MOTIENT CORP - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________

FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004
COMMISSION FILE NO. 0-23044
_______________

MOTIENT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 93-0976127
(State or other jurisdiction of (I.R.S. Employee Identification Number)
Incorporation or organization)

300 KNIGHTSBRIDGE PARKWAY
LINCOLNSHIRE, IL 60069
847-478-4200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

_______________

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 whether the 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 [X] No [ ]

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

Number of shares of common stock outstanding at August 10, 2004: 33,329,359

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MOTIENT CORPORATION
FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 2004

TABLE OF CONTENTS

PAGE
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PART I
FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Statements of Operations for the Three and Six
Months Ended June 30, 2003 and 2004 3

Consolidated Balance Sheets as of June 30, 2004 and December
31, 2003 4

Condensed Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 2003 and 2004 5

Notes to Consolidated Financial Statements 6

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 26

Item 3. Quantitative and Qualitative Disclosures about Market Risk 49

Item 4. Controls and Procedures 49

PART II
OTHER INFORMATION

Item 1. Legal Proceedings 54

Item 2. Changes in Securities and Use of Proceeds 54

Item 3. Defaults Upon Senior Securities 55

Item 6. Exhibits and Reports on Form 8-K 55

2

PART I- FINANCIAL INFORMATION
- -----------------------------

ITEM 1. FINANCIAL STATEMENTS

MOTIENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30, ENDED JUNE 30, ENDED JUNE 30,
2004 2003 2004 2003
------------- ------------- ------------- -------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)

REVENUES
Services and related revenue $ 10,156 $ 13,984 $ 20,117 $ 27,547
Sales of equipment 1,283 1,008 2,822 1,815
------------- ------------- ------------- -------------

Total revenues $ 11,439 $ 14,992 $ 22,939 $ 29,362
------------- ------------- ------------- -------------

COSTS AND EXPENSES

Cost of services and operations (including stock-based
compensation of $1,454 and $1,959, respectively for the
three and six months ended June 30, 2004; exclusive of
depreciation and amortization below) 10,412 13,884 21,764 27,538
Cost of equipment sold (exclusive of depreciation and
amortization below)
Sales and advertising (including stock-based 1,257 1,125 2,766 2,122
compensation of $529 and $889, respectively, for the
three and six months ended June 30, 2004; exclusive of
depreciation and amortization below) 860 1,475 1,892 2,717
General and administrative (including stock-based
compensation of $453 and $1,029, respectively, for the
three and six months ended June 30, 2004; exclusive of
depreciation and amortization below) 2,524 3,287 4,876 6,547
Restructuring Charges 5,110 -- 6,264 --
Depreciation and amortization 4,112 5,587 8,385 10,858
------------- ------------- ------------- -------------
Total Costs and Expenses 24,275 25,358 45,947 49,782
------------- ------------- ------------- -------------

Operating loss (12,836) (10,366) (23,008) (20,420)
------------- ------------- ------------- -------------

Interest expense, net (1,273) (1,642) (3,039) (2,954)
Write-off of deferred financing fees (8,052) -- (8,052) --
Other income, net 191 -- 199 807
Other income from Aether 662 1,286 1,307 1,776
Gain on asset disposal 2 -- -- --
Gain on debt and capital lease retirement 802 -- 802 --
Equity in loss of Mobile Satellite Ventures (2,608) (2,288) (4,838) (4,613)
------------- ------------- ------------- -------------

Net (loss) $ (23,112) $ (13,010) $ (36,629) $ (25,404)
============= ============= ============= =============

Basic and Diluted (Loss) Per Share of Common Stock:
Net (Loss), basic and diluted $ (0.79) $ (0.52) $ (1.34) $ (1.01)

Weighted-Average Common Shares Outstanding - basic and
diluted 29,338 25,116 27,285 25,107
============= ============= ============= =============

The accompanying notes are an integral part of these consolidated financial statements.

3

MOTIENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)

JUNE 30, DECEMBER 31,
2004 2003
---------- ----------
ASSETS (UNAUDITED) (AUDITED)

CURRENT ASSETS:
Cash and cash equivalents $ 12,172 $ 3,618
Restricted cash and short-term investments 1,438 504
Accounts receivable-trade, net of allowance for doubtful
accounts of $704 at June 30, 2004 and $759 at
December 31, 2003 3,416 3,804
Inventory 192 240
Due from Mobile Satellite Ventures, net 95 93
Deferred equipment costs 2,212 3,765
Assets held for sale 271 2,734
Other current assets 1,686 5,091
---------- ----------
Total current assets 21,482 19,849
---------- ----------

RESTRICTED INVESTMENTS 51 1,091
PROPERTY AND EQUIPMENT, net 23,608 31,381
FCC LICENSES AND OTHER INTANGIBLES, net 71,213 74,021
INVESTMENT IN AND NOTES RECEIVABLE FROM MSV 15,772 22,610
DEFERRED CHARGES AND OTHER ASSETS 5,066 8,076
---------- ----------
TOTAL ASSETS $ 137,192 $ 157,028
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses 12,159 12,365
Deferred equipment revenue 2,223 3,795
Deferred revenue and other current liabilities 6,387 11,005
Notes payable, including accrued interest thereon 23,405 --
Vendor financing commitment, current -- 2,413
Obligations under capital leases, current -- 1,454
---------- ----------
Total current liabilities 44,174 31,032
---------- ----------

LONG-TERM LIABILITIES
Capital lease obligations, net of current portion -- 1,642
Vendor financing commitment, net of current portion -- 2,401
Notes payable, including accrued interest thereon -- 22,885
Term credit facility, including accrued interest
thereon -- 4,914
Other long-term liabilities 290 1,347
---------- ----------
Total long-term liabilities 290 33,189
---------- ----------
Total liabilities 44,464 64,221
---------- ----------

COMMITMENTS AND CONTINGENCIES -- --

STOCKHOLDERS' EQUITY:
Preferred Stock; par value $0.01; authorized 5,000,000
shares at June 30, 2004 and December 31, 2003, no shares
issued or outstanding at June 30, 2004 or December 31, 2003 -- --
Common Stock; voting, par value $0.01; 100,000,000
shares authorized and 29,773,089 and 25,196,840 shares
issued and outstanding at June 30, 2004 and at December
31, 2003, respectively 298 252
Additional paid-in capital 220,168 198,743
Common stock purchase warrants 30,571 15,492
Accumulated deficit (158,309) (121,680)
---------- ----------
STOCKHOLDERS' EQUITY 92,728 92,807
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 137,192 $ 157,028
========== ==========

The accompanying notes are an integral part of these consolidated financial statements.

4

MOTIENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND THE SIX MONTHS ENDED JUNE 30, 2003
(in thousands)

SIX MONTHS SIX MONTHS
ENDED JUNE ENDED JUNE
30, 2004 30, 2003
--------- ---------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $(36,629) $(25,404)
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Depreciation and amortization 8,385 10,814
Equity in loss of MSV 4,838 4,613
Restructuring charges, fixed asset disposals 2,847 --
(Gain) loss on disposal of assets -- 580
Gain on debt restructuring (802) (405)
Write-off of deferred financing fees 8,052 --
Non cash amortization of deferred financing costs 1,571 --
Non cash stock compensation 3,877 1,244
Changes in assets and liabilities, net of acquisitions
and dispositions:
Inventory 48 239
Accounts receivable-- trade 388 927
Other current assets 6,308 1,222
Accounts payable and accrued expenses (1,991) 1,469
Accrued interest 575 998
Deferred revenue and other deferred items (5,697) 164
--------- ---------
Net cash (used in) operating activities (8,230) (3,539)
--------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from MSV note 2,000 --
Proceeds from sale of property and equipment 2 --
Proceeds (purchase) of restricted investments 106 83
Additions to property and equipment, net (653) --
--------- ---------
Net cash provided by investing activities 1,455 83
--------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under capital leases (2,419) (1,357)
Principal payments under vendor financing (682) (438)
Repayment from term loan (6,785) --
Proceeds from term credit facility 1,500 3,000
Proceeds from issuance of stock 23,188 --
Proceeds from issuance of employee stock options 1,003 --
Stock issuance costs and other charges (476) --
Debt issuance costs and other charges -- (537)
--------- ---------
Net cash provided by (used in) financing activities 15,329 (668)
--------- ---------
Net increase (decrease) in cash and cash equivalents 8,554 (2,788)
--------- ---------
CASH AND CASH EQUIVALENTS, beginning of period 3,618 5,840
CASH AND CASH EQUIVALENTS, end of period $ 12,172 $ 3,052
========= =========

The accompanying notes are an integral part of these
consolidated condensed financial statements.

5

MOTIENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004
(UNAUDITED)

1. ORGANIZATION AND BUSINESS

Motient Corporation (with its subsidiaries, "Motient" or the "Company") provides
two-way mobile communications services principally to business-to-business
customers and enterprises. Motient serves a variety of markets including mobile
professionals, telemetry, transportation and field service. Motient provides its
eLink(sm) brand two-way wireless email services to customers accessing email
through corporate servers, Internet Service Providers, Mail Service Provider
accounts, and paging network service providers. Motient also offers BlackBerry
TM by Motient, a wireless email solution developed by Research In Motion Ltd.
("RIM") and licensed to operate on Motient's network. BlackBerry TM by Motient
is designed for large corporate accounts operating in a Microsoft Exchange(R) or
Lotus Notes(R) environment. The Company considers the two-way mobile
communications service described in this paragraph to be its core wireless
business.

Motient has six wholly-owned subsidiaries and a 29.5% interest (assuming
conversion of all outstanding convertible notes) in Mobile Satellite Ventures LP
("MSV"). For further details regarding Motient's interest in MSV, please see "-
Mobile Satellite Ventures LP" below. Motient Communications Inc. ("Motient
Communications") owns the assets comprising Motient's core wireless business,
except for Motient's Federal Communications Commission ("FCC") licenses, which
are held in a separate subsidiary, Motient License Inc. ("Motient License").
Motient License is a special purpose wholly-owned subsidiary of Motient
Communications that holds no assets other than Motient's FCC licenses. Motient's
other four subsidiaries hold no material operating assets other than the stock
of other subsidiaries and Motient's interests in MSV. On a consolidated basis,
we refer to Motient Corporation and its six wholly-owned subsidiaries as
"Motient."

