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 SEPTEMBER 30, 2001



                         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.


<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, EXCEPT PAR AMOUNTS)


<TABLE>
<CAPTION>


                                                                                         SEPTEMBER 30,        DECEMBER 31,
                                                                                            2001                 2000
                                                                                         -------------        ------------
                                                                                          (UNAUDITED)              NOTE

                                       ASSETS
<S>                                                                                     <C>                  <C>
Current assets:
   Cash and cash equivalents                                                            $          6,745     $         37,169
   Accounts receivable, net                                                                       25,987               22,204
   Prepaid expenses and other current assets                                                       6,727                8,218
   Due from Loral companies                                                                        8,945                9,545
                                                                                        ----------------     ----------------
Total current assets                                                                              48,404               77,136

Property and equipment, net                                                                      638,664              702,311
Costs in excess of net assets acquired, net                                                      566,079              577,710
Deferred income taxes                                                                             40,966               44,982
Other assets                                                                                      26,470               26,810
                                                                                        ----------------     ----------------

TOTAL ASSETS                                                                            $      1,320,583     $      1,428,949
                                                                                        ================     ================

                        LIABILITIES AND STOCKHOLDER'S EQUITY

Current liabilities:
   Current portion of long-term debt                                                   $           2,919    $           2,551
   Accounts payable                                                                                6,858                7,368
   Accrued and other current liabilities                                                          13,131               11,366
   Customer deposits                                                                               5,711                7,062
   Deferred revenue                                                                                6,375                5,691
   Interest payable                                                                               10,384               22,846
   Note payable to Loral SpaceCom                                                                 79,669              107,866
   Due to Loral companies                                                                             --                4,495
                                                                                        ----------------     ----------------
Total current liabilities                                                                        125,047              169,245

Long-term debt                                                                                 1,026,134              997,991
Deferred revenue                                                                                   2,154                  998
Customer deposits                                                                                  4,588                5,413
Other long-term liabilities                                                                           --                  125
Commitments and contingencies (Note G) Stockholder's equity:
   Common stock, $.01 par value                                                                       --                   --
   Capital in excess of par value                                                                588,197              588,197
   Accumulated deficit                                                                          (423,911)            (331,562)
   Accumulated other comprehensive loss                                                           (1,626)              (1,458)
                                                                                        ----------------     ----------------
Total stockholder's equity                                                                       162,660              255,177
                                                                                        ----------------     ----------------

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY                                              $      1,320,583    $       1,428,949
                                                                                        ================     ================
</TABLE>

------------
Note:  The December 31, 2000 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 STATEMENTS OF OPERATIONS
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>


                                                  THREE MONTHS ENDED            NINE MONTHS ENDED
                                                    SEPTEMBER 30,                   SEPTEMBER 30,
                                               ------------------------        ----------------------

                                                  2001          2000             2001         2000
                                               ----------    ----------        ---------    ---------
<S>                                            <C>           <C>               <C>          <C>
Revenues                                       $   46,690    $   43,517        $ 146,148    $ 126,819

Operating expenses:
   Direct                                          12,148        15,250           41,375       48,507
   Sales and marketing                              3,863         5,416           15,443       18,311
   Engineering and technical services               2,767         2,663            9,202        7,755
   General and administrative                       4,786         5,771           15,079       16,617
   Depreciation and amortization                   27,764        27,108           82,737       80,953
                                               ----------    ----------        ---------    ---------
Total operating expenses                           51,328        56,208          163,836      172,143
                                               ----------    ----------        ---------    ---------
Loss from operations                               (4,638)      (12,691)         (17,688)     (45,324)

   Interest  income                                   328           340              945        3,343
   Interest expense                               (25,039)      (24,754)         (75,121)     (72,572)
   Other income                                       115           152              294          514
                                               ----------    ----------        ---------    ---------

Loss before income taxes                          (29,234)      (36,953)         (91,570)    (114,039)

Income tax (expense) benefit                       (1,517)        1,946             (779)       3,882
                                               ----------    ----------        ---------    ---------

Net loss                                          (30,751)   $  (35,007)      $  (92,349)   $(110,157)
                                               ==========    ==========       ==========    =========

</TABLE>






            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 CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)


<TABLE>
<CAPTION>


                                                             NINE MONTHS ENDED SEPTEMBER 30,
                                                             -------------------------------
                                                                 2001               2000
                                                             ------------       ------------
<S>                                                          <C>               <C>
OPERATING ACTIVITIES
Net loss                                                     $    (92,349)     $    (110,157)
Non-cash items:
   Deferred taxes                                                   4,016              2,358
   Depreciation and amortization                                   82,736             80,953
   Provision for bad debts                                          5,262              4,117
   Non-cash interest expense                                       30,259             27,552
   Interest earned on restricted cash                                  --             (3,518)
   Other                                                               --                 65

