##### 





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 1934FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE
    SECURITIES EXCHANGE ACT OF 1934   Commission file number 1-14180
  LORAL SPACE &
    COMMUNICATIONS INC.
 (Exact name of registrant
    specified in the charter)
  Jurisdiction of incorporation: Delaware
  IRS identification number: 87-0748324
  600 Third
    Avenue
    New York, New York 10016(Address of principal executive
    offices)
    Telephone:
    (212) 697-1105
  (Registrants telephone
    number, including area code)
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of each class

Name of each exchange on which registeredCommon stock, $.01 par value

NASDAQ   Securities registered pursuant to Section 12(g) of the
    Act:
  Indicate by check mark if the registrant is well-known
    seasoned issuer, as defined in Rule 405 of the Securities
    Act.  Yes o No þ
  Indicate by check mark if the registrant is not required to
    file reports pursuant to Section 13 or Section 15(d)
    of the
    Act.  Yes o     No þ
  þ o
  Regulation S-K Form 10-K Form 10-K.  Yes þ o
  Rule 12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer þ
    Non-accelerated
    filer o
    Smaller reporting
    company o (Do
    not check if a smaller reporting company)  Rule 12b-2 o þ
      þ o
    Part and Item Number ofDocument

Form 10-K into which incorporatedLoral Notice of Annual Meeting of Stockholders and Proxy
    Statement for the Annual Meeting of Stockholders to be held
    May 20, 2008

Part II, Item 5 (d)
    Part III, Items 11 through 14




---



##### 





PART I
  Item 1.
    Business  THE
    COMPANY
  Overview
        Satellite Manufacturing:
    Satellite Services:
    1 3
  and/or
  No. 90-7, Financial Reporting of Entities in Reorganization Under the
    Bankruptcy Code (SOP 90-7).
 1




---



##### 



Segment
    Overview
  Satellite
    Manufacturing
        Market
    and Competition
   2




---



##### 



Satellite
    Manufacturing Performance
  Successor Registrant



Predecessor RegistrantFor the Period



For the PeriodFor the Year


For the Year


October 2,



January 1,Ended


Ended


2005 to



2005 toDecember 31,


December 31,


December 31,



October 1,2007


2006


2005



2005(In millions)Total segment revenues

$
814


$
697


$
162



$
330Eliminations


(53
)


(60
)


(1
)



(11
)Revenues from satellite manufacturing as reported

$
761


$
637


$
161



$
319Segment Adjusted EBITDA before
    eliminations(1)

$
35


$
66


$
12



$
15     (1)
    
    See Consolidated Operating Results
    in Managements Discussion and Analysis of Financial
    Condition and Results of Operations for significant items that
    affect comparability between the periods presented (see
    Note 18 to the consolidated financial statements for the
    definition of Adjusted EBITDA).    Satellite
    Services
        Broadcast:
  DTH.
 3




---



##### 



Video Distribution.
  Occasional Use Services.
  Enterprise
    Services:
  North America Data Networks. and/or
  International Enterprise Networks. IP-based
  Ka-band
    Internet Services. Ka-band, Ka-band
  Telecommunication Carrier Services.
  Government Services.
 4




---



##### 



Consulting &
    Other:
        Market
    and Competition
         5




---



##### 



Satellite
    Fleet & Ground Resources
          ExpectedOrbital Location




Manufacturers


End-of-Regions

Launch


End-of-Service-


Commercial-




Transponders(1)Covered

Date


Life


Service
    Life(1)


C-band(2)

Ku-band(2)

Ka-band

L-band(3)

ModelNimiq 1

91.0o
    WL Canada, Continental United States


May 1999



2011



2024




32@24MHz





A2100 AX
    (Lockheed Martin)Nimiq
    2(4)

82.0o
    WL Canada, Continental United States


December 2002



2015



2023




20@24MHz

2@500/100MHz



A2100 AX
    (Lockheed Martin)Nimiq
    3(5)

82o
    WL Canada Continental United States


June 1995



2007



2010




16@24MHz





BSS 601
    (Boeing)Nimiq
    4iR(5)

91o
    WL Canada Continental United States


December 1993



2006



2009




16@24MHz





BSS 601
    (Boeing)Anik
    F1(6)

107.3o
    WL Canada, Continental United States, South America


November 2000



2016



2013


12@36MHz
    (S. America)

16@27MHz
    (S. America)





BSS702 (Boeing)Anik F2

111.1oWL Canada, Continental United States


July 2004



2019



2028


24@36MHz

32@27MHz

31@56/112 MHz
    6@500MHz
    1@56/112MHz



BSS702
    (Boeing)Anik
    F1-R(3)

107.3o
    WL North America


September 2005



2020



2023


24@36MHz

32@27MHz



2@20MHz

E3000
    (EADS
    Astrium)Anik
    F3(7)

118.7o
    WL Canada, Continental United States


April 2007



2022



2026


24@36MHz

32@27MHz

2@75MHz
    (500MHz)



E3000
    (EADS Astrium)Telstar
    10(8)

76.5o
    EL Asia and Portions of Europe, Africa and Australia


October 1997



2009



2012


1@30MHz
    26@36MHz

9@54MHz





SS/L 1300Telstar
    12(9)

15o
    WL Eastern United States, SE Canada, Europe, Russia, Middle
    East, North Africa, portions of South and Central America


October 1999



2012



2016




37@54MHz





SS/L 1300Telstar 14/ Estrela do
    Sul(10)

63o
    WL Brazil And portions of Latin America, North America, Atlantic
    Ocean


January 2004



2019



2011




9@72MHz
    10@36MHz
    2@28MHz
    1@56MHz





SS/L 1300Telstar
    18(11)(12)

138o
    EL India, South East Asia, China, Australia And Hawaii


June 2004



2017



2018


14@36MHz
    1@54MHz

3@54MHz
    1@40MHz





SS/L 1300     (1)
    
    The number of available
    transponders and expected end of life shown in this table
    reflect Telesat Canadas current estimate of each
    satellites capacity and useful life, taking account of
    anomalies and malfunctions the satellites have experienced and
    other factors such as remaining 6




---



##### 



fuel levels and consumption rates
    and other available engineering data. Telesat Canada
    periodically reviews and updates these estimates based on a
    satellites performance. Accordingly, these estimates are
    subject to change and it is possible that the actual commercial
    life of any of these satellites will be shorter than that
    indicated in the table. See Item 1A  Risk
    Factors  After launch, satellites remain vulnerable
    to in-orbit failures which may result in reduced revenues and
    profits and other financial consequences.(2)
    
    Includes extended C-band and
    extended Ku-band in certain cases.(3)
    
    Telesat Canada has contracted the
    L-band capacity on Anik F1-R to Lockheed Martin. This L-band
    spectrum is not Telesat Canadas; it is a United States
    spectrum licensed to Lockheed Martin.(4)
    
    Due to malfunctions affecting
    available power on Nimiq 2, not all transponders are operational.(5)
    
    These satellites are leased from
    DIRECTV, but are in Telesat Canada orbital positions. DIRECTV
    can terminate its lease agreement with Telesat Canada with
    respect to Nimiq 4iR if DIRECTV experiences one or more
    catastrophic failures with its other satellites. With respect to
    Nimiq 3, DIRECTV can terminate its lease agreement if it
    experiences two or more catastrophic failures with its other
    satellites. In the event of such termination, Telesat Canada may
    lose the revenues associated with these satellites if it cannot
    redeploy that capacity to other satellites.(6)
    
    Due to a gradual decrease in power
    on Anik Fl, this satellite will experience a premature
    end-of-life.(7)
    
    Telesat Canada has contracted for
    the sale of all of the Ku-band capacity of Anik F3 to EchoStar.(8)
    
    Telstar 10 does not include 1
    transponder @ 36MHz and 6 transponders @ 54MHz which have been
    turned off for satellite power management, and does not include
    1 transponder @ 36MHz owned by APT.(9)
    
    Telstar 12 has
    38-54MHz
    transponders. Four of these transponders were given to Eutelsat
    to settle coordination issues, and Telesat Canada leases back
    three of these transponders.(10)
    
    Telstar 14 has substantially
    reduced transponder capacity and a limited expected life due to
    the failure of a solar array to fully deploy upon launch.(11)
    
    Includes 16.6MHz of C-band capacity
    provided to the Government of Tonga in lieu of a cash payment
    for the use of the orbital location.(12)
    
    Additional transponders will be
    purchased from APT, four in 2008 and two in 2009.    
    Satmex 5:  3-36MHz Ku transponders;
    Satmex 6:  2-36MHz C-band transponders; 2-36MHz
    Ku transponders; and
    Agila (Mabuhay):  3-36MHz C-band transponders    Nimiq 4

Nimiq 5

Telstar 11NOrbital Location

82.0o
    WL

72.7o
    WL

37.55o
    WLRegions Covered

Canada

Canada, Continental United States

North and Central America, Europe, Africa and the maritime
    Atlantic Ocean regionPlanned In-Service 
    Date

2008(1)

2009(1)

2009Manufacturers End-of-
    Service-Life

15 Years

15 Years

15 YearsCustomer Committed 
    Capacity

15 Years/Fixed

15 Years/Fixed

Transponders:C-band





Ku-band

32@24MHz

32@24MHz

39@54MHzKa-band

8@54MHz



Model

E-3000 (EADS Astrium)

SS/L 1300

SS/L 1300     (1)
    
    The March 14, 2008 failure of
    a Proton rocket to lift its satellite payload to the appropriate
    orbit will cause a delay in the planned launch of the Nimiq 4
    satellite, originally scheduled to be launched on a Proton
    rocket in mid-2008. The launch of Nimiq 5, which had been
    planned for the second half of 2009, may likewise also be
    delayed as a result of this launch failure. These launch delays
    will adversely affect Telesat Canadas financial
    performance for 2008 and potentially 2009 and 2010 and will
    defer the backlog run-off previously anticipated. It is not
    possible to quantify the impact of these delays until more
    information about the Proton failure and the resumption of the
    launch schedule becomes available. 7




---



##### 



Satellite
    Services Performance
    Successor Registrant



Predecessor RegistrantFor the Period



For the PeriodFor The Year


For The Year


October 2,



January 1,Ended


Ended


2005 to



2005 toDecember 31,


December 31,


December 31,



October 1,2007


2006


2005



2005(in millions)Revenue:Total segment revenues

$
241


$
164


$
37



$
115Eliminations


(2
)


(3
)


(1
)



(4
)Affiliate
    eliminations(2)


(118
)











Revenues from satellite services as reported

$
121


$
161


$
36



$
111Adjusted EBITDA:Total segment Adjusted EBITDA

$
118


$
68


$
12



$
40Eliminations


(2
)


(3
)


(1
)



(10
)Affiliate
    eliminations(2)


(65
)











Adjusted EBITDA from satellite services after
    eliminations(1)

$
51


$
65


$
11



$
30     (1)
    
    See Consolidated Operating Results
    in Managements Discussion and Analysis of Financial
    Condition and Results of Operations for significant items that
    affect comparability between the periods presented (see
    Note 18 to the consolidated financial statements for the
    definition of Adjusted EBITDA).(2)
    
    Affiliate eliminations represent
    the elimination of amounts attributable to Telesat Canada.        Telesat CanadaFor the period fromJanuary 1,


For The Year


For The Year2007 to


Ended


EndedOctober 30,


December 31,


December 31,2007


2006


2005(in millions)Total operating revenues


CAD 457.8



CAD 479.0



CAD 474.7Adjusted EBITDA


CAD 263.2



CAD 261.0



CAD 268.1    8




---



##### 



Other
  o o XTAR-LANT, take-up
  Reorganization
  No. 03-41710 03-41709 03-41728
   9




---



##### 



REGULATION
  Satellite
    Manufacturing
  Export
    Regulation and Economic Sanctions Compliance
        Satellite
    Services
  Telecommunications
    Regulation
    Canadian
    Regulatory Environment
     10




---



##### 



winding-up
  United
    States Regulatory Environment
     11




---



##### 



15-year
  US-licensed
  Ka-band
  case-by-case
    Regulation Outside
    Canada and the United States
   12




---



##### 



International
    Regulatory Environment  International
    Telecommunication Union
           13




---



##### 



PATENTS
    AND PROPRIETARY RIGHTS
  Satellite
    Manufacturing
    Satellite
    Services
      RESEARCH
    AND DEVELOPMENT
  Satellite
    Manufacturing
    Satellite
    Services
   14




---



##### 



FOREIGN
    OPERATIONS
    Satellite
    Manufacturing
    Satellite
    Services
  non-U.S. customers,
  EMPLOYEES
     15




---



##### 



AVAILABLE
    INFORMATION
  Form 10-K, Form 10-Q, Form 8-K,
  Item 1A.
    Risk
    Factors  I.
    Financial
    and Telesat Canada Investment Risk Factors  We
    emerged from Chapter 11 in 2005 and have had a history of
    losses.
    While we
    ended December 31, 2007 with over $300 million of
    cash, we have significant projected cash requirements that will
    substantially reduce our cash position.
    We are a
    holding company with no operations; we are dependent on cash
    flow from our operating subsidiaries and affiliates to meet our
    financial obligations.
  1 3
   16




---



##### 



While we
    own 64% of Telesat Canada on an economic basis, we own only
    331/3%
    of its voting stock and therefore do not have the right to elect
    or appoint a majority of its Board of Directors.
  1 3 2 3 2 3
  Our
    equity investment in Telesat Canada may be at risk because
    Telesat Canada is highly leveraged.
       17




---



##### 



There can
    be no assurance that Telesat Canada will be able to fully
    implement planned cost savings, which will adversely affect our
    investment.
    Certain
    asset sales by Telesat Canada may trigger material adverse tax
    consequences for us.
    The
    Telesat Canada information in this report is based solely on
    information provided to us by Telesat Canada.
    Our U.S.
    dollar reporting of Telesat Canadas financial results will
    be affected by volatility in the Canadian/U.S. dollar exchange
    rate.
    We may in
    the future incur significant additional indebtedness, thereby
    making us more vulnerable to adverse developments.
   18




---



##### 



XTAR has
    not generated sufficient revenues to meet all of its contractual
    obligations, which are substantial.
  take-up
  Significant
    changes in discount rates, actual investment return on pension
    assets and other factors could affect our statement of
    operations, equity and pension contributions in future
    periods.
    II.
    Segment
    Risk Factors   Risk
    Factors Associated With Satellite Manufacturing
  The
    satellite manufacturing market is highly competitive and fixed
    costs are high.
   19




---



##### 



SS/Ls
    contracts are subject to adjustments, cost overruns, risk of
    non-payment and termination.
        start-up start-up
   20




---



##### 



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.
        Some
    satellites built by SS/L, including three satellites operated by
    Telesat Canada, 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.
    We are
    subject to export control and economic sanctions laws, which may
    result in delays, lost business and additional costs.
  and/or
 21




---



##### 



non-U.S. competitors
  The
    recent trend toward industry consolidation in the satellite
    services industry may adversely affect us; we do not control
    satellite procurement decisions at Telesat Canada.
  back-up
    The
    availability of qualified personnel and facility space may be
    limited; SS/L will incur significant costs to upgrade or expand
    its facility.
    SS/L is
    subject to credit risks with respect to certain of its
    customers.
   22




---



##### 



SS/L
    relies on certain key suppliers whose failure or delay in
    performance would adversely affect us.
  and/or
  We face
    risks in conducting business internationally.
     Risk
    Factors Associated With Satellite Services
  Telesat
    Canada derives a substantial amount of its revenues from only a
    few of its customers. A loss of one or more of these major
    customers, or a material adverse change in any of such
    customers business, could materially reduce its revenues
    and backlog.
    Launch
    delays or failures may result in delays in operations.
   23




---



##### 



After
    launch, satellites remain vulnerable to in-orbit failures which
    may result in reduced revenues and profits and other financial
    consequences.
    back-up back-up
  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; moreover, not all
    satellite-related losses will be covered by insurance.
      Telesat
    Canada competes for market share, customers and orbital
    slots.
   24




---



##### 



Changes
    in the Canadian competitive environment could adversely affect
    Telesat Canada.
      Telesat
    Canada operates in a highly regulated industry and government
    regulations may adversely affect its business.
    later-in-time
   25




---



##### 



Telesat
    Canadas ability to replace two of its satellites is
    subject to additional risk and cannot be assured.
    III.
    Other Risks
  We were
    late with the filing of our 2007
    Form 10-K;
    our ability to file our future financial reports on a timely
    basis will depend on correcting our material weakness related to
    income tax accounting, as well as the timely delivery by Telesat
    Canada of its financial statements.
  Form 10-K 15-day Rule 12b-25.
  Form 10-K Form 10-K Form S-3 Form S-3,
  Form 10-Q
  We share
    control of our affiliates with third parties.
  1 3
 26




---



##### 



We rely
    on key personnel.
    MHR may
    be viewed as our controlling stockholder and may have conflicts
    of interest with us in the future.
  and/or and/or and/or
  Compliance
    with the Sarbanes-Oxley Act increases our operating
    expenses.
    The
    future use of tax attributes is limited upon emergence from
    bankruptcy.
   27




---



##### 



There is
    a thin trading market for our common stock.
    The
    market for our stock could be adversely affected by future
    issuance of significant amounts of our common stock.
      Series A-1 Series B-1 Class B-1
    Litigation
    and Disputes
  We are
    involved in a number of ongoing lawsuits.
    Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties  Corporate
   28




---



##### 



Satellite
    Manufacturing
    Satellite
    Services
  tenants-in-common.
  back-up
    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  (a)
    Market
    Price and Dividend Information  Series A-2 Series B-2 Series B-1 Series B-2 Series A-2
 29




---



##### 



High


LowYear ended December 31, 2007Quarter ended December 31, 2007

$
45.27


$
31.67Quarter ended September 30, 2007


50.42



34.83Quarter ended June 30, 2007


51.82



44.50Quarter ended March 31, 2007


53.10



39.00Year ended December 31, 2006Quarter ended December 31, 2006

$
41.65


$
25.96Quarter ended September 30, 2006


29.60



24.16Quarter ended June 30, 2006


29.55



25.74Quarter ended March 31, 2006


29.01



23.76   (b)
    Approximate
    Number of Holders of Common Stock    (c)
    Dividends  pari passu
  (d)
    Securities
    Authorized for Issuance under Equity Compensation
    Plans   30




---



##### 



(e)
    Comparison
    of Cumulative Total Returns    
  Item 6.
    Selected
    Financial Data      SOP 90-7 Business
    Combinations
 31




---



##### 



Form 10-K.
  LORAL
    SPACE & COMMUNICATIONS INC.
    (In thousands, except per share data)
  Successor Registrant



Predecessor RegistrantFor the Period



For the PeriodOctober 2,



January 1,2005 to



2005 toYear Ended December 31,


December 31,



October 1,


Year Ended December 31,2007


2006


2005



2005


2004


2003Statement of operations data:Revenues

$
882,454


$
797,333


$
197,165



$
429,183


$
522,127


$
392,043Operating income (loss) from continuing
    operations(1)


45,256



29,818



(4,945
)



(67,095
)


(214,345
)


(388,873
)Gain on discharge of pre-petition obligations and fresh-start
    adjustments















1,101,453
(2)






Income (loss) from continuing operations before income taxes,
    equity in net losses of affiliates and minority
    interest(3)


157,786



30,117



(5,395
)



1,022,651



(207,852
)


(368,355
)Income tax (provision) benefit


(83,457
)


(20,880
)


(1,752
)



10,901



(13,284
)(4)


6,330Income (loss) from continuing operations before equity in net
    losses of affiliates and minority interest


74,329



9,237



(7,147
)



1,033,552



(221,136
)


(362,025
)Equity in net (losses) income of
    affiliates(5)


(21,430
)


(7,163
)


(5,447
)



(2,796
)


46,654



(51,153
)Minority interest


(23,240
)


(24,794
)


(2,667
)



126



135



20Income (loss) from continuing operations


29,659



(22,720
)


(15,261
)



1,030,882



(174,347
)


