GLOBALSTAR TELECOMMUNICATIONS LTD - 10-Q Quarterly Report

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

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FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO .

GLOBALSTAR TELECOMMUNICATIONS LIMITED

CEDAR HOUSE
41 CEDAR AVENUE
HAMILTON HM12, BERMUDA
TELEPHONE: (441) 295-2244

COMMISSION FILE NUMBER: 0-25456

BERMUDA 13-3795510
(JURISDICTION OF INCORPORATION) (IRS IDENTIFICATION NUMBER)

GLOBALSTAR, L.P.
3200 ZANKER ROAD
SAN JOSE, CA 95134
TELEPHONE: (408) 933-4000

COMMISSION FILE NUMBER: 333-25461

DELAWARE 13-3759024
(JURISDICTION OF REGISTRATION) (IRS IDENTIFICATION NUMBER)

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 reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X] No [ ]

As of October 31, 2002, there were 113,059,195 shares of Globalstar
Telecommunications Limited common stock outstanding.

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GLOBALSTAR TELECOMMUNICATIONS LIMITED AND GLOBALSTAR, L.P.

FORM 10-Q

INDEX

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Globalstar Telecommunications Limited (A General Partner of
Globalstar, L.P.)........................................... 2
Globalstar, L.P. (A Debtor-in-Possession)................... 9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 25
Item 3. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 41
Item 4. Controls and Procedures..................................... 41

PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 42
Item 2. Changes in Securities and Use of Proceeds................... 43
Item 3. Defaults Upon Senior Securities............................. 43
Item 4. Submission of Matters to Vote of Security Holders........... 43
Item 5. Other Information........................................... 43
Item 6. Exhibits and Reports on Form 8-K............................ 43
Signatures........................................................... 44
Certifications....................................................... 45

PART I.

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GLOBALSTAR TELECOMMUNICATIONS LIMITED
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)

CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)

See notes to condensed financial statements.
2

GLOBALSTAR TELECOMMUNICATIONS LIMITED
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)

CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

See notes to condensed financial statements.
3

GLOBALSTAR TELECOMMUNICATIONS LIMITED
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)

CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

See notes to condensed financial statements.
4

GLOBALSTAR TELECOMMUNICATIONS LIMITED
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)

NOTES TO CONDENSED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been
prepared by Globalstar Telecommunications Limited ("GTL") pursuant to the rules
of the Securities and Exchange Commission ("SEC") and, in the opinion of GTL,
include all adjustments (consisting of normal recurring accruals) necessary for
a fair presentation of financial position, results of operations and cash flows
as of and for the periods presented. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted pursuant to SEC rules. The results of operations
for the three and nine months ended September 30, 2002 are not necessarily
indicative of the results to be expected for the full year. These condensed
financial statements should be read in conjunction with GTL's Annual Report on
Form 10-K for the year ended December 31, 2001.

GTL, a general partner of Globalstar, L.P., a Delaware limited partnership
("Globalstar"), was created to permit public equity ownership in Globalstar. GTL
does not have any operations, any personnel or facilities, and does not manage
the day-to-day operations of Globalstar. GTL has no other business or
investments. GTL's sole asset is its investment in Globalstar and GTL's results
of operations reflect its share of the results of operations of Globalstar on an
equity accounting basis. Accordingly, GTL's results of operations only reflect
its share of Globalstar's results of operations, as presented on Globalstar's
financial statements.

GTL accounts for its investment in Globalstar's ordinary partnership
interests on an equity basis, recognizing its allocated share of net loss for
each period since its initial investment on February 22, 1995. This investment
includes the fair value of warrants received or acquired from Globalstar in 1996
and 1997 and the 8% convertible redeemable preferred partnership interests (the
"8% RPPIs") and 9% convertible redeemable preferred partnership interests (the
"9% RPPIs"). In 2000, Globalstar's losses reduced GTL's investment in Globalstar
ordinary and preferred partnership interests to zero. Accordingly, GTL has
discontinued providing for its allocated share of Globalstar's net losses and
recognized the remaining unallocated losses as a result of its general partner
status in Globalstar. Because GTL is a general partner of Globalstar, GTL is
jointly and severally liable with the other general partner for the recourse
debt and other recourse obligations of Globalstar to the extent Globalstar is
unable to pay such debts. GTL believes that such recourse obligations totaled
approximately $1.4 billion as of September 30, 2002. Certain of Globalstar's
debt, including the public debt, are non-recourse to the general partners. On
February 15, 2002, the other general partner of Globalstar, Loral QUALCOMM
Satellite Services, L.P. ("LQSS"), filed a voluntary petition under Chapter 11
of the United States Code. Effective February 15, 2002, Globalstar ceased
allocating additional losses associated with recourse debt to LQSS. As the only
remaining general partner of Globalstar that has not filed for bankruptcy
protection, GTL has been allocated all losses related to debt that is recourse
to General Partners since February 15, 2002. As a result of its general partner
status, GTL has recorded a cumulative liability of $862.5 million.

In 2001, an issue was raised as to whether the three-year notes issued to
the guarantors of The Chase Manhattan Bank $250 million credit facility were
prepared in accordance with the recourse provisions of the guarantee
arrangement. Management does not believe the existing notes containing
non-recourse language will need to be replaced with notes not containing the
non-recourse language. If the existing non-recourse notes were replaced with
notes not containing the non-recourse language, the replacement would not impact
Globalstar's results of operations. However, allocations of Globalstar's losses
to general partners, including GTL, would increase by the amount of the increase
in recourse obligations. Replacement of the notes would not alter the
subordinate position of GTL's shareholders relative to holders of these notes.

5

GLOBALSTAR TELECOMMUNICATIONS LIMITED
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)

NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)

2. ORGANIZATION AND BUSINESS

As of September 30, 2002, GTL owned 42.4% of the outstanding ordinary
partnership interests, 100% of the outstanding 8% RPPIs and 100% of the
outstanding 9% RPPIs of Globalstar.

On February 15, 2002 (the "Petition Date"), Globalstar and certain of its
subsidiaries filed voluntary petitions under Chapter 11 of Title 11, United
States Code, in the United States Bankruptcy Court ("Bankruptcy Court") for the
District of Delaware (Case Nos. 02-10499, 02-10501, 02-10503 and 02-10504).
Globalstar and its debtor subsidiaries remain in possession of their assets and
properties and continue to operate their businesses as debtors-in-possession. As
a result of Globalstar's bankruptcy petition, several of Globalstar's debt
obligations have been accelerated and are immediately due and payable. GTL does
not intend to file an immediate petition for bankruptcy relief, but will
continue to monitor events and govern its actions accordingly. In this regard,
in June 2002, GTL petitioned the Bankruptcy Court to order the appointment of an
Official Committee of Equity Security Holders to represent GTL shareholders in
the bankruptcy proceeding. The court denied GTL's petition on July 12, 2002.
Globalstar's bankruptcy filing and subsequent financial restructuring will
likely leave shares in GTL with very little or no value. These factors, among
others, raise substantial doubt about GTL's ability to continue as a going
concern. However, the accompanying financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business.

Negotiations prior to filing of Globalstar's bankruptcy petition resulted
in a memorandum of understanding ("MOU") and Plan Support Agreement ("PSA")
reached among Loral, Globalstar's informal committee of bondholders,
representing approximately 17% of Globalstar's outstanding senior notes, and
Globalstar, regarding the substantive terms of a proposed financial and legal
restructuring of Globalstar's business. The MOU provided that all of
Globalstar's assets would be contributed into a new Globalstar company, which
would be initially owned by Globalstar's existing noteholders and other
unsecured creditors. The MOU also called for the cancellation of all existing
partnership interests in Globalstar, but contemplated, subject to the
satisfaction of certain conditions, a rights offering to GTL's common and
preferred shareholders and Globalstar's creditors, which could give them the
option to purchase shares in the new company. On May 23, 2002, Globalstar filed
with the Bankruptcy Court, a Plan of Reorganization and related Disclosure
Statement reflecting terms substantially similar to those in the MOU and PSA.
The MOU and PSA were appended to Globalstar's Form 8-K filing dated February 19,
2002. The Plan of Reorganization and related Disclosure Statement were appended
to Globalstar's Form 8-K filing dated June 5, 2002. Pursuant to the terms of the
PSA, because the Disclosure Statement was not approved by the Bankruptcy Court
by August 13, 2002, each of Loral and the Creditors Committee had the right for
15 days thereafter to terminate the PSA. As permitted by the PSA, on August 21,
2002, the Creditors Committee advised Loral and Globalstar that they had
terminated the PSA as of that date. The Creditors Committee, Loral and
Globalstar are continuing their discussions with a view toward formulating a
modified restructuring plan that would be reflected in an amended Plan of
Reorganization and related Disclosure Statement that would be filed with the
Bankruptcy Court. No assurances can be given as to whether ongoing discussions
with Loral and the Creditors Committee will ultimately result in a successful
reorganization of Globalstar. There has been no contemplation under any
financial restructuring under this agreement or any other plan ultimately
approved by the court, that GTL's equity interest, along with the interests of
Globalstar's other partners, would not be eliminated.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Earnings Per Share

Due to GTL's net losses for the three months and nine months ended
September 30, 2002 and 2001, diluted weighted average common shares outstanding
excludes the weighted average effect of (i) the assumed

6

GLOBALSTAR TELECOMMUNICATIONS LIMITED
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)

NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)

conversion of GTL's 8% Series A convertible redeemable preferred stock, due 2011
(the "8% Preferred Stock") into 9.4 million common shares for the three and nine
months ended September 30, 2002 and 2001, (ii) the assumed conversion of GTL's
9% Series B convertible redeemable preferred stock, due 2011 (the "9% Preferred
Stock") into 0.8 million and 3.3 million common shares for the three months
ended September 30, 2002 and 2001, respectively, and into 1.1 million and 4.2
million common shares for the nine months ended September 30, 2002 and 2001,
respectively, and (iii) the assumed exercise of outstanding options and
warrants, into 12.0 million common shares for the three and nine months ended
September 30, 2002 and 2001, as their effect would have been anti-dilutive.
Accordingly, basic and diluted net loss per share is based on the net loss
applicable to common shareholders and the weighted average common shares
outstanding for the three months and nine months ended September 30, 2002 and
2001, respectively.

Comprehensive Loss

During the periods presented, GTL had no changes in equity from
transactions or other events and circumstances from non-owner sources.
Accordingly, a statement of comprehensive loss has not been provided.

4. CONVERTIBLE REDEEMABLE PREFERRED STOCK

The 8% and 9% convertible redeemable preferred stock of GTL has mandatory
redemption dates in 2011. Under the terms of the mandatory redemption, GTL may
make payments to the holders in either cash or common stock, or a combination
thereof. Based upon the price of GTL's common stock at September 30, 2002 and
December 31, 2001, GTL had not authorized a sufficient number of shares of
common stock to effect payment in common stock. Accordingly, GTL classified
$157,302,000 and $220,296,000 as of September 30, 2002 and December 31, 2001,
respectively, of the 8% and 9% convertible redeemable preferred stock outside
the shareholders' deficit section of the balance sheet based on GTL's average
common stock price in the 10-day period preceding the end of the period
(approximately $0.16 as of September 30, 2002). The number of shares of GTL
common stock that may be issued on the mandatory redemption date will depend on
factors at the redemption date including the price of GTL's common stock and the
number of shares of 8% and 9% convertible redeemable preferred stock outstanding
at the time of the redemption. The amount of the 8% and 9% convertible
redeemable preferred stock classified outside the shareholders' deficit section
will vary in future periods depending on these variables. No dividends have been
paid on the preferred stock since December 2000.

In the nine months ended September 30, 2002, 900 shares of 8% Preferred
Stock were converted into 1,932 shares of GTL common stock. No shares were
converted in the three months ended September 30, 2002. As a result, the
converted 8% RPPIs were converted into 477 Globalstar ordinary partnership
interests. As of September 30, 2002, the 8% Preferred Stock had an aggregate
liquidation preference equal to its $218 million aggregate redemption value and
a mandatory redemption date of February 11, 2011. The remaining shares of 8%
Preferred Stock outstanding at September 30, 2002 were convertible into
9,368,383 shares of GTL common stock.

In the nine months ended September 30, 2002, 1,303,933 shares of 9%
Preferred Stock were converted into 2,511,766 shares of GTL common stock. No
shares were converted in the three months ended September 30, 2002. As a result,
the converted 9% RPPIs were converted into 620,189 Globalstar ordinary
partnership interests. As of September 30, 2002, the 9% Preferred Stock had an
aggregate liquidation preference equal to its $20 million aggregate redemption
value and a mandatory redemption date of February 11, 2011. The remaining shares
of 9% Preferred Stock outstanding at September 30, 2002 were convertible into
750,213 shares of GTL common stock.

7

GLOBALSTAR TELECOMMUNICATIONS LIMITED
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)

NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)

5. COMMITMENTS AND CONTINGENCIES

In Re Globalstar Securities Litigation. On February 28, 2001, plaintiff
Eric Eismann filed a purported class action complaint against GTL in the United
States District Court for the Southern District of New York. The other
defendants named in the complaint were Loral Space & Communications Ltd. and
Bernard Schwartz, the former Chief Executive Officer of Globalstar. Globalstar
was not a named defendant in these actions. The complaint alleges that (a) GTL
and Mr. Schwartz violated Section 10(b) of the Securities Exchange Act of 1934
(the "Exchange Act") and Rule 10b-5 promulgated thereunder, by making material
misstatements or failing to state material facts about GTL's business and
prospects; and (b) that Loral and Mr. Schwartz are secondarily liable for these
alleged misstatements and omissions under Section 20(a) of the Exchange Act as
alleged "controlling persons" of GTL. The class of plaintiffs on whose behalf
this lawsuit has been asserted consists of all buyers of GTL common stock from
December 6, 1999, through October 27, 2000, excluding the defendants, officers
and directors of GTL, and certain persons affiliated therewith (the "Excluded
Persons"). Eighteen additional purported class action complaints were
subsequently filed in the United States District Court for the Southern District
of New York. These complaints were granted class action status and consolidated
into a case known as In Re Globalstar Securities Litigation, 01 Civ. 1748 (SHS).
On September 26, 2001, the Court appointed The Phillips Family as Lead Plaintiff
for the Class. On November 13, 2001, Lead Plaintiff filed a Consolidated Amended
Class Action Complaint and a demand for jury trial. The Amended Complaint drops
the cause of action against certain individuals and adds causes of action
against Globalstar and its wholly-owned subsidiary, Globalstar Capital. GTL and
Globalstar believe that they have meritorious defenses to these actions and on
or about February 25, 2002, filed a motion to dismiss the complaint. The case
against Globalstar and Globalstar Capital is stayed pursuant to the U.S.
Bankruptcy Code. There are, however, no assurances that the defenses to these
actions will be successful.

8

GLOBALSTAR, L.P., A DEBTOR-IN-POSSESSION

CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PARTNERSHIP INTERESTS)
(UNAUDITED)

See notes to condensed consolidated financial statements.
9

GLOBALSTAR, L.P., A DEBTOR-IN-POSSESSION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER ORDINARY PARTNERSHIP INTEREST AMOUNTS)
(UNAUDITED)

See notes to condensed consolidated financial statements.
10

GLOBALSTAR, L.P., A DEBTOR-IN-POSSESSION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

See notes to condensed consolidated financial statements.
11

GLOBALSTAR, L.P., A DEBTOR-IN-POSSESSION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have
been prepared by Globalstar, L.P., a Delaware limited partnership
("Globalstar"), pursuant to the rules of the Securities and Exchange Commission
("SEC") and, in the opinion of Globalstar, include all adjustments (consisting
of normal recurring accruals) necessary for a fair presentation of financial
position, results of operations and cash flows as of and for the periods
presented. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted pursuant
to such SEC rules. The results of operations for the three and nine months ended
September 30, 2002 are not necessarily indicative of the results to be expected
for the full year. These condensed consolidated financial statements should be
read in conjunction with Globalstar's Annual Report on Form 10-K for the year
ended December 31, 2001.

