<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
GLOBALSTAR TELECOMMUNICATIONS LIMITED
CEDAR HOUSE
41 CEDAR AVENUE
HAMILTON HM12, BERMUDA
TELEPHONE: (441) 295-2244
COMMISSION FILE NUMBER 0-25456
JURISDICTION OF INCORPORATION: BERMUDA
IRS IDENTIFICATION NUMBER: 13-3795510
------------------------
GLOBALSTAR, L.P.
3200 ZANKER ROAD
SAN JOSE, CA 95134
TELEPHONE: (408) 933-4000
COMMISSION FILE NUMBER: 333-25461
JURISDICTION OF INCORPORATION: DELAWARE
IRS IDENTIFICATION NUMBER: 13-3759824
The registrants have 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
and have been subject to such filing requirements for the past 90 days.
As of April 30, 1999, there were 82,024,171 shares of Globalstar
Telecommunications Limited common stock outstanding.
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<PAGE> 2
PART I. FINANCIAL INFORMATION
GLOBALSTAR TELECOMMUNICATIONS LIMITED
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)
CONDENSED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
----------- -------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Investment in Globalstar, L.P.:
Redeemable preferred partnership interests................ $ 339,858 $ --
Dividends receivable...................................... 4,667
Ordinary partnership interests............................ 552,710 568,394
Ordinary partnership warrants............................. 12,034 12,034
--------- ---------
Total assets........................................... $ 909,269 $ 580,428
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Dividends payable......................................... $ 4,667 $ --
Commitments and contingencies (Note 4)
Shareholders' equity:
8% Convertible redeemable preferred stock, $.01 par value,
10,000,000 shares authorized (7,000,000 issued and
outstanding at March 31, 1999), $350 million redemption
value.................................................. 339,858 --
Common stock, $1.00 par value, 600,000,000 shares
authorized (82,020,019 and 82,016,679 issued and
outstanding at March 31, 1999 and December 31, 1998,
respectively).......................................... 82,020 82,017
Paid-in capital........................................... 588,813 588,802
Warrants.................................................. 12,034 12,034
Accumulated deficit....................................... (118,123) (102,425)
--------- ---------
Total shareholders' equity............................. 904,602 580,428
--------- ---------
Total liabilities and shareholders' equity........ $ 909,269 $ 580,428
========= =========
</TABLE>
- ---------------
Note: The December 31, 1998 balance sheet has been derived from audited
financial statements at that date.
See notes to condensed financial statements.
1
<PAGE> 3
GLOBALSTAR TELECOMMUNICATIONS LIMITED
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)
CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1999 1998
------- -------
<S> <C> <C>
Equity in net loss applicable to ordinary partnership
interests of Globalstar, L.P. ............................ $15,698 $ 7,290
Dividend income on Globalstar, L.P. redeemable preferred
partnership interests..................................... (4,750) (5,300)
Interest expense on convertible preferred equivalent
obligations............................................... -- 5,300
------- -------
Net loss.................................................... 10,948 7,290
Preferred dividends on 8% convertible redeemable preferred
stock and accretion to redemption value................... 4,750 --
------- -------
Net loss applicable to common shareholders.................. $15,698 $ 7,290
======= =======
Net loss per share -- basic and diluted..................... $ 0.19 $ 0.12
======= =======
Weighted average shares outstanding -- basic and diluted.... 82,019 61,282
======= =======
</TABLE>
See notes to condensed financial statements.
2
<PAGE> 4
GLOBALSTAR TELECOMMUNICATIONS LIMITED
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1999 1998
--------- -------
<S> <C> <C>
Operating activities:
Net loss.................................................. $ (10,948) $(7,290)
Equity in net loss applicable to ordinary partnership
interests of Globalstar, L.P........................... 15,698 7,290
Accretion to redemption value of redeemable preferred
partnership interests.................................. (83) (263)
Dividends accrued on redeemable preferred partnership
interests.............................................. (4,667) --
Amortization of convertible preferred equivalent
obligation issue costs................................. -- 263
--------- -------
Net cash provided by (used in) operating activities......... -- --
--------- -------
Investing activities:
Purchase of ordinary partnership interests in Globalstar,
L.P.................................................... (14) (347)
Purchase of redeemable preferred partnership interests in
Globalstar, L.P........................................ (339,775) --
--------- -------
Net cash used in investing activities....................... (339,789) (347)
--------- -------
Financing activities:
Net proceeds from issuance of common stock upon exercise
of options and warrants................................ 14 347
Proceeds from issuance of 8% convertible redeemable
preferred stock........................................... 339,775 --
--------- -------
Net cash provided by financing activities................... 339,789 347
--------- -------
Net increase (decrease) in cash and cash equivalents........ -- --
Cash and cash equivalents, beginning of period.............. -- --
--------- -------
Cash and cash equivalents, end of period.................... $ -- $ --
========= =======
Supplemental information:
Interest paid during the period........................... $ -- $ 5,037
========= =======
</TABLE>
See notes to condensed financial statements.
3
<PAGE> 5
GLOBALSTAR TELECOMMUNICATIONS LIMITED
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. The accompanying unaudited condensed financial statements have been prepared
by Globalstar Telecommunications Limited ("GTL") pursuant to the rules of the
Securities and Exchange Commission ("SEC") and, in the opinion of GTL, include
all adjustments (consisting of normal recurring accruals) necessary for a fair
presentation of financial position, results of operations and cash flows.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to SEC rules. GTL believes that the
disclosures made are adequate to keep the information presented from being
misleading. The results of operations for the three months ended March 31, 1999
are not necessarily indicative of the results to be expected for the full year.