(413,158
)(Loss) income from discontinued operations, net of taxes



















(2,348
)


18,803Gain on sale of discontinued operations, net of taxes















13,967







Income (loss) before cumulative effect of change in accounting
    principle and extraordinary gain on acquisition of minority
    interest


29,659



(22,720
)


(15,261
)



1,044,849



(176,695
)


(394,355
)Cumulative effect of change in accounting principle, net of taxes























(1,970
)Extraordinary gain on acquisition of minority interest























13,615Net income (loss)


29,659



(22,720
)


(15,261
)



1,044,849



(176,695
)


(382,710
)Preferred dividends


(19,379
)



















(6,719
)Beneficial conversion feature related to the issuance of Loral
    Series A-1
    Preferred Stock


(25,685
)



















Net (loss) income applicable to common shareholders


(15,405
)


(22,720
)


(15,261
)



1,044,849



(176,695
)


(389,429
) 32




---



##### 



Successor Registrant



Predecessor RegistrantFor the Period



For the PeriodOctober 2,



January 1,2005 to



2005 toYear Ended December 31,


December 31,



October 1,


Year Ended December 31,2007


2006


2005



2005


2004


2003Basic and diluted (loss) earnings per share:Continuing operations

$
(0.77
)

$
(1.14
)

$
(0.76
)


$
23.37


$
(3.96
)

$
(9.58
)Discontinued operations















0.32



(0.05
)


0.43Before cumulative effect of change in accounting principle and
    extraordinary gain on acquisition of minority interest

$
(0.77
)


(1.14
)


(0.76
)



23.69



(4.01
)


(9.15
)Cumulative effect of change in accounting principle























(0.05
)Extraordinary gain on acquisition of minority interest























0.31(Loss) earnings per share

$
(0.77
)

$
(1.14
)

$
(0.76
)


$
23.69


$
(4.01
)

$
(8.89
)Deficiency of earnings to cover fixed charges

$
28,875


$
13,377


$
8,062



$
65,570


$
208,809


$
389,218Cash flow data:Provided by (used in) operating
    activities(6)


27,123



88,002



(38,531
)



(143,827
)


66,129



232,653Provided by (used in) by investing
    activities(7)


61,519



(175,978
)


(5,089
)



194,707



906,887



(157,484
)Provided by (used in) by financing activities


39,510



(1,278
)


120,763








(966,887
)


539   Predecessor Registrant



Successor RegistrantDecember 31,



December 31,2007


2006


2005



2004(8)


2003(8)Balance sheet data:Cash and cash equivalents

$
314,694


$
186,542


$
275,796



$
147,773


$
141,644Short-term investments






106,588












Total assets


1,702,939



1,729,911



1,678,977




1,218,733



2,463,813Debt, including current portion






128,084



128,191








Non-current liabilities and minority interest


289,602



535,271



603,374




84,677



72,932Liabilities subject to compromise















1,916,000



2,921,680Shareholders equity (deficit)


973,558



647,002



627,164




(1,044,101
)


(855,670
)     (1)
    
    In connection with the Telesat
    Canada transaction, which closed on October 31, 2007, we
    recognized a gain of $104.9 million on the contribution of
    substantially all of the assets and related liabilities of Loral
    Skynet to Telesat Canada. See Note 8 to the consolidated
    financial statements.(2)
    
    In connection with our emergence
    from Chapter 11 and our adoption of fresh-start accounting
    on October 1, 2005, we recognized a gain on discharge of
    pre-petition obligations and fresh-start adjustments of
    $1.101 billion, related interest expense of
    $13.2 million related to the holders of claims to be paid
    in cash and a tax benefit of $15.4 million, each of which
    is reflected separately in our statement of operations (see
    Note 4 to the consolidated financial statements).(3)
    
    In connection with the Telesat
    Canada transaction, we recognized a gain on foreign exchange
    contracts of $89.4 million (see Note 16 to the
    consolidated financial statements).(4)
    
    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, L.P.s $500 million
    credit facility, upon Globalstar, L.P.s dissolution in
    June 2004.(5)
    
    Beginning October 31, 2007,
    our principal affiliate is Telesat Canada. Loral also has
    investments in XTAR and joint ventures providing Globalstar
    service, which are accounted for under the equity method. On
    December 21, 2007 Loral agreed to sell its interest in
    Globalstar do Brazil S.A. which resulted in Loral recording a
    charge of $11.3 million (see Note 8 to the
    consolidated financial statements). 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, L.P. During 2003, we wrote
    off our remaining investment of $29 million in Satelites
    Mexicanos, S.A. de C.V. See Note 8 to the consolidated
    financial statements.(6)
    
    Cash flow provided by (used in)
    operating activities includes cash flow from operating
    activities provided by discontinued operations in 2004.(7)
    
    Cash flow provided by (used in)
    investing activities includes cash flow provided by (used in)
    investing activities of discontinued operations for the period
    January 1, 2005 to October 1, 2005 and 2004.(8)
    
    As a result of our Chapter 11
    filing, Old Lorals debt obligations, preferred stock
    obligations and certain other liabilities existing at
    July 15, 2003, were classified as liabilities subject to
    compromise on our balance sheets at December 31, 2004 and
    2003. These obligations were extinguished as of the Effective
    Date. 33




---



##### 



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.  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
      1 3
  and/or
  No. 90-7, Financial Reporting of Entities in Reorganization Under the
    Bankruptcy Code (SOP 90-7).
    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, including without limitation those relating to
    Telesat Canada, 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. 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.
 34




---



##### 



Overview
  Businesses
    Satellite
    Manufacturing
            Satellite
    Services
   35




---



##### 



1 3
          Bankruptcy
    Reorganization
  2001-2003, two-and-a-half
  SOP 90-7
  Future
    Outlook
   36




---



##### 



1 3
               37




---



##### 



Ka-band
  Consolidated
    Operating Results
           38




---



##### 



Disclosures about
    Segments of an Enterprise and Related Information.
    Revenues:
  For the Period


For the PeriodOctober 2,


January 1,2005 to


2005 toYear Ended December 31,


December 31,


October 1,2007


2006


2005 (a)


2005


2005(in millions)Satellite Manufacturing

$
814.3


$
696.5


$
491.3


$
161.8


$
329.5Satellite Services


241.2



163.8



151.5



37.0



114.5Segment revenues


1,055.5



860.3



642.8



198.8



444.0Eliminations(1)


(55.2
)


(63.0
)


(16.4
)


(1.6
)


(14.8
)Affiliate
    eliminations(2)


(117.8
)














Revenues as
    reported(3)

$
882.5


$
797.3


$
626.4


$
197.2


$
429.2       Adjusted
    EBITDA:
  For the Period


For the PeriodOctober 2,


January 1,2005 to


2005 toYear Ended December 31,


December 31,


October 1,2007


2006


2005 (a)


2005


2005(in millions)Satellite Manufacturing

$
34.5


$
65.9


$
27.0


$
11.8


$
15.2Satellite Services


118.4



68.0



51.3



11.5



39.8Corporate
    expenses(4)


(37.9
)


(26.8
)


(28.3
)


(11.0
)


(17.3
)Segment Adjusted EBITDA before eliminations


115.0



107.1



50.0



12.3



37.7Eliminations(1)


(6.1
)


(6.0
)


(13.5
)


(1.2
)


(12.3
)Affiliate
    eliminations(2)


(65.3
)














Adjusted EBITDA

$
43.6


$
101.1


$
36.5


$
11.1


$
25.4    39




---



##### 



Reconciliation
    of Adjusted EBITDA to Net (Loss) Income:
  For the Period


For the PeriodOctober 2,


January 1,2005 to


2005 toYear Ended December 31,


December 31,


October 1,2007


2006


2005 (a)


2005


2005(in millions)Adjusted EBITDA

$
43.6


$
101.1


$
36.5


$
11.1


$
25.4Depreciation and amortization


(103.3
)


(71.3
)


(77.3
)


(16.0
)


(61.3
)Gain on contribution of Loral
    Skynet(5)


104.9















Reorganization expenses due to bankruptcy










(31.2
)






(31.2
)Operating income (loss) from continuing operations


45.2



29.8



(72.0
)


(4.9
)


(67.1
)Gain on discharge of pre-petition obligations and fresh-start
    adjustments(6)










1,101.5







1,101.5Interest and investment income


39.3



31.5



10.5



4.1



6.4Interest expense


(2.3
)


(23.4
)


(21.6
)


(4.4
)


(17.2
)Gain (loss) on foreign exchange contracts


89.4



(5.8
)










Loss on extinguishment of debt


(16.2
)














Other income (expense)


2.4



(2.0
)


(1.1
)


(0.2
)


(0.9
)Income tax (provision) benefit


(83.5
)


(20.8
)


9.1



(1.8
)


10.9Equity losses in affiliates


(21.4
)


(7.2
)


(8.2
)


(5.4
)


(2.8
)Minority interest


(23.2
)


(24.8
)


(2.6
)


(2.7
)


0.1Income (loss) from continuing operations


29.7



(22.7
)


1,015.6



(15.3
)


1,030.9Income from discontinued operations, net of taxes










14.0







14.0Net income (loss)

$
29.7


$
(22.7
)

$
1,029.6


$
(15.3
)

$
1,044.9     (a)
    
    The combination of the period January 1, 2005 to
    October 1, 2005 and the period October 2, 2005 to
    December 31, 2005 represents non-GAAP financial
    information. Management believes that presenting the financial
    information in this way is the most relevant and useful method
    for making comparisons.(1)
    
    Represents the elimination of intercompany sales and
    intercompany Adjusted EBITDA, primarily for satellites under
    construction by SS/L for wholly owned subsidiaries.(2)
    
    Represents the elimination of amounts attributable to Telesat
    Canada whose results are reported in our consolidated statement
    of operations as equity in net loss of affiliates.(3)
    
    Includes revenues from affiliates of $22.0 million,
    $11.3 million, $4.1 million and $10.0 million for
    the years ended December 31, 2007 and 2006, for the period
    October 2, 2005 to December 31, 2005 and for the
    period January 1, 2005 to October 1, 2005,
    respectively.(4)
    
    Represents corporate expenses incurred in support of our
    operations and for the years ended December 31, 2007 and
    2006 and the period October 2, 2005 to December 31,
    2005 includes $0.3 million, $1.2 million and
    $3.9 million, respectively, of continuing expenses for
    bankruptcy related matters, which after the adoption of
    fresh-start accounting are classified as corporate general and
    administrative expenses. 40




---



##### 



(5)
    
    In connection with the Telesat Canada transaction, which closed
    on October 31, 2007, we recognized a gain on the
    contribution of substantially all of the assets and related
    liabilities of Loral Skynet to Telesat Canada (see Note 8
    to the financial statements).(6)
    
    In connection with our emergence from Chapter 11 and our
    adoption of fresh-start accounting on October 1, 2005, we
    recognized a gain on discharge of pre-petition obligations and
    fresh-start adjustments of $1.101 billion, related interest
    expense of $13.2 million and a tax benefit of
    $15.4 million, each of which is reflected separately in our
    statement of operations (see Note 4 to the financial
    statements).  2007
    Compared with 2006 and 2006 Compared with 2005 (a)
    (a)
    The combination of the period January 1, 2005 to
    October 1, 2005 and the period October 2, 2005 to
    December 31, 2005 represents non-GAAP financial
    information. Management believes that presenting the financial
    information in this way is the most relevant and useful method
    for making comparisons.  Revenues
    from Satellite Manufacturing
 % Increase(Decrease)Year Ended


2007


2006December 31,


vs.


vs.2007


2006


2005 (a)


2006


2005(in millions)Revenues from Satellite Manufacturing

$
814


$
697


$
491



17
%


42
%Eliminations


(53
)


(60
)


(11
)


(12
)%


445
%Revenues from Satellite Manufacturing as reported

$
761


$
637


$
480



20
%


33
%       Revenues
    from Satellite Services
  % Increase(Decrease)Year Ended


2007


2006December 31,


vs.


vs.2007


2006


2005 (a)


2006


2005(in millions)Revenues from Satellite Services before specific items

$
126


$
149


$
147



(17
)%


2
%Customer termination payment






15



Cash basis customer payments


(3
)






5Eliminations


(2
)


(3
)


(5
)


(26
)%


(35
)%Revenues from Satellite Services as reported

$
121


$
161


$
147



(25
)%


10
%  41




---



##### 



Cost of
    Satellite Manufacturing
  % Increase(Decrease)2007


2006Year Ended December 31,


vs.


vs.2007


2006


2005 (a)


2006


2005(in millions)Cost of Satellite Manufacturing includes:Cost of Satellite Manufacturing before specific identified
    charges

$
657


$
537


$
394



23
%


39
%Depreciation and amortization


36



23



15



56
%


55
%Transponder rights provided to SS/L in the Satmex settlement
    agreement






(19
)


Accrued warranty obligations


(4
)


8



17







(53
)%Provisions for inventory obsolescence






2



4







(54
)%Cost of Satellite Manufacturing

$
689


$
551


$
430



25
%


28
%Cost of Satellite Manufacturing as a % of Satellite
    Manufacturing revenues as reported


90
%


87
%


90
%      42




---



##### 



Cost of
    Satellite Services
  % Increase(Decrease)Year Ended


2007


2006December 31,


vs.


vs.2007


2006


2005 (a)


2006


2005(in millions)Cost of Satellite Services includes:Cost of Satellite Services before specific identified charges

$
42


$
53


$
59



(21
)%


(10
)%Depreciation and amortization


44



46



61



(3
)%


(25
)%Cost of Satellite Services

$
86


$
99


$
120



(13
)%


(18
)%Cost of Satellite Services as a % of Satellite Services revenues
    as reported


71
%


61
%


82
%       Selling,
    General and Administrative Expenses
  % Increase(Decrease)2007


2006Year Ended December 31,


vs.


vs.2007


2006


2005 (a)


2006


2005(in millions)Selling, general and administrative expenses includes:Selling, general and administrative expenses before specific
    charges

$
133


$
118


$
108



12
%


9
%Litigation costs


11



6



4



90
%


50
%Stock based compensation


23



2



Continuing expenses for bankruptcy related matters






1



4Selling, general and administrative expenses as reported

$
167


$
127


$
116% of revenues as reported


19
%


16
%


19
%


31
%


9
%  43




---



##### 



Gain on
    Contribution of Loral Skynet to Telesat Canada
    Consideration received for the contribution of Loral Skynet to
    Telesat Holdco:Cash and marketable securities

$
61.5Fair value of equity in Telesat Holdco


670.5Total consideration


732.0Book value of contributed net assets of Loral Skynet


440.5Consideration in excess of book value

$
291.5Gain recognized

$
104.9   EITF 01-2,
  Gain on
    Litigation Settlement
   44




---



##### 



Reorganization
    Expenses Due to Bankruptcy
  Year EndedDecember 31,2007


2006


2005 (a)(in millions)Reorganization Expenses Due to Bankruptcy

$



$



$
31     Gain on
    Discharge of Pre-petition Obligations and Fresh-start
    Adjustments
    Interest
    and Investment Income
  Year EndedDecember 31,2007


2006


2005 (a)(in millions)Interest and investment income

$
39


$
32


$
11       Interest
    Expense
  Year EndedDecember 31,2007


2006


2005 (a)(in millions)Interest cost before capitalized interest

$
12


$
26


$
9Interest expense in connection with our Plan of Reorganization










13Capitalized interest


(10
)


(3
)


Interest expense

$
2


$
23


$
22      45




---



##### 



Gain on
    Foreign Exchange Contracts
    Loss on
    Extinguishment of Debt
    Other
    Income (Expense)
    Income
    Tax (Provision) Benefit
  paid-in-capital.
     46




---



##### 



Employers Accounting
    for Defined Benefit Pension and Other Postretirement Plans
    Taxation
  Equity in
    Net Losses of Affiliates
  Year EndedDecember 31,2007


2006


2005 (a)(in millions)Telesat Canada

$
(1.8
)

$



$
XTAR


(10.6
)


(7.4
)


(8.1
)Other


(9.0
)


0.2



(0.1
)$
(21.4
)

$
(7.2
)

$
(8.2
)   1 3
 47




---



##### 



For the PeriodOctober 31,2007to December 31,2007Statement of Operations Data:Revenues

$
117.8Operating expenses


(93.7
)Operating income


24.1Net loss


(1.3
)   December 31, 2007Balance Sheet Data:Current assets

$
143.7Total assets


5,610.0Current liabilities


229.5Total liabilities


4,156.7Redeemable preferred stock


143.1Shareholders equity


1,310.2       Minority
    Interest
     48




---



##### 



Backlog
    2007


2006Satellite Manufacturing

$
1,025


$
1,118Satellite Services


5,251



355Total backlog before eliminations


6,276



1,473Satellite Manufacturing eliminations






(116
)Satellite Services eliminations


(5,251
)


(10
)Total backlog

$
1,025


$
1,347       and/or
  Critical
    Accounting Matters
    Fresh-Start
    Accounting
    Revenue
    recognition
   49




---



##### 



Billed
    receivables, vendor financing and long-term
    receivables
    Inventories
    Evaluation
    of Investments in Affiliates for Impairment
  Equity Method of
    Accounting for Investments in Common Stock
  Taxation
  Internal Control  Integrated Framework. Form 10-K
   50




---



##### 



paid-in-capital.
  Accounting for Uncertainty in Income Taxes, an
    interpretation of FASB Statement No. 109
    Pension
    and other employee benefits
   51




---



##### 



Stock
    Based Compensation
  Share-Based Payment No. 96-18, Accounting for Equity Instruments That Are Issued to
    Other Than Employees for Acquiring, or in Conjunction with
    Selling, Goods or Services
 52




---



##### 



Goodwill
    and Other Intangible Assets
  Goodwill and Other
    Intangible Assets
  build-up build-up
  Contingencies
    Liquidity
    and Capital Resources
  Cash
    and Available Credit
     53




---



##### 



true-up
          Series A-1 Series B-1 Class B-1 Class B-1 class B-1 Series A-1 Series A-1 Series B-1 class B-1
 54




---



##### 



Series B-1 class B-1
        FM-6
   55




---



##### 



Telesat
    Canada
  Cash and
    Available Credit
      Liquidity
        Debt
    Senior
    Secured Credit Facilities
     56




---



##### 



1 4
  Revolving
    Facility
    Canadian
    Term Loan Facility
    U.S. Term
    Loan Facility
    1 2
    Senior
    Bridge Loan
   57




---



##### 



Senior
    Subordinated Bridge Loan
    Interest
    Expense
    Derivatives
         58




---



##### 



Capital
    Expenditures
    Contractual
    Obligations and Other Commercial Commitments
    Contractual
    Obligations:
  Payments Due by PeriodLess than








More thanTotal


1 Year


1-3 Years


4-5 Years


5 YearsOperating
    leases(1)

$
32,765


$
8,589


$
14,624


$
7,573


$
1,979Unconditional purchase
    obligations(2)


567,910



495,241



70,889



1,780



Liability to
    PSP(3)


9,306



9,306











Other long-term
    obligations(4)


30,541



16,138



14,403







Total contractual cash
    obligations(5)

$
640,522


$
529,274


$
99,916


$
9,353


$
1,979   Other
    Commercial Commitments:
  Total


Amount of Commitment Expiration Per PeriodAmounts


Less than








More thanCommitted


1 Year


1-3 Years


4-5 Years


5 YearsStandby letters of
    credit(6)

$
6,127


$
6,127


$



$



$
     (1)
    
    Represents future minimum payments
    under operating leases with initial or remaining terms of one
    year or more, net of sub-lease rentals of $0.7 million.(2)
    
    SS/L has entered into various
    purchase commitments with suppliers due to the long lead times
    required to produce purchased parts.(3)
    
    Represents the final equity
    true-up
    payment to PSP in connection with the Telesat Canada transaction.(4)
    
    Primarily represents vendor
    financing amounts owed to subcontractors and commitments under
    employment arrangements.(5)
    
