Terrestar Corp · 10-K/A · For 12/31/04

Filed On 4/29/05 5:08pm ET   ·   SEC File 0-23044   ·   Accession Number 1214659-5-563

Amendment to Annual Report   ·   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K/A      Amendment No. 1                                        9     45K 
 2: EX-23       Consent of Friedman Llp                                1      5K 
 3: EX-31.1     Certification per Sarbanes-Oxley Act (Section 302)     2±    10K 
 4: EX-31.2     Certification per Sarbanes-Oxley Act (Section 302)     2±     9K 
 5: EX-32       Certification per Sarbanes-Oxley Act (Section 906)     1      6K 

10-K/A   ·   Amendment No. 1
Document Table of Contents

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 FORM 10-K/A
 (AMENDMENT No. 1)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 SECURITIES EXCHANGE ACT OF 1934

 For the fiscal year ended December 31, 2004
Commission file number 0-23044

 MOTIENT CORPORATION
(Exact name of registrant as specified in its charter)

          DELAWARE                                    93-0976127
 (State or other jurisdiction of                      (I.R.S. Employer
    incorporation or organization)                     Identification No.)

 300 Knightsbridge Parkway
Lincolnshire, IL 60069
 (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (847) 478-4200

 Securities registered pursuant to Section 12(b)
of the Act: None Securities registered
 pursuant to Section 12(g) of the Act:
 Common stock, $0.01 par value per share

(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 period that the registrant was     
required to file such report(s), 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 registrant's knowledge, in definitive proxy or information statements   
incorporated by reference in Part III of this Form 10-K or any amendments to    
this Form 10-K. Yes [_] No [X]                                                  

Indicate by check mark whether the registrant is an accelerated filer (as       
defined in Rule 12b-2 of the Act). Yes [X] No [_]                               

The aggregate market value of shares of common stock held by non-affiliates at  
June 30, 2004 was approximately $200,051,042.                                   

Indicate by check mark whether registrant has filed all documents and reports   
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act  
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes [_] No [X]                                                           

Number of shares of common stock outstanding at April 27, 2005: 65,210,760      

 DOCUMENTS INCORPORATED BY REFERENCE

None

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EXPLANATORY NOTE

We are filing this Amendment No. 1 to our Annual Report on Form 10-K for the    
year ended December 31, 2004 to amend and restate Item 9A, Controls and         
Procedures, to include Motient Corporation's management report on internal      
control over financial reporting and the related attestation report of Friedman 
LLP, an independent registered public accounting firm, which had been omitted   
from our original Annual Report on Form 10-K as permitted by the Order Under    
Section 36 of the Securities Exchange Act of 1934 Granting an Exemption from    
Specified Provisions of Exchange Act Rules 13a-1 and 15d-1 issued by the        
Securities and Exchange Commission on November 30, 2004. We are also filing this
amendment to add one risk factor to the section Risk Factors in Item 1. Unless  
the context otherwise requires, this Amendment speaks as of the original filing 
date of our Annual Report on Form 10-K and has not been updated to reflect      
events occurring subsequent to the original filing date.                        

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Item 1. Business - Risk Factors                                                 

The following Risk Factor is added:                                             

Failure to achieve and maintain effective internal control over financial       
reporting in accordance with rules of the Securities and Exchange Commission    
promulgated under Section 404 of the Sarbanes-Oxley Act could harm our business 
and operating results and/or result in a loss of investor confidence in our     
financial reports, which could in turn have a material adverse effect on our    
business and stock price.                                                       

Under rules of the Securities and Exchange Commission promulgated under Section 
404 of the Sarbanes-Oxley Act of 2002, beginning with our Annual Report on Form 
10-K for the fiscal year ended December 31, 2004, we were required to furnish a 
report by our management on our internal control over financial reporting. In   
the course of our assessment of the effectiveness of our internal control over  
financial reporting as of December 31, 2004, which assessment was conducted     
during the fourth quarter of 2004 and the first quarter of 2005 in connection   
with the preparation of 2004 audited financial statements and this report, we   
identified two material weaknesses in our internal control over financial       
reporting. These material weaknesses in our internal control over financial     
reporting, as described in Item 9A, Controls and Procedures, as well as any     
other weaknesses or deficiencies that may exist or hereafter arise or be        
identified, could harm our business and operating results, and could result in  
adverse publicity and a loss in investor confidence in the accuracy and         
completeness of our financial reports, which in turn could have a material      
adverse effect on our stock price, and, if such weaknesses are not properly     
remediated, could adversely affect our ability to report our financial results  
on a timely and accurate basis.                                                 

