##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-K


|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|  
|   |  | FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004                                                 
|  
|OR
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-14180


LORAL SPACE & COMMUNICATIONS LTD.


(Exact name of registrant specified in the charter)


Jurisdiction of incorporation: Bermuda


IRS identification number: 13-3867424


(Address of principal executive offices)


c/o Loral SpaceCom Corporation


600 Third Avenue


New York, New York 10016


(Registrants telephone number, including area code)


Telephone: (212) 697-1105


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


|                             |  |                      
|---------------------------- |  | ---------------------
|                             |  | Name of each exchange
|Title of each class          |  | on which registered  
|                             |  |                      
|Common stock, $.10 par value |  | None                 

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


þ o


o þ


þ o














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TABLE OF CONTENTS



|                                                          |                                                                                                                      |  |  |  |  |  |  | 
|--------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                                   
|                                                          | Item 1. Business                                                                                                    
|THE COMPANY                                              
|REGULATION                                               
|PATENTS AND PROPRIETARY RIGHTS                           
|FOREIGN OPERATIONS                                       
|EMPLOYEES                                                
|AVAILABLE INFORMATION                                    
|                                                          | Item 2. Properties                                                                                                  
|                                                          | Item 3. Legal Proceedings                                                                                           
|                                                          | Item 4. Submission of Matters to a Vote of Security Holders                                                         
|PART II                                                  
|                                                          | Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN POSSESSION
|                                                          | Item 7. Managements Discussion and Analysis of Results of Operations and Financial Condition                       
|                                                          | Item 7A. Quantitative and Qualitative Disclosures about Market Risk                                                 
|                                                          | Item 8. Financial Statements and Supplementary Data                                                                 
|                                                          | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                        
|                                                          | Item 9A. Controls and Procedures                                                                                    
|PART III                                                 
|                                                          | Item 10. Directors and Executive Officers of the Registrant                                                         
|                                                          | Item 11. Executive Compensation                                                                                     
|                                                          | Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters             
|                                                          | Item 13. Certain Relationships and Related Transactions                                                             
|                                                          | Item 14. Principal Accountant Fees and Services                                                                     
|PART IV                                                  
|                                                          | Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K                                            
|INDEX TO EXHIBITS                                        
|SIGNATURES                                               
|SECOND AMENDED PLAN OF REORGANIZATION                    
|PLEDGE AND SECURITY AGREEMENT                            
|STATEMENT RE: COMPUTATION OF RATIOS                      
|LIST OF SUBSIDIARIES                                     
|CONSENT OF DELOITTE & TOUCHE LLP                         
|CERTIFICATION                                            
|CERTIFICATION                                            
|CERTIFICATION                                            
|CERTIFICATION                                            



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##### Table of Contents






PART I







|        |         
|------- | --------
|Item 1. | Business






THE COMPANY


Overview












Bankruptcy Filings








1



---



##### Table of Contents









Sale of Assets






Reorganization






2



---



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Segment Overview




| |                   
| | ------------------
| | Satellite Services









3



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| |                    
| | -------------------
| | Transponder Leasing



(1)


|                                        |  |              |  |            |  |                                                                                                               |  |                 |  |                     
|--------------------------------------- |  | ------------ |  | ---------- |  | ------------------------------------------------------------------------------------------------------------- |  | --------------- |  | --------------------
|                                       
|                                        |  | Expected End
|Satellite                               |  | Location     |  | Frequency  |  | Coverage                                                                                                      |  | In Service Date |  | of Life             
|                                       
|Telstar 10/ ApstarIIR                   |  | 76.5°E.L.    |  | C/ Ku-band |  | Asia and portions of Europe, portions of Africa and Australia                                                 |  | December 1997   |  | October 2012        
|                                       
|Telstar 12                              |  | 15°W.L.      |  | Ku-band    |  | Eastern U.S., SE Canada, Europe, Russia, Middle East, North
    Africa, portions of South and Central America |  | January 2000    |  | June 2016           
|                                       
|Telstar 14/ Estrela
    do
    Sul-1(2) |  | 63°W.L.      |  | Ku-band    |  | Brazil and portions of Latin America, North America, Atlantic
    Ocean                                       |  | March 2004      |  | See footnote 2 below
|                                       
|Telstar
    18(3)                       |  | 138°E.L.     |  | C/ Ku-band |  | India, South East Asia, China, Australia and Hawaii                                                           |  | September 2004  |  | September 2019      
|                                       






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | We also operate Telstar 11 at 37.5°W.L. and Brazil 1T at
    63° W.L., which are both in inclined orbit and generate
    minimal revenues.                                                                                                                                                                                                                                                                                                                                                   
|   
|(2) | Estrela do Sul-1 was launched in January 2004 and did not fully
    deploy one of its solar arrays. At the end of March 2004, the
    satellite began commercial service operating 15 of its 41
    transponders. The satellites life expectancy is now
    approximately seven years, as compared to its design life of
    15 years. See Managements Discussion and Analysis of
    Results of Operations and Financial Condition, Results by
    Operating Segment  Satellite Services.
|   
|(3) | Telstar 18 went into commercial service in September 2004 and we
    have entered into a sales-type lease arrangement with an Asian
    satellite services company, initially for 37 transponders on the
    satellite (see Note 7 to the consolidated financial
    statements).                                                                                                                                                                                                            



| |                 
| | ----------------
| | Network Services

sm




4



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| |                      
| | ---------------------
| | Professional Services





| |                               
| | ------------------------------
| | Satellite Services Performance

|                                                       |  |                      |     |   |      |   |     |      |  |   |     |  
|------------------------------------------------------ |  | -------------------- | --- | - | ---- | - | --- | ---- |  | - | --- | -
|                                                       |  | For the years ending |    
|                                                       |  | December 31,         |    
|                                                       |  |                      |    
|                                                       |  | 2004                 |     |   | 2003 |   |     | 2002 | 
|                                                       |  |                      |     |   |      |   |     |      | 
|                                                       |  | (in millions)        |    
|Satellite services revenues                            |  | $                    | 141 |   |      | $ | 154 |      |  | $ | 197 |  
|Satellite services sales-type lease
    arrangement(1) |  |                      | 87  |   |      |   |    |      |  |   |    |  
|                                                       |  |                      |     |   |      |   |     |      | 
|Total segment revenues                                 |  |                      | 228 |   |      |   | 154 |      |  |   | 197 |  
|Eliminations                                           |  |                      | (5  | ) |      |   | (7  | )    |  |   | (5  | )
|                                                       |  |                      |     |   |      |   |     |      | 
|Revenues from satellite services as reported           |  | $                    | 223 |   |      | $ | 147 |      |  | $ | 192 |  
|                                                       |  |                      |     |   |      |   |     |      | 
|Segment adjusted EBITDA before
    eliminations(2)     |  | $                    | 23  |   |      | $ | 8   |      |  | $ | 36  |  
|                                                       |  |                      |     |   |      |   |     |      | 






|    |                                                                                                
|--- | -----------------------------------------------------------------------------------------------
|(1) | See Note 7 to the consolidated financial statements.                                           
|   
|(2) | See Note 18 to the consolidated financial statements for
    the definition of Adjusted EBITDA.





| |                        
| | -----------------------
| | Satellite Manufacturing







5



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| |                                    
| | -----------------------------------
| | Satellite Manufacturing Performance

|                                                   |  |                      |      |   |      |   |      |      |  |   |      |  
|-------------------------------------------------- |  | -------------------- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|                                                   |  | For the years ending |     
|                                                   |  | December 31,         |     
|                                                   |  |                      |     
|                                                   |  | 2004                 |      |   | 2003 |   |      | 2002 | 
|                                                   |  |                      |      |   |      |   |      |      | 
|                                                   |  | (in millions)        |     
|Total segment revenues                             |  | $                    | 437  |   |      | $ | 474  |      |  | $ | 853  |  
|Eliminations                                       |  |                      | (137 | ) |      |   | (229 | )    |  |   | (145 | )
|                                                   |  |                      |      |   |      |   |      |      | 
|Revenues from satellite manufacturing as reported  |  | $                    | 300  |   |      | $ | 245  |      |  | $ | 708  |  
|                                                   |  |                      |      |   |      |   |      |      | 
|Segment adjusted EBITDA before
    eliminations(1) |  | $                    | (14  | ) |      | $ | (159 | )    |  | $ | (34  | )
|                                                   |  |                      |      |   |      |   |      |      | 






|    |                                                                                                                                                                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | See Consolidated Operating Results in Managements
    Discussion and Analysis of Results of Operations and Financial
    Condition for significant items that affect comparability
    between the periods presented. See note 18 to the
    consolidated financial statements for the definition of Adjusted
    EBITDA.

Investment in Affiliates




| |     
| | ----
| | XTAR





| |                          
| | -------------------------
| | Globalstar Joint Ventures



6



---



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REGULATION


Telecommunications Regulation






| |                
| | ---------------
| | U.S. Regulation





| |                                               
| | ----------------------------------------------
| | Authorization to Launch and Operate Satellites







7



---



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| |                             
| | ----------------------------
| | Scope of Services Authorized





| |                          
| | -------------------------
| | Coordination Requirements





| |                                                                   
| | ------------------------------------------------------------------
| | Regulation by Non-U.S. National Telecommunications
    Authorities











| |                                       
| | --------------------------------------
| | The ITU Frequency Coordination Process



8



---



##### Table of Contents







| |                       
| | ----------------------
| | Additional ITU Filings



Export Regulation









PATENTS AND PROPRIETARY RIGHTS











FOREIGN OPERATIONS




9



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Managements Discussion and
Analysis of Results of Operations and Financial Condition





EMPLOYEES







AVAILABLE INFORMATION









|        |           
|------- | ----------
|Item 2. | Properties



| |          
| | ---------
| | Corporate





| |                   
| | ------------------
| | Satellite Services





| |                        
| | -----------------------
| | Satellite Manufacturing










|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings

Consent Agreement.


Alcatel Settlement.


10



---



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Globalstar Related Matters. In re: Globalstar Securities Litigation.


In re: Loral
Space &


11



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##### Table of Contents



Communications Ltd. Securities Litigation.


In re: Loral Space &
Communications Ltd. Securities Litigation




Lawsuits against our Directors and Officers. Beleson




12



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In re: Loral Space ERISA
Litigation.


In re: Loral Space ERISA
Litigation,




Natelco.


Environmental Regulation.


13



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






PART II







|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities



|    |                                      
|--- | -------------------------------------
|(a) | Market Price and Dividend Information



|                                 |  |      |      |  |     |   |      | 
|-------------------------------- |  | ---- | ---- |  | --- | - | ---- | 
|                                 |  | High |      |  | Low |  
|                                 |  |      |      |  |     |  
|Year ended December 31, 2004     |  |      |      |  |     |   |      | 
|Quarter ended December 31, 2004  |  | $    | 0.19 |  |     | $ | 0.03 | 
|Quarter ended September 30, 2004 |  |      | 0.18 |  |     |   | 0.03 | 
|Quarter ended June 30, 2004      |  |      | 0.61 |  |     |   | 0.12 | 
|Quarter ended March 31, 2004     |  |      | 1.20 |  |     |   | 0.31 | 
|Year ended December 31, 2003     |  |      |      |  |     |   |      | 
|Quarter ended December 31, 2003  |  | $    | 0.48 |  |     | $ | 0.26 | 
|Quarter ended September 30, 2003 |  |      | 3.06 |  |     |   | 0.15 | 
|Quarter ended June 30, 2003      |  |      | 4.60 |  |     |   | 2.59 | 
|Quarter ended March 31, 2003     |  |      | 5.20 |  |     |   | 3.00 | 



|    |                                              
|--- | ---------------------------------------------
|(b) | Approximate Number of Holders of Common Stock





|    |          
|--- | ---------
|(c) | Dividends



14



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|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data






LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


(In thousands, except per share data)


|                                                                                                                                                               |                                                                                                                           |                          |          |       |      |   |          |       |   |   |            |        |   |      |          |        |   |   |            |        |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------- | ------------------------ | -------- | ----- | ---- | - | -------- | ----- | - | - | ---------- | ------ | - | ---- | -------- | ------ | - | - | ---------- | ------ | -
|                                                                                                                                                               |                                                                                                                           | Years Ended December 31, |         
|                                                                                                                                                               |                                                                                                                           |                          |         
|                                                                                                                                                               |                                                                                                                           | 2004                     |          |       | 2003 |   |          | 2002  |   |   | 2001       |        |   | 2000 |         
|                                                                                                                                                               |                                                                                                                           |                          |          |       |      |   |          |       |   |   |            |        |   |      |         
|Statement of operations data:                                                                                                                                  |                                                                                                                           |                          |          |       |      |   |          |       |   |   |            |        |   |      |          |        |   |   |            |       
|Revenues                                                                                                                                                       |                                                                                                                           | $                        | 522,127  |       |      | $ | 392,043  |       |   | $ | 900,527    |        |   | $    | 845,725  |        |   | $ | 1,052,514  |       
|Operating loss from continuing operations                                                                                                                      |                                                                                                                           |                          | (214,345 | )     |      |   | (388,873 | )     |   |   | (208,368   | )      |   |      | (158,593 | )      |   |   | (178,737   | )     
|Loss from continuing operations before income taxes, equity
    income (losses) in affiliates, minority interest and Globalstar
    related impairment charges |                                                                                                                           |                          | (207,852 | )     |      |   | (368,355 | )     |   |   | (237,540   | )      |   |      | (229,851 | )      |   |   | (108,612   | )     
|Income tax (provision) benefit                                                                                                                                 |                                                                                                                           |                          | (13,284  | ) (1) |      |   | 6,330    |       |   |   | (322,422   | ) (1)  |   |      | 40,096   |        |   |   | 11,773     |       
|Loss from continuing operations before equity income (losses) in
    affiliates, minority interest and Globalstar related impairment
    charges               |                                                                                                                           |                          | (221,136 | )     |      |   | (362,025 | )     |   |   | (559,962   | )      |   |      | (189,755 | )      |   |   | (96,839    | )     
|Equity income (losses) in affiliates, net of
    taxes(2)                                                                                                      |                                                                                                                           |                          | 46,654   |       |      |   | (51,153  | )     |   |   | (76,280    | )      |   |      | (66,677  | )      |   |   | (1,294,910 | ) (3) 
|Globalstar related impairment charges, net of taxes                                                                                                            |                                                                                                                           |                          |         |       |      |   |         |       |   |   |           |        |   |      |         |        |   |   | (112,241   | ) (3) 
|Loss from continuing operations                                                                                                                                |                                                                                                                           |                          | (174,347 | )     |      |   | (413,158 | )     |   |   | (636,468   | )      |   |      | (255,971 | )      |   |   | (1,500,299 | )     
|(Loss) income from discontinued operations, net of taxes                                                                                                       |                                                                                                                           |                          | (2,348   | )     |      |   | 18,803   |       |   |   | 57,566     |        |   |      | 61,252   |        |   |   | 30,621     |       
|Loss before cumulative effect of change in accounting principle
    and extraordinary gain on acquisition of minority interest                                 |                                                                                                                           |                          | (176,695 | )     |      |   | (394,355 | )     |   |   | (578,902   | )      |   |      | (194,719 | )      |   |   | (1,469,678 | )     
|Cumulative effect of change in accounting principle, net of taxes                                                                                              |                                                                                                                           |                          |         |       |      |   | (1,970   | )     |   |   | (890,309   | ) (4)  |   |      | (1,741   | )      |   |   |           |       
|Extraordinary gain on acquisition of minority interest                                                                                                         |                                                                                                                           |                          |         |       |      |   | 13,615   |       |   |   |           |        |   |      |         |        |   |   |           |       
|Net loss                                                                                                                                                       |                                                                                                                           |                          | (176,695 | )     |      |   | (382,710 | )     |   |   | (1,469,211 | )      |   |      | (196,460 | )      |   |   | (1,469,678 | )     
|Preferred dividends and accretion                                                                                                                              |                                                                                                                           |                          |         |       |      |   | (6,719   | )     |   |   | (89,186    | )      |   |      | (80,743  | )      |   |   | (67,528    | )     
|Net loss applicable to common stockholders                                                                                                                     |                                                                                                                           |                          | (176,695 | )     |      |   | (389,429 | )     |   |   | (1,558,397 | )      |   |      | (277,203 | )      |   |   | (1,537,206 | )     
|Basic and diluted loss per share:                                                                                                                              |                                                                                                                           |                          |          |       |      |   |          |       |   |   |            |        |   |      |          |        |   |   |            |       
|                                                                                                                                                               | Continuing operations                                                                                                     |                          | $        | (3.96 | )    |   | $        | (9.58 | ) |   | $          | (19.47 | ) |      | $        | (10.40 | ) |   | $          | (52.99 | )
|                                                                                                                                                               | Discontinued operations                                                                                                   |                          |          | (0.05 | )    |   |          | 0.43  |   |   |            | 1.55   |   |      |          | 1.89   |   |   |            | 1.03   |  
|                                                                                                                                                               |                                                                                                                           |                          |          |       |      |   |          |       |   |   |            |        |   |      |         
|                                                                                                                                                               | Before cumulative effect of change in accounting principle and
    extraordinary gain on acquisition of minority interest |                          |          | (4.01 | )    |   |          | (9.15 | ) |   |            | (17.92 | ) |      |          | (8.51  | ) |   |            | (51.96 | )
|                                                                                                                                                               | Cumulative effect of change in accounting principle                                                                       |                          |          |      |      |   |          | (0.05 | ) |   |            | (23.89 | ) |      |          | (0.05  | ) |   |            |       |  
|                                                                                                                                                               | Extraordinary gain on acquisition of minority interest                                                                    |                          |          |      |      |   |          | 0.31  |   |   |            |       |   |      |          |       |   |   |            |       |  
|                                                                                                                                                               |                                                                                                                           |                          |          |       |      |   |          |       |   |   |            |        |   |      |         
|                                                                                                                                                               | Loss per share                                                                                                            |                          | $        | (4.01 | )    |   | $        | (8.89 | ) |   | $          | (41.81 | ) |      | $        | (8.56  | ) |   | $          | (51.96 | )
|                                                                                                                                                               |                                                                                                                           |                          |          |       |      |   |          |       |   |   |            |        |   |      |         
|Other data:                                                                                                                                                    |                                                                                                                           |                          |          |       |      |   |          |       |   |   |            |        |   |      |          |        |   |   |            |       
|Deficiency of earnings to cover fixed charges                                                                                                                  |                                                                                                                           | $                        | 208,809  |       |      | $ | 389,218  |       |   | $ | 337,019    |        |   | $    | 315,708  |        |   | $ | 193,222    |       

15



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|                                             |  |                          |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|-------------------------------------------- |  | ------------------------ | -------- | - | ---- | - | -------- | ---- |  | - | -------- | - |  | ---- | -------- | - |  | - | -------- | -
|                                             |  | Years Ended December 31, |         
|                                             |  |                          |         
|                                             |  | 2004                     |          |   | 2003 |   |          | 2002 |  |   | 2001     |   |  | 2000 |         
|                                             |  |                          |          |   |      |   |          |      |  |   |          |   |  |      |         
|Cash flow data:                              |  |                          |          |   |      |   |          |      |  |   |          |   |  |      |          |   |  |   |          |  
|Provided by operating
    activities(5)      |  | $                        | 61,080   |   |      | $ | 225,025  |      |  | $ | 192,670  |   |  | $    | 169,818  |   |  | $ | 258,816  |  
|Provided by (used in) investing activities   |  |                          | 911,936  |   |      |   | (149,856 | )    |  |   | (138,824 | ) |  |      | (248,672 | ) |  |   | (377,780 | )
|Provided by (used in) equity transactions    |  |                          |         |   |      |   | 3,852    |      |  |   | (32,737  | ) |  |      | (35,687  | ) |  |   | 352,415  |  
|(Used in) provided by financing transactions |  |                          | (966,887 | ) |      |   | (3,313   | )    |  |   | (115,122 | ) |  |      | (119,555 | ) |  |   | (79,271  | )
|Dividends paid per common share              |  |                          |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  

|                                              |  |              |            |   |         |   |           |            |  |   |           |   |  |         |           |  |  |   |           | 
|--------------------------------------------- |  | ------------ | ---------- | - | ------- | - | --------- | ---------- |  | - | --------- | - |  | ------- | --------- |  |  | - | --------- | 
|                                              |  | December 31, |           
|                                              |  |              |           
|                                              |  | 2004(6)      |            |   | 2003(6) |   |           | 2002(1)(4) |  |   | 2001(7)   |   |  | 2000(3) |          
|                                              |  |              |            |   |         |   |           |            |  |   |           |   |  |         |          
|Balance sheet data:                           |  |              |            |   |         |   |           |            |  |   |           |   |  |         |           |  |  |   |           | 
|Cash and cash equivalents                     |  | $            | 147,773    |   |         | $ | 141,644   |            |  | $ | 65,936    |   |  | $       | 159,949   |  |  | $ | 394,045   | 
|Total assets                                  |  |              | 1,218,733  |   |         |   | 2,463,813 |            |  |   | 2,692,802 |   |  |         | 4,426,187 |  |  |   | 4,692,082 | 
|Debt, including current portion               |  |              |           |   |         |   |          |            |  |   | 2,236,497 |   |  |         | 2,352,956 |  |  |   | 2,445,996 | 
|Non-current liabilities and minority interest |  |              | 84,677     |   |         |   | 72,932    |            |  |   | 354,475   |   |  |         | 272,302   |  |  |   | 261,432   | 
|Convertible redeemable preferred stock        |  |              |           |   |         |   |          |            |  |   | 125,081   |   |  |         |          |  |  |   |          | 
|Liabilities subject to compromise             |  |              | 1,916,000  |   |         |   | 2,921,680 |            |  |   |          |   |  |         |          |  |  |   |          | 
|Shareholders (deficit) equity                |  |              | (1,044,101 | ) |         |   | (855,670  | )          |  |   | (354,227  | ) |  |         | 1,350,868 |  |  |   | 1,586,388 | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | 2004 includes an $11 million increase to the deferred tax
    valuation allowance relating to the reversal of deferred tax
    liabilities arising from the write-off of our investment in
    Globalstars $500 million credit facility, upon
    Globalstars dissolution in June 2004. 2002 includes the
    increase in the deferred tax valuation allowance of
    $390 million, based upon managements assessment that
    insufficient positive evidence existed substantiating
    recoverability of our loss carryforwards and other deferred tax
    assets (see Note 12 to the consolidated financial
    statements).
|   
|(2) | Our principal affiliate is XTAR. Loral also has investments in
    Globalstar joint ventures, which are accounted for under the
    equity method. During 2004, we recorded $47 million of
    equity income on the reversal of vendor financing liabilities
    that were non-recourse to SS/ L in the event of non-payment by
    Globalstar (see Note 8 to the consolidated financial
    statements). During 2003, we wrote off our remaining investment
    of $29 million in Satmex.                                                                                                                                        
|   
|(3) | The results of operations for 2000 includes Lorals share
    of Globalstars related equity losses and after-tax
    impairment charges of approximately $1.3 billion
    (approximately $1.6 billion on a pre-tax basis), which is
    included in equity in net loss of affiliates and after-tax
    impairment charges of $112 million ($125 million
    pre-tax) relating to Lorals investments in and advances to
    Globalstar service provider partnerships.                                                                                                                                                            
|   
|(4) | On January 1, 2002, we recorded a charge of
    $890 million to write off all of our goodwill as the
    cumulative effect of change in accounting principle (see
    Note 9 to the consolidated financial statements).                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(5) | Cash flow provided by (used in) operating activities includes
    cash flow provided by discontinued operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(6) | As a result of our Chapter 11 filing, our debt obligations,
    preferred stock obligations and certain other liabilities
    existing at July 15, 2003, have been classified as
    liabilities subject to compromise on our balance sheets as of
    December 31, 2004 and 2003 (see Note 10 to the
    consolidated financial statements).                                                                                                                                                                                                                                                                                     
|   
|(7) | On December 21, 2001, Loral Orion completed exchange offers
    and consent solicitations by issuing $613 million principal
    amount of new senior notes guaranteed by Loral and
    0.6 million five year warrants to purchase Loral common
    stock in exchange for a total of $841 million principal
    amount of Loral Orion senior notes due 2007 and senior discount
    notes due 2007.                                                                                                                                                                                                                                

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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Results of
    Operations and Financial Condition

The following discussion and analysis should be read in
conjunction with our consolidated financial statements (the
financial statements) included in Item 15 of
this Annual Report on Form 10-K.


We use the terms Loral, the Company,
we, our, and us in this
report to refer to Loral Space & Communications Ltd.
and its subsidiaries. When we use the term Loral
Skynet or Skynet, we are, unless the context
provides otherwise, referring to our entire satellite services
business, the assets of which are held in various companies.


Disclosure Regarding Forward-Looking Statements


Except for the historical information contained in the
following discussion and analysis, the matters discussed below
are not historical facts, but are forward-looking
statements as that term is defined in the Private
Securities Litigation Reform Act of 1995. In addition, we or our
representatives have made and may continue to make
forward-looking statements, orally or in writing, in other
contexts. These forward-looking statements can be identified by
the use of words such as believes,
expects, plans, may,
will, would, could,
should, anticipates,
estimates, project, intend,
or outlook or other variations of these words. These
statements are not guarantees of future performance and involve
risks and uncertainties that are difficult to predict or
quantify. Actual events or results may differ materially as a
result of a wide variety of factors and conditions, many of
which are beyond our control. These include confirmation of a
plan of reorganization by the United States Bankruptcy Court for
the Southern District of New York (the Bankruptcy
Court), and our ability to maintain good relations with
our customers, suppliers and employees. For a detailed
discussion of these and other factors and conditions, please
refer to the Commitments and Contingencies section below and to
our other periodic reports filed with the Securities and
Exchange Commission (SEC). We operate in an industry
sector in which the value of securities may be volatile and may
be influenced by economic and other factors beyond our control.
We undertake no obligation to update any forward-looking
statements.


Overview


Businesses






| |                   
| | ------------------
| | Satellite Services





17



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| |                        
| | -----------------------
| | Satellite Manufacturing









Bankruptcy Proceedings






18



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Sale of Assets




Future Outlook












Consolidated Operating Results






19



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Revenues:


|                                                                                        |  |                          |        |   |      |   |        |      |  |   |         |  
|--------------------------------------------------------------------------------------- |  | ------------------------ | ------ | - | ---- | - | ------ | ---- |  | - | ------- | -
|                                                                                        |  | Years Ended December 31, |       
|                                                                                        |  |                          |       
|                                                                                        |  | 2004                     |        |   | 2003 |   |        | 2002 | 
|                                                                                        |  |                          |        |   |      |   |        |      | 
|                                                                                        |  | (in millions)            |       
|Satellite Services                                                                      |  | $                        | 141.2  |   |      | $ | 154.3  |      |  | $ | 197.5   |  
|Revenues from sales-type lease arrangement (see note 7 to
    the financial statements) |  |                          | 87.2   |   |      |   |       |      |  |   |        |  
|Satellite Manufacturing                                                                 |  |                          | 436.6  |   |      |   | 474.0  |      |  |   | 853.1   |  
|                                                                                        |  |                          |        |   |      |   |        |      | 
|Segment revenues                                                                        |  |                          | 665.0  |   |      |   | 628.3  |      |  |   | 1,050.6 |  
|Eliminations(1)                                                                         |  |                          | (142.9 | ) |      |   | (236.3 | )    |  |   | (150.1  | )
|                                                                                        |  |                          |        |   |      |   |        |      | 
|Revenues as
    reported(2)                                                             |  | $                        | 522.1  |   |      | $ | 392.0  |      |  | $ | 900.5   |  
|                                                                                        |  |                          |        |   |      |   |        |      | 

Adjusted EBITDA:


|                                                                                               |  |                         |       |   |      |   |        |      |  |   |       |  
|---------------------------------------------------------------------------------------------- |  | ----------------------- | ----- | - | ---- | - | ------ | ---- |  | - | ----- | -
|                                                                                               |  | Years Ended December 31 |      
|                                                                                               |  |                         |      
|                                                                                               |  | 2004                    |       |   | 2003 |   |        | 2002 | 
|                                                                                               |  |                         |       |   |      |   |        |      | 
|                                                                                               |  | (in millions)           |      
|Satellite
    Services(3)                                                                      |  | $                       | 15.6  |   |      | $ | 7.5    |      |  | $ | 35.9  |  
|Satellite Services sales-type lease
    arrangement(3)(see note 7 to the financial statements) |  |                         | 7.7   |   |      |   |       |      |  |   |      |  
|Satellite
    Manufacturing(4)                                                                 |  |                         | (13.5 | ) |      |   | (158.6 | )    |  |   | (34.0 | )
|Corporate
    expenses(5)                                                                      |  |                         | (34.9 | ) |      |   | (36.0  | )    |  |   | (36.8 | )
|                                                                                               |  |                         |       |   |      |   |        |      | 
|Segment Adjusted EBITDA before eliminations                                                    |  |                         | (25.1 | ) |      |   | (187.1 | )    |  |   | (34.9 | )
|Eliminations(1)                                                                                |  |                         | (24.0 | ) |      |   | (41.9  | )    |  |   | (44.1 | )
|                                                                                               |  |                         |       |   |      |   |        |      | 
|Adjusted EBITDA                                                                                |  | $                       | (49.1 | ) |      | $ | (229.0 | )    |  | $ | (79.0 | )
|                                                                                               |  |                         |       |   |      |   |        |      | 

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Reconciliation of Adjusted EBITDA to Net Loss:


|                                                                                                                               |  |                         |        |   |      |   |        |      |  |   |          |  
|------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------- | ------ | - | ---- | - | ------ | ---- |  | - | -------- | -
|                                                                                                                               |  | Years Ended December 31 |       
|                                                                                                                               |  |                         |       
|                                                                                                                               |  | 2004                    |        |   | 2003 |   |        | 2002 | 
|                                                                                                                               |  |                         |        |   |      |   |        |      | 
|                                                                                                                               |  | (in millions)           |       
|Adjusted EBITDA                                                                                                                |  | $                       | (49.1  | ) |      | $ | (229.0 | )    |  | $ | (79.0    | )
|Depreciation and
    amortization(6)                                                                                           |  |                         | (134.8 | ) |      |   | (134.6 | )    |  |   | (129.4   | )
|Reorganization expenses due to bankruptcy                                                                                      |  |                         | (30.4  | ) |      |   | (25.3  | )    |  |   |         |  
|                                                                                                                               |  |                         |        |   |      |   |        |      | 
|Operating loss from continuing operations                                                                                      |  |                         | (214.3 | ) |      |   | (388.9 | )    |  |   | (208.4   | )
|Interest and investment income                                                                                                 |  |                         | 9.9    |   |      |   | 15.2   |      |  |   | 12.8     |  
|Interest expense                                                                                                               |  |                         | (2.9   | ) |      |   | (14.1  | )    |  |   | (40.9    | )
|Other income (expense)                                                                                                         |  |                         | (0.5   | ) |      |   | 1.5    |      |  |   | 0.1      |  
|Gain (loss) on investments                                                                                                     |  |                         |       |   |      |   | 17.9   |      |  |   | (1.2     | )
|Income tax (provision) benefit                                                                                                 |  |                         | (13.2  | ) |      |   | 6.4    |      |  |   | (322.4   | )
|Equity income (losses) in affiliates, net of taxes                                                                             |  |                         | 46.6   |   |      |   | (51.2  | )    |  |   | (76.3    | )
|Minority interest                                                                                                              |  |                         | 0.1    |   |      |   |       |      |  |   | (0.2     | )
|                                                                                                                               |  |                         |        |   |      |   |        |      | 
|Loss from continuing operations                                                                                                |  |                         | (174.3 | ) |      |   | (413.2 | )    |  |   | (636.5   | )
|(Loss) income from discontinued operations                                                                                     |  |                         | (2.4   | ) |      |   | 18.8   |      |  |   | 57.6     |  
|                                                                                                                               |  |                         |        |   |      |   |        |      | 
|Loss before cumulative effect of change in accounting principle
    and extraordinary gain on acquisition of minority interest |  |                         | (176.7 | ) |      |   | (394.4 | )    |  |   | (578.9   | )
|Cumulative effect of change in accounting principle                                                                            |  |                         |       |   |      |   | (1.9   | )    |  |   | (890.3   | )
|Extraordinary gain on acquisition of minority interest                                                                         |  |                         |       |   |      |   | 13.6   |      |  |   |         |  
|                                                                                                                               |  |                         |        |   |      |   |        |      | 
|Net loss                                                                                                                       |  | $                       | (176.7 | ) |      | $ | (382.7 | )    |  | $ | (1,469.2 | )
|                                                                                                                               |  |                         |        |   |      |   |        |      | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents the elimination of intercompany sales and
    intercompany Adjusted EBITDA, primarily for satellites under
    construction by SS/ L for wholly owned subsidiaries and in 2003,
    the reversal of cumulative satellite manufacturing sales of
    $83 million and cost of satellite manufacturing of
    $73 million on a satellite program that was changed to a
    lease arrangement in the third quarter of 2003 (see Note 7
    to the financial statements).
|   
|(2) | Includes revenues from affiliates of $7.8 million,
    $27.7 million and $79.6 million in 2004, 2003 and
    2002, respectively.                                                                                                                                                                                                                                                                                                                                               

(3)


|                                                               |                                                                                                           |                                                                                              |      |       |      |   |     |      |   |   |      |      |   | 
|-------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | ---- | ----- | ---- | - | --- | ---- | - | - | ---- | ---- | - | 
|                                                               |                                                                                                           | Years Ended December 31,                                                                     |     
|                                                               |                                                                                                           |                                                                                              |     
|                                                               |                                                                                                           | 2004                                                                                         |      |       | 2003 |   |     | 2002 |  
|                                                               |                                                                                                           |                                                                                              |      |       |      |   |     |      |  
|Satellite Services includes:                                   |                                                                                                           |                                                                                              |      |       |      |   |     |      |   |   |      |     
|                                                               | Adjusted EBITDA before specific identified (charges) credits                                              |                                                                                              | $    | 27.6  |      |   | $   | 7.5  |   |   | $    | 35.9 |  
|                                                               | Impairment charge for Telstar 14/ Estrela do Sul-1 satellite
    (see Note 7 to the financial statements) |                                                                                              |      | (12.0 | )    |   |     |     |   |   |      |     |  
|                                                               |                                                                                                           | Satellite Services sales-type lease arrangement (see Note 7
    to the financial statements) |      |       | 7.7  |   |     |      |  |   |      |      |  | 
|                                                               |                                                                                                           |                                                                                              |      |       |      |   |     |      |  
|Satellite Services segment Adjusted EBITDA before eliminations |                                                                                                           | $                                                                                            | 23.3 |       |      | $ | 7.5 |      |   | $ | 35.9 |     
|                                                               |                                                                                                           |                                                                                              |      |       |      |   |     |      |  



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | Excludes charges of $24 million for 2004, as a result of
    the settlement of all orbital receivables on satellites sold to
    Intelsat. This settlement had the effect of reducing future
    orbital receipts by $25 million, including $15 million
    relating to a satellite currently under construction. Consistent
    with our internal reporting for satellite manufacturing, this
    decrease in contract value for the satellite currently under
    construction is not

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| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | being reflected as a decrease in 2004 satellite manufacturing
    revenues. These charges had no effect on our consolidated
    results.

|                                                                        |                                                                  |                          |       |       |      |   |        |       |   |   |       |       |  
|----------------------------------------------------------------------- | ---------------------------------------------------------------- | ------------------------ | ----- | ----- | ---- | - | ------ | ----- | - | - | ----- | ----- | -
|                                                                        |                                                                  | Years Ended December 31, |      
|                                                                        |                                                                  |                          |      
|                                                                        |                                                                  | 2004                     |       |       | 2003 |   |        | 2002  |  
|                                                                        |                                                                  |                          |       |       |      |   |        |       |  
|Satellite Manufacturing includes:                                       |                                                                  |                          |       |       |      |   |        |       |   |   |       |      
|                                                                        | Adjusted EBITDA before specific identified charges               |                          | $     | 1.1   |      |   | $      | (23.5 | ) |   | $     | 59.2  |  
|                                                                        | Write-off of long-term receivables due to contract modifications |                          |       | (11.3 | )    |   |        | (20.2 | ) |   |       |      |  
|                                                                        | Provisions for inventory obsolescence                            |                          |       | (3.3  | )    |   |        | (49.5 | ) |   |       | (14.0 | )
|                                                                        | Loss on cancellation of deposits                                 |                          |       |      |      |   |        | (23.5 | ) |   |       | (10.0 | )
|                                                                        | Accrual for Alcatel settlement                                   |                          |       |      |      |   |        | (13.0 | ) |   |       |      |  
|                                                                        | Loss on acceleration of receipt of long-term receivables         |                          |       |      |      |   |        | (10.9 | ) |   |       |      |  
|                                                                        | Valuation allowance on vendor financing receivables              |                          |       |      |      |   |        | (10.0 | ) |   |       | (32.6 | )
|                                                                        | Write-off of advances related to affiliate                       |                          |       |      |      |   |        |      |   |   |       | (36.6 | )
|                                                                        | Settlement of satellite contract dispute                         |                          |       |      |      |   |        | (8.0  | ) |   |       |      |  
|                                                                        |                                                                  |                          |       |       |      |   |        |       |  
|Satellite Manufacturing segment Adjusted EBITDA before
    eliminations |                                                                  | $                        | (13.5 | )     |      | $ | (158.6 | )     |   | $ | (34.0 | )    
|                                                                        |                                                                  |                          |       |       |      |   |        |       |  



|    |                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(5) | Represents corporate expenses incurred in support of our
    operations.                                                                                                                                                                                                                                       
|   
|(6) | Includes additional depreciation expense of $9 million and
    $14 million for 2004 and 2003, respectively, due to
    accelerating the estimated end of depreciable life of our
    Telstar 11 satellite to June 2004 from March 2005. Also,
    includes amortization of unearned stock compensation charges.

