##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE
 COMMISSION
 Washington, D.C.
    20549
      FORM 10-K
  þ

ANNUAL REPORT PURSUANT TO
    SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934FOR THE FISCAL YEAR ENDED
    DECEMBER 31, 2006ORo

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  Rule 12b-2 o þ
      þ o




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##### Table of Contents



PART I
  Item 1.
    Business  THE
    COMPANY
  Overview
    No. 90-7, Financial Reporting of Entities in Reorganization Under the
    Bankruptcy Code (SOP 90-7).
      Satellite Manufacturing: direct-to-home
  Satellite Services:
  Recent
    Developments
  Telesat
    Canada Acquisition
   1




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##### Table of Contents



direct-to-home
  true-up and/or
  1 3 2 3
    Preferred
    Stock Financing
  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
 2




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##### Table of Contents



Series B-1 Class B-1
  Reorganization
  No. 03-41710 03-41709 03-41728
      Segment
    Overview
  Satellite
    Manufacturing Operations
  direct-to-home
   3




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##### Table of Contents



direct-to-user
  Market
    and Competition
    Satellite
    Manufacturing Performance
  Successor Registrant



Predecessor RegistrantFor the Period



For the PeriodFor the Year


October 2,



January 1,


For the YearEnded


2005 to



2005 to


EndedDecember 31,


December 31,



October 1,


December 31,2006


2005



2005


2004(in millions)Total segment revenues

$
697


$
162



$
330


$
437Eliminations


(60
)


(1
)



(11
)


(137
)Revenues from satellite
    manufacturing as reported

$
637


$
161



$
319


$
300Segment Adjusted EBITDA before
    eliminations(1)

$
66


$
12



$
15


$
(14
)     (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 20 to the consolidated financial statements for the
    definition of Adjusted EBITDA).    Satellite
    Services Operations
  C-band Ku-band X-band.
  Transponder
    Leasing
  Ku-band direct-to-home
 4




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##### Table of Contents



Network
    Services
  bandwidth-on-demand, sm
    Professional
    Services
    Market
    and Competition
  point-to-point end-to-end point-to-multipoint
   5




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##### Table of Contents



Satellite
    Fleet & Ground Resources
      (1)
  Actual36 MHz Equivalent



or Planned

PlannedAvailable
    Transponders(2)

Geographic

In Service

End of

SatelliteSatellite

Location

C-band

Ku-band

Coverage

Date

Life(2)

ModelTelstar 10/Apstar
    IIR(3)

76.5o E.L.

26.8

14.5

Asia and portions of Europe,
    portions of Africa and Australia

12/1997

9/2012

SS/L 1300Telstar 12

15o W.L.

0

51

Eastern U.S., SE Canada, Europe,
    Russia, Middle East, North Africa, portions of South and Central
    America

12/1999

9/2016

SS/L 1300Telstar 14/Estrela do
    Sul-1(4)

63o W.L.

0

26.6

Brazil and portions of Latin
    America, North America, Atlantic Ocean

4/2004

7/2010

SS/L 1300Telstar
    18(5)

138o E.L.

15.2

5.6

India, South East Asia, China,
    Australia and Hawaii

8/2004

11/2018

SS/L 1300Telstar
    11N(6)

37.5o W.L

0

58.5

North and Central America, Europe,
    Africa and the maritime Atlantic Ocean region

Late 2008 Estimate

2026 Estimate

SS/L 1300     (1)
    
    In addition, we lease a total of
    17.4 36 MHz equivalent transponders from other satellite
    operators in regions where we currently do not have our own
    assets.(2)
    
    Our satellite fleet has experienced
    anomalies and malfunctions as further described in Note 19
    to the consolidated financial statements. The number of
    available transponders and expected end of life shown in this
    table reflects our estimate of the effect of such anomalies on
    each affected satellites capacity and useful life.(3)
    
    Loral Skynet has a
    fully-paid-up
    leasehold interest in this satellite through the end of the
    satellites life from APT.(4)
    
    Estrela do Sul-1 was launched in
    January 2004 and did not fully deploy one of its solar arrays,
    which resulted in a substantial loss of the satellites
    available transponder capacity and reduced its expected life to
    2010. See Managements Discussion and Analysis of Financial
    Condition and Results of Operations.(5)
    
    Telstar 18 went into commercial
    service in August 2004. This satellite carries additional
    transponders, not shown on the table, that APT acquired in 2004
    in return for funding a portion of the satellites cost.
    This transponder sale was accounted for as a sales-type lease,
    because substantially all of the benefits and risks incident to
    the ownership of the leased property were transferred to the
    lessee. Loral will re-acquire four additional transponders from
    APT in 2008 for $18.1 million and two additional
    transponders for $9.1 million in 2009.(6)
    
    This satellite is under
    construction at SS/L and is a replacement satellite to Loral
    Skynets Telstar 11, which is currently operating in
    inclined orbit and generating minimal revenues. 6




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##### Table of Contents



Satellite
    Services Performance
  Successor Registrant



Predecessor RegistrantFor the Period



For the PeriodFor the Year


October 2,



January 1,


For the YearEnded


2005 to



2005 to


EndedDecember 31,


December 31,



October 1,


December 31,2006


2005



2005


2004(in millions)Satellite services revenues

$
164


$
37



$
115


$
141Satellite services sales-type
    lease
    arrangement(1)















87Total segment revenues


164



37




115



228Eliminations


(3
)


(1
)



(4
)


(5
)Revenues from satellite services
    as reported

$
161


$
36



$
111


$
223Segment Adjusted EBITDA before
    eliminations(2)

$
68


$
12



$
40


$
23     (1)
    
    See Note 8 to the consolidated
    financial statements.(2)
    
    See Managements Discussion
    and Analysis of Financial Condition and Results of Operations
    for significant items that affect comparability between the
    periods presented (see Note 20 to the consolidated
    financial statements for the definition of Adjusted EBITDA).    Telesat
    Canada
  owned-and-operated leased-and-operated end-to-end
  back-up
  1 3 2 3
   7




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##### Table of Contents



Actual or Planned36 MHz Equivalent Available
    Transponders(1)



In Service

Planned

SatelliteSatellite

Location

C-band

Ku-band

Ka-band

Geographic Coverage

Date

End of
    Life(1)

ModelNimiq
    1(2)

91o W.L.

0

21.3

0

Canada, Continental United States

6/1999

2024

LM A2100AXNimiq
    2(3)

82o W.L.

0

13.3

2
    @500MHz(unavailable due to power constraints)

Canada, Continental United States

2/2003

2023

LM A2100AXAnik
    F1(4)

107.3o W.L.

12

12



Canada, Continental United States,
    South America

2/2001

2012

BSS 702Anik
    F2(5)

111.1oW.L.

24

24

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

Canada, Continental United States

8/2004

2028

BSS 702Anik
    F1-R(6)

107.3o W.L.

24

24

2 L-band transponders; @20MHz

North America

10/2005

2024

Astrium E3000Nimiq
    3(1)(7)

82o W.L.

0

10.7



Canada

7/1995

2010

BSS 601Nimiq
    4i(8)

91o W.L.

0

10.7



Canada

9/1994

2007

BSS 601Anik
    F3(9)

118.7o W.L.

24

24

2@75MHz

Canada, Continental United States

Early 2007 (est.)

2025 (est.)

Astrium E3000Nimiq
    4(10)

82o W.L.

0

21.3

8@54MHz

Canada

Mid 2008 (est.)

2026 (est.)

Astrium E3000Nimiq
    5(11)

72.7o W.L.

0

21.3

0

Canada

Early 2010 (est.)

2027 (est.)

SS/L 1300     (1)
    
    Certain of the satellites in
    Telesat Canadas fleet have experienced anomalies affecting
    the available power on the spacecraft and intermittent anomalies
    with certain amplifiers in the
    Ka-band and
    Ku-band payloads. The number of available transponders and
    expected end of life shown in the table reflects an estimate of
    the effect of such anomalies on a satellites current
    capacity and useful life. See notes below for additional
    information on the effects of these anomalies.In addition, Nimiq 3 has suffered
    the failure of its prime satellite computer processor and is now
    operating on the backup processor. A number of Boeings BSS
    601 series of satellites have suffered in orbit failures of both
    their satellite computer processors, resulting in a total loss
    of the satellite. Boeing has identified the root cause of the
    failure and believes that the probability of this type of
    failure decreases with time in orbit. If the satellite suffers a
    failure of the backup processor, it could have a material
    adverse effect on Telesat Canadas business.In certain instances insurance
    proceeds have been received for these anomalies. In one
    instance, insurance proceeds have been received and a balance of
    up to $20 million is expected to be received in 2007 if the
    power level on the satellite degrades as expected. In the event
    that the power level on such satellite is better than predicted,
    the amount of this payment will be adjusted by applying a
    formula that could result in either a pro-rated payment to
    Telesat Canada or a pro-rated repayment of up to a maximum of
    $14.1 million by Telesat Canada to the insurers.(2)
    
    The lifetime transponder capacity
    on Nimiq 1 was contracted for by Bell ExpressVu. The
    Ka-band
    payload on the satellite is a small demonstration payload and is
    currently not available due to power limitations.(3)
    
    The lifetime transponder capacity
    on Nimiq 2 was contracted for by Bell ExpressVu. The capacity of
    Nimiq 2 is expected to decrease to 11.3 (36 MHz equivalent)
    transponders by 2016. The
    Ka-band
    payload on the satellite is a small demonstration payload.(4)
    
    Anik F1 initially covered both
    North America and South America from the 107.3o W.L.
    orbital slot. Telesat Canada now uses Anik F1 to provide
    coverage only of South America. The power available for the
    South American payload is expected to decrease to 5 C-band
    transponders by end of life. Telesat Canadas current plan
    is to retain Anik F1 to provide service to customers in South
    America for an additional four to five years.(5)
    
    Telesat Canada has sold 13.5 of the
    24 Ku-band channels (36 MHz equivalent) on Anik F2 with
    Cancom (Star Choice) for the life of the satellite. In addition,
    Telesat Canada has licensed the
    Ka-band
    capacity covering the United States (30 of 45 spot beams)
    exclusively to WildBlue in exchange for service payments, which
    have been fully prepaid by Wildblue and a minority ownership
    interest in WildBlue, which ownership interest was transferred
    from Telesat Canada to BCE Inc.In 1999, Telesat Canada was awarded
    a $60 million contract from the Canadian Space Agency to
    build and integrate signal processing technology on the
    Ka-band
    payload in partnership with key Canadian space segment equipment
    manufacturers. As part of that agreement, 8




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##### Table of Contents



Telesat Canada agreed to provide
    specific engineering services and to provide a portion of the
    Ka-band
    capacity to the Government of Canada for multi-media services
    for a
    10-year
    period that will expire in 2014.(6)
    
    Anik F1-R, with a
    15-year
    contract service life, was constructed to provide service to
    Telesat Canadas North American customers previously being
    serviced on the Anik F1 satellite. Telesat Canada has entered
    into a
    10-year
    services agreement with Cancom (Star Choice) for 21 of the 24
    Ku-band transponders (36 MHz equivalent) on Anik F1-R.Anik F1-R also includes a North
    American Wide Area Augmentation System, or WAAS, payload for
    which Telesat Canada has a
    10-year
    utilization contract with Lockheed Martin Corporation. The WAAS
    payload enhances North American Air Traffic Control systems, and
    represents a continued expansion of Telesat Canadas North
    American customer base.(7)
    
    Telesat Canada entered into a lease
    agreement with DIRECTV, under which that operators
    in-orbit DBS satellite (DIRECTV 3) was moved to one of the
    Nimiq orbital positions for use by Telesat Canadas
    customer, Bell ExpressVu. The satellite was subsequently named
    Nimiq 3. Telesat Canada continues to lease and operate the
    satellite from the 82.0o WL position. The lease with
    DIRECTV for the Nimiq 3 satellite extends until the end of life
    of the satellite, except that DIRECTV has a right to terminate
    the lease early if there is a significant failure of one or more
    of its satellites. All of the Nimiq 3 transponders have been
    leased to Bell ExpressVu.(8)
    
    Telesat Canada entered into a lease
    agreement with DIRECTV, under which that operators
    in-orbit DBS satellite (DIRECTV 2) would be moved to one of
    the Nimiq orbital positions for use by its customer, Bell
    ExpressVu. Telesat Canada continues to lease and operate the
    satellite from the 91.0o WL position. The lease with
    DIRECTV for the Nimiq 4i satellite extends until the end of life
    of the satellite. All of the Nimiq 4i transponders have been
    leased to Bell ExpressVu. Like Nimiq 3, Nimiq 4i is in the
    BSS 601 series of satellite. Unlike Nimiq 3, however, both
    of Nimiq 4is satellite computer processors are
    operational. Nimiq 4i is currently being operated in inclined
    orbit. Telesat Canada plans to replace Nimiq 4i in the second
    quarter of 2007 with another leased satellite from DirecTV
    provided regulatory approvals are obtained to operate such
    replacement satellite at the 91.0o W.L. position.(9)
    
    Construction of Anik F3 is
    complete, but due to delays resulting from the investigation by
    the launch provider, International Launch Services, or ILS, of
    the failure of a Proton rocket launch early in 2006, Anik F3 has
    been placed in storage. ILS has now resolved the issue and
    resumed launches, and Telesat Canada expects Anik F3 to be
    launched during the first half of 2007. Telesat Canada has
    contracted all 24 Ku-band transponders (36 MHz equivalent)
    to EchoStar, covering the life of Anik F3.(10)
    
    Telesat Canada entered into
    contractual arrangements with EADS Astrium for the construction
    of Nimiq 4, currently scheduled to be available for service
    in mid-2008. Telesat Canada has contracted the entire payload of
    the lifetime capacity of Nimiq 4 to Bell ExpressVu.(11)
    
    Telesat Canada entered into
    contractual arrangements with SS/L for the construction of
    Nimiq 5, currently scheduled to be available for service in
    2010. Telesat Canada has contracted the entire payload of the
    lifetime capacity of Nimiq 5 to Bell ExpressVu.  Investment
    in Affiliates
  XTAR
    XTAR-LANT, take-up
  Globalstar
   9




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Satmex
   10




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REGULATION
  Telecommunications
    Regulation
    U.S. Regulation
  U.S.-licensed non-U.S. licensed
  Authorization
    to Launch and Operate Satellites  15-year 15-year
    Coordination
    Requirements   11




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##### Table of Contents



Regulation
    by Non-U.S National Telecommunications Authorities  and/or
  non-U.S. authorizations non-U.S. authorization
  U.S.-licensed
  Ka-band Ka-band Ka-band and/or
  14/Estrela 10/Apstar IIR
    The ITU
    Frequency Coordination Process      Export
    Regulation
   12




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PATENTS
    AND PROPRIETARY RIGHTS
        RESEARCH
    AND DEVELOPMENT
     13




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FOREIGN
    OPERATIONS
    EMPLOYEES
   14




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##### Table of Contents



AVAILABLE
    INFORMATION
  Form 10-K, Form 10-Q, Form 8-K,
  Item 1A.
    Risk
    Factors  I.
    Financial
    and Telesat Transaction Risk Factors  There can
    be no assurance that the pending Telesat acquisition will be
    completed, and the failure to complete the transaction would
    adversely affect us.
    Failure
    to effect the Skynet Transaction on the terms contemplated would
    have an adverse effect on us.
    Our joint
    venture acquisition vehicle will be required to close the
    Telesat acquisition without any
    purchase price adjustment even if Telesat Canada were to
    experience a satellite loss.
   15




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##### Table of Contents



Changes
    in the Canadian and U.S. dollar exchange rate can adversely
    affect us.
    There can
    be no assurance that we will be able to fully implement the cost
    savings we have planned.
    Our
    equity investment in New Telesat may be at risk because New
    Telesat will be highly leveraged.
    We
    emerged from Chapter 11 in 2005 and have a history of
    losses.
   16




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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.
    The
    indenture governing Loral Skynets 14% senior secured
    notes contains restrictions on our
    operations and the notes will be required to be redeemed to
    effect the Skynet Transaction, which
    proposed redemption has been objected to by certain
    noteholders.
    The Loral
    Skynet notes are collateralized by substantially all of Loral
    Skynets assets.
   17




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##### Table of Contents



We may in
    the future incur significant additional indebtedness, thereby
    making us more vulnerable to adverse developments.
    XTAR has
    not generated sufficient revenues to meet all of its contractual
    obligations; we may be required to make additional capital
    contributions to the venture.
  take-up
  Replacing
    a satellite upon the end of its useful life will require us to
    make significant expenditures.
    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.
   18




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##### Table of Contents



II.
    Operational
    Risk Factors  
    Risk
    Factors Associated With Satellite Manufacturing  The
    satellite manufacturing market is highly competitive and fixed
    costs are high.
      SS/Ls
    contracts are subject to adjustments, cost overruns, risk of
    non-payment and termination.
       19




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##### Table of Contents



start-up start-up
    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
    Loral Skynet or other affiliates, 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.
   20




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##### Table of Contents



We are
    subject to export controls, which may result in delays and
    additional costs.
  and/or
  non-U.S. competitors
  The
    recent trend toward industry consolidation in the satellite
    services industry may adversely affect us.
  back-up
  The
    availability of qualified personnel and facility space may be
    limited; SS/L will incur costs to upgrade or expand its facility
    and these costs may be substantial.
    