These financial statements should be read in conjunction with GTL's audited
financial statements and notes thereto included in the latest Annual Report on
Form 10-K for GTL and Globalstar, L.P. ("Globalstar").
2. ORGANIZATION AND BUSINESS
On November 23, 1994, GTL was incorporated as an exempted company under the
Companies Act 1981 of Bermuda. GTL's financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America.
GTL's sole business is acting as a general partner of Globalstar, which is
building and will operate a worldwide, low-earth orbit satellite-based wireless
digital telecommunications system.
At March 31, 1999, GTL held 34.8% of the outstanding ordinary partnership
interests and 100% of the outstanding 8% Redeemable Preferred Partnership
Interests ("8% RPPIs") (see Note 4) of Globalstar. GTL accounts for its
investment in Globalstar on the equity method, recognizing its allocated share
of net loss in the period incurred. GTL's allocated share of Globalstar's net
loss applicable to ordinary partnership interests from the period February 22,
1995 through March 31, 1999 was $118,123,000.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Earnings Per Share
GTL follows Statement of Financial Accounting Standards No. 128, Earnings
per Share ("SFAS 128") in presenting basic and diluted earnings per share. Due
to GTL's losses for the three months ended March 31, 1999 and 1998, diluted
weighted average common shares outstanding excludes the weighted average effect
of the assumed conversion, prior to actual conversion in April 1998, of GTL's
Convertible Preferred Equivalent Obligations into 20.1 million common shares for
the quarter ended March 31, 1998, the assumed conversion of GTL's 8% convertible
redeemable preferred stock into 15.1 million common shares for the quarter ended
March 31, 1999 and the assumed exercise of outstanding options and warrants into
6.2 million and 5.7 million common shares for the quarters ended March 31, 1999
and 1998, respectively, as their effect would have been anti-dilutive.
Accordingly, basic and diluted weighted average shares outstanding are based on
the net loss applicable to common shareholders' and the weighted average common
shares outstanding during the three months ended March 31, 1999 and 1998.
4. SHAREHOLDERS' EQUITY
8% Convertible Redeemable Preferred Stock
On January 21, 1999, GTL sold 7 million shares (face amount of $50 per
share) of 8% Convertible Redeemable Preferred Stock due 2011 (the "Preferred
Stock"). The Preferred Stock has an aggregate liquidation preference equal to
its $350 million aggregate redemption value and a mandatory redemption date of
February 15, 2011. Dividends accrue at 8% per annum and are payable quarterly.
The Preferred Stock is convertible into shares of GTL common stock at a
conversion price of $23.2563 per share, subject to
4
<PAGE> 6
GLOBALSTAR TELECOMMUNICATIONS LIMITED
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)
NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
adjustment for certain antidilution events. As of March 31, 1999, the Preferred
Stock was convertible into 15,049,685 shares of GTL common stock. Loral Space &
Communications Ltd. ("Loral") purchased 3 million shares ($150 million face
amount) of the Preferred Stock issued, in order to maintain its prior percentage
ownership interest in Globalstar.
The Preferred Stock has limited voting rights. With respect to dividend
rights and rights upon liquidation, winding up and dissolution, the Preferred
Stock ranks senior to common stock and to all other future series of preferred
stock or other class of capital stock of GTL, the terms of which do not
expressly provide that such series or class ranks senior to or on parity with
the Preferred Stock. Prior to its mandatory redemption date, the Preferred Stock
is redeemable (at a premium which declines over time) by GTL beginning in
February 2002 (or beginning in February 2000 if GTL's stock price exceeds
certain defined price ranges). Payments due on the Preferred Stock may be made
in cash, GTL common stock or a combination of both at the option of GTL. In the
event accrued and unpaid dividends accumulate to an amount equal to six
quarterly dividends, holders of the majority of the outstanding shares of
Preferred Stock will be entitled to elect additional members to GTL's Board of
Directors.
GTL used the net proceeds of approximately $340 million to purchase 7
million units (face amount of $50 per unit) of Globalstar's 8% RPPIs having
terms substantially similar to those of the Preferred Stock.
5
<PAGE> 7
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except partnership interest data)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED) (NOTE)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 200,338 $ 56,739
Insurance proceeds receivable............................. -- 28,500
Production gateways and user terminals.................... 142,879 145,509
Other current assets...................................... 5,510 5,540
---------- ----------
Total current assets.............................. 348,727 236,288
Property and equipment, net................................. 5,213 4,958
Globalstar System under construction:
Space segment............................................. 1,827,151 1,678,514
Ground segment............................................ 758,114 686,848
---------- ----------
2,585,265 2,365,362
Additional spare satellites................................. 3,348 --
Deferred financing costs.................................... 14,609 15,845
Other assets................................................ 47,806 47,572
---------- ----------
Total assets...................................... $3,004,968 $2,670,025
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable.......................................... $ 7,460 $ 14,240
Payable to affiliates..................................... 228,840 216,542
Vendor financing liability................................ 164,788 127,180
Accrued expenses.......................................... 13,808 11,679
Accrued interest.......................................... 43,831 31,549
---------- ----------
Total current liabilities......................... 458,727 401,190
Deferred revenues........................................... 25,811 25,811
Vendor financing liability, net of current portion.......... 225,895 243,990
Deferred interest payable................................... 467 458
11 3/8% Senior notes payable ($500,000 principal amount).... 479,608 479,566
11 1/4% Senior notes payable ($325,000 principal amount).... 307,029 306,949
10 3/4% Senior notes payable ($325,000 principal amount).... 321,039 320,997
11 1/2% Senior notes payable ($300,000 principal amount).... 288,797 288,663
Commitments and contingencies (Notes 4 and 5)
Partners' capital:
8% redeemable preferred partnership interests (7,000,000
outstanding at March 31, 1999), $350 million redemption
value.................................................. 339,858 --
Ordinary partnership interests (58,180,928 and 58,180,093
outstanding at March 31, 1999 and December 31, 1998,
respectively).......................................... 528,757 573,421
Warrants.................................................. 28,980 28,980
---------- ----------
Total partners' capital........................... 897,595 602,401
---------- ----------
Total liabilities and partners' capital........... $3,004,968 $2,670,025
========== ==========
</TABLE>
- ---------------
Note: The December 31, 1998 balance sheet has been derived from audited
consolidated financial statements at that date.
