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, 2000



Commission file number 0-22085
                       -------


                              LORAL CYBERSTAR, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


          Delaware                                                52-1564318
-------------------------------                               ------------------
(State or other jurisdiction of                                (I.R.S. Employer
incorporation or organization)                                Identification No.



2440 Research Boulevard, Suite 400, Rockville, Maryland                 20850
-------------------------------------------------------               ----------
      (Address of principal executive offices)                        (Zip Code)


                                  301-258-8101
--------------------------------------------------------------------------------
               (Registrant's telephone number including area code)

Indicate  by check  mark  whether  the  registrant:  (1) 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 for such  shorter  period  that the
registrant  was required to file such  reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]  No [ ]

THE REGISTRANT  MEETS THE  CONDITIONS SET FORTH IN GENERAL  INSTRUCTION H (1)(a)
AND (b) OF FORM 10-Q AND IS THEREFORE FILING WITH THE REDUCED  DISCLOSURE FORMAT
PURSUANT TO GENERAL INSTRUCTION H (2) OF FORM 10-Q.


                                       1
<PAGE>

Part I.  FINANCIAL INFORMATION

ITEM I.  FINANCIAL STATEMENTS

                              LORAL CYBERSTAR, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                        JUNE 30,          DECEMBER 31,
                                                                                         2000                 1999
                                                                                    ----------------     ----------------
                                                                                      (Unaudited)              Note
                                     ASSETS
<S>                                                                                 <C>                  <C>
Current assets:
   Cash and cash equivalents                                                        $         13,670     $         24,117
   Restricted and segregated cash                                                             25,063              187,315
   Accounts receivable (less allowance for doubtful accounts of $5,812
      and $2,257 at June 30, 2000 and December 31, 1999, respectively)                        54,026               16,797
   Prepaid expenses and other current assets                                                  15,127               11,716
   Due from CyberStar L.P.                                                                     9,282                  181
   Due from Space Systems/Loral                                                                2,360                   --
   Due from Loral Space and Communications Corp.                                                 346                   --
   Due from Loral Communication Services                                                          18                   --
                                                                                    ----------------     ----------------
Total current assets                                                                         119,892              240,126

Property and equipment at cost:
   Land                                                                                           74                   74
   Satellite and related equipment                                                           786,126              784,344
   Telecommunications equipment                                                               52,124               44,747
   Furniture and computer equipment                                                           10,365                9,910
                                                                                    ----------------     ----------------
                                                                                             848,689              839,075

Less accumulated depreciation                                                               (130,980)             (88,549)

Construction in progress                                                                      13,240               16,951
                                                                                    ----------------     ----------------
Net property and equipment                                                                   730,949              767,477

Costs in excess of net assets acquired                                                       585,464              593,219
Deferred income taxes                                                                         47,673               49,223
Other assets, net                                                                             31,809               34,242
                                                                                    ----------------     ----------------

TOTAL ASSETS                                                                        $      1,515,787    $       1,684,287
                                                                                    ================    =================
</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>

                              LORAL CYBERSTAR, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                  (IN THOUSANDS, EXCEPT SHARE AND PAR AMOUNTS)
                                   (CONTINUED)





<TABLE>
<CAPTION>
                                                                                       JUNE 30,           DECEMBER 31,
                                                                                         2000                 1999
                                                                                  ------------------    -----------------
                                                                                      (Unaudited)              Note
<S>                                                                               <C>                   <C>
                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Current portion of long-term debt                                              $            2,231    $           2,071
   Accounts payable                                                                            2,728                3,098
   Satellite purchase price payable                                                               --              181,928
   Accrued and other current liabilities                                                      13,261               13,995
   Customer deposits                                                                           5,361                9,069
   Deferred revenue                                                                            5,696                2,624
   Interest payable                                                                           22,842               22,842
   Note payable to Loral SpaceCom                                                             97,477               74,114
   Due to Skynet Delaware                                                                     27,606               41,788
   Due to Space Systems/Loral                                                                     --                9,750
                                                                                  ------------------    -----------------
Total current liabilities                                                                    177,202              361,279

Long-term debt                                                                               980,303              963,299
Deferred revenue                                                                              31,033                5,957
Customer deposits                                                                              4,140                   --
Other long-term liabilities                                                                      150                  448
Due to Space Systems/Loral                                                                     5,900                5,900

Commitments and contingencies:
Stockholders' equity:
   Common stock, $.01 par value, 1,000 shares authorized; 100 shares outstanding                  --                   --
   Capital in excess of par value                                                            589,211              544,176
   Unearned compensation                                                                      (1,397)              (1,804)
   Accumulated other comprehensive loss                                                       (1,460)                (824)
   Accumulated deficit                                                                      (269,295)            (194,144)
                                                                                  ------------------    -----------------
Total stockholders' equity                                                                   317,059              347,404
                                                                                  ------------------    -----------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                          $      1,515,787    $       1,684,287
                                                                                    ================    =================
</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.