Although we believe that we have taken steps to remediate these material        
weaknesses, as described in Item 9A, Controls and Procedures, we cannot assure  
you that this remediation will be successful or that additional deficiencies or 
weaknesses in our controls and procedures will not be identified. In addition,  
we cannot assure you that our independent registered public accounting firm will
agree with our assessment that our material weaknesses have been remediated.    
Moreover, while we have added accounting personnel, we continue to operate at a 
relatively small staffing level. Our control procedures have been designed with 
this staffing level in mind; however, they are highly dependent on each         
individual's performance of controls in the required manner. The loss of        
accounting personnel, particularly our chief accounting officer, would adversely
impact the effectiveness of our control environment and our internal controls,  
including our internal controls over financial reporting.                       

Item 9A. Controls and Procedures.                                               

The following is amended and restated:                                          

Disclosure Controls and Procedures                                              

We have performed an evaluation under the supervision and with the participation
of our management, including our principal executive officer and principal      
financial officer, of the effectiveness of our disclosure controls and          
procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of   
1934 (the "Exchange Act"). As of the end of the period covered by this report   
(December 31, 2004), our disclosure controls and procedures were not effective  
because of the material weaknesses in internal control over financial reporting 
described below.                                                                

Management's Report on Internal Control over Financial Reporting                

Pursuant to Item 308(a) of Regulation S-K and subsequent SEC Releases and       
guidance, we were not required to furnish an annual management report on our    
internal control of our financial reporting concurrently with the filing of our 
Annual Report on Form 10-K, but were permitted to file such report by amendment 
on or prior to April 30, 2005. In order to issue our report, management         
documented both the design of our internal controls and the testing processes   
that support management's evaluation and conclusion. Our management has         
completed the necessary processes and procedures for issuing its report on      
internal controls based on criteria established in Internal Control--Integrated 

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Framework issued by the Committee of Sponsoring Organizations of the Treadway   
Commission (COSO).                                                              

Our management is responsible for establishing and maintaining effective        
internal control over financial reporting and for its assessment of the         
effectiveness of internal control over financial reporting. The Company's       
internal control over financial reporting is a process designed under the       
supervision of the Company's principal executive officer and principal financial
officer, and effected by the Company's board of directors, management and other 
personnel, to provide reasonable assurance regarding the reliability of         
financial reporting and the preparation of financial statements for external    
purposes in accordance with generally accepted accounting principles in the     
United States of America. Our internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records    
that, in reasonable detail, accurately and fairly reflect the transactions and  
dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial       
statements in accordance with U.S. generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance 
with authorizations of management and directors of the company; and (3) provide 
reasonable assurance regarding prevention or timely detection of unauthorized   
acquisition, use, or disposition of the company's assets that could have a      
material effect on the financial statements.                                    

Internal control over financial reporting includes the controls themselves,     
monitoring and internal auditing practices and actions taken to correct         
deficiencies as identified.                                                     

Because of its inherent limitations, internal control over financial reporting  
may not prevent or detect misstatements. Also, projections of any evaluation of 
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance   
with the policies or procedures may deteriorate.                                

