<PAGE>   1
 
================================================================================
 
                       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 JUNE 30, 1997
 
                         COMMISSION FILE NUMBER 1-14180
 
                       LORAL SPACE & COMMUNICATIONS LTD.
                                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 or
such shorter period as the registrant was required to file such reports and has
been subject to such filing requirements for the past 90 days.
 
     As of July 31, 1997, there were 200,536,861 shares of Loral Space &
Communications Ltd. common stock outstanding.
 
================================================================================
<PAGE>   2
 
                         PART 1. FINANCIAL INFORMATION
 
                       LORAL SPACE & COMMUNICATIONS LTD.
 
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per share amounts)
                                  (Unaudited)
 
<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED              SIX MONTHS ENDED
                                             --------------------------     --------------------------
                                             JUNE 30,                       JUNE 30,
                                               1997       SEPTEMBER 30,       1997       SEPTEMBER 30,
                                             --------         1996          --------         1996
                                                          -------------                  -------------
                                                            (NOTE 1)                       (NOTE 1)
<S>                                          <C>          <C>               <C>          <C>
Revenues...................................  $291,148                       $631,501
Management fee from affiliate..............                 $   1,837                      $   3,375
Costs and expenses.........................   293,653           7,389        624,669          11,075
                                             --------        --------       --------        --------
Operating income (loss)....................    (2,505)         (5,552)         6,832          (7,700)
Interest income, net.......................     5,625           9,974         15,764          18,120
                                             --------        --------       --------        --------
Income before income taxes, minority
  interest and equity in net loss of
  affiliates...............................     3,120           4,422         22,596          10,420
Income taxes...............................     3,636             921         12,975           1,641
                                             --------        --------       --------        --------
Income (loss) before minority interest and
  equity in net loss of affiliates.........      (516)          3,501          9,621           8,779
Minority interest..........................    (1,690)                        (5,056)
Equity in net loss of affiliates...........    (8,090)           (548)       (15,267)         (4,525)
                                             --------        --------       --------        --------
Net income (loss)..........................   (10,296)          2,953        (10,702)          4,254
Preferred dividends........................    (2,947)             --         (2,947)             --
                                             --------        --------       --------        --------
Net income (loss) applicable to common
  stockholders.............................  $(13,243)      $   2,953       $(13,649)      $   4,254
                                             ========        ========       ========        ========
Weighted average number of common and
  equivalent shares outstanding............   238,186         233,728        237,588         225,600
                                             ========        ========       ========        ========
Earnings (loss) per share..................  $  (0.06)      $    0.01       $  (0.06)      $    0.02
                                             ========        ========       ========        ========
</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>
                                                                                     DECEMBER 31,
                                                                                         1996
                                                                      JUNE 30,       ------------
                                                                        1997            (Note)
                                                                     -----------
                                                                     (Unaudited)
<S>                                                                  <C>             <C>
ASSETS
Current assets:
  Cash and cash equivalents........................................  $   318,903      $1,180,752
  Contracts in process.............................................      376,482
  Inventories......................................................       99,020
  Other assets.....................................................      133,740          29,555
                                                                      ----------      ----------
Total current assets...............................................      928,145       1,210,307
Property, plant and equipment, net.................................      772,441          17,939
Cost in excess of net assets acquired, less amortization...........      439,748
Long-term receivables..............................................       84,507
Investments in affiliates..........................................      364,770         443,057
Other assets.......................................................       93,615          28,023
                                                                      ----------      ----------
                                                                     $ 2,683,226      $1,699,326
                                                                      ==========      ==========
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Current portion of long-term debt................................  $     2,146
  Accounts payable.................................................      219,692      $   10,708
  Accrued employment costs.........................................       32,909
  Customer advances................................................       51,942
  Accrued interest.................................................        2,016           6,000
  Other current liabilities........................................       16,750
  Income taxes payable.............................................        2,451           2,311
  Deferred income taxes............................................       59,959             112
                                                                      ----------      ----------
Total current liabilities..........................................      387,865          19,131
Deferred income taxes..............................................       49,872           4,611
Pension and other postretirement liabilities.......................       55,875          19,723
Long-term liabilities..............................................       34,750           2,500
Long-term debt.....................................................      204,488
Minority interest..................................................       11,171
Convertible preferred equivalent obligations ($600,000 principal
  amount at December 31, 1996).....................................                      583,292
Shareholders' equity:
  Series A convertible preferred stock, par value $.01.............          459             459
  Series C convertible redeemable preferred stock ($747,260
     principal amount at June 30, 1997)............................      730,830
  Common stock, par value $.01.....................................        2,004           1,911
  Paid-in capital..................................................    1,210,684       1,058,822
  Retained earnings (deficit)......................................       (4,772)          8,877
                                                                      ----------      ----------
Total shareholders' equity.........................................    1,939,205       1,070,069
                                                                      ----------      ----------
                                                                     $ 2,683,226      $1,699,326
                                                                      ==========      ==========
</TABLE>
 