On February 15, 2002 (the "Petition Date"), Globalstar and certain of its
subsidiaries filed voluntary petitions under Chapter 11 of Title 11, United
States Code, in the United States Bankruptcy Court ("Bankruptcy Court") for the
District of Delaware (Case Nos. 02-10499, 02-10501, 02-10503 and 02-10504).
Globalstar and its debtor subsidiaries remain in possession of their assets and
properties and continue to operate their businesses as debtors-in-possession.
Also on February 15, 2002, the managing general partner of Globalstar, LQSS,
filed a voluntary petition in Delaware under Chapter 11.

These factors, among others raise substantial doubt about Globalstar's
ability to continue as a going concern. The condensed consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

Under Chapter 11, substantially all unsecured liabilities as of the
Petition Date are subject to compromise or other treatment under a plan of
reorganization, which must be approved and confirmed by the Bankruptcy Court.
For financial reporting purposes, those liabilities and obligations whose
treatment and satisfaction are dependent on the outcome of the Chapter 11 case
have been segregated in the condensed consolidated balance sheet as liabilities
subject to compromise. Generally, all actions to enforce or otherwise require
repayment of pre-petition liabilities are stayed under Section 362(a) of the
U.S. Bankruptcy Code while Globalstar continues its business operations as a
debtor-in-possession. The amount and settlement terms of the pre-petition
liabilities subject to compromise are subject to an approved plan of
reorganization and may differ significantly from the amounts as reflected in
these financial statements.

Negotiations prior to filing of Globalstar's bankruptcy petition resulted
in a memorandum of understanding ("MOU") and Plan Support Agreement ("PSA")
reached among Loral, Globalstar's informal committee of bondholders,
representing approximately 17% of Globalstar's outstanding senior notes, and
Globalstar, regarding the substantive terms of a proposed financial and legal
restructuring of Globalstar's business. The MOU provided that all of
Globalstar's assets would be contributed into a new Globalstar company, which
would be initially owned by Globalstar's existing noteholders and other
unsecured creditors. The MOU also called for the cancellation of all existing
partnership interests in Globalstar, but contemplated, subject to the
satisfaction of certain conditions, a rights offering to GTL's common and
preferred shareholders and Globalstar's creditors, which could give them the
option to purchase shares in the new company. On May 23, 2002, Globalstar filed
with the Bankruptcy Court, a Plan of Reorganization and related Disclosure
Statement reflecting terms substantially similar to those in the MOU and PSA.
The MOU and PSA were appended to Globalstar's Form 8-K filing dated February 19,
2002. The Plan of Reorganization and related Disclosure Statement were appended
to Globalstar's Form 8-K filing dated June 5, 2002. Pursuant to the terms of the
PSA, because the Disclosure Statement was not approved by the Bankruptcy Court
by August 13, 2002, each of Loral and the Creditors Committee had the right for
15 days thereafter to terminate the PSA. As permitted by the PSA, on August 21,
2002, the Creditors Committee advised Loral and Globalstar that they had
terminated the PSA as of that date. The Creditors Committee, Loral and
Globalstar are continuing their discussions with a view toward formulating a
modified restructuring plan that would be
12

GLOBALSTAR, L.P., A DEBTOR-IN-POSSESSION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

reflected in an amended Plan of Reorganization and related Disclosure Statement
that would be filed with the Bankruptcy Court. No assurances can be given as to
whether ongoing discussions with Loral and the Creditors Committee will
ultimately result in a successful reorganization of Globalstar.

2. ORGANIZATION AND BUSINESS

The governing body of Globalstar is the General Partners' Committee. The
Committee may have up to seven members, five of whom may be appointed by the
managing general partner of Globalstar, LQSS. The general partner of LQSS is
Loral/QUALCOMM Partnership, L.P. ("LQP"), a Delaware limited partnership,
comprised of subsidiaries of Loral Space & Communications Ltd., a Bermuda
company ("Loral"), and QUALCOMM Incorporated ("QUALCOMM"). The managing general
partner of LQP is Loral General Partner, Inc. ("LGP"), a subsidiary of Loral. As
of September 30, 2002, Loral owned, directly or indirectly, 25,169,458
(approximately 38.2%) of the ordinary partnership interests of Globalstar,
including interests attributable to 9,902,990 shares of Globalstar
Telecommunications Limited ("GTL") outstanding common stock.

Globalstar was founded to design, construct and operate a worldwide,
low-earth orbit ("LEO") satellite-based wireless digital telecommunications
system (the "Globalstar System"). The Globalstar System's worldwide coverage is
designed to enable its service providers to extend modern telecommunications
services to millions of people who currently lack basic telephone service and to
enhance wireless communications in areas underserved or not served by existing
or future cellular systems, providing a telecommunications solution in parts of
the world where the build-out of terrestrial systems cannot be economically
justified. On January 31, 1995, the U.S. Federal Communications Commission
("FCC") granted the necessary license to a wholly-owned subsidiary of LQP to
construct, launch and operate the Globalstar System. LQP has agreed to use such
license for the exclusive benefit of Globalstar. On July 17, 2001, the FCC
granted a second, conditional satellite constellation license to Globalstar to
operate in the 2GHz spectrum band.

On November 23, 1994, GTL was incorporated as an exempted company under the
Companies Act 1981 of Bermuda. GTL's sole business is acting as a general
partner of Globalstar and its sole assets consist of its equity interests in
Globalstar. As of September 30, 2002, GTL owned 27,910,604 (42.4%) of
Globalstar's outstanding ordinary partnership interests and 100% of the
outstanding 8% and 9% convertible redeemable preferred partnership interests
("RPPIs").

Globalstar has developed a new business plan for the purpose of
restructuring the partnership's finances; the plan is subject to Bankruptcy
Court approval. The business plan, which is predicated on an infusion of funds,
assumes the conversion of all outstanding Globalstar debt obligations into
equity in a new Globalstar company ("Newco") and the consolidation of certain
Globalstar service provider operations into Newco. The service provider
consolidation is intended to bring additional efficiencies to the operation of
the Globalstar network and allow for increased coordination in the Globalstar
service offerings and pricing. Globalstar believes that these steps are needed
to achieve and maintain financial viability. In addition to the service provider
operations to be consolidated into Newco, Globalstar intends to continue to
offer its services through existing independent gateway operators in other
regions (see Note 4).

Effective July 17, 2002, Globalstar entered into a contract with Space
Systems/Loral ("SS/L") under which SS/L will design, manufacture, test, and
launch a new satellite constellation for Globalstar (the "2 GHz Contract"). The
FCC authorized this system on July 17, 2001, and required Globalstar to enter
into a contract within one year. The Bankruptcy Court authorized Globalstar to
enter into the 2 GHz Contract at a hearing held on July 16, 2002. Work under the
2 GHz Contract will be performed in three phases -- Design, or Definition (Phase
I), Development (Phase II) and Production (Phase III). Upon execution,
Globalstar made a prepayment to SS/L to fund the projected cost of the initial
six months of work on the Design Phase. Costs related to the work performed
under Phase I are being expensed in operations as incurred. Additional amounts
are to be paid on an agreed schedule subject to certain funding limitations. The
contract allows
13

GLOBALSTAR, L.P., A DEBTOR-IN-POSSESSION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Globalstar to terminate the contract for convenience. The schedule for
deliverables matches the implementation milestones prescribed in the FCC's July
17, 2001 authorization through launch of the first geostationary satellite into
an orbit above the United States. Globalstar has asked the FCC to approve
certain amendments to its authorization and also to extend the milestones for
launching the non-geostationary spacecraft and for bringing into service the
full constellation. There can be no assurance that the FCC will approve such
amendments or that Globalstar will obtain sufficient capital to fund this
constellation.

Globalstar has incurred cumulative ordinary partnership losses of $5.18
billion through September 30, 2002, which have been funded primarily through the
issuance of partnership interests and debt by Globalstar.

Globalstar operates in one industry segment, satellite telecommunications,
providing global mobile and fixed wireless voice and data services.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Since the Petition Date, February 15, 2002, Globalstar's financial
statements have been prepared in compliance with SOP 90-7, Entities in
Reorganization Under the Bankruptcy Code. Specifically, all pre-petition
liabilities subject to compromise have been segregated on the balance sheet and
classified as liabilities subject to compromise. No interest expense on
pre-petition liabilities or dividends on redeemable preferred partnership
interests since the Petition Date have been accrued or recorded as these amounts
are not expected to be allowed claims. No debt discounts or deferred financing
costs have been amortized since the Petition Date as the value of the allowed
debt has not been confirmed by the Bankruptcy Court. Debt obligations have not
been adjusted to redemption values as the Court has not finalized the amounts.
Management expects that the allowed claims will be finalized near the date that
the final plan of reorganization is approved by the Court and will adjust the
obligations when the claims are finalized. Adjusting the debt obligations to
redemption values may result in a reorganization charge approximating $102.2
million. Interest income since the Petition Date has been reported as a
reorganization item as the amounts are considered to be proceeds of the
bankruptcy proceedings.

Pre-petition Debt, Accrued Interest, and Dividends Payable

Under Chapter 11, substantially all unsecured liabilities as of the
Petition Date are subject to compromise or other treatment under a plan of
reorganization, which must be approved and confirmed by the Bankruptcy Court.
For financial reporting purposes, those liabilities and obligations whose
treatment and satisfaction are dependent on the outcome of the Chapter 11 case
have been segregated in the condensed consolidated balance sheet as liabilities
subject to compromise. Generally, all actions to enforce or otherwise require
repayment of pre-petition liabilities are stayed while Globalstar continues its
business operations as a debtor-in-possession. The amount and settlement terms
of the pre-petition liabilities subject to compromise are subject to an approved
plan of reorganization and may differ significantly from the amounts as
reflected in these financial statements.

As a result of the Chapter 11 filing, no principal or interest payments
will be made on unsecured pre-petition debt without Bankruptcy Court approval or
until a plan of reorganization providing for the repayment terms has been
confirmed by the Bankruptcy Court becomes effective. Interest expense on
pre-petition debt will not be paid during the bankruptcy proceeding and is not
expected to be an allowed claim; therefore, $188.8 million of interest on
pre-petition debt has not been recorded since the Petition Date. In addition,
$10.8 million and $32.0 million of amortization has not been recorded since the
Petition Date on the debt discounts and premiums and deferred financing costs,
respectively. Dividends of $12.0 million on redeemable preferred partnership
interests since the Petition Date have not been accrued or recorded as these
amounts are not expected to be allowed claims.

14

GLOBALSTAR, L.P., A DEBTOR-IN-POSSESSION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred Financing Costs and Interest

Deferred financing costs represent costs incurred in obtaining long-term
credit facilities and the estimated fair value of warrant agreements issued in
connection with these facilities. Prior to the Petition Date, these costs were
classified as long term assets and were being amortized over the terms of the
credit facilities as interest expense. Globalstar ceased the amortization of the
costs on the Petition Date as the value of the debt has not been confirmed by
the Bankruptcy Court. The amortization expense that otherwise would have been
recorded from the Petition Date through September 30, 2002 is $32.0 million. As
of September 30, 2002, the deferred financing costs have been offset with the
related debt and included in the liabilities subject to compromise.

Revenue Recognition

Globalstar, L.P. owns and operates the Globalstar satellite constellation
and earns its revenues primarily through the sale of airtime minutes on a
wholesale basis to Globalstar service providers. Revenue is recognized as
invoices are recorded and is accrued from the date of the billing cycle through
the end of the month.

In December 2001 Globalstar acquired 50.1% of the Canadian service
provider, and in August 2002, Globalstar acquired 100% of the U.S. and Caribbean
service providers. Service provider airtime revenue is recognized in the same
period as the billing cycle.

Subscriber equipment revenue represents the sale of fixed and mobile user
terminals and accessories. Revenue is recognized as equipment is shipped.

Production Gateways

These assets include receivables from service providers associated with the
reimbursement of gateway acquisition and deployment costs previously paid by
Globalstar to QUALCOMM. As of September 30, 2002, these receivables are
delinquent and Globalstar has sent notices of default where appropriate. If the
collection of these payments is unsuccessful, Globalstar may retain title to
these gateways, subject to local restrictions, or Globalstar may receive an
equity position in the service provider company in exchange for debt
forgiveness. The production gateway receivable, net of reserve, is based on the
estimated value of the anticipated recovery of the receivables based on current
discussions between Globalstar and the service providers. As of September 30,
2002, Globalstar has reserved $19.2 million of the production gateway
receivables.

Earnings Per Ordinary Partnership Interest

Due to Globalstar's net losses for the three and nine months ended
September 30, 2002 and 2001, diluted weighted average ordinary partnership
interests outstanding excludes the weighted average effect of (i) the assumed
conversion of the 8% convertible redeemable preferred partnership interests (the
"8% RPPIs") into 2.3 million ordinary partnership interests for the three and
nine months ended September 30, 2002 and 2001, (ii) the assumed conversion of
the 9% convertible redeemable preferred partnership interests (the "9% RPPIs")
into 0.2 million and 0.8 million ordinary partnership interests for the three
months ended September 30, 2002 and 2001, respectively, and into 0.3 million and
1.0 million ordinary partnership interests for the nine months ended September
30, 2002 and 2001, respectively, and (iii) the assumed issuance of ordinary
partnership interests upon exercise of warrants and GTL's outstanding options
and warrants, into 10.8 million ordinary partnership interests for the three and
nine months ended September 30, 2002 and 2001, as their effect would have been
anti-dilutive. Accordingly, basic and diluted net loss per ordinary partnership
interest are based on the net loss applicable to ordinary partnership interests
and the weighted average ordinary partnership interests outstanding for the
three and nine months ended September 30, 2002 and 2001.

15

GLOBALSTAR, L.P., A DEBTOR-IN-POSSESSION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Investment Income

Investment income for the three and nine months ended September 30, 2002 is
$0.1 million and is comprised of income from equity investments held by GCSC.

Research and Development Expenses

Globalstar's research and development costs, which are expensed as
incurred, were $0.3 million and $0.7 million for the three months ended
September 30, 2002 and 2001, respectively, and $0.8 million and $3.9 million for
the nine months ended September 30, 2002 and 2001, respectively, and are
included in operations expense.

Foreign Currency

Globalstar uses the U.S. dollar as its functional currency. Foreign
currency assets and liabilities are remeasured into U.S. dollars at current
exchange rates and revenue and expenses are translated at the average exchange
rates in effect during each period. Gains or losses are recognized as a
component of other comprehensive income. During the period ended September 30,
2002, net foreign currency transaction gains and losses were not material.

Comprehensive Income

Comprehensive income (loss) is defined as the change in equity of a
business during a period from transactions and other events and circumstances
from non-owner sources, including foreign currency translation adjustments.
Globalstar presents other comprehensive income (loss) in its consolidated
statements of partners' deficit.

New Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (SFAS) No. 141, Business Combinations and SFAS No.
142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that business
combinations be accounted for under the purchase method and addresses the
initial recognition and measurement of goodwill and other intangible assets
acquired in a business combination. SFAS No. 142 addresses the initial
recognition and measurement of intangible assets acquired outside of a business
combination and the accounting for goodwill and other intangible assets
subsequent to their acquisition. SFAS No. 142 provides that intangible assets
with finite useful lives be amortized and that goodwill and intangible assets
with indefinite lives not be amortized, but will rather be tested at least
annually for impairment. Globalstar adopted SFAS No. 142 on January 1, 2002. The
adoption of this pronouncement did not have an impact on its financial position
or its results of operations.