2004 Compared with 2003 and 2002




| |                                 
| | --------------------------------
| | Revenues from Satellite Services

|                                             |  |               |     |            |      |   |     |            |  |   |      |   |  |      |    |    |  |  |     |   
|-------------------------------------------- |  | ------------- | --- | ---------- | ---- | - | --- | ---------- |  | - | ---- | - |  | ---- | -- | -- |  |  | --- | --
|                                             |  |               |     |            |      |   |     | % Increase | 
|                                             |  |               |     | (Decrease) |     
|                                             |  | Years Ended   |     |            |      |  
|                                             |  | December 31,  |     |            | 2004 |   |     | 2003       | 
|                                             |  |               |     |            | Vs.  |   |     | vs.        | 
|                                             |  | 2004          |     |            | 2003 |   |     | 2002       |  |   | 2003 |   |  | 2002 |   
|                                             |  |               |     |            |      |   |     |            |  |   |      |   |  |      |   
|                                             |  | (in millions) |     |            |      |   |    
|Revenues from Satellite Services             |  | $             | 141 |            |      | $ | 154 |            |  | $ | 197  |   |  |      | (8 | )% |  |  | (22 | )%
|Revenues from sales-type lease arrangement   |  |               | 87  |            |      |   |    |            |  |   |     |   |  |      |    |    |  |  |     |   
|Eliminations                                 |  |               | (5  | )          |      |   | (7  | )          |  |   | (5   | ) |  |      | 29 | %  |  |  | (40 | )%
|                                             |  |               |     |            |      |   |     |            |  |   |      |   |  |      |   
|Revenues from Satellite Services as reported |  | $             | 223 |            |      | $ | 147 |            |  | $ | 192  |   |  |      | 51 | %  |  |  | (23 | )%
|                                             |  |               |     |            |      |   |     |            |  |   |      |   |  |      |   





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Revenues from Satellite
Manufacturing


|                                                  |  |               |      |            |      |   |      |            |  |   |      |   |  |      |    |    |  |  |     |   
|------------------------------------------------- |  | ------------- | ---- | ---------- | ---- | - | ---- | ---------- |  | - | ---- | - |  | ---- | -- | -- |  |  | --- | --
|                                                  |  |               |      |            |      |   |      | % Increase | 
|                                                  |  |               |      | (Decrease) |     
|                                                  |  | Years Ended   |      |            |      |  
|                                                  |  | December 31,  |      |            | 2004 |   |      | 2003       | 
|                                                  |  |               |      |            | vs.  |   |      | vs.        | 
|                                                  |  | 2004          |      |            | 2003 |   |      | 2002       |  |   | 2003 |   |  | 2002 |   
|                                                  |  |               |      |            |      |   |      |            |  |   |      |   |  |      |   
|                                                  |  | (in millions) |      |            |      |   |     
|Revenues from Satellite Manufacturing             |  | $             | 437  |            |      | $ | 474  |            |  | $ | 853  |   |  |      | (8 | )% |  |  | (44 | )%
|Eliminations                                      |  |               | (137 | )          |      |   | (229 | )          |  |   | (145 | ) |  |      | 40 | %  |  |  | (58 | )%
|                                                  |  |               |      |            |      |   |      |            |  |   |      |   |  |      |   
|Revenues from Satellite Manufacturing as reported |  | $             | 300  |            |      | $ | 245  |            |  | $ | 708  |   |  |      | 22 | %  |  |  | (65 | )%
|                                                  |  |               |      |            |      |   |      |            |  |   |      |   |  |      |   





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Cost of Satellite Services


|                                                                                 |                                                               |               |     |            |      |   |     |            |  |   |      |     |  |      |    |     |    |  |    |     |   
|-------------------------------------------------------------------------------- | ------------------------------------------------------------- | ------------- | --- | ---------- | ---- | - | --- | ---------- |  | - | ---- | --- |  | ---- | -- | --- | -- |  | -- | --- | --
|                                                                                 |                                                               |               |     |            |      |   |     | % Increase | 
|                                                                                 |                                                               |               |     | (Decrease) |     
|                                                                                 |                                                               | Years Ended   |     |            |      |  
|                                                                                 |                                                               | December 31,  |     |            | 2004 |   |     | 2003       | 
|                                                                                 |                                                               |               |     |            | vs.  |   |     | vs.        | 
|                                                                                 |                                                               | 2004          |     |            | 2003 |   |     | 2002       |  |   | 2003 |     |  | 2002 |   
|                                                                                 |                                                               |               |     |            |      |   |     |            |  |   |      |     |  |      |   
|                                                                                 |                                                               | (in millions) |     |            |      |   |    
|Cost of Satellite Services includes:                                             |                                                               |               |     |            |      |   |     |            |  |   |      |     |  |      |    |     |    |  |    |    
|                                                                                 | Cost of Satellite Services before specific identified charges |               | $   | 65         |      |   | $   | 85         |  |   | $    | 105 |  |      |    | (23 | )% |  |    | (19 | )%
|                                                                                 | Depreciation and amortization                                 |               |     | 112        |      |   |     | 107        |  |   |      | 96  |  |      |    | 4   | %  |  |    | 12  | % 
|                                                                                 | Impairment charge for Telstar 14/ Estrela do Sul-1 satellite  |               |     | 12         |      |   |     |           |  |   |      |    |  |      |    |     |    |  |    |     |   
|                                                                                 | Cost of sales-type lease arrangement                          |               |     | 80         |      |   |     |           |  |   |      |    |  |      |    |     |    |  |    |     |   
|                                                                                 |                                                               |               |     |            |      |   |     |            |  |   |      |     |  |      |   
|Cost of Satellite Services                                                       |                                                               | $             | 269 |            |      | $ | 192 |            |  | $ | 201  |     |  |      | 40 | %   |    |  | (5 | )% 
|                                                                                 |                                                               |               |     |            |      |   |     |            |  |   |      |     |  |      |   
|Cost of Satellite Services as a % of Satellite Services revenues
    as reported |                                                               |               | 121 | %          |      |   | 130 | %          |  |   | 105  | %   |  |      |    |     |    |  |    |    





24



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Cost of Satellite
Manufacturing


|                                                                                           |                                                                        |               |     |            |      |   |     |            |   |   |      |     |  |      |     |     |    |  |     |     |   
|------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------- | ------------- | --- | ---------- | ---- | - | --- | ---------- | - | - | ---- | --- |  | ---- | --- | --- | -- |  | --- | --- | --
|                                                                                           |                                                                        |               |     |            |      |   |     | % Increase |  
|                                                                                           |                                                                        |               |     | (Decrease) |     
|                                                                                           |                                                                        | Years Ended   |     |            |      |  
|                                                                                           |                                                                        | December 31,  |     |            | 2004 |   |     | 2003       |  
|                                                                                           |                                                                        |               |     |            | vs.  |   |     | vs.        |  
|                                                                                           |                                                                        | 2004          |     |            | 2003 |   |     | 2002       |   |   | 2003 |     |  | 2002 |    
|                                                                                           |                                                                        |               |     |            |      |   |     |            |   |   |      |     |  |      |    
|                                                                                           |                                                                        | (in millions) |     |            |      |   |    
|Cost of Satellite Manufacturing includes:                                                  |                                                                        |               |     |            |      |   |     |            |   |   |      |     |  |      |     |     |    |  |     |    
|                                                                                           | Cost of Satellite Manufacturing before specific identified
    charges |               | $   | 292        |      |   | $   | 352        |   |   | $    | 633 |  |      |     | (17 | )% |  |     | (44 | )%
|                                                                                           | Depreciation and amortization                                          |               |     | 23         |      |   |     | 27         |   |   |      | 33  |  |      |     | (16 | )% |  |     | (18 | )%
|                                                                                           | Provisions for inventory obsolescence                                  |               |     | 3          |      |   |     | 50         |   |   |      | 14  |  |      |     |     |    |  |     |     |   
|                                                                                           | Loss on cancellation of deposits                                       |               |     |           |      |   |     | 24         |   |   |      | 10  |  |      |     |     |    |  |     |     |   
|                                                                                           | Accrual for Alcatel settlement                                         |               |     |           |      |   |     | 13         |   |   |      |    |  |      |     |     |    |  |     |     |   
|                                                                                           | Loss on acceleration of receipt of long-term receivables               |               |     |           |      |   |     | 11         |   |   |      |    |  |      |     |     |    |  |     |     |   
|                                                                                           | Valuation allowance on vendor financing receivables                    |               |     |           |      |   |     | 10         |   |   |      | 33  |  |      |     |     |    |  |     |     |   
|                                                                                           | Write-off of advances related to affiliate                             |               |     |           |      |   |     |           |   |   |      | 37  |  |      |     |     |    |  |     |     |   
|                                                                                           | Settlement of satellite contract dispute                               |               |     |           |      |   |     | 8          |   |   |      |   |  |      |     |     |    |  |     |     |   
|                                                                                           | Reversal of costs on a satellite program changed to a lease            |               |     |           |      |   |     | (73        | ) |   |      |    |  |      |     |     |    |  |     |     |   
|                                                                                           |                                                                        |               |     |            |      |   |     |            |   |   |      |     |  |      |    
|Cost of Satellite Manufacturing                                                            |                                                                        | $             | 318 |            |      | $ | 422 |            |   | $ | 760  |     |  |      | (25 | )%  |    |  | (44 | )% 
|                                                                                           |                                                                        |               |     |            |      |   |     |            |   |   |      |     |  |      |    
|Cost of Satellite Manufacturing as a % of Satellite
    Manufacturing revenues as reported |                                                                        |               | 106 | %          |      |   | 172 | %          |   |   | 107  | %   |  |      |     |     |    |  |     |    





25



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##### Table of Contents



Selling, General and
Administrative Expenses


|                                             |  |               |     |            |      |   |     |            |  |   |      |   |  |      |     |    |  |  |    |   
|-------------------------------------------- |  | ------------- | --- | ---------- | ---- | - | --- | ---------- |  | - | ---- | - |  | ---- | --- | -- |  |  | -- | --
|                                             |  |               |     |            |      |   |     | % Increase | 
|                                             |  |               |     | (Decrease) |     
|                                             |  | Years Ended   |     |            |      |  
|                                             |  | December 31,  |     |            | 2004 |   |     | 2003       | 
|                                             |  |               |     |            | vs.  |   |     | Vs.        | 
|                                             |  | 2004          |     |            | 2003 |   |     | 2002       |  |   | 2003 |   |  | 2002 |    
|                                             |  |               |     |            |      |   |     |            |  |   |      |   |  |      |    
|                                             |  | (in millions) |     |            |      |   |    
|Selling, general and administrative expenses |  | $             | 119 |            |      | $ | 142 |            |  | $ | 148  |   |  |      | (16 | )% |  |  | (5 | %)
|% of revenues as reported                    |  |               | 23  | %          |      |   | 36  | %          |  |   | 16   | % |  |      |     |    |  |  |    |   





Reorganization Expenses Due to
Bankruptcy


|                                          |  |              |    |  |                  |            |    |            |  |  |    |  
|----------------------------------------- |  | ------------ | -- |  | ---------------- | ---------- | -- | ---------- |  |  | -- | -
|                                          |  |              |    |  |                  | % Increase |   
|                                          |  | Year Ended   |    |  | July 15, 2003 to |            |    | (Decrease) | 
|                                          |  | December 31, |    |  | December 31,     |            |    | 2004 vs.   | 
|                                          |  | 2004         |    |  | 2003             |            |    | 2003       | 
|                                          |  |              |    |  |                  |            |    |            | 
|Reorganization Expenses Due to Bankruptcy |  | $            | 30 |  |                  | $          | 25 |            |  |  | 20 | %



Interest and Investment
Income


|                               |  |               |    |            |      |   |    |            |  |   |      |  |  |      |     |    |  |  |    |  
|------------------------------ |  | ------------- | -- | ---------- | ---- | - | -- | ---------- |  | - | ---- |  |  | ---- | --- | -- |  |  | -- | -
|                               |  |               |    |            |      |   |    | % Increase | 
|                               |  |               |    | (Decrease) |     
|                               |  | Years Ended   |    |            |      |  
|                               |  | December 31,  |    |            | 2004 |   |    | 2003       | 
|                               |  |               |    |            | vs.  |   |    | vs.        | 
|                               |  | 2004          |    |            | 2003 |   |    | 2002       |  |   | 2003 |  |  | 2002 |    
|                               |  |               |    |            |      |   |    |            |  |   |      |  |  |      |    
|                               |  | (in millions) |    |            |      |   |   
|Interest and investment income |  | $             | 10 |            |      | $ | 15 |            |  | $ | 13   |  |  |      | (35 | )% |  |  | 18 | %



26



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Interest Expense


|                                          |  |               |    |            |      |   |     |            |  |   |      |   |  |      |     |    |  |  |     |   
|----------------------------------------- |  | ------------- | -- | ---------- | ---- | - | --- | ---------- |  | - | ---- | - |  | ---- | --- | -- |  |  | --- | --
|                                          |  |               |    |            |      |   |     | % Increase | 
|                                          |  |               |    | (Decrease) |     
|                                          |  | Years Ended   |    |            |      |  
|                                          |  | December 31,  |    |            | 2004 |   |     | 2003       | 
|                                          |  |               |    |            | vs.  |   |     | Vs.        | 
|                                          |  | 2004          |    |            | 2003 |   |     | 2002       |  |   | 2003 |   |  | 2002 |    
|                                          |  |               |    |            |      |   |     |            |  |   |      |   |  |      |    
|                                          |  | (in millions) |    |            |      |   |    
|Interest cost before capitalized interest |  | $             | 4  |            |      | $ | 28  |            |  | $ | 51   |   |  |      | (83 | )% |  |  | (48 | )%
|Capitalized interest                      |  |               | (1 | )          |      |   | (14 | )          |  |   | (10  | ) |  |      | (93 | )% |  |  | 37  | % 
|                                          |  |               |    |            |      |   |     |            |  |   |      |   |  |      |    
|Interest expense                          |  | $             | 3  |            |      | $ | 14  |            |  | $ | 41   |   |  |      | (73 | )% |  |  | (69 | )%
|                                          |  |               |    |            |      |   |     |            |  |   |      |   |  |      |    







| |                       
| | ----------------------
| | Other Income (Expense)





| |                           
| | --------------------------
| | Gain (Loss) on Investments





| |                               
| | ------------------------------
| | Income Tax (Provision) Benefit







27



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| |                                     
| | ------------------------------------
| | Equity Income (Losses) in Affiliates

|                                                        |  |                          |      |  |      |   |       |      |  |   |       |  
|------------------------------------------------------- |  | ------------------------ | ---- |  | ---- | - | ----- | ---- |  | - | ----- | -
|                                                        |  | Years Ended December 31, |     
|                                                        |  |                          |     
|                                                        |  | 2004                     |      |  | 2003 |   |       | 2002 | 
|                                                        |  |                          |      |  |      |   |       |      | 
|                                                        |  | (in millions)            |     
|XTAR                                                    |  | $                        | 0.1  |  |      | $ | (0.2  | )    |  | $ | (7.0  | )
|Satmex                                                  |  |                          |     |  |      |   | (51.7 | )    |  |   | (25.1 | )
|Europe*Star                                             |  |                          |     |  |      |   |      |      |  |   | (41.6 | )
|Globalstar and Globalstar service provider partnerships |  |                          | 46.6 |  |      |   | 0.7   |      |  |   | (2.6  | )
|                                                        |  |                          |      |  |      |   |       |      | 
|                                                        |  | $                        | 46.7 |  |      | $ | (51.2 | )    |  | $ | (76.3 | )
|                                                        |  |                          |      |  |      |   |       |      | 







| |                        
| | -----------------------
| | Discontinued Operations



28



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| |                                                    
| | ---------------------------------------------------
| | Cumulative Effect of Change in Accounting Principle







| |                                                       
| | ------------------------------------------------------
| | Extraordinary Gain on Acquisition of Minority Interest





| |                    
| | -------------------
| | Preferred Dividends

|                    |  |               |   |            |      |   |      |            |  |      |    |  |      |  |     |  |  |  |     |   
|------------------- |  | ------------- | - | ---------- | ---- | - | ---- | ---------- |  | ---- | -- |  | ---- |  | --- |  |  |  | --- | --
|                    |  |               |   |            |      |   |      | % Increase | 
|                    |  |               |   | (Decrease) |     
|                    |  | Years Ended   |   |            |      |  
|                    |  | December 31,  |   |            | 2004 |   |      | 2003       | 
|                    |  |               |   |            | vs.  |   |      | vs.        | 
|                    |  | 2004          |   | 2003       |      |   | 2002 |            |  | 2003 |    |  | 2002 | 
|                    |  |               |   |            |      |   |      |            |  |      |    |  |      | 
|                    |  | (in millions) |   |            |      |   |     
|Preferred dividends |  | $             |  |            |      | $ | 7    |            |  | $    | 89 |  |      |  | N/A |  |  |  | (92 | )%







| |        
| | -------
| | Backlog



|                                     |                                   |      |     |       |      |   |      |       | 
|------------------------------------ | --------------------------------- | ---- | --- | ----- | ---- | - | ---- | ----- | 
|                                     |                                   | 2004 |     |       | 2003 |  
|                                     |                                   |      |     |       |      |  
|Satellite Services                   |                                   | $    | 543 |       |      | $ | 830  |      
|Satellite Manufacturing              |                                   |      | 483 |       |      |   | 536  |      
|                                     |                                   |      |     |       |      |  
|                                     | Total backlog before eliminations |      |     | 1,026 |      |   |      | 1,366 | 
|Satellite Services eliminations      |                                   |      | (33 | )     |      |   | (37  | )    
|Satellite Manufacturing eliminations |                                   |      | (12 | )     |      |   | (145 | )    
|                                     |                                   |      |     |       |      |  
|                                     | Total backlog                     |      | $   | 981   |      |   | $    | 1,184 | 
|                                     |                                   |      |     |       |      |  



29



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| |                            
| | ---------------------------
| | Critical Accounting Matters





| |                    
| | -------------------
| | Revenue recognition





| |             
| | ------------
| | Depreciation





| |                                                                   
| | ------------------------------------------------------------------
| | Billed receivables, vendor financing and long-term
    receivables





| |            
| | -----------
| | Inventories



30



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| |                                                                                                         
| | --------------------------------------------------------------------------------------------------------
| | Evaluation of Satellites and Other Long-Lived Assets For
    Impairment and Satellite Insurance Coverage





| |   |                                                                                    
| | - | -----------------------------------------------------------------------------------
| |  | Changes in estimates of the useful life of the satellite                           
|
| |  | Changes in estimates of our ability to operate the satellite at
    expected levels
|
| |  | Changes in the manner in which the satellite is to be used                         
|
| |  | The loss of one or several significant customer contracts on the
    satellite     





| |         
| | --------
| | Taxation









31



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| |                                    
| | -----------------------------------
| | Pension and other employee benefits













32



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| |              
| | -------------
| | Contingencies



Liquidity and Capital Resources




| |                          
| | -------------------------
| | Cash and Available Credit





Contractual Obligations and Other Commercial Commitments






| |                                
| | -------------------------------
| | Contractual
    Obligations(1):

|                                          |  |                        |           |  |        |   |           |           |  |   |           |  |  |               |        |  |  |   |        | 
|----------------------------------------- |  | ---------------------- | --------- |  | ------ | - | --------- | --------- |  | - | --------- |  |  | ------------- | ------ |  |  | - | ------ | 
|                                          |  | Payments Due by Period |          
|                                          |  |                        |          
|                                          |  | Total                  |           |  | 1 Year |   |           | 2-3 Years |  |   | 4-5 Years |  |  | After 5 Years |       
|                                          |  |                        |           |  |        |   |           |           |  |   |           |  |  |               |       
|Debt(2)                                   |  | $                      | 1,269,977 |  |        | $ | 1,269,977 |           |  | $ |          |  |  | $             |       |  |  | $ |       | 
|Operating
    leases(3)                   |  |                        | 142,008   |  |        |   | 29,300    |           |  |   | 38,895    |  |  |               | 29,178 |  |  |   | 44,635 | 
|Unconditional purchase
    obligations(4) |  |                        | 82,033    |  |        |   | 62,233    |           |  |   | 10,102    |  |  |               | 9,698  |  |  |   |       | 
|Other long-term
    obligations(5)        |  |                        | 129,193   |  |        |   | 79,404    |           |  |   | 8,489     |  |  |               | 39,955 |  |  |   | 1,345  | 
|Preferred stock
    redemptions(6)        |  |                        | 223,981   |  |        |   | 223,981   |           |  |   |          |  |  |               |       |  |  |   |       | 
|                                          |  |                        |           |  |        |   |           |           |  |   |           |  |  |               |       
|Total contractual cash obligations        |  | $                      | 1,847,192 |  |        | $ | 1,664,895 |           |  | $ | 57,486    |  |  | $             | 78,831 |  |  | $ | 45,980 | 
|                                          |  |                        |           |  |        |   |           |           |  |   |           |  |  |               |       



| |                              
| | -----------------------------
| | Other Commercial Commitments:

|                                                |  |           |       |  |                                            |   |       |           |  |           |   |               |  |   |   |  |  |   |       | 
|----------------------------------------------- |  | --------- | ----- |  | ------------------------------------------ | - | ----- | --------- |  | --------- | - | ------------- |  | - | - |  |  | - | ----- | 
|                                                |  | Total     |       |  | Amount of Commitment Expiration Per Period |  
|                                                |  | Amounts   |       |  |                                            |  
|                                                |  | Committed |       |  | 1 Year                                     |   |       | 2-3 Years |  | 4-5 Years |   | After 5 Years | 
|                                                |  |           |       |  |                                            |   |       |           |  |           |   |               | 
|Standby letters of credit and
    guarantees(7) |  | $         | 7,305 |  |                                            | $ | 4,925 |           |  | $         |  |               |  | $ |  |  |  | $ | 2,380 | 
|                                                |  |           |       |  |                                            |   |       |           |  |           |   |               |  |   |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Pursuant to Section 365 of the Bankruptcy Code, Loral and
    its Debtor subsidiaries may reject or assume prepetition
    executory contracts and unexpired leases, and parties affected
    by rejections of these contracts or leases may file claims with
    the Bankruptcy Court which will be addressed in the context of
    the Chapter 11 Cases. The above table includes amounts that
    are subject to compromise under a plan of reorganization,
    including: all of our debt and preferred stock, and certain of
    our operating leases,

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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | unconditional purchase obligations
    and other long-term obligations. See Note 10 to the
    financial statements for further detail on liabilities subject
    to compromise.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(2) | Represents cash obligations for
    principal payments and the difference in the carrying value and
    principal amount for Loral Orions 10% senior notes
    that was amortized over the life of the notes. As a result of
    our Chapter 11 filing on July 15, 2003, all of our
    prepetition debt obligations were accelerated. While we
    continued to pay interest on our secured bank debt through March
    2004, we stopped accruing and paying interest on all of our
    senior unsecured notes with an aggregate principal amount of
    $1.049 billion. This has significantly reduced our cash
    interest payments. See Note 10 to the financial statements
    for further detail on our debt obligations.                                                    
|   
|(3) | Represents future minimum payments
    under operating leases with initial or remaining terms of one
    year or more, net of sub-lease rentals of $0.8 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(4) | SS/ L has entered into various
    purchase commitments with suppliers due to the long lead times
    required to produce purchased parts and launch vehicles.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(5) | Primarily represents vendor
    financing related amounts owed to subcontractors and amounts due
    to APT representing Lorals share of the project cost of
    Telstar 18.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(6) | In August 2002, our Board of
    Directors approved a plan to suspend indefinitely the future
    payment of dividends on our two series of preferred stock.
    Accordingly, we have deferred the payments of quarterly
    dividends due on our Series C and Series D preferred
    stock. We stopped accruing dividends on our two series of
    preferred stock on July 15, 2003 in our financial
    statements, as a result of our Chapter 11 filing. As a
    result of the adoption of SFAS 150 on July 1, 2003, we
    reclassified our preferred stock to liabilities from
    shareholders deficit at June 30, 2003 and the related
    dividends have been included in interest expense since the
    adoption of SFAS 150 (see Note 3 to the financial
    statements).
|   
|(7) | Letters of credit have a maturity
    of one year and are renewed annually.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          



| |                                                     
| | ----------------------------------------------------
| | Net Cash Provided by Continuing Operating Activities







| |                                             
| | --------------------------------------------
| | Net Cash Provided by Discontinued Operations





| |                                                    
| | ---------------------------------------------------
| | Net Cash Provided By (Used in) Investing Activities



34



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| |                                                    
| | ---------------------------------------------------
| | Net Cash (Used in) Provided by Financing Activities







| |      
| | -----
| | Other





| |                  
| | -----------------
| | Affiliate Matters

Managements Discussion and Analysis of Results of
Operations and Financial Condition




|                                                                                                      |  |                          |      |   |      |   |      |      |  |   |       |  
|----------------------------------------------------------------------------------------------------- |  | ------------------------ | ---- | - | ---- | - | ---- | ---- |  | - | ----- | -
|                                                                                                      |  | Years Ended December 31, |     
|                                                                                                      |  |                          |     
|                                                                                                      |  | 2004                     |      |   | 2003 |   |      | 2002 | 
|                                                                                                      |  |                          |      |   |      |   |      |      | 
|Revenues                                                                                              |  | $                        | 7.8  |   |      | $ | 27.7 |      |  | $ | 79.6  |  
|Elimination of Lorals proportionate share of losses
    (profits) relating to affiliate transactions |  |                          | 2.4  |   |      |   | 4.4  |      |  |   | (10.9 | )
|(Losses) profits relating to affiliate transactions not
    eliminated                                |  |                          | (1.9 | ) |      |   | (3.6 | )    |  |   | 9.9   |  



Commitments and Contingencies




35



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##### Table of Contents





|   |                       
|-- | ----------------------
|I. | Financial Risk Factors

We filed for bankruptcy protection on July 15, 2003 and
are subject to its associated risks and uncertainties.








Our emergence from Chapter 11 reorganization depends on
the success of our business plan and our ability to generate
enough cash to pay our obligations and fund our operations.











36



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##### Table of Contents





Our plan of reorganization contains conditions that will
restrict our ability to raise funds after emergence.




There may be certain tax implications upon our emergence from
Chapter 11 reorganization.






|    |                         
|--- | ------------------------
|II. | Operational Risk Factors

Launch failures have delayed some of our operations in the
past and may do so again in the future.






After launch, our satellites remain vulnerable to in-orbit
failures which may result in reduced revenues and profits and
other financial consequences.




37



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##### Table of Contents





Some satellites built by SS/ L, including three satellites
operated by subsidiaries or affiliates of Loral, have
experienced minor losses of power from their solar arrays.




Some satellites built by SS/ L have the same design as
another SS/ L-built satellite that has experienced a partial
failure.




It may be difficult to obtain full insurance coverage for
satellites that have, or are part of a family of satellites that
has, experienced problems in the past.




Like other satellite operators, we are faced with increased
launch and in-orbit insurance premiums and shorter coverage
periods.




Our satellite services businesses compete with other
providers for market share and customers.








| |   |                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Leasing or otherwise providing satellite services transponder
    capacity (other than for our network services business) to a
    customer for transmission within the United States;

38



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##### Table of Contents





| |   |                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Locating a satellite in the orbital arc between 54 degrees W.L.
    and 143 degrees W.L. for the purpose of engaging in the
    prohibited service; and
|
| |  | Soliciting existing customers on the satellite fleet serving the
    North American market to migrate their service to our satellites.                 







The satellite manufacturing market continues to be highly
competitive.




SS/ Ls contracts are subject to adjustments, cost
overruns and termination.








39



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##### Table of Contents





SS/ L may forfeit payments from customers as a result of
satellite failures or losses after launch, or may be liable for
penalty payments under certain circumstances, and these losses
may be uninsured.








We are subject to export controls, which may result in delays
and additional costs.






Our business is regulated, causing uncertainty and additional
costs.






40



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##### Table of Contents





We face risks in conducting business internationally.




We share control of our affiliates with third parties.




We rely on key personnel.






|     |            
|---- | -----------
|III. | Other Risks

Litigation and disputes.


Globalstar.


Shareholder Rights.


41



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##### Table of Contents



Other Matters




| |                          
| | -------------------------
| | Accounting Pronouncements








|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures about Market
    Risk



| |                 
| | ----------------
| | Foreign Currency



|                                            |  |              |        |  |       |   |      | 
|------------------------------------------- |  | ------------ | ------ |  | ----- | - | ---- | 
|                                            |  | Japanese Yen |        |  | U.S.$ |  
|                                            |  |              |        |  |       |  
|Future revenues                             |  |              | ¥1,770 |  |       | $ | 17.2 | 
|Future expenditures                         |  |              | 114    |  |       |   | 1.1  | 
|Contracts-in-process (unbilled receivables) |  |              | 1,467  |  |       |   | 14.2 | 





| |         
| | --------
| | Interest












|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data



42



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##### Table of Contents








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








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures



| |                                                 
| | ------------------------------------------------
| | Evaluation of Disclosure Controls and Procedures





| |                                                                     
| | --------------------------------------------------------------------
| | Managements Report on Internal Control Over Financial
    Reporting





| |                                                      
| | -----------------------------------------------------
| | Changes in Internal Controls Over Financial Reporting





| |                                                  
| | -------------------------------------------------
| | Inherent Limitations on Effectiveness of Controls



43



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




Internal Control  Integrated Framework








Internal
Control  Integrated Framework Internal Control  Integrated
Framework




44



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##### Table of Contents





DELOITTE &
TOUCHE LLP






45



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##### Table of Contents






PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant

Directors




|                     |  |                                                                                                                                                                                                                                                           
|-------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Bernard L. Schwartz  |  |                                                                                                                                                                                                                                                           
|                     |  |                                                                                                                                                                                                                                                           
|                    
|Age:                 |  | 79                                                                                                                                                                                                                                                        
|Director Since:      |  | 1996                                                                                                                                                                                                                                                      
|Business Experience: |  | Mr. Schwartz is Chairman of the Board of Directors and Chief
    Executive Officer of the Company.                                                                                                                                                        
|Other Directorships: |  | First Data Corp., K&F Industries, Inc. and Satélites
    Mexicanos, S.A. de C.V. Trustee of NYU Medical Center and Health
    System, Thirteen/WNET Educational Broadcasting Corporation and
    the Baruch College Fund.                                 
|                    
|Robert B. Hodes      |  |                                                                                                                                                                                                                                                           
|                     |  |                                                                                                                                                                                                                                                           
|                    
|Age:                 |  | 79                                                                                                                                                                                                                                                        
|Director Since:      |  | 1996                                                                                                                                                                                                                                                      
|Business Experience: |  | Mr. Hodes is counsel to Willkie Farr & Gallagher LLP, a
    law firm in New York, N.Y., and, until 1996, was a partner in
    and co-chairman of that firm.                                                                                               
|Other Directorships: |  | LCH Investments, N.V., Mueller Industries, Inc., The National
    Philanthropic Trust, and R.V.I. Guaranty Ltd.                                                                                                                                           
|                    
|Gershon Kekst        |  |                                                                                                                                                                                                                                                           
|                     |  |                                                                                                                                                                                                                                                           
|                    
|Age:                 |  | 70                                                                                                                                                                                                                                                        
|Director Since:      |  | 1996                                                                                                                                                                                                                                                      
|Business Experience: |  | Mr. Kekst is President of Kekst and Company Incorporated, a
    strategic corporate and financial communications (consulting)
    firm.                                                                                                                   
|                    
|Charles Lazarus      |  |                                                                                                                                                                                                                                                           
|                     |  |                                                                                                                                                                                                                                                           
|                    
|Age:                 |  | 81                                                                                                                                                                                                                                                        
|Director Since:      |  | 1996                                                                                                                                                                                                                                                      
|Business Experience: |  | Mr. Lazarus is Chairman Emeritus of Toys R Us, Inc.                                                                                                                                                                                                     
|                    
|Sally Minard         |  |                                                                                                                                                                                                                                                           
|                     |  |                                                                                                                                                                                                                                                           
|                    
|Age:                 |  | 62                                                                                                                                                                                                                                                        
|Director Since:      |  | 2002                                                                                                                                                                                                                                                      
|Business Experience: |  | Ms. Minard is co-chair of the Womens Leadership Forum of
    the Democratic National Committee in New York State. She was
    co-founder and CEO of Lotas Minard Patton McIver, an advertising
    communications firm in New York, N.Y., from 1986-1999.
|Other Directorships: |  | American Red Cross (NY), Metropolitan Museum of Art, NARAL
    Pro-Choice New York Foundation, The New School and The New York
    Womens Agenda.                                                                                                        
|                    
|Malvin A. Ruderman   |  |                                                                                                                                                                                                                                                           
|                     |  |                                                                                                                                                                                                                                                           
|                    
|Age:                 |  | 77                                                                                                                                                                                                                                                        
|Director Since:      |  | 1996                                                                                                                                                                                                                                                      
|Business Experience: |  | Dr. Ruderman is the Centennial Professor of Physics at Columbia
    University in New York, N.Y. He has been a member of the Board
    of Trustees of the Institute for Advanced Study and of
    Associated Universities, Inc.                           

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|                     |  |                                                                                                                                                                                                                                                                                                                                                                      
|-------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|E. Donald Shapiro    |  |                                                                                                                                                                                                                                                                                                                                                                      
|                     |  |                                                                                                                                                                                                                                                                                                                                                                      
|                    
|Age:                 |  | 73                                                                                                                                                                                                                                                                                                                                                                   
|Director Since:      |  | 1996                                                                                                                                                                                                                                                                                                                                                                 
|Business Experience: |  | Mr. Shapiro has been The Joseph Solomon Distinguished Professor
    of Law at New York Law School since 1983 and Dean Emeritus since
    2000 and was previously Dean/Professor of Law (1973-1983).                                                                                                                                                                  
|Other Directorships: |  | Frequency Electronics, Inc., Kramont Realty Trust, nStor, Inc.
    and Vasomedical, Inc.                                                                                                                                                                                                                                                                             
|                    
|Arthur L. Simon      |  |                                                                                                                                                                                                                                                                                                                                                                      
|                     |  |                                                                                                                                                                                                                                                                                                                                                                      
|                    
|Age:                 |  | 73                                                                                                                                                                                                                                                                                                                                                                   
|Director Since:      |  | 1996                                                                                                                                                                                                                                                                                                                                                                 
|Business Experience: |  | Mr. Simon is an independent consultant. Previously, he was a
    partner at Coopers & Lybrand L.L.P., Certified Public
    Accountants, from 1968 to 1994.                                                                                                                                                                                                           
|Other Directorships: |  | L-3 Communications Corporation                                                                                                                                                                                                                                                                                                                                       
|                    
|Daniel Yankelovich   |  |                                                                                                                                                                                                                                                                                                                                                                      
|                     |  |                                                                                                                                                                                                                                                                                                                                                                      
|                    
|Age:                 |  | 80                                                                                                                                                                                                                                                                                                                                                                   
|Director Since:      |  | 1996                                                                                                                                                                                                                                                                                                                                                                 
|Business Experience: |  | Mr. Yankelovich is Chairman of DYG, Inc., a market, consumer and
    opinion research firm in New York, N.Y. He is also Chairman of
    Viewpoint Learning, Inc., a consulting firm based in
    San Diego, CA.                                                                                                                                                      
|                    
|Eric J. Zahler       |  |                                                                                                                                                                                                                                                                                                                                                                      
|                     |  |                                                                                                                                                                                                                                                                                                                                                                      
|                    
|Age:                 |  | 54                                                                                                                                                                                                                                                                                                                                                                   
|Director Since:      |  | 2001                                                                                                                                                                                                                                                                                                                                                                 
|Business Experience: |  | Mr. Zahler has been President and Chief Operating Officer of the
    Company since February 2000. Previously, he was Executive Vice
    President of the Company since October 1999, Senior Vice
    President, General Counsel and Secretary of the Company since
    February 1998 and Vice President, General Counsel and Secretary
    of the Company since 1996.
|Other Directorships: |  | Satélites Mexicanos, S.A. de C.V. and EasyLink Services
    Corporation.                                                                                                                                                                                                                                                                                             





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Audit Committee




Executive Officers of the Registrant




|                     |  |     |    |  |          |                                                                                                                                                                                                                                                                                                                               
|-------------------- |  | --- | -- |  | -------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name                 |  | Age |    |  | Position
|                     |  |     |    |  |         
|Bernard L. Schwartz  |  |     | 79 |  |          | Chairman of the Board of Directors and Chief Executive Officer
    since January 1996.                                                                                                                                                                                                                                        
|Eric J. Zahler       |  |     | 54 |  |          | Director since July 2001 and President and Chief Operating
    Officer since February 2000. Prior to that, Executive Vice
    President since October 1999. Prior to that, Senior Vice
    President, General Counsel and Secretary since February 1998 and
    Vice President, General Counsel and Secretary since April 1996
|Richard J. Townsend  |  |     | 54 |  |          | Executive Vice President and Chief Financial Officer since March
    2003. Prior to that, Senior Vice President and Chief Financial
    Officer since October 1998.                                                                                                                                                           
|Robert E. Berry      |  |     | 76 |  |          | Senior Vice President since November 1996 and Chairman of Space
    Systems/Loral since September 1999. Prior to that, President of
    Space Systems/Loral since 1990.                                                                                                                                                       
|Laurence D. Atlas    |  |     | 47 |  |          | Vice President, Government Relations 
    Telecommunications since May 1997.                                                                                                                                                                                                                                                 
|Jeanette H. Clonan   |  |     | 56 |  |          | Vice President  Communications and Investor Relations
    since December 1996.                                                                                                                                                                                                                                               
|C. Patrick DeWitt    |  |     | 58 |  |          | Vice President. President of Space Systems/Loral since November
    2001. Prior to that, Executive Vice President of Space
    Systems/Loral since 1996.                                                                                                                                                                      
|Stephen L. Jackson   |  |     | 63 |  |          | Vice President  Administration since March 1997.                                                                                                                                                                                                                                                                             
|Avi Katz             |  |     | 46 |  |          | Vice President, General Counsel and Secretary since November
    1999. Prior to that, Vice President, Deputy General Counsel and
    Assistant Secretary since February 1998.                                                                                                                                                 
|Russell R. Mack      |  |     | 50 |  |          | Vice President  Business Ventures since February 1998.                                                                                                                                                                                                                                                                       
|Richard P. Mastoloni |  |     | 40 |  |          | Vice President and Treasurer since February 2002. Prior to that,
    Vice President since September 2001 and Assistant Treasurer
    since August 2000. Prior to that, Director of Corporate Finance
    since August 1997.                                                                                                   
|Harvey B. Rein       |  |     | 51 |  |          | Vice President and Controller since April 1996.                                                                                                                                                                                                                                                                               
|Janet T. Yeung       |  |     | 40 |  |          | Vice President, Deputy General Counsel and Assistant Secretary
    since February 2000. Prior to that, Associate General Counsel
    and Assistant Secretary since November 1999. Prior to that,
    Associate General Counsel since February 1998.                                                                           



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Section 16(a) Beneficial Ownership Reporting
Compliance




Code of Ethics









|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

Executive Compensation




|                          |                          |      |      |                     |        |              |           |           |            |           |              |            |     |        |           |         |         |  |   |                 |     |  |   |        |  |   |         |         | 
|------------------------- | ------------------------ | ---- | ---- | ------------------- | ------ | ------------ | --------- | --------- | ---------- | --------- | ------------ | ---------- | --- | ------ | --------- | ------- | ------- |  | - | --------------- | --- |  | - | ------ |  | - | ------- | ------- | 
|                          |                          |      |      |                     |        |              |           |           |            | Long Term |              |            |    
|                          |                          |      |      |                     |        | Compensation |           |           |           
|                          |                          |      |      | Annual Compensation |        |              |           |           |            |          
|                          |                          |      |      |                     |        |              |           |           | Securities |           |              |           
|                          |                          |      |      |                     |        | Other        |           |           | Restricted |           |              | Underlying |     |        |          
|Name &                    |                          |      |      |                     |        | Annual       |           |           | Stock      |           |              | Stock      |     |        | All Other |        
|Principal Position        |                          | Year |      |                     | Salary |              |           | Bonus     |            |           | Compensation |            |     | Awards |           |         | Options |  |   | Compensation(a) |    
|                          |                          |      |      |                     |        |              |           |           |            |           |              |            |     |        |           |         |         |  |   |                 |    
|Bernard L. Schwartz,      |                          |      |      |                     |        |              |           |           |            |           |              |            |     |        |           |         |         |  |   |                 |     |  |   |        |  |   |         |        
|                          | Chairman of the Board of |      |      | 2004                |        |              | $         | 1,518,767 | (b)        |           | $            | 0          |     |        |           |         |         |  |   |                 |     |  |   | 0      |  |   | $       | 32,380  | 
|                          | Directors and Chief      |      |      | 2003                |        |              | $         | 292,150   | (b)        |           | $            | 0          |     |        | $         | 42,763  | (c)     |  |   |                 |     |  |   | 0      |  |   | $       | 32,200  | 
|                          | Executive Officer        |      |      | 2002                |        |              | $         | 1,744,576 |            |           | $            | 0          |     |        |           |         |         |  |   |                 |     |  |   | 25,000 |  |   | $       | 261,648 | 
|Eric J. Zahler, President |                          |      | 2004 |                     |        | $            | 1,142,308 |           |            | $         | 480,000      |            |     |        |           |         |         |  |   |                 |     |  | 0 |        |  | $ | 191,626 |        
|                          | and Chief Operating      |      |      | 2003                |        |              | $         | 1,000,000 |            |           | $            | 400,000    |     |        |           |         |         |  |   |                 |     |  |   | 0      |  |   | $       | 53,946  | 
|                          | Officer                  |      |      | 2002                |        |              | $         | 1,000,000 |            |           | $            | 225,000    |     |        |           |         |         |  |   |                 |     |  |   | 16,250 |  |   | $       | 53,346  | 
|Richard J. Townsend,      |                          |      |      |                     |        |              |           |           |            |           |              |            |     |        |           |         |         |  |   |                 |     |  |   |        |  |   |         |        
|                          | Executive Vice President |      |      | 2004                |        |              | $         | 838,462   |            |           | $            | 360,000    |     |        |           |         |         |  |   |                 |     |  |   | 0      |  |   | $       | 131,615 | 
|                          | and Chief Financial      |      |      | 2003                |        |              | $         | 770,000   |            |           | $            | 360,000    |     |        |           |         |         |  |   |                 |     |  |   | 0      |  |   | $       | 21,435  | 
|                          | Officer                  |      |      | 2002                |        |              | $         | 640,673   |            |           | $            | 150,000    |     |        |           |         |         |  |   |                 |     |  |   | 15,000 |  |   | $       | 20,835  | 
|C. Patrick DeWitt, Vice   |                          |      |      |                     |        |              |           |           |            |           |              |            |     |        |           |         |         |  |   |                 |     |  |   |        |  |   |         |        
|                          | President and President  |      |      | 2004                |        |              | $         | 447,435   |            |           | $            | 271,109    |     |        |           |         |         |  |   |                 |     |  |   | 0      |  |   | $       | 130,446 | 
|                          | of Space Systems/        |      |      | 2003                |        |              | $         | 426,675   |            |           | $            | 0          | (d) |        |           |         |         |  |   |                 |     |  |   | 0      |  |   | $       | 7,197   | 
|                          | Loral, Inc.              |      |      | 2002                |        |              | $         | 363,462   |            |           | $            | 250,000    |     |        | $         | 148,269 | (e)     |  | $ | 152,000         | (f) |  |   | 0      |  |   | $       | 7,194   | 
|Avi Katz, Vice President, |                          |      | 2004 |                     |        | $            | 420,390   |           |            | $         | 170,000      |            |     |        |           |         |         |  |   |                 |     |  | 0 |        |  | $ | 66,726  |        
|                          | General Counsel and      |      |      | 2003                |        |              | $         | 400,404   |            |           | $            | 150,000    |     |        |           |         |         |  |   |                 |     |  |   | 0      |  |   | $       | 15,921  | 
|                          | Secretary                |      |      | 2002                |        |              | $         | 369,154   |            |           | $            | 135,000    |     |        |           |         |         |  |   |                 |     |  |   | 0      |  |   | $       | 15,321  | 

49



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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | For 2004, includes annual Board of Directors fee in the amount
    of $25,000 to each of Messrs. Schwartz and Zahler and
    Company matching contributions to the Savings Plan in the amount
    of $7,380 for each of Messrs. Schwartz, Zahler, Townsend
    and Katz and $5,446 for Mr. DeWitt and the value of
    supplemental life insurance premiums in the amounts of $21,746,
    $14,235 and $8,721 for Messrs. Zahler, Townsend and Katz,
    respectively. Also includes payments of $137,500, $110,000,
    $125,000 and $50,625 to Messrs. Zahler, Townsend, Dewitt,
    and Katz, respectively, under the Companys Key Employee
    Retention Plan (KERP) approved by the Bankruptcy
    Court in December 2003.
|   
|(b) | At Mr. Schwartzs request, the Compensation Committee
    of the Board of Directors agreed to amend his employment
    agreement to provide for no base salary for the twelve-month
    period commencing March 1, 2003. Salary paid in 2003 is for
    the period of January 1, 2003 through February 28,
    2003. Salary paid in 2004 is for the period March 1, 2004
    through December 31, 2004.                                                                                                                                                                                                                                                                                                                           
|   
|(c) | Represents the aggregate incremental cost to Loral for use of
    Lorals corporate jet by Mr. Schwartz.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|(d) | Mr. DeWitt received $125,000 payment under the KERP in 2004
    in lieu of his 2003 bonus.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(e) | Consists of $146,150 for Mr. DeWitt for a tax gross-up on
    his restricted stock award and the Companys Medicare match
    on this income of $2,119.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(f) | Represents the market value of 40,000 shares of restricted
    stock granted to Mr. DeWitt on December 18, 2002. Such
    shares had a market value of $6,800 based on the closing price
    of Lorals common stock at December 31, 2004. The
    restrictions lapse on the third anniversary of the date of
    grant. This is the only restricted stock grant that has been
    awarded to Mr. DeWitt and represents his entire restricted
    stock holdings at December 31, 2004.