                                       3
<PAGE>

                              LORAL CYBERSTAR, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (IN THOUSANDS)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                              THREE MONTHS ENDED JUNE 30,             SIX MONTHS ENDED JUNE 30,
                                           --------------------------------        -------------------------------
                                                2000              1999                 2000              1999
                                           ---------------   --------------        --------------   --------------
<S>                                        <C>               <C>                   <C>              <C>
Revenues                                   $        41,120   $       24,072        $       83,302   $       46,610

Operating expenses:
   Direct                                           16,458            7,566                33,257           14,197
   Sales and marketing                               6,996            6,315                12,895           12,217
   Engineering and technical services                2,660            2,184                 5,092            4,381
   General and administrative                        5,850            3,573                10,846            7,311
   Depreciation and amortization                    26,876           16,362                53,845           33,903
                                           ---------------   --------------        --------------   --------------
     Total operating expenses                       58,840           36,000               115,935           72,009

Loss from operations                               (17,720)         (11,928)              (32,633)         (25,399)

   Interest  income                                    622              897                 3,003            2,071
   Interest expense                                (24,052)         (17,523)              (47,818)         (31,419)
   Other income                                        150              234                   362              358
                                           ---------------   --------------        --------------   --------------

Loss before income taxes                           (41,000)         (28,320)              (77,086)         (54,389)

Income tax benefit                                   2,898              805                 1,936            2,639
                                           ---------------   --------------        --------------   --------------

Net loss                                   $       (38,102) $       (27,515)       $      (75,150)  $      (51,750)
                                           ===============  ===============        ==============   ==============
</TABLE>










            See notes to condensed consolidated financial statements.


                                       4
<PAGE>

                              LORAL CYBERSTAR, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                SIX MONTHS ENDED JUNE 30,
                                                            ----------------------------------
                                                                 2000               1999
                                                            ----------------   ---------------
<S>                                                         <C>                <C>
OPERATING ACTIVITIES
Net loss                                                    $        (75,150)  $       (51,750)
Adjustments to reconcile net loss to net cash
   Provided by (used in) operating activities:
   Deferred income tax provision                                       1,550             1,853
   Depreciation and amortization                                      53,845            33,903
   Provision for bad debts                                             2,654             1,353
   Non-cash interest expense                                          18,103            16,483
   Interest earned on restricted assets                               (3,308)               --
   Other                                                                  --               795
Changes in operating assets and liabilities:
   Accounts receivable                                               (39,941)           (2,342)
   Prepaid expenses and other current assets                          (3,411)            1,458
   Other assets                                                          197            (2,942)
   Accounts payable, accrued liabilities and other
      current liabilities                                             (2,308)           44,188
   Due to Skynet Delaware                                            (14,151)               --
   Customer deposits                                                     767               800
   Deferred revenue                                                   28,147               (73)
   Due from Loral Communications Services                                (18)               --
   Due from Space Systems/Loral                                       (2,360)               --
   Due to Space Systems/Loral                                         (9,750)               --
   Due from Loral Space & Communications Corp.                          (346)               --
   Due from CyberStar L.P.                                            (9,101)               --
                                                            ----------------   ---------------
Net cash (used in) provided by operating activities                  (54,481)           43,726

INVESTING ACTIVITIES
Increase in restricted and segregated cash                               (64)           (1,491)
Uses of and transfers from restricted and segregated cash            165,625            24,919
Construction in progress                                             (11,071)         (152,377)
Capital expenditures, net                                           (175,586)           (2,857)
                                                            ----------------   ---------------
Net cash used in investing activities                                (21,096)         (131,806)

FINANCING ACTIVITIES
Gain on sale of orbital slots                                         34,260                --
Equity contributed from Loral                                         10,750            13,033
Increase in note payable to Loral SpaceCom                            23,067            59,655
Repayment of senior notes and notes payable                             (676)             (590)
Payment of satellite incentive obligation                               (136)             (120)
Other                                                                 (2,035)           (3,744)
                                                            ----------------   ---------------
Net cash provided by financing activities                             65,230            68,234

Net decrease in cash and cash equivalents                            (10,447)          (19,846)
Cash and cash equivalents at beginning of period                      24,117            35,861
                                                            ----------------   ---------------
Cash and cash equivalents at end of period                  $         13,670  $         16,015
                                                            ================  ================

Non-cash activities:
   Insurance proceeds receivable for Orion 3                $             --   $       265,606
                                                            ================  ================
</TABLE>

            See notes to condensed consolidated financial statements.