---------------
Note: The December 31, 1996 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>
                                                                           SIX MONTHS ENDED
                                                                        -----------------------
                                                                        JUNE 30,      SEPT 30,
                                                                          1997          1996
                                                                        ---------     ---------
<S>                                                                     <C>           <C>
Operating activities:
  Net income (loss)...................................................  $ (10,702)    $   4,254
  Equity in net loss of affiliates....................................     15,267         4,525
  Minority interest...................................................      5,056
  Deferred taxes......................................................     12,961
  Depreciation and amortization.......................................     24,100           613
  Contracts in process and inventories................................    (61,837)
  Customer advances...................................................    (74,123)
  Other...............................................................    (26,449)      (17,277)
                                                                        ---------      --------
Cash used in operating activities.....................................   (115,727)       (7,885)
                                                                        ---------      --------
Investing activities:
  Acquisition of businesses, net of cash acquired.....................   (561,639)
  Proceeds from the sale of property, plant and equipment.............                    5,003
  Investment in affiliates............................................   (132,273)       (6,425)
  Capital expenditures, net...........................................   (129,539)         (658)
                                                                        ---------      --------
Cash used in investing activities.....................................   (823,451)       (2,080)
                                                                        ---------      --------
Financing activities:
  Borrowings under revolving credit facility, net.....................     79,048
  Proceeds from exercise of stock options.............................      1,228
  Preferred dividends.................................................     (2,947)
  Proceeds from the Distribution......................................                  612,274
  Transaction expenses related to the Distribution....................                  (12,000)
  Advances from Loral Corporation prior to the Distribution...........                    2,425
                                                                        ---------      --------
Cash provided by financing activities.................................     77,329       602,699
                                                                        ---------      --------
(Decrease) increase in cash and cash equivalents......................   (861,849)      592,734
Cash and cash equivalents -- beginning of period......................  1,180,752        --
                                                                        ---------      --------
Cash and cash equivalents -- end of period............................  $ 318,903     $ 592,734
                                                                        =========      ========
Non-cash investing activities:
  Issuance of Series C Preferred Stock to acquire equity interest in
     SS/L.............................................................  $ 147,260
                                                                        =========
  Issuance of Loral Common Stock to acquire equity interest in SS/L...  $ 133,240
                                                                        =========
  Issuance of Loral Common Stock to acquire equity interest in
     Globalstar.......................................................  $  17,487
                                                                        =========
  Assets transferred from Loral Corporation at the Distribution.......                $  36,622
                                                                                       ========
  Liabilities assumed from Loral Corporation at the Distribution......                $  15,650
                                                                                       ========
Acquisition of the interest in SS/L held by certain partnerships
  affiliated with Lehman Brothers:
     Issuance of Loral common stock...................................                $ 100,313
                                                                                       ========
     Transfer of GTL common stock.....................................                $   5,150
                                                                                       ========
Supplemental Information:
  Interest paid.......................................................  $  29,823
                                                                        =========
  Taxes paid..........................................................  $   2,322
                                                                        =========
</TABLE>
 
           See notes to condensed consolidated financial statements.
 
                                        3
<PAGE>   5
 
                       LORAL SPACE & COMMUNICATIONS LTD.
 
