<PAGE>   1

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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                            ------------------------

                                   FORM 10-Q

            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000

                         COMMISSION FILE NUMBER 1-14180

                       LORAL SPACE & COMMUNICATIONS LTD.

                         C/O LORAL SPACECOM CORPORATION
                                600 THIRD AVENUE
                            NEW YORK, NEW YORK 10016
                           TELEPHONE: (212) 697-1105

                     JURISDICTION OF INCORPORATION: BERMUDA

                     IRS IDENTIFICATION NUMBER: 13-3867424

     The registrant has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and
has been subject to such filing requirements for the past 90 days.

     As of April 30, 2000, there were 295,949,682 shares of Loral Space &
Communications Ltd. common stock outstanding.

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<PAGE>   2

                                    PART I.

                             FINANCIAL INFORMATION

                       LORAL SPACE & COMMUNICATIONS LTD.

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED
                                                                   MARCH 31,
                                                              --------------------
                                                                2000        1999
                                                              ---------   --------
<S>                                                           <C>         <C>
Revenues from satellite sales...............................  $ 222,584   $247,830
Revenues from satellite services............................     95,502     58,096
                                                              ---------   --------
     Total revenues.........................................    318,086    305,926
Costs of satellite sales....................................    190,974    215,299
Costs of satellite services.................................     78,829     44,952
Selling, general and administrative expenses................     54,262     46,841
                                                              ---------   --------
Operating loss..............................................     (5,979)    (1,166)
Interest and investment income..............................     29,239     14,804
Interest expense............................................    (43,316)   (17,839)
Gain on investment..........................................     15,157
                                                              ---------   --------
Loss before income taxes, equity in net loss of affiliates
  and minority interest.....................................     (4,899)    (4,201)
Income tax expense..........................................     10,262      2,397
                                                              ---------   --------
Loss before equity in net loss of affiliates and minority
  interest..................................................    (15,161)    (6,598)
Equity in net loss of affiliates............................   (108,389)   (32,781)
Minority interest...........................................        520        878
                                                              ---------   --------
Net loss....................................................   (123,030)   (38,501)
Preferred dividends and accretion...........................    (19,357)   (11,607)
                                                              ---------   --------
Net loss applicable to common stockholders..................  $(142,387)  $(50,108)
                                                              =========   ========
Loss per share:
  Basic and diluted.........................................  $   (0.49)  $  (0.17)
                                                              =========   ========
Weighted average shares outstanding:
  Basic and diluted.........................................    293,282    289,703
                                                              =========   ========
</TABLE>

           See notes to condensed consolidated financial statements.
                                        1
<PAGE>   3

                       LORAL SPACE & COMMUNICATIONS LTD.

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                               MARCH 31,     DECEMBER 31,
                                                                 2000            1999
                                                              -----------    ------------
                                                              (UNAUDITED)       (NOTE)
<S>                                                           <C>            <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................  $  490,702      $  239,865
  Restricted and segregated cash............................      25,206         187,315
  Accounts receivable, net..................................      67,911          47,899
  Contracts-in-process......................................     356,919         439,921
  Inventories...............................................     117,308         111,060
  Other current assets......................................     175,660          47,261
                                                              ----------      ----------
    Total current assets....................................   1,233,706       1,073,321
Property, plant and equipment, net..........................   1,873,948       1,884,975
Cost in excess of net assets acquired, net..................     940,736         946,781
Long-term receivables.......................................     172,900         167,464
Investments in and advances to affiliates...................   1,018,430       1,098,003
Deposits....................................................     178,895         195,875
Other assets................................................     126,150         244,002
                                                              ----------      ----------
                                                              $5,544,765      $5,610,421
                                                              ==========      ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Current portion of long-term debt.........................  $   91,815      $   85,496
  Accounts payable..........................................      76,484         207,362
  Satellite purchase price payable..........................                     181,928
  Accrued employee costs....................................      49,990          44,797
  Customer advances.........................................      32,019          67,725
  Accrued interest and preferred dividends..................      34,382          49,093
  Other current liabilities.................................      42,385          37,770
  Income taxes payable......................................      23,962          19,708
                                                              ----------      ----------
    Total current liabilities...............................     351,037         693,879
Pension and other postretirement liabilities................      53,190          51,601
Long-term liabilities.......................................     187,660         177,300
Long-term debt..............................................   1,897,342       1,913,826
Minority interest...........................................      22,545          23,151
Commitments and contingencies (Notes 6 and 8)
Shareholders' equity:
  Series A convertible preferred stock, $.01 par value......                         459
  Series B preferred stock, $.01 par value..................
  Series C 6% convertible redeemable preferred stock
    ($674,922 and $745,472 redemption value at March 31,
    2000 and December 31, 1999, respectively)...............     665,831         735,437
  Series D 6% convertible redeemable preferred stock
    ($400,000 redemption value).............................     388,000
  Common stock, $.01 par value..............................       2,956           2,452
  Paid-in capital...........................................   2,432,452       2,347,323
  Treasury stock, at cost...................................      (3,360)         (3,360)
  Unearned compensation.....................................        (964)         (1,253)
  Retained deficit..........................................    (551,688)       (409,301)
  Accumulated other comprehensive income....................      99,764          78,907
                                                              ----------      ----------
    Total shareholders' equity..............................   3,032,991       2,750,664
                                                              ----------      ----------
                                                              $5,544,765      $5,610,421
                                                              ==========      ==========
</TABLE>

---------------
NOTE: The December 31, 1999 balance sheet has been derived from the audited
      consolidated financial statements at that date.

           See notes to condensed consolidated financial statements.
                                        2
<PAGE>   4

                       LORAL SPACE & COMMUNICATIONS LTD.

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED
                                                                    MARCH 31,
                                                              ----------------------
                                                                2000         1999
                                                              ---------    ---------
<S>                                                           <C>          <C>
Operating activities:
  Net loss..................................................  $(123,030)   $ (38,501)
  Non-cash items:
     Equity in net loss of affiliates.......................    108,389       32,781
     Minority interest......................................       (520)        (878)
     Deferred taxes.........................................      5,367        1,936
     Non-cash interest and investment income................    (10,170)        (297)
     Non-cash interest expense..............................      9,827        8,210
     Depreciation and amortization..........................     53,107       37,793
     Gain on sale of investment.............................    (15,157)
  Change in operating assets and liabilities:
     Accounts receivable, net...............................    (20,012)        (408)
     Contracts-in-process...................................     83,002      (26,592)
     Inventories............................................     (6,248)       8,259
     Deposits...............................................     16,980       16,500
     Long-term receivables..................................     (5,436)      (8,524)
     Other current assets and other assets..................      4,754        2,901
     Accounts payable.......................................   (130,878)     (31,494)
     Accrued expenses and other current liabilities.........     (4,903)     (29,383)
     Income taxes payable...................................      4,254           76
     Customer advances......................................    (35,706)     (12,249)
     Long-term liabilities..................................     10,360       13,007
     Other..................................................        614        2,871
                                                              ---------    ---------
Cash used in operating activities...........................    (55,406)     (23,992)
                                                              ---------    ---------
Investing activities:
  Proceeds from sale of investment..........................     16,341
  Investments in and advances to affiliates.................    (20,655)    (210,877)
  Use and transfer of restricted and segregated cash........    162,109       24,919
  Capital expenditures......................................   (215,771)    (155,264)
                                                              ---------    ---------
Cash used in investing activities...........................    (57,976)    (341,222)
                                                              ---------    ---------
Financing activities:
  Proceeds from the issuance of 9.5% senior notes, net......                 343,875
  Proceeds from issuance of Series D 6% preferred stock,
     net....................................................    388,000
  Borrowings under revolving credit facility, net...........                  45,000
  Borrowings under note purchase facility...................                   1,922
  Repayments under term loan................................    (18,750)
  Repayments of other long-term obligations.................     (1,242)        (454)
  Proceeds from common stock issuances......................      9,686        4,767
  Preferred dividends.......................................    (13,475)     (11,183)
                                                              ---------    ---------
Cash provided by financing activities.......................    364,219      383,927
                                                              ---------    ---------
Increase in cash and cash equivalents.......................    250,837       18,713
Cash and cash equivalents -- beginning of period............    239,865      546,772
                                                              ---------    ---------
Cash and cash equivalents -- end of period..................  $ 490,702    $ 565,485
                                                              =========    =========
Non-cash activities:
  Conversion of Series A Preferred Stock to common stock....  $     459
                                                              =========
  Conversion of Series C Preferred Stock to common stock and
     related issuance of additional common shares on
     conversion.............................................  $  75,449
                                                              =========
  Unrealized gain (loss) on available-for-sale securities...  $  36,333    $ (15,720)
                                                              =========    =========
</TABLE>

           See notes to condensed consolidated financial statements.
                                        3
<PAGE>   5

                       LORAL SPACE & COMMUNICATIONS LTD.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1) ORGANIZATION AND PRINCIPAL BUSINESS

     Loral Space & Communications Ltd. together with its subsidiaries ("Loral"
or the "Company") is one of the world's leading satellite communications
companies with substantial activities in satellite manufacturing and
satellite-based communications services. Loral has assembled the building blocks
necessary to provide a seamless, global networking capability for the
information age. Loral is organized into four distinct operating segments (see
Note 9):

          Fixed Satellite Services ("FSS"):  Leasing transponder capacity to
     customers for various applications, including broadcasting, news gathering,
     Internet access and transmission, private voice and data networks, business
     television, distance learning and direct-to-home television ("DTH"),
     through the activities of Loral Skynet, Loral CyberStar, Inc. ("Loral
     CyberStar"), Satelites Mexicanos, S.A. de C.V. ("Satmex") and Europe*Star
     Limited ("Europe*Star"),

          Broadband Data Services:  Providing managed communications networks
     and Internet and intranet services through Loral CyberStar and delivering
     high-speed broadband data communications and business television services
     through CyberStar, L.P. ("CyberStar LP"),

          Satellite Manufacturing and Technology:  Designing and manufacturing
     satellites and space systems and developing satellite technology for a
     broad variety of customers and applications through Space Systems/Loral,
     Inc. ("SS/L"), and

          Global Mobile Telephone Service:  Acting as the managing general
     partner of Globalstar, L.P. ("Globalstar"), which owns and operates a
     global telecommunications network designed to serve virtually every
     populated area of the world by means of a 52-satellite constellation,
     including four in-orbit spares (the "Globalstar System"). The Globalstar
     System commenced operations in the first quarter of 2000.