As of December 31, 2004, management, with the participation of our principal    
executive officer and principal financial officer, assessed the effectiveness of
our internal control over financial reporting based on the framework established
in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Management's assessment        
included an evaluation of the design of our internal control over financial     
reporting and testing of the operational effectiveness of our internal control  
over financial reporting. Management reviewed the results of its assessment with
the Audit Committee of our Board of Directors, and based on this assessment,    
management has determined that as of December 31, 2004, there were two material 
weaknesses in our internal control over financial reporting. In light of these  
material weaknesses, management has concluded that, as of December 31, 2004,    
Motient Corporation and Subsidiaries did not maintain effective internal control
over financial reporting. As defined by the Public Company Accounting Oversight 
Board ("PCAOB") Auditing Standard No. 2, a material weakness is a significant   
control deficiency or a combination of significant control deficiencies, that   
results in there being more than a remote likelihood that a material            
misstatement of the annual or interim financial statements will not be prevented
or detected. Friedman LLP, our independent registered public accounting firm,   
which audited our consolidated financial statements included in our Annual      
Report on Form 10-K, has issued its attestation report on our management's      
assessment of our internal control over financial reporting, which appears      
below.                                                                          

This conclusion does not adversely affect the information contained in our      
financial statements included in this Annual Report. Our auditors expressed an  
unqualified opinion on our financial statements as of December 31, 2004.        

Material Weaknesses                                                             
-------------------                                                             

The following two material weaknesses have been identified and included in      
management's assessment.                                                        

1.         Management identified a material weakness relating to the lack of    
        information security and access to initiate, authorize, and record
    transactions in all functional areas relating to the financial
reporting software application.                           

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2.         Management identified the following significant deficiencies that    
  when aggregated give rise to a material weakness. Management
      identified certain control procedures that were not sufficiently
  documented relating to a) information technology back-up and
        recovery, b) operating systems access, c) firewall protections, as
        well as, d) control policies and procedures in certain transaction
cycles.                                                   

           Management also identified various segregation of duties deficiencies
      in a) information security and access to non-financial reporting
         software applications, b) program change management in the customer
management and billing systems and c) over the initiation,
 authorization, review and transaction recording for certain
transaction cycles and non-routine transaction processing.

        Additionally, management identified a lack of sufficient oversight
     and review of the processes involved in the financial close and
           reporting process, in particular as it relates to several complex and
sophisticated transactions.                               

These deficiencies in the design and implementation of the Company's internal   
control over financial reporting did not result in an actual misstatement to the
financial statements. However, due to (a) the significance of the potential     
material misstatement that could have resulted due to the deficient controls and
(b) the absence of other mitigating controls, there is more than a remote       
likelihood that a material misstatement of the interim and annual financial     
statements would not have been prevented or detected.                           

Actions Taken to Correct Material Weaknesses                                    
--------------------------------------------                                    

We have taken the following actions to remediate the above identified material  
weaknesses.                                                                     

With respect to our first material weakness (the lack of information security   
and access to initiate, authorize, and record transactions in all functional    
areas relating to the financial reporting software application), we have        
prevented access to the software applications that certain management level     
personnel previously had, which permitted them to change or record transactions 
in our financial reporting software application. We plan to conduct further     
review and evaluation of the access to our financial reporting software         
applications by all personnel, and to reassign the access rights used to control
the financial reporting process.                                                

With respect to our second material weakness, which was an aggregation of       
significant deficiencies that, individually, did not rise to the level of a     
material weakness, but in aggregate did, we have taken the following steps:     

o    We have begun drafting, and are in the process of implementing,  
      remedial control procedures to address: (i) information technology
       back-up and recovery, (ii) operating systems access, (iii) firewall
    protections, and (iv) control policies and procedures in certain
transaction cycles.                                         
o    We are in the process of implementing additional monitoring      
       activities, as well as evaluating job responsibilities, in order to
         improve internal controls related to (i) our information security and
     access to non-financial reporting software applications, (ii) our
         program change management in customer management and billing systems,
   and (iii) the initiation, authorization, review and transaction
        recording for certain transaction cycles and non-routine transaction
processing.                                                 
 o    We have enhanced our corporate accounting function by creating and
         filling the new position of Assistant Controller. We believe that the
          control deficiencies involving (i) segregation of duties, (ii) lack of
    sufficient oversight and review of the processes involved in the
         financial close and reporting process, in particular as it relates to
     complex and sophisticated transactions, and (iii) lack of control
    policy documentation, will be remedied with the addition of this
additional resource.                                        

The Company believes that the corrective actions described above, taken as a    
whole, will remediate the internal control deficiencies identified in this      
report, but the Company and the Audit Committee will continue to monitor the    
effectiveness of these actions and will make any other changes or take such     
other actions as management determines to be appropriate.                       

