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 MARCH 31, 2003

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 [ ]

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

As of April 30, 2003, 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)................... 10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 29
Item 3. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 47
Item 4. Controls and Procedures..................................... 47

PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 48
Item 2. Changes in Securities and Use of Proceeds................... 49
Item 3. Defaults Upon Senior Securities............................. 49
Item 4. Submission of Matters to Vote of Security Holders........... 49
Item 5. Other Information........................................... 49
Item 6. Exhibits and Reports on Form 8-K............................ 49
Signatures........................................................... 51
Certifications....................................................... 52

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 months ended March 31, 2003 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, 2002.

2. ORGANIZATION AND BUSINESS

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, personnel or facilities, and does not manage the
day-to-day operations of Globalstar. 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. In 2000, Globalstar's
losses reduced GTL's investment in Globalstar's ordinary and preferred
partnership interests to a book value of zero. Accordingly, GTL 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 March 31, 2003. Certain of Globalstar's debt, including the
public debt, is 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 Title 11 of the United
States Code (the "Bankruptcy 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 $882.0 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.

As of March 31, 2003, GTL owned 42.4% of Globalstar's outstanding ordinary
partnership interests, 100% of Globalstar's outstanding 8% convertible
redeemable preferred partnership interests and 100% of Globalstar's outstanding
9% convertible redeemable preferred partnership interests.

On February 15, 2002 (the "Petition Date"), Globalstar and certain of its
subsidiaries filed voluntary petitions under Chapter 11 of the Bankruptcy Code
in the United States Bankruptcy Court ("Bankruptcy

5

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

NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)

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 were accelerated and became 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.
Based on events to date, Globalstar's bankruptcy filing and subsequent financial
restructuring will leave shares in GTL with 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.

On January 14, 2003, Globalstar and the official committee of unsecured
creditors appointed in its bankruptcy case (the "Creditors' Committee") reached
an agreement with New Valley Corporation ("New Valley") providing for
debtor-in-possession financing (the "New Valley DIP Facility") of up to $20
million and a total investment in a reorganized Globalstar of $55 million.
Globalstar filed a motion with the Bankruptcy Court for approval of this new
investment on January 15, 2003 and filed a Form 8-K on the same date. A hearing
to seek Bankruptcy Court approval of the New Valley DIP Facility was scheduled
for January 30, 2003 in Delaware. Prior to the hearing, the Creditors' Committee
informed Globalstar and New Valley that the Creditors' Committee would not
support approval of the New Valley investment, but that a consortium including
certain individual members of the Creditors' Committee was prepared to provide
substitute debtor-in-possession financing. As a consequence, New Valley withdrew
its investment offer as of January 30, 2003. Globalstar filed another Form 8-K
reflecting New Valley's withdrawal on February 4, 2003.

On February 14, 2003, Globalstar and the consortium of lenders (the "DIP
Lenders") reached agreement on secured, super priority debtor-in-possession
financing of $10 million (the "DIP Facility") and filed a motion with the
Bankruptcy Court seeking approval of such financing. Globalstar also filed a
motion defining certain auction procedures by which Globalstar would conclude
its search for an investor to fund Globalstar's restructuring and exit from
bankruptcy. The Bankruptcy Court provided interim approval of the DIP Facility
and approved the auction procedures on February 20, 2003, and the parties
executed the DIP Facility documents on February 25, 2003. Copies of the DIP
Facility, auction procedures and related documents were filed with a Form 8-K on
February 27, 2003. The Bankruptcy Court granted final approval of the DIP
Facility on March 6, 2003. Globalstar satisfied the prerequisites for drawing
the loan and, as of March 31, 2003, had drawn $4.0 million of the loan
principal. The terms of the DIP Facility provide the DIP Lenders with a security
interest in substantially all the assets of Globalstar and its debtor
subsidiaries, exclusive of cash reserved to fund the liquidation of Globalstar
if it were to become necessary.

Under the approved auction procedures, Globalstar received expressions of
interest from prospective investors in early March 2003, and with the assistance
of its financial advisors and in consultation with the Creditors' Committee,
determined which of them were "qualified" to perform due diligence and make a
definitive proposal for an equity investment in Globalstar. March 21, 2003 was
the deadline set for the submission of proposals by the qualified investors.
Four proposals were submitted by qualified investors, each of which proposed a
transaction involving the transfer of substantially all of the assets of
Globalstar to a newly formed entity. In accordance with the approved auction
procedures, Globalstar, in consultation with the Creditors' Committee, (i)
invited the qualified investors that submitted the three highest proposals to
participate in the auction, which was conducted in New York City on April 2 and
April 3, 2003, and (ii) at the auction, selected Thermo Capital Partners, LLC
("Thermo") as the qualified investor having submitted the highest and best
proposal. The Bankruptcy Court confirmed the selection of Thermo on April 9,
2003. In so doing, the bankruptcy judge stated that he would consider any
materially better proposals submitted prior to the date for final approval of
Thermo's proposed transaction, set at April 24, 2003. Subsequently, ICO Global
Communications (Holdings) Limited ("ICO"), one of the three qualified investors
that participated in the
6

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

NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)

auction, amended its proposal in such a manner as to render it materially better
than Thermo's proposal. Globalstar advised Thermo of ICO's amended proposal, and
provided Thermo an opportunity to respond. Prior to the scheduled April 24, 2003
hearing, Globalstar and the Creditors' Committee notified the Bankruptcy Court
that ICO's proposal was then the highest and best proposal. On April 24, 2003,
the judge heard oral argument and postponed decision for one day so that
Globalstar and the Creditors' Committee could consider a revision to the Thermo
proposal. On April 25, 2003, Globalstar advised the Bankruptcy Court of its
preference for the ICO proposal and the judge signed an order approving ICO's
proposed transaction.

Globalstar and ICO are currently in negotiations regarding definitive
documents to effect the proposed ICO transaction. Under the terms of the ICO
proposal, ICO would invest $55 million in a newly formed Delaware corporation to
which substantially all of Globalstar's assets would be transferred ("New
Globalstar"); in exchange for such cash contribution, ICO would receive a 54%
ownership interest in New Globalstar, with the remaining 46% to be distributed
to Globalstar's unsecured creditors. Subject to certain conditions, up to $35
million of the $55 million to be invested would be made available as secured,
super priority debtor-in-possession financing (the "ICO DIP Facility") to fund
Globalstar's ongoing operations and the completion of Globalstar's
reorganization. A portion of the $35 million would be used to retire
Globalstar's current DIP Facility. There are certain conditions, including the
execution of definitive documents and satisfactory agreements with QUALCOMM
Incorporated ("QUALCOMM") related to certain products and services, that must be
satisfied before the ICO transaction can be consummated and Globalstar can
effectuate a plan of reorganization providing for the distribution of the 46%
equity interest in New Globalstar to its unsecured creditors as contemplated.

It is currently contemplated that the definitive documentation for the
proposed ICO transaction will provide that, subject to certain limitations, New
Globalstar will use its commercially reasonable efforts to ensure that
shareholders of GTL as of the effective date of Globalstar's plan of
reorganization are given the opportunity to participate in the first
underwritten public offering of equity securities, if any, made by New
Globalstar on or before the seventh anniversary of such effective date; provided
that (i) doing so will not result in any material expense to New Globalstar or
have an adverse effect on the success of such offering or result in any material
delay of the completion of such offering, and (ii) such obligation will
automatically terminate upon a change of control of New Globalstar or if GTL
dissolves or takes other action adverse to the debtors prior to the effective
date of Globalstar's plan of reorganization.

No assurance can be given as to whether or when the ICO transaction will be
consummated or whether or when a plan of reorganization of Globalstar will be
confirmed or effectuated. A Bankruptcy Court hearing to approve the ICO DIP
Facility is scheduled for May 20, 2003. In the event that the proposed ICO
transaction is successfully consummated and a plan of reorganization of
Globalstar as described above is confirmed, it is contemplated that GTL will
file a petition for bankruptcy relief and wind down its operations.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Stock Based Compensation

GTL accounts for stock-based employee compensation in accordance with the
provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," ("APB No. 25") and related interpretations and complies
with the disclosure provisions of Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation," ("SFAS No. 123").

7

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

NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)

The following table illustrates the effect on GTL's reported net loss
applicable to common shareholders and net loss per share if GTL had applied the
fair value recognition provision of SFAS No. 123 to stock-based employee
compensation (in thousands, except per share amounts):

Earnings Per Share

Due to GTL's net losses for the three months ended March 31, 2003 and 2002,
diluted weighted average common shares outstanding excludes the weighted average
effect of: (i) the assumed 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 months ended March 31, 2003 and 2002, (see Note 4);
(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 1.8
million common shares for the three months ended March 31, 2003 and 2002,
respectively, (see Note 4); and (iii) the assumed exercise of outstanding
options and warrants, into 12.0 million common shares for the three months ended
March 31, 2003 and 2002, 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 ended March 31, 2003 and 2002, respectively.

Comprehensive Loss

During the periods presented, GTL had no transactions or other events that
under generally accepted accounting principles are recorded as an element of
stockholders' deficit but are excluded from net loss. Accordingly, a statement
of comprehensive loss has not been provided.

4. CONVERTIBLE REDEEMABLE PREFERRED STOCK

The 8% Preferred Stock and 9% Preferred Stock of GTL have 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 of
both. Based upon the price of GTL's common stock at March 31, 2003 and December
31, 2002, GTL has not authorized a sufficient number of shares of common stock
to effect payment in common stock. Accordingly, GTL classified $198,649,000 and
$202,865,000 as of March 31, 2003 and December 31, 2002, respectively, of the 8%
Preferred Stock and 9% 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 $0.07 and $0.06 as of
March 31, 2003 and December 31, 2002, respectively). The number of shares of GTL
common stock that would be issuable on the mandatory redemption date depends on
factors at the redemption date including the price of GTL's common stock and the
number of shares of 8% Preferred Stock and 9% Preferred Stock outstanding at the
time of the redemption. The amount of the 8% Preferred Stock and 9% Preferred
Stock classified outside the

8

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

NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)

shareholders' deficit section will vary in future periods depending on these
variables. No dividends have been paid on this preferred stock since December
31, 2000.

In the three months ended March 31, 2003, no shares of the 8% Preferred
Stock were converted into shares of GTL common stock. As of March 31, 2003, 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 March 31
2003 were convertible into 9,365,807 shares of GTL common stock.

In the three months ended March 31, 2003, no shares of 9% Preferred Stock
were converted into shares of GTL common stock. As of March 31, 2003, 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 March 31, 2003 were
convertible into 750,213 shares of GTL common stock.

5. COMMITMENTS AND CONTINGENCIES

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. ("Loral") 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 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. 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, the 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 Corporation
("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 Bankruptcy Code. There are, however, no assurances that
the defenses to these actions will be successful.