Motient is devoting its efforts to maintaining its core wireless business, while
also focusing on cost-cutting efforts. These efforts involve substantial risk.
Future operating results will be subject to significant business, economic,
regulatory, technical, and competitive uncertainties and contingencies.
Depending on their extent and timing, these factors, individually or in the
aggregate, could have an adverse effect on the Company's financial condition and
future results of operations. In recent periods, certain factors have restrained
Motient's ability to generate revenue growth at the pace required to enable it
to generate cash in excess of its operating expenses. These factors include
competition from other wireless data suppliers and other wireless communications
providers with greater resources, the loss of UPS as a primary customer, cash
constraints that have limited Motient's ability to generate greater demand,
unanticipated technological and development delays and general economic factors.
Motient's results in recent periods, including the period covered by this
report, have also been hindered by the downturn in the economy and capital
markets.

For a discussion of certain significant recent developments and trends in
Motient's business after the end of the period covered by this report, please
see Note 6 ("Subsequent Events").

6

MOBILE SATELLITE VENTURES LP

On June 29, 2000, the Company formed a joint venture subsidiary, Mobile
Satellite Ventures LP (formerly known as Mobile Satellite Ventures LLC) ("MSV"),
in which it owned, until November 26, 2001, 80% of the membership interests, in
order to conduct research and development activities. In June 2000, three
investors unrelated to Motient purchased 20% of the interests in MSV for an
aggregate price of $50 million. The minority investors had certain participating
rights which provided for their participation in certain business decisions that
were made in the normal course of business, therefore, the Company's investment
in MSV has been recorded for all periods presented in the consolidated financial
statements pursuant to the equity method of accounting. On November 26, 2001,
Motient sold the assets comprising its satellite communications business to MSV,
as part of a transaction in which certain other parties joined MSV, including
TMI Communications and Company, Limited Partnership ("TMI"), a Canadian
satellite services provider. In this transaction, TMI also contributed its
satellite communications business assets to MSV. As part of this transaction,
Motient received, among other proceeds, a $15 million promissory note issued by
MSV and purchased a $2.5 million convertible note issued by MSV.

In July 2002, MSV commenced a rights offering seeking total funding in the
amount of $3.0 million. While the Company was not obligated to participate in
the offering, the Company's board determined that it was in the Company's best
interests to participate so that its interest in MSV would not be diluted. On
August 12, 2002, the Company funded an additional $957,000 to MSV pursuant to
this offering, and received a new convertible note in such amount. This rights
offering did not impact the Company's ownership position in MSV.

In January 2001, MSV had filed a separate application with the FCC with respect
to MSV's plans for a new generation satellite system utilizing ancillary
terrestrial components, or "ATC". In January 2003, MSV's application with the
FCC with respect to MSV's plans for a new generation satellite system utilizing
ATC was approved by the FCC. The order granting such approval (the "ATC Order")
requires that licensees, including MSV, submit a further application with the
FCC to seek approval of the specific system incorporating ATC that the licensee
intends to use. MSV has filed an application for ATC authority, which is
pending. MSV has also filed a petition for reconsideration with respect to
certain aspects of the ATC Order. In January 2004, certain terrestrial wireless
providers petitioned the U.S. Court of Appeals for the District of Columbia to
review the FCC's decision to grant ATC to satellite service providers. Oral
arguments in this case occurred in May 2004, but a decision has not yet been
issued by the court.

On August 21, 2003, two investors in MSV (excluding Motient) invested an
additional $3.7 million in MSV in exchange for Class A preferred units of
limited partnership interests in MSV. MSV used the proceeds from this investment
to repay other indebtedness that is senior in its right of repayment to the
Company's promissory note. Under the terms of MSV's amended and restated
investment agreement, these investors had the option of investing an additional
$17.6 million in MSV by December 31, 2003; however, if, prior to this time, the
FCC had not issued a decision addressing MSV's petition for reconsideration with
respect to the ATC Order, the option was automatically extended to March 31,
2004. As of the closing of the initial investment on August 21, 2003 and as of
June 30, 2004, the Company's percentage ownership of MSV was approximately
29.5%, assuming conversion of all outstanding convertible notes.

On April 2, 2004, the $17.6 million above-mentioned investment in MSV was
consummated. In connection with this investment, MSV's amended and restated
investment agreement was amended to provide that of the total $17.6 million in
proceeds, $5.0 million was used to repay certain outstanding indebtedness of

7

MSV, including $2.0 million of accrued interest under the $15.0 million
promissory note issued to Motient by MSV. Motient was required to use 25% of the
$2 million it received in this transaction, or $500,000, to and did make
prepayments under its existing notes owed to Rare Medium Group, Inc. and Credit
Suisse First Boston. The remainder of the proceeds from this investment were
used by MSV for general corporate purposes. As of the closing of the additional
investment on April 2, 2004, and at June 30, 2004, Motient's percentage
ownership of MSV remained approximately 29.5%, assuming the conversion of all
outstanding convertible notes.

On May 17, 2004, MSV was awarded its first patent on a next generation satellite
system technology containing an ATC innovation. MSV believes that patent will
support its ability to deploy ATC in a way that minimizes interference to other
satellite systems, and addresses ways to mitigate residual interference levels
using interference-cancellation techniques.

COST REDUCTION ACTIONS

Several factors have restrained the Company's ability to grow revenue at the
rate it previously anticipated. These factors include the weak economy generally
and the weak telecommunications and wireless sector specifically, the loss of
UPS as a primary customer, the financial difficulty of several of the Company's
key resellers, on whom it relies for a majority of its new revenue growth, and
the Company's continued limited liquidity.

The Company has taken a number of steps recently to reduce operating and capital
expenditures in order to lower its cash burn rate and improve its liquidity
position.

REDUCTIONS IN WORKFORCE. The Company undertook a reduction in its workforce in
February 2004. This action eliminated approximately 32.5% (54 employees) of its
workforce and reduced employee and related expenditures by approximately $0.4
million per month.

CREDIT FACILITY REPAYMENT: On April 13, 2004, Motient repaid all amounts then
owing under its term credit facility, including all principal and accrued
interest thereon, in an amount of $6.8 million. The remaining availability under
the credit facility of $5.7 million will be available for borrowing by the
Company until December 31, 2004, subject to the lending conditions in the credit
agreement.

TERMINATION OF MOTOROLA AND HEWLETT-PACKARD AGREEMENTS: In June 2004, the
Company negotiated settlements of the entire amounts outstanding under its
financing facilities with Motorola and its capital lease with Hewlett-Packard.
The full amount due and owing under these agreements was a combined $6.8
million. The Company paid a combined $3.9 million in cash to Motorola and
Hewlett-Packard and issued a warrant to Motorola to purchase 200,000 shares of
the Company's common stock at a price of $8.68, in full satisfaction of the
outstanding balances. At June 30, 2004 approximately $1.9 million of the
Company's accounts payable related to the Motorola settlement. In the case of
Hewlett-Packard, the Company took title to all of the leased equipment and
software and the letter of credit securing this lease was cancelled; in the case
of Motorola, there was no equipment or service that Motorola was obligated to
provide. The Company recorded a gain on the extinguishment of debt in the amount
of $0.7 million on the Hewlett Packard settlement. The Company recorded a gain
of $0.1 million on the Motorola settlement.

Please see Note 3 ("Liquidity and Financing") and Note 6 ("Subsequent Events")
for further discussion of this and other financing obligations.

8

NETWORK RATIONALIZATION. In the second quarter of 2004, we finalized plans to
implement certain base station rationalization initiatives. These initiatives
are anticipated to be completed by December 2004. These initiatives involve the
de-commissioning of approximately 409 base stations from our network. We had
1,549 base stations in our network as of March 31, 2004. We are taking these
actions in a coordinated effort to reduce network operating costs while also
focusing on minimizing the potential impact to our customers communications and
coverage requirements. This rationalization encompasses, among other things, the
reduction of unneeded capacity across the network by de-commissioning
under-utilized and un-profitable base stations as well as de-commissioning base
stations that pass an immaterial amount of customer data traffic. In some cases,
these base stations were originally constructed specifically to serve customers
with nationwide requirements that are no longer customers of Motient. In certain
instances, the geographic area that our network serves may be reduced by this
process and customer communications may be impacted. We have discussed these
changes to our network with many of our customers to assist them in evaluating
the potential impact, if any, to their respective communications requirements.
The full extent and effect of the changes to our network have yet to be
determined, but based on internal analyses, we believe the de-commissioning of
these base stations from our network will only impact approximately 1.5% of our
network's current data traffic. As of July 31, 2004, we were approximately 85%
complete with these network rationalization initiatives.

Please see Item 2 ("Management's Discussion and Analysis of Financial Condition
and Results of Operations") for further discussion of this network
rationalization.

COMMUNICATION TECHNOLOGY ADVISORS LLC. Effective January 30, 2004, Motient hired
Communications Technology Advisors LLC, or CTA, to serve as "Chief Restructuring
Entity" and advise the Company on various ways to reduce cash operating
requirements. The term of CTA's engagement was recently extended through
December 2004. See Note 2 ("Related Parties") for further discussion of
Motient's relationship with CTA.

Despite these initiatives, the Company continues to generate losses from
operations, and there can be no assurances that it will ever generate income
from operations.

CHANGES IN MANAGEMENT

On May 24, 2004 the board of directors designated Myrna J. Newman, the Company's
controller and chief accounting officer, as the Company's principal financial
officer. Simultaneously, the board of directors elected Christopher W. Downie to
the position of executive vice president, chief operating officer and treasurer.
Mr. Downie will remain as the Company's principal executive officer.

On May 6, 2004 the board of directors elected Raymond L. Steele to the Company's
board of directors. The board of directors now consists of six members. Mr.
Steele was also elected to the Company's audit committee.

Also on May 6, 2004 the board of directors elected Robert L. Macklin as the
Company's general counsel and secretary.

9

CHANGE IN ACCOUNTANTS

On March 2, 2004, Motient dismissed PricewaterhouseCoopers LLP as its
independent auditors effective immediately. The audit committee of the Company's
board of directors approved the dismissal of PricewaterhouseCoopers.
PricewaterhouseCoopers was previously appointed to audit Motient's consolidated
financial statements for the period May 1, 2002 to December 31, 2002, and, by
its terms, such engagement was to terminate upon the completion of services
related to such audit. PricewaterhouseCoopers did not report on Motient's
consolidated financial statements for such period or for any other fiscal
period. On March 2, 2004, the audit committee engaged Ehrenkrantz Sterling & Co.
LLC as Motient's independent auditors to replace PricewaterhouseCoopers to audit
Motient's consolidated financial statements for the period May 1, 2002 to
December 31, 2002. Ehrenkrantz Sterling & Co. LLC was also engaged to audit
Motient's consolidated financial statements for the period ended December 31,
2003.