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
1)  FORMATION OF LORAL SPACE & COMMUNICATIONS
 
          Loral Space & Communications Ltd. (the "Company" or "Loral") was
     formed to effectuate the distribution of Loral Corporation's ("Old Loral")
     space and telecommunications businesses (the "Distribution") to
     shareholders of Old Loral and holders of options to purchase Old Loral
     common stock pursuant to a merger agreement (the "Merger") dated January 7,
     1996 between Loral and Lockheed Martin Corporation ("Lockheed Martin"). The
     Distribution of approximately 183.6 million shares of Loral common stock
     was made on April 23, 1996. Old Loral's fiscal year end was March 31. Loral
     adopted a December 31 year end and its first fiscal quarter ended on June
     30, 1996. Accordingly, the comparative quarter for the quarter ended June
     30, 1997 is the quarter ended September 30, 1996 and the comparative period
     for the six months ended June 30, 1997 is the six months ended September
     30, 1996.
 
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.
     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 and six months ended June 30, 1997, are not necessarily
     indicative of the results to be expected for the full year. As described in
     Note 3, Loral increased its ownership of Space Systems/Loral, Inc. ("SS/L")
     in the first quarter of 1997. Accordingly, Loral discontinued the equity
     method of accounting and began consolidating the results of SS/L as of
     January 1, 1997, with a reduction for SS/L's earnings attributable to its
     other shareholders. It is suggested that these financial statements be read
     in conjunction with the audited consolidated financial statements and notes
     thereto of Loral and SS/L included in Loral's latest Form 10-K.
 
          As described in Note 3, Loral acquired Skynet Satellites Services
     ("Skynet") on March 14, 1997. Skynet customers lease transponder capacity
     on Skynet's satellites. Revenues for leased capacity is recognized as
     service is provided. SS/L has a contract to construct Skynet's satellites.
     Intercompany sales and profits on this contract are eliminated.
 
3)  ACQUISITIONS AND INVESTMENT IN AFFILIATES
 
     ACQUISITIONS
 
          In February 1997, Loral agreed to acquire the 49% of the common stock
     of SS/L held by four international aerospace and communications companies
     (the "Alliance Partners") for $374 million. In March 1997, Loral acquired
     24.5% of SS/L's common stock held by two of the Alliance Partners for $93.5
     million in cash and $93.5 million of Loral's 6% Convertible Preferred
     Equivalent Obligations due 2006 ("CPEOs"). In June 1997, the Company
     acquired the remaining 24.5% of SS/L's common stock for $187 million in the
     form of 8,042,922 shares of Loral common stock and 1,063,663 shares of
     Loral Series C Preferred Stock. At June 30, 1997, Loral owned 100% of
     SS/L's common stock.
 
          On March 14, 1997, Loral acquired Skynet from AT&T for $478 million in
     cash, subject to adjustment based on final net asset values. Skynet is a
     leading U.S. satellite communications service provider that owns and
     operates the Telstar satellite network. The Company intends to refinance a
     significant portion of the Skynet purchase price with debt. The assets and
     liabilities recorded in connection with the purchase price allocation based
     on preliminary estimates of fair values were $575.2 million and $97.1
     million, respectively.
 
                                        4
<PAGE>   6
 
                       LORAL SPACE & COMMUNICATIONS LTD.
 
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
          The acquisition of Skynet and the SS/L common stock have been
     accounted for as purchases. The cost in excess of net assets acquired
     arising from these acquisitions is being amortized over 40 years. Loral's
     condensed consolidated financial statements reflect the results of
     operations of SS/L from January 1, 1997 and the elimination of the minority
     interest of the SS/L equity not owned by Loral during the period. Prior to
     January 1, 1997, SS/L was accounted for under the equity method of
     accounting. Loral's condensed consolidated financial statements reflect the
     results of operations of Skynet since March 14, 1997.
 
          Had the acquisition of Skynet and the purchase of the 49% equity
     interest in SS/L held by the Alliance Partners occurred on April 1, 1996,
     the unaudited pro forma sales, operating income, net income (loss)
     applicable to common stockholders and related earnings per share data for
     the six months ended June 30, 1997 and September 30, 1996 would have been:
     $624.6 million and $639.3 million; $6.7 million and $41.6 million; $(15.7)
     million and $7.2 million; and $(0.06) and $0.03, respectively. These
     results, which are based on various assumptions, are not necessarily
     indicative of what would have occurred had the acquisitions been
     consummated on April 1, 1996.
 