    Does not include our commitment of
    approximately $54.2 million in connection with an agreement
    entered into between SS/L and ViaSat for the construction by
    SS/L for ViaSat of a high capacity broadband satellite called
    ViaSat-1 and our FIN 48 liabilities for uncertain tax
    positions of $68.0 million. On January 11, 2008, we
    entered into certain agreements (see Note 19 to the
    financial statements), pursuant to which we are investing in the
    Canadian coverage portion of the ViaSat-1 Satellite and granting
    to Telesat Canada an option to acquire our rights to the
    Canadian payload. Because the timing of future cash outflows
    associated with our FIN 48 liabilities for uncertain tax
    positions is highly uncertain, we are unable to make reasonably
    reliable estimates of the period of cash settlement with the
    respective taxing authorities.(6)
    
    Letters of credit have a maturity
    of one year and are renewed annually.  Net Cash
    Provided by (Used in) Operating Activities
  contracts-in-process
   59




---



##### 



Net Cash
    Provided By (Used in) Investing Activities
        Net Cash
    Provided by (Used in) Financing Activities
        Other
    Affiliate
    Matters
   60




---



##### 



Successor Registrant



Predecessor RegistrantFor the Period



For the PeriodOctober 2,



January 1,Year Ended


2005 to



2005 toDecember 31,


December 31,



October 1,2007


2006


2005



2005(In millions)Revenues

$
22.0


$
11.3


$
4.1



$
10.0Elimination of Lorals proportionate share of (profits)
    losses relating to affiliate transactions


1.9



0.4



(2.9
)



0.6Profits (losses) relating to affiliate transactions not
    eliminated


(1.1
)


(0.3
)


2.3




(0.5
)   Commitments
    and Contingencies
    Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk  Foreign
    Currency
    Foreign Currency


U.S. $Future revenues  Japanese Yen

¥
84


$
0.7Future expenditures  Japanese Yen

¥
4,222


$
37.6Future expenditures  EUROs

E
3.7


$
5.5   Interest
      Item 8.
    Financial
    Statements and Supplementary Data  page F-1.
  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure   61




---



##### 



Item 9A.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e) Form 10-K
  Managements
    Report on Internal Control Over Financial Reporting
  Rule 13a-15(f) Internal Control  Integrated Framework Internal Control  Integrated Framework
    Changes
    in Internal Controls Over Financial Reporting
     62




---



##### 



Inherent
    Limitations on Effectiveness of Controls
   63




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      Internal Control 
    Integrated Framework
           64




---



##### 



Internal Control  Integrated Framework
    DELOITTE &
    TOUCHE LLP
    65




---



##### 



Item 9B.
    Other
    Information    PART III
  Item 10.
    Directors
    and Executive Officers of the Registrant  Executive
    Officers of the Registrant
    Name

Age

PositionMichael B. Targoff


63


Chief Executive Officer since March 1, 2006, President since
    January 2008 and Vice Chairman of the Board of Directors since
    November 2005. Prior to that, founder of Michael B. Targoff
    & Co.C. Patrick DeWitt


61


Senior Vice President since January 2008. Vice President from
    November 2005 to January 2008. Vice President of Old Loral from
    January 2002 to November 2005. Chief Executive Officer of SS/L
    since June 2006. President of SS/L from November 2001 to June
    2006.Avi Katz


49


Senior Vice President, General Counsel and Secretary since
    January 2008. Vice President, General Counsel and Secretary from
    November 2005 to January 2008. Vice President, General Counsel
    and Secretary of Old Loral from November 1999 to November 2005.Richard P. Mastoloni


43


Senior Vice President of Finance and Treasurer since January
    2008.  Vice President and Treasurer from November 2005 to
    January 2008. Vice President and Treasurer of Old Loral from
    February 2002 to November 2005. Vice President of Old Loral from
    September 2001 to February 2002.Harvey B. Rein


54


Senior Vice President and Chief Financial Officer since January
    2008. Vice President and Controller from November 2005 to
    January 2008. Vice President and Controller of Old Loral from
    April 1996 to November 2005.John Capogrossi


54


Vice President and Controller since January 2008. Executive
    Director, Financial Planning and Analysis, from October 2006 to
    January 2008. Assistant Controller from November 2005 to October
    2006. Assistant Controller of Old Loral from January 2001 to
    November 2005.       Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters   66




---



##### 



Item 13.
    Certain
    Relationships and Related Transactions    Item 14.
    Principal
    Accountant Fees and Services    
  PART IV
  Item 15.
    Exhibits
    and Financial Statement Schedules    Index to Financial Statements and Financial
    Statement Schedule


F-1Loral Space & Communications Inc. and
    Subsidiaries:Report of Independent Registered Public
    Accounting Firm


F-2Consolidated Balance Sheets as of
    December 31, 2007 and 2006


F-4Consolidated Statements of Operations for the
    years ended December 31, 2007, and 2006 and the periods
    October 2, 2005 to December 31, 2005 (Successor
    Registrant) and January 1, 2005 to October 1, 2005
    (Predecessor Registrant)


F-5Consolidated Statements of Shareholders
    Equity for the years ended December 31, 2007, and 2006 and
    the periods October 2, 2005 to December 31, 2005
    (Successor Registrant) and January 1, 2005 to
    October 1, 2005 (Predecessor Registrant)


F-6Consolidated Statements of Cash Flows for the
    years ended December 31, 2007, and 2006 and the periods
    October 2, 2005 to December 31, 2005 (Successor
    Registrant) and January 1, 2005 to October 1, 2005
    (Predecessor Registrant)


F-7Notes to Consolidated Financial Statements


F-8(a) 2. Financial Statement SchedulesSchedule II


F-76Separate Financial Statements of Subsidiaries not consolidated
    Pursuant to
    Rule 3-09
    of
    Regulation S-XTelesat Holdings Inc. and Subsidiaries:Report of Independent Registered Accountants


F-77Consolidated Statement of Earnings for the period
    October 31, 2007 to December 31, 2007


F-78Consolidated Statement of Comprehensive Loss for
    the period October 31, 2007 to December 31, 2007


F-79Consolidated Statement of Shareholders
    Equity for the period October 31, 2007 to December 31,
    2007


F-80Consolidated Balance Sheet as of
    December 31, 2007


F-81Consolidated Statement of Cash Flow for the
    period October 31, 2007 to December 31, 2007


F-82Notes to Consolidated Financial Statements


F-83   67




---



##### 



INDEX TO
    EXHIBITS
  ExhibitNumber

Description2
.1

Debtors Fourth Amended Joint Plan of Reorganization Under
    Chapter 11 of the Bankruptcy Code dated June 3, 2005(2)2
.2

Modification to Debtors Fourth Amended Plan of
    Reorganization Under Chapter 11 of the Bankruptcy Code
    dated August 1, 2005(3)2
.3

Letter Agreement among Loral Space & Communications
    Inc., Loral Skynet Corporation, Public Sector Pension Investment
    Board, 4363205 Canada Inc. and 4363213 Canada Inc. dated
    December 14, 2006(9)2
.4

Share Purchase Agreement among 4363213 Canada Inc., BCE Inc. and
    Telesat Canada dated December 16, 2006(9)2
.5

Letter Agreement among Loral Space & Communications
    Inc., Public Sector Pension Investment Board and BCE Inc. dated
    December 16, 2006(9)2
.6

Asset Transfer Agreement, dated as of August 7, 2007, by
    and among 4363205 Canada Inc., Loral Skynet Corporation and
    Loral Space & Communications Inc.(15)2
.7

Amendment No. 1 to Asset Transfer Agreement, dated as of
    September 24, 2007, by and among 4363205 Canada Inc., Loral
    Skynet Corporation and Loral Space & Communications
    Inc.(18)2
.8

Asset Purchase Agreement, dated as of August 7, 2007, by
    and among Loral Skynet Corporation, Skynet Satellite Corporation
    and Loral Space & Communications Inc.(15)3
.1

Restated Certificate of Incorporation of Loral Space &
    Communications Inc. dated November 21, 2005(4)3
.2

Loral Space & Communications Inc. Amended and Restated
    Bylaws dated December 17, 2007(20)4
.1

Certificate of Designation of
    Series A-1
    Cumulative 7.50% Convertible Preferred Stock and
    Series A-2
    Convertible Preferred Stock of Loral Space &
    Communications Inc.(10)4
.2

Certificate of Designation of
    Series B-1
    Cumulative 7.50% Convertible Preferred Stock and
    Series B-2
    Convertible Preferred Stock of Loral Space &
    Communications Inc.(10)10
.1

Consent Agreement among the United States Department of State,
    Loral Space & Communications Ltd. and Space
    Systems/Loral, Inc. dated January 9, 2002(1)10
.2

Amended and Restated Letter of Credit Reimbursement Agreement
    between Space Systems/Loral, Inc. and JP Morgan Chase Bank, N.A.
    dated November 21, 2005(4)10
.3

Amended and Restated Cash Collateral Agreement dated
    November 21, 2005(4)10
.4

Amended and Restated Customer Credit Agreement, dated as of
    July 30, 2007, by and between Sirius Satellite Radio Inc.
    and Space Systems/Loral, Inc.(14)10
.5

Ancillary Agreement, dated as of August 7, 2007, by and
    among Loral Space & Communications Inc., Loral Skynet
    Corporation, Public Sector Pension Investment Board, 4363205
    Canada Inc. and 4363230 Canada Inc.(15)10
.6

Adjustment Agreement, dated as of October 29, 2007, between
    Telesat Interco Inc. (formerly 4363213 Canada Inc.), BCE Inc.
    and Telesat Canada(19)10
.7

Omnibus Agreement, dated as of October 30, 2007, by and
    among Loral Space & Communications Inc., Loral Skynet
    Corporation, Public Sector Pension Investment Board, Red Isle
    Private Investments Inc. and Telesat Holdings Inc. (formerly
    4363205 Canada Inc.)(19)10
.8

Shareholders Agreement, dated as of October 31, 2007,
    between Public Sector Pension Investment Board, Red Isle Private
    Investments Inc., Loral Space & Communications Inc.,
    Loral Space & Communications Holdings Corporation,
    Loral Holdings Corporation, Loral Skynet Corporation, John P.
    Cashman, Colin D. Watson, Telesat Holdings Inc. (formerly
    4363205 Canada Inc.), Telesat Interco Inc. (formerly 4363213
    Canada Inc.), Telesat Canada and MHR Fund Management LLC(19)10
.9

Consulting Services Agreement, dated as of October 31,
    2007, by and between Loral Space & Communications Inc.
    and Telesat Canada(19)10
.10

Indemnity Agreement, dated as of October 31, 2007, by and
    among Loral Space & Communications Inc., Telesat
    Canada, Telesat Holdings Inc., Telesat Interco Inc. and Henry
    Gerard (Hank) Intven(19) 68




---



##### 



ExhibitNumber

Description10
.11

Acknowledgement and Indemnity Agreement, dated as of
    October 31, 2007, between Loral Space &
    Communications Inc., Telesat Canada, Telesat Holdings Inc.
    (formerly 4363205 Canada Inc.), Telesat Interco Inc. (formerly
    4363213 Canada Inc.) and McCarthy Tétrault LLP(19)10
.12

Securities Purchase Agreement dated October 17, 2006, as
    amended and restated on February 27, 2007, by and between
    Loral Space & Communications Inc. and MHR
    Fund Management LLC(10)10
.13

Amended and Restated Registration Rights Agreement dated
    February 27, 2007 by and among Loral Space &
    Communications Inc., Loral Skynet Corporation and the Persons
    Affiliated with MHR Fund Management LLC Listed on the
    Signature Pages Thereof(10)10
.14

Memorandum of Understanding, dated March 21, 2007 relating
    to Babus v. Targoff, et al.(11)10
.15

Letter Agreement dated April 25, 2007 between Loral
    Space & Communications Inc. and MHR
    Fund Management LLC(12)10
.16

Letter Agreement dated August 8, 2007 between Loral
    Space & Communications Inc. and MHR
    Fund Management LLC(16)10
.17

Letter Agreement, dated August 29, 2007, by and among Loral
    Space & Communications, Inc. and the holders of the
    outstanding Series A Cumulative 7.50% Convertible
    Preferred Stock and Series B Cumulative
    7.50% Convertible Preferred Stock of Loral
    Space & Communications Inc.(17)10
.18

Letter Agreement dated April 28, 2008 between Loral
    Space & Communications Inc. and MHR
    Fund Management LLC10
.19

Partnership Interest Purchase Agreement dated December 21,
    2007 by and among GSSI, LLC, Globalstar, Inc., Loral/DASA
    Globalstar, LP, Globalstar do Brasil, SA., Loral/DASA do Brasil
    Holdings Ltda., Loral Holdings LLC, Global DASA LLC, LGP
    (Bermuda) Ltd., Mercedes-Benz do Brasil Ltda. (f/k/a
    DaimlerChrysler do Brasil Ltda.) and Loral Space &
    Communications Inc.(20)10
.20

Beam Sharing Agreement, dated as of January 11, 2008, by
    and between Loral Space & Communications Inc. and
    ViaSat Inc.(22)10
.21

Option Agreement, dated as of January 11, 2008, by and
    between Loral Space & Communications Inc. and Telesat
    Canada(22)10
.22

Employment Agreement between Loral Space &
    Communications Inc. and Michael B. Targoff dated March 28,
    2006(5)10
.23

Form of Officers and Directors Indemnification
    Agreement between Loral Space & Communications Inc.
    and Loral Executives(4)10
.24

Officers and Directors Indemnification Agreement
    between Space Systems/Loral, Inc. and C. Patrick DeWitt dated
    November 21, 2005(4)10
.25

Loral Space & Communications Inc. 2005 Stock Incentive
    Plan (Amended and Restated as of April 16, 2007) (13)10
.26

Form of Non-Qualified Stock Option Agreement under Loral
    Space & Communications Inc. 2005 Stock Incentive Plan
    for Senior Management(4)10
.27

Non-Qualified Stock Option Agreement under Loral
    Space & Communications Inc. 2005 Stock Incentive Plan
    between Loral Space & Communications Inc. and Michael
    B. Targoff dated March 28, 2006(5)10
.28

Non Qualified Stock Option Agreement under Loral
    Space & Communications Inc. 2005 Stock Incentive Plan
    between Loral Space & Communications Inc. and Richard
    J. Townsend dated June 19, 2006(7)10
.29

Form of Director 2006 Restricted Stock Agreement (13)10
.30

Form of Director 2007 Restricted Stock Agreement (13)10
.31

Form of Employee Restricted Stock Agreement (13)10
.32

Space Systems/Loral, Inc. Supplemental Executive Retirement Plan
    dated January 7, 2003(5)10
.33

Amendment to the Space Systems/Loral, Inc. Supplemental
    Executive Retirement Plan dated November 21, 2005(4)10
.34

Loral Space & Communications Inc. Severance Policy for
    Corporate Officers(6)10
.35

General Release and Separation Agreement dated January 4,
    2008 between Loral Space & Communications Inc. and
    Richard J. Townsend (21)  69




---



##### 



ExhibitNumber

Description10
.36

Letter dated March 28, 2008 to Richard J. Townsend(23)10
.37

General Release and Separation Agreement dated January 10,
    2008 between Loral Space & Communications Inc. and
    Dean A. Olmstead (22) 10
.38

General Release and Separation Agreement dated January 11,
    2008 between Loral Space & Communications Inc. and
    Eric J. Zahler (22) 10
.39

Consulting Agreement dated January 4, 2008 between Loral
    Space & Communications Inc. and Richard J. Townsend
    (21) 12
.1

Statement Re: Computation of Ratios14
.1

Code of Conduct, Revised as of August 1, 2006(8)21
.1

List of Subsidiaries of the Registrant23
.1

Consent of Deloitte & Touche LLP23
.2

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99
.1

Credit Agreement, dated as of October 31, 2007, among
    Telesat Interco Inc. (formerly 4363213 Canada Inc.), Telesat
    Holdings Inc. (formerly 4363205 Canada Inc.), 4363230 Canada
    Inc., Telesat LLC, certain subsidiaries of Telesat Holdings
    Inc., as guarantors, the lenders party thereto from time to
    time, Morgan Stanley Senior Funding, Inc., as administrative
    agent, and Morgan Stanley & Co. Incorporated, as
    collateral agent for the lenders, UBS Securities LLC, as
    syndication agent, JPMorgan Chase Bank, N.A., The Bank of Nova
    Scotia, as issuing bank, and Citibank, N.A., Canadian Branch or
    any of its lending affiliates, as co-documentation agents, and
    Morgan Stanley & Co. Incorporated, UBS Securities LLC
    and J.P. Morgan Securities Inc., as joint lead arrangers
    and joint book running managers(19)99
.2

Senior Bridge Loan Agreement, dated as of October 31, 2007,
    among Telesat Interco Inc. (formerly 4363213 Canada Inc.),
    Telesat Holdings Inc. (formerly 4363205 Canada Inc.), 4363230
    Canada Inc., Telesat LLC, certain subsidiaries of Telesat
    Holdings Inc., as guarantors, the lenders party thereto from
    time to time, Morgan Stanley Senior Funding, Inc., as
    administrative agent for the lenders, UBS Securities LLC, as
    syndication agent, JPMorgan Chase Bank, N.A., The Bank of Nova
    Scotia and Jefferies Finance LLC, as co-documentation agents,
    and Morgan Stanley & Co. Incorporated, UBS Securities
    LLC and J.P. Morgan Securities Inc., as joint lead
    arrangers and joint book running managers(19)99
.3

Senior Subordinated Bridge Loan Agreement, dated as of
    October 31, 2007, among Telesat Interco Inc. (formerly
    4363213 Canada Inc.), Telesat Holdings Inc. (formerly 4363205
    Canada Inc.), 4363230 Canada Inc., Telesat LLC, certain
    subsidiaries of Telesat Holdings Inc., as guarantors, the
    lenders party thereto from time to time, Morgan Stanley Senior
    Funding, Inc., as administrative agent for the lenders, UBS
    Securities LLC, as syndication agent, JPMorgan Chase Bank, N.A.,
    The Bank of Nova Scotia and Jefferies Finance LLC, as
    co-documentation agents, and Morgan Stanley & Co.
    Incorporated, UBS Securities LLC and J.P. Morgan Securities
    Inc., as joint lead arrangers and joint book running managers(19)99
.4

Articles of Incorporation of Telesat Holdings Inc. (formerly
    4363205 Canada Inc.)(19)99
.5

By-Law No. 1 of Telesat Holdings Inc. (formerly 4363205
    Canada Inc.)(19)99
.6

Letter Agreement dated March 28, 2008 among Loral
    Space & Communications Inc., Loral Skynet Corporation,
    Public Sector Pension Investment Board, Red Isle Private
    Investment Inc. and Telesat Holdings Inc.(23)     (1)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on January 9, 2002. 70




---



##### 



(2)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on June 8, 2005.(3)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on August 5, 2005.(4)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on November 23, 2005.(5)
    
    Incorporated by reference from the Companys Annual Report
    on
    Form 10-K
    for the fiscal year ended December 31, 2005.(6)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on June 20, 2006.(7)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K/A
    filed by the Company on June 26, 2006.(8)
    
    Incorporated by reference from the Companys Current
    Quarterly Report on
    Form 10-Q
    filed on August 8, 2006.(9)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on December 21, 2006.(10)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on February 28, 2007.(11)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on March 21, 2007.(12)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 10-Q
    filed on May 10, 2007.(13)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on May 29, 2007.(14)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on August 2, 2007.(15)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on August 9, 2007.(16)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 10-Q
    filed on August 9, 2007.(17)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on August 31, 2007.(18)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on September 27, 2007.(19)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on November 2, 2007.(20)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed December 21, 2007.(21)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on January 10, 2008.(22)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on January 16, 2008.(23)
    
    Incorporated by reference from the Companys Current Report
    on
    Form 8-K
    filed on March 31, 2008.
    
    Filed herewith.
    
