**GLOBALSTAR, L.P., ADEBTOR-IN-POSSESSION**
**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS — (Continued)**
     The carrying value of the Globalstar System isreviewed for impairment whenever events or changes incircumstances indicate that the recorded value of the SpaceSegment and Ground Segment, taken as a whole, may not berecoverable. Globalstar looks to current and future undiscountedcash flows, excluding financing costs, as primary indicators ofrecoverability. If an impairment is determined to exist, anyrelated impairment loss is calculated based on fair value.
**     ***AdditionalSpare Satellites*
     Following a launch failure in September 1998,Globalstar decided to purchase eight additional satellites for$148 million (including performance incentives of up to$16 million) to serve as on-ground spares. As ofDecember 31, 2002, costs of $147 million (including aportion of the performance incentives) have been recognized forthese spare satellites. Seven of the eight have been completed,and all eight are in storage in California. Depreciation ofthese assets will not begin until the satellites are placed inservice.
**     ***ProductionGateways*
     These assets include $12.6 million and$28.2 million in net receivables at December 31, 2002and 2001, respectively, from service providers associated withthe reimbursement of gateway acquisition and deployment costspreviously paid by Globalstar to QUALCOMM. As ofDecember 31, 2002, these receivables are delinquent andGlobalstar has sent notices of default where appropriate. If thecollection of these payments is unsuccessful, Globalstar mayretain title to these gateways, subject to local restrictions,or Globalstar may receive an equity position in the serviceprovider company in exchange for debt forgiveness. Theproduction gateway receivable, net of reserve, is based on theestimated value of the anticipated recovery of the receivablesbased on current discussions between Globalstar and the serviceproviders. As of December 31, 2002, Globalstar has reserved$18.9 million of the production gateway receivables.
**     ***DeferredFinancing Costs and Interest*
     Deferred financing costs represent costs incurredin obtaining long-term credit facilities and the estimated fairvalue of warrant agreements issued in connection with thesefacilities. Prior to the Petition Date, these costs wereclassified as long term assets and were being amortized over theterms of the credit facilities as interest expense. Globalstarceased the amortization of the costs on the Petition Date as thevalue of the debt has not been confirmed by the BankruptcyCourt. The amortization expense that otherwise would have beenrecorded from the Petition Date through December 31, 2002is $41.0 million. As of December 31, 2002, thedeferred financing costs have been offset with the related debtand included in the liabilities subject to compromise.
**     ***OtherAssets*
     Other assets primarily include the fair value ofwarrants issued to China Telecom (see Note 12) andexpenditures, including license fees, legal fees and directengineering and other technical support, for obtaining therequired FCC licenses. Such amounts are amortized over periodsof up to 10 years, the expected life of the firstgeneration satellites. Accumulated amortization totaled$9.7 million at December 31, 2002.
**     ***DeferredRevenues*
     Customer activation fees are deferred andrecognized over one year, the average life of the customercontract. Globalstar service providers purchased approximately$11.7 million of gross advance minutes ($8.8 millionnet of 25% discount). Approximately $2.2 million of thesegross advance minutes were recognized as service revenue duringthe year ended December 31, 2002. Prior to the PetitionDate, deferred revenues included the advance payments fromGlobalstar’s strategic partners to secure exclusive rightsto Globalstar service territories and related to promotionalprograms. These advance payments were recoverable
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