     INVESTMENTS IN AFFILIATES
 
          On May 28, 1997, Globalstar Telecommunications Limited ("GTL"), a
     general partner of Globalstar, L.P. ("Globalstar"), issued a two-for-one
     stock split. Accordingly, all GTL share amounts have been adjusted to
     reflect the two-for-one stock split. Prior to the two-for-one stock split,
     GTL's equity securities and convertible securities were represented by
     equivalent Globalstar partnership interests on a one-for-one basis.
     Globalstar's partnership interests were not affected by the GTL stock split
     and, accordingly, GTL's equity securities and convertible securities are
     now represented by equivalent Globalstar partnership interests on a
     two-for-one basis.
 
          In March 1997, Loral exercised warrants to purchase 2,275,044 shares
     of common stock of GTL (as adjusted for two-for-one stock split) for $30.1
     million and, in April 1997, Loral exercised its right as a shareholder in
     GTL to purchase an additional 350,348 shares of GTL common stock for $13.25
     per share (as adjusted for two-for-one stock split). GTL used the proceeds
     from the exercise of the warrants and the rights, to purchase Globalstar
     ordinary partnership interests. In the second quarter, Loral acquired
     2,208,372 Globalstar ordinary partnership interests from other Globalstar
     partners for $97.5 million in cash and 1,255,684 shares of Loral common
     stock.
 
          At June 30, 1997, Loral had an effective ownership of 20,422,212
     ordinary partnership interests of the total 52,316,486 Globalstar ordinary
     partnership interests outstanding (39.0%). At June 30, 1997, Loral's
     investment in Globalstar includes $14.5 million of capitalized costs,
     primarily interest.
 
          Investments in affiliates is summarized as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                       JUNE 30,     DECEMBER 31,
                                                                         1997           1996
                                                                       --------     ------------
    <S>                                                                <C>          <C>
    SS/L.............................................................  $     --       $267,418
    Globalstar.......................................................   364,770        175,639
    K & F............................................................    25,657         23,568
    Deferred K & F Gain..............................................   (25,657)       (23,568)
                                                                       --------       --------
                                                                       $364,770       $443,057
                                                                       ========       ========
</TABLE>
 
                                        5
<PAGE>   7
 
                       LORAL SPACE & COMMUNICATIONS LTD.
 
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
          Equity in net income (loss) of affiliates consists of (in thousands):
 
<TABLE>
<CAPTION>
                                                                           SIX MONTHS ENDED
                                                                      --------------------------
                                                                      JUNE 30,     SEPTEMBER 30,
                                                                        1997           1996
                                                                      --------     -------------
    <S>                                                               <C>          <C>
    SS/L............................................................  $     --       $   6,859
    Globalstar......................................................   (15,267)        (11,384)
                                                                      --------        --------
                                                                      $(15,267)      $  (4,525)
                                                                      ========        ========
</TABLE>
 
          The following table represents the summary of results of operations of
     Loral's affiliates for the six months ended June 30, 1997 and September 30,
     1996 (in thousands):
 
<TABLE>
<CAPTION>
                                                 JUNE 30, 1997              SEPTEMBER 30, 1996
                                             ---------------------   --------------------------------
                                             GLOBALSTAR    K & F     GLOBALSTAR    K & F       SS/L
                                             ----------   --------   ----------   --------   --------
    <S>                                      <C>          <C>        <C>          <C>        <C>
    Sales..................................   $     --    $146,174    $     --    $142,503   $613,832
    Operating income (loss)................    (39,363)     30,225     (29,396)     29,244     31,897
    Net income (loss)......................    (32,254)     11,349     (24,795)        578     18,490
    Net loss applicable to ordinary
      partnership interests................    (42,855)                (35,390)
</TABLE>
 
4)  CONTRACTS IN PROCESS (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                    JUNE 30,
                                                                                      1997
                                                                                    --------
    <S>                                                                             <C>
    U.S Government contracts:
      Amounts billed............................................................    $  3,355
      Unbilled contract receivables.............................................      12,431
                                                                                    --------
                                                                                      15,786
                                                                                    --------
    Commercial contracts:
      Amounts billed............................................................     277,007
      Unbilled contract receivables.............................................      83,689
                                                                                    --------
                                                                                     360,696
                                                                                    --------
                                                                                    $376,482
                                                                                    ========
</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.
 