On June 1, 2004, Ehrenkrantz Sterling & Co. LLC merged with the firm of Friedman
Alpren & Green LLP. The new entity, Friedman LLP has been retained by Motient
and the Audit Committee of Motient's Board of Directors approved this decision
on June 4, 2004.

For further details regarding the change in accountants, please see the
Company's current report on Form 8-K filed with the SEC in April 23, 2003, the
Company's amendment to current report on Form 8-K/A filed with the SEC on March
9, 2004 and the Company's quarterly report on Form 10-Q for the quarter ended
September 30, 2003, filed with the SEC on June 7, 2004.

SALE OF SMR LICENSES TO NEXTEL COMMUNICATIONS, INC.

On December 9, 2003, Motient Communications entered into an asset purchase
agreement, under which Motient Communications will sell surplus licenses to
Nextel for $2.75 million. In February 2004, the Company closed the sale of
licenses covering approximately $2.2 million of the purchase price, and in April
2004, the Company closed the sale of approximately one-half of the remaining
licenses. The transfer of the other half of the remaining licenses has been
challenged at the FCC by a third-party. While the Company believes, based on the
advice of counsel, that the FCC will ultimately rule in its favor, the Company
cannot assure you that it will prevail, and, in any event, the timing of any
final resolution is uncertain. None of these licenses are necessary for
Motient's future network requirements. Motient has and expects to continue to
use the proceeds of the sales to fund its working capital requirements and for
general corporate purposes. The lenders under Motient Communications' term
credit agreement consented to the sale of these licenses.

2. SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying financial statements have been prepared by the Company and are
unaudited. The results of operations for the three and six months ended June 30,
2004 are not necessarily indicative of the results to be expected for any future
period or for the full fiscal year. In the opinion of management, all
adjustments (consisting of normal recurring adjustments unless otherwise
indicated) necessary to present fairly the financial position, results of
operations and cash flows at June 30, 2004, and for all periods presented have
been made. Footnote disclosure has been condensed or omitted as permitted in
interim financial statements.

10

CONSOLIDATION

The consolidated financial statements include the accounts of Motient and its
wholly-owned subsidiaries. All significant inter-company transactions and
accounts have been eliminated.

CASH EQUIVALENTS

The Company considers highly liquid investments with original or remaining
maturities at the time of purchase of three months or less to be cash
equivalents.

SHORT-TERM INVESTMENTS

The Company considers highly liquid investments with original or remaining
maturities at the time of purchase of between three months and one year to be
short-term investments.

INVENTORY

Inventory, which consists primarily of communication devices and accessories,
such as power supplies and documentation kits, is stated at the lower of cost or
market. Cost is determined using the weighted average cost method. The Company
periodically assesses the market value of its inventory, based on sales trends
and forecasts and technological changes and records a charge to current period
income when such factors indicate that a reduction to net realizable value is
appropriate. The Company considers both inventory on hand and inventory which it
has committed to purchase, if any.

Periodically, the Company will offer temporary discounts on equipment sales to
customers. The value of this discount is recorded as a cost of sale in the
period in which the sale occurs.

CONCENTRATIONS OF CREDIT RISK

For the six months ended June 30, 2004, five customers accounted for
approximately 47% of the Company's service revenue, with one customer, SkyTel
Communications, Inc. ("SkyTel"), accounting for more than 21%. No one customer
accounted for more than 9% of the Company's net accounts receivable at June 30,
2004. For the six months ended June 30, 2003, five customers accounted for
approximately 50% of the Company's service revenue, with two customers, United
Parcel Service of America, Inc. ("UPS") and SkyTel, each accounting for more
than 15%. SkyTel accounted for approximately 10% of the Company's accounts
receivable at June 30, 2003. UPS migrated a majority of its units off of the
Company's network in the second half of 2003 and is no longer a material
customer of the Company.

The revenue attributable to such customers varies with the level of network
airtime usage consumed by such customers, and none of the service contracts with
such customers requires that the customers use any specified quantity of network
airtime, nor do such contracts specify any minimum level of revenue. There can
be no assurance that the revenue generated from these customers will continue in
future periods.

11

INVESTMENT IN MSV AND NOTES RECEIVABLE FROM MSV

The Company determined that certain adjustments to its historical financial
information for 2000, 2001 and 2002 were required to reflect the effects of
several complex transactions, including the formation of, and transactions with,
MSV. Please see the Company's current report on Form 8-K dated March 14, 2003
and its annual report on Form 10-K for the year ended December 31, 2002 for a
complete discussion of such adjustments.

Prior to our adoption of "fresh-start" accounting after we emerged from Chapter
11 bankruptcy proceedings on May 1, 2002, the Company had no basis in either its
$15 million note receivable from MSV or its $2.5 million convertible note
receivable from MSV, as the Company had fully written these off in 2001 through
the recording of its equity share of losses in MSV. It was determined that
Motient should not have recorded any suspended losses of MSV. As a result, it
was concluded that Motient should not have written off any prior MSV losses
against the value of these notes.

As a result of the application of "fresh-start" accounting, and the subsequent
modifications described below, the notes and investment in MSV were valued at
fair value and the Company recorded an asset in the amount of approximately
$53.9 million representing the estimated fair value of its investment in and
note receivable from MSV. Included in this investment is the historical cost
basis of the Company's common equity ownership of approximately 48% as of May 1,
2002, or approximately $19.3 million. In accordance with the equity method of
accounting, the Company recorded its approximate 48% share of MSV losses against
this basis.

Approximately $6.2 million of the value attributed to MSV is the excess of fair
value over cost basis and is amortized over the estimated lives of the
underlying MSV assets that gave rise to the basis difference. The Company is
amortizing this excess basis in accordance with the pro-rata allocation of
various components of MSV's intangible assets as determined by MSV through
recent independent valuations. Such assets consist of FCC licenses, intellectual
property and customer contracts, which are being amortized over a
weighted-average life of approximately 12 years.

Additionally, the Company has recorded the $15.0 million note receivable from
MSV, plus accrued interest thereon at its fair market value, estimated to be
approximately $13.0 million at "fresh start", after giving effect to discounted
future cash flows at market interest rates. This note matures in November 2006,
but may be fully or partially repaid prior to maturity, subject to certain
conditions and priorities with respect to payment of other indebtedness, in
certain circumstances involving the consummation of additional investments in
MSV. In April 2004, MSV repaid $2.0 million of accrued interest under this note.

In November 2003, Motient engaged CTA to perform a valuation of its equity
interests in MSV as of December 31, 2002. Concurrent with CTA's valuation,
Motient reduced the book value of its equity interest in MSV from $54 million
(inclusive of Motient's $2.5 million convertible note from MSV) to $41 million
as of May 1, 2002 to reflect certain preference rights on liquidation of certain
classes of equity holders in MSV. Including its note receivable from MSV ($13
million at May 1, 2002), the book value of Motient's aggregate interest in MSV
as of May 1, 2002 was reduced from $67 million to $53.9 million. Also, as a
result of CTA's valuation of MSV, Motient determined that the value of its
equity interest in MSV was impaired as of December 31, 2002. This impairment was
deemed to have occurred in the fourth quarter of 2002. Motient reduced the value
of its equity interest in MSV by $15.4 million as of December 31, 2002. There
was no further impairment required as of December 31, 2003 or June 30, 2004.

12

The valuation of Motient's investment in MSV and its note receivable from MSV
are ongoing assessments that are, by their nature, judgmental given that MSV is
not traded on a public market and is in the process of developing certain next
generation technologies, which depend on approval by the FCC. While the
financial statements currently assume that there is value in Motient's
investment in MSV and that the MSV note is collectible, there is the inherent
risk that this assessment will change in the future and Motient will have to
write down the value of this investment and note.

For the three and six month period ended June 30, 2004, MSV had revenues of $7.6
million and $15.7 million, respectively, operating expenses of $7.7 million and
$15.0 million, respectively, and a net loss of $7.5 million and $14.2 million,
respectively.

DEFERRED TAXES

The Company accounts for income taxes under the liability method as required in
SFAS No. 109, "Accounting for Income Taxes". Under the liability method,
deferred income taxes are recognized for the tax consequences of "temporary
differences" by applying enacted statutory tax laws and rates applicable to
future years to differences between the financial statement carrying amounts and
the tax bases of existing assets and liabilities. Under this method, the effect
on deferred taxes of a change in tax rates is recognized in income in the period
that includes the enactment date. A valuation reserve is established for
deferred tax assets if the realization of such benefits cannot be sufficiently
assured. The Company has paid no income taxes since inception.

The Company has generated significant net operating losses for tax purposes
through June 30, 2004; however, it has had its ability to utilize these losses
limited on two occasions as a result of transactions that caused a change of
control in accordance with the Internal Revenue Service Code Section 382.
Additionally, since the Company has not yet generated taxable income, it
believes that its ability to use any remaining net operating losses has been
greatly reduced; therefore, the Company has established a valuation allowance
for any benefit that would have been available as a result of the Company's net
operating losses.

REVENUE RECOGNITION

The Company generates revenue principally through equipment sales and airtime
service agreements, and consulting services. In 2000, the Company adopted Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition," issued by the SEC.
SAB No. 101 provides guidance on the recognition, presentation and disclosure of
revenue in financial statements. In certain circumstances, SAB No. 101 requires
the deferral of the recognition of revenue and costs related to equipment sold
as part of a service agreement.

In December 2003, the Staff of the SEC issued SAB No.104, "Revenue Recognition",
which supersedes SAB No. 101, "Revenue Recognition in Financial Statements." SAB
No. 104's primary purpose is to rescind accounting guidance contained in SAB No.
101 related to multiple-element revenue arrangements and to rescind the SEC's
"Revenue Recognition in Financial Statements Frequently Asked Questions and
Answers" ("FAQ") issued with SAB No. 104. Selected portions of the FAQ have been
incorporated into SAB No. 104. The adoption of SAB No. 104 did not have a
material impact on the Company's revenue recognition policies.

13

Revenue is recognized as follows:

SERVICE REVENUE: Revenues from wireless services are recognized when the
services are performed, evidence of an arrangement exists, the fee is fixed and
determinable and collectibility is probable. Service discounts and incentives
are recorded as a reduction of revenue when granted, or ratably over a contract
period. The Company defers any revenue and costs associated with activation of a
subscriber on its network over an estimated customer life of two years.