    Management compensation plan. 71




---



##### 



SIGNATURES
      By:
    /s/  MICHAEL
    B. TARGOFF         Signatures

Title

Date/s/  MICHAEL
    B. TARGOFFMichael
    B. Targoff

Vice Chairman of the Board, Chief
    Executive Officer and President

April 29, 2008/s/  MARK
    H. RACHESKY, M.D.Mark
    H. Rachesky, M.D.

Director, Non-Executive Chairman of the Board

April 29, 2008/s/  SAI
    S. DEVABHAKTUNISai
    S. Devabhaktuni

Director

April 29, 2008/s/  HAL
    GOLDSTEINHal
    Goldstein

Director

April 29, 2008/s/  JOHN
    D. HARKEY, JR.John
    D. Harkey, Jr.

Director

April 29, 2008/s/  ARTHUR
    L. SIMONArthur
    L. Simon

Director

April 29, 2008/s/  JOHN
    P. STENBITJohn
    P. Stenbit

Director

April 29, 2008/s/  HARVEY
    B. REINHarvey
    B. Rein

Senior Vice President and CFO 
    (Principal Financial Officer)

April 29, 2008/s/  JOHN
    CAPOGROSSIJohn
    Capogrossi

Vice President and Controller 
    (Principal Accounting Officer)

April 29, 2008  72




---



##### 



INDEX TO
    FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES  Loral Space & Communications Inc. and
    SubsidiariesReport of Independent Registered Public Accounting Firm


F-2Consolidated Balance Sheets as of December 31, 2007 and 2006


F-4Consolidated Statements of Operations for the years ended
    December 31, 2007 and 2006 and for the periods
    October 2, 2005 to December 31, 2005 (Successor
    Registrant) and January 1, 2005 to October 1, 2005
    (Predecessor Registrant)


F-5Consolidated Statements of Shareholders Equity for the
    years ended December 31, 2007 and 2006 and for the periods
    October 2, 2005 to December 31, 2005 (Successor
    Registrant) and January 1, 2005 to October 1, 2005
    (Predecessor Registrant)


F-6Consolidated Statements of Cash Flows for the years ended
    December 31, 2007 and 2006 and for the periods
    October 2, 2005 to December 31, 2005 (Successor
    Registrant) and January 1, 2005 to October 1, 2005
    (Predecessor Registrant)


F-7Notes to Consolidated Financial Statements


F-8Schedule II


F-76Separate Financial Statements of Subsidiaries not consolidated
    Pursuant to
    Rule 3-09
    of
    Regulation S-XTelesat Holdings Inc. and Subsidiaries:Report of Independent Registered Accountants


F-77Consolidated Statement of Earnings for the period
    October 31, 2007 to December 31, 2007


F-78Consolidated Statement of Comprehensive Loss for the period
    October 31, 2007 to December 31, 2007


F-79Consolidated Statement of Shareholders Equity for the
    period October 31, 2007 to December 31, 2007


F-80Consolidated Balance Sheet as of December 31, 2007


F-81Consolidated Statement of Cash Flow for the period
    October 31, 2007 to December 31, 2007


F-82Notes to Consolidated Financial Statements


F-83   F-1




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM            90-7, Financial Reporting by Entities in Reorganization Under the
    Bankruptcy Code,
  Accounting for
    Uncertainty in Income Taxes, an interpretation of FASB
    No. 109.
  Employers Accounting
    for Defined Benefit Pension and other Postretirement Plans.
  Share-Based Payment
 F-2




---



##### 



Internal Control  Integrated Framework
  DELOITTE &
    TOUCHE LLP
    F-3




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.CONSOLIDATED BALANCE SHEETS 
    (in thousands, except share data)
  December 31,2007


2006ASSETSCurrent assets:Cash and cash equivalents

$
314,694


$
186,542Short-term investments






106,588Accounts receivable, net






76,420Contracts-in-process


109,376



40,433Inventories


96,968



82,183Other current assets


48,850



55,534Total current assets


569,888



547,700Property, plant and equipment, net


147,828



558,879Long-term receivables


132,400



81,164Investments in affiliates


566,196



97,202Goodwill


227,058



305,691Intangible assets, net


42,854



111,749Other assets


16,715



27,526Total assets

$
1,702,939


$
1,729,911LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
69,205


$
67,604Accrued employment costs


42,890



43,797Customer advances and billings in excess of costs and profits


251,954



242,661Income taxes payable


31,239



2,567Accrued interest and preferred dividends


4,979



20,097Other current liabilities


39,512



42,828Total current liabilities


439,779



419,554Pension and other postretirement liabilities


152,341



167,987Long-term debt






128,084Long-term liabilities


137,261



153,028Total liabilities


729,381



868,653Minority interest






214,256Commitments and contingenciesShareholders equity:Series A-1
    Cumulative 7.5% convertible preferred stock, $0.01 par
    value 2,200,000 shares authorized, 141,953 shares
    issued and outstanding in 2007


41,873



Series B-1
    Cumulative 7.5% convertible preferred stock, $0.01 par
    value 2,000,000 shares authorized, 900,821 shares
    issued and outstanding in 2007


265,777



Common stock, $.01 par value; 40,000,000 shares
    authorized, 20,292,746 and 20,000,000 shares issued and
    outstanding


203



200Paid-in capital


663,127



644,708Accumulated deficit


(33,939
)


(37,981
)Accumulated other comprehensive income


36,517



40,075Total shareholders equity


973,558



647,002Total liabilities and shareholders equity

$
1,702,939


$
1,729,911    F-4




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.CONSOLIDATED STATEMENTS OF OPERATIONS 
    (in thousands, except per share amounts)
  PredecessorSuccessor Registrant



RegistrantFor the Period



For the PeriodOctober 2,



January 1,Year Ended


Year Ended


2005 to



2005 toDecember 31,


December 31,


December 31,



October 1,2007


2006


2005



2005Revenues from satellite manufacturing

$
761,363


$
636,632


$
161,069



$
318,587Revenues from satellite services


121,091



160,701



36,096




110,596Total revenues


882,454



797,333



197,165




429,183Cost of satellite manufacturing


688,991



550,821



138,882




291,454Cost of satellite services


86,213



98,614



26,386




94,169Selling, general and administrative expenses


166,936



127,080



36,842




79,419Gain on contribution of Loral Skynet


(104,942
)











Gain on litigation settlement






(9,000
)







Operating income (loss) from continuing operations before
    reorganization expenses due to bankruptcy


45,256



29,818



(4,945
)



(35,859
)Reorganization expenses due to bankruptcy















(31,236
)Operating income (loss) from continuing operations


45,256



29,818



(4,945
)



(67,095
)Gain on discharge of pre-petition obligations and fresh-start
    adjustments















1,101,453Interest and investment income


39,279



31,526



4,128




6,438Interest expense (contractual interest was $36,610 for the
    period ended October 1, 2005)


(2,312
)


(23,449
)


(4,408
)



(17,214
)Gain (loss) on foreign exchange contracts


89,364



(5,750
)







Loss on extinguishment of debt


(16,155
)Other income (expense)


2,354



(2,028
)


(170
)



(931
)Income (loss) from continuing operations before income taxes,
    equity in net losses of affiliates and minority interest


157,786



30,117



(5,395
)



1,022,651Income tax (provision) benefit


(83,457
)


(20,880
)


(1,752
)



10,901Income (loss) from continuing operations before equity in net
    losses of affiliates and minority interest


74,329



9,237



(7,147
)



1,033,552Equity in net losses of affiliates


(21,430
)


(7,163
)


(5,447
)



(2,796
)Minority interest


(23,240
)


(24,794
)


(2,667
)



126Income (loss) from continuing operations


29,659



(22,720
)


(15,261
)



1,030,882Gain on sale of discontinued operations, net of taxes















13,967Net income (loss)


29,659


$
(22,720
)

$
(15,261
)


$
1,044,849Preferred dividends


(19,379
)











Beneficial conversion feature related to the issuance of Loral
    Series A-1
    Preferred Stock


(25,685
)











Net (loss) income applicable to common shareholders

$
(15,405
)

$
(22,720
)

$
(15,261
)


$
1,044,849Basic and diluted earnings (loss) per share:Continuing operations

$
(0.77
)

$
(1.14
)

$
(0.76
)


$
23.37Discontinued operations















0.32(Loss) earnings per share

$
(0.77
)

$
(1.14
)

$
(0.76
)


$
23.69Weighted average shares outstanding:Basic and diluted


20,087



20,000



20,000




44,108    F-5




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.CONSOLIDATED STATEMENTS OF SHAREHOLDERS
    EQUITY 
    (in thousands)


Series A-1

Series B-1













AccumulatedConvertible

Convertible













Other

TotalPreferred Stock

Preferred Stock

Common Stock





Unearned



Comprehensive

ShareholdersShares



Shares



Shares



Paid-In

Treasury

Compen-

Accumulated

Income

(Deficit)Issued

Amount

Issued

Amount

Issued

Amount

Capital

Stock

sation

Deficit

(Loss)

EquityPredecessor RegistrantBalance, January 1, 2005


















44,125


$
4,413


$
3,392,825


$
(3,360
)

$
(87
)

$
(4,348,231
)

$
(89,661
)

$
(1,044,101
)Amortization of unearned compensation


































60











60Net income






































1,044,849Other comprehensive loss










































(808
)Comprehensive income














































1,044,041Cancellation of Predecessor Registrant common stock


















(44,125
)


(4,413
)


4,413



















Issuance of common stock to creditors


















20,000



200



642,068



















642,268Fresh-start adjustment


























(3,397,238
)


3,360



27



3,303,382



90,469



Balance, October 1, 2005


















20,000



200



642,068



















642,268Successor RegistrantNet loss






































(15,261
)Other comprehensive income










































15Comprehensive loss














































(15,246
)Stock option compensation


























142



















142Balance, December 31, 2005


















20,000



200



642,210











(15,261
)


15



627,164Adjustment to initially apply SFAS 158, net of tax, as
    restated










































29,951



29,951Net loss






































(22,720
)Other comprehensive income, as restated










































10,109Comprehensive loss, as restated














































(12,611
)Stock based compensation


























2,498



















2,498Balance, December 31, 2006


















20,000



200



644,708











(37,981
)


40,075



647,002Cumulative effect related to adoption of FIN48






































(6,238
)






(6,238
)Net income






































29,659Other comprehensive income










































(3,558
)Comprehensive income














































26,101Issuance of
    Series A-1
    preferred stock


137


$
40,237



















(1,218
)


















39,019Issuance of
    Series B-1
    preferred stock










859


$
253,013











(7,646
)


















245,367Issuance of
    Series A-1
    preferred stock as payment for dividend


5



1,636







































1,636Issuance of
    Series B-1
    preferred stock as payment for dividend










42



12,764































12,764Exercise of stock options


















108



1



1,920



















1,921Restricted shares surrendered to fund withholding taxes


















(20
)






(982
)


















(982
)Stock based compensation


















205



2



26,345



















26,347Preferred stock dividends






































(19,379
)






(19,379
)Balance, December 31, 2007


142


$
41,873



901


$
265,777



20,293


$
203


$
663,127


$



$



$
(33,939
)

$
36,517


$
973,558    F-6




---



##### 





LORAL
    SPACE & COMMUNICATIONS INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
 (in
    thousands)
 PredecessorSuccessor Registrant



RegistrantYear Ended


Year Ended


For the Period



For the PeriodDecember 31,


December 31,


October 2, 2005 to



January 1, 2005 to2007


2006


December 31, 2005



October 1, 2005Operating activities:Net income (loss)

$
29,659


$
(22,720
)

$
(15,261
)


$
1,044,849Adjustments to reconcile net income (loss) to net cash provided
    by (used in) operating activities:Non-cash items


(35,971
)


108,584



29,366




(1,051,330
)Changes in operating assets and liabilities:Accounts receivable


64,828



(9,129
)


1,855




557Contracts-in-process


(60,884
)


5,551



42,459




(76,464
)Inventories


(15,872
)


(31,990
)


(7,899
)



(10,212
)Long-term receivables


(266
)


(2,214
)


(13,833
)



(22,361
)Deposits






9,085



(35
)



Other current assets and other assets


6,369



(1,121
)


(9,914
)



11,981Accounts payable


6,041



(12,812
)


(13,250
)



(1,285
)Accrued expenses and other current liabilities


15,866



17,756



(64,039
)



21,573Customer advances


(17,751
)


50,634



5,739




(62,212
)Income taxes payable


28,719



391



1,389




3,079Pension and other postretirement liabilities


8,663



(20,453
)


3,077




(3,650
)Long-term liabilities


(2,282
)


(3,725
)


335




1,844Other


4



165



1,480




(196
)Net cash provided by (used in) operating activities


27,123



88,002



(38,531
)



(143,827
)Investing activities:Capital expenditures


(95,761
)


(82,157
)


(4,972
)



(4,649
)(Increase) decrease in restricted cash in escrow


(19,709
)


(323
)


(54
)



1,566Insurance proceeds received















205,000Proceeds received for the contribution of Loral Skynet net of
    cash contributed


57,591












Proceeds received from disposition of orbital slot






5,742








Proceeds from the sale of assets, net of expenses















144Distribution from an equity investment


2,955



250








Proceeds from the sale of short-term investments and
    available-for-sale securities


468,571



7,098








Purchase of short-term investments


(350,895
)


(106,588
)







Investments in and advances to affiliates


(1,233
)






(63
)



(7,354
)Net cash provided by (used in) investing activities


61,519



(175,978
)


(5,089
)



194,707Financing activities:Proceeds from term loan (Loral Skynet Notes refinancing facility)


141,050












Repayment of Loral Skynet Notes


(126,000
)











10% redemption fee on extinguishment of Loral Skynet Notes


(12,600
)











Preferred stock issuance costs


(8,864
)











Proceeds from the sale of Series-1 preferred stock


293,250












Redemption of Loral Skynet Preferred Stock


(237,599
)











Proceeds from the exercise of stock options


2,097Proceeds from Loral Skynet Notes










120,763




Cash dividends paid on Loral Skynet Preferred Stock


(11,824
)


(1,278
)







Net cash provided by (used in) financing activities


39,510



(1,278
)


120,763




Increase (decrease) in cash and cash equivalents


128,152



(89,254
)


77,143




50,880Cash and cash equivalents  beginning of period


186,542



275,796



198,653




147,773Cash and cash equivalents  end of period

$
314,694


$
186,542


$
275,796



$
198,653    F-7




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Organization
    and Principal Business        Satellite
    Manufacturing:
    Satellite
    Services:
    1 3
  and/or
 F-8




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2.
    Bankruptcy
    Filings and Reorganization  No. 03-41710 03-41709 03-41728
      
    20 million shares of New Loral common stock were issued to
    our distribution agent on the Effective Date, 19.9 million
    of which have been distributed to creditors as of
    December 31, 2007. The remaining undistributed shares of
    New Loral common stock have been reserved to cover disputed
    claims and will be distributed quarterly in accordance with the
    Plan of Reorganization upon resolution of those claims.
    $200 million of Loral Skynet preferred stock was issued to
    our distribution agent on the Effective Date,
    $199.2 million of which has been distributed to creditors.
    This preferred stock was redeemed in connection with the Telesat
    Canada transaction. As for the remaining $0.8 million that
    had not been distributed as of the redemption date, upon
    resolution of disputed claims, the redemption amount plus
    accrued interest through the redemption date corresponding to
    such undistributed shares will be distributed to creditors in
    accordance with the Plan of Reorganization.
    Pursuant to a rights offering, Loral Skynet issued on the
    Effective Date, $126 million, principal amount, of senior
    secured notes (the Loral Skynet Notes, see
    Note 10) to certain creditors who subscribed for the
    notes and to certain creditors who committed to purchase any
    unsubscribed notes (i.e., backstopped the offering).
    These notes were redeemed in connection with the Telesat Canada
    transaction.  3.
    Basis of
    Presentation    No. 90-7, Financial Reporting of Entities in Reorganization Under the
    Bankruptcy Code (SOP 90-7)
 F-9




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    SOP 90-7, Minority Interest Business Combinations
    Use of
    Estimates in Preparation of Financial Statements
      Cash and
    Cash Equivalents, Short-term Investments and Available for sale
    securities
   F-10




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Concentration
    of Credit Risk
  contracts-in-process,
  Receivables
    Inventories
  contracts-in-process, first-in-first-out
  Property,
    Plant and Equipment
    YearsLand improvements


20Buildings and building improvements


10 to 45Leasehold improvements


2 to 17Equipment, furniture and fixtures


5 to 10    F-11




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Valuation
    of Satellites and Long-Lived Assets
  Accounting for the Impairment or Disposal of Long-lived
    Assets
  Goodwill
    and Other Intangible Assets
  Goodwill and Other
    Intangible Assets
  build-up build-up
  Contingencies
   F-12




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Revenue
    Recognition
  Satellite
    Manufacturing
  81-1, Accounting for Performance of Construction-Type and Certain
    Production-Type Contracts
      contracts-in-process
  Loral
    Skynet
       F-13




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Research
    and Development
    Derivative
    Instruments
  Accounting for Derivative
    Instruments and Hedging Activities
  Minority
    Interest
      Stock-Based
    Compensation
  Share-Based Payment No. 96-18, Accounting for Equity Instruments That Are Issued to Other
    Than Employees for Acquiring, or in Conjunction with Selling,
    Goods or Services (EITF 96-18).
   F-14




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Share-Based Payment
  Accounting for
    Stock-Based Compensation-Transition and Disclosure Accounting for Stock-Based
    Compensation Accounting for Stock Issued to
    Employees
  Deferred
    Compensation
    Income
    Taxes
    paid-in-capital
  Accounting for Uncertainty in Income Taxes, an
    interpretation of FASB Statement No. 109
 F-15




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     F-16




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Additional
    Cash Flow Information
    PredecessorSuccessor Registrant



RegistrantFor the Period



For the PeriodOctober 2,



January 1,Year Ended


Year Ended


2005 to



2005 toDecember 31,


December 31,


December 31,



October 1,2007


2006


2005



2005Non-cash operating items:Gain on contribution of Loral Skynet

$
(104,942
)

$



$




$
Gain on discharge of pre-petition obligations and fresh-start
    adjustments















(1,101,453)Gain on sale of discontinued operations, net of tax















(13,967)Equity in net losses of affiliates


21,430



7,163



5,447




2,796Satmex settlement






(18,605
)







Minority interest


23,240



24,794



2,667




(126)Deferred taxes


32,205



9,105








(16,134)Depreciation and amortization


76,910



68,300



16,024




61,277Stock based compensation


26,347



2,997








Impairment of cost basis investment






3,000








Provisions for inventory obsolescence


543



1,678



1,525




2,127Warranty expense accruals (accrual reversals)


(18,879
)


12,180



2,704




11,850(Recoveries of) provisions for bad debts on billed receivables


(1,917
)


356



953




(2,880)Adjustment to revenue straightlining assessment


(204
)






46




1,031Write-off of construction in process


2,164Loss on equipment disposals















3,456Loss on extinguishment of debt


16,155












Curtailment gain


(1,686
)











Amortization of prior service credit and actuarial gains


(3,285
)











Gain on disposition of an orbital slot


(3,600
)


(1,149
)







Gain on disposition of available for sale securities


(11,088
)


(7,098
)







Non-cash net interest and (gain) loss on foreign currency
    transactions and contracts


(89,364
)


5,863








693Net non-cash operating items

$
(35,971
)

$
108,584


$
29,366



$
(1,051,330) F-17




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  PredecessorSuccessor Registrant



RegistrantFor the Period



For the PeriodOctober 2,



January 1,Year Ended


Year Ended


2005 to



2005 toDecember 31,


December 31,


December 31,



October 1,2007


2006


2005



2005Non-cash financing activities:Issuance of Preferred stock by subsidiary as payment for dividend

$
23,343


$
14,260


$




$
Issuance of Loral Series-1 Preferred Stock as payment for
    dividend

$
14,400


$



$




$
Accrued dividend on
    Series A-1
    and
    Series B-1
    Preferred Stock

$
4,979


$



$




$
Increase in restricted cash related to debt proceeds

$



$



$




$
98,736Supplemental information:Interest paid

$
24,891


$
17,921


$
15,548



$
Taxes paid, net of refunds

$
5,292


$
6,365


$
(418
)