2) BASIS OF PRESENTATION

     The accompanying unaudited condensed consolidated financial statements have
been prepared by Loral pursuant to the rules of the Securities and Exchange
Commission ("SEC") and, in the opinion of the Company, include all adjustments
(consisting of normal recurring accruals) necessary for a fair presentation of
results of operations, financial position and cash flows as of and for the
periods presented. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such SEC rules.
The Company believes that the disclosures made are adequate to keep the
information presented from being misleading. The results of operations for the
three months ended March 31, 2000, are not necessarily indicative of the results
to be expected for the full year. It is suggested that these financial
statements be read in conjunction with the audited consolidated financial
statements and notes thereto of Loral included in Loral's latest Annual Report
on Form 10-K.

  Restricted and Segregated Cash

     At March 31, 2000, Loral CyberStar had $25 million of restricted cash for
an interest payment on its senior notes. In March 2000, Loral CyberStar used
$137 million of segregated cash towards the final payment on the purchase of
Telstar 10/Apstar IIR.

  Reclassifications

     Certain reclassifications have been made to conform prior period amounts to
the current period presentation.

                                        4
<PAGE>   6
                       LORAL SPACE & COMMUNICATIONS LTD.

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3) COMPREHENSIVE LOSS

     The components of comprehensive loss for the three months ended March 31,
2000 and 1999, are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                2000        1999
                                                              ---------   --------
<S>                                                           <C>         <C>
Net loss....................................................  $(123,030)  $(38,501)
Cumulative translation adjustment...........................       (319)      (913)
Unrealized gains (losses) arising during the period.........     36,333    (15,720)
Less, realized gain included in net loss....................    (15,157)
                                                              ---------   --------
Comprehensive loss..........................................  $(102,173)  $(55,134)
                                                              =========   ========
</TABLE>

4) INVESTMENTS IN AND ADVANCES TO AFFILIATES

     As of March 31, 2000, Loral owned directly and indirectly 24.8 million
ordinary partnership interests (approximately 40%) of the total 61.9 million
Globalstar ordinary partnership interests outstanding.

     Investments in and advances to affiliates are as follows (in thousands):

<TABLE>
<CAPTION>
                                                              MARCH 31,    DECEMBER 31,
                                                                 2000          1999
                                                              ----------   ------------
<S>                                                           <C>          <C>
Globalstar, including advances of $233,430 and $219,823 at
  March 31, 2000 and December 31, 1999, respectively........  $  803,275    $  878,140
Satmex......................................................      62,317        70,747
Europe*Star.................................................      65,443        62,300
Other affiliates............................................      87,395        86,816
                                                              ----------    ----------
                                                              $1,018,430    $1,098,003
                                                              ==========    ==========
</TABLE>

     Equity in net loss of affiliates consists of (in thousands):

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED
                                                                  MARCH 31,
                                                              ------------------
                                                                2000      1999
                                                              --------   -------
<S>                                                           <C>        <C>
Globalstar, net of tax benefit..............................  $ 93,217   $17,921
Satmex......................................................     8,221     6,026
Europe*Star.................................................     1,403       643
SkyBridge, net of tax benefit...............................               6,799
Other affiliates, net of tax benefit........................     5,548     1,392
                                                              --------   -------
                                                              $108,389   $32,781
                                                              ========   =======
</TABLE>

                                        5
<PAGE>   7
                       LORAL SPACE & COMMUNICATIONS LTD.

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4) INVESTMENTS IN AND ADVANCES TO AFFILIATES -- (CONTINUED)
     The condensed consolidated statements of operations reflect the effects of
the following amounts related to transactions with or investments in affiliates
(in thousands):

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED
                                                                  MARCH 31,
                                                              ------------------
                                                               2000       1999
                                                              -------   --------
<S>                                                           <C>       <C>
Revenues from satellite sales...............................  $41,430   $110,220
Interest and investment income..............................   13,170        297
Interest expense capitalized on development stage
  enterprises...............................................    1,116      8,256
Elimination of Loral's proportionate share of intercompany
  profits...................................................    1,423       (227)
Amortization of excess carrying value, capitalized interest
  and intercompany profits related to investment in
  Globalstar................................................    7,733
</TABLE>

     The following table represents the summary of results of operations of
certain of Loral's affiliates for the three months ended March 31, 2000 and 1999
(in thousands):

<TABLE>
<CAPTION>
                                                       2000                   1999
                                               --------------------   --------------------
                                               GLOBALSTAR   SATMEX    GLOBALSTAR   SATMEX
                                               ----------   -------   ----------   -------
<S>                                            <C>          <C>       <C>          <C>
Sales........................................  $     609    $32,315    $           $27,977
Operating income (loss)......................   (135,230)     6,282    (42,681)      7,151
Net loss.....................................   (208,629)   (13,102)   (40,368)     (8,497)
Net loss applicable to common shareholders...               (13,479)                (8,497)
Net loss applicable to ordinary partnership
  interests..................................   (216,138)              (45,118)
</TABLE>

5) CONTRACTS-IN-PROCESS

<TABLE>
<CAPTION>
                                                        MARCH 31,   DECEMBER 31,
                                                          2000          1999
                                                        ---------   ------------
                                                             (IN THOUSANDS)
<S>                                                     <C>         <C>
U.S. Government contracts:
  Amounts billed......................................  $ 10,023      $  9,003
  Unbilled contract receivables.......................     2,341         6,965
                                                        --------      --------
                                                          12,364        15,968
                                                        --------      --------
Commercial contracts:
  Amounts billed......................................   151,908       226,609
  Unbilled contract receivables.......................   192,647       197,344
                                                        --------      --------
                                                         344,555       423,953
                                                        --------      --------
                                                        $356,919      $439,921
                                                        ========      ========
</TABLE>

     Unbilled amounts include recoverable costs and accrued profit on progress
completed, which have not been billed. Such amounts are billed upon shipment of
the product, achievement of contractual milestones, or completion of the
contract and are reclassified to billed receivables.

                                        6
<PAGE>   8
                       LORAL SPACE & COMMUNICATIONS LTD.

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6) LONG TERM DEBT

<TABLE>
<CAPTION>
                                                              MARCH 31,    DECEMBER 31,
                                                                 2000          1999
                                                              ----------   ------------
                                                                   (IN THOUSANDS)
<S>                                                           <C>          <C>
Term loan, 7.3% and 7.1% at March 31, 2000 and December 31,
  1999 respectively.........................................  $  237,500    $  256,250
Revolving credit facility, 7.3% and 7.1% at March 31, 2000
  and December 31, 1999, respectively.......................     275,000       275,000
Note purchase facility......................................     139,238       139,238
9.5% senior notes due 2006..................................     350,000       350,000
Export-Import credit facility...............................      12,872        12,872
Other.......................................................         571           591
Non-recourse debt of Loral CyberStar:
  11.25% senior notes due 2007 (principal amount $443
     million)...............................................     500,184       501,734
  12.5% senior discount notes due 2007 (principal amount at
     maturity $484 million and accreted principal of $390
     million and $378 million as of March 31, 2000 and
     December 31, 1999, respectively).......................     458,976       448,409
  Other.....................................................      14,816        15,228
                                                              ----------    ----------
Total debt..................................................   1,989,157     1,999,322
Less, current maturities....................................      91,815        85,496
                                                              ----------    ----------
                                                              $1,897,342    $1,913,826
                                                              ==========    ==========
</TABLE>

7) LOSS PER SHARE

     Basic loss per share is computed based on the weighted average number of
shares of common stock and the Series A preferred stock outstanding. Diluted
loss per share excludes the assumed conversion of the Series C preferred stock,
Series D preferred stock and stock options, as the effect would have been
antidilutive. For the three months ended March 31, 2000 and 1999, weighted
options equating to approximately 1.0 million and 1.3 million shares,
respectively, as calculated using the treasury stock method, were excluded from
the calculation of diluted loss per share, as the effect would have been
antidilutive.

                                        7
<PAGE>   9
                       LORAL SPACE & COMMUNICATIONS LTD.

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7) LOSS PER SHARE -- (CONTINUED)
     The following table sets forth the computation of basic and diluted loss
per share:

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED
                                                                    MARCH 31,
                                                              ---------------------
                                                                2000        1999
                                                              ---------   ---------
                                                              (IN THOUSANDS, EXCEPT
                                                                 PER SHARE DATA)
<S>                                                           <C>         <C>
Numerator:
  Net loss..................................................  $123,030    $ 38,501
  Preferred dividends and accretion.........................    19,357      11,607
                                                              --------    --------
  Numerator for basic and diluted earnings per share -- net
     loss applicable to common stockholders.................  $142,387    $ 50,108
                                                              ========    ========
Denominator:
  Weighted average shares:
     Common stock...........................................   247,889     243,806
     Series A Preferred Stock...............................    45,393      45,897
                                                              --------    --------
  Denominator for basic loss per share......................   293,282     289,703
  Effect of dilutive securities:
     Series C preferred stock...............................         *           *
     Series D preferred stock...............................         *           *
     Employee stock options.................................         *           *
                                                              --------    --------
  Denominator for diluted loss per share....................   293,282     289,703
                                                              ========    ========
Basic and diluted loss per share............................  $   0.49    $   0.17
                                                              ========    ========
</TABLE>

---------------
* Effect is antidilutive.