Employment Contracts, Change in Control and Other
Compensation Arrangements










50



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51



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Option Exercises and Year-End Value Table




|                    |  |                            |         |  |                              |  |   |             |  |  |               |  |  |  |   | 
|------------------- |  | -------------------------- | ------- |  | ---------------------------- |  | - | ----------- |  |  | ------------- |  |  |  | - | 
|                    |  | Number of Securities       |         |  | Value of Unexercised In-the- | 
|                    |  | Underlying Unexercised     |         |  | Money Options at Fiscal      | 
|                    |  | Options at Fiscal Year-End |         |  | Year-End                     | 
|                    |  |                            |         |  |                              | 
|Name                |  | Exercisable                |         |  | Unexercisable                |  |   | Exercisable |  |  | Unexercisable | 
|                    |  |                            |         |  |                              |  |   |             |  |  |               | 
|Bernard L. Schwartz |  |                            | 718,000 |  |                              |  | 0 |             |  |  | 0             |  |  |  | 0 | 
|Eric J. Zahler      |  |                            | 93,750  |  |                              |  | 0 |             |  |  | 0             |  |  |  | 0 | 
|Richard J. Townsend |  |                            | 62,500  |  |                              |  | 0 |             |  |  | 0             |  |  |  | 0 | 
|C. Patrick DeWitt   |  |                            | 34,945  |  |                              |  | 0 |             |  |  | 0             |  |  |  | 0 | 
|Avi Katz            |  |                            | 18,840  |  |                              |  | 0 |             |  |  | 0             |  |  |  | 0 | 

Pension Plan






52



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|                     |  |                               |        |  |    |   |         |    |  |   |         |  |  |    |         |  |    |   |         |  |  |   |         | 
|-------------------- |  | ----------------------------- | ------ |  | -- | - | ------- | -- |  | - | ------- |  |  | -- | ------- |  | -- | - | ------- |  |  | - | ------- | 
|                     |  | Years of Contributory Service |       
|                     |  |                               |       
|Final Average Salary |  | 10                            |        |  | 15 |   |         | 20 |  |   | 25      |  |  | 30 |         |  | 35 |  
|                     |  |                               |        |  |    |   |         |    |  |   |         |  |  |    |         |  |    |  
|$100,000             |  | $                             | 14,530 |  |    | $ | 21,800  |    |  | $ | 29,060  |  |  | $  | 36,330  |  |    | $ | 43,590  |  |  | $ | 50,860  | 
|125,000              |  |                               | 18,910 |  |    |   | 28,360  |    |  |   | 37,810  |  |  |    | 47,260  |  |    |   | 56,720  |  |  |   | 66,170  | 
|150,000              |  |                               | 23,280 |  |    |   | 34,920  |    |  |   | 46,560  |  |  |    | 58,200  |  |    |   | 69,840  |  |  |   | 81,480  | 
|175,000              |  |                               | 27,660 |  |    |   | 41,480  |    |  |   | 55,310  |  |  |    | 69,140  |  |    |   | 82,970  |  |  |   | 96,790  | 
|200,000              |  |                               | 32,030 |  |    |   | 48,050  |    |  |   | 64,060  |  |  |    | 80,080  |  |    |   | 96,090  |  |  |   | 112,110 | 
|225,000              |  |                               | 36,410 |  |    |   | 54,610  |    |  |   | 72,810  |  |  |    | 91,010  |  |    |   | 109,220 |  |  |   | 127,420 | 
|250,000              |  |                               | 40,780 |  |    |   | 61,170  |    |  |   | 81,560  |  |  |    | 101,950 |  |    |   | 122,340 |  |  |   | 142,730 | 
|275,000              |  |                               | 45,160 |  |    |   | 67,730  |    |  |   | 90,310  |  |  |    | 112,890 |  |    |   | 135,470 |  |  |   | 158,040 | 
|300,000              |  |                               | 49,530 |  |    |   | 74,300  |    |  |   | 99,060  |  |  |    | 123,830 |  |    |   | 148,590 |  |  |   | 173,360 | 
|350,000              |  |                               | 58,280 |  |    |   | 87,420  |    |  |   | 116,560 |  |  |    | 145,700 |  |    |   | 174,840 |  |  |   | 203,980 | 
|400,000              |  |                               | 67,030 |  |    |   | 100,550 |    |  |   | 134,060 |  |  |    | 167,580 |  |    |   | 201,090 |  |  |   | 234,610 | 
|450,000              |  |                               | 75,780 |  |    |   | 113,670 |    |  |   | 151,560 |  |  |    | 189,450 |  |    |   | 227,340 |  |  |   | 265,230 | 
|500,000              |  |                               | 84,530 |  |    |   | 126,800 |    |  |   | 169,060 |  |  |    | 211,330 |  |    |   | 253,590 |  |  |   | 295,860 | 



Annual Benefits




Director Compensation




53



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Indemnification of Directors and Officers




Compensation Committee Interlocks and Insider
Participation









|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters







54



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|                                                                             |  |                                 |           |      |            |  |     |  
|---------------------------------------------------------------------------- |  | ------------------------------- | --------- | ---- | ---------- |  | --- | -
|                                                                             |  | Amount and Nature of Beneficial |           |      | Percent of | 
|Name of Individual                                                           |  | Ownership (1)(2)                |           |      | Class      | 
|                                                                             |  |                                 |           |      |            | 
|Bernard L. Schwartz                                                          |  |                                 | 1,111,925 | (3)  |            |  | 2.5 | %
|C. Patrick DeWitt                                                            |  |                                 | 79,729    | (4)  |            |  | *   |  
|Robert B. Hodes                                                              |  |                                 | 30,720    | (5)  |            |  | *   |  
|Avi Katz                                                                     |  |                                 | 24,394    | (6)  |            |  | *   |  
|Gershon Kekst                                                                |  |                                 | 30,520    | (7)  |            |  | *   |  
|Charles Lazarus                                                              |  |                                 | 28,520    | (7)  |            |  | *   |  
|Sally Minard                                                                 |  |                                 | 5,000     | (8)  |            |  | *   |  
|Malvin A. Ruderman                                                           |  |                                 | 28,520    | (7)  |            |  | *   |  
|E. Donald Shapiro                                                            |  |                                 | 28,520    | (9)  |            |  | *   |  
|Arthur L. Simon                                                              |  |                                 | 32,520    | (10) |            |  | *   |  
|Richard J. Townsend                                                          |  |                                 | 70,047    | (11) |            |  | *   |  
|Daniel Yankelovich                                                           |  |                                 | 30,520    | (7)  |            |  | *   |  
|Eric J. Zahler                                                               |  |                                 | 115,896   | (12) |            |  | *   |  
|All directors, NEOs and other executive officers as a group
    (23 persons) |  |                                 | 1,758,513 | (13) |            |  | 3.9 | %






| |   |                                              
| | - | ---------------------------------------------
| | * | Represents holdings of less than one percent.



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Includes shares which, as of March 1, 2005, may be acquired
    within sixty days pursuant to the exercise of options (which
    shares are treated as outstanding for the purposes of
    determining beneficial ownership and computing the percentage
    set forth) and shares held for the benefit of named executive
    directors as of March 1, 2005 in the Loral Savings Plan
    (the Savings Plan).
|
| | (2) | Except as noted, all shares are owned directly with sole
    investment and voting power.                                                                                                                                                                                                                                                                                                                       
|
| | (3) | Includes 16,000 shares owned by Mr. Schwartzs
    wife, 718,000 shares exercisable under the Stock Option
    Plans and 2,599 shares held in the Savings Plan.                                                                                                                                                                                                                                                 
|
| | (4) | Includes 40,000 shares of restricted stock,
    34,945 shares exercisable under the Stock Option Plans and
    3,184 shares held in the Savings Plan.                                                                                                                                                                                                                                                           
|
| | (5) | Consists of 2,000 shares held in Mr. Hodes IRA
    account, 200 shares held by Mr. Hodes minor
    children and 28,520 shares exercisable under the Stock
    Option Plans.                                                                                                                                                                                                                                   
|
| | (6) | Includes 18,840 shares exercisable under the Stock Option
    Plans and 5,454 shares held in the Savings Plan.                                                                                                                                                                                                                                                                                                  
|
| | (7) | Includes 28,520 shares exercisable under the Stock Option
    Plans.                                                                                                                                                                                                                                                                                                                                            
|
| | (8) | Consists of 5,000 shares exercisable under the Stock Option
    Plans.                                                                                                                                                                                                                                                                                                                                          
|
| | (9) | Consists of 28,520 shares exercisable under the Stock
    Option Plans.                                                                                                                                                                                                                                                                                                                                         



|     |                                                                                                                                                                                                                                                                                                   
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Includes 2,975 shares held in Mr. Simons IRA
    account, 25 shares in his wifes IRA account,
    4,000 shares of Series C Preferred Stock convertible
    into 1,000 shares of common stock held in
    Mr. Simons IRA account and 28,520 shares
    exercisable under the Stock Option Plans.
|    
|(11) | Includes 2,500 shares of Series C Preferred Stock
    convertible into 625 shares of common stock,
    62,500 shares exercisable under the Stock Option Plans and
    2,872 shares held in the Savings Plan.                                                                                      
|    
|(12) | Includes 5,000 shares held in Mr. Zahlers IRA
    account, 67,912 shares exercisable under the Stock Option
    Plans and 4,026 shares held in the Savings Plan.                                                                                                                                 
|    
|(13) | Includes 6,500 shares of Series C Preferred Stock
    convertible into 1,625 shares of common stock,
    1,263,065 shares exercisable under the Stock Option Plans
    and 41,607 shares held in the Savings Plan.                                                                                

55



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##### Table of Contents





|                                                           |       |                   |           |           |                  |                     |       |                      |  |  |           |           | 
|---------------------------------------------------------- | ----- | ----------------- | --------- | --------- | ---------------- | ------------------- | ----- | -------------------- |  |  | --------- | --------- | 
|                                                           |       |                   |           |           |                  | Number of           |      
|                                                           |       |                   |           |           |                  | securities          |      
|                                                           |       |                   |           |           |                  | remaining available |      
|                                                           |       | Number of         |           |           | Weighted-        |                     |       | for future issuance  | 
|                                                           |       | securities to be  |           |           | average exercise |                     |       | under equity         | 
|                                                           |       | issued upon       |           |           | price of         |                     |       | compensation         | 
|                                                           |       | exercise of       |           |           | outstanding      |                     |       | plans (excluding     | 
|                                                           |       | outstanding       |           |           | options,         |                     |       | securities reflected | 
|                                                           |       | options, warrants |           |           | warrants and     |                     |       | in column (a))       | 
|Plan Category                                              |       | and rights (a)(1) |           |           | rights (b)       |                     |       | (c)(2)               | 
|                                                           |       |                   |           |           |                  |                     |       |                      | 
|Equity compensation plans approved by security holders     |       |                   | 767,520   |           |                  | $                   | 95.63 |                      |  |  | 881,696   |          
|Equity compensation plans not approved by security holders |       |                   | 1,585,431 |           |                  | $                   | 20.30 |                      |  |  | 2,114,569 |          
|                                                           |       |                   |           |           |                  |                     |       |                      | 
|                                                           | Total |                   |           | 2,352,951 |                  |                     | $     | 44.87                |  |  |           | 2,996,265 | 
|                                                           |       |                   |           |           |                  |                     |       |                      | 






|    |                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Does not include 34,262 of outstanding options that Loral
    assumed in connection with the acquisition of Loral Orion. These
    options have a weighted-average exercise price of $155.07.
|   
|(2) | During the pendency of our Chapter 11 Cases, no grants of
    stock or stock options will be made under our employee benefit
    plans.                                                      

Equity Compensation Plan Not Approved by Security Holders:
2000 Stock Option Plan












56



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##### Table of Contents












|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions

K&F Industries, Inc.






Other Relationships











|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services



|                          |  |      |           |  |      |   |           | 
|------------------------- |  | ---- | --------- |  | ---- | - | --------- | 
|                          |  | 2004 |           |  | 2003 |  
|                          |  |      |           |  |      |  
|Audit
    Fees(a)         |  | $    | 3,366,000 |  |      | $ | 2,789,000 | 
|Audit Related
    Fees(b) |  |      | 352,000   |  |      |   | 233,000   | 
|Tax Consultation Fees     |  |      | 167,000   |  |      |   | 388,000   | 
|All Other
    Fees(c)     |  |      | 574,000   |  |      |   | 719,000   | 
|                          |  |      |           |  |      |  
|Total                     |  | $    | 4,459,000 |  |      | $ | 4,129,000 | 
|                          |  |      |           |  |      |  






|    |  |                                                                                                                                                                                                                                                                                    
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes professional services rendered for the audit of the
    Companys annual consolidated financial statements for the
    fiscal years ended December 31, 2004 and 2003, for the
    reviews of the condensed consolidated financial statements
    included in the Companys

57



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##### Table of Contents



|    |  |                                                                                                                                                                                                                          
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  | Quarterly Reports on Form 10-Q for the 2004 and 2003 fiscal
    years, stand-alone and statutory audits of the Companys
    subsidiaries and accounting research and consultation related to
    the audits and reviews.
|   
|(b) |  | Relates primarily to research and consultation on a transfer of
    interest transaction and various other filings with the
    Securities and Exchange Commission.                                                      
|   
|(c) |  | Relates primarily to the Companys Chapter 11 filing
    and related filings and activities.                                                                                                                             



58



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##### Table of Contents






PART IV







|         |                                                                    
|-------- | -------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules and Reports on
    Form 8-K



|                                                               |                                                                                                                    |      |     |      | 
|-------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------ | ---- | --- | ---- | 
|                                                               |                                                                                                                    | Page |    
|                                                               |                                                                                                                    |      |    
|Index to Financial Statements and Financial Statement Schedule |                                                                                                                    |      | F-1 |     
|Loral Space & Communications Ltd., A Debtor In
    Possession  |                                                                                                                    |      |     |     
|                                                               | Report of Independent Registered Public Accounting Firm                                                            |      |     | F-2  | 
|                                                               | Consolidated Balance Sheets as of December 31, 2004 and 2003                                                       |      |     | F-4  | 
|                                                               | Consolidated Statements of Operations for the years ended
    December 31, 2004, 2003 and 2002                     |      |     | F-5  | 
|                                                               | Consolidated Statements of Shareholders (Deficit) Equity
    for the years ended December 31, 2004, 2003 and 2002 |      |     | F-6  | 
|                                                               | Consolidated Statements of Cash Flows for the years ended
    December 31, 2004, 2003 and 2002                     |      |     | F-7  | 
|                                                               | Notes to Consolidated Financial Statements                                                                         |      |     | F-8  | 
|                                                              
|                                                               | (a) 2. Financial Statement Schedule                                                                                |      |     |      | 
|                                                               | Schedule II                                                                                                        |      |     | F-66 | 

59



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INDEX TO EXHIBITS


|        |   |             |  |                                                                                                                                                                                                                                                                                                                                
|------- | - | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |            
|Number  |   | Description
|        |   |            
|        | 2 | .1          |  | Restructuring, Financing and Distribution Agreement, dated as of
    January 7, 1996, among Loral Corporation, Loral Aerospace
    Holdings, Inc., Loral Aerospace Corp., Loral General Partner,
    Inc., Loral Globalstar L.P., Loral Globalstar Limited, the
    Registrant and Lockheed Martin Corporation(1)              
|       
|        | 2 | .2          |  | Amendment to Restructuring, Financing and Distribution
    Agreement, dated as of April 15, 1996(1)                                                                                                                                                                                                                            
|       
|        | 2 | .3          |  | Agreement for the Purchase and Sale of Assets dated as of
    September 25, 1996 by and between AT&T Corp., as
    Seller, and Loral Space & Communications Ltd., as
    Buyer(2)                                                                                                                                              
|        | 2 | .3.1        |  | First Amendment to Agreement for the Purchase and Sale of Assets
    dated as of March 14, 1997, by and between AT&T Corp.,
    as Seller, and Loral Space & Communications Ltd., as
    Buyer(3)                                                                                                                              
|       
|        | 2 | .4          |  | Agreement and Plan of Merger dated as of October 7, 1997 by
    and among Orion Network Systems, Inc., Loral Space &
    Communications Ltd. and Loral Satellite Corporation(4)                                                                                                                                                
|       
|        | 2 | .4.1        |  | First Amendment to Agreement and Plan of Merger dated as of
    February 11, 1998 by and among Orion Network Systems, Inc.,
    Loral Space & Communications Ltd. and Loral Satellite
    Corporation(5)                                                                                                                       
|       
|        | 2 | .4.2        |  | Second Amendment to Agreement and Plan of Merger dated as of
    March 20, 1998 by and among Orion Network Systems, Inc.,
    Loral Space & Communications Ltd. and Loral Satellite
    Corporation(9)                                                                                                                         
|       
|        | 2 | .4.3        |  | Second Amended Plan of Reorganization dated December 5,
    2004                                                                                                                                                                                                                                                              
|       
|        | 2 | .5          |  | Asset Purchase Agreement dated as of July 15, 2003, among
    Intelsat, Ltd., Intelsat (Bermuda), Ltd., Loral Space &
    Communications Corporation, Loral SpaceCom Corporation and Loral
    Satellite, Inc. (20)                                                                                                            
|       
|        | 2 | .5.1        |  | Amendment No. 1 to Asset Purchase Agreement dated as of
    July 15, 2003, among Intelsat, Ltd., Intelsat (Bermuda),
    Ltd., Loral Space & Communications Corporation, Loral
    SpaceCom Corporation and Loral Satellite, Inc.(21)                                                                                          
|       
|        | 2 | .5.2        |  | Amendment No. 2 to Asset Purchase Agreement dated as of
    July 15, 2003, among Intelsat, Ltd., Intelsat (Bermuda),
    Ltd., Loral Space & Communications Corporation, Loral
    SpaceCom Corporation and Loral Satellite, Inc.(21)                                                                                          
|       
|        | 2 | .5.3        |  | Amendment No. 3 to Asset Purchase Agreement dated as of
    July 15, 2003, among Intelsat, Ltd., Intelsat (Bermuda),
    Ltd., Loral Space & Communications Corporation, Loral
    SpaceCom Corporation and Loral Satellite, Inc.(21)                                                                                          
|       
|        | 2 | .5.4        |  | Amendment No. 4 to Asset Purchase Agreement dated as of
    March 5, 2004, among Intelsat, Ltd., Intelsat (Bermuda),
    Ltd., Loral Space & Communications Corporation, Loral
    SpaceCom Corporation and Loral Satellite, Inc.(23)                                                                                          
|       
|        | 2 | .5.5        |  | Noncompetition Agreement, dated as of March 17, 2004, by
    and among Intelsat, Ltd., Intelsat (Bermuda), Ltd., Loral
    SpaceCom Corporation, Loral Satellite, Inc., Loral
    Space & Communications Corporation, Loral
    Space & Communications Ltd., Loral Orion, Inc., and
    Loral Skynet Network Services, Inc.(23)
|       
|        | 2 | .5.6        |  | Pledge and Security Agreement, dated as of March 17, 2004
    by and among Space Systems/ Loral, Inc., Loral Space &
    Communications Ltd., Loral SpaceCom Corporation, Loral Skynet do
    Brasil, Ltd. and Intelsat, L.L.C.                                                                                               
|       
|        | 3 | .1          |  | Memorandum of Association(1)                                                                                                                                                                                                                                                                                                   
|       
|        | 3 | .2          |  | Memorandum of Increase of Share Capital dated January 1996(1)                                                                                                                                                                                                                                                                  
|       
|        | 3 | .2.1        |  | Memorandum of Increase of Share Capital dated May 1997(17)                                                                                                                                                                                                                                                                     
|       
|        | 3 | .2.2        |  | Memorandum of Increase of Share Capital dated May 1999(17)                                                                                                                                                                                                                                                                     
|       
|        | 3 | .2.3        |  | Memorandum of Increase of Share Capital dated June 2003(22)                                                                                                                                                                                                                                                                    
|       
|        | 3 | .3          |  | Third Amended and Restated Bye-laws(12)                                                                                                                                                                                                                                                                                        
|       
|        | 3 | .4          |  | Schedule IV to the Third Amended and Restated Bye-laws(12)                                                                                                                                                                                                                                                                     
|       
|        | 3 | .5          |  | Fourth Amended and Restated Bye-laws(22)                                                                                                                                                                                                                                                                                       

60



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|        |    |      |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- | -- | ---- | ----------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |      |            
|Number  |    |      | Description
|        |    |      |            
|       
|        | 4  | .1   |             | Rights Agreement dated March 27, 1996 between the
    Registrant and The Bank of New York, Rights Agent(1)                                                                                                                                                                                                                                                                                                                                                                                                                     
|       
|        | 4  | .2   |             | Indenture dated as of January 15, 1999 relating to the
    Registrants
    91/2% Senior
    Notes due 2006(10)                                                                                                                                                                                                                                                                                                                                                                                                                
|       
|        | 10 | .1   |             | Shareholders Agreement dated as of April 23, 1996 between
    Loral Corporation and the Registrant(1)                                                                                                                                                                                                                                                                                                                                                                                                                          
|       
|        | 10 | .1.1 |             | Amended Shareholders Agreement dated as of March 29, 2000
    between the Registrant and Lockheed Martin Corporation(12)                                                                                                                                                                                                                                                                                                                                                                                                       
|       
|        | 10 | .2   |             | Tax Sharing Agreement dated as of April 22, 1996 between
    Loral Corporation, the Registrant, Lockheed Martin Corporation
    and LAC Acquisition Corporation(1)                                                                                                                                                                                                                                                                                                                                                             
|       
|        | 10 | .3   |             | Exchange Agreement dated as of April 22, 1996 between the
    Registrant and Lockheed Martin Corporation(1)                                                                                                                                                                                                                                                                                                                                                                                                                    
|       
|        | 10 | .4   |             | 1996 Amended and Restated Stock Option Plan(18)                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       
|        | 10 | .4.1 |             | Amendment No. 1 to 1996 Amended and Restated Stock Option
    Plan(18)                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       
|        | 10 | .4.2 |             | 2000 Amended and Restated Stock Option Plan(18)                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       
|        | 10 | .4.3 |             | Amendment No. 1 to 2000 Amended and Restated Stock Option
    Plan(18)                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       
|        | 10 | .5   |             | Common Stock Purchase Plan for Non-Employee Directors(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       
|        | 10 | .6   |             | Employment Agreement between the Registrant and Bernard L.
    Schwartz(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       
|        | 10 | .6.1 |             | Amendment dated as of March 1, 1998 to Employment Agreement
    between the Registrant and Bernard L. Schwartz(9)                                                                                                                                                                                                                                                                                                                                                                                                             
|       
|        | 10 | .6.2 |             | Amendment dated as of July 18, 2000 to Employment Agreement
    between the Registrant and Bernard L. Schwartz(13)                                                                                                                                                                                                                                                                                                                                                                                                            
|       
|        | 10 | .6.3 |             | Amendment dated February 25, 2003 to Employment Agreement
    between the Registrant and Bernard L. Schwartz(18)                                                                                                                                                                                                                                                                                                                                                                                                              
|       
|        | 10 | .7   |             | Registration Rights Agreement dated as of August 9, 1996
    among Loral Space & Communications Ltd., Lehman
    Brothers Capital Partners II, L.P., Lehman Brothers
    Merchant Banking Portfolio Partnership L.P., Lehman Brothers
    Offshore Investment Partnership L.P. and Lehman Brothers
    Offshore Investment Partnership-Japan L.P.(7)                                                                                                                                                                           
|       
|        | 10 | .8   |             | Registration Rights Agreement dated November 6, 1996
    relating to the Registrants 6% Convertible Preferred
    Equivalent Obligations due 2006(6)                                                                                                                                                                                                                                                                                                                                                                          
|       
|        | 10 | .9   |             | Registration Rights Agreement (Series C Preferred Stock)
    dated as of March 31, 1997 between Loral Space &
    Communications Ltd. and Finmeccanica S.p.A. an dated as of
    June 23, 1997 among Loral Space & Communications
    Ltd., Aerospatiale SNI and Alcatel Espace(8)                                                                                                                                                                                                                                             
|       
|        | 10 | .10  |             | Registration Rights Agreement (Common Stock) dated as of
    June 23, 1997 among Loral Space & Communications
    Ltd., Aerospatiale and Alcatel Espace(8)                                                                                                                                                                                                                                                                                                                                                                     
|       
|        | 10 | .11  |             | Purchase and Sale Agreement dated November 17, 1997 between
    the Federal Government of the United Mexican States and
    Corporativo Satelites Mexicanos, S.A. de C.V. for the purchase
    and sale of the capital stock of Satelites Mexicanos, S.A. de
    C.V. (English translation of Spanish original)(9)                                                                                                                                                                                                             
|       
|        | 10 | .12  |             | Amended and Restated Membership Agreement dated and effective as
    of August 21, 1998 among Loral SatMex Ltd. and Ediciones
    Enigma, S.A. de C.V. and Firmamento Mexicano, S. de R.L. de
    C.V.(10)                                                                                                                                                                                                                                                                                                                     
|       
|        | 10 | .13  |             | Letter Agreement dated December 29, 1997 between Loral
    Space & Communications Ltd., Telefonica Autrey S.A. de
    C.V., Donaldson, Lufkin & Jenrette Securities
    Corporation, Lehman Brothers Inc. and Lehman Commercial Paper
    Inc. and related Agreement between the Federal Government of the
    United Mexican States, Telefonica Autrey, S.A. de C.V.,
    Ediciones Enigma, S.A. de C.V., Loral Space &
    Communications Ltd., Loral SatMex Ltd. and Servicios
    Corporativos Satelitales, S.A. de C.V.(9)
|       
|        | 10 | .14  |             | Registration Rights Agreement dated as of January 21, 1999
    relating to Registrants
    91/2% Senior
    Notes due 2006(10)                                                                                                                                                                                                                                                                                                                                                                                                
|       
|        | 10 | .15  |             | Lease Agreement dated as of August 18, 1999 by and between
    Loral Asia Pacific Satellite (HK) Limited and APT Satellite
    Company Limited(11)                                                                                                                                                                                                                                                                                                                                                                             

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|        |    |     |             |                                                                                                                                                                                                                                                                                                      
|------- | -- | --- | ----------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |     |            
|Number  |    |     | Description
|        |    |     |            
|       
|        | 10 | .16 |             | Registration Rights Agreement dated as of February 18, 2000
    relating to Registrants 6% Series D Convertible
    Redeemable Preferred Stock due 2007(12)                                                                                                                                         
|       
|        | 10 | .17 |             | Form of Subordinated Guaranty Agreement between Loral Space&
    Communications Ltd. and Loral SpaceCom Corporation, with respect
    to the $29.7 million aggregate principal amount,
    10% Subordinated Note due 2006, with a copy of the
    10% Subordinated Note due 2006 included therein(14)
|       
|        | 10 | .18 |             | Warrant Agreement dated as of December 21, 2001 between
    Loral Space & Communications Ltd. and The Bank of New
    York, as warrant agent(15)                                                                                                                                                     
|       
|        | 10 | .19 |             | Guaranty Agreement dated as of December 21, 2001 between
    Loral Space & Communications Ltd. and Bankers Trust
    Company, as trustee(15)                                                                                                                                                         
|       
|        | 10 | .20 |             | Indenture, dated as of December 21, 2001, by and among
    Loral CyberStar, Inc., certain of its subsidiaries and Bankers
    Trust Company, as trustee(15)                                                                                                                                          
|       
|        | 10 | .21 |             | Consent Agreement dated January 9, 2002 among the United
    States Department of State, Loral Space &
    Communications Ltd. and Space Systems/ Loral, Inc.(16)                                                                                                                                    
|       
|        | 10 | .22 |             | Master Settlement Agreement dated June 30, 2003 among Loral
    Space & Communications Ltd., Loral Space &
    Communications Corporation, Loral SpaceCom Corporation, Space
    Systems/ Loral, Inc. and Alcatel Space Industries(19)                                                               
|       
|        | 10 | .23 |             | Form of Conformed as Amended Apstar V Satellite Agreement dated
    as of November  16, 2003 between APT Satellite company
    Limited and Loral Orion, Inc.(22)                                                                                                                                     
|       
|        | 10 | .24 |             | Consent Order, signed on November 26, 2003, approving Key
    Employee Retention Plan and other relief for Space Systems/
    Loral, Inc. and Loral Skynet Division of Loral SpaceCom
    Corporation(22)                                                                                           
|       
|        | 10 | .26 |             | Change-in-Control Severance Agreement, entered into on
    February 4, 2004, by and between Loral Space &
    Communications Ltd., Space Systems/ Loral, Inc. and C. Patrick
    DeWitt(22)                                                                                                         
|       
|        | 10 | .27 |             | Form of Letter of Credit Reimbursement Agreement between Space
    Systems/ Loral, Inc. and JP Morgan Chase Bank dated
    April 2, 2004.(24)                                                                                                                                                        
|       
|        | 10 | .28 |             | Form of Cash Collateral Agreement between Space Systems/ Loral,
    Inc. and JP Morgan Chase Bank dated April 2, 2004.(24)                                                                                                                                                                           
|       
|        | 12 |     |             | Statement Re: Computation of Ratios                                                                                                                                                                                                                                                                 
|       
|        | 14 |     |             | Code of Conduct(22)                                                                                                                                                                                                                                                                                  
|       
|        | 21 |     |             | List of Subsidiaries of the Registrant                                                                                                                                                                                                                                                              
|       
|        | 23 | .1  |             | Consent of Deloitte & Touche LLP                                                                                                                                                                                                                                                                    
|       
|        | 31 | .1  |             | Certification of Chief Executive Officer pursuant to
    18 U.S.C. § 1350, as adopted pursuant to
    § 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                       
|       
|        | 31 | .2  |             | Certification of Chief Financial Officer pursuant to
    18 U.S.C. § 1350, as adopted pursuant to
    § 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                       
|       
|        | 32 | .1  |             | Certification of Chief Executive Officer pursuant to
    18 U.S.C. § 1350, as adopted pursuant to
    § 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                       
|        | 32 | .2  |             | Certification of Chief Financial Officer pursuant to
    18 U.S.C. § 1350, as adopted pursuant to
    § 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                       






|    |                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference from the Registrants
    Registration Statement on Form 10 (No. 1-14180).                                       
|   
|(2) | Incorporated by reference from the Registrants Current
    Report on Form 8-K filed on September 27, 1996.                                
|   
|(3) | Incorporated by reference from the Registrants Current
    Report on Form 8-K filed on March 28, 1997.                                    
|   
|(4) | Incorporated by reference from the Registrants Current
    Report on Form 8-K filed on October 10, 1997.                                  
|   
|(5) | Incorporated by reference from the Registrants
    Registration Statement on Form S-4 filed on
    February 17, 1998 (File No. 333-46407).

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|    |                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------
|(6) | Incorporated by reference from the Registrants Annual
    Report on Form 10-K for the nine month period ended
    December 31, 1996.
|   
|(7) | Incorporated by reference from the Registrants Current
    Report on Form 8-K filed on August 13, 1996.                             
|   
|(8) | Incorporated by reference from the Registrants Current
    Report on Form 8-K filed on July 8, 1997.                                
|   
|(9) | Incorporated by reference from the Registrants Annual
    Report on Form 10-K for the fiscal year ended
    December 31, 1997.      



|     |                                                                                                                                
|---- | -------------------------------------------------------------------------------------------------------------------------------
|(10) | Incorporated by reference from the Registrants Annual
    Report on Form 10-K for the fiscal year ended
    December 31, 1998.
|    
|(11) | Incorporated by reference from Registrants Current Report
    on Form 8-K filed on August 23, 1999.                           
|    
|(12) | Incorporated by reference from the Registrants Annual
    Report on Form 10-K for the fiscal year ended
    December 31, 1999.
|    
|(13) | Incorporated by reference from Registrants Annual Report
    on Form 10-K for the fiscal year ended December 31,
    2000.    
|    
|(14) | Incorporated by reference from Registrants Current Report
    on Form 8-K filed on December 14, 2001.                         
|    
|(15) | Incorporated by reference from Registrants Current Report
    on Form 8-K filed on January 7, 2002.                           
|    
|(16) | Incorporated by reference from Registrants Current Report
    on Form 8-K filed on January 9, 2002.                           
|    
|(17) | Incorporated by reference from Registrants Annual Report
    on Form 10-K for the fiscal year ended December 31,
    2001.    
|    
|(18) | Incorporated by reference from Registrants Annual Report
    on Form 10-K for the fiscal year ended December 31,
    2002.    
|    
|(19) | Incorporated by reference from Registrants Quarterly
    Report on Form 10-Q filed on August 14, 2003.                        
|    
|(20) | Incorporated by reference from Registrants Current Report
    on Form 8-K filed on July 23, 2003.                             
|    
|(21) | Incorporated by reference from Registrants Current Report
    on Form 8-K filed on October 30, 2003.                          
|    
|(22) | Incorporated by reference from Registrants Annual Report
    on Form 10-K for the fiscal year ended December 31,
    2003.    
|    
|(23) | Incorporated by reference from Registrants Current Report
    on Form 8-K filed on April 1, 2004.                             
|    
|(24) | Incorporated by reference from Registrants Quarterly
    Report on Form 10-Q filed on May 10, 2003.                           



| |   |                              
| | - | -----------------------------
| |  | Filed herewith.              
|
| |  | Management compensation plan.

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|                  |  |                                                                                                                                                     |  |                                                                                                                                                                            
|----------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Date of Report    |  |                                                                                                                                                     |  | Description                                                                                                                                                                
|                  |  |                                                                                                                                                     |  |                                                                                                                                                                            
|October 15, 2004  |  | Item 8  Other Events
    Item 9  Financial Statements, Pro
    Forma Financial Information and Exhibits                                           |  | Press Release relating to Registrants Agreement w/
    Creditors on Revised Plan of Reorganization.                                                                       
|October 25, 2004  |  | Item 7  Regulation FD Disclosure
    Item 8  Other Events
    Item 9  Financial Statements, Pro
    Forma Financial Information and
    Exhibits |  | First Amended Plan of Reorganization.                                                                                                                                      
|November 10, 2004 |  | Item 7  Regulation FD Disclosure                                                                                                                   |  | Monthly Operating Report for the Period of August 21, 2004
    through September 30, 2004 as filed with the
    U.S. Bankruptcy Court for the Southern District of New York
|December 7, 2004  |  | Item 7  Regulation FD Disclosure                                                                                                                   |  | Monthly Operating Report for the Period of October 1, 2004
    through October 22, 2004 as filed with the
    U.S. Bankruptcy Court for the Southern District of New York  
|December 22, 2004 |  | Item 8  Other Events                                                                                                                               |  | EchoStar Communications Corporations selection of Space
    Systems/Loral, Inc., a subsidiary of the Registrant, to build
    the EchoStar XI satellite                   

64



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SIGNATURES






| |                                  
| | ---------------------------------
| | LORAL SPACE & COMMUNICATIONS LTD.



| |     |                        
| | --- | -----------------------
| | By: | /s/ BERNARD L. SCHWARTZ

| |                          
| | -------------------------
| |                          
| | Bernard L. Schwartz      
| | Chairman of the Board and
| | Chief Executive Officer  
| | Dated: March 14, 2005    



|                                               |  |                                                                    |  |                |  |     
|---------------------------------------------- |  | ------------------------------------------------------------------ |  | -------------- |  | ----
|                                               |  | Signatures                                                         |  | Title          |  | Date
|                                               |  |                                                                    |  |                |  |     
|                                              
|/s/ BERNARD L. SCHWARTZBernard
    L. Schwartz |  | Chairman of the Board and
    Chief Executive Officer              |  | March 14, 2005
|                                              
|/s/ ROBERT B. HODESRobert
    B. Hodes         |  | Director                                                           |  | March 14, 2005
|                                              
|/s/ GERSHON KEKSTGershon
    Kekst             |  | Director                                                           |  | March 14, 2005
|                                              
|/s/ CHARLES LAZARUSCharles
    Lazarus         |  | Director                                                           |  | March 14, 2005
|                                              
|/s/ SALLY MINARDSally
    Minard               |  | Director                                                           |  | March 14, 2005
|                                              
|/s/ MALVIN A. RUDERMANMalvin
    A. Ruderman   |  | Director                                                           |  | March 14, 2005
|                                              
|/s/ E. DONALD SHAPIROE.
    Donald Shapiro     |  | Director                                                           |  | March 14, 2005
|                                              
|/s/ ARTHUR L. SIMONArthur
    L. Simon         |  | Director                                                           |  | March 14, 2005
|                                              
|/s/ DANIEL YANKELOVICHDaniel
    Yankelovich   |  | Director                                                           |  | March 14, 2005
|                                              
|/s/ ERIC J. ZAHLEREric
    J. Zahler           |  | Director, President and COO                                        |  | March 14, 2005
|                                              
|/s/ RICHARD J. TOWNSENDRichard
    J. Townsend |  | Executive Vice President and CFO
    (Principal Financial Officer) |  | March 14, 2005
|                                              
|/s/ HARVEY B. REINHarvey
    B. Rein           |  | Vice President and Controller
    (Principal Accounting Officer)   |  | March 14, 2005

65



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INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULE


|                                                                               |                                                                                                                    |  |     
|------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------ |  | ----
|                                                                              
|Loral Space & Communications Ltd. and Subsidiaries,
    A Debtor In Possession |                                                                                                                    | 
|                                                                               | Report of Independent Registered Public Accounting Firm                                                            |  | F-2 
|                                                                               | Consolidated Balance Sheets as of December 31, 2004 and 2003                                                       |  | F-4 
|                                                                               | Consolidated Statements of Operations for the years ended
    December 31, 2004, 2003 and 2002                     |  | F-5 
|                                                                               | Consolidated Statements of Shareholders (Deficit) Equity
    for the years ended December 31, 2004, 2003 and 2002 |  | F-6 
|                                                                               | Consolidated Statements of Cash Flows for the years ended
    December 31, 2004, 2003 and 2002                     |  | F-7 
|                                                                               | Notes to Consolidated Financial Statements                                                                         |  | F-8 
|                                                                               | Schedule II                                                                                                        |  | F-66

F-1



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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Shareholders of Loral Space & Communications
Ltd. (a Debtor In Possession)








Internal Control 
Integrated Framework


Accounting for the Impairment or Disposal of Long-Lived
Assets.


Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity, Goodwill and Other Intangible Assets,




F-2



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##### Table of Contents











F-3



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##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


CONSOLIDATED BALANCE SHEETS


(in thousands, except par value)


|                                                                                            |                                                                                           |                                                               |                                             |            |         |            |           |            |         |           |  
|------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------- | ------------------------------------------------------------- | ------------------------------------------- | ---------- | ------- | ---------- | --------- | ---------- | ------- | --------- | -
|                                                                                            |                                                                                           | December 31,                                                  |                                            
|                                                                                            |                                                                                           |                                                               |                                            
|                                                                                            |                                                                                           | 2004                                                          |                                             |            | 2003    |           
|                                                                                            |                                                                                           |                                                               |                                             |            |         |           
|ASSETS                                                                                     
|Current assets:                                                                             |                                                                                           |                                                               |                                             |            |         |            |           |           
|                                                                                            | Cash and cash equivalents                                                                 |                                                               | $                                           | 147,773    |         |            | $         | 141,644    |        
|                                                                                            | Accounts receivable, net                                                                  |                                                               |                                             | 12,132     |         |            |           | 22,969     |        
|                                                                                            | Contracts-in-process                                                                      |                                                               |                                             | 19,040     |         |            |           | 62,063     |        
|                                                                                            | Inventories                                                                               |                                                               |                                             | 37,412     |         |            |           | 42,456     |        
|                                                                                            | Insurance proceeds receivable                                                             |                                                               |                                             |           |         |            |           | 122,770    |        
|                                                                                            | Other current assets                                                                      |                                                               |                                             | 21,096     |         |            |           | 36,004     |        
|                                                                                            |                                                                                           |                                                               |                                             |            |         |           
|                                                                                            |                                                                                           |                                                               | Total current assets                        |            |         | 237,453    |           |            |         | 427,906   |  
|Property, plant and equipment, net                                                          |                                                                                           |                                                               | 798,908                                     |            |         |            | 1,828,282 |           
|Long-term receivables                                                                       |                                                                                           |                                                               | 74,851                                      |            |         |            | 70,749    |           
|Investments in and advances to affiliates                                                   |                                                                                           |                                                               | 49,181                                      |            |         |            | 46,674    |           
|Deposits                                                                                    |                                                                                           |                                                               | 9,832                                       |            |         |            | 9,000     |           
|Other assets                                                                                |                                                                                           |                                                               | 48,508                                      |            |         |            | 81,202    |           
|                                                                                            |                                                                                           |                                                               |                                             |            |         |           
|                                                                                            |                                                                                           |                                                               | Total assets                                |            | $       | 1,218,733  |           |            | $       | 2,463,813 |  
|                                                                                            |                                                                                           |                                                               |                                             |            |         |           
|                                                                                           
|LIABILITIES AND SHAREHOLDERS DEFICIT                                                      
|Liabilities not subject to compromise:                                                      |                                                                                           |                                                               |                                             |            |         |            |           |           
|                                                                                            | Current liabilities:                                                                      |                                                               |                                             |            |         |            |           |            |        
|                                                                                            |                                                                                           | Accounts payable                                              |                                             | $          | 33,248  |            |           | $          | 50,656  |          
|                                                                                            |                                                                                           | Accrued employment costs                                      |                                             |            | 34,385  |            |           |            | 23,532  |          
|                                                                                            |                                                                                           | Customer advances and billings in excess of costs and profits |                                             |            | 164,981 |            |           |            | 239,225 |          
|                                                                                            |                                                                                           | Deferred gain on sale of assets (Note 4)                      |                                             |            | 10,545  |            |           |            |        |          
|                                                                                            |                                                                                           | Income taxes payable                                          |                                             |            | 2,359   |            |           |            | 269     |          
|                                                                                            |                                                                                           | Accrued interest                                              |                                             |            |        |            |           |            | 1,319   |          
|                                                                                            |                                                                                           | Other current liabilities                                     |                                             |            | 16,639  |            |           |            | 9,870   |          
|                                                                                            |                                                                                           |                                                               |                                             |            |         |           
|                                                                                            |                                                                                           |                                                               | Total current liabilities                   |            |         | 262,157    |           |            |         | 324,871   |  
|                                                                                            | Pension liabilities (Note 10)                                                             |                                                               |                                             | 942        |         |            |           | 3,470      |        
|                                                                                            | Long-term liabilities                                                                     |                                                               |                                             | 81,355     |         |            |           | 66,947     |        
|                                                                                            |                                                                                           |                                                               |                                             |            |         |           
|                                                                                            |                                                                                           |                                                               | Total liabilities not subject to compromise |            |         | 344,454    |           |            |         | 395,288   |  
|Liabilities subject to compromise (Note 10)                                                 |                                                                                           |                                                               | 1,916,000                                   |            |         |            | 2,921,680 |           
|Minority interest                                                                           |                                                                                           |                                                               | 2,380                                       |            |         |            | 2,515     |           
|Commitments and contingencies (Notes 2, 7, 8, 10,
    15, 16 and 17) Shareholders deficit: |                                                                                           |                                                               |                                             |            |         |            |           |           
|                                                                                            | Common stock, $.10 par value; 125,000,000 shares
    authorized, 44,125,202 shares issued |                                                               |                                             | 4,413      |         |            |           | 4,413      |        
|                                                                                            | Paid-in capital                                                                           |                                                               |                                             | 3,392,825  |         |            |           | 3,392,829  |        
|                                                                                            | Treasury stock, at cost; 17,420 shares                                                    |                                                               |                                             | (3,360     | )       |            |           | (3,360     | )      
|                                                                                            | Unearned compensation                                                                     |                                                               |                                             | (87        | )       |            |           | (168       | )      
|                                                                                            | Retained deficit                                                                          |                                                               |                                             | (4,348,231 | )       |            |           | (4,171,536 | )      
|                                                                                            | Accumulated other comprehensive loss                                                      |                                                               |                                             | (89,661    | )       |            |           | (77,848    | )      
|                                                                                            |                                                                                           |                                                               |                                             |            |         |           
|                                                                                            |                                                                                           |                                                               | Total shareholders deficit                 |            |         | (1,044,101 | )         |            |         | (855,670  | )
|                                                                                            |                                                                                           |                                                               |                                             |            |         |           
|                                                                                            |                                                                                           |                                                               | Total liabilities and shareholders deficit |            | $       | 1,218,733  |           |            | $       | 2,463,813 |  
|                                                                                            |                                                                                           |                                                               |                                             |            |         |           



F-4



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##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


CONSOLIDATED STATEMENTS OF OPERATIONS


(in thousands, except per share amounts)


|                                                                                                                                              |                                                                                                                                      |                          |          |        |      |   |          |        |   |   |            |        |  
|--------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------ | ------------------------ | -------- | ------ | ---- | - | -------- | ------ | - | - | ---------- | ------ | -
|                                                                                                                                              |                                                                                                                                      | Years Ended December 31, |         
|                                                                                                                                              |                                                                                                                                      |                          |         
|                                                                                                                                              |                                                                                                                                      | 2004                     |          |        | 2003 |   |          | 2002   |  
|                                                                                                                                              |                                                                                                                                      |                          |          |        |      |   |          |        |  
|Revenues from satellite services                                                                                                              |                                                                                                                                      | $                        | 135,319  |        |      | $ | 147,156  |        |   | $ | 192,060    |       
|Revenues from sales-type lease arrangement  satellite
    services (Note 7)                                                                  |                                                                                                                                      |                          | 87,200   |        |      |   |         |        |   |   |           |       
|Revenues from satellite manufacturing                                                                                                         |                                                                                                                                      |                          | 299,608  |        |      |   | 244,887  |        |   |   | 708,467    |       
|                                                                                                                                              |                                                                                                                                      |                          |          |        |      |   |          |        |  
|Total revenues                                                                                                                                |                                                                                                                                      |                          | 522,127  |        |      |   | 392,043  |        |   |   | 900,527    |       
|Cost of satellite services                                                                                                                    |                                                                                                                                      |                          | 189,330  |        |      |   | 191,989  |        |   |   | 201,142    |       
|Cost of sales-type lease arrangement  satellite
    services (Note 7)                                                                        |                                                                                                                                      |                          | 79,543   |        |      |   |         |        |   |   |           |       
|Cost of satellite manufacturing                                                                                                               |                                                                                                                                      |                          | 318,295  |        |      |   | 422,091  |        |   |   | 759,520    |       
|Selling, general and administrative expenses                                                                                                  |                                                                                                                                      |                          | 118,848  |        |      |   | 141,552  |        |   |   | 148,233    |       
|                                                                                                                                              |                                                                                                                                      |                          |          |        |      |   |          |        |  
|Loss from continuing operations before reorganization expenses
    due to bankruptcy                                                          |                                                                                                                                      |                          | (183,889 | )      |      |   | (363,589 | )      |   |   | (208,368   | )     
|Reorganization expenses due to bankruptcy                                                                                                     |                                                                                                                                      |                          | (30,456  | )      |      |   | (25,284  | )      |   |   |          |       
|                                                                                                                                              |                                                                                                                                      |                          |          |        |      |   |          |        |  
|Operating loss from continuing operations                                                                                                     |                                                                                                                                      |                          | (214,345 | )      |      |   | (388,873 | )      |   |   | (208,368   | )     
|Interest and investment income                                                                                                                |                                                                                                                                      |                          | 9,953    |        |      |   | 15,203   |        |   |   | 12,842     |       
|Interest expense (contractual interest was $46,451 and $34,020
    for the years ended December 31, 2004 and 2003,
    respectively (Note 10) |                                                                                                                                      |                          | (2,947   | )      |      |   | (14,080  | )      |   |   | (40,892    | )     
|Other income (expense)                                                                                                                        |                                                                                                                                      |                          | (513     | )      |      |   | 1,495    |        |   |   | 67         |       
|Gain (loss) on investments                                                                                                                    |                                                                                                                                      |                          |         |        |      |   | 17,900   |        |   |   | (1,189     | )     
|                                                                                                                                              |                                                                                                                                      |                          |          |        |      |   |          |        |  
|Loss from continuing operations before income taxes, equity
    income (losses) in affiliates and minority interest                           |                                                                                                                                      |                          | (207,852 | )      |      |   | (368,355 | )      |   |   | (237,540   | )     
|Income tax (provision) benefit                                                                                                                |                                                                                                                                      |                          | (13,284  | )      |      |   | 6,330    |        |   |   | (322,422   | )     
|                                                                                                                                              |                                                                                                                                      |                          |          |        |      |   |          |        |  
|Loss from continuing operations before equity income (losses) in
    affiliates and minority interest                                         |                                                                                                                                      |                          | (221,136 | )      |      |   | (362,025 | )      |   |   | (559,962   | )     
|Equity income (losses) in affiliates, net of tax provision of
    $5,639 in 2002                                                              |                                                                                                                                      |                          | 46,654   |        |      |   | (51,153  | )      |   |   | (76,280    | )     
|Minority interest                                                                                                                             |                                                                                                                                      |                          | 135      |        |      |   | 20       |        |   |   | (226       | )     
|                                                                                                                                              |                                                                                                                                      |                          |          |        |      |   |          |        |  
|Loss from continuing operations                                                                                                               |                                                                                                                                      |                          | (174,347 | )      |      |   | (413,158 | )      |   |   | (636,468   | )     
|(Loss) income from discontinued operations, net of taxes                                                                                      |                                                                                                                                      |                          | (2,348   | )      |      |   | 18,803   |        |   |   | 57,566     |       
|                                                                                                                                              |                                                                                                                                      |                          |          |        |      |   |          |        |  
|Loss before cumulative effect of change in accounting principle
    and extraordinary gain on acquisition of minority interest                |                                                                                                                                      |                          | (176,695 | )      |      |   | (394,355 | )      |   |   | (578,902   | )     
|Cumulative effect of change in accounting principle
    (Notes 3 and 9)                                                                       |                                                                                                                                      |                          |         |        |      |   | (1,970   | )      |   |   | (890,309   | )     
|Extraordinary gain on acquisition of minority interest                                                                                        |                                                                                                                                      |                          |         |        |      |   | 13,615   |        |   |   |          |       
|                                                                                                                                              |                                                                                                                                      |                          |          |        |      |   |          |        |  
|Net loss                                                                                                                                      |                                                                                                                                      |                          | (176,695 | )      |      |   | (382,710 | )      |   |   | (1,469,211 | )     
|Preferred dividends and accretion                                                                                                             |                                                                                                                                      |                          |         |        |      |   | (6,719   | )      |   |   | (89,186    | )     
|                                                                                                                                              |                                                                                                                                      |                          |          |        |      |   |          |        |  
|Net loss applicable to common shareholders                                                                                                    |                                                                                                                                      | $                        | (176,695 | )      |      | $ | (389,429 | )      |   | $ | (1,558,397 | )     
|                                                                                                                                              |                                                                                                                                      |                          |          |        |      |   |          |        |  
|Basic and diluted (loss) earnings per share (Note 14):                                                                                        |                                                                                                                                      |                          |          |        |      |   |          |        |   |   |            |       
|                                                                                                                                              | Continuing operations                                                                                                                |                          | $        | (3.96  | )    |   | $        | (9.58  | ) |   | $          | (19.47 | )
|                                                                                                                                              | Discontinued operations                                                                                                              |                          |          | (0.05  | )    |   |          | 0.43   |   |   |            | 1.55   |  
|                                                                                                                                              |                                                                                                                                      |                          |          |        |      |   |          |        |  
|                                                                                                                                              | (Loss) before cumulative effect of change in accounting
    principle and extraordinary gain on acquisition of minority
    interest |                          |          | (4.01  | )    |   |          | (9.15  | ) |   | $          | (17.92 | )
|                                                                                                                                              | Cumulative effect of change in accounting principle                                                                                  |                          |          |       |      |   |          | (0.05  | ) |   |            | (23.89 | )
|                                                                                                                                              | Extraordinary gain on acquisition of minority interest                                                                               |                          |          |       |      |   |          | 0.31   |   |   |            |      |  
|                                                                                                                                              |                                                                                                                                      |                          |          |        |      |   |          |        |  
|                                                                                                                                              | Loss per share                                                                                                                       |                          | $        | (4.01  | )    |   | $        | (8.89  | ) |   | $          | (41.81 | )
|                                                                                                                                              |                                                                                                                                      |                          |          |        |      |   |          |        |  
|Weighted average shares outstanding:                                                                                                          |                                                                                                                                      |                          |          |        |      |   |          |        |   |   |            |       
|                                                                                                                                              | Basic and diluted                                                                                                                    |                          |          | 44,108 |      |   |          | 43,819 |   |   |            | 37,272 |  
|                                                                                                                                              |                                                                                                                                      |                          |          |        |      |   |          |        |  



F-5



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##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


CONSOLIDATED STATEMENTS OF SHAREHOLDERS
(DEFICIT) EQUITY


Years ended December 31, 2004, 2003 and 2002


(in thousands, except per share amounts)


|                                                                                          |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          |           |         |               |   |        |               |  |   |        |   |  |   |            |         |   |   |         |   |  |   |            |        |  
|----------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------- | --------------- | ------ | ------ | --------------- | - | -------- | ------------ | - |  | ------ | ------ | - | ------ | -------- | -------- | ------- |  | ----------- | -------- |  | ----- | ------------- | --- |  | -------- | --------- | ------- | ------------- | - | ------ | ------------- |  | - | ------ | - |  | - | ---------- | ------- | - | - | ------- | - |  | - | ---------- | ------ | -
|                                                                                          |                                                                                                                           | 6% Series C     |        |        | 6% Series D     |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |      
|                                                                                          |                                                                                                                           | Convertible     |        |        | Convertible     |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |      
|                                                                                          |                                                                                                                           | Redeemable      |        |        | Redeemable      |   |          |              |   |  |        |        |   |        |          |          |         |  |             |         
|                                                                                          |                                                                                                                           | Preferred Stock |        |        | Preferred Stock |   |          | Common Stock |   |  |        |        |   |        |          |          |         |  | Accumulated |          |  | Total |              
|                                                                                          |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        | Unearned |          |         |  |             | Other    |  |       | Shareholders |    
|                                                                                          |                                                                                                                           | Shares          |        |        |                 |   | Shares   |              |   |  |        | Shares |   |        |          |          | Paid-In |  |             | Treasury |  |       | Compen-       |     |  | Retained |           |         | Comprehensive |   |        | (Deficit)     | 
|                                                                                          |                                                                                                                           | Issued          |        |        | Amount          |   |          | Issued       |   |  | Amount |        |   | Issued |          |          | Amount  |  |             | Capital  |  |       | Stock         |     |  | sation   |           |         | Deficit       |   |        | Income (Loss) |  |   | Equity |  
|                                                                                          |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          |           |         |               |   |        |               |  |   |        |  
|Balance, December 31, 2001                                                                |                                                                                                                           |                 | 9,840  |        |                 | $ | 485,371  |              |   |  | 6,111  |        |   | $      | 296,529  |          |         |  | 33,679      |          |  | $     | 3,368         |     |  | $        | 2,771,964 |         |               | $ | (3,360 | )             |  | $ | (81    | ) |  | $ | (2,223,710 | )       |   | $ | 20,787  |   |  | $ | 1,350,868  |       
|Shares issued:                                                                            |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          |           |         |               |   |        |               |  |   |        |   |  |   |            |         |   |   |         |   |  |   |            |       
|                                                                                          | Employee savings plan                                                                                                     |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             | 1,536    |  |       |               | 152 |  |          |           | 11,400  |               |   |        |               |  |   |        |   |  |   |            |         |   |   |         |   |  |   |            | 11,552 |  
|                                                                                          | Restricted stock option exercise                                                                                          |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             | 40       |  |       |               | 4   |  |          |           |         |               |   |        |               |  |   |        |   |  |   |            |         |   |   |         |   |  |   |            | 4      |  
|                                                                                          | Conversion of Series C preferred stock to common stock and
    related issuance of additional common shares on conversion |                 |        | (6,095 | )               |   |          | (300,618     | ) |  |        |        |   |        |          |          |         |  |             | 4,042    |  |       |               | 404 |  |          |           | 319,480 |               |   |        |               |  |   |        |   |  |   |            | (28,701 | ) |   |         |   |  |   |            | (9,435 | )
|                                                                                          | Conversion of Series D preferred stock to common stock and
    related issuance of additional common shares on conversion |                 |        |        |                 |   |          |              |   |  |        | (5,377 | ) |        |          | (260,905 | )       |  |             | 3,623    |  |       |               | 363 |  |          |           | 285,201 |               |   |        |               |  |   |        |   |  |   |            | (30,808 | ) |   |         |   |  |   |            | (6,149 | )
|                                                                                          | Orion note conversion                                                                                                     |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             | 6        |  |       |               | 2   |  |          |           |         |               |   |        |               |  |   |        |   |  |   |            |         |   |   |         |   |  |   |            | 2      |  
|Reclassification of preferred stock to mezzanine                                          |                                                                                                                           |                 |        |        |                 |   | (104,582 | )            |   |  |        |        |   |        | (20,499  | )        |         |  |             |          |  |       |               |     |  |          |           |         |               |   |        |               |  |   |        |   |  |   |            |         |   |   |         |   |  |   | (125,081   | )     
|Option grants to affiliates                                                               |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          | 924       |         |               |   |        |               |  |   |        |   |  |   |            |         |   |   |         |   |  |   | 924        |       
|Amortization of unearned compensation                                                     |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          |           |         |               |   |        |               |  |   | 6      |   |  |   |            |         |   |   |         |   |  |   | 6          |       
|Restricted stock grant                                                                    |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          | 150       |         |               |   |        |               |  |   | (150   | ) |  |   |            |         |   |   |         |   |  |   |            |       
|Amortization of restricted stock                                                          |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          |           |         |               |   |        |               |  |   | 2      |   |  |   |            |         |   |   |         |   |  |   | 2          |       
|Unearned compensation on grants to non-employees, including
    mark-to-market adjustment |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          | (84       | )       |               |   |        |               |  |   | 84     |   |  |   |            |         |   |   |         |   |  |   |            |       
|Amortization of deferred compensation related to non-employees                            |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          |           |         |               |   |        |               |  |   | (12    | ) |  |   |            |         |   |   |         |   |  |   | (12        | )     
|Preferred dividends $3.00 per share                                                       |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          |           |         |               |   |        |               |  |   |        |   |  |   | (29,677    | )       |   |   |         |   |  |   | (29,677    | )     
|Net loss                                                                                  |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          |           |         |               |   |        |               |  |   |        |   |  |   | (1,469,211 | )       |   |   |         |   |  |   |            |       
|Other comprehensive loss                                                                  |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          |           |         |               |   |        |               |  |   |        |   |  |   |            |         |   |   | (78,020 | ) |  |   |            |       
|Comprehensive loss                                                                        |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          |           |         |               |   |        |               |  |   |        |   |  |   |            |         |   |   |         |   |  |   | (1,547,231 | )     
|                                                                                          |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          |           |         |               |   |        |               |  |   |        |  
|Balance, December 31, 2002                                                                |                                                                                                                           |                 | 3,745  |        |                 |   | 80,171   |              |   |  | 734    |        |   |        | 15,125   |          |         |  | 42,926      |          |  |       | 4,293         |     |  |          | 3,389,035 |         |               |   | (3,360 | )             |  |   | (151   | ) |  |   | (3,782,107 | )       |   |   | (57,233 | ) |  |   | (354,227   | )     
|Shares issued:                                                                            |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          |           |         |               |   |        |               |  |   |        |   |  |   |            |         |   |   |         |   |  |   |            |       
|                                                                                          | Employee savings plan                                                                                                     |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             | 1,167    |  |       |               | 117 |  |          |           | 3,880   |               |   |        |               |  |   |        |   |  |   |            |         |   |   |         |   |  |   |            | 3,997  |  
|                                                                                          | Restricted stock option exercise                                                                                          |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             | 30       |  |       |               | 3   |  |          |           |         |               |   |        |               |  |   |        |   |  |   |            |         |   |   |         |   |  |   |            | 3      |  
|                                                                                          | Reverse stock split                                                                                                       |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             | 2        |  |       |               |     |  |          |           | (109    | )             |   |        |               |  |   |        |   |  |   |            |         |   |   |         |   |  |   |            | (109   | )
|Reclassification of preferred stock on adoption of SFAS 150                               |                                                                                                                           |                 | (3,745 | )      |                 |   | (80,171  | )            |   |  | (734   | )      |   |        | (15,125  | )        |         |  |             |          |  |       |               |     |  |          |           |         |               |   |        |               |  |   |        |   |  |   |            |         |   |   |         |   |  |   | (95,296    | )     
|Amortization of unearned compensation                                                     |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          |           |         |               |   |        |               |  |   | 75     |   |  |   |            |         |   |   |         |   |  |   | 75         |       
|Costs associated with conversion of preferred stock to common
    stock                   |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          | (42       | )       |               |   |        |               |  |   |        |   |  |   |            |         |   |   |         |   |  |   | (42        | )     
|Restricted stock grant                                                                    |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          | 92        |         |               |   |        |               |  |   | (92    | ) |  |   |            |         |   |   |         |   |  |   |            |       
|Unearned compensation on grants to non-employees, including
    mark-to-market adjustment |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          | (27       | )       |               |   |        |               |  |   |        |   |  |   |            |         |   |   |         |   |  |   | (27        | )     
|Preferred dividends $3.00 per share                                                       |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          |           |         |               |   |        |               |  |   |        |   |  |   | (6,719     | )       |   |   |         |   |  |   | (6,719     | )     
|Net loss                                                                                  |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          |           |         |               |   |        |               |  |   |        |   |  |   | (382,710   | )       |   |   |         |   |  |   |            |       
|Other comprehensive loss                                                                  |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          |           |         |               |   |        |               |  |   |        |   |  |   |            |         |   |   | (20,615 | ) |  |   |            |       
|Comprehensive loss                                                                        |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          |           |         |               |   |        |               |  |   |        |   |  |   |            |         |   |   |         |   |  |   | (403,325   | )     
|                                                                                          |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          |           |         |               |   |        |               |  |   |        |  
|Balance, December 31, 2003                                                                |                                                                                                                           |                 |       |        |                 |   |         |              |   |  |       |        |   |        |         |          |         |  | 44,125      |          |  |       | 4,413         |     |  |          | 3,392,829 |         |               |   | (3,360 | )             |  |   | (168   | ) |  |   | (4,171,536 | )       |   |   | (77,848 | ) |  |   | (855,670   | )     
|Amortization of unearned compensation                                                     |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          |           |         |               |   |        |               |  |   | 81     |   |  |   |            |         |   |   |         |   |  |   | 81         |       
|Cost associated with conversion of preferred stock to common
    stock                    |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          | (4        | )       |               |   |        |               |  |   |        |   |  |   |            |         |   |   |         |   |  |   | (4         | )     
|Net loss                                                                                  |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          |           |         |               |   |        |               |  |   |        |   |  |   | (176,695   | )       |   |   |         |   |  |   |            |       
|Other comprehensive loss                                                                  |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          |           |         |               |   |        |               |  |   |        |   |  |   |            |         |   |   | (11,813 | ) |  |   |            |       
|Comprehensive loss                                                                        |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          |           |         |               |   |        |               |  |   |        |   |  |   |            |         |   |   |         |   |  |   | ( 188,508  | )     
|                                                                                          |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          |           |         |               |   |        |               |  |   |        |  
|Balance, December 31, 2004                                                                |                                                                                                                           |                 |       |        |                 | $ |         |              |   |  |       |        |   | $      |         |          |         |  | 44,125      |          |  | $     | 4,413         |     |  | $        | 3,392,825 |         |               | $ | (3,360 | )             |  | $ | (87    | ) |  | $ | (4,348,231 | )       |   | $ | (89,661 | ) |  | $ | (1,044,101 | )     
|                                                                                          |                                                                                                                           |                 |        |        |                 |   |          |              |   |  |        |        |   |        |          |          |         |  |             |          |  |       |               |     |  |          |           |         |               |   |        |               |  |   |        |  



F-6



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


CONSOLIDATED STATEMENTS OF CASH FLOWS


(in thousands)


|                                                           |                                                             |                                                                             |          |          |         |   |          |          |         |   |            |          |         |  
|---------------------------------------------------------- | ----------------------------------------------------------- | --------------------------------------------------------------------------- | -------- | -------- | ------- | - | -------- | -------- | ------- | - | ---------- | -------- | ------- | -
|                                                           |                                                             | Years ended December 31,                                                    |         
|                                                           |                                                             |                                                                             |         
|                                                           |                                                             | 2004                                                                        |          |          | 2003    |   |          | 2002     |        
|                                                           |                                                             |                                                                             |          |          |         |   |          |          |        
|Operating activities:                                      |                                                             |                                                                             |          |          |         |   |          |          |         |   |            |         
|Net loss                                                   |                                                             | $                                                                           | (176,695 | )        |         | $ | (382,710 | )        |         | $ | (1,469,211 | )       
|Non-cash items:                                            |                                                             |                                                                             |          |          |         |   |          |          |         |   |            |         
|                                                           |                                                             | (Income) loss from discontinued operations, net of taxes                    |          |          | 2,348   |   |          |          | (18,803 | ) |            |          | (57,566 | )
|                                                           |                                                             | Cumulative effect of change in accounting principle                         |          |          |        |   |          |          | 1,970   |   |            |          | 890,309 |  
|                                                           |                                                             | Extraordinary gain on acquisition of minority interest                      |          |          |        |   |          |          | (13,615 | ) |            |          |        |  
|                                                           |                                                             | Equity (income) losses in affiliates, net of taxes                          |          |          | (46,654 | ) |          |          | 51,153  |   |            |          | 84,478  |  
|                                                           |                                                             | Minority interest                                                           |          |          | (135    | ) |          |          | (20     | ) |            |          | 226     |  
|                                                           |                                                             | Deferred taxes                                                              |          |          | 12,153  |   |          |          | (7,321  | ) |            |          | 328,877 |  
|                                                           |                                                             | Depreciation and amortization                                               |          |          | 134,796 |   |          |          | 134,663 |   |            |          | 129,348 |  
|                                                           |                                                             | Write-off of long-term receivables due to contract modifications            |          |          | 11,265  |   |          |          | 20,177  |   |            |          |        |  
|                                                           |                                                             | Impairment charge on satellite and related assets                           |          |          | 11,989  |   |          |          |        |   |            |          |        |  
|                                                           |                                                             | Profit on sales-type lease arrangement (Note 7)                             |          |          | (7,657  | ) |          |          |        |   |            |          |        |  
|                                                           |                                                             | Provisions for inventory obsolescence                                       |          |          | 3,324   |   |          |          | 49,546  |   |            |          | 14,013  |  
|                                                           |                                                             | Valuation allowance on vendor financing receivables                         |          |          |        |   |          |          | 10,008  |   |            |          | 32,574  |  
|                                                           |                                                             | Write-off of advances related to Europe*Star                                |          |          |        |   |          |          |        |   |            |          | 36,620  |  
|                                                           |                                                             | Loss on cancellation of deposits                                            |          |          |        |   |          |          | 23,500  |   |            |          | 10,000  |  
|                                                           |                                                             | Loss on acceleration of receipt of long-term receivables                    |          |          |        |   |          |          | 10,893  |   |            |          |        |  
|                                                           |                                                             | Charge on conversion of sales arrangement to lease arrangement
    (Note 7) |          |          |        |   |          |          | 10,098  |   |            |          |        |  
|                                                           |                                                             | Accrual for Alcatel settlement                                              |          |          |        |   |          |          | 8,000   |   |            |          |        |  
|                                                           |                                                             | (Recoveries of) provisions for bad debts on billed receivables              |          |          | (2,143  | ) |          |          | 7,221   |   |            |          | 2,764   |  
|                                                           |                                                             | Adjustment to revenue straightlining assessment                             |          |          | 1,149   |   |          |          | 9,034   |   |            |          | 1,407   |  
|                                                           |                                                             | Loss on equipment disposals                                                 |          |          | 394     |   |          |          | 4,804   |   |            |          | 6,191   |  
|                                                           |                                                             | (Gain) loss on investments                                                  |          |          |        |   |          |          | (17,900 | ) |            |          | 1,189   |  
|                                                           |                                                             | Non cash net interest and (gain) loss on foreign currency
    transactions  |          |          | (2,808  | ) |          |          | 4,887   |   |            |          | 172     |  
|Changes in operating assets and liabilities:               |                                                             |                                                                             |          |          |         |   |          |          |         |   |            |         
|                                                           | Accounts receivable, net                                    |                                                                             |          | 10,422   |         |   |          | (1,478   | )       |   |            | 6,241    |        
|                                                           | Contracts-in-process                                        |                                                                             |          | 28,678   |         |   |          | 36,188   |         |   |            | 97,100   |        
|                                                           | Inventories                                                 |                                                                             |          | 1,720    |         |   |          | 3,731    |         |   |            | (1,604   | )      
|                                                           | Long-term receivables                                       |                                                                             |          | 2,911    |         |   |          | 60,774   |         |   |            | (1,963   | )      
|                                                           | Deposits                                                    |                                                                             |          |         |         |   |          | 25,750   |         |   |            | 58,940   |        
|                                                           | Other current assets and other assets                       |                                                                             |          | 2,484    |         |   |          | 28,302   |         |   |            | 19,829   |        
|                                                           | Accounts payable                                            |                                                                             |          | 1,755    |         |   |          | 41,148   |         |   |            | (88,666  | )      
|                                                           | Accrued expenses and other current liabilities              |                                                                             |          | (948     | )       |   |          | 1,139    |         |   |            | (19,976  | )      
|                                                           | Customer advances                                           |                                                                             |          | 35,249   |         |   |          | 38,632   |         |   |            | (31,729  | )      
|                                                           | Income taxes payable                                        |                                                                             |          | (2,814   | )       |   |          | 1,847    |         |   |            | 3,420    |        
|                                                           | Pension and other postretirement liabilities                |                                                                             |          | 10,503   |         |   |          | 13,245   |         |   |            | 4,521    |        
|                                                           | Long-term liabilities                                       |                                                                             |          | 3,016    |         |   |          | (11,927  | )       |   |            | (6,153   | )      
|                                                           | Other                                                       |                                                                             |          | 216      |         |   |          | 501      |         |   |            | (28      | )      
|                                                           |                                                             |                                                                             |          |          |         |   |          |          |        
|Net cash provided by continuing operating activities       |                                                             |                                                                             | 34,518   |          |         |   | 143,437  |          |         |   | 51,323     |         
|                                                           |                                                             |                                                                             |          |          |         |   |          |          |        
|Net cash provided by discontinued operations, net of taxes |                                                             |                                                                             | 26,562   |          |         |   | 81,588   |          |         |   | 141,347    |         
|                                                           |                                                             |                                                                             |          |          |         |   |          |          |        
|Investing activities:                                      |                                                             |                                                                             |          |          |         |   |          |          |         |   |            |         
|                                                           | Capital expenditures for continuing operations              |                                                                             |          | (24,786  | )       |   |          | (115,362 | )       |   |            | (80,404  | )      
|                                                           | Capital expenditures for discontinued operations            |                                                                             |          | (11,185  | )       |   |          | (61,202  | )       |   |            | (17,803  | )      
|                                                           | Proceeds from the sale of assets, net of expenses (Note 2)  |                                                                             |          | 953,619  |         |   |          |         |         |   |            |         |        
|                                                           | Proceeds from the sale of investments                       |                                                                             |          |         |         |   |          | 45,908   |         |   |            |         |        
|                                                           | Investments in and advances to affiliates                   |                                                                             |          | (5,712   | )       |   |          | (19,200  | )       |   |            | (40,617  | )      
|                                                           |                                                             |                                                                             |          |          |         |   |          |          |        
|Net cash provided by (used in) investing activities        |                                                             |                                                                             | 911,936  |          |         |   | (149,856 | )        |         |   | (138,824   | )       
|                                                           |                                                             |                                                                             |          |          |         |   |          |          |        
|Financing activities:                                      |                                                             |                                                                             |          |          |         |   |          |          |         |   |            |         
|                                                           | Repayments of term loans                                    |                                                                             |          | (576,500 | )       |   |          | (32,500  | )       |   |            | (85,000  | )      
|                                                           | Repayments of revolving credit facilities                   |                                                                             |          | (390,387 | )       |   |          |         |         |   |            | (127,000 | )      
|                                                           | Borrowings under revolving credit facilities                |                                                                             |          |         |         |   |          | 71,387   |         |   |            | 145,000  |        
|                                                           | Interest payments on 10% senior notes                       |                                                                             |          |         |         |   |          | (30,635  | )       |   |            | (45,954  | )      
|                                                           | Repayments of export-import facility                        |                                                                             |          |         |         |   |          | (6,434   | )       |   |            | (2,146   | )      
|                                                           | Repayments of other long-term obligations                   |                                                                             |          |         |         |   |          |         |         |   |            | (22      | )      
|                                                           | Preferred dividends                                         |                                                                             |          |         |         |   |          |         |         |   |            | (29,677  | )      
|                                                           | Preferred dividends on exchange offers and related expenses |                                                                             |          |         |         |   |          |         |         |   |            | (15,583  | )      
|                                                           | Proceeds from other stock issuances                         |                                                                             |          |         |         |   |          | 3,852    |         |   |            | 12,523   |        
|                                                           | Payment of bank amendment costs                             |                                                                             |          |         |         |   |          | (5,131   | )       |   |            |         |        
|                                                           |                                                             |                                                                             |          |          |         |   |          |          |        
|Net cash (used in) provided by financing activities        |                                                             |                                                                             | (966,887 | )        |         |   | 539      |          |         |   | (147,859   | )       
|                                                           |                                                             |                                                                             |          |          |         |   |          |          |        
|Increase (decrease) in cash and cash equivalents           |                                                             |                                                                             | 6,129    |          |         |   | 75,708   |          |         |   | (94,013    | )       
|Cash and cash equivalents  beginning of period            |                                                             |                                                                             | 141,644  |          |         |   | 65,936   |          |         |   | 159,949    |         
|                                                           |                                                             |                                                                             |          |          |         |   |          |          |        
|Cash and cash equivalents  end of period                  |                                                             | $                                                                           | 147,773  |          |         | $ | 141,644  |          |         | $ | 65,936     |         
|                                                           |                                                             |                                                                             |          |          |         |   |          |          |        



F-7



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|   |                                    
|-- | -----------------------------------
|1. | Organization and Principal Business



Satellite Services,


Satellite Manufacturing,




|   |                                                      
|-- | -----------------------------------------------------
|2. | Bankruptcy Filings, Sale of Assets and Reorganization



| |                   
| | ------------------
| | Bankruptcy Filings









F-8



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






Sale of Assets






Reorganization






F-9



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












|   |                      
|-- | ---------------------
|3. | Basis of Presentation





F-10



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Reorganization








| |                                                        
| | -------------------------------------------------------
| | Use of Estimates in Preparation of Financial Statements







| |                          
| | -------------------------
| | Cash and Cash Equivalents



F-11



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                             
| | ----------------------------
| | Concentration of Credit Risk





| |            
| | -----------
| | Receivables







| |            
| | -----------
| | Inventories





| |                              
| | -----------------------------
| | Property, Plant and Equipment



|                                  |  |       |          | 
|--------------------------------- |  | ----- | -------- | 
|                                  |  | Years |         
|                                  |  |       |         
|Land improvements                 |  |       | 20       | 
|Buildings                         |  |       | 25 to 45 | 
|Leasehold improvements            |  |       | 5 to 25  | 
|Satellites-in-orbit               |  |       | 7 to 16  | 
|Earth stations                    |  |       | 5 to 15  | 
|Equipment, furniture and fixtures |  |       | 3 to 20  | 



F-12



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                      
| | -------------------------------------
| | Cost in Excess of Net Assets Acquired





| |                                                                                             
| | --------------------------------------------------------------------------------------------
| | Valuation of Satellites, Long-Lived Assets and Investments in
    and Advances to Affiliates





| |   |                                                                                    
| | - | -----------------------------------------------------------------------------------
| |  | Changes in estimates of the useful life of the satellite                           
|
| |  | Changes in estimates of our ability to operate the satellite at
    expected levels
|
| |  | Changes in the manner in which the satellite is to be used                         
|
| |  | The loss of one or several significant customer contracts on the
    satellite     





| |         
| | --------
| | Deposits





| |            
| | -----------
| | Investments





F-13



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                    
| | -------------------
| | Revenue Recognition















F-14



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                         
| | ------------------------
| | Research and Development





| |                           
| | --------------------------
| | Foreign Exchange Contracts





| |                         
| | ------------------------
| | Stock-Based Compensation



F-15



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                                                                                                                         |  |                          |        |   |      |   |        |      |  |   |          |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------ | ------ | - | ---- | - | ------ | ---- |  | - | -------- | -
|                                                                                                                                                                         |  | Years Ended December 31, |       
|                                                                                                                                                                         |  |                          |       
|                                                                                                                                                                         |  | 2004                     |        |   | 2003 |   |        | 2002 | 
|                                                                                                                                                                         |  |                          |        |   |      |   |        |      | 
|Reported loss from continuing operations                                                                                                                                 |  | $                        | (174.3 | ) |      | $ | (413.2 | )    |  | $ | (636.5   | )
|Add: Total stock based compensation charged to operations under
    the intrinsic value method, net of taxes                                                             |  |                          |       |   |      |   |       |      |  |   | 1.0      |  
|Less: Total stock based employee benefit
    (compensation) determined under the fair value method for
    all awards, net of taxes                                      |  |                          | (0.6   | ) |      |   | 7.6    |      |  |   | (46.3    | )
|                                                                                                                                                                         |  |                          |        |   |      |   |        |      | 
|Pro form loss from continuing operations                                                                                                                                 |  |                          | (174.9 | ) |      |   | (405.6 | )    |  |   | (681.8   | )
|Income (loss) from discontinued operations, net of taxes                                                                                                                 |  |                          | (2.3   | ) |      |   | 18.8   |      |  |   | 57.6     |  
|                                                                                                                                                                         |  |                          |        |   |      |   |        |      | 
|Pro forma net loss before cumulative effect of change in
    accounting principle and extraordinary gain on acquisition of
    minority interest                         |  |                          | (177.2 | ) |      |   | (386.8 | )    |  |   | (624.2   | )
|Cumulative effect of change in accounting principle, net of taxes                                                                                                        |  |                          |       |   |      |   | (2.0   | )    |  |   | (890.3   | )
|Extraordinary gain on acquisition of minority interest                                                                                                                   |  |                          |       |   |      |   | 13.6   |      |  |   |         |  
|                                                                                                                                                                         |  |                          |        |   |      |   |        |      | 
|Pro forma net loss                                                                                                                                                       |  |                          | (177.2 | ) |      |   | (375.2 | )    |  |   | (1,514.5 | )
|Preferred dividends                                                                                                                                                      |  |                          |       |   |      |   | (6.7   | )    |  |   | (89.2    | )
|                                                                                                                                                                         |  |                          |        |   |      |   |        |      | 
|Pro forma net loss applicable to common shareholders                                                                                                                     |  | $                        | (177.2 | ) |      | $ | (381.9 | )    |  | $ | (1,603.7 | )
|                                                                                                                                                                         |  |                          |        |   |      |   |        |      | 
|Reported basic and diluted loss per share from continuing
    operations                                                                                                 |  | $                        | (3.96  | ) |      | $ | (9.58  | )    |  | $ | (19.47   | )
|Pro forma basic and diluted loss per share from continuing
    operations                                                                                                |  |                          | (3.97  | ) |      |   | (9.41  | )    |  |   | (20.69   | )
|Reported basic and diluted loss per share before cumulative
    effect of change in accounting principle and extraordinary gain
    on acquisition of minority interest  |  |                          | (4.01  | ) |      |   | (9.15  | )    |  |   | (17.92   | )
|Pro forma basic and diluted loss per share before cumulative
    effect of change in accounting principle and extraordinary gain
    on acquisition of minority interest |  |                          | (4.02  | ) |      |   | (8.98  | )    |  |   | (19.14   | )
|Reported loss per share applicable to common shareholders                                                                                                                |  |                          | (4.01  | ) |      |   | (8.89  | )    |  |   | (41.81   | )
|Pro forma loss per share applicable to common shareholders                                                                                                               |  |                          | (4.02  | ) |      |   | (8.72  | )    |  |   | (43.03   | )





| |             
| | ------------
| | Income Taxes





F-16



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                                 
| | --------------------------------
| | Additional Cash Flow Information



|                          |                                                                                                                                                             |                          |   |         |         |   |   |         |        |   |   |         |   | 
|------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------ | - | ------- | ------- | - | - | ------- | ------ | - | - | ------- | - | 
|                          |                                                                                                                                                             | Years Ended December 31, |  
|                          |                                                                                                                                                             |                          |  
|                          |                                                                                                                                                             | 2004                     |   |         | 2003    |   |   | 2002    |       
|                          |                                                                                                                                                             |                          |   |         |         |   |   |         |       
|Non-cash activities:      |                                                                                                                                                             |                          |   |         |         |   |   |         |        |   |   |        
|                          | Minimum pension liability adjustment                                                                                                                        |                          | $ | (19,049 | )       |   | $ | (4,526  | )      |   | $ | (63,926 | )
|                          |                                                                                                                                                             |                          |   |         |         |   |   |         |       
|                          | Unrealized gains (losses) on available-for-sale securities, net
    of taxes                                                                                |                          | $ | 8,142   |         |   | $ | (16,815 | )      |   | $ | (12,603 | )
|                          |                                                                                                                                                             |                          |   |         |         |   |   |         |       
|                          | Unrealized net losses on derivatives, net of taxes                                                                                                          |                          | $ | (1,046  | )       |   | $ | (244    | )      |   | $ | (2,676  | )
|                          |                                                                                                                                                             |                          |   |         |         |   |   |         |       
|                          | Insurance proceeds receivable recorded for satellite loss and
    warranty obligations                                                                      |                          |   |         |         |   | $ | 122,770 |        |   |   |         |  
|                          |                                                                                                                                                             |                          |   |         |         |   |   |         |       
|                          | Conversion of Series C preferred stock and Series D
    preferred stock to common stock and related issuance of
    additional common shares on conversions |                          |   |         |         |   |   |         |        |   | $ | 605,448 |  
|                          |                                                                                                                                                             |                          |   |         |         |   |   |         |       
|                          | Accrual of preferred dividends                                                                                                                              |                          |   |         |         |   | $ | 6,719   |        |   | $ | 5,508   |  
|                          |                                                                                                                                                             |                          |   |         |         |   |   |         |       
|Supplemental information: |                                                                                                                                                             |                          |   |         |         |   |   |         |        |   |   |        
|                          | Interest paid, net of capitalized interest                                                                                                                  |                          | $ | 23,550  |         |   | $ | 83,062  |        |   | $ | 106,044 |  
|                          |                                                                                                                                                             |                          |   |         |         |   |   |         |       
|                          | Taxes paid, net of refunds                                                                                                                                  |                          | $ | 4,318   |         |   | $ | 1,342   |        |   | $ | 2,124   |  
|                          |                                                                                                                                                             |                          |   |         |         |   |   |         |       
|                          | Cash (paid) received for reorganization items:                                                                                                              |                          |   |         |         |   |   |         |        |   |   |         |  
|                          |                                                                                                                                                             | Professional fees        |   | $       | (18,745 | ) |   | $       | (7,598 | ) |   |         |   | 
|                          |                                                                                                                                                             |                          |   |         |         |   |   |         |       
|                          |                                                                                                                                                             | Employee retention costs |   | $       | (6,468  | ) |   | $       | (2,680 | ) |   |         |   | 
|                          |                                                                                                                                                             |                          |   |         |         |   |   |         |       
|                          |                                                                                                                                                             | Severance costs          |   | $       | (1,722  | ) |   |         |        |   |   |         |   | 
|                          |                                                                                                                                                             |                          |   |         |         |   |   |         |       
|                          |                                                                                                                                                             | Interest income          |   | $       | 1,740   |   |   | $       | 708    |   |   |         |   | 
|                          |                                                                                                                                                             |                          |   |         |         |   |   |         |       

