<PAGE>

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

                                  FORM 10-K/A

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

                                      OR

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

            For the Fiscal Year               Commission File Number
          Ended November 30, 2000                     0-22972

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

         Delaware                                           75-2479727
(State of Incorporation)                    (I.R.S. Employer Identification No.)

                             1730 Briercroft Court
                            Carrollton, Texas 75006
                           Telephone (972) 466-5000
              (Address, including zip code, and telephone number,
       including area code, of registrant's principal executive offices)

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

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

                    Common Stock, par value $0.01 per share
                               (Title of Class)

                  Rights to Purchase Series A Preferred Stock
                               (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                               Yes [X]     No [ ]

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

On February 23, 2001, the aggregate market value of the voting stock held by
nonaffiliates of the Company was approximately $44,785,675, based on the closing
sale price of $1.12 as reported by the NASDAQ/NMS. (For purposes of
determination of the above stated amount, only directors, executive officers and
10% or greater stockholders have been deemed affiliates).

On February 23, 2001, there were 60,142,221 outstanding shares of Common Stock,
$0.01 par value per share.

                      DOCUMENTS INCORPORATED BY REFERENCE

None

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<PAGE>

                              CELLSTAR CORPORATION

                               Introductory Note

      CellStar Corporation (the "Company" or "CellStar") hereby amends and
restates in its entirety  the Company's Annual Report on Form 10-K as amended by
Form 10K/A for the fiscal year ended November 30, 2000 filed with the Securities
and Exchange Commission on March 30, 2001.  This Form 10-K/A Amendment No. 2 is
being filed to include restated financial information and disclosures related to
the Company's accounting restatement announced on June 28, 2001.  The specific
items amended to reflect the impact of the accounting restatement are Items
1,6,7,8 and 14 below.


                              INDEX TO FORM 10-K/A
<TABLE>
<CAPTION>

                                                                                                      Page
                                                                                                     Number
<S>           <C>                                                                                    <C>

PART I.
Item 1.       Business                                                                                    3
Item 2.       Properties                                                                                 10
Item 3.       Legal Proceedings                                                                          10
Item 4.       Submission of Matters to a Vote of Security Holders                                        11

PART II.
Item 5.       Market for Registrant's Common Equity and Related Stockholder Matters                      11
Item 6.       Selected Consolidated Financial Data                                                       11
Item 7.       Management's Discussion and Analysis of Financial Condition and Results of Operations      13
Item 7(A).    Quantitative and Qualitative Disclosures About Market Risk                                 20
Item 8.       Consolidated Financial Statements and Supplementary Data                                   21
Item 9.       Changes in and Disagreements with Accountants on Accounting and Financial Disclosure       21

PART III.
Item 10.      Directors and Executive Officers of the Registrant                                         22
Item 11.      Executive Compensation                                                                     23
Item 12.      Security Ownership of Certain Beneficial Owners and Management                             29
Item 13.      Certain Relationships and Related Transactions                                             30

PART IV.
Item 14.      Exhibits, Financial Statement Schedules and Reports on Form 8-K                            30

</TABLE>

                                       2
<PAGE>

                                    PART I.

Item 1. Business

General

CellStar Corporation (the "Company" or "CellStar") is a leading global provider
of distribution and value-added logistics services to the wireless
communications industry, with operations in Asia-Pacific, Latin America, Europe
and North America. The Company facilitates the effective and efficient
distribution of handsets, related accessories, and other wireless products from
leading manufacturers to network operators, agents, resellers, dealers and
retailers. In many of the Company's markets, the Company provides activation
services that generate new subscribers for its wireless carrier customers.

On June 28, 2001, the Company announced that the results for its year ended
November 30, 2000 would be restated to reflect certain accounting adjustments.
The restatement increases the previously reported net loss by $3.5 million
($0.06 per diluted share) from $59.4 million ($0.99 per diluted share) to $63.0
million ($1.05 per diluted share).

In the normal course of business, the Company returns certain inventory to its
vendors in exchange for vendor credits.  The Company uses accounts payable
clearing accounts to record inventory returned to vendors until credit is
received from the vendor.  The Company determined during the second quarter of
fiscal 2001 that the Company incorrectly recorded credits received from vendors
for returned inventory to different clearing accounts and subsequently cleared
those amounts to cost of sales.  These entries had the effect of understating
accounts payable and cost of sales for the year ended November 30, 2000.  The
accounting adjustments required to restate the Company's consolidated financial
statements as of November 30, 2000, increase accounts payable by $5.5 million,
increase deferred income tax assets by $2.0 million, and reduce retained
earnings by $3.5 million. For the year ended November 30, 2000 the accounting
adjustments increase cost of sales by $5.5 million and increase the income tax
benefit by $2.0 million.

The "Asia-Pacific Region" consists of Taiwan, Singapore, The Philippines,
Malaysia, Japan, Korea and the People's Republic of China ("PRC"), including
Hong Kong. The "Latin American Region" consists of Mexico, Chile, Peru,
Colombia, Argentina and the Company's Miami, Florida operations. Until the
Company completed the sale of its Venezuela operations on December 26, 2000,
Venezuela was included in the Latin American Region. The "European Region"
consists of the United Kingdom, Sweden and The Netherlands. The "North American
Region" consists of the United States.

The Company's distribution services include purchasing, selling, warehousing,
picking, packing, shipping and "just-in-time" delivery of wireless handsets and
accessories. In addition, the Company offers its customers value-added services,
including Internet-based supply chain services (AOS On-LineSM), Internet-based
tracking and reporting, inventory management, marketing, prepaid wireless,
product fulfillment, kitting and customized packaging, private labeling, light
assembly, accounts receivable management and end-user support services. The
Company also provides wireless activation services and operates retail locations
in certain markets from which wireless communications products and accessories
are marketed to the public.

The Company markets its products to wholesale purchasers using, among other
methods, direct sales strategies, the Internet, strategic account management,
trade shows and trade journal advertising. The Company offers advertising
allowances, ready-to-use advertising materials and displays, easy access to
hard-to-find products, credit terms, a variety of name brand products and
highly-responsive customer service.

The Company, a Delaware corporation, was formed in 1993 to hold the stock of
National Auto Center, Inc., ("National Auto Center") a company that is now an
operating subsidiary. National Auto Center was originally formed in 1981 to
distribute and install automotive aftermarket products. In 1984, National Auto
Center began offering wireless communications products and services. In 1989,
National Auto Center became an authorized distributor of Motorola, Inc.
("Motorola") wireless handsets in certain portions of the United States.
National Auto Center entered into similar arrangements with Motorola in the
Latin American Region in 1991, and the Company entered into similar arrangements
with Motorola in the Asia-Pacific Region in 1994 and the European Region in
1996. The Company has also entered into similar distributor agreements with
other manufacturers, including Nokia Mobile Phones, Inc. ("Nokia"), Ericsson
Inc. ("Ericsson"), LG International Corp. Ltd. ("LG"), Samsung
Telecommunications America, Inc. ("Samsung") and Kyocera Wireless Corp.
("Kyocera").

Wireless communications technology encompasses wireless communications devices
such as handheld, mobile and transportable handsets, pagers and two-way radios.
Since its inception in 1983, the wireless handset market has grown rapidly.
Continued strong growth in the worldwide subscriber base and the convergence of
existing and emerging technologies into a single multi-function handset
connected to a wireless web should create significant new opportunities for the
Company. The Company believes that the wireless communications industry should
continue to grow for a number of reasons, including the following: economic
growth, increased service availability and the lower cost of wireless service
compared to conventional landline telephone systems. The Company also believes
that advanced digital technologies have led to increases in the number of
network operators and resellers, which has promoted greater competition for
subscribers and, the Company believes, has resulted in increased demand for
wireless

                                       3
<PAGE>

communications products. Finally, the proliferation of new products is expected
to lower prices, increase product selection and expand sales channels.

The Company's revenues grew at a 25.0% compound annual rate for the five fiscal
years ended November 30, 2000, and increased 6.1% for the year ended November
30, 2000, compared to the prior fiscal year. The Company generated 79.8% of its
revenues in 2000 from operations conducted outside the United States.

Cautionary Statements

The Company's success will depend upon, among other things, its ability to
maintain its operating margins, continue to secure an adequate supply of
competitive products on a timely basis and on commercially reasonable terms,
service its indebtedness and meet covenant requirements, secure adequate
financial resources, continually turn its inventories and accounts receivable,
successfully manage growth (including monitoring operations, controlling costs,
maintaining adequate information systems and effective inventory and credit
controls), manage operations that are geographically dispersed, achieve
significant penetration in existing and new geographic markets, and hire, train
and retain qualified employees who can effectively manage and operate its
business.

The Company's foreign operations are subject to various political and economic
risks including, but not limited to, the following: political instability;
economic instability; currency controls; currency devaluations; exchange rate
fluctuations; potentially unstable channels of distribution; increased credit
risks; export control laws that might limit the markets the Company can enter;
inflation; changes in laws related to foreign ownership of businesses abroad;
foreign tax laws; changes in cost of and access to capital; changes in
import/export regulations, including enforcement policies; "gray market"
resales; and tariff and freight rates. Political and other factors beyond the
control of the Company, including trade disputes among nations or internal
political or economic instability in any nation where the Company conducts
business, could have a material adverse effect on the Company.

The Company's consolidated financial statements and accompanying notes, which
include certain business segment and geographic information, are in Part IV.

Asia-Pacific Region

The Company believes that in the Asia-Pacific Region, primarily in the PRC,
demand for wireless communications services has been and should continue to be
driven by an unsatisfied demand for basic phone service due to the lack of
adequate landline service and limited wireless penetration. The Company believes
that wireless systems in this region offer a more attractive alternative to
landline systems because wireless systems do not require the substantial amount
of time and investment in infrastructure (in the form of buried or overhead
cables) associated with landline systems. Based on these and other factors, as
well as the large population base and economic growth in this region, the
Company believes that phone users should increasingly use wireless systems.

The Company offers wireless handsets and accessories manufactured by Original
Equipment Manufacturers ("OEMs"), such as Motorola, LG and Nokia, and
aftermarket accessories manufactured by a variety of suppliers. Throughout the
Asia-Pacific Region, CellStar acts as a wholesale distributor of wireless
handsets to large and small volume purchasers.

CellStar (Asia) Corporation Limited ("CellStar Asia"), the oldest of the
Company's business units in the region, derives its revenue principally from
wholesale sales of wireless handsets to Hong Kong-based companies that ship
these products to the remainder of the PRC and Taiwan.

Shanghai CellStar International Trading Company, Ltd. ("CellStar Shanghai"), a
wholly-owned, limited liability foreign trade company established in Shanghai,
PRC, commenced domestic wholesale operations in the PRC in 1997 using a local
commodities exchange market as an intermediary, pursuant to an experimental
initiative permitting market access as authorized by the Shanghai municipal
government. CellStar Shanghai purchases wireless handsets locally manufactured
by Motorola and Nokia and wholesales those products to distributors and
retailers located throughout the PRC. CellStar Shanghai has also entered into
cooperative arrangements with certain local distributors that allow them to
establish wholesale and retail operations using CellStar's trademarks. Under the
terms of such arrangements, CellStar Shanghai provides services, sales support,
training and access to promotional materials for use in their operations. As a
result of these cooperative arrangements, more than 1,000 retail points of sale
in the PRC display the CellStar name and trademarks. In exchange, those
distributors agree to purchase most of their requirements of wireless handsets
from CellStar Shanghai.

CellStar Shanghai currently deals with numerous local distributors, including
distributors located in the ten largest metropolitan areas in the PRC. CellStar
Shanghai leases warehouse, showroom and office space in the Pudong district of
Shanghai, as well as two other warehouses in Beijing and Guangzhou.

                                       4
<PAGE>

Although the Company's business in the Asia-Pacific Region is predominantly
wholesale, retail operations are also conducted in Singapore, Malaysia and
Taiwan. The Company has historically acted through wholly-owned subsidiaries in
each of the countries in this region; however, some of the retail operations may
be owned jointly with local partners, depending on the market and regulatory
environment in the host country.

The Company commenced operations in Taiwan in 1995. In 1999, the Company entered
into a strategic alliance with Arcoa Communications Co., Ltd. ("Arcoa"), the
largest telecommunications retail store chain in Taiwan. As a result of this
alliance, the Company became the primary supplier of Motorola-licensed handsets
and accessories to Arcoa's more than 400 retail outlets in Taiwan. In January
2000, the Company strengthened its relationship with Arcoa by acquiring 3.5% of
the issued and outstanding common stock of Arcoa. The Company entered the
Singapore, The Philippines and Malaysia markets in 1995 and conducts wholesale
and retail operations in each country. In Malaysia, the Company is a minority
partner (49%) in a joint venture. Due to the continuing deterioration in the
Malaysia market, the Company intends to divest its ownership interest in the
Malaysia joint venture in 2001. In 2000, the Company established a wholly-owned
subsidiary in Japan and an 80% owned subsidiary in Korea to locate and purchase
product and to develop relationships with local handset manufacturers in those
areas.

The following table outlines the Company's entry into the Asia-Pacific Region:
<TABLE>
<CAPTION>

                                            Year        Type of Operation (as of
             Country                       Entered         November 30, 2000)
             -------                       -------         -----------------
<S>                                        <C>      <C>

             Hong Kong                        1993              Wholesale
             Singapore                        1995         Wholesale and Retail
             The Philippines                  1995              Wholesale
             Malaysia                         1995         Wholesale and Retail
             Taiwan                           1995         Wholesale and Retail
             People's Republic of China       1997              Wholesale
             Japan                            2000              Purchasing
             Korea                            2000              Purchasing
</TABLE>

At November 30, 2000, the Company sold its products to over 200 wholesale
customers in the Asia-Pacific Region (excluding customers of the Company's
Malaysia joint venture), the ten largest of which accounted for approximately
23% of the Company's consolidated revenues in fiscal 2000. The Company offers a
broad product mix compatible with digital systems in the Asia-Pacific Region and
anticipates that its product offerings will continue to expand with the
evolution of new technologies as they become commercially viable.

The Company markets its products to a variety of wholesale purchasers, including
retailers, exporters and wireless carriers, through its direct sales force and
through trade shows. To penetrate local markets in certain countries, the
Company has made use of subagent and license relationships.

Latin American Region

As in the Asia-Pacific Region, the Company believes that demand for wireless
communications services in the Latin American Region has been and should
continue to be driven by an unsatisfied demand for basic phone service due to
the lack of adequate landline service and to limited wireless penetration. The
Company believes that wireless systems in this region offer a more attractive
alternative to landline systems because wireless systems do not require the
substantial amount of time and investment in infrastructure (in the form of
buried or overhead cables) associated with landline systems. Based on these and
other factors, as well as the large population base and economic growth in this
region, the Company believes that phone users should increasingly use wireless
communications systems.

The Company in the Latin American Region offers wireless communications
handsets, related accessories and other wireless products manufactured by OEMs,
such as Motorola, Nokia, Samsung, Kyocera and Ericsson, and aftermarket
accessories manufactured by a variety of suppliers to carriers, mass
merchandisers and other retailers. The Company, through its Miami, Florida
("Miami") operations, acts as a wholesale distributor of wireless communications
products in the Latin American Region to large volume purchasers, such as
wireless carriers, as well as to smaller volume purchasers. As a result, the
Company's Miami operations are included in the Latin American Region.

In the quarter ended May 31, 2000, the Company began phasing out a major portion
of its redistributor business in Miami due to the volatility of such business,
the relatively lower margins and higher credit risks. Redistributors are
distributors without existing direct relationships with manufacturers and
without long-term carrier or dealer/agent relationships. Such distributors
purchase product on a spot basis to fulfill intermittent customer demand and do
not have a long-term predictable product demand. Due to the reduction in the
redistributor business and the increased availability of in-country manufactured
product, the Company has experienced a significant

                                       5
<PAGE>

decline in exports from its Miami operation and intends to restructure or
consolidate its Miami operation in 2001.

Although the Company's business in the Latin American Region is predominantly
wholesale and value-added fulfillment services, retail operations are conducted
by the Company in all countries. On November 30, 2000, the Company operated 34
retail locations (including kiosks) in the Latin American Region, the majority
of which are located in Mexico. The Company has historically acted through
wholly-owned subsidiaries in each of the countries in this region. From 1998
until August 2000, the Company conducted its operations in Brazil primarily
through a majority owned (51%) joint venture. After a review of its Brazil
operations, the Company decided in the quarter ended May 31, 2000 to exit the
Brazil market and divest its 51% interest in the joint venture based on the
joint venture structure, foreign exchange risk, high cost of capital,
alternative uses of capital, accumulated losses, and the prospect of ongoing
losses. The Company completed divestiture of its 51% joint venture on August 25,
2000.

The Company decided during the quarter ended August 31, 2000, based on the
current and future economic and political outlook in Venezuela, to divest its
operations in Venezuela. The Company exited the Venezuela market on December 26,
2000.

The following table outlines the Company's entry into the Latin American Region:
<TABLE>
<CAPTION>

                       Year           Type of Operation (as of
Country               Entered            November 30, 2000)
-------               -------            ------------------
<S>                   <C>      <C>

Mexico                   1991     Wholesale and Retail
Chile                    1993     Wholesale and Retail
Venezuela                1993     Wholesale and Retail (Exited Venezuela
                                  December 26, 2000)
Colombia                 1994     Wholesale and Retail
Argentina                1995     Wholesale and Retail
Peru                     1998     Wholesale and Retail
</TABLE>

At November 30, 2000, the Company sold its products to over 1,450 wholesale
customers in the Latin American Region, the ten largest of which accounted for
approximately 15% of the Company's consolidated revenues in fiscal 2000. The
Company offers a broad product mix in the Latin American Region, including
products that are compatible with digital and analog systems, and anticipates
that its product offerings will continue to expand with the evolution of new
technologies as they become commercially viable.

The Company markets its products through direct sales and advertising. In all
markets except Peru, the Company uses direct mailings and newspapers to promote
its retail operations. To penetrate local markets, the Company has made use of
subagent relationships in certain countries.

European Region

The Company acts as a wholesale distributor of wireless communications products
in the European Region to large volume purchasers, such as large wireless
carriers, as well as to smaller volume purchasers. The Company uses distribution
facilities in Manchester, England, Stockholm, Sweden, and Amsterdam, The
Netherlands, to serve customers in the European Region. The Company in the
European Region offers wireless communications handsets, related accessories and
other wireless products manufactured by OEMs such as Motorola, Nokia, and
Ericsson, and aftermarket accessories manufactured by a variety of suppliers to
carriers, mass merchandisers and other retailers. In 1999, the Company acquired
Montana Telecommunications Group, B.V. in The Netherlands to expand the
Company's sales and market presence in The Netherlands, Belgium and Luxembourg.
In the third quarter of 2000, the Company completed the sale of its operations
in Poland.

In April 2000, the Company curtailed a significant portion of its U.K.
international trading operations following third party theft and fraud losses.
Trading in wireless handsets involves the purchase of wireless handsets from
sources other than the manufacturers or network operators (i.e., trading
companies) and the sale of those handsets to other trading companies. The
curtailment in the Company's trading activities had a significant impact on
revenues and profit for the Company's U.K. operation and on the European Region
as a whole.

The Company's largest wholesale customers in the region are wireless carriers.
Although the Company's business in the European Region is predominantly
wholesale, it has one retail location in The Netherlands. The Company has
historically acted through wholly-owned subsidiaries in each of the countries in
this region.

                                       6
<PAGE>

The following table outlines the Company's entry into the European Region:
<TABLE>
<CAPTION>

                                 Year        Type of Operation (as of
             Country            Entered         November 30, 2000)
             -------            -------         ------------------
<S>                             <C>          <C>

             United Kingdom        1996             Wholesale
             Sweden                1998             Wholesale
             The Netherlands       1999        Wholesale and Retail
</TABLE>

At November 30, 2000, the Company sold its products to over 1,050 wholesale
customers in the European Region, the ten largest of which accounted for
approximately 4% of the Company's consolidated revenues in fiscal 2000. The
Company offers a broad product mix compatible with digital systems in the
European Region and anticipates that its product offerings will continue to
expand with the evolution of new technologies as they become commercially
viable.

The Company markets its products through direct sales and advertising. In The
Netherlands, the Company primarily uses direct mailings and newspapers to
promote its retail operations.

North American Region

In the United States, wireless communications services were developed as an
alternative to conventional landline systems and have been among the fastest
growing market segments in the communications industry. The Company believes
that the U.S. market for wireless services should continue to expand due to the
increasing affordability and availability of such services and shorter
development cycles for new products and product and service enhancements. In
addition, many wireless service providers are upgrading their existing systems
from analog to digital technology as a result of capacity constraints in many of
the larger wireless markets and to respond to competition. Digital technology
offers certain advantages, such as improved overall average signal quality,
improved call security, lower incremental costs for additional subscribers, and
the ability to provide data transmission services.

At November 30, 2000, the Company sold its products to over 1,250 customers in
the North American Region, the ten largest of which accounted for approximately
10% of the Company's consolidated revenues in fiscal 2000. The Company offers
wireless handsets and accessories manufactured by OEMs, such as Motorola,
Ericsson, Nokia, Kyocera, Sony Electronics Inc. ("Sony") and NEC Corporation
("NEC") and aftermarket accessories manufactured by a variety of suppliers. The
Company's distribution operations and value-added services complement these
manufacturer distribution channels by allowing these manufacturers to sell and
distribute their products to smaller volume purchasers and retailers.

The Company offers a broad product mix in the United States, including products
that are compatible with digital and analog systems and anticipates that its
product offerings will continue to expand with the evolution of new technologies
as they become commercially viable.

The Company continues to develop and enhance the functionality of its AOS On-
Line and netXtremeSM programs. These programs are proprietary, Internet-based
order entry and supply chain services software and systems designed to assist
the Company's customers in the submission of orders, the tracking of such orders
and the analysis of business activities with the Company. AOS On-Line and
netXtreme greatly enhance a customer's ability to actively manage its
inventories and reduce supply chain delays. In addition, the Company assists
customers in developing e-commerce platforms and solutions designed to enhance
sales and reduce product delivery and activation delays.

As of November 30, 2000, the Company operates two retail locations in the United
States--one in Austin, Texas, and one in Houston, Texas.

Industry Relationships

The Company has established strong relationships with leading wireless equipment
manufacturers and wireless service carriers. Although the Company purchased its
products from more than 15 suppliers in fiscal 2000, the majority of the
Company's purchases were from Motorola, Nokia, Ericsson, LG, Samsung and
Kyocera. For the year ended November 30, 2000, Motorola accounted for
approximately 46% of the Company's product purchases.

The Company has various supply contracts with terms of approximately one year
with Motorola, Nokia, Ericsson, Samsung, Kyocera, NEC, LG and Sony that specify
territories, minimum purchase levels, pricing and payment terms. These contracts
typically provide the Company with "price protection," or the right to receive
the benefit of price decreases on products currently in the Company's inventory
if such products were purchased by the Company within a specified period of time
prior to the effective date of the price decrease.

                                       7
<PAGE>

The Company's expansion has been due to several factors, one of which is its
relationship with Motorola, historically one of the largest manufacturers of
wireless products in the world and the Company's largest supplier. In July 1995,
Motorola purchased a split-adjusted 2,089,312 shares of the outstanding common
stock of the Company. The Company believes that its relationship with Motorola
and its other suppliers should enable it to continue to offer a wide variety of
wireless communications products in all markets. While the Company believes that
its relationship with Motorola and other significant vendors is satisfactory,
there can be no assurance that these relationships will continue.

The loss of Motorola or any other significant vendor or a substantial price
increase imposed by any vendor or a shortage or oversupply of product available
from its vendors could have a materially adverse impact on the Company. No
assurance can be given that product shortages or product surplus will not occur
in the future.

Asset Management

The Company continues to invest in and focus on technology to improve financial
and information control systems. During 2000, the Company continued to make
progress on several information technology initiatives: (i) implementation and
rollout of data mart and decision support applications to improve sales and
inventory analysis, (ii) upgrades to the corporate headquarter network backbone
including enhanced redundancy and failover infrastructure as part of 24x7x365
availability, (iii) implementation of a common electronic mail and groupware
solution worldwide, (iv) implementation of remote access and computing for all
traveling workforce, and (v) upgrade of all internet security and electronic
commerce platforms. Key efforts for 2001 include: (i) increasing electronic
commerce capabilities through the rollout of additional features in the
Company's AOS On-Line system designed to support end user fulfillment; (ii)
expansion of internet-based commerce to international markets; (iii) increasing
XML-based catalog and order management capabilities; and (iv) rollout of data
mart and reporting applications to international customers. These initiatives
will continue to position the Company to take advantage of the market trends
with internet-based commerce and further provide opportunities to integrate the
Company's systems with their customers' systems.

The Company purchases its products from more than 15 suppliers that ship
directly to the Company's warehouse or distribution facilities. Inventory
purchases are based on quality, price, service, market demand, product
availability and brand recognition. Certain of the Company's major vendors
provide favorable purchasing terms to the Company, including price protection
credits, stock balancing, increased product availability and cooperative
advertising and marketing allowances. The Company provides stock balancing to
certain of its customers.