EQUIPMENT AND SERVICE SALES: The Company sells equipment to resellers who market
its terrestrial product and airtime service to the public, and it also sells its
product directly to end-users. Revenue from the sale of the equipment, as well
as the cost of the equipment, are initially deferred and are recognized over a
period corresponding to the Company's estimated customer life of two years.
Equipment costs are deferred only to the extent of deferred revenue.

PROPERTY AND EQUIPMENT

Property and equipment are depreciated over its useful life using the
straight-line method. Assets recorded as capital leases are amortized over the
shorter of their useful lives or the term of the lease. The estimated useful
lives of office furniture and equipment vary from two to ten years, and the
network equipment is depreciated over seven years. The Company has also
capitalized certain costs to develop and implement its computerized billing
system. These costs are included in property and equipment and are depreciated
over three years. Repairs and maintenance that do not significantly increase the
utility or useful life of an asset are expensed as incurred.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs are expensed as incurred. Such costs include
internal research and development activities and expenses associated with
external product development agreements.

ADVERTISING COSTS

Advertising costs are charged to operations in the year incurred.

14

STOCK-BASED COMPENSATION

The Company accounts for employee stock options using the method of accounting
prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees." Generally, no expense is recognized related to
the Company's stock options because the option's exercise price is set at the
stock's fair market value on the date the option is granted. In cases where the
Company issues shares of restricted stock, the Company will record an expense
based on the value of the restricted stock on the measurement date.

As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation", which
establishes a fair value based method of accounting for stock-based compensation
plans, the Company has elected to follow Accounting Principles Board Opinion No.
25 "Accounting for Stock Issued to Employees" for recognizing stock-based
compensation expense for financial statement purposes. For companies that choose
to continue applying the intrinsic value method, SFAS No. 123 mandates certain
pro forma disclosures as if the fair value method had been utilized. The Company
accounts for stock based compensation to consultants in accordance with EITF
96-18, "Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or Services" and
SFAS No. 123.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure - an amendment of FASB Statement No.
123", which provides optional transition guidance for those companies electing
to voluntarily adopt the accounting provisions of SFAS No. 123. In addition,
SFAS No. 148 mandates certain new disclosures that are incremental to those
required by SFAS No. 123. The Company continued to account for stock-based
compensation in accordance with APB No. 25.

The following table illustrates the effect on (loss) attributable to common
stockholders and (loss) per share if the Company had applied the fair value
recognition provisions of SFAS No. 123 to stock-based employee compensation.

Three Months Three Months Six Months Six Months
Ended June 30, Ended June 30, Ended June 30, Ended June 30,
2004 2003 2004 2003
------------- ------------- ------------- -------------

Net loss, as reported $ (23,112) $ (13,010) $ (36,629) $ (25,404)
Add: Stock-based employee compensation expense
included in net loss, net of related tax effects 2,435 1,141 3,877 1,141
(Deduct)/Add: Total stock-based employee
compensation (expense) income determined under fair
value based method for all awards, net of tax
related effects 11 (567) (428) (2,198)
------------- ------------- ------------- -------------
Pro forma net loss (20,666) (12,436) (33,180) (26,461)
Weighted average common shares outstanding 29,338 25,116 27,285 25,107
Loss per share:
Basic and diluted---as reported $ (0.79) $ (0.52) $ (1.34) $ (1.01)
Basic and diluted---pro-forma $ (0.70) $ (0.49) $ (1.22) $ (1.05)

Under SFAS No. 123 the fair value of each option grant is estimated on the date
of grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions:

15

Three Months Three Months Six Months Six Months
Ended June 30, Ended June 30, Ended June 30, Ended June 30,
2004 2003 2004 2003
------------- ------------- ------------- -------------

Expected life (in years) 9 10 10 10
Risk-free interest rate .88%-.93% 1.71% .88%-.93% 1.71%
Volatility 146%-162% 173% 146%-162% 173%
Dividend yield 0% 0% 0% 0%

SEGMENT DISCLOSURES

In accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information", the Company had one operating segment: its core
wireless business. The Company provides its core wireless business to the
continental United States, Alaska, Hawaii and Puerto Rico. The following
summarizes the Company's core wireless business revenue by major market
categories:

Three Months Three Months Six Months Six Months
Ended June 30, Ended June 30, Ended June 30, Ended June 30,
2004 2003 2004 2003
------------- ------------- ------------- -------------

Summary of Revenue
- ------------------
(in millions)
Wireless Internet $5.2 $7.3 $11.4 $14.4
Field Services 1.5 2.8 3.3 6.0
Transportation 0.9 3.2 1.8 5.8
Telemetry 0.6 0.6 1.2 1.2
All Other 1.9 0.1 2.4 0.2
----- ----- ----- -----
Service revenue 10.1 14.0 20.1 27.6
Equipment revenue 1.3 1.0 2.8 1.8
----- ----- ----- -----
Total Revenue $11.4 $15.0 $22.9 $29.4
===== ===== ===== =====

The Company does not measure ultimate profit and loss or track its assets by
these market categories.

(LOSS) PER SHARE

Basic and diluted (loss) income per common share is computed by dividing income
(loss) available to common stockholders by the weighted-average number of common
shares outstanding for the period. Diluted earnings per share reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity.

Options and warrants to purchase shares of common stock were not included in the
computation of loss per share as the effect would be antidilutive for all
periods. As a result, the basic and diluted earnings per share amounts for all
periods presented are the same. As of June 30, 2004 and 2003, there were
warrants to acquire approximately 8,864,962 and 5,464,962, respectively, shares
of common stock. As of June 30, 2004 and June 30, 2003 there were options
outstanding for 799,108 and 1,273,649 shares, respectively.

Holders of our pre-bankruptcy common stock received warrants to purchase an
aggregate of approximately 1,496,512 shares of common stock. The warrants were
exercisable to purchase shares of our common stock at a price of $.01 per share,
if and only at such time, the average closing price of our common stock for
ninety consecutive trading days was equal to or greater than $15.44 per share
during the two years following our May 1, 2002 reorganization. The terms of
these warrants were not met and therefore, they expired May 1, 2004.

16

RELATED PARTIES

The Company made payments of $570,000 and $771,000 to related parties for
service-related obligations for the three and six-month period ended June 30,
2004, as compared to $38,000 and $208,000 for the three and six month period
ended June 30, 2003. There were no amounts due to related parties as of June 30,
2004. CTA is a consulting and private advisory firm specializing in the
technology and telecommunications sectors. It had previously acted as the
spectrum and technology advisor to the official committee of unsecured creditors
in connection with the Company's bankruptcy proceedings, and subsequently as a
consultant to the Company since May 2002. On January 30, 2004, the Company
engaged CTA to act as chief restructuring entity. As consideration for this
work, Motient agreed to pay to CTA a monthly fee of $60,000. In addition, since
the initial engagement of CTA, the payment of certain monthly fees to CTA had
been deferred. In April 2004, Motient paid CTA $440,000 for all past deferred
fees. The term of CTA's engagement was recently extended through December 2004.

3. LIQUIDITY AND FINANCING

The Company has taken a number of steps recently to reduce operating and capital
expenditures in order to lower its cash burn rate and improve its liquidity
position. Most recently, the Company undertook a reduction in its workforce in
February 2004. This action eliminated approximately 32.5% (54 employees) of its
workforce.

In addition to cash generated from operations, the Company holds a $15 million
promissory note issued by MSV in November 2001. This note matures in November
2006, but may be fully or partially repaid prior to maturity, subject to certain
conditions and priorities with respect to payment of other indebtedness, in
certain circumstances involving the consummation of additional investments in
MSV. Under the terms of the Company's notes issued to Rare Medium and CSFB in
connection with its Plan of Reorganization, in certain circumstances the Company
must use 25% of any proceeds from the repayment of the $15 million note from MSV
to repay the Rare Medium and CSFB notes, on a pro-rata basis. In April 2004, MSV
repaid $2.0 million of accrued interest under this note and the Company paid
$0.5 million to Rare Medium and CSFB, pro-rata, for accrued interest under those
notes. There can be no assurance that the remainder of the MSV note will be
repaid prior to maturity, or at all.

The Company's future financial performance will depend on its ability to
continue to reduce and manage operating expenses, as well as its ability to grow
revenue. The Company's future financial performance could be negatively affected
by unforeseen factors and unplanned expenses.

For additional information with regard to recent funding events and debt
reduction, please see Note 6 ("Subsequent Events").

DEBT OBLIGATIONS & CAPITAL LEASES

The following table outlines the Company debt obligations and capital leases as
of June 30, 2004.

17

(UNAUDITED)
JUNE 30, 2004
---------
(IN THOUSANDS)
Rare Medium note payable due 2005,
including accrued interest thereon $ 22,516
CSFB note payable due 2005, including
accrued interest thereon 889
Vendor financing and Promissory Note --
---------
Less current maturities 23,405
---------
Long-term debt $ --
---------

RARE MEDIUM NOTE: Under the Company's Plan of Reorganization, the Rare Medium
notes were cancelled and replaced by a new note in the principal amount of $19.0
million. The new note was issued by a new subsidiary of Motient Corporation that
owns 100% of Motient Ventures Holding Inc., which owns substantially all of the
Company's interests in MSV. The new note matures on May 1, 2005 and carries
interest at 9% per annum. The note allows the Company to elect to accrue
interest and add it to the principal, instead of paying interest in cash. The
note requires that it be prepaid using 25% of the proceeds of any repayment of
the $15 million note receivable from MSV. In April 2004, the Company paid
accrued interest of $0.5 million under this note as a result of the $2.0 million
repayment of the MSV note. On July 15, 2004, the Company paid all principal and
interest due and owing on this note, in the amount of $23.6 million. Please see
Note 6 ("Subsequent Events - Repayment of Rare Medium and CSFB Debt
Obligations") for further information with regard to certain payments made on
this note subsequent to the period covered by this report.

CSFB NOTE: Under the Company's Plan of Reorganization, the Company issued a note
to CSFB, in satisfaction of certain claims by CSFB against Motient, in the
principal amount of $750,000. The new note was issued by a subsidiary of Motient
Corporation that owns 100% of Motient Ventures Holdings Inc., which owns
substantially all of the Company's interest in MSV. The note matures on May 1,
2005 and carries interest at 9% per annum. The note allows the Company to elect
to accrue interest and add it to the principal, instead of paying interest in
cash. The Company must use 25% of the proceeds of any repayment of the $15
million note receivable from MSV to prepay the CSFB note. In April 2004, the
Company paid accrued interest of $0.02 million under this note as a result of
the $2.0 million repayment of the MSV note. On July 15, 2004, the Company paid
all principal and interest due and owing on this note, in the amount of $0.9
million. Please see Note 6 ("Subsequent Events - Repayment of Rare Medium and
CSFB Debt Obligations") for further information with regard to certain payments
made on this note subsequent to the period covered by this report.

