<PAGE>


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

                                     FORM 10-K

[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, 2001                            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 22, 2002, the aggregate market value of the voting stock held by
nonaffiliates of the Company was approximately $27,996,018, based on the closing
sale price of $3.50 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 22, 2002, there were 12,028,425 outstanding shares of Common Stock,
$0.01 par value per share.

                     DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the annual meeting of stockholders of the
Company to be held during the second quarter of 2002 are incorporated by
reference into Part III of this Form 10-K.

                                      1

<PAGE>


                              CELLSTAR CORPORATION

                               INDEX TO FORM 10-K
<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                                      10

PART II.
Item 5.     Market for Registrant's Common Equity and Related Stockholder Matters                    11
Item 6.     Selected Consolidated Financial Data                                                     12
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                               24
Item 8.     Consolidated Financial Statements and Supplementary Data                                 25
Item 9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure     25

PART III.
Item 10.    Directors and Executive Officers of the Registrant                                       25
Item 11.    Executive Compensation                                                                   25
Item 12.    Security Ownership of Certain Beneficial Owners and Management                           25
Item 13.    Certain Relationships and Related Transactions                                           25

PART IV.
Item 14.    Exhibits, Financial Statement Schedules and Reports on Form 8-K                          26
</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, North America, Latin
America and Europe. 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.

The Company's "Asia-Pacific Region" consists of Taiwan, Singapore, The
Philippines, Malaysia, Korea and the People's Republic of China, including Hong
Kong. During 2001, the Company closed its Japan operation. The Company is in
the process of divesting its 49% ownership in its Malaysia joint venture. The
Company's "Latin American Region" consists of Mexico, Chile, Peru, Colombia,
Argentina and the Company's Miami, Florida operations. Venezuela was included
in the Latin American Region until the operations were sold on December 26,
2000. The Company's "European Region" consists of the United Kingdom, Sweden
and The Netherlands. The Company's "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-Line(SM)),
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, 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 had grown rapidly
until 2001. Future growth in the worldwide subscriber base and the convergence
of existing and emerging technologies into a single multifunction 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, although at a slower rate than in prior years, for a number
of reasons, including the following: increased service availability, the lower
cost of wireless service compared to conventional landline telephone systems,
and future economic growth. The Company also believes that advanced digital
technologies have led to increases in the number of network operators and
resellers, which have promoted greater competition for subscribers and, we
believe, have resulted in increased demand for wireless communications
products.

CellStar's revenues grew at a 20.8% compound annual rate for the five fiscal
years ended November 30, 2001, and decreased 1.7% for the year ended November
30, 2001, compared to the prior fiscal year. The Company generated 76.2% of its
revenues in 2001 from operations conducted outside the United States.

Cautionary Statements

The Company's success will depend upon, among other things, economic
conditions, wireless market conditions, its ability to improve 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

                                      3

<PAGE>

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 China,
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, Nokia, Ericcson and LG and
aftermarket accessories manufactured by a variety of suppliers. Throughout the
Asia-Pacific Region, the Company acts as a wholesale distributor of wireless
handsets to large and small volume purchasers.

CellStar (Asia) Corporation Limited ("CellStar Asia"), the oldest of our
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 China.

Shanghai CellStar International Trading Company, Ltd. ("CellStar Shanghai"), a
wholly-owned, limited liability foreign trade company established in Shanghai,
China, commenced domestic wholesale operations in China 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, Nokia and Ericcson and wholesales those products to distributors
and retailers located throughout China. 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 China 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 China. CellStar
Shanghai leases warehouse, showroom and office space in the Pudong district of
Shanghai, as well as two other warehouses in Beijing and Guangzhou.

Although the Company's business in the Asia-Pacific Region is predominantly
wholesale, retail operations are also conducted in Singapore, Malaysia and
Taiwan. Historically the Company has 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. The Company entered the
Singapore, The Philippines and Malaysia markets in 1995. In Malaysia, the
Company is a minority partner (49%) in a joint venture. Due to the continuing
deterioration in the Malaysia market, the Company is in the process of
divesting its ownership interest in the Malaysia joint venture. 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. In 2001, the Company closed
the Japan operation.

                                      4

<PAGE>

The following table outlines CellStar's entry into the Asia-Pacific Region:

<TABLE>
<CAPTION>
                                                    Type of Operation
Country                         Year Entered    (as of November 30, 2001)

<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 (closed as
                                                  of November 30, 2001)
Korea                               2000                Purchasing
</TABLE>

At November 30, 2001, the Company sold its products to over 250 wholesale
customers in the Asia-Pacific Region (excluding customers of the Company's
Malaysia joint venture), the ten largest of which accounted for approximately
32% of consolidated revenues. 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.

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 have upgraded 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 signal quality, improved
call security, lower incremental costs for additional subscribers, and the
ability to provide data transmission services.

At November 30, 2001, the Company sold its products to approximately 1,800
customers in the North American Region, the ten largest of which accounted for
approximately 14% of consolidated revenues. The Company offers wireless handsets
and accessories manufactured by OEMs, such as Motorola, Nokia, Kyocera, Sony
Ericsson Mobile Communications (USA) Inc. ("Sony") and InfoComm U.S.A., Inc. and
aftermarket accessories manufactured by a variety of suppliers. The Company's
distribution operations and value-added services complement the manufacturer
distribution channels by allowing the 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 the
Company's 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 the AOS
On-Line and netXtreme(SM) programs. These programs are proprietary,
internet-based order entry and supply chain services software and systems
designed to assist customers in the submission of orders, the tracking of such
orders and the analysis of business activities with CellStar. AOS On-Line and
netXtreme greatly enhance a customer's ability to actively manage 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, 2001, the Company operated two retail locations in the
United States--one in Austin, Texas, and one in Houston, Texas.

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

                                      5

<PAGE>

well as the large population base in this region, the Company believes that
phone users should increasingly use wireless communications systems.

In the Latin American Region, CellStar 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 operation, 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 operation is
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 decline in
exports from its Miami operation and has restructured the Miami operation in
2001 to reduce the size and cost of the operation.

Although the Company's business in the Latin American Region is predominantly
wholesale and value-added fulfillment services, the Company conducts retail
operations in all its countries in this region. At November 30, 2001, CellStar
operated 103 retail locations (including kiosks) in the Latin American Region,
the majority of which are located in Colombia and Mexico. Historically, the
Company has acted primarily through wholly-owned subsidiaries in each of the
countries in this region. From 1998 until the divestiture of the Brazil
operations in August 2000, the Company conducted its operations in Brazil
primarily through a majority owned (51%) joint venture.

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 CellStar's entry into the Latin American Region:

   <TABLE>
   <CAPTION>
                                                          Type of Operation
   Country              Year Entered                  (as of November 30, 2001)

   <S>                      <C>                      <C>
   Mexico                   1991                         Wholesale and Retail
   Chile                    1993                         Wholesale and Retail
   Venezuela                1993                     Wholesale and Retail (sold in
                                                            December 2000)
   Colombia                 1994                         Wholesale and Retail
   Argentina                1995                         Wholesale and Retail
   Peru                     1998                         Wholesale and Retail
   </TABLE>

At November 30, 2001, the Company sold its products to over 750 wholesale
customers in the Latin American Region, the ten largest of which accounted for
approximately 11% of the Company's consolidated revenues in fiscal 2001. 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. 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 wireless carriers
and retailers, as well as to smaller volume purchasers. The Company uses
distribution facilities in Manchester, England; Stockholm, Sweden; and
s'Hertogenbosch, The Netherlands, to serve customers in the European Region. In
the European Region the Company 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 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

                                      6

<PAGE>


manufacturers or network operators (i.e., trading companies) and the sale of
those handsets to other trading companies. The curtailment in its trading
activities had a significant impact on revenues and profit for its U.K.
operation and on the European Region as a whole. (See "Management's Discussion
and Analysis of Financial Condition and Results of Operations --International
Operations").

Although the Company's business in the European Region is predominantly
wholesale, the Company has one retail location in The Netherlands. The Company
has historically acted through wholly-owned subsidiaries in each of the
countries in this region. The following table outlines the Company's entry into
the European Region:

<TABLE>
<CAPTION>
                                                     Type of Operation
Country                     Year Entered         (as of November 30, 2001)
<S>                            <C>                 <C>
United Kingdom                 1996                      Wholesale
Sweden                         1998                      Wholesale
The Netherlands                1999                Wholesale and Retail
</TABLE>

As of November 30, 2001, the Company sold its products to approximately 1,400
wholesale customers in the European Region, the ten largest of which accounted
for approximately 3% of consolidated revenues. 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, catalogues and
advertising.

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 2001, the majority
of the Company's purchases were from Motorola, Nokia, Ericsson, LG, Samsung and
Kyocera. For the year ended November 30, 2001, Motorola and Nokia accounted for
approximately 75% 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.

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 417,862 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, Nokia 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 surpluses
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. The Company expanded and extended its
technology tools to improve financial and information control systems during
2001. These initiatives included : (i) implementation of virtual private
network capabilities for Asian and Latin America sites to increase wide area
network performance, (ii) adding several new service levels to NetXtreme, the
Company's customer portal (catalog, invoice management, file transfer protocol
(FTP) services, order status and Dataport), (iii) extension of the customer
data warehouse capabilities including full order life cycle analysis and
perpetual inventory reconciliation, (iv) expanding electronic data interchange
(EDI) processing for both customer and vendor relationships, and (v) expansion
of system integration capabilities, especially with direct to consumer
customers. One result of the Company's technology investment is that e-commerce
tools process over 50% of all U.S. orders and virtually all orders in the
People's Republic of China. The Company believes 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 its
systems with those of its customers.

The Company purchases its products from more than 15 suppliers that ship
directly to the Company's warehouse or distribution

                                      7

<PAGE>


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 of 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 the trade name "CellStar" 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.

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 wireless carriers.

Employees

As of November 30, 2001, the Company had approximately 1,300 employees
worldwide. In Mexico and Argentina, approximately 100 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.

                                      8

<PAGE>


Executive Officers of the Registrant

The following table sets forth certain information concerning the executive
officers of the Company:

   <TABLE>
   <S>                      <C>    <C>
   Terry S. Parker          56     Chief Executive Officer
   Dale H. Allardyce        52     President and Chief Operating Officer
   A.S. Horng               44     Chairman and Chief Executive Officer of CellStar
                                    (Asia) Corporation Limited
   Robert A. Kaiser         48     Senior Vice President, Chief Financial Officer and
                                    Treasurer
   Elaine Flud Rodriguez    45     Senior Vice President, General Counsel and Secretary
   Raymond L. Durham        40     Vice President, Corporate Controller
   </TABLE>

Terry S. Parker has served as Chief Executive Officer of the Company since July
2001, as a director of the Company since March 1995 and 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. Before 1991, Mr. Parker served
as President of GTE Mobile Communications. Mr. Parker serves as an officer 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.

Robert A. Kaiser has served as Senior Vice President, Chief Financial Officer
and Treasurer since December 2001. Prior to joining CellStar, Mr. Kaiser served
as President and Chief Executive Officer of MobileStar Network Corporation, a
provider of broadband wireless Internet access, from May 2001 to December 2001.
Prior to joining MobileStar, Mr. Kaiser served as Chief Executive Officer of
WorldCom Broadband Solutions Group from August 2000 to May 2001. Mr. Kaiser
served as Chief Executive Officer and Chief Financial Officer of SkyTel from
January 2000 to August 2000 and as Chief Financial Officer from August 1996 to
December 1999. Mr. Kaiser served as Chief Financial Officer of Southwestern
Bell's Mobile Systems from March 1987 to August 1996. Mr. Kaiser serves as an
officer of the Company pursuant to his employment agreement.

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, an international
independent accounting firm, 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 dependent on the efforts of its executive officers and
key employees including Terry S. Parker, Chief Executive Officer, and A.S.
Horng, the chairman, chief executive officer and general manager of the
Company's Asia-Pacific Region, which was responsible for approximately 50% of
the Company's revenues for fiscal 2001. If Mr. Horng were to depart as chief
executive officer of the Asia-Pacific Region, the Company's operations in the
Asia-Pacific Region could be materially adversely affected. Although the Company
has entered into employment agreements with these officers and several other
officers and key employees, there can be no assurance that the Company will be
able to retain their services. The Company

                                      9

<PAGE>


does not maintain key man insurance on the life of any officer of the Company.
The loss or interruption of the continued full-time service of the Company's
executive officers and key employees could materially and adversely affect the
Company's business. 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 material adverse effect on the Company.

Item 2. Properties

As of November 30, 2001, the Company had a total of 25 operating facilities in
the Asia-Pacific Region (including kiosks, but not including facilities of the
Company's Malaysia joint venture), 23 of which were leased, a total of 118
operating facilities in the Latin American Region (including kiosks), all but
one 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,
2001, 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. On September 28,
2001, the Court entered an order and judgement to dismiss the consolidated
complaint with prejudice, and closed the consolidated action for administrative
purposes.

On August 3, 1998, the Company announced that the Securities and Exchange
Commission ("SEC") was conducting an investigation of the Company relating to
its compliance with federal securities laws. On June 28, 2001, the Company
announced that the SEC had terminated the investigation with no enforcement
action recommended.

On October 15, 2001, the Company announced that the results for the three and
six months ended May 31, 2001 would be restated to reflect certain accounting
adjustments. In October 2001, the Company received an inquiry from the SEC
requesting information concerning the restatement of earnings for the quarter
ended May 31, 2001. The Company believes that it has fully responded to such
request.