     In the first quarter of 2000, all of the Company's Series A preferred stock
and 1.4 million shares of Series C preferred stock were converted into the
Company's common stock (see Note 10).

8) COMMITMENTS AND CONTINGENCIES

     On December 15, 1995, Globalstar entered into a $250 million credit
agreement (the "Globalstar Credit Agreement") with a group of banks. Lockheed
Martin Corporation ("Lockheed"), SS/L and certain other Globalstar partners have
guaranteed $206.3 million, $11.7 million and $32.0 million of the Globalstar
Credit Agreement, respectively. In addition, Loral agreed to indemnify Lockheed
for any liability in excess of $150 million.

     On August 5, 1999, Globalstar entered into a $500 million credit agreement
with a group of banks for the build-out of the Globalstar System of which $400
million was outstanding as of March 31, 2000. The credit facility is guaranteed
by Loral SatCom Ltd. and Loral Satellite, Inc., wholly owned subsidiaries of
Loral, for which Loral received 3,450,000 warrants to purchase Globalstar
partnership interests. The guarantee is secured by the pledge of certain assets
of Loral and its subsidiaries, including the stock of the guarantors and the
Telstar 6 and Telstar 7 satellites. Based on third party valuations, management
believes that the fair value of Telstar 6 and Telstar 7 is in excess of this
$500 million credit agreement. As of March 31, 2000, the net book value of
Telstar 6 and Telstar 7 was $387 million. The guarantee agreement contains
customary financial covenants of the guarantors, including maintenance of a
minimum collateral coverage ratio and maintenance of a combined minimum net
worth and combined earnings before interest, taxes, depreciation and

                                        8
<PAGE>   10
                       LORAL SPACE & COMMUNICATIONS LTD.

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8) COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
amortization ("EBITDA"). In addition, the guarantee agreement contains customary
restrictions, including limitations on indebtedness, liens, fundamental changes,
asset sales, dividends (except that the guarantors may pay dividends to their
parents provided that combined aggregate cash on hand at the guarantors is at
least equal to $50 million and the guarantors hold an intercompany note due from
Loral for at least $100 million), investments, capital expenditures, creating
liens other than those created pursuant to the guarantee and transactions with
affiliates.

     In May 2000, Globalstar finalized $531.1 million of vendor financing
arrangements with Qualcomm that replaces the previous $100 million vendor
financing agreement. The vendor financing bears interest at 6%, matures on
August 15, 2003 and requires repayment pro rata with the term loans under
Globalstar's $500 million credit facility discussed above. As of May 5, 2000,
$482 million was outstanding under this facility. In connection with this
agreement, Qualcomm received warrants to purchase 3,450,000 Globalstar
partnership interests at an exercise price of $42.25 per interest. The exercise
price was determined by reference to the fair market value of GTL's common stock
on the closing date of the vendor financing, based on an approximate one
partnership interest for four shares of GTL common stock. Fifty percent of the
warrants vested on the closing date. The remaining 50% will vest generally in
two equal installments on September 1, 2000 and September 1, 2001. The warrants
will expire in 2007.

     Loral has agreed that if the principal amount (excluding capitalized
interest, currently amounting to $31.1 million) outstanding under the Qualcomm
vendor financing facility exceeds the principal amount outstanding under
Globalstar's $500 million credit facility, as determined on certain measurement
dates, then Loral will guarantee 50% of such excess amount. As a result, Loral's
aggregate guarantee liability for debt outstanding under the Qualcomm vendor
financing facility and Globalstar's $500 million credit facility will not exceed
$500 million.

     Prior to its acquisition by Loral, Loral Skynet sold several transponders
under which title to specific transponders was transferred to the customer.
Under the terms of the sales contracts, Loral Skynet continues to operate the
satellites on which the transponders are located and provides a warranty for a
period of 10 to 14 years. Depending on the contract, Loral Skynet is required to
replace any transponders failing to meet operating specifications. All customers
are entitled to a refund equal to the reimbursement value, as defined, in the
event there is no replacement. The reimbursement value is determined based on
the original purchase price plus an interest factor from the time the payment
was received to acceptance of the transponder by the customer, reduced on a
straight-line basis over the warranty period. In case of satellite failure, the
reimbursement value may be paid from proceeds received from insurance policies.

     In late 1998, following the launch of an SS/L-built satellite sold to
PanAmSat, a manufacturing error was discovered that affected the geographical
coverage of the Ku-band transponders on the satellite. On January 6, 2000,
PanAmSat filed an arbitration proceeding in connection with this error claiming
damages of $225 million for lost profits, and increased sales and marketing
costs. SS/L believes it has meritorious defenses to the claim and that its
liability is limited to a loss of a portion of the applicable orbital
incentives, the estimated impact of which is included in Loral's condensed
consolidated financial statements. PanAmSat has received a recovery from its
insurance carrier that should reduce any damage claim. While this proceeding is
in its very early stages, management believes that this matter will not have a
material adverse effect on the financial condition or results of operations of
Loral.

     SS/L is a target of a grand jury investigation being conducted by the
office of the U.S. Attorney for the District of Columbia with respect to
possible violations of export control laws that may have occurred in connection
with the participation of SS/L employees on a committee formed in the wake of
the 1996 crash of a Long March rocket in China and whose purpose was to consider
whether studies of the crash made by the Chinese had correctly identified the
cause of the failure. The Company is not in a position to predict the
                                        9
<PAGE>   11
                       LORAL SPACE & COMMUNICATIONS LTD.

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8) COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
direction or outcome of the investigation. If SS/L were to be indicted and
convicted of a criminal violation of the Arms Export Control Act, it would be
subject to a fine of $1 million per violation and could be debarred from certain
export privileges and, possibly, from participation in government contracts.
Since many of SS/L's satellites are built for foreign customers and/or launched
on foreign rockets, such a debarment would have a material adverse effect on
SS/L's business and, therefore, the Company. Indictment for such violations
would subject SS/L to discretionary debarment from further export licenses.
Under the applicable regulations, SS/L could be debarred from export privileges
without being convicted of any crime if it is indicted for these alleged
violations, and loss of export privileges would harm SS/L's business. Whether or
not SS/L is indicted or convicted, SS/L remains subject to the State
Department's general statutory authority to prohibit exports of satellites and
related services if it finds a violation of the Arms Export Control Act that
puts SS/L's reliability in question, and it can suspend export privileges
whenever it determines that grounds for debarment exist and that such suspension
"is reasonably necessary to protect world peace or the security or foreign
policy of the United States."

     As far as SS/L can determine, no sensitive information or technology was
conveyed to the Chinese, and no secret or classified information was discussed
with or reported to them. SS/L believes that its employees acted openly and in
good faith and that none engaged in intentional misconduct. Accordingly, the
Company does not believe that SS/L has committed a criminal violation of the
export control laws. The Company does not expect the grand jury investigation or
its outcome to result in a material adverse effect upon its business. However,
there can be no assurance as to these conclusions.

     On December 23, 1998, the Office of Defense Trade Controls ("ODTC") of the
U.S. Department of State temporarily suspended the previously approved technical
assistance agreement under which SS/L had been preparing for the launch of the
ChinaSat-8 satellite. According to ODTC, the purpose of the temporary suspension
is to permit that agency to review the agreement for conformity with
newly-enacted legislation (Section 74 of the Arms Export Control Act) with
respect to the export of missile equipment or technology. SS/L has complied with
ODTC's instructions, and believes that a review of the agreement will show that
its terms comply with the new law. The ODTC, however, has not yet completed its
review, and the scheduled launch date for ChinaSat-8 is being delayed. If the
suspension is not lifted by July 31, 2000, ChinaSat could decide to terminate
the contract. If such a termination were to occur, SS/L would have to refund
advances received from ChinaSat ($134 million as of March 31, 2000) and may
incur penalties of up to $11 million and believes it would incur costs of up to
approximately $38 million to refurbish and retrofit the satellite so that it
could be sold to another customer. There can be no assurance that SS/L will be
able to find such a replacement customer for the satellite or its Chinese launch
vehicle. SS/L will record a charge to earnings of approximately $35 million if
it is unable to find a replacement customer for this launch vehicle.

     In March 1999, jurisdiction for satellite licensing was transferred from
the Commerce Department to the State Department, and the State Department has
issued regulations relating to the export of, and disclosure of technical
information related to, satellites and related equipment. SS/L anticipates that
obtaining licenses and technical assistance agreements under these new
regulations will take more time and will be considerably more burdensome than in
the past. Delays in obtaining the necessary licenses and technical assistance
agreements may delay SS/L's performance on existing contracts, and, as a result,
SS/L may incur penalties or lose incentive payments under these contracts. In
addition, such delays may have an adverse effect on SS/L's ability to compete
against foreign satellite manufacturers for new satellite contracts.

     Under an agreement reached with Eutelsat, Loral CyberStar agreed to operate
Telstar 12, which was originally intended to operate at 12 degrees W.L., at 15
degrees W.L. while Eutelsat will continue to develop its services at 12.5
degrees W.L. Eutelsat has in turn agreed not to use its 14.8 degrees W.L.
orbital slot and will assert its priority rights over such location on Loral
CyberStar's behalf. As part of this coordination effort,

                                       10
<PAGE>   12
                       LORAL SPACE & COMMUNICATIONS LTD.

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8) COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
Loral CyberStar agreed to provide to Eutelsat four transponders on Telstar 12
for the life of the satellite. Eutelsat also has the right to acquire, at cost,
four transponders on the next replacement satellite for Telstar 12. As part of
the international coordination process, Loral continues to conduct discussions
with various administrations regarding Telstar 12's operations at 15 degrees
W.L. If these discussions are not successful, Telstar 12's useable capacity may
be reduced.

9) SEGMENTS

     Loral has four reportable business segments: Fixed Satellite Services,
Broadband Data Services, Satellite Manufacturing and Technology and Global
Mobile Telephone Service (see Note 1).