Inventory control is important to the Company's ability to maintain its margins
while offering its customers competitive prices and rapid delivery of a wide
variety of products. The Company uses its integrated management information
technology systems, specifically its inventory management, electronic purchase
order and sales modules (AOS On-Line and netXtreme), to help manage inventory
and sales margins.

Typically, the Company ships its products within 24 hours from receipt of
customer orders and, therefore, backlog is not considered material to the
Company's business.

The market for wireless products is characterized by rapidly changing technology
and frequent new product introductions, often resulting in product obsolescence
or short product life cycles. The Company's success depends in large part upon
its ability to anticipate and adapt its business to such technological changes.
There can be no assurance that the Company will be able to identify, obtain and
offer products necessary to remain competitive or that competitors or
manufacturers of wireless communications products will not market products that
have perceived advantages over the Company's products or that render the
products sold by the Company obsolete or less marketable. The Company maintains
a significant investment in its product inventory and, therefore, is subject to
the risks of inventory obsolescence and excessive inventory levels. The Company
attempts to limit these risks by managing inventory turns and by entering into
arrangements with its vendors, including price protection credits and return
privileges for slow-moving products. The Company's significant inventory
investment in its international operations exposes it to certain political and
economic risks. See "Item 1. Business--Cautionary Statements" and "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations--International Operations."

Significant Trademarks

The Company markets certain of its products under the trade name CellStar. The
Company has registered its trade name on the Principal Register of the United
States Patent and Trademark Office and has registered or applied for
registration of its trade name in certain foreign jurisdictions. The Company
also has filed for registrations of its other trade names in the United States
and other jurisdictions where it does business.

                                       8
<PAGE>

Competition

The Company operates in a highly competitive environment and believes that such
competition will intensify in the future. The Company competes primarily on the
basis of inventory availability and selection, delivery time, service and price.
Many of the Company's competitors are larger and have greater capital and
management resources than the Company. In addition, potential users of wireless
systems may find their communications needs satisfied by other current and
developing technologies. The Company's ability to remain competitive will
therefore depend upon its ability to anticipate and adapt its business to such
technological changes. There can be no assurance that the Company will be
successful in anticipating and adapting to such technological changes.

In the current U.S. wireless communications products market, the Company's
primary competitors are manufacturers, wireless carriers and other independent
distributors such as Brightpoint, Inc. The Company also competes with logistics
companies.

Competitors of the Company in the Asia-Pacific, Latin American and European
Regions include manufacturers, national carriers that have retail outlets with
direct end-user access, and U.S. and foreign-based exporters and distributors.
The Company is also subject to competition from gray market activities by third
parties that are legal, but are not authorized by manufacturers, or that are
illegal (e.g., activities that avoid applicable duties or taxes). In addition,
the Company competes for activation fees and residual fees with agents and
subagents for the wireless carriers.

Employees

As of November 30, 2000, the Company had approximately 1,300 employees
worldwide. In Mexico and Argentina, approximately 220 employees are subject to
labor agreements. The Company has never experienced any material labor
disruption and is unaware of any efforts or plans to organize additional
employees. Management believes that its labor relations are satisfactory.

Executive Officers of the Registrant

The following table sets forth certain information concerning the executive
officers of the Company:
<TABLE>
<CAPTION>

<S>                            <C> <C>
Alan H. Goldfield              57  Chief Executive Officer and Chairman of the Board
Dale H. Allardyce              51  President and Chief Operating Officer
A.S. Horng                     43  Chairman and Chief Executive Officer of CellStar
                                   (Asia) Corporation Limited
Austin P. Young                60  Senior Vice President, Chief Financial Officer and Treasurer
Elaine Flud Rodriguez          44  Senior Vice President, General Counsel and Secretary
Raymond L. Durham              39  Vice President, Corporate Controller
</TABLE>

Alan H. Goldfield is a founder of the Company and has been the Chairman of the
Board and Chief Executive Officer of the Company since its formation. Mr.
Goldfield served as President of the Company from its formation until March 1995
and from August 1996 until December 1996. Mr. Goldfield serves as an officer and
director of the Company pursuant to his employment agreement.

Dale H. Allardyce has served as the President and Chief Operating Officer of the
Company since November 1999. Previously, Mr. Allardyce served as Executive Vice
President--Operations for ENTEX Information Services, Inc., a personal computer
systems integrator, from February 1995 to December 1998. From January 1993 to
February 1995, Mr. Allardyce served as Senior Vice President of THORN Americas,
Inc., a nationwide chain of rent-to-own stores and a subsidiary of UK based
THORN EMI. From March 1982 to December 1992, Mr. Allardyce was employed by The
Southland Corporation, the owner and operator of a nationwide convenience store
chain, where he served as Vice President of distribution, food processing and
procurement from 1987 to 1992. Mr. Allardyce serves as an officer of the Company
pursuant to his employment agreement.

A.S. Horng has served as Chairman of CellStar Asia since January 1998 and has
also served as Chief Executive Officer of such company since April 1997 and
General Manager since 1993. From April 1997 until January 1998, Mr. Horng served
as Vice Chairman of CellStar Asia, and from April 1997 until October 1997, Mr.
Horng served as President of CellStar Asia. From 1991 to 1993, Mr. Horng was
President of C-Mart USA Corporation, a distributor and manufacturer of
aftermarket wireless phone accessory products. Mr. Horng serves the Company
pursuant to his employment agreement.

Austin P. Young has served as Senior Vice President, Chief Financial Officer and
Treasurer since November 1999. Prior to joining CellStar, Mr. Young served as a
Director and Executive Vice President--Finance and Administration of Metamor
Worldwide, Inc., an information technology and staffing services firm, from
August 1996 until November 1998. He was also Senior Vice President and Chief
Financial Officer of American General Corporation, a diversified insurance and
financial services company, from 1988 to 1996. Before joining American General,
Mr. Young was a partner with KPMG LLP, one of the largest independent
professional accounting firms, where he spent 22 years of his professional
career. Mr. Young serves as an officer of the Company pursuant to his employment

                                       9
<PAGE>

agreement and is a certified public accountant.

Elaine Flud Rodriguez has been Senior Vice President, General Counsel and
Secretary since January 2000. Previously, Ms. Rodriguez served as Vice
President, General Counsel and Secretary since joining the Company in October
1993. From October 1991 to August 1993, she was General Counsel and Secretary of
Zoecon Corporation, a pesticide manufacturer and distributor owned by Sandoz
Ltd. Prior thereto, she was engaged in the private practice of law with Atlas &
Hall and Akin, Gump, Strauss, Hauer & Feld. Ms. Rodriguez is licensed to
practice in the states of Texas and Louisiana. Ms. Rodriguez serves as an
officer of the Company pursuant to her employment agreement.

Raymond L. Durham has served as Vice President, Corporate Controller since
February 2001, Corporate Controller from November 1999 until January 2001, and
acting Corporate Controller from July 1999 until November 1999. From March 1997
until July 1999, Mr. Durham served as Director of Audit Services for the
Company. Prior to joining the Company, he was with KPMG LLP, one of the largest
independent professional accounting firms, from 1986 until 1997 where he held
several positions including Audit Senior Manager from 1990 until 1997. Mr.
Durham is a certified public accountant.

The Company's success is substantially dependent on the efforts of Alan H.
Goldfield, its Chairman and Chief Executive Officer, and certain other of the
Company's executive officers and key employees. The loss or interruption of the
continued full-time service of Mr. Goldfield or other of the Company's executive
officers and key employees could materially and adversely affect the Company's
business. Although the Company has entered into employment agreements with Mr.
Goldfield and several other officers and employees, there can be no assurance
that the Company will be able to retain their services. The Company does not
maintain key man insurance on the life of Mr. Goldfield or any other officer of
the Company. To support its continued growth, the Company will be required to
effectively recruit, develop and retain additional qualified management. The
inability of the Company to attract and retain such necessary personnel could
also have a materially adverse effect on the Company.

Item 2. Properties

As of November 30, 2000, the Company had a total of 29 operating facilities in
the Asia-Pacific Region (including kiosks, but not including facilities of the
Company's Malaysia joint venture), 28 of which were leased, a total of 53
operating facilities in the Latin American Region (including kiosks), all of
which were leased, and a total of 6 operating facilities in the European Region
(including kiosks), all of which were leased. These facilities serve as offices,
warehouses, distribution centers or retail locations.

The Company's corporate headquarters and principal North American Region
distribution facility is located at 1730 and 1728 Briercroft Court in
Carrollton, Texas. Both facilities are owned by the Company. As of November 30,
2000, the Company had three other operating facilities in the North American
Region, all of which were leased.

The Company believes that suitable additional space will be available, if
necessary, to accommodate future expansion of its operations.

Item 3. Legal Proceedings

During the period from May 1999 through July 1999, seven purported class action
lawsuits were filed in the United States District Court for the Southern
District of Florida, Miami Division, styled as follows: (1) Elfie Echavarri v.
CellStar Corporation, Alan H. Goldfield, Richard M. Gozia and Mark Q. Huggins;
(2) Mark Krug v. CellStar Corporation, Alan H. Goldfield, Richard M. Gozia and
Mark Q. Huggins; (3) Jewell Wright v. CellStar Corporation, Alan H. Goldfield,
Richard M. Gozia and Mark Q. Huggins; (4) Theodore Weiss v. CellStar
Corporation, Alan H. Goldfield, Richard M. Gozia and Mark Q. Huggins; (5) Tony
LaBella v. CellStar Corporation, Alan H. Goldfield, Richard M. Gozia and Mark Q.
Huggins; (6) Thomas F. Petrone v. CellStar Corporation, Alan H. Goldfield,
Richard M. Gozia and Mark Q. Huggins; and (7) Adele Brody v. CellStar
Corporation, Alan H. Goldfield, Richard M. Gozia and Mark Q. Huggins. Each of
the above lawsuits sought certification as a class action to represent those
persons who purchased the publicly traded securities of the Company during the
period from March 19, 1998, to September 21, 1998. Each of these lawsuits
alleges that the Company issued a series of materially false and misleading
statements concerning the Company's results of operations and investment in Topp
Telecom, Inc. ("Topp") resulting in violations of Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule
10b-5 promulgated thereunder.

The Court entered an order on September 26, 1999 consolidating the above
lawsuits and appointing lead plaintiffs and lead plaintiffs' counsel. On
November 8, 1999, the lead plaintiffs filed a consolidated complaint. The
Company filed a Motion to Dismiss the consolidated complaint and the Court
granted that motion on August 3, 2000. The plaintiffs filed a Second Amended and
Consolidated Complaint on September 1, 2000, essentially re-alleging the
violations of Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5
promulgated thereunder. The Company filed a Motion to Dismiss plaintiffs' Second
Amended and Consolidated Complaint on November 2, 2000, but the Court has not
yet rendered a decision. The Company believes that it has fully complied with
all applicable securities laws and regulations and that it has meritorious
defenses to the allegations made in the Second Amended and Consolidated

                                       10
<PAGE>

Complaint. The Company intends to vigorously defend the consolidated action if
its Motion to Dismiss is denied.

On August 3, 1998, the Company announced that the Securities and Exchange
Commission is conducting an investigation of the Company relating to its
compliance with federal securities laws. The Company believes that it has fully
complied with all securities laws and regulations and is cooperating with the
Commission staff in its investigation.

The Company is a party to various other claims, legal actions and complaints
arising in the ordinary course of business.

Management believes that the disposition of these matters will not have a
materially adverse effect on the consolidated financial condition or results of
operations of the Company.

Item 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of the Company's security holders
during the fiscal quarter ended November 30, 2000.

                                    PART II.

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

The Company's common stock is quoted on the NASDAQ Stock Market under the symbol
"CLST." The following table sets forth, on a per share basis for the periods
indicated, the high and low closing sale prices for the common stock as reported
by the NASDAQ Stock Market.
<TABLE>
<CAPTION>

                                                         High    Low
                                                         ----    ---
<S>                                                     <C>    <C>
Fiscal Year ended November 30, 2000
            Quarter Ended:
                  February 29, 2000                     $11.500  8.188
                  May 31, 2000                            9.375  2.438
                  August 31, 2000                         4.000  2.156
                  November 30, 2000                       4.375  1.656

Fiscal Year ended November 30, 1999
            Quarter Ended:
                  February 28, 1999                     $12.500  6.219
                  May 31, 1999                           12.688  6.313
                  August 31, 1999                         9.063  5.250
                  November 30, 1999                      10.438  5.500
</TABLE>

As of February 23, 2001, there were 272 stockholders of record, although the
Company believes that the number of beneficial owners is significantly greater
than that number because a large number of shares are held of record by CEDE &
Co.

The Company has never declared or paid cash dividends on its common stock. The
Company currently intends to retain all earnings to finance the continued growth
and development of its business and does not anticipate paying cash dividends on
the common stock in the foreseeable future. Any future determination as to the
payment of cash dividends will depend on a number of factors, including future
earnings, capital requirements, the financial condition and prospects of the
Company and any restrictions under the Company's credit agreements existing from
time to time, as well as other factors the Board of Directors may deem relevant.
The Company's current multicurrency revolving credit facility restricts the
payment of dividends by the Company to its stockholders. There can be no
assurance that the Company will pay any dividends in the future.

Item 6. Selected Consolidated Financial Data

The financial data presented below, as of and for each of the years in the five-
year period ended November 30, 2000, were derived from the Company's audited
financial statements. The selected consolidated financial data should be read in
conjunction with "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations," and the Company's Consolidated Financial
Statements and Notes thereto, included elsewhere herein.

                                       11
<PAGE>

<TABLE>
<CAPTION>

                                                                                      Year Ended November 30,
                                                                  --------------------------------------------------------------
                                                                     2000         1999         1998         1997         1996
                                                                  ----------   ----------   ----------   ----------   ----------
                                                               As Restated (1)
                                                                     (In thousands, except per share data and operating data)
<S>                                                               <C>          <C>         <C>               <C>         <C>
Statements of Operations Data:
  Revenues                                                        $2,475,682    2,333,805    1,995,850    1,482,814      947,601
  Cost of sales                                                    2,364,197    2,140,375    1,823,075    1,325,488      810,000
                                                                  ----------   ----------   ----------   ----------   ----------

  Gross profit                                                       111,485      193,430      172,775      157,326      137,601
  Operating expenses:
    Selling, general and administrative expenses                     169,232      111,613      116,747       81,319      135,585
    Impairment of assets                                              12,339        5,480            -            -            -
    Lawsuit settlement                                                     -            -        7,577            -            -
    Restructuring charge                                                (157)       3,639            -            -            -
                                                                  ----------   ----------   ----------   ----------   ----------

  Operating income (loss)                                            (69,929)      72,698       48,451       76,007        2,016
  Other income (expense):
    Interest expense                                                 (19,113)     (19,027)     (14,446)      (7,776)      (8,350)
    Equity in income (loss) of affiliated companies, net              (1,805)      31,933      (28,448)         465         (219)
    Gain on sale of assets                                             6,200        8,774            -            -          128
    Other, net                                                           932       (1,876)       1,389        2,260         (441)
                                                                  ----------   ----------   ----------   ----------   ----------

  Total other income (expense)                                       (13,786)      19,804      (41,505)      (5,051)      (8,882)
                                                                  ----------   ----------   ----------   ----------   ----------

  Income (loss) before income taxes                                  (83,715)      92,502        6,946       70,956       (6,866)
  Provision (benefit) for income taxes                               (20,756)      23,415       (7,418)      17,323         (453)
                                                                  ----------   ----------   ----------   ----------   ----------

  Net income (loss)                                               $  (62,959)      69,087       14,364       53,633       (6,413)
                                                                  ==========   ==========   ==========   ==========   ==========


  Net income (loss) per share: (2)
    Basic                                                             $(1.05)        1.16         0.24         0.92        (0.11)
    Diluted                                                           $(1.05)        1.12         0.24         0.89        (0.11)
  Weighted average number of shares: (2)
    Basic                                                             60,131       59,757       58,865       58,144       57,821
    Diluted                                                           60,131       65,589       60,656       60,851       57,821

Operating Data:
  International revenues, including export sales,
    as a percentage of revenues                                         79.8%        83.8         76.3         66.7         64.0


                                                                                           At November 30,
                                                                  --------------------------------------------------------------
                                                                     2000         1999         1998         1997         1996
                                                                  ----------   ----------   ----------   ----------   ----------

                                                                                           (In thousands)
Balance Sheet Data:
 Working capital                                                  $  264,380      332,841      259,923      259,954       71,365
 Total assets                                                        858,824      706,438      775,525      497,111      298,551
 Notes payable to financial institutions
   and current portion of long-term debt                             127,128       50,609       85,023            -       56,704
 Long-term debt, less current portion                                150,000      150,000      150,000      150,000        6,285
 Stockholders' equity                                                185,583      250,524      177,791      160,865      104,263

</TABLE>
   (1)   The Company has made adjustments to restate its previously reported
   results of operations for fiscal 2000.  See "Item 8. Consolidated Financial
   Statements and Supplementary Data" and the notes to the consolidated
   financial statements set forth therein.

   (2)   Common stock amounts have been retroactively adjusted to give effect to
   a two-for-one stock split, which was made in the form of a stock dividend
   distributed on June 23, 1998 and a three-for-two stock split, which was made
   in the form of a stock dividend distributed on June 17, 1997.

                                       12
<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Overview

CellStar is a leading global provider of distribution and value-added logistics
services to the wireless communications industry, with operations in Asia-
Pacific, Latin America, North America and Europe. CellStar facilitates the
effective and efficient distribution of handsets, related accessories and other
wireless products from leading manufacturers to network operators, agents,
resellers, dealers and retailers. In many of its markets, CellStar provides
activation services that generate new subscribers for its wireless carrier
customers. From 1996 through 2000, the Company's revenues grew from $947.6
million to $2,475.7 million. Sales of wireless communications products have
increased primarily as a result of greater market penetration due in part to
decreasing unit prices and service costs. During 2000, the Company divested its
majority interest in its Brazil joint venture, announced its intent to divest
its Venezuela operations, phased out a major portion of its North America and
Miami redistributor business, and substantially reduced its international
trading operations conducted by its U.K. subsidiary. In addition, the Company
experienced a decline in gross margins in 2000 primarily due to competitive
margin pressures and a shift in geographic revenue mix. The Company also
experienced an increase in bad debt expense of $41.1 million in 2000. As a
result, the Company incurred a net loss of $1.05 per diluted share in 2000,
compared to net income of $1.12 per diluted share in 1999.

On June 28, 2001, the Company announced that the results for its year ended
November 30, 2000 would be restated to reflect certain accounting adjustments.
The restatement increases the previously reported net loss by $3.5 million
($0.06 per diluted share) from $59.4 million ($0.99 per diluted share) to $63.0
million ($1.05 per diluted share).   The Company determined in the second
quarter of fiscal 2001 that it had incorrectly included as a reduction of cost
of sales certain credits received from vendors for returned inventory.

The accounting adjustments required to restate the Company's consolidated
financial statements as of November 30, 2000, increase accounts payable by $5.5
million, increase deferred income tax assets by $2.0 million, and reduce
retained earnings by $3.5 million.  For the year ended November 30, 2000 the
accounting adjustments increase cost of sales by $5.5 million and increase the
income tax benefit by $2.0 million.

The Company derives substantially all revenues from net product sales, which
includes sales of handsets and other wireless communications products. The
Company also derives revenues from value-added services, including activations,
residual income, and prepaid wireless services. Value-added service revenues
include fulfillment service fees, handling fees and assembly revenues.
Activation income includes commissions paid by a wireless carrier to the Company
when a customer initially subscribes for the carrier's wireless service through
the Company. Residual income includes payments received from carriers based on
the wireless handset usage by a customer activated by the Company.

Special Cautionary Notice Regarding Forward-Looking Statements

Certain of the matters discussed under the captions "Business," "Properties,"
"Legal Proceedings," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and elsewhere in this report may
constitute "forward-looking" statements for purposes of the Securities Act of
1933, as amended, and the Exchange Act and, as such, may involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company to be materially different
from future results, performance or achievements expressed or implied by such
forward-looking statements. When used in this report, the words "anticipates,"
"estimates," "believes," "continues," "expects," "projections," "forecasts,"
"intends," "may," "might," "could," "should," and similar expressions are
intended to be among the statements that identify forward-looking statements.
Various factors that could cause the actual results, performance or achievements
of the Company to differ materially from the Company's expectations are
disclosed in this report ("Cautionary Statements"), including, without
limitation, those statements made in conjunction with the forward-looking
statements included under the captions identified above and otherwise herein.
All written and oral forward-looking statements attributable to the Company are
expressly qualified in their entirety by the Cautionary Statements.

                                       13
<PAGE>

Results of Operations

The following table sets forth certain consolidated statements of operations
data for the Company expressed as a percentage of revenues for the past three
fiscal years:
<TABLE>
                                                                     2000    1999    1998
                                                                    -----   -----   -----
                                                                 As restated
<S>                                                           <C>           <C>     <C>
Revenues                                                            100.0%  100.0   100.0
  Cost of sales                                                      95.5    91.7    91.3
                                                                    -----   -----   -----

      Gross profit                                                    4.5     8.3     8.7
  Selling, general and administrative expenses                        6.8     4.8     5.8
  Impairment of assets                                                0.5     0.2       -
  Lawsuit settlement                                                    -       -     0.4
  Restructuring charge                                                  -     0.2       -
                                                                    -----   -----   -----

      Operating income (loss)                                        (2.8)    3.1     2.5
  Other income (expense):
      Interest expense                                               (0.8)   (0.8)   (0.7)
      Equity in income (loss) of affiliated companies, net           (0.1)    1.4    (1.4)
      Gain on sale of assets                                          0.3     0.4       -
      Other, net                                                        -    (0.1)      -
                                                                    -----   -----   -----

        Total other income (expense)                                 (0.6)    0.9    (2.1)
                                                                    -----   -----   -----

      Income (loss) before income taxes                              (3.4)    4.0     0.4
  Provision (benefit) for income taxes                               (0.9)    1.0    (0.3)
                                                                    -----   -----   -----

      Net income (loss)                                             (2.5)%    3.0     0.7
                                                                    =====   =====   =====

</TABLE>
The amount of revenues and the approximate percentages of revenues attributable
to the Company's operations by region for the past three fiscal years are shown
below:
<TABLE>
<CAPTION>

                                2000                1999             1998
                                ----                ----             ----
                                           (Dollars in thousands)
<S>                        <C>         <C>      <C>        <C>    <C>        <C>
Asia-Pacific Region        $1,024,762    41.4%    769,412   33.0    513,869   25.7

Latin American Region         636,354    25.7     717,273   30.7    705,624   35.4

North American Region         499,171    20.2     377,129   16.2    472,837   23.7

European Region               315,395    12.7     469,991   20.1    303,520   15.2
                           ----------  ------   ---------  -----  ---------  -----

Total                      $2,475,682   100.0%  2,333,805  100.0  1,995,850  100.0
                           ==========  ======   =========  =====  =========  =====

</TABLE>

Revenues from the Company's Miami operation have been classified as Latin
American Region revenues as these revenues are primarily exports to South
American countries, either by the Company or by exporter customers.

Fiscal 2000 Compared to Fiscal 1999

Revenues. The Company's revenues increased $141.9 million, or 6.1% from $2,333.8
million to $2,475.7 million.

Revenues in the Asia-Pacific Region increased $255.4 million, or 33.2% from
$769.4 million to $1,024.8 million. The Company's operations in the PRC,
including Hong Kong, provided $725.4 million in revenue, an increase of $196.8
million, or 37.2% from $528.6 million. This increase continued to be driven by
the strong demand in the PRC and the build-up of sales channels. The Company's
operations in Taiwan provided $207.7 million in revenue, an increase of $20.3
million, or 10.8%, from $187.4 million. Demand in Taiwan increased due to the
introduction of new high-end handsets. However, Taiwan's growth was impacted
negatively in the fourth quarter of 2000 by political uncertainty in the country
and concern about Taiwan's relationship with the PRC. Taiwan's fourth quarter
2000 revenues of $44.2 million were its lowest quarterly revenues since the
first quarter of 1999 when revenues were $27.0 million. In The Philippines,
revenues increased $33.5 million to $48.7 million due to carrier promotions and
receipt by the Company in the fourth quarter of 1999 of certain distribution
rights to Nokia products in The Philippines. The growth rate over 1999, however,
decreased in the second half of 2000. Revenues in the second half of 2000 were
$17.7 million reflecting the slowdown in the Philippine economy. Revenues in
Singapore were $42.9 million in 2000 compared to $38.3 million in 1999.