In August 2001, the FASB issued SFAS No. 144, Accounting for Impairment or
Disposal of Long-Lived Assets. SFAS No. 144 supersedes SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of, and addresses financial accounting and reporting for the impairment or
disposal of long-lived assets. Globalstar adopted SFAS No. 144 on January 1,
2002. The adoption of this pronouncement did not have an impact on its financial
position or its results of operations.

In June 2002, the FASB issued SFAS 146, Accounting for Costs Associated
with Exit or Disposal Activities, which addresses accounting for restructuring
and similar costs. SFAS 146 supersedes previous accounting guidance, principally
Emerging Issues Task Force Issue No. 94-3. Globalstar will adopt the provisions
of SFAS 146 for restructuring activities initiated after December 31, 2002. SFAS
146 requires that the liability for costs associated with an exit or disposal
activity be recognized when the liability is incurred. Under Issue 94-3, a
liability for an exit cost was recognized at the date of the company's
commitment to an exit plan. SFAS 146 also establishes that the liability should
initially be measured and recorded at fair value.
16

GLOBALSTAR, L.P., A DEBTOR-IN-POSSESSION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Accordingly, SFAS 146 may affect the timing of recognizing future restructuring
costs as well as the amounts recognized.

Reclassifications

Certain amounts from the prior year have been reclassified to conform to
current year presentation. These reclassifications do not change previously
reported total assets, liabilities, partners' (deficit) or net loss.

4. ACQUISITIONS

In December 2001, Globalstar signed two agreements to acquire certain
subsidiaries of Vodafone Group Plc ("Vodafone") through Globalstar Corporation,
a non-debtor subsidiary of Globalstar. In the first transaction, completed on
December 18, 2001, Globalstar purchased all of the outstanding common shares of
Vodafone Satellite Services, Inc. ("VSSI"), a Delaware corporation, for $100
plus acquisition costs of $258,000. Globalstar has renamed the company
Globalstar Satellite Services Inc. ("GSSI"). GSSI indirectly owns the majority
interest in GCSC, a Nova Scotia corporation based in Ontario, Canada. The
results of operations of GCSC are presented in these consolidated financial
statements. GCSC is the Globalstar service provider in Canada and generates its
revenue from the provision of Globalstar services in Canada, billing customers
for usage over two Canadian gateways. Loral Holdings Ltd., a subsidiary of
Loral, owns the remaining minority interest in GCSC. Therefore, the result of
this transaction is that Globalstar is now a shareholder with Loral in GCSC, the
Canadian service provider. The acquisition is intended to bring additional
efficiencies to the operation of the Globalstar network and allow for increased
coordination in the Globalstar service offerings and pricing. As part of the
purchase, Globalstar released the seller from a portion of a gateway payment
guarantee related to Canadian gateways in exchange for a credit memo to offset
expenses from an affiliated company. The following table summarizes the
estimated values of the assets acquired and liabilities assumed with the
acquisition (in thousands):

The terms of the acquisition include Vodafone's funding of its previous
guarantee of bank debt due from GCC, the entity which owns the Globalstar
gateways in Canada. The majority of GCC is owned by a Canadian company. GSSI,
through subsidiary companies, holds a minority interest in GCC and had been
guarantor of a portion of GCC's outstanding bank debt. Prior to the acquisition,
Vodafone contributed $10.1 million into a cash collateral account, fully funding
its guarantor obligation. GCC's guaranteed bank debt came due in September 2002,
at which time the cash collateral account was used to repay 50.1% of the
principal value of the loan. Vodafone waived all rights pursuant to its recovery
of the $10.1 million. The use of the cash collateral account to retire a portion
of GCC's debt reduced GCC's total liabilities by $10.0 million.

On August 19, 2002, the second transaction with Vodafone was completed to
acquire the U.S. and Caribbean gateways and sales operations. Globalstar
Corporation purchased all the outstanding equity

17

GLOBALSTAR, L.P., A DEBTOR-IN-POSSESSION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

interests of Globalstar USA, LLC ("GUSA"), a Delaware Company, and all
outstanding common shares of Globalstar Caribbean Ltd. ("GCL"), a Cayman Islands
Corporation, for $100 plus acquisition costs of $1.9 million. Included with the
transaction was the transfer of the U.S. operating license for mobile satellite
services. This transaction is part of the Globalstar's restructuring plan to
bring additional efficiencies to the operation of the Globalstar network. The
following table summarizes the estimated values of the assets acquired and
liabilities assumed with the acquisition (in thousands):

The operating results of GUSA and GCL are included in the consolidated
statements of operations since the acquisition date. The following unaudited pro
forma consolidated amounts give effect to the acquisition as if it had occurred
on January 1, 2001 by consolidating the results of operations with Globalstar's
results for the three and nine months ended September 30, 2002 and September 30,
2001 (in thousands, except per ordinary partnership interest amounts):

The unaudited pro forma results have been prepared for comparative purposes
only and do not purport to be indicative of the results of operations which
actually would have resulted had the combination been in effect at the beginning
of the periods presented, or of future results of the operations of the
entities.

On July 2, 2002 Globalstar closed a transaction with TE.SA.M. under which
Globalstar Corporation acquired TE.SA.M.'s French gateway and back office assets
related to the provision of Globalstar services in Europe, TE.SA.M.'s 3,000,000
limited partnership interests in Globalstar and TE.SA.M.'s remaining inventory
of approximately 15,000 user terminals. Under the terms of the transaction, both
Globalstar and TE.SA.M. forgave all outstanding obligations between the parties
and provided mutual releases of liability. Also, Globalstar reimbursed TE.SA.M.
for the cost of operating the French gateway from March 1, 2002 through July 1,
2002 at a cost of approximately 400,000 Euros. This funding was expensed as part
of operations expense in the three months ended June 30, 2002. The French
gateway is operational, but is not currently producing revenues. Globalstar is
in the process of restarting the European business and expects to begin earning
revenues from the French gateway during the fourth quarter of 2002. TE.SA.M. is
in the process of liquidating and has exited the Globalstar business. TE.SA.M.
provided Globalstar service through gateways in France, Turkey, Venezuela,
Argentina, and Peru. Local purchasers in Turkey, Venezuela, Argentina, and Peru
have purchased local service provider operations from TE.SA.M. and have executed
letter agreements with Globalstar that define the terms under which they will
provide Globalstar services

18

GLOBALSTAR, L.P., A DEBTOR-IN-POSSESSION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

through December 2002. As a result of the TE.SA.M transaction, net gateway
receivables of $3.7 million were written off, $6.6 million in liabilities were
forgiven, $1.6 million of inventory was purchased and $4.4 million of previously
provided bad debt allowances were reversed.

5. LIABILITIES SUBJECT TO COMPROMISE

Under Chapter 11, substantially all unsecured liabilities as of the
Petition Date are subject to compromise or other treatment under a plan of
reorganization, which must be approved and confirmed by the Bankruptcy Court.
For financial reporting purposes, those liabilities and obligations whose
treatment and satisfaction are dependent on the outcome of the Chapter 11 case
have been segregated in the condensed consolidated balance sheet as liabilities
subject to compromise. Generally, all actions to enforce or otherwise require
repayment of pre-petition liabilities are stayed while Globalstar continues its
business operations as a debtor-in-possession. The amount and settlement terms
of the pre-petition liabilities subject to compromise are subject to an approved
plan of reorganization and may differ significantly from the amounts as
reflected in these financial statements.

As a result of the Chapter 11 filing, no principal or interest payments
will be made on unsecured pre-petition debt without Bankruptcy Court approval or
until a plan or reorganization providing for the repayment terms has been
confirmed by the Bankruptcy Court becomes effective. Therefore, interest expense
on pre-petition debt has not been accrued since the Petition Date.

Liabilities subject to compromise are comprised of the following (in
thousands):

19

GLOBALSTAR, L.P., A DEBTOR-IN-POSSESSION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. PAYABLES TO AFFILIATES AND VENDOR FINANCING

Payables and vendor financing due to affiliates is comprised of the
following (in thousands):

All payables to affiliates and vendor financing incurred prior to the
Petition Date have been classified as liabilities subject to compromise (see
Note 5). No principal or interest payments will be made on unsecured
pre-petition debt without Bankruptcy Court approval or until a plan of
reorganization providing for the repayment terms has been confirmed by the
Bankruptcy Court and becomes effective. Interest expense of $50.4 million, which
would have been recognized for the period from the Petition Date through
September 30, 2002 under pre-petition accounting practices, has not been
accrued. Debt discounts related to the vendor financing have not been adjusted
since the Petition Date. Under pre-petition accounting practices, the value of
vendor financing debt would have been increased by $3.8 million during the
period from the Petition Date through September 30, 2002.

In January 2001, Globalstar suspended indefinitely principal and interest
payments on all of its vendor financing, in order to conserve cash for
operations. Under the terms of the QUALCOMM vendor financing facility,
non-payment of interest payments when they become due, and continuance of
non-payment for five days, is an "event of default". An event of default
occurred on January 16, 2001, when Globalstar failed to pay interest with
respect to separate credit extensions made under the QUALCOMM vendor financing
facility. As a result of Globalstar's bankruptcy petition filed on February 15,
2002, this vendor financing has been accelerated and is immediately due and
payable.

7. CREDIT FACILITIES

As of September 30, 2002, the credit facilities have been included in the
liabilities subject to compromise (see Note 5). No principal or interest
payments will be made on unsecured pre-petition debt without Bankruptcy Court
approval or until a plan of reorganization providing for the repayment terms has
been confirmed by the Bankruptcy Court and becomes effective. Interest expense
of $28.0 million and $8.6 million has not been accrued on the $500 million
credit facility and on the notes issued to the guarantors of The Chase Manhattan
Bank $250 million credit facility, respectively, from the Petition Date through
September 30, 2002.

In January 2001, Globalstar suspended indefinitely principal and interest
payments on its funded debt in order to conserve cash for operations.
Non-payment of interest payments when they become due, and continuance of
non-payment for five days, is an "event of default" under the terms of the $500
million credit facility. An event of default occurred on January 16, 2001 under
the $500 million credit facility when Globalstar failed to pay interest with
respect to two separate credit extensions made under the $500 million credit
agreement. As a result of Globalstar's bankruptcy petition filed on February 15,
2002, this credit facility has been accelerated and is immediately due and
payable.

20

GLOBALSTAR, L.P., A DEBTOR-IN-POSSESSION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. SENIOR NOTES AND WARRANTS

As of September 30, 2002, the senior notes have been included in the
liabilities subject to compromise (see Note 5). No principal or interest
payments will be made on unsecured pre-petition debt without Bankruptcy Court
approval or until a plan of reorganization providing for the repayment terms has
been confirmed by the Bankruptcy Court and becomes effective. Therefore,
interest expense of $101.8 million has not been accrued from the Petition Date
through September 30, 2002. Prior to the Petition Date Globalstar was increasing
the carrying value of the senior notes payable to their ultimate redemption
value over the lives of the notes. On the Petition Date, the note values were
stayed, therefore the carrying value was not increased by $7.0 million for the
period from the Petition Date through September 30, 2002.

In January 2001, Globalstar suspended indefinitely principal and interest
payments on its funded debt in order to conserve cash for operations. Under the
terms of Globalstar's 11 3/8% senior notes due February 15, 2004, its 11 1/4%
senior notes due June 15, 2004, its 10 3/4% senior notes due November 1, 2004,
and its 11 1/2% senior notes due June 1, 2005 (the "Notes"), non-payment of
interest on the Notes when it becomes due, and continuance of non-payment for 30
days, is an "event of default". As a result of Globalstar's bankruptcy petition
filed on February 15, 2002, these Notes have been accelerated and are
immediately due and payable.

9. RESTRUCTURING AND REORGANIZATION, NET

Beginning in 2001, Globalstar implemented a number of initiatives designed
to reduce its cost of operations and restructure the company's finances. These
initiatives included reductions in Globalstar's workforce, the development of
financial restructuring plans, negotiations with Globalstar's significant
creditors, and the initiation of Globalstar's Chapter 11 cases on February 15,
2002. As a result of the restructuring efforts, Globalstar has recorded
cumulative charges totaling $17.4 million through September 30, 2002.
Restructuring and reorganization charges recorded in the quarter ended September
30, 2002 were $2.2 million, including $1.7 million in Globalstar advisory fees,
$0.6 million in creditor advisory fees, offset by interest income of $0.1
million. Since the Petition Date, all advisory fees are expensed as incurred as
reorganization charges and interest income is recognized as a reorganization
item, consistent with SOP 90-7.

A summary of the restructuring charges incurred from the beginning of 2001
through September 30, 2002 are as follows (in millions):

Globalstar Advisory Fees -- Globalstar has retained financial advisors,
restructuring counsel and other advisors to assist in the development of its
financial restructuring plans, discussions with its various creditor groups and
preparation for its Chapter 11 bankruptcy petition. The remaining $1.8 million
accrued as of September 30, 2002 related to fees that were incurred, but either
not billed by the advisors or fees that were waiting for court approval to be
paid.

21

GLOBALSTAR, L.P., A DEBTOR-IN-POSSESSION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Creditor Advisory Fees -- At Globalstar's expense, Globalstar's informal
committee of bondholders and later the official Creditors' Committee retained
financial advisors and restructuring counsel. Globalstar discontinued paying the
informal committee's expenses upon formation of the official Creditors'
Committee. The remaining $0.7 million accrued as of September 30, 2002 related
to fees that were incurred, but either not billed by the advisors or fees that
were waiting for court approval to be paid.

Employee Separation Costs -- Globalstar reduced its workforce from 439
full-time employees as of January 1, 2001 to 155 full-time employees as of
September 30, 2002, including 25 GUSA employees added as of August 19, 2002,
primarily through three separate actions in March, July and September of 2001.
Employee separation costs of $4.9 million were recorded for the year 2001 for
employee severance obligations, payments in accordance with Globalstar's
retention bonus program and fringe benefit costs related to terminated
employees. All amounts due to the terminated employees as a result of these
actions were disbursed prior to 2002.

10. COMMITMENTS AND CONTINGENCIES

On February 20, 2001, a purported class action lawsuit was filed against
Globalstar and Globalstar Capital Corporation on behalf of the owners of the
10 3/4% bonds, due November 2004 (the "Bonds") in Superior Court, New Castle
County, Delaware. Globalstar Capital Corporation and Globalstar, L.P. issued the
Bonds as joint obligors. The complaint alleges that the defendants repudiated
the Bonds' registration statement, prospectus and indenture, without consent of
the bondholders, when Globalstar announced that it was suspending its future
interest payments on the Bonds. On April 23, 2001, the defendants moved to
dismiss the complaint for failure to state a cause of action. A second similar
class action was filed in Delaware on June 5, 2001. The defendants have also
moved to dismiss this complaint. Plaintiffs subsequently amended the complaint
and defendants again moved to dismiss the amended complaint for failure to state
a cause of action. On December 31, 2001, the court granted defendants' motion to
dismiss in part, dismissing plaintiffs' claims for principal and interest not
yet due, but allowing plaintiffs to proceed with their breach of contract claim
based on the interest payments already missed at the time the amended complaints
were filed. Defendants answered the complaints on January 17, 2002. These
proceedings are now automatically stayed in accordance with Section 362(a) of
the U.S. Bankruptcy Code. On August 7, 2001, Globalstar received a petition
filed on July 13, 2001 in Texas state court by L.E. Creel III, a holder of an
11 3/8% note seeking principal payment of the note plus interest. Globalstar
filed an answer contesting the petition. On December 6, 2001, the parties
participated in court ordered mediation, which failed to lead a settlement of
plaintiff's claims. This proceeding is also stayed pursuant to the U.S.
Bankruptcy Code.