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, 2001.

                                      10

<PAGE>


                                       PART II.

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

The Company's common stock is quoted on the NASDAQ National 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 National Market (adjusted for the effect of the
one-for-five reverse stock split effective on February 22, 2002).

<TABLE>
<CAPTION>
                                                     High     Low
                                                     ----     ---
<S>                                                <C>       <C>
Fiscal Year ended November 30, 2001
  Quarter Ended:
    February 28, 2001                              $ 10.63    5.63
    May 31, 2001                                     10.60    4.69
    August 31, 2001                                  12.90    6.50
    November 30, 2001                                 6.65    3.80

Fiscal Year ended November 30, 2000
  Quarter Ended:
    February 29, 2000                              $ 57.50   40.94
    May 31, 2000                                     46.88   12.19
    August 31, 2000                                  20.00   10.78
    November 30, 2000                                21.88    8.28
</TABLE>

As of February 22, 2002, there were 289 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 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 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.

                                      11

<PAGE>


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, 2001, 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.

<TABLE>
<CAPTION>
                                                                                   Year Ended November 30,
                                                           2001             2000              1999          1998         1997
                                                       -----------       ----------       ----------    ----------    ----------

                                                                (In thousands, except per share data and operating data)
<S>                                                    <C>                <C>              <C>           <C>           <C>

Statements of Operations Data:
  Revenues                                             $ 2,433,803        2,475,682        2,333,805     1,995,850     1,482,814
  Cost of sales                                          2,297,977        2,364,197        2,140,375     1,823,075     1,325,488
                                                       -----------       ----------       ----------    ----------    ----------
Gross Profit                                               135,826          111,485          193,430       172,775       157,326
Operating expenses:
  Selling, general and administrative
    expenses                                               113,785          169,232          111,613       116,747        81,319
  Impairment of assets                                        -              12,339            5,480          -             -
  Lawsuit settlement                                          -                -                -            7,577          -
  Separation agreement                                       5,680             -                -             -             -
  Restructuring charge (credit)                                750             (157)           3,639          -             -
                                                       -----------       ----------       ----------    ----------    ----------
Operating income (loss):                                    15,611          (69,929)          72,698        48,451        76,007
Other income (expense):
  Interest expense                                         (15,383)         (19,113)         (19,027)      (14,446)       (7,776)
  Equity in income (loss) of affiliated
    companies, net                                            (858)          (1,805)          31,933       (28,448)          465
  Gain on sale of assets                                       933            6,200            8,774          -             -
  Impairment of investment                                  (2,215)            -                -             -             -
  Other, net                                                 5,288              932           (1,876)        1,389         2,260
                                                       -----------       ----------       ----------    ----------    ----------
Total other income (expense)                               (12,235)         (13,786)          19,804       (41,505)       (5,051)

Income (loss) before income taxes
  and extraordinary loss                                     3,376          (83,715)          92,502         6,946        70,956
Provision (benefit) for income taxes                         2,200          (20,756)          23,415        (7,418)       17,323
                                                       -----------       ----------       ----------    ----------    ----------
Income (loss) before extraordinary loss                      1,176          (62,959)          69,087        14,364        53,633
Extraordinary loss on early extinguishment
  of debt, net of tax                                         (626)            -                -             -             -
                                                       -----------       ----------       ----------    ----------    ----------
Net income (loss)                                      $       550          (62,959)          69,087        14,364        53,633
                                                       ===========       ==========       ==========    ==========    ==========

Net income (loss) per share: (1)
  Basic:
  Income (loss) before extraordinary loss              $      0.10            (5.24)            5.78          1.22          4.61
  Extraordinary loss on early extinguishment
    of debt, net of tax                                      (0.05)            -                -             -             -
                                                       -----------       ----------       ----------    ----------    ----------
  Net income (loss)                                    $      0.05            (5.24)            5.78          1.22          4.61
                                                       ===========       ==========       ==========    ==========    ==========

  Diluted:
  Income (loss) before extraordinary loss              $      0.10            (5.24)            5.61          1.18          4.45
  Extraordinary loss on early extinguishment
    of debt, net of tax                                      (0.05)            -                -             -             -
                                                       -----------       ----------       ----------    ----------    ----------
  Net income (loss)                                    $      0.05            (5.24)            5.61          1.18          4.45
                                                       ===========       ==========       ==========    ==========    ==========

Weighted average number of shares: (1)(2)
  Basic                                                     12,028           12,026           11,952        11,773        11,629
  Diluted                                                   12,029           12,026           13,118        12,131        12,170

Operating Data:
  International revenues, including export
    sales, as a percentage of revenues                        76.2%            79.8             83.8          76.3          66.7
</TABLE>
                                      12

<PAGE>


<TABLE>
<CAPTION>
                                                                                      At November 30,
                                                           2001              2000             1999          1998          1997
                                                       -----------       -----------      -----------   -----------    ----------
                                                                                  (In thousands)
<S>                                                    <C>                  <C>              <C>           <C>           <C>
Balance Sheet Data:
  Working capital                                      $   116,892          264,380          332,841       259,923       259,954
  Total assets                                             646,070          858,824          706,438       775,525       497,111
  Notes payable and current portion
    of long-term debt                                      202,644          127,128           50,609        85,023          -
  Long-term debt, less current portion                        -             150,000          150,000       150,000       150,000
  Stockholders' equity                                     184,210          185,583          250,524       177,791       160,865
</TABLE>

(1) Common stock amounts have been retroactively adjusted to give effect to the
one-for-five reverse stock split effective February 22, 2002, 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.

(2) The Company issued in an exchange offer $39.1 million in senior convertible
notes which are convertible into 7.8 million shares of common stock by November
30, 2002 (see "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources"). The 7.8 million shares
will be considered as dilutive securities beginning in the first quarter of
2002.

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, North America, Latin America, and Europe. 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. From 1997 through 2001, the Company's revenues grew from
$1,482.8 million to $2,433.8 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. In 2001, industry wide sales of
handsets declined approximately 5 percent. The Company's revenues decreased
from $2,475.7 million in 2000 to $2,433.8 million in 2001. The Company
experienced an improvement in gross profit to 5.6% of revenues in 2001 from
4.5% of revenues in 2000, primarily due to better product management and mix.
Selling, general and administrative expenses were $113.8 million in 2001
compared to $169.2 million in 2000, primarily due to a $44.8 million reduction
in bad debt expense. As a result, the Company had net income of $0.05 per
diluted share in 2001 compared to a loss of $5.24 per diluted share in 2000.

The Company announced on July 6, 2001, that Alan H. Goldfield retired effective
immediately from the position of Chairman and Chief Executive Officer and that
James L. "Rocky" Johnson, who has served on the Board of Directors since March
1994, became Chairman of the Board, and that Terry S. Parker, a member of the
Board of Directors and a former President and Chief Operating Officer, rejoined
the Company as Chief Executive Officer. The Company recorded expense of $5.7
million in 2001 related to the separation agreement between the Company and Alan
H. Goldfield.

On February 20, 2002 the Company completed its exchange offer for its $150
million 5% convertible subordinated notes due October 2002. Holders owning
$128.6 million of existing convertible subordinated notes exchanged them for
$47.2 million in cash, $12.4 million of new 12% senior subordinated notes due
January 2007, and $39.1 million of new 5% senior subordinated convertible notes
due November 2002. The Company expects to recognize an extraordinary gain of
approximately $11.0 million after-tax in 2002 as a result of the exchange.

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," "intends," "may," "might,"
"could," "should," and similar expressions are intended to be among the
statements that identify forward-looking statements. Statements of various
factors that could cause the actual results, performance or achievements of the
Company to differ materially from the Company's expectations ("Cautionary
Statements"), are disclosed in this report, including, without

                                      13

<PAGE>


limitation, those statements made in conjunction with the forward-looking
statements included under the captions identified above and otherwise herein.
All forward-looking statements attributable to the Company are expressly
qualified in their entirety by the Cautionary Statements.

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>
<CAPTION>
                                                                  2001      2000      1999
                                                                -------- --------   -------
<S>                                                              <C>        <C>       <C>
Revenues                                                         100.0%     100.0     100.0
Cost of sales                                                     94.4       95.5      91.7
                                                                -------- --------   -------

  Gross profit                                                     5.6        4.5       8.3
Selling, general and administrative expenses                       4.7        6.8       4.8
Impairment of assets                                                -         0.5       0.2
Seperation agreement                                               0.3         -         -
Restructuring charge (credit)                                       -          -        0.2
                                                                -------- --------   -------
    Operating income (loss)                                        0.6       (2.8)      3.1
Other income (expense):
  Interest expense                                                (0.6)      (0.8)     (0.8)
  Equity in income (loss) of affiliated companies, net              -        (0.1)      1.4
  Gain on sale of assets                                            -         0.3       0.4
  Impairment of investment                                        (0.1)        -         -
  Other, net                                                       0.2         -       (0.1)
                                                                -------- --------   -------

    Total other income (expense)                                  (0.5)      (0.6)      0.9

    Income (loss) before income taxes and
      extraordinary loss                                           0.1       (3.4)      4.0
Provision (benefit) for income taxes                               0.1       (0.9)      1.0
                                                                -------- --------   -------

    Income (loss)before extraordinary loss                         0.0       (2.5)      3.0
Extraordinary loss on early extinguishment of
  debt, net of tax                                                 0.0         -         -
                                                                -------- --------   -------
Net income (loss)                                                  0.0%      (2.5)      3.0
                                                                ======== ========   =======
</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>
                                 2001                   2000             1999
                           -------------------   ----------------  ----------------
                                               (Dollars in thousands)
<S>                        <C>         <C>       <C>        <C>    <C>        <C>
Asia-Pacific Region        $1,213,454   49.9%    1,024,762   41.4    769,412   33.0
North American Region         578,612   23.7       499,171   20.2    377,129   16.2
Latin America Region          411,079   16.9       636,354   25.7    717,273   30.7
European Region               230,658    9.5       315,395   12.7    469,991   20.1
                           ----------  -------   ---------  -----  ---------  -----
Total                      $2,433,803  100.0%    2,475,682  100.0  2,333,805  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 2001 Compared to Fiscal 2000

Revenues. The Company's revenues decreased $41.9 million, or 1.7%, from
$2,475.7 million to $2,433.8 million.

Revenues in the Asia-Pacific Region increased $188.7 million, or 18.4% from
$1,024.8 million to $1,213.5 million. The Company's operations in The
People's Republic of China ("PRC"), including Hong Kong, provided
$1,049.6 million in revenue, an increase of $324.2 million, or 44.7%, from
$725.4 million. Growth in China, where market penetration of handsets is

                                      14

<PAGE>


approximately 10% of the total population, is being driven by the addition of
new wireless subscribers.  However, the Company's growth in the PRC was
negatively impacted in the fourth quarter of 2001 by the lack of availability
of compelling new products and the implementation of new warranty requirements
to the manufacturer which resulted in the delay of consumer purchases. The
Company's revenues in the PRC in the fourth quarter of 2001 of $232.6 million
were the lowest since the fourth quarter of 2000 when revenues were $218.6
million.  Industry forecasts show that the rate of growth of net new
subscribers will decrease from five million per month to approximately four
million per month in 2002.  Revenues from the Company's operations in Singapore
increased $47.5 million, or 110.6%, to $90.4 million due to third party
subsidies and new products, including sales of two products for which the
Company has exclusive rights. Revenues from Taiwan and The Philippines
operations decreased $178.5 million, or 85.9%, and $4.6 million, or 9.4%,
respectively to $29.2 million and $44.1 million, respectively. The Company's
operations in Taiwan and The Philippines continue to be affected by economic
and political turmoil in the respective countries. In addition, the Company's
supplier base in Taiwan is limited, and there are no new compelling products
from the Company's major supplier.

North American Region revenues were $578.6 million, an increase of $79.4
million, or 15.9% when compared to $499.2 million. U.S. revenues continued to
benefit from strong promotional activity by several customers, as well as from
the addition of new customers and expanded markets. Early in the first quarter
of 2001, the Company converted a major U.S. account to a consignment basis with
fulfillment fees.  Revenues for the years ended November 30, 2001 and November
30, 2000, on a comparable basis were $547.8 million and $399.9 million,
respectively. The conversion to consignment did not significantly impact net
income, but reduced inventory risk and the need for working capital. By
converting to consignment basis, the Company is not required to purchase and
hold inventory for this customer and therefore eliminates the Company's
exposure to decline in market prices.

The Latin American Region provided $411.1 million of revenues, compared to
$636.4 million, or a 35.4% decrease. Revenues in Mexico decreased $133.0
million from $383.3 million in 2000, which benefited from strong carrier
promotions, to $250.3 million in 2001. The decrease was primarily due to
reduced promotional activities by carrier customers and to reduced business
with carrier customers. Revenues for Brazil were $40.6 million in 2000. The
Company sold its Brazil operations in August 2000 (see "International
Operations").  Revenues from Venezuela operations were $36.6 million in 2000.
The Company sold its Venezuela operations in December 2000. Revenues from the
Company's operations in Miami decreased $24.1 million from $79.1 million in
2000 to $55.0 million in 2001 as increased product availability from in-country
manufacturers in Latin America continued to reduce exports from Miami. The
Company phased out a major portion of its redistributor business in its Miami
and North American operations, starting in the second quarter of 2000, due to
the volatility of the redistributor business, the relatively lower margins, and
higher credit risks. As a result the Company restructured its Miami operation
to reduce the size and cost of the operation, resulting in a charge of $0.8
million in the second quarter of 2001. Combined revenues from the operations in
Argentina, Chile, Colombia and Peru increased $7.8 million to $104.6 million
primarily due to significant promotional activity by a major carrier in
Colombia during the first quarter of 2001.