9

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

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

See notes to condensed consolidated financial statements.
10

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.
11

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

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

See notes to condensed consolidated financial statements.
12

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 months ended March
31, 2003 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, 2002.

2. ORGANIZATION AND BUSINESS

The governing body of Globalstar is the General Partners' Committee. This
Committee may have up to seven members, five of whom may be appointed by the
managing general partner of Globalstar, Loral QUALCOMM Satellite Services, L.P.
("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 (and with its subsidiaries
"Loral"), and QUALCOMM Incorporated ("QUALCOMM"). The managing general partner
of LQP is Loral General Partner, Inc. ("LGP"), a subsidiary of Loral. As of
March 31, 2003, Loral owned, directly or indirectly, 25,163,207 (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 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. In
1995, the United States Federal Communications Commission (the "FCC") granted
the necessary license to a wholly-owned subsidiary of LQP to construct, launch
and operate the Globalstar System. LQP, which has agreed to use such license for
the exclusive benefit of Globalstar, will transfer the license to Globalstar as
described below.

GTL was incorporated in 1994 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 March 31, 2003, GTL owned 27,911,240 (42.4%) of Globalstar's outstanding
ordinary partnership interests and 100% of the outstanding 8% and 9% convertible
redeemable preferred partnership interests ("RPPIs").

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

Globalstar has incurred cumulative ordinary partnership losses of $5.23
billion through March 31, 2003, which have been funded primarily through the
issuance of partnership interests and debt by Globalstar.

On February 15, 2002 (the "Petition Date"), Globalstar and certain of its
subsidiaries filed voluntary petitions under Chapter 11 of Title 11 of the
United States Code (the "Bankruptcy 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,
13

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the managing general partner of Globalstar, LQSS, filed a voluntary petition in
Delaware under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. 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 sheets 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
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 condensed consolidated financial statements.

On January 14, 2003, Globalstar and the official committee of unsecured
creditors appointed in its bankruptcy case (the "Creditors' Committee") reached
an agreement with New Valley Corporation ("New Valley") providing for
debtor-in-possession financing (the "New Valley DIP Facility") of up to $20
million and a total investment in a reorganized Globalstar of $55 million.
Globalstar filed a motion with the Bankruptcy Court for approval of this new
investment on January 15, 2003 and filed a Form 8-K on the same date. A hearing
to seek Bankruptcy Court approval of the New Valley DIP Facility was scheduled
for January 30, 2003 in Delaware. Prior to the hearing, the Creditors' Committee
informed Globalstar and New Valley that the Creditors' Committee would not
support approval of the New Valley investment, but that a consortium including
certain individual members of the Creditors' Committee was prepared to provide
substitute debtor-in-possession financing. As a consequence, New Valley withdrew
its investment offer as of January 30, 2003. Globalstar filed another Form 8-K
reflecting New Valley's withdrawal on February 4, 2003.

On February 14, 2003, Globalstar and the consortium of lenders (the "DIP
Lenders") reached agreement on secured, super priority debtor-in-possession
financing of $10 million (the "DIP Facility") and filed a motion with the
Bankruptcy Court seeking approval of such financing. Globalstar also filed a
motion defining certain auction procedures by which Globalstar would conclude
its search for an investor to fund Globalstar's restructuring and exit from
bankruptcy. The Bankruptcy Court provided interim approval of the DIP Facility
and approved the auction procedures on February 20, 2003, and the parties
executed the DIP Facility documents on February 25, 2003. Copies of the DIP
Facility, auction procedures and related documents were filed with a Form 8-K on
February 27, 2003. The Bankruptcy Court granted final approval of the DIP
Facility on March 6, 2003. Globalstar satisfied the prerequisites for drawing
the loan and, as of March 31, 2003, had drawn $4.0 million of the loan
principal. The terms of the DIP Facility provide the DIP Lenders with a security
interest in substantially all of the assets of Globalstar and its debtor
subsidiaries, exclusive of cash reserved to fund the liquidation of Globalstar
if it were to become necessary.

Under the approved auction procedures, Globalstar received expressions of
interest from prospective investors in early March 2003, and with the assistance
of its financial advisors and in consultation with the Creditors' Committee,
determined which of them were "qualified" to perform due diligence and make a
definitive proposal for an equity investment in Globalstar. March 21, 2003 was
the deadline set for the submission of proposals by the qualified investors.
Four proposals were submitted by qualified investors, each of which proposed a
transaction involving the transfer of substantially all of the assets of
Globalstar to a newly formed entity. In accordance with the approved auction
procedures, Globalstar, in consultation with the Creditors' Committee, (i)
invited the qualified investors that submitted the three highest proposals to
participate in the auction, which was conducted in New York City on April 2 and
April 3, 2003, and (ii) at the auction, selected Thermo Capital Partners, LLC
("Thermo") as the qualified investor having submitted the highest and best
proposal. The Bankruptcy Court confirmed the selection of Thermo on April 9,
2003. In so

14

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

doing, the bankruptcy judge stated that he would consider any materially better
proposals submitted prior to the date for final approval of Thermo's proposed
transaction, set at April 24, 2003. Subsequently, ICO Global Communications
(Holdings) Limited ("ICO"), one of the three qualified investors that
participated in the auction, amended its proposal in such a manner as to render
it materially better than Thermo's proposal. Globalstar advised Thermo of ICO's
amended proposal, and provided Thermo an opportunity to respond. Prior to the
scheduled April 24, 2003 hearing, Globalstar and the Creditors' Committee
notified the Bankruptcy Court that ICO's proposal was then the highest and best
proposal. On April 24, 2003, the judge heard oral argument and postponed
decision for one day so that Globalstar and the Creditors' Committee could
consider a revision to the Thermo proposal. On April 25, 2003, Globalstar
advised the Bankruptcy Court of its preference for the ICO proposal and the
judge signed an order approving ICO's proposed transaction.

Globalstar and ICO are currently in negotiations regarding definitive
documents to effect the proposed ICO transaction. Under the terms of the ICO
proposal, ICO would invest $55 million in a newly formed Delaware corporation to
which substantially all of Globalstar's assets would be transferred ("New
Globalstar"); in exchange for such cash contribution, ICO would receive a 54%
ownership interest in New Globalstar, with the remaining 46% to be distributed
to Globalstar's unsecured creditors. Subject to certain conditions, up to $35
million of the $55 million to be invested would be made available as secured,
super priority debtor-in-possession financing (the "ICO DIP Facility") to fund
Globalstar's ongoing operations and the completion of Globalstar's
reorganization. A portion of the $35 million would be used to retire
Globalstar's current DIP Facility. There are certain conditions, including the
execution of definitive documents and satisfactory agreements with QUALCOMM
related to certain products and services, that must be satisfied before the ICO
transaction can be consummated and Globalstar can effectuate a plan of
reorganization providing for the distribution of the 46% equity interest in New
Globalstar to its unsecured creditors as contemplated.

It is currently contemplated that the definitive documentation for the
proposed ICO transaction will provide that, subject to certain limitations, New
Globalstar will use its commercially reasonable efforts to ensure that
shareholders of GTL as of the effective date of Globalstar's plan of
reorganization are given the opportunity to participate in the first
underwritten public offering of equity securities, if any, made by New
Globalstar on or before the seventh anniversary of such effective date; provided
that (i) doing so will not result in any material expense to New Globalstar or
have an adverse effect on the success of such offering or result in any material
delay of the completion of such offering, and (ii) such obligation will
automatically terminate upon a change of control of New Globalstar or if GTL
dissolves or takes other action adverse to the debtors prior to the effective
date of Globalstar's plan of reorganization.

No assurance can be given as to whether or when the ICO transaction will be
consummated or whether or when a plan or reorganization of Globalstar will be
confirmed or effectuated. A Bankruptcy Court hearing to approve the ICO DIP
Facility is scheduled for May 20, 2003.

Globalstar has developed a business plan in connection with its
restructuring. The business plan, which is predicated on an infusion of funds,
assumes the consolidation of certain Globalstar service provider operations into
New Globalstar. Several of the acquisitions contemplated in the business plan
have been completed, commencing in December 2001 and continuing through May
2003. The consolidation strategy has brought additional efficiencies to the
operation of the Globalstar System and allowed for increased geographic coverage
and pricing coordination in Globalstar's service offerings and pricing. In
addition, Globalstar intends to revise its business relationships with the
remaining independent service providers, including exploring the possible
acquisition of their businesses or assets. Globalstar believes that these, and
additional, steps are needed to achieve and maintain financial viability (see
Note 4).

On March 14, 2003, Loral, the Creditors' Committee and Globalstar signed a
term sheet outlining the terms and conditions of a comprehensive settlement of
certain contested matters and a release of the claims
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

against Loral (the "Loral Settlement"). Also on March 14, 2003, Globalstar and
the Creditors' Committee filed a joint motion with the Bankruptcy Court under
Bankruptcy Rule 9019 for an order approving the Loral Settlement. The Bankruptcy
Court approved the Loral Settlement on April 14, 2003, and the parties executed
a definitive agreement reflecting the Loral Settlement on May 6, 2003. The Loral
Settlement provides the following, among other items: (1) Space Systems/Loral,
Inc. ("SS/L") would transfer to Globalstar title "as is" to the eight spare
satellites that are currently held in storage by SS/L; (2) certain strategic
agreements under which Loral holds exclusive rights to provide Globalstar
services to certain defense, national security and other governmental agencies
and in the aviation market would terminate, and a new joint venture company (to
be owned 75% by Globalstar and 25% by Loral) would be formed to pursue business
opportunities with those governmental agencies; (3) L/Q Licensee, Inc. ("L/Q
Licensee") a subsidiary of LQP, would transfer the FCC license held by it to
Globalstar or LQP would transfer its interests in L/Q Licensee to Globalstar;
(4) Loral would convey its interests in the Canadian service provider operations
to Globalstar; (5) certain Loral service provider financial obligations would be
settled through a reduction in debt obligations due from Globalstar Canada Co.
("GCC") to Loral and the remaining financial obligations would be restructured;
(6) Loral's general unsecured claims as a creditor in the Globalstar bankruptcy
proceeding would be quantified and allowed; (7) SS/L would return to Globalstar
unused advance prepayments related to the 2 GHz satellite contract; (8) if
requested by Loral, Globalstar would transfer its interest in the Russian
service provider, which it holds for the benefit of Loral, to Loral; (9) Loral's
designees would resign from Globalstar's General Partners Committee; and (10)
Globalstar and its subsidiaries would release their claims against Loral,
certain Loral affiliates and all six members of Globalstar's General Partners'
Committee (the "Released Parties") and would use reasonable best efforts to
cause Globalstar's Chapter 11 plan of reorganization to include a release of
third party claims against the Released Parties. Under the definitive settlement
agreement, the closing of the Loral Settlement is subject to the satisfaction of
certain conditions, including a condition that the Bankruptcy Court order
approving the Loral Settlement shall have becoming a final order. Subsequent to
the entry of such Bankruptcy Court order and before such order became a final
order, a motion to reconsider was filed by Advanced Metering and Technologies
Inc., and accordingly, such order has not yet become a final order as of the
date of this Report. No assurance can be given as to whether or when the
Bankruptcy Court order approving the Loral Settlement will become a final order
or as to whether or when the closing of the Loral Settlement will occur.