See notes to condensed consolidated financial statements.
6
<PAGE> 8
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per interest data)
(Unaudited)
<TABLE>
<CAPTION>
CUMULATIVE
THREE MONTHS ENDED MARCH 23, 1994
MARCH 31, (COMMENCEMENT OF
------------------ OPERATIONS) TO
1999 1998 MARCH 31, 1999
------- ------- ----------------
<S> <C> <C> <C>
Operating expenses:
Development costs..................................... $30,708 $16,490 $305,724
Marketing, general and administrative................. 11,973 8,271 123,675
Loss from launch failure.............................. -- -- 17,315
------- ------- --------
Total operating expenses...................... 42,681 24,761 446,714
Interest income......................................... 2,313 5,165 60,090
------- ------- --------
Net loss................................................ 40,368 19,596 386,624
Preferred distributions on redeemable preferred
partnership interests and accretion to redemption
value................................................. 4,750 5,300 65,472
------- ------- --------
Net loss applicable to ordinary partnership interests... $45,118 $24,896 $452,096
======= ======= ========
Net loss per ordinary partnership interest -- basic and
diluted............................................... $ 0.78 $ 0.48
======= =======
Weighted average ordinary partnership interests
outstanding -- basic and diluted...................... 58,181 52,321
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
7
<PAGE> 9
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
CUMULATIVE
THREE MONTHS ENDED MARCH 23, 1994
MARCH 31, (COMMENCEMENT OF
--------------------- OPERATIONS) TO
1999 1998 MARCH 31, 1999
--------- --------- ----------------
<S> <C> <C> <C>
Operating activities:
Net loss................................................... $ (40,368) $ (19,596) $ (386,624)
Loss from launch failure................................... -- -- 17,315
Deferred revenues.......................................... -- -- 25,811
Stock compensation transactions............................ 440 322 3,331
Depreciation and amortization.............................. 545 347 4,528
Changes in operating assets and liabilities:
Other current assets..................................... 30 (528) (5,510)
Other assets............................................. (54) (355) (10,635)
Accounts payable......................................... (6,401) 1,327 8,454
Payable to affiliates.................................... 4,877 5,994 83,971
Accrued expenses......................................... (2,538) (2,889) 9,141
--------- --------- -----------
Net cash used in operating activities....................... (43,469) (15,378) (250,218)
--------- --------- -----------
Investing activities:
Globalstar System under construction....................... (219,903) (213,716) (2,793,080)
Insurance proceeds from launch failure..................... 28,500 -- 190,500
Payable to affiliates for Globalstar System under
construction............................................. 7,421 (31,075) 136,069
Capitalized interest accrued............................... 13,825 6,898 75,345
Accounts payable........................................... (379) 12,073 (1,502)
Vendor financing liability................................. 19,513 73,736 390,683
--------- --------- -----------
Cash used for Globalstar System............................ (151,023) (152,084) (2,001,985)
Production gateways and user terminals..................... 2,630 819 (142,879)
Additional spare satellites................................ (3,348) -- (3,348)
Purchases of property and equipment........................ (800) (681) (9,726)
Deferred FCC license costs................................. (180) (209) (9,179)
Purchases of investments................................... -- -- (126,923)
Maturity of investments.................................... -- -- 126,923
--------- --------- -----------
Net cash used in investing activities....................... (152,721) (152,155) (2,167,117)
--------- --------- -----------
Financing activities:
Net proceeds from issuance of $500,000 11 3/8% Senior
Notes.................................................... -- -- 472,090
Proceeds from warrants issued in connection with $500,000
11 3/8% Senior Notes..................................... -- -- 12,210
Net proceeds from issuance of $325,000 11 1/4% Senior
Notes.................................................... -- -- 301,850
Net proceeds from issuance of $325,000 10 3/4% Senior
Notes.................................................... -- -- 320,197
Net proceeds from issuance of $300,000 11 1/2% Senior
Notes.................................................... -- -- 287,552
Deferred financing costs................................... -- -- (2,125)
Proceeds of capital subscriptions receivable............... -- -- 282,441
Payment of accrued capital raising costs................... -- -- (2,400)
Sale of ordinary partnership interests..................... 14 347 346,556
Sale of redeemable preferred partnership interests to
GTL...................................................... 339,775 -- 639,275
Distributions on redeemable preferred partnership
interests................................................ -- (5,037) (40,020)
Prepaid interest on redeemable preferred partnership
interests................................................ -- -- 47
Borrowings under long-term revolving credit facility....... -- -- 171,000
Repayment of borrowings under long-term revolving credit
facility................................................. -- -- (171,000)
--------- --------- -----------
Net cash provided by financing activities................... 339,789 (4,690) 2,617,673
--------- --------- -----------
Net increase (decrease) in cash and cash equivalents........ 143,599 (172,223) 200,338
Cash and cash equivalents, beginning of period.............. 56,739 464,154 --
--------- --------- -----------
Cash and cash equivalents, end of period.................... $ 200,338 $ 291,931 $ 200,338
========= ========= ===========
Noncash transactions:
Payable to affiliates...................................... $ 9,308
===========
Accrual of capital raising costs........................... $ 2,400
===========
Deferred FCC license costs................................. $ 2,235
===========
Warrants issued in exchange for debt guarantee............. $ 22,601
===========
Accretion to redemption value of preferred partnership
interests................................................ $ 83 $ 263 $ 4,023
========= ========= ===========
Ordinary partnership interests distributed upon conversion
of redeemable preferred partnership interests and related
dividend make-whole payment.............................. $ 320,250
===========
Warrants issued to China Telecom to acquire ordinary
partnership interests.................................... $ 31,917
===========
Dividends accrued.......................................... $ 4,667 $ 4,667
========= ===========
Supplemental Information:
Interest paid.............................................. $ 28,613 $ 28,613 $ 225,533
========= ========= ===========
</TABLE>
See notes to condensed consolidated financial statements.