$
2,166Cash (paid) received for reorganization items:Professional fees

$
(160
)

$
(9,581
)

$
(9,650
)


$
(17,533)Employee retention costs









$
(4,790
)Restructuring costs





$
(740
)






$
(55)Interest income














$
2,536Vendor settlement





$
(432
)   New
    Accounting Pronouncements
  SFAS 157
  Fair Value Measurements
  SFAS 159
  The
    Fair Value Option for Financial Assets and Financial Liabilities
 F-18




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  SFAS 141R
  Business Combinations
  SFAS 160
  Non-controlling Interests in Consolidated Financial
    Statements  an amendment of ARB No. 51
  4.
    Fresh-Start
    Accounting  SOP 90-7
 F-19




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  CONDENSED
    CONSOLIDATED BALANCE
    SHEET(a)
  Predecessor


Plan


Fresh-Start


SuccessorOctober 1,


Reorganization


Valuation


October 1,2005


Adjustments


Adjustments(e)


2005(in millions)ASSETSCurrent assets:Cash and cash equivalents

$
198.7


$



$



$
198.7Accounts receivable, net


14.4











14.4Contracts-in-process


91.4







(14.3
)


77.1Inventories


45.5











45.5Other current assets


41.3



97.5
(b)


3.4



142.2Total current assets


391.3



97.5



(10.9
)


477.9Property, plant and equipment, net


536.5



(3.5
)(i)


0.2



533.2Long-term receivables


67.6







(23.8
)


43.8Investments in and advances to affiliates


53.7







56.3



110.0Deposits


9.8











9.8Goodwill










340.1
(g)


340.1Other assets


42.1



2.1
(b)(j)


126.7



170.9$
1,101.0


$
96.1


$
488.6


$
1,685.7LIABILITIES AND SHAREHOLDERS (DEFICIT) EQUITYCurrent liabilities:Accounts payable

$
36.1


$
45.1
(c)(h)

$
1.2


$
82.4Accrued employment costs


33.9



0.5
(c)






34.4Customer advances and billings in excess of costs and profits


108.4



24.9
(c)(h)


(3.2
)


130.1Interest payable






19.1
(c)(h)






19.1Vendor financing payable






37.1
(c)(h)






37.1Income taxes payable






0.8
(c)






0.8Other current liabilities


25.5



17.9
(c)(h)


(1.7
)


41.7Total current liabilities


203.9



145.4



(3.7
)


345.6Pension and other postretirement liabilities






156.6
(c)


78.2



234.8Long-term liabilities


84.5



34.6
(c)


40.5



159.6Long-term debt






103.4
(b)






103.4Total liabilities


288.4



440.0



115.0



843.4Liabilities subject to compromise


1,914.0



(1,914.0
)(c)






Minority interest


2.3



200.0
(b)


(2.3
)


200.0Shareholders equity:Common stock, par value $.01 and Paid-in capital


3,397.2



642.3
(d)


(3,397.2
)(f)


642.3Other


(93.8
)






93.8
(f)


Accumulated (deficit) retained earnings


(4,407.1
)


727.8
(c)(d)


3,679.3
(f)


Total shareholders (deficit) equity


(1,103.7
)


1,370.1



375.9



642.3$
1,101.0


$
96.1


$
488.6


$
1,685.7  F-20




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (a)
    
    The Condensed Consolidated Balance
    Sheet reflects a reorganization enterprise value of
    $970 million based on the Bankruptcy Courts
    determination (see Note 2), which, after reduction for the
    fair value of the Loral Skynet Notes and Loral Skynet Preferred
    Stock (see Notes 10 and 13), results in a reorganization
    equity value of approximately $642 million. This results in
    goodwill equal to the excess of reorganization equity value over
    fair value of identifiable net assets.(b)
    
    Reflects $98.7 million of
    proceeds from the rights offering of Loral Skynet Notes held in
    escrow as of October 1, 2005, and the related deferred debt
    issuance costs of $4.7 million and $200 million of
    Loral Skynet Preferred Stock issued pursuant to the Plan of
    Reorganization (see Notes 10 and 13).(c)
    
    Reflects the discharge of
    pre-petition liabilities in accordance with the Plan of
    Reorganization and the reclassification of the remaining
    liabilities subject to compromise to the appropriate liability
    accounts in accordance with the Plan of Reorganization.
    Discharge of Lorals pre-petition liabilities is summarized
    as follows (in millions):  Exchanged for stock

$
1,298.0Cancelled


292.2Reinstated and/or paid in cash


323.8$
1,914.0     (d)
    
    Reflects the issuance of New Loral
    common stock to pre-petition creditors and the gain on the
    discharge of liabilities subject to compromise.(e)
    
    Reflects changes to carrying values
    of assets and liabilities to reflect estimated fair values.(f)
    
    Reflects the revaluation gain and
    the elimination of the retained deficit and other equity
    balances.(g)
    
    Reflects goodwill equal to the
    excess of reorganization equity value over the estimated fair
    value of identifiable net assets.(h)
    
    Amounts payable upon emergence are
    included in current liabilities.(i)
    
    Reflects agreement to return
    certain fixed assets in settlement of certain pre-petition
    obligations.(j)
    
    Reflects elimination of deferred
    charges related to the Old Loral debt and preferred stock, which
    were discharged in accordance with the Plan of Reorganization.      Gain on discharge of pre-petition obligations

$
727.8Gain on fresh-start valuation adjustments


375.9Total gain on discharge of pre-petition obligations and
    fresh-start adjustments


1,103.7Add interest expense to holders of claims paid in cash


13.2Less tax benefit on Plan of Reorganization and fresh-start
    valuation adjustments


(15.4
)Total gain on discharge of pre-petition obligations and
    fresh-start adjustments excluding interest expense and income
    tax benefit

$
1,101.5    F-21




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  5.
    Accumulated
    Other Comprehensive Income (Loss)    Accumulated Other Comprehensive



Other Comprehensive Income (loss)Income (Loss)













PredecessorSuccessor Registrant



Successor Registrant



RegistrantFor the Period



For the PeriodOctober 2,



January 1,2005 to



2005 toDecember 31,



Year Ended December 31,


December 31,



October 1,2007


2006



2007


2006


2005



2005Cumulative translation adjustment

$
498


$
287



$
211


$
272


$
15



$
(222
)Derivatives classified as cash flow hedges, net of taxes:Reclassifications into revenues, cost of sales and income taxes
    from other comprehensive income
























(487
)Unrealized net gains (losses) on derivatives
























(487
)Unrealized gains (losses) on available-for-sale securities, net
    of taxes


6,987



9,837




(2,850
)


9,837








(99
)Reclassification adjustment for gains included in net income


(6,546
)







(6,546
)Pension actuarial gains and prior service credit, net of taxes


40,072








10,121Reclassification due to amortization and contribution of Loral
    Skynet


(4,494
)







(4,494
)











Adjustment to initially apply SFAS 158, net of tax






29,951Total

$
36,517


$
40,075



$
(3,558
)

$
10,109


$
15



$
(808
)     Employers Accounting for Defined Benefit
    Pension and Other Postretirement Plans Reporting Comprehensive
    Income
 F-22




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  6.
    Contracts-in-Process
    and Long-Term Receivables  Contracts-in-Process
  Contracts-in-Process
  December 31,2007


2006U.S. government contracts:Amounts billed

$
193


$
983Unbilled receivables


1,166



1,5441,359



2,527Commercial contracts:Amounts billed


60,355



17,306Unbilled receivables


47,662



20,600108,017



37,906$
109,376


$
40,433   contracts-in-process
  Long-Term
    Receivables
      Long-TermReceivables2008

$
2,2502009


2,6402010


8,1682011


10,3472012


9,853Thereafter


101,392134,650Less, current portion included in
    contracts-in-process


(2,250
)Long-term receivables

$
132,400   contracts-in-process,
 F-23




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  7.
    Property,
    Plant and Equipment (see Note 3)    December 31,2007


2006Land and land improvements

$
26,799


$
27,533Buildings


49,917



53,572Leasehold improvements


8,691



6,434Satellites in-orbit, including satellite transponder rights of
    $136.7 million in 2006






386,196Satellite under construction






59,085Earth stations






18,141Equipment, furniture and fixtures


94,844



76,787Other construction in progress


18,552



18,167198,803



645,915Accumulated depreciation and amortization


(50,975
)


(87,036
)$
147,828


$
558,879          F-24




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      8.
    Investments
    in Affiliates    December 31,2007


2006Telesat Holdings Inc.

$
479,579


$
XTAR, LLC


86,617



97,202$
566,196


$
97,202     PredecessorSuccessor Registrant



RegistrantFor the Period



For the PeriodOctober 2,



January 1,Year Ended


Year Ended


2005 to



2005 toDecember 31,


December 31,


December 31,



October 1,2007


2006


2005



2005Telesat Holdings Inc.

$
(1,792
)

$



$




$
XTAR, LLC


(10,585
)


(7,413
)


(5,384
)



(2,796
)Globalstar, L.P. and Globalstar service provider partnerships


(9,053
)


250








Other










(63
)



$
(21,430
)

$
(7,163
)

$
(5,447
)


$
(2,796
)     PredecessorSuccessor Registrant



RegistrantFor the Period



For the PeriodOctober 2,



January 1,Year Ended


Year Ended


2005 to



2005 toDecember 31,


December 31,


December 31,



October 1,2007


2006


2005



2005Revenues

$
21,968


$
11,262


$
4,148



$
10,025Elimination of Lorals proportionate share of (profits)
    losses relating to affiliate transactions


1,935



412



(2,949
)



593Profits (losses) relating to affiliate transactions not
    eliminated


(1,082
)


(324
)


2,318




(466
)  F-25




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Telesat
    Canada
  1 3 2 3
  Contribution
    of Loral Skynet
        Current assets

$
25.4Property, plant and equipment, net


443.8Foreign currency contracts


83.6Goodwill


42.2Intangible assets, net


50.4Other assets


3.2Total assets

$
648.6Current liabilities

$
181.1Long-term liabilities


27.0Total liabilities

$
208.1  F-26




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Consideration received for the contribution of Loral Skynet to
    Telesat Holdco:Cash and marketable securities

$
61.5Fair value of equity in Telesat Holdco


670.5Total consideration


732.0Book value of contributed net assets of Loral Skynet


440.5Consideration in excess of book value

$
291.5Gain recognized

$
104.9   EITF 01-2, Interpretations of APB Opinion No. 29
      For the PeriodOctober 31,2007to December 31,Statement of Operations Data:

2007Revenues

$
117.8Operating expenses


(93.7
)Operating income


24.1Net loss


(1.3
)   Balance Sheet Data:

December 31, 2007Current assets

$
143.7Total assets


5,610.0Current liabilities


229.5Total liabilities


4,156.7Redeemable preferred stock


143.1Shareholders equity


1,310.2   1 3
 F-27




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        XTAR
    o o XTAR-LANT,
    XTAR-LANT XTAR-LANT
   F-28




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  paid-in-kind
     Year EndedDecember 31,2007


2006


2005Revenues

$
19.4


$
15.3


$
9.4Operating expenses


(5.0
)


(6.7
)


(4.0
)Operating loss


(14.4
)


(8.6
)


(5.4
)Net loss


(18.4
)


(12.6
)


(9.6
)    December 31,2007


2006Current assets

$
8.9


$
6.4Total assets


124.9



132.1Current liabilities


29.6



20.1Total liabilities


64.4



53.2Members equity


60.5



78.9   Satmex
        usufructo usufructo
 F-29




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  usufructo
  usufructo usufructo usufructo
  Other
          9.
    Goodwill
    and Other Intangible Assets  Goodwill
   F-30




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Goodwill  December 31, 2005

$
340,094Adjustments due to the completion of the fair valuation process:Deferred revenues  fair value


6,070Fixed assets  fair value


502Intangibles  fair value


(212
)Contracts-in-process 
    fair value


(171
)Reversal of excess valuation allowance on deferred tax assets


(36,367
)Release of tax contingency liability


(4,225
)Goodwill  December 31, 2006


305,691Cumulative effect of adopting FIN 48


7,542Settlement of FIN 48 liabilities


(2,000
)Reversal of excess valuation allowance on deferred tax assets


(35,088
)Reversal of Old Loral deferred state tax liabilities


(6,840
)Contribution of Loral Skynet to Telesat Canada


(42,247
)Goodwill  December 31, 2007

$
227,058   Other
    Intangible Assets
    Weighted AverageRemaining


December 31, 2007


December 31, 2006Amortization Period


Gross


Accumulated


Gross


Accumulated(Years)


Amount


Amortization


Amount


AmortizationInternally developed software and technology


3


$
59.0


$
(24.3
)

$
59.0


$
(13.5
)Orbital slots














10.8



(1.8
)Trade names


18



9.2



(1.0
)


13.2



(0.8
)Customer relationships














20.0



(1.7
)Customer contracts














33.0



(8.3
)Other intangibles














2.7



(0.8
)Total





$
68.2


$
(25.3
)

$
138.7


$
(26.9
)      F-31




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2008

$
11.32009


11.32010


9.22011


2.92012


2.3   10.
    Debt
    Obligations    December 31,2007


2006Loral Skynet 14.0% Senior Secured Notes due 2015 (principal
    amount $126 million)

$



$
128,084   Successor
    Registrant
  Loan
    Payable Valley National Bank
          Loral
    Skynet Notes
   F-32




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          SS/L
    Letter of Credit Facility
    Predecessor
    Registrant
      11.
    Reorganization
    Expenses Due to Bankruptcy    For the PeriodJanuary 1,2005 toOctober 1,2005Professional fees

$
32,240Employee retention costs


(917
)Severance costs


972Lease rejection claims (gains)


(265
)Vendor settlement losses (gains)


289Restructuring costs


1,503Interest income


(2,586
)Total reorganization expenses due to bankruptcy

$
31,236  F-33




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  12.
    Income
    Taxes    PredecessorSuccessor Registrant



RegistrantFor the Period



For the PeriodOctober 2,



January 1,Year Ended


Year Ended


2005 to



2005 toDecember 31,


December 31,


December 31,



October 1,2007


2006


2005



2005Current:U.S. Federal

$
(31,142
)

$
(4,018
)

$
(532
)


$
(1,235
)State and local


(19,712
)


(2,467
)


(429
)



(2,339
)Foreign


(398
)


(5,290
)


(791
)



(1,659
)Total current


(51,252
)


(11,775
)


(1,752
)



(5,233
)Deferred:U.S. Federal


(47,209
)


(7,342
)


325




(259,373
)State and local


31,291



(1,763
)


97




(45,737
)Valuation allowance


(16,287
)






(422
)



321,244Total deferred


(32,205
)


(9,105
)







16,134Total income tax (provision) benefit

$
(83,457
)

$
(20,880
)

$
(1,752
)


$
10,901       Unrecognized tax benefits

$
(12,652
)Interest expense


(4,186
)Interest income


41Penalties


(303
)Total

$
17,100      F-34




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
         F-35




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    PredecessorSuccessor Registrant



RegistrantFor the Period



For the PeriodOctober 2,



January 1,Year Ended


Year Ended


2005 to



2005 toDecember 31,


December 31,


December 31,



October 1,2007


2006


2005



2005Tax (provision) benefit at U.S. Statutory Rate of 35%

$
(55,225
)

$
(10,541
)

$
1,888



$
(357,928
)Permanent adjustments which change statutory amounts:State and local income taxes, net of federal income tax


5,101



(2,749
)


(216
)



(31,249
)Additional tax imposed on foreign source income


(94
)


(3,438
)


(847
)



(6,308
)Reorganization expenses due to bankruptcy










(94
)



(9,944
)Plan of Reorganization and Fresh-Start valuation adjustments















94,206Equity in net losses of affiliates


7,162



2,585








Tax gain on transfer of Loral
    Skynet assets to Telesat Canada


(16,419
)











Provision for unrecognized tax benefits


(8,370
)











Nondeductible expenses


(2,682
)


(3,065
)


(1,410
)



(1,122
)Change in valuation allowance


(16,287
)






(422
)



321,244Other, net


3,357



(3,672
)


(651
)



2,002Total income tax (provision) benefit

$
(83,457
)

$
(20,880
)

$
(1,752
)


$
10,901      F-36




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    TotalBalance at January 1, 2007

$
42,484Increases related to prior year tax positions


157Decreases related to prior year tax positions


(342
)Decrease as a result of tax settlements


(1,508
)Increases related to current year tax positions


21,707Decrease for indemnified liabilities transferred to Telesat
    Canada and recorded in other long term liabilities


(2,595
)Balance at December 31, 2007

$
59,903              F-37




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        paid-in-capital
       F-38




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2007


2006Deferred tax assets:Postretirement benefits other than pensions

$
31,591


$
33,641Inventoried costs


17,943



37,836Net operating loss and tax credit carryforwards


205,209



376,202Compensation and benefits


22,802



9,236Deferred research & development costs


18,948



20,734Income recognition on long-term contracts


26,707



19,787Other, net


7,086



5,980Federal benefit of uncertain tax positions


3,610



Pension costs


35,612



33,451Total deferred tax assets before valuation allowance


369,508



536,867Less valuation allowance


(241,228
)


(304,884
)Net deferred tax asset


128,280



231,983Deferred tax liabilities:Property, plant and equipment


18,653



144,794Intangible assets


18,569



47,869Investments in and advances to affiliates


87,704



50,914Total deferred tax liability


124,926



243,577Net deferred tax asset (liability)

$
3,354


$
(11,594
)     13.
    Shareholders
    Equity and Minority Interest  Successor
    Registrant
  Common
    Stock
      Preferred
    Stock
   F-39




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Series A-1 Series A-1 Series B-1 Series B-1 Series A-1 Series A-1 Class B-1 Series B-1 Class B-1 Series B-1 Class B-1 Series B-1 Class B-1
  Series A-1
  Series A-1 and/or
  30-day
 F-40




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Class B-1 Class B-2
  Series A-1 Series B-1 Class B-1 Class B-2 Class B-2 Series A-1 Series A-2 Series A-2 Series B-1 Series B-2 Series B-2
  Series A-1 Series A-2 Series B-1 Series B-2
  Series A-2 Series B-2 Series A-2 Series B-2
  Series A-1 Series B-1
  Series A-1 Series B-1
 F-41




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Class B-1 Class B-1 class B-1 Series A-1 Series A-1 Series B-1 class B-1 Series B-1 class B-1
      Loral
    Skynet Series A Preferred Stock
        Cash


PIK Dividends


TotalPayment Date

Dividend Period

Dividends


Shares


Amount


DividendsNovember 5, 2007


7/14/07 to 11/05/07

$
8.79






$



$
8.79July 13, 2007


1/14/07 to 7/13/07


1.26



61,282



12.26



13.52January 12, 2007


7/14/06 to 1/13/07


1.77



55,434



11.09



12.86July 14, 2006


11/21/05 to 7/13/06


1.27



71,281



14.26



15.53    F-42




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Stock
    Plans
      EITF 96-18
    Year Ended


For the PeriodDecember 31,


October 2, 20052007


2006


to December 31, 2005Risk  free interest rate


4.5
%


4.3
%


4.4
%Expected life (years)


2.80



4.75



4.75Estimated volatility


32.8
%


27.4
%


27.4
%Expected dividends


None



None



None  F-43




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    WeightedWeighted


Average


AggregateAverage


Remaining


IntrinsicExercise


Contractual


ValueShares


Price


Term


(in millions)Outstanding at October 2, 2005










Granted (weighted average grant date fair value $6.82 per share)


746,952


$
28.44



7 yearsExercised


Forfeited


Outstanding at December 31, 2005


746,952


$
28.44



7 yearsGranted (weighted average grant date fair value $7.66 per share)


643,500


$
28.44Exercised


Forfeited


(80,000
)