     In evaluating financial performance, management uses revenues and EBITDA as
the measure of a segment's profit or loss. Segment results include the results
of Loral's subsidiaries and its affiliates, Satmex, Europe*Star and Globalstar,
which are accounted for using the equity method in these condensed consolidated
financial statements. Intersegment revenues primarily consists of satellites
under construction by Satellite Manufacturing and Technology for Fixed Satellite
Services and Global Mobile Telephone Service and sales by Fixed Satellite
Services to Broadband Data Services for the lease of transponder capacity.

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

                       THREE MONTHS ENDED MARCH 31, 2000

<TABLE>
<CAPTION>
                                                                           SATELLITE       GLOBAL
                                                FIXED       BROADBAND    MANUFACTURING     MOBILE
                                              SATELLITE       DATA            AND        TELEPHONE
                                             SERVICES(1)   SERVICES(2)   TECHNOLOGY(3)   SERVICE(4)   CORPORATE(5)     TOTAL
                                             -----------   -----------   -------------   ----------   ------------   ---------
<S>                                          <C>           <C>           <C>             <C>          <C>            <C>
REVENUES AND EBITDA:
Revenues from external customers...........   $   94.7        $ 32.5       $  181.3       $    0.6                   $   309.1
Intersegment revenues......................        7.3                         66.9                                       74.2
                                              --------        ------       --------       --------                   ---------
Operating segment revenues.................   $  102.0        $ 32.5       $  248.2       $    0.6                       383.3
                                              ========        ======       ========       ========
Revenues of unconsolidated affiliates(6)...                                                                              (32.9)
Intercompany revenues(7)...................                                                                              (32.3)
                                                                                                                     ---------
Operating revenue as reported..............                                                                          $   318.1
                                                                                                                     =========
Segment EBITDA before Broadband investment
  and eliminations.........................   $   62.0        $ (9.3)      $   26.4       $  (57.4)     $   (9.5)    $    12.2
Broadband investment(8)....................                     (1.1)                                                     (1.1)
EBITDA of unconsolidated affiliates(6).....                                                                               38.0
Intercompany EBITDA(7).....................                                                                               (2.0)
                                                                                                                     ---------
EBITDA as reported(9)......................                                                                               47.1
Depreciation and amortization(10)..........                                                                               53.1
                                                                                                                     ---------
Operating loss.............................                                                                          $    (6.0)
                                                                                                                     =========
OTHER DATA:
Depreciation and amortization before
  affiliate eliminations(10)...............   $   54.3        $  4.9       $    9.0       $   78.2      $    0.3     $   146.7
                                              ========        ======       ========       ========      ========
Depreciation and amortization of
  unconsolidated affiliates(6)(10).........                                                                              (93.6)
                                                                                                                     ---------
Depreciation and amortization(10)..........                                                                          $    53.1
                                                                                                                     =========
Total assets before affiliate
  eliminations.............................   $3,722.9        $223.1       $1,566.3       $3,825.4      $1,308.1     $10,645.8
                                              ========        ======       ========       ========      ========
Total assets of unconsolidated
  affiliates(6)............................                                                                          $ 5,101.0
                                                                                                                     ---------
Total assets...............................                                                                          $ 5,544.8
                                                                                                                     =========
</TABLE>

 (1) Includes 100% of Europe*Star's EBITDA and 100% of Satmex's revenues and
     EBITDA.

 (2) Broadband Data Services consists of 100% of CyberStar LP and 100% of Loral
     CyberStar's data services business and consumer broadband services.

                                       11
<PAGE>   13
                       LORAL SPACE & COMMUNICATIONS LTD.

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9) SEGMENTS -- (CONTINUED)
---------------
 (3) Satellite Manufacturing and Technology consists of 100% of SS/L's results.

 (4) Includes 100% of Globalstar's revenues and EBITDA.

 (5) Represents unallocated corporate expenses incurred in support of the
     Company's operations.

 (6) Represents amounts related to unconsolidated affiliates (Satmex,
     Europe*Star and Globalstar). These amounts are eliminated in order to
     arrive at Loral's condensed consolidated results. Loral's proportionate
     share of these affiliates is included in equity in net loss from affiliates
     in Loral's condensed consolidated statements of operations.

 (7) Represents the elimination of intercompany sales and EBITDA, primarily for
     satellites under construction by SS/L for wholly-owned subsidiaries; as
     well as eliminating sales for the lease of transponder capacity by
     Broadband Data Services from Fixed Satellite Services.

 (8) Excludes capital investment in Broadband Services.

 (9) EBITDA (which is equivalent to operating income/loss before depreciation
     and amortization, including amortization of unearned compensation) is
     provided because it is a measure commonly used in the communications
     industry to analyze companies on the basis of operating performance,
     leverage and liquidity and is presented to enhance the understanding of
     Loral's operating results. EBITDA is not an alternative to net income as an
     indicator of a company's operating performance, or cash flow from
     operations as a measure of a company's liquidity. EBITDA may be calculated
     differently and, therefore, may not be comparable to similarly titled
     measures reported by other companies.

(10) Includes amortization of unearned stock compensation charges.

                                       12
<PAGE>   14
                       LORAL SPACE & COMMUNICATIONS LTD.

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                       THREE MONTHS ENDED MARCH 31, 1999

<TABLE>
<CAPTION>
                                                                          SATELLITE       GLOBAL
                                               FIXED       BROADBAND    MANUFACTURING     MOBILE
                                             SATELLITE       DATA            AND        TELEPHONE
                                            SERVICES(1)   SERVICES(2)   TECHNOLOGY(3)   SERVICE(4)   CORPORATE(5)     TOTAL
                                            -----------   -----------   -------------   ----------   ------------   ---------
<S>                                         <C>           <C>           <C>             <C>          <C>            <C>
REVENUE AND EBITDA:
Revenue from external customers...........   $   69.7       $ 16.3        $  140.7                                  $   226.7
Intersegment revenue......................        2.4                        185.8                                      188.2
                                             --------       ------        --------                                  ---------
Operating segment revenue.................   $   72.1       $ 16.3        $  326.5                                      414.9
                                             ========       ======        ========
Revenue of unconsolidated affiliates(6)...                                                                              (28.0)
Intercompany revenue(7)...................                                                                              (81.0)
                                                                                                                    ---------
Operating revenue as reported.............                                                                          $   305.9
                                                                                                                    =========
Segment EBITDA before Broadband investment
  and eliminations........................   $   47.6       $ (6.7)       $   31.6       $  (42.1)     $   (9.2)    $    21.2
Broadband investment(8)
EBITDA of unconsolidated affiliates(6)....                                                                               21.7
Intercompany EBITDA(7)....................                                                                               (6.3)
                                                                                                                    ---------
EBITDA as reported(9).....................                                                                               36.6
Depreciation and amortization(10).........                                                                               37.8
                                                                                                                    ---------
Operating loss............................                                                                          $    (1.2)
                                                                                                                    =========
OTHER DATA:
Depreciation and amortization before
  affiliate eliminations(10)..............   $   38.0       $  4.2        $    8.8       $    0.5      $    0.8     $    52.3
                                             ========       ======        ========       ========      ========
Depreciation and amortization of
  unconsolidated affiliates(6)(10)........                                                                              (14.5)
                                                                                                                    ---------
Depreciation and amortization(10).........                                                                          $    37.8
                                                                                                                    =========
Total assets before affiliate
  eliminations............................   $3,484.3       $130.8        $1,679.4       $3,005.0      $1,459.6     $ 9,759.1
                                             ========       ======        ========       ========      ========
Total assets of unconsolidated
  affiliates(6)...........................                                                                          $(4,246.1)
                                                                                                                    ---------
Total assets..............................                                                                          $ 5,513.0
                                                                                                                    =========
</TABLE>

10. SHAREHOLDERS' EQUITY

  Series A Preferred Stock

     In February 2000, Loral and Lockheed filed certain notices under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 in connection with
Lockheed's plan to convert its 45,896,978 shares of Loral Series A preferred
stock into an equal number of shares of Loral common stock. On March 31, 2000,
Lockheed converted the shares of Series A preferred stock into 45,896,978 shares
of Loral common stock. Lockheed may dispose of the common stock in transactions
registered under, or exempt from, the registration provisions of, the federal
securities laws. Loral filed a registration statement to register the shares of
common stock acquired by Lockheed upon the conversion of the Series A preferred
stock, which became effective in May 2000. Loral has agreed to maintain the
effectiveness of such registration until May 19, 2001, subject to certain
extensions, and has agreed to refrain from selling equity securities in the
public markets for its own account until November 2000, subject to certain
extensions.

                                       13
<PAGE>   15
                       LORAL SPACE & COMMUNICATIONS LTD.

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10) SHAREHOLDERS' EQUITY -- (CONTINUED)
  Series C Preferred Stock

     In February 2000, 1.4 million shares of Series C preferred stock were
converted into 3.5 million shares of Loral common stock. In connection with this
conversion, Loral issued to the converting shareholders 332,777 additional
shares of its common stock, which approximated the dividend prepayments to which
they would have been entitled if a provisional redemption of those securities
had been made.

  Series D Preferred Stock

     In February 2000, Loral sold $400 million of Series D 6% convertible
redeemable preferred stock due 2007 in an offering exempt from registration. The
preferred stock is convertible into 20,171,152 shares of common stock at a
conversion price of $19.83 per share. Loral intends to apply the net proceeds of
$388 million for general corporate purposes, including investment in its
broadband strategy and expansion of the Loral Global Alliance by acquisition of
additional satellites and orbital slots.