    Risk
    Factors Associated With Satellite Services  Launch
    delays or failures have delayed some of our operations in the
    past and may do so again in the future.
    14/Estrela
 21




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##### Table of Contents



After
    launch, our 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 our insurance.
   22




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Like
    other satellite operators, we are faced with increased launch
    and in-orbit insurance premiums.
    Our fixed
    satellite services businesses compete for market share,
    customers and orbital slots against competitors that are
    significantly larger than us.
  point-to-point
      The
    content of third-party transmissions over our satellites may
    affect us.
    Our
    business is regulated, causing uncertainty and additional
    costs.
   23




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##### Table of Contents



later-in-time
    
    Risk
    Associated With Conducting Business
    Internationally  We face
    risks in conducting business internationally.
    III.
    Other
    Risks  We share
    control of our affiliates with third parties.
  1 3
  We rely
    on key personnel.
   24




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##### Table of Contents



MHR is
    our controlling shareholder and may have conflicts of interest
    with us in the future.
  Series B-1 Series A-1
  Compliance
    with the Sarbanes-Oxley Act increases our operating
    expenses.
    The
    future use of tax attributes is limited upon emergence from
    bankruptcy.
   25




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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
   26




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##### Table of Contents



IV.
    Litigation
    and Disputes  We are
    involved in a number of ongoing lawsuits.
    Item 1B.Unresolved
    Staff Comments
    Item 2.
    Properties  Corporate
    Satellite
    Manufacturing
    Satellite
    Services
      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  New
    Loral Common Stock
   27




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##### Table of Contents



Series A-2 Series B-2 Series B-1 Series B-2 Series A-2
  Over-the-Counter
  High


LowYear ended December 31,
    2006Quarter ended December 31,
    2006

$
41.13


$
26.05Quarter ended September 30,
    2006


29.40



24.50Quarter ended June 30, 2006


29.39



26.37Quarter ended March 31, 2006


28.75



24.44Year ended December 31,
    2005October 1, 2005 through
    December 31, 2005

$
29.40


$
21.75July 27, 2005 through
    September 30, 2005

$
28.70


$
26.50  28




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##### Table of Contents



Comparison
    of Cumulative Total Returns
  The following Performance Graph and related information shall
    not be deemed soliciting material or to be
    filed with the Securities and Exchange Commission,
    nor shall such information be incorporated by reference into any
    future filing und the Securities Act of 1933 or Securities Act
    of 1934, each as amended, except to the extent that the Company
    specifically incorporates it by reference into such filings.
    
  Old
    Loral Common Stock
    High


LowYear ended December 31,
    2005October 1, 2005 through
    November 21, 2005

$
0.43


$
0.04Quarter ended September 30,
    2005


0.30



0.04Quarter ended June 30, 2005


0.53



0.16Quarter ended March 31, 2005


0.23



0.11   (b)
    Approximate
    Number of Holders of Common Stock   29




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##### Table of Contents



(c)
    Dividends    Series A-1 Series B-1 Series A-1 Series B-1 Series A-1 Series B-1 Series A-1 Series B-1
    (d)
    Sales of
    Unregistered Securities by Registrant    (e)
    Securities
    Authorized for Issuance under Equity Compensation
    Plans    Item 6.
    Selected
    Financial Data     30




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##### Table of Contents



SOP 90-7 Business Combinations Form 10-K.
    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,Year Ended


2005 to



2005 toDecember 31,


December 31,



October 1,


Year Ended December 31,2006


2005



2005


2004


2003


2002Statement of operations
    data:Revenues

$
797,333


$
197,165



$
429,183


$
522,127


$
392,043


$
900,527Operating income (loss) from
    continuing operations


29,818



(4,945
)



(67,095
)


(214,345
)


(388,873
)


(208,368
)Gain on discharge of pre-petition
    obligations and fresh-start adjustments











1,101,453(1
)










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


30,117



(5,395
)



1,022,651



(207,852
)


(368,355
)


(237,540
)Income tax (provision) benefit


(20,880
)


(1,752
)



10,901



(13,284
)(2)


6,330



(322,422
)(2)Income (loss) from continuing
    operations before equity (losses) income in affiliates and
    minority interest


9,237



(7,147
)



1,033,552



(221,136
)


(362,025
)


(559,962
)Equity (losses) income in
    affiliates(3)


(7,163
)


(5,447
)



(2,796
)


46,654



(51,153
)


(76,280
)Minority interest


(24,794
)


(2,667
)



126



135



20



(226
)(Loss) income from continuing
    operations


(22,720
)


(15,261
)



1,030,882



(174,347
)


(413,158
)


(636,468
)(Loss) income from discontinued
    operations, net of taxes















(2,348
)


18,803



57,566Gain on sale of discontinued
    operations, net of taxes











13,967











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


(22,720
)


(15,261
)



1,044,849



(176,695
)


(394,355
)


(578,902
) 31




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##### Table of Contents



Successor Registrant



Predecessor RegistrantFor the Period



For the PeriodOctober 2,



January 1,Year Ended


2005 to



2005 toDecember 31,


December 31,



October 1,


Year Ended December 31,2006


2005



2005


2004


2003


2002Cumulative effect of change in
    accounting principle, net of taxes



















(1,970
)


(890,309
)(4)Extraordinary gain on acquisition
    of minority interest



















13,615



Net (loss) income


(22,720
)


(15,261
)



1,044,849



(176,695
)


(382,710
)


(1,469,211
)Preferred dividends



















(6,719
)


(89,186
)Net (loss) income applicable to
    common stockholders


(22,720
)


(15,261
)



1,044,849



(176,695
)


(389,429
)


(1,558,397
)Basic and diluted (loss)
    earnings per share:Continuing operations

$
(1.14
)

$
(0.76
)


$
23.37


$
(3.96
)

$
(9.58
)

$
(19.47
)Discontinued operations











0.32



(0.05
)


0.43



1.55Before cumulative effect of change
    in accounting principle and extraordinary gain on acquisition of
    minority interest


(1.14
)


(0.76
)



23.69



(4.01
)


(9.15
)


(17.92
)Cumulative effect of change in
    accounting principle



















(0.05
)


(23.89
)Extraordinary gain on acquisition
    of minority interest



















0.31



(Loss) earnings per share

$
(1.14
)

$
(0.76
)


$
23.69


$
(4.01
)

$
(8.89
)

$
(41.81
)Deficiency of earnings to cover
    fixed charges

$
13,377


$
8,062



$
65,570


$
208,809


$
389,218


$
337,019Cash flow data:Provided by (used in) operating
    activities(5)


88,002



(38,531
)



(143,827
)


66,129



232,653



192,670(Used in) provided by investing
    activities(6)


(175,978
)


(5,089
)



194,707



906,887



(157,484
)


(138,824
)Provided by (used in) equity
    transactions



















3,852



(32,737
)(Used in) provided by financing
    transactions


(1,278
)


120,763








(966,887
)


(3,313
)


(115,122
)   Successor Registrant



Predecessor RegistrantDecember 31,



December 31,2006


2005



2004(7)


2003(7)


2002(2)(4)Balance sheet data:Cash and cash equivalents

$
186,542


$
275,796



$
147,773


$
141,644


$
65,936Short-term investments


106,588
















Total assets


1,729,911



1,678,977




1,218,733



2,463,813



2,692,802Debt, including current portion


128,084



128,191












2,236,497Non-current liabilities and
    minority interest


535,271



603,374




84,677



72,932



354,475Convertible redeemable preferred
    stock



















125,081Liabilities subject to compromise
    (see Notes 5 and 11 to the consolidated financial
    statements)











1,916,000



2,921,680



Shareholders equity (deficit)


647,002



627,164




(1,044,101
)


(855,670
)


(354,227
)     (1)
    
    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).(2)
    
    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. 2002 includes an increase in the deferred tax
    valuation allowance of $390 million, based upon
    managements assessment that insufficient positive evidence
    existed substantiating recoverability of our loss carryforwards
    and other deferred tax assets (see Note 14 to the
    consolidated financial statements). 32




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##### Table of Contents



(3)
    
    Our principal affiliate is XTAR.
    Loral also has investments in joint ventures providing
    Globalstar service, which are accounted for under the equity
    method. During 2004, we recorded $47 million of equity
    income on the reversal of vendor financing liabilities that were
    non-recourse to SS/L in the event of non-payment by Globalstar,
    L.P. During 2003, we wrote off our remaining investment of
    $29 million in Satmex. See Note 9 to the consolidated
    financial statements.(4)
    
    On January 1, 2002, in
    compliance with the adoption of SFAS 142, we recorded a
    charge of $890 million to write off all of our goodwill as
    the cumulative effect of change in accounting principle.(5)
    
    Cash flow provided by (used in)
    operating activities includes cash flow from operating
    activities provided by discontinued operations.(6)
    
    Cash flow (used in) provided by
    investing activities includes cash flow provided by (used in)
    investing activities of discontinued operations.(7)
    
    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 have been extinguished as of the
    Effective Date.  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.
    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 New
    Telesat, 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.
 33




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##### Table of Contents



Overview
  Businesses
    Satellite
    Manufacturing
  direct-to-home
        Satellite
    Services
  point-to-point end-to-end point-to-multipoint
 34




---



##### Table of Contents



Bankruptcy
    Reorganization
  2001-2003, two-and-a-half
  SOP 90-7
 35




---



##### Table of Contents



Future
    Outlook
              Form 10-K,
  Consolidated
    Operating Results
     36




---



##### Table of Contents



37




---



##### Table of Contents



Revenues:
  For the Period


For the PeriodOctober 2,


January 1,Year Ended


2005 to


2005 to


Year EndedDecember 31,


December 31,


October 1,


December 31,2006


2005 (a)


2005


2005


2004(in millions)Satellite Manufacturing

$
696.5


$
491.3


$
161.8


$
329.5


$
436.6Satellite Services


163.8



151.5



37.0



114.5



141.2Revenues from sales-type lease
    arrangement


















87.2Segment revenues


860.3



642.8



198.8



444.0



665.0Eliminations(1)


(63.0
)


(16.4
)


(1.6
)


(14.8
)


(142.9
)Revenues as
    reported(2)

$
797.3


$
626.4


$
197.2


$
429.2


$
522.1   Adjusted
    EBITDA:
  For the Period


For the PeriodOctober 2,


January 1,Year Ended


2005 to


2005 to


Year EndedDecember 31,


December 31,


October 1,


December 31,2006


2005 (a)


2005


2005


2004(in millions)Satellite
    Manufacturing(3)

$
65.9


$
27.0


$
11.8


$
15.2


$
(13.5
)Satellite
    Services(4)


68.0



51.3



11.5



39.8



15.6Satellite Services sales-type
    lease arrangement


















7.7Corporate
    expenses(5)


(26.8
)


(28.3
)


(11.0
)


(17.3
)


(34.9
)Segment Adjusted EBITDA before
    eliminations


107.1



50.0



12.3



37.7



(25.1
)Eliminations(1)


(6.0
)


(13.5
)


(1.2
)


(12.3
)


(24.0
)Adjusted EBITDA

$
101.1


$
36.5


$
11.1


$
25.4


$
(49.1
)  38




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##### Table of Contents



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


For the PeriodOctober 2,


January 1,Year Ended


2005 to


2005 to


Year EndedDecember 31,


December 31,


October 1,


December 31,2006


2005 (a)


2005


2005


2004(in millions)Adjusted EBITDA

$
101.1


$
36.5


$
11.1


$
25.4


$
(49.1
)Depreciation and
    amortization(6)


(71.3
)


(77.3
)


(16.0
)


(61.3
)


(134.8
)Reorganization expenses due to
    bankruptcy






(31.2
)






(31.2
)


(30.4
)Operating income (loss) from
    continuing operations


29.8



(72.0
)


(4.9
)


(67.1
)


(214.3
)Gain on discharge of pre-petition
    obligations and fresh-start
    adjustments(7)






1,101.5







1,101.5



Interest and investment income


31.5



10.5



4.1



6.4



9.9Interest expense


(23.4
)


(21.6
)


(4.4
)


(17.2
)


(2.9
)Other expense


(7.8
)


(1.1
)


(0.2
)


(0.9
)


(0.5
)Income tax (provision) benefit


(20.8
)


9.1



(1.8
)


10.9



(13.2
)Equity (losses) income in
    affiliates


(7.2
)


(8.2
)


(5.4
)


(2.8
)


46.6Minority interest


(24.8
)


(2.6
)


(2.7
)


0.1



0.1(Loss) income from continuing
    operations


(22.7
)


1,015.6



(15.3
)


1,030.9



(174.3
)Income (loss) from discontinued
    operations, net of taxes






14.0







14.0



(2.4
)Net (loss) income

$
(22.7
)

$
1,029.6


$
(15.3
)

$
1,044.9


$
(176.7
)     (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)
    
    Includes revenues from affiliates of $11.3 million,
    $4.1 million, $10.0 million, and $7.8 million for
    the year ended December 31, 2006, for the period
    October 2, 2005 to December 31, 2005, the period
    January 1, 2005 to October 1, 2005 and the year ended
    December 31, 2004, respectively.(3)  Year Ended December 31,2006