                                       5
<PAGE>

                              LORAL CYBERSTAR, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE A.  BASIS OF PRESENTATION

ORGANIZATION AND BUSINESS

The  principal  business  of Loral  CyberStar,  Inc.  (the  "Company"  or "Loral
CyberStar"),  formerly  known as Orion  Network  Systems,  Inc.  ("Orion" or the
"Predecessor   Company"),   and   its   subsidiary   guarantors   is   providing
satellite-based  communications services for private communications networks and
video distribution and other satellite transmission services. Loral CyberStar is
organized into two distinct operating segments as follows:

         Fixed Satellite Services:  Leasing  transponder  capacity and providing
         value-added  services to customers for a wide variety of  applications,
         including the  distribution of broadcast  programming,  news gathering,
         business  television,  distance learning and  direct-to-home  services.
         Loral  Skynet,  a division of Loral  SpaceCom  Corporation,  which is a
         subsidiary  of Loral Space &  Communications  Corporation,  which is in
         turn a subsidiary of Loral Space & Communications Ltd. ("Loral"), began
         managing  the  Company's  Fixed  Satellite   Services   ("FSS")  assets
         effective January 1, 1999.

         Data Services:  Providing managed communications  networks and Internet
         and intranet services,  using transponder  capacity on the Loral Skynet
         and Loral CyberStar fleets.

GENERAL

The accompanying unaudited condensed consolidated financial statements have been
prepared by the Company  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
the  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 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, 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 Company's latest Annual Report on Form 10-K.


                                       6
<PAGE>

                              LORAL CYBERSTAR, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
   NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED


COMPREHENSIVE LOSS

Comprehensive loss is as follows (in thousands):


                                              SIX MONTHS ENDED JUNE 30,
                                            -----------------------------
                                                2000              1999
                                            ------------      -----------
Net loss                                    $     75,150      $    51,750
Cumulative translation adjustment                    636            1,385
                                            ------------      -----------
Comprehensive loss                          $     75,786      $    53,135
                                            ============      ===========


NOTE B.  RESTRICTED AND SEGREGATED CASH

As of June 30, 2000,  the Company had  approximately  $25 million of  restricted
cash for an interest payment on its senior notes due July 15, 2000.

NOTE C.  LONG-TERM DEBT

Long-term debt consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                                                JUNE 30,            DECEMBER 31,
                                                                                  2000                  1999
                                                                             ---------------       ---------------
<S>                                                                          <C>                   <C>
Senior notes (including premium of $55.6 million and $58.7 million
   at June 30, 2000 and December 31, 1999, respectively)                     $       498,623       $       501,734
Senior discount notes (principal amount at maturity $484 million and
   accreted principal amount of $401 million and $378 million at
   June 30, 2000 and December 31, 1999, respectively                                 469,623               448,408
Notes payable - TT&C Facility                                                          3,054                 3,729
Satellite incentive obligation                                                        10,992                11,129
Other                                                                                    242                   370
                                                                             ---------------       ---------------
   Total debt                                                                        982,534               965,370
       Less current portion                                                           (2,231)               (2,071)
                                                                             ---------------       ---------------
   Long-term debt                                                            $       980,303       $       963,299
                                                                             ===============       ===============
</TABLE>

In  connection  with the merger with Loral,  Loral did not assume the  Company's
outstanding debt. Such debt remains outstanding and is non-recourse to Loral.


                                       7
<PAGE>

                              LORAL CYBERSTAR, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
   NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE D.  NOTE DUE TO LORAL

Loral CyberStar has obtained additional financing (via an intercompany note from
Loral  SpaceCom,) to complete the  construction  of its satellite fleet and meet
its operating  requirements.  Borrowings under this note can be made for periods
of 1, 2, 3 or 6 months and bear  interest at LIBOR (6.22% at June 30, 2000) plus
275 basis  points.  The note can be prepaid at any time  without  penalty and is
payable  on  demand.  All  borrowings  under  this note are  subject  to Loral's
approval.  At June 30, 2000,  the  outstanding  amount under this note was $97.5
million  (including  accrued  interest of $7.7  million) and is reflected on the
balance sheet as a note payable to Loral SpaceCom.

NOTE E.  INCOME TAXES

The Company is included in the  consolidated  U.S.  Federal income tax return of
Loral Space & Communications  Corporation.  Pursuant to a tax sharing  agreement
for the current year with Loral Space & Communications Corporation,  the Company
is entitled to reimbursement for the use of its tax losses, when such losses are
utilized by the consolidated  group;  otherwise,  the Company is required to pay
its  separate  company  income tax  liability  to Loral  Space &  Communications
Corporation.  The  Company  recorded a net  receivable  under  this tax  sharing
agreement of  approximately  $3.8 million and $3.6  million,  and a deferred tax
provision  of $0.9 million and $1.7  million,  resulting in a net tax benefit of
$2.9  million and $1.9 million for the three and six months ended June 30, 2000,
respectively.  The Company's effective tax rate of 2.5% for the six months ended
June 30, 2000 differs from the federal  statutory  rate of 35%  primarily due to
the valuation allowance established for the carryforward of the current year tax
loss  and the  non-deductible  amortization  of  costs in  excess  of net  asset
acquired.  The  deferred  tax asset of $47.7  million as of June 30, 2000 on the
accompanying balance sheet arises primarily from the tax effect of the temporary
differences  between  the  carrying  amount of the  senior  notes and the senior
discount notes payable for financial and income tax purposes.