11. SUBSEQUENT EVENT

     On April 18, 2000, the Board of Directors of Loral approved a new stock
option plan (the "2000 Plan") in order to provide an inducement to attract and
retain the services of qualified employees. The 2000 Plan is intended to
constitute a "broadly-based plan" as defined in Section 312.04(h) of the New
York Stock Exchange ("NYSE") Listed Company Manual, which provides that at least
50% of grants thereunder exclude senior management. The 2000 Plan provides for
the grant of non-qualified stock options only. Up to 13 million shares of common
stock may be issued under the 2000 Plan, of which approximately 4.5 million
options are currently outstanding. Employees of Loral, its subsidiaries and
affiliates are eligible to participate in the 2000 Plan. The 2000 Plan (but not
outstanding options) will terminate on the tenth anniversary of its adoption.

                                       14
<PAGE>   16

                       LORAL SPACE & COMMUNICATIONS LTD.

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     Except for the historical information contained herein, the matters
discussed in the following Management's Discussion and Analysis of Results of
Operations and Financial Condition of Loral Space & Communications, Ltd. and its
subsidiaries ("Loral" or the "Company") 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, the Company or its representatives
have made and may continue to make forward-looking statements, orally or in
writing, in other contexts, such as in reports filed with the SEC, press
releases or statements made with the approval of an authorized executive officer
of the Company. These forward-looking statements can be identified by the use of
forward-looking terminology such as "believes," "expects," "plans," "may,"
"will," "would," "could," "should," "anticipates," "estimates," "project,"
"intend," or "outlook" or the negative of these words or other variations of
these words or other comparable words, or by discussion of strategy that involve
risks and uncertainties. These forward-looking statements are only predictions,
and actual events or results may differ materially as a result of a wide variety
of factors and conditions, many of which are beyond the Company's control. Some
of these factors and conditions include: (i) the Company and its subsidiaries
and affiliates owe significant amounts of money; (ii) the Company's consumer
broadband and streaming media strategies are subject to substantial financing
and execution risks; (iii) Globalstar was a development-stage company through
December 31, 1999, that may continue to lose money, have negative cash flow,
require additional money and suffer delays in meeting its targets; (iv) launch
failures may delay operations; (v) satellites may fail prematurely; (vi)
dependence on operating subsidiaries, especially Space Systems/Loral,
Inc.("SS/L), for operating income; (vii) severe competition in the Company's
industries; and (viii) governmental or regulatory changes. For a detailed
discussion of these factors and conditions, please refer to the periodic reports
filed with the SEC by Loral, Globalstar, L.P. ("Globalstar"), Globalstar
Telecommunications Limited ("GTL"), Loral CyberStar, Inc.("Loral CyberStar") and
Satelites de Mexico, S.A. de C.V. ("Satmex"). In addition, we caution you that
the Company operates in an industry sector where securities values may be
volatile and may be influenced by economic and other factors beyond the
Company's control.

     Loral is one of the world's leading satellite communications companies,
with substantial activities in satellite manufacturing and satellite-based
communications services. Loral has assembled the building blocks necessary to
create a seamless, global networking capability for the information age. Loral's
four operating segments are:

          Fixed Satellite Services ("FSS").  Through the Loral Global Alliance,
     which currently consists of Loral Skynet, Loral CyberStar, its 49% owned
     affiliate Satmex, and its 47% owned affiliate Europe*Star Limited
     ("Europe*Star"), Loral has become one of the world's leading providers of
     satellite services using geostationary communications satellites. The
     Company leases transponder capacity on its satellites to its customers who
     use the capacity for various applications, including broadcasting, news
     gathering, Internet access and transmission, private voice and data
     networks, business television, distance learning and direct-to-home
     television. The Loral Global Alliance currently has ten high-powered
     geosynchronous satellites in orbit: the seven satellite Telstar fleet and
     three Satmex satellites, with footprints covering almost all of the world's
     population.

          Broadband Data Services:  Through Loral CyberStar and its 82% owned
     subsidiary CyberStar, L.P. ("CyberStar LP"), Loral currently (i) delivers
     U.S.-based Internet content via satellite to more than 130 Internet Service
     Providers ("ISPs") in more than 32 foreign countries, which reach
     approximately seven million residential customers around the world, (ii)
     distributes high-speed data over private corporate very small aperture
     terminal ("VSAT") networks, which reach approximately 2.5 million corporate
     desktops around the world, and (iii) offers business television ("BTV")
     services by satellite to corporations. Loral's broadband strategy will
     build on these existing resources and will initially focus on two
     attractive opportunities for early market entry: consumer broadband
     services and streaming media services.

                                       15
<PAGE>   17

          Satellite Manufacturing and Technology.  SS/L is one of the world's
     leading manufacturers of satellites and space systems, providing its
     customers with a full suite of services, including: developing custom
     designs to meet their requirements, manufacturing and testing, and
     arranging for launch services and insurance.

          Global Mobile Telephone Service:  Acting as the managing general
     partner of Globalstar, which owns and operates a global telecommunications
     network designed to serve virtually every populated area of the world by
     means of a 52-satellite constellation, including four in-orbit spares (the
     "Globalstar System"). The Globalstar system commenced operations in the
     first quarter of 2000 and as of March 31, 2000, 25 countries were in full
     service, served by 11 gateways. Loral is the managing general partner and
     owned approximately 40% of Globalstar as of March 31, 2000.

CONSOLIDATED OPERATING RESULTS

     In evaluating financial performance, management uses revenues and earnings
before interest, taxes, depreciation and amortization ("EBITDA") as a measure of
a segment's profit or loss. The following discussion of revenues and EBITDA
reflects the results of Loral's operating segments for the three months ended
March 31, 2000 and 1999. See Note 9 to Loral's condensed consolidated financial
statements for additional information on segment results. The remainder of the
discussion relates to the consolidated results of Loral, unless otherwise noted.

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED
                                                                  MARCH 31,
                                                              ------------------
                                                               2000       1999
                                                              -------    -------
                                                                (IN MILLIONS)
<S>                                                           <C>        <C>
OPERATING REVENUES:
Fixed satellite services(1).................................  $102.0     $ 72.1
Broadband data services(2)..................................    32.5       16.3
Satellite manufacturing and technology......................   248.2      326.5
Global mobile telephone service(3)..........................     0.6
                                                              ------     ------
Operating segment revenues..................................   383.3      414.9
Affiliate eliminations(4)...................................   (32.9)     (28.0)
Intercompany eliminations(5)................................   (32.3)     (81.0)
                                                              ------     ------
Operating revenues as reported..............................  $318.1     $305.9
                                                              ======     ======
EBITDA(6):
Fixed satellite services(1).................................  $ 62.0     $ 47.6
Broadband data services(2)..................................    (9.3)      (6.7)
Satellite manufacturing and technology......................    26.4       31.6
Global mobile telephone service(3)..........................   (57.4)     (42.1)
Corporate expenses(7).......................................    (9.5)      (9.2)
                                                              ------     ------
Segment EBITDA before Broadband investment and
  eliminations..............................................    12.2       21.2
Broadband investment(8).....................................    (1.1)
Affiliate eliminations(4)...................................    38.0       21.7
Intercompany eliminations(5)................................    (2.0)      (6.3)
                                                              ------     ------
EBITDA as reported..........................................  $ 47.1     $ 36.6
                                                              ======     ======
</TABLE>

                                       16
<PAGE>   18

---------------
(1) Includes 100% of Europe*Star's EBITDA and 100% of Satmex's revenues and
    EBITDA.

(2) Broadband Data Services consists of 100% of CyberStar LP and 100% of Loral
    CyberStar's data services business and consumer broadband services.

(3) Includes 100% of Globalstar's revenue and EBITDA.

(4) Represents amounts related to unconsolidated affiliates (Satmex, Europe*Star
    and Globalstar). These amounts are eliminated in order to arrive at Loral's
    condensed consolidated results. Loral's proportionate share of these
    affiliates is included in equity in net loss of affiliates in Loral's
    condensed consolidated statements of operations.

(5) Represents the elimination of sales and EBITDA primarily for satellites
    under construction by SS/L for wholly-owned subsidiaries; as well as
    eliminating sales for the lease of transponder capacity by Broadband Data
    Services from Fixed Satellite Services.

(6) EBITDA (which is equivalent to operating income (loss) before depreciation
    and amortization, including amortization of unearned compensation) is
    provided because it is a measure commonly used in the communications
    industry to analyze companies on the basis of operating performance,
    leverage and liquidity and is presented to enhance the understanding of
    Loral's operating results. However, EBITDA should not be construed as an
    alternative to net income as an indicator of a company's operating
    performance, or cash flow from operations as a measure of a company's
    liquidity. EBITDA may be calculated differently and, therefore, may not be
    comparable to similarly titled measures reported by other companies.

(7) Represents unallocated corporate expenses incurred in support of the
    Company's operations.

(8) Excludes capital investment in Broadband Services.

THREE MONTHS ENDED MARCH 31, 2000 COMPARED WITH MARCH 31, 1999

     Total revenues for Loral's operating segments were $383 million for 2000
versus $415 million in 1999, before intercompany and affiliate eliminations of
$65 million in 2000 and $109 million in 1999. The decrease in revenues was due
primarily to lower revenues in satellite manufacturing and technology due to the
timing of revenues under contract, offset in part by strong growth in FSS as a
result of the service start-up of Telstar 6 in March 1999, and Telstar 7,
Telstar 10/Apstar IIR and Telstar 12 satellites after the first quarter of 1999
and increased revenues at Satmex, and from growth in the broadband data business
in 2000. The decrease in intercompany eliminations in 2000 primarily reflects
lower sales by satellite manufacturing and technology to fixed satellite
services.

     EBITDA as reported increased to $47 million in 2000 from $37 million in
1999, mainly due to a strong increase in FSS EBITDA as a result of the service
start-up of the Telstar 6, Telstar 7, Telstar 10/Apstar IIR and Telstar 12
satellites.

     Depreciation and amortization rose to $53 million in 2000 from $38 million
in 1999, and excludes depreciation and amortization of unconsolidated affiliates
of $94 million and $15 million for 2000 and 1999, respectively, for Globalstar
and Satmex. The increase primarily results from depreciation of satellites
recently placed in service, including, Telstar 6, Telstar 7, Telstar 10/Apstar
IIR and Telstar 12.

