through December 31, 2003, ESP recognized revenues totaling
approximately $0.6 million and $0.3 million, respectively, for certain
services provided to Navigauge and the MSV Joint Venture.

     In May 2002, the Company acquired ownership interests in Miraxis (see
Note 4(d)). Prior to joining the Company, the Company's Chief Executive
Officer and President served as President of Miraxis, a position he continues
to hold. The Company's Chief Executive Officer and President currently holds
shares, options and warrants of Miraxis representing approximately 1% of the
outstanding ownership interests.

     Miraxis License Holdings, LLC ("MLH"), an entity unaffiliated with
Miraxis, other than as described herein, holds the rights to certain orbital
slots, one of which Miraxis has the ability to use so long as it implements
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.

     During 2002, in accordance with the terms of the Investment Agreement,
dated April 2, 2002, and the Amended and Restated Purchase Agreement, dated
June 4, 1999, each between the Company and the Apollo Stockholders, the
Company paid approximately $0.2 million for professional fees resulting from
the Company's rights offering and approximately $0.9 million for certain
professional fees substantially associated with the class action lawsuit and
other indemnified legal actions, all of which were incurred by the Apollo
Stockholders.

     From time to time, the Company designates certain of its directors and
officers to serve on the Board of Directors of an affiliate, including the MSV
Joint Venture and TerreStar. To the extent such affiliate grants or has
granted options to members of its Board of Directors, the Company designees on
such Board receives similar grants for their service.

(18)   Contingencies and Commitments

   Leases

     The Company has non-cancelable operating leases, primarily related to the
rental of facilities by Rare Medium, Inc., which is one of the Company's
discontinued operating subsidiaries. Future minimum payments, by year and in
the aggregate, under operating leases with initial or remaining terms of one
year or more consisted of the following at December 31, 2004 (in thousands):

Year Ending December 31:
   2005                                                             $1,340
   2006                                                                 27
   2007                                                                  -
   2008                                                                  -
   2009                                                                  -
   Thereafter                                                            -
                                                             --------------
   Total minimum lease payments                                     $1,367
                                                             ==============

     Of the total commitment, approximately $0.2 million in 2005 and $27,000
in 2006 relate to leases for the Company's continuing operations. Also
included in the total commitment is approximately $0.8 million, net of secured
letters of credit, which is guaranteed by the Company (see Note 14). Excluded
from total commitments is $1.8 million, net of secured letters of credit
issued by the assignee, relating to leases that have been assigned and require
no future payments by the Company or its subsidiaries unless there is a
default by the party to which the respective lease has been assigned. Rare
Medium, Inc. is holding funds in a certificate of deposit which is maintained
under an agreement to assure future credit availability relating to one of
these leases. As of December 31, 2004 and 2003, these restricted funds
amounted to approximately $0.3 million which is included in cash and cash
equivalents.

     Total expense under operating leases amounted to $0.3 million, $0.2
million and $0.1 million for 2004, 2003 and 2002, respectively.


   Employment Agreements

     The Company is a party to an amended and restated employment agreement
with its Chief Executive Officer and President. The term of the agreement is
from January 1, 2004 to December 31, 2005 and calls for a base salary of
$300,000 per year. Annual increases are at the sole discretion of the
compensation committee of the Company's board of directors. In addition, the
officer is eligible, based upon the achievement of certain subjective goals
established by the compensation committee, to receive a target bonus of up to
75% of his base salary following the end of each calendar year during the term
of the agreement.

     The Company is party to employment agreements with two of its other
executive officers. Under one agreement, if, either (i) after 90 days
following a change in control of the Company, the executive terminates his
employment or (ii) the executive is terminated for other than "cause" as such
term is defined in his agreement, then the executive is entitled to receive
severance compensation in a lump sum payment consisting of one year of his
current salary and the right to exercise all vested stock options and unvested
stock options through the option expiration date for such options. The other
agreement provides that the executive is entitled to a lump sum payment
consisting of six months of his then current salary if his terminated for
other than "for cause," as such term is defined in his agreement.