$
28.44Outstanding at December 31, 2006


1,310,452


$
28.44



5.8 years


$
16.1Granted (weighted average grant date fair value $23.46 per share)


965,000


$
26.95Exercised


(208,750
)

$
27.82






$
2.9Forfeited


(15,000
)

$
27.57Outstanding at December 31, 2007


2,051,702


$
27.81



4.2 years


$
13.2Vested and expected to vest at December 31, 2007


2,043,659


$
27.81



4.2 years


$
13.2Exercisable at December 31, 2007


1,376,214


$
27.89



4.3 years


$
8.8     Weighted AverageGrant- DateShares


Fair ValueNon-vested restricted stock at January 1, 2007


Granted


206,700


$
46.65Vested (intrinsic value of $3,016,000)


(62,777
)

$
46.65Forfeited


(1,919
)

$
46.65Non-vested restricted stock at December 31, 2007


142,004


$
46.65      F-44




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Predecessor
    Registrant
  Common
    Stock and Old Loral Stock Plans
    14.
    Earnings
    (Loss) Per Share      PredecessorSuccessor Registrant



RegistrantFor the Period



For the PeriodFor the Year


For the Year


October 2,



January 1,Ended


Ended


2005 to



2005 toDecember 31,


December 31,


December 31,



October 1,2007


2006


2005



2005(in thousands, except per share data)Numerator for basic and diluted loss per share:(Loss) income applicable to common shareholders from continuing
    operations

$
(15,405
)

$
(22,720
)

$
(15,261
)


$
1,030,882Gain on sale of discontinued operations, net of taxes















13,967Net (loss) income applicable to common stockholders

$
(15,405
)

$
(22,720
)

$
(15,261
)


$
1,044,849Denominator:Weighted average common shares outstanding


20,087



20,000



20,000




44,108Basic and diluted (loss) earnings per share:Continuing operations

$
(0.77
)

$
(1.14
)

$
(0.76
)


$
23.37Discontinued operations















0.32(Loss) earnings per share

$
(0.77
)

$
(1.14
)

$
(0.76
)


$
23.69  F-45




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  15.
    Pensions
    and Other Employee Benefits  Pensions
  and/or
  non-U.S. and
    Other
    Benefits
    Curtailment
   F-46




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Funded
    Status
    Pension Benefits


Other BenefitsFor The Year Ended December 31,


For The Year Ended December 31,2007


2006


2007


2006(in thousands)


(in thousands)Reconciliation of benefit obligationObligation at beginning of period

$
371,883


$
406,906


$
85,652


$
81,176Service cost


10,145



10,926



1,607



1,482Interest cost


22,455



21,835



4,995



4,834Participant contributions


1,612



1,051



1,827



1,569Amendments






(35,849
)


(2,815
)


(2,154
)Actuarial (gain) loss


(15,492
)


(12,423
)


(3,125
)


3,519Benefit payments


(21,382
)


(20,563
)


(5,008
)


(4,774
)Curtailment gain


(1,351
)






(1,169
)


Transfer of liability due to Telesat Canada transaction










(8,176
)


Obligation at December 31,

$
367,870


$
371,883


$
73,788


$
85,652Reconciliation of fair value of plan assetsFair value of plan assets at beginning of period

$
284,275


$
247,728


$
866


$
1,028Actual return on plan assets


18,936



27,762



89



38Employer contributions






27,460



3,181



3,005Participant contributions


1,612



1,051



1,827



1,569Benefit payments


(20,540
)


(19,726
)


(5,008
)


(4,774
)Fair value of plan assets at December 31,

$
284,283


$
284,275


$
955


$
866Funded status at end of period

$
(83,587
)

$
(87,608
)

$
(72,833
)

$
(84,786
)   Employers Accounting For Defined Benefit Pension and
    Other Postretirement Plans
 F-47




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Pension Benefits


Other BenefitsDecember 31,


December 31,2007


2006


2007


2006Actuarial gain (loss)

$
26,477


$
16,033


$
(2,103
)

$
(2,893
)Amendments-prior service credit


30,829



34,450



3,446



1,915$
57,306


$
50,483


$
1,343


$
(978
)     Pension Benefits


Other BenefitsActuarial gain during the period

$
10,660


$
3,178Prior service credit during the period






2,815Amortization of actuarial gain


(59
)


111Amortization of prior service credit


(2,784
)


(553
)Recognition due to curtailment


(994
)


(693
)Recognition due to Telesat Canada transaction






(2,537
)Total recognized in other comprehensive income

$
6,823


$
2,321     Pension Benefits


Other BenefitsDecember 31,


December 31,2007


2006


2007


2006Current Liabilities

$
892


$
797


$
3,187


$
3,610Long-Term Liabilities


82,695



86,811



69,646



81,176$
83,587


$
87,608


$
72,833


$
84,786        F-48




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Pension Benefits


Other BenefitsPredecessor






PredecessorSuccessor Registrant



Registrant


Successor Registrant



RegistrantFor the Period



For the Period





For the Period



For the PeriodFor The Year


October 2,



January 1,


For The Year


October 2,



January 1,Ended


2005 to



2005 to


Ended


2005 to



2005 toDecember 31,


December 31,



October 1,


December 31,


December 31,



October 1,2007


2006


2005



2005


2007


2006


2005



2005Service cost

$
10,145


$
10,926


$
2,896



$
7,787


$
1,607


$
1,482


$
255



$
680Interest cost


22,455



21,835



5,760




17,601



4,995



4,834



1,157




3,407Expected return on plan assets


(23,768
)


(22,229
)


(5,545
)



(15,343
)


(36
)


(52
)


(23
)



(78
)Amortization of prior service credit


(2,784
)


(1,399
)







(27
)


(553
)


(239
)







(1,443
)Amortization of net actuarial loss(gain)


(59
)











4,976



111



127








1,843Curtailment gain


(2,345
)















(1,862
)











Net periodic cost

$
3,644


$
9,133


$
3,111



$
14,994


$
4,262


$
6,152


$
1,389



$
4,409     PredecessorSuccessor Registrant


RegistrantFor the Period


For the PeriodFor The Year

October 2,


January 1,Ended

2005 to


2005 toDecember 31

December 31,


October 1,2007

2006

2005


2005Discount rate

6.00%/6.50%

5.75%

5.75%


6.00%Expected return on plan assets

8.50%

9.00%

9.00%


9.00%Rate of compensation increase

4.25%

4.25%

4.25%


4.25%     PredecessorSuccessor Registrant



RegistrantDecember 31,



October 1,2007


2006


2005



2005Discount rate


6.50
%


6.00
%


5.75
%



5.75
%Rate of compensation increase


4.25
%


4.25
%


4.25
%



4.25
%    F-49




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      December 31,2007


2006Equity investments


54
%


55
%Fixed income investments


46
%


45
%100
%


100
%     1% Increase


1% DecreaseEffect on total of service and interest cost components of net
    periodic postretirement health care benefit cost

$
474


$
(390
)Effect on the health care component of the accumulated
    postretirement benefit obligation

$
5,944


$
(4,993
)     Other BenefitsGross


MedicarePension


Benefit


SubsidyBenefits


Payments


Receipts2008

$
23,527


$
4,558


$
2842009


24,191



4,835



3142010


24,844



5,114



3422011


25,618



5,396



3692012


25,771



5,650



4002013 to 2017


140,187



30,600



2,375     Employee
    Savings (401k) Plan
  2 3
 F-50




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    16.
    Financial
    Instruments and Foreign Currency  Financial
    Instruments
      Foreign
    Currency
      Foreign Currency


U.S. $Future revenues  Japanese Yen

¥
84


$
0.7Future expenditures  Japanese Yen

¥
4,222


$
37.6Future expenditures  EUROs

E
3.7


$
5.5   Derivatives
       F-51




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      17.
    Commitments
    and Contingencies  Financial
    Matters
          Balance of deferred amounts at January 1, 2005

$
27.2Accruals for deferred amounts issued during the period


1.3Accruals relating to pre-existing contracts (including changes
    in estimates)


10.5Balance of deferred amounts at October 1, 2005


39.0Accruals for deferred amounts issued during the period


Accruals relating to pre-existing contracts (including changes
    in estimates)


2.7Balance of deferred amounts at December 31, 2005


41.7Accruals for deferred amounts issued during the period


4.8Accruals relating to pre-existing contracts (including changes
    in estimates)


7.4Balance of deferred amounts at December 31, 2006


53.9Warranty costs incurred including payments


(10.8
)Accruals relating to pre-existing contracts (including changes
    in estimates)


(8.1
)Balance of deferred amounts at December 31, 2007

$
35.0  F-52




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      start-up
      Satellite
    Matters
   F-53




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Regulatory
    Matters
   F-54




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Lease
    Arrangements
  and/or
  Gross


SubleaseRent


Income


Net RentYear ended December 31, 2007

$
26,302


$
(76
)

$
26,226Year ended December 31, 2006

$
27,317


$
(20
)

$
27,297October 2, 2005 to December 31, 2005

$
6,536


$
(38
)

$
6,498January 1, 2005 to October 1, 2005

$
20,057


$
(261
)

$
19,796     2008

$
8,5892009


7,6712010


6,9532011


4,9222012


2,651Thereafter


1,979$
32,765   Legal
    Proceedings
  New York
    Shareholder Litigation
    Form 8-K Babus
 F-55




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Babus
  Delaware
    Shareholder Litigation
  In re: Loral Space and
    Communications Inc. Consolidated Litigation
         F-56




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      In re: Loral Space and Communications Inc. Consolidated
    Litigation
    Skynet
    Noteholders Litigation
     F-57




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      In re: Loral Space and Communications
    Inc. Consolidated Litigation
    Informal
    SEC Inquiry
    Rainbow
    DBS Litigation
   F-58




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Indemnification
    Claims of Directors and Officers of Old Loral
  In re: Loral Space ERISA Litigation In re: Loral Space & Communications Ltd. Securities
    Litigation
  Class Action
    Securities Litigations
  Rule 10b-5
 F-59




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Beleson
  Rule 10b-5 Beleson
  Class Action
    ERISA Litigation
  In re:
    Loral Space ERISA Litigation
 F-60




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    In re: Loral Space ERISA
    Litigation
  In re: Loral Space
    ERISA Litigation In re: Loral
    Space ERISA Litigation
  In re: Loral Space ERISA Litigation
  Globalstar
    Related Class Action Securities Litigations
  In re: Globalstar
    Securities Litigation Rule 10b-5
 F-61




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    In re:
    Loral Space & Communications Ltd. Securities
    Litigation Rule 10b-5
  In re: Loral
    Space & Communications Ltd. Securities Litigation
 F-62




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  In re: Loral
    Space & Communications Ltd. Securities Litigation
  Reorganization
    Matters
      Other
    and Routine Litigation
    18.
    Segments  Disclosures about
    Segments of an Enterprise and Related Information
 F-63




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
         F-64




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2007
    Segment Information
    (in millions)
  Satellite


SatelliteManufacturing


Services(1)


Corporate(2)


TotalRevenues and Adjusted EBITDA:Revenues(3)

$
739.9


$
238.9






$
978.8Intersegment
    revenues(3)


74.4



2.3







76.7Operating segment revenues

$
814.3


$
241.2







1,055.5Intercompany
    eliminations(4)














(55.2
)Affiliate
    eliminations(1)














(117.8
)Revenues as reported













$
882.5Segment Adjusted EBITDA before
    eliminations(5)(6)

$
34.5


$
118.4


$
(37.9
)

$
115.0Intercompany
    eliminations(4)














(6.1
)Affiliate
    eliminations(1)














(65.3
)Adjusted EBITDA














43.6Depreciation and
    amortization(7)














(103.3
)Gain on the contribution of Loral Skynet to Telesat Canada














104.9Operating income from continuing operations














45.2Interest and investment income














39.3Interest expense














(2.3
)Unrealized gain on foreign exchange contracts














89.4Loss on extinguishment of debt














(16.2
)Other expense














2.4Income tax provision














(83.5
)Equity loss in affiliates





$
(1.8
)

$
(19.6
)


(21.4
)Minority interest














(23.2
)Income from continuing operations













$
29.7Other Data:Segment depreciation and
    amortization(7)

$
36.3


$
85.9


$
22.3


$
144.5Affiliate
    eliminations(1)






(41.2
)






(41.2
)Depreciation and amortization as reported

$
36.3


$
44.7


$
22.3


$
103.3Segment capital
    expenditures(7)

$
37.5


$
88.7


$



$
126.2Affiliate
    eliminations(1)






(30.4
)






(30.4
)Capital expenditures as reported

$
37.5


$
58.3


$



$
95.8Segment total assets

$
963.4


$
6,221.4


$
128.1


$
7,312.9Affiliate
    eliminations(1)






(5,610.0
)






(5,610.0
)Total assets as
    reported(7)

$
963.4


$
611.4


$
128.1


$
1,702.9  F-65




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2006
    Segment Information
    (in millions)
  Satellite


SatelliteManufacturing


Services


Corporate(2)


TotalRevenues and Adjusted EBITDA:Revenues(3)

$
636.6


$
160.7






$
797.3Intersegment revenues


59.9



3.1







63.0Operating segment revenues

$
696.5


$
163.8







860.3Intercompany
    eliminations(4)














(63.0
)Revenues as reported













$
797.3Segment Adjusted EBITDA before
    eliminations(5)(6)

$
65.9


$
68.0


$
(26.8
)

$
107.1Intercompany
    eliminations(4)














(6.0
)Adjusted EBITDA














101.1Depreciation and
    amortization(7)














(71.3
)Operating income from continuing operations














29.8Interest and investment income














31.5Interest expense














(23.4
)Other expense














(7.8
)Income tax provision














(20.8
)Equity loss in affiliates














(7.2
)Minority interest














(24.8
)Loss from continuing operations













$
(22.7
)Other Data:Depreciation and amortization as
    reported(7)

$
23.3


$
45.9


$
2.1


$
71.3Capital Expenditures as reported

$
18.4


$
63.7


$
0.1


$
82.2Total assets as
    reported(7)

$
944.6


$
750.4


$
34.9


$
1,729.9  F-66




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2005
    Segment Information
    (in millions)
    Satellite


SatelliteManufacturing


Services


Corporate(2)


TotalRevenues and Adjusted EBITDA:Revenues(3)

$
161.0


$
36.1






$
197.1Intersegment revenues


0.8



0.9







1.7Operating segment revenues

$
161.8


$
37.0







198.8Intercompany
    eliminations(4)














(1.6
)Revenues as reported













$
197.2Segment Adjusted EBITDA before
    eliminations(5)(6)

$
11.8


$
11.5


$
(11.0
)

$
12.3Intercompany
    eliminations(4)














(1.2
)Adjusted EBITDA














11.1Depreciation and
    amortization(7)














(16.0
)Operating loss from continuing operations














(4.9
)Interest and investment income














4.1Interest expense














(4.4
)Other expense














(0.2
)Income tax provision














(1.8
)Equity loss in affiliates














(5.4
)Minority interest














(2.7
)Loss from continuing operations













$
(15.3
)Other Data:Depreciation and amortization as reported

$
3.2


$
12.4


$
0.4


$
16.0Capital Expenditures as reported

$
3.0


$
2.0


$



$
5.0Total assets as reported

$
871.5


$
741.4


$
66.1


$
1,679.0  F-67




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  2005
    Segment Information
    (in millions)
  Predecessor
    Registrant
   Satellite


SatelliteManufacturing


Services



Corporate(2)


TotalRevenues and Adjusted EBITDA:Revenues(3)

$
318.6


$
111.3







$
429.9Intersegment revenues


10.9



3.2








14.1Operating segment revenues

$
329.5


$
114.5








444.0Intercompany
    eliminations(4)















(14.8
)Revenues as reported














$
429.2Segment Adjusted EBITDA before
    eliminations(5)(6)

$
15.2


$
39.8



$
(17.3
)

$
37.7Intercompany
    eliminations(4)















(12.3
)Adjusted EBITDA















25.4Depreciation and
    amortization(7)















(61.3
)Reorganization expenses due to bankruptcy















(31.2
)Operating loss from continuing operations















(67.1
)Gain on discharge of pre-petition obligations and fresh-start
    adjustments(8)















1,101.5Interest and investment income















6.4Interest
    expense(7)















(17.2
)Other expense















(0.9
)Income tax
    benefit(7)















10.9Equity loss in affiliates















(2.8
)Minority interest















0.1Income from continuing operations














$
1,030.9Other Data:Depreciation and amortization as reported

$
11.9


$
48.8



$
0.6


$
61.3Capital Expenditures as reported

$
2.4


$
2.2



$



$
4.6Total assets as
    reported(7)

$
510.7


$
521.5



$
68.8


$
1,101.0     (1)
    
    Satellite Services for 2007 include
    Loral Skynet for the period January 1, 2007 to
    October 30, 2007 and Telesat Canada for the period
    October 31, 2007 to December 31, 2007. Affiliate
    eliminations represent the elimination of amounts attributable
    to Telesat Canada whose results are reported in our consolidated
    statement of operations as equity in net income of affiliates
    and in our consolidated balance sheet as investment in
    affiliates.(2)
    
    Includes corporate expenses
    incurred in support of our operations and for the years ended
    December 31, 2007 and 2006 and the period October 2,
    2005 to December 31, 2005 includes $0.3 million,
    $1.2 million and $3.9 million, respectively, of
    continuing expenses for bankruptcy related matters, which after
    the adoption of fresh-start accounting are classified as
    corporate general and administrative expenses. Corporate for
    2007 includes our equity investments in XTAR and Globalstar
    service providers. F-68




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   (3)
    
    Includes revenues from affiliates
    of $0.5 million for 2007, $11.3 million in 2006 and
    $4.1 million for the period October 2, 2005 to
    December 31, 2005, and $10.0 million for the period
    January 1, 2005 to October 1, 2005, respectively. In
    2007 intersegment revenues include $21.5 million of revenue
    from affiliates.(4)
    
    Represents the elimination of
    intercompany sales and intercompany Adjusted EBITDA, primarily
    for satellites under construction by SS/L for wholly owned
    subsidiaries.(5)
    
    Satellite manufacturing includes
    (in millions):  PredecessorSuccessor Registrant



RegistrantFor the Period



For the PeriodOctober 2,



January 1,Year Ended


Year Ended


2005 to



2005 toDecember 31,


December 31,


December 31,



October 1,2007


2006


2005



2005Adjusted EBITDA before specific identified charges

$
27.3


$
56.8


$
20.5



$
27.4Transponders rights provided to SS/L in the Satmex settlement
    agreement






19.0








Accrued warranty obligations


6.7



(8.2
)


(7.2
)



(10.1
)Provisions for inventory obsolescence


0.5



(1.7
)


(1.5
)



(2.1
)Satellite manufacturing segment Adjusted EBITDA before
    eliminations

$
34.5


$
65.9


$
11.8



$
15.2    (6)
    
    Satellite Services Revenue and
    EBITDA include $14.9 million resulting from receipt of a
    customer termination payment for the year ended
    December 31, 2006.(7)
    
    Amounts are presented after the
    elimination of intercompany profit and include goodwill of
    $227 million for Satellite Manufacturing, as of
    December 31, 2007. In addition, total assets as reported
    excludes $2.5 billion of satellite services goodwill
    related to Telesat Canada as of December 31, 2007.(8)
    
    In connection with our emergence
    from Chapter 11 and our adoption of fresh-start accounting
    on October 1, 2005 we recognized a gain on discharge of
    pre-petition obligations and fresh-start adjustments of
    $1.101 billion, related interest expense of
    $13.2 million and a tax benefit of $15.4 million (see
    Note 4).  Revenue
    by Customer Location
    PredecessorSuccessor Registrant



RegistrantFor the Period



For the PeriodOctober 2,



January 1,Year Ended


Year Ended


2005 to



2005 toDecember 31,


December 31,


December 31,



October 1,2007


2006


2005



2005United States

$
702,605


$
691,986


$
170,103



$
350,622Peoples Republic of China (including Hong Kong)