The Europe Region recorded revenues of $230.7 million, a decrease of $84.7
million, or 26.9%, from $315.4 million, primarily due to the Company's decision
to curtail its U.K. international trading operations in April 2000 (see
"International Operations") and to a decline in the Company's Sweden
operations.  The handset market in Europe is highly penetrated and is
increasingly driven by replacement sales, which are depressed due to delays in
the rollout of new handset technologies and services.

Gross Profit. Gross profit increased $24.3 million from $111.5 million, or 4.5%
of revenues, to $135.8 million, or 5.6% of revenues. During 2000, the Company
incurred $32.3 million in inventory obsolescence primarily as a result of 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. In 2001, the
Company incurred $10.2 million in inventory obsolescence. The increase in gross
profit as a percentage of revenues was due to better inventory management and
product mix. In addition in 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 profit as a
percentage of revenues. 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.

Selling, General and Administrative Expenses.  Selling, general and
administrative expenses decreased $55.4 million from $169.2 million to $113.8
million. This decrease was principally due to a reduction in bad debt expense
of $44.8 million from $51.5 million to $6.7 million in 2001. The bad debt
expense in 2000 was primarily 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 a supply shortage in 1999 and were also further affected by the
phase-out of a major portion of the redistributor business in the 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.
Bad debt expense in 2001 included a recovery of $3.9 million related to

                                      15

<PAGE>


the receivable from the satellite handset customer which was reserved in 2000.
In the fourth quarter of 2001, selling, general and administrative expenses
included a $3.0 million charge for a value-added tax prepaid asset in the
Company's Mexico operations for which the recoverability is uncertain. Selling,
general and administrative expenses related to the Brazil and Venezuela
operations, which were sold in August 2000 and December 2000, respectively, were
$0.2 million in 2001 and $17.8 million in 2000 and included $2.5 million in bad
debt expense. Overall selling, general and administrative expenses as a
percentage of revenues decreased to 4.7% from 6.8%.

Impairment of Assets. In the third quarter of 2000, the Company decided to exit
its Venezuela operations. In the third quarter of 2000, 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 sold its Venezuela operations. 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 also recorded a charge
of $1.0 million to reduce the carrying value of other assets.

Separation Agreement. The Company announced on July 6, 2001, that Alan H.
Goldfield retired effective immediately from the position of Chairman and Chief
Executive Officer and that James L. "Rocky" Johnson, who has served on the Board
of Directors since March 1994, became Chairman of the Board, and that Terry S.
Parker, a member of the Board of Directors and a former President and Chief
Operating Officer of the Company, rejoined the Company as Chief Executive
Officer. In 2001, the Company recorded expense of $5.7 million related to the
separation agreement between the Company and Alan H. Goldfield. Included in the
$5.7 million charge is a cash payment of $4.3 million and stock option
compensation expense of $0.6 million.

Restructuring Charge (Credit). The Company restructured its Miami facilities in
the second quarter of 2001 to reduce the size and cost of those operations,
resulting in a charge of $0.8 million, primarily related to the impairment of
leasehold improvements.

Equity in Loss of Affiliated Companies. Equity in loss of affiliated companies
was $0.9 million in 2001 and $1.8 million in 2000 primarily due to losses from
the Company's 49% minority interest in CellStar Amtel Sdn. Bhd. ("CellStar
Amtel"), a joint venture in Malaysia. As a result of the continuing
deterioration in the Malaysia market, the Company is in the process of
divesting its ownership interest in CellStar Amtel. The Company will be
required to recognize future losses, if any, of CellStar Amtel up to the amount
of debt and payables of CellStar Amtel that it guaranteed ($0.8 million at
November 30, 2001). The Company does not anticipate that any further losses
will be recognized.

Gain on Sale of Assets. The Company recorded a gain on sale of assets of $0.9
million in 2001 primarily associated with the sale of its Venezuela operations
in December 2000. In 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. During the third quarter 2000, the
Company also completed the sale of its Poland operations and recognized a
pre-tax gain of $0.2 million (see "International Operations").

Interest Expense. Interest expense decreased to $15.4 million in 2001 from
$19.1 million in 2000. This decrease was primarily related to the elimination
of debt of the Brazil operation, which was sold in August 2000 and to a lesser
extent, lower borrowings and interest rates on the Company's revolving credit
facility. These decreases were partially offset by interest on additional
borrowings in the Asia Pacific region.

Impairment of Investment. In 2001, the Company recorded an impairment charge of
$2.2 million to reduce the carrying value of its 3.5% interest in a Taiwan
retailer. Due to the continuing economic and political turmoil in Taiwan, the
Company considered its investment in the Taiwan retailer to be permanently
impaired. As a result the Company reduced the carrying value of its 3.5%
investment in the retailer to $1.9 million which represents the Company's
estimate of the fair value of its 3.5% interest in the retailer.

Other, Net. Other, net increased $4.4 million, from income of $0.9 million to
income of $5.3 million, primarily due to gains on foreign currencies related to
European operations in 2001 compared with losses in 2000.

Income Taxes. Income tax expense increased from a benefit of $20.8 million in
2000 to expense of $2.2 million in 2001 due to the changes in pretax income. The
Company's annual effective tax rate for 2001 was 65.2% and for 2000 was 24.8%.
The increase in the effective tax rate for 2001 is primarily due to the impact
of non-deductible items. The impact of the non-deductible items is greater in
2001 due to the smaller amount of pretax income.

Extraordinary loss on early extinguishment of debt, net of tax. As a result of
the early termination of its previously-existing revolving credit facility, the
Company had an after tax extraordinary loss of $0.6 million, primarily related
to the write off of deferred loan costs related to the facility.

                                      16

<PAGE>


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 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 the first quarter of 1999 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 restructured 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.

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
part 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

                                      17

<PAGE>


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 a 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 remaining increase in selling, general and
administrative expenses was primarily 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 the third quarter of 2000, the Company decided to exit
its Venezuela operations.  In the third quarter of 2000 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. 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 in 1999, including a $4.5
million writedown of goodwill to reduce the carrying value of the assets in
Poland to their estimated fair value.

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 49% minority interest in CellStar Amtel.

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.

Critical Accounting Policies

Financial Reporting Release No. 60, which was recently released by the
Securities and Exchange Commission, requires all companies to include a
discussion of critical accounting policies or methods used in the preparation
of financial statements.  Note 1 of the Notes to the Consolidated Financial
Statements includes a summary of the significant accounting policies and
methods used in the preparation of the Company's Consolidated Financial
Statements.  The following is a brief discussion of the more critical
accounting policies and methods used by the Company.

                                      18

<PAGE>

Significant Estimates

Management of the Company has made a number of estimates and assumptions related
to the reporting of assets and liabilities in preparation of the consolidated
financial statements in conformity with generally accepted accounting
principles. The most significant estimates relate to the allowance for doubtful
accounts, the reserve for inventory obsolescence, the deferred tax asset
valuation allowance and the determination of the recoverability of goodwill.

In determining the adequacy of the allowance for doubtful accounts, management
considers a number of factors, including the aging of the receivable portfolio,
customer payment trends, financial condition of the customer, economic
conditions in the customer's country, and industry conditions.  In some years,
the Company has experienced significant amounts of bad debt, including $51.5
million in 2000.  In 2000, the decline in the redistributor market, the
decision to exit the Brazil market, and the competitive market conditions
significantly impacted bad debt expense.  Actual amounts could differ
significantly from management's estimates.

In determining the adequacy of the reserve for inventory obsolescence,
management considers a number of factors, including the aging of the inventory,
recent sales trends, industry market conditions, and economic conditions.  In
assessing the reserve, management also considers price protection credits or
other incentives the Company expects to receive from the vendor.  In some
years, the Company has experienced significant amounts of inventory
obsolescence, including $32.3 million in 2000.  After a supply shortage in
1999, there was an oversupply of product resulting in intense price competition
in 2000 which significantly impacted obsolescence.  Actual amounts could differ
significantly from management's estimates.

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.  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 determines if it is more likely than not that the
Company will 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.

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, 2001, the Company had
not provided U.S. Federal income taxes on earnings of international
subsidiaries of approximately $186.5 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.

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.

Management's estimates of future cash flows are based in part upon prior
performance, industry conditions, economic conditions, and vendor and customer
relationships. Changes in these factors or other factors could result in
significantly different cash flow estimates and an impairment charge. In 1999,
due to changing market conditions in Poland, the Company considered the
remaining $4.5 million in goodwill related to its Poland operations to be
impaired. In 2000, due to the current and expected future economic conditions in
Venezuela, the Company considered the goodwill related to the Venezuela
operations impaired and recorded a $3.9 million impairment charge. In 2000, a
major customer's proposed change to an existing contract that adversely changed
the long-term prospects of the Peru operations resulted in the Company recording
a goodwill impairment charge of $6.4 million.

Revenue Recognition

For the Company's wholesale business, revenue is recognized when the customer
takes title and assumes risk of loss.  If the customer takes title and assumes
risk of loss upon shipment, revenue is recognized on the shipment date.  If the
customer takes title and assumes risk of loss upon delivery, revenue is
recognized on the delivery date. 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

                                      19

<PAGE>

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 service fee revenue when the
service is completed.

Vendor Credits

The Company recognizes price protection credits and other incentives from
vendors when such credits are received in writing, or if the credits are based
on sell-through to customers, when the credits have been received in writing and
the related product is sold. Vendor credits, excluding sell-through credits, are
applied against inventory and cost of goods sold, depending on whether the
related inventory is on-hand or has been previously sold at the time the credits
are received in writing. Sell-through credits are recorded as a reduction in
cost of goods sold in the period received.

Liquidity and Capital Resources

The following table summarizes the Company's contractual obligations at
November 30, 2001 (amounts in thousands):

<TABLE>
<CAPTION>
                                                 Payments Due By Period
                                  -----------------------------------------------------
                                  Less than       One to         Four to     More than
                        Total     One Year      Three Years    Five Years    Five Years
                     ----------   ----------    -----------    ----------    ----------
<S>                  <C>             <C>             <C>           <C>             <C>
Notes payable        $   52,644       52,644             -             -             -
Long-term debt (A)      150,000      150,000             -             -             -
Operating leases          9,220        3,995         3,518         1,480           227
                     ----------   ----------    -----------    ----------    ----------
  Total              $  211,864      206,639         3,518         1,480           227
                     ==========   ==========    ===========    ==========    ==========
</TABLE>

(A) See discussion of exchange offer for long-term debt below.

During the year ended November 30, 2001, the Company relied primarily on cash
available at November 30, 2000, funds generated from operations and borrowings
under its revolving credit facilities to fund working capital, capital
expenditures and expansions.

At November 30, 2001, the Company's operations in China had two lines of credit,
one for USD $12.5 million and the second for RMB (Chinese People's Currency) 220
million (approximately USD $26.6 million), bearing interest at 7.16%, and from
5.28% to 5.56%, respectively. The loans have maturity dates through September
2002. Both lines of credit are fully collateralized by U.S. dollar cash
deposits. The cash deposits were made via intercompany loans from the operating
entity in Hong Kong as a mechanism to secure repatriation of these funds. At
November 30, 2001, the U.S. dollar equivalent of $39.1 million had been borrowed
against the lines of credit in China. As a result of this method of funding
operations in China, the consolidated balance sheet at November 30, 2001
reflects USD $41.8 million in cash that is restricted as collateral on these
advances and a corresponding USD $39.1 million in notes payable. At November 30,
2001, the Company's China operations also had $5.8 million in promissory notes
to a bank with maturity dates through January 2002 and bearing interest at 5%.
These notes were subsequently renewed with maturities through May 2002. The
Company expects to renew the borrowings under similar terms. At February 20,
2002 the Company had borrowings of $59.0 million in its China operations. In
addition, the Company has notes payable in Taiwan totaling $7.8 million at
November 30, 2001.

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.

                                      20

<PAGE>

As of November 10, 2000, the Company had negotiated an 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
to assist 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 Agreement which further reduced
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)
increased the applicable interest rate margin by 25 basis points, (ii) shortened
the term of the Facility from June 1, 2002 to March 1, 2002, (iii) provided
additional collateral for such Facility in the form of additional stock pledges
and mortgages on real property, (iv) provided for dominion of funds by the banks
for the Company's U.S. operations, (v) limited the borrowing base, and (vi)
tightened restrictions on the Company's ability to fund its operations,
particularly its non-U.S. operations.

Fundings under the Facility were limited by a borrowing base test, which was
measured monthly. Borrowings under the Facility were 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 included an applicable
margin that was 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 was
secured by the Company's accounts receivable, property, plant and equipment and
all other real property. The Facility contained, 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.

As of September 28, 2001, the Company had negotiated and finalized a new,
five-year, $60.0 million Loan and Security Agreement ("the New Facility") with a
bank and terminated the previously existing Facility. On October 12, 2001 the
Company finalized an amendment to the New Facility increasing the commitment
amount from $60.0 million to $85.0 million. The New Facility lowers the
applicable interest rate margin by 25 basis points from its level at August 31,
2001 of 125 basis points, provides a more extensive borrowing base, more
flexible financial covenants and greater flexibility in funding foreign
operations.