                                       8
<PAGE>

                              LORAL CYBERSTAR, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
   NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE F.  SEGMENTS

The  Company's  two  operating  segments are Fixed  Satellite  Services and Data
Services (see Note A).

In  evaluating  financial  performance,  management  uses  revenues and earnings
before  interest,  taxes and  depreciation  and  amortization  ("EBITDA") as the
measure  of  a  segment's  profit  or  loss.  Summarized  financial  information
concerning the Company's operating segments is as follows (in millions):


                        THREE MONTHS ENDED JUNE 30, 2000
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                              FIXED                                TOTAL
                                            SATELLITE            DATA           REPORTABLE
                                             SERVICES          SERVICES          SEGMENTS         ELIMINATIONS       CONSOLIDATED
                                           -------------      ------------      ------------      -------------      ------------
<S>                                        <C>                <C>               <C>               <C>                <C>
Revenue from external customers            $        18.3      $       23.6      $       41.9      $        (0.8)     $       41.1
Intersegment revenue                                 5.6                --               5.6               (5.6)               --
                                           -------------      ------------      ------------      -------------      ------------
Gross revenue                              $        23.9      $       23.6      $       47.5      $        (6.4)     $       41.1
                                           =============      ============      ============      =============      ============
EBITDA (1)                                 $        16.0      $       (6.0)     $       10.0      $        (0.8)     $        9.2
Depreciation and amortization                       22.6               4.3              26.9                 --              26.9
                                           -------------      ------------      ------------      -------------      ------------
Loss from operations                       $        (6.6)     $      (10.3)     $      (16.9)     $        (0.8)     $      (17.7)
                                           =============      ============      ============      =============      ============
Total assets                               $     1,401.8      $      114.0      $    1,515.8      $          --      $    1,515.8
                                           =============      ============      ============      =============      ============
</TABLE>



                        THREE MONTHS ENDED JUNE 30, 1999
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                              FIXED                               TOTAL
                                            SATELLITE            DATA           REPORTABLE
                                             SERVICES          SERVICES          SEGMENTS         ELIMINATIONS       CONSOLIDATED
                                           -------------      ------------      ------------      ------------       ------------
<S>                                        <C>                <C>               <C>               <C>                <C>
Revenue from external customers            $         7.5      $       16.6      $       24.1      $          --      $       24.1
Intersegment revenue                                 1.7                --               1.7               (1.7)               --
                                           -------------      ------------      ------------      -------------      ------------
Gross revenue                              $         9.2      $       16.6      $       25.8      $        (1.7)     $       24.1
                                           =============      ============      ============      =============      ============
EBITDA (1)                                 $         4.9      $       (0.5)     $        4.4      $          --      $        4.4
Depreciation and amortization                       12.7               3.7              16.4                 --              16.4
                                           -------------      ------------      ------------      -------------      ------------
Loss from operations                       $        (7.7)     $       (4.2)     $      (11.9)     $          --      $      (11.9)
                                           =============      ============      ============      =============      ============
Total assets                               $     1,419.9      $       68.7      $    1,488.6      $          --      $    1,488.6
                                           =============      ============      ============      =============      ============

<FN>
-------------------------

(1) 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 the  Company'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.
</FN>
</TABLE>


                                       9
<PAGE>

                              LORAL CYBERSTAR, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
   NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED


                         SIX MONTHS ENDED JUNE 30, 2000
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                              FIXED                               TOTAL
                                            SATELLITE            DATA           REPORTABLE
                                             SERVICES          SERVICES          SEGMENTS         ELIMINATIONS       CONSOLIDATED
                                           -------------      ------------      ------------      -------------      ------------
<S>                                        <C>                <C>               <C>               <C>                <C>
Revenue from external customers            $        35.7      $       48.4      $       84.1      $        (0.8)     $       83.3
Intersegment revenue                                10.2                --              10.2              (10.2)               --
                                           -------------      ------------      ------------      -------------      ------------
Gross revenue                              $        45.9      $       48.4      $       94.3      $       (11.0)     $       83.3
                                           =============      ============      ============      =============      ============
EBITDA (1)                                 $        30.9      $       (8.9)     $       22.0      $        (0.8)     $       21.2
Depreciation and amortization                       44.9               8.9              53.8                 --              53.8
                                           -------------      ------------      ------------      -------------      ------------
Loss from operations                       $       (14.0)     $      (17.8)     $      (31.8)     $        (0.8)     $      (32.6)
                                           =============      ============      ============      =============      ============
</TABLE>