8
<PAGE> 10
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited condensed consolidated financial statements have
been prepared by Globalstar, L.P. ("Globalstar") pursuant to the rules of the
Securities and Exchange Commission ("SEC") and, in the opinion of Globalstar,
include all adjustments (consisting of normal recurring accruals) necessary for
a fair presentation of financial position, results of operations and cash flows.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such SEC rules. Globalstar believes
that the disclosures made are adequate to keep the information presented from
being misleading. The results of operations for the three months ended March 31,
1999 are not necessarily indicative of the results to be expected for the full
year. These condensed consolidated financial statements should be read in
conjunction with Globalstar's audited consolidated financial statements and
notes thereto included in the latest Annual Report on Form 10-K for Globalstar
Telecommunications Limited ("GTL") and Globalstar.
2. ORGANIZATION AND BUSINESS
Globalstar, founded by Loral Space & Communications Ltd. ("Loral") and
QUALCOMM Incorporated ("Qualcomm"), is building and will operate a worldwide,
low-earth orbit satellite-based wireless digital telecommunications system (the
"Globalstar System").
Globalstar, a Delaware limited partnership with a December 31 fiscal year
end, was formed in November 1993. It had no activities until March 23, 1994,
when it received capital subscriptions for $275 million and commenced
operations. The accompanying condensed consolidated financial statements reflect
the operations of Globalstar from that date.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Development Stage Company
Globalstar is devoting substantially all of its efforts to the launch,
licensing, construction and testing of the Globalstar System, and establishing
its business. Globalstar's planned principal operations have not commenced and,
accordingly, Globalstar is a development stage company as defined in Statement
of Financial Accounting Standards No. 7 "Accounting and Reporting by Development
Stage Enterprises."
Globalstar may encounter problems, delays and expenses, many of which may
be beyond Globalstar's control. These may include, but are not limited to,
launch delays and launch failures, in-orbit failures, problems related to
technical development of the system, testing, regulatory compliance,
manufacturing and assembly, user terminal availability in sufficient quantities,
the competitive and regulatory environment in which Globalstar will operate,
marketing problems and costs and expenses that may exceed current estimates.
There can be no assurance that substantial delays in any of the foregoing
matters would not delay Globalstar's achievement of profitable operations.
Earnings Per Ordinary Partnership Interest
Globalstar follows Statement of Financial Accounting Standards No. 128,
Earnings per Share ("SFAS 128") in presenting basic and diluted earnings per
interest. Due to Globalstar's net losses for the three months ended March 31,
1999 and 1998, diluted weighted average ordinary partnership interests
outstanding excludes the weighted average effect of the assumed conversion,
prior to actual conversion in April 1998, of the 6 1/2% redeemable preferred
partnership interests into 4.8 million ordinary partnership interests for the
quarter ended March 31, 1998, the assumed conversion of the 8% redeemable
preferred partnership interests into 3.8 million ordinary partnership interests
for the quarter ended March 31, 1999, and the assumed issuance of ordinary
partnership interests upon exercise of GTL's outstanding options and warrants
into 2.5 million and 3.3 million ordinary partnership interests for the quarters
ended March 31, 1999 and 1998, respectively, as their effect would have been
anti-dilutive. Accordingly, basic and diluted weighted
9
<PAGE> 11
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
average ordinary partnership interests outstanding are based on net loss
applicable to ordinary partnership interests and the weighted average ordinary
partnership interests outstanding for the three months ended March 31, 1999 and
1998.
Reclassifications
Certain reclassifications have been made to conform prior period amounts to
the current period presentation.
4. GLOBALSTAR SYSTEM UNDER CONSTRUCTION
Through March 31, 1999, Globalstar incurred costs of approximately $2.9
billion for the design, development and construction of the space and ground
segments. Costs incurred during 1999 were approximately $222.1 million. Qualcomm
is in the process of completing its revision to cost estimates for its portion
of the ground segment. Due to additional scope and cost growth and based on
preliminary information, Globalstar expects the total project cost to increase
by less than 3%. The Qualcomm estimate is still subject to review by Globalstar.