The Latin American Region provided $636.4 million of revenues, compared to
$717.3 million, a decrease of $80.9 million, or 11.3%. Revenues in Mexico
increased $154.3 million to $383.3 million in 2000 due primarily to increased
carrier business. Revenues for Brazil were down $153.2 million in 2000 to $40.6
million. In 1999, the recently completed privatization of the telecommunications

                                       14
<PAGE>

industry was driving rapid growth in carrier sales in Brazil. In 2000, sales to
the Company's major customer in Brazil were greatly reduced due to the increased
availability of in-country manufactured product. In August 2000, the Company
completed the divestiture of its 51% interest in its Brazil operations (see
"International Operations"). Revenues from the Venezuela operations declined
$40.4 million in 2000 to $36.6 million. The decline was a result of the effects
of the torrential floods in late 1999, the positive impact on last year's first
quarter of a special carrier promotion, and market softness in 2000 caused by
political and economic instability. In the third quarter 2000, the Company
decided to exit its Venezuela operations and completed its sale of that
operation in December 2000 (see "International Operations"). Revenues from the
Company's operations in Miami decreased $75.1 million to $79.1 million in 2000
as increased product availability from in-country manufacturers in Latin America
continued to reduce export sales from Miami. The Company began phasing out a
major portion of its redistributor business in its Miami and North American
operations in the second quarter 2000, due to the volatility of the
redistributor business, the relatively lower margins, and higher credit risks.
Also, supply shortages in the third and fourth quarters of 1999 significantly
weakened the redistributor channel, reducing the number of financially viable
redistributors and creating operating and financial difficulties for others.
Revenues from the redistributor business for Miami and North America were $57.4
million and $158.6 million in 2000 and 1999, respectively. Due to the reduction
in the redistributor business and the decline in export sales, the Company
intends to restructure or consolidate its Miami operation in 2001. Revenues in
Colombia increased $32.1 million to $48.1 million primarily reflecting increased
carrier activity business in the fourth quarter of 2000. Combined revenues from
the operations in Argentina, Chile, and Peru increased from $47.1 million in
1999 to $48.6 million in 2000.

North America Region revenues were $499.2 million, up 32.4% from $377.1 million
for the prior year. U.S. revenues continued to benefit from strong promotional
activity by several customers, as well as the addition of new customers and
expanded markets. In the first quarter of 2001, the Company converted a major
U.S. account to a consignment basis with fulfillment fees, which will reduce
revenue potential for 2001 by approximately $100 million, but will also reduce
inventory risk and the need for working capital.

The Company's Europe Region recorded revenues of $315.4 million, a decrease of
$154.6 million, or 32.9% from $470.0 million, primarily due to the Company's
decision to curtail its U.K. international trading operations in April 2000 (see
"International Operations"). Revenues from Sweden increased $6.7 million to
$118.7 million in 2000. Revenues from operations in The Netherlands, which were
acquired in the third quarter of 1999, were $30.7 million. The Company sold its
operations in Poland in the third quarter of 2000.

Gross Profit. Gross profit decreased $81.9 million, or 42.3% from $193.4 million
to $111.5 million. The decrease in gross profit can be attributed to a shift in
geographic revenue mix, shortages of digital handsets in North America, and
global industry price competition, including an oversupply of analog handsets in
North America and an oversupply of handsets in the Asia-Pacific Region during
parts of 2000. The Company's commitment to defend market share in the face of
intense global industry price competition, particularly in the Asia-Pacific
Region, also negatively impacted the gross margin percentage. Based on 1999's
handset shortages and industry forecasts of higher demand, manufacturers
significantly increased production in 2000. However, worldwide handset sales,
while significantly higher in 2000, were still below industry forecasts. This
resulted in a surplus of product during parts of 2000 driving stronger-than-
usual competition for market share, mainly in the Asia-Pacific Region and to a
lesser extent in the Latin American Region. The decrease in gross profit is also
partially due to $32.3 million in inventory obsolescence caused primarily by
price declines during the second quarter and $3.2 million in third party theft
and fraud losses related to the U.K. international trading operations, also in
the second quarter.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $57.6 million, or 51.6% from $111.6 million to
$169.2 million. This increase was primarily due to bad debt expense of $51.5
million, up from $10.4 million for 1999. This bad debt expense related to: (i)
certain U.S.-based accounts receivable from Brazilian importers, the
collectibility of which deteriorated significantly in the second quarter of
2000, and which were further affected by the Company's decision to divest its
majority interest in its joint venture in Brazil; (ii) accounts receivable from
redistributors, many of which were impacted by the supply shortage in 1999 and
were also further affected by the phase out of a major portion of the
redistributor business in the Company's Miami and North America operations;
(iii) accounts receivable in the Asia-Pacific Region whose businesses have been
adversely affected by competitive market conditions in Asia; and (iv) a
receivable in the U.S. from a satellite handset customer. The increase in
selling, general and administrative expenses was also attributable to costs
associated with business expansion activities and professional expenses. Overall
selling, general and administrative expenses as a percentage of revenues
increased to 6.8% from 4.8%.

Impairment of Assets. In 2000, the Company decided to exit its Venezuela
operations. The Company recorded a $4.9 million non-cash impairment charge to
reduce the carrying value of certain Venezuela assets, primarily goodwill, to
their estimated fair value. In December 2000, the Company completed the sale of
its Venezuela operations at approximately carrying value. In the fourth quarter
of 2000, the Company recorded a non-cash goodwill impairment charge of $6.4
million related to the operations in Peru due to a major carrier customer's
proposed changes to an existing contract that adversely changed the long-term
prospects of the Peru operations. In the fourth quarter of 1999, based on the
market conditions in Poland, the Company decided to sell its operations in
Poland and completed the sale in the third quarter of 2000. The Company recorded
an impairment charge of $5.5 million, including a $4.5 million writedown of
goodwill to reduce the carrying value of the assets in Poland to their estimated
fair value (see "International Operations").

                                       15
<PAGE>

Restructuring Charge. The Company's results of operations include a pre-tax
restructuring charge of $3.6 million in 1999 associated with the reorganization
and consolidation of the management for the Company's Latin American and North
American Regions as well as the centralization of management in the Asia-Pacific
Region.

Equity in Income (Loss) of Affiliated Companies. Equity in income (loss) of
affiliated companies decreased from income of $31.9 million in 1999 to a loss of
$1.8 million in 2000. In 2000, the Company incurred losses of $1.8 million
related to its minority interest in CellStar Amtel Sdn. Bhd. ("Amtel"), a joint
venture in which the Company owns a 49% interest. As a result of the continuing
deterioration in the Malaysia market, the Company has decided to limit further
exposure, currently estimated to be up to $2.5 million, by divesting its
ownership interest in the joint venture in 2001.

In February 1999, the Company sold part of its equity investment in Topp to a
wholly-owned subsidiary of Telefonos de Mexico S.A. de C.V. ("TelMex"). At the
closing, the Company also sold a portion of its debt investment to certain other
shareholders of Topp. As a result of these transactions, the Company recorded a
pre-tax gain of $5.8 million. In September 1999, the Company sold its remaining
debt and equity interest in Topp to the TelMex subsidiary for a pre-tax gain of
$26.1 million.

Gain on Sale of Assets. In the third quarter of 2000, the Company recorded a
pre-tax gain of $6.0 million, from the completion of the divestiture of its 51%
ownership interest in its Brazil joint venture (see "International Operations").
During the third quarter of 2000, the Company also completed the sale of its
Poland operations and recognized a pre-tax gain of $0.2 million. In 1999, the
Company recorded a pre-tax gain of $8.8 million primarily associated with the
sale of its prepaid operations in Venezuela and the sale of the Company's retail
stores in the Dallas-Fort Worth and Kansas City areas.

Interest Expense. Interest expense increased from $19.0 million in 1999 to $19.1
million in 2000.

Other, Net. Other, net changed from an expense of $1.9 million to income of $0.9
million. This change was primarily due to (i) a $2.6 million foreign currency
transaction loss realized in 1999 from the conversion of U.S. dollar denominated
debt in Brazil into a Brazilian real denominated credit facility, (ii) losses
due to the revaluations of foreign currency related to the Company's European
operations in 2000, and (iii) offset by an increase in interest income.

Income Taxes. Income tax expense decreased from $23.4 million in 1999 to a
benefit of $20.8 million in 2000 due to the losses incurred in 2000. The
Company's effective tax rate decreased to 24.8% from 25.3%. The lower effective
tax rate was attributable to changes in the geographic mix of income (loss)
before income taxes and an increased valuation allowance for capital losses and
carry forwards related to international operations.

Fiscal 1999 Compared to Fiscal 1998

Revenues. The Company's revenues increased $337.9 million, or 16.9% from
$1,995.9 million to $2,333.8 million. Revenue growth in the second half of 1999
was impacted by a global shortage of handsets. Worldwide demand in 1999 was
greater than both manufacturers and component suppliers had anticipated. As a
result, there were continued component and handset shortages for which increased
production capacity, in many instances, required long lead times. The shortages
differed by region of the world, by manufacturer, and by handset model.

Revenues in the Asia-Pacific Region increased $255.5 million, or 49.7% from
$513.9 million to $769.4 million. The Company's operations in the PRC, including
Hong Kong, provided $528.6 million in revenue, an increase of $123.7 million, or
30.6% from $404.9 million. This increase continued to be driven by the strong
demand in the PRC, coupled with a broadened source of product manufactured in-
country and the impact of the PRC's tighter customs controls on imported
products, which began in the third quarter of 1998. The Company's operations in
Taiwan provided the largest percentage growth in the region, providing $187.4
million in revenue, an increase of $119.0 million, or 174.0%, from $68.4
million. Demand in Taiwan increased due to the entry of several new wireless
carriers into the market during 1998 as well as the introduction of new high-end
digital handsets. Revenue from the Company's operations in Singapore and The
Philippines increased $12.8 million, or 31.5%, from $40.6 million to $53.4
million. This increase was due to increased demand for wireless products as a
result of the strengthening of the general economic, financial and currency
conditions in the Southern Asia-Pacific area.

The Latin American Region provided $717.3 million of revenues, compared to
$705.6 million, or a 1.7% increase. Revenues in Brazil, Mexico, Venezuela,
Colombia, and Chile increased $93.9 million, or 94.0%, $84.8 million, or 58.8%,
$25.5 million, or 49.4%, $11.8 million, or 278.7%, and $9.4 million, or 75.4%,
respectively. The increase in Brazil was due to revenue growth in the Company's
majority-owned joint venture, which benefited from the privatization of the
telecommunication industry and the entry of additional carriers into the
wireless market during the latter half of 1998. The increase in Mexico was
largely due to carrier promotions coupled with the introduction of the calling-
party-pays billing process. The increase in Venezuela was a result of additional
handset sales to carriers. The Company was also awarded an exclusive two-year
contract to supply services for prepaid phone kits in connection with

                                       16
<PAGE>

the sale of its prepaid wireless business in Venezuela in March 1999. The
increases in Colombia and Chile are attributable to new contracts with some of
the carriers in those countries and also a carrier promotion in Chile. Revenues
in the remainder of the region decreased $213.7 million, or 54.3%, primarily in
Miami. The decrease in Miami was due to increased product availability from in-
country suppliers, thereby reducing export sales from Miami.

The Company's European Region recorded revenues of $470.0 million, an increase
of $166.5 million, or 54.9%, from $303.5 million. This increase reflected
continued growth from the Company's U.K. operation, arising primarily from its
international trading operations, as well as from increased revenues from the
operation in Sweden, which was acquired in the first quarter of 1998, and partly
from the acquisition of CellStar Netherlands in the third quarter of 1999.

North American Region revenues were $377.1 million, a decrease of $95.7 million,
or 20.2%, compared to $472.8 million. The decrease was primarily a result of
lower product sales to Pacific Bell Mobile Services ("PBMS") in 1999 as compared
to 1998 as PBMS increasingly coordinated its handset distribution directly with
manufacturers. The decrease was also attributable to a continued decrease in the
retail business due to the sale of almost all of the Company's retail stores in
early 1999. The overall decrease in revenues was partially offset by an increase
in the U.S. wholesale business of $30.3 million, or 11.7%.

Gross Profit. Gross profit increased $20.6 million, or 11.9%, from $172.8
million to $193.4 million, while gross profit as a percentage of revenues
decreased from 8.7% to 8.3%. The increase in gross profit was principally due to
increases in the European, North American and Asia-Pacific Regions. The increase
in the European Region was due to the continued growth of the U.K. operation and
the increased revenues from the Company's operation in Sweden and the
Netherlands. The North American Region benefited from improved margins in its
core wholesale business. The overall increase in the Asia-Pacific Region was
primarily due to the increase in Taiwan, which was offset partially by a
decrease in the PRC. The decrease in gross profit as a percentage of revenues
was due primarily to decreases in market prices of certain handsets, the
decision to reduce prices on some slower-moving inventory in the Asia-Pacific
Region to liquidate it during periods of higher demand, and an increase in
revenues from the European Region, which has lower margin percentages than the
Company's other regions.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $5.1 million, or 4.4% from $116.7 million to
$111.6 million. This decrease was primarily attributable to: a decrease in bad
debt expense of $3.2 million, from $13.6 million in 1998 to $10.4 million in
1999; the effects of the second quarter reorganization and consolidation of the
North and Latin American Regions operations and the centralization of management
in the Asia-Pacific Region; and charges in 1998 to de-emphasize or eliminate
certain businesses. These decreases were partially offset by an increase in
costs associated with the Company's revenue growth. Overall selling, general and
administrative expenses as a percentage of revenues decreased to 4.8% from 5.8%.
Bad debt expense as a percentage of revenues decreased to 0.4% in 1999 from 0.7%
in 1998.

Impairment of Assets. Based on the market conditions in Poland, the Company
decided in the fourth quarter of 1999 to sell its operations in Poland. The
Company recorded an impairment charge of $5.5 million, including a $4.5 million
writedown of goodwill to reduce the carrying value of the assets to their
estimated fair value.

Restructuring Charge. The Company recognized a restructuring charge of $3.6
million associated with the reorganization and consolidation of the management
for the Company's Latin American and North American Regions as well as the
centralization of management in the Asia-Pacific Region.

Interest Expense. Interest expense increased to $19.0 million from $14.4
million, primarily as a result of an increase in the average debt outstanding
related to the Company's operations in Brazil, as well as an increase in average
borrowings under the Company's Multicurrency Revolving Credit Facility.

Equity in Income (Loss) of Affiliated Companies. Equity in income (loss) of
affiliated companies increased $60.3 million to income of $31.9 million, as
compared to a loss of $28.4 million in 1998. In February 1999, the Company sold
part of its equity investment in Topp to a wholly-owned subsidiary of TelMex. At
the closing, the Company also sold a portion of its debt investment to certain
other shareholders of Topp. As a result of these transactions, the Company
received cash in the amount of $7.0 million, retained a $22.5 million note
receivable and a 19.5% equity ownership interest in Topp, and recorded a pre-tax
gain of $5.8 million. In September 1999, the Company sold its remaining debt and
equity interest in Topp to the TelMex subsidiary for $26.5 million in cash,
resulting in a pre-tax gain of $26.1 million.

Beginning in the third quarter of 1998 the Company became the primary source of
funding for Topp through the supply of handsets and, therefore, recognized
Topp's net loss to the extent of the Company's entire debt and equity investment
in Topp. In 1998, the Company recognized $29.2 million in losses on its debt and
equity investment in Topp.

Gain on Sale of Assets. The Company recorded a gain of $8.8 million in 1999
primarily associated with the sale of its prepaid operations in Venezuela and
its retail stores in the Dallas-Fort Worth and Kansas City areas.

                                       17
<PAGE>

Other, Net. Other, net decreased $3.3 million, from income of $1.4 million to
expense of $1.9 million. This decrease was primarily due to a $2.6 million
foreign currency transaction loss realized from the conversion of U.S. dollar
denominated debt in Brazil into a Brazilian real denominated credit facility.

Provision (Benefit) for Income Taxes. Income tax expense increased $30.8 million
primarily as a result of an $85.6 million increase in income before income taxes
and an increase in the Company's effective tax rate to 25.3%. The higher
effective tax rate was attributable to higher income before income taxes,
primarily in the U.S., Latin American and European Regions. In both the Latin
American and the European Regions the statutory tax rates are generally
comparable to the statutory rate in the U.S., and higher than the statutory
rates in the Asia-Pacific Region.

Liquidity and Capital Resources

During the year ended November 30, 2000, the Company relied primarily on cash
available at November 30, 1999, funds generated from operations and borrowings
under its Multicurrency Revolving Credit Facility (the "Facility") to fund
working capital, capital expenditures and expansions. At February 28, 2001, the
Company had available $16.1 million of unused borrowing capacity under the
Facility.

Compared to November 30, 1999, accounts receivable increased $39.8 million,
inventories increased $75.8 million and accounts payable increased
$150.8 million. The increase in accounts receivable was primarily due to
increased business in the United States and large sales transactions with
carriers in Mexico and Colombia in November 2000. Inventory increased to support
sales growth and the ending of the supply shortage that existed in 1999.
Accounts payable increased due to growth and several large transactions in
November.

Effective August 25, 2000, the Company sold its 51% interest in its Brazil joint
venture to its joint venture partner, Fontana Business Corp. To facilitate the
closing of the transaction, the Company repaid certain debt of the joint venture
to the extent it was collateralized by letters of credit issued under the
Company's Facility. The Company received promissory notes totaling $8.5 million
from CellStar do Brazil, Ltda. These notes are fully reserved and will remain
fully reserved pending receipt of payments by the Company.

At November 30, 2000, the Company's operations in the PRC had three lines of
credit, one for USD $12.5 million, the second for RMB 215 million (approximately
USD $26.0 million) and the third for RMB 50 million (approximately USD $6.0
million), bearing interest at 7.16%, 5.85% and 2.34% respectively. The loans
have maturity dates through August 2001. The first two lines of credit are fully
collateralized by U.S. dollar cash deposits. The cash deposit was made via an
intercompany loan from the operating entity in Hong Kong as a mechanism to
secure repatriation of these funds. The third line of credit is supported by a
RMB 15.0 million cash collateral deposit and a promissory note. At November 30,
2000 and January 31, 2001, the U.S. dollar equivalent of $44.4 million and $38.5
million, respectively, had been borrowed against the lines of credit in the PRC.
As a result of this method of funding operations in the PRC, the consolidated
balance sheet at November 30, 2000 reflects USD $42.6 million in cash that is
restricted as collateral on these advances and a corresponding USD $44.4 million
in notes payable.

At May 31, 2000, the Company would not have been in compliance with one of its
covenants under its Facility. As of July 12, 2000, the Company had negotiated an
amendment to the Facility following which the Company was in compliance with the
covenant. The amount of the Facility was also reduced from $115.0 million to
$100.0 million. At August 31, 2000, the Company was not in compliance with
another of its covenants and subsequently received a waiver for this covenant.

As of November 10, 2000, the Company had negotiated another amendment to the
Facility which allowed the Company to remain in compliance by extending the date
by which a compliance certificate was required to be delivered to its banks. The
date for delivering the compliance certificate was extended again by an
additional amendment as of December 20, 2000.

At November 30, 2000, the outstanding balance under the Facility was $82.7
million and is included in notes payable to financial institutions in the
accompanying consolidated balance sheet. In addition, letters of credit of $3.7
million have been issued under the Facility. Borrowings under the Facility are
made under the London Interbank Offering Rate (LIBOR) contracts, generally for
30-90 days, or at the bank's prime lending rate and include an applicable
margin. At November 30, 2000, the interest rate on the Facility borrowing under
the LIBOR rate was 9.529% and the prime rate was 10.75%.

As of January 30, 2001, the Company had negotiated an additional amendment to
its Facility that assists the Company in complying with certain covenants
through March 2, 2001. The amount of the Facility was reduced from $100.0
million to $86.4 million.

On February 27, 2001, the Company and its banking syndicate negotiated and
executed a Second Amended and Restated Credit

                                       18
<PAGE>

Agreement which further reduces the amount of the Facility to $85.0 million on
February 28, 2001, $74.0 million on July 31, 2001, $65.0 million on September
30, 2001, and $50.0 million on December 15, 2001. Such Second Amended and
Restated Credit Agreement further (i) increases the applicable interest rate
margin by 25 basis points, (ii) shortens the term of the Facility from June 1,
2002 to March 1, 2002, (iii) provides additional collateral for such Facility in
the form of additional stock pledges and mortgages on real property, (iv)
provides for dominion of funds by the banks for the Company's U.S. operations,
(v) limits the borrowing base, and (vi) tightens restrictions on the Company's
ability to fund its operations, particularly its non-U.S. operations.

Based upon current and anticipated levels of operations, and aggressive efforts
to reduce inventories and accounts receivable, the Company anticipates that its
cash flow from operations, together with amounts available under its Facility
and existing unrestricted cash balances, will be adequate to meet its
anticipated cash requirements in the foreseeable future. In the event that
existing unrestricted cash balances, cash flows and available borrowings under
the Facility are not sufficient to meet future cash requirements, the Company
may be required to reduce planned expenditures or seek additional financing. The
Company can provide no assurances that reductions in planned expenditures would
be sufficient to cover shortfalls in available cash or that additional financing
would be available or, if available, offered on terms acceptable to the Company.

International Operations

The Company's foreign operations are subject to various political and economic
risks including, but not limited to, the following: political instability;
economic instability; currency controls; currency devaluations; exchange rate
fluctuations; potentially unstable channels of distribution; increased credit
risks; export control laws that might limit the markets the Company can enter;
inflation; changes in laws related to foreign ownership of businesses abroad;
foreign tax laws; trade disputes among nations; changes in cost of capital;
changes in import/export regulations, including enforcement policies, "gray
market" resales, tariff and freight rates. Such risks and other factors beyond
the control of the Company in any nation where the Company conducts business
could have a material adverse effect on the Company.

From 1998 to 2000, the Company's Brazil operations were primarily conducted
through a majority-owned joint venture. Following a review of its operations in
Brazil, the Company concluded that its joint venture structure, together with
foreign exchange risk, the high cost of capital in that country, alternative
uses of capital, accumulated losses, and the prospect of ongoing losses, were
not optimal for success in that market. As a result, in the second quarter of
2000, the Company elected to exit the Brazil market and to divest its 51%
interest in its joint venture. In August 2000, the Company completed its
divestiture of its 51% interest in its joint venture (see note 15 to the
consolidated financial statements for a summary of the results of the Brazil
operations). The Company fully reserved certain U.S.-based accounts receivable
from Brazilian importers in the second quarter of 2000, the collectibility of
which significantly deteriorated in the second quarter of 2000, and which were
further affected by the decision, in the second quarter, to exit Brazil.

During the quarter ended August 31, 2000, the Company decided, based on the
current and future economic and political outlook in Venezuela, to divest its
operations in Venezuela and to focus its resources on more profitable, lower
risk, growth markets. For the quarter ended August 31, 2000, the Company
recorded an impairment charge of $4.9 million to reduce the carrying value of
certain Venezuela assets, primarily goodwill, to their estimated fair value (see
note 16 to the consolidated financial statements for a summary of the results of
the Venezuela operations). In December 2000, the Company sold its Venezuela
operations at approximately carrying value.

In April 2000, the Company curtailed a significant portion of its U.K.
international trading operations following third party theft and fraud losses.
The trading business involves the purchase of products from suppliers other than
manufacturers and the sale of those products to customers other than network
operators or their dealers and other representatives. As a result of the
curtailment, the Company experienced a reduction in revenues for the U.K.
operation after the first quarter of 2000 compared to 1999. For the quarter
ended May 31, 2000, the Company recorded a $4.4 million charge consisting of
$3.2 million from third party theft and fraud losses during the purchase,
transfer of title and transport of six shipments of wireless handsets, and $1.2
million in inventory obsolescence expense for inventory price reductions
incurred while the international trading business was curtailed pending
investigation. The Company is negotiating to obtain an insurance settlement and
is pursuing legal action where appropriate. However, the ultimate recovery in
relation to these losses, if any, cannot be determined at this time.

In the third quarter of 2000, the Company completed the sale of its operations
in Poland and recognized a gain of $0.2 million.

During the second half of 1998, the Company's sales from Miami to customers
exporting into South American countries began to decline as a result of
increased in-country manufactured product availability in South America,
primarily Brazil. In the second quarter of 2000, the Company phased out a major
portion of its redistributor business in Miami. Overall, revenues declined in
2000 to $79.1 million from $154.2 million in 1999 for the Company's operation in
Miami and are expected to continue to decline in 2001. As a result, the Company
intends to restructure or consolidate its operation in Miami in 2001.

                                       19
<PAGE>

In the fourth quarter of 2000, the Company recorded a non-cash goodwill
impairment charge of $6.4 million related to the operations in Peru due to a
major carrier customer's proposed changes to an existing contract that adversely
changed the long-term prospects of the Peru operations.

In 2000, the Company incurred losses of $1.8 million related to its minority
interest in Amtel. As a result of the continuing deterioration in the Malaysia
market, the Company intends to limit further exposure by divesting its ownership
in the joint venture. The carrying value of the investment at November 30, 2000
is zero. However, the Company will be required to recognize future losses, if
any, of Amtel up to the amount of debt and payables of Amtel guaranteed by the
Company which is currently estimated to be up to $2.5 million.

Impact of Inflation

Historically, inflation has not had a significant impact on the Company's
overall operating results. However, the effects of inflation in volatile
economies in foreign markets could have a material adverse impact on the
Company.

Seasonality and Cyclicality

The effects of seasonal fluctuations have not historically been apparent in the
Company's operating results due to the Company's rapid growth in revenues.
However, the Company's sales are influenced by a number of seasonal factors in
the different countries and markets in which it operates, including the
purchasing patterns of customers, product promotions of competitors and
suppliers, availability of distribution channels, and product supply and
pricing. The Company's sales are also influenced by cyclical economic conditions
in the different countries and markets in which it operates. An economic
downturn in one of the Company's principal markets could have a materially
adverse effect on the Company's operating results.