                         SIX MONTHS ENDED JUNE 30, 1999
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                              FIXED                                TOTAL
                                            SATELLITE            DATA           REPORTABLE
                                             SERVICES          SERVICES          SEGMENTS         ELIMINATIONS      CONSOLIDATED
                                           -------------      ------------      ------------      -------------      ------------
<S>                                        <C>                <C>               <C>               <C>                <C>
Revenue from external customers            $        14.8      $       31.8      $       46.6      $          --      $       46.6
Intersegment revenue                                 3.5                --               3.5               (3.5)               --
                                           -------------      ------------      ------------      -------------      ------------
Gross revenue                              $        18.3      $       31.8      $       50.1      $        (3.5)     $       46.6
                                           =============      ============      ============      =============      ============
EBITDA (1)                                 $        11.3      $       (2.8)     $        8.5      $          --      $        8.5
Depreciation and amortization                       26.9               7.0              33.9                 --              33.9
                                           -------------      ------------      ------------      -------------      ------------
Loss from operations                       $       (15.6)     $       (9.8)     $      (25.4)     $          --      $      (25.4)
                                           =============      ============      ============      =============      ============
</TABLE>


                                       10
<PAGE>

                              LORAL CYBERSTAR, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
   NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE G. COMMITMENTS AND CONTINGENCIES

Telstar 11  (formerly  Orion 1) -- In November  1995,  a component on Telstar 11
malfunctioned,  resulting in a 2-hour service  interruption.  The malfunctioning
component  supported nine  transponders  serving the European portion of Telstar
11's  footprint.  Full service was restored using a back-up  component.  If that
back-up component fails,  Telstar 11 would lose a significant  amount of useable
capacity.  In such  event,  while the Company  would be  entitled  to  insurance
proceeds  of  approximately  $195  million as of June 30, 2000 and would seek to
lease  replacement  capacity  and  function as a reseller  with  respect to such
capacity,  the loss of  capacity  would  have a material  adverse  effect on the
Company.

Telstar 12  (formerly  Orion 2) -- Telstar  12, a high power  satellite  with 38
Ku-band  transponders,  expands Loral CyberStar's  European coverage and extends
coverage to portions of the former Soviet Union, Latin America,  the Middle East
and South Africa.  Telstar 12 was launched  aboard an Ariane  launch  vehicle in
October 1999 into 15 degrees  W.L.,  and  commenced  operations in January 2000.
Although Telstar 12 was originally intended to operate at 12 degrees W.L., Loral
CyberStar reached an agreement with Eutelsat to operate Telstar 12 at 15 degrees
W.L.  while  Eutelsat  continued  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 and retained the risk
of loss.  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, the Company 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.

Agreements  with Loral Skynet -- Loral  CyberStar  and Loral Skynet have entered
into  agreements  (the "Loral  Skynet  Agreements")  effective  January 1, 1999,
whereby  Loral Skynet  provides to Loral  CyberStar  (i)  marketing and sales of
satellite capacity services on the Loral CyberStar satellite network and related
billing and  administration of customer contracts for those services (the "Sales
Services")  and (ii)  telemetry,  tracking  and control  services  for the Loral
CyberStar  satellite  network (the "Technical  Services",  and together with the
Sales Services, the "Services"). Loral CyberStar is charged Loral Skynet's costs
for providing these services plus a 5 percent administrative fee.

Litigation -- The Company is party to various  litigation  arising in the normal
course of its operations.  In the opinion of management,  the ultimate liability
for  these  matters,  if any,  will not have a  material  adverse  effect on the
Company's financial position or results of operations.

NOTE H.  SALE OF Ka-BAND SLOTS

On March 24, 2000,  Loral CyberStar  entered into an agreement with a subsidiary
of Loral to assign to the Loral subsidiary,  pending  regulatory  approval,  its
Ka-band  orbital  slots  located at 89 degrees W.L., 81 degrees W.L., 78 degrees
E.L. and 47 degrees W.L. In connection  with this  transaction,  Loral CyberStar
also  agreed to  transfer  to the Loral  subsidiary  all  agreements,  including
satellite  construction  contracts,  related to such slots. The total sale price
for the slots and these agreements was $36.5 million, of which $34.5 million was
received in the first quarter of 2000 and applied by Loral CyberStar towards the
last  installment  payment on Telstar  10/Apstar IIR. The remaining $2.0 million
was received in the second  quarter of 2000.  In connection  with the sale,  the
Company  recorded a gain of approximately  $34 million.  Since the sale was to a
subsidiary of Loral, the gain was credited directly to equity.

NOTE I.  RECLASSIFICATIONS

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


                                       11
<PAGE>

                              LORAL CYBERSTAR, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
            MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS

ITEM 2. MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS

Except for the historical information contained herein, the matters discussed in
this Management's Narrative Analysis of Results of Operations are not historical
facts, but are  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,  Loral
CyberStar,  Loral or their 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 Loral CyberStar or
Loral with the Securities  and Exchange  Commission  ("SEC"),  press releases or
oral statements made by or with the approval of an authorized  executive officer
of  Loral   CyberStar  or  Loral.   They  can  be   identified  by  the  use  of
forward-looking  words such as "believes",  "expects",  "plans",  "may", "will",
"should" or  "anticipates" or their negatives or other variations of these words
or other comparable  words, or by discussions of strategy that involve risks and
uncertainties.  The forward-looking statements are only predictions,  and actual
events or results could differ  materially  from those projected or suggested in
any  forward-looking  statements  as a result of a wide  variety  of  factors or
conditions,  many of which  are  beyond  the  Company's  control.  Some of these
factors and conditions  include:  (i) the Company has substantial debt; (ii) the
Company's debt imposes  restrictions and otherwise affects the Company's ability
to undertake certain actions;  (iii) the Company has funding requirements;  (iv)
the Company's satellites may fail prematurely;  (v) the Company cannot guarantee
successful  coordination  for its satellites;  and (vi) the Company faces severe
competition.  For a detailed discussion of these factors and conditions,  please
refer to the  Company's  most recent  Annual  Report on Form 10-K filed with the
SEC.