          Payment terms and conditions vary between contracts, however, SS/L
     generally requires advance deposits for commercial contracts, equal to
     varying percentages of the total contract amount.
 
5)  SHAREHOLDERS' EQUITY
 
          On April 30, 1997, the Company's shareholders approved the creation of
     20 million shares of Series C Convertible Redeemable Preferred Stock
     ("Series C Preferred Stock"). On June 5, 1997, the Company's outstanding 6%
     Convertible Preferred Equivalent Obligations ("CPEOs") were exchanged into
     Series C Preferred Stock. The exchange resulted in the reclassification of
     the outstanding amount of the CPEOs into shareholders' equity. The Series C
     Preferred Stock may be redeemed at maturity for Loral common stock at the
     option of the Company.
 
                                        6
<PAGE>   8
 
                       LORAL SPACE & COMMUNICATIONS LTD.
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
 
     This quarterly report on Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. In addition,
from time to time, the Company or its representatives have made or may make
forward-looking statements, orally or in writing. Such forward-looking
statements may be included in, but are not limited to, various filings made by
the Company with the Securities and Exchange Commission, press releases or oral
statements made by or with the approval of an authorized executive officer of
the Company. Actual results could differ materially from those projected or
suggested in any forward-looking statements as a result of a wide variety of
factors and conditions.
 
RESULTS OF OPERATIONS
 
     In February 1997, Loral agreed to acquire the 49% of the common stock of
Space Systems/Loral, Inc. ("SS/L") held by four international aerospace and
communications companies (the "Alliance Partners") for $374 million. In March
1997, Loral acquired 24.5% of SS/L's common stock held by two of the Alliance
Partners for $93.5 million in cash and $93.5 million of Loral's 6% Convertible
Preferred Equivalent Obligations due 2006 ("CPEOs"). In June 1997, Loral
acquired the remaining 24.5% of SS/L's common stock for $187 million in the form
of 8,042,922 shares of Loral common stock and 1,063,663 shares of Loral Series C
Preferred Stock. At June 30, 1997, Loral owned 100% of SS/L's common stock.
 
     On March 14, 1997, Loral acquired Skynet Satellite Services ("Skynet") from
AT&T for $478 million in cash, subject to adjustment based on final net asset
values. Skynet is a leading U.S. satellite communications service provider that
owns and operates the Telstar satellite network. The Company intends to
refinance a significant portion of the Skynet purchase price with debt.
 
     In the second quarter of 1997, Loral acquired 2,208,372 Globalstar ordinary
partnership interests from other Globalstar partners for $97.5 million in cash
and 1,255,684 shares of Loral common stock. At June 30, 1997, Loral had a 39.0%
interest in Globalstar's ordinary partnership interests.
 
     The acquisition of Skynet and the SS/L common stock have been accounted for
as purchases. Loral's condensed consolidated financial statements for the three
and six months ended June 30, 1997, reflect the results of operations of SS/L
from January 1, 1997, the elimination of the minority interest of the SS/L
equity not owned by Loral during the periods and the results of operations of
Skynet from March 14, 1997. Prior to January 1, 1997, SS/L was accounted for
using the equity method of accounting.
 
     Net income (loss) applicable to common stockholders for the quarter ended
June 30, 1997 was $(13.2) million compared to $3.0 million for the quarter ended
September 30, 1996. The change is primarily due to development costs related to
new satellite-based services of $8.9 million, an increase in allocated
Globalstar losses of $3.1 million, a decrease in interest income of $4.3 million
and preferred dividends of $2.9 million, offset by the increased share of SS/L's
profits.
 