Fundings under the New Facility are limited by a borrowing base test, which is
measured weekly. Interest on borrowings under the New Facility is at the London
Interbank Offered Rate or at the bank's prime lending rate, plus an applicable
margin. The New Facility is also secured by a pledge of 100% of the outstanding
stock of all U.S. subsidiaries and 65% of the outstanding stock of all first
tier foreign subsidiaries. The New Facility is further secured by the Company's
domestic accounts receivable, inventory, property, plant and equipment and all
other domestic real property and intangible assets. The New Facility contains,
among other provisions, covenants relating to the maintenance of minimum net
worth and certain financial ratios, exchanging, refinancing or extending of the
Company's convertible notes, dividend payments, additional debt, mergers and
acquisitions and disposition of assets. At November 30, 2001, the Company had no
borrowings under the New Facility.

At November 30, 2001 and 2000, long-term debt consisted of $150.0 million of the
Company's 5% Convertible Subordinated Notes Due October 15, 2002 (the
"Subordinated Notes"), which are convertible into 1.1 million shares of common
stock at $138.34 per share (adjusted for the effect of the one-for-five reverse
stock split effective on February 22, 2002) at any time prior to maturity.

On January 14, 2002, the Company filed an S-4 registration statement (the
"Exchange Offer"), with the Securities and Exchange Commission ("SEC") offering
to exchange, for each $1,000 principal amount of the Subordinated Notes, $366.67
in cash and, at the election of the holder, one of the following options: a)
$400.94 principal amount of 12% Senior Subordinated Notes due January 2007 (the
"Senior Notes") or, b) $320.75 principal amount of Senior Notes and $80.19
principal amount of 5% Senior Subordinated Convertible Notes due November 2002
(the "Senior Convertible Notes") or, c) $400.94 principal amount of Senior
Convertible Notes.

On February 20, 2002, the Company completed its Exchange Offer for its
Subordinated Notes. Holders owning $128.6 million of Subordinated Notes
exchanged them for $47.2 million in cash, $12.4 million of Senior Notes and
$39.1 million of Senior Convertible Notes. Upon completion of the Exchange
Offer, $21.4 million of the Subordinated Notes were not exchanged and are now
subordinate to the Company's New Facility, the Senior Notes and the Senior
Convertible Notes.

The Senior Convertible Notes are mandatorily convertible into the Company's
common stock on November 30, 2002, and bear interest at 5%, payable
semi-annually in arrears, in either cash or stock, at the Company's option, on
August 15, 2002, and November 30, 2002. In the event of bankruptcy the Senior
Convertible Note holders are entitled to cash equal to the face value of the
Senior Convertible Note plus accrued interest. The Senior Convertible Notes are
convertible into the Company's common stock at a conversion price of $5.00 per
share (adjusted for the effect of the one-for-five reverse stock split effective
on February 22, 2002) and may be converted at any time prior to maturity at the
option of the holders. The 39.1 million of Senior Convertible Notes are
convertible into 7.8 million shares of common stock and will be considered as
dilutive securities in calculating earnings per share beginning in the first
quarter of 2002.

The Senior Notes mature January 15, 2007, and bear interest at 12%, payable in
cash in arrears semi-annually on February 15 and August 15, commencing August
15, 2002. The Senior Notes contain certain covenants that restrict the
Company's ability to incur additional indebtedness; make investments, loans and
advances; declare dividends or certain other distributions; create liens; enter
into sale-leaseback transactions; consolidate; merge; sell assets and enter
into transactions with affiliates.

                                      21

<PAGE>

Cash, cash equivalents, and restricted cash at November 30, 2001 were $89.3
million, compared to $119.6 million at November 30, 2000, primarily reflecting
the use of the cash to reduce the previously-existing credit facility and
accounts payable.

Compared to November 30, 2000, accounts receivable decreased from $346.0
million to $216.0 million at November 30, 2001. Inventories declined to $218.9
million at November 30, 2001, from $265.6 million at November 30, 2000.
Management has worked aggressively to reduce accounts receivable and inventory
levels through tightening of credit policies, aggressive collection efforts,
and better purchasing and inventory management. Accounts payable declined to
$229.0 million at November 30, 2001 compared to $363.8 million at November 30,
2000.

Based upon current and anticipated levels of operations, the Company
anticipates that its cash flow from operations, together with amounts available
under its New 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 New 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; tariffs 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.

The Company's sales from its Miami operation to customers exporting into South
American countries continued 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 due to the volatility of the redistribtor
business, the relatively lower margins, and higher credit risks. The Company
restructured its Miami operation in the second quarter of 2001 to reduce the
size and cost of the operation, resulting in a charge of $0.8 million,
primarily related to the impairment of leasehold improvements.

In 2000 and 2001, the Company incurred losses of $1.8 million and $0.7 million,
respectively related to its minority interest in CellStar Amtel. As a result of
the continuing deterioration in the Malaysia market, the Company intends to
limit further exposure by divesting its 49% ownership in CellStar Amtel. The
carrying value of the investment at November 30, 2001 was zero. The Company will
be required to recognize future losses, if any, of CellStar Amtel up to the
amount of debt and payables of CellStar Amtel guaranteed by the Company ($0.8
million at November 30, 2001). The Company currently does not anticipate any
further losses to be recognized.

In December 2001, the Argentine government removed the fixed exchange rate
maintained between the Argentine peso and the U.S. dollar. Based upon the
Company's current level of operations in Argentina, the Company does not expect
a significant impact as a result of Argentine peso devaluation.

During the fourth quarter of 2001, the Company recorded a $3.0 million charge
for a value-added tax prepaid asset in the Company's Mexico operations for which
the recoverability is uncertain.

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. 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 of 2000, to exit Brazil.

During the third 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. 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. In
December 2000, the Company completed the sale of its Venezuela operations and
recorded a gain of $1.1 million.

                                      22

<PAGE>

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 pursuing legal action where appropriate. However,
the ultimate recovery in relation to these losses, if any, cannot be determined
at this time. Since the curtailment, the Company has experienced operating
losses in its U.K. operation.

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

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.

Impact of Inflation

Historically, inflation has not had a significant impact on CellStar'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 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 its principal markets could have a materially adverse effect on its
operating results.

Accounting Pronouncements Not Yet Adopted

In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("Statement") No. 141, "Business
Combinations." Statement No. 141 changes the accounting for business
combinations to eliminate the pooling-of-interests method and requires all
business combinations initiated after June 30, 2001 to be accounted for using
the purchase method. This statement also requires intangible assets that arise
from contractual or other legal rights, or that are capable of being separated
or divided from the acquired entity, be recognized separately from goodwill.
Existing intangible assets and goodwill that were acquired in a prior purchase
business combination must be evaluated and any necessary reclassifications must
be made in order to conform with the new criteria in Statement No. 141 for
recognition apart from goodwill. The Company does not expect the adoption of
this statement to have a material impact on its consolidated results of
operations or financial position.

In June 2001, the FASB issued Statement No. 142, "Goodwill and Other Intangible
Assets." Statement No. 142 addresses the initial recognition and measurement of
intangible assets acquired (other than those acquired in a business
combination, which is addressed by Statement No. 141) and the subsequent
accounting for goodwill and other intangible assets after initial recognition.
Statement No. 142 eliminates the amortization of goodwill and intangible assets
with indefinite lives. Intangible assets with lives restricted by contractual,
legal, or other means will continue to be amortized over their useful lives.
Adoption of this statement will also require the Company to reassess the useful
lives of all intangible assets acquired, and make any necessary amortization
period adjustments. Goodwill and other intangible assets not subject to
amortization will be tested for impairment annually, or more frequently if
events or changes in circumstances indicate that the asset might be impaired.
Statement No.142 requires a two-step process for testing goodwill for
impairment. First, the fair value of each reporting unit will be compared to
its carrying value to determine whether an indication of impairment exists. If
an impairment is indicated, then the fair value of the reporting unit's
goodwill will be determined by allocating the unit's fair value to its assets
and liabilities (including any unrecognized intangible assets) as if the
reporting unit had been acquired in a business combination. The amount of
impairment for goodwill and other intangible assets will be measured as the
excess of its carrying value over its fair value. Goodwill and intangible
assets acquired after June 30, 2001 will be immediately subject to the
impairment provisions of this statement. For goodwill and other intangible
assets acquired on or before June 30, 2001, the Company is required to adopt
Statement No. 142 no later than the beginning of fiscal 2003, with early
application permitted during the first quarter of fiscal 2002. CellStar has not
yet determined the impact of the adoption of this statement will have on its
consolidated results of operations or financial position.

In June 2001, the FASB issued Statement No. 143, Accounting for Asset
Retirement Obligations, which addresses financial accounting and reporting
obligations associated with the retirement of tangible long-lived assets and
the associated asset

                                      23

<PAGE>


retirement costs. The standard applies to legal obligations associated with the
retirement of long-lived assets that result from the acquisition, construction,
development and (or) normal use of the asset. Statement No. 143 requires that
the fair value of a liability for an asset retirement obligation be recognized
in the period in which it is incurred if a reasonable estimate of fair value
can be made. The fair value of the liability is added to the carrying amount of
the associated asset and this additional carrying amount is depreciated over
the life of the asset. The liability is accrued at the end of each period
through charges to operating expense. If the obligation is settled for other
than the carrying amount of the liability, the Company will recognize a gain or
loss on settlement. The Company is required to adopt the provisions of
Statement No. 143 no later than the beginning of fiscal year 2003, with early
adoption permitted. The Company does not expect the adoption of this statement
to have a material effect on its consolidated results of operations or
financial position.

In October 2001, the FASB issued Statement No. 144, Accounting for the
Impairment or Disposal of Long- Lived Assets, which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
While Statement No. 144 supersedes FASB Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, it
retains many of the fundamental provisions of that Statement. Statement No. 144
becomes effective for fiscal years beginning after December 15, 2001, with
early applications encouraged. The Company does not expect the adoption of this
statement to have a material effect on its consolidated results of operations
or financial position.

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

Foreign Exchange Risk

For the years ended November 30, 2001 and 2000, the Company recorded net foreign
currency losses of $1.0 million and $5.8 million, respectively in costs of goods
sold. For the years ended November 30, 2001 and 2000, the Company recorded in
other income (expense), net foreign currency gains and (losses) of $1.3 million
and $(4.2) million, respectively. The gain in 2001 and the loss in 2000, were
primarily due to the revaluations of foreign currency related to the European
operations.

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.

The Company does have foreign exchange exposure on the intercompany advances
from the Hong Kong entity to the China entity as the funds have been effectively
converted into RMB (Chinese People's Currency).

In December 2001, the Argentine government removed the fixed exchange rate
maintained between the Argentine peso and the U.S. dollar. Based upon the
Company's current level of operations in Argentina, the Company does not expect
a significant impact as a result of Argentine peso devaluation.

Derivative Financial Instruments

The Company periodically uses various derivative financial instruments as part
of an overall strategy to manage its exposure to market risk associated with
interest rate and foreign currency exchange rate fluctuations. The Company
periodically 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 Company's risk of loss in the event of
non-performance by any counterparty under derivative financial instrument
agreements is not significant. Although the derivative financial instruments
expose CellStar 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 its
international operations. The forward contracts establish the exchange rates at
which the Company purchases or sells 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 receive or
pay the difference between the contracted forward rate and the exchange rate at
the settlement date.

At November 30, 2001, the Company had no forward contracts and does not hold
any other derivative instruments.

Interest Rate Risk

The interest rate of the Company's previous Facility and the New 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

                                      24

<PAGE>


Interbank Offered Rate. During the year ended November 30, 2001, the interest
rates of borrowings under the revolving credit facilities ranged from 6.0% to
10.0%. A one percent change in variable interest rates will not have a material
impact on the Company.

The Company manages its borrowings under the revolving credit facility each
business day to minimize interest expenses. The Company has short-terms
borrowings in China as discussed in Liquidity and Capital Resources. The notes
payable in Taiwan bear interest at 5.98% and 7.2%, respectively. The
Subordinated Notes have a fixed interest rate of 5.0% and are due in October
2002. The Senior Convertible Notes issued in February 2002 bear interest at 5.0%
and mature November 30, 2002. The Senior Notes issued in February 2002 bear
interest at 12.0% and mature January 15, 2007.

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.


                                    PART III

Item 10. Directors and Executive Officers of the Registrant

The information required by this item regarding Directors of the Company is set
forth in the Proxy Statement (the "Proxy Statement") to be delivered to the
Company's stockholders in connection with the Company's Annual Meeting of
Stockholders to be held during the second quarter of 2002 under the heading
"Election of Directors," which information is incorporated herein by reference.
The information required by this item regarding executive officers of the
Company is set forth under the heading "Executive Officers of the Registrant"
in Part I of this Form 10-K, which information is incorporated herein by
reference.

Item 11. Executive Compensation

The information required by this item is set forth in the Proxy Statement under
the heading "Executive Compensation," which information is incorporated herein
by reference. Information contained in the Proxy Statement under the captions
"Executive Compensation--Report of the Compensation Committee of the Board of
Directors on Executive Compensation" and "Comparative Performance Graph" is not
incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The information required by this item is set forth in the Proxy Statement under
the heading "Security Ownership of Certain Beneficial Owners and Management,"
which information is incorporated herein by reference.