In Re Globalstar Securities Litigation. On February 28, 2001, plaintiff
Eric Eismann filed a purported class action complaint against GTL in the United
States District Court for the Southern District of New York. The other
defendants named in the complaint were Loral Space & Communications Ltd. and
Bernard Schwartz, the former Chief Executive Officer of Globalstar. Globalstar
was not a named defendant in these actions. The complaint alleges that (a) GTL
and Mr. Schwartz violated Section 10(b) of the Securities Exchange Act of 1934
(the "Exchange Act") and Rule 10b-5 promulgated thereunder, by making material
misstatements or failing to state material facts about GTL's business and
prospects; and (b) that Loral and Mr. Schwartz are secondarily liable for these
alleged misstatements and omissions under Section 20(a) of the Exchange Act as
alleged "controlling persons" of GTL. The class of plaintiffs on whose behalf
this lawsuit has been asserted consists of all buyers of GTL common stock from
December 6, 1999, through October 27, 2000, excluding the defendants, officers
and directors of GTL, and certain persons affiliated therewith (the "Excluded
Persons"). Eighteen additional purported class action complaints were
subsequently filed in the United States District Court for the Southern District
of New York. These complaints were granted class action status and consolidated
into a case known as In Re Globalstar Securities Litigation, 01 Civ. 1748 (SHS).
On September 26, 2001, the Court appointed The Phillips Family as Lead Plaintiff
for the Class. On November 13, 2001, Lead Plaintiff filed a Consolidated Amended
Class Action Complaint and a demand for
22

GLOBALSTAR, L.P., A DEBTOR-IN-POSSESSION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

jury trial. The Amended Complaint drops the cause of action against certain
individuals and adds causes of action against Globalstar and its wholly-owned
subsidiary, Globalstar Capital. GTL and Globalstar believe that they have
meritorious defenses to these actions and on or about February 25, 2002, filed a
motion to dismiss the complaint. The case against Globalstar and Globalstar
Capital is stayed pursuant to the U.S. Bankruptcy Code. There are, however, no
assurances that the defenses to these actions will be successful.

Any Plan of Reorganization would likely involve the cancellation of debt in
exchange for equity. The cancellation of debt will give rise to considerable
taxable income that will be allocable to the partners of Globalstar. Under a
certain interpretation of Section 1446 of the Internal Revenue Code of 1986, as
amended, Globalstar may be obligated to pay a 35% withholding tax on all income
allocated to the foreign partners regardless of the fact they will not receive a
cash distribution. Globalstar believes the imposition of the withholding tax may
have the effect of diverting its assets from its creditors to its foreign
partners in contravention of bankruptcy law. The U.S. Department of Treasury is
currently working on a regulation project that may clarify this issue.
Globalstar is also evaluating other avenues of relief and is optimistic that it
will be able to reduce the potential tax liability to a relatively small amount
or otherwise resolve the issue. However, until a solution is confirmed, no
assurances can be given that Globalstar will be able to successfully reorganize.

At the time of their respective acquisitions both GCSC and GUSA were
offering service guarantees to portions of their customer base, under which
certain customers are entitled to cash compensation in the event that Globalstar
services do not remain active and available to them for at least one year after
initial activation. Globalstar has assumed these guarantees since the
acquisition and is continuing them on an exception basis. As of September 30,
2002, Globalstar has maximum contingent obligations with respect to these
service guarantees of approximately $4 million, that would come due in the event
that Globalstar services were discontinued in Canada or the United States.

On June 30, 2000, Globalstar's $250 million credit facility with The Chase
Manhattan Bank became due, and was repaid in full by its guarantors, including
Lockheed Martin Corporation ("Lockheed Martin"), QUALCOMM, DASA and SS/L, who
had previously received warrants for GTL common stock in consideration of their
guarantee. Pursuant to the relevant agreements, Globalstar issued three-year
notes in the amounts of $206.3 million, $21.9 million, $11.7 million and $10.1
million to Lockheed Martin, QUALCOMM, SS/L and DASA, respectively, in
satisfaction of their subrogation rights. The notes are due on June 30, 2003 and
bear interest, on a deferred basis, at a rate of LIBOR plus 3%. On the
consolidated balance sheet of Globalstar the notes are presented as liabilities
subject to compromise as of September 30, 2002 and notes payable and notes
payable to affiliates as of December 31, 2001.

Lockheed Martin, however, rejected the notes it received and instead asked
Globalstar to issue new securities with additional rights and enhanced value,
without waiving its claim that it is entitled to receive an immediate cash
reimbursement by Globalstar of its $150 million payment to the bank lenders.
Globalstar disputes Lockheed Martin's interpretation of the relevant agreements.

If the dispute is not resolved, Globalstar cannot be sure that if the
matter were litigated, the court would agree with Globalstar's interpretation of
the agreements. Management believes, however, that a court would agree with
Globalstar's interpretation of the relevant agreements.

In 2001, an issue was raised as to whether the three-year notes issued to
the guarantors of The Chase Manhattan Bank $250 million credit facility were
prepared in accordance with the recourse provisions of the guarantee
arrangement. Management does not believe the existing notes containing
non-recourse language will need to be replaced with notes not containing the
non-recourse language. If the existing non-recourse notes were replaced with
notes not containing the non-recourse language, the replacement would not impact
Globalstar's results of operations. However, allocations of Globalstar's losses
to general partners would increase by the amount of the increase in recourse
obligations.

23

GLOBALSTAR, L.P., A DEBTOR-IN-POSSESSION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On May 21, 2002, an employee incentive program was approved by the
Bankruptcy Court to recognize and retain key employees. The total value of the
program is $2.9 million of which $0.7 million was paid in July 2002. The balance
of the incentive program will be paid upon the successful reorganization of
Globalstar. Under certain conditions, up to $1.0 million of the remaining
payments may be made in common stock of Newco.

In 1998, Globalstar secured twelve-month call-up orders for two additional
Delta launch vehicles from SS/L for the purpose of launching spare satellites.
The call-up date for Delta 8 was September 8, 2002, and the call-up date for
Delta 9 was March 31, 2002. During 2002, Globalstar sought and received several
no-cost month-to-month deferrals of the call-up deadline for Delta 9. In October
2002, the launch contractor declined to grant additional no-cost extensions.
Globalstar determined that it would be more advantageous to terminate the
launches than to begin to make the required progress payments at this time and
requested SS/L to terminate the launches if further no cost extensions could not
be secured. Consequently, SS/L terminated the Globalstar Delta 8 and 9 launches
on October 31, 2002.

Globalstar has requested further information from SS/L related to the
termination including SS/L's actual costs related to the termination and the
disposition of Globalstar unique hardware related to these launch vehicles.
Globalstar's assets as of September 30, 2002 include $1.2 million of deposits
related to the additional Delta launch vehicles. It is likely that SS/L's
termination will cause Globalstar to write off these deposits in the fourth
quarter of 2002. Additionally, SS/L has advised Globalstar that SS/L will
invoice Globalstar for $17.2 million of remaining termination liability related
to these launches. Globalstar believes that this termination liability will not
be classified as an administrative claim in its bankruptcy case, but will be
included as a pre-petition liability subject to compromise.

Globalstar's full constellation has been launched and the satellites have,
in general, been performing well. However, in mid-March 2001 Globalstar detected
anomalous behavior in two of the satellites and removed them from service. These
two satellites were subsequently declared failed and replaced with two in-orbit
spares in late 2001. Following the two initial anomalies in March 2001,
Globalstar implemented operational safeguards to limit worsening of the
anomalous behavior once initiated and to accelerate recovery where possible.

In the 18-month period following March 2001, an additional ten Globalstar
satellites have experienced similar anomalous behavior. In most cases, this
anomalous behavior has proven to be temporary in nature and to date seven of
these ten satellites have been recovered and returned to service. The remaining
three are still undergoing diagnostic testing and recovery procedures. Although
recovery cannot be guaranteed, the recovery period for those satellites returned
to service has ranged from two weeks to six months, occurring on average in
approximately two months.

11. REVENUE INFORMATION

Globalstar's 2002 revenue by subsidiary and affiliated companies is
presented for purposes of disseminating the distribution of Globalstar's 2002
revenue and is as follows (in thousands):

24

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

Except for the historical information contained herein, the matters
discussed in the following Management's Discussion and Analysis of Financial
Condition and Results of Operations are not historical facts, but are
"forward-looking statements," as that term is defined in the Private Securities
Litigation Reform Act of 1995. In addition, Globalstar and GTL or its
representatives have made and may continue to make forward-looking statements,
orally or in writing, in other contexts, such as in reports filed with the SEC,
press releases or statements made with the approval of an authorized executive
officer of either Globalstar or GTL. These forward-looking statements can be
identified by the use of forward-looking terminology such as "believes,"
"expects," "plans," "may," "will," "would," "could," "should," "anticipates,"
"estimates," "project," "intend," or "outlook" or the negative of these words or
other variations of these words or other comparable words, or by discussion of
strategy that involve risks and uncertainties. These forward-looking statements
are only predictions, and actual events or results may differ materially as a
result of a wide variety of factors and conditions, many of which are beyond
Globalstar's or GTL's control. Some of these factors and conditions include: (i)
Globalstar filed Chapter 11 petition under the United States Bankruptcy Code on
February 15, 2002; (ii) Globalstar has limited cash to fund its operations and
will require additional financing; (iii) Globalstar has defaulted on certain
debt payments; (iv) The rate of growth for the service has not been sufficient
to sustain Globalstar's cost of operations; (v) Globalstar may be required to
withhold tax on income resulting from the cancellation of debt; (vi) Globalstar
depends on service providers to market its service and implement important parts
of its system; (vii)Globalstar's consolidation of certain service providers
might not bring efficiencies to operation; (viii) GTL may be unable to fund
mandatory redemption requirements of 8% and 9% convertible redeemable preferred
stock.; (ix) GTL has been de-listed by the NASDAQ national market; (x) Lockheed
Martin is disputing Globalstar's right to issue it a $150 million note in
satisfaction of payments made under a guaranty; (xi) Globalstar's satellites
have a limited useful life and may fail prematurely; (xii) Globalstar faces
special risks by doing business in developing markets and faces currency risks;
(xiii) Globalstar's business is regulated, causing uncertainty and additional
costs;(xiv) Globalstar faces intense competition from both direct and indirect
competitors, and additional direct competitors plan to enter the market soon;
(xv) technological advances and a continuing trend toward strategic alliances in
the telecommunications industry could give rise to significant new competitors;
(xvi) new technologies and the expansion of land-based systems may reduce demand
for Globalstar's service; (xvii) Globalstar could face liability based on
alleged health risks; (xviii) Globalstar relies on key personnel; (xix)
Globalstar is dependent on key vendors; (xx) certain potential conflicts of
interest could result in decisions adverse to Globalstar's interests; (xxi) as a
general partner, GTL is liable for the recourse debt and other obligations of
Globalstar; (xxii) a change of control of GTL or reduction in GTL's ownership of
Globalstar could result in GTL having to pay additional taxes and becoming
subject to onerous requirements under the Investment Company Act; (xxiii)
holders of GTL preferred stock will have the right under certain circumstances
to appoint directors to GTL's Board of Directors and to appoint a member to
Globalstar's General Partners' Committee; (xxiv) patents held by other firms or
individuals may block Globalstar's patents; (xxv) Globalstar operates in an
industry sector where securities values may be volatile and may be influenced by
economic and other factors beyond Globalstar's control; (xxvi) GTL is dependent
upon payments from Globalstar to meet its obligations; (xxvii) GTL has no source
of funds other than those provided by Globalstar; and (xxviii) Globalstar is
subject to export regulation. For a detailed discussion of these factors and
conditions, please refer to the section of this Form 10-Q entitled "CERTAIN
FACTORS THAT MAY AFFECT FUTURE RESULTS" and to the most recent Report on Form
10-K that Globalstar and GTL filed with the SEC. In addition, Globalstar
operates in an industry sector where securities values may be volatile and may
be influenced by economic and other factors beyond Globalstar's control.

SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the reported
amount of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the amount of revenues
and expenses reported for the period. Actual results could differ from
estimates.

25

Since the Petition Date, February 15, 2002, Globalstar's financial
statements have been prepared in compliance with SOP 90-7, Entities in
Reorganization Under the Bankruptcy Code. Specifically, all pre-petition
liabilities subject to compromise have been segregated on the balance sheet and
classified as liabilities subject to compromise. No interest expense on
pre-petition liabilities or dividends on redeemable preferred partnership
interests since the Petition Date have been accrued or recorded as these amounts
are not expected to be allowed claims. No debt discounts or deferred financing
costs have been amortized since the Petition Date as the value of the allowed
debt has not been confirmed by the Bankruptcy Court. Debt obligations have not
been adjusted to redemption values as the Court has not finalized the amounts.
Management expects that the allowed claims will be finalized near the date that
the final plan of reorganization is approved by the Court and will adjust the
obligations when the claims are finalized. Adjusting the debt obligations to
redemption values may result in a reorganization charge approximating $102.2
million. Interest income since the Petition Date has been reported as a
reorganization item as the amounts are considered to be proceeds of the
bankruptcy proceedings.

GTL accounts for its investment in Globalstar's ordinary partnership
interests on an equity basis, recognizing its allocated share of net loss for
each period since its initial investment on February 22, 1995. This investment
includes the fair value of warrants received or acquired from Globalstar in 1996
and 1997 and the 8% convertible redeemable preferred partnership interests (the
"8% RPPIs") and 9% convertible redeemable preferred partnership interests (the
"9% RPPIs"). In 2000, Globalstar's losses reduced GTL's investment in Globalstar
ordinary and preferred partnership interests to zero. Accordingly, GTL has
discontinued providing for its allocated share of Globalstar's net losses and
recognized the remaining unallocated losses as a result of its general partner
status in Globalstar.

Because GTL is a general partner of Globalstar, GTL is jointly and
severally liable with the other general partner for the recourse debt and other
recourse obligations of Globalstar to the extent Globalstar is unable to pay
such debts. GTL believes that such recourse obligations totaled approximately
$1.4 billion as of September 30, 2002. On February 15, 2002, the other general
partner of Globalstar, LQSS, filed a voluntary petition under Chapter 11 of the
United States Code. Effective February 15, 2002, Globalstar ceased allocating
losses associated with recourse debt to LQSS. As the only remaining general
partner of Globalstar that has not filed for bankruptcy protection, GTL has been
allocated all losses related to debt that is recourse to General Partners since
February 15, 2002. As a result of its general partner status, GTL has recorded a
cumulative liability of $862.5 million. Certain of Globalstar's debt, including
the public debt, are non-recourse to the general partners. The basis for the
decision to date of GTL to refrain from filing for bankruptcy are not materially
altered by this allocation. It has been GTL's view that any hope of providing a
rights offering or other element of value to its shareholders is enhanced by not
filing for bankruptcy at this time.

The carrying value of the Globalstar System is reviewed for impairment
whenever events or changes in circumstances indicate that the recorded value of
the Space Segment and Ground Segment, taken as a whole, may not be recoverable.
Globalstar looks to current and future undiscounted cash flows, excluding
financing costs, as primary indicators of recoverability. If an impairment is
determined to exist, any related impairment loss is calculated based on fair
value. If Globalstar's estimates of future performance and long term revenue
projections change, management may be required to record additional impairment
charges.

Long-term assets include receivables from service providers associated with
the reimbursement of gateway acquisition and deployment costs previously paid by
Globalstar to QUALCOMM. During 2001, Globalstar resumed collection of airtime
usage and gateway operational costs from service providers. Collections of
production gateway receivables have been deferred indefinitely and are
classified as long-term assets. If actual collections are less favorable than
those projected by management, additional allowances may be required.