On March 25, 2003, Globalstar entered into a settlement and release
agreement with Elsacom SpA ("Elsacom") and a gateway asset purchase agreement
(collectively the "Elsacom Settlement") with a wholly owned subsidiary of
Elsacom. Elsacom is the primary Globalstar service provider in Central and
Eastern Europe, the operator of the gateway located in Avezzano, Italy and,
through its affiliate, Globalstar Northern Europe, the former operator of the
gateway located in Karkkila, Finland. Although Elsacom had defaulted on its
gateway contract obligations to Globalstar, Elsacom desired to continue
providing Globalstar service to its customers from Avezzano. Accordingly,
Globalstar and Elsacom agreed to negotiate a mutually acceptable plan for paying
certain of the debt, transferring the equipment in Finland to Globalstar and
maintaining Elsacom's service provider rights. Under the terms of the Elsacom
Settlement, Globalstar will receive cash payments totaling $2.4 million in two
installments to be completed by June 2003 and the release of all past payment
obligations, including certain pre-petition liabilities, due to Elsacom in
exchange for liquidation of the gateway contract payments due to Globalstar from
Elsacom. Elsacom paid the first installment of $1.2 million in March 2003.
Additionally, Globalstar will retain title to the gateway equipment installed in
Finland. Globalstar is in the process of dismantling the Finland gateway and
placing the removable parts, which contain most of the gateway's electronics, in
storage for future deployment.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Financial Statement Preparation

The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the amounts of expenses reported for the period. Actual results
could differ from estimates.

Since the Petition Date, Globalstar's consolidated financial statements
have been prepared in compliance with Statement of Position ("SOP 90-7") on
Financial Reporting by Entities in Reorganization Under the Bankruptcy Code
issued by the American Institute of Certified Public Accountants. 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 fixed by the Bankruptcy Court. Debt
obligations have not been adjusted to reorganization values since the Bankruptcy
Court has not yet confirmed a plan of reorganization. Management expects that
the allowed claims will be established near the date that a final plan of
reorganization is confirmed by the Bankruptcy Court and pre-petition liabilities
will be adjusted as the claims are resolved.

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 sheets 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 consolidated 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, $342.9 million of interest on
pre-petition debt has not been recorded since the Petition Date. In addition,
$19.2 million and $50.4 million of amortization have not been recorded since the
Petition Date on the debt discounts and premiums and deferred financing costs,
respectively. Dividends of $21.6 million on RPPIs since the Petition Date have
not been accrued or recorded as these amounts are not expected to be allowed
claims.

Production Gateways

These assets include $6.6 million and $12.6 million in net receivables at
March 31, 2003 and December 31, 2002, respectively, from service providers
associated with the reimbursement of gateway acquisition and deployment costs
previously paid by Globalstar to QUALCOMM. As of March 31, 2003, these
receivables are delinquent and Globalstar has sent notices of default where
appropriate. If the collection
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 March 31, 2003, Globalstar
has provided an allowance for doubtful collection of $9.8 million and $18.9
million as of March 31, 2003 and December 31, 2002, respectively.

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 March 31, 2003 is $50.4 million. As of
March 31, 2003, the deferred financing costs have been offset with the related
debt and included in the liabilities subject to compromise.

Stock-Based Compensation

Globalstar accounts for stock-based employee compensation in accordance
with the provisions of Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," ("APB No. 25") and related interpretations and
complies with the disclosure provisions under Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation," ("SFAS No. 123").

The following table illustrates the effect on Globalstar's reported net
loss applicable to common shareholders and net loss per share if Globalstar had
applied the fair value recognition provision of SFAS No. 123 to stock-based
employee compensation (in thousands, except per share amounts):

Revenue Recognition

Globalstar 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 and, through its subsidiaries, on a retail
basis directly to retail subscribers. Revenue from services to Globalstar
service providers is recognized based upon airtime minutes processed and
contractual fee arrangements. Service provider airtime revenue is recognized at
the close of the monthly billing cycle for each customer. Where collectibility
is uncertain, revenue is recognized on the cash basis.

Customer activation fees are deferred and recognized over one year, the
average life of the customer contract. Service revenue is presented net of
commissions paid to distributors. Commissions that reduced

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

revenue for the three months ended March 31, 2003 and March 31, 2002 were $0.6
million and $0.1 million, respectively.

Subscriber equipment revenue represents the sale of fixed and mobile user
terminals and accessories. Revenue is recognized upon shipment provided title
and risk of loss had passed to the customer, persuasive evidence of an
arrangement exists, the fee is fixed and determinable and collectibility is
probable.

Research and Development Expenses

Globalstar's research and development costs, which are expensed as
incurred, were $0.7 million and $0.2 million for the three months ended March
31, 2003 and 2002, respectively, and are included in operations expense.

Income Taxes

Globalstar is organized as a limited partnership with various corporate
subsidiaries. Generally, taxable income or loss, deductions and credits of the
partnership are passed through to its partners. Globalstar's corporate
subsidiaries will provide for a tax provision or benefit using the asset and
liability method of accounting for income taxes as prescribed by SFAS No. 109,
Accounting for Income Taxes.

Earnings Per Ordinary Partnership Interest

Due to Globalstar's net losses for the three months ended March 31, 2003
and 2002, diluted weighted average ordinary partnership interests outstanding
excludes the weighted average effect of: (i) the assumed conversion of the 8%
RPPIs into 2.3 million ordinary partnership interests for the three months ended
March 31, 2003 and 2002; (ii) the assumed conversion of the 9% RPPIs into 0.2
million and 0.5 million ordinary partnership interests for the three months
ended March 31, 2003 and 2002, respectively; and (iii) the assumed issuance of
ordinary partnership interests upon exercise of warrants and GTL's outstanding
options and warrants, totaling 10.8 million ordinary partnership interests for
the three months ended March 31, 2003 and 2002, 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 months ended March 31, 2003 and 2002.

Comprehensive Income

Comprehensive income (loss) is defined as revenue, expenses, gains and
losses that under generally accepted accounting principles are recorded as an
element of partners' deficit but are excluded from net loss, including foreign
currency translation adjustments. Globalstar presents other comprehensive income
(loss) in its consolidated statements of partners' deficit.

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.

New Accounting Pronouncements

In June 2002, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 146, Accounting for
Costs Associated with Exit or Disposal Activities, which addresses accounting
for restructuring and similar costs. SFAS No. 146 supersedes previous accounting
guidance, principally Emerging Issues Task Force ("EITF") Issue No. 94-3.
Globalstar has adopted the provisions of SFAS No. 146 for restructuring
activities initiated after December 31, 2002. SFAS No. 146 requires that the
liability for costs associated with an exit or disposal activity be recognized
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GLOBALSTAR, L.P., A DEBTOR-IN-POSSESSION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

when the liability is incurred. Under EITF Issue No. 94-3, a liability for an
exit cost was recognized at the date of the company's commitment to an exit
plan. SFAS No. 146 also establishes that the liability should initially be
measured and recorded at fair value. Accordingly, SFAS No. 146 may affect the
timing of recognizing future restructuring costs as well as the amounts
recognized.

In November 2002, the FASB issued FASB Interpretation ("FIN") No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN No. 45 requires companies to
recognize, at the inception of a guarantee, a liability for the fair value of
the obligation undertaken in issuing the guarantee. Globalstar adopted the
initial recognition and measurement provisions of FIN No. 45 for guarantees
issued or modified after December 31, 2002 and it did not have a significant
impact on its financial position or results of operations.

In December 2002, the EITF reached a consensus on EITF Issue No. 00-21,
"Revenue Arrangements with Multiple Deliverables." EITF Issue No. 00-21
addresses certain aspects of the accounting by a vendor for arrangements under
which it will perform multiple revenue-generating activities. In some
arrangements, the different revenue-generating activities (deliveries) are
sufficiently separable and there exists sufficient evidence of their fair values
to separately account for some or all of the deliveries (that is, there are
separate units of accounting). In other arrangements, some or all of the
deliveries are not independently functional, or there is not sufficient evidence
of their fair values to account for them separately. EITF Issue No. 00-21
addresses when, and if so, how an arrangement involving multiple deliverables
should be divided into separate units of accounting. EITF Issue No. 00-21 does
not change otherwise applicable revenue recognition criteria. The guidance in
this Issue is effective for revenue arrangements entered into in fiscal periods
beginning after June 15, 2003. The adoption of EITF Issue No. 00-21 is not
expected to have a material effect on Globalstar's consolidated financial
statements.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure, an amendment to FASB Statement No.
123". SFAS No. 148 provides alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends the disclosure requirement of
SFAS No. 123, "Accounting for Stock-Based Compensation", to require prominent
disclosures in both annual and interim consolidated financial statements about
the method of accounting for stock-based employee compensation and the effect of
the method used on reported results. Globalstar adopted the disclosure
provisions of SFAS No. 148 effective December 31, 2002.

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 Globalstar Canada Satellite Co. ("GCSC"), a Nova Scotia corporation
based in Ontario, Canada. The results of operations of GCSC, since December
2001, 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. 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. Loral's interest in GCSC is to be transferred to Globalstar
as part of the Loral Settlement discussed above (see Note 2).

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On August 19, 2002, the second transaction with Vodafone was completed to
acquire the United States and Caribbean gateways and sales operations. A
Globalstar subsidiary purchased all the outstanding equity interests of
Globalstar USA, LLC ("GUSA"), a Delaware limited liability 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 was part of Globalstar's plan to bring additional
efficiencies to the operation of the Globalstar System. The following table
summarizes the estimated values of the assets acquired and liabilities assumed
with the acquisition (in thousands):

On July 2, 2002 Globalstar, through 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 limited partnership interests in
Globalstar and TE.SA.M.'s remaining inventory. 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. The French
gateway was operational, but was not producing revenues at the time of the
purchase. Globalstar has restarted the European business and is earning limited
revenue from the French gateway. 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 provide Globalstar services.