New Accounting Pronouncements




| |         
| | --------
| | SFAS 150



F-17



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |        
| | -------
| | FIN 46R





| |          
| | ---------
| | SFAS 132R





| |          
| | ---------
| | FSP 106-2





| |          
| | ---------
| | SFAS 123R





| |         
| | --------
| | SFAS 151



F-18



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |          
| | ---------
| | FSP 109-1





|   |                        
|-- | -----------------------
|4. | Discontinued Operations





|                                                |  |                          |         |   |      |   |         |      |  |   |         |  
|----------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                |  | Years Ended December 31, |        
|                                                |  |                          |        
|                                                |  | 2004                     |         |   | 2003 |   |         | 2002 | 
|                                                |  |                          |         |   |      |   |         |      | 
|                                                |  | (In thousands)           |        
|Revenues of discontinued operations             |  | $                        | 29,149  |   |      | $ | 143,564 |      |  | $ | 200,121 |  
|Operating income                                |  | $                        | 22,408  |   |      | $ | 78,958  |      |  | $ | 126,339 |  
|Interest expense on secured bank debt (Note 10) |  |                          | (24,756 | ) |      |   | (49,178 | )    |  |   | (36,153 | )
|Income (loss) before income taxes               |  |                          | (2,348  | ) |      |   | 29,780  |      |  |   | 90,186  |  
|Income tax provision                            |  |                          |        |   |      |   | (10,977 | )    |  |   | (32,620 | )
|Income (loss) from discontinued operations      |  | $                        | (2,348  | ) |      | $ | 18,803  |      |  | $ | 57,566  |  



F-19



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                                     
|-- | ------------------------------------
|5. | Accumulated Other Comprehensive Loss



|                                                                                |                                                                                                                                      |              |         |   |                          |   |         |      |  |   |         |        |   |      |         |      |   |   |         |        |  
|------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------ | ------------ | ------- | - | ------------------------ | - | ------- | ---- |  | - | ------- | ------ | - | ---- | ------- | ---- | - | - | ------- | ------ | -
|                                                                                |                                                                                                                                      | December 31, |         |   | Years Ended December 31, |  
|                                                                                |                                                                                                                                      |              |         |   |                          |  
|                                                                                |                                                                                                                                      | 2004         |         |   | 2003                     |   |         | 2004 |  |   | 2003    |        |   | 2002 |        
|                                                                                |                                                                                                                                      |              |         |   |                          |   |         |      |  |   |         |        |   |      |        
|Cumulative translation adjustment                                               |                                                                                                                                      | $            | (799    | ) |                          | $ | (939    | )    |  | $ | 140     |        |   | $    | 970     |      |   | $ | (4      | )     
|Derivatives classified as cash flow hedges, net of taxes:                       |                                                                                                                                      |              |         |   |                          |   |         |      |  |   |         |        |   |      |         |      |   |   |         |       
|                                                                                | Net (decrease) increase in foreign currency exchange contracts                                                                       |              |         |   |                          |   |         |      |  |   |         |       |   |      |         | 551  |   |   |         | (1,142 | )
|                                                                                | Reclassifications into revenues, cost of sales and income taxes
    from other comprehensive income                                  |              |         |   |                          |   |         |      |  |   |         | (1,046 | ) |      |         | (355 | ) |   |         | (1,534 | )
|                                                                                | Reclassifications into interest expense from other comprehensive
    income for anticipated transactions that are no longer probable |              |         |   |                          |   |         |      |  |   |         |       |   |      |         | (440 | ) |   |         |       |  
|                                                                                |                                                                                                                                      |              |         |   |                          |   |         |      |  |   |         |        |   |      |        
|Unrealized net gains (losses) on derivatives                                    |                                                                                                                                      |              | (604    | ) |                          |   | 442     |      |  |   | (1,046  | )      |   |      | (244    | )    |   |   | (2,676  | )     
|Unrealized (losses) gains on available-for-sale securities, net
    of taxes    |                                                                                                                                      |              |        |   |                          |   | (8,142  | )    |  |   | 8,142   |        |   |      | (16,815 | )    |   |   | (12,603 | )     
|Minimum pension liability adjustment                                            |                                                                                                                                      |              | (88,258 | ) |                          |   | (69,209 | )    |  |   | (19,049 | )      |   |      | (4,526  | )    |   |   | (63,926 | )     
|Less: realized losses on available-for-sale securities included
    in net loss |                                                                                                                                      |              |         |   |                          |   |         |      |  |   |         |        |   |      |         |      |   |   | 1,189   |       
|                                                                                |                                                                                                                                      |              |         |   |                          |   |         |      |  |   |         |        |   |      |        
|Accumulated other comprehensive loss                                            |                                                                                                                                      | $            | (89,661 | ) |                          | $ | (77,848 | )    |  | $ | (11,813 | )      |   | $    | (20,615 | )    |   | $ | (78,020 | )     
|                                                                                |                                                                                                                                      |              |         |   |                          |   |         |      |  |   |         |        |   |      |        





F-20



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                                               
|-- | ----------------------------------------------
|6. | Contracts-in-Process and Long-Term Receivables



| |                     
| | --------------------
| | Contracts-in-Process

|                           |                      |                |        |       |      |   |        |        | 
|-------------------------- | -------------------- | -------------- | ------ | ----- | ---- | - | ------ | ------ | 
|                           |                      | December 31,   |       
|                           |                      |                |       
|                           |                      | 2004           |        |       | 2003 |  
|                           |                      |                |        |       |      |  
|                           |                      | (in thousands) |       
|U.S. government contracts: |                      |                |        |       |      |   |        |       
|                           | Amounts billed       |                | $      | 1,936 |      |   | $      | 3,724  | 
|                           | Unbilled receivables |                |        | 4,818 |      |   |        | 3,459  | 
|                           |                      |                |        |       |      |  
|                           |                      |                | 6,754  |       |      |   | 7,183  |       
|                           |                      |                |        |       |      |  
|Commercial contracts:      |                      |                |        |       |      |   |        |       
|                           | Amounts billed       |                |        | 6,210 |      |   |        | 10,380 | 
|                           | Unbilled receivables |                |        | 6,076 |      |   |        | 44,500 | 
|                           |                      |                |        |       |      |  
|                           |                      |                | 12,286 |       |      |   | 54,880 |       
|                           |                      |                |        |       |      |  
|                           |                      | $              | 19,040 |       |      | $ | 62,063 |       
|                           |                      |                |        |       |      |  





| |                      
| | ---------------------
| | Long-Term Receivables



|                                                       |  |             |        |  
|------------------------------------------------------ |  | ----------- | ------ | -
|                                                       |  | Long-Term   |       
|                                                       |  | Receivables |       
|                                                       |  |             |       
|2005                                                   |  | $           | 3,801  |  
|2006                                                   |  |             | 30,599 |  
|2007                                                   |  |             | 2,031  |  
|2008                                                   |  |             | 1,888  |  
|2009                                                   |  |             | 7,599  |  
|Thereafter                                             |  |             | 32,734 |  
|                                                       |  |             |       
|                                                       |  |             | 78,652 |  
|Less, current portion included in contracts-in-process |  |             | (3,801 | )
|                                                       |  |             |       
|Long-term receivables                                  |  | $           | 74,851 |  
|                                                       |  |             |       





F-21



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|   |                              
|-- | -----------------------------
|7. | Property, Plant and Equipment

|                                                                                  |  |                |           |   |      |   |           |  
|--------------------------------------------------------------------------------- |  | -------------- | --------- | - | ---- | - | --------- | -
|                                                                                  |  | December 31,   |          
|                                                                                  |  |                |          
|                                                                                  |  | 2004           |           |   | 2003 |  
|                                                                                  |  |                |           |   |      |  
|                                                                                  |  | (in thousands) |          
|Land and land improvements                                                        |  | $              | 24,827    |   |      | $ | 24,827    |  
|Buildings                                                                         |  |                | 87,133    |   |      |   | 86,065    |  
|Leasehold improvements                                                            |  |                | 15,638    |   |      |   | 16,995    |  
|Satellites in-orbit, including satellite transponder rights of
    $279.6 million |  |                | 1,093,951 |   |      |   | 1,454,511 |  
|Satellites under construction                                                     |  |                |          |   |      |   | 707,453   |  
|Earth stations                                                                    |  |                | 82,577    |   |      |   | 59,303    |  
|Equipment, furniture and fixtures                                                 |  |                | 276,948   |   |      |   | 290,257   |  
|Other construction in progress                                                    |  |                | 2,337     |   |      |   | 24,728    |  
|                                                                                  |  |                |           |   |      |  
|                                                                                  |  |                | 1,583,411 |   |      |   | 2,664,139 |  
|Accumulated depreciation and amortization                                         |  |                | (784,503  | ) |      |   | (835,857  | )
|                                                                                  |  |                |           |   |      |  
|                                                                                  |  | $              | 798,908   |   |      | $ | 1,828,282 |  
|                                                                                  |  |                |           |   |      |  









F-22



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|           |  |   |         | 
|---------- |  | - | ------- | 
|2005       |  | $ | 113,922 | 
|2006       |  |   | 83,433  | 
|2007       |  |   | 66,198  | 
|2008       |  |   | 55,143  | 
|2009       |  |   | 50,709  | 
|Thereafter |  |   | 141,269 | 
|           |  |   |        
|           |  | $ | 510,674 | 
|           |  |   |        



|   |                                          
|-- | -----------------------------------------
|8. | Investments in and Advances to Affiliates



|                                    |  |              |        |  |      |   |        | 
|----------------------------------- |  | ------------ | ------ |  | ---- | - | ------ | 
|                                    |  | December 31, |       
|                                    |  |              |       
|                                    |  | 2004         |        |  | 2003 |  
|                                    |  |              |        |  |      |  
|XTAR equity investment              |  | $            | 49,181 |  |      | $ | 43,382 | 
|Globalstar acquired notes and loans |  |              |       |  |      |   | 3,292  | 
|                                    |  |              |        |  |      |  
|                                    |  | $            | 49,181 |  |      | $ | 46,674 | 
|                                    |  |              |        |  |      |  

F-23



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                        |  |                          |        |  |      |   |         |       |  |   |         |      
|------------------------------------------------------- |  | ------------------------ | ------ |  | ---- | - | ------- | ----- |  | - | ------- | -----
|                                                        |  | Years Ended December 31, |       
|                                                        |  |                          |       
|                                                        |  | 2004                     |        |  | 2003 |   |         | 2002  | 
|                                                        |  |                          |        |  |      |   |         |       | 
|XTAR                                                    |  | $                        | 87     |  |      | $ | (230    | )     |  | $ | (7,017  | )    
|Satmex                                                  |  |                          |       |  |      |   | (51,699 | ) (1) |  |   | (25,067 | )    
|Europe*Star                                             |  |                          |       |  |      |   |        |       |  |   | (41,586 | ) (2)
|Globalstar and Globalstar service provider partnerships |  |                          | 46,567 |  |      |   | 776     |       |  |   | (2,610  | )    
|                                                        |  |                          |        |  |      |   |         |       | 
|                                                        |  | $                        | 46,654 |  |      | $ | (51,153 | )     |  | $ | (76,280 | )    
|                                                        |  |                          |        |  |      |   |         |       | 






|    |                                                                                                                                                                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes the write-off of our remaining investment in
    Satélites Mexicanos, S.A. de C.V. (Satmex) of
    $29 million due to the financial difficulties that Satmex
    is having (see below).                                                                                                                                                                  
|   
|(2) | Includes the write-off of our remaining investment in
    Europe*Star Limited (Europe*Star), which resulted
    from recording valuation allowances of $38 million on the
    vendor financing and the receivables advanced to Europe*Star due
    to collection concerns and recording a $7 million
    impairment charge relating to our investment (see below).



|                                                                                                      |  |                          |        |   |      |   |        |      |  |   |         |  
|----------------------------------------------------------------------------------------------------- |  | ------------------------ | ------ | - | ---- | - | ------ | ---- |  | - | ------- | -
|                                                                                                      |  | Years Ended December 31, |       
|                                                                                                      |  |                          |       
|                                                                                                      |  | 2004                     |        |   | 2003 |   |        | 2002 | 
|                                                                                                      |  |                          |        |   |      |   |        |      | 
|Revenues                                                                                              |  | $                        | 7,779  |   |      | $ | 27,716 |      |  | $ | 79,624  |  
|Investment income                                                                                     |  |                          |       |   |      |   | 886    |      |  |   | 1,177   |  
|Interest expense capitalized on development stage enterprises                                         |  |                          | 478    |   |      |   | 1,196  |      |  |   | 1,252   |  
|Elimination of Lorals proportionate share of losses
    (profits) relating to affiliate transactions |  |                          | 2,440  |   |      |   | 4,444  |      |  |   | (10,921 | )
|(Losses) profits relating to affiliate transactions not
    eliminated                                |  |                          | (1,917 | ) |      |   | (3,621 | )    |  |   | 9,887   |  
|Amortization of deferred credit and profits relating to
    investments in affiliates                 |  |                          |       |   |      |   | (783   | )    |  |   | (508    | )



| |     
| | ----
| | XTAR







F-24



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










| |       
| | ------
| | Satmex







F-25



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                           |  |               |         |   |              |   |         |  
|------------------------------------------ |  | ------------- | ------- | - | ------------ | - | ------- | -
|                                           |  | Nine Months   |         |   |             
|                                           |  | Ended         |         |   | Year Ended   |  
|                                           |  | September 30, |         |   | December 31, |  
|                                           |  | 2003          |         |   | 2002         |  
|                                           |  |               |         |   |              |  
|Revenues                                   |  | $             | 59,212  |   |              | $ | 85,011  |  
|Operating (loss) income                    |  |               | (4,195  | ) |              |   | (1,388  | )
|Net loss                                   |  |               | (31,687 | ) |              |   | (19,932 | )
|Net loss applicable to common stockholders |  |               | (32,818 | ) |              |   | (21,440 | )



| |            
| | -----------
| | Europe*Star





|                                    |  |   |         |  
|----------------------------------- |  | - | ------- | -
|Revenues                            |  | $ | 16,090  |  
|Operating loss                      |  |   | (23,162 | )
|Net loss applicable to shareholders |  |   | (74,773 | )



| |                              
| | -----------------------------
| | Globalstar Related Activities







F-26



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












|   |                                                                 
|-- | ----------------------------------------------------------------
|9. | Accounting for Goodwill and Other Acquired Intangible
    Assets





| |         
| | --------
| | Goodwill



F-27



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##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                                 
| | --------------------------------
| | Other Acquired Intangible Assets





|                                     |       |                   |      |      |                   |   |       |        |   |   |              |      |  |   |       |       |  
|------------------------------------ | ----- | ----------------- | ---- | ---- | ----------------- | - | ----- | ------ | - | - | ------------ | ---- |  | - | ----- | ----- | -
|                                     |       | December 31, 2004 |      |      | December 31, 2003 |  
|                                     |       |                   |      |      |                   |  
|                                     |       | Gross             |      |      | Accumulated       |   |       | Gross  |   |   | Accumulated  |     
|                                     |       | Amount            |      |      | Amortization      |   |       | Amount |   |   | Amortization |     
|                                     |       |                   |      |      |                   |   |       |        |   |   |              |     
|Satellite related
    intangibles(1) |       | $                 |     |      |                   | $ |      |        |   | $ | 40.7         |      |  | $ | (23.4 | )    
|Regulatory fees                      |       |                   | 22.5 |      |                   |   | (7.7  | )      |   |   | 22.7         |      |  |   | (6.2  | )    
|Other intangibles                    |       |                   | 13.0 |      |                   |   | (12.0 | )      |   |   | 13.0         |      |  |   | (10.2 | )    
|                                     |       |                   |      |      |                   |   |       |        |   |   |              |     
|                                     | Total |                   | $    | 35.5 |                   |   | $     | (19.7  | ) |   | $            | 76.4 |  |   | $     | (39.8 | )
|                                     |       |                   |      |      |                   |   |       |        |   |   |              |     






|    |                                                             
|--- | ------------------------------------------------------------
|(1) | Amortization expense is included in discontinued operations.





|     |  |   |     | 
|---- |  | - | --- | 
|2005 |  | $ | 2.5 | 
|2006 |  |   | 1.4 | 
|2007 |  |   | 1.4 | 
|2008 |  |   | 1.4 | 
|2009 |  |   | 1.4 | 



|    |                                  
|--- | ---------------------------------
|10. | Liabilities Subject to Compromise





F-28



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                   |  |              |           |  |      |   |           |    
|-------------------------------------------------- |  | ------------ | --------- |  | ---- | - | --------- | ---
|                                                   |  | December 31, |          
|                                                   |  |              |          
|                                                   |  | 2004         |           |  | 2003 |  
|                                                   |  |              |           |  |      |  
|Debt obligations (see below)                       |  | $            | 1,269,977 |  |      | $ | 2,236,864 |    
|Accounts payable                                   |  |              | 52,728    |  |      |   | 50,605    |    
|Accrued employment costs                           |  |              | 542       |  |      |   | 6,295     |    
|Customer advances                                  |  |              | 30,837    |  |      |   | 36,430    |    
|Accrued interest and preferred dividends           |  |              | 40,428    |  |      |   | 44,610    |    
|Income taxes payable                               |  |              | 38,934    |  |      |   | 39,514    |    
|Pension and other postretirement liabilities       |  |              | 178,647   |  |      |   | 146,566   |    
|Other liabilities                                  |  |              | 79,926    |  |      |   | 136,815   | (1)
|6% Series C convertible redeemable preferred stock |  |              | 187,274   |  |      |   | 187,274   |    
|6% Series D convertible redeemable preferred stock |  |              | 36,707    |  |      |   | 36,707    |    
|                                                   |  |              |           |  |      |  
|                                                   |  | $            | 1,916,000 |  |      | $ | 2,921,680 |    
|                                                   |  |              |           |  |      |  






|    |                                                                                                                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes approximately $47 million of vendor financing that
    was non-recourse to SS/ L in the event of non-payment by
    Globalstar due to bankruptcy. In June 2004, we recorded
    $47 million of equity income relating to Globalstar on the
    reversal of such non-recourse vendor financing obligations, upon
    the dissolution of Globalstar (see Note 8).

F-29



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Debt Obligations


|                                         |                                                                           |                |           |         |      |   |           |         | 
|---------------------------------------- | ------------------------------------------------------------------------- | -------------- | --------- | ------- | ---- | - | --------- | ------- | 
|                                         |                                                                           | December 31,   |          
|                                         |                                                                           |                |          
|                                         |                                                                           | 2004           |           |         | 2003 |  
|                                         |                                                                           |                |           |         |      |  
|                                         |                                                                           | (In thousands) |          
|Loral Orion 10.0% senior notes due 2006: |                                                                           |                |           |         |      |   |           |        
|                                         | Principal amount                                                          |                | $         | 612,704 |      |   | $         | 612,704 | 
|                                         | Accrued interest (deferred gain on debt exchanges)                        |                |           | 214,446 |      |   |           | 214,446 | 
|Bank debt:                               |                                                                           |                |           |         |      |   |           |        
|                                         | Loral Satellite term loan, 5.75% at December 31, 2003                     |                |           |        |      |   |           | 226,500 | 
|                                         | Loral Satellite revolving credit facility, 5.75% at
    December 31, 2003 |                |           |        |      |   |           | 200,000 | 
|                                         | LSC term loan facility, 5.25% at December 31, 2003                        |                |           |        |      |   |           | 350,000 | 
|                                         | LSC revolving credit facility, 5.25% at December 31, 2003                 |                |           |        |      |   |           | 190,387 | 
|                                         | 9.50% Senior notes due 2006                                               |                |           | 350,000 |      |   |           | 350,000 | 
|Non-recourse debt of Loral Orion:        |                                                                           |                |           |         |      |   |           |        
|                                         | 11.25% Senior notes due 2007 (principal amount
    $37 million)           |                |           | 39,402  |      |   |           | 39,402  | 
|                                         | 12.50% Senior discount notes due 2007 (principal amount
    $49 million)  |                |           | 53,425  |      |   |           | 53,425  | 
|                                         |                                                                           |                |           |         |      |  
|                                         |                                                                           | $              | 1,269,977 |         |      | $ | 2,236,864 |        
|                                         |                                                                           |                |           |         |      |  









| |                       
| | ----------------------
| | Loral Orion Indentures





F-30



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |                   
| | ------------------
| | Loral Senior Notes



Preferred Stock






F-31



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                        
| | ---------------------------------------
| | 6% Series C Convertible Preferred Stock







| |                                        
| | ---------------------------------------
| | 6% Series D Convertible Preferred Stock









|    |                                          
|--- | -----------------------------------------
|11. | Reorganization Expenses Due to Bankruptcy



|                         |                                                 |              |        |               |                  |   |        |        | 
|------------------------ | ----------------------------------------------- | ------------ | ------ | ------------- | ---------------- | - | ------ | ------ | 
|                         |                                                 |              |        | July 15, 2003 |                 
|                         |                                                 | Year Ended   |        |               | (Filing Date) to |  
|                         |                                                 | December 31, |        |               | December 31,     |  
|                         |                                                 | 2004         |        |               | 2003             |  
|                         |                                                 |              |        |               |                  |  
|Professional fees        |                                                 | $            | 20,898 |               |                  | $ | 15,489 |       
|Employee retention costs |                                                 |              | 10,035 |               |                  |   | 4,692  |       
|Severance costs          |                                                 |              | 4,641  |               |                  |   |      |       
|Facility closing costs   |                                                 |              | 1,963  |               |                  |   |      |       
|Lease rejection claims   |                                                 |              | 220    |               |                  |   | 5,872  |       
|Vendor settlement gains  |                                                 |              | (5,561 | )             |                  |   | (61    | )     
|Interest income          |                                                 |              | (1,740 | )             |                  |   | (708   | )     
|                         |                                                 |              |        |               |                  |  
|                         | Total reorganization expenses due to bankruptcy |              | $      | 30,456        |                  |   | $      | 25,284 | 
|                         |                                                 |              |        |               |                  |  

F-32



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |             
|--- | ------------
|12. | Income Taxes



|                                     |                     |                          |         |         |      |   |       |         |   |   |          |          |  
|------------------------------------ | ------------------- | ------------------------ | ------- | ------- | ---- | - | ----- | ------- | - | - | -------- | -------- | -
|                                     |                     | Years Ended December 31, |        
|                                     |                     |                          |        
|                                     |                     | 2004                     |         |         | 2003 |   |       | 2002    |  
|                                     |                     |                          |         |         |      |   |       |         |  
|Current:                             |                     |                          |         |         |      |   |       |         |   |   |          |         
|                                     | U.S. Federal        |                          | $       |        |      |   | $     | 358     |   |   | $        | 5,297    |  
|                                     | State and local     |                          |         | (335    | )    |   |       | (745    | ) |   |          | 2,199    |  
|                                     | Foreign             |                          |         | (796    | )    |   |       | (604    | ) |   |          | (1,041   | )
|                                     |                     |                          |         |         |      |   |       |         |  
|                                     | Total               |                          |         | (1,131  | )    |   |       | (991    | ) |   |          | 6,455    |  
|                                     |                     |                          |         |         |      |   |       |         |  
|Deferred:                            |                     |                          |         |         |      |   |       |         |   |   |          |         
|                                     | U.S. Federal        |                          |         | 59,635  |      |   |       | 118,672 |   |   |          | 55,126   |  
|                                     | State and local     |                          |         | 12,891  |      |   |       | (16,811 | ) |   |          | 13,346   |  
|                                     | Foreign             |                          |         | (3,650  | )    |   |       | 960     |   |   |          | 880      |  
|                                     | Valuation allowance |                          |         | (81,029 | )    |   |       | (95,500 | ) |   |          | (398,229 | )
|                                     |                     |                          |         |         |      |   |       |         |  
|                                     | Total               |                          |         | (12,153 | )    |   |       | 7,321   |   |   |          | (328,877 | )
|                                     |                     |                          |         |         |      |   |       |         |  
|Total income tax (provision) benefit |                     | $                        | (13,284 | )       |      | $ | 6,330 |         |   | $ | (322,422 | )       
|                                     |                     |                          |         |         |      |   |       |         |  









F-33



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                      |                                                         |                          |         |         |      |   |         |         |   |   |          |          |  
|----------------------------------------------------- | ------------------------------------------------------- | ------------------------ | ------- | ------- | ---- | - | ------- | ------- | - | - | -------- | -------- | -
|                                                      |                                                         | Years Ended December 31, |        
|                                                      |                                                         |                          |        
|                                                      |                                                         | 2004                     |         |         | 2003 |   |         | 2002    |  
|                                                      |                                                         |                          |         |         |      |   |         |         |  
|Tax benefit at U.S. Statutory Rate of 35%             |                                                         | $                        | 72,748  |         |      | $ | 128,924 |         |   | $ | 83,139   |         
|Permanent adjustments which change statutory amounts: |                                                         |                          |         |         |      |   |         |         |   |   |          |         
|                                                      | State and local income taxes, net of federal income tax |                          |         | 8,161   |      |   |         | (11,411 | ) |   |          | 10,104   |  
|                                                      | Non-U.S. income and losses taxed at lower rates         |                          |         | (4,575  | )    |   |         | (9,121  | ) |   |          | (16,212  | )
|                                                      | Reorganization expenses due to bankruptcy               |                          |         | (7,080  | )    |   |         | (5,885  | ) |   |          |         |  
|                                                      | Change in valuation allowance                           |                          |         | (81,029 | )    |   |         | (95,500 | ) |   |          | (398,229 | )
|                                                      | Other, net                                              |                          |         | (1,509  | )    |   |         | (677    | ) |   |          | (1,224   | )
|                                                      |                                                         |                          |         |         |      |   |         |         |  
|Total income tax (provision) benefit                  |                                                         | $                        | (13,284 | )       |      | $ | 6,330   |         |   | $ | (322,422 | )       
|                                                      |                                                         |                          |         |         |      |   |         |         |  







F-34



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












|                           |                                                      |              |         |          |      |   |         |          |  
|-------------------------- | ---------------------------------------------------- | ------------ | ------- | -------- | ---- | - | ------- | -------- | -
|                           |                                                      | December 31, |        
|                           |                                                      |              |        
|                           |                                                      | 2004         |         |          | 2003 |  
|                           |                                                      |              |         |          |      |  
|Deferred tax assets:       |                                                      |              |         |          |      |   |         |         
|                           | Postretirement benefits other than pensions          |              | $       | 21,373   |      |   | $       | 18,959   |  
|                           | Inventoried costs                                    |              |         | 30,718   |      |   |         | 28,448   |  
|                           | Net operating loss and tax credit carryforwards      |              |         | 487,934  |      |   |         | 624,702  |  
|                           | Compensation and benefits                            |              |         | 8,669    |      |   |         | 10,201   |  
|                           | Premium on senior notes                              |              |         | 69,663   |      |   |         | 113,847  |  
|                           | Investments in and advances to affiliates            |              |         | 38,108   |      |   |         | 18,938   |  
|                           | Other, net                                           |              |         | 6,715    |      |   |         | 3,430    |  
|                           | Pension costs                                        |              |         | 44,933   |      |   |         | 35,113   |  
|                           |                                                      |              |         |          |      |  
|                           | Total deferred tax assets before valuation allowance |              |         | 708,113  |      |   |         | 853,638  |  
|                           | Less valuation allowance                             |              |         | (659,783 | )    |   |         | (670,922 | )
|                           |                                                      |              |         |          |      |  
|                           | Net deferred tax asset                               |              | $       | 48,330   |      |   | $       | 182,716  |  
|                           |                                                      |              |         |          |      |  
|Deferred tax liabilities:  |                                                      |              |         |          |      |   |         |         
|                           | Property, plant and equipment                        |              | $       | 66,436   |      |   | $       | 199,883  |  
|                           | Income recognition on long-term contracts            |              |         | 12,501   |      |   |         | 13,440   |  
|                           |                                                      |              |         |          |      |  
|                           | Total deferred tax liability                         |              | $       | 78,937   |      |   | $       | 213,323  |  
|                           |                                                      |              |         |          |      |  
|Net deferred tax liability |                                                      | $            | (30,607 | )        |      | $ | (30,607 | )       
|                           |                                                      |              |         |          |      |  

F-35



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |                      
|--- | ---------------------
|13. | Shareholders Deficit



| |             
| | ------------
| | Common Stock









| |                         
| | ------------------------
| | Series B Preferred Stock





| |                                                                    
| | -------------------------------------------------------------------
| | Series C and Series D Preferred Stock Conversions
    (see Note 10)







| |            
| | -----------
| | Stock Plans



F-36



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










|                                                                                  |  |        |            |          |       |   |       | 
|--------------------------------------------------------------------------------- |  | ------ | ---------- | -------- | ----- | - | ----- | 
|                                                                                  |  |        |            | Weighted |      
|                                                                                  |  |        |            | Average  |      
|                                                                                  |  |        |            | Exercise |      
|                                                                                  |  | Shares |            |          | Price |  
|                                                                                  |  |        |            |          |       |  
|Outstanding at January 1, 2002                                                    |  |        | 4,766,066  |          |       | $ | 66.60 | 
|Granted at fair market value (weighted average fair value
    $10.80 per share)   |  |        | 93,950     |          |       |   | 18.60 | 
|Granted below fair market value (weighted average fair value
    $3.76 per share) |  |        | 40,000     |          |       |   | 0.10  | 
|Exercised                                                                         |  |        | (40,000    | )        |       |   | 0.10  | 
|Forfeited                                                                         |  |        | (575,132   | )        |       |   | 86.40 | 
|                                                                                  |  |        |            |          |       |  
|Outstanding at December 31, 2002                                                  |  |        | 4,284,884  |          |       |   | 62.90 | 
|Granted below fair market value (weighted average fair value
    $3.06 per share) |  |        | 30,000     |          |       |   | 0.10  | 
|Exercised                                                                         |  |        | (30,000    | )        |       |   | 0.10  | 
|Forfeited                                                                         |  |        | (1,897,671 | )        |       |   | 83.60 | 
|                                                                                  |  |        |            |          |       |  
|Outstanding at December 31, 2003                                                  |  |        | 2,387,213  |          |       |   | 46.45 | 
|Granted below fair market value (weighted average fair value
    $3.06 per share) |  |        |            |          |       |   |       | 
|Exercised                                                                         |  |        |           |          |       |   |      | 
|Forfeited                                                                         |  |        | (384,343   | )        |       | $ | 39.12 | 
|                                                                                  |  |        |            |          |       |  
|Outstanding at December 31, 2004                                                  |  |        | 2,002,870  |          |       | $ | 47.86 | 
|                                                                                  |  |        |            |          |       |  
|Options exercisable at December 31, 2002                                          |  |        | 2,555,606  |          |       | $ | 77.36 | 
|                                                                                  |  |        |            |          |       |  
|Options exercisable at December 31, 2003                                          |  |        | 1,945,227  |          |       | $ | 52.21 | 
|                                                                                  |  |        |            |          |       |  
|Options exercisable at December 31, 2004                                          |  |        | 1,974,654  |          |       | $ | 48.25 | 
|                                                                                  |  |        |            |          |       |  

F-37



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                     |  |                   |           |             |             |  |          |       |  |   |        |          |  |       |           |  |  |   |        | 
|-------------------- |  | ----------------- | --------- | ----------- | ----------- |  | -------- | ----- |  | - | ------ | -------- |  | ----- | --------- |  |  | - | ------ | 
|                     |  | December 31, 2004 |          
|                     |  |                   |          
|                     |  | Outstanding       |           |             |            
|                     |  |                   |           |             | Exercisable | 
|                     |  |                   |           | Weighted    |             |  |          |       |  |  
|                     |  |                   |           | Average     |             |  | Weighted |       |  |   |        | Weighted | 
|                     |  |                   |           | Remaining   |             |  | Average  |       |  |   |        | Average  | 
|                     |  |                   |           | Contractual |             |  | Exercise |       |  |   |        | Exercise | 
|Exercise Price Range |  | Number            |           |             | Life-Years  |  |          | Price |  |   | Number |          |  | Price |          
|                     |  |                   |           |             |             |  |          |       |  |   |        |          |  |       |          
|$3.80  $19.60       |  |                   | 1,021,683 |             |             |  | 6.79     |       |  | $ | 13.23  |          |  |       | 995,653   |  |  | $ | 13.09  | 
|$24.75  $34.70      |  |                   | 376,787   |             |             |  | 6.02     |       |  |   | 32.63  |          |  |       | 375,121   |  |  |   | 32.67  | 
|$75.00  $81.30      |  |                   | 270,940   |             |             |  | 5.52     |       |  |   | 79.99  |          |  |       | 270,940   |  |  |   | 79.99  | 
|$105.00  $155.00    |  |                   | 199,152   |             |             |  | 1.72     |       |  |   | 111.91 |          |  |       | 198,632   |  |  |   | 111.90 | 
|$160.00  $202.00    |  |                   | 86,160    |             |             |  | 4.09     |       |  |   | 165.76 |          |  |       | 86,160    |  |  |   | 165.76 | 
|$238.50  $272.80    |  |                   | 48,148    |             |             |  | 2.17     |       |  |   | 245.25 |          |  |       | 48,148    |  |  |   | 245.25 | 
|                     |  |                   |           |             |             |  |          |       |  |   |        |          |  |       |          
|                     |  |                   | 2,002,870 |             |             |  | 5.74     |       |  |   | 47.86  |          |  |       | 1,974,654 |  |  |   | 48.25  | 
|                     |  |                   |           |             |             |  |          |       |  |   |        |          |  |       |          







|    |               
|--- | --------------
|14. | Loss Per Share



F-38



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##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                |                                                                                                                                |                                       |   |          |      |  |   |          |   |  |   |            |  
|----------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------- | - | -------- | ---- |  | - | -------- | - |  | - | ---------- | -
|                                                |                                                                                                                                | Years Ended December 31,              |  
|                                                |                                                                                                                                |                                       |  
|                                                |                                                                                                                                | 2004                                  |   |          | 2003 |  |   | 2002     |  
|                                                |                                                                                                                                |                                       |   |          |      |  |   |          |  
|                                                |                                                                                                                                | (in thousands, except per share data) |  
|Numerator for basic and diluted loss per share: |                                                                                                                                |                                       |   |          |      |  |   |          |   |  |   |           
|                                                | Loss from continuing operations                                                                                                |                                       | $ | (174,347 | )    |  | $ | (413,158 | ) |  | $ | (636,468   | )
|                                                | Income (loss) from discontinued operations, net of taxes                                                                       |                                       |   | (2,348   | )    |  |   | 18,803   |   |  |   | 57,566     |  
|                                                |                                                                                                                                |                                       |   |          |      |  |   |          |  
|                                                | Loss before cumulative effect of change in accounting principle
    and extraordinary gain on acquisition of minority interest |                                       |   | (176,695 | )    |  |   | (394,355 | ) |  |   | (578,902   | )
|                                                | Cumulative effect of change in accounting principle                                                                            |                                       |   |         |      |  |   | (1,970   | ) |  |   | (890,309   | )
|                                                | Extraordinary gain on acquisition of minority interest                                                                         |                                       |   |         |      |  |   | 13,615   |   |  |   |           |  
|                                                |                                                                                                                                |                                       |   |          |      |  |   |          |  
|                                                | Net loss                                                                                                                       |                                       |   | (176,695 | )    |  |   | (382,710 | ) |  |   | (1,469,211 | )
|                                                | Preferred dividends                                                                                                            |                                       |   |         |      |  |   | (6,719   | ) |  |   | (89,186    | )
|                                                |                                                                                                                                |                                       |   |          |      |  |   |          |  
|                                                | Net loss applicable to common stockholders                                                                                     |                                       | $ | (176,695 | )    |  | $ | (389,429 | ) |  | $ | (1,558,397 | )
|                                                |                                                                                                                                |                                       |   |          |      |  |   |          |  
|Denominator:                                    |                                                                                                                                |                                       |   |          |      |  |   |          |   |  |   |           
|                                                | Weighted average common shares outstanding                                                                                     |                                       |   | 44,108   |      |  |   | 43,819   |   |  |   | 37,272     |  
|                                                |                                                                                                                                |                                       |   |          |      |  |   |          |  
|Basic and diluted loss per share:               |                                                                                                                                |                                       |   |          |      |  |   |          |   |  |   |           
|                                                | Continuing operations                                                                                                          |                                       | $ | (3.96    | )    |  | $ | (9.58    | ) |  | $ | (19.47     | )
|                                                | Discontinued operations                                                                                                        |                                       |   | (0.05    | )    |  |   | 0.43     |   |  |   | 1.55       |  
|                                                |                                                                                                                                |                                       |   |          |      |  |   |          |  
|                                                | Before cumulative effect of change in accounting principle and
    extraordinary gain on acquisition of minority interest      |                                       |   | (4.01    | )    |  |   | (9.15    | ) |  | $ | (17.92     | )
|                                                | Cumulative effect of change in accounting principle                                                                            |                                       |   |         |      |  |   | (0.05    | ) |  |   | (23.89     | )
|                                                | Extraordinary gain on acquisition of minority interest                                                                         |                                       |   |         |      |  |   | 0.31     |   |  |   |           |  
|                                                |                                                                                                                                |                                       |   |          |      |  |   |          |  
|                                                | Loss per share                                                                                                                 |                                       | $ | (4.01    | )    |  | $ | (8.89    | ) |  | $ | (41.81     | )
|                                                |                                                                                                                                |                                       |   |          |      |  |   |          |  



|    |                                     
|--- | ------------------------------------
|15. | Pensions and Other Employee Benefits

Pensions






| |               
| | --------------
| | Other Benefits



F-39



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##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                            |  |                  |          |   |                |   |          |      |  |   |         |   |  |   |         |  
|------------------------------------------- |  | ---------------- | -------- | - | -------------- | - | -------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                            |  | Pension Benefits |          |   | Other Benefits |  
|                                            |  |                  |          |   |                |  
|                                            |  | 2004             |          |   | 2003           |   |          | 2004 |  |   | 2003    |  
|                                            |  |                  |          |   |                |   |          |      |  |   |         |  
|                                            |  | (in thousands)   |         
|Reconciliation of benefit obligation        |  |                  |          |   |                |   |          |      |  |   |         |   |  |   |         |  
|Obligation at January 1                     |  | $                | 353,881  |   |                | $ | 319,950  |      |  | $ | 69,337  |   |  | $ | 71,990  |  
|Service cost                                |  |                  | 9,694    |   |                |   | 10,647   |      |  |   | 1,212   |   |  |   | 3,139   |  
|Interest cost                               |  |                  | 22,740   |   |                |   | 22,021   |      |  |   | 5,178   |   |  |   | 5,647   |  
|Participant contributions                   |  |                  | 1,008    |   |                |   | 1,033    |      |  |   | 1,592   |   |  |   | 1,055   |  
|Plan amendments                             |  |                  |          |   |                |   |          |      |  |   |         |   |  |   | (20,842 | )
|Actuarial loss                              |  |                  | 28,467   |   |                |   | 24,405   |      |  |   | 9,748   |   |  |   | 21,981  |  
|Curtailment gain                            |  |                  |          |   |                |   | (6,207   | )    |  |   |         |   |  |   | (9,893  | )
|Benefit payments                            |  |                  | (20,692  | ) |                |   | (17,968  | )    |  |   | (5,038  | ) |  |   | (3,740  | )
|                                            |  |                  |          |   |                |   |          |      |  |   |         |  
|Obligation at December 31                   |  | $                | 395,098  |   |                | $ | 353,881  |      |  | $ | 82,029  |   |  | $ | 69,337  |  
|Reconciliation of fair value of plan assets |  |                  |          |   |                |   |          |      |  |   |         |   |  |   |         |  
|Fair value of plan assets at January 1      |  | $                | 218,897  |   |                | $ | 203,225  |      |  | $ | 1,380   |   |  | $ | 1,549   |  
|Actual return (loss) on plan assets         |  |                  | 17,268   |   |                |   | 32,607   |      |  |   | 26      |   |  |   | 40      |  
|Employer contributions                      |  |                  | 13,255   |   |                |   |          |      |  |   | 3,194   |   |  |   | 2,476   |  
|Participant contributions                   |  |                  | 1,008    |   |                |   | 1,033    |      |  |   | 1,592   |   |  |   | 1,055   |  
|Benefit payments                            |  |                  | (19,743  | ) |                |   | (17,968  | )    |  |   | (5,038  | ) |  |   | (3,740  | )
|                                            |  |                  |          |   |                |   |          |      |  |   |         |  
|                                            |  | $                | 230,685  |   |                | $ | 218,897  |      |  | $ | 1,154   |   |  | $ | 1,380   |  
|Funded status                               |  |                  |          |   |                |   |          |      |  |   |         |   |  |   |         |  
|Unfunded status at December 31              |  | $                | (164,413 | ) |                | $ | (134,984 | )    |  | $ | (80,875 | ) |  | $ | (67,957 | )
|Unrecognized prior service cost             |  |                  | (225     | ) |                |   | (261     | )    |  |   | (21,335 | ) |  |   | (25,362 | )
|Unrecognized loss                           |  |                  | 125,248  |   |                |   | 102,486  |      |  |   | 50,041  |   |  |   | 45,252  |  
|                                            |  |                  |          |   |                |   |          |      |  |   |         |  
|Net amount recognized                       |  | $                | (39,390  | ) |                | $ | (32,759  | )    |  | $ | (52,169 | ) |  | $ | (48,067 | )
|                                            |  |                  |          |   |                |   |          |      |  |   |         |  



|                                     |  |      |          |   |      |   |          |  
|------------------------------------ |  | ---- | -------- | - | ---- | - | -------- | -
|                                     |  | 2004 |          |   | 2003 |  
|                                     |  |      |          |   |      |  
|Accrued benefit liability            |  | $    | (127,648 | ) |      | $ | (101,968 | )
|Accumulated other comprehensive loss |  |      | 88,258   |   |      |   | 69,209   |  
|                                     |  |      |          |   |      |  
|Net amount recognized                |  | $    | (39,390  | ) |      | $ | (32,759  | )
|                                     |  |      |          |   |      |  