2005 (a)


2004(in millions)Satellite Manufacturing includes:Adjusted EBITDA before specific
    identified charges

$
56.8


$
47.9


$
10.8Transponder rights provided to
    SS/L in the Satmex Settlement Agreement


19.0







Accrued warranty obligations


(8.2
)


(17.3
)


(9.7
)Write-off of long-term receivables
    due to contract modifications










(11.3
)Provisions for inventory
    obsolescence


(1.7
)


(3.6
)


(3.3
)Satellite Manufacturing segment
    Adjusted EBITDA before eliminations

$
65.9


$
27.0


$
(13.5
)  39




---



##### Table of Contents



Satellite Manufacturing EBITDA excludes charges of
    $24 million for 2004, as a result of the settlement of all
    orbital receivables on satellites sold to Intelsat. This
    settlement had the effect of reducing future orbital receipts by
    $25 million, including $15 million relating to a
    satellite under construction in 2004. Consistent with our
    internal reporting for satellite manufacturing, this decrease in
    contract value for the satellite under construction was not
    reflected as a decrease in 2004 satellite manufacturing
    revenues. These charges had no effect on our consolidated
    results in 2004.(4)
    
    Satellite Services Revenue and EBITDA include $14.9 million
    resulting from receipt of a customer termination payment for the
    year ended December 31, 2006. For the year ended
    December 31, 2004, Satellite Services recognized
    $7.7 million of EBITDA for a sales-type lease arrangement
    for satellite capacity and an impairment charge of
    $12.0 million relating to our Telstar
    14/Estrela
    do Sul-1 satellite and related assets to reduce the carrying
    values to the expected proceeds from insurance.(5)
    
    Represents corporate expenses incurred in support of our
    operations and for the year ended December 31, 2006 and the
    period October 2, 2005 to December 31, 2005 includes
    $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.(6)
    
    Includes additional depreciation expense of $9 million for
    2004, due to reducing the estimated life of our Telstar 11
    satellite from March 2005 to June 2004. Also includes
    amortization of unearned stock compensation charges.(7)
    
    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).  2006
    Compared with 2005 and 2005 Compared with 2004 (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


2006


2005December 31,


vs.


vs.2006


2005 (a)


2004


2005


2004(in millions)Revenues from Satellite
    Manufacturing

$
697


$
491


$
437



42
%


13
%Eliminations


(60
)


(11
)


(137
)


412
%


91
%Revenues from Satellite
    Manufacturing as reported

$
637


$
480


$
300



33
%


61
%      40




---



##### Table of Contents



Revenues
    from Satellite Services
  % Increase(Decrease)Year Ended


2006


2005December 31,


vs.


vs.2006


2005 (a)


2004


2005


2004(in millions)Revenues from Satellite Services
    before specific items

$
149


$
147


$
141



2
%


7
%Customer termination payment


15







Cash basis customer payments






5



Revenues from sales-type lease
    arrangement










87Eliminations


(3
)


(5
)


(5
)


(35
)%


Revenues from Satellite Services
    as reported

$
161


$
147


$
223



10
%


(34
)%      41




---



##### Table of Contents



Cost of
    Satellite Manufacturing
  % Increase(Decrease)Year Ended


2006


2005December 31,


vs.


vs.2006


2005 (a)


2004


2005


2004(in millions)Cost of Satellite Manufacturing
    includes:Cost of Satellite Manufacturing
    before specific identified charges

$
537


$
394


$
273



36
%


46
%Depreciation and amortization


23



15



23



55
%


(34
)%Transponder rights provided to
    SS/L in the Satmex Settlement Agreement


(19
)






Accrued warranty obligations


8



17



8



(53
)%


50
%Write-off of long-term receivables
    due to contract modifications










11Provisions for inventory
    obsolescence


2



4



3



(54
)%


10
%Cost of Satellite Manufacturing

$
551


$
430


$
318



28
%


36
%Cost of Satellite Manufacturing as
    a % of Satellite Manufacturing revenues as reported


87
%


90
%


106
%      42




---



##### Table of Contents



Cost of
    Satellite Services
  % Increase(Decrease)Year Ended


2006


2005December 31,


vs.


vs.2006


2005 (a)


2004


2005


2004(in millions)Cost of Satellite Services
    includes:Cost of Satellite Services before
    specific identified charges

$
53


$
59


$
65



(10
)%


(10
)%Depreciation and amortization


46



61



112



(25
)%


(44
)%Impairment charge for Telstar
    14/Estrela
    do Sul-1 satellite










12Cost of sales-type lease
    arrangement










80Cost of Satellite Services

$
99


$
120


$
269



(18
)%


(55
)%Cost of Satellite Services as a %
    of Satellite Services revenues as reported


62
%


82
%


121
%     14/Estrela
 43




---



##### Table of Contents



Selling,
    General and Administrative Expenses
  % Increase(Decrease)Year Ended


2006


2005December 31,


vs.


vs.2006


2005 (a)


2004


2005


2004(in millions)Selling, general and
    administrative expenses

$
126


$
112


$
119



12
%


(2
)%Continuing expenses for bankruptcy
    related matters


1



4







(70
)%



%Selling, general and
    administrative expenses as reported

$
127


$
116


$
119% of revenues as reported


16
%


19
%


23
%       Gain on
    Litigation Settlement
    Reorganization
    Expenses Due to Bankruptcy
  % Increase(Decrease)Year Ended


2006


2005December 31,


vs.


vs.2006


2005 (a)


2004


2005


2004(in millions)Reorganization Expenses Due to
    Bankruptcy

$



$
31


$
30




%


3
%      44




---



##### Table of Contents



Gain on
    Discharge of Pre-petition Obligations and Fresh-start
    Adjustments
    Interest
    and Investment Income
  Year EndedDecember 31,2006


2005 (a)


2004(in millions)Interest and investment income

$
32


$
11


$
10       Interest
    Expense
  Year EndedDecember 31,2006


2005 (a)


2004(in millions)Interest cost before capitalized
    interest

$
26


$
9


$
4Interest expense in connection
    with our Plan of Reorganization






13



Capitalized interest


(3
)






(1
)Interest expense

$
23


$
22


$
3       Other
    Income (Expense)
   45




---



##### Table of Contents



Income
    Tax (Provision) Benefit
  paid-in-capital.
  available-for-sale
           46




---



##### Table of Contents



Equity
    Income (Losses) in Affiliates
  Year EndedDecember 31,2006


2005 (a)


2004(in millions)XTAR

$
(7.4
)

$
(8.1
)

$
0.1Other


0.2



(0.1
)


46.5$
(7.2
)

$
(8.2
)

$
46.6     start-up,
    Minority
    Interest
      Discontinued
    Operations
    Accounting for
    the Impairment or Disposal of Long-Lived Assets
 47




---



##### Table of Contents



Backlog
    2006


2005Satellite Manufacturing

$
1,118


$
815Satellite Services


355



453Total backlog before eliminations


1,473



1,268Satellite Manufacturing
    eliminations


(116
)


Satellite Services eliminations


(10
)


(20
)Total backlog

$
1,347


$
1,248   Critical
    Accounting Matters
    Fresh-Start
    Accounting
    Revenue
    recognition
  cost-to-cost
  Depreciation
    Cash
    and Cash Equivalents and Short-Term Investments
   48




---



##### Table of Contents



Available-for-sale
  Billed
    receivables, vendor financing and long-term
    receivables
    Inventories
    Evaluation
    of Satellites and Other Long-Lived Assets For
    Impairment
    
    Changes in estimates of the useful life of the satellite
    Changes in estimates of our ability to operate the satellite at
    expected levels
    Changes in the manner in which the satellite is to be used
    The loss of one or several significant customer contracts on the
    satellite   49




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##### Table of Contents



Taxation
      paid-in-capital.
    Pension
    and other employee benefits
     50




---



##### Table of Contents



Employers Accounting For Defined Benefit Pension and
    Other Postretirement Plans
  Stock
    Based Compensation
  Share-Based Payment
   51




---



##### Table of Contents



Goodwill
    and Other Intangible Assets
  Goodwill and Other
    Intangible Assets
  build-up build-up
  Contingencies
    Liquidity
    and Capital Resources
  Cash
    and Available Credit
   52




---



##### Table of Contents



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 B-1 Class B-1 Class B-1 Class B-1
 53




---



##### Table of Contents



54




---



##### Table of Contents



The
    Telesat Canada Transaction
     55




---



##### Table of Contents



direct-to-home
  true-up and/or
  1 3 2 3
    Summary
    Financial Information
    56




---



##### Table of Contents



Loral Skynet


Telesat(CAD in millions)Revenues


185.4



479.0Adjusted EBITDA


77.1



261.0Operating Income


12.8



140.3Net Income (Loss)


(46.7
)


102.5Cash and Cash Equivalents


18.7



38.6Total Assets


867.8



1,773.8Debt, including current portion


149.2



203.9Shareholders Equity


510.5



879.6Backlog


413.6



5,188.0   Synergies
      Liquidity
    Capital Expenditures
  Equity
    and Funding Requirements
    1 3
 57




---



##### Table of Contents



2 3
        and/or true-up and/or
  Debt
      Senior
    Secured Credit Facilities
   58




---



##### Table of Contents



Term
    Loan A
    Term
    Loan B
    Term
    Loan B-1
  Loan B-1
  Term
    Loan B-2
    Revolving
    Credit
    Senior
    Bridge Facility
      Interest
    Expense
   59




---



##### Table of Contents



Capital
    Expenditures
    Backlog
  36 MHz
  36 MHz
  and/or
    Loral Skynet


Telesat CanadaNon-cash








Non-cashAnnual


Revenue


Transponders


Annual


Revenue


TranspondersRevenue


Related to


Available


Revenue


Related to


AvailableFrom


Customer


(36 MHz


From


Customer


(36 MHzBacklog(1)


Prepayments


equivalents)(2)


Backlog(1)


Prepayments


equivalents)(2)(CAD in millions)


(CAD in millions)





(CAD in millions)


(CAD in millions)2007


117.3



6.3



50



386.5



37.5



662008


78.8



4.1



81



406.6



28.9



1082009


60.0



2.4



161



403.5



25.6



1202010


42.3



1.2



175



449.4



23.9



1232011


34.6



0.3



159



413.4



23.5



121Thereafter


80.6



1.9



159



3,128.6



163.6



119Total


413.6



16.2







5,188.0



303.0  60




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##### Table of Contents



(1)
    
    Annual revenue includes non-cash
    revenue representing amortization of customer prepayments but
    does not include any revenues that may be generated from the
    leasing of 58.5 36 MHz equivalent Ku-band transponders
    on Telstar 11N, scheduled to be launched in late 2008.(2)
    
    Transponders available at the
    beginning of each period assumes that the four satellites under
    construction are launched and placed into service on their
    current schedule but does not assume replacements for satellites
    currently in-orbit that are nearing their end of life, or
    renewal of contracts as they expire.  Contractual
    Obligations and Other Commercial Commitments
    Contractual
    Obligations:
  Payments Due by PeriodLess than








More thanTotal


1 Year


1-3 Years


4-5 Years


5 YearsDebt(1)

$
126,000


$



$



$



$
126,000Interest on
    debt(1)


165,326



17,640



35,280



35,280



77,126Operating
    leases(2)


110,613



19,582



34,725



24,013



32,293Unconditional purchase
    obligations(3)


677,773



466,814



199,007



11,887



65Other long-term
    obligations(4)


61,550



24,044



33,032



912



3,562Total contractual cash
    obligations(5)

$
1,141,262


$
528,080


$
302,044


$
72,092


$
239,046   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)

$
3,193


$
3,193


$



$



$
     (1)
    
    Represents cash obligations for
    principal payments and interest payments on Loral Skynet
    14% senior secured notes (see Note 12 to the financial
    statements for further detail on our debt obligations). The
    Loral Skynet notes will be redeemed in connection with the
    Skynet Transaction, following which Loral Skynet will no longer
    have any further contractual obligation related to this debt.(2)
    
    Represents future minimum payments
    under operating leases with initial or remaining terms of one
    year or more, net of
    sub-lease
    rentals of $0.3 million.(3)
    
    SS/L has entered into various
    purchase commitments with suppliers due to the long lead times
    required to produce purchased parts.(4)
    
    Primarily represents vendor
    financing related amounts owed to subcontractors and amounts due
    to APT, representing Lorals share of the project cost of
    Telstar 18, and commitments under employment agreements.(5)
    
    Other than the interest on Loral
    Skynet senior notes which is reflected separately in the table,
    does not include our net cash funding requirements of
    approximately $207 million in connection with the Telesat
    acquisition, assuming a simultaneous close with the Skynet
    Transaction. This amount is as of December 31, 2006, and is
    subject to change depending on the actual closing date of the
    Telesat acquisition.(6)
    
    Letters of credit have a maturity
    of one year and are renewed annually.  Net Cash
    Provided by (Used in) Continuing Operating Activities
   61




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##### Table of Contents



contracts-in-process
  Net Cash
    Provided by Operating Activities of Discontinued
    Operations
    Net Cash
    (Used in) Provided By Investing Activities
  available-for-sale
      Net Cash
    (Used in) Provided by Financing Activities
        Other
   62




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##### Table of Contents



Affiliate
    Matters
      Successor Registrant



Predecessor RegistrantFor the Period



For the PeriodOctober 2,



January 1,Year Ended


2005 to



2005 to


Year EndedDecember 31,


December 31,



October 1,


December 31,2006


2005



2005


2004Revenues

$
11.3


$
4.1



$
10.0


$
7.8Elimination of Lorals
    proportionate share of (profits) losses relating to affiliate
    transactions


0.4



(2.9
)



0.6



2.4Profits (losses) relating to
    affiliate transactions not eliminated


(0.3
)


2.3




(0.5
)


(1.9
)   Commitments
    and Contingencies
    Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk  Foreign
    Currency
    Foreign Currency


U.S. $Future revenues 
    Japanese Yen

¥
72


$
0.6Future expenditures 
    Japanese Yen

¥
3,011


$
25.3Future expenditures 
    EUROs

E
5.2


$
6.9   Telesat
    Transaction  Derivatives
   63




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##### Table of Contents



mark-to-market
  mark-to-market
    Interest
        Item 8.
    Financial
    Statements and Supplementary Data  page F-1.
  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure   64




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##### Table of Contents



Item 9A.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e)
  Managements
    Report on Internal Control Over Financial Reporting
  Rule 13a-15(f) Internal Control  Integrated Framework
  Changes
    in Internal Controls Over Financial Reporting
    Inherent
    Limitations on Effectiveness of Controls
   65




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    Internal Control 
    Integrated Framework
        Internal
    Control  Integrated Framework Internal Control  Integrated
    Framework
 66




---



##### Table of Contents



Employers Accounting for Defined Benefit
    Pension and other Postretirement Plans.
  DELOITTE &
    TOUCHE LLP
    67




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##### Table of Contents



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


62


Chief Executive Officer since
    March 1, 2006; Vice Chairman of the Board of Directors
    since November 2005. Prior to that, founder of Michael B.
    Targoff & Co.Eric J. Zahler