As of March 31, 1999, and including the effect of the preliminary Qualcomm
estimate, Globalstar's budgeted expenditures were $3.17 billion for the design,
construction and deployment of the Globalstar System to commence commercial
service and $340 million for budgeted financing costs. In addition to
expenditures for operating costs and debt service, Globalstar anticipates
further expenditures on system software for the improvement of system
functionality and the addition of new features beyond those planned for the
commencement of commercial service. Substantial additional financing will be
required if there are delays in the commencement of commercial service and, in
any event, after the commencement of commercial service and before positive cash
flow is achieved. Although Globalstar believes it will be able to obtain these
additional funds, there can be no assurance that such funds will be available on
favorable terms or on a timely basis, if at all.
Globalstar has agreed, subject to its partners' approval, to purchase from
Space Systems/Loral ("SS/L", a subsidiary of Loral) 12 additional spare
satellites for which the cost and payment terms have not as yet been negotiated.
It is anticipated that approximately $100 million will be expended for these
spare satellites by the commencement of commercial service
As of March 31, 1999, Globalstar has raised or received commitments for
approximately $3.3 billion. Globalstar intends to raise the remaining funds
required, of approximately $600 million, by the initiation of commercial service
in September 1999, from a combination of sources including: high yield debt
issuance (which may include an equity component), bank financing, equity
issuance, financial support from the Globalstar partners, projected service
provider payments, and anticipated payments for the sale of gateways and
Globalstar user terminals.
5. VENDOR FINANCING LIABILITY
At March 31, 1999, the current portion of vendor financing liability
includes $90 million of interest bearing deferred billings due to SS/L which
were scheduled for repayment in 20 quarterly installments beginning on March 31,
1999. Globalstar is currently in negotiations with SS/L to defer commencement of
repayment of the $90 million.
10
<PAGE> 12
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. ORDINARY PARTNERS' CAPITAL
8% Redeemable Preferred Partnership Interests
On January 21, 1999, Globalstar sold to GTL 7 million units (face amount of
$50 per unit) of 8% RPPIs in Globalstar, in connection with GTL's offering of 7
million shares (face amount of $50 per share) of 8% Convertible Redeemable
Preferred Stock due 2011 (the "Preferred Stock"). Dividends on the 8% RPPIs and
the Preferred Stock accrue at 8% per annum and are payable quarterly. Globalstar
is using the funds for the construction and deployment of the Globalstar System.
The Preferred Stock is convertible into shares of GTL common stock at a
conversion price of $23.2563 per share, subject to adjustment for certain
antidilution events. As of March 31, 1999, the Preferred Stock was convertible
into 15,049,685 shares of GTL common stock. Loral purchased 3 million shares
($150 million face amount) of the Preferred Stock issued, in order to maintain
its prior percentage ownership interest in Globalstar.
The Preferred Stock has limited voting rights. With respect to dividend
rights and rights upon liquidation, winding up and dissolution, the Preferred
Stock ranks senior to common stock and to all other future series of preferred
stock or other class of capital stock of GTL, the terms of which do not
expressly provide that such series or class ranks senior to or on parity with
the Preferred Stock. Prior to its mandatory redemption date, the Preferred Stock
is redeemable (at a premium which declines over time) by GTL beginning in
February 2002 (or beginning in February 2000 if GTL's stock price exceeds
certain defined price ranges). Payments due on the Preferred Stock may be made
in cash, GTL common stock or a combination of both at the option of GTL. In the
event accrued and unpaid dividends accumulate to an amount equal to six
quarterly dividends, holders of the majority of the outstanding shares of
Preferred Stock will be entitled to elect additional members to GTL's Board of
Directors.
The 8% RPPIs rank senior to ordinary partnership interests and have terms
substantially similar to the Preferred Stock. However, they are subordinate to
all existing and future liabilities of Globalstar, and cash distributions
thereon are limited to the amount of the partnership capital accounts that are
maintained for such interests. The 8% RPPIs will convert to ordinary partnership
interests upon any conversion of the Preferred Stock into GTL common stock.
Payments due on the 8% RPPIs may be made in cash, Globalstar ordinary
partnership interests or a combination of both at the option of Globalstar.
11
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Except for the historical information contained herein, the matters
discussed in this Management's Discussion and Analysis of Financial Condition
and Results of Operations, and elsewhere in this Form 10-Q, are forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In
addition, from time to time, Globalstar and or GTL or their representatives have
made or may make forward-looking statements, orally or in writing. Such
forward-looking statements may be included in, but are not limited to, various
filings made by Globalstar and or GTL with the Securities and Exchange
Commission, press releases or oral statements made by or with the approval of an
authorized executive officer of Globalstar and or GTL. Actual results could
differ materially from those projected or suggested in any forward-looking
statements as a result of a wide variety of factors or conditions. All
forward-looking statements involve risks and uncertainties, many of which may be
beyond Globalstar's and or GTL's control. These may include, but are not limited
to, problems relating to technical development and deployment of the system,
testing, regulatory compliance, manufacturing and assembly, user terminal
availability in sufficient quantities, the competitive and regulatory
environment in which Globalstar will operate, marketing problems and costs and
expenses that may exceed current estimates. See the section of GTL's and
Globalstar's most recent Annual Report on Form 10-K entitled "Certain Factors
That May Affect Future Results" and GTL's registration statement on Form S-3
(File No. 333-75677), entitled "Risk Factors".