     In order to provide additional understanding of the Company, the results of
operations discusses the pro forma results of operations for the three and six
months ended June 30, 1997 compared with the pro forma results of operations for
the three and six months ended September 30, 1996 assuming Skynet and the 49%
equity interest in SS/L were acquired on April 1, 1996. (See Notes 1, 2 and 3)
Pro forma sales for the quarter ended June 30, 1997 were $291.1 million compared
to $328.3 million for the quarter ended September 30, 1996. Sales for SS/L,
before intercompany eliminations, increased $52.2 million reflecting increased
satellite sales on the Telstar, ChinaSat and Globalstar programs, offset by
reductions due to the completion of certain programs. Intercompany eliminations
increased $75.1 million for the quarter ended June 30, 1997 compared to the
quarter ended September 30, 1996. Skynet's sales decreased $14.3 million
reflecting the loss of the Telstar 401 satellite in January 1997.
 
                                        7
<PAGE>   9
 
                       LORAL SPACE & COMMUNICATIONS LTD.
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
          RESULTS OF OPERATIONS AND FINANCIAL CONDITION -- (CONTINUED)
 
     Pro forma operating income (loss) was $(2.9) million for the quarter ended
June 30, 1997 compared to $23.8 million for the quarter ended September 30,
1996. This decrease is primarily attributed to the impact of the loss of Telstar
401 and development costs related to new satellite-based services of $8.9
million.
 
     Pro forma interest income (expense) for the quarter ended June 30, 1997 was
$4.6 million compared to $(1.7) million for the quarter ended September 30,
1996, due to the difference in the assumed purchase price in each period related
to the value of the Telstar 401 satellite, offset by increased amounts of
capitalized interest in the quarter ended June 30, 1997 due to the higher level
of Skynet satellites under construction.
 
     The Company is organized in Bermuda and, accordingly, foreign source income
and expenses are not subject to, or deductible for, U.S. Federal taxation. The
Company's provision for income taxes will vary depending on the proportion of
such foreign source income and expenses. The pro forma tax provision for the
quarter ended June 30, 1997 decreased to $3.6 million as compared to $10.4
million for the quarter ended September 30, 1996 primarily due to the extent of
the Company's foreign source income and expenses.
 
     The pro forma net income (loss) applicable to common stockholders for the
quarter ended June 30, 1997 was $(12.9) million compared to $6.4 million for the
quarter ended September 30, 1996. Pro forma earnings per share are $(.05) for
the quarter ended June 30, 1997 and $.03 for the quarter ended September 30,
1996, based on 245.1 million and 245.0 million weighted average common shares
outstanding for the three months ended June 30, 1997 and September 30, 1996,
respectively.
 
     Pro forma sales for the six months ended June 30, 1997 were $624.6 million
compared to $639.3 million for the six months ended September 30, 1996. Sales
for SS/L, before intercompany eliminations, increased $82.9 million reflecting
increased satellite sales on the Telstar, Tempo, M2A, ChinaSat and Globalstar
programs, offset by reductions due to the completion of certain programs.
Intercompany sales increased $76.3 million. Skynet's sales decreased $21.3
million reflecting the loss of the Telstar 401 satellite in January 1997.
 
     Pro forma operating income was $6.7 million for the six months ended June
30, 1997 compared to $41.6 million for the six months ended September 30, 1996.
This decrease is primarily attributed to the impact of the loss of Telstar 401
and $11.5 million of development costs related to new satellite-based services.
 
     Pro forma interest income (expense) for the six months ended June 30, 1997
was $6.8 million compared to $(5.9) million for the six months ended September
30, 1996, due to the difference in the assumed purchase price in each period
related to the value of the Telstar 401 satellite, offset by increased amounts
of capitalized interest for the six months ended June 30, 1997 due to the higher
level of Skynet satellites under construction.
 
     The pro forma tax provision for the six months ended June 30, 1997
decreased to $11.0 million as compared to $16.3 million for the six months ended
September 30, 1996 primarily due to the extent of the Company's foreign source
income and expenses.
 
     The pro forma net income (loss) applicable to common stockholders for the
six months ended June 30, 1997 was $(15.7) million compared to $7.2 million for
the six months ended September 30, 1996. Pro forma earnings per share are $(.06)
for the six months ended June 30, 1997 and $.03 for the six months ended
September 30, 1996, based on 245.1 million and 239.0 million weighted average
common shares outstanding for the six months ended June 30, 1997 and September
30, 1996, respectively.
 