F-40



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##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                       |  |                  |         |   |                |   |         |      |  |   |         |   |  |      |        |   |      |   |        |   |  |   |        |  
|-------------------------------------- |  | ---------------- | ------- | - | -------------- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------ | - | ---- | - | ------ | - |  | - | ------ | -
|                                       |  | Pension Benefits |         |   | Other Benefits |  
|                                       |  |                  |         |   |                |  
|                                       |  | 2004             |         |   | 2003           |   |         | 2002 |  |   | 2004    |   |  | 2003 |        |   | 2002 |  
|                                       |  |                  |         |   |                |   |         |      |  |   |         |   |  |      |        |   |      |  
|Service cost                           |  | $                | 9,694   |   |                | $ | 10,647  |      |  | $ | 9,382   |   |  | $    | 1,212  |   |      | $ | 3,139  |   |  | $ | 2,135  |  
|Interest cost                          |  |                  | 22,740  |   |                |   | 22,021  |      |  |   | 21,041  |   |  |      | 5,178  |   |      |   | 5,647  |   |  |   | 4,111  |  
|Expected return on plan assets         |  |                  | (19,415 | ) |                |   | (18,318 | )    |  |   | (22,640 | ) |  |      | (74    | ) |      |   | (139   | ) |  |   | (135   | )
|Amortization of prior service cost     |  |                  | (36     | ) |                |   | (36     | )    |  |   | (36     | ) |  |      | (1,931 | ) |      |   | (1,429 | ) |  |   | (1,272 | )
|Amortization of net loss               |  |                  | 5,294   |   |                |   | 5,372   |      |  |   | 540     |   |  |      | 2,911  |   |      |   | 2,120  |   |  |   | 733    |  
|Recognition of curtailment loss (gain) |  |                  |        |   |                |   | 18      |      |  |   |        |   |  |      |       |   |      |   | (1,257 | ) |  |   |       |  
|                                       |  |                  |         |   |                |   |         |      |  |   |         |   |  |      |        |   |      |  
|Net periodic cost                      |  | $                | 18,277  |   |                | $ | 19,704  |      |  | $ | 8,287   |   |  | $    | 7,296  |   |      | $ | 8,081  |   |  | $ | 5,572  |  
|                                       |  |                  |         |   |                |   |         |      |  |   |         |   |  |      |        |   |      |  





|                               |  |      |      |   |      |  |      |      |  |  |      |  
|------------------------------ |  | ---- | ---- | - | ---- |  | ---- | ---- |  |  | ---- | -
|                               |  | 2004 |      |   | 2003 |  |      | 2002 | 
|                               |  |      |      |   |      |  |      |      | 
|Discount rate                  |  |      | 6.25 | % |      |  | 6.75 | %    |  |  | 7.50 | %
|Expected return on plan assets |  |      | 9.00 | % |      |  | 9.00 | %    |  |  | 9.50 | %
|Rate of compensation increase  |  |      | 4.25 | % |      |  | 4.25 | %    |  |  | 4.25 | %



|                              |  |      |      |   |      |  |      |  
|----------------------------- |  | ---- | ---- | - | ---- |  | ---- | -
|                              |  | 2004 |      |   | 2003 | 
|                              |  |      |      |   |      | 
|Discount rate                 |  |      | 6.00 | % |      |  | 6.25 | %
|Rate of compensation increase |  |      | 4.25 | % |      |  | 4.25 | %



F-41



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##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                         |  |      |     |   |      |  |     |  
|------------------------ |  | ---- | --- | - | ---- |  | --- | -
|                         |  | 2004 |     |   | 2003 | 
|                         |  |      |     |   |      | 
|Equity investments       |  |      | 56  | % |      |  | 55  | %
|Fixed income investments |  |      | 44  | % |      |  | 45  | %
|                         |  |      |     |   |      | 
|                         |  |      | 100 | % |      |  | 100 | %
|                         |  |      |     |   |      | 



|                                                                                                                    |  |             |       |  |             |   |        |  
|------------------------------------------------------------------------------------------------------------------- |  | ----------- | ----- |  | ----------- | - | ------ | -
|                                                                                                                    |  | 1% Increase |       |  | 1% Decrease |  
|                                                                                                                    |  |             |       |  |             |  
|Effect on total of service and interest cost components of net
    periodic postretirement health care benefit cost |  | $           | 531   |  |             | $ | (445   | )
|Effect on the health care component of the accumulated
    postretirement benefit obligation                        |  | $           | 6,768 |  |             | $ | (5,746 | )



|             |  |          |         |                |          |   |        |          |  |   |        |  
|------------ |  | -------- | ------- | -------------- | -------- | - | ------ | -------- |  | - | ------ | -
|             |  |          |         | Other Benefits |         
|             |  |          |         |                |         
|             |  |          |         | Gross          |          |   |       
|             |  | Pension  |         |                | Benefit  |   |        | Subsidy  | 
|             |  | Benefits |         |                | Payments |   |        | Receipts | 
|             |  |          |         |                |          |   |        |          | 
|2005         |  | $        | 19,747  |                |          | $ | 4,792  |          |  | $ |       |  
|2006         |  |          | 20,233  |                |          |   | 4,937  |          |  |   | (311   | )
|2007         |  |          | 20,789  |                |          |   | 5,172  |          |  |   | (351   | )
|2008         |  |          | 21,618  |                |          |   | 5,435  |          |  |   | (387   | )
|2009         |  |          | 22,341  |                |          |   | 5,749  |          |  |   | (422   | )
|2010 to 2014 |  |          | 124,279 |                |          |   | 32,310 |          |  |   | (2,572 | )







F-42



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##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                      
| | ---------------------
| | Employee Savings Plan





|    |                                           
|--- | ------------------------------------------
|16. | Financial Instruments and Foreign Currency



| |                      
| | ---------------------
| | Financial Instruments



|                                                      |  |              |           |  |            |   |          |        |  |   |            |  |  |   |           | 
|----------------------------------------------------- |  | ------------ | --------- |  | ---------- | - | -------- | ------ |  | - | ---------- |  |  | - | --------- | 
|                                                      |  | December 31, |          
|                                                      |  |              |          
|                                                      |  | 2004         |           |  | 2003       |  
|                                                      |  |              |           |  |            |  
|                                                      |  | Carrying     |           |  |            |   | Carrying |        |  |  
|                                                      |  | Amount       |           |  | Fair Value |   |          | Amount |  |   | Fair Value | 
|                                                      |  |              |           |  |            |   |          |        |  |   |            | 
|Cash and cash equivalents                             |  | $            | 147,773   |  |            | $ | 147,773  |        |  | $ | 141,644    |  |  | $ | 141,644   | 
|Supplemental retirement plan assets                   |  |              | 7,444     |  |            |   | 7,444    |        |  |   | 8,072      |  |  |   | 8,072     | 
|Investment in Globalstar $500 million credit facility |  |              |          |  |            |   |         |        |  |   | 3,440      |  |  |   | 3,440     | 
|Debt                                                  |  |              | 1,269,977 |  |            |   | 563,000  |        |  |   | 2,236,864  |  |  |   | 1,650,035 | 
|6% Series C Preferred Stock                           |  |              | 187,274   |  |            |   | 1,000    |        |  |   | 187,274    |  |  |   | 13,000    | 
|6% Series D Preferred Stock                           |  |              | 36,707    |  |            |   |         |        |  |   | 36,707     |  |  |   | 3,000     | 









| |                 
| | ----------------
| | Foreign Currency



F-43



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##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                            |  |              |        |  |       |   |      | 
|------------------------------------------- |  | ------------ | ------ |  | ----- | - | ---- | 
|                                            |  | Japanese Yen |        |  | U.S.$ |  
|                                            |  |              |        |  |       |  
|Future revenues                             |  |              | ¥1,770 |  |       | $ | 17.2 | 
|Future expenditures                         |  |              | 114    |  |       |   | 1.1  | 
|Contracts-in-process (unbilled receivables) |  |              | 1,467  |  |       |   | 14.2 | 





|    |                              
|--- | -----------------------------
|17. | Commitments and Contingencies







|                                                                                 |  |   |      |  
|-------------------------------------------------------------------------------- |  | - | ---- | -
|Balance of deferred amounts at January 1, 2002                                   |  | $ | 14.8 |  
|Accruals for deferred amounts issued during the period                           |  |   | 1.0  |  
|Accruals relating to pre-existing contracts (including changes
    in estimates) |  |   | (1.7 | )
|                                                                                 |  |   |     
|Balance of deferred amounts at December 31, 2002                                 |  |   | 14.1 |  
|Accruals for deferred amounts issued during the period                           |  |   |     |  
|Accruals relating to pre-existing contracts (including changes
    in estimates) |  |   | 2.2  |  
|                                                                                 |  |   |     
|Balance of deferred amounts at December 31, 2003                                 |  |   | 16.3 |  
|Accruals for deferred amounts issued during the period                           |  |   | 2.9  |  
|Accruals relating to pre-existing contracts (including changes
    in estimates) |  |   | 6.8  |  
|                                                                                 |  |   |     
|Balance of deferred amounts at December 31, 2004                                 |  | $ | 26.0 |  
|                                                                                 |  |   |     



F-44



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##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












F-45



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##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










F-46



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##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










F-47



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##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                                            
| | -------------------------------------------
| | Lawsuits against our Directors and Officers

Beleson




In re: Loral Space ERISA
Litigation.


F-48



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##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




In re: Loral Space ERISA Litigation,






| |      
| | -----
| | Other





| |                           
| | --------------------------
| | Globalstar Related Matters

In re: Globalstar Securities Litigation.


F-49



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##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




In re: Loral
Space & Communications Ltd. Securities Litigation.


In re: Loral Space &
Communications Ltd. Securities Litigation






| |                   
| | ------------------
| | Lease Arrangements



F-50



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##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|           |  |   |         | 
|---------- |  | - | ------- | 
|2005       |  | $ | 29,300  | 
|2006       |  |   | 21,406  | 
|2007       |  |   | 17,489  | 
|2008       |  |   | 15,279  | 
|2009       |  |   | 13,899  | 
|Thereafter |  |   | 44,635  | 
|           |  |   |        
|           |  | $ | 142,008 | 
|           |  |   |        





|    |         
|--- | --------
|18. | Segments







F-51



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LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |                                                                                                     
| | ----------------------------------------------------------------------------------------------------
| | Summarized financial information concerning the reportable
    segments is as follows (in millions):

2004 Segment Information


|                                                          |  |           |       |  |               |   |       |              |  |   |       |   |  |   |         |  
|--------------------------------------------------------- |  | --------- | ----- |  | ------------- | - | ----- | ------------ |  | - | ----- | - |  | - | ------- | -
|                                                          |  | Satellite |       |  | Satellite     |   |       |              |  |  
|                                                          |  | Services  |       |  | Manufacturing |   |       | Corporate(1) |  |   | Total |  
|                                                          |  |           |       |  |               |   |       |              |  |   |       |  
|Revenues and Adjusted EBITDA:                             |  |           |       |  |               |   |       |              |  |   |       |   |  |   |         |  
|Revenues(2)                                               |  | $         | 136.7 |  |               | $ | 299.6 |              |  |   |       |   |  | $ | 436.3   |  
|Revenues from sales-type lease arrangement (see Note 7)   |  |           | 87.2  |  |               |   |       |              |  |   |       |   |  |   | 87.2    |  
|Intersegment revenues                                     |  |           | 4.5   |  |               |   | 137.0 |              |  |   |       |   |  |   | 141.5   |  
|                                                          |  |           |       |  |               |   |       |              |  |   |       |  
|Operating segment revenues                                |  | $         | 228.4 |  |               | $ | 436.6 |              |  |   |       |   |  |   | 665.0   |  
|                                                          |  |           |       |  |               |   |       |              |  |   |       |  
|Eliminations(3)                                           |  |           |       |  |               |   |       |              |  |   |       |   |  |   | (142.9  | )
|                                                          |  |           |       |  |               |   |       |              |  |   |       |  
|Operating revenues as reported                            |  |           |       |  |               |   |       |              |  |   |       |   |  | $ | 522.1   |  
|                                                          |  |           |       |  |               |   |       |              |  |   |       |  
|Segment Adjusted EBITDA before eliminations
    (4)(5)(9) |  | $         | 23.3  |  |               | $ | (13.5 | )            |  | $ | (34.9 | ) |  | $ | (25.1   | )
|                                                          |  |           |       |  |               |   |       |              |  |   |       |  
|Eliminations(3)                                           |  |           |       |  |               |   |       |              |  |   |       |   |  |   | (24.0   | )
|                                                          |  |           |       |  |               |   |       |              |  |   |       |  
|Adjusted EBITDA                                           |  |           |       |  |               |   |       |              |  |   |       |   |  |   | (49.1   | )
|Depreciation and
    amortization(6)(7)                   |  |           |       |  |               |   |       |              |  |   |       |   |  |   | (134.8  | )
|Reorganization expenses due to bankruptcy                 |  |           |       |  |               |   |       |              |  |   |       |   |  |   | (30.4   | )
|                                                          |  |           |       |  |               |   |       |              |  |   |       |  
|Operating loss from continuing operations                 |  |           |       |  |               |   |       |              |  |   |       |   |  |   | (214.3  | )
|Interest and investment income                            |  |           |       |  |               |   |       |              |  |   |       |   |  |   | 9.9     |  
|Interest expense                                          |  |           |       |  |               |   |       |              |  |   |       |   |  |   | (2.9    | )
|Other expense                                             |  |           |       |  |               |   |       |              |  |   |       |   |  |   | (0.5    | )
|Income tax provision                                      |  |           |       |  |               |   |       |              |  |   |       |   |  |   | (13.2   | )
|Equity income in affiliates                               |  |           |       |  |               |   |       |              |  |   |       |   |  |   | 46.6    |  
|Minority interest                                         |  |           |       |  |               |   |       |              |  |   |       |   |  |   | 0.1     |  
|                                                          |  |           |       |  |               |   |       |              |  |   |       |  
|Loss from continuing operations                           |  |           |       |  |               |   |       |              |  |   |       |   |  | $ | (174.3  | )
|                                                          |  |           |       |  |               |   |       |              |  |   |       |  
|Other Data:                                               |  |           |       |  |               |   |       |              |  |   |       |   |  |   |         |  
|Depreciation and
    amortization(6)(7)                   |  | $         | 111.3 |  |               | $ | 22.9  |              |  | $ | 0.6   |   |  | $ | 134.8   |  
|                                                          |  |           |       |  |               |   |       |              |  |   |       |  
|Capital
    expenditures(7)                               |  | $         | 22.8  |  |               | $ | 1.8   |              |  | $ | 0.2   |   |  | $ | 24.8    |  
|                                                          |  |           |       |  |               |   |       |              |  |   |       |  
|Total
    assets(7)                                       |  | $         | 780.8 |  |               | $ | 382.2 |              |  | $ | 55.7  |   |  | $ | 1,218.7 |  
|                                                          |  |           |       |  |               |   |       |              |  |   |       |  

F-52



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


2003 Segment
Information(8)


|                                                          |  |           |         |  |               |   |        |              |  |   |       |   |  |   |         |  
|--------------------------------------------------------- |  | --------- | ------- |  | ------------- | - | ------ | ------------ |  | - | ----- | - |  | - | ------- | -
|                                                          |  | Satellite |         |  | Satellite     |   |        |              |  |  
|                                                          |  | Services  |         |  | Manufacturing |   |        | Corporate(1) |  |   | Total |  
|                                                          |  |           |         |  |               |   |        |              |  |   |       |  
|Revenues and Adjusted EBITDA:                             |  |           |         |  |               |   |        |              |  |   |       |   |  |   |         |  
|Revenues(2)                                               |  | $         | 150.0   |  |               | $ | 245.0  |              |  |   |       |   |  | $ | 395.0   |  
|Intersegment revenues                                     |  |           | 4.3     |  |               |   | 229.0  |              |  |   |       |   |  |   | 233.3   |  
|                                                          |  |           |         |  |               |   |        |              |  |   |       |  
|Operating segment revenues                                |  | $         | 154.3   |  |               | $ | 474.0  |              |  |   |       |   |  |   | 628.3   |  
|                                                          |  |           |         |  |               |   |        |              |  |   |       |  
|Eliminations(3)                                           |  |           |         |  |               |   |        |              |  |   |       |   |  |   | (236.3  | )
|                                                          |  |           |         |  |               |   |        |              |  |   |       |  
|Operating revenues as reported                            |  |           |         |  |               |   |        |              |  |   |       |   |  | $ | 392.0   |  
|                                                          |  |           |         |  |               |   |        |              |  |   |       |  
|Segment Adjusted EBITDA before eliminations
    (4)(5)(9) |  | $         | 7.5     |  |               | $ | (158.6 | )            |  | $ | (36.0 | ) |  | $ | (187.1  | )
|                                                          |  |           |         |  |               |   |        |              |  |   |       |  
|Eliminations(3)                                           |  |           |         |  |               |   |        |              |  |   |       |   |  |   | (41.9   | )
|                                                          |  |           |         |  |               |   |        |              |  |   |       |  
|Adjusted EBITDA                                           |  |           |         |  |               |   |        |              |  |   |       |   |  |   | (229.0  | )
|Depreciation and
    amortization(6)(7)                   |  |           |         |  |               |   |        |              |  |   |       |   |  |   | (134.6  | )
|Reorganization expenses due to bankruptcy                 |  |           |         |  |               |   |        |              |  |   |       |   |  |   | (25.3   | )
|                                                          |  |           |         |  |               |   |        |              |  |   |       |  
|Operating loss from continuing operations                 |  |           |         |  |               |   |        |              |  |   |       |   |  |   | (388.9  | )
|Interest and investment income                            |  |           |         |  |               |   |        |              |  |   |       |   |  |   | 15.2    |  
|Interest expense                                          |  |           |         |  |               |   |        |              |  |   |       |   |  |   | (14.1   | )
|Other income                                              |  |           |         |  |               |   |        |              |  |   |       |   |  |   | 1.5     |  
|Gain on investment                                        |  |           |         |  |               |   |        |              |  |   |       |   |  |   | 17.9    |  
|Income tax provision                                      |  |           |         |  |               |   |        |              |  |   |       |   |  |   | 6.4     |  
|Equity losses in affiliates                               |  |           |         |  |               |   |        |              |  |   |       |   |  |   | (51.2   | )
|Minority interest                                         |  |           |         |  |               |   |        |              |  |   |       |   |  |   |        |  
|                                                          |  |           |         |  |               |   |        |              |  |   |       |  
|Loss from continuing operations                           |  |           |         |  |               |   |        |              |  |   |       |   |  | $ | (413.2  | )
|                                                          |  |           |         |  |               |   |        |              |  |   |       |  
|Other Data:                                               |  |           |         |  |               |   |        |              |  |   |       |   |  |   |         |  
|Depreciation and
    amortization(6)(7)                   |  | $         | 106.9   |  |               | $ | 27.2   |              |  | $ | 0.5   |   |  | $ | 134.6   |  
|                                                          |  |           |         |  |               |   |        |              |  |   |       |  
|Capital
    expenditures(7)                               |  | $         | 109.4   |  |               | $ | 6.0    |              |  | $ |      |   |  | $ | 115.4   |  
|                                                          |  |           |         |  |               |   |        |              |  |   |       |  
|Total
    assets(7)                                       |  | $         | 1,983.9 |  |               | $ | 362.0  |              |  | $ | 117.9 |   |  | $ | 2,463.8 |  
|                                                          |  |           |         |  |               |   |        |              |  |   |       |  

F-53



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


2002 Segment
Information(8)


|                                                          |  |           |       |  |               |   |       |              |  |   |       |   |  |   |         |  
|--------------------------------------------------------- |  | --------- | ----- |  | ------------- | - | ----- | ------------ |  | - | ----- | - |  | - | ------- | -
|                                                          |  | Satellite |       |  | Satellite     |   |       |              |  |  
|                                                          |  | Services  |       |  | Manufacturing |   |       | Corporate(1) |  |   | Total |  
|                                                          |  |           |       |  |               |   |       |              |  |   |       |  
|Revenues and Adjusted EBITDA:                             |  |           |       |  |               |   |       |              |  |   |       |   |  |   |         |  
|Revenues(2)                                               |  | $         | 193.3 |  |               | $ | 708.5 |              |  |   |       |   |  | $ | 901.8   |  
|Intersegment revenues                                     |  |           | 4.2   |  |               |   | 144.6 |              |  |   |       |   |  |   | 148.8   |  
|                                                          |  |           |       |  |               |   |       |              |  |   |       |  
|Operating segment revenues                                |  | $         | 197.5 |  |               | $ | 853.1 |              |  |   |       |   |  |   | 1,050.6 |  
|                                                          |  |           |       |  |               |   |       |              |  |   |       |  
|Eliminations(3)                                           |  |           |       |  |               |   |       |              |  |   |       |   |  |   | (150.1  | )
|                                                          |  |           |       |  |               |   |       |              |  |   |       |  
|Operating revenues as reported                            |  |           |       |  |               |   |       |              |  |   |       |   |  | $ | 900.5   |  
|                                                          |  |           |       |  |               |   |       |              |  |   |       |  
|Segment Adjusted EBITDA before eliminations
    (4)(5)(9) |  | $         | 35.9  |  |               | $ | (34.0 | )            |  | $ | (36.8 | ) |  | $ | (34.9   | )
|                                                          |  |           |       |  |               |   |       |              |  |   |       |  
|Eliminations(3)                                           |  |           |       |  |               |   |       |              |  |   |       |   |  |   | (44.1   | )
|                                                          |  |           |       |  |               |   |       |              |  |   |       |  
|Adjusted EBITDA                                           |  |           |       |  |               |   |       |              |  |   |       |   |  |   | (79.0   | )
|Depreciation and
    amortization(6)(7)                   |  |           |       |  |               |   |       |              |  |   |       |   |  |   | (129.4  | )
|                                                          |  |           |       |  |               |   |       |              |  |   |       |  
|Operating loss from continuing operations                 |  |           |       |  |               |   |       |              |  |   |       |   |  |   | (208.4  | )
|Interest and investment income                            |  |           |       |  |               |   |       |              |  |   |       |   |  |   | 12.8    |  
|Interest expense                                          |  |           |       |  |               |   |       |              |  |   |       |   |  |   | (40.9   | )
|Other income                                              |  |           |       |  |               |   |       |              |  |   |       |   |  |   | 0.1     |  
|Loss on investment                                        |  |           |       |  |               |   |       |              |  |   |       |   |  |   | (1.2    | )
|Income tax provision                                      |  |           |       |  |               |   |       |              |  |   |       |   |  |   | (322.4  | )
|Equity losses in affiliates                               |  |           |       |  |               |   |       |              |  |   |       |   |  |   | (76.3   | )
|Minority interest                                         |  |           |       |  |               |   |       |              |  |   |       |   |  |   | (0.2    | )
|                                                          |  |           |       |  |               |   |       |              |  |   |       |  
|Loss from continuing operations                           |  |           |       |  |               |   |       |              |  |   |       |   |  | $ | (636.5  | )
|                                                          |  |           |       |  |               |   |       |              |  |   |       |  
|Other Data:                                               |  |           |       |  |               |   |       |              |  |   |       |   |  |   |         |  
|Depreciation and
    amortization(6)(7)                   |  | $         | 95.7  |  |               | $ | 33.1  |              |  | $ | 0.6   |   |  | $ | 129.4   |  
|                                                          |  |           |       |  |               |   |       |              |  |   |       |  
|Capital
    expenditures(7)                               |  | $         | 67.0  |  |               | $ | 13.3  |              |  | $ | 0.1   |   |  | $ | 80.4    |  
|                                                          |  |           |       |  |               |   |       |              |  |   |       |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents corporate expenses incurred in support of our
    operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(2) | Includes revenues from affiliates of $7.8 million,
    $27.7 million and $79.6 million in 2004, 2003 and
    2002, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(3) | Represents the elimination of intercompany sales and
    intercompany Adjusted EBITDA, primarily for satellites under
    construction by SS/ L for wholly owned subsidiaries and in the
    year ended December 31, 2003, the reversal of cumulative
    satellite manufacturing sales of $83 million and cost of
    satellite manufacturing of $73 million on a satellite
    program that was changed to a lease arrangement in the third
    quarter of 2003 (see Note 7).                                                                                                                                                                         
|   
|(4) | Satellite manufacturing excludes charges of $24 million for
    2004, as a result of the settlement of all orbital receivables
    on satellites sold to Intelsat. This settlement had the effect
    of reducing future orbital receipts by $25 million,
    including $15 million relating to a satellite currently
    under construction. Consistent with our internal reporting for
    satellite manufacturing, this decrease in contract value for the
    satellite currently under construction is not being reflected as
    a decrease in 2004 satellite manufacturing revenues. These
    charges had no effect on our consolidated results.

(5)


|                                                               |                                                                               |              |      |       |      |   |     |      |  |   |      |      | 
|-------------------------------------------------------------- | ----------------------------------------------------------------------------- | ------------ | ---- | ----- | ---- | - | --- | ---- |  | - | ---- | ---- | 
|                                                               |                                                                               | Years Ended  |     
|                                                               |                                                                               | December 31, |     
|                                                               |                                                                               |              |     
|                                                               |                                                                               | 2004         |      |       | 2003 |   |     | 2002 | 
|                                                               |                                                                               |              |      |       |      |   |     |      | 
|Satellite Services includes:                                   |                                                                               |              |      |       |      |   |     |      |  |   |      |     
|                                                               | Adjusted EBITDA before specific identified (charges) credits                  |              | $    | 27.6  |      |   | $   | 7.5  |  |   | $    | 35.9 | 
|                                                               | Impairment charge for Telstar 14/ Estrela do Sul-1 satellite
    (see Note 7) |              |      | (12.0 | )    |   |     |     |  |   |      |     | 
|                                                               | Sales-type lease arrangement (see Note 7)                                     |              |      | 7.7   |      |   |     |     |  |   |      |     | 
|                                                               |                                                                               |              |      |       |      |   |     |      | 
|Satellite services segment Adjusted EBITDA before eliminations |                                                                               | $            | 23.3 |       |      | $ | 7.5 |      |  | $ | 35.9 |     
|                                                               |                                                                               |              |      |       |      |   |     |      | 



|    |                                                                                                                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(6) | Includes additional depreciation expense of $9 million for
    2004 and $14 million for 2003, due to accelerating the
    estimated end of depreciable life of our Telstar 11 satellite to
    June 2004 from March 2005. Also, includes amortization of
    unearned stock compensation charges.
|   
|(7) | Amounts are presented after the elimination of intercompany
    profit.                                                                                                                                                                                                                          

F-54



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(8) | The 2003 and 2002 segment information has been adjusted to
    remove the operations of the North American satellites and
    related assets sold, which have been reclassified to
    discontinued operations (see Note 4).

(9)


|                                                                        |                                                                  |                          |       |       |      |   |        |       |   |   |       |       |  
|----------------------------------------------------------------------- | ---------------------------------------------------------------- | ------------------------ | ----- | ----- | ---- | - | ------ | ----- | - | - | ----- | ----- | -
|                                                                        |                                                                  | Years Ended December 31, |      
|                                                                        |                                                                  |                          |      
|                                                                        |                                                                  | 2004                     |       |       | 2003 |   |        | 2002  |  
|                                                                        |                                                                  |                          |       |       |      |   |        |       |  
|Satellite manufacturing includes:                                       |                                                                  |                          |       |       |      |   |        |       |   |   |       |      
|                                                                        | Adjusted EBITDA before specific identified charges               |                          | $     | 1.1   |      |   | $      | (23.5 | ) |   | $     | 59.2  |  
|                                                                        | Write-off of long-term receivables due to contract modifications |                          |       | (11.3 | )    |   |        | (20.2 | ) |   |       |      |  
|                                                                        | Provisions for inventory obsolescence                            |                          |       | (3.3  | )    |   |        | (49.5 | ) |   |       | (14.0 | )
|                                                                        | Loss on cancellation of a deposits                               |                          |       |      |      |   |        | (23.5 | ) |   |       | (10.0 | )
|                                                                        | Accrual for Alcatel settlement                                   |                          |       |      |      |   |        | (13.0 | ) |   |       |      |  
|                                                                        | Loss on acceleration of receipt of long-term receivables         |                          |       |      |      |   |        | (10.9 | ) |   |       |      |  
|                                                                        | Valuation allowance on vendor financing receivables              |                          |       |      |      |   |        | (10.0 | ) |   |       | (32.6 | )
|                                                                        | Write-off of advances related to affiliate                       |                          |       |      |      |   |        |      |   |   |       | (36.6 | )
|                                                                        | Settlement of satellite contract dispute                         |                          |       |      |      |   |        | (8.0  | ) |   |       |      |  
|                                                                        |                                                                  |                          |       |       |      |   |        |       |  
|Satellite manufacturing segment Adjusted EBITDA before
    eliminations |                                                                  | $                        | (13.5 | )     |      | $ | (158.6 | )     |   | $ | (34.0 | )    
|                                                                        |                                                                  |                          |       |       |      |   |        |       |  



| |                             
| | ----------------------------
| | Revenue by Customer Location



|                                                        |  |      |         |  |      |   |         |      |  |   |         | 
|------------------------------------------------------- |  | ---- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                                                        |  | 2004 |         |  | 2003 |   |         | 2002 | 
|                                                        |  |      |         |  |      |   |         |      | 
|United States                                           |  | $    | 303,258 |  |      | $ | 239,531 |      |  | $ | 404,776 | 
|Japan                                                   |  |      | 47,641  |  |      |   | 69,573  |      |  |   | 174,629 | 
|Thailand                                                |  |      | 20,378  |  |      |   | 54,436  |      |  |   | 89,875  | 
|Spain                                                   |  |      | 5,292   |  |      |   | 30,903  |      |  |   | 31,814  | 
|Mexico                                                  |  |      | 1,693   |  |      |   | (3,749  | )    |  |   | 51,113  | 
|Peoples Republic of China (including Hong
    Kong)(1) |  |      | 97,628  |  |      |   | (66,047 | )    |  |   | 64,373  | 
|Other                                                   |  |      | 46,237  |  |      |   | 67,396  |      |  |   | 83,947  | 
|                                                        |  |      |         |  |      |   |         |      | 
|                                                        |  | $    | 522,127 |  |      | $ | 392,043 |      |  | $ | 900,527 | 
|                                                        |  |      |         |  |      |   |         |      | 






|    |                                                                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The 2004 amount includes $87 million for a sales-type lease
    arrangement for satellite capacity. The 2003 amount includes the
    reversal of $83 million of sales on a satellite program
    with a customer where the contract was changed to a lease
    arrangement (see Note 7).







|    |                           
|--- | --------------------------
|19. | Related Party Transactions



|                                     |  |      |       |  |      |   |        | 
|------------------------------------ |  | ---- | ----- |  | ---- | - | ------ | 
|                                     |  | 2003 |       |  | 2002 |  
|                                     |  |      |       |  |      |  
|Cost of purchased goods and services |  | $    | 8,573 |  |      | $ | 21,675 | 

F-55



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                     |  |   |         | 
|------------------------------------ |  | - | ------- | 
|Revenue from goods and services sold |  | $ | 752     | 
|Cost of purchased goods and services |  |   | 120,395 | 



|    |                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------
|20. | Financial Information for Subsidiary Issuer, Guarantor
    Subsidiaries and Non-Guarantor Subsidiaries







F-56



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------
|20. | Financial Information for Subsidiary Issuer, Guarantor
    Subsidiaries and Non-Guarantor Subsidiaries

CONDENSED CONSOLIDATING BALANCE SHEET


December 31, 2004


(in thousands)


|                                           |                                                      |                                                               |                                             |            |            |        |           |              |        |        |               |         |       |              |            |            |              |         |           |           |      |         |            |            |         |         | 
|------------------------------------------ | ---------------------------------------------------- | ------------------------------------------------------------- | ------------------------------------------- | ---------- | ---------- | ------ | --------- | ------------ | ------ | ------ | ------------- | ------- | ----- | ------------ | ---------- | ---------- | ------------ | ------- | --------- | --------- | ---- | ------- | ---------- | ---------- | ------- | ------- | 
|                                           |                                                      | Parent                                                        |                                             |            | Subsidiary |        |           | Guarantor    |        |        | Non-Guarantor |         |       |              |            |           
|                                           |                                                      | Company                                                       |                                             |            | Issuer     |        |           | Subsidiaries |        |        | Subsidiaries  |         |       | Eliminations |            |            | Consolidated |        
|                                           |                                                      |                                                               |                                             |            |            |        |           |              |        |        |               |         |       |              |            |            |              |        
|Current assets:                            |                                                      |                                                               |                                             |            |            |        |           |              |        |        |               |         |       |              |            |            |              |         |           |           |      |         |            |           
|                                           | Cash and cash equivalents                            |                                                               | $                                           | 1,525      |            |        | $         | 27,230       |        |        | $             |        |       |              | $          | 119,018    |              |         | $         |          |      |         | $          | 147,773    |        
|                                           | Accounts receivable, net                             |                                                               |                                             |           |            |        |           | 5,186        |        |        |               | 10      |       |              |            | 6,936      |              |         |           |          |      |         |            | 12,132     |        
|                                           | Contracts-in-process                                 |                                                               |                                             |           |            |        |           |             |        |        |               |        |       |              |            | 19,040     |              |         |           |          |      |         |            | 19,040     |        
|                                           | Inventories                                          |                                                               |                                             |           |            |        |           |             |        |        |               |        |       |              |            | 37,412     |              |         |           |          |      |         |            | 37,412     |        
|                                           | Other current assets                                 |                                                               |                                             | 2,331      |            |        |           | 5,899        |        |        |               | 3,861   |       |              |            | 9,138      |              |         |           | (133      | )    |         |            | 21,096     |        
|                                           |                                                      |                                                               |                                             |            |            |        |           |              |        |        |               |         |       |              |            |            |              |        
|                                           |                                                      | Total current assets                                          |                                             |            | 3,856      |        |           |              | 38,315 |        |               |         | 3,871 |              |            |            | 191,544      |         |           |           | (133 | )       |            |            | 237,453 |        
|Property, plant and equipment, net         |                                                      |                                                               |                                            |            |            |        | 255,772   |              |        |        | 162,675       |         |       |              | 402,608    |            |              |         | (22,147   | )         |      |         | 798,908    |           
|Long-term receivables                      |                                                      |                                                               |                                            |            |            |        |          |              |        |        |              |         |       |              | 74,851     |            |              |         |          |           |      |         | 74,851     |           
|Due (to) from unconsolidated subsidiaries  |                                                      |                                                               | 8,123                                       |            |            |        | (15,820   | )            |        |        | 26,028        |         |       |              | 33,741     |            |              |         | (52,072   | )         |      |         |           |           
|Investments in unconsolidated subsidiaries |                                                      |                                                               | (561,874                                    | )          |            |        | 307,972   |              |        |        | (271,698      | )       |       |              | (1,612,062 | )          |              |         | 2,137,662 |           |      |         |           |           
|Investments in and advances to affiliates  |                                                      |                                                               |                                             |            |            |        |          |              |        |        |              |         |       |              | 49,181     |            |              |         |          |           |      |         | 49,181     |           
|Deposits                                   |                                                      |                                                               |                                            |            |            |        |          |              |        |        |              |         |       |              | 9,832      |            |              |         |          |           |      |         | 9,832      |           
|Other assets                               |                                                      |                                                               | 4,197                                       |            |            |        | 5,839     |              |        |        | 377           |         |       |              | 38,095     |            |              |         |          |           |      |         | 48,508     |           
|                                           |                                                      |                                                               |                                             |            |            |        |           |              |        |        |               |         |       |              |            |            |              |        
|                                           | Total assets                                         |                                                               | $                                           | (545,698   | )          |        | $         | 592,078      |        |        | $             | (78,747 | )     |              | $          | (812,210   | )            |         | $         | 2,063,310 |      |         | $          | 1,218,733  |        
|                                           |                                                      |                                                               |                                             |            |            |        |           |              |        |        |               |         |       |              |            |            |              |        
|Liabilities not subject to compromise:     |                                                      |                                                               |                                             |            |            |        |           |              |        |        |               |         |       |              |            |            |              |         |           |           |      |         |            |           
|                                           | Current liabilities:                                 |                                                               |                                             |            |            |        |           |              |        |        |               |         |       |              |            |            |              |         |           |           |      |         |            |            |        
|                                           |                                                      | Accounts payable                                              |                                             | $          | 499        |        |           | $            | 267    |        |               | $       |      |              |            | $          | 32,482       |         |           | $         |     |         |            | $          | 33,248  |        
|                                           |                                                      | Accrued employment costs                                      |                                             |            |           |        |           |              |       |        |               |         |      |              |            |            | 34,385       |         |           |           |     |         |            |            | 34,385  |        
|                                           |                                                      | Customer advances and billings in excess of costs and profits |                                             |            |           |        |           |              | 3,591  |        |               |         | 10    |              |            |            | 161,380      |         |           |           |     |         |            |            | 164,981 |        
|                                           |                                                      | Deferred gain on sale of assets                               |                                             |            |           |        |           |              |       |        |               |         |      |              |            |            | 10,545       |         |           |           |     |         |            |            | 10,545  |        
|                                           |                                                      | Income taxes payable                                          |                                             |            |           |        |           |              |       |        |               |         |      |              |            |            | 2,359        |         |           |           |     |         |            |            | 2,359   |        
|                                           |                                                      | Other current liabilities                                     |                                             |            | 1,220      |        |           |              |       |        |               |         |      |              |            |            | 15,419       |         |           |           |     |         |            |            | 16,639  |        
|                                           |                                                      |                                                               |                                             |            |            |        |           |              |        |        |               |         |       |              |            |            |              |        
|                                           |                                                      |                                                               | Total current liabilities                   |            |            | 1,719  |           |              |        | 3,858  |               |         |       | 10           |            |            |              | 256,570 |           |           |      |        |            |            |         | 262,157 | 
|Pension liability                          |                                                      |                                                               |                                            |            |            |        |          |              |        |        |              |         |       |              | 942        |            |              |         |          |           |      |         | 942        |           
|Long-term liabilities                      |                                                      |                                                               | 52,233                                      |            |            |        | 34,802    |              |        |        | 10,037        |         |       |              | 15,946     |            |              |         | (31,663   | )         |      |         | 81,355     |           
|                                           |                                                      |                                                               |                                             |            |            |        |           |              |        |        |               |         |       |              |            |            |              |        
|                                           |                                                      |                                                               | Total liabilities not subject to compromise |            |            | 53,952 |           |              |        | 38,660 |               |         |       | 10,047       |            |            |              | 273,458 |           |           |      | (31,663 | )          |            |         | 344,454 | 
|Liabilities subject to compromise          |                                                      |                                                               | 442,575                                     |            |            |        | 1,108,839 |              |        |        | (117,386      | )       |       |              | 486,168    |            |              |         | (4,196    | )         |      |         | 1,916,000  |           
|Minority interest                          |                                                      |                                                               |                                            |            |            |        |          |              |        |        |              |         |       |              | 2,380      |            |              |         |          |           |      |         | 2,380      |           
|Shareholders (deficit) equity:            |                                                      |                                                               |                                             |            |            |        |           |              |        |        |               |         |       |              |            |            |              |         |           |           |      |         |            |           
|                                           | Common stock                                         |                                                               |                                             | 4,413      |            |        |           |             |        |        |               |        |       |              |            |           |              |         |           |          |      |         |            | 4,413      |        
|                                           | Paid-in capital                                      |                                                               |                                             | 3,392,825  |            |        |           | 604,166      |        |        |               |        |       |              |            |           |              |         |           | (604,166  | )    |         |            | 3,392,825  |        
|                                           | Treasury stock, at cost                              |                                                               |                                             | (3,360     | )          |        |           |             |        |        |               |        |       |              |            |           |              |         |           |          |      |         |            | (3,360     | )      
|                                           | Unearned compensation                                |                                                               |                                             | (87        | )          |        |           |             |        |        |               |        |       |              |            |           |              |         |           |          |      |         |            | (87        | )      
|                                           | Due (from) to related parties                        |                                                               |                                             |           |            |        |           | (53,996      | )      |        |               |        |       |              |            | 53,996     |              |         |           |          |      |         |            |           |        
|                                           | Retained (deficit) earnings                          |                                                               |                                             | (4,345,618 | )          |        |           | (1,105,591   | )      |        |               | 28,592  |       |              |            | (1,628,949 | )            |         |           | 2,703,335 |      |         |            | (4,348,231 | )      
|                                           | Accumulated other comprehensive (loss)               |                                                               |                                             | (90,398    | )          |        |           |             |        |        |               |        |       |              |            | 737        |              |         |           |          |      |         |            | (89,661    | )      
|                                           |                                                      |                                                               |                                             |            |            |        |           |              |        |        |               |         |       |              |            |            |              |        
|Total shareholders (deficit) equity       |                                                      |                                                               | (1,042,225                                  | )          |            |        | (555,421  | )            |        |        | 28,592        |         |       |              | (1,574,216 | )          |              |         | 2,099,169 |           |      |         | (1,044,101 | )         
|                                           |                                                      |                                                               |                                             |            |            |        |           |              |        |        |               |         |       |              |            |            |              |        
|                                           | Total liabilities and shareholders (deficit) equity |                                                               |                                             | (545,698   | )          |        |           | 592,078      |        |        |               | (78,747 | )     |              |            | (812,210   | )            |         |           | 2,063,310 |      |         |            | 1,218,733  |        
|                                           |                                                      |                                                               |                                             |            |            |        |           |              |        |        |               |         |       |              |            |            |              |        