Inventory consists of fixed and mobile user terminals, and accessories.
Inventory is stated at lower of cost or market. Cost is computed using a
standard cost, which approximates actual cost on a first-in, first-out basis.
Inventory write-downs are based on management's best estimates as they relate to
excess and obsolescence and estimated market values. If actual market conditions
are less favorable than those projected by management, inventory write-downs may
be required.

26

GENERAL OVERVIEW

GTL, a general partner of Globalstar, was created to permit public equity
ownership in Globalstar. GTL does not have any operations, any personnel or
facilities, and does not manage the day-to-day operations of Globalstar. GTL has
no other business or investments. GTL's sole asset is its investment in
Globalstar, and GTL's results of operations reflect its share of the results of
operations of Globalstar on an equity accounting basis. Accordingly, GTL's
results of operations only reflect its share of Globalstar's results of
operations, as presented on Globalstar's financial statements. Therefore,
matters discussed in this section address the financial condition and results of
operations of Globalstar.

On February 15, 2002, Globalstar and certain of its subsidiaries filed
voluntary petitions under Chapter 11 of Title 11, United States Code, in the
United States Bankruptcy Court for the District of Delaware (Case Nos. 02-10499,
02-10501, 02-10503 and 02-10504). Globalstar and its debtor subsidiaries remain
in possession of their assets and properties and continue to operate their
businesses as debtors-in-possession. As a result of Globalstar's bankruptcy
petition, several of Globalstar debt facilities have been accelerated and are
immediately due and payable. It has been GTL's view that any hope of providing a
rights offering or other element of value to its shareholders is enhanced by not
filing for bankruptcy at this time.

Negotiations prior to filing of Globalstar's bankruptcy petition resulted
in a memorandum of understanding ("MOU") and Plan Support Agreement ("PSA")
reached among Loral, Globalstar's informal committee of bondholders,
representing approximately 17% of Globalstar's outstanding senior notes, and
Globalstar, regarding the substantive terms of a proposed financial and legal
restructuring of Globalstar's business. The MOU provided that all of
Globalstar's assets would be contributed into a new Globalstar company, which
would be initially owned by Globalstar's existing noteholders and other
unsecured creditors. The MOU also called for the cancellation of all existing
partnership interests in Globalstar, but contemplated, subject to the
satisfaction of certain conditions, a rights offering to GTL's common and
preferred shareholders and Globalstar's creditors, which could give them the
option to purchase shares in the new company. On May 23, 2002, Globalstar filed
with the Bankruptcy Court, a Plan of Reorganization and related Disclosure
Statement reflecting terms substantially similar to those in the MOU and PSA.
The MOU and PSA were appended to Globalstar's Form 8-K filing dated February 19,
2002. The Plan of Reorganization and related Disclosure Statement were appended
to Globalstar's Form 8-K filing dated June 5, 2002. Pursuant to the terms of the
PSA, because the Disclosure Statement was not approved by the Bankruptcy Court
by August 13, 2002, each of Loral and the Creditors Committee had the right for
15 days thereafter to terminate the PSA. As permitted by the PSA, on August 21,
2002, the Creditors Committee advised Loral and Globalstar that they had
terminated the PSA as of that date. The Creditors Committee, Loral and
Globalstar are continuing their discussions with a view toward formulating a
modified restructuring plan that would be reflected in an amended Plan of
Reorganization and related Disclosure Statement that would be filed with the
Bankruptcy Court. No assurances can be given as to whether ongoing discussions
with Loral and the Creditors Committee will ultimately result in a successful
reorganization of Globalstar.

Globalstar has developed a new business plan for the purpose of
restructuring the partnership's finances; the plan is subject to Bankruptcy
Court approval. The business plan, which is predicated on an infusion of funds,
assumes the conversion of all outstanding Globalstar debt obligations into
equity in a new Globalstar company ("Newco") and the consolidation of certain
Globalstar service provider operations into Newco. The service provider
consolidation is intended to bring additional efficiencies to the operation of
the Globalstar network and allow for increased coordination in the Globalstar
service offerings and pricing. Globalstar believes that these steps are needed
to achieve and maintain financial viability. In addition to the service provider
operations to be consolidated into Newco, Globalstar intends to continue to
offer its services through existing independent gateway operators in other
regions.

Pursuant to its consolidation strategy, on December 18, 2001, Globalstar
signed two agreements to acquire certain subsidiaries of Vodafone Group Plc
("Vodafone") through Globalstar Corporation, a non-debtor subsidiary of
Globalstar. In the first transaction, which closed on December 18, 2001,
Globalstar obtained a majority interest in the Globalstar service provider
company in Canada and a minority interest in the Canadian gateway company. Under
the terms of the MOU, Loral would have contributed its minority

27

interest in the Canadian operations to Newco in exchange for Newco equity
interests simultaneously with the confirmation of Globalstar's Plan of
Reorganization. Globalstar remains in discussions with Loral regarding the
acquisition of Loral's Canadian interests. Assuming the successful execution of
such a transaction, Globalstar would assume full ownership of Globalstar Canada
Satellite Co. ("GCSC") and a 46% indirect equity interest in Globalstar Canada
Co. ("GCC"), with the majority interest continuing to be owned by Canadian
interests.

In the second Vodafone transaction, which closed on August 19, 2002,
Globalstar acquired the United States and Caribbean service provider and gateway
operations from Vodafone at a cost of $1.9 million. Vodafone retains its service
provider rights in Australia, the United Kingdom and Greece, and retains a
minority interest in the Mexican Globalstar service provider business.

TE.SA.M. is in the process of liquidating and has exited the Globalstar
business. TE.SA.M. provided Globalstar service through gateways in France,
Turkey, Venezuela, Argentina, and Peru. On July 2, 2002 Globalstar closed a
transaction with TE.SA.M. under which Globalstar Corporation acquired TE.SA.M.'s
French gateway and back office assets related to the provision of Globalstar
services in Europe, TE.SA.M.'s 3,000,000 limited partnership interests in
Globalstar and TE.SA.M.'s remaining inventory of approximately 15,000 user
terminals. Under the terms of the transaction, both Globalstar and TE.SA.M.
forgave all outstanding obligations between the parties and provided mutual
releases of liability. Also, Globalstar reimbursed TE.SA.M. for the cost of
operating the French gateway from March 1, 2002 through July 1, 2002 at a cost
of approximately 400,000 Euros. This funding was expensed as part of operations
expense in the three months ended June 30, 2002. The French gateway is
operational, but is not currently producing revenues. Globalstar is in the
process of restarting the European business and expects to begin earning
revenues from the French gateway during the fourth quarter of 2002. Local
purchasers in Turkey, Venezuela, Argentina, and Peru have purchased local
service provider operations from TE.SA.M. and have executed letter agreements
with Globalstar that define the terms under which they will provide Globalstar
services through December 2002.

Effective July 17, 2002, Globalstar entered into a contract with Space
Systems/Loral ("SS/L") under which SS/L will design, manufacture, test, and
launch a new satellite constellation for Globalstar (the "2 GHz Contract"). The
FCC authorized this system on July 17, 2001, and required Globalstar to enter
into a contract within one year. The Bankruptcy Court authorized Globalstar to
enter into the 2 GHz Contract at a hearing held on July 16, 2002. Work under the
2 GHz Contract will be performed in three phases -- Design, or Definition (Phase
I), Development (Phase II) and Production (Phase III). Upon execution,
Globalstar made a prepayment to SS/L to fund the projected cost of the initial
six months of work on the Design Phase. Costs related to the work performed
under Phase I are being expensed in operations as incurred. Additional amounts
are to be paid on an agreed schedule subject to certain funding limitations. The
contract allows Globalstar to terminate the contract for convenience. The
schedule for deliverables matches the implementation milestones prescribed in
the FCC's July 17, 2001 authorization through launch of the first geostationary
satellite into an orbit above the United States. Globalstar has asked the FCC to
approve certain amendments to its authorization and also to extend the
milestones for launching the non-geostationary spacecraft and for bringing into
service the full constellation. There can be no assurance that the FCC will
approve such amendments or that Globalstar will obtain sufficient capital to
fund this constellation.

On May 21, 2002, an employee incentive program was approved by the
Bankruptcy Court to recognize and retain key employees. The total value of the
program is $2.9 million of which $0.7 million was paid in July 2002. The balance
of the incentive program will be paid upon the successful reorganization of
Globalstar. Under certain conditions, up to $1.0 million of the remaining
payments may be made in common stock of Newco.

RESULTS OF OPERATIONS

Globalstar currently provides satellite-based telephony and narrow band
data services through 24 gateways. These gateways provide coverage to 133
countries, including all of North and South America (excluding northwestern
Alaska and portions of Canada above 70 degrees North latitude), Europe,
Australia,

28

Russia, most of the Middle East, China and South Korea. For the three months
ended September 30, 2002, Globalstar recorded total revenues of $7.8 million and
provided 10.1 million minutes of billable telecommunication services as compared
to $1.5 million and 7.4 million minutes for the three months ended September 30,
2001. As of September 2002, Globalstar had approximately 80,000 commercial
subscribers using the system. Globalstar's revenues during the quarter were not
sufficient to fund Globalstar's operations.

Globalstar service providers are generally not earning revenues sufficient
to fund their operating costs. Globalstar cannot be sure that they will continue
operations until Globalstar's financial restructuring is completed. Globalstar's
restructuring plan assumes that Globalstar will take ownership of some of these
gateways, consistent with its consolidation strategy, and that Globalstar will
revise its business relationships with the remaining service providers. In
addition to Globalstar's acquisition of certain service provider operations from
Vodafone and TE.SA.M, Globalstar is in discussions with several other service
providers with the objective of restructuring their business relationships with
Globalstar.

Elsacom, Globalstar's service provider in Italy, Northern Europe and parts
of Eastern Europe, ceased operations of its gateway located in Karkkila, Finland
on May 13, 2002. The coverage area of Elsacom's Italy gateway was expanded to
cover the region previously served by the Karkkila gateway. There was no
material effect on service revenues from the closure of the gateway.

Globalstar's total revenues have increased significantly during 2002,
primarily through its acquisitions Globalstar USA, LLC ("GUSA") and the majority
interest in GCSC. The distribution of Globalstar's 2002 revenue by subsidiary
and affiliated companies is as follows (in thousands):

Globalstar, L.P. owns and operates the Globalstar satellite constellation
and earns its revenues primarily through the sale of airtime minutes on a
wholesale basis to Globalstar service providers. During the three months ended
September 30, 2002, Globalstar, L.P. recognized total revenue of $1.7 million,
consisting of $1.6 million of service revenue and $0.1 million related to the
sale of subscriber equipment and spare parts, compared with total revenue of
$1.5 million, consisting of $1.4 million of service revenue and $18,000 of
royalty income, during the three months ended September 30, 2001. The increase
in service revenue is primarily related to the increase in Globalstar system
call minute volume to 10.1 million billable minutes during the three months
ended September 30, 2002 from 7.8 million for the equivalent period of 2001.
During the nine months ended September 30, 2002, Globalstar, L.P. recognized
total revenue of $3.5 million, consisting of $3.4 million of service revenue and
$0.1 million related to the sale of subscriber equipment and spare parts,
compared with total revenue of $4.8 million, consisting of $4.6 million of
service revenue and $0.2 million of royalty income, during the nine months ended
September 30, 2001. The decline in service revenue was primarily due to revenue
not being recognized in regions where service providers are delinquent on their
service billings and is partially offset by increased minute volume.

Globalstar Canada Satellite Co. (GCSC) is the Globalstar service provider
in Canada and as of December 18, 2001 is 50.1% owned by a wholly-owned
non-debtor subsidiary of Globalstar, L.P. During the three months ended
September 30, 2002 GCSC and its affiliates recognized total revenue of $5.3
million, consisting of $3.8 million of service revenue and $1.5 million of
subscriber equipment sales. During the nine months ended September 30, 2002 GCSC
and its affiliates recognized total revenue of $12.5 million, consisting of $8.6
million of service revenue and $3.9 million of subscriber equipment sales. As
Globalstar acquired the majority interest in GCSC in December 2001, Globalstar
did not earn any revenue related to its investment in GCSC during the first nine
months of 2001.

29

GUSA is the Globalstar service provider in the United States and the
Caribbean and was acquired by a wholly-owned non-debtor subsidiary of
Globalstar, L.P. on August 19, 2002. From August 19, 2002 through September 30,
2002, GUSA recognized total revenue of $2.1 million, consisting of $1.1 million
of service revenue and $1.0 million of subscriber equipment sales. Globalstar
did not earn any revenue related to its ownership of GUSA in 2001.

Globalstar eliminates revenues recorded on sales between subsidiary
companies and between the parent and subsidiaries. For the three months ended
September 30, 2002, $1.2 million of revenues were eliminated, consisting
primarily of wholesale airtime sales from Globalstar, L.P. to GCSC and GUSA of
$0.8 million and subscriber equipment sales from GUSA to GCSC of $0.4 million.
For the nine months ended September 30, 2002, $1.7 million of revenues were
eliminated, consisting primarily of wholesale airtime sales from Globalstar,
L.P. to GCSC and GUSA of $1.3 million and subscriber equipment sales from
Globalstar, L.P. and GUSA to GCSC of $0.4 million. No such eliminations were
recorded for the first nine months of 2001 as Globalstar had not yet made its
acquisitions of GCSC and GUSA.

On a consolidated basis, Globalstar recorded subscriber equipment revenue
of $2.1 million and $4.6 million for the three months and nine months ended
September 30, 2002, respectively. In order to facilitate service demand,
Globalstar typically sells subscriber equipment at or near its cost.
Globalstar's cost of subscriber equipment sold was $2.1 million and $3.6 million
for the three months and nine months ended September 30, 2002, respectively. No
subscriber equipment revenue or cost of subscriber equipment sold was recorded
in the nine months ended September 30, 2001.

Globalstar expects that the acquisition of GUSA will increase consolidated
revenues to between $8 million and $9 million for the fourth quarter of 2002.
The fourth quarter revenue growth that will be realized from the acquisition of
GUSA is expected to be partially offset by seasonal declines in the United
States and Canada during the fourth quarter of 2002. Historically, Globalstar's
North American business has peaked in the third quarter of each calendar year
and then declined in the fourth quarter.

Operations expense decreased to $6.0 million for the three months ended
September 30, 2002 from $10.4 million for the three months ended September 30,
2001 and decreased to $15.7 million for the nine months ended September 30, 2002
from $52.2 million for the nine months ended September 30, 2001. The decline is
primarily the result of reduced development costs incurred under Globalstar's
development contract with QUALCOMM, which was terminated by QUALCOMM in November
2001. Costs incurred under the QUALCOMM development contract were $5.3 million
and $23.4 million for the three months and nine months ended September 30, 2001
respectively. The balance of the decreases in operations expense are the result
of cost saving measures implemented during 2001, partially offset by operations
costs incurred by GCSC and GUSA.

Marketing, general and administrative expenses decreased to $3.8 million
for the three months ended September 30, 2002 from $4.5 million for the three
months ended September 30, 2001 and increased to $33.8 million for the nine
months ended September 30, 2002 from $28.8 million for the nine months ended
September 30, 2001. The decrease for the three months ended September 30, 2002
is primarily the result of a reversal of $4.4 million of previously recorded bad
debt expense associated with TE.SA.M. Increased expenses related to the
acquisitions of GCSC and GUSA partially offset this nonrecurring event. The year
to date increase in marketing, general and administrative expenses is primarily
the result of bad debt reserves related to gateways purchased by Globalstar
service providers of $8.8 million for the nine months ended September 30, 2002.
Exclusive of bad debt reserves, marketing, general and administrative expenses
decreased by $3.8 million for the nine months ended September 30, 2002; the
decline is primarily related to reductions in promotional activities and cost
savings measures implemented in 2001, partially offset by GCSC and GUSA
expenses.