SUMMARY RESULTS OF OPERATIONS OF AFFILIATES
 
GLOBALSTAR
 
     Globalstar is a development stage partnership and has not commenced
commercial service operations. The net loss applicable to ordinary partnership
interests for the six months ended June 30, 1997 was $42.9 million as compared
to $35.4 million for the six months ended September 30, 1996. The increase in
the
 
                                        8
<PAGE>   10
 
                       LORAL SPACE & COMMUNICATIONS LTD.
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
          RESULTS OF OPERATIONS AND FINANCIAL CONDITION -- (CONTINUED)
 
net loss is a result of increased marketing, general and administrative expenses
of $3.2 million and an increase in development costs of $6.8 million offset by
an increase in interest income of $2.5 million. Globalstar is expending
significant funds for the construction, testing and deployment of the Globalstar
System and expects such losses to continue through commencement of revenue
generating service operations.
 
     Interest income increased as a result of higher average cash balances
outstanding.
 
     Development costs increased primarily as a result of increased activity in
the development of Globalstar's user terminals.
 
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 communications
service opportunities. In order to pursue such opportunities, Loral may seek
funds from strategic partners and other investors or through incurrence of debt
or the issuance of additional equity.
 
     At June 30, 1997, Loral had $318.9 million of cash and cash equivalents.
Loral intends to utilize its existing capital base and access to the capital
markets to construct additional Skynet satellites, make additional investments
in Globalstar and Globalstar service provider opportunities and invest in
additional satellite communications service opportunities. In connection with
the Merger between Old Loral and Lockheed Martin, Lockheed Martin assumed
approximately $206 million of the guarantee under the Globalstar Credit
Agreement. The balance of $44 million of the guarantee was assumed by various
Globalstar partners, including $11.7 million by SS/L. Loral has agreed to
indemnify Lockheed Martin for its liability, if any, in excess of $150 million
under its guarantee of the Globalstar Credit Agreement. Globalstar is currently
financed without recourse to Loral other than the indemnification described
above.
 
     Skynet currently has two high-powered satellites operating in orbit. SS/L
is constructing two satellites and has commenced the process of designing and
obtaining long-lead components and subassemblies for two additional satellites
for Skynet. Although short-term borrowings may be required depending on the
timing of cash receipts and expenditures, Loral believes that available cash and
internal cash flows should be adequate to fund substantially all the capital
expenditures for these satellites. Loral intends to expand Skynet's business to
become a worldwide satellite service provider through the construction of
additional satellites. Loral anticipates that a portion of the funds required
for construction of these additional satellites will be provided through
additional borrowings.
 
     Globalstar's current budget for the design, construction and deployment of
the Globalstar System, including working capital, cash interest on anticipated
borrowings and operating expenses is approximately $2.5 billion. Globalstar has
recently added enhanced capabilities and additional test requirements and has
experienced cost growth in the development of the ground system, the final cost
impact of which is under assessment. Globalstar, however, does not expect such
cost growth to increase the funding requirements for the project by more than
five percent. Globalstar has raised or received commitments for approximately
$2.3 billion in equity, debt and vendor financing.
 
     Globalstar has also agreed to purchase from SS/L eight additional spare
satellites at a cost estimated at $175 million. Further, in order to accelerate
the deployment of gateways around the world, Globalstar has agreed to finance
approximately $80 million of the cost of up to 32 of the 35 gateways ordered by
Globalstar service providers. Globalstar expects to recover its investment in
this gateway financing program from the resale of the gateways to service
providers.
 
                                        9
<PAGE>   11
 
                       LORAL SPACE & COMMUNICATIONS LTD.
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
          RESULTS OF OPERATIONS AND FINANCIAL CONDITION -- (CONTINUED)
 
     SS/L is the prime contractor for the design and construction of
Globalstar's satellites. In connection therewith, SS/L and its subcontractors
have committed $310 million of vendor financing to Globalstar, of which $121
million of such vendor financing is effectively borne by the subcontractors.
 