GENERAL

The  principal  business  of Loral  CyberStar,  Inc.  (the  "Company"  or "Loral
CyberStar"),  formerly  known as Orion  Network  Systems,  Inc.  ("Orion" or the
"Predecessor  Company"),  and  its  subsidiaries  is  providing  satellite-based
communications   services   for  private   communications   networks  and  video
distribution  and other  satellite  transmission  services.  Loral  CyberStar is
organized into two distinct operating segments as follows:

         Fixed Satellite Services:  Leasing  transponder  capacity and providing
         value-added  services to customers for a wide variety of  applications,
         including the  distribution of broadcast  programming,  news gathering,
         business  television,  distance learning and  direct-to-home  services.
         Loral  Skynet,  a division of Loral  SpaceCom  Corporation,  which is a
         subsidiary  of Loral Space &  Communications  Corporation,  which is in
         turn a subsidiary of Loral Space & Communications Ltd. ("Loral"), began
         managing  the  Company's  Fixed  Satellite   Services   ("FSS")  assets
         effective January 1, 1999.

         Data Services:  Providing managed communications  networks and Internet
         and intranet services,  using transponder  capacity on the Loral Skynet
         and Loral CyberStar fleets.

Ka-BAND SLOTS

On March 24, 2000,  Loral CyberStar  entered into an agreement with a subsidiary
of Loral to assign to the Loral subsidiary,  pending  regulatory  approval,  its
Ka-band  orbital  slots  located at 89 degrees W.L., 81 degrees W.L., 78 degrees
E.L. and 47 degrees W.L. In connection  with this  transaction,  Loral CyberStar
also  agreed to  transfer  to the Loral  subsidiary  all  agreements,  including
satellite construction contracts,  related to such slots. The sale price for the
slots and these  agreements  was  $36.5  million,  of which  $34.5  million  was
received in the first quarter of 2000 and applied by Loral CyberStar towards the
last  installment  payment on Telstar  10/Apstar IIR. The remaining $2.0 million
was received in the second quarter of 2000.


                                       12
<PAGE>

                              LORAL CYBERSTAR, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
            MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
                                   (CONTINUED)

COMMITMENTS AND CONTINGENCIES

Telstar 11  (formerly  Orion 1) -- In November  1995,  a component on Telstar 11
malfunctioned,  resulting in a 2-hour service  interruption.  The malfunctioning
component  supported nine  transponders  serving the European portion of Telstar
11's  footprint.  Full service was restored using a back-up  component.  If that
back-up component fails,  Telstar 11 would lose a significant  amount of useable
capacity.  In such  event,  while the Company  would be  entitled  to  insurance
proceeds  of  approximately  $195  million as of June 30, 2000 and would seek to
lease  replacement  capacity  and  function as a reseller  with  respect to such
capacity,  the loss of  capacity  would  have a material  adverse  effect on the
Company.

Telstar 12  (formerly  Orion 2) -- Telstar  12, a high power  satellite  with 38
Ku-band  transponders,  expands Loral CyberStar's  European coverage and extends
coverage to portions of the former Soviet Union, Latin America,  the Middle East
and South Africa.  Telstar 12 was launched  aboard an Ariane  launch  vehicle in
October 1999 into 15 degrees  W.L.,  and  commenced  operations in January 2000.
Although Telstar 12 was originally intended to operate at 12 degrees W.L., Loral
CyberStar reached an agreement with Eutelsat to operate Telstar 12 at 15 degrees
W.L.  while  Eutelsat  continued  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 and retained the risk
of loss.  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, the Company 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.

Agreements  with Loral Skynet -- Loral  CyberStar  and Loral Skynet have entered
into  agreements  (the "Loral  Skynet  Agreements")  effective  January 1, 1999,
whereby  Loral Skynet  provides to Loral  CyberStar  (i)  marketing and sales of
satellite capacity services on the Loral CyberStar satellite network and related
billing and  administration of customer contracts for those services (the "Sales
Services")  and (ii)  telemetry,  tracking  and control  services  for the Loral
CyberStar  satellite  network (the "Technical  Services",  and together with the
Sales Services, the "Services"). Loral CyberStar is charged Loral Skynet's costs
for providing these services plus a 5 percent administrative fee.

Litigation -- The Company is party to various  litigation  arising in the normal
course of its operations.  In the opinion of management,  the ultimate liability
for  these  matters,  if any,  will not have a  material  adverse  effect on the
Company's financial position or results of operations.