5. TERM LOANS

On March 6, 2003, the Bankruptcy Court approved the $10 million DIP
Facility. Funds can be borrowed in increments not greater than $2.0 million and
can only be borrowed every 15 days. Two borrowings of $2.0 million each were
received in the three months ended March 31, 2003, totaling draws of $4.0
million. Interest accrues on the loans at 10% per annum and the balance of
accrued interest as of March 31, 2003 was $26,000. The maturity date of the term
loans is the earliest of the date a plan of reorganization becomes effective,
the closing of a sale of Globalstar's assets and July 15, 2003. The terms of the
DIP Facility provide the DIP Lenders with a security interest in substantially
all the assets of Globalstar and its debtor subsidiaries, exclusive of cash
reserved to fund the liquidation of Globalstar if it were to become necessary.
In partial consideration for the loan, upon confirmation of Globalstar's plan of
reorganization, Globalstar is obligated to pay the DIP Lenders a $250,000
commitment fee, which is being accrued through July 15, 2003. The accrued
commitment fee as of March 31, 2003 is $62,000 and is included in accrued
expenses. In the event that Globalstar's creditors are provided consideration in
excess of $55 million through Globalstar's plan of reorganization, the DIP
Lenders commitment fee will be increased by 10% of the amount of consideration
in excess of $55 million up to total consideration of $155 million and 5% of any
consideration provided in excess of $155 million. It is contemplated that a
portion of the ICO DIP Facility will be utilized to repay the principal and
interest owing under the term loans and to fund a $250,000 escrow to secure
payment of the commitment fee (see Note 2).

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. ACCRUED EXPENSES

Accrued expenses consist of the following (in thousands):

7. 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 consolidated 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 and 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):

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. 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 7). 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 $93.4 million, which
would have been recognized for the period from the Petition Date through March
31, 2003 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 $8.2 million during the period from
the Petition Date through March 31, 2003.

In May 2000, Globalstar finalized $531.1 million of vendor financing
arrangements (including $31.1 million of accrued interest) with QUALCOMM that
replaced the previous arrangement. As of March 31, 2003, $623.3 million was
outstanding under this facility (including $123.3 million of accrued interest).
This liability, including accrued interest through the Petition Date, has been
included in liabilities subject to compromise (see Note 7). In connection with
this agreement, QUALCOMM received warrants to purchase 3,450,000 Globalstar
partnership interests at an exercise price of $42.25 per interest. The exercise
price was determined by reference to the fair market value of GTL's common stock
on the closing date of the vendor financing, based on an approximate ratio of
one partnership interest for every four shares of GTL common stock. The warrants
are vested and will expire in 2007. The fair value of the vested warrants
totaled approximately $34.0 million and is being amortized over the term of the
vendor financing arrangements. However, in light of Globalstar's Chapter 11
petition, these warrants are likely to be of no value.

As a result of Globalstar's bankruptcy petition filed on February 15, 2002,
this vendor financing was accelerated and became immediately due and payable and
is included in liabilities subject to compromise.

SS/L provided $344 million of billings deferred under its construction
contracts with Globalstar, which included $120 million of orbital incentives.
The orbital payments on the replacement satellites are due on a per satellite
basis with 50% due when the satellite is placed in storage. The remaining 50% is
due when Globalstar directs SS/L to ship the satellite to the launch base. Until
such time, interest on the remaining 50% accrues at an interest rate of 10% per
annum. As of March 31, 2003, seven of the eight replacement satellites were
placed in storage and payments became due. No payments were made in the three
months ended March 31, 2003 or 2002 and interest accrued on the remaining 50%
through the Petition Date. Total accrued interest on the orbitals as of March
31, 2003 was $237,000. Payments were made on the $134 million of non-interest
bearing vendor financing through January 15, 2001. Penalty fees were accrued at
the London Interoffer Bank Rate ("LIBOR") plus 3%, through the Petition Date,
and total accrued penalties as of March 31, 2003 were $1.2 million. Interest was
being accrued at LIBOR plus 3%, through the Petition Date, and total accrued
interest as of March 31, 2003 was $53.7 million. All of the construction
contract amounts

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

owed to SS/L have been included in liabilities subject to compromise. Claims of
Loral and its affiliates are to be resolved as part of the Loral Settlement
discussed above (see Note 2).

9. CREDIT FACILITIES

As of March 31, 2003, the credit facilities have been included in the
liabilities subject to compromise (see Note 7). 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 $51.0 million and $15.3 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
March 31, 2003. As a result of Globalstar's bankruptcy petition filed on
February 15, 2002, this credit facility was accelerated and became immediately
due and payable.

10. SENIOR NOTES AND WARRANTS

As of March 31, 2003, the senior notes have been included in the
liabilities subject to compromise (see Note 7). 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 $183.2 million has not been accrued from the Petition Date
through March 31, 2003. 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 $13.0 million for the period
from the Petition Date through March 31, 2003.

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 (collectively, 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.

11. RESTRUCTURING AND REORGANIZATION

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 $21.6 million through March 31, 2003. Restructuring
and reorganization charges recorded in the quarter ended March 31, 2003 were
$1.9 million, including $1.1 million in Globalstar advisory fees, $0.6 million
in creditor advisory fees, and $0.2 in other restructuring costs. 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.

24

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A summary of the restructuring charges incurred from the beginning of 2001
through March 31, 2003 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 $2.8 million
accrued as of March 31, 2003 related to fees that were incurred, but either not
billed by the advisors or fees that were waiting for court approval to be paid.

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 $1.0 million accrued as of March 31, 2003 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 by
approximately 300 employees primarily through three separate actions in March,
July and September of 2001. Employee separation costs of $4.9 million and $0.2
million were recorded for the year 2001 and 2002, respectively, for employee
severance obligations, payments in accordance with Globalstar's retention bonus
program and fringe benefit costs related to terminated employees.

12. REVENUE INFORMATION

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

25

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. COMMITMENTS AND CONTINGENCIES

On February 20, 2001, a purported class action lawsuit was filed against
Globalstar and Globalstar Capital Corporation ("Globalstar Capital") on behalf
of the owners of the 10 3/4% senior notes, due November 2004 (the "10 3/4%
Senior Notes") in Superior Court, New Castle County, Delaware. Globalstar
Capital and Globalstar issued the 10 3/4% Senior Notes as joint obligors. The
complaint alleges that the defendants repudiated the 10 3/4% Senior Notes'
registration statement, prospectus and indenture, without consent of the holders
of the 10 3/4% Senior Notes, when Globalstar announced that it was suspending
its future interest payments on the 10 3/4% Senior Notes. 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. The 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. The defendants
answered the complaints on January 17, 2002. These proceedings are now
automatically stayed in accordance with Section 362(a) of the 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% senior note due
February 2004 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 Bankruptcy Code.

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 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 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. 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, the 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 Bankruptcy Code. There are, however, no assurances that the defenses to
these actions will be successful.

On December 5, 2002, StarMD, LLC ("StarMD") filed a complaint in the
Pennsylvania Court of Common Pleas, Allegheny County, naming GUSA as the
defendant. The complaint alleges four counts: (1) in equity, seeking a mandatory
injunction requiring GUSA to sell to StarMD "as many telephones as its requests
and to provide service to plaintiff's customers . . . ;" (2) in assumpsit, for
lost profits "and related revenue" from the sale of "an estimated 10,800
telephones," in the amount of $31,104,000; (3) in assumpsit, for recovery of the
value of plaintiff's efforts in developing a marketing campaign, for damages "in
excess of $25,000;" and (4) in trespass, for tortiously interfering with
plaintiff's agreement with Globalstar for the development and co-marketing of an
antenna kit for the Globalstar 1600 telephone. In February 2003, GUSA
26

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

filed Preliminary Objections requesting the court to dismiss the complaint on
grounds of (1) lack of personal jurisdiction, (2) improper venue, (3) forum non
conveniens, (4) a prior-existing valid and enforceable agreement to arbitrate
and (5) legal insufficiency. The court requested the parties to file briefs
before deciding the motion to dismiss.

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 even if they do 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. Globalstar expects to enter into an agreement
with the United States Internal Revenue Service pursuant to which, based upon
certain representations and satisfaction of certain terms and conditions,
Globalstar's total withholding obligation on this taxable income will be
significantly reduced. However, there can be no assurances such an agreement
will be reached.

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 only when necessary for certain accounts. As
of March 31, 2003, Globalstar has maximum contingent obligations with respect to
these service guarantees of approximately $2.3 million, that would come due in
the event that Globalstar services were discontinued in Canada or the United
States. Globalstar believes service will continue, therefore no accrual was
recorded.

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 New Globalstar.

Globalstar's employees are participants in a defined benefit pension plan
managed by Loral (the "Loral Plan"), Globalstar is current with respect to its
funding obligations required under the Loral Plan. Globalstar is currently
reviewing the impact of the proposed ICO transaction on the continued
participation of Globalstar employees in the Loral Plan and Globalstar's future
obligations thereunder.

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 Globalstar
Limited Partner, Inc. ("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.

Lockheed Martin, however, rejected the notes it received and instead
requested that Globalstar 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

27

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

interpretation of the agreements. Management believes, however, that a court
would agree with Globalstar's interpretation of the relevant agreements. The
notes are unsecured claims in Globalstar's bankruptcy case.

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.

14. SUBSEQUENT EVENT

Pursuant to Globalstar's restructured business plan, on May 6, 2003, GCSC
entered into a share purchase agreement to acquire 66.67% of the outstanding
common stock of Globalstar Canada Holding Co. ("GCHC"). As a result of this
stock purchase, GCSC indirectly owns 100% of GCC, the company which owns and
operates the two Canadian gateways. The purchase price of $354,000 was paid at
closing. This transaction, combined with the acquisition of the Loral interests
in the Canadian service provider operations contemplated by the Loral Settlement
(see Note 2), will provide Globalstar with 100% ownership of the Canadian
service provider operations.

28

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, L.P. ("Globalstar") and
Globalstar Telecommunications Limited ("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 for
bankruptcy protection on February 15, 2002 and GTL's equity interest in
Globalstar will likely be eliminated, in which event GTL shares will have no
value; (ii) Globalstar has limited cash to fund its operations; (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
operations; (viii) Globalstar is dependent on key vendors; (ix) GTL will likely
be unable to fund mandatory redemption requirements of 8% Preferred Stock 9%
Preferred Stock; (x) GTL has been de-listed by The NASDAQ Stock Market; (xi)
Lockheed Martin is disputing Globalstar's right to issue it a $150 million note
in satisfaction of payments made under a guaranty; (xii) Globalstar's satellites
have a limited useful life and may fail prematurely; (xiii) Globalstar faces
currency risks and special risks by doing business in developing markets; (xiv)
Globalstar's business is regulated, causing uncertainty and additional costs;
(xv) Globalstar's 2 GHz license has been cancelled and might not be reinstated;
(xvi) Globalstar may have its Big LEO spectrum allocation reduced; (xvii)
Globalstar faces intense competition from both direct and indirect competitors,
and additional direct competitors plan to enter the market in the future;
(xviii) technological advances and a continuing trend toward strategic alliances
in the telecommunications industry could give rise to significant new
competitors; (xix) new technologies and the expansion of land-based systems may
reduce demand for Globalstar's service; (xx) Globalstar could face liability
based on alleged health risks; (xxi) Globalstar relies on key personnel; (xxii)
certain potential conflicts of interest could result in decisions adverse to
Globalstar's interests; (xxiii) as a general partner, GTL is liable for the
recourse debt and other obligations of Globalstar; (xxiv) 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; (xxv) 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; (xxvi) patents
held by other firms or individuals may block Globalstar's patents; (xxvii)
publicly traded securities are subject to volatility of market values; (xxviii)
GTL is dependent upon payments from Globalstar to meet its obligations; (xxix)
GTL has no source of funds other than those provided by Globalstar; and (xxx)
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.