56


President and Chief Operating
    Officer since November 2005. President and Chief Operating
    Officer of Old Loral since February 2000.Richard J. Townsend


56


Executive Vice President and Chief
    Financial Officer since November 2005. Executive Vice President
    and Chief Financial Officer of Old Loral since March 2003. Prior
    to that, Senior Vice President and Chief Financial Officer of
    Old Loral since October 1998.C. Patrick DeWitt


60


Vice President since November
    2005. Vice President of Old Loral since January 2002. Chief
    Executive Officer of SS/L since June 2006. Prior to that,
    President of SS/L since November 2001.Avi Katz


48


Vice President, General Counsel
    and Secretary since November 2005. Vice President, General
    Counsel and Secretary of Old Loral since November 1999.Richard P. Mastoloni


42


Vice President and Treasurer since
    November 2005. Vice President and Treasurer of Old Loral since
    February 2002. Prior to that, Vice President since September
    2001.Harvey B. Rein


53


Vice President and Controller
    since November 2005. Vice President and Controller of Old Loral
    since April 1996.       Item 11.
    Executive
    Compensation  Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters  Item 13.
    Certain
    Relationships and Related Transactions    Item 14.
    Principal
    Accountant Fees and Services   68




---



##### 



PART IV
  Item 15.
    Exhibits
    and Financial Statement Schedules    Index to Financial
    Statements and Financial Statement Schedule


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


F-2Consolidated
    Balance Sheets as of December 31, 2006 and 2005


F-4Consolidated
    Statements of Operations for the year ended December 31,
    2006, the period October 2, 2005 to December 31, 2005
    (Successor Registrant), January 1, 2005 to October 1,
    2005 and for the year ended December 31, 2004 (Predecessor
    Registrant)


F-5Consolidated
    Statements of Shareholders Equity for the year ended
    December 31, 2006, the period October 2, 2005 to
    December 31, 2005 (Successor Registrant), January 1,
    2005 to October 1, 2005 and for the year ended
    December 31, 2004 (Predecessor Registrant)


F-6Consolidated
    Statements of Cash Flows for the year ended December 31,
    2006, the period October 2, 2005 to December 31, 2005
    (Successor Registrant), January 1, 2005 to October 1,
    2005 and for the year ended December 31, 2004 (Predecessor
    Registrant)


F-7Notes to
    Consolidated Financial Statements


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


F-70Schedule II


F-73Separate Financial Statements of
    Subsidiaries not consolidated Pursuant to
    Rule 3-09
    of
    Regulation S-XXTAR LLC:Report of
    Independent Registered Public Accounting Firm


F-74Consolidated
    Balance Sheets as of December 31, 2006 and 2005
    (unaudited)


F-75Consolidated
    Statements of Operations for the years ended December 31,
    2006, 2005 (unaudited) and 2004 (unaudited)


F-76Consolidated
    Statements of Cash Flows for the year ended December 31,
    2006, 2005 (unaudited) and 2004 (unaudited)


F-77Consolidated
    Statements of Members Equity for the year ended
    December 31, 2006, 2005 (unaudited) and 2004
    (unaudited)


F-78Notes to
    Consolidated Financial Statements


F-79EX-10.19: AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENTEX-12.1: STATEMENT RE: COMPUTATION OF RATIOSEX-21.1: LIST OF SUBSIDIARIESEX-23.1: CONSENT OF DELOITTE & TOUCHE LLPEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION   69




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##### Table of Contents



INDEX TO
    EXHIBITS
  ExhibitNumber

Description2
.1

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

Modification to Debtors
    Fourth Amended Plan of Reorganization Under Chapter 11 of
    the Bankruptcy Code dated August 1, 2005(2)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(3)2
.4

Share Purchase Agreement among
    4363213 Canada Inc., BCE Inc. and Telesat Canada dated
    December 16, 2006(3)2
.5

Letter Agreement among Loral
    Space & Communications Inc., Public Sector Pension
    Investment Board and BCE Inc. dated December 16, 2006(3)3
.1

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

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.(18)3
.3

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.(18)3
.4

Loral Space &
    Communications Inc. Amended and Restated Bylaws dated
    February 27, 2007(18)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.(18)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.(18)10
.1

Restated Certificate of
    Incorporation of Loral Skynet Corporation dated
    November 21, 2005(4)10
.2

Indenture in respect of Loral
    Skynet Corporations 14% Senior Secured Cash/PIK Notes
    Due 2015 dated November 21, 2005(4)10
.3

Security Agreement in respect of
    Loral Skynet Corporations 14% Senior Secured Cash/PIK
    Notes due 2015 dated November 21, 2005(4)10
.4

Hong Kong Security Agreement in
    respect of Loral Skynet Corporations 14% Senior
    Secured Cash/PIK Notes due 2015 dated November 21, 2005(4)10
.5

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(18)10
.6

Lease Agreement by and between
    Loral Asia Pacific Satellite (HK) Limited and APT Satellite
    Company Limited dated as of August 18, 1999(5)10
.7

Consent Agreement among the United
    States Department of State, Loral Space &
    Communications Ltd. and Space Systems/ Loral, Inc. dated
    January 9, 2002(6)10
.8

Form of Conformed as Amended
    Apstar V Satellite Agreement between APT Satellite company
    Limited and Loral Orion, Inc. dated as of November 16,
    2003(7)10
.9

$20,000,000 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
.10

Amended and Restated Cash
    Collateral Agreement dated November 21, 2005(4)10
.11

Customer Credit Agreement between
    Sirius Satellite Radio Inc. and Space Systems/Loral, Inc. dated
    May 31, 2006(11)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(18)10
.13

Employment Agreement between Loral
    Space & Communications Inc. and Michael B. Targoff
    dated March 28, 2006(9) 70




---



##### Table of Contents



ExhibitNumber

Description10
.14

Employment Agreement between Loral
    Space & Communications Inc. and Eric J. Zahler dated
    November 21, 2005(9)10
.15

Employment Agreement between Loral
    Space & Communications Inc. and Richard J. Townsend
    dated November 21, 2005(9)10
.16

Amendment No. 1 to Employment
    Agreement between Loral Space & Communications Inc. and
    Richard J. Townsend dated June 19, 2006(10)10
.17

Employment Agreement between Loral
    Space & Communications Inc. and Avi Katz dated
    November 21, 2005(9)10
.18

Amendment No. 1 to Employment
    Agreement between Loral Space & Communications Inc. and
    Avi Katz dated June 19, 2006(10)10
.19

Amendment No. 2 to Employment
    Agreement between Loral Space & Communications Inc. and
    Avi Katz dated January 4, 200710
.20

Employment Agreement between Space
    Systems/Loral, Inc. and C. Patrick DeWitt dated
    November 21, 2005(8)10
.21

Consulting Agreement between Loral
    Space & Communications Inc. and Dean A. Olmstead dated
    June 7, 2006(11)10
.22

Form of Officers and
    Directors Indemnification Agreement between Loral
    Space & Communications Inc. and Loral
    Executives(4)10
.23

Officers and Directors
    Indemnification Agreement between Space Systems/Loral, Inc. and
    C. Patrick DeWitt dated November 21, 2005(8)10
.24

Loral Space &
    Communications Inc. 2005 Stock Incentive Plan(4)10
.25

Form of Non-Qualified Stock Option
    Agreement under Loral Space & Communications Inc. 2005
    Stock Incentive Plan for Senior Management(4)10
.26

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(9)10
.27

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(12)10
.28

Non Qualified Stock Option
    Agreement under Loral Space & Communications Inc. 2005
    Stock Incentive Plan between Loral Space &
    Communications Inc. and Dean A. Olmstead dated June 19,
    2006(12)10
.29

Space Systems/Loral, Inc.
    Supplemental Executive Retirement Plan dated January 7,
    2003(9)10
.30

Amendment to the Space
    Systems/Loral, Inc. Supplemental Executive Retirement Plan dated
    November 21, 2005(4)10
.31

Loral Space &
    Communications Inc. Severance Policy for Corporate
    Officers(11)12
.1

Statement Re: Computation of
    Ratios14
.1

Code of Conduct, Revised as of
    August 1, 2006(14)21
.1

List of Subsidiaries of the
    Registrant23
.1

Consent of Deloitte & Touche
    LLP31
.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 71




---



##### Table of Contents



ExhibitNumber

Description32
.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

Fourth Amended and Restated
    Commitment Letter, dated February 1, 2007 among 4363205
    Canada Inc., Morgan Stanley Senior Funding, Inc., Morgan Stanley
    Senior Funding Nova Scotia, Morgan Stanley & Co.,
    Incorporated, UBS Loan Finance LLC, UBS Securities LLC,
    JPMorgan Chase Bank, N.A., J.P. Morgan Securities Inc., The
    Bank of Nova Scotia, Citigroup Global Markets Inc.,
    Jefferies & Company, Inc. and Jefferies Finance
    LLC(17)     (1)
    
    Incorporated by reference from the Companys Current Report
    on Form 8-K
    filed on June 8, 2005.(2)
    
    Incorporated by reference from the Companys Current Report
    on Form 8-K
    filed on August 5, 2005.(3)
    
    Incorporated by reference from the Companys Current Report
    on Form 8-K
    filed on December 21, 2006.(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 Current Report
    on Form 8-K
    filed on August 23, 1999.(6)
    
    Incorporated by reference from the Companys Current Report
    on Form 8-K
    filed on January 9, 2002.(7)
    
    Incorporated by reference from the Companys Annual Report
    on Form 10-K
    for the fiscal year ended December 31, 2003.(8)
    
    Incorporated by reference from the Companys Current Report
    on Form 8-K
    filed on November 23, 2005.(9)
    
    Incorporated by reference from the Companys Annual Report
    on Form 10-K
    for the fiscal year ended December 31, 2005.(10)
    
    Incorporated by reference from the Companys Current Report
    on Form 8-K
    filed on June 20, 2006.(11)
    
    Incorporated by reference from the Companys Current Report
    on Form 8-K
    filed on June 8, 2006.(12)
    
    Incorporated by reference from the Companys Current Report
    on Form
    8-K/A filed
    by the Company on June 26, 2006.(13)
    
    Incorporated by reference from the Companys Current Report
    on Form 8-K
    filed on November 13, 2006.(14)
    
    Incorporated by reference from the Companys Quarterly
    Report on Form
    10-Q filed
    on August 7, 2006.(15)
    
    Incorporated by reference from the Companys Current Report
    on Form 8-K
    filed on February 2, 2006.(16)
    
    Incorporated by reference from the Companys Current Report
    on Form 8-K
    filed on March 16, 2006.(17)
    
    Incorporated by reference from the Companys Current Report
    on Form 8-K
    filed on February 11, 2007.(18)
    
    Incorporated by reference from the Companys Current Report
    on Form 8-K
    filed on February 28, 2007.
    
    Filed herewith.
    
    Management compensation plan. 72




---



##### Table of Contents



SIGNATURES
      By:
    /s/  MICHAEL
    B. TARGOFF        Signatures

Title

Date/s/  MICHAEL
    B. TARGOFFMichael
    B. Targoff

Vice Chairman of the Board and
    Chief Executive Officer

March 15, 2007/s/  MARK
    H.
    RACHESKY, M.D.Mark
    H. Rachesky, M.D.

Director, Non-Executive Chairman
    of the Board

March 15, 2007/s/  SAI
    S.
    DEVABHAKTUNISai
    S. Devabhaktuni

Director

March 15, 2007/s/  HAL
    GOLDSTEINHal
    Goldstein

Director

March 15, 2007/s/  JOHN
    D. HARKEY,
    JR.John
    D. Harkey, Jr.

Director

March 15, 2007/s/  DEAN
    A. OLMSTEADDean
    A. Olmstead

Director

March 15, 2007/s/  ARTHUR
    L. SIMONArthur
    L. Simon

Director

March 15, 2007/s/  JOHN
    P. STENBITJohn
    P. Stenbit

Director

March 15, 2007/s/  RICHARD
    J. TOWNSENDRichard
    J. Townsend

Executive Vice President and CFO
    (Principal Financial Officer)

March 15, 2007/s/  HARVEY
    B. REINHarvey
    B. Rein

Vice President and Controller
    (Principal Accounting Officer)

March 15, 2007  73




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##### Table of Contents



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, 2006 and 2005


F-4Consolidated
    Statements of Operations for the year ended
    December 31, 2006, for the period October 2, 2005 to
    December 31, 2005 (Successor Registrant), January 1,
    2005 to October 1, 2005 and for the year ended
    December 31, 2004 (Predecessor Registrant)


F-5Consolidated
    Statements of Shareholders Equity for the year ended
    December 31, 2006, for the period October 2, 2005 to
    December 31, 2005 (Successor Registrant), January 1,
    2005 to October 1, 2005 and for the year ended
    December 31, 2004 (Predecessor Registrant)


F-6Consolidated
    Statements of Cash Flows for the year ended
    December 31, 2006, for the period October 2, 2005 to
    December 31, 2005 (Successor Registrant), January 1,
    2005 to October 1, 2005 and for the year ended
    December 31, 2004 (Predecessor Registrant)


F-7Notes to
    Consolidated Financial Statements


F-8Schedule I


F-70Schedule II


F-73Separate Financial Statements of
    Subsidiaries not consolidated Pursuant to
    Rule 3-09
    of
    Regulation S-XXTAR LLC:Report of
    Independent Registered Public Accounting Firm


F-74Consolidated
    Balance Sheets as of December 31, 2006 and 2005
    (unaudited)


F-75Consolidated
    Statements of Operations for the years ended December 31,
    2006, 2005 (unaudited) and 2004 (unaudited)


F-76Consolidated
    Statements of Cash Flows for the year ended December 31,
    2006, 2005 (unaudited) and 2004 (unaudited)


F-77Consolidated
    Statements of Members Equity for the year ended
    December 31, 2006, 2005 (unaudited) and 2004
    (unaudited)


F-78Notes to
    Consolidated Financial Statements


F-79  F-1




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  To the Board of Directors and Stockholders of Loral
    Space & Communications Inc.
        Internal Control 
    Integrated Framework
  90-7, Financial Reporting by Entities in Reorganization Under the
    Bankruptcy Code,
  Employers Accounting
    for Defined Benefit Pension and other Postretirement Plans.
  Share-Based
    Payment,
 F-2




---



##### Table of Contents



Accounting for the Impairment or Disposal of
    Long-Lived Assets.
  DELOITTE &
    TOUCHE LLP
    F-3




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.CONSOLIDATED BALANCE SHEETS 
    (in thousands, except share data)
  December 31,2006



2005ASSETSCurrent assets:Cash and cash equivalents

$
186,542



$
275,796Short-term investments


106,588




Accounts receivable, net


76,420




59,347Contracts-in-process


40,433




73,584Inventories


82,183




51,871Other current assets


55,534




31,066Total current assets


547,700




491,664Property, plant and equipment, net


558,879




520,503Long-term receivables


81,164




48,155Investments in and advances to
    affiliates


97,202




104,616Deposits


755




9,840Goodwill


305,691




340,094Other assets


138,520




164,105Total assets

$
1,729,911



$
1,678,977LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
67,604



$
72,594Accrued employment costs


43,797




35,277Customer advances and billings in
    excess of costs and profits


242,661




172,995Income taxes payable


2,567




2,177Accrued interest and preferred
    dividends


20,097




4,881Other current liabilities


42,828




32,324Total current liabilities


419,554




320,248Pension and other postretirement
    liabilities


167,987




237,948Long-term debt


128,084




128,191Long-term liabilities


153,028




165,426Total liabilities


868,653




851,813Minority interest


214,256




200,000Commitments and contingenciesShareholders equity:Common stock, $.01 par value;
    40,000,000 shares authorized, 20,000,000 shares issued
    and outstanding