F-57



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------
|20. | Financial Information for Subsidiary Issuer, Guarantor
    Subsidiaries and Non-Guarantor Subsidiaries

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS


Year ended December 31, 2004


(in thousands)


|                                                                                                                                                                 |                |         |          |   |            |   |         |              |  |   |               |        |  |              |          |         |              |   |         |         |   |   |          |         | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------- | ------- | -------- | - | ---------- | - | ------- | ------------ |  | - | ------------- | ------ |  | ------------ | -------- | ------- | ------------ | - | ------- | ------- | - | - | -------- | ------- | 
|                                                                                                                                                                 |                | Parent  |          |   | Subsidiary |   |         | Guarantor    |  |   | Non-Guarantor |        |  |              |          |        
|                                                                                                                                                                 |                | Company |          |   | Issuer     |   |         | Subsidiaries |  |   | Subsidiaries  |        |  | Eliminations |          |         | Consolidated |  
|                                                                                                                                                                 |                |         |          |   |            |   |         |              |  |   |               |        |  |              |          |         |              |  
|Revenues from satellite services                                                                                                                                 |                | $       |         |   |            | $ | 78,251  |              |  | $ | 31,815        |        |  | $            | 60,622   |         |              | $ | (35,369 | )       |   | $ | 135,319  |        
|Revenues from sales-type lease arrangement  satellite
    services                                                                                              |                |         |         |   |            |   | 87,200  |              |  |   |              |        |  |              |         |         |              |   |        |         |   |   | 87,200   |        
|Revenues from satellite manufacturing                                                                                                                            |                |         |         |   |            |   |        |              |  |   |              |        |  |              | 309,460  |         |              |   | (9,852  | )       |   |   | 299,608  |        
|                                                                                                                                                                 |                |         |          |   |            |   |         |              |  |   |               |        |  |              |          |         |              |  
|                                                                                                                                                                 | Total revenues |         |          |  |            |   |         | 165,451      |  |   |               | 31,815 |  |              |          | 370,082 |              |   |         | (45,221 | ) |   |          | 522,127 | 
|Cost of satellite services                                                                                                                                       |                |         |         |   |            |   | 108,581 |              |  |   | 31,158        |        |  |              | 85,262   |         |              |   | (35,671 | )       |   |   | 189,330  |        
|Cost of sales-type lease arrangement  satellite
    services                                                                                                    |                |         |         |   |            |   | 79,543  |              |  |   |              |        |  |              |         |         |              |   |        |         |   |   | 79,543   |        
|Cost of satellite manufacturing                                                                                                                                  |                |         |         |   |            |   |        |              |  |   |              |        |  |              | 326,767  |         |              |   | (8,472  | )       |   |   | 318,295  |        
|Selling, general and administrative expenses                                                                                                                     |                |         | 4,279    |   |            |   | 18,054  |              |  |   | 11,858        |        |  |              | 84,657   |         |              |   |        |         |   |   | 118,848  |        
|                                                                                                                                                                 |                |         |          |   |            |   |         |              |  |   |               |        |  |              |          |         |              |  
|Loss from continuing operations before reorganization expenses
    due to bankruptcy                                                                             |                |         | (4,279   | ) |            |   | (40,727 | )            |  |   | (11,201       | )      |  |              | (126,604 | )       |              |   | (1,078  | )       |   |   | (183,889 | )      
|Reorganization expenses due to bankruptcy                                                                                                                        |                |         | (3,885   | ) |            |   | (2,731  | )            |  |   |              |        |  |              | (23,840  | )       |              |   |        |         |   |   | (30,456  | )      
|                                                                                                                                                                 |                |         |          |   |            |   |         |              |  |   |               |        |  |              |          |         |              |  
|Loss income from continuing operations                                                                                                                           |                |         | (8,164   | ) |            |   | (43,458 | )            |  |   | (11,201       | )      |  |              | (150,444 | )       |              |   | (1,078  | )       |   |   | (214,345 | )      
|Interest and investment income                                                                                                                                   |                |         | 10       |   |            |   |        |              |  |   |              |        |  |              | 9,943    |         |              |   |        |         |   |   | 9,953    |        
|Interest expense                                                                                                                                                 |                |         |         |   |            |   | (1,547  | )            |  |   |              |        |  |              | (3,836   | )       |              |   | 2,436   |         |   |   | (2,947   | )      
|Other expense                                                                                                                                                    |                |         |         |   |            |   |        |              |  |   |              |        |  |              | (513     | )       |              |   |        |         |   |   | (513     | )      
|                                                                                                                                                                 |                |         |          |   |            |   |         |              |  |   |               |        |  |              |          |         |              |  
|(Loss) income from continuing operations before income taxes,
    equity income (losses) in unconsolidated subsidiaries and
    affiliates and minority interest |                |         | (8,154   | ) |            |   | (45,005 | )            |  |   | (11,201       | )      |  |              | (144,850 | )       |              |   | 1,358   |         |   |   | (207,852 | )      
|Income tax (provision) benefit                                                                                                                                   |                |         |         |   |            |   | 1,941   |              |  |   | 3,919         |        |  |              | (13,140  | )       |              |   | (6,004  | )       |   |   | (13,284  | )      
|                                                                                                                                                                 |                |         |          |   |            |   |         |              |  |   |               |        |  |              |          |         |              |  
|(Loss) income from continuing operations before equity income
    (losses) in unconsolidated subsidiaries and affiliates and
    minority interest               |                |         | (8,154   | ) |            |   | (43,064 | )            |  |   | (7,282        | )      |  |              | (157,990 | )       |              |   | (4,646  | )       |   |   | (221,136 | )      
|Equity income (losses) in unconsolidated subsidiaries, net of
    taxes                                                                                          |                |         | (168,541 | ) |            |   | (7,282  | )            |  |   |              |        |  |              |         |         |              |   | 175,823 |         |   |   |         |        
|Equity income (losses) in affiliates                                                                                                                             |                |         |         |   |            |   |        |              |  |   |              |        |  |              | 46,654   |         |              |   |        |         |   |   | 46,654   |        
|Minority interest                                                                                                                                                |                |         |         |   |            |   |        |              |  |   |              |        |  |              | 135      |         |              |   |        |         |   |   | 135      |        
|                                                                                                                                                                 |                |         |          |   |            |   |         |              |  |   |               |        |  |              |          |         |              |  
|(Loss) income from continuing operations                                                                                                                         |                |         | (176,695 | ) |            |   | (50,346 | )            |  |   | (7,282        | )      |  |              | (111,201 | )       |              |   | 171,177 |         |   |   | (174,347 | )      
|Loss from discontinued operations                                                                                                                                |                |         |         |   |            |   |        |              |  |   |              |        |  |              | (2,348   | )       |              |   |        |         |   |   | (2,348   | )      
|                                                                                                                                                                 |                |         |          |   |            |   |         |              |  |   |               |        |  |              |          |         |              |  
|Net (loss) income                                                                                                                                                |                | $       | (176,695 | ) |            | $ | (50,346 | )            |  | $ | (7,282        | )      |  | $            | (113,549 | )       |              | $ | 171,177 |         |   | $ | (176,695 | )      
|                                                                                                                                                                 |                |         |          |   |            |   |         |              |  |   |               |        |  |              |          |         |              |  

F-58



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------
|20. | Financial Information for Subsidiary Issuer, Guarantor
    Subsidiaries and Non-Guarantor Subsidiaries

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS


Year ended December 31, 2004


(in thousands)


|                                                               |                   |                                                                  |        |          |            |   |         |              |         |   |               |        |         |              |          |          |              |   |         |         |          |   |          |          |          |  
|-------------------------------------------------------------- | ----------------- | ---------------------------------------------------------------- | ------ | -------- | ---------- | - | ------- | ------------ | ------- | - | ------------- | ------ | ------- | ------------ | -------- | -------- | ------------ | - | ------- | ------- | -------- | - | -------- | -------- | -------- | -
|                                                               |                   | Parent                                                           |        |          | Subsidiary |   |         | Guarantor    |         |   | Non-Guarantor |        |         |              |          |         
|                                                               |                   | Company                                                          |        |          | Issuer     |   |         | Subsidiaries |         |   | Subsidiaries  |        |         | Eliminations |          |          | Consolidated |  
|                                                               |                   |                                                                  |        |          |            |   |         |              |         |   |               |        |         |              |          |          |              |  
|Operating activities:                                          |                   |                                                                  |        |          |            |   |         |              |         |   |               |        |         |              |          |          |              |   |         |         |          |   |          |         
|                                                               | Net (loss) income |                                                                  | $      | (176,695 | )          |   | $       | (50,346      | )       |   | $             | (7,282 | )       |              | $        | (113,549 | )            |   | $       | 171,177 |          |   | $        | (176,695 | )       
|                                                               | Non-cash items:   |                                                                  |        |          |            |   |         |              |         |   |               |        |         |              |          |          |              |   |         |         |          |   |          |          |         
|                                                               |                   | Loss from discontinued operations                                |        |          |           |   |         |              |        |   |               |        |        |              |          |          | 2,348        |   |         |         |         |   |          |          | 2,348    |  
|                                                               |                   | Equity income in affiliates, net of taxes                        |        |          |           |   |         |              |        |   |               |        |        |              |          |          | (46,654      | ) |         |         |         |   |          |          | (46,654  | )
|                                                               |                   | Minority interest                                                |        |          |           |   |         |              |        |   |               |        |        |              |          |          | (135         | ) |         |         |         |   |          |          | (135     | )
|                                                               |                   | Equity losses in unconsolidated subsidiaries                     |        |          | 168,541    |   |         |              | 7,282   |   |               |        |        |              |          |          | 68           |   |         |         | (175,891 | ) |          |          |         |  
|                                                               |                   | Deferred taxes                                                   |        |          |           |   |         |              |        |   |               |        | (2,951  | )            |          |          | 12,153       |   |         |         | 2,951    |   |          |          | 12,153   |  
|                                                               |                   | Depreciation and amortization                                    |        |          |           |   |         |              | 63,983  |   |               |        | 21,013  |              |          |          | 49,800       |   |         |         |         |   |          |          | 134,796  |  
|                                                               |                   | Write-off of long-term recievables due to contract modifications |        |          |           |   |         |              |        |   |               |        |        |              |          |          | 11,265       |   |         |         |         |   |          |          | 11,265   |  
|                                                               |                   | Recovery of bad debts                                            |        |          |           |   |         |              | (822    | ) |               |        | (262    | )            |          |          | (1,059       | ) |         |         |         |   |          |          | (2,143   | )
|                                                               |                   | Impairment charge on satellite and related assets                |        |          |           |   |         |              |        |   |               |        |        |              |          |          | 11,989       |   |         |         |         |   |          |          | 11,989   |  
|                                                               |                   | Profit on sales-type lease arrangement (Note 8)                  |        |          |           |   |         |              |        |   |               |        |        |              |          |          | (7,657       | ) |         |         |         |   |          |          | (7,657   | )
|                                                               |                   | Provisions for inventory obsolescence                            |        |          |           |   |         |              |        |   |               |        |        |              |          |          | 3,324        |   |         |         |         |   |          |          | 3,324    |  
|                                                               |                   | Adjustment to revenue straightlining assessment                  |        |          |           |   |         |              |        |   |               |        |        |              |          |          | 1,149        |   |         |         |         |   |          |          | 1,149    |  
|                                                               |                   | Loss on equipment disposals                                      |        |          |           |   |         |              |        |   |               |        |        |              |          |          | 394          |   |         |         |         |   |          |          | 394      |  
|                                                               |                   | Non cash (gain) loss on foreign currency transactions            |        |          |           |   |         |              |        |   |               |        |        |              |          |          | (2,808       | ) |         |         |         |   |          |          | (2,808   | )
|Changes in operating assets and liabilities:                   |                   |                                                                  |        |          |            |   |         |              |         |   |               |        |         |              |          |          |              |   |         |         |          |   |          |         
|                                                               |                   | Accounts receivable, net                                         |        |          |           |   |         |              | 2,548   |   |               |        | 1,220   |              |          |          | 6,654        |   |         |         |         |   |          |          | 10,422   |  
|                                                               |                   | Contracts-in-process                                             |        |          |           |   |         |              |        |   |               |        |        |              |          |          | 28,678       |   |         |         |         |   |          |          | 28,678   |  
|                                                               |                   | Inventories                                                      |        |          |           |   |         |              |        |   |               |        |        |              |          |          | 1,720        |   |         |         |         |   |          |          | 1,720    |  
|                                                               |                   | Long-term receivables                                            |        |          |           |   |         |              |        |   |               |        |        |              |          |          | 2,911        |   |         |         |         |   |          |          | 2,911    |  
|                                                               |                   | Due (to) from unconsolidated subsidiaries                        |        |          | 4,527      |   |         |              | (17,271 | ) |               |        | (13,202 | )            |          |          | 10,994       |   |         |         | 14,952   |   |          |          |         |  
|                                                               |                   | Other current assets and other assets                            |        |          | 1,147      |   |         |              | (3,953  | ) |               |        | 2,005   |              |          |          | 3,285        |   |         |         |         |   |          |          | 2,484    |  
|                                                               |                   | Accounts payable                                                 |        |          |           |   |         |              | (2,815  | ) |               |        | 172     |              |          |          | 4,398        |   |         |         |         |   |          |          | 1,755    |  
|                                                               |                   | Accrued expenses and other current liabilities                   |        |          | (476       | ) |         |              | 1,413   |   |               |        | (713    | )            |          |          | (1,172       | ) |         |         |         |   |          |          | (948     | )
|                                                               |                   | Customer advances                                                |        |          |           |   |         |              | (3,564  | ) |               |        | (1,003  | )            |          |          | 39,816       |   |         |         |         |   |          |          | 35,249   |  
|                                                               |                   | Income taxes payable                                             |        |          |           |   |         |              |        |   |               |        |        |              |          |          | (2,814       | ) |         |         |         |   |          |          | (2,814   | )
|                                                               |                   | Pension and other postretirement liabilities                     |        |          |           |   |         |              |        |   |               |        |        |              |          |          | 10,503       |   |         |         |         |   |          |          | 10,503   |  
|                                                               |                   | Long-term liabilities                                            |        |          |           |   |         |              | (3,789  | ) |               |        | 1,003   |              |          |          | 5,802        |   |         |         |         |   |          |          | 3,016    |  
|                                                               |                   | Other                                                            |        |          |           |   |         |              |        |   |               |        |        |              |          |          | 216          |   |         |         |         |   |          |          | 216      |  
|                                                               |                   |                                                                  |        |          |            |   |         |              |         |   |               |        |         |              |          |          |              |  
|Net cash (used in) provided by continuing operating activities |                   |                                                                  | (2,956 | )        |            |   | (7,334  | )            |         |   |              |        |         |              | 31,619   |          |              |   | 13,189  |         |          |   | 34,518   |         
|                                                               |                   |                                                                  |        |          |            |   |         |              |         |   |               |        |         |              |          |          |              |  
|Net cash provided by discontinued operations                   |                   |                                                                  |       |          |            |   |        |              |         |   |              |        |         |              | 26,562   |          |              |   |        |         |          |   | 26,562   |         
|                                                               |                   |                                                                  |        |          |            |   |         |              |         |   |               |        |         |              |          |          |              |  
|Investing activities:                                          |                   |                                                                  |        |          |            |   |         |              |         |   |               |        |         |              |          |          |              |   |         |         |          |   |          |         
|                                                               |                   | Capital expenditures for continuing operations                   |        |          |           |   |         |              | (12,267 | ) |               |        |        |              |          |          | 670          |   |         |         | (13,189  | ) |          |          | (24,786  | )
|                                                               |                   | Capital expenditures for discontinued operations                 |        |          |           |   |         |              |        |   |               |        |        |              |          |          | (11,185      | ) |         |         |         |   |          |          | (11,185  | )
|                                                               |                   | Proceeds from the sale of assets, net of expenses                |        |          |           |   |         |              |        |   |               |        |        |              |          |          | 953,619      |   |         |         |         |   |          |          | 953,619  |  
|                                                               |                   | Investments in and advances to affiliates                        |        |          |           |   |         |              |        |   |               |        |        |              |          |          | (5,712       | ) |         |         |         |   |          |          | (5,712   | )
|                                                               |                   |                                                                  |        |          |            |   |         |              |         |   |               |        |         |              |          |          |              |  
|Net cash (used in) provided by investing activities            |                   |                                                                  |       |          |            |   | (12,267 | )            |         |   |              |        |         |              | 937,392  |          |              |   | (13,189 | )       |          |   | 911,936  |         
|                                                               |                   |                                                                  |        |          |            |   |         |              |         |   |               |        |         |              |          |          |              |  
|Financing activities:                                          |                   |                                                                  |        |          |            |   |         |              |         |   |               |        |         |              |          |          |              |   |         |         |          |   |          |         
|                                                               |                   | Repayments of term loans                                         |        |          |           |   |         |              |        |   |               |        |        |              |          |          | (576,500     | ) |         |         |         |   |          |          | (576,500 | )
|                                                               |                   | Repayments of revolving credit facilities                        |        |          |           |   |         |              |        |   |               |        |        |              |          |          | (390,387     | ) |         |         |         |   |          |          | (390,387 | )
|                                                               |                   |                                                                  |        |          |            |   |         |              |         |   |               |        |         |              |          |          |              |  
|Net cash used in financing activities                          |                   |                                                                  |       |          |            |   |        |              |         |   |              |        |         |              | (966,887 | )        |              |   |        |         |          |   | (966,887 | )       
|                                                               |                   |                                                                  |        |          |            |   |         |              |         |   |               |        |         |              |          |          |              |  
|Net increase (decrease) in cash and cash equivalents           |                   |                                                                  | (2,956 | )        |            |   | (19,601 | )            |         |   |              |        |         |              | 28,686   |          |              |   |        |         |          |   | 6,129    |         
|Cash and cash equivalents  beginning of period                |                   |                                                                  | 4,481  |          |            |   | 46,831  |              |         |   |              |        |         |              | 90,332   |          |              |   |        |         |          |   | 141,644  |         
|                                                               |                   |                                                                  |        |          |            |   |         |              |         |   |               |        |         |              |          |          |              |  
|Cash and cash equivalents  end of period                      |                   | $                                                                | 1,525  |          |            | $ | 27,230  |              |         | $ |              |        |         | $            | 119,018  |          |              | $ |        |         |          | $ | 147,773  |         
|                                                               |                   |                                                                  |        |          |            |   |         |              |         |   |               |        |         |              |          |          |              |  

F-59



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------
|20. | Financial Information for Subsidiary Issuer, Guarantor
    Subsidiaries and Non-Guarantor Subsidiaries

CONDENSED CONSOLIDATING BALANCE SHEET


December 31, 2003


(in thousands)


|                                           |                                        |                                                      |          |            |            |   |           |              |         |  |               |        |         |              |            |            |              |  |           |           |           |   |           |            |           | 
|------------------------------------------ | -------------------------------------- | ---------------------------------------------------- | -------- | ---------- | ---------- | - | --------- | ------------ | ------- |  | ------------- | ------ | ------- | ------------ | ---------- | ---------- | ------------ |  | --------- | --------- | --------- | - | --------- | ---------- | --------- | 
|                                           |                                        | Parent                                               |          |            | Subsidiary |   |           | Guarantor    |         |  | Non-Guarantor |        |         |              |            |           
|                                           |                                        | Company                                              |          |            | Issuer     |   |           | Subsidiaries |         |  | Subsidiaries  |        |         | Eliminations |            |            | Consolidated | 
|                                           |                                        |                                                      |          |            |            |   |           |              |         |  |               |        |         |              |            |            |              | 
|Current assets:                            |                                        |                                                      |          |            |            |   |           |              |         |  |               |        |         |              |            |            |              |  |           |           |           |   |           |           
|                                           | Cash and cash equivalents              |                                                      | $        | 4,481      |            |   | $         | 46,831       |         |  | $             |       |         |              | $          | 90,332     |              |  | $         |          |           |   | $         | 141,644    |          
|                                           | Accounts receivable, net               |                                                      |          |           |            |   |           | 6,912        |         |  |               | 968    |         |              |            | 15,089     |              |  |           |          |           |   |           | 22,969     |          
|                                           | Contracts-in-process                   |                                                      |          |           |            |   |           |             |         |  |               |       |         |              |            | 62,063     |              |  |           |          |           |   |           | 62,063     |          
|                                           | Inventories                            |                                                      |          |           |            |   |           |             |         |  |               |       |         |              |            | 42,456     |              |  |           |          |           |   |           | 42,456     |          
|                                           | Insurance proceeds receivable          |                                                      |          |           |            |   |           |             |         |  |               |       |         |              |            | 122,770    |              |  |           |          |           |   |           | 122,770    |          
|                                           | Other current assets                   |                                                      |          | 2,341      |            |   |           | 2,925        |         |  |               | 5,859  |         |              |            | 25,859     |              |  |           | (980      | )         |   |           | 36,004     |          
|                                           |                                        |                                                      |          |            |            |   |           |              |         |  |               |        |         |              |            |            |              | 
|                                           |                                        | Total current assets                                 |          |            | 6,822      |   |           |              | 56,668  |  |               |        | 6,827   |              |            |            | 358,569      |  |           |           | (980      | ) |           |            | 427,906   | 
|Property, plant and equipment, net         |                                        |                                                      |         |            |            |   | 390,649   |              |         |  | 183,688       |        |         |              | 1,289,281  |            |              |  | (35,336   | )         |           |   | 1,828,282 |           
|Long-term receivables                      |                                        |                                                      |         |            |            |   |          |              |         |  |              |        |         |              | 70,749     |            |              |  |          |           |           |   | 70,749    |           
|Due (to) from unconsolidated subsidiaries  |                                        |                                                      | (3,055   | )          |            |   | (24,622   | )            |         |  | 17,598        |        |         |              | 47,199     |            |              |  | (37,120   | )         |           |   |          |           
|Investments in unconsolidated subsidiaries |                                        |                                                      | (375,795 | )          |            |   | 311,487   |              |         |  | (271,698      | )      |         |              | (1,625,765 | )          |              |  | 1,961,771 |           |           |   |          |           
|Investments in and advances to affiliates  |                                        |                                                      | 20       |            |            |   |          |              |         |  |              |        |         |              | 46,654     |            |              |  |          |           |           |   | 46,674    |           
|Deposits                                   |                                        |                                                      |         |            |            |   |          |              |         |  |              |        |         |              | 9,000      |            |              |  |          |           |           |   | 9,000     |           
|Other assets                               |                                        |                                                      | 4,253    |            |            |   | 5,030     |              |         |  | 549           |        |         |              | 71,370     |            |              |  |          |           |           |   | 81,202    |           
|                                           |                                        |                                                      |          |            |            |   |           |              |         |  |               |        |         |              |            |            |              | 
|                                           |                                        | Total assets                                         |          | $          | (367,755   | ) |           | $            | 739,212 |  |               | $      | (63,036 | )            |            | $          | 267,067      |  |           | $         | 1,888,335 |   |           | $          | 2,463,813 | 
|                                           |                                        |                                                      |          |            |            |   |           |              |         |  |               |        |         |              |            |            |              | 
|Liabilities not subject to compromise:     |                                        |                                                      |          |            |            |   |           |              |         |  |               |        |         |              |            |            |              |  |           |           |           |   |           |           
|Current liabilities:                       |                                        |                                                      |          |            |            |   |           |              |         |  |               |        |         |              |            |            |              |  |           |           |           |   |           |           
|                                           |                                        | Accounts payable                                     |          | $          |           |   |           | $            | 824     |  |               | $      |        |              |            | $          | 49,832       |  |           | $         |         |   |           | $          | 50,656    | 
|                                           |                                        | Accrued employment costs                             |          |            |           |   |           |              |        |  |               |        |        |              |            |            | 23,532       |  |           |           |          |   |           |            | 23,532    | 
|                                           |                                        | Customer advances                                    |          |            |           |   |           |              | 120,386 |  |               |        |        |              |            |            | 118,839      |  |           |           |          |   |           |            | 239,225   | 
|                                           |                                        | Accrued interest and preferred dividends             |          |            |           |   |           |              |        |  |               |        |        |              |            |            | 1,319        |  |           |           |          |   |           |            | 1,319     | 
|                                           |                                        | Income taxes payable                                 |          |            |           |   |           |              |        |  |               |        |        |              |            |            | 269          |  |           |           |          |   |           |            | 269       | 
|                                           |                                        | Other current liabilities                            |          |            | 1,191      |   |           |              |        |  |               |        |        |              |            |            | 8,679        |  |           |           |          |   |           |            | 9,870     | 
|                                           |                                        |                                                      |          |            |            |   |           |              |         |  |               |        |         |              |            |            |              | 
|                                           |                                        | Total current liabilities                            |          |            | 1,191      |   |           |              | 121,210 |  |               |        |        |              |            |            | 202,470      |  |           |           |          |   |           |            | 324,871   | 
|Pension liability                          |                                        |                                                      |         |            |            |   |          |              |         |  |              |        |         |              | 3,470      |            |              |  |          |           |           |   | 3,470     |           
|Long-term liabilities                      |                                        |                                                      | 52,233   |            |            |   | 4,302     |              |         |  | 13,835        |        |         |              | 32,488     |            |              |  | (35,461   | )         |           |   | 66,947    |           
|                                           |                                        |                                                      |          |            |            |   |           |              |         |  |               |        |         |              |            |            |              | 
|                                           |                                        | Total liabilities not subject to compromise          |          |            | 53,424     |   |           |              | 125,512 |  |               |        | 13,835  |              |            |            | 238,428      |  |           |           | (35,461   | ) |           |            | 395,288   | 
|Liabilities subject to compromise          |                                        |                                                      | 434,491  |            |            |   | 1,120,295 |              |         |  | (116,663      | )      |         |              | 1,487,753  |            |              |  | (4,196    | )         |           |   | 2,921,680 |           
|Minority interest                          |                                        |                                                      |         |            |            |   |          |              |         |  |              |        |         |              | 2,515      |            |              |  |          |           |           |   | 2,515     |           
|Shareholders (deficit) equity:            |                                        |                                                      |          |            |            |   |           |              |         |  |               |        |         |              |            |            |              |  |           |           |           |   |           |           
|                                           | Common stock, par value $.01           |                                                      |          | 4,413      |            |   |           |             |         |  |               |       |         |              |            |           |              |  |           |          |           |   |           | 4,413      |          
|                                           | Paid-in capital                        |                                                      |          | 3,392,829  |            |   |           | 604,166      |         |  |               |       |         |              |            |           |              |  |           | (604,166  | )         |   |           | 3,392,829  |          
|                                           | Treasury stock, at cost                |                                                      |          | (3,360     | )          |   |           |             |         |  |               |       |         |              |            |           |              |  |           |          |           |   |           | (3,360     | )        
|                                           | Unearned compensation                  |                                                      |          | (168       | )          |   |           |             |         |  |               |       |         |              |            |           |              |  |           |          |           |   |           | (168       | )        
|                                           | Due (from) to related parties          |                                                      |          |           |            |   |           | (59,601      | )       |  |               |       |         |              |            | 59,601     |              |  |           |          |           |   |           |           |          
|                                           | Retained (deficit) earnings            |                                                      |          | (4,171,536 | )          |   |           | (1,051,160   | )       |  |               | 39,792 |         |              |            | (1,520,790 | )            |  |           | 2,532,158 |           |   |           | (4,171,536 | )        
|                                           | Accumulated other comprehensive income |                                                      |          | (77,848    | )          |   |           |             |         |  |               |       |         |              |            |           |              |  |           |          |           |   |           | (77,848    | )        
|                                           |                                        |                                                      |          |            |            |   |           |              |         |  |               |        |         |              |            |            |              | 
|Total shareholders (deficit) equity       |                                        |                                                      | (855,670 | )          |            |   | (506,595  | )            |         |  | 39,792        |        |         |              | (1,461,189 | )          |              |  | 1,927,992 |           |           |   | (855,670  | )         
|                                           |                                        |                                                      |          |            |            |   |           |              |         |  |               |        |         |              |            |            |              | 
|                                           |                                        | Total liabilities and shareholders (deficit) equity |          | $          | (367,755   | ) |           | $            | 739,212 |  |               | $      | (63,036 | )            |            | $          | 267,067      |  |           | $         | 1,888,335 |   |           | $          | 2,463,813 | 
|                                           |                                        |                                                      |          |            |            |   |           |              |         |  |               |        |         |              |            |            |              | 

F-60



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------
|20. | Financial Information for Subsidiary Issuer, Guarantor
    Subsidiaries and Non-Guarantor Subsidiaries

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS


Year ended December 31, 2003


(in thousands)


|                                                                                                                                                                     |                |         |          |   |            |   |         |              |  |   |               |        |  |              |          |         |              |   |         |          |   |   |          |         | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------- | ------- | -------- | - | ---------- | - | ------- | ------------ |  | - | ------------- | ------ |  | ------------ | -------- | ------- | ------------ | - | ------- | -------- | - | - | -------- | ------- | 
|                                                                                                                                                                     |                | Parent  |          |   | Subsidiary |   |         | Guarantor    |  |   | Non-Guarantor |        |  |              |          |        
|                                                                                                                                                                     |                | Company |          |   | Issuer     |   |         | Subsidiaries |  |   | Subsidiaries  |        |  | Eliminations |          |         | Consolidated |  
|                                                                                                                                                                     |                |         |          |   |            |   |         |              |  |   |               |        |  |              |          |         |              |  
|Revenues from satellite services                                                                                                                                     |                | $       |         |   |            | $ | 86,119  |              |  | $ | 39,828        |        |  | $            | 64,861   |         |              | $ | (43,652 | )        |   | $ | 147,156  |        
|Revenues from satellite manufacturing                                                                                                                                |                |         |         |   |            |   |        |              |  |   |              |        |  |              | 341,737  |         |              |   | (96,850 | )        |   |   | 244,887  |        
|                                                                                                                                                                     |                |         |          |   |            |   |         |              |  |   |               |        |  |              |          |         |              |  
|                                                                                                                                                                     | Total revenues |         |          |  |            |   |         | 86,119       |  |   |               | 39,828 |  |              |          | 406,598 |              |   |         | (140,502 | ) |   |          | 392,043 | 
|Cost of satellite services                                                                                                                                           |                |         |         |   |            |   | 111,509 |              |  |   | 31,523        |        |  |              | 90,045   |         |              |   | (41,088 | )        |   |   | 191,989  |        
|Cost of satellite manufacturing                                                                                                                                      |                |         |         |   |            |   |        |              |  |   |              |        |  |              | 504,026  |         |              |   | (81,935 | )        |   |   | 422,091  |        
|Selling, general and administrative expenses                                                                                                                         |                |         | 8,937    |   |            |   | 10,192  |              |  |   | 3,572         |        |  |              | 118,851  |         |              |   |        |          |   |   | 141,552  |        
|                                                                                                                                                                     |                |         |          |   |            |   |         |              |  |   |               |        |  |              |          |         |              |  
|(Loss) income from continuing operations before reorganization
    expenses due to bankruptcy                                                                        |                |         | (8,937   | ) |            |   | (35,582 | )            |  |   | 4,733         |        |  |              | (306,324 | )       |              |   | (17,479 | )        |   |   | (363,589 | )      
|Reorganization expenses due to bankruptcy                                                                                                                            |                |         | (1,900   | ) |            |   | (5,561  | )            |  |   |              |        |  |              | (17,823  | )       |              |   |        |          |   |   | (25,284  | )      
|                                                                                                                                                                     |                |         |          |   |            |   |         |              |  |   |               |        |  |              |          |         |              |  
|Operating (loss) income from continuing operations                                                                                                                   |                |         | (10,837  | ) |            |   | (41,143 | )            |  |   | 4,733         |        |  |              | (324,147 | )       |              |   | (17,479 | )        |   |   | (388,873 | )      
|Interest and investment income                                                                                                                                       |                |         | 12,198   |   |            |   | 18      |              |  |   |              |        |  |              | 16,954   |         |              |   | (13,967 | )        |   |   | 15,203   |        
|Interest expense                                                                                                                                                     |                |         | (21,675  | ) |            |   | (6,522  | )            |  |   |              |        |  |              | (2,449   | )       |              |   | 16,566  |          |   |   | (14,080  | )      
|Other income                                                                                                                                                         |                |         |         |   |            |   |        |              |  |   |              |        |  |              | 1,495    |         |              |   |        |          |   |   | 1,495    |        
|Gain on investment                                                                                                                                                   |                |         |         |   |            |   |        |              |  |   |              |        |  |              | 17,900   |         |              |   |        |          |   |   | 17,900   |        
|                                                                                                                                                                     |                |         |          |   |            |   |         |              |  |   |               |        |  |              |          |         |              |  
|(Loss) income from continuing operations before income taxes,
    equity income (losses) in unconsolidated subsidiaries and
    affiliates and minority interest     |                |         | (20,314  | ) |            |   | (47,647 | )            |  |   | 4,733         |        |  |              | (290,247 | )       |              |   | (14,880 | )        |   |   | (368,355 | )      
|Income tax (provision) benefit                                                                                                                                       |                |         | (3,656   | ) |            |   | (4,174  | )            |  |   | (2,146        | )      |  |              | 10,128   |         |              |   | 6,178   |          |   |   | 6,330    |        
|                                                                                                                                                                     |                |         |          |   |            |   |         |              |  |   |               |        |  |              |          |         |              |  
|(Loss) income from continuing operations before equity income
    (losses) in subsidiaries and affiliates and minority interest
    acquisition of minority interest |                |         | (23,970  | ) |            |   | (51,821 | )            |  |   | 2,587         |        |  |              | (280,119 | )       |              |   | (8,702  | )        |   |   | (362,025 | )      
|Equity income (losses) in unconsolidated subsidiaries, net of
    taxes                                                                                              |                |         | (334,995 | ) |            |   | 2,587   |              |  |   |              |        |  |              |         |         |              |   | 332,408 |          |   |   |         |        
|Equity income (losses) in affiliates                                                                                                                                 |                |         | (21,775  | ) |            |   |        |              |  |   |              |        |  |              | (29,378  | )       |              |   |        |          |   |   | (51,153  | )      
|Minority interest                                                                                                                                                    |                |         |         |   |            |   |        |              |  |   |              |        |  |              | 20       |         |              |   |        |          |   |   | 20       |        
|                                                                                                                                                                     |                |         |          |   |            |   |         |              |  |   |               |        |  |              |          |         |              |  
|(Loss) income from continuing operations                                                                                                                             |                |         | (380,740 | ) |            |   | (49,234 | )            |  |   | 2,587         |        |  |              | (309,477 | )       |              |   | 323,706 |          |   |   | (413,158 | )      
|Income from discontinued operations, net of taxes                                                                                                                    |                |         |         |   |            |   |        |              |  |   |              |        |  |              | 18,803   |         |              |   |        |          |   |   | 18,803   |        
|                                                                                                                                                                     |                |         |          |   |            |   |         |              |  |   |               |        |  |              |          |         |              |  
|(Loss) income before cumulative effect of change in accounting
    principle and extraordinary gain on acquisition of minority
    interest                          |                |         | (380,740 | ) |            |   | (49,234 | )            |  |   | 2,587         |        |  |              | (290,674 | )       |              |   | 323,706 |          |   |   | (394,355 | )      
|Cumulative effect of change in accounting principle                                                                                                                  |                |         | (1,970   | ) |            |   |        |              |  |   |              |        |  |              |         |         |              |   |        |          |   |   | (1,970   | )      
|Extraordinary gain on acquisition of minority interest                                                                                                               |                |         |         |   |            |   |        |              |  |   |              |        |  |              | 13,615   |         |              |   |        |          |   |   | 13,615   |        
|                                                                                                                                                                     |                |         |          |   |            |   |         |              |  |   |               |        |  |              |          |         |              |  
|Net (loss) income                                                                                                                                                    |                | $       | (382,710 | ) |            | $ | (49,234 | )            |  | $ | 2,587         |        |  | $            | (277,059 | )       |              | $ | 323,706 |          |   | $ | (382,710 | )      
|                                                                                                                                                                     |                |         |          |   |            |   |         |              |  |   |               |        |  |              |          |         |              |  

F-61



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------
|20. | Financial Information for Subsidiary Issuer, Guarantor
    Subsidiaries and Non-Guarantor Subsidiaries