OVERVIEW

GTL, a general partner of Globalstar, which is a Delaware limited
partnership, was created to permit public equity ownership in Globalstar. GTL
does not have any operations, personnel or facilities, and does not manage the
day-to-day operations of Globalstar. GTL's sole asset is its investment in
Globalstar, and GTL's
29

results of operations reflect its share of the results of operations of
Globalstar on an equity accounting basis. Therefore, matters discussed in this
section address the financial condition and results of operations of Globalstar.

GLOBALSTAR'S RESTRUCTURING

On February 15, 2002 (the "Petition Date"), Globalstar and certain of its
subsidiaries filed voluntary petitions under Chapter 11 of Title 11 of the
United States Code (the "Bankruptcy Code"), in the United States Bankruptcy
Court (the "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 were accelerated and became
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. Based on events to date, Globalstar's bankruptcy filing and
subsequent financial restructuring will leave shares in GTL with 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.

On January 14, 2003, Globalstar and the official committee of unsecured
creditors appointed in its bankruptcy case (the "Creditors' Committee") reached
an agreement with New Valley Corporation ("New Valley") providing for
debtor-in-possession financing (the "New Valley DIP Facility") of up to $20
million and a total investment in a reorganized Globalstar of $55 million.
Globalstar filed a motion with the Bankruptcy Court for approval of this new
investment on January 15, 2003 and filed a Form 8-K on the same date. A hearing
to seek Bankruptcy Court approval of the New Valley DIP Facility was scheduled
for January 30, 2003 in Delaware. Prior to the hearing, the Creditors' Committee
informed Globalstar and New Valley that the Creditors' Committee would not
support approval of the New Valley investment, but that a consortium including
certain individual members of the Creditors' Committee was prepared to provide
substitute debtor-in-possession financing. As a consequence, New Valley withdrew
its investment offer as of January 30, 2003. Globalstar filed another Form 8-K
reflecting New Valley's withdrawal on February 4, 2003.

On February 14, 2003, Globalstar and the consortium of lenders (the "DIP
Lenders") reached agreement on secured, super priority debtor-in-possession
financing of $10 million (the "DIP Facility") and filed a motion with the
Bankruptcy Court seeking approval of such financing. Globalstar also filed a
motion defining certain auction procedures by which Globalstar would conclude
its search for an investor to fund Globalstar's restructuring and exit from
bankruptcy. The Bankruptcy Court provided interim approval of the DIP Facility
and approved the auction procedures on February 20, 2003, and the parties
executed the DIP Facility documents on February 25, 2003. Copies of the DIP
Facility, auction procedures and related documents were filed with a Form 8-K on
February 27, 2003. The Bankruptcy Court granted final approval of the DIP
Facility on March 6, 2003. Globalstar satisfied the prerequisites for drawing
the loan and, as of March 31, 2003, had drawn $4.0 million of the loan
principal. The terms of the DIP Facility provide the DIP Lenders with a security
interest in substantially all the assets of Globalstar and its debtor
subsidiaries, exclusive of cash reserved to fund the liquidation of Globalstar
if it were to become necessary.

Under the approved auction procedures, Globalstar received expressions of
interest from prospective investors in early March 2003, and with the assistance
of its financial advisors and in consultation with the Creditors' Committee,
determined which of them were "qualified" to perform due diligence and make a
definitive proposal for an equity investment in Globalstar. March 21, 2003 was
the deadline set for the submission of proposals by the qualified investors.
Four proposals were submitted by qualified investors, each of which proposed a
transaction involving the transfer of substantially all of the assets of
Globalstar to a newly formed entity. In accordance with the approved auction
procedures, Globalstar, in consultation with the Creditors' Committee, (i)
invited the qualified investors that submitted the three highest proposals to
participate in the auction, which was conducted in New York City on April 2 and
April 3, 2003, and (ii) at the auction, selected Thermo Capital Partners, LLC
("Thermo") as the qualified investor having submitted the highest and best
proposal. The Bankruptcy Court confirmed the selection of Thermo on April 9,
2003. In so
30

doing, the bankruptcy judge stated that he would consider any materially better
proposals submitted prior to the date for final approval of Thermo's proposed
transaction, set at April 24, 2003. Subsequently, ICO Global Communications
(Holdings) Limited ("ICO"), one of the three qualified investors that
participated in the auction, amended its proposal in such a manner as to render
it materially better than Thermo's proposal. Globalstar advised Thermo of ICO's
amended proposal, and provided Thermo an opportunity to respond. Prior to the
scheduled April 24, 2003 hearing, Globalstar and the Creditors' Committee
notified the Bankruptcy Court that ICO's proposal was then the highest and best
proposal. On April 24, 2003, the judge heard oral argument and postponed
decision for one day so that Globalstar and the Creditors' Committee could
consider a revision to the Thermo proposal. On April 25, 2003, Globalstar
advised the Bankruptcy Court of its preference for the ICO proposal and the
judge signed an order approving ICO's proposed transaction.

Globalstar and ICO are currently in negotiations regarding definitive
documents to effect the proposed ICO transaction. Under the terms of the ICO
proposal, ICO would invest $55 million in a newly formed Delaware corporation to
which substantially all of Globalstar's assets would be transferred ("New
Globalstar"); in exchange for such cash contribution, ICO would receive a 54%
ownership interest in New Globalstar, with the remaining 46% to be distributed
to Globalstar's unsecured creditors. Subject to certain conditions, up to $35
million of the $55 million to be invested would be made available as secured,
super priority debtor-in-possession financing (the "ICO DIP Facility") to fund
Globalstar's ongoing operations and the completion of Globalstar's
reorganization. A portion of the $35 million would be used to retire
Globalstar's current DIP Facility. There are certain conditions, including the
execution of definitive documents and satisfactory agreements with QUALCOMM
Incorporated ("QUALCOMM") related to certain products and services, that must be
satisfied before the ICO transaction can be consummated and Globalstar can
effectuate a plan of reorganization providing for the distribution of the 46%
equity interest in New Globalstar to its unsecured creditors as contemplated.

It is currently contemplated that the definitive documentation for the
proposed ICO transaction will provide that, subject to certain limitations, New
Globalstar will use its commercially reasonable efforts to ensure that
shareholders of GTL as of the effective date of Globalstar's plan of
reorganization are given the opportunity to participate in the first
underwritten public offering of equity securities, if any, made by New
Globalstar on or before the seventh anniversary of such effective date; provided
that (i) doing so will not result in any material expense to New Globalstar or
have an adverse effect on the success of such offering or result in any material
delay of the completion of such offering, and (ii) such obligation will
automatically terminate upon a change of control of New Globalstar or if GTL
dissolves or takes other action adverse to the debtors prior to the effective
date of Globalstar's plan of reorganization.

No assurance can be given as to whether or when the ICO transaction will be
consummated or whether or when a plan of reorganization of Globalstar will be
confirmed or effectuated. A Bankruptcy Court hearing to approve the ICO DIP
Facility is scheduled for May 20, 2003. In the event that the proposed ICO
transaction is successfully consummated and a plan of reorganization of
Globalstar as described above is confirmed, it is contemplated that GTL will
file a petition for bankruptcy relief and wind down its operations.

NEW BUSINESS PLAN AND RELATED TRANSACTIONS

Globalstar has developed a business plan in connection with its
restructuring. The business plan, which is predicated on an infusion of funds,
assumes the consolidation of certain Globalstar service provider operations into
New Globalstar. Several of the acquisitions contemplated in the business plan
have been completed, commencing in December 2001 and continuing through May
2003. The consolidation strategy has brought additional efficiencies to the
operation of the Globalstar System and allowed for increased geographic coverage
and pricing coordination in Globalstar's service offerings and pricing. In
addition, Globalstar intends to revise its business relationships with the
remaining independent service providers, including exploring the possible
acquisition of their businesses or assets. Globalstar believes that these, and
additional, steps are needed to achieve and maintain financial viability.

31

In accordance with Globalstar's consolidation strategy, 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, 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. 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 is exiting the Globalstar
business and has transferred its service provider interests in Australia and
Mexico to third parties.

TE.SA.M. provided Globalstar service through gateways in France, Turkey,
Venezuela, Argentina, and Peru. TE.SA.M. is in the process of liquidating and
has exited the Globalstar business. On July 2, 2002 Globalstar, through
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
interest 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. The French gateway was operational, but was not
producing revenues at the time of the purchase. Globalstar has restarted the
European business and is earning limited revenue from the French gateway. 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 provide Globalstar
services.

On December 30, 2002, the Bankruptcy Court approved a settlement agreement
among Globalstar Services Company, Inc. ("GSCI"), Globalstar, Globalstar
Vodafone Network Pty Ltd. Australia and Globalstar Australia Pty Ltd. Under this
settlement, Globalstar consented to the transfer by Vodafone Satellite Services
Limited ("VSSL") to Localstar of the service provider rights in Australia, and
Globalstar entered into a new service provider agreement with Localstar. VSSL
was the original authorized service provider for Australia and the operator of
three gateways in that country. In conjunction with this transaction, VSSL
agreed to settle certain pre-petition and post-petition debts with Globalstar.
Globalstar received payments totaling $1.7 million from Vodafone in January
2003.