Accounting Pronouncement Not Yet Adopted

In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("Statement
133"), amended by Statement 138 issued in June 2000. Statement 133 is now
effective for all interim and annual periods of the Company commencing December
1, 2000. Given the Company's current and anticipated derivative activities,
management does not believe the adoption of Statement 133 should have a material
effect on the Company's consolidated financial position and results of
operations.

In December 1999, the SEC staff issued Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 summarizes
certain of the staff's views in applying generally accepted accounting
principles to revenue recognition and accounting for deferred costs in the
financial statements and is effective no later than the fourth quarter of fiscal
years beginning after December 15, 1999. Based on the Company's current revenue
recognition policies, SAB 101 is not expected to materially impact the Company's
financial position and consolidated results of operations.

Item 7(A). Quantitative and Qualitative Disclosures About Market Risk

Foreign Exchange Risk

For the year ended November 30, 2000, and 1999, respectively, the Company
recorded in other income (expense), net foreign currency losses of $4.2 million
and $4.1 million, primarily due to the revaluations of foreign currency related
to the Company's European operations in 2000 and to the Company's Latin American
operations in 1999.

Regarding the intercompany advances from the Hong Kong entity to the PRC entity,
the Company has foreign exchange exposure on the funds as they have been
effectively converted into RMB.

The Company manages foreign currency risk by attempting to increase prices of
products sold at or above the anticipated exchange rate of the local currency
relative to the U.S. dollar, by indexing certain of its accounts receivable to
exchange rates in effect at the time of their payment and by entering into
foreign currency hedging instruments in certain instances. The Company
consolidates the bulk of its foreign exchange exposure related to intercompany
transactions in its international finance subsidiary. These transactional
exposures are managed using various derivative alternatives depending on the
length and size of the exposure.

The Company continues to evaluate foreign currency exposures and related
protection measures.

                                       20
<PAGE>

Derivative Financial Instruments

The Company uses various derivative financial instruments as part of an overall
strategy to manage the Company's exposure to market risk associated with
interest rate and foreign currency exchange rate fluctuations. The Company uses
foreign currency forward contracts to manage the foreign currency exchange rate
risks associated with international operations. The Company evaluates the use of
interest rate swaps and cap agreements to manage its interest risk on debt
instruments, including the reset of interest rates on variable rate debt. The
Company does not hold or issue derivative financial instruments for trading
purposes.

The risk of loss to the Company in the event of non-performance by any
counterparty under derivative financial instrument agreements is not
significant. All counterparties are rated A or higher by Moody's and Standard
and Poor's. Although the derivative financial instruments expose the Company to
market risk, fluctuations in the value of the derivatives are mitigated by
expected offsetting fluctuations in the matched instruments.

The Company uses foreign currency forward contracts to reduce exposure to
exchange rate risks primarily associated with transactions in the regular course
of the Company's international operations. The forward contracts establish the
exchange rates at which the Company should purchase or sell the contracted
amount of local currencies for specified foreign currencies at a future date.
The Company uses forward contracts, which are short-term in nature (45 days to
one year), and receives or pays the difference between the contracted forward
rate and the exchange rate at the settlement date.

The major currency exposures hedged by the Company are the British pound, Dutch
glider, Euro and Swedish Krona. The carrying amount and fair value of these
contracts are not significant.

Contractual amounts of the Company's forward exchange contracts at November 30,
2000 and January 31, 2001, respectively, are $18.7 million and $36.9 million.

Interest Rate Risk

The interest rate of the Company's Facility is an index rate at the time of
borrowing plus an applicable margin on certain borrowings. The interest rate is
based on either the agent bank's prime lending rate or the London Interbank
Offered Rate. Additionally, the applicable margin is subject to increases as the
Company's ratio of consolidated funded debt to consolidated cash flow increases.
During the year ended November 30, 2000, the interest rates of borrowings under
the Facility ranged from 8.75% to 10.75%. As a result of the July 12, 2000
amendment to the Facility, interest rates increased by 50 basis points. As a
result of the February 27, 2001 amendment to the Facility, interest rates will
increase by 25 basis points. A one percent change in variable interest rates
will not have a material impact on the Company. The Company manages its
borrowings under the Facility each business day to minimize interest expenses.

The Company has short-term borrowings in the PRC as discussed in Liquidity and
Capital Resources.

The Company's $150.0 million in long-term debt has a fixed coupon interest rate
of 5.0% and is due in October 2002. Fair value of the long-term debt was $37.3
million and $116.4 million at November 30, 2000 and 1999, respectively.

Item 8. Consolidated Financial Statements and Supplementary Data

See Index to Consolidated Financial Statements on Page F-1 of this Form
10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

Not Applicable.

                                       21
<PAGE>

                                    PART III

Item 10. Directors and Executive Officers of the Registrant

See Item 1 "Business - Executive Officers of the Registrant" for information
concerning executive officers.

The Company's Board of Directors consists of six directors. On March 10, 2000,
Sheldon I. Stein, a Class I director, resigned from the Company's Board of
Directors. Each director has been elected to serve for a specified term or until
his successor has been elected and qualified.

The following is a description of the principal occupations and other employment
during the past five years and their directorships in certain companies of the
directors of the Company:

James L. Johnson, 73, whose term expires at the 2003 Annual Meeting of
Stockholders, has served as a director of the Company since March 1994. Mr.
Johnson has been Chairman Emeritus of GTE Corporation since May 1992 and served
as GTE's Chairman and Chief Executive Officer from April 1988 to April 1992. Mr.
Johnson began his career with Southwestern Associated Telephone Company (the
predecessor company of GTE Central) in 1949. He was a member of GTE's Board of
Directors from 1985 to May 1999. He is currently a director of Harte Hanks
Communications, Inc., M.O.N.Y (Mutual of New York, Inc.), Walter Industries
Incorporated and Finova Group Incorporated (formerly GFC Financial). Mr. Johnson
is also past Chairman of the United States Telephone Association. Mr. Johnson
presently serves on the Audit, Nominating and Compensation Committees of
CellStar's Board of Directors.

J.L. Jackson, 69, whose term expires at the 2003 Annual Meeting of Stockholders,
has served as a director of the Company since March 1999. Mr. Jackson is the
former Chairman and Chief Executive Officer of Global Industrial Technologies,
Inc. (formerly, INDRESCO), where he served in that capacity from 1993 to 1998.
Prior to joining Global Industrial Technologies, Mr. Jackson was engaged in
private executive business consulting from 1987 to 1993. From 1983 to 1987, Mr.
Jackson served as a Director and as the President and Chief Operating Officer of
Diamond Shamrock Corporation and was Executive Vice President of Diamond
Shamrock and President of its then newly formed coal unit from 1979 to 1983. Mr.
Jackson has served on numerous boards, including the Fourth District Federal
Reserve Bank of Cleveland, First Republic Bank, American Federal Bank, Hadsen
Energy Resources and National Gypsum Company. Mr. Jackson presently serves as
Chairman of the Nominating and Compensation Committees of CellStar's Board of
Directors and also serves on the Audit Committee of CellStar's Board of
Directors.

Jere W. Thompson, 69, whose term expires at the 2003 Annual Meeting of
Stockholders, has served as a director of the Company since October 1999. Mr.
Thompson is the former President and Chief Executive Officer of The Southland
Corporation, where he served in that capacity from 1986 to 1991. Mr. Thompson
joined Southland in 1954 and was made Vice President of store operations in
1962. He became Southland's President in 1973 and was elected to Southland's
board of directors in 1961. Mr. Thompson was engaged in private business
consulting from 1991 to 1996 when he became the President of The Williamsburg
Corporation. Mr. Thompson serves on the board of directors and is the former
Chairman of The National Center for Policy Analysis. He is also a member and
former Chairman of The Development Board and the College and Graduate School of
Business Foundation Advisory Council for The University of Texas at Austin. Mr.
Thompson currently serves on the Compensation Committee of CellStar's Board of
Directors.

Alan H. Goldfield, 57, whose term expires at the 2001 Annual Meeting of
Stockholders, is a founder of the Company and has been the Chairman of the Board
and Chief Executive Officer of the Company since its formation. Mr. Goldfield
served as President of the Company from its formation until March 1995, and from
August 1996 until December 1996. Mr. Goldfield serves as an officer and director
of the Company pursuant to his employment agreement. See "Executive
Compensation--Employment Contracts and Termination of Employment and Change in
Control Arrangements."

Terry S. Parker, 56, whose term expires at the 2001 Annual Meeting of
Stockholders, has served as a director of the Company since March 1995 and
served as President and Chief Operating Officer of the Company from March 1995
through July 1996. Mr. Parker served as Senior Vice President of GTE Corporation
and President of GTE's Personal Communications Services, GTE's wireless
division, from October 1993 until he joined the Company. From 1991 to 1993, Mr.
Parker served as President of GTE Telecommunications Products and Services.
Prior to 1991, Mr. Parker served as President of GTE Mobile Communications. Mr.
Parker has served on the Board of Directors for Nucentrix Corporation since
April 1988. In addition, Mr. Parker has served on the Board of Directors of
Telenetics Corporation from May 2000 until March 2001, and as the President and
Chief Executive Officer of Telenetics from September 2000 until March 2001. Mr.
Parker served on the Audit Committee of CellStar's Board of Directors until
January 21, 2000, when the CellStar Board of Directors restructured the
composition and duties of the Audit Committee.

                                       22
<PAGE>

Dale V. Kesler, 62, whose term expires at the 2002 Annual Meeting of
Stockholders, has served as a director of the Company since March 1999. Mr.
Kesler retired as an active partner of the professional accounting firm of
Arthur Andersen LLP in 1996 and served as the Managing Partner of Arthur
Andersen's Dallas/Fort Worth office from 1983 to 1994. Mr. Kesler was
responsible for strategic planning on a world wide basis for the Audit and
Business Advisory practices of Arthur Andersen in 1982 and 1983 and served as
the head of the Audit Practice in the firm's Dallas office from 1973 to 1982.
Mr. Kesler also serves on the Boards of Elcor Corporation, New Millennium Homes,
Resource Services, Inc., Triad Hospitals, Inc. and Compass Bank--Dallas. Mr.
Kesler currently serves on the Audit and Nominating Committees of CellStar's
Board of Directors. Mr. Kesler served on the Compensation Committee of
CellStar's Board of Directors from March 1999 until January 21, 2000.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's directors and officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission. Such persons are required by regulations of the Securities and
Exchange Commission to furnish the Company with copies of all Section 16(a)
reports that they file.

To the Company's knowledge, based solely on its review of the copies of such
reports received by it with respect to fiscal year end November 30, 2000, or
written representations from certain reporting persons, all of the Company's
directors, officers and holders of more than 10% of a registered class of the
Company's equity securities have, with respect to fiscal year end November 30,
2000, timely filed all reports required by Section 16(a) of the Securities
Exchange Act of 1934.

Item 11. Executive Compensation

Summary Compensation Table

The following table sets forth information concerning the compensation of the
Company's Chief Executive Officer, each of the other four most highly
compensated executive officers of the Company who were serving as such on
November 30, 2000 and two former highly compensated executive officers (based on
salary and bonus earned during fiscal year end November 30, 2000) (collectively,
the "Named Executive Officers").

<TABLE>
<CAPTION>

                                                                                             Long Term
                                                     Annual Compensation                 Compensation Awards
                                                     -------------------                 -------------------
                                                                                      Restricted      Securities
                                                                    Other Annual        Stock         Underlying     All Other
                                                  Salary    Bonus   Compensation      Award(s)       Options/SARs  Compensation
<S>                                     <C>      <C>       <C>      <C>              <C>            <C>            <C>
Name and Principal Position             Year       ($)      ($)         ($)             ($)           (#)(1)(2)          ($)
---------------------------             ----     -------   ------   ------------     ----------      ------------- ------------
Alan H. Goldfield.....................  2000     850,000       --             --             --          100,000         50,975(3)
 Chairman of the Board                  1999     850,000       --             --             --               --         26,434(3)
 and Chief Executive Officer            1998     850,000       --             --             --          200,000         26,434(3)

A.S. Horng............................  2000     800,103   66,675             --             --          457,414             --
 Chairman, Chief Executive              1999     796,897   66,162         25,388(4)          --          100,000             --
 Officer and General Manager            1998     795,487       --         34,620(4)          --          200,000             --
 of CellStar (Asia) Corporation Ltd.

Dale H. Allardyce.....................  2000     400,000       --        172,674(5)          --               --         21,813(3)
 President and Chief Operating          1999(6)   17,375       --             --             --               --             --
 Officer                                1998(7)       --       --             --             --               --             --

Austin P. Young.......................  2000     350,000       --             --             --               --          6,912(3)
 Senior Vice President,                 1999(8)   24,006       --             --             --               --             --
 Chief Financial Officer                1998(7)       --       --             --             --               --             --
 and Treasurer
</TABLE>

                                       23
<PAGE>

<TABLE>
<CAPTION>
<S>                                         <C>      <C>      <C>     <C> <C> <C>      <C>
Daniel T. Bogar...........................  2000(9)  327,851      --  -   -   154,627       --
 Senior Vice President--                    1999     300,000      --  -   -        --       --
 Americas Region                            1998     295,000      --  -   -        --       --

Timothy L. Maretti........................  2000(9)  244,941      --  -   -    19,280  130,769(10)
 Senior Vice President--                    1999     300,000      --  -   -        --       --
 Brazilian Region                           1998     295,000      --  -   -        --       --

Lawrence King.............................  2000     360,000  30,000  -   -    43,136    1,826(3)
 President and Chief Operating Officer--    1999     310,000  30,000  -   -        --    1,826(3)
 CellStar (Asia) Corporation Limited        1998     240,000  40,000  -   -        --       --

</TABLE>
   (1)  Reflects options to acquire shares of Common Stock. The Company has not
   granted stock appreciation rights.

   (2)  All figures in this column reflect an adjustment for the Company's two-
   for-one Common Stock split that was effected in the form of a stock dividend
   in June 1998.

   (3)  Consists of life insurance premiums paid by the Company.

   (4)  Represents amounts paid or reimbursed by the Company to Mr. Horng as an
   annual housing allowance. See "--Employment Contracts and Termination of
   Employment and Change in Control Arrangements."

   (5)  Consists of relocation expenses paid or reimbursed by the Company.

   (6)  Mr. Allardyce became the Company's President and Chief Operating Officer
   in November 1999.

   (7)  In accordance with Item 402 of Regulation S-K promulgated under the
   Securities Exchange Act of 1934, as amended, no information is included for
   fiscal years during which the Named Executive Officer did not serve as an
   executive officer of the Company.

   (8)  Mr. Young became the Company's Senior Vice President, Chief Financial
   Officer and Treasurer in November 1999.

   (9)  Mr. Bogar and Mr. Maretti resigned from the Company in July 2000.

   (10) Consists of severance payments paid by the Company to Mr. Maretti.

   Option Grants During 2000 Fiscal Year

   The following table provides information related to options granted to the
   Named Executive Officers during fiscal year end November 30, 2000.


<TABLE>
<CAPTION>
                                                                                          Potential Realizable Value
                                                                                            at Assumed Annual Rates
                                                                                          of Stock Price Appreciation
                                                 Individual Grants                            for Option Term(1)
                          --------------------------------------------------------------  ----------------------------
                             Number of       % of Total
                             Securities     Options/SARs    Exercise
                             Underlying      Granted to     of Base
                            Options/SARs    Employees in     Price
Name                      Granted(#)(2)     Fiscal Year   ($/Sh)(3)     Expiration Date      5% ($)        10% ($)
------------------------  ------------      ------------  --------      ----------------  ------------   ------------
<S>                       <C>               <C>           <C>           <C>               <C>            <C>
Alan H. Goldfield.......       100,000               6.6     9.875      January 20, 2010    620,818.44   1,573,151.94
A.S. Horng..............       451,414              29.8     9.875      January 20, 2010  2,802,461.36   7,101,428.12
Dale H. Allardyce(4)....            --                --        --                    --            --             --
Austin P. Young(4)......            --                --        --                    --            --             --
Daniel T. Bogar(5)......       154,627              10.2     9.875      January 20, 2010    959,952.94   2,432,517.66
Timothy L. Maretti(5)...        19,280               1.3     9.875      January 20, 2010    119,693.80     303,303.69
Lawrence King...........        43,136               2.8     9.875      January 20, 2010    267,796.24     678,594.82
</TABLE>

  (1) The potential realizable value portion of the table illustrates value that
  might be realized upon exercise of the options immediately prior to the
  expiration of their term, assuming the specified compounded rates of
  appreciation on the Company's Common Stock over the term of the options. These
  numbers do not take into account provisions of certain options providing for
  termination of the option following termination of employment,
  nontransferability or vesting over periods of up to ten years.

  (2) Reflects options to acquire shares of Common Stock. The Company has not
  granted stock appreciation rights. The options become exercisable with respect
  to 25% of the shares covered thereby on each of the first four anniversaries
  of the date of grant. In the event of a "change of control" (as defined in the
  1993 Amended and Restated Long-Term Incentive Plan (the "1993 Plan")) of the
  Company, any unexercisable portion of the options will become immediately
  exercisable.

  (3) The exercise price is equal to the fair market value of the Common Stock
  on the date of grant. The option exercise price may be paid as follows: (a) in
  cash or by certified check, bank draft or money order payable to the order of
  the Company; (b) with Common Stock (including restricted stock), valued at its
  fair market value on the date of exercise; (c) by delivery to the Company or
  its designated agent of an executed irrevocable option exercise form together
  with irrevocable instructions from the optionee to a broker or dealer,
  reasonably acceptable to the Company, to sell certain of the shares of Common
  Stock purchased upon exercise of the stock option or to pledge such shares as
  collateral for a loan and promptly deliver to the Company the amount of sale
  or loan proceeds
                                       24
<PAGE>

  necessary to pay such purchase price; and/or (d) in any other form of valid
  consideration that is acceptable to the Compensation Committee in its sole
  discretion.

  (4) Each of Messrs. Allardyce and Young joined the Company in November 1999
  and received options to acquire 200,000 and 150,000 shares of the Company's
  Common Stock, respectively.

  (5) Each of Messrs. Bogar and Maretti resigned their respective positions with
  the Company in July 2000.

  Option Exercises During 2000 Fiscal Year and Fiscal Year End Option Values

  The following table provides information related to options exercised by the
  Named Executive Officers during the fiscal year ended November 30, 2000 and
  the number and value of options held at fiscal year end. The Company does not
  have any outstanding stock appreciation rights.

<TABLE>
<CAPTION>

                                                           Number of Securities                      Value of Unexercised
                                                          Underlying Unexercised                        In-the-Money
                           Shares          Value        Options/SARs at FY-End (#)              Options/SARs at FY-End ($)(1)
                         Acquired on     Realized    -----------------------------------  -----------------------------------------
Name                     Exercise (#)     ($)(2)         Exercisable      Unexercisable       Exercisable           Unexercisable
----                     -----------     --------    -----------------  ----------------  --------------------    -----------------
<S>                      <C>             <C>          <C>                <C>              <C>                      <C>
Alan H. Goldfield......           --           --                   --           925,000                    --                 --
A.S. Horng.............           --           --                   --           517,854                    --                 --
Dale H. Allardyce(3)...           --           --                   --            50,000                    --                 --
Austin P. Young(3).....           --           --                   --            37,500                    --                 --
Daniel T. Bogar(4).....           --           --                   --                --(5)                 --                 --
Timothy L. Maretti(4)..           --           --                   --                --(5)                 --                 --
Lawrence King..........           --           --                   --           213,284                    --                 --
</TABLE>

  (1) The closing price for the Company's Common Stock as reported by the
  NASDAQ/National Market System on November 30, 2000 (the last trading day of
  fiscal 2000) was $1.656. Value is calculated on the basis of the difference
  between the option exercise price and $1.656 multiplied by the number of
  shares of Common Stock underlying the option.

  (2) Value is calculated based on the difference between the option exercise
  price and the closing market price of the Common Stock on the date of exercise
  multiplied by the number of shares to which the exercise related.

  (3) Each of Messrs. Allardyce and Young joined the Company in November 1999
  and received options to acquire 200,000 and 150,000 shares of the Company's
  Common Stock, respectively.

  (4) Each of Messrs. Bogar and Maretti resigned their respective positions with
  the Company in July 2000.

  (5) Pursuant to the 1993 Plan, all options granted to Messrs. Bogar and
  Maretti expired as of August 20, 2000 and August 5, 2000, respectively, which
  was the 30th day following the date of their respective resignations.

  Compensation of Directors

  During the fiscal year ended November 30, 2000, each director of the Company
  who was not an officer or other employee of the Company (an "Independent
  Director") received an annual retainer fee of $25,000, plus $1,500 for each
  meeting of the Board of Directors or committee of the Board of Directors that
  he attended and $750 for each telephonic Board of Directors or committee
  meeting attended. In addition, to the extent that any committee meeting is
  held on the same day as a full Board of Directors meeting or another committee
  meeting, only one $1,500 or $750 fee (as applicable) will be paid. Beginning
  in January 2000, the Company began paying a per diem fee of $1,500 to each
  Independent Director for each day such director performs additional services
  for the Company at the request of the Chief Executive Officer.

  Pursuant to the 1994 Amended and Restated Non-Employee Director Nonqualified
  Stock Option Plan (the "Directors' Plan"), each Independent Director
  automatically receives an option (the "Initial Option") to purchase 7,500
  shares of Common Stock upon becoming an Independent Director. Also beginning
  in fiscal 1998, in addition to the Initial Option, each Independent Director
  receives an annual grant pursuant to the 1993 Plan of an option (the "Annual
  Option") to purchase 5,000 shares of Common Stock, which option will be
  automatically granted on the date of the first full Board of Directors meeting
  following the end of each fiscal year. The Annual Option will vest with
  respect to 25% of the shares covered thereby on each anniversary of the date
  of grant and will expire ten years following the date of grant. The exercise
  price of all options granted to Independent Directors must be equal to the
  fair market value of the Company's Common Stock on the date of grant.

  Directors who are also employees of the Company receive no additional
  compensation for serving as directors. All directors of the Company are
  entitled to reimbursement of their reasonable out-of-pocket expenses in
  connection with their travel to, and attendance at, meetings of the Board of
  Directors or committees thereof.

  Employment Contracts and Termination of Employment and Change in Control
  Arrangements

  The Company has entered into employment agreements (collectively, the
  "Employment Agreements" or individually, an "Employment Agreement") with Mr.
  Goldfield, Mr. Horng, Mr. Allardyce, Mr. Young and Mr. King (collectively, the

                                       25
<PAGE>

  "Executives" and individually, an "Executive"), effective December 1, 1994,
  January 22, 1998, November 12, 1999, November 5, 1999 and February 2, 1998,
  respectively. The Employment Agreements of Messrs. Goldfield, Horng,
  Allardyce, Young and King provide for annual base salaries of $850,000,
  $800,000, $400,000, $350,000 and $240,000, respectively, subject to increase
  by the Compensation Committee of the Board of Directors. Each of the
  Employment Agreements also provides that the Executive is eligible to receive
  an annual bonus.

  The Company is obligated under the Employment Agreements to provide to
  Messrs. Goldfield, Horng and King (i) life insurance policies with face
  amounts of $5,000,000, $4,000,000 and $1,200,000, respectively, and (ii)
  disability insurance policies with annual disability benefits of $640,000,
  $300,000 and $192,000, respectively, until attainment of age 65. In addition,
  the Company is obligated to pay or reimburse each Executive for all medical
  and dental expenses incurred by him or his spouse or dependents. The Company
  has in place insurance to cover a portion of such expenses. Messrs. Allardyce
  and Young are eligible to participate in the life, health and disability
  insurance programs customarily made available to executives of the Company.

  Mr. Goldfield's Employment Agreement expires on the fifth anniversary of the
  date on which the Board of Directors notifies Mr. Goldfield that it has
  determined to fix the expiration date of the Employment Agreement. The
  Employment Agreements of Messrs. Horng, Allardyce, Young and King have terms
  of five years, four years, four years and three years, respectively. Mr. King
  continues to serve under his Employment Agreement while Mr. King and the
  Company negotiate and finalize a new Employment Agreement. All of the
  Employment Agreements are subject to earlier termination as follows: (i) by
  the Company (a) due to the disability of the Executive, (b) for "cause" or (c)
  "without cause"; or (ii) by the Executive (a) upon a material breach by the
  Company of the Employment Agreement ("Company Breach"), (b) within twelve
  months of a "change in control" or (c) without "good reason" (i.e., for any
  reason other than Company Breach). If Mr. Goldfield terminates his employment
  due to Company Breach or if he is terminated by the Company "without cause,"
  he will be entitled to receive his accrued but unpaid base salary and annual
  incentive payments through the date of termination plus five times the sum of
  (a) his base salary plus (b) the average of his annual incentive payments for
  the preceding two years. If any of Messrs. Horng, Allardyce, Young or King
  terminates his employment due to Company Breach or if any of them is
  terminated by the Company "without cause," he will be entitled to receive his
  accrued but unpaid base salary and annual incentive payments through the date
  of termination plus an amount equal to the product of (i)(a) his base salary
  plus (b) the average of his annual incentive payments for the preceding two
  years (one year for Mr. Horng) divided by 365 and multiplied by (ii) the
  number of days remaining in the term of his Employment Agreement. In the event
  of termination of employment after a "change in control," each of the
  Executives will be entitled to receive an amount equal to $100 less than three
  times his "annualized includable compensation," which is the maximum payment
  permitted by the Internal Revenue Code that does not constitute an "excess
  parachute payment."