Restructuring and reorganization costs of $2.2 million and $5.4 million
were incurred in the three months and nine months ended September 30, 2002
respectively. These costs were primarily fees to Globalstar's restructuring
specialists including financial advisors, legal counsel, and other advisors of
$1.7 million and $4.0 million during the three and nine months, respectively,
and fees to the creditors' legal counsel and financial advisors of $0.6 million
and $1.6 million during the three months and nine months, respectively.
30

Other restructuring costs of $0.1 million were paid in the nine months ended
September 30, 2002. These costs are partially offset by interest income earned
during Globalstar's Chapter 11 case of $0.1 million and $0.3 million during the
three months and nine months ended September 30, 2002, respectively.
Restructuring and reorganization costs decreased to $2.2 million for the three
months ended September 30, 2002 from $4.8 million for the three months ended
September 30, 2001, and decreased to $5.4 million for the nine months ended
September 30, 2002 from $9.8 million for the nine months ended September 30,
2001. The decrease is primarily due to the employee separation costs paid in
2001.

Depreciation and amortization expenses decreased to $8.4 million for the
three months ended September 30, 2002 from $9.2 million for the three months
ended September 30, 2001 and decreased to $25.2 million for the nine months
ended September 30, 2002 from $28.5 million for the nine months ended September
30, 2001. The decrease is primarily the result of the reduction in the
Globalstar System due to failed satellites being written off in 2001.

Interest income earned subsequent to the Petition Date is accounted for as
an offset to restructuring costs. Consequently, no interest income was
recognized during the three months ended September 30, 2002. Interest income was
$0.8 million for the three months ended September 30, 2001. Interest income for
the nine months ended September 30, 2002 declined to $0.1 million from $4.2
million in the nine months ended September 30, 2001. This was the result of
reduced cash balances available for investment in 2002, lower interest rates and
the change in accounting practice on the Petition Date.

Investment income for the three and nine months ended September 30, 2002
was $0.1 million. There was no investment income in 2001. Investment income is
comprised of equity investments held by GCSC.

Globalstar ceased recognizing interest expense on pre-petition debts on the
Petition Date. No interest expense was recognized for the three months ended
September 30, 2002. For the three months ended September 30, 2001, $95.9 million
of interest expense on pre-petition debt obligations was recognized. For the
nine months ended September 30, 2002, interest expense of $46.5 million was
incurred, compared with $287.5 million for the nine months ended September 30,
2001. This decrease is primarily the result of ceasing the recognition of
interest expense on pre-petition debts on the Petition Date.

The accrual of preferred dividends on the 8% and 9% redeemable preferred
partnership interests ceased on the Petition Date. No preferred dividends were
accrued for the three months ended September 30, 2002. For the three months
ended September 30, 2001, $6.3 million of preferred dividends were accrued.
Preferred dividends decreased to $2.9 million for the nine months ended
September 30, 2002 from $20.3 million for the nine months ended September 30,
2001. The decrease is primarily the result of the change in accounting practice
as well as conversions of portions of the 8% and 9% convertible redeemable
preferred partnership interests. None of the distributions accrued during 2001
or 2002 have been paid.

As a result of the above, the net loss applicable to ordinary partnership
interests decreased to $14.6 million for the three months ended September 30,
2002 from $128.8 million for the three months ended September 30, 2001 and
decreased to $116.5 million for the nine months ended September 30, 2002 from
$418.1 million for the nine months ended September 30, 2001.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2002, Globalstar had approximately $22.6 million in
cash and cash equivalents on hand. During the remainder of 2002, Globalstar
plans to use its available funds to cover its net cash out flow, which it
expects to include costs associated with operating its satellite constellation,
operating gateways, and providing retail services in North America and portions
of Europe. Assuming no new financing and no significant changes to anticipated
revenue or expense levels, Globalstar expects to have cash of approximately $10
million, including $2 million held by GCSC, on hand at the end of 2002.

The $22.6 million cash on hand at September 30, 2002 and the anticipated
revenue from operations will not be sufficient to sustain Globalstar as a going
concern. Globalstar will require additional financing to sustain its current
operations until breakeven cash flow is achieved. Globalstar will likely require
debtor in possession financing to sustain its operations through the conclusion
of its bankruptcy case. There can be no
31

assurance that a successful restructuring will be completed and that additional
financing will be available on terms acceptable to Globalstar, if at all. If
Globalstar is unable to obtain additional financing, it will likely cease to
operate as a going concern.

Cash and cash equivalents decreased from $55.6 million on December 31, 2001
to $22.6 million on September 30, 2002, the decrease is primarily the result of
cash used to fund operations for the nine months ended September 30, 2002.

As a result of Globalstar's bankruptcy petition, several of Globalstar's
debt obligations have been accelerated and are immediately due and payable.
Globalstar is not authorized to pay any pre-petition liabilities without
Bankruptcy Court approval.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (SFAS) No. 141, Business Combinations and SFAS No.
142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that business
combinations be accounted for under the purchase method and addresses the
initial recognition and measurement of goodwill and other intangible assets
acquired in a business combination. SFAS No. 142 addresses the initial
recognition and measurement of intangible assets acquired outside of a business
combination and the accounting for goodwill and other intangible assets
subsequent to their acquisition. SFAS No. 142 provides that intangible assets
with finite useful lives be amortized and that goodwill and intangible assets
with indefinite lives not be amortized, but will rather be tested at least
annually for impairment. Globalstar adopted SFAS No. 142 on January 1, 2002. The
adoption of this pronouncement did not have an impact on its financial position
or its results of operations.

In August 2001, the FASB issued SFAS No. 144, Accounting for Impairment or
Disposal of Long-Lived Assets. SFAS No. 144 supersedes SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of, and addresses financial accounting and reporting for the impairment or
disposal of long-lived assets. Globalstar adopted SFAS No. 144 on January 1,
2002. The adoption of this pronouncement did not have an impact on its financial
position or its results of operations.

In June 2002, the FASB issued SFAS 146, Accounting for Costs Associated
with Exit or Disposal Activities, which addresses accounting for restructuring
and similar costs. SFAS 146 supersedes previous accounting guidance, principally
Emerging Issues Task Force Issue No. 94-3. Globalstar will adopt the provisions
of SFAS 146 for restructuring activities initiated after December 31, 2002. SFAS
146 requires that the liability for costs associated with an exit or disposal
activity be recognized when the liability is incurred. Under Issue 94-3, a
liability for an exit cost was recognized at the date of the company's
commitment to an exit plan. SFAS 146 also establishes that the liability should
initially be measured and recorded at fair value. Accordingly, SFAS 146 may
affect the timing of recognizing future restructuring costs as well as the
amounts recognized.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

This quarterly report on Form 10-Q contains 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. In addition,
from time to time, Globalstar or GTL or their representatives have made or may
make forward-looking statements, orally or in writing. They can be identified by
the use of forward-looking words such as "believes", "expects", "plans", "may",
"will", "should", or "anticipates" or their negatives or other variations of
these words or other comparable words, or by discussions of strategy that
involve risks and uncertainties. Such forward-looking statements may be included
in, but are not limited to, various filings made by Globalstar or GTL with the
Securities and Exchange Commission, press releases or oral statements made by or
with the approval of an authorized executive officer of Globalstar or GTL. We
warn you that forward-looking statements are only predictions. Actual events or
results may differ materially as a result of risks that we face, including those
presented below. The following are representative of factors that could affect
the outcome of the forward-looking statements.

32

GLOBALSTAR FILED FOR BANKRUPTCY PROTECTION ON FEBRUARY 15, 2002; GTL'S EQUITY
INTEREST IN GLOBALSTAR WILL LIKELY BE ELIMINATED, OR AT BEST, SEVERELY DILUTED,
IN WHICH EVENT IT WILL HAVE LITTLE OR NO VALUE.

On February 19, 2002, the Globalstar filed a Form 8-K reporting that it had
reached an agreement with Loral Space & Communications Ltd. and its Informal
Committee of Bondholders regarding the substantive terms of the financial and
legal restructuring of Globalstar's businesses. The terms of the agreement were
set forth in the Memorandum of Understanding, dated February 15, 2002, a copy of
which was annexed to the Plan Support Agreement ("PSA") dated February 15, 2002,
and was filed with the February 19, 2002, Form 8-K as Exhibit 99.2.

Globalstar subsequently filed with the Bankruptcy Court a Joint Plan of
Reorganization of Globalstar, L.P. and its Debtor Subsidiaries and a related
Disclosure Statement implementing the PSA (see Form 8-K, filed June 5, 2002).
However, Globalstar did not obtain the Bankruptcy Court's approval of the
Disclosure Statement on or before August 12, 2002, as required by the PSA, as
amended. As permitted by the PSA, on August 21, 2002, counsel for the Creditors
Committee advised Globalstar that it was terminating the PSA as of the date of
the letter. Globalstar, the Creditors Committee and Loral are continuing their
discussions with a view to formulating a modified restructuring plan that would
be reflected in an amended Plan of Reorganization and related Disclosure
Statement that would be filed with the Bankruptcy Court. No assurances can be
given as to whether ongoing discussions with Loral and the Creditors Committee
will ultimately result in a successful reorganization of Globalstar. It is very
likely that in any financial restructuring under this agreement or any other
plan ultimately approved by the court, GTL's equity interest, along with the
interests of Globalstar's other partners, would be eliminated.

GLOBALSTAR HAS LIMITED CASH TO FUND ITS OPERATIONS.

The $22.6 million cash on hand at September 30, 2002 and the anticipated
revenue from operations will not be sufficient to sustain Globalstar as a going
concern. Globalstar will require additional financing to sustain its current
operations until breakeven cash flow is achieved. Globalstar will likely require
debtor in possession financing to sustain its operations through the conclusion
of its bankruptcy case. There can be no assurance that a successful
restructuring will be completed and that additional financing will be available
on terms acceptable to Globalstar, if at all. If Globalstar is unable to obtain
additional financing, it will likely cease to operate as a going concern.

GLOBALSTAR HAS DEFAULTED ON CERTAIN DEBT PAYMENTS.

On January 16, 2001, Globalstar suspended indefinitely principal and
interest payments on its funded debt and dividend payments on its 8% and 9%
convertible redeemable preferred partnership interests in order to conserve cash
for operations. Non-payment of interest on Globalstar's debt instruments, credit
facility and vendor financing agreements when they become due, and continuance
of non-payment for the applicable grace period, are "events of default" under
the terms of each of the debt instruments. An event of default has occurred in
connection with Globalstar's $500 million credit facility, its vendor financing
facility with QUALCOMM, its 11 3/8% senior notes due February 15, 2004, its
11 1/4% senior notes due June 15, 2004, its 10 3/4% senior notes due November 1,
2004, and its 11 1/2% senior notes due June 1, 2005 ("senior notes due 2004 and
2005"). Accordingly, for reporting and accounting purposes, Globalstar
classified the $500 million credit facility, the QUALCOMM vendor financing and
the senior notes as current obligations.

As a result of Globalstar's bankruptcy petition on February 15, 2002,
several of Globalstar's debt obligations have been accelerated and are
immediately due and payable.

THE RATE OF GROWTH FOR THE SERVICE HAS NOT BEEN SUFFICIENT TO SUSTAIN
GLOBALSTAR'S COST OF OPERATIONS.

Low earth orbit satellite telecommunications systems are a new business
sector that has not yet succeeded in the marketplace. Globalstar commenced
commercial service in early 2000 but had acquired only approximately 80,000
commercial subscribers by September 30, 2002, too few to generate sufficient
revenue to cover Globalstar's operating costs and service its debt. On January
16, 2001, Globalstar announced that it was not generating sufficient cash flow
from operations and that it would suspend indefinitely payments on
33

its funded debt. By announcing a financial restructuring and filing for
bankruptcy protection on February 15, 2002, Globalstar became vulnerable to
additional risks, namely, that potential subscribers may defer subscribing for
fear that Globalstar will cease operating in the near future, and that potential
investors, partners and service providers would withhold investment because of
Globalstar's uncertain future. If Globalstar is unable to restructure its debt
obligations in bankruptcy, or ultimately generate positive additional cash flows
from operations, Globalstar is unlikely to survive as a going concern.

GLOBALSTAR MAY BE REQUIRED TO WITHHOLD TAX ON INCOME RESULTING FROM THE
CANCELLATION OF DEBT.

Any Plan of Reorganization would likely involve the cancellation of debt in
exchange for equity. The cancellation of debt will give rise to considerable
taxable income that will be allocable to the partners of Globalstar. Under a
certain interpretation of Section 1446 of the Internal Revenue Code of 1986, as
amended, Globalstar may be obligated to pay a 35% withholding tax on all income
allocated to the foreign partners regardless of the fact they will not receive a
cash distribution. Globalstar believes the imposition of the withholding tax may
have the effect of diverting its assets from its creditors to its foreign
partners in contravention of bankruptcy law. The U.S. Department of Treasury is
currently working on a regulation project that may clarify this issue.
Globalstar is also evaluating other avenues of relief and is optimistic that it
will be able to reduce the potential tax liability to a relatively small amount
or otherwise resolve the issue. However, until a solution is confirmed, no
assurances can be given as to whether Globalstar will be able to successfully
reorganize. Failure to resolve this tax issue may adversely impact Globalstar's
ability to have a plan of reorganization confirmed.

GLOBALSTAR DEPENDS ON SERVICE PROVIDERS TO MARKET ITS SERVICE AND IMPLEMENT
IMPORTANT PARTS OF ITS SYSTEM.

Globalstar depends on unaffiliated service providers to purchase, install
and operate gateway equipment, to sell phones and to market Globalstar service
in each country where the service provider holds exclusive rights. Not all of
these service providers have been successful, and in some countries they have
not initiated service according to their schedules, or sold as much usage as
they originally anticipated. Globalstar service providers are generally not
earning revenues sufficient to fund their operating costs and several are
delinquent on their payments to Globalstar. Globalstar cannot be sure that they
will continue operations until Globalstar's financial restructuring is
completed. Globalstar's restructuring plan assumes that Globalstar will take
ownership of some of these gateways, consistent with its consolidation strategy,
and that Globalstar will revise its business relationship with the remaining
service providers. In addition to Globalstar's acquisition of certain service
provider operations and assets from Vodafone and TE.SA.M., Globalstar is in
discussions with several other service providers with the objective of
restructuring their business relationships with Globalstar. Elsacom,
Globalstar's service provider in Italy, Northern Europe and parts of Eastern
Europe, ceased operations of its gateway located in Karkkila, Finland on May 13,
2002. The coverage area of Elsacom's Italy Gateway was expanded to cover the
region previously served by the Karkkila gateway.

Globalstar has been unable to find suitable new or replacement service
providers for several important regions and countries, including South Africa,
India, Malaysia and Indonesia, the Philippines and other parts of Southeast
Asia. Neither has Globalstar been able to find purchasers for gateways which
were ordered and later cancelled. Globalstar's inability to offer service in
these areas ultimately reduces overall demand for its service and undermines its
value for potential users who require global service or service in Africa,
Southeast Asia, and the Indian subcontinent. In addition to the lack of global
service availability, roaming is not yet available in certain countries because
the affected service providers have been unable to date to reach business
arrangements with one another and conclude roaming testing.

GLOBALSTAR'S CONSOLIDATION OF CERTAIN SERVICE PROVIDERS MIGHT NOT BRING
EFFICIENCIES TO OPERATIONS.