VENDOR FINANCING AND PROMISSORY NOTE & CAPITAL LEASES: In June 2004, the Company
negotiated settlements of the entire amounts outstanding under the financing
facilities with Motorola and the capital lease with Hewlett-Packard. The full
amount due and owing under these agreements was a combined $6.8 million. The
Company paid a combined $3.9 million in cash to Motorola and Hewlett-Packard and
issued a warrant to Motorola to purchase 200,000 shares of the Company's common
stock at a price of $8.68, in full satisfaction of the outstanding balances. In
the case of Hewlett-Packard, the Company took title to all of the leased
equipment and software and the letter of credit securing this lease was
cancelled, and in the case of Motorola, there was no equipment or service that
Motorola was obligated to provide. The Company recorded a gain on the
extinguishment of debt in the amount of $0.7 million on the Hewlett Packard
settlement. The Company recorded a gain of $0.1 million on the Motorola
settlement.

18

SOURCES OF FUNDING

SALE OF COMMON STOCK

On April 7, 2004, Motient sold 4,215,910 shares of its common stock at a per
share price of $5.50 for an aggregate purchase price of $23.2 million to The
Raptor Global Portfolio Ltd., The Tudor BVI Global Portfolio, Ltd., The Altar
Rock Fund L.P., Tudor Proprietary Trading, L.L.C., Highland Crusader Offshore
Partners, L.P., York Distressed Opportunities Fund, L.P., York Select, L.P.,
York Select Unit Trust, M&E Advisors L.L.C., Catalyst Credit Opportunity Fund,
Catalyst Credit Opportunity Fund Offshore, DCM, Ltd., Greywolf Capital II LP and
Greywolf Capital Overseas Fund and LC Capital Master Fund. The sale of these
shares was not registered under the Securities Act of 1933, as amended (the
"Securities Act") and the shares may not be sold in the United States absent
registration or an applicable exemption from registration requirements. The
shares were offered and sold pursuant to the exemption from registration
afforded by Rule 506 under the Securities Act and/or Section 4(2) of the
Securities Act. In connection with this sale, the Company signed a registration
rights agreement with the holders of these shares. Among other things, this
registration rights agreement requires the Company to file and cause to make
effective a registration statement permitting the resale of the shares by the
holders thereof. Motient also issued warrants to purchase an aggregate of
1,053,978 shares of its common stock to the investors listed above, at an
exercise price of $5.50 per share. Motient's registration statement registering
the shares issued in this transaction became effective on July 13, 2004, prior
to the deadline imposed by the registration rights agreement. Therefore, the
warrants issued in this transaction will never vest.

In connection with this sale, Motient issued to Tejas Securities Group, Inc.,
Motient's placement agent for the sale, and certain members of CTA, warrants to
purchase 600,000 and 400,000 shares, respectively, of its common stock. The
exercise price of these warrants is $5.50 per share. CTA assisted Tejas
Securities on certain due diligence matters for this transaction. The warrants
are immediately exercisable upon issuance and have a term of five years. Motient
also paid Tejas Securities Group, Inc. a placement fee of $350,000 at closing.
The warrants were offered and sold pursuant to the exemption from registration
afforded by Rule 506 under the Securities Act and/or Section 4(2) of the
Securities Act.

ADDITIONAL SALE OF COMMON STOCK

On July 1, 2004, Motient sold 3,500,000 shares of its common stock at a per
share price of $8.57 for an aggregate purchase price of $30.0 million to The
Raptor Global Portfolio Ltd., The Tudor BVI Global Portfolio, Ltd., The Altar
Rock Fund L.P., Tudor Proprietary Trading, L.L.C., York Distressed Opportunities
Fund, L.P., York Select, L.P., York Select Unit Trust, York Global Value
Partner, L.P., Catalyst Credit Opportunity Fund, Catalyst Credit Opportunity
Fund Offshore, DCM, Ltd., Rockbay Capital Fund, LLC, Rockbay Capital Investment
Fund, LLC, Rockbay Capital Offshore Fund, Ltd., Glenview Capital Partner, L.P.,
Glenview Institutional Partners, L.P., Glenview Capital Master Fund, Ltd., GCM
Little Arbor Master Fund, Ltd., OZ Master Fund, Ltd., OZ Mac 13 Ltd., Fleet
Maritime, Inc., John Waterfall, Edwin Morgens, Greywolf Capital II, L.P.,
Greywolf Capital Overseas Fund, Highland Equity Focus Fund, L.P., Highland
Equity Fund, L.P., Singer Children's Management Trust, and Strome Hedgecap
Limited. The sale of these shares was not registered under the Securities Act
and the shares may not be sold in the United States absent registration or an
applicable exemption from registration requirements. The shares were offered and
sold pursuant to the exemption from registration afforded by Rule 506 under the

19

Securities Act and/or Section 4(2) of the Securities Act. In connection with
this sale, Motient signed a registration rights agreement with the holders of
these shares. Among other things, this registration rights agreement requires
Motient to file and cause to make effective a registration statement permitting
the resale of the shares by the holders thereof. Motient also issued warrants to
purchase an aggregate of 525,000 shares of its common stock to the investors
listed above, at an exercise price of $8.57 per share. Motient's registration
statement registering the shares issued in this transaction became effective on
July 13, 2004, prior to the deadline imposed by the registration rights
agreement. Therefore, the warrants issued in this transaction will never vest.

In connection with this sale, Motient issued to certain CTA affiliates and
certain affiliates of Tejas Securities Group, Inc., our placement agent for the
private placement, warrants to purchase 340,000 and 510,000 shares,
respectively, of our common stock. CTA assisted Tejas Securities on certain due
diligence matters for this transaction. The exercise price of these warrants is
$8.57 per share. The warrants are immediately exercisable upon issuance and have
a term of five years. Motient also paid Tejas Securities Group, Inc. a placement
fee of $850,000 at closing. The shares were offered and sold pursuant to the
exemption from registration afforded by Rule 506 under the Securities Act and/or
Section 4(2) of the Securities Act.

TERM CREDIT FACILITY: On January 27, 2003, the Company's wholly-owned
subsidiary, Motient Communications, closed a $12.5 million term credit agreement
with a group of lenders, including several of the Company's existing
stockholders. The lenders include the following entities or their affiliates:
M&E Advisors, L.L.C., Bay Harbour Partners, York Capital, Highland Capital
Management and Lampe Conway & Co. York Capital is affiliated with JGD Management
Corp. and James G. Dinan. JGD Management Corp, James G. Dinan, Highland Capital
Management and James D. Dondero each hold 5% or more of Motient's common stock.
The lenders also include Gary Singer, directly or through one or more entities.
Gary Singer is the brother of Steven G. Singer, one of our directors.

The table below shows, as of August 1, 2004 the number of shares of Motient
common stock beneficially owned by the following parties to the term credit
agreement, based solely on filings made by such parties with the SEC:

NAME OF BENEFICIAL OWNER NUMBER OF SHARES
------------------------ ----------------

James G. Dinan* 2,276,445
JGD Management Corp.* 2,276,445
Highland Capital Management** 4,642,469
James Dondero** 4,642,469

*JGD Management Corp and James G. Dinan share beneficial ownership
with respect to the 2,276,445 shares of our common stock. Mr. Dinan is
the president and sole stockholder of JGD Management Corp, which
manages the other funds and accounts that hold our common stock over
which Mr. Dinan has discretionary investment authority.

** James D. Dondero, a member of Motient's board of directors, is the
President of Highland Capital Management, L.P., which, pursuant to an
arrangement with M&E Advisors, L.L.C., has indirectly made a
commitment under the credit facility.

20

Under the credit agreement, the lenders have made commitments to lend Motient
Communications up to $12.5 million. The commitments are not revolving in nature
and amounts repaid or prepaid may not be reborrowed. Borrowing availability
under Motient's term credit facility terminated on December 31, 2003. On March
16, 2004, Motient Communications entered into an amendment to the credit
facility which extended the borrowing availability period until December 31,
2004. As part of this amendment, Motient Communications provided the lenders
with a pledge of all of the stock of a newly-formed special purpose subsidiary
of Motient Communications, Motient License, which holds all of Motient's FCC
licenses formerly held by Motient Communications.

Under this facility, the lenders have agreed to make loans to Motient
Communications through December 31, 2004 upon Motient Communications' request no
more often than once per month, in aggregate principal amounts not to exceed
$1.5 million for any single loan, and subject to satisfaction of other
conditions to borrowing, including certain financial and operating covenants,
contained in the credit agreement. On April 13, 2004, Motient repaid all
principal amounts then owing under the credit facility, including accrued
interest thereon, in an amount of $6.8 million, which amount may not be
reborrowed. In conjunction with the April 13, 2004 repayment, Motient
immediately expensed $6.4 million and $1.7 million in financing fees related to
the January 2003 and March 2004 credit facilities.

The remaining availability under the credit facility of $5.7 million will be
available for borrowing to the Company until December 31, 2004, subject to the
lending conditions in the credit agreement.

Each loan borrowed under the credit agreement has a term of three years. Loans
carry interest at 12% per annum. Interest accrues, compounding annually, from
the first day of each loan term, and all accrued interest is payable at each
respective loan maturity, or, in the case of mandatory or voluntary prepayment,
at the point at which the respective loan principal is repaid. Loans may be
prepaid at any time without penalty.

The obligations of Motient Communications under the credit agreement are secured
by a pledge of all the assets owned by Motient Communications that can be
pledged as security (including, but not limited to Motient Communication's
shares in Motient License). Motient Communications owns, directly or indirectly,
all of the Company's assets relating to its terrestrial wireless communications
business. In addition, Motient and its wholly-owned subsidiary, Motient Holdings
Inc., have guaranteed Motient Communications' obligations under the credit
agreement, and the Company has delivered a pledge of the stock of Motient
Holdings Inc., Motient Communications, Motient Services and Motient License to
the lenders. In addition, upon the repayment in full of the outstanding
$19,750,000 in senior notes due 2005 issued by MVH Holdings Inc. to Rare Medium
and CSFB in connection with the Company's approved Plan of Reorganization, the
lenders could ask the Company to pledge the stock of MVH Holdings Inc. to the
lenders.