  Under the Employment Agreements, a termination will be deemed to be "without
  cause" if it is for any reason other than due to the disability of the
  Executive or for "cause." Under the Employment Agreements for Messrs.
  Goldfield, Horng and King, a termination will generally be considered to be
  for "cause" if it is due to the Executive's (i) willful gross misconduct, (ii)
  conviction of a felony, (iii) gross incompetence, (iv) willful failure to
  follow the directives of the Board of Directors, or (v) any other material
  breach of his Employment Agreement that is not cured within sixty (60) days
  after receipt of written notice from the Company specifying the breach. Under
  the Employment Agreements for Messrs. Allardyce and Young, a termination will
  generally be considered to be for "cause," as determined by the Board of
  Directors in the exercise of good faith, if it is due to the Executive's (i)
  willful failure to perform his duties, (ii) misconduct that causes or is
  likely to cause material economic harm to, or material discredit to the
  reputation of, the Company or its affiliated entities, (iii) failure to follow
  the directions of senior management or the Board of Directors of the Company,
  (iv) conviction or a plea of nolo contendre of a felony involving moral
  turpitude or the entry of an order by any federal or state regulatory agency
  prohibiting the Executive from participating in the affairs of the Company, or
  (v) any other material breach of his Employment Agreement that is not cured
  within sixty (60) days after receipt of written notice from the Company
  specifying the breach.

  For purposes of the Employment Agreements, a "change in control" will be
  deemed to occur upon the occurrence of any of the following: (1) any
  consolidation or merger of the Company in which the Company is not the
  continuing or surviving corporation or pursuant to which shares of the
  Company's Common Stock would be converted into cash, securities or other
  property, other than a merger of the Company in which the holders of the
  Company's Common Stock immediately prior to the merger have the same
  proportionate ownership of common stock of the surviving corporation
  immediately after the merger; (2) any sale, lease, exchange or other transfer
  (in one transaction or a series of related transactions) of all or
  substantially all of the assets of the Company; (3) any approval by the
  stockholders of the Company of any plan or proposal for the liquidation or
  dissolution of the Company; (4) the cessation of control (by virtue of their
  not constituting a majority of directors) of the Company's Board of Directors
  by the Continuing Directors (as defined); (5) the acquisition of beneficial
  ownership of 15% of the voting power of the Company's outstanding voting
  securities by any person or group who beneficially owned less than 10% of such
  voting power on the date of the Employment Agreement or the acquisition of
  beneficial ownership of an additional 5% of the voting power of the Company's
  outstanding voting securities by any person or group who beneficially owned at
  least 10% of such voting power on the date of the Employment Agreement, in
  each case subject to certain exceptions; or (6) subject to applicable law, in
  a Chapter 11 bankruptcy proceeding, the appointment of a trustee or the
  conversion of a case involving the Company to a case under

                                       26
<PAGE>

  Chapter 7 of the United States Bankruptcy Code. In addition, the Employment
  Agreements of Messrs. Horng, Allardyce and Young each provide that a "change
  in control" will be deemed to occur (subject to certain exceptions) upon the
  execution by the Company and a stockholder of a contract that by its terms
  grants such stockholder (in its, his or her capacity as a stockholder) or such
  stockholder's affiliate, including, without limitation, such stockholder's
  nominee to the Board of Directors (in its, his or her capacity as an affiliate
  of such stockholder), the right to veto or block decisions or actions of the
  Board of Directors.

  The Employment Agreements also provide that the Executives will be indemnified
  by the Company to the fullest extent permitted by law. The rights of Messrs.
  Goldfield and Horng to indemnification are protected by their respective
  rights to require the Company to establish and fund a trust for their
  indemnification after a change in control or a potential change in control.
  The Employment Agreements of all Executives include non-competition and
  confidentiality provisions.

  Report of the Compensation Committee of the Board of Directors on Executive
  Compensation

  General. Subject to existing contractual obligations, the Compensation
  Committee of the Board of Directors is primarily responsible for the Company's
  executive compensation policies and practices, and administers executive
  awards under the Company's 1993 Plan and the Amended and Restated Annual
  Incentive Compensation Plan (the "Incentive Plan"). The Compensation Committee
  is currently composed of Messrs. J.L. Jackson (Chairman), James L. Johnson and
  Jere W. Thompson. Mr. Kesler served on the Compensation Committee from March
  1999 until January 21, 2000.

  Compensation Philosophy. The Company's executive compensation philosophy
  reflects its belief that the compensation of executives (i) should be linked
  to achievement of the Company's business and strategic goals; (ii) should be
  aligned with the interests of stockholders through awards of stock options and
  other stock-based compensation; (iii) should recognize individual
  contributions, as well as overall business results; and (iv) should have the
  ultimate result of attracting, motivating and retaining highly-talented
  executives for the Company. To achieve these objectives, the Company's current
  compensation program consists of the following elements:

  .  Base salary

  .  Annual incentive compensation, the receipt of which is based on (i) the
  financial performance of the Company and its divisions from year to year
  and/or (ii) significant individual contributions

  .  Long-term incentive compensation, primarily in the form of stock options

  Chief Executive Officer's Fiscal 2000 Compensation. The structure of Mr.
  Goldfield's fiscal 2000 compensation was based in large part on the
  recommendations of an outside consulting firm hired by the Company. In
  accordance with such recommendations, the Company entered into an employment
  agreement with Mr. Goldfield, effective December 1, 1994. Such agreement
  provides for an annual base salary of $850,000 or such greater amount as may
  be approved by the Compensation Committee. In addition, such agreement
  provides that Mr. Goldfield is eligible for an annual bonus pursuant to an
  incentive plan approved by the Compensation Committee. Mr. Goldfield's base
  salary has not been raised from the $850,000 amount provided for in 1994;
  however, during fiscal 2000, Mr. Goldfield was eligible to receive a cash
  bonus under the Incentive Plan of up to 100% of his base salary (the "Maximum
  Bonus"), subject to achievement by the Company of an earnings threshold
  specified by the Compensation Committee. The percentage of the Maximum Bonus
  that Mr. Goldfield was eligible to receive was based on a range of earnings
  per share targets established by the Compensation Committee. Because the
  Company did not achieve the specified earnings per share target, Mr. Goldfield
  did not receive a bonus in fiscal 2000. Thus, a significant percentage of Mr.
  Goldfield's fiscal 2000 compensation was tied to performance of the Company.
  The Compensation Committee believes that the structure of Mr. Goldfield's
  compensation, with its strong emphasis on Company performance, is in the best
  interests of the Company's stockholders because it more closely aligns the
  interests of Mr. Goldfield and the Company's stockholders. Mr. Goldfield was
  awarded a grant of 100,000 options under the 1993 Plan in January 2000.

  In fiscal 1999, the Company commissioned a new compensation survey to review
  its compensation practices in light of the practices of certain of its
  competitors and industry peers. The report, delivered in January 2000,
  confirmed that the range of cash compensation, bonus awards and option grants
  to executives and managers of the Company are competitive and that the
  thresholds and performance targets set by management of the Company are
  generally consistent with those of its peers and competitors.

  Compensation of Other Executive Officers. In the fiscal year ended November
  30, 2000, the compensation package received by the other executives of the
  Company consisted of base salary, stock options and bonus awards. Each element
  is consistent with the compensation philosophy set forth above, and the
  determinations of the Compensation Committee regarding the appropriate form
  and level of executive compensation were based in part on the recommendations
  of management. Such recommendations reflected each individual's level of
  responsibility and experience and the assessment by the Compensation Committee
  of the individual's contribution to the success of the Company's business.

                                       27
<PAGE>

  The Compensation Committee continues to place its emphasis on compensation
  that would more closely align the executives' interests with the stockholders'
  interests. Therefore, as with the Chief Executive Officer, a significant
  percentage of each executive's total compensation opportunity was tied to
  performance of the Company and individual achievement through bonus
  eligibility, based on a combination of (i) individual performance and (ii)
  Company performance, and stock option awards.

  Subject to achievement by the Company of an earnings threshold specified by
  the Compensation Committee, certain of the Company's executives are eligible
  to receive incentive bonuses under the Incentive Plan ranging from 33% to 100%
  of their base salaries. The percentage of the bonus amount awarded is based in
  part on a range of targets established by the Compensation Committee involving
  the Company's earnings per share, return on capital employed and operating
  income generated.

  In granting stock options to the Company's executives, the Compensation
  Committee, with the input of management, considered each executive's current
  and future ability to impact achievement of strategic goals and objectives, as
  well as internal equity within the executive's peer group. The Compensation
  Committee believes this emphasis on equity compensation is in the best
  interests of the Company's stockholders because it more closely aligns the
  interests of the executives and the Company's stockholders for both near and
  long-term. All options granted during fiscal 2000 to the Company's executives
  were granted at the fair market value on the date of grant. All of such
  options vest at a rate of 25% per year, beginning on the first anniversary of
  the date of grant. See "Executive Compensation--Option Grants During Fiscal
  2000." Therefore, an executive will receive full benefits from the option
  grant only if the Company's stock price appreciates and only if the executive
  remains with the Company for the full term of vesting.

  Internal Revenue Code Section 162(m). In August 1993, as part of the Omnibus
  Budget Reconciliation Act of 1993, Section 162(m) of the Internal Revenue Code
  (the "Code") was enacted, which section provides for an annual one million
  dollar limitation (the "Deduction Limitation") on the deduction that an
  employer may claim for compensation of certain executives. Section 162(m) of
  the Code provides an exception (the "Performance-Based Compensation
  Exception") to the Deduction Limitation for certain performance-based
  compensation, and it is the intent of the Compensation Committee to qualify
  executive compensation for such exception to the extent necessary, feasible
  and in the best interests of the Company.

                                        J.L. Jackson
                                        James L. Johnson
                                        Jere W. Thompson

  Notwithstanding anything to the contrary set forth in any of the Company's
  previous filings under the Securities Act of 1933 or the Securities Exchange
  Act of 1934 that might incorporate future filings, in whole or in part, the
  preceding report and the Performance Graph shown hereinafter shall not be
  incorporated by reference into any such filings.

  Comparative Performance Graph

  The following chart compares the cumulative total stockholder return on the
  Company's Common Stock with the cumulative total return on the stocks
  comprising The Nasdaq Market Value Index (the "Nasdaq Index") and the
  Electronics Wholesale Index over the period commencing December 1, 1995 and
  ending November 30, 2000. The comparison assumes $100 was invested on December
  1, 1995 in the Company's Common Stock and in each of the foregoing indices and
  assumes reinvestment of dividends. The stock performance graph is not
  necessarily indicative of future price performance.

  Comparison of Cumulative Total Return of CellStar Corporation, Nasdaq Index
  and Electronics Wholesale Index

                        [PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
                                              FISCAL YEAR ENDING
COMPANY/INDEX/MARKET     12/01/1995  11/29/1996  11/28/1997  11/30/1998  11/30/1999  11/30/2000
<S>                      <C>         <C>         <C>         <C>         <C>         <C>
CellStar Corp                100.00       44.52      147.78       73.53      110.30       18.92

Electronics Wholesale        100.00      113.67      129.54      106.85      120.29       98.41

NASDAQ Market Index          100.00      124.07      154.11      190.51      312.01      259.11
</TABLE>

                                       28
<PAGE>

Item 12. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information with respect to the number of shares
of Common Stock beneficially owned as of March 26, 2001, by (i) each person
known by the Company to beneficially own more than five percent (5%) of the
outstanding shares of Common Stock; (ii) the Named Executive Officers; (iii)
each director and nominee for director of the Company; and (iv) all directors
and executive officers of the Company as a group. Unless otherwise noted, the
persons named in the table have sole voting and investment power with respect to
all shares of Common Stock beneficially owned by them.

<TABLE>
<CAPTION>

                                                         Amount and Nature
                                                                 of
                                                             Beneficial            Percent
Name of Beneficial Owner or Group                            Ownership            of Class
---------------------------------                      ----------------------     ---------
<S>                                                    <C>                        <C>
Lord, Abbet & Co.(1).................................          4,651,032(2)            7.7%
Fuller & Thaler Asset Management, Inc.(3)(4).........          3,656,700(5)(6)         6.1
Alan H. Goldfield(7).................................         21,001,110(8)           35.0
A.S. Horng(7)........................................          2,887,854(9)            4.8
Dale H. Allardyce(7).................................             80,000(10)             *
Austin P. Young(7)...................................             45,500(11)             *
James L. Johnson(7)..................................             41,250(12)(13)         *
Terry S. Parker(7)...................................             18,750(12)(13)         *
Dale V. Kesler(7)....................................              9,750(12)(14)         *
J.L. Jackson(7)......................................             18,750(12)(14)         *
Jere W. Thompson(7)..................................             10,950(12)(14)         *
Lawrence King(7).....................................            213,284(15)             *
Current Directors and Executive Officers as a Group..         21,957,198(16)          36.5
</TABLE>

*  Less than 1%.

   (1)  The address for Lord, Abbet & Co. is 90 Hudson Street, Jersey City, New
   Jersey 07302.

   (2)  Based on a Schedule 13G/A filed with the Securities and Exchange
   Commission on January 19, 2001, by Lord, Abbet & Co., Lord, Abbet & Co.
   reported sole voting power and sole dispositive power with respect to all
   4,651,032 shares.

   (3)  The address for Fuller & Thaler Asset Management, Inc., is 411 Borel
   Avenue, Suite 402, San Mateo, California 94402.

   (4)  The address for Mr. Russell J. Fuller is 411 Borel Avenue, Suite 402,
   San Mateo, California 94402.

   (5)  Based on a Schedule 13G filed with the Securities and Exchange
   Commission on February 13, 2001, by Fuller & Thaler Asset Management, Inc.,
   and Russell J. Fuller, Fuller & Thaler Asset Management, Inc., reported sole
   voting power with respect to 2,745,700 shares and sole dispositive power with
   respect to all 3,656,700 shares.

   (6)  Russell J. Fuller has investment authority over assets held by Fuller &
   Thaler Asset Management, Inc.

   (7)  The address is 1730 Briercroft Court, Carrollton, Texas 75006.

   (8)  Includes 17,706,110 held jointly with Mr. Goldfield's wife. Also
   includes 2,370,000 shares that are subject to a revocable (upon 90 days
   written notice) proxy granted to Mr. Goldfield by Mr. A.S. Horng, which proxy
   gives Mr. Goldfield the right to vote such shares. Also includes 925,000
   shares subject to options granted under the 1993 Plan, which options are
   exercisable within 60 days.

   (9)  Includes 2,370,000 shares that are subject to a revocable (upon 90 days
   written notice) proxy to vote such shares held by Alan H. Goldfield. Also
   includes 517,854 shares subject to options granted under the 1993 Plan, which
   options are exercisable within 60 days.

   (10) Includes 50,000 shares subject to options granted under the 1993 Plan,
   to which options are exercisable within 60 days.

   (11) Includes 37,500 shares subject to options granted under the 1993 Plan,
   to which options are exercisable within 60 days.

   (12) Includes 7,500 shares subject to options granted under the Directors'
   Plan, which options are exercisable within 60 days.

   (13) Includes 11,250 shares subject to options granted under the 1993 Plan,
   which options are exercisable within 60 days.

   (14) Includes 1,250 shares subject to options granted under the 1993 Plan,
   which options are exercisable within 60 days.

   (15) Includes 213,284 shares subject to options granted under the 1993 Plan,
   which options are exercisable within 60 days.

   (16) In addition to the ownership of the directors and executive officers
   listed in the table and more fully described in footnotes 8 through 15 above,
   includes 1,807,388 shares subject to options granted under the 1993 Plan,
   which options are exercisable within 60 days.

                                       29
<PAGE>

   Item 13. Certain Relationships and Related Transactions

   Related Transactions

   In May 2000, CellStar (Asia) Corporation Limited ("CellStar Asia") loaned
   $320,503 to Mr. A.S. Horng, Chairman and Chief Executive Officer of CellStar
   Asia, at an interest rate of 6%. CellStar Asia made the loan to Mr. Horng to
   assist with the payment of taxes. Mr. Horng paid the loan in September 2000.

   In connection with its initial public offering in December 1993, the Company
   bought from Mr. Goldfield, its Chief Executive Officer, a jet aircraft at
   book value and agreed that he would have the right to buy the aircraft back
   at its then current book value if the Company decided to sell it. In January
   2001, the Company sold the aircraft to Mr. Goldfield for its book value,
   which was $2,236,718.

                                    PART IV.

   Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

   1.  Consolidated Financial Statements

   See Index to Consolidated Financial Statements on page F-1 of this Form 10-K.

   2.  Financial Statement Schedules

   See Index to Consolidated Financial Statements on page F-1 of this Form 10-K.


   3.  Exhibits

Number   Description
------   -----------

 3.1     Amended and Restated Certificate of Incorporation of CellStar
         Corporation (the "Certificate of Incorporation"). (1)

 3.2     Certificate of Amendment to Certificate of Incorporation. (14)

 3.3     Amended and Restated Bylaws of CellStar Corporation. (17)

 4.1     The Certificate of Incorporation, Certificate of Amendment to
         Certificate of Incorporation and Amended and Restated Bylaws of
         CellStar Corporation filed as Exhibits 3.1, 3.2 and 3.3 are
         incorporated into this item by reference. (1)(14)(13)

 4.2     Specimen Common Stock Certificate of CellStar Corporation. (2)

 4.3     Rights Agreement, dated as of December 30, 1996, by and between
         CellStar Corporation and Chase Mellon Shareholder Services, L.L.C., as
         Rights Agent ("Rights Agreement"). (3)

 4.4     First Amendment to Rights Agreement, dated as of June 18, 1997. (4)

 4.5     Form of Certificate of Designation, Preferences and Rights of Series A
         Preferred Stock of CellStar Corporation ("Certificate of
         Designation"). (3)

 4.6     Form of Rights Certificate. (3)

 4.7     Certificate of Correction of Certificate of Designation. (4)

 4.8     Indenture, dated as of October 14, 1997, by and between CellStar
         Corporation and The Bank of New York, as Trustee. (12)

                                       30
<PAGE>

Number   Description
------   -----------

 10.1    Employment Agreement, effective as of December 1, 1994, by and between
         CellStar Corporation and Alan H. Goldfield. (2)(21)

 10.2    Employment Agreement, effective January 22, 1998, by and between
         CellStar (Asia) Corporation Limited, CellStar Corporation and Hong An-
         Hsien. (13)(21)

 10.3    Employment Agreement, effective as of November 12, 1999, by and
         between CellStar, Ltd., CellStar Corporation and Dale H. Allardyce.
         (17)(21)

 10.4    Employment Agreement, effective as of November 5, 1999, by and between
         CellStar, Ltd., CellStar Corporation and Austin P. Young. (17)(21)

 10.5    Employment Agreement, effective as of January 21, 2000, by and between
         CellStar Ltd., CellStar Corporation and Elaine Flud Rodriguez.
         (17)(21)

 10.6    Master Agreement for the Purchase of Products and Inventory
         Maintenance, Assembly and Fulfillment (IAF) Services between Pacific
         Bell Mobile Services and CellStar, Ltd., effective September 20, 1996.
         (5)(22)

 10.7    Registration Rights Agreement by and between the Company and Audiovox
         Corporation. (9)

 10.8    Registration Rights Agreement by and between the Company and Motorola
         Inc., dated as of July 20, 1995. (1)

 10.9    CellStar Corporation 1994 Amended and Restated Director Nonqualified
         Stock Option Plan. (10)

 10.10   Registration Rights Agreement, dated as of June 2, 1995, between Hong
         An Hsien and CellStar Corporation. (13)(21)

 10.11   Purchase Agreement, dated October 7, 1997, by and among CellStar
         Corporation and Bear, Stearns & Co. Inc. and Chase Securities Inc.
         (12)

 10.12   Registration Rights Agreement, dated as of October 14, 1997, by and
         among CellStar Corporation and Bear, Stearns & Co. Inc. and Chase
         Securities Inc. (12)

 10.13   Agreement, dated as of April 28, 1995, by and between CellStar, Ltd.
         and Motorola, Inc., Greater China Cellular Subscriber Division
         (People's Republic of China). (8)

 10.14   Separation Agreement and Release Agreement between Richard M. Gozia
         and CellStar, Ltd., CellStar Corporation, and all affiliated entities,
         dated April 21, 1999. (15)(21)

 10.15   Amended and Restated Credit Agreement, dated as of August 2, 1999,
         among CellStar Corporation, each of the banks or other lending
         institutions signatory thereto, and Chase Securities, Inc. as lead
         arranger and book manager. (16)

                                       31
<PAGE>

Number   Description
------   -----------

 10.16   Stock Purchase Agreement, dated as of September 3, 1999, among
         CellStar Telecom, Inc., Inmobiliaria Azltan, S.A. de C.V., and Topp
         Telecom, Inc. (16)

 10.17   Letter Agreement between Pacific Bell Mobile Services and CellStar,
         Ltd. dated as of May 31, 1999. (16)

 10.18   Amendment to Master Agreement for the Purchase of Products and
         Inventory Maintenance, Assembly and Fulfillment (IAF) Services between
         Pacific Bell Mobile Services and CellStar, Ltd. dated as of May 31,
         1999. (16)(22)

 10.19   Pledge Agreement, dated as of July 10, 1998, between CellStar Telecom,
         Inc. and Chase Bank of Texas, National Association. (16)

 10.20   Contribution and Indemnification Agreement, dated as of July 10, 1998,
         among CellStar Corporation and the affiliated entities signatory
         thereto. (16)

 10.21   Guaranty, dated as of July 10, 1998, provided by CellStar Telecom,
         Inc., Florida Properties, Inc., CellStar Global Satellite Service,
         Ltd. to Chase Bank of Texas, National Association and the other banks
         and lending institutions signatory to the Credit Agreement. (16)

 10.22   Pledge Agreement, dated as of July 10, 1998, between NAC Holdings,
         Inc. and Chase Bank of Texas, National Association. (16)

 10.23   Pledge Agreement, dated as of July 10, 1998, between CellStar
         Corporation and Chase Bank of Texas, National Association. (16)

 10.24   Pledge Agreement, dated as of July 10, 1998, between National Auto
         Center, Inc. and Chase Bank of Texas, National Association. (16)

 10.25   Guarantor Security Agreement, dated as of July 10, 1998, among
         CellStar Telecom, Inc. Florida Properties, Inc., CellStar Global
         Satellite Service, Ltd. and Chase Bank of Texas, National Association.
         (16)

 10.26   Consent, Ratification and Confirmation, dated as of August 2, 1999, by
         and among CellStar Corporation, National Auto Center, Inc., CellStar,
         Ltd., CellStar Fulfillment, Ltd., CellStar West, Inc., CellStar Air
         Services, Inc., A&S Air Service, Inc., CellStar International
         Corporation/SA, AudioMex Export Corp., CellStar International
         Corporation/Asia, CellStar Fulfillment, Inc., NAC Holdings, Inc.,
         ACC-CellStar, Inc., CellStar Finance, Inc., CellStar Telecom, Inc.,
         Florida Properties, Inc., and CellStar Global Satellite Service, Ltd.,
         for the benefit of The First National Bank of Chicago, as Syndication
         Agent, National City Bank, as Documentation Agent, Chase Bank of
         Texas, National Association, as Administrative Agent, and The Chase
         Manhattan Bank, as Alternate Currency Agent. (19)

 10.27   First Amendment to Amended and Restated Credit Agreement, dated
         November 23, 1999, among CellStar Corporation and each of the banks
         and lending institutions signatory thereto. (17)

 10.28   CellStar Corporation 1993 Amended and Restated Long-Term Incentive
         Plan, amended and effective as of January 21, 2000. (17)(21)

                                       32
<PAGE>

Number   Description
------   -----------

 10.29   Distribution Agreement, dated as of April 15, 2000, by and between
         Motorola, Inc. by and through its Personal Communications Sector Latin
         America Group and CellStar, Ltd. (19)(22)

 10.30   Second Amendment to Amended and Restated Credit Agreement, dated as of
         July 12, 2000, among CellStar Corporation and each of the banks or
         other lending institutions which is or may from time to time become a
         signatory thereof. (18)

 10.31   Third Amendment to Amended and Restated Credit Agreement dated as of
         November 10, 2000, among CellStar Corporation, each of the banks or
         other lending institutions which is or may from time to time become a
         signatory to the Amended and Restated Credit Agreement, Bank One,
         N.A., as Syndication Agent, National City Bank, as Documentation Agent
         and The Chase Manhattan Bank, as the Administrative Agent and
         Alternate Currency Agent. (19)

 10.32   Fourth Amendment to Amended and Restated Credit Agreement dated as of
         December 20, 2000, among CellStar Corporation, each of the banks or
         other lending institutions which is or may from time to time become a
         signatory to the Amended and Restated Credit Agreement, Bank One,
         N.A., as Syndication Agent, National City Bank, as Documentation Agent
         and The Chase Manhattan Bank as the Administrative Agent and Alternate
         Currency Agent. (19)

 10.33   Fifth Amendment to Amended and Restated Credit Agreement dated as of
         January 30, 2001, among CellStar Corporation, each of the banks or
         other lending institutions which is or may from time to time become a
         signatory to the Amended and Restated Credit Agreement, Bank One,
         N.A., as Syndication Agent, National City Bank, as Documentation Agent
         and The Chase Manhattan Bank as the Administrative Agent and Alternate
         Currency Agent. (19)

 10.34   Wireless Products Agreement by and between Motorola, Inc., by and
         through its Cellular Subscriber Sector, and CellStar, Ltd., effective
         November 15, 2000. (19)(22)

 10.35   Aircraft and Asset Purchase Agreement, dated as of January 30, 2001,
         by and between A & S Air Service, Inc. and Alan H. Goldfield. (19)

 21.1    Subsidiaries of the Company. (19)

 23.1    Consent of KPMG LLP. (20)

 99.1    Shareholders Agreement by Alan H. Goldfield to Motorola Inc., dated as
         of July 20, 1995. (1)


   (1)  Previously filed as an exhibit to the Company's Quarterly Report on
   Form 10-Q for the quarter ended August 31, 1995, and incorporated herein by
   reference.