   Litigation

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

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

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

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

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

(19)   Subsequent Events

    The terms of the Company's  Series A Preferred stock provide  for dividends
of 4.65% of the  then current face value  to be paid quarterly  in arrears. The
payment of  approximately $1.4  million, for  the three  months ended December
31,  2004, was  declared by  the Company's  board of directors and paid on
January 13, 2005 and is reflected in the accompanying  consolidated financial
statements in the carrying amount of the Series A Preferred Stock and in net
loss attributable to common stockholders.

     On April 22, 2005, the Company completed its acquisition of 50% of the
equity interests of HNS LLC from HNSI, a wholly owned subsidiary of DIRECTV, for
$50.0 million in cash and 300,000 shares of the Company's common stock.  The
acquisition occurred pursuant to an agreement among the Company, DIRECTV, HNSI
and HNS LLC, dated December 3, 2004, as amended.  Immediately prior to the
acquisition, HNSI contributed substantially all of the assets and certain
liabilities of its very small aperture terminal, mobile satellite and carrier
businesses, as well as the certain portions of its SPACEWAY Ka-band satellite
communications platform that is under development, to HNS LLC, which at the time
was a wholly-owned subsidiary of HNSI.  In consideration for the contribution of
assets by HNSI, HNS LLC paid HNSI $190.7 million of cash.  This payment
represents the $201.0 million stated in the agreement less an estimated purchase
price adjustment of $10.3 million, which is subject to further adjustment
depending principally upon the closing value of HNS LLC's working capital (as
defined in the agreement).  On July 21, 2005, DIRECTV submitted its proposed
final working capital statement asserting that it was entitled to a $12.0
million payment from HNS LLC.  On October 21, 2005, HNS LLC notified DIRECTV of
its objection to the proposed final working capital statement and asserted that
an additional payment of $19.7 million was due from DIRECTV to HNS LLC.  Under
the terms of the agreement, if the parties are unable to resolve the dispute, it
will be referred to an independent accounting firm for binding resolution.

     Concurrent with the acquisition, HNS LLC incurred $325.0 million of term
indebtedness and obtained a $50.0 million revolving credit facility.  The
Company and HNSI have each granted a security interest in their respective
equity interest in HNS LLC to secure the obligations of HNS LLC under the term
indebtedness.  Following the acquisition, the Company serves as the managing
member of HNS LLC.  The Company will account for its interest in HNS LLC under
the equity method in accordance with FIN 46R, as HNS LLC is a variable interest
entity as defined in FIN 46R and the Company is not the primary beneficiary, as
defined in FIN 46R.

     On May 11, 2005, TerreStar raised $200.0 million in cash by selling common
stock to Motient at a purchase price of $24.42 per share (the "TerreStar Private
Placement"), raising Motient's ownership of TerreStar to approximately 61% on an
undiluted basis (see Note 3).  In connection with the TerreStar Private
Placement, the TerreStar Rights were exchanged for shares of TerreStar common
stock.  Following these transactions, the Company's MSV Investors Subsidiary
owns 5,303,315 shares of TerreStar common stock, or approximately 17% of
TerreStar on an undiluted basis, and will account for its interest in TerreStar
under the cost method.

     On September 22, 2005, the Company announced a plan to separate into two
publicly owned companies:  the Company, which would solely hold its current
stake in each of the MSV Joint Venture and TerreStar; and a newly formed
subsidiary ("Holdings") that would own all of the Company's other assets,
including its managing interest in HNS LLC.  This proposed separation would be
accomplished by a special dividend distribution of shares of Holdings to the
Company's stockholders.  The Company also announced that it had executed a non-
binding letter of intent with Motient and TMI Communications and Company, among
others, that would result in the consolidation of the ownership of the MSV Joint
Venture and TerreStar into Motient.  This consolidation would include the merger
of the Company, following the special dividend distribution, into Motient, in a
tax-free stock-for-stock merger.