On January 27, 2003, in connection with the signing of the credit agreement,
Motient issued warrants at closing to the lenders to purchase, in the aggregate,
3,125,000 shares of its common stock. The exercise price for these warrants is
$1.06 per share. The warrants were immediately exercisable upon issuance and
have a term of five years. The warrants were valued at $10 million using a
Black-Scholes pricing model and have been recorded as a debt discount and are
being amortized as additional interest expense over three years, the term of the
related debt. Upon closing of the credit agreement, the Company paid closing and
commitment fees to the lenders of $500,000. These fees have been recorded on the
Company's balance sheet and are being amortized as additional interest expense
over three years, the term of the related debt. Under the credit agreement, the

21

Company must pay an annual commitment fee of 1.25% of the daily average of
undrawn amounts of the aggregate commitments from the period from the closing
date to December 31, 2003. In December 2003, the Company paid the lenders a
commitment fee of approximately $113,000.

On March 16, 2004, in connection with the execution of the amendment to the
credit agreement, Motient issued warrants to the lenders to purchase, in the
aggregate, 1,000,000 shares of Motient's common stock. The exercise price of the
warrants is $4.88 per share. The warrants were immediately exercisable upon
issuance and have a term of five years. The warrants were valued using a
Black-Scholes pricing model at $6.7 million and will be recorded as a debt
discount and will be amortized as additional interest expense over three years,
the term of the related debt. The warrants are also subject to a registration
rights agreement. Under such agreement, Motient agreed to file a registration
statement to register the shares underlying the warrants upon the request of a
majority of the warrant holders, or in conjunction with the filing of a
registration statement in respect of shares of common stock of the Company held
by other holders. Motient will bear all the expenses of such registration. In
connection with the amendment, Motient was also required to pay commitment fees
to the lenders of $320,000, which were added to the principal balance of the
credit facility at closing. These fees were recorded on the Company's balance
sheet and will be amortized as additional interest expense over three years, the
term of the related debt.

In each of April, June and August 2003 and March of 2004, the Company made draws
under the credit agreement in the amount of $1.5 million for an aggregate amount
of $6.0 million. The Company used such funds to fund general working capital
requirements of operations.

For the monthly periods ended April 2003 through December 2003, the Company
reported events of default under the terms of the credit facility to the
lenders. These events of default related to non-compliance with covenants
requiring minimum monthly revenue, earnings before interest, taxes and
depreciation and amortization and free cash flow performance. In each period,
the lenders waived these events of default. There can be no assurance that
Motient will not have to report additional events of default or that the lenders
will continue to provide waivers in such event. Ultimately, there can be no
assurances that the liquidity provided by the credit facility will be sufficient
to fund Motient's ongoing operations.

For further details regarding the term credit facility, please see our annual
report on Form 10-K for the year ended December 31, 2002, filed with the SEC on
March 22, 2004, and the exhibits attached thereto.

LITIGATION PROCEEDS

On April 15, 2004, Motient filed a claim under the rules of the American
Arbitration Association in Fairfax County, VA, against Wireless Matrix
Corporation, a reseller of Motient's services, for the non-payment of certain
amounts due and owing under the "take-or-pay" agreement between Motient and
Wireless Matrix. In June 2004, Motient reached a favorable out of court
settlement with Wireless Matrix in which Wireless Matrix paid Motient $1.1
million. The $1.1 million was recorded as service revenue in June 2004.

4. COMMITMENTS AND CONTINGENCIES

As of June 30, 2004, the Company had no contractual inventory commitments.

22

In December 2002 Motient entered into an agreement with UPS pursuant to which
the customer prepaid an aggregate of $5 million in respect of network airtime
service to be provided beginning January 1, 2004. The $5 million prepayment will
be credited against airtime services provided to UPS beginning January 1, 2004,
until the prepayment is fully credited. Based on UPS' current level of network
airtime usage, Motient does not expect that UPS will be required to make any
cash payments in 2004 for service provided during 2004. There are no minimum
purchase requirements under the contract with UPS, and the contract may be
terminated by UPS on 30 days' notice. If UPS terminates the contract, we will be
required to refund any unused portion of the prepayment to UPS. The Company's
remaining airtime service obligation to UPS at June 30, 2004 in respect of the
prepayment was approximately $4.3 million.

5. LEGAL AND REGULATORY MATTERS

LEGAL

Our rights to use and sell the BlackBerryTM software and RIM's handheld devices
may be limited or made prohibitively expensive as a result of a patent
infringement lawsuit brought against RIM by NTP Inc. (NTP v. Research In Motion,
Civ. Action No. 3:01CV767 (E.D. Va.)). In that action, a jury concluded that
certain of RIM's BlackBerryTM products infringe patents held by NTP covering the
use of wireless radio frequency information in email communications. On August
5, 2003, the judge in the case ruled against RIM, awarding NTP $53.7 million in
damages and enjoining RIM from making, using, or selling the products, but
stayed the injunction pending appeal by RIM. This appeal has not yet been
resolved. As a purchaser of those products, the Company could be adversely
affected by the outcome of that litigation.

On April 15, 2004, Motient filed a claim under the rules of the American
Arbitration Association in Fairfax County, VA, against Wireless Matrix
Corporation, a reseller of Motient's services, for the non-payment of certain
amounts due and owing to Motient under the "take-or-pay" agreement between
Motient and Wireless Matrix. Under this agreement, Wireless Matrix agreed to
purchase certain minimum amounts of air-time on the Motient network. In June
2004, Motient reached an out of court settlement with Wireless Matrix, in which
Wireless Matrix paid Motient $1.1 million.

From time to time, Motient is involved in legal proceedings in the ordinary
course of its business operations. Although there can be no assurance as to the
outcome or effect of any legal proceedings to which Motient is a party, Motient
does not believe, based on currently available information, that the ultimate
liabilities, if any, arising from any such legal proceedings not otherwise
disclosed would have a material adverse impact on its business, financial
condition, results of operations or cash flows.

REGULATORY

Seeking to resolve interference to public safety users, on July 8, 2004, the FCC
approved adoption of a reconfiguration plan for the 800 MHz spectrum band. Under
the plan, Nextel is allowed to occupy spectrum in the 1.9 GHz band in exchange
for, among other things, relocating and retuning public safety licensees in the
800 MHz band. However, there are reports that a court challenge will be filed
challenging the legality of the FCC's decision, and the U.S. Comptroller General
is investigating whether the plan would impermissibly diverge funds from the
U.S. Treasury. Motient has spectrum in both the lower-800 MHz band and upper-800
MHz band, and on April 8, 2004, filed a request with the FCC asking that the FCC

23

relocate its lower-800 MHz band frequencies into the upper -800 MHz band as part
of the 800 MHz reconfiguration plan. On August 6, 2004, the FCC released the
text of its July 8, 2004 order. The text of the order did not grant Motient's
request, but neither did it explicitly deny it. Motient cannot assure that its
operations will be not affected by the adoption or implementation of this order
or any subsequent addenda.

6. SUBSEQUENT EVENTS

SALE OF COMMON STOCK

On July 1, 2004, Motient sold 3,500,000 shares of its common stock at a per
share price of $8.57 for an aggregate purchase price of $30.0 million to The
Raptor Global Portfolio Ltd., The Tudor BVI Global Portfolio, Ltd., The Altar
Rock Fund L.P., Tudor Proprietary Trading, L.L.C., York Distressed Opportunities
Fund, L.P., York Select, L.P., York Select Unit Trust, York Global Value
Partner, L.P., Catalyst Credit Opportunity Fund, Catalyst Credit Opportunity
Fund Offshore, DCM, Ltd., Rockbay Capital Fund, LLC, Rockbay Capital Investment
Fund, LLC, Rockbay Capital Offshore Fund, Ltd., Glenview Capital Partner, L.P.,
Glenview Institutional Partners, L.P., Glenview Capital Master Fund, Ltd., GCM
Little Arbor Master Fund, Ltd., OZ Master Fund, Ltd., OZ Mac 13 Ltd., Fleet
Maritime, Inc., John Waterfall, Edwin Morgens, Greywolf Capital II, L.P.,
Greywolf Capital Overseas Fund, Highland Equity Focus Fund, L.P., Highland
Equity Fund, L.P., Singer Children's Management Trust, and Strome Hedgecap
Limited. The sale of these shares was not registered under the Securities Act
and the shares may not be sold in the United States absent registration or an
applicable exemption from registration requirements. The shares were offered and
sold pursuant to the exemption from registration afforded by Rule 506 under the
Securities Act and/or Section 4(2) of the Securities Act. In connection with
this sale, Motient signed a registration rights agreement with the holders of
these shares. Among other things, this registration rights agreement requires
Motient to file and cause to make effective a registration statement permitting
the resale of the shares by the holders thereof. Motient also issued warrants to
purchase an aggregate of 525,000 shares of its common stock to the investors
listed above, at an exercise price of $8.57 per share. Motient's registration
statement registering the shares issued in this transaction became effective on
July 13, 2004, prior to the deadline imposed by the registration rights
agreement. Therefore, the warrants issued in this transaction will never vest.

In connection with this sale, Motient issued to certain CTA affiliates and
certain affiliates of Tejas Securities Group, Inc., our placement agent for the
private placement, warrants to purchase 340,000 and 510,000 shares,
respectively, of our common stock. CTA assisted Tejas Securities on certain due
diligence matters for this transaction. The exercise price of these warrants is
$8.57 per share. The warrants are immediately exercisable upon issuance and have
a term of five years. Motient also paid Tejas Securities Group, Inc. a placement
fee of $850,000 at closing. The shares were offered and sold pursuant to the
exemption from registration afforded by Rule 506 under the Securities Act and/or
Section 4(2) of the Securities Act.

REPAYMENT OF RARE MEDIUM AND CSFB DEBT OBLIGATIONS

On July 15, 2004, Motient repaid all principal amounts then owing under its
notes payable to Rare Medium and CSFB, including accrued interest thereon, in an
amount of $23.6 million and $0.9 million, respectively.

24

TERMINATION OF MOTOROLA AGREEMENTS

In June 2004, the Company negotiated a settlement of its entire amount
outstanding under its financing facilities with Motorola. The full amount due
and owing under these agreements was a combined $4.2 million. On July 12, 2004,
the Company paid $1.9 million in cash and issued a warrant to Motorola to
purchase 200,000 shares of the Company's common stock at a price of $8.68, in
full satisfaction of the outstanding balances. The Company recorded a gain of
$0.1 million on this Motorola settlement.