Changes in Internal Control Over Financial Reporting                            

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There has been no change in our internal control over financial reporting that  
occurred during our last fiscal quarter that has materially affected, or is     
reasonably likely to materially affect, our internal control over financial     
reporting. The changes outlined above began in 2005.                            

Report of Independent Registered Public Accounting Firm on Internal Control Over
Financial Reporting                                                             

To the Board of Directors and                                                   
Stockholders of Motient Corporation                                             

We have audited management's assessment, included in the accompanying           
"Management's Report on Internal Control", that Motient Corporation and         
Subsidiaries (the "Company") did not maintain effective internal control over   
financial reporting as of December 31, 2004, because of the effect of the       
material weaknesses identified in management's assessment based on criteria     
established in Internal Control--Integrated Framework issued by the Committee of
Sponsoring Organization of the Treadway Commission (COSO). The Company's        
management is responsible for maintaining effective internal control over       
financial reporting and for its assessment of the effectiveness of internal     
control over financial reporting. Our responsibility is to express an opinion on
management's assessment and an opinion on the effectiveness of the company's    
internal control over financial reporting based on our audit.                   

We conducted our audit in accordance with the standards of the Public Company   
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective    
internal control over financial reporting was maintained in all material        
respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management's assessment, testing and evaluating 
the design and operating effectiveness of internal control, and performing such 
other procedures as we considered necessary in the circumstances. We believe    
that our audit provides a reasonable basis for our opinion.                     

A company's internal control over financial reporting is a process designed to  
provide reasonable assurance regarding the reliability of financial reporting   
and the preparation of financial statements for external purposes in accordance 
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to  
the maintenance of records that, in reasonable detail, accurately and fairly    
reflect the transactions and dispositions of the assets of the company; (2)     
provide reasonable assurance that transactions are recorded as necessary to     
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are    
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's     
assets that could have a material effect on the financial statements.           

Because of its inherent limitations, internal control over financial reporting  
may not prevent or detect misstatements. Also, projections of any evaluation of 
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance   
with the policies or procedures may deteriorate.                                

A material weakness is a control deficiency, or combination of control          
deficiencies, that results in more than a remote likelihood that a material     
misstatement of the annual or interim financial statements will not be prevented
or detected. The following two material weaknesses have been identified and     
included in management's assessment.                                            

1.         Management identified a material weakness relating to the lack of    
        information security and access to initiate, authorize, and record
    transactions in all functional areas relating to the financial
reporting software application.                           

2.         Management identified the following significant deficiencies that    
  when aggregated give rise to a material weakness. Management
      identified certain control procedures that were not sufficiently
  documented relating to a) information technology back-up and
        recovery, b) operating systems access, c) firewall protections, as
        well as, d) control policies and procedures in certain transaction
cycles.                                                   

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           Management also identified various segregation of duties deficiencies
      in a) information security and access to non-financial reporting
         software applications, b) program change management in the customer
management and billing systems and c) over the initiation,
 authorization, review and transaction recording for certain
transaction cycles and non-routine transaction processing.

        Additionally, management identified a lack of sufficient oversight
     and review of the processes involved in the financial close and
           reporting process, in particular as it relates to several complex and
sophisticated transactions.                               

These deficiencies in the design and implementation of the Company's internal   
control over financial reporting did not result in an actual misstatement to the
financial statements. However, due to (a) the significance of the potential     
material misstatement that could have resulted due to the deficient controls and
(b) the absence of other mitigating controls, there is more than a remote       
likelihood that a material misstatement of the interim and annual financial     
statements would not have been prevented or detected.                           

These material weaknesses were considered in determining the nature, timing, and
extent of audit tests applied in our audit of the 2004 financial statements, and
this report does not affect our report dated March 30, 2004 on those financial  
statements.                                                                     

In our opinion, management's assessment that the Company did not maintain       
effective internal control over financial reporting as of December 31, 2004, is 
fairly stated, in all material respects, based on criteria established in       
Internal Control--Integrated Framework issued by the Committee of Sponsoring    
Organizations of the Treadway Commission (COSO). Also, in our opinion, because  
of the effect of the material weaknesses described above on the achievement of  
the objectives of the control criteria, the Company has not maintained effective
internal control over financial reporting as of December 31, 2004, based on     
criteria established in Internal Control--Integrated Framework issued by the    
Committee of Sponsoring Organizations of the Treadway Commission (COSO).        