                                       13
<PAGE>

                              LORAL CYBERSTAR, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
            MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
                                   (CONTINUED)

RESULTS OF OPERATIONS

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. See Note F to the unaudited  condensed  consolidated
financial statements for additional information on segment results.

OPERATING REVENUES (IN MILLIONS):

<TABLE>
<CAPTION>
                                             THREE MONTHS ENDED                     SIX MONTHS ENDED
                                                  JUNE 30,                              JUNE 30,
                                        ------------------------------         ------------------------------
                                            2000              1999                2000               1999
                                        -------------     ------------         ------------      ------------
<S>                                     <C>               <C>                  <C>               <C>
Fixed satellite services                $        23.9     $        9.2         $       45.9      $       18.3
Data services                                    23.6             16.6                 48.4              31.8
Eliminations                                     (6.4)            (1.7)               (11.0)             (3.5)
                                        -------------     ------------         ------------      ------------
Operating revenues                      $        41.1     $       24.1         $       83.3      $       46.6
                                        =============     ============         ============      ============
</TABLE>

EBITDA (1) (IN  MILLIONS):

<TABLE>
<CAPTION>
                                             THREE MONTHS ENDED                     SIX MONTHS ENDED
                                                  JUNE 30,                              JUNE 30,
                                        ------------------------------         ------------------------------
                                            2000              1999                2000               1999
                                        -------------     ------------         ------------      ------------
<S>                                     <C>               <C>                  <C>               <C>
Fixed satellite services                $        16.0     $        4.9         $       30.9      $       11.3
Data services                                    (6.0)            (0.5)                (8.9)             (2.8)
Eliminations                                     (0.8)              --                 (0.8)               --
                                        -------------     ------------         ------------      ------------
EBITDA                                  $         9.2     $        4.4         $       21.2      $        8.5
                                        =============     ============         ============      ============

<FN>
--------
(1) 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 the  Company'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.
</FN>
</TABLE>


                                       14
<PAGE>

                              LORAL CYBERSTAR, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
            MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
                                  (CONTINUED))

Revenue and Backlog. Total revenues for the three months ended June 30, 2000 and
June 30, 1999 were $41.1 million and $24.1 million, respectively. Total revenues
for the six months ended June 30, 2000 and June 30, 1999 were $83.3  million and
$46.6  million,  respectively.  These  increases are primarily  attributable  to
improved  results in the private  communications  network  services  operations,
which added 221 and 244  customer  sites for the three and six months ended June
30, 2000, as compared to the same periods in 1999, the service  commencement  of
Telstar 12 and Telstar  10/Apstar IIR after the second  quarter of 1999;  and an
equipment sale of $3.3 million in the first quarter of 2000.

At June 30, 2000, the Company had backlog  (representing  future  revenues under
contract) of approximately $891.8 million compared to $261.7 million at June 30,
1999.  Revenue from customer  contract  backlog is typically  earned over two to
five years.

Direct  Expenses.  Direct expenses for the three months ended June 30, 2000 were
$16.5  million  compared to $7.6  million  for the same  period in 1999.  Direct
expenses  for the six months  ended June 30,  2000 and June 30,  1999 were $33.3
million  and  $14.2  million,   respectively.   These  increases  are  primarily
attributable to Internet access,  satellite  transponder leasing and terrestrial
link charges that support the Worldcast  Internet  access  product , increase in
in-orbit  satellite  insurance for Telstar 12 and Telstar  10/Apstar IIR and the
cost of equipment related to an equipment sale in the first quarter of 2000.

Sales and Marketing Expenses. Sales and marketing expenses were $7.0 million for
the three months  ended June 30, 2000,  as compared to $6.3 million for the same
period in 1999.  Sales and marketing  expenses for the six months ended June 30,
2000 and June 30, 1999 were $12.9 million and $12.2 million, respectively. These
increases  are related to travel  expenses  associated  with sales and marketing
initiatives.

Engineering and Technical Services Expenses.  Engineering and technical services
expenses for the three months ended June 30, 2000 were $2.7 million  compared to
$2.2 million for the same period in 1999. Engineering and technical expenses for
the six months  ended June 30, 2000 and June 30, 1999 were $5.1 million and $4.4
million, respectively.

General and Administrative  Expenses.  General and administrative  expenses were
$5.9 million for the three  months ended June 30, 2000  compared to $3.6 million
for the same period in 1999.  General and  administrative  expenses  for the six
months  ended  June 30,  2000 and June 30,  1999  were  $10.8  million  and $7.3
million,  respectively.  These increases are associated with additional bad debt
costs for the FSS business and recruiting costs for the Data Services business.

Depreciation and  Amortization.  Depreciation  and amortization  expense for the
three months ended June 30, 2000 was $26.9 million compared to $16.4 million for
the same  period in 1999.  Depreciation  and  amortization  expense  for the six
months  ended  June 30,  2000 and June 30,  1999 was  $53.8  million  and  $33.9
million, respectively.  These increases were primarily due to the acquisition of
Telstar  10/Apstar IIR on September 28, 1999 and from Telstar 12 being placed in
service in December 1999.