Item 13. Certain Relationships and Relation Transactions

The information required by this item is set forth in the Proxy Statement under
the caption "Certain Transactions," which information in incorporated herein by
reference.

                                      25

<PAGE>


                                 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

<TABLE>
<CAPTION>
Number  Description
------  -----------
<S>     <C>
   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. (12)

   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)(12)(17)

   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. (10)

   4.9  12% Senior Subordinated Notes Indenture, dated as of February 20, 2002,
        by and between CellStar Corporation and The Bank of New York, as
        Trustee. (19)

  4.10  5% Senior Subordinated Convertible Notes Indenture, dated as of
        February 20, 2002, by and between CellStar Corporation and The Bank of
        New York, as Trustee. (19)

  10.1  Employment Agreement, effective as of December 1, 1994, by and between
        CellStar Corporation and Alan H. Goldfield. (2)(20)

  10.2  Employment Agreement, effective January 22, 1998, by and between
        CellStar (Asia) Corporation Limited, CellStar Corporation and Hong
        An- Hsien. (11)(20)

  10.3  Employment Agreement, effective as of November 12, 1999, by and between
        CellStar, Ltd., CellStar Corporation and Dale H. Allardyce. (13)(20)

  10.5  Employment Agreement, effective as of January 21, 2000, by and between
        CellStar Ltd., CellStar Corporation and Elaine Flud Rodriguez. (13)(20)
</TABLE>

                                      26

<PAGE>


<TABLE>
<CAPTION>
Number  Description
------  -----------
<S>    <C>
  10.6 Registration Rights Agreement by and between the Company and Audiovox
       Corporation. (7)

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

  10.8 CellStar Corporation 1994 Amended and Restated Director Nonqualified
       Stock Option Plan. (8)

  10.9 Registration Rights Agreement, dated as of June 2, 1995, between Hong
       An- Hsien and CellStar Corporation. (11)(20)

 10.10 CellStar Corporation 1993 Amended and Restated Long-Term Incentive Plan,
       amended and effective as of January 21, 2000. (13)(20)

 10.11 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. (15)(24)

 10.12 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. (14)

 10.13 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. (15)

 10.14 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. (15)

 10.15 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. (15)

 10.16 Wireless Products Agreement by and between Motorola, Inc., by and
       through its Cellular Subscriber Sector, and CellStar, Ltd., effective
       November 15, 2000. (15)(21)

 10.17 Aircraft and Asset Purchase Agreement, dated as of January 30, 2001, by
       and between A & S Air Service, Inc. and Alan H. Goldfield. (15)
</TABLE>

                                      27

<PAGE>
<TABLE>
<CAPTION>
Number  Description
------  -----------
<S>    <C>
 10.18 Second Amended and Restated Credit Agreement, dated February 27, 2001, by
       and among CellStar Corporation, the Financial Institutions Signatory
       Thereto, and The Chase Manhattan Bank, as Agent for such Financial
       Institutions. (16)

 10.19 Form of Revolving Credit Promissory note. (16)

 10.20 Amendment, Ratification and Confirmation, dated as of February 27, 2001,
       by and between CellStar Corporation and The Chase Manhattan Bank, as
       Agent for Financial Institutions Signatory to the Second Amended and
       Restated Credit Agreement. (16)

 10.21 Deed of Trust, dated February 27, 2001, granted by CellStar, Ltd. To
       David L. Mendez, Trustee. (16)

 10.22 First Amendment to Second Amended and Restated Credit Agreement and Post
       Closing Matters Agreement, dated as of March 15, 2001, by and among
       CellStar Corporation and the Financial Institutions Signatory Thereto.
       (16)

 10.23 Second Amendment to Second Amended and Restated Credit Agreement, dated
       as of July 3, 2001, by and among CellStar Corporation, the Financial
       Institutions Signatory Thereto, and The Chase Manhattan Bank, as Agent
       for such Financial Institutions. (17)

 10.24 Separation Agreement and Release, dated as of July 5, 2001, by and among
       CellStar Corporation and Alan H. Goldfield. (17)(20)

 10.25 Consulting Agreement, dated as of July 5, 2001, by and among CellStar
       Corporation and Alan H. Goldfield. (17)(20)

 10.26 Employment Agreement, dated as of July 5, 2001, by and among CellStar
       Corporation and Terry S. Parker. (17)(20)

 10.27 Loan and Security Agreement, dated as of September 28, 2001, by and
       among CellStar Corporation and Each Of Its Subsidiaries That Are
       Signatories Thereto, as Borrowers, The Lenders That Are Signatories
       Thereto, as the Lenders, and Foothill Capital Corporation, as the
       Arranger and Administrative Agent. (18)

 10.28 First Amendment To Loan Agreement, dated as of October 12, 2001, by and
       among CellStar Corporation and Each Of Its Subsidiaries That Are
       Signatories Thereto, as Borrowers, The Lenders That Are Signatories
       Thereto, as the Lenders, and Foothill Capital Corporation, as the
       Arranger and Administrative Agent. (18)

 10.29 Second Amendment to Loan Agreement, dated as of February 22, 2002, by
       and among CellStar Corporation and Each Of Its Subsidiaries That Are
       Signatories Thereto, as Borrowers, The Lenders That Are Signatories
       Thereto, as the Lenders, and Foothill Capital Corporation, as the
       Arranger and Administrative Agent. (19)

 10.30 Exhibit A to Consulting Agreement, dated as of July 5, 2001, by and
       among CellStar Corporation and Alan H. Goldfield. (18)(20)

  21.1 Subsidiaries of the Company. (19)

  23.1 Consent of KPMG LLP. (19)

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

(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.

                                      28

<PAGE>


(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.

(5)  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.

(6)  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.

(7)  Previously filed as an exhibit to the Company's Registration Statement No.
33-70262 on Form S-1 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 February 28, 1995, and incorporated herein by
reference.

(9)  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.

(10) 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.

(11) 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.

(12) 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.

(13) 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.

(14) 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.

(15) 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.

(16) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended February 28, 2001, and incorporated herein by
reference.

(17) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q/A for the quarter ended May 31, 2001, and incorporated herein by reference.

(18) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q/A for the quarter ended August 31, 2001, and incorporated herein by
reference.

(19) Filed herewith.

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

                                      29

<PAGE>


(21) 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

                                      30

<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/ Terry S. Parker
                                    ---------------------------------
                                     Terry S. Parker
                                     Chief Executive Officer

                                     Date: February 27, 2002

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.


By /s/ Terry S Parker                                  Date: February 27, 2002
------------------------------------------------
Terry S. Parker
Chief Executive Officer and Director
(Principal Executive Officer)

By /s/ James L. Johnson                                Date: February 27, 2002
------------------------------------------------
James L. Johnson
Chairman of the Board

By /s/ Dale H. Allardyce                               Date: February 27, 2002
------------------------------------------------
Dale H. Allardyce
President and Chief Operating Officer

By /s/ Robert A. Kaiser                                Date: February 27, 2002
------------------------------------------------
Robert A. Kaiser
Senior Vice President, Chief Financial Officer
and Treasurer
(Principal Financial Officer)

By /s/ Raymond L. Durham                               Date: February 27, 2002
------------------------------------------------
Raymond L. Durham
Vice President, Corporate Controller
(Principal Accounting Officer)

By /s/ J. L. Jackson                                   Date: February 27, 2002
------------------------------------------------
J. L. Jackson
Director

By /s/ Dale V. Kesler                                  Date: February 27, 2002
------------------------------------------------
Dale V. Kesler
Director

By /s/ Jere W. Thompson                                Date: February 27, 2002
------------------------------------------------
Jere W. Thompson
Director

                                      31

<PAGE>


                     CELLSTAR CORPORATION AND SUBSIDIARIES

                  Index to Consolidated Financial Statements

<TABLE>
<S>                                                                     <C>
Independent Auditors' Report                                            F-2

Consolidated Balance Sheets as of November 30, 2001 and 2000.           F-3

Consolidated Statements of Operations for the years ended
November 30, 2001, 2000 and 1999                                        F-4

Consolidated Statements of Stockholders' Equity and Comprehensive
Income (Loss) for the years ended November 30, 2001, 2000 and 1999      F-5

Consolidated Statements of Cash Flows for the years ended
November 30, 2001, 2000 and 1999                                        F-6

Notes to Consolidated Financial Statements                              F-7

Schedule II - Valuation and Qualifying Accounts for the years ended
November 30, 2001, 2000 and 1999                                        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, 2001 and 2000, and the results
of their operations and their cash flows for each of the years in the
three-year period ended November 30, 2001, 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.

                                   KPMG LLP

Dallas, Texas
   January 11, 2002,
    except as to note 22 which
    is as of February 22, 2002

                                     F-2

<PAGE>

                     CELLSTAR CORPORATION AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                          November 30, 2001 and 2000
                   (Amounts in thousands, except share data)

<TABLE>
<CAPTION>
                                                                                  2001         2000
                                                                              ------------  ---------
<S>                                                                           <C>            <C>
ASSETS

Current assets:
  Cash and cash equivalents                                                    $    47,474     77,023
  Restricted cash                                                                   41,820     42,622
  Accounts receivable (less allowance for doubtful accounts of
   $57,359 and $75,810, respectively)                                              216,002    345,996
  Inventories                                                                      218,927    265,644
  Deferred income tax assets                                                        35,915     30,866
  Prepaid expenses                                                                  18,614     25,470
                                                                               -----------  ---------
   Total current assets                                                            578,752    787,621
Property and equipment, net                                                         19,340     22,015
Goodwill (less accumulated amortization of $7,423 and $17,408 respectively)         22,060     23,532
Deferred income tax assets                                                          18,102     16,484
Other assests                                                                        7,816      9,172
                                                                               -----------  ---------
                                                                               $   646,070    858,824
                                                                               ===========  =========

                            LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Notes payable                                                                $    52,644    127,128
  Current portion of long-term debt                                                150,000          -
  Account payable                                                                  228,958    363,848
  Accrued expenses                                                                  21,804     22,744
  Income taxes payable                                                               4,767      2,948
  Deferred income tax liabilities                                                    3,687      6,573
                                                                               -----------  ---------
   Total current liabilities                                                       461,860    523,241
Long-term debt                                                                           -    150,000
                                                                               -----------  ---------
   Total liabilities                                                               461,860    673,241
                                                                               -----------  ---------
Stockholders' equity:
  Preferred stock, $.01 par value, 5,000,000 shares authorized;
   none issued                                                                           -          -
  Common stock, $.01 par value, 200,000,000 shares authorized;
   12,028,425 shares issued and outstanding                                            120        120
  Additional paid-in capital                                                        82,443     81,780
  Accumulated other comprehensive loss - foreign currency
   translation adjustments                                                         (13,447)   (10,861)
  Retained earnings                                                                115,094    114,544
                                                                               -----------  ---------
   Total stockholders' equity                                                      184,210    185,583
                                                                               -----------  ---------
                                                                               $   646,070    858,824
                                                                               ===========  =========
</TABLE>

         See accompanying notes to consolidated financial statements.

                                     F-3

<PAGE>

                              CELLSTAR CORPORATION AND SUBSIDIARIES

                              CONSOLIDATED STATEMENTS OF OPERATIONS
                          Years ended November 30, 2001, 2000, and 1999
                              (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                              2001        2000        1999
                                                          -----------  ----------  ---------
<S>                                                       <C>          <C>         <C>
Revenues                                                  $2,433,803   2,475,682   2,333,805
Cost of sales                                              2,297,977   2,364,197   2,140,375
                                                          -----------  ----------  ----------
  Gross profit                                               135,826     111,485     193,430

Selling, general and administrative expenses                 113,785     169,232     111,613
Impairment of assets                                               -      12,339       5,480
Separation agreement                                           5,680           -           -
Restructuring charge (credit)                                    750        (157)      3,639
                                                          -----------  ----------  ----------
  Operating income (loss)                                     15,611     (69,929)     72,698

Other income (expense):
  Interest expense                                           (15,383)    (19,113)    (19,027)
  Equity in income (loss) of affiliated companies, net          (858)     (1,805)     31,933
  Gain on sale of assets                                         933       6,200       8,774
  Impairment of investment                                    (2,215)          -           -
  Other, net                                                   5,288         932      (1,876)
                                                          -----------  ----------  ----------
    Total other income (expense)                             (12,235)    (13,786)     19,804
                                                          -----------  ----------  ----------
  Income (loss) before income taxes and extraordinary loss     3,376     (83,715)     92,502
Provision (benefit) for income taxes                           2,200     (20,756)     23,415
                                                          -----------  ----------  ----------
  Income (loss) before extraordinary loss                      1,176     (62,959)     69,087
Extraordinary loss on early extinguishment
  of debt, net of tax                                           (626)          -           -
                                                          -----------  ----------  ----------
  Net income (loss)                                       $      550     (62,959)     69,087
                                                          ===========  ==========  ==========
Net income (loss) per share:
  Basic:
  Income (loss) before extraordinary loss                 $     0.10       (5.24)       5.78
  Extraordinary loss on early extinguishment
    of debt, net of tax                                        (0.05)          -           -
                                                          -----------  ----------  ----------
  Net income (loss)                                       $     0.05       (5.24)       5.78
                                                          ===========  ==========  ==========
  Diluted:
  Income (loss) before extraordinary loss                 $     0.10       (5.24)       5.61
  Extraordinary loss on early extinguishment
    of debt, net of tax                                        (0.05)          -           -
                                                          -----------  ----------  ----------
Net income (loss)                                         $     0.05       (5.24)       5.61
                                                          ===========  ==========  ==========
</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, 2001, 2000, and 1999
                               (In thousands)

<TABLE>
                                                                                              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, 1998                               11,792  $   118       77,434      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         107        1        3,973      -                 -            -       3,974
Exercise of common stock warrant                     112        1            3     (4)                -            -           -
                                              ---------- -----------  ---------- --------   --------------  ---------   ---------

Balance at November 30, 1999                      12,011      120       81,410      -            (8,509)     177,503     250,524
  Comprehensive loss:
    Net loss                                           -        -            -      -                 -      (62,959)    (62,959)
    Foreign currency translation adjustment            -        -            -      -            (2,352)           -      (2,352)
                                                                                                                        ---------
      Total comprehensive loss                                                                                           (65,311)
Common stock issued under stock option plans          17        -          370      -                 -            -         370
                                              ---------- -----------  ---------- --------   --------------  ---------   ---------
Balance at November 30, 2000                      12,028      120       81,780      -           (10,861)     114,544     185,583
  Comprehensive income (loss):
    Net income                                         -        -            -      -                 -          550         550
    Foreign currency translation adjustment            -        -            -      -            (2,586)           -      (2,586)
                                                                                                                        ---------
      Total comprehensive loss                                                                                            (2,036)
    Stock option compensation
      expense                                          -        -          663      -                 -            -         663
                                              ---------- -----------  ---------- --------   --------------  ---------   ---------
Balance at November 30, 2001                      12,028  $   120       82,443      -           (13,447)     115,094     184,210
                                              ========== ===========  ========== ========   ==============  =========   =========


</TABLE>

         See accompanying notes to consolidated financial statements.