We do not express an opinion or any other form of assurance on management's     
statements relating to new controls being implemented and tested.               

We have also audited, in accordance with the standards of the Public Company    
Accounting Oversight Board (United States), the consolidated balance sheets of  
Motient Corporation and Subsidiaries as of December 31, 2004 and 2003 (Successor
Company), and the related consolidated statements of operations, changes in     
stockholders' equity (deficit) and cash flows for the years ended December 31,  
2004 and 2003 (Successor Company), the eight months ended December 31, 2002     
(Successor Company), and the four months ended April 30, 2002 (Predecessor      
Company) and our report dated March 30, 2005 expressed an unqualified opinion   
thereon.                                                                        

/s/ Friedman LLP                                                                

East Hanover, New Jersey                                                        
April 29, 2005                                                                  

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SIGNATURES

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

 MOTIENT CORPORATION

          By /s/ Christopher W. Downie
               ---------------------------
         Christopher W. Downie
            Executive Vice President
                         Chief Operating Officer and Treasurer

  Date: April 29, 2005

 Power of Attorney

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears    
below hereby severally constitutes and appoints, Christopher W. Downie and Myrna
J. Newman, and each or any of them, his or her true and lawful attorney-in-fact 
and agent, each with the power of substitution and resubstitution, for him or   
her in any and all capacities, to sign any and all amendments to this Annual    
Report on Form 10-K/A and to file the same, with exhibits thereto and other     
documents in connection therewith, with the Securities and Exchange Commission, 
hereby ratifying and confirming all that each said attorney-in-fact and agent,  
or his substitute or substitutes, may lawfully do or cause to be done by virtue 
hereof.                                                                         

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and  
in the capacities and on the dates indicated.                                   

                                                        [Enlarge/Download Table]
                                                                                                

/s/ Christopher W. Downie             Executive Vice President, Chief Operating   April 29, 2005
------------------------------------  Officer and Treasurer (principal executive                
Christopher W. Downie                 officer)                                                  

/s/ Myrna J. Newman                   Controller and Chief Accounting Officer     April 29, 2005
------------------------------------  (principal financial officer)                             
Myrna J. Newman                                                                                 

                                      Chairman of the Board                       April 29, 2005
------------------------------------                                                            
Steven G. Singer                                                                                

/s/ Jonelle St. John                  Director                                    April 29, 2005
------------------------------------                                                            
Jonelle St. John                                                                                

/s/ Gerald S. Kittner                 Director                                    April 29, 2005
------------------------------------                                                            
Gerald S. Kittner                                                                               

/s/ James D. Dondero                  Director                                    April 29, 2005
------------------------------------                                                            
James D. Dondero                                                                                

/s/ Raymond L. Steele                 Director                                    April 29, 2005
------------------------------------                                                            
Raymond J. Steele                                                                               

/s/ Barry A. Williamson               Director                                    April 29, 2005
------------------------------------                                                            
Barry A. Williamson                                                                             

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 EXHIBIT INDEX

23   - Consent of Friedman LLP                              

24   - Power of attorney (included on signature page)       

       31.1 - Certification of the principal executive officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 

       31.2 - Certification of the principal financial officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 

         32   - Certification of the principal financial officer and principal
                 executive officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002                                   

9 

Dates Referenced Herein   and   Documents Incorporated By Reference

				Referenced-On Page
This 10-K/A Filing		Date		First		Last			Other Filings
		4/30/02		7
		12/31/02		7					10-K
		12/31/03		7					10-K, 10-K/A
		3/30/04		7
		6/30/04		1					10-Q, 10-Q/A
		11/30/04		2
For The Period Ended		12/31/04		1		7			10-K, NT 10-K
		3/30/05		7					4
		4/27/05		1
Filed On / Filed As Of		4/29/05		7		8
		4/30/05		3
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