GTL is a general partner of Globalstar and has no other business. GTL's
sole asset is its investment in Globalstar and GTL's results of operations
reflect its share of the results of operations of Globalstar on an equity
accounting basis.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased from $56.7 million at December 31, 1998
to $200.3 million at March 31, 1999. The net increase is primarily the result of
the net proceeds from the sale of Globalstar's 8% convertible redeemable
preferred partnership interests ("8% RPPIs") totaling $339.8 million, offset by
net expenditures for the Globalstar System of $151.0 million and net cash used
in operating activities of $43.5 million.
Current liabilities increased from $401.2 million at December 31, 1998 to
$458.7 million at March 31, 1999, primarily as a result of the reclassification
of a portion of vendor financing due within one year, the timing of payments to
Globalstar contractors and accrued interest on the senior notes.
From January 1, to April 30, 1999, Globalstar had three successful
launches, of four satellites each, aboard Soyuz launch vehicles from the
Baikonur Cosmodrome in Kazakhstan, bringing the total number of satellites in
orbit to twenty. Globalstar had previously launched its first group of four
satellites on February 14, 1998 and its second group of four satellites on April
24, 1998. The first 16 Globalstar satellites have reached their final orbital
positions and are currently being used to test basic system functionality,
including the system's inter-satellite handoff capabilities and the latest four
satellites are expected to reach their final orbital positions and will begin
operations testing in May 1999. As of April 1999, in addition to the 20
satellites already in orbit, Globalstar had 8 completed satellites on hand and
24 more in final integration and test. For the remainder of 1999, Globalstar's
current launch plan includes eight additional launches of four satellites each,
using a mix of Delta and Soyuz rockets. According to the plan, Globalstar will
deploy an operational constellation of a minimum of 32 satellites by September
1999 and a total of 52 satellites (including 4 in-orbit spares) by the end of
1999.
Through March 31, 1999, Globalstar incurred costs of approximately $2.9
billion for the design, development and construction of the space and ground
segments. Costs incurred during 1999 were approximately $222.1 million. Qualcomm
is in the process of completing its revision to cost estimates for its portion
of the ground segment. Due to additional scope and cost growth and based on
preliminary information, Globalstar expects the total project cost to increase
by less than 3%. The Qualcomm estimate is still subject to review by Globalstar.
As of March 31, 1999, and including the effect of the preliminary Qualcomm
estimate,
12
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
Globalstar's budgeted expenditures were $3.17 billion for the design,
construction and deployment of the Globalstar System to commence commercial
service and $340 million for budgeted financing costs. In addition to
expenditures for operating costs, and debt service, Globalstar anticipates
further expenditures on system software for the improvement of system
functionality and the addition of new features beyond those planned for the
commencement of commercial service. Globalstar expects to achieve positive cash
flow in the third quarter of 2000. Substantial additional financing will be
required if there are delays in the commencement of commercial service and, in
any event, after the commencement of commercial service and before positive cash
flow is achieved. Although Globalstar believes it will be able to obtain these
additional funds, there can be no assurance that such funds will be available on
favorable terms or on a timely basis, if at all.
Globalstar has agreed, subject to its partners' approval, to purchase from
Space Systems/Loral 12 additional spare satellites for which the cost and
payment terms have not as yet been negotiated. It is anticipated that
approximately $100 million will be expended for these spare satellites by the
commencement of the commercial service in September 1999.
On January 21, 1999, Globalstar sold to GTL 7 million units (face amount of
$50 per unit) of 8% Redeemable Preferred Partnership Interests (the "8% RPPIs"),
in connection with GTL's offering of 7 million shares (face amount of $50 per
share) of 8% Convertible Redeemable Preferred Stock due 2011 (the "Preferred
Stock"). The Preferred Stock is convertible into shares of GTL common stock at a
conversion price of $23.2563 per share. Loral purchased 3 million shares or $150
million face amount of the $350 million of the Preferred Stock offered, to
maintain its ownership percentage. Dividends on the 8% RPPIs and the Preferred
Stock accrue at 8% per annum and are payable quarterly. Globalstar is using the
funds for the construction and deployment of the Globalstar System.
As of March 31, 1999, Globalstar has raised or received commitments for
approximately $3.3 billion. Globalstar intends to raise the remaining funds
required, of approximately $600 million, by the initiation of commercial service
in September 1999, from a combination of sources including: high yield debt
issuance (which may include an equity component), bank financing, equity
issuance, financial support from the Globalstar partners, projected service
provider payments, and anticipated payments for the sale of gateways and
Globalstar user terminals.
RESULTS OF OPERATIONS
Globalstar is a development stage partnership and has not commenced
commercial operations. For the period March 23, 1994 (commencement of
operations) to March 31, 1999, Globalstar has recorded cumulative net losses
applicable to ordinary partnership interests of $452.1 million. The net loss
applicable to ordinary partnership interests for the three months ended March
31, 1999 increased to $45.1 million from $24.9 million for the three months
ended March 31, 1998. The net loss increased primarily as a result of increased
activity in the development of Globalstar user terminals, increased in-house
engineering and an increase in marketing, general and administration costs.
Globalstar is expending significant funds for the construction, launch, testing
and deployment of the Globalstar System and expects such losses to continue
through commencement of commercial operations.
Globalstar has earned interest income of $60.1 million on cash balances and
short-term investments since commencement of operations. Interest income for the
three months ended March 31, 1999 decreased to $2.3 million from $5.2 million
for the three months ended March 31, 1998, as result of lower average cash
balances available for investment during 1999.