     Interest and investment income increased to $29 million in 2000 from $15
million in 1999, principally due to $10 million of non-cash interest income
related to warrants received in connection with Globalstar's 1999 credit
agreement and higher average cash balances available for investment in 2000,
primarily resulting from proceeds received from the issuance of the Series D 6%
convertible redeemable preferred stock due 2007 (the "Series D Preferred Stock")
in February 2000.

     Interest expense was $43 million in 2000, net of capitalized interest of
$2.4 million, versus $18 million in 1999, net of capitalized interest of $22
million. Capitalized interest decreased due to the commencement of Globalstar
service in 2000 and the successful launches in 1999 of Telstar 6, Telstar 7 and
Telstar 12.

     The Company realized a $15 million gain from the sale of a portion of its
investment in The Fantastic Corporation's common stock in 2000.

     For 2000, the Company recorded an income tax provision of $10.3 million on
a loss of $4.9 million, yielding an effective rate of 209%. For 1999, the
Company recorded an income tax provision of $2.4 million on a loss of $4.2
million yielding an effective rate of 57%. When comparing 2000 to 1999, the
change in the effective rate is primarily attributed to an increase in foreign
losses and state and local income tax expense for the current period.

                                       17
<PAGE>   19

     The minority interest benefit in 2000 primarily reflects the reduction of
CyberStar LP's loss attributed to CyberStar LP's other investor, who owned 17.6%
as of March 31, 2000.

     The equity in net loss of affiliates was $108 million in 2000 compared to
$33 million in 1999. Loral's share of equity in net loss of affiliates for
Globalstar, net of the related tax benefit, was $93 million in 2000 compared to
$18 million in 1999. This increase was primarily due to Globalstar moving from
the development stage into revenue operations, which initiated depreciation of
the Globalstar system, and expensing of interest. Loral's share of Satmex's
losses was $8 million for 2000 and $6 million for 1999. Also included in net
loss from affiliates is Loral's share of losses from Europe*Star and losses from
other affiliates (see Note 4 to Loral's condensed consolidated financial
statements).

     Preferred distributions were $19 million in 2000 as compared to $12 million
for 1999. The increase was primarily due to the issuance of the Series D
Preferred Stock in February 2000 and the 332,777 shares of common stock issued
in connection with the conversion of 1.4 million shares of Loral's Series C 6%
convertible redeemable preferred stock due 2006 (the "Series C Preferred Stock")
into common stock during the first quarter of 2000 (see "Liquidity and Capital
Resources").

     As a result of the above, the net loss applicable to common stockholders
for 2000 was $142 million or $0.49 per basic and diluted share, compared to the
net loss of $50 million or $0.17 per basic and diluted share, for 1999. Basic
and diluted weighted average shares were 293.3 million for 2000 and 289.7
million for 1999. The increase in shares primarily relates to the conversion of
the Series C Preferred Stock into Loral common stock.

RESULTS BY OPERATING SEGMENT

  Fixed Satellite Services

     FSS revenue for 2000 was $102 million versus $72 million in 1999. EBITDA
was $62 million in 2000, up from EBITDA of $48 million, in 1999. As of March 31,
2000, FSS had 10 operational satellites (including three satellites owned by
Satmex), up from seven (including three satellites owned by Satmex) in March
1999. Funded backlog for FSS totaled $1.9 billion at March 31, 2000, an increase
of 119% over the $889 million as of March 31, 1999, including intercompany
backlog of $4 million in both 2000 and 1999 and affiliate backlog for Satmex of
$481 million in 2000 and $179 million in 1999.

  Broadband Data Services

     Revenues for the Broadband Data Services segment in 2000 were $33 million
versus $16 million in 1999, primarily from Loral CyberStar's corporate data
networking and Internet and intranet services businesses. EBITDA in 2000 was a
loss of $9 million versus a loss of $7 million in 1999. This increase primarily
relates to consolidation costs arising from the Company's purchase of Global
Access's business television service. As of March 31, 2000, funded backlog for
the segment increased to $232 million from $165 million as of March 31, 1999
(all from external sources).

     Total investment in Broadband Data Services was $1 million in 2000 which
relates to consumer broadband services.

  Satellite Manufacturing and Technology

     Revenues at SS/L, the Company's satellite manufacturing and technology
subsidiary, before intercompany eliminations were approximately $248 million in
2000 versus $327 million in 1999, primarily due to the timing of revenues for
customer contracts. EBITDA in 2000 was $26 million versus $32 million in 1999,
primarily due to lower revenues. Funded backlog for SS/L as of March 31, 2000
and 1999, was $1.6 billion and $1.5 billion, respectively, including
intercompany backlog of $325 million in 2000 and $292 million in 1999.

                                       18
<PAGE>   20

  Global Mobile Telephone Service

     Loral manages and is the largest equity owner of Globalstar, Loral's global
mobile telephone service segment. Through December 31, 1999, Globalstar was a
development stage partnership and in 2000 began commercial operations. In 2000,
Globalstar realized revenues of $0.6 million and its EBITDA loss increased to
$57 million from $42 million in 1999, primarily as a result of increased
operations costs and marketing, general and administrative costs, associated
with the commencement of service. Globalstar has expended significant funds for
the construction, testing and deployment of the Globalstar system and expects
deployment and system enhancement costs to continue throughout 2000.

LIQUIDITY AND CAPITAL RESOURCES

     Loral intends to capitalize on its innovative capabilities, market position
and advanced technologies to offer value-added satellite-based services as part
of the evolving worldwide communications networks and, where appropriate, to
form strategic alliances with major telecommunications service providers and
equipment manufacturers to enhance and expand its satellite-based communications
service opportunities. In order to pursue such opportunities, Loral may seek
funds from strategic partners and other investors, and through incurrence of
debt or the issuance of additional equity.

  Debt

     The Amended and Restated Credit Agreement, dated as of November 10, 1999,
among Loral SpaceCom Corporation ("Loral SpaceCom"), SS/L and the banks party
thereto (the "Credit Agreement"), provides for a $275 million term loan
facility, a $500 million revolving credit facility (the "Revolving Credit
Facility"), of which up to $175 million can be used for letters of credit and a
separate $75 million letter of credit facility. The facility is secured by the
stock of Loral SpaceCom Corporation and SS/L, and contains various covenants,
including an interest coverage ratio, debt to capitalization ratios and
restrictions on cash transfers to its parent. As of March 31, 2000, there was
approximately $652 million of borrowings outstanding under the Credit Agreement.
Total borrowing availability under the Credit Agreement was $52 million at March
31, 2000. The Company had outstanding letters of credit of approximately $117
million as of March 31, 2000. The Company also had $20 million of Canadian
Dollar letters of credit outstanding at March 31, 2000.

     Loral CyberStar's outstanding debt as of March 31, 2000, was $974 million,
is non-recourse to Loral, and includes certain restrictions on Loral CyberStar's
ability to pay dividends or make loans to Loral.

  Equity

     In February 2000, Loral and Lockheed Martin Corporation ("Lockheed") filed
certain notices under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
in connection with Lockheed's plan to convert its 45,896,978 shares of Loral
Series A preferred stock into an equal number of shares of Loral common stock.
On March 31, 2000, Lockheed converted the shares of Series A preferred stock
into 45,896,978 shares of Loral common stock. Lockheed may dispose of the common
stock in transactions registered under, or exempt from, the registration
provisions of, the federal securities laws. Loral filed a registration statement
to register the shares of common stock acquired by Lockheed upon the conversion
of the Series A preferred stock which became effective in May 2000. Loral has
agreed to maintain the effectiveness of such registration until May 19, 2001,
subject to certain extensions, and has agreed to refrain from selling equity
securities in the public markets for its own account until November 2000,
subject to certain extensions.

     In February 2000, 1.4 million shares of the Series C Preferred Stock were
converted into 3.5 million shares of Loral common stock. In connection with this
conversion, Loral issued to converting holders 332,777 additional shares of its
common stock, which approximated the dividend prepayments to which they would
have been entitled if a provisional redemption of those securities had been
made.

     In February 2000, Loral sold $400 million of the Series D Preferred Stock
in an offering exempt from registration. The preferred stock is convertible into
20,171,152 shares of common stock at a conversion price of $19.83 per share.
Loral intends to apply the proceeds of $388 million for general corporate
purposes, including

                                       19
<PAGE>   21

investment in its broadband strategy and expansion of the Loral Global Alliance
by acquisition of additional satellites and orbital slots.

  Cash and Restricted and Segregated Cash

     As of March 31, 2000, Loral had $515 million of cash, including $25 million
of restricted cash, which will be used for an interest payment on Loral
Cyberstar's senior notes in July 2000. Loral intends to utilize its existing
capital base and access to the capital markets to construct and operate
additional satellites, make additional investments in Globalstar and Globalstar
service provider opportunities, invest in its other core businesses, expand the
Loral Global Alliance and pursue its broadband strategy. In March 2000, Loral
CyberStar used $137 million of segregated cash towards the final payment on the
purchase of Telstar 10/ Apstar IIR.

  Net Cash Used in Operating Activities

     Net cash used in operating activities for 2000 was $55 million, primarily
due to decreases in accounts payable of $131 million and customer advances of
$36 million, offset by the net loss as adjusted for non-cash operating items of
$28 million and a decrease in contracts-in-process of $83 million.

     Net cash used in operating activities for the three months ended March 31,
1999 was $24 million, primarily due to decreases in accounts payable of $31
million and accrued expenses and other current liabilities of $29 million and an
increase in contracts-in-process of $27 million, offset by the net loss as
adjusted for non-cash operating items of $41 million and a decrease in deposits
of $17 million.