   (2)  Previously filed as an exhibit to the Company's Annual Report on
   Form 10-K for the fiscal year ended November 30, 1995, and incorporated
   herein by reference.

   (3)  Previously filed as an exhibit to the Company's Registration Statement
   on Form 8-A (File No. 000-22972), filed January 3, 1997, and incorporated
   herein by reference.

   (4)  Previously filed as an exhibit to the Company's Registration Statement
   on Form 8-A/A, Amendment No. 1 (File No. 000-22972), filed June 30, 1997, and
   incorporated herein by reference.

                                       33
<PAGE>

   (5)  Previously filed as an exhibit to the Company's Annual Report on
   Form 10-K for the fiscal year ended November 30, 1996, and incorporated
   herein by reference.

   (6)  Previously filed as an exhibit to the Company's Quarterly Report on
   Form 10-Q for the quarter ended August 31, 1997, and incorporated herein by
   reference.

   (7)  Previously filed as an exhibit to the Company's Annual Report on
   Form 10-K for the fiscal year ended November 30, 1994, and incorporated
   herein by reference.

   (8)  Previously filed as an exhibit to the Company's Quarterly Report on
   Form 10-Q for the quarter ended May 31, 1995, and incorporated herein by
   reference.

   (9)  Previously filed as an exhibit to the Company's Registration Statement
   No. 33-70262 on Form S-1 and incorporated herein by reference.

   (10) Previously filed as an exhibit to the Company's Quarterly Report on
   Form 10-Q for the quarter ended February 28, 1995, and incorporated herein by
   reference.

   (11) Previously filed as an exhibit to the Company's Quarterly Report on
   Form 10-Q for the quarter ended May 31, 1997 and incorporated herein by
   reference.

   (12) Previously filed as an exhibit to the Company's Current Report on
   Form 8-K dated October 8, 1997, filed October 24, 1997, and incorporated
   herein by reference.

   (13) Previously filed as an exhibit to the Company's Annual Report on
   Form 10-K for the fiscal year ended November 30, 1997, and incorporated
   herein by reference.

   (14) Previously filed as an exhibit to the Company's Quarterly Report on
   Form 10-Q for the quarter ended May 31, 1998, and incorporated herein by
   reference.

   (15) Previously filed as an exhibit to the Company's Quarterly Report on
   Form 10-Q for the quarter ended May 31, 1999, and incorporated herein by
   reference.

   (16) Previously filed as an exhibit to the Company's Quarterly Report on
   Form 10-Q for the quarter ended August 31, 1998, and incorporated herein by
   reference.

   (17) Previously filed as an exhibit to the Company's Annual Report on
   Form 10-K for the fiscal year ended November 30, 1999 and incorporated herein
   by reference.

   (18) Previously filed as an exhibit to the Company's Quarterly Report on
   Form 10-Q for the quarter ended May 31, 2000, and incorporated herein by
   reference.

   (19)  Previously filed as an exhibit to the Company's Annual Report on
   Form 10-K for the fiscal year ended November 30, 2000, filed on
   February 28,2001, and incorporated herein by reference.

   (20) Filed herewith.

   (21) The exhibit is a management contract or compensatory plan or agreement.

   (22) Certain provisions of this exhibit are subject to a request for
   confidential treatment filed with the Securities and Exchange Commission.

4.   Reports on Form 8-K

None

                                       34
<PAGE>

                                  SIGNATURES

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

                              CELLSTAR CORPORATION

                           By       /s/ Alan H. Goldfield
                           ----------------------------------------
                                    Alan H. Goldfield
                                    Chairman of the Board and
                                    Chief Executive Officer

                                    Date: July 5, 2001


Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S>                                                                                     <C>
By  /s/ Alan H. Goldfield                                                               Date: July 5, 2001
----------------------------------------
Alan H. Goldfield
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)

By  /s/ Dale H. Allardyce                                                               Date: July 5, 2001
----------------------------------------
Dale H. Allardyce
President and Chief Operating Officer

By  /s/ Austin P. Young                                                                 Date: July 5, 2001
----------------------------------------
Austin P. Young
Senior Vice President, Chief Financial Officer
and Treasurer
(Principal Financial Officer)

By  /s/ Raymond L. Durham                                                               Date: July 5, 2001
----------------------------------------
Raymond L. Durham
Vice President, Corporate Controller
(Principal Accounting Officer)

By  /s/ J. L. Jackson                                                                   Date: July 5, 2001
----------------------------------------
J. L. Jackson
Director

By  /s/ James L. Johnson                                                                Date: July 5, 2001
----------------------------------------
James L. Johnson
Director

By  /s/ Dale V. Kesler                                                                  Date: July 5, 2001
----------------------------------------
Dale V. Kesler
Director
</TABLE>

                                       35
<PAGE>

<TABLE>
<CAPTION>
<S>                                                                                     <C>
By  /s/ Terry S. Parker                                                                 Date: July 5, 2001
----------------------------------------
Terry S. Parker
Director

By  /s/ Jere W. Thompson                                                                Date: July 5, 2001
----------------------------------------
Jere W. Thompson
Director
</TABLE>

                                       36
<PAGE>

                     CELLSTAR CORPORATION AND SUBSIDIARIES

                  Index to Consolidated Financial Statements
<TABLE>
<CAPTION>
<S>                                                                                                                     <C>
Independent Auditors' Report                                                                                            F-2

Consolidated Balance Sheets as of November 30, 2000 and 1999.                                                           F-3

Consolidated Statements of Operations for the years ended November 30, 2000, 1999 and 1998                              F-4

Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss) for the years
ended November 30, 2000, 1999 and 1998                                                                                  F-5

Consolidated Statements of Cash Flows for the years ended November 30, 2000, 1999 and 1998                              F-6

Notes to Consolidated Financial Statements                                                                              F-7

Schedule II - Valuation and Qualifying Accounts for the years ended November 30, 2000, 1999 and 1998                    S-1
</TABLE>

                                      F-1
<PAGE>

                         INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
CellStar Corporation:

We have audited the consolidated financial statements of CellStar Corporation
and subsidiaries as listed in the accompanying index. In connection with our
audits of the consolidated financial statements, we also have audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CellStar Corporation
and subsidiaries as of November 30, 2000 and 1999, and the results of their
operations and their cash flows for each of the years in the three-year period
ended November 30, 2000, in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.

As discussed in note 2, the accompanying consolidated financial statements as of
November 30, 2000 and for the year then ended have been restated.



                                    KPMG LLP



Dallas, Texas
January 12, 2001
  except as to note 7
  which is as of February 27, 2001
  and note 2 which
  is as of June 28, 2001

                                      F-2
<PAGE>

                     CELLSTAR CORPORATION AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                          November 30, 2000 and 1999
                   (Amounts in thousands, except share data)

<TABLE>
<CAPTION>

                                                                                   2000       1999
                                                                                 --------   -------
                                                                                As restated
                                                                                 (note 2)
<S>                                                                             <C>           <C>
                    ASSETS

Current assets:
    Cash and cash equivalents                                                      $ 77,023    70,498
    Restricted cash                                                                  42,622    25,000
    Accounts receivable (less allowance for doubtful accounts of
        $75,810 and $33,152, respectively)                                          345,996   306,235
    Inventories                                                                     265,644   189,866
    Deferred income tax assets                                                       30,866    15,127
    Prepaid expenses                                                                 25,470    32,029
                                                                                   --------   -------

        Total current assets                                                        787,621   638,755

Property and equipment, net                                                          22,015    27,481
Goodwill (less accumulated amortization of $17,408 and $10,483 respectively)         23,532    32,584
Deferred income tax assets                                                           16,484         -
Other assets                                                                          9,172     7,618
                                                                                   --------   -------

                                                                                   $858,824   706,438
                                                                                   ========   =======

            LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Accounts payable                                                               $363,848   212,999
    Notes payable to financial institutions                                         127,128    50,609
    Accrued expenses                                                                 22,744    24,864
    Income taxes payable                                                              2,948     8,646
    Deferred income tax liabilities                                                   6,573     8,796
                                                                                   --------   -------

        Total current liabilities                                                   523,241   305,914
Long-term debt                                                                      150,000   150,000
                                                                                   --------   -------

        Total liabilities                                                           673,241   455,914
                                                                                   --------   -------

Stockholders' equity:
    Preferred stock, $.01 par value, 5,000,000 shares authorized;
        none issued                                                                       -         -
    Common stock, $.01 par value, 200,000,000 shares authorized;
        60,142,221 and 60,057,096 shares issued and outstanding, respectively           602       601
    Additional paid-in capital                                                       81,298    80,929
    Accumulated other comprehensive loss - foreign currency
       translation adjustments                                                      (10,861)   (8,509)
    Retained earnings                                                               114,544   177,503
                                                                                   --------   -------

        Total stockholders' equity                                                  185,583   250,524
                                                                                   --------   -------

                                                                                   $858,824   706,438
                                                                                   ========   =======
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>

                     CELLSTAR CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                 Years ended November 30, 2000, 1999, and 1998
                     (In thousands, except per share data)
<TABLE>
<CAPTION>

                                                               2000        1999        1998
                                                            ----------   ---------   ---------
                                                            As restated
                                                             (note 2)
<S>                                                        <C>           <C>         <C>
Revenues                                                    $2,475,682   2,333,805   1,995,850
Cost of sales                                                2,364,197   2,140,375   1,823,075
                                                            ----------   ---------   ---------

  Gross profit                                                 111,485     193,430     172,775

Selling, general and administrative expenses                   169,232     111,613     116,747
Impairment of assets                                            12,339       5,480           -
Lawsuit settlement                                                   -           -       7,577
Restructuring charge                                              (157)      3,639           -
                                                            ----------   ---------   ---------

  Operating income (loss)                                      (69,929)     72,698      48,451

Other income (loss):
   Interest expense                                            (19,113)    (19,027)    (14,446)
   Equity in income (loss) of affiliated companies, net         (1,805)     31,933     (28,448)
   Gain on sale of assets                                        6,200       8,774           -
   Other, net                                                      932      (1,876)      1,389
                                                            ----------   ---------   ---------

       Total other income (expense)                            (13,786)     19,804     (41,505)
                                                            ----------   ---------   ---------

   Income (loss) before income taxes                           (83,715)     92,502       6,946

Provision (benefit) for income taxes                           (20,756)     23,415      (7,418)
                                                            ----------   ---------   ---------

   Net income (loss)                                        $  (62,959)     69,087      14,364
                                                            ==========   =========   =========

Net income (loss) per share:

   Basic                                                        $(1.05)       1.16        0.24
                                                                ======        ====        ====

   Diluted                                                      $(1.05)       1.12        0.24
                                                                ======        ====        ====
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>

                     CELLSTAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)
                 Years ended November 30, 2000, 1999, and 1998
                                (In thousands)
<TABLE>
<CAPTION>

                                                                                             Accumulated
                                                                     Additional    Common       other
                                                      Common Stock     paid-in     stock    comprehensive   Retained
                                                     Shares  Amount    capital    warrant        loss       earnings   Total
                                                     ------  ------  -----------  --------  --------------  --------  --------
<S>                                                  <C>     <C>     <C>          <C>       <C>             <C>       <C>

Balance at November 30, 1997                         58,499    $293      72,985         4          (6,469)    94,052  160,865
 Comprehensive income:
  Net income                                              -       -           -         -               -     14,364   14,364
  Foreign currency translation
   adjustment                                             -       -           -         -          (1,712)         -   (1,712)
                                                                                                                      -------
      Total comprehensive income                                                                                       12,652
 Common stock issued under
  stock option plans                                    464       5       4,269         -               -          -    4,274
 Two-for-one common stock split                           -     292        (292)        -               -          -        -
                                                     ------    ----      ------   -------   -------------   --------  -------

Balance at November 30, 1998                         58,963     590      76,962         4          (8,181)   108,416  177,791
 Comprehensive Income:
  Net income                                              -       -           -         -               -     69,087   69,087
  Foreign currency translation
    adjustment                                            -       -           -         -            (328)         -     (328)
                                                                                                                      -------
      Total comprehensive income                                                                                       68,759
 Common stock issued under
    stock option plans                                  533       5       3,969         -               -          -    3,974
 Exercise of common stock warrant                       561       6          (2)       (4)              -          -        -
                                                     ------    ----      ------   -------   -------------   --------  -------

Balance at November 30, 1999                         60,057     601      80,929         -          (8,509)   177,503  250,524
 Comprehensive Loss:
  Net loss as restated (note 2)                           -       -           -         -               -    (62,959) (62,959)
  Foreign currency translation
    adjustment                                            -       -           -         -          (2,352)         -   (2,352)
                                                                                                                      -------
      Total comprehensive loss                                                                                        (65,311)
 Common stock issued under
    stock option plans                                   85       1         369         -               -          -      370
                                                     ------    ----      ------   -------   -------------   --------  -------

Balance at November 30, 2000 as restated (note 2)    60,142    $602      81,298         -         (10,861)   114,544  185,583
                                                     ======    ====      ======   =======   =============   ========  =======
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>

                     CELLSTAR CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                 Years ended November 30, 2000, 1999, and 1998
                                (In thousands)
<TABLE>
<CAPTION>

                                                                             2000       1999       1998
                                                                           ---------   -------   --------
                                                                          As restated
                                                                            (note 2)
<S>                                                                      <C>           <C>       <C>
Cash flows from operating activities:
 Net income (loss)                                                         $ (62,959)   69,087     14,364
 Adjustments to reconcile net income (loss) to net cash
  provided by (used in) operating activities:
      Provision for doubtful accounts                                         51,636    11,643     14,120
      Provision for inventory obsolescence                                    32,255    23,012     12,434
      Depreciation, amortization and impairment of assets                     23,571    16,911     11,426
      Gain on sale of assets                                                  (6,200)   (8,774)         -
      Equity in loss (income) of affiliated companies, net                     1,805   (31,933)    28,448
      Deferred income taxes                                                  (34,446)    8,950    (13,073)
      Changes in certain operating assets and liabilities:
          Accounts receivable                                               (101,243)   29,751   (208,437)
          Inventories                                                       (119,867)   61,232    (90,164)
          Prepaid expenses                                                     2,705   (15,201)    (8,803)
          Other assets                                                          (648)   (2,327)      (116)
          Accounts payable                                                   168,224   (99,349)   119,360
          Accrued expenses                                                     1,474   (16,070)    19,760
          Income taxes payable                                                (5,698)      882     (2,109)
                                                                           ---------   -------   --------

               Net cash provided by (used in) operating activities           (49,391)   47,814   (102,790)
                                                                           ---------   -------   --------

Cash flows from investing activities:
 Purchases of property and equipment                                          (5,461)   (8,499)   (12,498)
 Acquisitions of businesses, net of cash acquired                             (4,241)   (2,301)   (13,526)
 Proceeds from sale of assets                                                    377    41,778          -
 Purchase of investment                                                       (4,144)        -          -
 Acquisition of minority interests                                                 -         -       (900)
 Increase in restricted cash                                                 (17,622)  (25,000)         -
                                                                           ---------   -------   --------

               Net cash provided by (used in) investing activities           (31,091)    5,978    (26,924)
                                                                           ---------   -------   --------

Cash flows from financing activities:
 Net borrowings (payments) on notes payable to financial institutions         86,637   (34,414)    82,030
 Checks not presented for payment                                                  -         -     17,719
 Net proceeds from issuance of common stock                                      370     3,137      3,302
                                                                           ---------   -------   --------

               Net cash provided by (used in) financing activities            87,007   (31,277)   103,051
                                                                           ---------   -------   --------

Net increase (decrease) in cash and cash equivalents                           6,525    22,515    (26,663)
Cash and cash equivalents at beginning of year                                70,498    47,983     74,646
                                                                           ---------   -------   --------

Cash and cash equivalents at end of year                                   $  77,023    70,498     47,983
                                                                           =========   =======   ========
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>

                     CELLSTAR CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)  Summary of Significant Accounting Policies

(a)  Basis for Presentation

CellStar Corporation and subsidiaries (the "Company") is a leading global
provider of distribution and value-added logistics services to the wireless
communications industry, with operations in Asia-Pacific, Latin America, Europe
and North America. The Company facilitates the effective and efficient
distribution of handsets, related accessories and other wireless products from
leading manufacturers to network operators, agents, resellers, dealers and
retailers. In many of its markets, the Company provides activation services that
generate new subscribers for its wireless carrier customers.

All significant intercompany balances and transactions have been eliminated in
consolidation. Certain prior year amounts have been reclassified to conform to
the current year presentation.

(b)  Use of Estimates

Management of the Company has made a number of estimates and assumptions related
to the reporting of assets and liabilities and the disclosure of contingent
assets and liabilities in preparation of these consolidated financial statements
in conformity with generally accepted accounting principles. Actual results
could differ from those estimates.

(c)  Inventories

Inventories are stated at the lower of cost (primarily on a moving average
basis) or market and are comprised of finished goods.

(d)  Property and Equipment

Property and equipment are recorded at cost. Depreciation of equipment is
provided over the estimated useful lives of the respective assets, which range
from three to thirty years, on a straight-line basis. Leasehold improvements are
amortized over the shorter of their useful life or the related lease term. Major
renewals are capitalized, while maintenance, repairs and minor renewals are
expensed as incurred.

(e)  Goodwill

Goodwill represents the excess of the purchase price over the fair value of net
assets acquired and is amortized using the straight-line method over 20 years.
The Company assesses the recoverability of this intangible asset by determining
the estimated future cash flows related to such acquired assets. In the event
that goodwill is found to be carried at an amount that is in excess of estimated
future operating cash flows, then the goodwill will be adjusted to a level
commensurate with a discounted cash flow analysis using a discount rate
reflecting the Company's average cost of funds.

(f)  Impairment of Long-Lived Assets

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

                                      F-7
<PAGE>

                     CELLSTAR CORPORATION AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(g)  Equity Investments in Affiliated Companies

The Company accounts for its investments in common stock of affiliated companies
using the equity method or the modified equity method, if required. The
investments are included in other assets in the accompanying consolidated
balance sheets.

(h)  Revenue Recognition

For the Company's wholesale business, revenue is generally recognized when
product is shipped. In accordance with contractual agreements with wireless
service providers, the Company receives an activation commission for obtaining
subscribers for wireless services in connection with the Company's retail
operations. The agreements contain various provisions for additional commissions
("residual commissions") based on subscriber usage. The agreements also provide
for the reduction or elimination of activation commissions if subscribers
deactivate service within stipulated periods. The Company recognizes revenue for
activation commissions on the wireless service providers' acceptance of
subscriber contracts and residual commissions when earned and provides an
allowance for estimated wireless service deactivations, which is reflected as a
reduction of accounts receivable and revenues in the accompanying consolidated
financial statements. The Company recognizes fee revenue when the service is
completed.

(i)  Foreign Currency

Assets and liabilities of the Company's foreign subsidiaries have been
translated at the rate of exchange at the end of each period. Revenues and
expenses have been translated at the weighted average rate of exchange in effect
during the respective period. Gains and losses resulting from translation are
accumulated as other comprehensive loss in stockholders' equity, except for
subsidiaries located in countries whose economies are considered highly
inflationary. In such cases, translation adjustments are included primarily in
other income (expense) in the accompanying consolidated statements of
operations. Net foreign currency transaction gains (losses) for the years ended
November 30, 2000, 1999 and 1998 were ($9.4) million, ($3.4) million and $0.3
million, respectively. The currency exchange rates of the Latin American and
Asia Pacific countries in which the Company conducts operations have
historically been volatile. The Company manages the risk of foreign currency
devaluation by attempting to increase prices of products sold at or above the
anticipated rate of local currency devaluation relative to the U.S. dollar, by
indexing certain of its receivables to exchange rates in effect at the time of
their payment and by entering into non-deliverable foreign currency forward
contracts in certain instances.

(j)  Derivative Financial Instruments

The Company uses various derivative financial instruments as part of an overall
strategy to manage the Company's exposure to market risk associated with
interest rate and foreign currency exchange rate fluctuations. The Company uses
foreign currency forward contracts to manage the foreign currency exchange rate
risks associated with international operations. The Company evaluates the use of
interest rate swaps and cap agreements to manage its interest risk on debt
instruments, including the reset of interest rates on variable rate debt. The
Company does not hold or issue derivative financial instruments for trading
purposes.

Foreign exchange contracts that hedge the currency exposure on intercompany
loans and sales transactions are valued at current spot rates at the market's
close, and the change in value is recognized currently.

The Company used foreign currency non-deliverable forward ("NDF") contracts to
manage certain foreign exchange risks in conjunction with transactions with E.A.
Electronicos e Componentes Ltda. (see note 3(b)). These contracts did not
qualify as hedges against financial statement exposure. Gains or losses on these
contracts represent the difference between the forward rate available on the
underlying currency against the U.S. dollar for the remaining maturity of the
contracts as of the balance sheet date and the contracted forward rate and are
included in selling, general and administrative expenses in the consolidated
statements of operations.

                                      F-8
<PAGE>

                     CELLSTAR CORPORATION AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(k)  Income Taxes

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

(l)  Net Income (Loss) Per Share

Basic net income (loss) per common share is based on the weighted average number
of common shares outstanding for the relevant period. Diluted net income (loss)
per common share is based on the weighted average number of common shares
outstanding plus the dilutive effect of potentially issuable common shares
pursuant to stock options, warrants, and convertible debentures.

A reconciliation of the numerators and denominators of the basic and diluted net
income (loss) per share computations for the years ended November 30, 2000,
1999, and 1998, follows (in thousands, except per share data):
<TABLE>
<CAPTION>

                                                             2000     1999      1998
                                                             ----     ----      ----
<S>                                                        <C>        <C>      <C>
Basic:
Net income (loss)                                          $(62,959)  69,087   14,364
                                                           ========   ======   ======

Weighted average number of shares outstanding                60,131   59,757   58,865
                                                             ======   ======   ======

   Net income (loss) per share                               $(1.05)    1.16     0.24
                                                             ======     ====     ====
Diluted:
Net income (loss)                                          $(62,959)  69,087   14,364
Interest on convertible notes, net of tax effect                  -    4,500        -
                                                           --------   ------   ------

   Adjusted net income (loss)                              $(62,959)  73,587   14,364
                                                           ========   ======   ======

Weighted average number of shares outstanding                60,131   59,757   58,865
Effect of dilutive securities:
   Stock options and warrant                                      -      411    1,791
   Convertible notes                                              -    5,421        -
                                                           --------   ------   ------

Weighted average number of shares outstanding including
 effect of dilutive securities                               60,131   65,589   60,656
                                                           ========   ======   ======

   Net income (loss) per share                               $(1.05)    1.12     0.24
                                                             ======     ====     ====
</TABLE>

Outstanding options to purchase 4.7 million, 2.3 million and 1.3 million shares
of common stock at November 30, 2000, 1999 and 1998, respectively, were not
included in the computation of diluted earnings per share because their
inclusion would have been anti-dilutive.

Diluted weighted average shares outstanding at November 30, 2000 and 1998 do not
include 5.4 million common equivalent shares issuable for the convertible notes,
as their effect would be anti-dilutive.

                                      F-9
<PAGE>

                     CELLSTAR CORPORATION AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(m)  Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income (loss) and foreign currency
translation adjustments and is presented in the consolidated statements of
stockholders' equity and comprehensive income (loss). The Company does not tax
effect its foreign currency translation adjustments since it considers the
unremitted earnings of its foreign subsidiaries to be indefinitely reinvested.

(n)  Consolidated Statements of Cash Flow Information

For purposes of the consolidated statements of cash flows, the Company considers
all highly-liquid investments with an original maturity of 90 days or less to be
cash equivalents. The Company paid approximately $17.9 million, $19.4 million
and $13.0 million of interest for the years ended November 30, 2000, 1999 and
1998, respectively. The Company paid approximately $14.5 million, $13.6 million
and $8.7 million of income taxes for the years ended November 30, 2000, 1999 and
1998, respectively.

(o)  Stock Option Plans

The Company applies the intrinsic value-based method of accounting prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("Opinion 25"), and related interpretations, in accounting for grants
to employees and non-employee directors under its fixed stock option plans.
Accordingly, compensation expense is recorded on the date of grant of options
only if the current market price of the underlying stock exceeds the exercise
price.