On March 14, 2003, Loral Space & Communications Ltd. ("Loral"), the
Creditors' Committee and Globalstar signed a term sheet outlining the terms and
conditions of a comprehensive settlement of certain contested matters and a
release of claims against Loral (the "Loral Settlement"). Also on March 14,
2003, Globalstar and the Creditors' Committee filed a joint motion with the
Bankruptcy Court under Bankruptcy Rule 9019 for an order approving the Loral
Settlement. The Bankruptcy Court approved the Loral Settlement on April 14, 2003
and the parties executed a definitive agreement reflecting the Loral Settlement
on May 6, 2003. The Loral Settlement provides the following, among other items:
(1) Space Systems/Loral, Inc. ("SS/L") would transfer to Globalstar title "as
is" to the eight spare satellites that are currently held in storage by SS/L;
(2) certain strategic agreements under which Loral holds exclusive rights to
provide Globalstar services to certain defense, national security and other
governmental agencies and in the aviation market would terminate, and a new
joint venture company (to be owned 75% by Globalstar and 25% by Loral) would be
formed to pursue business opportunities with those governmental agencies; (3)
L/Q Licensee, Inc. ("L/Q Licensee") a subsidiary of Loral/QUALCOMM Partnership,
LP ("LQP"), would transfer the Federal Communications Commission ("FCC") license
held by it to Globalstar or LQP would transfer its interest in L/Q Licensee to
Globalstar; (4) Loral would convey its interests in the Canadian service
provider operations to Globalstar; (5) certain Loral service provider financial
obligations would be settled through a reduction in debt obligations due from
Globalstar Canada Co. ("GCC") to Loral and the remaining financial obligations
would be restructured; (6) Loral's general unsecured claims as a creditor in the
Globalstar bankruptcy proceeding would be quantified and allowed; (7) SS/L would
return to Globalstar unused advance prepayments related to the 2 GHz satellite
contract; (8) if requested by Loral, Globalstar would transfer its interest in
the Russian service provider, which it holds for the benefit of Loral, to Loral;
(9) Loral's designees would resign from Globalstar's General Partners Committee;
and (10) Globalstar and its subsidiaries would release their claims against
Loral, certain Loral affiliates and all six members of Globalstar's General
Partners' Committee, (the "Released Parties") and would use reasonable best
efforts

32

to cause Globalstar's Chapter 11 plan of reorganization to include a release of
third party claims against the Released Parties. Under the definitive settlement
agreement, the closing of the Loral Settlement is subject to the satisfaction of
certain conditions, including a condition that the Bankruptcy Court order
approving the Loral Settlement shall have become a final order. Subsequent to
the entry of such Bankruptcy Court order and before such order becoming a final
order, a motion to reconsider was filed by Advanced Metering and Technologies
Inc., and accordingly, such order has not yet become a final order as of the
date of this Report. No assurance can be given as to whether or when the
Bankruptcy Court order approving the Loral Settlement will become a final order
or as to whether or when the closing of the Loral Settlement will occur.

On March 25, 2003, Globalstar entered into a settlement and release
agreement with Elsacom SpA ("Elsacom") and a gateway asset purchase agreement
(collectively, the "Elsacom Settlement") with a wholly owned subsidiary of
Elsacom. Elsacom is the primary Globalstar service provider in Central and
Eastern Europe, the operator of the gateway located in Avezzano, Italy and,
through its affiliate, Globalstar Northern Europe, the former operator of the
gateway located in Karkkila, Finland. Although Elsacom had defaulted on its
gateway contract obligations to Globalstar, Elsacom desired to continue
providing Globalstar service to its customers from Avezzano. Accordingly,
Globalstar and Elsacom agreed to negotiate a mutually acceptable plan for paying
certain of the debt, transferring the equipment in Finland to Globalstar and
maintaining Elsacom's service provider rights. Under the terms of the Elsacom
Settlement, Globalstar will receive cash payments totaling $2.4 million in two
installments to be completed by June 2003 and the release of all past payment
obligations, including certain pre-petition liabilities, due to Elsacom in
exchange for liquidation of the gateway contract payments due to Globalstar from
Elsacom. Elsacom paid the first installment of $1.2 million in March 2003.
Additionally, Globalstar will retain title to the gateway equipment installed in
Finland. Globalstar is in the process of dismantling the Finland gateway and
placing the removable parts, which contain most of the gateway's electronics, in
storage for future deployment.

On May 6, 2003, Globalstar Canada Satellite Co. "GCSC" entered into a share
purchase agreement to acquire 66.67% of the outstanding common stock of
Globalstar Canada Holding Co. ("GCHC"). As a result of the stock purchase, GCSC
indirectly owns 100% of GCC, the company which owns and operates the two
Canadian gateways. The purchase price of $354,000 was paid at closing. This
transaction, combined with the acquisition of the Loral interests in the
Canadian service provider operations contemplated by the Loral Settlement, will
provide Globalstar with 100% ownership of the Canadian service provider
operations.

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 New Globalstar.

SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with United States
generally accepted accounting principles 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.

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. 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 March 31, 2003. Certain of Globalstar's debt, including the
public debt, is non-recourse to the general partners. On February 15, 2002,
Loral QUALCOMM Satellite Services, L.P. ("LQSS"), the other general
33

partner of Globalstar filed a voluntary petition under Chapter 11 of the
Bankruptcy 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 the general
partners since February 15, 2002. As a result of its general partner status, GTL
has recorded a cumulative liability of $882.0 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.

Since Globalstar filed a voluntary petition under Chapter 11 of the
Bankruptcy Code on February 15, 2002, Globalstar's consolidated financial
statements have been prepared in compliance with Statement of Position ("SOP
90-7") on Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code issued by the American Institute of Certified Public Accountants.
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 fixed by the
Bankruptcy Court. Debt obligations have not been adjusted to reorganization
values since the Bankruptcy Court has not yet confirmed the plan of
reorganization. Management expects that the allowed claims will be established
near the date that a final plan of reorganization is confirmed by the Bankruptcy
Court and pre-petition liabilities will be adjusted as the claims are resolved.

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 were accelerated and became 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.
Based on the events to date, Globalstar's bankruptcy filing and subsequent
financial restructuring will leave shares in GTL with no value. These factors,
among others, raise substantial doubt about GTL's ability to function as a going
concern.

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. As of March 31, 2003, 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 March 31, 2003, Globalstar
has reserved $9.8 million of the production gateway receivables.

34

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, Russia, most of the Middle East, China and South Korea. For the three
months ended March 31, 2003, Globalstar recorded total revenues of $11.6 million
and provided 11.3 million minutes of billable telecommunication services as
compared to $3.7 million and 6.8 million minutes for the three months ended
March 31, 2002. As of March 31, 2003, approximately 84,000 commercial
subscribers were using the Globalstar System. Globalstar's revenues during the
quarter were not sufficient to fund Globalstar's operations.

Globalstar's total revenues have increased significantly during the three
months ended March 31, 2003, primarily through its acquisition Globalstar USA,
LLC ("GUSA"), increased equipment sales and minute volume, and improved
collection of service provider accounts. The distribution of Globalstar's
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
March 31, 2003, Globalstar, L.P. recognized total revenue of $3.2 million,
consisting of $3.0 million of service revenue and $0.2 million related to the
sale of subscriber equipment and spare parts, compared with total revenue of
$0.8 million, consisting of service revenue during the three months ended March
31, 2002. The increase in service revenue consists of $0.6 million recognized
through collection of proceeds from the Vodafone settlement and an increase in
Globalstar system call minute volume to 11.3 million billable minutes during the
three months ended March 31, 2003 from 6.8 million for the equivalent period of
2002.

On December 18, 2001, Globalstar acquired an indirect 50.1% interest in
Globalstar Canada Satellite Co. (GCSC), Globalstar's Canadian service provider.
During the three months ended March 31, 2003, GCSC and its affiliates recognized
total revenue of $5.3 million, consisting of $3.1 million of service revenue and
$2.2 million of subscriber equipment sales, compared with total revenue of $3.2
million, consisting of $2.2 million of service revenue and $1.1 million of
subscriber equipment sales during the three months ended March 31, 2002. The
increase is due to an increase in call volume, primarily the result of services
to winter season oil and gas drillers in Northern Canada, and related increases
in equipment sales.

GUSA is the Globalstar service provider in the United States and the
Caribbean. GUSA and Globalstar Caribbean Ltd. which holds the Caribbean gateway
license, were acquired by a wholly-owned non-debtor subsidiary of Globalstar,
L.P. on August 19, 2002. During the three months ended March 31, 2003, GUSA
recognized total revenue of $5.3 million, consisting of $2.9 million of service
revenue and $2.4 million of subscriber equipment sales. Globalstar did not earn
any revenue related to its ownership of GUSA in the three months ended March 31,
2002.

Globalstar Europe Satellite Services, Ltd. ("GESS") was formed in July 2002
by Globalstar to restart the commercial Globalstar operations in western Europe
and North Africa. During the three months ended

35

March 31, 2003, GESS recognized total revenue of $21,000 of service revenue.
Globalstar did not earn any revenue related to GESS in the three months ended
March 31, 2002.

Globalstar eliminates revenues recorded on sales between subsidiary
companies and between the parent and subsidiaries. For the three months ended
March 31, 2003, $2.3 million of revenues were eliminated, consisting of
wholesale airtime sales from Globalstar, L.P. to GCSC, GUSA and GESS of $1.1
million and subscriber equipment sales between GUSA and GCSC of $1.2 million.
For the three months ended March 31, 2002, $0.3 million of revenues were
eliminated, consisting of wholesale airtime sales from Globalstar, L.P. to GCSC.

On a consolidated basis, Globalstar recorded subscriber equipment revenue
of $3.7 million and $1.1 million for the three months ended March 31, 2003 and
March 31, 2002, respectively. The increase is primarily the result of the GUSA
acquisition in August 2002 and new equipment sales by GCSC for the three months
ended March 31, 2003. Globalstar's cost of subscriber equipment sold was $2.1
million and $0.6 million for the three months ended March 31, 2003 and March 31,
2002, respectively. Both periods include inventory acquired at low cost in
acquisitions of the operations of several service providers. Most subscriber
products are currently being sold at 10% to 20% in excess of product cost.

Operations expense increased to $6.9 million for the three months ended
March 31, 2003 from $4.3 million for the three months ended March 31, 2002. The
increase is primarily the result of operation costs incurred by GUSA, which was
acquired in August 2002 and the expenses incurred by GESS for the restart of
European operations.

Marketing, general and administrative expenses decreased to $7.3 million
for the three months ended March 31, 2003 from $19.8 million for the three
months ended March 31, 2002. The decrease is primarily the result of $11.0
million in additional production gateway bad debt reserves recorded in the three
months ended March 31, 2002 and the reversal of accruals related to the Elsacom
Settlement of $0.6 million in the three months ended March 31, 2003. This
decrease is partially offset by an increase due to costs incurred by GUSA and
GESS in the three months ended March 31, 2003.

Restructuring and reorganization costs of $1.9 million were incurred in the
three months ended March 31, 2003, compared to $2.1 million for the three months
ended March 31, 2002. In the three months ended March 31, 2003, these costs were
primarily fees to Globalstar's restructuring specialists including financial
advisors, legal counsel, and other advisors of $1.1 million, fees to the
creditors' legal counsel of $0.6 million, and other restructuring costs of $0.2
million.

Depreciation and amortization expenses increased to $8.4 million for the
three months ended March 31, 2003 from $8.3 million for the three months ended
March 31, 2002. The increase is the result of additional assets purchased in
2002.

Interest income earned subsequent to the Petition Date is accounted for as
an offset to restructuring costs. Consequently, only $0.1 million was recorded
as interest income in the three months ended March 31, 2002, prior to the
Petition Date.

Globalstar ceased recognizing interest expense on pre-petition debts on the
Petition Date. Interest expense recorded from the beginning of the year through
the Petition Date in 2002 was $46.5 million. Interest expense recorded in the
three months ended March 31, 2003 was $0.1 million and represents accrued
interest and accrued financing costs on the term loans.