200




200Paid-in capital


644,708




642,210Accumulated deficit


(37,981
)



(15,261
)Accumulated other comprehensive
    income


40,075




15Total shareholders equity


647,002




627,164Total liabilities and
    shareholders equity

$
1,729,911



$
1,678,977    F-4




---



##### Table of Contents



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



Predecessor RegistrantFor the Period



For the PeriodOctober 2,



January 1,Year Ended


2005 to



2005 to


Year EndedDecember 31,


December 31,



October 1,


December 31,2006


2005



2005


2004Revenues from satellite
    manufacturing

$
636,632


$
161,069



$
318,587


$
299,608Revenues from satellite services


160,701



36,096




110,596



135,319Revenues from sales-type lease
    arrangement  satellite services















87,200Total revenues


797,333



197,165




429,183



522,127Cost of satellite manufacturing


550,821



138,882




291,454



318,295Cost of satellite services


98,614



26,386




94,169



189,330Cost of sales-type lease
    arrangement  satellite services















79,543Selling, general and
    administrative expenses


127,080



36,842




79,419



118,848Gain on litigation settlement


(9,000
)











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


29,818



(4,945
)



(35,859
)


(183,889
)Reorganization expenses due to
    bankruptcy











(31,236
)


(30,456
)Operating income (loss) from
    continuing operations


29,818



(4,945
)



(67,095
)


(214,345
)Gain on discharge of pre-petition
    obligations and fresh-start adjustments











1,101,453



Interest and investment income


31,526



4,128




6,438



9,953Interest expense (contractual
    interest was $36,610 for the period ended October 1, 2005
    and $46,451 for the year ended December 31, 2004,
    respectively)


(23,449
)


(4,408
)



(17,214
)


(2,947
)Other expense


(7,778
)


(170
)



(931
)


(513
)Income (loss) from continuing
    operations before income taxes, equity (losses) income in
    affiliates and minority interest


30,117



(5,395
)



1,022,651



(207,852
)Income tax (provision) benefit


(20,880
)


(1,752
)



10,901



(13,284
)Income (loss) from continuing
    operations before equity (losses) income in affiliates and
    minority interest


9,237



(7,147
)



1,033,552



(221,136
)Equity (losses) income in
    affiliates


(7,163
)


(5,447
)



(2,796
)


46,654Minority interest


(24,794
)


(2,667
)



126



135(Loss) income from continuing
    operations


(22,720
)


(15,261
)



1,030,882



(174,347
)(Loss) income from discontinued
    operations















(2,348
)Gain on sale of discontinued
    operations, net of taxes











13,967



Net (loss) income

$
(22,720
)

$
(15,261
)


$
1,044,849


$
(176,695
)Basic and diluted (loss) earnings
    per share:Continuing operations

$
(1.14
)

$
(0.76
)


$
23.37


$
(3.96
)Discontinued operations











0.32



(0.05
)(Loss) earnings per share

$
(1.14
)

$
(0.76
)


$
23.69


$
(4.01
)Weighted average shares
    outstanding:Basic and diluted


20,000



20,000




44,108



44,108    F-5




---



##### Table of Contents



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


TotalCommon Stock








Unearned





Comprehensive


ShareholdersShares





Paid-In


Treasury


Compen-


Accumulated


Income


(Deficit)Issued


Amount


Capital


Stock


sation


Deficit


(Loss)


EquityPredecessor
    RegistrantBalance, January 1, 2004


44,125


$
4,413


$
3,392,829


$
(3,360
)

$
(168
)

$
(4,171,536
)

$
(77,848
)

$
(855,670
)Amortization of unearned
    compensation


















81











81Cost associated with conversion of
    preferred stock to common stock










(4
)


















(4
)Net loss






















(176,695
)Other comprehensive loss


























(11,813
)Comprehensive loss






























(188,508
)Balance, December 31, 2004


44,125



4,413



3,392,825



(3,360
)


(87
)


(4,348,231
)


(89,661
)


(1,044,101
)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



627,164Net loss






















(22,720
)Other comprehensive income


























40,060Comprehensive income






























17,340Stock option compensation










2,498



















2,498Balance, December 31, 2006


20,000


$
200


$
644,708


$



$



$
(37,981
)

$
40,075


$
647,002    F-6




---



##### Table of Contents



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



Predecessor RegistrantYear Ended


For the Period



For the Period


Year EndedDecember 31,


October 2, 2005 to



January 1, 2005 to


December 31,2006


December 31, 2005



October 1, 2005


2004Operating activities:Net (loss) income

$
(22,720
)

$
(15,261
)


$
1,044,849


$
(176,695
)Adjustments to reconcile net (loss)
    income to cash flows from operating activities:Non-cash items


108,584



29,366




(1,051,330
)


127,712Changes in operating assets and
    liabilities:Accounts receivable, net


(9,129
)


1,855




557



10,423Contracts-in-process


5,551



42,459




(76,464
)


29,082Inventories


(31,990
)


(7,899
)



(10,212
)


1,720Long-term receivables


(2,214
)


(13,833
)



(22,361
)


2,911Deposits


9,085



(35
)







Other current assets and other
    assets


(1,121
)


(9,914
)



11,981



7,533Accounts payable


(12,812
)


(13,250
)



(1,285
)


1,755Accrued expenses and other current
    liabilities


17,756



(64,039
)



21,573



(948
)Customer advances


50,634



5,739




(62,212
)


35,249Income taxes payable


391



1,389




3,079



(2,814
)Pension and other postretirement
    liabilities


(20,453
)


3,077




(3,650
)


10,503Long-term liabilities


(3,725
)


335




1,844



(7,080
)Other


165



1,480




(196
)


216Net cash provided by (used in)
    operating activities of continuing operations


88,002



(38,531
)



(143,827
)


39,567Net cash provided by operating
    activities of discontinued operations















26,562Net cash provided by (used in)
    operating activities


88,002



(38,531
)



(143,827
)


66,129Investing activities:Capital expenditures for continuing
    operations


(82,157
)


(4,972
)



(4,649
)


(24,786
)Short-term investments


(106,588
)











(Increase) decrease in restricted
    cash in escrow


(323
)


(54
)



1,566



(5,049
)Insurance proceeds received











205,000



Proceeds received from disposition
    of orbital slot


5,742












Proceeds from sale of equity
    investment


250












Proceeds from sale of available for
    sale securities


7,098












Investments in and advances to
    affiliates






(63
)



(7,354
)


(5,712
)Net cash (used in) provided by
    investing activities of continuing operations


(175,978
)


(5,089
)



194,563



(35,547
)Proceeds from the sale of assets,
    net of expenses











144



953,619Capital expenditures for
    discontinued operations















(11,185
)Net cash provided by investing
    activities of discontinued operations











144



942,434Net cash (used in) provided by
    investing activities


(175,978
)


(5,089
)



194,707



906,887Financing activities:Proceeds from Skynet Notes






120,763








Repayments of term loans















(576,500
)Repayments of revolving credit
    facilities















(390,387
)Cash dividends paid on preferred
    stock of subsidiary


(1,278
)











Net cash (used in) provided by
    financing activities


(1,278
)


120,763








(966,887
)(Decrease) increase in cash and
    cash equivalents


(89,254
)


77,143




50,880



6,129Cash and cash
    equivalents  beginning of period


275,796



198,653




147,773



141,644Cash and cash
    equivalents  end of period

$
186,542


$
275,796



$
198,653


$
147,773    F-7




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Organization
    and Principal Business    No. 90-7, Financial Reporting of Entities in Reorganization Under the
    Bankruptcy Code (SOP 90-7).
      Satellite Manufacturing: direct-to-home
  Satellite Services:
  2.
    Bankruptcy
    Filings and Reorganization  Bankruptcy
    Filings
  No. 03-41710 03-41709 03-41728
   F-8




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Reorganization
      
    The business and operations of Old Loral have been transferred
    to New Loral, and Loral Skynet and SS/L have emerged intact as
    separate subsidiaries of reorganized Loral.
    Our new common stock has been listed on NASDAQ under the symbol
    LORL.
    SS/L has emerged debt-free.
    The initial distributions to creditors of Old Loral and its
    subsidiaries have been completed in accordance with the Plan of
    Reorganization as follows:  
    All holders of allowed claims against SS/L and Loral SpaceCom
    have been, or will be, paid in cash in full, including interest
    from the petition date to the Effective Date.
    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, 2006.
    $200 million of Loral Skynet preferred stock was issued to
    our distribution agent on the Effective Date,
    $198.8 million of which has been distributed to creditors
    (See Note 3).
    The remaining undistributed shares of New Loral common stock and
    Loral Skynet preferred 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.
    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 12) to certain creditors who subscribed for the
    notes and to certain creditors who committed to purchase any
    unsubscribed notes (i.e., backstopped the offering).
    Old Loral has commenced liquidation proceedings; the common and
    preferred stock of Old Loral were cancelled on the Effective
    Date, and no distribution was made to the holders of such stock.   F-9




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   3.
    Basis of
    Presentation    SOP 90-7
  SOP 90-7, Minority Interest Business
    Combinations
    Use of
    Estimates in Preparation of Financial Statements
     F-10




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Cash
    and Cash Equivalents and Short-term Investments
  Available-for-sale
  Concentration
    of Credit Risk
  contracts-in-process,
  Receivables
    Inventories
  contracts-in-process, first-in-first-out
  Property,
    Plant and Equipment
   F-11




---



##### Table of Contents



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


20Buildings


25 to 45Leasehold improvements


5 to 25Satellites-in-orbit


5 to 13Earth stations


5 to 15Equipment, furniture and fixtures


3 to 20     Valuation
    of Satellites, Long-Lived Assets and Investments in and Advances
    to Affiliates
  Accounting for
    the Impairment or Disposal of Long-lived Assets Equity Method of Accounting for Investments in
    Common Stock
  
    Changes in estimates of the useful life of the satellite
    Changes in estimates of our ability to operate the satellite at
    expected levels
    Changes in the manner in which the satellite is to be used
    The loss of one or several significant customer contracts on the
    satellite   F-12




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   Available-for-sale
    securities
  available-for-sale,
  Goodwill
    and Other Intangible Assets
  Goodwill and Other
    Intangible Assets
  build-up build-up
  Contingencies
    Revenue
    Recognition
  81-1, Accounting for Performance of Construction-Type and Certain
    Production-Type Contracts cost-to-cost percentage-of-completion
 F-13




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
        contracts-in-process
      cost-to-cost percentage-of-completion
  Research
    and Development
    Derivative
    Instruments
  contracts-in-process Accounting for Derivative Instruments
    and Hedging Activities
 F-14




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   Minority
    Interest
      Stock-Based
    Compensation
  Share-Based Payment
  For the PeriodYear Ended


October 2 toDecember 31,


December 31,2006


2005Risk  free interest rate


4.3
%


4.4
%Expected life (years)


4.75



4.75Estimated volatility


27.4
%


27.4
%Expected dividends


None



None   Share-Based Payment
  Accounting for
    Stock-Based Compensation-Transition and Disclosure Accounting for Stock-Based
    Compensation Accounting for Stock Issued to
    Employees
 F-15




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Deferred
    Compensation
    Income
    Taxes
  paid-in-capital
   F-16




---



##### Table of Contents



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



Predecessor RegistrantFor the Period



For the PeriodOctober 2,



January 1,Year Ended


2005 to



2005 to


Year EndedDecember 31,


December 31,



October 1,


December 31,2006


2005



2005


2004Non-cash operating itemsGain on discharge of pre-petition
    obligations and fresh-start adjustments

$



$




$
(1,101,453
)

$
Gain on sale of discontinued
    operations, net of tax











(13,967
)


(Income) loss from discontinued
    operations















2,348Equity losses (income) in
    affiliates


7,163



5,447




2,796



(46,654
)Satmex settlement


(18,605
)











Minority interest


24,794



2,667




(126
)


(135
)Deferred taxes


9,105








(16,134
)


12,153Depreciation and amortization


68,300



16,024




61,277



134,796Stock option compensation


2,997












Impairment of cost basis investment


3,000












Write-off of long-term receivables
    due to contract modifications















11,265Impairment charge on satellite and
    related assets















11,989Profit on sales-type lease
    arrangement















(7,657
)Provisions for inventory
    obsolescence


1,678



1,525




2,127



3,324Warranty expense accruals


12,180



2,704




11,850



9,692Provisions for (recoveries of) bad
    debts on billed receivables


356



953




(2,880
)


(2,144
)Adjustment to revenue
    straightlining assessment






46




1,031



1,149Loss on equipment disposals











3,456



394Net gain on disposition of an
    orbital slot


(1,149
)











Gain on disposition of available
    for sale securities


(7,098
)











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


5,863








693



(2,808
)Net non-cash provided by (used in)
    operating activities of continuing operations

$
108,584


$
29,366



$
(1,051,330
)

$
127,712 F-17




---



##### Table of Contents



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



Predecessor RegistrantFor the Period



For the PeriodOctober 2,



January 1,Year Ended


2005 to



2005 to


Year EndedDecember 31,


December 31,



October 1,


December 31,2006


2005



2005


2004Non-cash financing activities:Issuance of Preferred stock by
    subsidiary as payment for dividend


14,260












Increase in restricted cash
    related to debt proceeds











98,736



Net non-cash financing activities
    of continuing operations

$
14,260


$




$
98,736


$
Supplemental information:Interest paid, net of capitalized
    interest

$
17,921


$
15,548



$



$
23,550Taxes paid, net of refunds

$
6,365


$
(418
)


$
2,166


$
4,318Cash (paid) received for
    reorganization items:Professional fees

$
(9,581
)

$
(9,650
)


$
(17,533
)

$
(18,745
)Employee retention costs





$
(4,790
)


$



$
(6,468
)Severance costs










$



$
(1,722
)Restructuring costs

$
(740
)






$
(55
)Interest income










$
2,536


$
1,740Vendor settlement

$
(432
)   New
    Accounting Pronouncements
  FIN 48
  Accounting for Uncertainty in Income Taxes, an Interpretation
    of FASB Statement No. 109
  SFAS 157
  Fair Value Measurements,
 F-18




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    SFAS 158
  Employers Accounting for Defined Benefit Pensions and
    Other Postretirement Plans, not-for-profit
  SFAS 159
  The
    Fair Value Option for Financial Assets and Financial Liabilities
  SAB 108
  Considering the Effects
    of Prior Year Misstatements when Quantifying Misstatements in
    Current Year Financial Statements.
  4.
    Fresh-Start
    Accounting  SOP 90-7
 F-19