47,591



26,607



2,411




4,498United Kingdom


45,596



11,943



2,612




8,374Japan


4,795



6,758



4,193




13,486Thailand


69



997



2,711




6,010Spain


385



5,682



3,418




7,483Mexico


117



7,735



1,327




7,122Other


81,296



45,625



10,390




31,588$
882,454


$
797,333


$
197,165



$
429,183  F-69




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    19.
    Related
    Party Transactions  Transactions
    with Affiliates
  Telesat
    Canada
         F-70




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
               F-71




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      XTAR
        Other
    Equity Investments
    MHR
    Fund Management LLC
   F-72




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,


December 31,2007


2006Loral Series-1 Preferred StockDividends paid in cash

$



$
Dividends paid in the form of additional shares Number of shares


47,762



 Amount

$
14.4


$
Loral Skynet Preferred StockDividends paid in cash

$
4.5


$
0.5Dividends paid in the form of additional shares Number of shares


44,539



27,011 Amount

$
8.9


$
5.4Loral Skynet NotesInterest payments paid in cash

$
9.0


$
5.1Redemption premium paid in cash

$
5.6


$
      F-73




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Other
    Relationships
    non-executive
       F-74




---



##### 



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          20.
    Selected
    Quarterly Financial Information (unaudited, in thousands, except
    per share amounts)  Quarter EndedMarch 31,


June 30,


September 30,


December 31,Year ended December 31, 2007Revenues

$
220,532


$
226,000


$
235,640


$
200,282Operating income (loss),


(11,798
)


(15,121
)


66



72,109Income (loss) before income taxes, equity in net losses of
    affiliates and minority interest


(4,011
)


54,990



58,441



48,366Minority interest


(6,986
)


(6,487
)


(7,078
)


(2,689
)Net income (loss)


(16,823
)


20,627



25,929



(74
)Basic and diluted loss per
    share(1):Basic income (loss) per share


(2.16
)


0.70



0.99



(0.30
)Diluted income (loss) per share


(2.16
)


0.67



0.96



(0.30
)   Quarter EndedMarch 31,


June 30,


September 30,


December 31,Year ended December 31, 2006Revenues

$
171,976


$
192,883


$
226,794


$
205,680Operating income (loss)


(6,216
)


(520
)


17,566



18,988Income (loss) before income taxes, equity in net losses of
    affiliates and minority interest


(5,826
)


(1,088
)


16,472



20,559Minority interest


(6,000
)


(6,000
)


(6,366
)


(6,428
)Net income (loss)


(15,840
)


(11,395
)


1,186



3,329Basic and diluted loss per
    share(1):Income (loss) per share


(0.79
)


(0.57
)


0.06



0.16     (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-75




---



##### 



SCHEDULE II
  LORAL
    SPACE & COMMUNICATIONS INC.
    VALUATION AND QUALIFYING ACCOUNTS
    For the Year Ended December 31, 2007, 2006 and 2005
    (in thousands)
  AdditionsBalance at


Charged to


Charged to


Deductions


Balance atBeginning


Costs and


Other


From


End ofDescription

of Period


Expenses


Accounts(1)


Reserves(2)


PeriodPredecessor Registrant:January 1, 2005-October 1, 2005Allowance for billed receivables

$
6,445


$
(2,880
)

$
2


$
942


$
4,509Inventory allowance

$
34,000


$
2,127


$



$
(2,207
)

$
33,920Deferred tax valuation allowance

$
659,783


$
(321,244
)

$
(1,615
)

$



$
336,924Successor Registrant:October 2,
    2005-December 31,
    2005Allowance for billed receivables

$
4,509


$
953


$



$



$
5,462Inventory allowance

$
33,920


$
1,525


$



$
(1,703
)

$
33,742Deferred tax valuation allowance

$
336,924


$
422


$



$



$
337,346Year ended 2006Allowance for billed receivables

$
5,462


$
(307
)

$
1


$
(3,532
)

$
1,624Inventory allowance

$
33,742


$
1,678


$



$
(5,822
)

$
29,598Deferred tax valuation allowance

$
337,346


$



$
3,905


$
(36,367
)

$
304,884Year ended 2007Allowance for billed receivables

$
1,624


$
(620
)

$
20


$
(1,024
)

$
Inventory allowance

$
29,598


$
(543
)

$



$
(609
)

$
28,446Deferred tax valuation allowance

$
304,884


$
16,287


$
(34,749
)

$
(45,194
)

$
241,228     (1)
    
    Allowance for long-term receivables
    recorded as a reduction to revenues. Deferred tax valuation
    allowance against Old Loral deferred tax assets recorded to
    goodwill and adjustments from adoption of FIN 48 in 2007.(2)
    
    Receivable allowance reflects
    write-offs of uncollectible accounts. Inventory allowance was
    primarily reduced as a result of disposals of the related
    inventory. Reversal of excess deferred tax valuation allowance
    recorded as a reduction to goodwill. F-76




---



##### 



REPORT OF
    INDEPENDENT REGISTERED ACCOUNTANTS            Deloitte
    & Touche LLP
      F-77




---



##### 



TELESAT
    HOLDINGS INC.
  CONSOLIDATED STATEMENT OF EARNINGS
 (In thousands of Canadian dollars)
  October 31 toDecember 31,Notes


2007Operating revenuesService revenues





$
103,509Equipment sales revenues






7,907Sales-type lease revenuesOperating revenues


(4
)


111,416Amortization






40,046Operations and administration






43,276Cost of equipment sales






6,485Cost of sales-type leaseTotal operating expenses






89,807Earnings from operations






21,609Interest expense


(5
)


(43,861
)Other expense


(6
)


(43,969
)Loss before income taxes






(66,221
)Income tax recovery


(7
)


(62,170
)Net loss





$
(4,051
)  F-78




---



##### 



TELESAT
    HOLDINGS INC.
  CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
  October 31 toDecember 31,2007Net loss

$
(4,051
)Other comprehensive loss, net of tax:Unrealized loss on translation of financial statements of self
    sustaining foreign operations


(665
)Related tax


66Comprehensive loss

$
(4,650
)  F-79




---



##### 



TELESAT
    HOLDINGS INC.
  CONSOLIDATED STATEMENT OF SHAREHOLDERS
    EQUITY
 FOR THE PERIOD FROM OCTOBER 31 TO DECEMBER 31, 2007
 (In thousands of Canadian dollars)
  AccumulatedDeficit andAccumulated


AccumulatedOther


Other


TotalCommon


Preferred


Accumulated


Comprehensive


Comprehensive


ShareholdersNotes

Shares


Shares


Deficit


Loss


Loss


EquityBalance at October 31, 2007



$



$



$



$



$



$
Common shares issued as part of the sale transaction

(3),(16)


756,414



















756,414Preferred shares issued as part of the sale transaction

(3),(16)






541,764















541,764Net loss












(4,051
)






(4,051
)


(4,051
)Unrealized losses on translation of financial statements of self
    sustaining foreign operations
















(599
)


(599
)


(599
)Balance at December 31, 2007



$
756,414


$
541,764


$
(4,051
)

$
(599
)

$
(4,650
)

$
1,293,528  F-80




---



##### 



TELESAT
    HOLDINGS INC.
  CONSOLIDATED BALANCE SHEET
 (In thousands of Canadian dollars)
  December 31,Notes


2007ASSETSCurrent assetsCash and cash equivalents





$
42,203Accounts and notes receivable


(8
)


53,875Current future tax asset


(7
)


2,594Assets held for sale


(9
)


4,037Other current assets


(10
)


57,777Total current assets






160,486Satellites, property and other equipment, net


(11
)


1,818,612Other long-term assets


(10
)


27,368Intangible assets, net


(12
)


1,092,359Goodwill


(12
)


2,446,603Total assets





$
5,545,428LIABILITIESCurrent liabilitiesAccounts payable and accrued liabilities





$
61,599Other current liabilities


(13
)


152,375Debt due within one year


(14
)


18,419Total current liabilities






232,393Debt financing


(14
)


2,775,944Future tax liability


(7
)


439,641Other long-term liabilities


(13
)


662,487Senior preferred shares


(15
)


141,435Total liabilities






4,251,900Shareholders equityCommon shares (74,252,460 common shares issued)


(16
)


756,414Preferred shares


(16
)


541,764Accumulated deficit






(4,051
)Accumulated other comprehensive loss






(599
)Total shareholders equity






1,293,528Total liabilities and shareholders equity





$
5,545,428  F-81




---



##### 



TELESAT
    HOLDINGS INC.
  CONSOLIDATED STATEMENT OF CASH FLOW
 (In thousands of Canadian dollars)
  October 31 toDecember 31,Notes

2007Cash flows from operating activitiesNet loss



$
(4,051
)Adjustments to reconcile net loss to cash flows from operating
    activities:Amortization




40,046Future income taxes




(60,653
)Unrealized foreign exchange




43,066Other




(317
)Operating assets and liabilities

(17)


207,185225,276Cash flows from investing activitiesSatellite programs




(15,496
)Property additions




(14,019
)Business acquisitions

(3)


(3,229,194
)Proceeds on disposals of assets




25(3,258,684
)Cash flows from financing activitiesDebt financing and bank loans




2,767,716Repayment of bank loans and debt financing




(44,899
)Capitalized debt issuance costs




(83,585
)Note repayment




(129,334
)Common shares issued

(16)


311,124Preferred shares issued

(15, 16)


258,833Capital lease payments




(1,306
)Satellite performance incentive payments




(4,196
)Preferred dividends paid




3,074,353Effect of changes in exchange rates on cash and cash equivalents




1,258Increase in cash and cash equivalents




42,203Cash and cash equivalents, beginning of period




Cash and cash equivalents, end of period

(17)

$
42,203Supplemental disclosure of cash flow informationInterest paid



$
18,339Income taxes paid




343$
18,682  F-82




---



##### 



TELESAT
    HOLDINGS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts
    in thousands of Canadian dollars, unless otherwise
    noted)
  1.
    Basis of
    Presentation  1 3 2 3
        Regulation
        2.
    Summary
    of Significant Accounting Policies  Use of
    Estimates
   F-83




---



##### 



TELESAT
    HOLDINGS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands of Canadian dollars, unless otherwise
    noted)
    Revenue
    Recognition
        Cash and
    Cash Equivalents
    Inventories
    Satellites,
    Property and Other Equipment
     F-84




---



##### 



TELESAT
    HOLDINGS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands of Canadian dollars, unless otherwise
    noted)
    YearsSatellites


6 to 15Transponders under capital lease


12 to 15Earth stations


5 to 30Office buildings


30Leasehold improvements


1Equipment, furniture and fixtures


5 to 10         Impairment
    of Long-Lived Assets
    Translation
    of Foreign Currencies
       F-85




---



##### 



TELESAT
    HOLDINGS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands of Canadian dollars, unless otherwise
    noted)
  Goodwill
    and Other Intangible Assets
      YearsBacklog


4 to 17Customer relationships


11 to 21Favourable leases


3 to 4Patents


18     Derivative
    Financial Instruments
    Embedded
    Derivatives
    Transaction
    Costs
    Employee
    Benefit Plans
   F-86




---



##### 



TELESAT
    HOLDINGS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands of Canadian dollars, unless otherwise
    noted)
        Stock-Based
    Compensation Plans
    Income
    Taxes
      
    the temporary differences between the carrying amounts of assets
    and liabilities for accounting purposes and the amounts used for
    tax purposes
    the benefit of unutilized tax losses that will more likely than
    not be realized and carried forward to future years to reduce
    income taxes.   F-87




---



##### 



TELESAT
    HOLDINGS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands of Canadian dollars, unless otherwise
    noted)
  Recent
    Changes to Accounting Standards
  Financial
    Instruments
      Capital
    Disclosures
    Inventories
    Goodwill
    and Intangible Assets
    3.
    Business
    Acquisitions  1 3 2 3
 F-88




---



##### 



TELESAT
    HOLDINGS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands of Canadian dollars, unless otherwise
    noted)
    TotalCash paid (net of cash acquired)


3,229,194Shares issued (note 16)


869,656Transaction costs


32,692Purchase price


4,131,542       Current assets


101,317Satellites, property and other equipment


1,826,047Other long term assets


19,219Intangible assets


1,099,965Assumed debt


(171,620
)Current liabilities, less current portion of debt


(285,016
)Future income tax liability


(497,419
)Other long term liabilities


(407,554
)Total net assets acquired


1,684,939Goodwill


2,446,603Purchase price


4,131,542        F-89




---



##### 



TELESAT
    HOLDINGS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands of Canadian dollars, unless otherwise
    noted)
    4.
    Segmented
    Information    
    Broadcast  distribution or collection of video
    and audio signals in the North American and International
    markets which include television transmit and receive services,
    occasional use, bundled Digital Video Compression and radio
    services.
    Enterprise  provision of satellite capacity
    and ground network services for voice, data, and image
    transmission and internet access around the world.
    Consulting and Other  all consulting services
    related to space and earth segments, government studies,
    satellite control services, R&D.    Broadcast


52,771Enterprise


53,758Consulting and Other


4,887Total operating revenues


111,416   Geographic
    Information
    Revenues  Canada


60,085Revenues  United States


34,352Revenues  Europe


6,108Revenues  Asia


5,588Revenues  South America


4,586Revenues  all others


697Total operating revenues


111,416    F-90




---



##### 



TELESAT
    HOLDINGS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands of Canadian dollars, unless otherwise
    noted)
    Satellites, property and other equipment  Canada


1,373,513Satellites, property and other equipment  United
    States


434,596Satellites, property and other equipment  all others


10,503Total satellites, property and other equipment


1,818,612   Major
    Customers
    5.
    Interest
    Expense  December 31,2007Debt service costs


47,535Dividends on senior preferred shares


1,695Capitalized interest


(5,369
)43,861   6.
    Other
    Expense  December 31, 2007Foreign exchange loss


(118,034
)Gain on financial instruments


75,098Interest income


301Performance incentive payments and milestone interest expense


(499
)Other


(835
)(43,969
)   7.
    Income
    Taxes    December 31, 2007Statutory income tax rate


35.3
%Permanent differences


(32.7
)%Adjustment for tax rate changes


83.4
%Resolution of uncertain tax positions


2.2
%Other


5.7
%Effective income tax rate


93.9
%  F-91




---



##### 



TELESAT
    HOLDINGS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands of Canadian dollars, unless otherwise
    noted)
    Future


(60,653
)Current


(1,517
)Total income tax expense


(62,170
)     December 31, 2007Future Tax AssetsCapital assets


7,912Intangible assets


5,353Investments


8,256Loss carry forwards


12,610Derivative assets


17,895Other


3,560Less: valuation allowance


(34,358
)Total future tax assets


21,228   December 31, 2007Future Tax LiabilitiesCapital assets


(170,276
)Intangibles


(276,005
)Derivative liabilities


(7,398
)Other


(4,596
)Total future tax liabilities


(458,275
)Total future income taxes  net


(437,047
)     Net future income tax asset  current portion


2,594Net future income tax liability  long-term portion


(439,641
)Total future income taxes  net


(437,047
)   8.
    Accounts
    and Notes Receivable  December 31, 2007Trade receivables  net of allowance for doubtful
    accounts


54,114Less: long-term portion of trade receivables


23953,875      F-92




---



##### 



TELESAT
    HOLDINGS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands of Canadian dollars, unless otherwise
    noted)
  9.
    Assets
    Held for Sale    10.
    Other
    Assets  December 31, 2007Current portion


Long term portion


TotalNet investment in
    leases(a)


16,747



3,395



20,142Income taxes recoverable


12,847







12,847Accrued pension benefit (see note 20)






9,911



9,911Prepaid expenses and
    deposits(b)


15,236



712



15,948Deferred
    charges(c)


4,808



8,637



13,445Inventories(d)


7,239







7,239Other
    assets(e)


900



4,713



5,61357,777



27,368



85,145     (a)
    
    The net investment in leases is
    classified on the balance sheet in other current assets and
    other long-term assets, and includes the following:  December 31,Net investment in leases as at

2007Total minimum lease payments


21,383Unearned finance income


(1,241
)20,142Current portion


(16,747
)Long-term portion


3,395    Unearned finance income is
    allocated to income over the term of the lease in a manner that
    produces a constant rate of return on the investment in the
    leases. The investment in the leases for purposes of income
    recognition is composed of net minimum lease payments and
    unearned finance income. Future minimum lease payments
    receivable under the sales-type leases are $18.0 million in
    2008, and $3.4 million in 2009.(b)
    
    Prepaid expenses and deposits
    includes mainly prepaid insurance for in-orbit satellites,
    prepaid interest on bankers acceptances, and deposits
    related to foreign taxes.(c)
    
    Deferred charges include deferred
    costs related to deferred revenue, as well as deferred financing
    charges related to the revolving credit facility and the
    Canadian Term Loan (note 14).(d)
    
    Inventories are valued at lower of
    cost or market and consist of $5.7 million of finished
    goods and $1.5 million of work in process. Cost for
    substantially all network equipment inventories is determined on
    an average cost basis. Cost for work in process and certain
    one-of-a-kind finished goods is determined using specific
    identification.(e)
    
    Other assets includes: tax
    indemnifications receivable from Loral of $2.3 million
    (note 22), other deposits of $2.1 million, investments
    of $0.6 million, derivative assets of $0.4 million and
    long term trade receivables of $0.2 million.  Investments are recorded at cost.
    No impairments were recorded as no events or changes in
    circumstances were identified during the period that may have a
    significant adverse effect on the carrying value of the
    investments. Telesat has a portfolio interest in Hellas-Sat
    Consortium Limited. The consortium has one satellite which
    provides regional coverage to Greece, Cyprus and the Balkans.
    Telesat also holds a F-93




---



##### 



TELESAT
    HOLDINGS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands of Canadian dollars, unless otherwise
    noted)
  nominal portfolio interest in
    Anik-Colombia. Telesats wholly-owned subsidiary Infosat
    has a 22% interest in Pakistans Comstar ISA Ltd., a
    satellite service provider.Derivative assets relate to a
    foreign currency forward contract that matures in January 2008.  11.
    Satellites,
    Property and Other Equipment    Accumulated


Net BookCost


Amortization


ValueSatellites


1,285,583



(26,324
)


1,259,259Earth stations


120,210



(4,546
)


115,664Transponders under capital lease


67,085



(1,411
)


65,674Office buildings and other


32,619



(1,544
)


31,075Construction in progress


346,940







346,9401,852,437



(33,825
)


1,818,612     12.
    Goodwill
    and Intangible Assets    Accumulated


Net BookCost


Amortization


ValueFinite life intangible assets:Revenue backlog


274,487



(5,316
)


269,171Customer relationships


207,704



(2,072
)


205,632Favourable leases


4,368



(218
)


4,150Patents


59







59486,618



(7,606
)


479,012Indefinite life intangible assets:Orbital slots


596,347







596,347Trade name


17,000







17,000Intangible assets


1,099,965



(7,606
)


1,092,359Goodwill


2,446,603







2,446,603Goodwill and intangible assets


3,546,568



(7,606
)


3,538,962    F-94




---



##### 



TELESAT
    HOLDINGS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands of Canadian dollars, unless otherwise
    noted)
  13.
    Other
    Liabilities  Current


Long term


December 31, 2007portion


portion


TotalDeferred revenues and
    deposits(a)


54,652



257,256



311,908Derivative
    liabilities(b)


14,811



271,061



285,872Capital lease
    liabilities(c)


29,008



44,344



73,352Deferred satellite performance incentive
    payments(d)


7,533



35,791



43,324Interest payable


40,146







40,146Dividends payable on senior preferred shares (note 15)


1,695







1,695Pension and other post retirement liabilities (note 20)






24,313



24,313Other
    liabilities(e)


4,530



29,722



34,252152,375



662,487



814,862     (a)
    
    Deferred revenues represent the
    Companys liability for the provision of future services.
    The prepaid amount is brought into income over the period of
    service to which the prepayment applies. The net amount
    outstanding at December 31, 2007 will be reflected in the
    Statement of Earnings as follows: $54.7 million in 2008,
    $27 million in 2009, $25.9 million in 2010,
    $25 million in 2011, $24.9 million in 2012, and
    $154.4 million thereafter.(b)
    