Operating Expenses. Development costs for the three months ended March 31,
1999 were $30.7 million as compared to $16.5 million for the three months ended
March 31, 1998. Development costs increased as a result of increased activity in
the development of Globalstar user terminals and in-house engineering.
13
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
Marketing, general and administrative expenses were $12.0 million and $8.3
million for the three months ended March 31, 1999 and 1998, respectively. The
increase in marketing, general and administrative expenses is primarily the
result of an increase in the number of employees and an increase in marketing
costs as Globalstar gears up for commercial operations.
Depreciation. Globalstar capitalizes all costs, including interest as
applicable, associated with the design, construction and deployment of the
Globalstar System, except costs associated with the development of the
Globalstar user terminals and certain technologies under a cost sharing
arrangement with Qualcomm. Globalstar will not record depreciation expense on
the Globalstar System under construction until the commencement of commercial
operations, as assets are placed into service.
Income Taxes. Globalstar is organized as a limited partnership. As such,
no income tax provision or benefit is included in the accompanying financial
statements since U.S. income taxes are the responsibility of its partners.
Generally, taxable income or loss, deductions and credits of Globalstar will be
passed through to its partners.
TAXATION
GTL will be subject to US federal, state and local corporate income tax on
its share of Globalstar's income that is effectively connected with the conduct
of a trade or business in the United States ("US income") and will be required
to file federal, state and local income tax returns with respect to such US
income. In addition, any portion of GTL's income from sources outside the US,
realized through Globalstar or otherwise, may be subject to taxation by certain
foreign countries. However, the extent to which these countries may require GTL
or Globalstar to pay tax or to make payments in lieu of tax cannot be determined
in advance.
YEAR 2000 ISSUE
Globalstar's Year 2000 Program is proceeding on schedule. The Year 2000
Issue is the result of computer programs which were written using two digits
rather than four to signify a year (i.e., the year 1999 is denoted as "99" and
not "1999"). Computer programs written using only two digits may recognize the
year 2000 as the year 1900. This could result in a system failure or
miscalculations causing disruption of operations.
Globalstar has implemented a Year 2000 program (the "Year 2000 Program")
for its internal products, system and equipment, as well as for key vendor
supplied products, system and equipment. As part of the Year 2000 Program,
Globalstar is assessing the Year 2000 capabilities of, among other things, its
satellites, ground equipment, research and development activities, and facility
management systems. The Year 2000 Program consists of the following phases:
Inventory of Year 2000 items, Assessment (including prioritization), Remediation
(including modification, upgrading and replacement), Testing and Auditing. This
five-step program is divided into five major sections covering both information
and non-information technology systems: 1) business systems, 2) technical
systems, 3) imbedded hardware/firmware, 4) products and services, and 5)
vendor-supplied services. As of March 31, 1999, Globalstar has completed
approximately 98% of the inventory phase and approximately 32% of its assessment
phase. Globalstar expects to complete the first three phases, through the
remediation phase, of the Year 2000 Program during the second quarter of 1999.
The testing phase will be completed during the third quarter of 1999, prior to
the anticipated in-service date of Globalstar. The fifth phase, the audit phase,
commenced in January 1999 and is expected to continue through the third quarter
of 1999 to accommodate re-audits if deemed necessary.
Both internal and external resources are being utilized to execute
Globalstar's plan. The program to address Year 2000 has been underway since July
1997. The incremental costs incurred by Globalstar through March 31, 1999, for
this effort were approximately $735,000. Based on its efforts to date Globalstar
anticipates additional incremental expenses of approximately $565,000 will be
incurred to substantially complete the effort.
14
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
Based upon the accomplishments to date, no contingency plans are expected
to be needed. As risks are identified, contingency plans will be developed and
implemented as necessary. However, because of the progress achieved to date and
Globalstar's expectations that its Year 2000 program will be substantially
complete in the third quarter of calendar 1999, Globalstar believes adequate
time will be available to insure alternatives can be developed, assessed and
implemented prior to a Year 2000 issue having a material negative impact on its
operations. However, there can be no assurance that such modifications and
conversions, if required, will be completed on a timely basis.
The cost of the program and the dates on which Globalstar believes it will
substantially complete Year 2000 modifications are based on management's best
estimates. Such estimates were derived using software surveys and programs to
evaluate calendar date exposures and numerous assumptions of future events,
including the continued availability of certain resources, third-party Year 2000
readiness and other factors. Because none of these estimates can be guaranteed,
actual results could differ materially and adversely from those anticipated.
Specific factors that might cause an adjustment of costs are: number of
personnel trained in this area, the ability to locate and correct all relevant
computer codes, the ability to validate supplier certification and similar
uncertainties.
Globalstar's failure to remediate a material Year 2000 problem could result
in an interruption or failure of certain basic business operations. These
failures could materially and adversely effect Globalstar's results of
operations, liquidity and financial condition. Globalstar is also assessing the
Year 2000 readiness of its key third-party suppliers. Information requests have
been distributed to such suppliers and replies are being evaluated. If the risk
is deemed material, on-site visits to suppliers will be conducted to verify the
adequacy of the information received. In addition, Globalstar has commenced
discussions with its service providers to determine the status of their Year
2000 capabilities. However, due to the general uncertainty of the Year 2000
problem, including uncertainty with regard to third-party suppliers and service
providers, especially those in developing countries, Globalstar is unable to
determine at this time whether the consequences of Year 2000 failures will have
an adverse material impact on Globalstar's results of operations, liquidity or
financial condition. There can be no assurance that the Company's Year 2000
Program will be successful in avoiding any interruption or failure of certain
basic business operations, which may have a material adverse effect on the
Company's results of operations or financial position.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement No.