                                     F-5

<PAGE>

                     CELLSTAR CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Years ended November 30, 2001, 2000, and 1999
                                (In thousands)

<TABLE>
<CAPTION>
                                                                2001         2000      1999
                                                              ----------  ---------  ---------
<S>                                                           <C>         <C>        <C>
Cash flows from operating activities:
 Net income (loss)                                            $     550    (62,959)    69,087
 Adjustments to reconcile net income (loss) to net cash
  provided by (used in) operating activities
    Provision for doubtful accounts                               6,684     51,636     11,643
    Provision for inventory obsolesence                          10,210     32,255     23,012
    Depreciation, amortization, and impairment of assets         11,888     23,571     16,911
    Gain on sale of assets                                         (933)    (6,200)    (8,774)
    Equity in loss (income) of affiliated companies, net            858      1,805    (31,933)
    Deferred income taxes                                        (9,553)   (34,446)     8,950
    Stock option compensation expense                               663        -          -
    Impairment of investment                                      2,215        -          -
    Changes in certain operating assets and liabilities:
       Accounts receivable                                      118,282   (101,243)    29,751
       Inventories                                               35,278   (119,867)    61,232
       Prepaid expenses                                           5,784      2,705    (15,201)
       Other assets                                                (141)      (648)    (2,327)
       Accounts payable                                        (130,169)   168,224    (99,349)
       Accrued expenses                                            (207)     1,474    (16,070)
       Income taxes payable                                       1,819     (5,698)       882
                                                              ----------  ---------  --------
         Net cash provided by (used in) operating activities     53,228    (49,391)    47,814
                                                              ----------  ---------  --------
 Cash flows from investing activities:
    Purchases of property and equipment                          (5,558)    (5,461)    (8,499)
    Acquisitions of businesses, net of cash acquired               (320)    (4,241)    (2,301)
    Proceeds from sale of assets                                  2,237        377     41,778
    Purchase of investment                                          -       (4,144)       -
    Investment in joint venture                                    (735)       -          -
    Change in restricted cash                                       802    (17,622)   (25,000)
                                                              ----------  ---------  --------
         Net cash provided by (used in) investing activities     (3,574)   (31,091)     5,978
                                                              ----------  ---------  --------
 Cash flows from financing activities:
    Borrowings on notes payable                                 311,318    404,637    509,736
    Payments on notes payable                                  (385,802)  (318,000)  (544,150)
    Additions to deferred loan costs                             (4,719)       -          -
    Net proceeds from issuance of common stock                      -          370      3,137
                                                              ---------   --------   --------
       Net cash provided by (used in) financing activities      (79,203)    87,007    (31,277)
                                                              ---------   --------   --------
 Net increase (decrease) in cash and cash equivalents           (29,549)     6,525     22,515
 Cash and cash equivalents at beginning of the year              77,023     70,498     47,983
                                                              ---------   --------   --------
 Cash and cash equivalents at end of year                     $  47,474     77,023     70,498
                                                              =========   ========   ========
</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, North America, Latin
America, and Europe. 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 financial 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.

(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.

                                     F-7

<PAGE>

(h) Revenue Recognition

For the Company's wholesale business, revenue is recognized when the customer
takes title and assumes risk of loss.  If the customer takes title and assumes
risk of loss upon shipment, revenue is recognized on the shipment date.  If the
customer takes title and assumes risk of loss upon delivery, revenue is
recognized on the delivery date. 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 service
fee revenue when the service is completed.

The Company adopted the provisions of SEC Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements", (SAB No. 101) in fiscal year
2001. The adoption of SAB No. 101 had no material impact on the Company's
revenue recognition practices.

(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, along with foreign
currency gains and losses related to intercompany transactions at the Company's
international finance subsidiary, are included in other income (expense) in the
accompanying consolidated statements of operations. Net foreign currency
transaction gains (losses) for the years ended November 30, 2001, 2000 and 1999
were ($0.3) million, ($10.0) million and $(3.4) 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
periodically 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 Company currently has no material derivative instruments that qualify as a
hedge as defined by Financial Accounting Standards Board Statement ("Statement")
No. 133, Accounting for Derivative Instruments, and Statement No. 138,
Accounting for Derivative Instruments and Certain Hedging Activities.
Accordingly, all changes in fair value of derivative instruments are recognized
in the statements of operations.

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 2(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.

(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

                                     F-8

<PAGE>

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, 2001,
2000, and 1999, follows (in thousands, except per share data):

<TABLE>
<CAPTION>

                                                                  2001        2000       1999
                                                                --------   ---------  ---------
<S>                                                             <C>        <C>        <C>
Basic:
Income (loss) before extraordinary loss                         $  1,176    (62,959)    69,087
Extraordinary loss on early extinguishment of debt, net of tax      (626)       -            -
                                                                ---------  ---------  ---------
   Net income (loss)                                            $    550    (62,959)    69,087
                                                                =========  =========  =========

Weighted average number of shares outstanding                     12,028     12,026     11,952
                                                                =========  =========  =========

Income (loss) per share before extraordinary loss               $   0.10   $  (5.24)  $   5.78
Extraordinary loss per share on early extinguishment of debt
   net of tax                                                      (0.05)       -            -
                                                                ---------  ---------  ---------
   Net income (loss), per share                                 $   0.05   $  (5.24)  $   5.78
                                                                =========  =========  =========

Diluted:
Income (loss) before extraordinary loss                         $  1,176    (62,959)    69,087
Extraordinary loss on early extinguishment of debt, net of tax      (626)       -            -
                                                                ---------  ---------  ---------
   Net income (loss)                                                 550    (62,959)    69,087
Interest on convertible notes, net of tax effect                     -          -        4,500
                                                                ---------  ---------  ---------
   Adjusted net income (loss)                                   $    550    (62,959)    73,587
                                                                =========  =========  =========

Weighted average number of shares outstanding                     12,028     12,026     11,952
Effect of dilutive securities:
   Stock options and warrant                                           1        -           82
   Convertible notes                                                 -          -        1,084
                                                                ---------  ---------  ---------
Weighted average number of share outstanding including
   effect of dilutive securities                                  12,029     12,026     13,118
                                                                =========  =========  =========

Income (loss) per share before extraordinary loss               $   0.10      (5.24)      5.61
Extraordinary loss per share on early extinguishment of debt
   net of tax                                                      (0.05)       -            -
                                                                ---------  ---------  ---------
   Net income (loss)                                            $   0.05      (5.24)      5.61
                                                                =========  =========  =========
</TABLE>

Outstanding options to purchase 1.3 million, 0.9 million and 0.5 million shares
of common stock at November 30, 2001, 2000 and 1999, 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, 2001 and 2000 do
not include 1.1 million common equivalent shares issuable for the convertible
notes, as their effect would be anti-dilutive (see Note 6).

(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.

                                      F-9

<PAGE>

(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 $16.8 million,
$17.9 million and $19.4 million of interest for the years ended November 30,
2001, 2000 and 1999, respectively. The Company paid approximately $4.8 million,
$14.5 million and $13.6 million of income taxes for the years ended November
30, 2001, 2000 and 1999, 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.

(p) Other, Net

Other, net was comprised of the following for the years ended November 30, 2001,
2000 and 1999 (in thousands):

<TABLE>
<CAPTION>
                                      2001     2000     1999
                                     ------   ------   ------
<S>                                  <C>       <C>      <C>
  Interest income                    $3,237    4,759    3,881
  Foreign currency gains (losses)     1,260   (4,167)  (4,066)
  Other income (expense)                791      340   (1,691)
                                     ------   ------   ------
                                     $5,288      932   (1,876)
                                     ======   ======   ======
</TABLE>

(2) Related Party Transactions

(a) Transactions with Motorola

Motorola purchased 0.4 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 $834.1 million, $1,074.3 million and
$1,055.1 million for the years ended November 30, 2001, 2000 and 1999,
respectively. Included in accounts payable at November 30, 2001 and 2000 was
approximately $46.5 million and $113.3 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 14), 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.

(c) Sale of Aircraft to Chief Executive Officer

In December 1993, the Company and the Company's then 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
the book value of $2.2 million in January 2001.

(3) Fair Value of Financial Instruments

The carrying amounts of accounts receivable, accounts payable and notes payable
as of November 30, 2001 and 2000 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, 2001 and 2000 as set forth
in the table below (in thousands):

<TABLE>
<CAPTION>
                         2001                 2000
                         ----                 ----
                 Carrying      Fair    Carrying     Fair
                  Amount      Value     Amount     Value
                  ------      -----     ------     -----
<S>             <C>           <C>     <C>          <C>
Long-term debt  $ 150,000     63,000  $ 150,000    37,320
                =========     ======  =========    ======
</TABLE>

                                      F-10

<PAGE>

(4) Property and Equipment

Property and equipment consisted of the following at November 30, 2001 and 2000
(in thousands):

<TABLE>
<CAPTION>
                                                       2001       2000
                                                       ----       ----
     <S>                                             <C>         <C>
     Land and buildings                              $ 11,034     8,695
     Furniture, fixtures and equipment                 27,718    29,054
     Jet aircraft                                           -     4,454
     Leasehold improvements                             5,408     5,457
                                                     --------   -------
                                                       44,160    47,660
     Less accumulated depreciation and amortization   (24,820)  (25,645)
                                                     --------   -------
                                                     $ 19,340    22,015
                                                     ========   =======
</TABLE>

(5)  Investments in Affiliated Companies

At November 30, 2001 and 2000, investments in affiliated companies includes a
49% interest in CellStar Amtel Sdn. Bhd. ("CellStar Amtel"), a Malaysian
company. CellStar Amtel is a distributor of wireless handsets.

As a result of the continuing deterioration in the Malaysia market, the Company
is in the process of divesting its 49% ownership in CellStar Amtel.  The
carrying value of the investment at November 30, 2001 was zero.  During the
years ended November 30, 2001 and 2000, the Company incurred losses of  $0.7 and
$1.8 million, respectively related to the operations of CellStar Amtel. The
Company will be required to recognize future losses, if any, of CellStar Amtel
up to the amount of debt and payables of CellStar Amtel guaranteed by the
Company ($0.8 million at November 30, 2001).  The Company does not currently
anticipate any further losses to be recognized.

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.

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 for $4.1 million 3.5% of the issued and
outstanding common stock of Arcoa Communications Co. Ltd, ("Arcoa") a
telecommunications retail store chain in Taiwan. Due to the continuing economic
and political turnoil in Taiwan, the Company considered its investment in Arcoa
to be permanently impaired.  In the third quarter of 2001, the Company recorded
an impairment charge of $2.2 million to reduce the carrying value of its 3.5%
interest to the Company's estimate of the fair value of its interest of $1.9
million.

                                      F-11

<PAGE>

(6)  Debt

Notes payable consisted of the following at November 30, 2001 and 2000
(in thousands):

<TABLE>
<CAPTION>
                                                            2001      2000
                                                            ----      ----
     <S>                                                   <C>       <C>
     Revolving credit facility                             $     -    82,700
     Peoples' Republic of China ("PRC") credit facilities   39,078    44,428
     Peoples' Republic of China ("PRC") notes payable        5,799         -
     Taiwan notes payable                                    7,767         -
                                                           -------   -------
                                                           $52,644   127,128
                                                           =======   =======
</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 an 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
to assist the Company in complying with certain covenants through March 2,
2001. The amount of the Facility was also 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 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) increased the applicable interest rate margin by 25 basis points, (ii)
shortened the term of the Facility from June 1, 2002 to March 1, 2002, (iii)
provided additional collateral for such Facility in the form of additional
stock pledges and mortgages on real property, (iv) provided for dominion of
funds by the banks for the Company's U.S. operations, (v) limited the borrowing
base, and (vi) tightened restrictions on the Company's ability to fund its
operations, particularly its non-U.S. operations.