     Cash Used and Provided.  Cash used in operating activities for the six
months ended June 30, 1997 was $115.7 million, primarily due to an increase in
satellite contracts in process and inventories of $61.8 million and a decrease
in customer advances of $74.1 million due to the progress on commercial
satellite contracts, offset by funds generated by earnings before depreciation,
taxes, minority interest and equity in net loss of affiliates of $46.7 million.
Cash used in operating activities for the six months ended September 30, 1996,
was $7.9 million, primarily due to increases in other current assets, offset by
funds generated from earnings before depreciation, taxes and equity in net loss
of affiliates of $11.0 million.
 
     Cash used in investing activities for the six months ended June 30, 1997
was $823.5 million, primarily due to the purchase of Skynet and the SS/L equity
interest (see Note 3); the purchase of additional equity interests in Globalstar
(see Note 3); and capital expenditures of $129.5 million primarily for the
construction of the Telstar satellites by SS/L for Skynet. Cash used in
investing activities for the six months ended September 30, 1996 was $2.1
million due primarily to the purchase of $2.5 million principal amount of GTL
Convertible Preferred Equivalent Obligations in April 1996 and the purchase of
SS/L equity interests, offset by the sale of certain fixed assets.
 
     Net cash provided by financing activities for the six months ended June 30,
1997 and September 30, 1996 was $77.3 million and $602.7 million, respectively,
primarily as a result of borrowings by SS/L under existing credit facilities in
1997 and the proceeds from the Distribution and advances from Loral Corporation
offset by cash paid for transaction expenses related to the Distribution in
1996.
 
FINANCIAL ACCOUNTING PRONOUNCEMENTS
 
     In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 "Earnings Per Share" ("SFAS 128"),
which is required to be adopted for fiscal periods ending after December 15,
1997. SFAS 128 establishes the accounting standards for computing and presenting
earnings per share. The Company believes that the adoption of SFAS 128 will not
have a material effect on the reported earnings per share of the Company.
 
                                       10
<PAGE>   12
 
                          PART II -- OTHER INFORMATION
 
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
 
     (a) Exhibits
 
     The following exhibits are filed as part of this report:
 
<TABLE>
  <S>            <C>     <C>
  Exhibit 11.1   --      Computation of Earnings per Share for the Three Months
                         Ended June 30, 1997 and September 30, 1996.
 
  Exhibit 11.2   --      Computation of Earnings per Share for the Six Months
                         Ended June 30, 1997 and September 30, 1996.
 
  Exhibit 12     --      Computation of Ratio of Earnings to Fixed Charges
 
  Exhibit 27     --      Financial Data Schedule
</TABLE>
 
     (b) Reports on Form 8-K
 
<TABLE>
<CAPTION>
DATE OF REPORT                                DESCRIPTION
---------------    ------------------------------------------------------------------
<S>                <C>
May 28, 1997       Amendment No. 1 to Form 8-K dated March 14, 1997 to add Item 7 --
                   Financial Statements and Pro Forma Financial Information.
June 23, 1997      Item 2 -- Loral acquired 24.5% minority interest in Space
                   Systems/Loral.
                   Item 5 -- Loral acquired 2,208,372 Globalstar ordinary partnership
                   interests.
</TABLE>
 
                                       11
<PAGE>   13
 
                                   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
Date:  August 13, 1997
                                                    MICHAEL P. DEBLASIO
                                          --------------------------------------
                                             Senior Vice President -- Finance
                                              (Principal Financial Officer)
                                                           and
                                             Registrant's Authorized Officer
 
                                       12
<PAGE>   14


                                EXHIBIT INDEX
                                ------------- 


EXHIBIT NO.              DESCRIPTION
-----------              -----------

  Exhibit 11.1   --      Computation of Earnings per Share for the Three Months
                         Ended June 30, 1997 and September 30, 1996.
 
  Exhibit 11.2   --      Computation of Earnings per Share for the Six Months
                         Ended June 30, 1997 and September 30, 1996.
 
  Exhibit 12     --      Computation of Ratio of Earnings to Fixed Charges
 
  Exhibit 27     --      Financial Data Schedule