(2)  Financial Statement Restatement

On June 28, 2001, the Company announced that the results of its year ended
November 30, 2000 would be restated to reflect certain accounting adjustments.
The restatement increases the previously reported net loss by $3.5 million
($0.06 per diluted share) from $59.4 million ($0.99 per diluted share) to $63.0
million ($1.05 per diluted share). The Company determined in the second quarter
of fiscal 2001 that it had incorrectly included as a reduction of cost of sales
certain credits received from vendors for returned inventory.

The accounting adjustments required to restate the Company's consolidated
financial statements as of November 30, 2000, increase accounts payable by $5.5
million, increase deferred income tax assets by $2.0 million, and reduce
retained earnings by $3.5 million.  For the year ended November 30, 2000, the
accounting adjustments increase cost of sales by $5.5 million and increase the
income tax benefit by $2.0 million.

(3)  Related Party Transactions

(a)  Transactions with Motorola

Motorola purchased 2.1 million shares of the Company's common stock in July 1995
and is a major supplier of handsets and accessories to the Company. Total
purchases from Motorola approximated $1,074.3 million, $1,055.1 million and
$1,276.1 million for the years ended November 30, 2000, 1999 and 1998,
respectively. Included in accounts payable at November 30, 2000 and 1999 was
approximately $113.3 million and $87.5 million, respectively, due to Motorola
for purchases of inventory.

(b)  Transactions with E.A. Electronicos e Componentes Ltda.

From 1998 until 2000 when the Company sold its interest in the joint venture
(see note 15), the Company's Brazil operations had been primarily conducted
through a majority-owned joint venture. The primary supplier of handsets to the
joint venture was a Brazilian importer, E.A. Electronicos e Componentes Ltda.
("E.A."), which was a customer of the Company. Sales to E.A. were excluded from
the Company's consolidated revenues, and the related gross profit was deferred
until the handsets were sold by the Brazil joint venture to customers. At
November 30, 1999, the Company had accounts receivable of $7.0 million due from
E.A. and accounts payable of $10.5 million due to E.A.

From November 1998 through March 1999, the Company used Brazilian real NDF
contracts to manage currency exposure risk related to credit sales made to E.A.
Payment for these sales was remitted by E.A. using the Brazilian real rate
exchange against the U.S. dollar on the day the Company recorded the sale to
E.A. Foreign currency rate fluctuations caused bad debt expense of $26.4 million
related to the payments remitted by the importer. This expense was included in
selling, general and administrative expenses for the year ended November 30,
1999, but was completely offset by gains realized on NDF contract settlements,
which gains also were included in selling, general and administrative expenses.

                                     F-10
<PAGE>

(c)  Sale of Aircraft to Chief Executive Officer

In December 1993, the Company and the Company's Chief Executive Officer entered
into an agreement pursuant to which the Company purchased the Chief Executive
Officer's jet aircraft at book value. Pursuant to that agreement, the Company
sold the Company's jet aircraft back to the Chief Executive Officer for book
value in January 2001.

(4)  Fair Value of Financial Instruments

The carrying amounts of accounts receivable, accounts payable and notes payable
as of November 30, 2000 and 1999 approximate fair value due to the short
maturity of these instruments. The fair value of the Company's long-term debt
represents quoted market prices as of November 30, 2000 and 1999 as set forth in
the table below (in thousands):
<TABLE>
<CAPTION>

                                 2000               1999
                                 ----               ----

                           Carrying   Fair   Carrying   Fair
                            Amount   Value    Amount    Value
                           --------  ------  --------  -------
<S>                        <C>       <C>     <C>       <C>

         Long-term debt    $150,000  37,320  $150,000  116,350
                           ========  ======  ========  =======
</TABLE>

(5)  Property and Equipment

Property and equipment consisted of the following at November 30, 2000 and 1999
(in thousands):
<TABLE>
<CAPTION>

                                                           2000      1999
                                                         --------   -------
<S>                                                      <C>        <C>

       Land and buildings                                $  8,695     9,382
       Furniture, fixtures and equipment                   29,054    28,937
       Jet aircraft                                         4,454     4,454
       Leasehold improvements                               5,457     5,137
                                                         --------   -------

                                                           47,660    47,910
       Less accumulated depreciation and amortization     (25,645)  (20,429)
                                                         --------   -------

                                                         $ 22,015    27,481
                                                         ========   =======
</TABLE>

(6)  Investments in Affiliated Companies

At November 30, 2000 and 1999, investments in affiliated companies includes a
49% interest in CellStar Amtel Sdn. Bhd. ("Amtel"), a Malaysian company. Amtel
is a distributor of wireless handsets. At November 30, 1999, the Company's
investment in Amtel approximated its equity in Amtel's net assets.

In 2000, the Company incurred losses of $1.8 million related to its minority
interest in Amtel. As a result of the continuing deterioration in the Malaysia
market, the Company intends to limit further exposure by divesting its ownership
in the joint venture. The carrying value of the investment at November 30, 2000
is zero. However, the Company will be required to recognize future losses, if
any, of Amtel up to the amount of debt and payables of Amtel guaranteed by the
Company, which is currently estimated to be up to $2.5 million.

In November 1997, the Company made a $3.0 million equity investment which
represented an 18% voting interest in the common stock of Topp Telecomm, Inc.
("Topp") and began supplying Topp with handsets. Topp is a reseller of wireless
airtime through the provision of prepaid wireless services.

                                     F-11
<PAGE>

                     CELLSTAR CORPORATION AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Topp incurred substantial operating losses associated with the acquisition costs
of expanding its customer base. Beginning in the Company's third fiscal quarter
of 1998, the Company became Topp's primary source of funding through the
Company's supply of handsets.

Accordingly, the Company then began to account for its debt and equity
investment in Topp under the modified equity method. Under this method, in 1998
the Company recognized Topp's net loss to the extent of the Company's entire
debt and equity investment, or $29.2 million. In February 1999, the Company sold
part of its equity investment in Topp to a wholly-owned subsidiary of Telefonos
de Mexico S.A. de C.V. At the closing, the Company also sold a portion of its
debt investment to certain other shareholders of Topp. As a result of these
transactions, the Company received cash in the amount of $7.0 million, retained
a $22.5 million note receivable and a 19.5% equity ownership interest in Topp,
and recorded a pre-tax gain of $5.8 million. In September 1999, the Company sold
its remaining debt and equity interest in Topp for $26.5 million in cash,
resulting in a pre-tax gain of $26.1 million.

In January 2000, the Company acquired 3.5% of the issued and outstanding common
stock of Arcoa Communications Co. Ltd, a telecommunications retail store chain
in Taiwan. The investment is carried at the acquisition cost of $4.1 million.

(7)  Debt

Notes payable to financial institutions consisted of the following at November
30, 2000 and 1999 (in thousands):
<TABLE>
<CAPTION>

                                                                2000     1999
                                                              --------  ------
<S>                                                           <C>       <C>

      Multicurrency revolving credit facility                 $ 82,700  17,200
      Brazilian credit facilities                                    -   8,872
      Peoples' Republic of China ("PRC") credit facilities      44,428  24,537
                                                              --------  ------

                                                              $127,128  50,609
                                                              ========  ======
</TABLE>

On October 15, 1997, the Company entered into a five year $135.0 million
Multicurrency Revolving Credit Facility (the "Facility") with a syndicate of
banks. On April 8, 1999, the amount of the Facility was reduced from $135.0
million to $115.0 million due to the release of a syndication member bank. On
August 2, 1999, the Company restructured its Facility to add additional
flexibility for foreign working capital funding and capitalization.

At May 31, 2000, the Company would not have been in compliance with one of its
covenants under the Facility. As of July 12, 2000, the Company had negotiated an
amendment to the Facility following which the Company was in compliance with the
covenant. The amount of the Facility was also reduced from $115.0 million to
$100.0 million. At August 31, 2000, the Company was not in compliance with
another of its covenants and subsequently received an additional amendment
following which the Company was in compliance.

As of November 10, 2000, the Company had negotiated another amendment to the
Facility which allowed the Company to remain in compliance by extending the date
by which a compliance certificate was required to be delivered to its banks. The
date for delivering the compliance certificate was extended again by an
additional amendment as of December 20, 2000.

As of January 30, 2001, the Company had negotiated an amendment to the Facility
that assists the Company in complying with certain covenants through March 2,
2001. The amount of the Facility was reduced from $100.0 million to $86.4
million.

                                     F-12
<PAGE>

                     CELLSTAR CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Fundings under the Facility are limited by a borrowing base test, which is
measured monthly. Borrowings under the Facility are made under London Interbank
Offering Rate contracts, generally for 30-90 days, or at the bank's prime
lending rate. Total interest charged on those borrowings includes an applicable
margin that is subject to certain increases based on the ratio of consolidated
funded debt to consolidated cash flow determined at the end of each fiscal
quarter. At November 30, 2000, the interest rate on the Facility borrowing under
the LIBOR rate was 9.529% and the prime rate was 10.75%. The Facility is secured
by the Company's accounts receivable, property, plant and equipment and all
other real property. The Facility contains, among other provisions, covenants
relating to the maintenance of minimum net worth and certain financial ratios,
dividend payments, additional debt, mergers and acquisitions and dispositions of
assets.

On February 27, 2001, the Company and its banking syndicate negotiated and
executed a Second Amended and Restated Credit Agreement which further reduces
the amount of the Facility to $85.0 million on February 28, 2001, $74.0 million
on July 31, 2001, $65.0 million on September 30, 2001, and $50.0 million on
December 15, 2001. Such Second Amended and Restated Credit Agreement further (i)
increases the applicable interest rate margin by 25 basis points, (ii) shortens
the term of the Facility from June 1, 2002 to March 1, 2002, (iii) provides
additional collateral for such Facility in the form of additional stock pledges
and mortgages on real property, (iv) provides for dominion of funds by the banks
for the Company's U.S. operations, (v) limits the borrowing base, and (vi)
tightens restrictions on the Company's ability to fund its operations,
particularly its non-U.S. operations.

As of November 30, 1999, the Company's Brazil operations had borrowed $8.9
million, including accrued interest thereon, under credit facilities with
several Brazilian banks. All $8.9 million was denominated in Brazilian reals.
Interest rates on borrowings in Brazil range from approximately 20% to 28%.

At November 30, 2000, the Company's operations in the PRC had three lines of
credit, one for USD $12.5 million, the second for RMB 215 million (approximately
USD $26.0 million) and the third for RMB 50 million (approximately USD $6.0
million), bearing interest at 7.16%, 5.85% and 2.34%, respectively. The loans
have maturity dates through August 2001. The first two lines of credit are fully
collateralized by U.S. dollar cash deposits. The cash deposit was made via an
intercompany loan from the operating entity in Hong Kong as a mechanism to
secure repatriation of these funds. The third line of credit is supported by a
RMB 15.0 million cash collateral deposit and a promissory note. At November 30,
2000, the U.S. dollar equivalent of $44.4 million had been borrowed against the
lines of credit in the PRC. As a result of this method of funding operations in
the PRC, the accompanying consolidated balance sheet at November 30, 2000
reflects USD $42.6 million in cash that is restricted as collateral on these
advances and a corresponding USD $44.4 million in notes payable.

The weighted average interest rate on short-term borrowings at November 30, 2000
and 1999, was 9.7% and 7.5% respectively.

At November 30, 2000 and 1999, long-term debt consisted of $150.0 million of the
Company's 5% Convertible Subordinated Notes Due October 15, 2002 (the "Notes"),
which are convertible into 5.4 million shares of common stock at $27.668 per
share at any time prior to maturity. Subsequent to October 18, 2000, the Notes
are redeemable at the option of the Company, in whole or in part, initially at
102% and thereafter at prices declining to 100% at maturity, together with
accrued interest. The Notes were initially issued pursuant to an exempt offering
and were subsequently registered under the Securities Act of 1933, along with
the common stock into which the Notes are convertible.

Based upon current and anticipated levels of operations, and aggressive efforts
to reduce inventories and accounts receivable, the Company anticipates that its
cash flow from operations, together with amounts available under its Facility
and existing unrestricted cash balances, will be adequate to meet its
anticipated cash requirements in the foreseeable future. In the event that
existing unrestricted cash balances, cash flows and available borrowings under
the Facility are not sufficient to meet future cash requirements, the Company
may be required to reduce planned expenditures or seek additional financing. The
Company can provide no assurances that reductions in planned expenditures would
be sufficient to cover shortfalls in available cash or that additional financing
would be available or, if available, offered on terms acceptable to the Company.

(8) Income Taxes

The Company's income (loss) before income taxes was comprised of the following
for the years ended November 30, 2000, 1999 and 1998 (in thousands):
<TABLE>
                   2000       1999       1998
                 --------   --------   --------
<S>              <C>        <C>         <C>

United States    $(85,138)  $ 13,430    (48,413)
International       1,423     79,072     55,359
                 --------   --------   --------

 Total           $(83,715)  $ 92,502      6,946
                 ========   ========   ========
</TABLE>

                                     F-13
<PAGE>

                     CELLSTAR CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Provision (benefit) for income taxes for the years ended November 30, 2000, 1999
and 1998 consisted of the following (in thousands):
<TABLE>
<CAPTION>

                                 Current   Deferred    Total
                                 --------  ---------  --------
<S>                              <C>       <C>        <C>

Year ended November 30, 2000:
     United States:
          Federal                $    -     (28,296)  (28,296)
          State                    1,138     (1,778)     (640)
     International                12,552     (4,372)    8,180
                                 -------    -------   -------

                                 $13,690    (34,446)  (20,756)
                                 =======    =======   =======


Year ended November 30, 1999:
     United States:
         Federal                 $   (28)     3,245     3,217
         State                       897        407     1,304
     International                13,596      5,298    18,894
                                 -------    -------   -------

                                 $14,465      8,950    23,415
                                 =======    =======   =======


Year ended November 30, 1998:
     United States:
         Federal                 $(2,553)   (15,283)  (17,836)
         State                     1,067       (849)      218
     International                 7,141      3,059    10,200
                                 -------    -------   -------

                                 $ 5,655    (13,073)   (7,418)
                                 =======    =======   =======

</TABLE>

Provision (benefit) for income taxes differed from the amounts computed by
applying the U.S. Federal income tax rate of 35% to income before income taxes
as a result of the following for the years ended November 30, 2000, 1999 and
1998 (in thousands):
<TABLE>
<CAPTION>

<S>                                                                            <C>        <C>      <C>
                                                                                   2000     1999     1998
                                                                               --------   ------   ------

Expected tax expense (benefit)                                                 $(29,300)  32,376    2,431
International and U.S. tax effects attributable to international operations      (4,731)  (8,869)  (9,065)
State income taxes, net of Federal benefits                                        (416)     848      142
Equity in (loss) income of affiliated companies, net                                631        6   (5,073)
Non-deductible goodwill and other                                                 1,919      371      204
Change in valuation allowance                                                    11,763     (131)   3,741
Foreign accumulated earnings tax                                                  1,228        -        -
Other, net                                                                       (1,850)  (1,186)     202
                                                                               --------   ------   ------

   Actual tax (benefit) expense                                                $(20,756)  23,415   (7,418)
                                                                               ========   ======   ======

</TABLE>

As a result of certain activities undertaken by the Company, income in certain
foreign countries is subject to reduced tax rates, and in some cases is wholly
exempt from taxes, primarily through 1999. The income tax benefits attributable
to the tax status of these subsidiaries are estimated to be $1.4 million, $3.0
million and $5.3 million, respectively, for 2000, 1999 and 1998, respectively.

                                     F-14
<PAGE>

                     CELLSTAR CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The tax effect of temporary differences underlying significant portions of
deferred income tax assets and liabilities at November 30, 2000 and 1999, is
presented below (in thousands):
<TABLE>
<CAPTION>

                                                  2000     1999
                                                --------   ------
<S>                                             <C>        <C>

Deferred income tax assets:
   United States:
      Accounts receivable                       $ 14,387    2,746
      Inventory adjustments for tax purposes       2,827    4,666
      Net operating loss carryforwards            22,784    2,306
      Foreign tax credit carryforwards             2,656    2,308
      Capital Losses                               4,639        -
      Other, net                                   4,381    2,279
   International:
      Accounts receivable                          2,091        -
      Net operating loss carryforwards             8,640    4,172
      Other, net                                     880      822
                                                --------   ------

                                                  63,285   19,299
   Valuation allowance                           (15,935)  (4,172)
                                                --------   ------

                                                $ 47,350   15,127
                                                ========   ======


Deferred income tax liabilities -
   international inventory adjustments
   for tax purposes                               $6,573    8,796
                                                  ======   ======

</TABLE>

In assessing the realizability of deferred income tax assets, management
considers whether it is more likely than not that the deferred income tax assets
will be realized. The ultimate realization of deferred income tax assets is
dependent on the generation of future taxable income during the periods in which
those temporary differences become deductible. The valuation allowance for
deferred income tax assets as of December 1, 1999 and 1998, was $4.2 million and
$2.6 million, respectively. The net change in the total valuation allowance for
the years ended November 30, 2000 and 1999, was an increase of $11.8 million and
$1.6 million, respectively. Management considers the scheduled reversal of
deferred income tax liabilities, projected future taxable income, and tax
planning strategies in making this assessment. Based on the level of historical
taxable income and projections for future taxable income over the periods in
which the deferred income tax assets are deductible, management believes it is
more likely than not the Company should realize the benefits of these deductible
differences. The amount of the deferred income tax asset considered realizable,
however, could be reduced in the near term if estimates of future taxable income
during the carry forward period are reduced. At November 30, 2000, the Company
had U.S. Federal net operating loss carryforwards of approximately $64.9
million, which will begin to expire in 2018.

The Company does not provide for U.S. Federal income taxes or tax benefits on
the undistributed earnings and/or losses of its international subsidiaries
because earnings are reinvested and, in the opinion of management, should
continue to be reinvested indefinitely. At November 30, 2000, the Company had
not provided U.S. Federal income taxes on earnings of international subsidiaries
of approximately $177.3 million. On distribution of these earnings in the form
of dividends or otherwise, the Company would be subject to both U.S. income
taxes and certain withholding taxes in the various international jurisdictions.
Determination of the related amount of unrecognized deferred U.S. income tax
liability is not practicable because of the complexities associated with this
hypothetical calculation.

                                     F-15
<PAGE>

                     CELLSTAR CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Because many types of transactions are susceptible to varying interpretations
under foreign and domestic income tax laws and regulations, the amounts recorded
in the accompanying consolidated financial statements may be subject to change
on final determination by the respective taxing authorities. Management believes
it has made an adequate tax provision.

(9) Leases

The Company leases certain warehouse and office facilities, equipment and retail
stores under operating leases that range from two to six years. Facility and
retail store leases generally contain renewal options. Rental expense for
operating leases was $5.0 million, $6.0 million and $5.6 million for the years
ended November 30, 2000, 1999 and 1998, respectively. Future minimum lease
payments under operating leases as of November 30, 2000 are as follows (in
thousands):

                 Year ending
                 November 30,    Amount
                 ------------    ------

                     2001        $4,542
                     2002         3,387
                     2003         2,546
                     2004         1,811
                     2005         1,700
                   Thereafter       428
                                -------
                                $14,414
                                =======

(10) Impairment of Assets

In the third quarter of 2000, the Company decided to exit its Venezuela
operations (see note 16). The Company recorded a $4.9 million impairment charge
to reduce the carrying value of certain Venezuela assets, primarily goodwill, to
their estimated fair value. In December 2000, the Company completed the sale of
its Venezuela operations at approximately carrying value.

In the fourth quarter of 2000, the Company recorded a non-cash goodwill
impairment charge of $6.4 million due to a major carrier customer's proposed
changes to an existing contract that adversely changed the long-term prospects
of the Peru operations.

In the fourth quarter of 1999, based on the market conditions in Poland, the
Company decided to sell its operations in Poland. The sale was completed in 2000
resulting in a gain of $0.2 million. The Company recorded an impairment charge
of $5.5 million, including a $4.5 million writedown of goodwill to reduce the
carrying value of the assets of the operations in Poland to their estimated fair
value. Revenues for the operations in Poland were $2.2 million, $7.4 million and
$9.9 million for the years ended November 30, 2000, 1999, and 1998,
respectively.

(11) Lawsuit Settlement

During the period from May 14, 1996 through July 22, 1996, four separate
purported class action lawsuits were filed in the United States District Court,
Northern District of Texas, Dallas Division, against the Company, certain of the
Company's current and former officers, directors and employees, and the
Company's independent auditors. The four lawsuits were consolidated, and the
State of Wisconsin Investment Board was appointed lead plaintiff in the
consolidated action. On November 19, 1998, the Company entered into a
Stipulation of Settlement that resolved all claims pending in the suit. The
settlement was approved by the Court on January 25, 1999, and all remaining
claims were dismissed.

                                     F-16
<PAGE>

                     CELLSTAR CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(12) Restructuring Charge

As part of the Company's strategy to streamline its organizational structure,
beginning in the second quarter of 1999 the Company reorganized and consolidated
the management of the Company's Latin American and North American Regions and
centralized the management in the Company's Asia-Pacific Region. As a result,
the consolidated statement of operations for the year ended November 30, 1999,
includes a charge of $3.6 million related to the reorganization. Of the total
costs, $0.8 million consisted of non-cash outlays and the remaining $2.8 million
consisted of cash outlays, which were paid in full by November 30, 2000. The
components of the restructuring charge were as follows (in thousands):

                  Employee termination costs            $2,373
                  Write-down of assets                     760
                  Other                                    506
                                                        ------
                                                        $3,639
                                                        ======

(13) Gain on Sale of Assets

The Company recorded a gain of $6.2 million for the year ended November 30,
2000, associated with the sale of the following (in thousands):

                  Brazil joint venture                  $6,048
                  Poland operations                        152
                                                        ------
                                                        $6,200
                                                        ======

The Company recorded a gain of $8.8 million for the year ended November 30, 1999
associated with the sale of the following (in thousands):


                  Prepaid operations in Venezuela       $5,197
                  Retail stores in the United States     2,911
                  Other                                    666
                                                        ------
                                                        $8,774
                                                        ======

(14) United Kingdom International Trading Operations

In April 2000, the Company curtailed a significant portion of its U.K.
international trading operations following third party theft and fraud losses.
As a result of the curtailment, the Company experienced a reduction in revenues
for the U.K. operations after the first quarter of 2000 compared to 1999. The
trading business involves the purchase of products from suppliers other than
manufacturers and the sale of those products to customers other than network
operators or their dealers and other representatives.

                                     F-17
<PAGE>

                     CELLSTAR CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

For the quarter ended May 31, 2000, the Company recorded a $4.4 million charge
consisting of $3.2 million for third party theft and fraud losses during the
purchase, transfer of title and transport of six shipments of wireless handsets
and $1.2 million in inventory obsolescence expense for inventory price
reductions incurred while the international trading business was curtailed
pending investigation. The Company is negotiating to obtain an insurance
settlement and is pursuing legal action where appropriate. However, the ultimate
recovery in relation to these losses, if any, cannot be determined at this time.

(15) Brazil

Since 1998, the Company's Brazil operations were primarily conducted through a
majority-owned joint venture. Following a review of its operations in Brazil,
the Company concluded that its joint venture structure, together with foreign
exchange risk, the high cost of capital in that country, accumulated losses, and
the prospect of ongoing losses, were not optimal for success in that market. As
a result, in the second quarter of 2000 the Company elected to exit the Brazil
market.

On August 25, 2000, the Company completed the divestiture of its 51% ownership
in the joint venture to its joint venture partner, Fontana Business Corp.
Following is a summary of the operations related to Brazil (amounts in
thousands):
<TABLE>
<CAPTION>

                                                   Year ended November 30,
                                                ------------------------------
                                                  2000       1999      1998
                                                --------   --------   --------
<S>                                             <C>        <C>        <C>

           Revenues                             $ 40,602    193,756     99,877

           Cost of sales                          41,567    178,829     95,927
                                                --------   --------   --------

             Gross profit (loss)                    (965)    14,927      3,950

           Selling, general and
             administrative expenses              10,038     10,255      7,081
                                                --------   --------   --------

                Operating income (loss)          (11,003)     4,672     (3,131)
                                                --------   --------   --------

           Other income (expense):
             Gain on sale of assets                6,047         -           -
             Interest expense                     (3,474)   (5,098)     (2,448)
             Other, net                                -    (2,249)        801
                                                --------   --------   --------

                Total other income (expense)       2,573     (7,347)    (1,647)
                                                --------   --------   --------

           Loss before income taxes             $ (8,430)    (2,675)    (4,778)
                                                ========   ========   ========

</TABLE>

The Company recognized a pre-tax gain on sale of $6.0 million in conjunction
with the disposition of its 51% interest in the joint venture in the third
quarter of 2000. The Company had a negative carrying value in its 51% interest
in the joint venture as a result of losses previously recognized. In the
disposition, the Company obtained promissory notes totaling $8.5 million related
to the Company's funding of certain U.S. letters of credit supporting Brazilian
debt obligations. These promissory notes are fully reserved and will remain
reserved pending receipt of payments by the Company.