While Globalstar believes that the consolidation of certain service
providers with Globalstar will increase operating efficiencies and provide for
improved global service coordination, there can be no assurance that such
efficiencies will be realized once operations are consolidated. Prior to 2002,
Globalstar had no experience in offering Globalstar services at the retail level
and may encounter unforeseen difficulties in assuming retail
34

service provider operations. While the European assets Globalstar acquired from
TE.SA.M. in July 2002 are operational, TE.SA.M. ceased billing its customers in
Europe and North Africa in late 2001. The support services, including
distribution networks, billing and customer care operations, must be restarted
before revenue can be earned from the French gateway.

GTL MAY BE UNABLE TO FUND MANDATORY REDEMPTION REQUIREMENTS OF 8% AND 9%
CONVERTIBLE REDEEMABLE PREFERRED STOCK.

The 8% and 9% convertible redeemable preferred stock of GTL has mandatory
redemption dates in 2011. Under the terms of the mandatory redemption, GTL may
make payments to the holders in either cash or common stock or a combination
thereof. Based upon the price of GTL's common stock at September 30, 2002, GTL
has not authorized a sufficient number of shares of common stock to effect
payment in common stock. Accordingly, as of September 30, 2002, GTL classified
$157,302,000 of the 8% and 9% convertible redeemable preferred stock outside the
shareholders' deficit section of the balance sheet based on GTL's average common
stock price in the 10-day period preceding September 30, 2002 (approximately
$0.16). The number of shares of GTL common stock that may be issued on the
mandatory redemption date will depend on factors at the redemption date
including the price of GTL's common stock and the number of shares of 8% and 9%
convertible redeemable preferred stock outstanding at the time of the
redemption. The amount of the 8% and 9% convertible redeemable preferred stock
classified outside the shareholders' deficit section will vary in future periods
depending on these variables.

GTL HAS BEEN DE-LISTED BY THE NASDAQ NATIONAL MARKET.

On June 14, 2001, GTL's listing was transferred to the Nasdaq SmallCap
Market. This change, while still permitting public trading of GTL's shares,
reduced their liquidity and may also have had an adverse effect on their trading
value. Since December 12, 2001, GTL has traded on the Nasdaq OTC Bulletin Board
under the symbol GSTRF.OB. There can be no assurance that there will be any
future trading market for the GTL common stock.

LOCKHEED MARTIN IS DISPUTING GLOBALSTAR'S RIGHT TO ISSUE IT A $150 MILLION NOTE
IN SATISFACTION OF PAYMENTS MADE UNDER A GUARANTY.

On June 30, 2000, Globalstar's $250 million credit facility with The Chase
Manhattan Bank, became due and was repaid in full by its guarantors, including
Lockheed Martin Corporation. Pursuant to the relevant agreements, Globalstar
issued to all the guarantors three-year notes in proportion to the principal
amount of the credit facility guaranteed. Lockheed Martin, however, rejected the
notes it received and instead asked Globalstar to issue new securities with
additional rights and enhanced value without waiving its claim that it is
entitled to receive an immediate cash reimbursement by Globalstar of its $150
million payment to the bank lenders. Globalstar disputes Lockheed Martin's
interpretation of the relevant agreements. If the dispute is not resolved,
Globalstar cannot be sure that a court would agree with Globalstar's
interpretation of the agreements. Management believes, however, that a court
would agree with Globalstar's interpretation of the relevant agreements.

GLOBALSTAR'S SATELLITES HAVE A LIMITED USEFUL LIFE AND MAY FAIL PREMATURELY.

Globalstar's system has performed well, in general. The satellites in orbit
have certain redundant systems in case of failure. However, in-orbit failure may
result from various causes, including:

- component failure;

- loss of power or fuel;

- inability to control positioning of the satellite;

- solar and other astronomical events; and

- space debris.

35

Repair of satellites in space is not feasible. Factors that affect the
useful lives of Globalstar's satellites include the quality of construction,
gradual degradation of solar panels and the durability of components. Random
failure of satellite components may result in damage to or loss of a satellite
before the end of its expected life. Globalstar has not insured its satellites
against in-orbit failures.

In mid-March 2001 Globalstar detected anomalous behavior in two of the
satellites and removed them from service. These two satellites were subsequently
declared failed and replaced with two in-orbit spares in late 2001.

Globalstar has since experienced ten additional anomalies, one in April
2001, one in November 2001, two in February 2002, one in April 2002, one in June
2002, two in July 2002 and two in October 2002. These events are again similar
in observed behavior to the prior events. Of these ten satellites, seven have
been recovered, with six returned to service and one held as an in plane spare.
The remaining three satellites are still out-of-service undergoing diagnostic
testing and recovery operations. While the performance characteristics of these
discrepant satellites are similar to those that have been successfully
recovered, recovery cannot be guaranteed and may take a considerable time to
achieve.

GLOBALSTAR FACES SPECIAL RISKS BY DOING BUSINESS IN DEVELOPING MARKETS AND FACES
CURRENCY RISKS.

Based on business operations in 2001, in which Globalstar earned about 91%
of its revenue internationally, it expects that most of its business in the
future will be conducted outside the United States. International operations are
subject to changes in domestic and foreign government regulations and
telecommunications standards, tariffs or taxes and other trade barriers.
Political, economic or social instability or other developments, including
currency fluctuations, could also adversely affect Globalstar's operations. In
addition, Globalstar's contracts may be governed by foreign law or enforceable
only in foreign jurisdictions. As a result, Globalstar may find it hard to
enforce its rights under these agreements if there is a dispute.

Globalstar's largest potential markets are in developing countries or
regions that are substantially underserved and are not expected to be served by
existing telecommunications systems. Developing countries are more likely than
industrialized countries to experience market, currency and interest
fluctuations and may have higher inflation. In addition, these countries present
risks relating to government policy, price and wage, exchange control, tax and
social instability, expropriation and other economic, political and diplomatic
conditions.

Although Globalstar anticipates that it will receive payments from its
service providers in U.S. dollars, limited availability of U.S. currency in some
local markets may prevent a service provider from making payments in U.S.
dollars. In addition, exchange rate fluctuations may affect Globalstar's ability
to control the prices charged for its services.

GLOBALSTAR'S BUSINESS IS REGULATED, CAUSING UNCERTAINTY AND ADDITIONAL COSTS.

Globalstar's operations are and will continue to be subject to United
States and international regulation. Globalstar's service providers must be
authorized in each of the markets in which they intend to provide service.
Globalstar and its service providers may not be able to obtain or retain all
regulatory approvals needed for operations. For example, Vodafone's affiliate,
Globalstar Southern Africa, has not received a license from the government
although its gateway has been operational for more than two years. Regulatory
changes, such as those resulting from judicial decisions and/or adoption of
treaties, legislation or regulation in countries where Globalstar intends to
operate, may also significantly affect Globalstar's business.

In July 2001, the FCC authorized Globalstar, along with seven other
applicants, to construct and launch a second generation system in the 2 GHz
spectrum band. The FCC established construction milestones. Globalstar's failure
to meet one or more of these milestones could result in cancellation of
Globalstar's 2 GHz authorization. Effective July 17, 2002, Globalstar entered
into a contract with SS/L under which SS/L will design, manufacture, test, and
launch a new satellite constellation for Globalstar (the "2 GHz Contract"). Work
under the 2 GHz Contract will be performed in three phases -- Design, or
Definition (Phase I), Development (Phase II) and Production (Phase III). Upon
execution, Globalstar made a prepayment to

36

SS/L to fund the projected cost of the initial six months of work on the Design
Phase. Costs related to the work performed under Phase I are being expensed in
operations as incurred. Additional amounts are to be paid on an agreed schedule
subject to certain funding limitations. The contract allows Globalstar to
terminate the contract for convenience. The schedule for deliverables matches
the implementation milestones prescribed in the FCC's July 17, 2001
authorization through launch of the first geostationary satellite into an orbit
above the United States. Globalstar has asked the FCC to approve certain
amendments to its authorization and also to extend the milestones for launching
the non-geostationary spacecraft and for bringing into service the full
constellation. There can be no assurance that the FCC will approve such
amendments or that Globalstar will obtain sufficient capital to fund this
constellation.

GLOBALSTAR FACES INTENSE COMPETITION FROM BOTH DIRECT AND INDIRECT COMPETITORS,
AND ADDITIONAL DIRECT COMPETITORS PLAN TO ENTER THE MARKET SOON.

Iridium L.L.C. has emerged from bankruptcy with no debt under new ownership
and resumed commercial service in competition with Globalstar in April 2001. It
has secured a two-year contract valued at $72 million from the U.S. Department
of Defense. ICO Global Communications has also emerged from bankruptcy, and is
expected to complete its system and compete with Globalstar in the future.

Existing fixed satellite systems, including those of Mobile Satellite
Ventures (formerly Motient and American Mobile Satellite Corporation), Comsat
Corporation's Planet-1, and Inmarsat, and recently developed systems, including
those of ACeS and Thuraya Satellite Communications Company, also provide
competing service on a regional basis at potentially lower costs.

TECHNOLOGICAL ADVANCES AND A CONTINUING TREND TOWARD STRATEGIC ALLIANCES IN THE
TELECOMMUNICATIONS INDUSTRY COULD GIVE RISE TO SIGNIFICANT NEW COMPETITORS.

Satellite-based telecommunications systems are characterized by high
up-front costs and relatively low operating costs. Several systems are being
proposed and, while the proponents of these systems believe that there will be
significant demand for their services, actual demand will not become known until
such systems are operational. If the capacity of Globalstar and competing
systems exceeds demand, price competition could be intense. Further, the
reorganizations of Iridium L.L.C. and ICO Global Communications have allowed
them to dramatically reduce or eliminate their debt and the need to service that
debt. Globalstar anticipates that if it is able to successfully reorganize it
will also reduce or eliminate its debt and the need to service that debt.

NEW TECHNOLOGIES AND THE EXPANSION OF LAND-BASED SYSTEMS MAY REDUCE DEMAND FOR
GLOBALSTAR'S SERVICE.

Globalstar believes that the extension of land-based telecommunications
services to regions previously underserved or not served by wireline or cellular
services has reduced demand for Globalstar service in those regions. These
land-based telecommunications services have been built more quickly than
Globalstar anticipated; therefore, demand for Globalstar's service is expected
to be reduced sooner than Globalstar assumed in formulating earlier business
plans. This development has been responsible, in part, for Globalstar's effort
in 2001 to identify and sell into vertical markets and to deploy data products,
rather than focusing more resources on areas formerly underserved by terrestrial
systems.

Globalstar may also face competition in the future from companies using new
technologies and new satellite systems. The space and communications industries
are subject to rapid advances and innovations in technology. New technology
could render Globalstar obsolete or less competitive by satisfying consumer
demand in more attractive ways or through the introduction of incompatible
standards. In addition, Globalstar depends on technologies developed by third
parties, and Globalstar cannot be certain that these technologies will continue
to be available to Globalstar on a timely basis or on commercially reasonable
terms.

GLOBALSTAR COULD FACE LIABILITY BASED ON ALLEGED HEALTH RISKS.

There has been adverse publicity concerning alleged health risks associated
with the use of portable hand-held telephones which have transmitting antennae.
Recent medical studies, however, have failed to confirm

37

such health risks. In any event, because hand-held Globalstar telephones will
use on average lower power to transmit signals than traditional cellular
telephones, Globalstar does not believe that any new guidelines from the Federal
Communications Commission, or any other regulatory agency, will require any
significant modifications of its system or of its hand-held telephones. Even so,
Globalstar cannot be certain that these guidelines, or any associated health
issues, will not have an adverse effect on Globalstar's business.

GLOBALSTAR RELIES ON KEY PERSONNEL.

Globalstar must hire and retain highly qualified personnel to operate its
system and manage its business successfully. None of GTL's or Globalstar's
officers have an employment contract with GTL or Globalstar, except that Mr.
Olof Lundberg has a written agreement to serve as chairman of Globalstar's
Committee of General Partners and chief executive officer of Globalstar and that
Mr. Ira E. Goldberg has agreed to serve as the restructuring officer of GTL
under terms set out by the Board of Directors of GTL. In addition, neither GTL
nor Globalstar maintains "key man" life insurance. The departure of any of its
executives or other key employees could have an adverse effect on Globalstar's
business, especially during its restructuring period. Globalstar has implemented
a retention bonus program in an effort to retain its executives and key
employees, however, there can be no assurance that such efforts will be
successful or that Globalstar will be able to attract qualified persons to
replace departing personnel.

DEPENDENCE ON KEY VENDORS.

Globalstar is dependent on QUALCOMM for gateway hardware and software, on
QUALCOMM as the exclusive manufacturer of phones using the IS-41 CDMA North
American standard, and on Telit for the manufacture of GSM dual-mode phones.
Ericsson has discontinued manufacturing Globalstar products, and there is no
assurance that QUALCOMM or Telit will not choose to terminate its business
relationship with Globalstar. If either does, Globalstar may not be able to find
a replacement; if Globalstar does find a replacement, there may be a substantial
period of time in which its products are not available.

In order to preserve cash during 2001, Globalstar ceased its payments for
services performed by SS/L and QUALCOMM; and is currently overdue on its
contractual payment obligations to these vendors. Globalstar and QUALCOMM
previously contracted for the design and development of the Globalstar ground
segment pursuant to the Development Contract dated March 18, 1994 (the
"Development Contract") and contracted for the manufacture, deployment and
maintenance of Globalstar Gateways via the Production Gateway Purchase Agreement
dated April 30, 1997 (the "Production Agreement"). QUALCOMM terminated the
Development Contract and the Production Agreement for non-payment of invoices on
November 29, 2001, and on December 20, 2001, respectively. QUALCOMM has
substantially reduced its staff assigned to Globalstar and is requesting advance
payments or deposits for current and future work. Negotiations between
Globalstar and QUALCOMM for a support agreement that will allow Globalstar to
utilize QUALCOMM's expertise to assist in system maintenance have stalled as a
result of Globalstar's financial status. Globalstar is currently operating the
Globalstar system without significant support from QUALCOMM. There can be no
assurances that Globalstar and QUALCOMM will renegotiate the mutually
satisfactory terms required to restart QUALCOMM's support to Globalstar's system
operations.

SS/L has not terminated its satellite contract with Globalstar and has
continued the production of eight spare satellites. In the context of its
bankruptcy case, Globalstar is in discussions with SS/L regarding the settlement
of unpaid amounts due under the satellite contract and the transfer of title to
the spare satellites, which is currently held by SS/L, to Globalstar. There can
be no assurances that Globalstar and SS/L will reach agreement on terms and
conditions, or that the Bankruptcy Court will approve, a settlement that will
result in the delivery of the satellites from SS/L to Globalstar.

38

CERTAIN POTENTIAL CONFLICTS OF INTEREST COULD RESULT IN DECISIONS ADVERSE TO
GLOBALSTAR'S INTERESTS.

Potential conflicts of interest include the following:

- Globalstar partners, or their affiliates, are suppliers of the major
parts of the Globalstar System, as well as retail service providers. They
also manufacture the system elements which are sold to service providers
and subscribers.

- Globalstar is dependent upon the management skills of Loral and
technologies developed by Loral, QUALCOMM and others.

- Partners and affiliates of Globalstar, including companies affiliated
with or controlled by Loral, are among Globalstar's main customers.
Accordingly, they may have conflicts of interest with respect to the
terms of Globalstar's service provider agreements.

- Globalstar is currently managed by a committee of its general partners, a
majority of the representatives on which may be designated by Loral,
which in turn owns SS/L, a contractor of Globalstar. Loral is also a
significant creditor of Globalstar.

- Several Globalstar service providers and their retail distributors are
cellular operators and may have an incentive to favor terrestrial
wireless services over satellite services in certain markets.

AS A GENERAL PARTNER, GTL IS LIABLE FOR THE RECOURSE DEBT AND OTHER OBLIGATIONS
OF GLOBALSTAR.