25

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This quarterly report on Form 10-Q contains and incorporates forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All
statements regarding our expected financial position and operating results, our
business strategy, and our financing plans are forward-looking statements. These
statements can sometimes be identified by our use of forward-looking words such
as "may," "will," "anticipate," "estimate," "expect," "project" or "intend."
These forward-looking statements reflect our plans, expectations and beliefs
and, accordingly, are subject to certain risks and uncertainties. We cannot
guarantee that any of such forward-looking statements will be realized.

Statements regarding factors that may cause actual results to differ materially
from those contemplated by such forward-looking statements include, among
others, those under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Overview - Overview of Liquidity
and Risk Factors," and elsewhere in this quarterly report. All of our subsequent
written and oral forward-looking statements (or statements that may be
attributed to us) are expressly qualified in their entirety by the cautionary
statements referred to above and contained elsewhere in this quarterly report on
Form 10-Q. You should carefully review the risk factors described in our other
filings with the Securities and Exchange Commission from time to time, including
the risk factors contained in our Form 10-K for the period ended December 31,
2003, and our reports on Form 10-K and 10-Q to be filed after this quarterly
report, as well as our other reports and filings with the SEC.

Our forward-looking statements are based on information available to us today,
and we will not update these statements. Our actual results may differ
significantly from the results discussed in these statements.

OVERVIEW

GENERAL

This section provides information regarding the various components of Motient's
business, which we believe are relevant to an assessment and understanding of
the financial condition and consolidated results of operations of Motient.

Motient presently has six wholly-owned subsidiaries and a 29.5% interest
(assuming conversion of all outstanding convertible notes) in MSV as of June 30,
2004. Motient Communications Inc. owns the assets comprising Motient's core
wireless business, except for Motient's FCC licenses, which are held in a
separate subsidiary, Motient License Inc. Motient License was formed on March
16, 2004, as part of Motient's amendment of its credit facility, as a special
purpose wholly-owned subsidiary of Motient Communications and holds all of the
FCC licenses formerly held by Motient Communications. A pledge of the stock of
Motient License, along with the other assets of Motient Communications, secures
borrowings under our term credit facility. For further details regarding the
formation of Motient License, please see Note 3 ("Liquidity and Financing -
Sources of Funding -- Term Credit Facility") of notes to consolidated financial

26

statements. Motient's other four subsidiaries hold no material operating assets
other than the stock of other subsidiaries and Motient's interests in MSV. On a
consolidated basis, we refer to Motient Corporation and its six wholly-owned
subsidiaries as "Motient." Our indirect, less-than 50% voting interest in MSV is
not consolidated with Motient for financial statement purposes. Rather, we
account for our interest in MSV under the equity method of accounting.

CORE WIRELESS BUSINESS

We are a nationwide provider of two-way, wireless mobile data services and
mobile Internet services. Our customers use our network for a variety of
wireless data communications services, including email messaging and other
services that enable businesses, mobile workers and consumers to transfer
electronic information and messages and access corporate databases and the
Internet.

MOBILE SATELLITE VENTURES LP

On June 29, 2000, we formed a joint venture subsidiary, MSV (formerly known as
Mobile Satellite Ventures LLC), in which we owned, until November 26, 2001, 80%
of the membership interests, in order to conduct research and development
activities. In June 2000, three investors unrelated to Motient purchased 20% of
the interests in MSV for an aggregate price of $50 million. The minority
investors had certain participating rights which provided for their
participation in certain business decisions that were made in the normal course
of business, therefore, our investment in MSV has been recorded for all periods
presented in the consolidated financial statements pursuant to the equity method
of accounting. On November 26, 2001, Motient sold the assets comprising its
satellite communications business to MSV, as part of a transaction in which
certain other parties joined MSV, including TMI Communications and Company,
Limited Partnership, or TMI, a Canadian satellite services provider. In this
transaction, TMI also contributed its satellite communications business assets
to MSV. As part of this transaction, Motient received a $15 million promissory
note issued by MSV and purchased a $2.5 million convertible note issued by MSV.

In July 2002, MSV commenced a rights offering seeking total funding in the
amount of $3.0 million. While we were not obligated to participate in the
offering, our board determined that it was in our best interests to participate
so that our interest in MSV would not be diluted. On August 12, 2002, we funded
an additional $957,000 to MSV pursuant to this offering, and received a new
convertible note in such amount. This rights offering did not impact our
ownership position in MSV.

The $3.5 million of convertible notes from MSV mature on November 26, 2006, bear
interest at 10% per annum, compounded semiannually, and are payable at maturity.
The convertible notes are convertible at any time at Motient's discretion, and
automatically under certain circumstances into class A preferred units of
limited partnership interests of MSV. Our $15 million promissory note from MSV
is subject to prepayment in certain circumstances where MSV receives cash
proceeds from equity, debt or asset sale transactions. If not repaid earlier,
outstanding amounts owing under the $15.0 million note from MSV, including
accrued interest thereon, become due and payable on November 26, 2006; however,
there can be no assurance that MSV would have the ability, at that time, to pay
the amounts due under the note. Motient has recorded the $15.0 million note
receivable from MSV, plus accrued interest thereon at its fair market value,
estimated to be approximately $13.0 million at the May 1, 2002 "fresh-start"
accounting date, after giving effect to discounted future cash flows at market
interest rates.

27

On August 21, 2003, two investors in MSV (excluding Motient) invested an
additional $3.7 million in MSV in exchange for Class A preferred units of
limited partnership interests in MSV. MSV used the proceeds from this investment
to repay other indebtedness that is senior in its right of repayment to
Motient's promissory note. Under the terms of MSV's amended and restated
investment agreement, these investors had the option of investing an additional
$17.6 million in MSV by December 31, 2003; however, if, prior to this time, the
FCC had not issued a decision addressing MSV's petition for reconsideration
concerning MSV's application with the FCC with respect to MSV's plans for a new
generation satellite system utilizing ancillary terrestrial components, or ATC,
the option was automatically extended to March 31, 2004. As of the closing of
the initial investment on August 21, 2003, Motient's percentage ownership of MSV
was approximately 29.5%, assuming conversion of all outstanding convertible
notes.

On April 2, 2004, the above-mentioned additional $17.6 million investment was
consummated. In connection with this investment, MSV's amended and restated
investment agreement was amended to provide that of the total $17.6 million in
proceeds, $5.0 million was used to repay certain outstanding indebtedness of
MSV, including $2.0 million of accrued interest under the $15.0 million
promissory note issued to Motient by MSV. Motient was required to, and paid, 25%
of the $2 million it received in this transaction, or $500,000, to make
prepayments under its existing notes owed to Rare Medium Group, Inc. and Credit
Suisse First Boston. The remainder of the proceeds from this investment will be
used for general corporate purposes by MSV. As of the closing of the initial
investment on April 2, 2004, and at June 30, 2004, Motient's percentage
ownership of MSV remained approximately 29.5%, assuming conversion of all
outstanding convertible notes.

SUMMARY OF RISK FACTORS

In addition to the challenge of growing revenue as described above, our future
operating results could be adversely affected by a number of uncertainties and
factors, including:

o We have undergone significant organizational restructuring and we
face substantial operational challenges.
o We are not cash flow positive, and our prospects will depend on
our ability to control our costs while maintaining and improving
our service levels.
o We will need additional liquidity to fund our operations.
o We may not be able to meet our debt obligations, operating
expenses, working capital and other capital expenditures.
o We will continue to incur significant losses.
o We generate a large part of our revenues and cash flows from a
small number of customers, and the loss of one or more key
customers could result in a significant reduction in revenues and
cash flows; UPS has recently deregistered a majority of its units
on our network.
o Our growth has been curtailed by funding constraints.
o Our in internal controls may not be sufficient to ensure timely
and reliable financial information.
o We may not be able to realize value from our investment in MSV due
to risks associated with MSV's next-generation business plan.
o Motient may have to take actions which are disruptive to its
business to avoid registration under the Investment Company Act of
1940.

28

o We could lose market share and revenues as a result of increasing
competition from companies in the wireless communications industry
that have greater resources and name recognition.
o Failure to keep pace with rapidly changing markets for wireless
communications would significantly harm our business.
o The success of our wireless communications business depends on our
ability to enter into and maintain third party distribution
relationships.
o We expect to maintain a limited inventory of devices to be used in
connection with our eLink service, and any interruption in the
supply of such devices could significantly harm our business.
o We cannot guarantee that our suppliers will be able to supply us
with components and devices in the quantities and at the times we
require, or at all.
o If prices charged by suppliers for wireless devices do not decline
as we anticipate, our business may not experience the growth we
expect.
o We may not be able to develop, acquire and maintain proprietary
information and intellectual property rights, which could limit
the growth of our business and reduce our market share.
o Patent infringement litigation against Research In Motion, Ltd.,
or RIM, may impede our ability to use and sell certain software
and handheld devices.
o Government regulation may increase our cost of providing services,
slow our expansion into new markets, subject our services to
additional competitive pressures and affect the value of our
common stock.
o We face burdens relating to the recent trend toward stricter
corporate governance and financial reporting standards.
o Motient's competitive position may be harmed if the wireless
terrestrial network technology it licenses from Motorola is made
available to competitors.
o Motient could incur substantial costs if it is required to
relocate its spectrum licenses under a pending proposal being
considered by the FCC.
o Our adoption of "fresh-start" accounting may make evaluation our
financial position and results of operations for 2002 and 2003, as
compared to prior periods, more difficult.
o Certain tax implications of our bankruptcy and reorganization may
increase our tax liability.
o There is a very limited public trading market for our common
stock, and our equity securities may continue to be illiquid or
experience significant price volatility.
o We do not expect to pay any dividends on our common stock for the
foreseeable future.
o Future sales of our common stock could adversely affect its price
and/or our ability to raise capital.

For a more complete description of the above factors, please see the section
entitled "Risk Factors" in Motient's annual report on Form 10-K for the fiscal
year ended December 31, 2003.