---



##### Table of Contents



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




---



##### Table of Contents



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 12 and 15), 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 pursuant to the Plan of
    Reorganization (see Notes 12 and 15).(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):  To be exchanged for stock

$
1,298.0To be cancelled


292.2To be reinstated
    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     5.
    Discontinued
    Operations   F-21




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      Predecessor RegistrantFor the PeriodJanuary 1,2005 to


Year EndedOctober 1,


December 31,2005


2004(in thousands)Revenues of discontinued operations

$



$
29,149Operating income





$
22,408Interest expense on secured bank
    debt






(24,756
)Income (loss) before income taxes






(2,348
)Gain on sale of discontinued
    operations, net of tax


13,967



Income (loss) from discontinued
    operations, net of taxes

$
13,967


$
(2,348
)  F-22




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  6.
    Accumulated
    Other Comprehensive Income (Loss)    Consolidated Balance Sheet


Consolidated Statement of Shareholders EquitySuccessor


Successor



PredecessorRegistrant


Registrant



RegistrantFor the Period



For the PeriodOctober 2,



January 1,Year Ended


2005 to



2005 to


Year EndedDecember 31,


December 31,


December 31,



October 1,


December 31,2006


2005


2006


2005



2005


2004Cumulative translation adjustment

$
287


$
15


$
272


$
15



$
(222
)

$
140Derivatives classified as cash flow
    hedges, net of taxes:Reclassifications into revenues,
    cost of sales and income taxes from other comprehensive income



















(487
)


(1,046
)Unrealized net gains (losses) on
    derivatives



















(487
)


(1,046
)Unrealized gains (losses) on
    available-for-sale
    securities, net of taxes


9,837







9,837








(99
)


8,142Minimum pension liability adjustment























(19,049
)Adjustment to initially apply
    SFAS 158, net of tax


29,951







29,951Accumulated other comprehensive
    income (loss)

$
40,075


$
15


$
40,060


$
15



$
(808
)

$
(11,813
)     7.
    Contracts-in-Process
    and Long-Term Receivables  Contracts-in-Process
  Contracts-in-Process
  December 31,2006


2005U.S. government contracts:Amounts billed

$
983


$
124Unbilled receivables


1,544



4,2872,527



4,411Commercial contracts:Amounts billed


17,306



38,789Unbilled receivables


20,600



30,38437,906



69,173$
40,433


$
73,584  F-23




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  contracts-in-process
  Long-Term
    Receivables
      Long-TermReceivables2007

$
2,0102008


4922009


5,8022010


9,4252011


16,326Thereafter


49,11983,174Less, current portion included in
    contracts-in-process


(2,010
)Long-term receivables

$
81,164   contracts-in-process,
 F-24




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   8.
    Property,
    Plant and Equipment (see Note 3)    December 31,2006


2005Land and land improvements

$
27,533


$
27,833Buildings


53,572



52,873Leasehold improvements


6,434



6,352Satellites in-orbit, including
    satellite transponder rights of $136.7 million and
    $116.7 million in 2006 and 2005, respectively


386,196



366,196Satellites under construction


59,085



197Earth stations


18,141



17,710Equipment, furniture and fixtures


76,787



61,937Other construction in progress


18,167



5,096645,915



538,194Accumulated depreciation and
    amortization


(87,036
)


(17,691
)$
558,879


$
520,503     14/Estrela
   F-25




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  10/Apstar IIR
          2007

$
98,0062008


65,9442009


50,5452010


35,3782011


28,818Thereafter


66,692$
345,383  F-26




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  9.
    Investments
    in and Advances to Affiliates    December 31,2006


2005XTAR equity investment

$
97,202


$
104,616     Successor Registrant



Predecessor RegistrantFor the Period



For the PeriodOctober 2,



January 1,Year Ended


2005 to



2005 to


Year EndedDecember 31,


December 31,



October 1,


December 31,2006


2005



2005


2004XTAR

$
(7,413
)

$
(5,384
)


$
(2,796
)

$
87Globalstar, L.P. and Globalstar
    service provider partnerships


250












46,567Other






(63
)







$
(7,163
)

$
(5,447
)


$
(2,796
)

$
46,654     Successor Registrant



Predecessor RegistrantFor the Period



For the PeriodOctober 2,



January 1,Year Ended


2005 to



2005 to


Year EndedDecember 31,


December 31,



October 1,


December 31,2006


2005



2005


2004Revenues

$
11,262


$
4,148



$
10,025


$
7,779Interest expense capitalized on
    development stage enterprises















478Elimination of Lorals
    proportionate share of (profits) losses relating to affiliate
    transactions


412



(2,949
)



593



2,440Profits (losses) relating to
    affiliate transactions not eliminated


(324
)


2,318




(466
)


(1,917
)   XTAR
     F-27




---



##### Table of Contents



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




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
       Year EndedDecember 31,2006


2005Revenues

$
15.3


$
9.4Operating loss


(8.6
)


(5.4
)Net loss


(12.6
)


(9.6
)Balance Sheet Data:   December 31,2006


2005Current assets

$
6.4


$
7.4Total assets


132.1



142.8Current liabilities


20.1



21.2Long-term liabilities


33.1



30.1Members equity


78.9



91.5   Satmex
             F-29




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Ku-band C-band conciliador
  usufructo usufructo
  Other
  available-for-sale
   F-30




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    10.
    Goodwill
    and Other Intangible Assets  Goodwill
      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

$
305,691   Other
    Intangible Assets
    Weighted AverageRemaining


December 31, 2006


December 31, 2005Amortization Period


Gross


Accumulated


Gross


Accumulated(Years)


Amount


Amortization


Amount


AmortizationInternally developed software and
    technology


4


$
59.0


$
(13.5
)

$
59.8


$
(2.7
)Orbital slots


9



10.8



(1.8
)


15.8



(0.8
)Trade names


19



13.2



(0.8
)


13.2



(0.2
)Customer relationships


14



20.0



(1.7
)


20.0



(0.3
)Customer contracts


8



33.0



(8.3
)


32.0



(2.1
)Other intangibles


3



2.7



(0.8
)


2.7



(0.1
)Total





$
138.7


$
(26.9
)

$
143.5


$
(6.2
)      F-31




---



##### Table of Contents



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

$
19.82008


19.22009


18.22010


14.62011


7.0   11.
    Liabilities
    Subject to Compromise  Predecessor
    Registrant    12.
    Debt
    Obligations    December 31,2006


2005Loral Skynet 14.0% senior
    secured notes due 2015 (principal amount $126 million)

$
128,084


$
128,191   Successor
    Registrant
  Loral
    Skynet Notes
     F-32




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
        SS/L
    Letter of Credit Facility
    Predecessor
    Registrant (see Note 11)
       F-33




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   13.
    Reorganization
    Expenses Due to Bankruptcy    For the PeriodJanuary 1,2005 to


Year EndedOctober 1,


December 31,2005


2004Professional fees

$
32,240


$
20,898Employee retention costs


(917
)


10,035Severance costs


972



4,641Facility closing costs






1,963Lease rejection claims (gains)


(265
)


220Vendor settlement losses (gains)


289



(5,561
)Restructuring costs


1,503



Interest income


(2,586
)


(1,740
)Total reorganization expenses due
    to bankruptcy

$
31,236


$
30,456   14.
    Income
    Taxes    Successor Registrant



Predecessor RegistrantFor the Period



For the PeriodOctober 2,



January 1,Year Ended


2005 to



2005 to


Year EndedDecember 31,


December 31,



October 1,


December 31,2006


2005



2005


2004Current:U.S. Federal

$
(4,018
)

$
(532
)


$
(1,235
)

$
State and local


(2,467
)


(429
)



(2,339
)


(335
)Foreign


(5,290
)


(791
)



(1,659
)


(796
)Total


(11,775
)


(1,752
)



(5,233
)


(1,131
)Deferred:U.S. Federal


(7,342
)


325




(259,373
)


59,635State and local


(1,763
)


97




(45,737
)


12,891Foreign















(3,650
)Valuation allowance






(422
)



321,244



(81,029
)Total


(9,105
)







16,134



(12,153
)Total income tax (provision)
    benefit

$
(20,880
)

$
(1,752
)


$
10,901


$
(13,284
)    F-34




---



##### Table of Contents



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




---



##### Table of Contents



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



Predecessor RegistrantFor the Period



For the PeriodOctober 2,



January 1,Year Ended


2005 to



2005 to


Year EndedDecember 31,


December 31,



October 1,


December 31,2006


2005



2005


2004Tax (provision) benefit at
    U.S. Statutory Rate of 35%

$
(10,541
)

$
1,888



$
(357,928
)

$
72,748Permanent adjustments which change
    statutory amounts:State and local income taxes, net
    of federal income tax


(2,749
)


(216
)



(31,249
)


8,161Additional tax imposed on foreign
    source income


(3,438
)


(847
)



(6,308
)


(4,575
)Reorganization expenses due to
    bankruptcy






(94
)



(9,944
)


(7,080
)Plan of Reorganization and
    Fresh-Start valuation adjustments











94,206



Nondeductible expenses


(3,073
)


(1,410
)



(1,122
)


(1,548
)Change in valuation allowance






(422
)



321,244



(81,029
)Other, net


(1,079
)


(651
)



2,002



39Total income tax (provision)
    benefit

$
(20,880
)

$
(1,752
)


$
10,901


$
(13,284
)   five-year
       F-36




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  paid-in-capital
          December 31,2006


2005Deferred tax assets:Postretirement benefits other than
    pensions

$
33,641


$
30,912Inventoried costs


37,836



36,114Net operating loss and tax credit
    carryforwards


376,202



421,271Compensation and benefits


9,236



7,662Deferred research &
    development costs


20,734



Income recognition on long-term
    contracts


19,787



Other, net


5,980



2,519Pension costs


33,451



60,374Total deferred tax assets before
    valuation allowance


536,867



558,852Less valuation allowance


(304,884
)


(337,346
)Net deferred tax asset

$
231,983


$
221,506Deferred tax liabilities:Property, plant and equipment

$
144,794


$
148,905Intangible assets


47,869



43,528Investments in and advances to
    affiliates


50,914



21,807Income recognition on long-term
    contracts






20,145Total deferred tax liability

$
243,577


$
234,385Net deferred tax liability

$
(11,594
)

$
(12,879
)    F-37




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    15.
    Shareholders
    Equity and Minority Interest  Successor
    Registrant
  Common
    Stock
      Loral
    Skynet Preferred Stock
        Preferred
    Stock Offering
    Stock
    Plans
   F-38




---



##### Table of Contents



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


$
16.1Exercisable at December 31,
    2006


353,863


$
28.44



5.4 years


$
4.3        F-39




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Predecessor
    Registrant
  Common
    Stock and Old Loral Stock Plans
    16.
    Earnings
    (Loss) Per Share      Successor Registrant



Predecessor RegistrantFor the Period



For the PeriodOctober 2,



January 1,2005 to



2005 toDecember 31,


December 31,



October 1,


December 31,2006


2005



2005


2004(in thousands, except per share data)Numerator for basic and diluted
    loss per share:(Loss) income from continuing
    operations

$
(22,720
)

$
(15,261
)


$
1,030,882


$
(174,347
)(Loss) income from discontinued
    operations















(2,348
)Gain on sale of discontinued
    operations, net of taxes











13,967



Net (loss) income applicable to
    common stockholders


(22,720
)


(15,261
)



1,044,849



(176,695
)Denominator:Weighted average common shares
    outstanding


20,000



20,000




44,108



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

$
(1.14
)

$
(0.76
)


$
23.37


$
(3.96
)Discontinued operations











0.32



(0.05
)(Loss) earnings per share

$
(1.14
)

$
(0.76
)


$
23.69


$
(4.01
)  F-40




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  17.
    Pensions
    and Other Employee Benefits  Pensions
      Other
    Benefits
      Pension Benefits


Other BenefitsDecember 31


December 312006


2005


2006


2005(in thousands)


(in thousands)


(in thousands)


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

$
406,906


$
395,098


$
81,176


$
82,029Service cost


10,926



10,683



1,482



935Interest cost


21,835



23,361



4,834



4,564Participant contributions


1,051



933



1,569



1,751Amendments


(35,849
)






(2,154
)


Actuarial (gain) loss


(12,423
)


(3,246
)


3,519



(2,765
)Benefit payments


(20,563
)


(19,923
)


(4,774
)


(5,338
)Obligation at December 31,

$
371,883


$
406,906


$
85,652


$
81,176 F-41




---



##### Table of Contents



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


Other BenefitsDecember 31


December 312006


2005


2006


2005(in thousands)


(in thousands)


(in thousands)


(in thousands)Reconciliation of fair value of
    plan assetsFair value of plan assets at
    beginning of period

$
247,728


$
230,685


$
1,028


$
1,154Actual return on plan assets


27,762



15,305



38



21Employer contributions


27,460



20,022



3,005



3,440Participant contributions


1,051



933



1,569



1,751Benefit payments


(19,726
)


(19,217
)


(4,774
)


(5,338
)Fair value of plan assets at
    December 31,

$
284,275


$
247,728


$
866


$
1,028Funded
    statusUnfunded status at end of period

$
(87,608
)

$
(159,178
)

$
(84,786
)

$
(80,148
)Unrecognized loss (gain)






1,922







(544
)Net amount recognized

$
(87,608
)

$
(157,256
)

$
(84,786
)

$
(80,692
)   Employers Accounting For Defined Benefit Pension and
    Other Postretirement Plans,
    Pension Benefits


Other BenefitsActuarial gain (loss)

$
16,033


$
(2,893
)Amendments-prior service credit


34,450



1,915$
50,483


$
(978
)     Pension Benefits


Other BenefitsDecember 31,


December 31,2006


2005


2006


2005Current liabilities

$
797


$



$
3,610


$
Long-term liabilities


86,811



157,256



81,176



80,692$
87,608


$
157,256


$
84,786


$
80,692  F-42




---



##### Table of Contents



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





After Applicationof SFAS 158


Adjustments


of SFAS 158Goodwill

$
325,245


$
(19,554
)

$
305,691Total Assets


1,749,465



(19,554
)


1,729,911Other current liabilities


38,421



4,407



42,828Total current liabilities


415,147



4,407



419,554Pension and other postretirement
    liabilities


221,899



(53,912
)


167,987Total liabilities


918,158



(49,505
)


868,653Accumulated other comprehensive
    income


10,124



29,951



40,075Total shareholders equity


617,051


$
29,951



647,002           Pension Benefits



Other BenefitsSuccessor Registrant



Predecessor Registrant



Successor Registrant



Predecessor RegistrantFor the Period



For the Period









For the Period



For the PeriodOctober 2,



January 1,









October 2,



January 1,2005 to



2005 to









2005 to



2005 toDecember 31,


December 31,



October 1,


December 31,



December 31,


December 31,



October 1,


December 31,2006


2005



2005


2004



2006


2005



2005


2004Service cost

$
10,926


$
2,896



$
7,787


$
9,694



$
1,482


$
255



$
680


$
1,212Interest cost


21,835



5,760




17,601



22,740




4,834



1,157




3,407



5,178Expected return on plan assets


(22,229
)


(5,545
)



(15,343
)


(19,415
)



(52
)


(23
)



(78
)


(74
)Amortization of prior service cost


(1,399
)