Because GTL is a general partner of Globalstar, GTL is jointly and
severally liable with the other general partner for the recourse debt and other
recourse obligations of Globalstar to the extent Globalstar is unable to pay
such debts. GTL believes that such recourse obligations totaled approximately
$1.4 billion as of September 30, 2002. Globalstar's other general partner, LQSS,
filed for protection under the U.S. Bankruptcy Code on February 15, 2002 and is
extremely unlikely to have sufficient funds to pay the portion of Globalstar's
recourse debt previously allocated to it. Certain of Globalstar's debt,
including the public debt, are non-recourse to the general partners.

In 2001, an issue was raised as to whether the three-year notes issued to
the guarantors of The Chase Manhattan Bank $250 million credit facility were
prepared in accordance with the recourse provisions of the guarantee
arrangement. Management does not believe the existing notes containing
non-recourse language will need to be replaced with notes not containing the
non-recourse language. If the existing non-recourse notes were replaced with
notes not containing the non-recourse language, the replacement would not impact
Globalstar's results of operations. However, allocations of Globalstar's losses
to general partners, including GTL, would increase by the amount of the increase
in recourse obligations. Replacement of the notes would not alter the
subordinate position of GTL's shareholders relative to holders of these notes.

A CHANGE OF CONTROL OF GTL OR REDUCTION IN GTL'S OWNERSHIP OF GLOBALSTAR COULD
RESULT IN GTL HAVING TO PAY ADDITIONAL TAXES AND BECOMING SUBJECT TO ONEROUS
REQUIREMENTS UNDER THE INVESTMENT COMPANY ACT.

If either of the following occurs, GTL will become a limited partner in
Globalstar and will no longer appoint representatives to serve on its committee
of general partners:

- a change of control of GTL at a time when GTL owns less than 50% of the
Globalstar partnership interests outstanding, including changes in GTL's
board of directors; or

- a sale or other disposition of partnership interests following which
GTL's equity interest is reduced to less than 5%, without prior approval
by the managing general partner of Globalstar or by the limited partners
of Globalstar.

If GTL were to become a limited partner in Globalstar, GTL could be deemed
to be an investment company under the Investment Company Act of 1940. If this
happens, GTL would become subject to the registration and other requirements of
that law. In order to register, GTL might be required to reincorporate as a
domestic U.S. corporation and would thereafter be subject to U.S. tax on its
worldwide income. GTL
39

currently intends to conduct its operations so as to avoid being deemed an
investment company under the Investment Company Act of 1940.

HOLDERS OF GTL PREFERRED STOCK WILL HAVE THE RIGHT UNDER CERTAIN CIRCUMSTANCES
TO APPOINT DIRECTORS TO GTL'S BOARD OF DIRECTORS AND TO APPOINT A MEMBER TO
GLOBALSTAR'S GENERAL PARTNERS' COMMITTEE.

In January 2001, GTL announced that it was suspending indefinitely dividend
payments on its 8% preferred stock and its 9% preferred stock. Under the terms
of each such series of preferred stock, if GTL should fail to pay dividend
payments on such series for an aggregate of six quarters, holders of the
majority of the outstanding shares of that series will have the right to elect
up to two additional members to GTL's Board of Directors. Globalstar's
partnership agreement further provides that in the event accrued and unpaid
dividends accumulate to an amount equal to six quarterly dividends on the 8%
preferred stock and/or the 9% preferred stock, holders of the majority of such
outstanding preferred stock, voting together as a class, will have the right to
appoint one additional member to Globalstar's General Partners' Committee.
Dividends have been accrued and not paid for six consecutive quarters on May 15,
2002 and June 1, 2002 for the 8% preferred stock and the 9% preferred stock,
respectively. As of September 30, 2002, these rights have not been exercised.

PATENTS HELD BY OTHER FIRMS OR INDIVIDUALS MAY BLOCK GLOBALSTAR'S PATENTS.

Because the U.S. patent application process is confidential, there can be
no assurance that third parties, including competitors of Globalstar, do not
have patents pending or issued that could result in infringement by Globalstar.
In such an event, Globalstar could be required to redesign some part of its
system or pay royalties for use of the third parties' patents, which could
increase cost or delay implementation of certain features or functions.

VOLATILITY OF MARKET VALUES.

Globalstar's stock price and the fair value of its senior notes experienced
substantial price volatility in the period before Globalstar announced that it
would restructure its debt. This volatility may continue as Globalstar
restructures its debt obligations and increases cash flows from operations.
These factors, as well as general economic conditions, actions of its
competitors, and political conditions may materially adversely affect its market
values in the future.

GTL IS DEPENDENT UPON PAYMENTS FROM GLOBALSTAR TO MEET ITS OBLIGATIONS.

Because GTL is a holding company whose only assets are its interests in
Globalstar, GTL is dependent upon payments from Globalstar to meet its
obligations, including those under its preferred stock. Further, GTL's rights
and the rights of holders of its securities, including the holders of preferred
stock, to participate in the distribution of assets upon Globalstar's
liquidation or recapitalization will be subject to the prior claims of
Globalstar's and GTL's creditors.

GTL HAS NO SOURCE OF FUNDS OTHER THAN THOSE PROVIDED BY GLOBALSTAR.

GTL is totally dependent on Globalstar for funding of its ongoing operating
costs, including legal fees, transfer agent fees, directors fees and its
restructuring officer. Continued funding from Globalstar is subject to
Bankruptcy Court approval and there can be no assurance that future funding of
GTL will be authorized.

GLOBALSTAR IS SUBJECT TO EXPORT REGULATION.

Globalstar's operations are subject to certain regulations of the U.S.
Treasury Department's Office of Foreign Assets Control (i.e., financial
transactions) and the U.S. Commerce Department's Bureau of Export Administration
(i.e., export of gateways and Globalstar phones). There can be no assurance that
such regulations will not adversely affect or delay Globalstar's operations in a
particular country.

40

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of September 30, 2002 and December 31, 2001, the fair value of
Globalstar's long-term debt and interest bearing vendor financing (collectively,
"long-term obligations") was estimated to be $124 million and $201 million,
respectively, using quoted market prices or, in the case of vendor financing and
term-loans with variable interest rates, the ratio of the carrying amount to
fair value of the senior notes for 2002 and 2001. The long-term obligations
carrying value exceeded fair value by $3.0 billion and $2.9 billion as of
September 30, 2002 and December 31, 2001, respectively. Market rate risk on
long-term obligations is estimated as the potential increase in annual interest
expense resulting from a hypothetical one percentage point increase in interest
rates and amounted to approximately $31 million and $30 million as of September
30, 2002 and December 31, 2001, respectively.

ITEM 4. CONTROLS AND PROCEDURES

(a) Globalstar maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in its filings under the
Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the periods specified in the rules and forms of the
Securities and Exchange Commission. Such information is accumulated and
communicated to Globalstar's management, including its chief executive
officer and chief financial officer, to allow timely decisions regarding
required disclosure. Globalstar's management recognizes that any set of
controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control
objectives.

Within 90 days prior to the filing date of this quarterly report on Form
10-Q, Globalstar has carried out an evaluation, under the supervision and
with the participation of Globalstar's management, including Globalstar's
chief executive officer and chief financial officer, of the effectiveness of
the design and operation of Globalstar's disclosure controls and procedures.
Based on such evaluation, Globalstar's chief executive officer and chief
financial officer concluded that Globalstar's disclosure controls and
procedures are effective.

GTL maintains disclosure controls and procedures that are designed to ensure
that information required to be disclosed in its filings under the
Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the periods specified in the rules and forms of the
Securities and Exchange Commission. Such information is accumulated and
communicated to GTL's restructuring officer to allow timely decisions
regarding required disclosure. GTL's restructuring officer recognizes that
any set of controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired
control objectives.

Within 90 days prior to the filing date of this quarterly report on Form
10-Q, GTL has carried out an evaluation, under the supervision and with the
participation of GTL's restructuring officer, of the effectiveness of the
design and operation of GTL's disclosure controls and procedures. Based on
such evaluation, GTL's restructuring officer concluded that GTL's disclosure
controls and procedures are effective.

(b) There have been no significant changes in Globalstar's internal controls or
in other factors that could significantly affect the internal controls
subsequent to the date of their evaluation in connection with the
preparation of this quarterly report on Form 10-Q.

There have been no significant changes in GTL's internal controls or in
other factors that could significantly affect the internal controls
subsequent to the date of their evaluation in connection with the
preparation of this quarterly report on Form 10-Q.

41

PART II.

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On February 20, 2001, a purported class action lawsuit was filed against
Globalstar and Globalstar Capital Corporation on behalf of the owners of the
10 3/4% bonds, due November 2004 (the "Bonds") in Superior Court, New Castle
County, Delaware. Globalstar Capital Corporation and Globalstar, L.P. issued the
Bonds as joint obligors. The complaint alleges that the defendants repudiated
the Bonds' registration statement, prospectus and indenture, without consent of
the bondholders, when Globalstar announced that it was suspending its future
interest payments on the Bonds. On April 23, 2001, the defendants moved to
dismiss the complaint for failure to state a cause of action. A second similar
class action was filed in Delaware on June 5, 2001. The defendants have also
moved to dismiss this complaint. Plaintiffs subsequently amended the complaint
and defendants again moved to dismiss the amended complaint for failure to state
a cause of action. On December 31, 2001, the court granted defendants' motion to
dismiss in part, dismissing plaintiffs' claims for principal and interest not
yet due, but allowing plaintiffs to proceed with their breach of contract claim
based on the interest payments already missed at the time the amended complaints
were filed. Defendants answered the complaints on January 17, 2002. These
proceedings are now automatically stayed in accordance with Section 362(a) of
the U.S. Bankruptcy Code. On August 7, 2001, Globalstar received a petition
filed on July 13, 2001 in Texas state court by L.E. Creel III, a holder of an
11 3/8% note seeking principal payment of the note plus interest. Globalstar
filed an answer contesting the petition. On December 6, 2001, the parties
participated in court ordered mediation, which failed to lead to a settlement of
plaintiff's claim. This proceeding is also stayed pursuant the U.S. Bankruptcy
Code.

In Re Globalstar Securities Litigation. On February 28, 2001, plaintiff
Eric Eismann filed a purported class action complaint against GTL in the United
States District Court for the Southern District of New York. The other
defendants named in the complaint were Loral Space & Communications Ltd. and
Bernard Schwartz, the former Chief Executive Officer of Globalstar. Globalstar
was not a named defendant in these actions. The complaint alleges that (a) GTL
and Mr. Schwartz violated Section 10(b) of the Securities Exchange Act of 1934
(the "Exchange Act") and Rule 10b-5 promulgated thereunder, by making material
misstatements or failing to state material facts about GTL's business and
prospects; and (b) that Loral and Mr. Schwartz are secondarily liable for these
alleged misstatements and omissions under Section 20(a) of the Exchange Act as
alleged "controlling persons" of GTL. The class of plaintiffs on whose behalf
this lawsuit has been asserted consists of all buyers of GTL common stock from
December 6, 1999, through October 27, 2000, excluding the defendants, officers
and directors of GTL, and certain persons affiliated therewith (the "Excluded
Persons"). Eighteen additional purported class action complaints were
subsequently filed in the United States District Court for the Southern District
of New York. These complaints were granted class action status and consolidated
into a case known as In Re Globalstar Securities Litigation, 01 Civ. 1748 (SHS).
On September 26, 2001, the Court appointed The Phillips Family as Lead Plaintiff
for the Class. On November 13, 2001, Lead Plaintiff filed a Consolidated Amended
Class Action Complaint and a demand for jury trial. The Amended Complaint drops
the cause of action against certain individuals and adds causes of action
against Globalstar and its wholly-owned subsidiary, Globalstar Capital. GTL and
Globalstar believe that they have meritorious defenses to these actions and on
or about February 25, 2002, filed a motion to dismiss the complaint. The case
against Globalstar and Globalstar Capital is stayed pursuant to the U.S.
Bankruptcy Code. There are, however, no assurances that the defenses to these
actions will be successful.

During 2001, Ericsson OMC Limited ("Ericsson") filed two separate demands
for arbitration with the American Arbitration Association that sought monetary
damages in the combined amount of $64.0 million with respect to two contracts.
Ericsson took the position that Globalstar failed to satisfy minimum purchase
requirements for phones under two contracts, one for the purchase of Fixed
Access Units (FAU) and one for the purchase of mobile R290 units (R290). The
parties negotiated a settlement and liquidation in the amount of $35.0 million,
which amount is a creditor's claim by Ericsson against Globalstar.

42

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

On January 16, 2001, Globalstar suspended indefinitely principal and
interest payments on its funded debt and dividend payments on its 8% and 9%
convertible redeemable preferred partnership interests in order to conserve cash
for operations. Non-payment of interest on Globalstar's debt instruments, credit
facility and vendor financing agreements when they become due, and continuance
of non-payment for the applicable grace period, are "events of default" under
the terms of each of the debt instruments. An event of default has occurred in
connection with Globalstar's $500 million credit facility, its vendor financing
facility with QUALCOMM, its 11 3/8% senior notes due February 15, 2004, its
11 1/4% senior notes due June 15, 2004, its 10 3/4% senior notes due November 1,
2004, and its 11 1/2% senior notes due June 1, 2005. Accordingly, for reporting
and accounting purposes, Globalstar classified the $500 million credit facility,
the QUALCOMM vendor financing and the senior notes as current obligations.

On February 15, 2002, Globalstar and certain of its subsidiaries filed
voluntary petitions under Chapter 11 of Title 11, United States Code, in the
United States Bankruptcy Court for the District of Delaware (Case Nos. 02-10499,
02-10501, 02-10503 and 02-10504). Globalstar and its debtor subsidiaries remain
in possession of their assets and properties and continue to operate their
businesses as debtors-in-possession. As a result of Globalstar's bankruptcy
petition, several of Globalstar's debt obligations have been accelerated and are
immediately due and payable.

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

The following exhibits are filed as part of this report:

Exhibit 12 Statement Regarding Computation of Ratios
Exhibit 99.1 Certification Required by 18 U.S.C. Section 1350
Exhibit 99.2 Certification Required by 18 U.S.C. Section 1350
Exhibit 99.3 Certification Required by 18 U.S.C. Section 1350

(b) Reports on Form 8-K

43

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.

GLOBALSTAR TELECOMMUNICATIONS LIMITED
Registrant

/s/ IRA E. GOLDBERG
--------------------------------------
Ira E. Goldberg
Restructuring Officer
and Registrant's Authorized Officer

GLOBALSTAR, L.P.

/s/ DANIEL P. MCENTEE
--------------------------------------
Daniel P. McEntee
Vice President and Chief Financial
Officer
(Principal Financial Officer)
and Registrant's Authorized Officer

Date: November 14, 2002

44

CERTIFICATIONS

I, Ira E. Goldberg, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Globalstar
Telecommunications Limited;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

Date: November 14, 2002

/s/ IRA E. GOLDBERG
--------------------------------------
Ira E. Goldberg
Restructuring Officer

45

I, Olof Lundberg, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Globalstar, L.P.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

Date: November 14, 2002

/s/ OLOF LUNDBERG
--------------------------------------
Olof Lundberg
Chief Executive Officer

46

I, Daniel P. McEntee, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Globalstar, L.P.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

Date: November 14, 2002

/s/ DANIEL P. MCENTEE
--------------------------------------
Daniel P. McEntee
Vice President and Chief Financial
Officer

47

INDEX TO EXHIBITS

Exhibit 12 Statement Regarding Computation of Ratios
Exhibit 99.1 Certification Required by 18 U.S.C. Section 1350
Exhibit 99.2 Certification Required by 18 U.S.C. Section 1350
Exhibit 99.3 Certification Required by 18 U.S.C. Section 1350