  Net Cash Used in Investing Activities

     Net cash used in investing activities for 2000 was $58 million, primarily
as a result of capital expenditures of $216 million (including approximately
$181 million for the final payment for Telstar 10/Apstar IIR), mainly for the
construction or acquisition of satellites, $10 million of advances to affiliates
and $10 million of investments in affiliates, offset by a reduction in
restricted and segregated cash of $162 million and proceeds from the sale of The
Fantastic Corporation's common stock of $16 million.

     Net cash used in investing activities was $341 million in 1999, primarily
as a result of $155 million of capital expenditures, mainly for the construction
of satellites, the $145 million cost of acquiring GTL preferred stock and $66
million of other investments in and advances to affiliates, offset by a
reduction in restricted cash of $25 million used for Loral CyberStar's interest
payment.

  Net Cash Provided by Financing Activities

     Net cash provided by financing activities for 2000 was $364 million,
primarily due to net proceeds of $388 million from the Company's issuance of the
Series D Preferred Stock and proceeds from other equity transactions of $10
million, offset by repayments of debt obligations of $20 million and preferred
dividend payments of $13 million.

     Net cash provided by financing activities was $384 million in 1999,
primarily due to the $344 million of net proceeds from the issuance of 9.5%
senior notes, and borrowings of $45 million under the Revolving Credit Facility.

  Fixed Satellite Services

     Loral Skynet currently has four high-power satellites in orbit. Loral
intends to expand Loral Skynet's business to become a worldwide satellite
service provider through the construction of additional satellites.

     To replace Orion 3, on September 28, 1999, Loral CyberStar purchased from
APT Satellite Company Limited ("APT") for approximately $273 million, the rights
to all transponder capacity and existing customer leases on the Apstar IIR
satellite (except for one C-band transponder retained by APT), and renamed the
satellite the Telstar 10/Apstar IIR satellite. Loral CyberStar has full use of
the transponders for the remaining

                                       20
<PAGE>   22

life of Telstar 10/Apstar IIR. Loral CyberStar will also have the option to
lease from APT replacement satellites upon the end of life of Telstar 10/Apstar
IIR. In March 2000, the Company made the final payment of $181 million to APT.

     Satmex currently has three satellites in orbit (Satmex 5, Solidaridad 1 and
Solidaridad 2) and one satellite in inclined orbit (Morelos 2).

     On February 16, 2000, Satmex obtained amendments to certain of its debt
agreements which adjusted certain financial covenants. As a result, Satmex
believes that its future operating cash flow and the availability of its
revolving credit facility will be sufficient to service its interest and debt
repayment requirements and ensure compliance with its debt agreements.

  Broadband Data Services

     Based upon its current expectations for growth, Loral CyberStar anticipates
it will have additional funding requirements over the next three years to fund
the purchase of VSATs, senior note interest payments, other capital expenditures
and other operating needs. Interest charges on the senior notes are fully
provided for by restricted cash through July 2000. Loral CyberStar does not have
a revolving credit facility. Accordingly, Loral CyberStar will need to secure
funding from Loral, or raise additional financing. Sources of additional capital
may include public or private debt, equity financings or strategic investments.
To the extent that Loral CyberStar seeks to raise additional debt financing, its
indentures limit the amount of such additional debt and prohibit Loral CyberStar
from using Telstar 11, Telstar 10/Apstar IIR and Telstar 12 as collateral for
indebtedness for money borrowed. If Loral CyberStar requires additional
financing and is unable to obtain such financing from Loral or from outside
sources in the amounts and at the times needed, there would be a material
adverse effect on Loral CyberStar.

  Broadband Investment

     Loral's broadband strategy will build on its existing resources to address
both the expanding market for today's broadband services and to become a leading
medium for delivery of even richer Internet content in the future. The Company's
initial focus will be on two attractive opportunities for early market entry:
consumer broadband services and streaming media services.

     Consumer Broadband Services.  The Company plans to serve the growing
consumer broadband services market, initially in North America, with an
affordable, ubiquitous, two-way, high-speed Internet access service employing a
hybrid satellite/fiber network. When fully deployed, this network will be
capable of serving at least ten million homes and small businesses. The network
will offer point-to-point downlink data rates of 1.5 megabits per second and
uplink data rates of 128 kilobits per second or greater. In addition, the system
will offer streaming multimedia in multicast mode at speeds of up to 30 megabits
per second. The Company intends to serve as the "wholesaler" of this
connectivity service to ISPs, cable companies, and telephone companies who will
market and sell the service to their customers as a high-value extra feature in
their own portfolio of services. The Company currently estimates that the
required investment for the consumer broadband services business in North
America will be approximately $3 billion, with the services implemented and the
associated investments made in several phases. Total investment by the Company
during the first quarter of 2000 was $1 million.

     Streaming Media Services.  The Company intends to exploit the technical
advantages of satellites to deliver streaming media services more effectively
than terrestrial alternatives. Instead of flooding the Internet with multiple
point-to-point transmissions of these massive files, the Company's system will
move content directly from its source via satellite to multiple servers located
at the "edge of the net," near the end user. This should eliminate bottlenecks,
improve quality, lower cost and expand content choices and applications. The
Company plans to focus its marketing efforts initially on its existing base of
ISP and corporate customers. The Company intends to enter three streaming media
business segments: transport services to the "edge of the net" for content and
applications service providers; content aggregation services for customers
wishing to outsource their streaming media distribution process; and development
of a portal tailored for businesses. The

                                       21
<PAGE>   23

Company currently estimates the required investment for the streaming media
services business at approximately $500 million.

     The Company is seeking strategic partners to enhance the establishment and
prospects of both the planned consumer broadband and streaming media businesses.
The Company expects that such third party strategic partners will bear a
significant portion of the costs of these projects.

  Global Mobile Telephone Service

     On August 5, 1999, Globalstar entered into a $500 million credit agreement
with a group of banks for the build-out of the Globalstar system, of which $400
million was outstanding at March 31, 2000. The credit facility is guaranteed by
Loral SatCom Ltd. and Loral Satellite, Inc., wholly owned subsidiaries of Loral.
The guarantee is secured by the pledge of certain assets of Loral and its
subsidiaries, including the stock of the guarantors and the Telstar 6 and
Telstar 7 satellites. Based on third party valuations, management believes that
the fair value of Telstar 6 and Telstar 7 is in excess of this $500 million
credit agreement. As of March 31, 2000, the net book value of Telstar 6 and
Telstar 7 was $387 million. The guarantee agreement contains customary financial
covenants of the guarantors, including maintenance of a minimum collateral
coverage ratio and maintenance of a combined minimum net worth and combined
EBITDA. In addition, the guarantee agreement contains customary restrictions,
including limitations on indebtedness, liens, fundamental changes, asset sales,
dividends (except that the guarantors may pay dividends to their parents
provided that combined aggregate cash on hand at the guarantors is at least
equal to $50 million and the guarantors hold an intercompany note due from Loral
for at least $100 million), investments, capital expenditures, creating liens
other than those created pursuant to the guarantee and transactions with
affiliates.

     In consideration for the guarantee, Loral received warrants to purchase
3,450,000 Globalstar partnership interests at an exercise price of $91 per
interest, which were valued at $141 million (based on the guarantee provided).
The exercise price was determined by reference to the fair market value of GTL
common stock on the closing date of the credit agreement, based on an
approximate one partnership interest for four shares of GTL common stock
exchange ratio. 50% of the warrants vested in February 2000. Assuming the
guarantee remains in effect, an additional 25% will vest in August 2000 with the
remaining 25% vesting in August 2001. The warrants expire in 2006. Globalstar
may call the warrants after August 5, 2001 if GTL's common stock price exceeds
$45.50 for a defined period.

     In February 2000, GTL sold 8,050,000 shares of its common stock to the
public under its shelf registration statement. GTL used the net proceeds from
the offering of approximately $268.5 million to purchase 1,987,654 ordinary
partnership interests in Globalstar. Globalstar intends to use the offering
proceeds for general corporate purposes, including: the acceleration of
Globalstar's roll-out through increased support for service provider marketing
activities and the funding of promotional discounts, development of new service
features, and possible repayment of debt.

     From April 1, 2000 through December 31, 2000, Globalstar expects to spend
approximately $180 million, for the enhancement of its system software, for the
eight spare satellites being constructed by SS/L, for development work completed
but not paid at March 31, 2000, and for the net financing provided to
Globalstar's service providers to assist in the purchase of gateways, fixed
access terminals and handsets (which includes expected receipts of $181 million
from the service providers as repayment of such financing). In addition, cash
interest, preferred dividends and operating costs are expected to be
approximately $125 million per quarter in 2000. Globalstar believes that, its
cash on hand ($235 million at March 31, 2000), remaining available credit as of
March 31, 2000 of approximately $410 million, under its $250 million and $500
million credit agreements and vendor financing arrangements, will be sufficient
to cover its expected cash outflows for 2000. If Globalstar does not negotiate
reinstatement of the December 30, 2000 maturity date of its $250 million credit
facility and if revenues are less than $160 million in 2000, Globalstar believes
that it will require additional funds to the extent revenue falls short of $160
million. While Globalstar believes it will be able to obtain the additional
funds, there can be no assurance, however, that such funds will be available on
favorable terms or on a timely basis, if at all.

                                       22
<PAGE>   24

     In May 2000, Globalstar finalized $531.1 million of vendor financing
arrangements with Qualcomm that replaces the previous $100 million vendor
financing agreement. The vendor financing bears interest at 6%, matures on
August 15, 2003 and requires repayment pro rata with the term loans under
Globalstar's $500 million credit facility discussed above. As of May 5, 2000,
$482 million was outstanding under this facility. In connection with this
agreement, Qualcomm received warrants to purchase 3,450,000 Globalstar
partnership interests at an exercise price of $42.25 per interest. The exercise
price was determined by reference to the fair market value of GTL's common stock
on the closing date of the vendor financing, based on an approximate one
partnership interest for four shares of GTL common stock. Fifty percent of the
warrants vested on the closing date. The remaining 50% will vest generally in
two equal installments on September 1, 2000 and September 1, 2001. The warrants
will expire in 2007.