The accrual of preferred dividends on the 8% RPPIs and 9% RPPIs ceased on
the Petition Date. No preferred dividends were accrued for the three months
ended March 31, 2003. Through the Petition Date in 2002, $2.9 million of
preferred dividends were accrued. None of the distributions accrued during 2002
have been paid.

As a result of the above, the net loss applicable to ordinary partnership
interests decreased to $15.2 million for the three months ended March 31, 2003,
compared to $80.7 million for the three months ended March 31, 2002.

36

Globalstar is organized as a limited partnership with various corporate
subsidiaries. Generally, taxable income or loss, deductions and credits of the
partnership are passed through to its partners. Globalstar's corporate
subsidiaries will provide for a tax provision or benefit using the asset and
liability method of accounting for income taxes as prescribed by SFAS No. 109,
Accounting for Income Taxes.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2003, Globalstar had approximately $13.5 million in cash
and cash equivalents on hand, including $2.9 million held by GCSC. During 2003,
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.

The $13.5 million cash on hand at March 31, 2003 and the anticipated
revenue from operations are insufficient to fund Globalstar's operations.
Assuming approval of the ICO DIP Facility by the Bankruptcy Court on May 20,
2003, cash on hand from operations, together with funds available under the ICO
DIP Facility, are expected to be sufficient to fund operations through the
closing of the transactions contemplated by the ICO proposal. However, no
assurance can be given in this regard or, if such funds are insufficient, that
additional financing will be available on terms acceptable to Globalstar, if at
all. In such circumstances, if Globalstar is unable to obtain additional
financing, it will likely cease to operate.

Cash and cash equivalents decreased from $15.3 million on December 31, 2002
to $13.5 million on March 31, 2003. The decrease is primarily the result of cash
used to fund operations for the three months ended March 31, 2003, partially
offset by $4.0 million drawn on the DIP Facility.

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

NEW ACCOUNTING PRONOUNCEMENTS

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

In November 2002, the FASB issued FASB Interpretation ("FIN") No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN No. 45 requires companies to
recognize, at the inception of a guarantee, a liability for the fair value of
the obligation undertaken in issuing the guarantee. Globalstar adopted the
initial recognition and measurement provisions of FIN No. 45 for guarantees
issued or modified after December 31, 2002 and it did not have a significant
impact on its financial position or results of operations.

In December 2002, the EITF reached a consensus on EITF Issue No. 00-21,
"Revenue Arrangements with Multiple Deliverables." EITF Issue No. 00-21
addresses certain aspects of the accounting by a vendor for arrangements under
which it will perform multiple revenue-generating activities. In some
arrangements, the different revenue-generating activities (deliveries) are
sufficiently separable and there exists sufficient evidence of their fair values
to separately account for some or all of the deliveries (that is, there are
separate units of accounting). In other arrangements, some or all of the
deliveries are not independently functional, or there is not sufficient evidence
of their fair values to account for them separately. EITF Issue No. 00-21
addresses when, and if so, how an arrangement involving multiple deliverables
should be divided into separate

37

units of accounting. EITF Issue No. 00-21 does not change otherwise applicable
revenue recognition criteria. The guidance in this Issue is effective for
revenue arrangements entered into in fiscal periods beginning after June 15,
2003. The adoption of EITF Issue No. 00-21 is not expected to have a material
effect on Globalstar's consolidated financial statements.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure, an amendment to FASB Statement No.
123". SFAS No. 148 provides alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends the disclosure requirement of
SFAS No. 123, "Accounting for Stock-Based Compensation", to require prominent
disclosures in both annual and interim consolidated financial statements about
the method of accounting for stock-based employee compensation and the effect of
the method used on reported results. Globalstar adopted the disclosure
provisions of SFAS No. 148 effective December 31, 2002.

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.

GLOBALSTAR FILED FOR BANKRUPTCY PROTECTION ON FEBRUARY 15, 2002; GTL'S EQUITY
INTEREST IN GLOBALSTAR WILL LIKELY BE ELIMINATED, IN WHICH EVENT GTL SHARES WILL
HAVE NO VALUE.

Globalstar and certain of its subsidiaries filed petitions under Chapter 11
of the Bankruptcy Code on February 15, 2002. No assurances can be given as to
whether Globalstar will be able to successfully effectuate a plan of
reorganization. It is very likely that in any plan of reorganization 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 $13.5 million cash on hand at March 31, 2003 and the anticipated
revenue from operations are insufficient to fund Globalstar's operations.
Globalstar will require additional financing to sustain its current operations
until breakeven cash flow is achieved. Globalstar will require
debtor-in-possession financing, beyond the $10 million available under the DIP
Facility, to sustain its operations through the conclusion of its bankruptcy
case. Under the terms of the proposed ICO transaction, ICO would invest $55
million of which $35 million would be made available as debtor-in-possession
financing to fund Globalstar's ongoing operations and the completion of
Globalstar's reorganization. A portion of the $35 million would be used to
retire Globalstar's current DIP Facility. There are certain conditions that must
be satisfied before the ICO transaction can be consummated and Globalstar can
effectuate a plan of reorganization providing for the distribution of the 46%
equity interest in New Globalstar to its unsecured creditors as contemplated. No
assurance can be given as to whether or when the ICO transaction will be
consummated or whether or when a plan of reorganization of Globalstar will be
confirmed or effectuated. If the ICO transaction is not consummated, Globalstar
may be forced to cease operations.

38

The terms of the DIP Facility provide the DIP Lenders with a security
interest in substantially all the assets of Globalstar and its debtor
subsidiaries, exclusive of cash reserved to fund the liquidation of Globalstar
if it were to become necessary.

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% RPPIs and
9% RPPIs in order to conserve cash for operations. Non-payment of interest on
Globalstar's debt instruments, credit facility and vendor financing agreements
when due, and continuance of such non-payment beyond the applicable grace
periods, constitute "events of default" under the terms of each of those debt
instruments. Events of default have occurred under Globalstar's $500 million
credit facility, its vendor financing facility with QUALCOMM, and 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 (collectively, the "Senior Notes").

In addition, as a result of Globalstar's bankruptcy petition on February
15, 2002, other debt obligations of Globalstar were accelerated and became
immediately due and payable. Claims in respect of these obligations are
unsecured claims in the bankruptcy proceeding.

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 an immature
business sector that has not yet achieved commercial success in the marketplace.
Globalstar commenced commercial service in early 2000 but had acquired only
approximately 84,000 commercial subscribers by March 31, 2003, too few to
generate sufficient revenue to cover Globalstar's operating costs and service
its 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.

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 even if they do 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. Globalstar expects to enter into an agreement
with the United States Internal Revenue Service pursuant to which, based upon
certain representations and satisfaction of certain terms and conditions,
Globalstar's total withholding obligation on this taxable income will be
significantly reduced. However, there can be no assurance such an agreement will
be reached. Failure to successfully implement such an agreement or otherwise
resolve this tax issue may adversely impact Globalstar's ability to consummate
the proposed ICO transaction and have a plan of reorganization confirmed.

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

Until relatively recently, Globalstar depended entirely 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

39

costs. Globalstar has implemented its consolidation strategy and intends to
revise its business relationship with the service providers that are not
consolidated. Globalstar believes that the consolidation of certain service
providers and the possible consolidation of remaining independent service
providers contemplated by Globalstar's new business plan, will increase
Globalstar's operating efficiencies and provide for improved global service
coordination. Globalstar has limited experience in offering Globalstar services
at the retail level and may encounter unforeseen difficulties in assuming retail
service provider operations. No assurance can be given that the consolidation
strategy will be successful or that such efficiencies will be realized over the
longer term.

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. Globalstar has also not been able to find purchasers for gateways, which
were ordered and later canceled. 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.

While the assets Globalstar acquired from TE.SA.M. in July 2002 are
operational, TE.SA.M. ceased operating its billing systems, and, therefore,
generating revenue, in Western Europe and Northern Africa in late 2001.
Globalstar has recently reinitiated commercial operations of the Western
European Globalstar service, including distribution networks, billing and
customer care operations. There can be no assurance that TE.SA.M.'s former
customers will continue their subscriptions on the Globalstar network or that
Globalstar's Western European operations will provide revenue sufficient to
cover its cost of operations.

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.

GLOBALSTAR IS DEPENDENT 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 Mobile Terminals S.p.A. ("Telit"), for the
manufacture of GSM dual-mode phones. Ericsson OMC Limited 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. Even if
Globalstar does find a replacement, there may be a substantial period of time in
which its products are not available.

In late 2001 QUALCOMM purported to terminate its Development Contract with
Globalstar. Globalstar has been in discussions with QUALCOMM regarding a follow
on agreement that will allow it to utilize the QUALCOMM expertise necessary to
maintain the system. There can be no assurances that Globalstar and QUALCOMM
will successfully negotiate mutually satisfactory terms required to secure
QUALCOMM's support to Globalstar's system operations. QUALCOMM has substantially
reduced its staff assigned to Globalstar and is requesting advance payments or
deposits for current and future work.

Globalstar's inventory of QUALCOMM mobile phones is limited and is expected
to be exhausted by the end of the quarter ending June 30, 2003. QUALCOMM
currently maintains a substantial inventory of mobile Globalstar phones.
Globalstar and QUALCOMM are currently in discussions regarding terms under which
Globalstar would purchase some or all of the QUALCOMM inventory. There can be no
assurance that Globalstar will be able to obtain this phone inventory on terms
favorable to Globalstar, if at all, or that agreement can be reached prior to
the exhaustion of Globalstar's current inventory.

40

QUALCOMM has sold its entire inventory of Satellite Data Modems ("SDM's")
and has requested substantial volume commitments from Globalstar and its service
providers to restart production. Globalstar is currently reviewing this
requirement with QUALCOMM.

Globalstar is currently experiencing shortages of QUALCOMM fixed radio
access units or RAU's. QUALCOMM has restarted production of these units, but its
current production capacity is limited, and components required to build the
units as currently designed may not be available for future production. There
can be no assurance that Globalstar will have sufficient RAU units or SDM's to
meet anticipated demand for those products without incurring substantial
redesign and inventory costs.

Failure to reach agreement with QUALCOMM with respect to certain commercial
relationships may adversely impact Globalstar's ability to consummate the
proposed ICO transaction and have a plan of reorganization confirmed.

Telit is itself restructuring in Italy. There can be no assurance at this
time that Telit will continue as a going concern and will continue to
manufacture products for the Globalstar System.

SS/L completed production of seven of the eight spare satellites. All eight
are in storage in California. Title to those satellites, which is currently held
by SS/L, is to be transferred to Globalstar as part of the Loral Settlement
discussed above.