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS


Year ended December 31, 2003


(in thousands)


|                                                    |                                                            |                                                                            |         |          |            |   |         |              |        |   |               |       |         |              |          |          |              |   |         |         |          |   |          |          |         |  
|--------------------------------------------------- | ---------------------------------------------------------- | -------------------------------------------------------------------------- | ------- | -------- | ---------- | - | ------- | ------------ | ------ | - | ------------- | ----- | ------- | ------------ | -------- | -------- | ------------ | - | ------- | ------- | -------- | - | -------- | -------- | ------- | -
|                                                    |                                                            | Parent                                                                     |         |          | Subsidiary |   |         | Guarantor    |        |   | Non-Guarantor |       |         |              |          |         
|                                                    |                                                            | Company                                                                    |         |          | Issuer     |   |         | Subsidiaries |        |   | Subsidiaries  |       |         | Eliminations |          |          | Consolidated |  
|                                                    |                                                            |                                                                            |         |          |            |   |         |              |        |   |               |       |         |              |          |          |              |  
|Operating activities:                               |                                                            |                                                                            |         |          |            |   |         |              |        |   |               |       |         |              |          |          |              |   |         |         |          |   |          |         
|                                                    | Net (loss) income                                          |                                                                            | $       | (382,710 | )          |   | $       | (49,234      | )      |   | $             | 2,587 |         |              | $        | (277,059 | )            |   | $       | 323,706 |          |   | $        | (382,710 | )      
|                                                    | Non-cash items:                                            |                                                                            |         |          |            |   |         |              |        |   |               |       |         |              |          |          |              |   |         |         |          |   |          |          |        
|                                                    |                                                            | Income from discontinued operations, net of taxes                          |         |          |           |   |         |              |       |   |               |       |        |              |          |          | (18,803      | ) |         |         |         |   |          |          | (18,803 | )
|                                                    |                                                            | Cumulative effect of change in accounting principle                        |         |          | 1,970      |   |         |              |       |   |               |       |        |              |          |          |             |   |         |         |         |   |          |          | 1,970   |  
|                                                    |                                                            | Extraordinary gain on acquisition of minority interest                     |         |          |           |   |         |              |       |   |               |       |        |              |          |          | (13,615      | ) |         |         |         |   |          |          | (13,615 | )
|                                                    |                                                            | Equity in net losses of affiliates, net of taxes                           |         |          | 21,775     |   |         |              |       |   |               |       |        |              |          |          | 29,378       |   |         |         |         |   |          |          | 51,153  |  
|                                                    |                                                            | Minority interest                                                          |         |          |           |   |         |              |       |   |               |       |        |              |          |          | (20          | ) |         |         |         |   |          |          | (20     | )
|                                                    |                                                            | Equity income (losses) in unconsolidated subsidiaries, net of
    taxes    |         |          | 334,995    |   |         |              | (2,587 | ) |               |       |        |              |          |          |             |   |         |         | (332,408 | ) |          |          |        |  
|                                                    |                                                            | Deferred taxes                                                             |         |          | 3,656      |   |         |              |       |   |               |       | 3,401   |              |          |          | (10,977      | ) |         |         | (3,401   | ) |          |          | (7,321  | )
|                                                    |                                                            | Depreciation and amortization                                              |         |          |           |   |         |              | 68,532 |   |               |       | 21,013  |              |          |          | 45,118       |   |         |         |         |   |          |          | 134,663 |  
|                                                    |                                                            | Write-off of long-term receivables due to contract modifications           |         |          |           |   |         |              |       |   |               |       |        |              |          |          | 20,177       |   |         |         |         |   |          |          | 20,177  |  
|                                                    |                                                            | Provisions for inventory obsolescence                                      |         |          |           |   |         |              |       |   |               |       |        |              |          |          | 49,546       |   |         |         |         |   |          |          | 49,546  |  
|                                                    |                                                            | Valuation allowance on vendor financing receivables                        |         |          |           |   |         |              |       |   |               |       |        |              |          |          | 10,008       |   |         |         |         |   |          |          | 10,008  |  
|                                                    |                                                            | Loss on cancellation of deposits                                           |         |          |           |   |         |              |       |   |               |       |        |              |          |          | 23,500       |   |         |         |         |   |          |          | 23,500  |  
|                                                    |                                                            | Loss on acceleration of receipt of long-term receivables                   |         |          |           |   |         |              |       |   |               |       |        |              |          |          | 10,893       |   |         |         |         |   |          |          | 10,893  |  
|                                                    |                                                            | Charge on conversion of sales arrangement to lease arrangement             |         |          |           |   |         |              |       |   |               |       |        |              |          |          | 10,098       |   |         |         |         |   |          |          | 10,098  |  
|                                                    |                                                            | Accrual for Alcatel settlement                                             |         |          |           |   |         |              |       |   |               |       |        |              |          |          | 8,000        |   |         |         |         |   |          |          | 8,000   |  
|                                                    |                                                            | Provisions for bad debts on billed receivables                             |         |          |           |   |         |              | 1,601  |   |               |       | 329     |              |          |          | 5,291        |   |         |         |         |   |          |          | 7,221   |  
|                                                    |                                                            | Adjustment to revenue straightlining assessment                            |         |          |           |   |         |              | 5,315  |   |               |       |        |              |          |          | 3,719        |   |         |         |         |   |          |          | 9,034   |  
|                                                    |                                                            | Loss on equipment disposals                                                |         |          |           |   |         |              | 2,151  |   |               |       |        |              |          |          | 2,653        |   |         |         |         |   |          |          | 4,804   |  
|                                                    |                                                            | Gain on investment                                                         |         |          |           |   |         |              |       |   |               |       |        |              |          |          | (17,900      | ) |         |         |         |   |          |          | (17,900 | )
|                                                    |                                                            | Non cash net interest and (gain) loss on foreign currency
    transactions |         |          |           |   |         |              | 670    |   |               |       |        |              |          |          | 4,217        |   |         |         |         |   |          |          | 4,887   |  
|                                                    | Changes in operating assets and liabilities:               |                                                                            |         |          |            |   |         |              |        |   |               |       |         |              |          |          |              |   |         |         |          |   |          |          |        
|                                                    |                                                            | Accounts receivable, net                                                   |         |          |           |   |         |              | (1,036 | ) |               |       | (1,159  | )            |          |          | 717          |   |         |         |         |   |          |          | (1,478  | )
|                                                    |                                                            | Contracts-in-process                                                       |         |          |           |   |         |              |       |   |               |       |        |              |          |          | 36,188       |   |         |         |         |   |          |          | 36,188  |  
|                                                    |                                                            | Inventories                                                                |         |          |           |   |         |              |       |   |               |       |        |              |          |          | 3,731        |   |         |         |         |   |          |          | 3,731   |  
|                                                    |                                                            | Long-term receivables                                                      |         |          |           |   |         |              |       |   |               |       |        |              |          |          | 60,774       |   |         |         |         |   |          |          | 60,774  |  
|                                                    |                                                            | Deposits                                                                   |         |          |           |   |         |              |       |   |               |       |        |              |          |          | 25,750       |   |         |         |         |   |          |          | 25,750  |  
|                                                    |                                                            | Due (to) from unconsolidated subsidiaries                                  |         |          | 2,080      |   |         |              | 25,870 |   |               |       | (28,595 | )            |          |          | (3,175       | ) |         |         | 3,820    |   |          |          |        |  
|                                                    |                                                            | Other current assets and other assets                                      |         |          | (964       | ) |         |              | 6,871  |   |               |       | 2,871   |              |          |          | 19,524       |   |         |         |         |   |          |          | 28,302  |  
|                                                    |                                                            | Accounts payable                                                           |         |          |           |   |         |              | 410    |   |               |       | (192    | )            |          |          | 40,930       |   |         |         |         |   |          |          | 41,148  |  
|                                                    |                                                            | Accrued expenses and other current liabilities                             |         |          | 1,253      |   |         |              | 435    |   |               |       |        |              |          |          | (549         | ) |         |         |         |   |          |          | 1,139   |  
|                                                    |                                                            | Customer advances                                                          |         |          |           |   |         |              | (2,324 | ) |               |       | (324    | )            |          |          | 41,280       |   |         |         |         |   |          |          | 38,632  |  
|                                                    |                                                            | Income taxes payable                                                       |         |          |           |   |         |              |       |   |               |       |        |              |          |          | 4,624        |   |         |         | (2,777   | ) |          |          | 1,847   |  
|                                                    |                                                            | Pension and other postretirement liabilities                               |         |          |           |   |         |              |       |   |               |       |        |              |          |          | 13,245       |   |         |         |         |   |          |          | 13,245  |  
|                                                    |                                                            | Long-term liabilities                                                      |         |          |           |   |         |              | (1,738 | ) |               |       | 69      |              |          |          | (10,258      | ) |         |         |         |   |          |          | (11,927 | )
|                                                    |                                                            | Other                                                                      |         |          | 67         |   |         |              |       |   |               |       |        |              |          |          | 434          |   |         |         |         |   |          |          | 501     |  
|                                                    |                                                            |                                                                            |         |          |            |   |         |              |        |   |               |       |         |              |          |          |              |  
|Net cash provided by (used in) operating activities |                                                            |                                                                            | (17,878 | )        |            |   | 54,936  |              |        |   |              |       |         |              | 117,439  |          |              |   | (11,060 | )       |          |   | 143,437  |         
|                                                    |                                                            |                                                                            |         |          |            |   |         |              |        |   |               |       |         |              |          |          |              |  
|Net cash provided by discontinued operations        |                                                            |                                                                            |        |          |            |   |        |              |        |   |              |       |         |              | 81,588   |          |              |   |        |         |          |   | 81,588   |         
|                                                    |                                                            |                                                                            |         |          |            |   |         |              |        |   |               |       |         |              |          |          |              |  
|Investing activities:                               |                                                            |                                                                            |         |          |            |   |         |              |        |   |               |       |         |              |          |          |              |   |         |         |          |   |          |         
|                                                    | Capital expenditures for continuing operations             |                                                                            |         |         |            |   |         | (20,434      | )      |   |               |      |         |              |          | (105,988 | )            |   |         | 11,060  |          |   |          | (115,362 | )      
|                                                    | Capital expenditures for discontinued operations           |                                                                            |         |         |            |   |         |             |        |   |               |      |         |              |          | (61,202  | )            |   |         |        |          |   |          | (61,202  | )      
|                                                    | Proceeds from the sale of investments                      |                                                                            |         |         |            |   |         |             |        |   |               |      |         |              |          | 45,908   |              |   |         |        |          |   |          | 45,908   |        
|                                                    | Investments in and advances to unconsolidated subsidiaries |                                                                            |         | (288     | )          |   |         |             |        |   |               |      |         |              |          | 288      |              |   |         |        |          |   |          |         |        
|                                                    | Investments in and advances to affiliates                  |                                                                            |         |         |            |   |         |             |        |   |               |      |         |              |          | (19,200  | )            |   |         |        |          |   |          | (19,200  | )      
|                                                    |                                                            |                                                                            |         |          |            |   |         |              |        |   |               |       |         |              |          |          |              |  
|Net cash provided by (used in) investing activities |                                                            |                                                                            | (288    | )        |            |   | (20,434 | )            |        |   |              |       |         |              | (140,194 | )        |              |   | 11,060  |         |          |   | (149,856 | )       
|                                                    |                                                            |                                                                            |         |          |            |   |         |              |        |   |               |       |         |              |          |          |              |  
|Financing activities:                               |                                                            |                                                                            |         |          |            |   |         |              |        |   |               |       |         |              |          |          |              |   |         |         |          |   |          |         
|                                                    | Borrowings under revolving credit facilities               |                                                                            |         |         |            |   |         |             |        |   |               |      |         |              |          | 71,387   |              |   |         |        |          |   |          | 71,387   |        
|                                                    | Repayments under term loans                                |                                                                            |         |         |            |   |         |             |        |   |               |      |         |              |          | (32,500  | )            |   |         |        |          |   |          | (32,500  | )      
|                                                    | Interest payments on 10% senior notes                      |                                                                            |         |         |            |   |         | (30,635      | )      |   |               |      |         |              |          |         |              |   |         |        |          |   |          | (30,635  | )      
|                                                    | Repayments of export-import facility                       |                                                                            |         |         |            |   |         |             |        |   |               |      |         |              |          | (6,434   | )            |   |         |        |          |   |          | (6,434   | )      
|                                                    | Payment of bank amendment costs                            |                                                                            |         |         |            |   |         |             |        |   |               |      |         |              |          | (5,131   | )            |   |         |        |          |   |          | (5,131   | )      
|                                                    | Note receivable from unconsolidated affiliate              |                                                                            |         | 17,284   |            |   |         |             |        |   |               |      |         |              |          | (17,284  | )            |   |         |        |          |   |          |         |        
|                                                    | Proceeds from other stock issuances                        |                                                                            |         | 3,849    |            |   |         |             |        |   |               |      |         |              |          | 3        |              |   |         |        |          |   |          | 3,852    |        
|                                                    |                                                            |                                                                            |         |          |            |   |         |              |        |   |               |       |         |              |          |          |              |  
|Net cash provided by (used in) financing activities |                                                            |                                                                            | 21,133  |          |            |   | (30,635 | )            |        |   |              |       |         |              | 10,041   |          |              |   |        |         |          |   | 539      |         
|                                                    |                                                            |                                                                            |         |          |            |   |         |              |        |   |               |       |         |              |          |          |              |  
|Increase in cash and cash equivalents               |                                                            |                                                                            | 2,967   |          |            |   | 3,867   |              |        |   |              |       |         |              | 68,874   |          |              |   |        |         |          |   | 75,708   |         
|Cash and cash equivalents  beginning of period     |                                                            |                                                                            | 1,514   |          |            |   | 42,964  |              |        |   |              |       |         |              | 21,458   |          |              |   |        |         |          |   | 65,936   |         
|                                                    |                                                            |                                                                            |         |          |            |   |         |              |        |   |               |       |         |              |          |          |              |  
|Cash and cash equivalents  end of period           |                                                            | $                                                                          | 4,481   |          |            | $ | 46,831  |              |        | $ |              |       |         | $            | 90,332   |          |              | $ |        |         |          | $ | 141,644  |         
|                                                    |                                                            |                                                                            |         |          |            |   |         |              |        |   |               |       |         |              |          |          |              |  

F-62



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------
|20. | Financial Information for Subsidiary Issuer, Guarantor
    Subsidiaries and Non-Guarantor Subsidiaries

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS


Year ended December 31, 2002


(in thousands)


|                                                                                                                                                                 |                |         |            |   |            |   |          |              |  |   |               |        |  |              |          |         |              |   |           |          |   |   |            |         | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------- | ------- | ---------- | - | ---------- | - | -------- | ------------ |  | - | ------------- | ------ |  | ------------ | -------- | ------- | ------------ | - | --------- | -------- | - | - | ---------- | ------- | 
|                                                                                                                                                                 |                | Parent  |            |   | Subsidiary |   |          | Guarantor    |  |   | Non-Guarantor |        |  |              |          |        
|                                                                                                                                                                 |                | Company |            |   | Issuer     |   |          | Subsidiaries |  |   | Subsidiaries  |        |  | Eliminations |          |         | Consolidated |  
|                                                                                                                                                                 |                |         |            |   |            |   |          |              |  |   |               |        |  |              |          |         |              |  
|Revenues from satellite services                                                                                                                                 |                | $       |           |   |            | $ | 99,717   |              |  | $ | 48,198        |        |  | $            | 95,679   |         |              | $ | (51,534   | )        |   | $ | 192,060    |        
|Revenues from satellite manufacturing                                                                                                                            |                |         |           |   |            |   |         |              |  |   |              |        |  |              | 761,793  |         |              |   | (53,326   | )        |   |   | 708,467    |        
|Management fee from parent                                                                                                                                       |                |         |           |   |            |   |         |              |  |   |              |        |  |              | 18       |         |              |   | (18       | )        |   |   |           |        
|                                                                                                                                                                 |                |         |            |   |            |   |          |              |  |   |               |        |  |              |          |         |              |  
|                                                                                                                                                                 | Total revenues |         |            |  |            |   |          | 99,717       |  |   |               | 48,198 |  |              |          | 857,490 |              |   |           | (104,878 | ) |   |            | 900,527 | 
|Cost of satellite services                                                                                                                                       |                |         |           |   |            |   | 100,360  |              |  |   | 29,231        |        |  |              | 120,035  |         |              |   | (48,484   | )        |   |   | 201,142    |        
|Cost of satellite manufacturing                                                                                                                                  |                |         |           |   |            |   |         |              |  |   |              |        |  |              | 805,710  |         |              |   | (46,190   | )        |   |   | 759,520    |        
|Selling, general and administrative expenses                                                                                                                     |                |         | 7,198      |   |            |   | 10,089   |              |  |   | 964           |        |  |              | 129,982  |         |              |   |          |          |   |   | 148,233    |        
|Management fee expense                                                                                                                                           |                |         | 18         |   |            |   |         |              |  |   |              |        |  |              |         |         |              |   | (18       | )        |   |   |           |        
|                                                                                                                                                                 |                |         |            |   |            |   |          |              |  |   |               |        |  |              |          |         |              |  
|Operating (loss) income from continuing operations                                                                                                               |                |         | (7,216     | ) |            |   | (10,732  | )            |  |   | 18,003        |        |  |              | (198,237 | )       |              |   | (10,186   | )        |   |   | (208,368   | )      
|Interest and investment income                                                                                                                                   |                |         | 21,514     |   |            |   | 631      |              |  |   |              |        |  |              | 15,088   |         |              |   | (24,391   | )        |   |   | 12,842     |        
|Interest expense                                                                                                                                                 |                |         | (39,327    | ) |            |   | (13,016  | )            |  |   | 3             |        |  |              | (15,690  | )       |              |   | 27,138    |          |   |   | (40,892    | )      
|Other income                                                                                                                                                     |                |         |           |   |            |   |         |              |  |   |              |        |  |              | 67       |         |              |   |          |          |   |   | 67         |        
|Loss on investment                                                                                                                                               |                |         | (1,189     | ) |            |   |         |              |  |   |              |        |  |              |         |         |              |   |          |          |   |   | (1,189     | )      
|                                                                                                                                                                 |                |         |            |   |            |   |          |              |  |   |               |        |  |              |          |         |              |  
|(Loss) income from continuing operations before income taxes,
    equity income (losses) in unconsolidated subsidiaries and
    affiliates and minority interest |                |         | (26,218    | ) |            |   | (23,117  | )            |  |   | 18,006        |        |  |              | (198,772 | )       |              |   | (7,439    | )        |   |   | (237,540   | )      
|Income tax provision                                                                                                                                             |                |         | (6,398     | ) |            |   | (14,739  | )            |  |   | (6,455        | )      |  |              | (118,088 | )       |              |   | (176,742  | )        |   |   | (322,422   | )      
|                                                                                                                                                                 |                |         |            |   |            |   |          |              |  |   |               |        |  |              |          |         |              |  
|(Loss) income from continuing operations before equity income
    (losses) in unconsolidated subsidiaries and affiliates and
    minority interest               |                |         | (32,616    | ) |            |   | (37,856  | )            |  |   | 11,551        |        |  |              | (316,860 | )       |              |   | (184,181  | )        |   |   | (559,962   | )      
|Equity in net income (losses) of unconsolidated subsidiaries,
    net of taxes                                                                                   |                |         | (1,360,150 | ) |            |   | 11,551   |              |  |   |              |        |  |              |         |         |              |   | 1,348,599 |          |   |   |           |        
|Equity income (losses) in affiliates, net of taxes                                                                                                               |                |         | (76,445    | ) |            |   |         |              |  |   |              |        |  |              | 165      |         |              |   |          |          |   |   | (76,280    | )      
|Minority interest                                                                                                                                                |                |         |           |   |            |   |         |              |  |   |              |        |  |              | (226     | )       |              |   |          |          |   |   | (226       | )      
|                                                                                                                                                                 |                |         |            |   |            |   |          |              |  |   |               |        |  |              |          |         |              |  
|(Loss) income from continuing operations                                                                                                                         |                |         | (1,469,211 | ) |            |   | (26,305  | )            |  |   | 11,551        |        |  |              | (316,921 | )       |              |   | 1,164,418 |          |   |   | (636,468   | )      
|Income from discontinued operations, net of taxes                                                                                                                |                |         |           |   |            |   |         |              |  |   |              |        |  |              | 57,566   |         |              |   |          |          |   |   | 57,566     |        
|                                                                                                                                                                 |                |         |            |   |            |   |          |              |  |   |               |        |  |              |          |         |              |  
|(Loss) income before cumulative effect of change in accounting
    principle                                                                                     |                |         | (1,469,211 | ) |            |   | (26,305  | )            |  |   | 11,551        |        |  |              | (259,355 | )       |              |   | 1,164,418 |          |   |   | (578,902   | )      
|Cumulative effect of change in accounting principle                                                                                                              |                |         |           |   |            |   | (562,201 | )            |  |   |              |        |  |              | (328,108 | )       |              |   |          |          |   |   | (890,309   | )      
|                                                                                                                                                                 |                |         |            |   |            |   |          |              |  |   |               |        |  |              |          |         |              |  
|Net (loss) income                                                                                                                                                |                | $       | (1,469,211 | ) |            | $ | (588,506 | )            |  | $ | 11,551        |        |  | $            | (587,463 | )       |              | $ | 1,164,418 |          |   | $ | (1,469,211 | )      
|                                                                                                                                                                 |                |         |            |   |            |   |          |              |  |   |               |        |  |              |          |         |              |  

F-63



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------
|20. | Financial Information for Subsidiary Issuer, Guarantor
    Subsidiaries and Non-Guarantor Subsidiaries

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS


Year ended December 31, 2002


(in thousands)


|                                                    |                                                             |                                                                   |         |            |            |   |         |              |         |   |               |        |         |              |          |          |              |   |        |           |            |   |          |            |         |  
|--------------------------------------------------- | ----------------------------------------------------------- | ----------------------------------------------------------------- | ------- | ---------- | ---------- | - | ------- | ------------ | ------- | - | ------------- | ------ | ------- | ------------ | -------- | -------- | ------------ | - | ------ | --------- | ---------- | - | -------- | ---------- | ------- | -
|                                                    |                                                             | Parent                                                            |         |            | Subsidiary |   |         | Guarantor    |         |   | Non-Guarantor |        |         |              |          |         
|                                                    |                                                             | Company                                                           |         |            | Issuer     |   |         | Subsidiaries |         |   | Subsidiaries  |        |         | Eliminations |          |          | Consolidated |  
|                                                    |                                                             |                                                                   |         |            |            |   |         |              |         |   |               |        |         |              |          |          |              |  
|Operating activities:                               |                                                             |                                                                   |         |            |            |   |         |              |         |   |               |        |         |              |          |          |              |   |        |           |            |   |          |           
|                                                    | Net (loss) income                                           |                                                                   | $       | (1,469,211 | )          |   | $       | (588,506     | )       |   | $             | 11,551 |         |              | $        | (587,463 | )            |   | $      | 1,164,418 |            |   | $        | (1,469,211 | )      
|                                                    | Non-cash items:                                             |                                                                   |         |            |            |   |         |              |         |   |               |        |         |              |          |          |              |   |        |           |            |   |          |            |        
|                                                    |                                                             | Income from discontinued operations, net of taxes                 |         |            |           |   |         |              |        |   |               |        |        |              |          |          | (57,566      | ) |        |           |           |   |          |            | (57,566 | )
|                                                    |                                                             | Cumulative effect of change in accounting principle               |         |            |           |   |         |              | 562,201 |   |               |        |        |              |          |          | 328,108      |   |        |           |           |   |          |            | 890,309 |  
|                                                    |                                                             | Equity income (losses) in affiliates, net of taxes                |         |            | 76,445     |   |         |              |        |   |               |        |        |              |          |          | 8,033        |   |        |           |           |   |          |            | 84,478  |  
|                                                    |                                                             | Minority interest                                                 |         |            |           |   |         |              |        |   |               |        |        |              |          |          | 226          |   |        |           |           |   |          |            | 226     |  
|                                                    |                                                             | Equity in net losses of unconsolidated subsidiaries, net of taxes |         |            | 1,360,150  |   |         |              | (11,551 | ) |               |        |        |              |          |          |             |   |        |           | (1,348,599 | ) |          |            |        |  
|                                                    |                                                             | Deferred taxes                                                    |         |            | 6,214      |   |         |              | 32,130  |   |               |        | 5,143   |              |          |          | 125,827      |   |        |           | 159,563    |   |          |            | 328,877 |  
|                                                    |                                                             | Depreciation and amortization                                     |         |            | (47        | ) |         |              | 54,279  |   |               |        | 21,013  |              |          |          | 54,103       |   |        |           |           |   |          |            | 129,348 |  
|                                                    |                                                             | Provisions for inventory obsolescence                             |         |            |           |   |         |              |        |   |               |        |        |              |          |          | 14,013       |   |        |           |           |   |          |            | 14,013  |  
|                                                    |                                                             | Valuation allowance on vendor financing receivables               |         |            |           |   |         |              |        |   |               |        |        |              |          |          | 32,574       |   |        |           |           |   |          |            | 32,574  |  
|                                                    |                                                             | Valuation allowance on Europe*Star advances                       |         |            |           |   |         |              |        |   |               |        |        |              |          |          | 36,620       |   |        |           |           |   |          |            | 36,620  |  
|                                                    |                                                             | Loss on cancellation of deposits                                  |         |            |           |   |         |              |        |   |               |        |        |              |          |          | 10,000       |   |        |           |           |   |          |            | 10,000  |  
|                                                    |                                                             | Provisions for bad debts on billed receivables                    |         |            |           |   |         |              | 822     |   |               |        | (78     | )            |          |          | 2,020        |   |        |           |           |   |          |            | 2,764   |  
|                                                    |                                                             | Adjustment to revenue straight lining assessment                  |         |            |           |   |         |              | 387     |   |               |        |        |              |          |          | 1,020        |   |        |           |           |   |          |            | 1,407   |  
|                                                    |                                                             | Loss on equipment disposals                                       |         |            |           |   |         |              |        |   |               |        |        |              |          |          | 6,191        |   |        |           |           |   |          |            | 6,191   |  
|                                                    |                                                             | Loss on investment                                                |         |            | 1,189      |   |         |              |        |   |               |        |        |              |          |          |             |   |        |           |           |   |          |            | 1,189   |  
|                                                    |                                                             | Net interest and (gain) loss on foreign currency
    transactions |         |            |           |   |         |              | 503     |   |               |        |        |              |          |          | (331         | ) |        |           |           |   |          |            | 172     |  
|                                                    | Changes in operating assets and liabilities:                |                                                                   |         |            |            |   |         |              |         |   |               |        |         |              |          |          |              |   |        |           |            |   |          |            |        
|                                                    |                                                             | Accounts receivable, net                                          |         |            |           |   |         |              | 4,772   |   |               |        | 437     |              |          |          | 1,032        |   |        |           |           |   |          |            | 6,241   |  
|                                                    |                                                             | Contracts-in-process                                              |         |            |           |   |         |              |        |   |               |        |        |              |          |          | 97,100       |   |        |           |           |   |          |            | 97,100  |  
|                                                    |                                                             | Inventories                                                       |         |            |           |   |         |              |        |   |               |        |        |              |          |          | (1,604       | ) |        |           |           |   |          |            | (1,604  | )
|                                                    |                                                             | Long-term receivables                                             |         |            |           |   |         |              |        |   |               |        |        |              |          |          | (1,963       | ) |        |           |           |   |          |            | (1,963  | )
|                                                    |                                                             | Deposits                                                          |         |            |           |   |         |              |        |   |               |        |        |              |          |          | 58,940       |   |        |           |           |   |          |            | 58,940  |  
|                                                    |                                                             | Due to (from) unconsolidated subsidiaries                         |         |            | (17,135    | ) |         |              | 33,882  |   |               |        | (34,931 | )            |          |          | (904         | ) |        |           | 19,088     |   |          |            |        |  
|                                                    |                                                             | Other current assets and other assets                             |         |            | 2,260      |   |         |              | 3,202   |   |               |        | (3,296  | )            |          |          | 17,663       |   |        |           |           |   |          |            | 19,829  |  
|                                                    |                                                             | Accounts payable                                                  |         |            | (1,357     | ) |         |              | (1,484  | ) |               |        | 481     |              |          |          | (86,306      | ) |        |           |           |   |          |            | (88,666 | )
|                                                    |                                                             | Accrued expenses and other current liabilities                    |         |            | 715        |   |         |              | 2,382   |   |               |        |        |              |          |          | (23,073      | ) |        |           |           |   |          |            | (19,976 | )
|                                                    |                                                             | Customer advances                                                 |         |            |           |   |         |              | (3,739  | ) |               |        | (320    | )            |          |          | (27,670      | ) |        |           |           |   |          |            | (31,729 | )
|                                                    |                                                             | Income taxes payable                                              |         |            | 184        |   |         |              |        |   |               |        |        |              |          |          | 3,572        |   |        |           | (336       | ) |          |            | 3,420   |  
|                                                    |                                                             | Pension and other postretirement liabilities                      |         |            |           |   |         |              |        |   |               |        |        |              |          |          | 4,521        |   |        |           |           |   |          |            | 4,521   |  
|                                                    |                                                             | Long-term liabilities                                             |         |            |           |   |         |              | (1,728  | ) |               |        |        |              |          |          | (4,425       | ) |        |           |           |   |          |            | (6,153  | )
|                                                    |                                                             | Other                                                             |         |            | (2         | ) |         |              |        |   |               |        |        |              |          |          | (26          | ) |        |           |           |   |          |            | (28     | )
|                                                    |                                                             |                                                                   |         |            |            |   |         |              |         |   |               |        |         |              |          |          |              |  
|Net cash provided by (used in) operating activities |                                                             |                                                                   | (40,595 | )          |            |   | 87,552  |              |         |   |              |        |         |              | 10,232   |          |              |   | (5,866 | )         |            |   | 51,323   |           
|                                                    |                                                             |                                                                   |         |            |            |   |         |              |         |   |               |        |         |              |          |          |              |  
|Net cash provided by discontinued operations        |                                                             |                                                                   |        |            |            |   |        |              |         |   |              |        |         |              | 141,347  |          |              |   |       |           |            |   | 141,347  |           
|                                                    |                                                             |                                                                   |         |            |            |   |         |              |         |   |               |        |         |              |          |          |              |  
|Investing activities:                               |                                                             |                                                                   |         |            |            |   |         |              |         |   |               |        |         |              |          |          |              |   |        |           |            |   |          |           
|                                                    | Capital expenditures for continuing operations              |                                                                   |         |           |            |   |         | (18,033      | )       |   |               |       |         |              |          | (68,237  | )            |   |        | 5,866     |            |   |          | (80,404    | )      
|                                                    | Capital expenditures for discontinued operations            |                                                                   |         |           |            |   |         |             |         |   |               |       |         |              |          | (17,803  | )            |   |        |          |            |   |          | (17,803    | )      
|                                                    | Investments in and advances to unconsolidated subsidiaries  |                                                                   |         | (2,243     | )          |   |         |             |         |   |               |       |         |              |          | 2,243    |              |   |        |          |            |   |          |           |        
|                                                    | Investments in and advances to affiliates                   |                                                                   |         | (11,479    | )          |   |         |             |         |   |               |       |         |              |          | (29,138  | )            |   |        |          |            |   |          | (40,617    | )      
|                                                    |                                                             |                                                                   |         |            |            |   |         |              |         |   |               |        |         |              |          |          |              |  
|Net cash (used in) provided by investing activities |                                                             |                                                                   | (13,722 | )          |            |   | (18,033 | )            |         |   |              |        |         |              | (112,935 | )        |              |   | 5,866  |           |            |   | (138,824 | )         
|                                                    |                                                             |                                                                   |         |            |            |   |         |              |         |   |               |        |         |              |          |          |              |  
|Financing activities:                               |                                                             |                                                                   |         |            |            |   |         |              |         |   |               |        |         |              |          |          |              |   |        |           |            |   |          |           
|                                                    | Borrowings under revolving credit facilities                |                                                                   |         |           |            |   |         |             |         |   |               |       |         |              |          | 145,000  |              |   |        |          |            |   |          | 145,000    |        
|                                                    | Repayments under term loans                                 |                                                                   |         |           |            |   |         |             |         |   |               |       |         |              |          | (85,000  | )            |   |        |          |            |   |          | (85,000    | )      
|                                                    | Repayments under revolving credit facilities                |                                                                   |         |           |            |   |         |             |         |   |               |       |         |              |          | (127,000 | )            |   |        |          |            |   |          | (127,000   | )      
|                                                    | Interest payments on 10% senior notes                       |                                                                   |         |           |            |   |         | (45,954      | )       |   |               |       |         |              |          |         |              |   |        |          |            |   |          | (45,954    | )      
|                                                    | Repayment of export-import facility                         |                                                                   |         |           |            |   |         |             |         |   |               |       |         |              |          | (2,146   | )            |   |        |          |            |   |          | (2,146     | )      
|                                                    | Repayments of other long-term obligations                   |                                                                   |         |           |            |   |         |             |         |   |               |       |         |              |          | (22      | )            |   |        |          |            |   |          | (22        | )      
|                                                    | Note receivable from unconsolidated affiliate               |                                                                   |         | 42,500     |            |   |         |             |         |   |               |       |         |              |          | (42,500  | )            |   |        |          |            |   |          |           |        
|                                                    | Preferred dividends                                         |                                                                   |         | (29,677    | )          |   |         |             |         |   |               |       |         |              |          |         |              |   |        |          |            |   |          | (29,677    | )      
|                                                    | Preferred dividends on exchange offers and related expenses |                                                                   |         | (15,583    | )          |   |         |             |         |   |               |       |         |              |          |         |              |   |        |          |            |   |          | (15,583    | )      
|                                                    | Proceeds from other stock issuances                         |                                                                   |         | 12,523     |            |   |         |             |         |   |               |       |         |              |          |         |              |   |        |          |            |   |          | 12,523     |        
|                                                    |                                                             |                                                                   |         |            |            |   |         |              |         |   |               |        |         |              |          |          |              |  
|Net cash (used in) provided by financing activities |                                                             |                                                                   | 9,763   |            |            |   | (45,954 | )            |         |   |              |        |         |              | (111,668 | )        |              |   |       |           |            |   | (147,859 | )         
|                                                    |                                                             |                                                                   |         |            |            |   |         |              |         |   |               |        |         |              |          |          |              |  
|(Decrease) increase in cash and cash equivalents    |                                                             |                                                                   | (44,554 | )          |            |   | 23,565  |              |         |   |              |        |         |              | (73,024  | )        |              |   |       |           |            |   | (94,013  | )         
|Cash and cash equivalents  beginning of period     |                                                             |                                                                   | 46,068  |            |            |   | 19,399  |              |         |   |              |        |         |              | 94,482   |          |              |   |       |           |            |   | 159,949  |           
|                                                    |                                                             |                                                                   |         |            |            |   |         |              |         |   |               |        |         |              |          |          |              |  
|Cash and cash equivalents  end of period           |                                                             | $                                                                 | 1,514   |            |            | $ | 42,964  |              |         | $ |              |        |         | $            | 21,458   |          |              | $ |       |           |            | $ | 65,936   |           
|                                                    |                                                             |                                                                   |         |            |            |   |         |              |         |   |               |        |         |              |          |          |              |  

F-64



---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                                                                                 
|--- | ------------------------------------------------------------------------------------------------
|21. | Selected Quarterly Financial Information (unaudited, in
    thousands, except per share amounts)

|                                           |                         |               |         |       |          |   |         |               |   |   |              |       |   |   |         |       |  
|------------------------------------------ | ----------------------- | ------------- | ------- | ----- | -------- | - | ------- | ------------- | - | - | ------------ | ----- | - | - | ------- | ----- | -
|                                           |                         | Quarter Ended |        
|                                           |                         |               |        
|                                           |                         | March 31,     |         |       | June 30, |   |         | September 30, |   |   | December 31, |      
|                                           |                         |               |         |       |          |   |         |               |   |   |              |      
|Year ended December 31, 2004               |                         |               |         |       |          |   |         |               |   |   |              |       |   |   |         |      
|Revenues                                   |                         | $             | 103,684 |       |          | $ | 113,703 |               |   | $ | 198,615      |       |   | $ | 106,125 |      
|Operating loss from continuing operations  |                         |               | (68,078 | )     |          |   | (58,489 | )             |   |   | (35,127      | )     |   |   | (52,651 | )    
|Loss from continuing operations            |                         |               | (68,016 | )     |          |   | (22,827 | )             |   |   | (31,701      | )     |   |   | (51,803 | )    
|Income (loss) from discontinued operations |                         |               | (11,620 | )     |          |   | 158     |               |   |   | 299          |       |   |   | 8,815   |      
|Net loss                                   |                         |               | (79,636 | )     |          |   | (22,669 | )             |   |   | (31,402      | )     |   |   | (42,988 | )    
|Preferred dividends                        |                         |               |        |       |          |   |        |               |   |   |             |       |   |   |        |      
|Net loss applicable to common shareholders |                         |               | (79,636 | )     |          |   | (22,669 | )             |   |   | (31,402      | )     |   |   | (42,988 | )    
|Basic and diluted loss per
    share(1):   |                         |               |         |       |          |   |         |               |   |   |              |       |   |   |         |      
|                                           | Continuing operations   |               |         | (1.54 | )        |   |         | (0.51         | ) |   |              | (0.72 | ) |   |         | (1.17 | )
|                                           | Discontinued operations |               |         | (0.26 | )        |   |         |              |   |   |              | 0.01  |   |   |         | 0.20  |  
|                                           |                         |               |         |       |          |   |         |               |   |   |              |      
|                                           | Loss per share          |               |         | (1.80 | )        |   |         | (0.51         | ) |   |              | (0.71 | ) |   |         | (0.97 | )

|                                                                                                                               |                                                            |               |         |       |          |   |          |               |   |   |              |       |   |   |          |       |  
|------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------- | ------------- | ------- | ----- | -------- | - | -------- | ------------- | - | - | ------------ | ----- | - | - | -------- | ----- | -
|                                                                                                                               |                                                            | Quarter Ended |        
|                                                                                                                               |                                                            |               |        
|                                                                                                                               |                                                            | March 31,     |         |       | June 30, |   |          | September 30, |   |   | December 31, |      
|                                                                                                                               |                                                            |               |         |       |          |   |          |               |   |   |              |      
|Year ended December 31, 2003                                                                                                   |                                                            |               |         |       |          |   |          |               |   |   |              |       |   |   |          |      
|Revenues                                                                                                                       |                                                            | $             | 155,446 |       |          | $ | 109,999  |               |   | $ | 13,740       |       |   | $ | 112,858  |      
|Operating loss from continuing operations                                                                                      |                                                            |               | (53,073 | )     |          |   | (124,976 | )             |   |   | (91,414      | )     |   |   | (119,410 | )    
|Loss from continuing operations                                                                                                |                                                            |               | (58,135 | )     |          |   | (117,684 | )             |   |   | (128,029     | )     |   |   | (109,310 | )    
|Income (loss) from discontinued operations, net of taxes                                                                       |                                                            |               | 9,961   |       |          |   | 8,280    |               |   |   | 2,120        |       |   |   | (1,558   | )    
|Loss before cumulative effect of change in accounting principle
    and extraordinary gain on acquisition of minority interest |                                                            |               | (48,174 | )     |          |   | (109,404 | )             |   |   | (125,909     | )     |   |   | (110,868 | )    
|Net loss                                                                                                                       |                                                            |               | (48,174 | )     |          |   | (95,789  | )             |   |   | (127,879     | )     |   |   | (110,868 | )    
|Preferred dividends                                                                                                            |                                                            |               | (3,360  | )     |          |   | (3,359   | )             |   |   |             |       |   |   |         |      
|Net loss applicable to common shareholders                                                                                     |                                                            |               | (51,534 | )     |          |   | (99,148  | )             |   |   | (127,879     | )     |   |   | (110,868 | )    
|Basic and diluted loss per
    share(1):                                                                                       |                                                            |               |         |       |          |   |          |               |   |   |              |       |   |   |          |      
|                                                                                                                               | Continuing operations                                      |               |         | (1.42 | )        |   |          | (2.76         | ) |   |              | (2.91 | ) |   |          | (2.48 | )
|                                                                                                                               | Discontinued operations                                    |               |         | 0.23  |          |   |          | 0.19          |   |   |              | 0.05  |   |   |          | (0.03 | )
|                                                                                                                               |                                                            |               |         |       |          |   |          |               |   |   |              |      
|                                                                                                                               | Before cumulative effect of change in accounting principle |               |         | (1.19 | )        |   |          | (2.57         | ) |   |              | (2.86 | ) |   |          | (2.51 | )
|                                                                                                                               | Cumulative effect of change in accounting principle        |               |         |      |          |   |          |              |   |   |              | (0.04 | ) |   |          |      |  
|                                                                                                                               | Extraordinary gain on acquisition of minority interest     |               |         |      |          |   |          | 0.31          |   |   |              |      |   |   |          |      |  
|                                                                                                                               |                                                            |               |         |       |          |   |          |               |   |   |              |      
|                                                                                                                               | Loss per share                                             |               |         | (1.19 | )        |   |          | (2.26         | ) |   |              | (2.90 | ) |   |          | (2.51 | )






|    |                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The quarterly earnings per share information is computed
    separately for each period. Therefore, the sum of such quarterly
    per share amounts may differ from the total for the year.

F-65



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##### Table of Contents



SCHEDULE II


LORAL SPACE & COMMUNICATIONS LTD., A DEBTOR IN
POSSESSION


VALUATION AND QUALIFYING ACCOUNTS


For the Years Ended December 31, 2004, 2003 and 2002


(in thousands)


|                                    |  |            |        |           |             |   |        |             |  |   |             |   |  |            |         |   |  |   |        | 
|----------------------------------- |  | ---------- | ------ | --------- | ----------- | - | ------ | ----------- |  | - | ----------- | - |  | ---------- | ------- | - |  | - | ------ | 
|                                    |  |            |        | Additions |             |   |        |             | 
|                                    |  |            |        |           |             |   |        |             | 
|                                    |  | Balance at |        |           | Charged to  |   |        | Charged to  |  |   | Deductions  |   |  | Balance at |        
|                                    |  | Beginning  |        |           | Costs and   |   |        | Other       |  |   | From        |   |  | End of     |        
|Description                         |  | of Year    |        |           | Expenses(1) |   |        | Accounts(2) |  |   | Reserves(3) |   |  | Year       |        
|                                    |  |            |        |           |             |   |        |             |  |   |             |   |  |            |        
|Year ended 2002                     |  |            |        |           |             |   |        |             |  |   |             |   |  |            |         |   |  |   |        | 
|Allowance for billed receivables    |  | $          | 4,412  |           |             | $ | 4,308  |             |  | $ | 3,403       |   |  | $          | (5,029  | ) |  | $ | 7,094  | 
|Allowance for long-term receivables |  |            |       |           |             |   | 32,574 |             |  |   |            |   |  |            |        |   |  |   | 32,574 | 
|                                    |  |            |        |           |             |   |        |             |  |   |             |   |  |            |        
|                                    |  | $          | 4,412  |           |             | $ | 36,882 |             |  | $ | 3,403       |   |  | $          | (5,029  | ) |  | $ | 39,668 | 
|                                    |  |            |        |           |             |   |        |             |  |   |             |   |  |            |        
|Year ended 2003                     |  |            |        |           |             |   |        |             |  |   |             |   |  |            |         |   |  |   |        | 
|Allowance for billed receivables    |  | $          | 7,094  |           |             | $ | 7,402  |             |  | $ | 1,405       |   |  | $          | (4,198  | ) |  | $ | 11,703 | 
|Allowance for long-term receivables |  |            | 32,574 |           |             |   | 10,329 |             |  |   | 19,856      |   |  |            | (42,582 | ) |  |   | 20,177 | 
|                                    |  |            |        |           |             |   |        |             |  |   |             |   |  |            |        
|                                    |  | $          | 39,668 |           |             | $ | 17,731 |             |  | $ | 21,261      |   |  | $          | (46,780 | ) |  | $ | 31,880 | 
|                                    |  |            |        |           |             |   |        |             |  |   |             |   |  |            |        
|Year ended 2004                     |  |            |        |           |             |   |        |             |  |   |             |   |  |            |         |   |  |   |        | 
|Allowance for billed receivables    |  | $          | 11,703 |           |             | $ | (2,144 | )           |  | $ | (13         | ) |  | $          | (3,101  | ) |  | $ | 6,445  | 
|Allowance for long-term receivables |  |            | 20,177 |           |             |   |       |             |  |   |            |   |  |            |        |   |  |   | 20,177 | 
|                                    |  |            |        |           |             |   |        |             |  |   |             |   |  |            |        
|                                    |  | $          | 31,880 |           |             | $ | (2,144 | )           |  | $ | (13         | ) |  | $          | (3,101  | ) |  | $ | 26,622 | 
|                                    |  |            |        |           |             |   |        |             |  |   |             |   |  |            |        






|    |                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes charges to allowance for billed receivables for
    discontinued operations of $1,544, $181 and $409 for 2002, 2003
    and 2004, respectively.
|   
|(2) | Allowance for long-term receivables recorded as a reduction to
    revenues.                                                                            
|   
|(3) | Write-offs of uncollectible accounts                                                                                                                    

F-66