RESULTS OF OPERATIONS

The table below outlines operating results for Motient:

29

Three Months Three Months Six Months Ended Six Months Ended
Ended June 30, Ended June 30, June 30, June 30,
2004 2003 2004 2003
-------------- -------------- -------------- --------------

Summary of Revenue
- ------------------
(in millions)
Wireless Internet $ 5.2 $ 7.3 $ 11.4 $ 14.4
Field Services 1.5 2.8 3.3 6.0
Transportation 0.9 3.2 1.8 5.8
Telemetry 0.6 0.6 1.2 1.2
All Other 1.9 0.1 2.4 0.2
-------------- -------------- -------------- --------------
Service Revenue 10.1 14.0 20.1 27.6
Equipment Revenue 1.3 1.0 2.8 1.8
-------------- -------------- -------------- --------------
Total $ 11.4 $ 15.0 $ 22.9 $ 29.4
============== ============== ============== ==============

Three Months Ended Three Months Ended
June 30, % of Service June 30, % of Service
2004(1) Revenue 2003(2) Revenue
------------- ----------- ------------ -----------

Summary of Expense
- ------------------
(in millions)
Cost of Service and Operations $ 10.4 103% $ 13.9 99%
Cost of Equipment Sold 1.3 13 1.1 8
Sales and Advertising 0.9 9 1.5 11
General and Administration 2.5 25 3.3 24
Operational Restructuring Costs 5.1 50 -- --
Depreciation and Amortization 4.1 41 5.6 40
------------- ----------- ------------ -----------
Total Operating $ 24.3 241% $ 25.4 182%
============= =========== ============ ===========

(1) Includes compensation expense of $2.4 million related to the market
value of employee stock options.
(2) Includes compensation expense of $1.2 million related to the market
value of employee stock options.

Six Months Ended Six Months Ended
June 30, % of Service June 30, % of Service
2004(1) Revenue 2003(2) Revenue
------------ ----------- ------------ -----------
Summary of Expense
- ------------------
(in millions)

Cost of Service and Operations $ 21.7 108% $ 27.5 100%
Cost of Equipment Sold 2.8 14 2.1 8
Sales and Advertising 1.9 10 2.7 10
General and Administration 4.9 24 6.6 24
Operational Restructuring Costs 6.3 31 -- --
Depreciation and Amortization 8.4 42 10.9 39
------------ ----------- ------------ -----------
Total Operating $ 46.0 229% $ 49.8 181%
============ =========== ============ ===========

(1) Includes compensation expense of $3.9 million related to the market
value of employee stock options.
(2) Includes compensation expense of $1.2 million related to the market
value of employee stock options.

THREE AND SIX MONTHS ENDED JUNE 30, 2004 AND 2003

REVENUE AND SUBSCRIBER STATISTICS

Service revenues approximated $10.1 million and $20.1 million for the three and
six months ended June 30, 2004, respectively, which represented a $3.9 million
and $7.5 million decrease as compared to the three and six months ended June 30,
2003, respectively. The decrease in these periods was primarily the result of a
decrease in revenue in our wireless internet, field services and transportation

30

market segments. Total revenues approximated $11.4 million and $22.9 million for
the three and six months ended June 30, 2004, respectively, which represented a
$3.6 million and $6.5 million decrease as compared to the three and six months
ended June 30, 2003, respectively. The decrease was primarily a result of the
decreased service revenues, partially offset by an increase in equipment
revenue.

The tables below summarize our revenue for the three and six months ended June
30, 2004 and 2003 and our subscriber base as of June 30, 2004 and 2003. An
explanation of certain changes in revenue and subscribers is set forth below.

Three Months Ended June 30,
----------------------------
Summary of Revenue 2004 2003 Change % Change
- ------------------ ------------- ------------- ----------- -----------
(in millions)
Wireless Internet $ 5.2 $ 7.3 $ (2.1) (29)%
Field Services 1.5 2.8 (1.3) (46)
Transportation 0.9 3.2 (2.3) (72)
Telemetry 0.6 0.6 0.0 0
All Other 1.9 0.1 1.8 1,800
------------- ------------- ----------- -----------
Service Revenue 10.1 14.0 (3.9) (28)
Equipment Revenue 1.3 1.0 0.3 30
------------- ------------- ----------- -----------
Total $ 11.4 $ 15.0 $ (3.6) (24)%
============= ============= =========== ===========

Six Months Ended June 30,
----------------------------
Summary of Revenue 2004 2003 Change % Change
- ------------------ ------------- ------------- ----------- -----------
(in millions)
Wireless Internet $ 11.4 $ 14.4 $ (3.0) (21)%
Field Services 3.3 6.0 (2.7) (45)
Transportation 1.8 5.8 (4.0) (69)
Telemetry 1.2 1.2 0.0 0
All Other 2.4 0.2 2.2 1,100
------------- ------------- ----------- -----------
Service Revenue 20.1 27.6 (7.5) (27)
Equipment Revenue 2.8 1.8 1.0 56
------------- ------------- ----------- -----------
Total $ 22.9 $ 29.4 $ (6.5) (22)%
============= ============= =========== ===========

The make up of our registered subscriber base was as follows:

As of June 30,
----------------------------
2004 2003 Change % Change
------------- ------------- ----------- -----------
Wireless Internet 89,471 110,452 (20,981) (19)%
Field Services 14,356 20,770 (6,414) (31)
Transportation (1) 46,986 100,793 (53,807) (53)
Telemetry 31,002 29,787 1,215 (4)
All Other 722 941 (219) (23)
------------- ------------- ----------- -----------
Total 182,537 262,743 (80,206) (31)%
============= ============= =========== ===========

(1) Includes 9,692 registered UPS devices as of June 30,
2004, of which 3,066 were actively passing data
traffic, as compared to 69,954 registered UPS devices
as of June 30, 2003, of which 33,890 were actively
passing data traffic.

31

o Wireless Internet: Revenue declined from $7.3 million to $5.2
million for the three months ended June 30, 2004, as compared to
the three months ended June 30, 2003. Revenue declined from $14.4
million to $11.4 million for the six months ended June 30, 2004,
as compared to the six months ended June 30, 2003. The revenue
decline in the Wireless Internet sector during this period
represented customer losses that we are experiencing in both our
direct and reseller channels as a result of the migration of
wireless internet customers to other networks. These customer
losses have been exacerbated by the `end-of-life' announcement by
RIM for the 857 device, which has negatively impacted the ability
of our resellers to add new devices to our network to replace
those that are migrating from their respective customer bases.
This decline is also the result of Motient's coordinated effort to
actively sell and promote wireless email and wireless Internet
applications to enterprise accounts under our agent relationships
with T-Mobile USA and Verizon Wireless. During the fourth quarter
of 2003, we sold several of our existing customers devices on
these networks that resulted in their termination of devices on
our network in the first six months of 2004. We received
commissions from these carriers for these sales.
o Field Services: Revenue declined from $2.8 million to $1.5 million
for the three months ended June 30, 2004, as compared to the three
months ended June 30, 2003. Revenue declined from $6.0 million to
$3.3 million for the six months ended June 30, 2004, as compared
to the six months ended June 30, 2003. The decrease in revenue
from field services was primarily the result of the termination of
several customer contracts, including Sears and Lanier, as well as
the general reduction of units and/or rates across the remainder
of our field service customer base, primarily IBM and Pitney
Bowes. This revenue segment was also negatively impacted by
approximately $350,000 due to the reclassification of one of our
customers, Lucent, to the wireless internet segment.
o Transportation: Revenue declined from $3.2 million to $0.9 million
for the three months ended June 30, 2004, as compared to the three
months ended June 30, 2003. Revenue declined from $5.8 million to
$1.8 million for the six months ended June 30, 2004, as compared
to the six months ended June 30, 2003. The decrease in revenue
from the transportation sector was primarily the result of UPS,
beginning in July 2003, having removed a significant number of
their units from our network and no longer maintaining their
historical level of payments. UPS represented $0.2 million and
$0.5 million of revenue for the three and six months ended June
30, 2004, as compared to $2.7 million and $4.8 million of revenue
for the three and six months ended June 30, 2003. We did, however,
also continue to experience growth during this period in other
transportation accounts, most notably Aether and Roadnet.
o Telemetry: Revenue remained at $0.6 million for the three months
ended June 30, 2004, as compared to the three months ended June
30, 2003. Revenue remained at $1.2 million for the six months
ended June 30, 2004, as compared to the six months ended June 30,
2003. While we experienced growth in certain telemetry customer
accounts, including US Wireless Data and USA Technologies, this
was equally offset by churn or negative rate changes in other
telemetry accounts.
o Other: Revenue increased from $0.1 million to $1.9 million for the
three months ended June 30, 2004, as compared to the three months
ended June 30, 2003. Revenue increased from $0.2 million to $2.4
million for the six months ended June 30, 2004, as compared to the
six months ended June 30, 2003. The increase was attributable to
the settlement of a take-or-pay contract with Wireless Matrix
resulting in the recognition of $1.1 million and approximately
$0.6 million of commissions earned via the agency and dealer
agreements with Verizon Wireless and T-Mobile USA.

32

o Equipment: Revenue increased from $1.0 million to $1.3 million for
the three months ended June 30, 2004, as compared to the three
months ended June 30, 2003. Revenue increased from $1.8 million to
$2.8 million for the six months ended June 30, 2004, as compared
to the six months ended June 30, 2003. The increase in equipment
revenue was primarily the result of the sales of devices
attributable to agency and dealer agreements with Verizon Wireless
and T-Mobile USA.

The table below summarizes our operating expenses for the three and six months
ended June 30, 2004 and 2003. An explanation of certain changes in operating
expenses is set forth below.

Three Months Ended June 30,
----------------------------
Summary of Expenses 2004(1) 2003(2) Change % Change
- ------------------- ------------- ------------- ----------- -----------

(in millions)
Cost of Service and Operations $ 10.4 $ 13.9 $ (3.5) (25)%
Cost of Equipment Sales 1.3 1.1 0.2 18
Sales and Advertising 0.9 1.5 (0.6) (40)
General and Administration 2.5 3.3 (0.8) (24)
Operational Restructuring Costs 5.1 -- 5.1 --
Depreciation and Amortization 4.1 5.6 (1.5) (27)
------------- ------------- ----------- -----------
Total Operating $ 24.3 $ 25.4 $ (1.1) (4)%
============= ============= =========== ===========

(1) Includes compensation expense of $2.4 million related to the market
value of employee stock options.
(2) Includes compensation expense of $1.2 million related to the market
value of employee stock options.

Six Months Ended June 30,
----------------------------
Summary of Expenses 2004(1) 2003(2) Change % Change
- ------------------- ------------- ------------- ----------- -----------
(in millions)
Cost of Service and Operations $ 21.7 $ 27.5 $ (5.8) (21)%
Cost of Equipment Sales 2.8 2.1 0.7 33
Sales and Advertising 1.9 2.7 (0.8) (30)
General and Administration 4.9 6.6 (1.7) (26)
Operational Restructuring Costs 6.3 -- 6.3 --
Depreciation and Amortization 8.4 10.9 (2.5) (23)
------------- ------------- ----------- -----------
Total Operating $ 46.0 $ 49.8 $ (3.8)