     Loral has agreed that if the principal amount (excluding capitalized
interest, currently amounting to $31.1 million) outstanding under the Qualcomm
vendor financing facility exceeds the principal amount outstanding under
Globalstar's $500 million credit facility, as determined on certain measurement
dates, then Loral will guarantee 50% of such excess amount. As a result, Loral's
aggregate guarantee liability for debt outstanding under the Qualcomm vendor
financing facility and Globalstar's $500 million credit facility will not exceed
$500 million.

COMMITMENTS AND CONTINGENCIES

     On December 15, 1995, Globalstar entered into a $250 million credit
agreement (the "Globalstar Credit Agreement") with a group of banks. Lockheed,
SS/L and certain other Globalstar partners have guaranteed $206.3 million, $11.7
million and $32.0 million of the Globalstar Credit Agreement, respectively. In
addition, Loral agreed to indemnify Lockheed for any liability in excess of $150
million.

     Prior to its acquisition by Loral, Loral Skynet sold several transponders
under which title to specific transponders was transferred to the customer.
Under the terms of the sales contracts, Loral Skynet continues to operate the
satellites on which the transponders are located and provides a warranty for a
period of 10 to 14 years. Depending on the contract, Loral Skynet is required to
replace any transponders failing to meet operating specifications. All customers
are entitled to a refund equal to the reimbursement value, as defined, in the
event there is no replacement. The reimbursement value is determined based on
the original purchase price plus an interest factor from the time the payment
was received to acceptance of the transponder by the customer, reduced on a
straight-line basis over the warranty period. In case of satellite failure, the
reimbursement value may be paid from proceeds received from insurance policies.

     In late 1998, following the launch of an SS/L-built satellite sold to
PanAmSat, a manufacturing error was discovered that affected the geographical
coverage of the Ku-band transponders on the satellite. On January 6, 2000,
PanAmSat filed an arbitration proceeding in connection with this error claiming
damages of $225 million for lost profits, and increased sales and marketing
costs. SS/L believes it has meritorious defenses to the claim and that its
liability is limited to a loss of a portion of the applicable orbital
incentives, the estimated impact of which is included in Loral's consolidated
financial statements. PanAmSat has received a recovery from its insurance
carrier that should reduce any damage claim. While this proceeding is in its
very early stages, management believes that this matter will not have a material
adverse effect on the financial condition or results of operations of Loral.

     SS/L is a target of a grand jury investigation being conducted by the
office of the U.S. Attorney for the District of Columbia with respect to
possible violations of export control laws that may have occurred in connection
with the participation of SS/L employees on a committee formed in the wake of
the 1996 crash of a Long March rocket in China and whose purpose was to consider
whether studies of the crash made by the Chinese had correctly identified the
cause of the failure. The Company is not in a position to predict the direction
or outcome of the investigation. If SS/L were to be indicted and convicted of a
criminal violation of the Arms Export Control Act, it would be subject to a fine
of $1 million per violation and could be debarred from certain export privileges
and, possibly, from participation in government contracts. Since many of SS/L's
satellites are built for foreign customers and/or launched on foreign rockets,
such a debarment would have a material adverse effect on SS/L's business and,
therefore, the Company. Indictment for such violations would subject SS/L to
discretionary debarment from further export licenses. Under the applicable
regulations, SS/L

                                       23
<PAGE>   25

could be debarred from export privileges without being convicted of any crime if
it is indicted for these alleged violations, and loss of export privileges would
harm SS/L's business. Whether or not SS/L is indicted or convicted, SS/L remains
subject to the State Department's general statutory authority to prohibit
exports of satellites and related services if it finds a violation of the Arms
Export Control Act that puts SS/L's reliability in question, and it can suspend
export privileges whenever it determines that grounds for debarment exist and
that such suspension "is reasonably necessary to protect world peace or the
security or foreign policy of the United States."

     As far as SS/L can determine, no sensitive information or technology was
conveyed to the Chinese, and no secret or classified information was discussed
with or reported to them. SS/L believes that its employees acted openly and in
good faith and that none engaged in intentional misconduct. Accordingly, the
Company does not believe that SS/L has committed a criminal violation of the
export control laws. The Company does not expect the grand jury investigation or
its outcome to result in a material adverse effect upon its business. However,
there can be no assurance as to these conclusions.

     On December 23, 1998, the Office of Defense Trade Controls ("ODTC") of the
U.S. Department of State temporarily suspended the previously approved technical
assistance agreement under which SS/L had been preparing for the launch of the
ChinaSat-8 satellite. According to ODTC, the purpose of the temporary suspension
is to permit that agency to review the agreement for conformity with
newly-enacted legislation (Section 74 of the Arms Export Control Act) with
respect to the export of missile equipment or technology. SS/L has complied with
ODTC's instructions, and believes that a review of the agreement will show that
its terms comply with the new law. The ODTC, however, has not yet completed its
review, and the scheduled launch date for ChinaSat-8 is being delayed. If the
suspension is not lifted by July 31, 2000, ChinaSat could decide to terminate
the contract. If such a termination were to occur, SS/L would have to refund
advances received from ChinaSat ($134 million as of March 31, 2000) and may
incur penalties of up to $11 million and believes it would incur costs of up to
approximately $38 million to refurbish and retrofit the satellite so that it
could be sold to another customer. There can be no assurance that SS/L will be
able to find such a replacement customer for the satellite or its Chinese launch
vehicle. SS/L will record a charge to earnings of approximately $35 million if
it is unable to find a replacement customer for this launch vehicle.

     In March 1999, jurisdiction for satellite licensing was transferred from
the Commerce Department to the State Department, and the State Department has
issued regulations relating to the export of, and disclosure of technical
information related to, satellites and related equipment. SS/L anticipates that
obtaining licenses and technical assistance agreements under these new
regulations will take more time and will be considerably more burdensome than in
the past. Delays in obtaining the necessary licenses and technical assistance
agreements may delay SS/L's performance on existing contracts, and, as a result,
SS/L may incur penalties or lose incentive payments under these contracts. In
addition, such delays may have an adverse effect on SS/L's ability to compete
against foreign satellite manufacturers for new satellite contracts.

     Under an agreement reached with Eutelsat, Loral CyberStar agreed to operate
Telstar 12, originally intended to operate at 12 degrees W.L., at 15 degrees
W.L. while Eutelsat continues to develop its services at 12.5 degrees W.L.
Eutelsat has in turn agreed not to use its 14.8 degrees W.L. orbital slot and to
assert its priority rights at such location on Loral CyberStar's behalf. As part
of this coordination effort, Loral CyberStar agreed to provide to Eutelsat four
transponders on Telstar 12 for the life of the satellite. Eutelsat also has the
right to acquire, at cost, four transponders on the next replacement satellite
for Telstar 12. As part of the international coordination process, Loral
continues to conduct discussions with various administrations regarding Telstar
12's operations at 15 degrees W.L. If these discussions are not successful,
Telstar 12's useable capacity may be reduced.

OTHER MATTERS

  Accounting Pronouncements

     In June 1998, the Financial Accounting Standards Board issued Statement No.
133 Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"),
which requires that all derivative instruments be recorded on the balance sheet
at their fair value. Changes in the fair value of derivatives are recorded each
                                       24
<PAGE>   26

period in current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if it is, the type
of hedge transaction. The Company has not yet determined the impact that the
adoption of SFAS 133 will have on its earnings or financial position. The
Company is required to adopt SFAS 133 on January 1, 2001.

                           PART II. OTHER INFORMATION

ITEM 2(C).  CHANGES IN SECURITIES

     In February 2000, Loral sold $400 million face amount of 6% Series D
convertible redeemable preferred stock due 2007 in a private offering pursuant
to Rule 144A and Regulation S under the Securities Act of 1933. The initial
purchasers were Lehman Brothers, Banc of America Securities LLC, Bear, Stearns &
Co., Inc., ING Barings, C.E. Unterberg, Towbin, Credit Lyonnais Securities (USA)
Inc. and S.G. Cowen. Underwriting discounts and other costs for this offering
were approximately $12 million. The price to the initial purchasers was 97.25%
of the face amount of the preferred stock. The preferred stock is convertible
into shares of Loral common stock at the option of the holder, initially at the
conversion price of $19.8303 per share.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits

     The following exhibits are filed as part of this report:

Exhibit 10.1 -- Guarantee dated as of May 5, 2000, made by Loral Space &
                Communications Ltd. in favor of Qualcomn Incorporated

Exhibit 12  -- Computation of Deficiency of Earnings to Cover Fixed Charges

Exhibit 27  -- Financial Data Schedule

     (b) Reports on Form 8-K

<TABLE>
<CAPTION>
DATE OF REPORT                                                            DESCRIPTION
--------------                                                            -----------
<S>                             <C>                             <C>
February 9, 2000                Item 5 -- Other Events          Offering of Series D Preferred
                                                                  Stock
</TABLE>

                                       25
<PAGE>   27

                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                            LORAL SPACE & COMMUNICATIONS LTD.
                                                        Registrant

                                          /s/ RICHARD J. TOWNSEND
                                          --------------------------------------
                                          Richard J. Townsend
                                          Senior Vice President and
                                          Chief Financial Officer
                                          (Principal Financial Officer) and
                                          Registrant's Authorized Officer

Date: May 15, 2000

                                       26
<PAGE>   28

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO.                                DESCRIPTION
-----------                                -----------
<S>           <C>  <C>

Exhibit 10.1   --  Guarantee dated as of May 5, 2000, made by Loral Space &
                   Communications Ltd. in favor of Qualcomn Incorporated
Exhibit 12     --  Computation of Deficiency of Earnings to Cover Fixed Charges
Exhibit 27     --  Financial Data Schedule
</TABLE>