(27
)


(36
)



(239
)







(1,443
)


(1,931
)Amortization of net loss











4,976



5,294




127








1,843



2,911Net periodic cost

$
9,133


$
3,111



$
14,994


$
18,277



$
6,152


$
1,389



$
4,409


$
7,296  F-43




---



##### Table of Contents



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



Predecessor RegistrantFor the Period



For the PeriodOctober 2,



January 1,2005 to



2005 toDecember 31,


December 31,



October 1,


December 31,2006


2005



2005


2004Discount rate


5.75
%


5.75
%



6.00
%


6.25
%Expected return on plan assets


9.00
%


9.00
%



9.00
%


9.00
%Rate of compensation increase


4.25
%


4.25
%



4.25
%


4.25
%     PredecessorRegistrantSuccessor


Successor



For the PeriodRegistrant


Registrant



EndedDecember 31,


December 31,



October 1,2006


2005



2005Discount rate


6.00
%


5.75
%



5.75
%Rate of compensation increase


4.25
%


4.25
%



4.25
%       December 31,2006


2005Equity investments


55
%


56
%Fixed income investments


45
%


44
%100
%


100
%    F-44




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    1% Increase


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

$
588


$
(480
)Effect on the health care
    component of the accumulated postretirement benefit obligation

$
7,246


$
(6,049
)     Other BenefitsGross


MedicarePension


Benefit


SubsidyBenefits


Payments


Receipts2007

$
21,944


$
4,922


$
3112008


22,700



5,213



3492009


23,239



5,459



3942010


23,727



5,752



4322011


24,502



6,124



4702012 to 2016


131,161



33,727



2,926     Employee
    Savings Plan
    18.
    Financial
    Instruments and Foreign Currency  Financial
    Instruments
    available-for-sale
 F-45




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
     December 31,2006



2005Carrying






CarryingAmount


Fair Value



Amount


Fair ValueCash and cash equivalents

$
186,542


$
186,542



$
275,796


$
275,796Investments in
    available-for-sale
    securities


16,260



16,260








Supplemental retirement plan assets


6,418



6,418




6,637



6,637Long-term debt


128,084



143,640




128,191



153,405   available-for-sale
  Foreign
    Currency
      Foreign Currency


U.S. $Future revenues 
    Japanese Yen

¥
72


$
0.6Future expenditures 
    Japanese Yen

¥
3,011


$
25.3Future expenditures 
    EUROs

E
5.2


$
6.9   Derivatives
     F-46




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    mark-to-market
    19.
    Commitments
    and Contingencies  Financial
    Matters
         F-47




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Balance of deferred amounts at
    January 1, 2004

$
17.5Accruals for deferred amounts
    issued during the period


2.9Accruals relating to pre-existing
    contracts (including changes in estimates)


6.8Balance of deferred amounts at
    December 31, 2004


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

$
53.9   start-up SS/L.
     F-48




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      Telesat
    Transaction
        1 3 2 3
 F-49




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
     $1.00/CAD
    and/or true-up and/or
  Satellite
    Matters
   F-50




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      back-up back-up
       F-51




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Ku-band Ku-band
  Regulatory
    Matters
      Lease
    Arrangements    Gross


SubleaseRent


Income


Net RentYear 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
)

$
19,796Year ended December 31, 2004

$
36,565


$
(328
)

$
36,237  F-52




---



##### Table of Contents



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

$
19,5822008


19,4432009


15,2822010


13,6582011


10,355Thereafter


32,293$
110,613   Legal
    Proceedings  R/L
  Babus
   F-53




---



##### Table of Contents



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 Beleson
  Rule 10b-5
 F-54




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Class Action
    ERISA Litigation
  In re:
    Loral Space ERISA Litigation.
  In re: Loral Space ERISA
    Litigation,
 F-55




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  In re: Loral Space ERISA Litigation
  Globalstar
    Related Class Action Securities Litigations
  Rule 10b-5
 F-56




---



##### Table of Contents



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 In re: Loral Space &
    Communications Ltd. Securities Litigation
  Reorganization
    Matters
   F-57




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
           Other
    and Routine Litigation
   F-58




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    20.
    Segments         F-59




---



##### Table of Contents



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


SatelliteManufacturing


Services


Corporate(1)


TotalRevenues and Adjusted EBITDA:Revenues(2)

$
636.6


$
160.7






$
797.3Intersegment revenues


59.9



3.1







63.0Operating segment revenues

$
696.5


$
163.8







860.3Eliminations(3)














(63.0
)Revenues as reported













$
797.3Segment Adjusted EBITDA before
    eliminations(4)(5)

$
65.9


$
68.0


$
(26.8
)

$
107.1Eliminations(3)














(6.0
)Adjusted EBITDA














101.1Depreciation and
    amortization(6)(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(6)(7)

$
23.3


$
45.9


$
2.1


$
71.3Capital
    expenditures(7)

$
18.4


$
63.7


$
0.1


$
82.2Total
    assets(7)

$
944.6


$
750.4


$
34.9


$
1,729.9  F-60




---



##### Table of Contents



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


SatelliteManufacturing


Services


Corporate(1)


TotalRevenues and Adjusted EBITDA:Revenues(2)

$
161.0


$
36.1






$
197.1Intersegment revenues


0.8



0.9







1.7Operating segment revenues

$
161.8


$
37.0







198.8Eliminations(3)














(1.6
)Revenues as reported













$
197.2Segment Adjusted EBITDA before
    eliminations(4)(5)

$
11.8


$
11.5


$
(11.0
)

$
12.3Eliminations(3)














(1.2
)Adjusted EBITDA














11.1Depreciation and
    amortization(6)(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(6)(7)

$
3.2


$
12.4


$
0.4



16.0Capital
    expenditures(7)

$
3.0


$
2.0


$



$
5.0Total
    assets(7)

$
871.5


$
741.4


$
66.1


$
1,679.0  F-61




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Predecessor
    Registrant January 1,
    2005 through October 1, 2005
  Satellite


SatelliteManufacturing


Services


Corporate(1)


TotalRevenues and Adjusted
    EBITDA:Revenues(2)

$
318.6


$
111.3






$
429.9Intersegment revenues


10.9



3.2







14.1Operating segment revenues

$
329.5


$
114.5







444.0Eliminations(3)














(14.8
)Revenues as reported













$
429.2Segment Adjusted EBITDA before
    eliminations(4)(5)

$
15.2


$
39.8


$
(17.3
)

$
37.7Eliminations(3)














(12.3
)Adjusted EBITDA














25.4Depreciation and
    amortization(6)(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(8)














(17.2
)Other expense














(0.9
)Income tax
    benefit(8)














10.9Equity loss in affiliates














(2.8
)Minority interest














0.1Income from continuing operations













$
1,030.9Other Data:Depreciation and
    amortization(6)(7)

$
11.9


$
48.8


$
0.6


$
61.3Capital
    expenditures(7)

$
2.4


$
2.2


$



$
4.6Total
    assets(7)

$
510.7


$
521.5


$
68.8


$
1,101.0  F-62




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  2004
    Segment Information
  Satellite


SatelliteManufacturing


Services


Corporate(1)


TotalRevenues and Adjusted EBITDA:Revenues(2)

$
299.6


$
136.7






$
436.3Revenues from sales-type lease
    arrangement






87.2







87.2Intersegment revenues


137.0



4.5







141.5Operating segment revenues

$
436.6


$
228.4







665.0Eliminations(3)














(142.9
)Revenues as reported













$
522.1Segment Adjusted EBITDA before
    eliminations(4)(5)

$
(13.5
)

$
23.3


$
(34.9
)

$
(25.1
)Eliminations(3)














(24.0
)Adjusted EBITDA














(49.1
)Depreciation and
    amortization(6)(7)














(134.8
)Reorganization expenses due to
    bankruptcy














(30.4
)Operating loss from continuing
    operations














(214.3
)Interest and investment income














9.9Interest expense














(2.9
)Other expense














(0.5
)Income tax provision














(13.3
)Equity income in affiliates














46.7Minority interest














0.1Loss from continuing operations













$
(174.3
)Other Data:Depreciation and
    amortization(6)(7)

$
22.9


$
111.3


$
0.6


$
134.8Capital
    expenditures(7)

$
1.8


$
22.8


$
0.2


$
24.8Total
    assets(7)

$
382.2


$
780.8


$
55.7


$
1,218.7     (1)
    
    Represents corporate expenses
    incurred in support of our operations and for the year ended
    December 31, 2006 and the period October 2, 2005 to
    December 31, 2005 includes $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.(2)
    
    Includes revenues from affiliates
    of $11.3 million in 2006, $4.1 million for the period
    October 2, 2005 to December 31, 2005,
    $10.0 million for the period January 1, 2005 to
    October 1, 2005 and $7.8 million in 2004, respectively.(3)
    
    Represents the elimination of
    intercompany sales and intercompany Adjusted EBITDA, primarily
    for satellites under construction by SS/L for wholly owned
    subsidiaries. F-63




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   (4)
    
    Satellite manufacturing includes: Successor Registrant



Predecessor RegistrantFor the Period



For the PeriodOctober 2,



January 1,Year Ended


2005 to



2005 to


Year EndedDecember 31,


December 31,



October 1,


December 31,2006


2005



2005


2004Adjusted EBITDA before specific
    identified charges

$
56.8


$
20.5



$
27.4


$
10.8Transponders rights provided to
    SS/L in the Satmex Settlement Agreement


19.0












Accrued warranty obligations


(8.2
)


(7.2
)



(10.1
)


(9.7
)Write-off of long-term receivables
    due to contract modifications















(11.3
)Provisions for inventory
    obsolescence


(1.7
)


(1.5
)



(2.1
)


(3.3
)Satellite manufacturing segment
    Adjusted EBITDA before eliminations

$
65.9


$
11.8



$
15.2


$
(13.5
)     (5)
    
    Satellite Services Revenue and
    EBITDA include $14.9 million resulting from receipt of a
    customer termination payment for the year ended
    December 31, 2006. Satellite Services recognized for the
    year ended December 31, 2004, $7.7 million of EBITDA
    for a sales-type lease arrangement for satellite capacity and an
    impairment charge of $12.0 million relating to our Telstar
    14/Estrela
    do Sul-1
    satellite and related assets to reduce the carrying values to
    the expected proceeds from insurance.(6)
    
    Includes additional depreciation
    expense of $9 million for 2004, due to accelerating the
    estimated life of our Telstar 11 satellite from March 2005
    to June 2004. Also, includes stock compensation charges.(7)
    
    Amounts are presented after the
    elimination of intercompany profit and include
    $217.5 million, $88.2 million and zero goodwill for
    Satellite Manufacturing, Satellite Services and Corporate,
    respectively, as of December 31, 2006.(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). F-64




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   Revenue
    by Customer Location
    Successor Registrant



Predecessor RegistrantFor the Period



For the PeriodOctober 2,



January 1,Year Ended


2005 to



2005 to


Year EndedDecember 31,


December 31,



October 1,


December 31,2006


2005



2005


2004United States

$
691,986


$
170,103



$
350,622


$
303,258Japan


6,758



4,193




13,486



47,641Thailand


997



2,711




6,010



20,378Spain


5,682



3,418




7,483



5,292Mexico


7,735



1,327




7,122



1,693Peoples Republic of China
    (including Hong
    Kong)(1)


26,607



2,411




4,498



97,628Other


57,568



13,002




39,962



46,237$
797,333


$
197,165



$
429,183


$
522,127     (1)
    
    The 2004 amount includes
    $87 million for a sales-type lease arrangement for
    satellite capacity.    21.
    Related
    Party Transactions  MHR Fund
    Management LLC
     F-65




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
       out-of-pocket
    Other
    Relationships
           F-66




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   22.
    Selected
    Quarterly Financial Information (unaudited, in thousands, except
    per share amounts)  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 and minority interest


(5,826
)


(1,088
)


16,472



20,559Minority
    interest(1)


(6,000
)


(6,000
)


(6,366
)


(6,428
)Net income (loss)


(15,840
)


(11,395
)


1,186



3,329Basic and diluted loss per
    share(2):Income (loss) per share


(0.79
)


(0.57
)


0.06



0.16   SuccessorPredecessor Registrant


RegistrantQuarter Ended


October 2 toMarch 31,


June 30,


September 30,


October 1,


December 31,Year ended December 31,
    2005Revenues

$
132,378


$
136,762


$
160,043


$



$
197,165Operating loss from continuing
    operations


(23,959
)


(16,741
)


(26,395
)






(4,945
)Minority
    interest(1)


















(2,667
)Loss from continuing operations


(26,221
)


(18,776
)


(27,800
)






(15,261
)Gain on discharge of pre-petition
    obligations and fresh-start adjustments














1,101,453



Gain on sale of discontinued
    operations, net of taxes






11,371



2,596







Net (loss) income


(26,221
)


(7,405
)


(25,204
)


1,103,679



(15,261
)Basic and diluted (loss) earnings
    per
    share(1):Continuing operations


(0.59
)


(0.43
)


(0.63
)


25.02



(0.76
)Discontinued operations






0.26



0.06







(Loss) earnings per share


(0.59
)


(0.17
)


(0.57
)


25.02



(0.76
)     (1)
    
    The Loral Skynet Preferred Stock is
    reflected as minority interest on our consolidated statement of
    operations.(2)
    
    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.  23.
    Subsequent
    Event  Series A-1 Series A-1 Series B-1 Series B-1 Series A-1 Series A-1
 F-67




---



##### Table of Contents



LORAL SPACE & COMMUNICATIONS INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  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 B-1 Class B-1 Class B-1 Class B-1
 F-68




---



##### Table of Contents



SCHEDULE I  LORAL
    SPACE & COMMUNICATIONS INC.
  CONDENSED
    FINANCIAL INFORMATION OF THE PARENT COMPANY
  CONDENSED
    BALANCE SHEETS
 (In
    thousands)
  December 31,2006


2005Current assets:Cash and cash equivalents

$
16,696


$
8,309Accounts receivable


538



227Other current assets


5,156



1,627Total current assets


22,390



10,163Property, plant and equipment, net


1,129



1,758Investments in and advances to
    subsidiaries


696,368



685,321Other assets


11,146



6,637Total assets

$
731,033


$
703,879Current liabilities:Accounts payable

$
321


$
5,555Accrued employment costs


6,515



5,551Other current liabilities


23,736



17,550Total current liabilities


30,572



28,656Pension and other postretirement
    liabilities


14,561



15,529Long-term liabilities


38,898



32,530Total liabilities


84,031



76,715Shareholders equity:Common stock


200



200Paid-in capital


644,708



642,210Accumulated deficit


(37,981
)


(15,261
)Accumulated other comprehensive
    income


40,075



15Total shareholders equity


647,002



627,164Total liabilities and
    shareholders equity

$
731,033


$
703,879    F-69




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  SCHEDULE I 
    CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY
  CONDENSED
    STATEMENTS OF OPERATIONS
 (in
    thousands)
  Successor Parent



Predecessor ParentFor the Period



For the PeriodOctober 2,



January 1,Year Ended


2005 to



2005 to


Year EndedDecember 31,


December 31,



October 1,


December 31,2006


2005



2005


2004Selling, general and
    administrative expenses

$
(1,127
)