Fundings under the Facility were limited by a borrowing base test, which was
measured monthly. Borrowings under the Facility were 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 included an applicable
margin that was 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 was
secured by the Company's accounts receivable, property, plant and equipment and
all other real property. The Facility contained, 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.

As of September 28, 2001, the Company had negotiated and finalized a new,
five-year, $60.0 million Loan and Security Agreement (the "New Facility") with
a bank and terminated the Facility.  On October 12, 2001 the Company finalized
an amendment to the New Facility increasing the commitment amount from $60.0
million to $85.0 million.  The New Facility lowers the applicable interest rate
margin by 25 basis points from its level at August 31, 2001 of 125 basis
points, provides a more extensive borrowing base,more flexible financial
covenants and greater flexibility in funding foreign operations.

Fundings under the New Facility are limited by a borrowing base test, which is
measured weekly. Interest on borrowings under the New Facility is at the London
Interbank Offered Rate or at the bank's prime lending rate, plus an applicable
margin. The New Facility is also secured by a pledge of 100% of the outstanding
stock of all U.S. subsidiaries and 65% of the outstanding stock of

                                      F-12

<PAGE>

all first tier foreign subsidiaries. The New Facility is further secured by the
Company's domestic accounts receivable, inventory, property, plant and
equipment and all other domestic real property and intangile assets. The New
Facility contains, among other provisions, covenants relating to the
maintenance of minimum net worth and certain financial ratios, exchanging,
refinancing or extending of the Company's convertible notes, dividend payments,
additional debt, mergers and acquisitions and disposition of assets.

As a result of terminating its previous Facility, the Company recorded an after
tax extraordinary loss on early extinguishment of $0.6 million, primarily
related to the write-off of deferred loan costs related to the previous
Facility.

The weighted average interest rate on short-term borrowings outstanding under
the Facility and the New Facility for the years ended November 30, 2001 and
2000, was 9.2% and 9.7% respectively.

At November 30, 2001, the Company's operations in China had two lines of credit,
one for USD $12.5 million and the second for RMB (Chinese People's Currency) 220
million (approximately USD $26.6 million), bearing interest at 7.16%, and from
5.28% to 5.56% respectively. The loans have maturity dates through September
2002. Both lines of credit are fully collateralized by U.S. dollar cash
deposits. The cash deposits were made via intercompany loans from the operating
entity in Hong Kong as a mechanism to secure repatriation of these funds. At
November 30, 2001, the U.S. dollar equivalent of $39.1 million had been borrowed
against the lines of credit in China. As a result of this method of funding
operations in China, the consolidated balance sheet at November 30, 2001
reflects USD $41.8 million in cash that is restricted as collateral on these
advances and a corresponding USD $39.1 million in notes payable. At November 30,
2001, China also had $5.8 million in promissory notes to a bank with maturity
dates through January 2002 and bearing interest at 5.0%. The maturities have
been extended through May 2002. In addition, the Company has notes payable in
Taiwan totaling $7.8 million.

At November 30, 2001 and 2000, long-term debt consisted of $150.0 million of the
Company's 5% Convertible Subordinated Notes Due October 15, 2002 (the
"Subordinated Notes"), which are convertible into 1.1 million shares of common
stock at $138.34 per share (adjusted for the effect of the one-for-five reverse
stock split effective on February 22, 2002) at any time prior to maturity.
Subsequent to October 18, 2000, the Subordinated 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
Subordinated 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 Subordinated Notes are convertible. Subsequent to year-end,
the Company completed an exchange offer for a portion of the Subordinated Notes
(see note 22).

Based upon current and anticipated levels of operations, the Company
anticipates that its cash flow from operations, together with amounts available
under its New 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 New 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.

(7) Income Taxes

The Company's income (loss) before income taxes and extraordinary loss was
comprised of the following for the years ended November 30, 2001, 2000 and 1999
(in thousands):

<TABLE>
<CAPTION>
                  2001     2000       1999
                --------  --------  --------
<S>             <C>       <C>        <C>
United States   $ 3,593   (85,138)   13,430
International      (217)    1,423    79,072
                --------  --------  --------
Total           $ 3,376   (83,715)   92,502
                ========  ========  ========
</TABLE>

                                      F-13

<PAGE>

Provision (benefit) for income taxes for the years ended November 30, 2001,
2000 and 1999 consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                                         Current      Deferred      Total
                                                        ---------    ----------    -------
<S>                                                     <C>            <C>        <C>
Year ended November 30, 2001:
  United States:
    Federal                                             $      -         3,782      3,782
    State                                                    152            (3)       149
  International                                           11,601       (13,332)    (1,731)
                                                        ---------    ----------   --------
                                                        $ 11,753        (9,553)     2,200
                                                        =========    ==========   ========

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
                                                        =========    ==========   ========
</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
and extraordinary loss as a result of the following for the years ended November
30, 2001, 2000 and 1999 (in thousands):

<TABLE>
<CAPTION>
                                                          2001        2000          1999
                                                        --------    ---------     --------
<S>                                                     <C>          <C>           <C>
Expected tax expense (benefit)                          $ 1,182      (29,300)      32,376
International and U.S. tax effects attributable
  to international operations                            (5,737)      (4,731)      (8,869)
State income taxes, net of Federal benefits                  97         (416)         848
Equity in loss of affiliated companies, net                 204          631            6
Non-deductible goodwill and other                         2,097        1,919          371
Change in valuation allowance                             4,716       11,763         (131)
Foreign accumulated earnings tax                              -        1,228            -
Other, net                                                 (359)      (1,850)      (1,186)
                                                        --------    ---------     --------
  Actual tax (benefit) expense                          $ 2,200      (20,756)      23,415
                                                        ========    =========     ========
</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 $2.3 million, $1.4
million and $3.0 million, respectively, for 2001, 2000 and 1999, respectively.

                                     F-14

<PAGE>

The tax effect of temporary differences underlying significant portions of
deferred income tax assets and liabilities at November 30, 2001 and 2000, is
presented below (in thousands):

<TABLE>
<CAPTION>
                                                                     2001          2000
                                                                   ---------     ---------
<S>                                                                <C>           <C>
Deferred income tax assets:
  United States:
    Accounts receivable                                            $ 13,987        14,387
    Inventory adjustments for tax purposes                            2,578         2,827
    Net operating loss carryforwards                                 22,117        22,784
    Foreign tax credit carryforwards                                  2,469         2,656
    Capital losses                                                    3,791         4,639
    Other, net                                                        4,451         4,381
  International:
    Accounts receivable                                               3,246         2,091
    Net operating loss carryforwards                                  5,751         8,640
    Other, net                                                        2,937           880
                                                                   ---------     ---------

                                                                     61,327        63,285
  Valuation allowance                                                (7,310)      (15,935)
                                                                   ---------     ---------
                                                                   $ 54,017        47,350
                                                                   =========     =========
Deferred income tax liabilities
  International inventory adjustments for tax purposes             $  3,687         6,573
                                                                   =========     =========
</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, 2000 and 1999, was $15.9 million
and $4.2 million, respectively. The net change in the total valuation allowance
for the years ended November 30, 2001 and 2000, was a decrease of $8.6 million
and an increase of $11.8 million, respectively. This change in 2001 includes the
removal of the valuation allowance against $8.6 million in net loss operating
carryforwards that were eliminated when the Company divested the entities to
which the carryforwards related. 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, 2001, the Company
had U.S. Federal net operating loss carryforwards of approximately $63.2
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, 2001, the Company had
not provided U.S. Federal income taxes on earnings of international
subsidiaries of approximately $186.5 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.

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

(8) 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 $3.9

                                     F-15

<PAGE>

million, $5.0 million and $6.0 million for the years ended November 30, 2001,
2000 and 1999, respectively. Future minimum lease payments under operating
leases as of November 30, 2001 are as follows (in thousands):

<TABLE>
<CAPTION>
                          Year ending
                          November 30,       Amount
                         -------------       ------
                          <S>                 <C>
                             2002            $3,995
                             2003             2,180
                             2004             1,338
                             2005             1,174
                             2006               306
                          Thereafter            227
</TABLE>

(9) Impairment of Assets

In the third quarter of 2000, the Company decided to exit its Venezuela
operations (see note 15). 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 and realized a gain of $1.1 million.

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
and $7.4 million for the years ended November 30, 2000 and 1999, respectively.

(10) Separation Agreement

The Company announced on July 6, 2001, that Alan H. Goldfield retired effective
immediately from the position of Chairman and Chief Executive Officer and that
James L. "Rocky" Johnson, who has served on the Board of Directors since March
1994 became Chairman of the Board, and that Terry S. Parker, a member of the
Board of Directors and a former President and Chief Operating Officer of the
Company, rejoined the Company as Chief Executive Officer. The Company recorded
expense of $5.7 million in 2001 related to the separation agreement between the
Company and Alan H. Goldfield. Included in the $5.7 million charge is a cash
payment of $4.3 million and stock option compensation expense of $0.6 million.

(11) 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):

<TABLE>
            <S>                                  <C>
            Employee termination costs           $2,373
            Write-down of assets                    760
            Other                                   506
                                                 ------
                                                 $3,639
                                                 ======
</TABLE>

As a result of a continued decline in revenues from its Miami operations, the
Company restructured its Miami operations in the second quarter of 2001. The
restructuring reduced the size and cost of those operations, resulting in a
charge of $0.8 million, primarily related to the impairment of leasehold
improvements.

                                     F-16

<PAGE>

(12) Gain on Sale of Assets

The Company recorded a gain on sale of assets of $0.9 million in 2001 primarily
associated with the sale of its Venezuela operations in December 2000.  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):

<TABLE>
            <S>                                  <C>
            Brazil joint venture                 $6,048
            Poland operations                       152
                                                 ------
                                                 $6,200
                                                 ======
</TABLE>

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):

<TABLE>
            <S>                                  <C>
            Prepaid operations in Venezuela      $5,197
            Retail stores in the United States    2,911
            Other                                   666
                                                 ------
                                                 $8,774
                                                 ======
</TABLE>

(13) 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.

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.

(14) 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
                                                        ----        ----
     <S>                                              <C>         <C>
     Revenues                                         $ 40,602    193,756
     Cost of sales                                      41,567    178,829
                                                      --------    -------
       Gross profit (loss)                                (965)    14,927
     Selling, general and administrative expenses       10,038     10,255
                                                      --------    -------
       Operating income (loss)                         (11,003)     4,672
                                                      --------    -------
     Other income (expense):
       Gain on sale of assets                            6,047          -
       Interest expense                                 (3,474)    (5,098)
       Other, net                                            -     (2,249)
                                                      --------    -------
         Total other income (expense)                    2,573     (7,347)
                                                      --------    -------
     Loss before income taxes                         $ (8,430)    (2,675)
                                                      ========    =======
</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

                                     F-17

<PAGE>

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.

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 of 2000, to exit
Brazil.

(15) 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 2000 for a gain of $1.1 million. Following is a summary of the
Venezuela operations (amounts in thousands):

     <TABLE>
     <CAPTION>
                                                   Year ended November 30,
                                                     2000           1999
                                                     ----           ----
     <S>                                           <C>             <C>
     Revenues                                      $ 36,639        77,077
     Cost of sales                                   35,342        67,995
                                                   --------        ------
       Gross profit                                   1,297         9,082
     Selling, general and administrative expenses     8,630         4,212
     Impairment of assets                             4,930             -
                                                   --------        ------
       Operating income (loss)                      (12,263)        4,870
                                                   --------        ------
     Other income (expense):
       Gain on sale of assets                             -         5,197
       Interest expense                                  (8)          (14)
       Other, net                                    (1,039)         (593)
                                                   --------        ------
         Total other income (expense)                (1,047)        4,590
                                                   --------        ------
     Income (loss) before income taxes             $(13,310)        9,460
                                                   ========        ======
     </TABLE>

(16) Redistributor Business

The Company phased out a major portion of its redistributor business in the
Miami and North American operations in 2000 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 and 1999, were $57.4
million and $158.6 million, respectively.

(17) Inventory Obsolescence Expense And Bad Debt Expense

Inventory obsolescence expense of $10.2 million, $32.3 million and $23.0
million for the years ended November 30, 2001, 2000 and 1999, respectively, is
included in cost of goods sold in the accompanying consolidated statements of
operations.

Bad debt expense of $6.7 million, $51.5 million and $10.4 million for the years
ended November 30, 2001, 2000 and 1999 respectively, is included in selling,
general and administrative expenses in the accompanying consolidated statements
of operations.