    Derivative liabilities comprise the
    following:  Derivative liability

Maturity


December 31, 2007Foreign currency forward contracts


January 1, 2008 to December 1, 2009



17,545Cross currency basis swap


October 31, 2014



261,974Interest rate swaps


January 31, 2010 to November 28, 2011



6,353285,872    (c)
    
    The obligation under the capital
    lease is classified on the balance sheet in other current
    liabilities and other long-term liabilities.  Capital lease obligations

December 31, 2007Total minimum lease payments


90,025Amount representing interest (9)%


(16,673
)73,352Current portion


(29,008
)Long-term portion


44,344     Future
    minimum lease payments payable under all capital leases are
    $34 million in 2008, $17.9 million in 2009,
    $7.8 million in 2010,
         $7.8 million in 2011,
    $7.8 million in 2012 and $14.7 million thereafter.  (d)
    
    Deferred satellite performance
    incentive payments are payable over the lives of the Nimiq 1,
    Anik F1, Anik F2, Anik F3 and Anik F1R satellites. The present
    value of the payments is capitalized as part of the cost of the
    satellite, recorded as a liability, and charged against
    operations as part of the normal amortization of the satellite.
    The amounts payable on the successful operation of the
    transponders are $7.5 million in 2008, $3.1 million in
    2009, $3.4 million in 2010, $2.8 million in 2011,
    $2.1 million in 2012, and $24.4 million thereafter.(e)
    
    Other liabilities includes: tax
    indemnifications payable to Loral of $6.9 million
    (note 22), potential income tax liabilities of
    $1.8 million, unfavourable leases of $2.2 million,
    unfavourable customer revenue backlog of $15.2 million,
    income taxes payable of $0.9 million, and other liabilities
    of $7.3 million at December 31, 2007. F-95




---



##### 



TELESAT
    HOLDINGS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands of Canadian dollars, unless otherwise
    noted)
   14.
    Debt
    Financing  December 31, 2007Senior secured credit
    facilities(a):Revolving facility


20,000The Canadian term loan facility


200,000The U.S. term loan facility


1,687,652The U.S. term loan II facility


5,842Senior bridge
    loan(b)


667,806Senior subordinated bridge
    loan(c)


209,324Other debt
    financing(d)


3,7392,794,363Current portion


(18,419
)Long-term portion


2,775,944     (a)
    The senior secured credit facilities are secured by
    substantially all of Telesats assets. Under the terms of
    these facilities, Telesat is required to comply with certain
    covenants including financial reporting, maintenance of certain
    financial covenant ratios for leverage and interest coverage, a
    requirement to maintain minimum levels of satellite insurance,
    restrictions on capital expenditures, a restriction on
    fundamental business changes or the creation of subsidiaries,
    restrictions on investments, restrictions on dividend payments,
    restrictions on the incurrence of additional debt, restrictions
    on asset dispositions, and restrictions on transactions with
    affiliates. The financial covenant ratios include total debt to
    EBITDA (earnings before interest, taxes, depreciation and
    amortization) and EBITDA to interest expense. Both financial
    covenant ratios become tighter over the term of the credit
    facility. At December 31, 2007 Telesat was in compliance
    with all of the required covenants.  1 4
  (i)
    A revolving Canadian dollar denominated credit facility (the
    Revolving Facility) of up to the Canadian dollar
    equivalent of $153 million (US$154.8 million) is
    available to Telesat. This Revolving Facility matures on
    October 31, 2012 and is available to be drawn at any time.
    The drawn loans will bear interest at the prime rate or LIBOR or
    Bankers Acceptance plus an applicable margin of 175 to
    275 basis points per annum. The average interest rate was
    7.53% for the two months ended December 31, 2007. Undrawn
    amounts under the facility are subject to a commitment fee. As
    at December 31, 2007, $20 million was drawn under this
    facility.  (ii)
    The Canadian Term Loan Facility is a $200 million loan
    facility denominated in Canadian dollars, bears interest at a
    floating rate of the Bankers Acceptance rate plus an
    applicable margin of 275 basis points per annum, and has a
    maturity of October 31, 2012. There are no required
    repayments on the F-96




---



##### 



TELESAT
    HOLDINGS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands of Canadian dollars, unless otherwise
    noted)
  Canadian Term Loan facility until the third quarter of 2008. The
    average interest rate was 7.55% for the two months ended
    December 31, 2007. This facility was fully drawn at
    December 31, 2007.  (iii)
    The U.S. Term Loan Facility is a $1,755 million loan
    facility denominated in US dollars ($1,733.7 million CAD),
    bears interest at LIBOR plus an applicable margin of
    300 basis points per annum, and has a maturity of
    October 31, 2014. The average interest rate was 7.92% for
    the two months ended December 31, 2007. This facility was
    fully drawn at December 31, 2007.  (iv)
    The U.S. Term Loan II Facility is a $150 million
    delayed draw facility denominated in US dollars
    ($148.2 million CAD), bears interest at LIBOR plus an
    applicable margin of 300 basis points per annum, and has a
    maturity of October 31, 2014. The average interest rate was
    8.0% for the two months ended December 31, 2007. The
    U.S. Term Loan II Facility is available to be drawn
    for 12 months after the closing of the acquisition
    described in Note 3 to fund capital expenditures. The
    undrawn amount of the Term loan B-2 is subject to a commitment
    fee. As at December 31, 2007, US$10 million
    ($9.9 million CAD) of the facility was drawn.  (b)
    Senior Bridge Loan is a $692.8 million loan facility
    denominated in US dollars ($684.6 million CAD). The Bridge
    Loan is unsecured but is guaranteed by certain Telesat
    subsidiary entities. This facility has a maturity of
    October 31, 2008, and an initial interest rate per annum
    equal to the greater of 9% or three-month LIBOR plus the
    applicable margin. The applicable margin increases over time
    subject to an interest rate cap of 11%. The average interest
    rate was 9.0% for the two months ended December 31, 2007.
    This facility was fully drawn at December 31, 2007. The
    lenders under the Bridge Loan have a right, as early as
    April 28, 2008, to make a Securities Demand whereby Telesat
    would issue high yield notes subject to registration rights at
    an interest rate at or below the 11% cap in exchange for the
    Bridge Loan. If the Senior Bridge Loan is not repaid in full
    before October 31, 2008, the Senior Bridge Loan is
    automatically converted into a rollover loan which matures on
    October 31, 2015 and has escalating interest rates which
    are capped at 11%.  (c)
    Senior Subordinated Bridge Loan is a $217.2 million loan
    facility denominated in US dollars ($214.6 million CAD).
    The Senior Subordinated Bridge Loan is unsecured but is
    guaranteed by certain Telesat subsidiary entities. This facility
    has a maturity of October 31, 2008 and an initial interest
    rate per annum equal to the greater of 10.5% or three-month
    LIBOR plus the applicable margin. The average interest rate was
    10.5% for the two months ended December 31, 2007. The
    applicable margin increases over time subject to an interest
    rate cap of 12.5%. This facility was fully drawn at
    December 31, 2007. The lenders under the Senior
    Subordinated Bridge Loan have a right, as early as
    April 28, 2008, to make a Securities Demand whereby Telesat
    would issue high yield notes subject to registration rights at
    an interest rate at or below the 12.5% cap in exchange for the
    Senior Subordinated Bridge Loan. If the Senior Bridge Loan is
    not repaid in full before October 31, 2008, the Senior
    Subordinated Bridge Loan is automatically converted into a
    rollover loan which matures on October 31, 2015 and has
    escalating interest rates which are capped at 12.5%.  (d)
    Other debt financing includes the financing for the
    Companys headquarters building. With respect to the
    headquarters building, the Company shares equally with the
    developer, the ownership, cost and debt of the building. The
    Company has leased the developers share for twenty years
    beginning January 25, 1989 for an annual rent, excluding
    operating costs, of $1.8 million. Total headquarters
    financing of $3.7 million includes the amount owing under
    this capital lease of $1.8 million at December 31,
    2007. The imputed interest rate for the capital lease is 10.69%
    per annum.  Mortgage financing for the Companys share of the facility
    has been arranged by the developer for a twenty-year term
    coincident with the lease with interest at 11% per annum and
    with annual payments of principal and interest of
    $1.8 million. F-97




---



##### 



TELESAT
    HOLDINGS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands of Canadian dollars, unless otherwise
    noted)
     2008

2009

2010

2011

2012

Thereafter

Total$25.9

$27.7

$32.4

$107.5

$117.4

$2,556.0

$2,866.9   15.
    Senior
    Preferred Shares  winding-up,
      16.
    Capital
    Stock    Common
    Shares
  winding-up
 F-98




---



##### 



TELESAT
    HOLDINGS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands of Canadian dollars, unless otherwise
    noted)
      Common SharesValueNumber


($)Opening balance, October 31, 2007


1



Issued for cash (notes 1 and 3)


35,172,218



311,124Issued in exchange for contributed assets (notes 1 and 3)


39,080,241



445,290Ending balance, December 31, 2007


74,252,460



756,414   Voting
    Participating Preferred Shares
    
    The holders of Voting Participating Preferred Shares are not
    entitled to vote at meetings of the shareholders of the Company
    on resolutions electing directors.
    For all other meetings of the shareholders of the Company, the
    holders of Voting Participating Preferred Shares are entitled to
    a variable number of votes per Voting Participating Preferred
    Share based on the number of Voting Participating Preferred
    Shares, Non-Voting Participating Preferred Shares and Redeemable
    Non-Voting Participating Preferred Shares outstanding on the
    record date of the given meeting of the shareholders of the
    Company.
    The Voting Participating Preferred Shares are convertible, at
    any time, at the holders option into Common Shares or
    Non-Voting Participating Preferred Shares on a one-for-one basis
    as long as the result of such conversion does not cause the
    Company to cease to be a qualified corporation
    within the meaning of the Canadian Telecommunication Common
    Carrier Ownership and Control Regulations pursuant to the
    Telecommunications Act (Canada).  Non-Voting
    Participating Preferred Shares
    
    The holders of Non-Voting Participating Preferred Shares are not
    entitled to vote on any matter at meetings of the shareholders
    of the Company, except in respect of a class vote applicable
    only to the Non-Voting Participating Preferred Shares.
    The Non-Voting Participating Preferred Shares are convertible,
    at any time, at the holders option into Common Shares or
    Voting Participating Preferred Shares on a one-for-one basis as
    long as the result of such conversion does not cause the Company
    to cease to be a qualified corporation within the
    meaning of the Canadian Telecommunication Common Carrier
    Ownership and Control Regulations pursuant to the
    Telecommunications Act (Canada). F-99




---



##### 



TELESAT
    HOLDINGS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands of Canadian dollars, unless otherwise
    noted)
   Director
    Voting Preferred Shares
    
    The holders of Director Voting Preferred Shares are entitled to
    receive notice of and to attend all meetings of the shareholders
    of the Company at which directors of the Company are to be
    elected. The holders of the Director Voting Preferred Shares are
    not entitled to attend meetings of the shareholders of the
    Company and have no right to vote on any matter other than the
    election of directors of the Company.
    The holders of Director Voting Preferred Shares are entitled to
    receive annual non-cumulative dividends of $10 per share if
    declared by the board of directors of the Company, in priority
    to the payment of dividends on the Common Shares, Voting
    Participating Preferred Shares, Non-Voting Participating
    Preferred Shares, Redeemable Common Shares, and Redeemable
    Non-Voting Participating Preferred Shares, but after payment of
    any accrued dividends on the Senior Preferred Shares.
    In the event of liquidation,
    wind-up or
    dissolution, the holders of Director Voting Preferred Shares are
    entitled to receive $10 per share in priority to the payment of
    dividends on the Common Shares, Voting Participating Preferred
    Shares, Non-Voting Participating Preferred Shares, Redeemable
    Common Shares, and Redeemable Non-Voting Participating Preferred
    Shares, but after payment of any accrued dividends on the Senior
    Preferred Shares.
    The Director Voting Preferred Shares are redeemable at the
    option of the Company, at any time, at a redemption price of $10
    per share.    Voting Participating


Non-Voting Participating


Director Voting


TotalValue





Value





Value





ValueNumber


($)


Number


($)


Number


($)


Number


($)Opening balance,October 31, 2007






























Issued for cash (note 3)


7,034,444



117,388











1,000



10



7,035,444



117,398Issued in exchange for contributed assets (note 3)










25,794,025



304,449











25,794,025



304,449Issued in exchange for the novation of forward contracts from
    Loral Skynet (note 3)










10,159,799



119,917











10,159,799



119,917Ending balance, December 31, 2007


7,034,444



117,388



35,953,824



424,366



1,000



10



42,989,268



541,764  F-100




---



##### 



TELESAT
    HOLDINGS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands of Canadian dollars, unless otherwise
    noted)
  17.
    Cash Flow
    Information  December 31, 2007Cash and cash equivalents is comprised of:Cash


32,737Short term investments, original maturity 90 days or less


9,46642,203Changes in operating assets and liabilities are comprised of:Receivables


(4,718
)Other assets


132,768Accounts payable


72,380Income taxes payable


(749
)Other liabilities


7,504207,185Non-cash investing and financing activities are comprised of:Purchase of satellites, property and other equipment


4,767Shares issued in exchange for assets contributed (note 3)


869,656   18.
    Financial
    Instruments    December 31,
    2007
  Carrying ValueLoans &HFT


AFS


Receivables


Total


Fair ValueFinancial AssetsCash and cash equivalents


42,203











42,203



42,203Accounts and notes receivable










55,299



55,299



55,299Derivative financial instruments


354











354



354Other assets


7,203











7,203



7,20349,760







55,299



105,059



105,059   Carrying ValueHFT


Other


Total


Fair ValueFinancial LiabilitiesAccounts payable and accrued liabilities






81,221



81,221



81,221Customer and other deposits






6,291



6,291



6,291Debt






2,792,575



2,792,575



2,865,116Derivative financial instruments


285,872







285,872



285,872Other liabilities






80,928



80,928



80,928285,872



2,961,015



3,246,887



3,319,428  F-101




---



##### 



TELESAT
    HOLDINGS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands of Canadian dollars, unless otherwise
    noted)
            Credit
    Risk
        Currency
    Exposures
      Interest
    Rate Risk
   F-102




---



##### 



TELESAT
    HOLDINGS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands of Canadian dollars, unless otherwise
    noted)
      Fair
    Value
        19.
    Stock-Based
    Compensation Plans  Stock
    Options
      Number


Weighted-Averageof Shares


Exercise Price ($)December 31, 2007Outstanding, beginning of period


411,047



34Granted






Exercised






Expired/forfeited


(4,139
)


30Outstanding, end of period


406,908



34Exercisable, end of period


406,908



34  F-103




---



##### 



TELESAT
    HOLDINGS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands of Canadian dollars, unless otherwise
    noted)
  Deferred
    Share Units (DSUs)
      Number of DSUsDecember 31, 2007Outstanding, beginning of period


6,772Granted


Dividends credited


Exercised


Outstanding, end of period


6,772   20.
    Employee
    Benefit Plans  Telesat
    Canada
    Skynet
    Satellite Corporation
   F-104




---



##### 



TELESAT
    HOLDINGS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands of Canadian dollars, unless otherwise
    noted)
    Telesat Canada


SkynetPension


Other


OtherBenefits


Benefits


Benefits


TotalDecember 31, 2007Change in benefit obligationsBenefit obligation, October 31, 2007


159,392



16,631



8,079



184,102Current service cost


774



79







853Interest cost


1,513



146







1,659Benefit payments


(722
)


(70
)


(24
)


(816
)Plan amendment (early retirement program)


5,703







5



5,708Employee contributions


145







87



232Restructuring


(3,259
)


(562
)


(58
)


(3,879
)Benefit obligation, December 31, 2007


163,546



16,224



8,089



187,859   Telesat Canada


SkynetPension


Other


OtherBenefits


Benefits


Benefits


TotalDecember 31, 2007Change in fair value of plan assetsFair value of plan assets, October 31, 2007


176,595











176,595Return on plan assets


(2,596
)










(2,596
)Benefit payments


(722
)


(70
)


(24
)


(816
)Employee contributions


145







5



150Employer contributions


35



70



19



124Fair value of plan assets, December 31, 2007


173,457











173,457Funded status


9,911



(16,224
)


(8,089
)


(14,402
)     December 31, 2007Equity securities


60
%Fixed income instruments


38
%Short-term investments


2
%Total


100
%    F-105




---



##### 



TELESAT
    HOLDINGS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands of Canadian dollars, unless otherwise
    noted)
    Telesat Canada


SkynetPension


Other


OtherBenefits


Benefits


BenefitsDecember 31, 2007Accrued benefit obligationDiscount rate


5.5
%


5.5
%


6.5
%Rate of compensation increase


3.5
%


3.5
%


4.3
%Benefit costs for the period endedDiscount rate


5.5
%


5.5
%


6.5
%Expected long-term rate of return on plan assets


7.5
%


7.5
%


8.5
%Rate of compensation increase


3.5
%


3.5
%


4.3
%       Telesat Canada


SkynetPension


Other


OtherBenefits


Benefits


Benefits


TotalOctober 31, 2007 to December 31, 2007Current service cost


774



79







853Interest cost


1,513



146



87



1,746Expected return on plan assets


(2,206
)










(2,206
)Net benefit expense


81



225



87



393   21.
    Commitments
    and Contingent Liabilities    2008


2009


2010


2011


2012


Thereafter


TotalOff balance sheet commitments


192,402



96,537



23,073



14,749



10,648



55,024



392,433        F-106




---



##### 



TELESAT
    HOLDINGS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands of Canadian dollars, unless otherwise
    noted)
              22.
    Related
    Party Transactions   F-107




---



##### 



TELESAT
    HOLDINGS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands of Canadian dollars, unless otherwise
    noted)
    December 31, 2007Service revenues


440Operations and administration expenses


825Capital expenditures  Satellites


12,318     December 31, 2007Receivables at year end


3,389Payables at year end


9,682   23.
    Reconciliation
    to US GAAP    Reconciliation
    of Net Loss
  December 31, 2007Canadian GAAP  Net loss


(4,051
)Gains on embedded
    derivatives(a)


774Sales type lease  operating lease for US
    GAAP(b)


2,748Capital lease  operating lease for US
    GAAP(b)


(78
)Dividends on senior preferred
    shares(c)


1,695Tax effect of above
    adjustments(d)


(976
)Uncertainty in income
    taxes(e)


(2,648
)Impact of future tax rate
    reduction(d)


1,251United States GAAP  Net loss


(1,285
)Other comprehensive loss itemsChange in currency translation adjustment


(599
)United States GAAP  Comprehensive loss


(1,884
)   Accumulated
    Other Comprehensive Loss
  December 31, 2007Cumulative translation adjustment


(599
)Accumulated other comprehensive loss


(599
)  F-108




---



##### 



TELESAT
    HOLDINGS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands of Canadian dollars, unless otherwise
    noted)
  Reconciliation
    of Total Shareholders Equity
  December 31, 2007Canadian GAAP


1,293,528AdjustmentsGains on embedded
    derivatives(a)


774Sales type lease  operating lease for US
    GAAP(b)


2,748Capital lease  operating lease for US
    GAAP(b)


(78
)Tax effect of above
    adjustments(d)


(976
)Uncertainty in income
    taxes(e)


(2,648
)Impact of future tax rate
    reduction(d)


1,251United States GAAP


1,294,599     (a)
    Embedded
    Derivatives        (b)
    Sales-Type
    and Capital Leases   F-109




---



##### 



TELESAT
    HOLDINGS INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands of Canadian dollars, unless otherwise
    noted)
    (c)
    Senior
    Preferred Shares    (d)
    Income
    Taxes      (e)
    Uncertainty
    in Income Taxes    24.
    Subsequent
    Events       F-110