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

GTL's 8% convertible redeemable preferred stock ("8% Preferred Stock") and
9% convertible redeemable preferred stock ("9% Preferred Stock") have 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 of
both. Based upon the price of GTL's common stock at March 31, 2003, GTL has not
authorized a sufficient number of shares of common stock to effect payment in
common stock. Accordingly, as of March 31, 2003, GTL classified $198,649,000 of
the 8% Preferred Stock and 9% 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 March 31, 2003 (approximately $0.07). The number of
shares of GTL common stock that would be issuable on the mandatory redemption
date depends on factors at the redemption date including the price of GTL's
common stock and the number of shares of 8% Preferred Stock and 9% Preferred
Stock outstanding at the time of the redemption. The amount of the 8% Preferred
Stock and 9% 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 ("Lockheed Martin"). 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 requested that
Globalstar 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

41

relevant agreements. If the dispute is not resolved, Globalstar cannot be sure
that a court would agree with Globalstar's interpretation of the agreements.

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

The Globalstar satellite 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.

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.

Since mid-March 2001, sixteen satellites experienced anomalous behavior in
the S-Band converter. Of these, eight have been recovered and returned to
service, four have been declared failed (two of which were replaced by spares),
and four are currently out of service and undergoing recovery operations. On May
3, 2003, one satellite previously returned to service after recovering from
anomalous behavior, had a subsequent unrecoverable failure and was declared
failed. This satellite will be written off in the second quarter. 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. If Globalstar is unable to recover those satellites
currently undergoing recovery operations or any satellites that experience
anomalous behavior in the future are not recovered, Globalstar's results of
operations may be materially adversely affected. Failure or anomalous behavior
in additional satellites could also adversely impact the ability to consummate
the proposed ICO transaction and to have a plan of reorganization confirmed.

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

Based on business operations in 2002, in which Globalstar earned about 74%
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 international law or
enforceable only in foreign jurisdictions. As a result, Globalstar may find it
difficult 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
related and social instability, expropriation and other economic, political and
diplomatic conditions.

The limited availability of United States currency in some local markets
may prevent a service provider from making payments in United States dollars. In
addition, exchange rate fluctuations may affect Globalstar's ability to control
the prices charged for its services.

42

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 three 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.

GLOBALSTAR'S 2 GHZ LICENSE HAS BEEN CANCELLED AND MIGHT NOT BE REINSTATED.

On July 17, 2001, the FCC granted Globalstar and seven other applicants
authorizations to construct, launch and operate mobile satellite services
("MSS") systems in the 2 GHz band, subject to strict milestone requirements.
Each applicant received a base allocation of 3.5 MHz of paired spectrum with the
opportunity to gain additional spectrum upon launch of its system. Globalstar
held this authorization directly. Systems were required to be constructed in
compliance with certain milestones, the first of which was executing a non-
contingent contract to construct the system by July 17, 2002. Globalstar
believes that it met this first milestone by entering into a non-contingent
contract with SS/L on July 16, 2002. Globalstar requested the FCC to grant
certain waivers of later milestones. On January 30, 2003, the FCC's
International Bureau denied Globalstar's waivers and declared the 2 GHz license
to be null and void. Globalstar believes that this action by the FCC's staff is
inconsistent with the facts and the law and has requested the full FCC to review
and reverse it. Globalstar has also requested the full FCC to stay the
International Bureau's decision pending review. However, there can be no
assurance that the FCC will ultimately overturn the International Bureau's
decision and reinstate Globalstar's 2GHz license.

In August 2001, the FCC issued Notices of Proposed Rulemaking in two
proceedings that affect (1) the amount of radio frequency spectrum available in
the future for MSS, including Globalstar and (2) an MSS licensee's ability to
use its spectrum for ATC. In the first case, terrestrial wireless carriers
asserted that they need more spectrum, including the 2GHz band for their third
generation services. On January 30, 2003, the FCC issued decisions in both of
these proceedings. In the first, the FCC reassigned 30 MHz of MSS spectrum in
the 2 GHz band for terrestrial wireless use. In the second, the FCC allowed all
MSS operators, including Globalstar, to offer ATC in their assigned MSS spectrum
subject to certain conditions. Assuming that Globalstar succeeds in having its 2
GHz license reinstated, Globalstar does not believe that the reduction in 2 GHz
spectrum available for MSS will have a materially adverse effect on Globalstar's
future services. Globalstar is currently evaluating whether and how to implement
ATC in its low-earth orbit ("Big LEO") spectrum; however, no final decision will
be made pending completion of Globalstar's restructuring.

GLOBALSTAR MAY HAVE ITS BIG LEO SPECTRUM ALLOCATION REDUCED.

Under the FCC's band plan for MSS in Globalstar's frequency bands,
Globalstar must share the frequencies in the United States with other licensed
operators of CDMA systems. The FCC initially licensed Odyssey(TM) Mobile
Satellite System, MCHI Mobile Communications Holdings, Inc. (Ellipso(TM) Mobile
Satellite System) and Constellation Communications Holdings, Inc. to share
Globalstar's band. However, each of these three has either turned its license in
or had its license revoked by the FCC. On January 30, 2003, the FCC opened a
rulemaking proceeding to consider whether the 1610-1626.5 MHz band should be
reallocated between Globalstar and Iridium L.L.C. ("Iridium") and whether some
portion of the 2483.5-2500 MHz band should be assigned to Iridium or to other
terrestrial wireless operators. The FCC will also consider whether these "Big
LEO" bands should be opened up for new satellite system applications. Globalstar
intends to contest any proposed reduction in its spectrum assignment vigorously.
There can be no assurance that Globalstar will be permitted to retain all of its
Big LEO spectrum.

43

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

Iridium 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 long-term contract from the United States Department of Defense.

Existing MSS systems, including those of Mobile Satellite Ventures
(formerly Motient and American Mobile Satellite Corporation) 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.

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 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 efforts
beginning 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 the Globalstar System 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 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 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 FCC, 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 Globalstar's officers has
an employment contract with Globalstar, except that Mr. Olof Lundberg has a
written agreement to serve as chairman of Globalstar's General Partners'
Committee and chief executive officer of Globalstar. In addition, Globalstar
does not maintain "key man" life insurance. The departure of any of its
executives or other key employees could have an adverse effect on Globalstar's
business.

44

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 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.

- Certain members of Globalstar's Creditors' Committee have loaned money to
Globalstar and have invested, or are considering investing, in service
provider operations.

- On February 25, 2003, the Bankruptcy Court approved a $10 million DIP
Facility. One of the five lenders participating in the DIP Facility is
Iridium, a Globalstar competitor.

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 March 31, 2003. Globalstar's other general partner, LQSS,
filed for protection under the 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, is non-recourse to the general partners.

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

45

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 March 31, 2003, 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.

PUBLICLY TRADED SECURITIES ARE SUBJECT TO VOLATILITY OF MARKET VALUES.

GTL's stock price and the fair value of Globalstar's 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 the
market values of those securities 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. Globalstar has made no
such payments, nor is it likely to do so. 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 restructuring 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 fees. 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 United
States State Department's Office of Defense Trade Controls (i.e., satellites and
related technical data), United States Treasury Department's Office of Foreign
Assets Control (i.e., financial transactions) and the United States Commerce
Department's Bureau of Export Administration (i.e., 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.

46

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of March 31, 2003 and December 31, 2002, the fair value of Globalstar's
long-term debt and interest bearing vendor financing (collectively, "long-term
obligations") was estimated to be $124 million, 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 as of March 31, 2003 and December 31, 2002. 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 as of March 31, 2003 and
December 31, 2002.

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
Exchange Act 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.

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 to ensure that information required to be disclosed
in its filings under the Exchange Act is recorded, processed, summarized and
reported within the periods specified in the rules and forms of the
Securities and Exchange Commission.

GTL maintains disclosure controls and procedures that are designed to ensure
that information required to be disclosed in its filings under the Exchange
Act 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.

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 to ensure that information required to
be disclosed in its filings under the Exchange Act is recorded, processed,
summarized and reported within the periods specified in the rules and forms
of the Securities and Exchange Commission.

(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.

47

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 ("Globalstar Capital") on behalf
of the owners of the 10 3/4% senior notes, due November 2004 (the "10 3/4%
Senior Notes") in Superior Court, New Castle County, Delaware. Globalstar
Capital and Globalstar issued the 10 3/4% Senior Notes as joint obligors. The
complaint alleges that the defendants repudiated the 10 3/4% Senior Notes'
registration statement, prospectus and indenture, without consent of the holders
of the 10 3/4% Senior Notes, when Globalstar announced that it was suspending
its future interest payments on the 10 3/4% Senior Notes. 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. The 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. The defendants
answered the complaints on January 17, 2002. These proceedings are now
automatically stayed in accordance with Section 362(a) of the 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% senior note due
February 2004 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 Bankruptcy Code.

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 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 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. 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, the 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 Bankruptcy Code. There are, however, no assurances that the defenses to
these actions will be successful.

On December 5, 2002, StarMD, LLC ("StarMD") filed a complaint in the
Pennsylvania Court of Common Pleas, Allegheny County, naming GUSA as the
defendant. The complaint alleges four counts: (1) in equity, seeking a mandatory
injunction requiring GUSA to sell to StarMD "as many telephones as its requests
and to provide service to plaintiff's customers . . . ;" (2) in assumpsit, for
lost profits "and related revenue" from the sale of "an estimated 10,800
telephones," in the amount of $31,104,000; (3) in assumpsit, for recovery of the
value of plaintiff's efforts in developing a marketing campaign, for damages "in
excess of $25,000;" and (4) in trespass, for tortiously interfering with
plaintiff's agreement with Globalstar for the development and co-marketing of an
antenna kit for the Globalstar 1600 telephone. In February 2003, GUSA
48

filed Preliminary Objections requesting the court to dismiss the complaint on
grounds of (1) lack of personal jurisdiction, (2) improper venue, (3) forum non
conveniens, (4) a prior-existing valid and enforceable agreement to arbitrate
and (5) legal insufficiency. The court requested the parties to file briefs
before deciding the motion to dismiss.

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% RPPIs and
9% RPPIs 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
periods, constitute "events of default" under the terms of each of those debt
instruments. Events of default have occurred under 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. For a discussion of amounts of default, dividends payable and total
arrearages owing under these instruments, see Notes 7, 8, 9 and 10 to
Globalstar's financial statements contained in Part I, Item 1 of this Report,
each of which is incorporated by reference in this Part II, Item 3.

On February 15, 2002, Globalstar and certain of its subsidiaries filed
voluntary petitions under Chapter 11 of the Bankruptcy Code, in the Bankruptcy
Court. 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 were accelerated and became 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 10.1 Settlement Agreement and Release between Globalstar and
Loral
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

49

(b) Reports on Form 8-K:

50

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
(Sole Executive Officer)

GLOBALSTAR, L.P.

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

Date: May 15, 2003

51

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.

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

Date: May 15, 2003

52

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.

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

Date: May 15, 2003

53

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.

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

Date: May 15, 2003

54

INDEX TO EXHIBITS

Exhibit 10.1 Settlement Agreement and Release between Globalstar and
Loral
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