     On November 10, 2005, the Company, through Holdings, entered into an
agreement with DIRECTV to acquire the remaining 50% of the Class A membership
interests of HNS LLC for $100.0 million in cash.  To finance the transaction,
Holdings has received a commitment for $100.0 million of short-term debt
financing from certain of the Apollo Stockholders.  Concurrent with the special
dividend distribution of shares of Holdings to the Company's shareholders, the
Company expects that Holdings will conduct a rights offering to its stockholders
in order to repay the short-term debt financing provided by such Apollo
Stockholders.  In connection with such rights offering, such Apollo Stockholders
have agreed to subscribe for the maximum number of shares of common stock
allocated to them, including the exercise of pro rata over-subscription rights.
The exercise by such Apollo Stockholders of their rights would occur by
converting the outstanding amounts due under the note into a number of shares of
Holdings' common stock at the subscription price in the rights offering.  The
unconverted principal and interest obligations under the note would be repaid in
cash immediately following the consummation of the rights offering.  The closing
of the acquisition is expected in the first quarter of 2006 and is subject to
regulatory approvals, receipt of the short-term financing from such Apollo
Stockholders and customary closing conditions.   Pursuant to the acquisition
agreement, HNS LLC and DIRECTV agreed to resolve the purchase price adjustment
related to the April 2005 transactions with HNS LLC paying DIRECTV $10.0 million
at closing.







<TABLE>
<CAPTION>
                                                       SKYTERRA COMMUNICATIONS, INC.
                                              Schedule II - Valuation and Qualifying Accounts


                                                                    Additions      Additions
                                                    Balance at      Charged to     Charged to
                                                   Beginning of     Costs and        Other                            Balance at
            Deductions - Descriptions                  Year         Expenses        Accounts       Deductions        End of Year
                                                   ------------     ----------     ----------    --------------     -------------
Reserves and allowances deducted from asset
  accounts:

Allowances for uncollectible accounts receivable

<S>                                                     <C>             <C>                <C>      <C>              <C>
Year ended December 31, 2002                            $649,961              -            -        $(649,961)                -
Year ended December 31, 2003                                   -        $43,672            -                -           $43,672
Year ended December 31, 2004                             $43,672        $38,093            -          $(3,915)          $77,850

Allowances for uncollectible notes receivable

Year ended December 31, 2002                         $26,956,853     $1,160,774            -      $(7,956,853)      $20,160,774
Year ended December 31, 2003                         $20,160,774     $1,855,292            -                -       $22,016,066
Year ended December 31, 2004                         $22,016,066              -            -     $(22,016,066)(1)             -
-----------------------------------
</TABLE>


(1)  Relates to adjustment to reserve for note receivable from Motient
     Corporation as a result of repayment of amounts owed thereunder.






                                  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.


                                  SKYTERRA COMMUNICATIONS, INC.

Date: November 10, 2005           By:  /s/ JEFFREY A. LEDDY
                                       --------------------
                                  Name:  Jeffrey A. Leddy
                                  Title: Chief Executive Officer and President


         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


<TABLE>
<CAPTION>

                Signature                                    Title                              Date
                ---------                                    -----                              ----

           <S>                              <C>                                           <C>
           /s/ JEFFREY A. LEDDY             Chief Executive Officer and President         November 10, 2005
           --------------------               (Principal Executive Officer and
             Jeffrey A. Leddy                   Principal Financial Officer)


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

           /s/ ANDREW D. AFRICK             Director                                      November 10, 2005
           --------------------
             Andrew D. Africk

          /s/ JEFFREY M. KILLEEN            Director                                      November 10, 2005
          ----------------------
            Jeffrey M. Killeen

          /s/ WILLIAM F. STASIOR            Director                                      November 10, 2005
          ----------------------
            William F. Stasior

            /s/ AARON J. STONE              Director                                      November 10, 2005
            ------------------
              Aaron J. Stone

          /s/ MICHAEL D. WEINER             Director                                      November 10, 2005
          ---------------------
            Michael D. Weiner

</TABLE>