133 Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"),
which requires that all derivative instruments be recorded on the balance sheet
at their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if it is, the type
of hedge transaction. Globalstar has not yet determined the impact that the
adoption of SFAS 133 will have on its earnings or financial position. Globalstar
is required to adopt SFAS 133 on January 1, 2000.
15
<PAGE> 17
PART II - OTHER INFORMATION
ITEM 2(C). CHANGES IN SECURITIES
On January 26, 1999, GTL sold $350 million face amount of 8% Convertible
Redeemable Preferred Stock due 2011 in a private offering pursuant to Rule 144A
and Regulation D under the Securities Act of 1933. The initial purchasers of the
Preferred Stock were Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette
Securities Corporation, Lehman Brothers Inc., C.E. Unterberg, Towbin, CIBC
Oppenheimer Corp. and ING Baring Furman Selz LLC. In addition, Loral purchased
$150 million face amount of the Preferred Stock. The price to the initial
purchasers and Loral was 97.25% of the face amount of the Preferred Stock.
The Preferred Stock is convertible at the option the holder, initially at
the conversion price of $23.2563 per share.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed as part of this report:
Exhibit 12 -- Statement Regarding Computation of Ratios
Exhibit 27 -- Financial Data Schedules
(b) Reports on Form 8-K
<TABLE>
<CAPTION>
DATE OF REPORT DESCRIPTION
-------------- -----------
<S> <C>
January 7, 1999 Item 5 -- Sale of $350 Million of Preferred Stock
January 21, 1999 Item 5 -- Sale of $350 Million of Preferred Stock
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
GLOBALSTAR TELECOMMUNICATIONS LIMITED
------------------------------------------
Registrant
Nicholas C. Moren
--------------------------------------------------------------------------
Treasurer
(Principal Financial Officer)
and
Registrant's Authorized Officer
GLOBALSTAR, L.P.
------------------------------------------
Stephen Wright
--------------------------------------------------------------------------
Chief Financial Officer
(Principal Financial Officer)
and
Registrant's Authorized Officer
Date: May 14, 1999
16
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
Exhibit 12 -- Statement Regarding Computation of Ratios
Exhibit 27 -- Financial Data Schedules
</TABLE>
<PAGE> 1
EXHIBIT 12
STATEMENT REGARDING COMPUTATION OF RATIOS
(IN THOUSANDS, EXCEPT RATIOS)
(UNAUDITED)
GLOBALSTAR TELECOMMUNICATIONS LIMITED
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 1999 MARCH 31, 1998
-------------- --------------
<S> <C> <C>
Earnings:
Net loss.................................................. $(10,948) $(7,290)
Add:
Equity in loss applicable to ordinary partnership
interests of Globalstar, L.P. .................... 15,698 7,290
Interest expense..................................... -- 5,300
-------- -------
Earnings available to cover fixed charges(1)................ $ 4,750 $ 5,300
======== =======
Fixed charges(2)............................................ $ 4,750 $ 5,300
======== =======
Ratio of earnings to fixed charges and preferred stock
dividends................................................. 1x 1x
======== =======
</TABLE>
- ---------------
(1) The earnings of GTL available to cover fixed charges, consist solely of
dividends from Globalstar, L.P. on the redeemable preferred partnership
interests held by GTL.
(2) Fixed charges include interest expense and preferred dividends and related
increase to redemption value of such preferred stock.
GLOBALSTAR, L.P.
DEFICIENCY OF EARNINGS TO COVER FIXED CHARGES
AND DISTRIBUTIONS ON REDEEMABLE PREFERRED PARTNERSHIP INTERESTS
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 1999 MARCH 31, 1998
-------------- --------------
<S> <C> <C>
Net loss.................................................... $(40,368) $(19,596)
Dividends on redeemable preferred partnership interests..... (4,750) (5,300)
Capitalized interest........................................ (46,252) (39,483)
-------- --------
Deficiency of earnings to cover fixed charges and
distributions on redeemable preferred partnership
interests................................................. $(91,370) $(64,379)
======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary consolidated financial information extracted from
the financial statements of Globalstar Telecommunication Limited for the quarter
ended March 31, 1999 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000933401
<NAME> GLOBALSTAR TELECOMMUNICATIONS LIMITED
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 909,269
<CURRENT-LIABILITIES> 4,667
<BONDS> 0
0
339,858
<COMMON> 82,020
<OTHER-SE> 482,724
<TOTAL-LIABILITY-AND-EQUITY> 909,269
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (10,948)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,948)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,698)
<EPS-PRIMARY> (0.19)
<EPS-DILUTED> (0.19)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary consolidated financial information extracted from
the financial statements of Globalstar L.P. for the quarter ended March 31, 1999
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001037927
<NAME> GLOBALSTAR L.P.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 200,338
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 348,727
<PP&E> 2,598,339
<DEPRECIATION> 4,513
<TOTAL-ASSETS> 3,004,968
<CURRENT-LIABILITIES> 458,727
<BONDS> 1,396,473
0
339,858
<COMMON> 557,737
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,004,968
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 42,681
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (40,368)
<INCOME-TAX> 0
<INCOME-CONTINUING> (40,368)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (45,118)
<EPS-PRIMARY> (0.78)
<EPS-DILUTED> (0.78)
</TABLE>