$
516



$



$
4,279Income (loss) from continuing
    operations before reorganization expenses due to bankruptcy


1,127



(516
)







(4,279
)Reorganization expenses due to
    bankruptcy











(5,539
)


(3,885
)Income (loss) from operations


1,127



(516
)



(5,539
)


(8,164
)Gain on discharge of pre-petition
    obligations and fresh-start adjustments











352,202



Interest and investment income


24,800



2,724




20



10Interest expense











(389
)


Other expense











(3
)


Income (loss) from operations
    before income taxes, equity income (losses) in subsidiaries and
    affiliates


25,927



2,208




346,291



(8,154
)Income tax (provision) benefit


(14,767
)


(3,225
)



32,099



(1,077
)Income (loss) from operations
    before equity (losses) income in subsidiaries and affiliates


11,160



(1,017
)



378,390



(9,231
)Equity (loss) income in
    subsidiaries, net of taxes


(33,880
)


(14,244
)



666,459



(167,464
)Net (loss) income

$
(22,720
)

$
(15,261
)


$
1,044,849


$
(176,695
)    F-70




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  SCHEDULE I 
    CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY
  CONDENSED
    STATEMENTS OF CASH FLOW
 (in
    thousands)
  Successor Parent



Predecessor ParentFor the Period



For the PeriodOctober 2,



January 1,Year Ended


2005 to



2005 to


Year EndedDecember 31,


December 31,



October 1,


December 31,2006


2005



2005


2004Operating activities:Net (loss) income

$
(22,720
)

$
(15,261
)


$
1,044,849


$
(176,695
)Non-cash items:Gain on discharge of pre-petition
    obligations and fresh-start adjustments











(352,202
)


Equity losses in subsidiaries


33,880



14,244




(666,459
)


167,464Deferred taxes


(1,427
)


1,427




(30,607
)


Depreciation and amortization


758



464








Stock option compensation


1,374












Due from (to) subsidiaries


25,321



(19,902
)



58



4,527Accounts receivable


(311
)


(62
)







Other current assets and other
    assets


(6,588
)


(53
)



1,732



1,147Accounts payable


(5,234
)


(37
)



(1,536
)


Accrued expenses and other current
    liabilities


6,687



(9,667
)



1,418



(476
)Pension and other postretirement
    liabilities


427



(222
)







Income taxes payable


(291
)


1,661




(1,492
)


Long-term liabilities


6,368



696








1,077Merger of subsidiary into parent
    in connection with Plan of Reorganization











34,012



Other


272












Net cash provided by (used in)
    operating activities


38,516



(26,712
)



29,773



(2,956
)Investing activities:Capital expenditures


(129
)


(24
)







Note receivable from subsidiary


(30,000
)











Investments in and advances to
    subsidiaries















Investments in and advances to
    affiliates











3,747



Net cash (used in) provided by
    investing activities


(30,129
)


(24
)



3,747



Financing activities:Net cash used in financing
    activities















Net increase (decrease) in cash
    and cash equivalents


8,387



(26,736
)



33,520



(2,956
)Cash and cash
    equivalents  beginning of period


8,309



35,045




1,525



4,481Cash and cash
    equivalents  end of period

$
16,696


$
8,309



$
35,045


$
1,525    F-71




---



##### Table of Contents



LORAL
    SPACE & COMMUNICATIONS INC.
  SCHEDULE I 
    CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY
  NOTES TO
    CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY
      No. 90-7, Financial Reporting of Entities in Reorganization Under the
    Bankruptcy Code (SOP 90-7).
            2.
    Guarantees and Contingencies       F-72




---



##### Table of Contents



SCHEDULE II  LORAL
    SPACE & COMMUNICATIONS INC.
    VALUATION AND QUALIFYING ACCOUNTS
    For the Year Ended December 31, 2006, 2005 and 2004
    (in thousands)
  AdditionsBalance at


Charged to


Charged to


Deductions


Balance atBeginning


Costs and


Other


From


End ofDescription

of Year


Expenses


Accounts(1)


Reserves(2)


YearPredecessor
    Registrant:Year ended 2004Allowance for billed receivables

$
11,703


$
(2,144
)

$
(13
)

$
(3,101
)

$
6,445Allowance for long-term receivables


20,177











(20,177
)


Total Receivables allowance

$
31,880


$
(2,144
)

$
(13
)

$
(23,278
)

$
6,445Inventory allowance

$
41,736


$
3,324


$



$
(11,060
)

$
34,000Deferred tax valuation allowance

$
670,922


$
81,029


$
(5,014
)

$
(87,154
)

$
659,783January 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
)

$
304,884     (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.(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-73




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                F-74




---



##### Table of Contents



XTAR,
    L.L.C.
  CONSOLIDATED BALANCE SHEETS
  December 31,


December 31,2006


2005(unaudited)ASSETSCurrent assets:Cash

$
3,091


$
5,687Accounts receivable, net


2,595



751Other current assets


717



914Total current assets


6,403



7,352Property, plant and equipment, net
    (Note 5)


125,248



134,905Other assets, net (Note 6)


469



503Total assets

$
132,120


$
142,760LIABILITIES AND MEMBERS
    EQUITYCurrent liabilities:Accounts payable

$
321


$
144Accrued employment costs


431



438Income taxes payable


21



27Deferred revenue






2,191Note payable (Note 7)


5,754



13,714Customer advances


462



Payable to related parties
    (Note 9)


13,156



4,722Total current liabilities


20,145



21,236Term loan (Note 10)


12,603



11,653Other long-term liabilities
    (Note 11)


20,493



18,363Total liabilities


53,241



51,252Members equity:Loral Skynet


44,235



51,307Hisdesat


34,644



40,201Total members equity


78,879



91,508Total liabilities and
    members equity

$
132,120


$
142,760    F-75




---



##### Table of Contents



XTAR,
    L.L.C.
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
 (In
    thousands)
  Year Ended December 31,2006


2005


2004(unaudited)


(unaudited)Revenues from satellite services

$
8,416


$
2,870


$
Related party revenues from
    satellite services


6,918



6,573



Cost of satellite services


20,735



11,674



898Selling, general and
    administrative expenses


3,232



3,194



1,488Operating loss


(8,633
)


(5,425
)


(2,386
)Interest and investment income


150



153



30Interest expense


3,496



3,376



Other income (expense)


(134
)


32



(2
)Loss before taxes


(12,113
)


(8,616
)


(2,358
)Income tax provision


516



986



4Net loss

$
(12,629
)

$
(9,602
)

$
(2,362
)    F-76




---



##### Table of Contents



XTAR,
    L.L.C.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
 (In
    thousands)
  Year Ended December 31,2006


2005


2004(unaudited)


(unaudited)Operating activities:Net loss

$
(12,629
)

$
(9,602
)

$
(2,362
)Non-cash items:Depreciation and amortization


9,693



7,195



8Non-cash interest expense


1,950



2,280



Other  Accretion to
    launch consideration payable to Arianespace


1,525



1,070



Changes in operating assets and
    liabilities:Accounts receivable and other
    current assets


(1,646
)


(1,378
)


13Accounts payable and other current
    liabilities


631



(30
)


(180
)Deferred revenue


(2,191
)


2,191



Income taxes payable


(6
)


23



3Long-term liabilities


605







Payable to related parties


8,432



1,861



535Net cash provided by (used in)
    operating activities


6,364



3,610



(1,983
)Investing activities:Capital expenditures






(19,548
)


(6,971
)Net cash used in investing
    activities






(19,548
)


(6,971
)Financing activities:Hisdesat term loan






10,787



Notes payable borrowings
    (repayments)


(8,960
)


(3,500
)


Equity contribution 
    Loral






7,354



5,235Equity contribution 
    Hisdesat






5,778



4,114Net cash provided by (used in)
    financing activities


(8,960
)


20,419



9,349Net (decrease) increase in cash
    and cash equivalents


(2,596
)


4,481



395Cash and cash
    equivalents  beginning of year


5,687



1,206



811Cash and cash
    equivalents  end of year

$
3,091


$
5,687


$
1,206    F-77




---



##### Table of Contents



XTAR,
    L.L.C.
  CONSOLIDATED
    STATEMENTS OF MEMBERS EQUITY
 (In
    thousands)
  Loral Space &Communications





Loral Skynet


Hisdesat ServiciosCorporation


Space Systems/ Loral


International LLC


Estrategicos, S.A.


TotalBalance January 1, 2004
    (unaudited)

$
27,619


$
17,799






$
35,573


$
80,991Additional capital contributions
    (unaudited)






5,235







4,114



9,349Net loss (unaudited)


(758
)


(565
)






(1,039
)


(2,362
)Balance December 31, 2004
    (unaudited)


26,861



22,469







38,648



87,978Additional capital contributions
    (unaudited)






7,354







5,778



13,132Net loss  for the period
    January 01, 2005 to November 21, 2005 (unaudited)


(2,327
)


(1,344
)






(2,885
)


(6,556
)(Sale)/purchase of membership
    interests (unaudited)


(24,534
)


(28,479
)


53,013Net loss  for the period
    November 22, 2005 to December 31, 2005 (unaudited)










(1,706
)


(1,340
)


(3,046
)Balance December 31, 2005
    (unaudited)










51,307



40,201



91,508Net loss










(7,072
)


(5,557
)


(12,629
)Balance December 31, 2006

$



$



$
44,235


$
34,644


$
78,879    F-78




---



##### Table of Contents



XTAR,
    L.L.C.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Amounts
    in thousands, unless otherwise noted)
  1.
    Organization
    and Principal Business    XTAR-LANT) XTAR-LANT X-band
  2.
    Basis of
    Presentation      3.
    Summary
    of Significant Accounting Policies  Use of
    Estimates in Preparation of Financial Statements
    Principles
    of Consolidation
    Cash and
    Cash Equivalents
   F-79




---



##### Table of Contents



XTAR,
    L.L.C.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands, unless otherwise noted)
   Property,
    Plant and Equipment
    YearsSatellite-in-orbit


15Earth stations


7-15Equipment, furniture and fixtures


3Leasehold improvement on Spainsat
    Transponders


15   Valuation
    of Satellite, Long-Lived Assets
  Accounting for
    the Impairment or Disposal of Long-Lived Assets
  
    Changes in estimates of the useful life of the satellite
    Changes in estimates of our ability to operate the satellite at
    expected levels
    Changes in the manner in which the satellite is to be used
    The loss of one or several significant customer contracts on the
    satellite    Revenue
    Recognition
    Income
    Taxes
   F-80




---



##### Table of Contents



XTAR,
    L.L.C.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands, unless otherwise noted)
    Additional
    Cash Flow Information
    December 31,2006


2005


2004Supplemental information:Financed launch vehicle acquisition

$



$
12,300


$
Capital expenditure incurred and
    unpaid  Arianespace incentive cap

$



$
17,293


$
Capital expenditure incurred and
    unpaid  related parties

$
2


$
562


$
1,229Interest paid

$



$



$
Foreign taxes paid, net of refunds

$
522


$
963


$
     Net Loss
    Allocation
    Foreign
    Currency
    Comprehensive
    Income
   F-81




---



##### Table of Contents



XTAR,
    L.L.C.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands, unless otherwise noted)
   4.
    New
    Accounting Pronouncements  FIN 48
  Accounting for Uncertainty in Income Taxes, an Interpretation
    of FASB Statement No. 109
  SFAS 157
  Fair Value Measurements
  EITF
    06-3
  No. 06-3, How Taxes Collected from Customers and Remitted to
    Governmental Authorities Should Be Presented in the Income
    Statement (That Is, Gross versus Net Presentation).
  SAB 108
  Considering the Effects of
    Prior Year Misstatements when Quantifying Misstatements in
    Current Year Financial Statements.
  SFAS 159
  The
    Fair Value Option for Financial Assets and Financial Liabilities
 F-82




---



##### Table of Contents



XTAR,
    L.L.C.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands, unless otherwise noted)
   5.
    Property,
    Plant and Equipment  December 31,2006


2005Satellite in-orbit

$
130,436


$
130,436Earth stations


9,177



9,177Equipment, furniture and fixtures


385



383Leasehold improvement on
    transponders


2,100



2,100142,098



142,096Accumulated depreciation and
    amortization


(16,850
)


(7,191
)Property, plant and equipment, net

$
125,248


$
134,905       Year2007

$
9,8782008


7,1722009


2,6272010


5632011


580Thereafter


   6.
    Other
    Assets  December 31,2006


2005Intangible assets:Regulatory and orbital slot

$
518


$
518Accumulated amortization


(60
)


(26
)Intangible assets, net


458



492Other assets


11



11Total other assets

$
469


$
503    F-83




---



##### Table of Contents



XTAR,
    L.L.C.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands, unless otherwise noted)
     Year2007

$
34.52008


34.52009


34.52010


34.52011


34.5   7.
    Note Payable  December 31,2006


2005Arianespace:Principal amount

$
3,340


$
12,300Interest accrued and due


2,414



1,414Total

$
5,754


$
13,714   Arianespace
    Launch Service Agreement
  paid-in-kind
   F-84




---



##### Table of Contents



XTAR,
    L.L.C.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands, unless otherwise noted)
    8.
    Income
    Taxes        9.
    Related
    Party Transactions:    Lease
    of Capacity to Hisdesat on XTAR-EUR
    back-to-back
  back-up back-up
  Lease
    Obligation to Hisdesat
  (XTAR-LANT) XTAR-LANT XTAR-LANT
 F-85




---



##### Table of Contents



XTAR,
    L.L.C.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands, unless otherwise noted)
    Year2007

$
13,1552008


23,0512009


23,4202010


23,7942011


24,175Thereafter


244,631   Operations
    Services Agreements with Hisdesat
    Hisdesat
    Management Agreement with XTAR
    Loral
    Skynet Corporation Service Agreements and Arrangements with
    XTAR
     F-86




---



##### Table of Contents



XTAR,
    L.L.C.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands, unless otherwise noted)
   Loral
    Skynet Corporation Management Agreement with XTAR
    Deferment
    arrangement with Loral and Hisdesat
    10.
    Term
    Loan  Hisdesat
    Term Loan
    December 31,2006


2005Principal amount

$
10,787


$
10,787Interest accrued and due


1,816



866Total

$
12,603


$
11,653   11.
    Other
    Long Term Liabilities  paid-in-kind
 F-87




---



##### Table of Contents



XTAR,
    L.L.C.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Amounts
    in thousands, unless otherwise noted)
     December 31,2006


2005Long-Term Liabilities:Straight-lining of Spainsat lease

$
605



Arianespace Incentive


19,888


$
18,363Total Long-Term Liabilities

$
20,493


$
18,363   12.
    Revenue
    Information  Revenue
    by Customer Location
    2006


2005


2004United States

$
8,416


$
2,870


$
Spain


6,918



6,573



$
15,334


$
9,443


$
   13.
    Financial
    Instruments        December 31, 2006


December 31, 2005Carrying


Fair


Carrying


FairAmount


Value


Amount


ValueArianespace note payable

$
5,754


$
5,904


$
13,714


$
14,244Hisdedsat term loan

$
12,603


$
12,371


$
11,653


$
10,950  F-88