                                     F-18
<PAGE>

                     CELLSTAR CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

During the quarter ended May 31, 2000, the Company also fully reserved certain
U.S.-based accounts receivable from Brazilian importers, the collectibility of
which deteriorated significantly in the second quarter of 2000 and which were
further affected by the decision, in the second quarter, to exit Brazil.

(16) Venezuela

During the quarter ended August 31, 2000, the Company decided, based upon the
current and expected future economic and political climate in Venezuela, to
divest its operations in Venezuela. For the quarter ended August 31, 2000, the
Company recorded an impairment charge of $4.9 million to reduce the carrying
value of certain Venezuela assets, primarily goodwill, to their estimated fair
value. The Company subsequently sold its operations in Venezuela in December at
approximately carrying value. Following is a summary of the Venezuela operations
(amounts in thousands):

<TABLE>
<CAPTION>
                                                          Year ended November 30,
                                                         --------------------------
                                                           2000     1999     1998
                                                           ----     ----     ----
<S>                                                      <C>        <C>      <C>
         Revenues                                        $ 36,639   77,077   51,607
         Cost of sales                                     35,342   67,995   41,341
                                                         --------   ------   ------

           Gross profit                                     1,297    9,082   10,266

         Selling, general and administrative expenses       8,630    4,212    5,016
         Impairment of assets                               4,930        -        -
                                                         --------   ------   ------

              Operating income (loss)                     (12,263)   4,870    5,250
                                                         --------   ------   ------

         Other income (expense):
           Gain on sale of assets                               -    5,197        -
           Interest expense                                    (8)     (14)     (10)
           Other, net                                      (1,039)    (593)    (200)
                                                         --------   ------   ------

              Total other income (expense)                 (1,047)   4,590     (210)
                                                         --------   ------   ------

         Income (loss) before income taxes               $(13,310)   9,460    5,040
                                                         ========   ======   ======

</TABLE>
(17) Redistributor Business

The Company is phasing out a major portion of its redistributor business in the
Miami and North American operations due to the volatility of the redistributor
business, the relatively lower margins and higher credit risks. Redistributors
are distributors that do not have existing direct relationships with
manufacturers and who do not have long-term carrier or dealer/agent
relationships. These distributors purchase product on a spot basis to fulfill
intermittent customer demand and do not have long-term predictable product
demand. Revenues for the redistributor business for Miami and the North American
Region for the years ended November 30, 2000, 1999 and 1998, were $57.4 million,
$158.6 million and $344.4 million, respectively.

(18) Inventory Obsolescence Expense and Bad Debt Expense

Inventory obsolescence expense of $32.3 million, $23.0 million and $12.4 million
for the years ended November 30, 2000, 1999 and 1998, respectively, is included
in cost of goods sold in the accompanying consolidated statements of operations.

                                     F-19
<PAGE>

                     CELLSTAR CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Bad debt expense of $51.5 million, $10.4 million and $13.6 million for the years
ended November 30, 2000, 1999 and 1998 respectively, is included in selling,
general and administrative expenses in the accompanying consolidated statements
of operations.

(19) Concentration of Credit Risk and Major Customer Information

Pacific Bell Mobile Services, a North American Region customer, accounted for
approximately 10% of revenues or $194.6 million of revenues for the year ended
November 30, 1998. No customer accounted for 10% or more of consolidated
revenues in the years ended November 30, 2000 and 1999.

(20) Segment and Related Information

The Company operates predominantly within one industry, wholesale and retail
sales of wireless telecommunications products. The Company's management
evaluates operations primarily on income before interest and income taxes in the
following reportable geographic regions: Asia-Pacific, Latin America, which
includes Mexico and the Company's Miami, Florida operations ("Miami"), Europe
and North America, primarily the United States. Revenues and operations of Miami
are included in Latin America since Miami's activities are primarily for export
to South American countries, either by the Company or through its exporter
customers. The Corporate segment includes headquarters operations, income and
expenses not allocated to reportable segments, and interest expense on the
Company's Facility and Notes. Corporate segment assets primarily consist of
cash, cash equivalents and deferred income tax assets. The accounting policies
of the reportable segments are the same as those described in note (1).
Intersegment sales and transfers are not significant.

Segment information for the years ended November 30, 2000, 1999 and 1998 follows
(in thousands):
<TABLE>
<CAPTION>

                                                            Asia-      Latin     North
                                                           Pacific    America   America   Europe   Corporate     Total
                                                         -----------  --------  --------  -------  ----------  ----------
<S>                                                      <C>          <C>       <C>       <C>      <C>         <C>

November 30, 2000:
 Revenues from external customers                        $1,024,762   636,354   499,171   315,395          -   2,475,682
 Impairment of assets                                             -    11,365       974         -          -      12,339
 Operating income (loss)                                      7,770   (38,724)  (16,425)    2,263    (24,813)    (69,929)
 Equity in income (loss) of affiliated companies, net        (1,805)        -         -         -          -      (1,805)
 Income (loss) before interest and income taxes               6,361   (31,623)  (24,021)    2,450    (22,528)    (69,361)
 Total assets                                               289,677   256,907   172,527    56,824     82,889     858,824
 Depreciation, amortization and impairment of assets          1,905    14,492     3,661       810      2,703      23,571
 Capital expenditures                                         1,256     2,052     1,309       452        392       5,461

November 30, 1999:
 Revenues from external customers                        $  769,412   717,273   377,129   469,991          -   2,333,805
 Impairment of assets                                             -         -         -     5,480          -       5,480
 Restructuring charge                                         1,277         -     2,302         -         60       3,639
 Operating income (loss)                                     41,537    31,580    17,529     5,506    (23,454)     72,698
 Equity in income (loss) of affiliated companies, net           (18)        -    31,951         -          -      31,933
 Income (loss) before interest and income taxes              41,102    31,013    48,555     5,433    (18,455)    107,648
 Total assets                                               240,523   261,618   126,208    56,536     21,553     706,438
 Depreciation, amortization and impairment of assets          1,869     2,564     3,683     6,426      2,369      16,911
 Capital expenditures (1)                                     1,028     3,522     3,072       877          -       8,499

November 30, 1998:
 Revenues from external customers                        $  513,869   705,624   472,837   303,520          -   1,995,850
 Lawsuit settlement                                               -         -         -         -      7,577       7,577
 Operating income (loss)                                     38,727    28,541       527     5,226    (24,570)     48,451
 Equity in income (loss) of affiliated companies, net           768         -   (29,216)        -          -     (28,448)
 Income (loss) before interest and income taxes              37,804    27,959   (28,437)    6,482    (25,337)     18,471
 Total assets                                               235,147   319,944   152,004    54,659     13,771     775,525
 Depreciation and amortization                                2,012     3,742     3,197       670      1,805      11,426
 Capital expenditures (1)                                       968     5,922     5,082       526          -      12,498

</TABLE>
(1) Prior to 2000, Corporate segment property and equipment was reported in
North America.

                                     F-20
<PAGE>

                     CELLSTAR CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

       A reconciliation from the segment information to the income (loss) before
       income taxes included in the consolidated statements of operations for
       the years ended November 30, 2000, 1999, and 1998 follows (in thousands):
<TABLE>
<CAPTION>


                                                                                           2000      1999      1998
                                                                                       --------   -------   -------
<S>                                                                                    <C>        <C>       <C>
Income (loss) before interest and income taxes per segment information                 $(69,361)  107,648    18,471
Interest expense per the consolidated statements of operations                          (19,113)  (19,027)  (14,446)
Interest income included in other, net in the consolidated statements of operations       4,759     3,881     2,921
                                                                                       --------   -------   -------

Income (loss) before income taxes per the consolidated statements of operations        $(83,715)   92,502     6,946
                                                                                       ========   =======   =======

</TABLE>

Geographical information for the years ended November 30, 2000, 1999 and 1998,
follows (in thousands):
<TABLE>
<CAPTION>

                                     2000                    1999                   1998
                                  ----------              ----------              ---------

                                           Long-lived              Long-lived             Long-lived
                               Revenues    Assets      Revenues    Assets      Revenues   Assets
                               ----------  ----------  ----------  ----------  ---------  ----------
<S>                            <C>         <C>         <C>         <C>         <C>        <C>

United States                  $  578,262      15,257     531,328      19,538    834,521      25,448

People's Republic of China,
 which includes Hong Kong         725,409       6,591     528,572       3,296    404,883       1,797

United Kingdom                    163,797         637     341,090         798    209,439         372

Mexico                            383,256       3,038     228,959       2,469    144,178       1,572

All other countries               624,958       5,664     703,856       8,998    402,829       5,769
                               ----------      ------   ---------      ------  ---------      ------

                               $2,475,682      31,187   2,333,805      35,099  1,995,850      34,958
                               ==========      ======   =========      ======  =========      ======

</TABLE>

For purposes of the geographical information above, the Company's Miami
operations are included in the United States. Revenues are attributed to
individual countries based on the location of the originating transaction.

(21) Acquisitions

In August 1999, the Company acquired the business and certain net assets of
Montana Telecommunications Group B.V. in The Netherlands in a transaction
accounted for as a purchase. The purchase price was $2.3 million, which resulted
in $1.0 million of goodwill with an estimated life of 20 years. Additional
payments based on future operating results of the business over the four year
period subsequent to acquisition may be paid in cash.

The Company acquired three companies during 1998: (i) TA Intercall AB (Sweden),
January 1998; (ii) Digicom Spoka zo.o. (Poland), March 1998; and (iii) ACC del
Peru (Peru), May 1998. Each of these transactions was accounted for as a
purchase. The aggregate of the original purchase prices was $18.2 million, which
resulted in $18.1 million of goodwill with an estimated life of 20 years.
Additional payments based on operating results of Sweden for the three years
subsequent to acquisition may be paid either in cash or common stock at the
Company's option. In 2000, $4.0 million of additional goodwill was recorded for
Sweden based upon the estimated payment amount.

The consolidated financial statements include the operating results of each
business from the date of acquisition. The impact of these acquisitions was not
material in relation the Company's consolidated financial position or results of
operations.

                                     F-21
<PAGE>

                     CELLSTAR CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(22) Stockholders' Equity

(a) Common Stock Warrant and Options

At November 30, 1998, the Company had outstanding a warrant exercisable for 1.3
million restricted shares of its common stock at $4.60 per share. In December
1998, the warrant holder and the Company amended the warrant agreement to remove
the restriction on the resale of the common stock issuable on exercise of the
warrant and to pay the exercise price in shares of common stock. The holder
subsequently exercised the warrant and was issued 0.6 million shares of common
stock.

The Company has a stock option plan (the "Plan") covering 11.15 million shares
of its common stock. Options under the Plan expire ten years from the date of
grant unless earlier terminated due to the death, disability, retirement or
other termination of service of the optionee. Options have vesting schedules
ranging from 100% on the first anniversary of the date of grant to 25% per year
commencing on the first anniversary of the date of grant. The exercise price is
equal to the fair market value of the common stock on the date of grant.

The Company also has a stock option plan for non-employee directors ("Directors'
Option Plan"). The Directors' Option Plan provides that each non- employee
director of the Company as of the date the Directors' Option Plan was adopted
and each person who thereafter becomes a non-employee director should
automatically be granted an option to purchase 7,500 shares of common stock. The
exercise price is equal to the fair market value of the common stock on the date
of grant. A total of 150,000 shares of common stock are authorized for issuance
pursuant to the Directors' Option Plan. Each option granted under the Directors'
Option Plan becomes exercisable six months after its date of grant and expires
ten years from the date of grant unless earlier terminated due to the death,
disability, retirement or other termination of service of the optionee. Non-
employee directors also receive an annual grant of an option for 5,000 shares of
Company common stock under the Plan. Such options vest over a four year period
and have an exercise price equal to the fair market value of the Company's
common stock as of market close on the date of grant.

The per share weighted-average fair value of stock options granted during the
years ended November 30, 2000, 1999 and 1998, was $5.85, $4.45 and $6.375,
respectively, on the date of grant using the Black-Scholes option- pricing model
with the following weighted-average assumptions:
<TABLE>
<CAPTION>

                                                   2000    1999   1998
                                                  -----   -----  -----
<S>                                               <C>     <C>    <C>

           Dividend yield                          0.00%   0.00   0.00
           Volatility                             88.00   81.00  83.00
           Risk-free interest rate                 6.50    5.10   5.40
           Expected term of options (in years)      3.4     3.4    3.2

</TABLE>

The Company applies Opinion 25 in accounting for its plans and, accordingly, no
compensation cost has been recognized for its stock options in the consolidated
financial statements. Had the Company determined compensation cost based on the
fair value at the grant date for its stock options under Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation", the
Company's net income (loss) would have been the pro forma amounts below for the
years ended November 30, 2000, 1999 and 1998 (in thousands, except per share
amounts):

                                     F-22
<PAGE>

                     CELLSTAR CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
<TABLE>
<CAPTION>


                                                           2000     1999      1998
                                                           ----     ----      ----
<S>                                                      <C>        <C>     <C>
      Net income (loss) as reported                      $(62,959)  69,087  14,364
      Diluted net income (loss) per share as reported       (1.05)    1.12    0.24
      Pro forma net income (loss)                         (65,981)  67,605  10,136
      Pro forma diluted net income (loss) per share         (1.10)    1.11    0.17

</TABLE>
Stock option activity during the years ended November 30, 2000, 1999 and 1998,
is as follows:
<TABLE>
<CAPTION>

                                               2000                 1999                 1998
                                     --------------------  --------------------  --------------------

                                                Weighted-             Weighted-             Weighted-
                                                Average               Average               Average
                                     Number     Exercise   Number     Exercise   Number     Exercise
                                     of shares  Prices     of shares  Prices     of shares  Prices
                                     ---------  ---------  ---------  ---------  ---------  ---------
<S>                                  <C>        <C>        <C>        <C>        <C>        <C>
Granted                              1,513,695     $9.553  1,487,450     $8.057  2,095,458    $11.491
Exercised                               85,125      4.654    532,878      5.545    464,378      7.110
Forfeited                            1,019,851      9.559  1,369,012      9.444  1,075,062     19.680
Outstanding, end of year             4,684,307      8.782  4,275,588      8.617  4,690,028      8.704
Exercisable, end of year             2,189,689      8.121  1,929,149      7.829  1,417,757      6.531
Reserved for future grants
 under the Plan                      5,057,532
Reserved for future grants
 under the Directors' Option Plan       90,000

</TABLE>
For options outstanding and exercisable as of November 30, 2000, the exercise
prices and remaining lives were:
<TABLE>
<CAPTION>

                                             Average      Average                Average
                              Number     Remaining Life   Exercise    Number     Exercise
Range of Exercise Prices    Outstanding    (in years)      Prices   Exercisable   Prices
--------------------------  -----------  ---------------  --------  -----------  --------
<S>                         <C>          <C>              <C>       <C>          <C>

$2.2500 - 6.4060              1,172,500       5.6         $ 5.9034      968,125  $ 6.1077
$6.4380 - 8.3750              1,199,502       7.4           7.6997      573,252    7.4166
$8.6700 - 9.8750              1,216,679       9.1           9.8433       11,250    8.6700
$10.3130 - 19.880             1,095,626       7.2          11.8705      637,062   11.8041
                              ---------                               ---------

                              4,684,307       7.3         $ 8.7824    2,189,689  $ 8.1208
                              =========      ====         ========    =========  ========

</TABLE>

                                     F-23
<PAGE>

                     CELLSTAR CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(b) Stockholder Rights Plan

The Company has a Stockholder Rights Plan, which provides that the holders of
the Company's common stock receive one-third of a right ("Right") for each share
of the Company's common stock they own. Each Right entitles the holder to buy
one one-thousandth of a share of Series A Preferred Stock, par value $.01 per
share, at a purchase price of $80.00, subject to adjustment. The Rights are not
currently exercisable, but would become exercisable if certain events occurred
relating to a person or group acquiring or attempting to acquire 15% or more of
the outstanding shares of common stock of the Company. Under those
circumstances, the holders of Rights would be entitled to buy shares of the
Company's common stock or stock of an acquirer of the Company at a 50% discount.
The Rights expire on January 9, 2007, unless earlier redeemed by the Company.

(23) Commitments and Contingencies

(a) Litigation

During the period from May 1999 through July 1999, seven purported class action
lawsuits were filed in the United States District Court for the Southern
District of Florida, styled as follows: (1) Elfie Echavarri v. CellStar
Corporation, Alan H. Goldfield, Richard M. Gozia and Mark Q. Huggins; (2) Mark
Krug v. CellStar Corporation, Alan H. Goldfield, Richard M. Gozia and Mark Q.
Huggins; (3) Jewell Wright v. CellStar Corporation, Alan H. Goldfield, Richard
M. Gozia and Mark Q. Huggins; (4) Theodore Weiss v. CellStar Corporation, Alan
H. Goldfield, Richard M. Gozia and Mark Q. Huggins; (5) Tony LaBella v. CellStar
Corporation, Alan H. Goldfield, Richard M. Gozia and Mark Q. Huggins; (6) Thomas
E. Petrone v. CellStar Corporation, Alan H. Goldfield, Richard M. Gozia and Mark
Q. Huggins; (7) Adele Brody v. CellStar Corporation, Alan H. Goldfield, Richard
M. Gozia and Mark Q. Huggins. Each of the above lawsuits sought certification as
a class action to represent those persons who purchased the publicly traded
securities of the Company during the period from March 19, 1998 to September 21,
1998. Each of these lawsuits alleges that the Company issued a series of
materially false and misleading statements concerning the Company's results of
operations and the Company's investment in Topp, resulting in violations of
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange
Act"), as amended, and Rule 10b-5 promulgated thereunder. The Court entered an
order on September 26, 1999 consolidating the above lawsuits and appointing lead
plaintiffs and lead plaintiffs' counsel. The lead plaintiffs filed a
consolidated complaint on November 8, 1999. The Company filed a Motion to
Dismiss the consolidated complaint, and the Court granted that motion on August
3, 2000. The plaintiffs filed a Second Amended and Consolidated Complaint on
September 1, 2000, essentially re-alleging the violations of Sections 10(b) and
20(a) of the Exchange Act, and Rule 10b-5 promulgated thereunder. The Company
filed a Motion to Dismiss plaintiffs' Second Amended and Consolidated Complaint
on November 2, 2000, but the Court has not yet rendered a decision. The Company
believes that it has fully complied with all applicable securities laws and
regulations and that it has meritorious defenses to the allegations made in the
Second Amended and Consolidated Complaint. The Company intends to vigorously
defend the consolidated action if its Motion to Dismiss is denied.

The Company is also a party to various other claims, legal actions and
complaints arising in the ordinary course of business.

Management believes that the disposition of these matters should not have a
materially adverse effect on the consolidated financial condition or results of
operations of the Company.

(b) SEC Investigation

On August 3, 1998, the Company announced that the Securities and Exchange
Commission is conducting an investigation of the Company relating to its
compliance with Federal securities laws. The Company believes that it has fully
complied with all securities laws and regulations and is cooperating with the
Commission in its investigation.

                                     F-24
<PAGE>

                     CELLSTAR CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

    (c) Financial Guarantee

    The Company has guaranteed up to MYR 5.9 million (Malaysian ringgits), or
    $1.5 million as of November 30, 2000, for bank borrowings of Amtel. In
    addition, the Company has guaranteed certain accounts payable of Amtel at
    November 30, 2000. The Company is not guaranteeing future debt or accounts
    payable of Amtel. As of January 31, 2001, the aggregate bank borrowings and
    accounts payable of Amtel guaranteed by the Company was approximately $2.5
    million.

    (d) 401(k) Savings Plan

    The Company established a savings plan for employees in 1994. Employees are
    eligible to participate if they were full-time employees as of July 1, 1994,
    or on completing 90 days of service. The plan is subject to the provisions
    of the Employee Retirement Income Security Act of 1974. Under provisions of
    the plan, eligible employees are allowed to contribute as much as 15% of
    their compensation, up to the annual maximum allowed by the Internal Revenue
    Service. The Company may make a discretionary matching contribution based on
    the Company's profitability. The Company made contributions of approximately
    $0.2 million to the plan in 2000 and $0.3 million to the plan in each of
    1999 and 1998.

    (e) Foreign Currency Contracts

    The Company uses foreign currency forward contracts to reduce exposure to
    exchange rate risks primarily associated with transactions in the regular
    course of the Company's international operations. The forward contracts
    establish the exchange rates at which the Company should purchase or sell
    the contracted amount of local currencies for specified foreign currencies
    at a future date. The Company uses forward contracts, which are short-term
    in nature (45 days to one year), and receives or pays the difference between
    the contracted forward rate and the exchange rate at the settlement date.

    The major currency exposures hedged by the Company are the British pound,
    Dutch guilder, Euro and Swedish Krona. The carrying amount and fair value of
    these contracts are not significant.

    The contractual amount of the Company's forward exchange contracts at
    November 30, 2000, was $18.7 million.

                                     F-25
<PAGE>

                     CELLSTAR CORPORATION AND SUBSIDIARIES
                    SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)
                     (In thousands, except per share data)
<TABLE>
<CAPTION>

                                 First          Second            Third           Fourth
                                Quarter        Quarter           Quarter         Quarter
                               ----------  ----------------  ---------------  --------------
<S>                            <C>         <C>               <C>              <C>
2000

Revenues                        $589,859        561,370          629,793          694,660
Gross profit                      48,283          3,137 (a)       23,277 (a)       36,788 (a)
Net income(loss)                   9,446        (42,424)(a)(b)   (13,905)(a)(c)   (16,076)(a)(d)
Net income(loss) per share:
      Basic                         0.16          (0.71)(a)        (0.23)(a)        (0.27)(a)
      Diluted                       0.16          (0.71)(a)        (0.23)(a)        (0.27)(a)

1999

Revenues                        $515,348        570,325          560,222          687,910
Gross profit                      43,639         49,058           47,706           53,027
Net income                        15,591 (e)     13,969 (f)       14,998           24,529 (g)
Net income per share:
      Basic                         0.26           0.23             0.25             0.41
      Diluted                       0.26           0.23             0.25             0.39
</TABLE>

(a)  As restated (see Note 2 of notes to consolidated financial statements).
The effect of the restatement by quarter is to reduce gross profit and increase
net loss by the following amounts:
<TABLE>
<CAPTION>
                          Second    Third     Fourth
                         Quarter   Quarter   Quarter
<S>                      <C>       <C>       <C>

Gross profit              (4,289)     (916)     (338)
Net income                (2,745)     (586)     (217)
Net income per share:
 Basic                     (0.05)    (0.01)    (0.01)
 Diluted                   (0.05)    (0.01)    (0.01)

</TABLE>

(b)  In the second quarter of 2000, the Company's operations were affected by
significant declines in gross profit due to competitive margin pressures and by
increases in bad debt expense related to the redistributor business and Brazil
related receivables.

(c)  In the third quarter of 2000, the Company's operations were affected by
charges related to its decision to exit its Venezuela operations and the gain on
the divestiture of its 51% interest in the Brazil joint venture.

(d)  In the fourth quarter of 2000, the Company's operations were affected by
accounts receivable reserves for accounts whose businesses have been adversely
affected by competitive market conditions in Asia and the United States, and a
non-cash goodwill impairment charge for its Peru operations.

(e)  In the first quarter of 1999, the Company's operations were affected by the
gain on the sale of part of its equity and debt investment in Topp, a gain
associated with the sale of all its retail stores in the Dallas-Fort Worth area,
and a loss on the conversion of a U.S. dollar denominated loan into Brazilian
reals.

(f)  In the second quarter of 1999, the Company's operations were affected by
the restructuring charge associated with the reorganization and consolidation of
the management for the Company's Latin American and North American Regions as
well as the centralization of the management in the Asia-Pacific Region and the
sale of its prepaid operation in Venezuela and retail stores in the Kansas City
area.

(g)  In the fourth quarter of 1999, the Company's operations were affected by
the gain on the sale of the remaining debt and equity interest in Topp and a
charge to reduce the carrying value of CellStar Poland Sp. zo.o.

                                     F-26
<PAGE>

                     CELLSTAR CORPORATION AND SUBSIDIARIES

                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                  Years ended November 30, 2000, 1999 and 1998
                                 (in thousands)
<TABLE>
<CAPTION>

                                       Balance at   Charged to  Charged to   Deductions,   Balance at
                                      beginning of  costs and   activation      net of       end of
                                         period      expenses   income (a)    recoveries     period
                                      ------------  ----------  -----------  ------------  ----------
<S>                                   <C>           <C>         <C>          <C>           <C>

Allowance for doubtful accounts:
     November 30, 2000                     $33,152      51,533         103        (8,978)      75,810
     November 30, 1999                      33,361      10,392       1,251       (11,852)      33,152
     November 30, 1998                      23,857      13,639         481        (4,616)      33,361
Reserve for inventory obsolescence
     November 30, 2000                     $14,868      32,255           -       (27,811)      19,312
     November 30, 1999                      12,082      23,012           -       (20,226)      14,868
     November 30, 1998                       2,795      12,434           -        (3,147)      12,082

</TABLE>

(a) The Company, under agent agreements, earns activation commissions from
wireless service providers on engaging subscribers for wireless handset services
in connection with the Company's retail operations. The agent agreements also
provide for the reduction or elimination of activation commissions if the
subscribers deactivate service within a stipulated period. The Company reduces
activation income for increases in the allowance for estimated deactivations.

                                      S-1