(18) 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, North America,
primarily the United States, Latin America, which includes Mexico and the
Company's Miami, Florida operations ("Miami") and Europe. Revenues and
operations of Miami are included in Latin America since Miami's product sales
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

                                     F-18

<PAGE>

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, 2001, 2000 and 1999
follows (in thousands):

<TABLE>
<CAPTION>
                                                             Asia-       North     Latin
                                                            Pacific     America   America   Europe  Corporate    Total
                                                            -------     -------   -------   ------  ---------    -----
<S>                                                       <C>           <C>       <C>      <C>      <C>        <C>
November 30, 2001:
  Revenues from external customers                        $ 1,213,454   578,612   411,079  230,658          -  2,433,803
  Separation agreement                                              -         -         -        -      5,680      5,680
  Operating income (loss)                                      33,099    25,805   (11,372)  (3,878)   (28,043)    15,611
  Equity in income (loss) of affiliated companies, net           (858)        -         -        -          -       (858)
  Impairment of investment                                     (2,215)        -         -        -          -     (2,215)
  Income (loss) before interest and income taxes and
    extraordinary loss                                         30,300    21,752   (10,793)  (3,722)   (22,015)    15,522
  Extraordinary loss on extinguishment of debt, net of tax          -         -         -        -       (626)      (626)
  Total assets                                                263,268   143,598   130,481   48,885     59,838    646,070
  Depreciation, amortization and impairment of assets           2,309     1,179     2,664      929      4,807     11,888
  Capital expenditures                                          2,822       801     1,108      258        569      5,558

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

November 30, 1999:
  Revenues from external customers                        $   769,412   377,129   717,273  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    17,529    31,580    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    48,555    31,013    5,433    (18,455)   107,648
  Total assets                                                240,523   126,208   261,618   56,536     21,553    706,438
  Depreciation, amortization and impairment of assets           1,869     3,683     2,564    6,426      2,369     16,911
  Capital expenditures(1)                                       1,028     3,072     3,522      877          -      8,499
</TABLE>

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

A reconciliation from the segment information to the income (loss) before income
taxes and extraordinary loss included in the consolidated statements of
operations for the years ended November 30, 2001, 2000, and 1999 follows (in
thousands):

<TABLE>
<CAPTION>
                                                                                          2001           2000       1999
                                                                                          ----           ----       ----
<S>                                                                                    <C>             <C>          <C>
Income (loss) before interest and income taxes and extraordinary loss
  per segment information                                                              $  15,522       (69,361)     107,648
Interest expense per the consolidated statements of operations                           (15,383)      (19,113)     (19,027)
Interest income included in other, net in the consolidated statements of operations        3,237         4,759        3,881
                                                                                       ---------       -------      -------
Income (loss) before income taxes and extraordinary loss per the consolidated
  statements of operations                                                             $   3,376       (83,715)      92,502
                                                                                       =========       =======      =======
</TABLE>

                                     F-19

<PAGE>

Geographical information for the years ended November 30, 2001, 2000 and 1999,
follows (in thousands):

<TABLE>
<CAPTION>
                                       2001                    2000                        1999
                                       ----                    ----                        ----
                                          Long-lived                Long-lived                 Long-lived
                               Revenues     Assets      Revenues      Assets        Revenues      Assets
                               --------     ------      --------      ------        --------      ------
<S>                          <C>            <C>        <C>            <C>          <C>            <C>
United States                $  633,566     12,341       578,262      15,257         531,328      19,538
People's Republic of China,
which includes Hong Kong      1,049,633      4,525       725,409       6,591         528,572       3,296

United Kingdom                  111,433        457       163,797         637         341,090         798
Mexico                          250,335      2,838       383,256       3,038         228,959       2,469
All other countries             388,836      6,995       624,958       5,664         703,856       8,998
                             ----------     ------     ---------      ------       ---------      ------
                             $2,433,803     27,156     2,475,682      31,187       2,333,805      35,099
                             ==========     ======     =========      ======       =========      ======
</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.

A customer in the Asia-Pacific Region accounted for approximately 11% of
consolidated revenues or $268.0 million of revenues for the year ended November
30, 2001. No customer accounted for 10% or more of consolidated revenues in the
years ended November 30, 2000, and 1999.

At November 30, 2001, the Company had a receivable of $33.4 million from a
customer in the North America Region.

(19)   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. For 2000 and 2001,
payments of $0.1 million were made pursuant to the agreement and recorded as
goodwill.

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. In 2001, $0.6 million of
additional goodwill was recorded in conjunction with the final acquisition
payment.

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.

(20)  Stockholders' Equity

(a) Common Stock Options

The Company has a stock option plan (the "Plan") covering 2.23 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 1,500 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 30,000 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
1,000 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.

                                     F-20

<PAGE>

The per share weighted-average fair value of stock options granted during the
years ended November 30, 2001, 2000 and 1999, was $5.51, $29.25 and $22.25,
respectively, on the date of grant using the Black-Scholes option-pricing
model with the following weighted-average assumptions:

<TABLE>
<CAPTION>
                                                  2001     2000      1999
                                                  ----     ----      ----
            <S>                                  <C>       <C>       <C>
            Dividend yield                        0.00%     0.00      0.00
            Volatility                           92.00%    88.00     81.00
            Risk-free interest rate               4.70%     6.50      5.10
            Expected term of options (in years)    3.4       3.4       3.4
</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, 2001, 2000 and 1999 (in thousands, except per share
amounts):

<TABLE>
<CAPTION>
                                                   2001     2000     1999
                                                   ----     ----     ----
<S>                                              <C>      <C>       <C>
Net income (loss) as reported                       $550  (62,959)  69,087
Diluted net income (loss) per share as reported     0.05    (5.24)    5.61
Pro forma net income (loss)                       (1,380) (65,981)  67,605
Pro forma diluted net income (loss) per share      (0.11)   (5.49)    5.53
</TABLE>

Stock option activity during the years ended November 30, 2001, 2000 and 1999,
is as follows:

<TABLE>
<CAPTION>
                                                          2001                  2000                 1999
                                                          ----                  ----                 ----
                                                             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                                            603,925    $ 9.555    302,739    $47.765    297,490    $40.285
Exercised                                                -      0.000     17,025     23.270    106,576     27.725
Forfeited                                          159,860     34.775    203,971     47.795    273,802     47.220
Outstanding, end of year                         1,380,926     29.780    936,861     43.910    855,118     43.085
Exercisable, end of year                           597,780     39.185    437,938     40.605    385,830     39.145
Reserved for future grants under the Plan          567,442
Reserved for future grants under the Directors'     18,000
Option Plan
</TABLE>

For options outstanding and exercisable as of November 30, 2001, 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>
$4.1500  -  9.3750            360,875         9.2        $ 9.1630            -  $      -
$10.2500 - 30.8500            387,950         6.9         19.5350      223,700   25.8475
$31.0950 - 49.3750            433,726         7.3         43.2390      219,386   39.7240
$51.5650 - 99.4000            198,375         6.3         57.8825      154,694   57.7150
                            ---------                                  -------
                            1,380,926         7.5        $29.7785      597,780  $39.1870
                            =========         ===        ========      =======  ========
</TABLE>

(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 $5.33, 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.

(21) Commitments and Contingencies


                                      F-21

<PAGE>

(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. The Company filed a Motion to Dismiss plaintiffs' Second
Amended and Consolidated Complaint on November 2, 2000. On September 28, 2001,
the Court entered an order and judgement to dismiss the consolidated complaint
with prejudice, and closed the consolidated action for administrative purposes.

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

On August 3, 1998, the Company announced that the Securities and Exchange
Commission (SEC) was conducting an investigation of the Company relating to its
compliance with Federal securities laws. On June 28, 2001, the Company
announced that the SEC had terminated the investigation with no enforcement
action recommended.

On October 15, 2001, the Company announced that the results for the three and
six months ended May 31, 2001 would be restated to reflect certain accounting
adjustments. In October 2001, the Company received an inquiry from the SEC
requesting information concerning the restatement of earnings for the quarter
ended May 31, 2001. The Company believes that it has fully responded to such
request.

(c) Financial Guarantee

The Company has guaranteed up to MYR $3.0 million (Malaysian ringgits), or $0.8
million as of November 30, 2001, for bank borrowings of CellStar Amtel. In
addition, the Company has guaranteed certain accounts payable of CellStar Amtel
at November 30, 2001. The Company is in the process of divesting its 49%
interest in CellStar Amtel. The Company has entered into an indemnity agreement
with the prospective purchaser.

(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 $0.3
million, $0.2 million and $0.3 million to the plan for the years ended November
30, 2001, 2000 and 1999 respectively.

(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

                                     F-22

<PAGE>

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 periodically 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.

At November 30, 2001, the Company had no forward contracts and does not hold any
other derivative instruments.

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

(22)  Subsequent Events

(a)  Reverse Stock Split

On February 12, 2002, the stockholders approved a one-for-five reverse stock
split. The reverse stock split was effective February 22, 2002. The impact of
this share split has been retroactively applied to all periods presented herein.

(b)  Exchange Offer

On January 14, 2002, the Company filed an S-4 registration statement (the
"Exchange Offer"), with the Securities and Exchange Commission ("SEC"), offering
to exchange, for each $1,000 principal amount of the Subordinated Notes, $366.67
in cash and, at the election of the holder, one of the following options: a)
$400.94 principal amount of 12% Senior Subordinated Notes due January 2007 (the
"Senior Notes") or, b) $320.75 principal amount of Senior Notes and $80.19
principal amount of 5% Senior Subordinated Convertible Notes due November 2002
(the "Senior Convertible Notes") or, c) $400.94 principal amount of Senior
Convertible Notes.

On February 20, 2002, the Company completed its Exchange Offer for its $150
million 5% Subordinated Notes due October 2002. Holders owning $128.6 million of
Subordinated Notes exchanged them for $47.2 million in cash, $12.4 million of
Senior Notes due January 2007, and $39.1 million of Senior Convertible Notes due
November 2002. Upon completion of the Exchange Offer, $21.4 million of the
Subordinated Notes due October 2002 were not exchanged and are now subordinate
to the Company's New Facility, the Senior Notes and the Senior Convertible
Notes.

The Company expects to realize a pre-tax extraordinary gain on early
extinguishment of debt of approximately $17.0 million during the first quarter
of fiscal 2002 ($11.0 million after-tax) as a result of the exchange. The
exchange will be accounted for as a troubled debt restructuring in accordance
with Statement No. 15.

The Senior Convertible Notes are mandatorily convertible into the Company's
common stock on November 30, 2002, and bear interest at 5%, payable
semi-annually in arrears, in either cash or stock, at the Company's option, on
August 15, 2002, and November 30, 2002. In the event of bankruptcy the Senior
Convertible Note holders are entitled to cash equal to the face value of the
Senior Convertible Note plus accrued interest. The Senior Convertible Notes are
convertible into the Company's common stock at a conversion price of $5.00 per
share (adjusted for the effect of the one-for-five reverse stock split
effective on February 22, 2002) and may be converted at any time prior to
maturity at the option of the holders

The Senior Notes mature January 15, 2007, and bear interest at 12%, payable in
cash in arrears semi-annually on February 15 and August 15, commencing August
15, 2002. The Senior Notes contain certain covenants that restrict the
Company's ability to incur additional indebtedness, make investments, loans and
advances, declare dividends or certain other distributions, create liens, enter
into sale-leaseback transactions, consolidate, merge, sell assets and enter
into transactions with affiliates.

                                     F-23

<PAGE>

(c) Shares To Be Issued Upon Conversion of Senior Convertible Notes

The Senior Convertible Notes issued in the Exchange Offer are convertible into
7.8 million shares of the Company's common stock on or before November 30, 2002.
The 7.8 million shares will be included as dilutive securities in calculating
net income per diluted share beginning in the first quarter of 2002.


                                     F-24

<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>
     2001
Revenues                      $ 645,158   572,879      610,496        605,270
Gross Profit                     36,793    32,267       31,069         35,697
Net income (loss)                 4,192     3,591       (5,840)(a)     (1,393)(b)
Net income (loss) per share:
  Basic:                           0.35      0.30        (0.49)(a)      (0.12)(b)
  Diluted:                         0.35      0.30        (0.49)(a)      (0.12)(b)

     2000
Revenues                      $ 589,859   561,370      629,793        694,660
Gross Profit                     48,283     3,137 (c)   23,277         36,788 (e)
Net income (loss)                 9,446   (42,424)(c)  (13,905)(d)    (16,076)(e)
Net income (loss) per share:
  Basic:                           0.79     (3.53)(c)    (1.16)(d)      (1.34)(e)
  Diluted                          0.78     (3.53)(c)    (1.16)(d)      (1.34)(e)
</TABLE>

(a) In the third quarter of 2001, the Company's operations were affected by a
charge related to the separation agreement between the Company and the former
Chief Executive Officer and an impairment charge to reduce the carrying value
of an investment.

(b) In the fourth quarter of 2001, the Company's operations were affected by an
$0.6 million after tax extraordinary loss on the early extinguishment of debt
and a $3.0 million charge related to a value-added tax prepaid asset in the
Company's Mexico operations for which the recoverability is uncertain.

(c) 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.

(d) 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.

(e) In the fourth quarter of 2000, the Company's operations were affected by
$16.2 million in accounts receivable reserves for accounts whose businesses have
been adversely affected by competitive market conditions in Asia and the United
States, and a $6.4 million non-cash goodwill impairment charge for its Peru
operations.

                                     F-25

<PAGE>


                     CELLSTAR CORPORATION AND SUBSIDIARIES

               SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                Years ended November 30, 2001, 2000 and 1999
                                (in thousands)

<TABLE>
<CAPTION>
                                      Balance at    Charged to    Charged to   Deductions,
                                     beginning of   costs and     activation     net of      Balance at
                                       period        expenses      income(a)   recoveries      period
                                       ------        --------      ---------   ----------      ------
<S>                                    <C>            <C>          <C>          <C>            <C>
Allowance for doubtful accounts:
   November 30, 2001                   $75,810         6,737        (53)        (25,135)       57,359
   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
Reserve for inventory obsolescence
   November 30, 2001                   $19,312        10,210          --        (13,334)       16,188
   November 30, 2000                    14,868        32,255          --        (27,811)       19,312
   November 30, 1999                    12,082        23,012          --        (20,226)       14,868
</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