Interest.  Interest  income was $0.6 million for the three months ended June 30,
2000,  compared  to $0.9  million  for the three  months  ended  June 30,  1999.
Interest  income for the six months  ended June 30,  2000 and June 30,  1999 was
$3.0 million and $2.1 million, respectively.  Interest expense was $24.1 million
for the three months ended June 30, 2000, and $17.5 million,  net of capitalized
interest of $3.8  million,  for the three months  ended June 30, 1999.  Interest
expense for the six months ended June 30, 2000 was $47.8 million and for the six
months ended June 30, 1999 was $31.4  million,  net of  capitalized  interest of
$11.1 million. The increase in interest expense is primarily due to the interest
expense  on the  intercompany  debt from  Loral  SpaceCom  and the  decrease  in
capitalized interest in 2000.


                                       15
<PAGE>

                              LORAL CYBERSTAR, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)
            MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
                                  (CONTINUED))

Income Taxes.  The Company is included in the  consolidated  U.S. Federal income
tax  return  of Loral  Space &  Communications  Corporation.  Pursuant  to a tax
sharing  agreement  for the  current  year  with  Loral  Space &  Communications
Corporation,  the Company is entitled  to  reimbursement  for the use of its tax
losses, when such losses are utilized by the consolidated group; otherwise,  the
Company is required to pay its separate  company  income tax  liability to Loral
Space & Communications Corporation.  The Company recorded a net receivable under
this tax sharing agreement of approximately $3.8 million and $3.6 million, and a
deferred tax provision of $0.9 million and $1.7 million,  resulting in a net tax
benefit of $2.9 million and $1.9 million for the three and six months ended June
30, 2000,  respectively.  The  Company's  effective tax rate of 2.5% for the six
months  ended June 30,  2000  differs  from the  federal  statutory  rate of 35%
primarily due to the valuation allowance established for the carryforward of the
current year tax loss and the non-deductible  amortization of costs in excess of
net asset acquired.  The deferred tax asset of $47.7 million as of June 30, 2000
on the  accompanying  balance sheet arises  primarily from the tax effect of the
temporary  differences  between the carrying  amount of the senior notes and the
senior discount notes payable for financial and income tax purposes.

Net Loss.  As a result of the above,  the Company  incurred  net losses of $38.1
million  and $27.5  million for the three  months  ended June 30, 2000 and 1999,
respectively.  Net losses for the six months  ended June 30,  2000 and 1999 were
$75.2 million and $51.8 million, respectively.

RESULTS BY OPERATING SEGMENT

Fixed Satellite Service

FSS revenue for the three  months ended June 30, 2000 was $23.9  million  versus
$9.2 million for the three  months ended June 30, 1999.  FSS revenue for the six
months ended June 30, 2000 was $45.9  million  versus $18.3  million for the six
months ended June 30, 1999.  EBITDA for the three months ended June 30, 2000 was
$16.0 million, or 67 percent of revenues,  versus $4.9 million, or 53 percent of
revenues,  for the three months  ended June 30, 1999.  EBITDA for the six months
ended June 30, 2000 was $30.9 million,  or 67 percent of revenues,  versus $11.3
million or 62 percent of revenues, for the six months ended June 30, 1999. These
increases were due in part to the service commencement of Telstar 12 and Telstar
10/Apstar IIR after the second quarter of 1999.

Data Services

Revenues for the Data Services  segment for the three months ended June 30, 2000
was $23.6 million versus $16.6 million for the three months ended June 30, 1999.
Data  Services  revenues  for the six months  ended June 30,  2000 and 1999 were
$48.4 million and $31.8 million,  respectively.  These increases were mainly due
to the added  customer  sites in 2000,  as compared to 1999.  EBITDA for the six
months  ended  June 30,  2000 was a loss of $8.9  million  versus a loss of $2.8
million  for the six months  ended June 30,  1999.  EBITDA for the three  months
ended June 30, 2000 was a loss of  approximately  $6.0 million  versus a loss of
$0.5 million for the three months ended June 30, 1999.  The  increases in EBITDA
losses in 2000 were due in part to the increased  costs in  connection  with the
expansion of the business.

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
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.


                                       16
<PAGE>

                              LORAL CYBERSTAR, INC.
     (A WHOLLY OWNED SUBSIDIARY OF LORAL SPACE & COMMUNICATIONS CORPORATION)


PART II. OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits:

                  27       Financial Data Schedule

         (b)      Reports on Form 8-K:

                  None.




                                    SIGNATURE

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





                                                 LORAL CYBERSTAR, INC.
                                          --------------------------------------
                                                       Registrant


Date:  August 14, 2000                      /s/    Richard J. Townsend
                                          --------------------------------------
                                                   Richard J. Townsend
                                                Senior Vice President and
                                                 Chief Financial Officer
                                              (Principal Financial Officer
                                           and Registrant's Authorized Officer)


                                       17