Changes in operating assets and liabilities:
   Accounts receivable                                             (9,045)            15,147
   Prepaid expenses and other current assets                        1,491               (765)
   Due from Loral companies                                           600             (2,000)
   Other assets                                                    (3,445)                43
   Accounts payable and accrued and other current
        liabilities                                                 1,255                118
   Customer deposits                                               (2,176)             2,040
   Deferred revenue                                                 1,840            (18,214)
   Interest payable                                               (12,462)           (12,457)
   Due to Loral companies                                          (4,495)           (37,452)
                                                             ------------
   Due to Space Systems/Loral                                          --             (9,750)
                                                             ------------       ------------
Net cash (used in) provided by operating activities                 3,487            (61,920)
                                                             ------------       ------------

INVESTING ACTIVITIES
Purchase of property and equipment                                 (4,331)          (190,269)
Increase in restricted and segregated cash                             --                (64)
                                                             ------------
Use and transfers from restricted and
   segregated cash                                                     --            190,898
                                                             ------------       ------------
Net cash (used in) provided by investing activities                (4,331)               565
                                                             ------------       ------------

FINANCING ACTIVITIES
(Decrease) increase in note payable to Loral SpaceCom             (28,197)            23,081
Repayment of notes payable                                         (1,179)            (1,031)
Payment of satellite incentive obligation                            (473)              (207)
Proceeds from sale of orbital slots to Loral, net                      --             34,260
Equity contributed by Loral                                            --             10,750
Other                                                                 269             (3,147)
                                                             ------------       ------------
Net cash (used in) provided by financing activities               (29,580)            63,706
                                                             ------------       ------------

Net (decrease) increase in cash and cash equivalents              (30,424)             2,351
Cash and cash equivalents at beginning of period                   37,169             24,117
                                                             ------------       ------------
Cash and cash equivalents at end of period                   $      6,745      $      26,468
                                                             ============      =============




</TABLE>

            See notes to condensed consolidated financial statements.



                                       4

<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 (See Note F):

     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 ("Loral SpaceCom"), which
     is a subsidiary of Loral Space & Communications Corporation, which is in
     turn a subsidiary of Loral Space & Communications Ltd. ("Loral"), manages
     the Company's Fixed Satellite Services ("FSS") segment.

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

On March 20, 1998, Orion was acquired by Loral, through the merger with a wholly
owned subsidiary of Loral (the "Merger").

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 for the periods
presented. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the U. S. 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
nine months ended September 30, 2001 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.

COMPREHENSIVE LOSS

Comprehensive loss is as follows (in thousands):

                                               NINE MONTHS ENDED SEPTEMBER 30,
                                               -------------------------------
                                                   2000              2001
                                               --------------    --------------

Net loss.................................        $     92,349    $     110,157
Foreign currency translation adjustment..                 171            1,157
                                                 ------------    -------------
Comprehensive loss........................       $     92,520    $     111,314
                                                 ============    =============
EARNINGS PER SHARE

Earnings per share is not presented since it is not considered meaningful due to
the Merger and the subsequent recapitalization of the Company.





                                       5


<PAGE>


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

NOTE B.  LONG-TERM DEBT

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

<TABLE>
<CAPTION>


                                                                                       SEPTEMBER 30,         DECEMBER 31,
                                                                                           2000                 2001
                                                                                       -------------         ------------
<S>                                                                                    <C>                   <C>

11.25% Senior Notes (principal amount at maturity $443 million and premium of
  $47.2 million and $52.4 million at September 30, 2001
  and December 31, 2000, respectively)...........................................       $     490,229         $    495,377
12.5% Senior Discount Notes (principal amount at maturity $484 million and
  accreted principal amount of $467 million and $427 million at September 30,
  2001 and December 31, 2000, respectively) ...................................             527,250               491,841
Note payable - TT&C Facility...................................................                1,152                 2,331
Satellite incentive obligations................................................               10,375                10,848
Other..........................................................................                   47                   145
                                                                                       -------------         -------------
   Total debt..................................................................            1,029,053             1,000,542
Less current portion...........................................................               (2,919)               (2,551)
                                                                                       -------------         -------------
   Long-term debt..............................................................        $   1,026,134         $     997,991
                                                                                       =============         =============

</TABLE>


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

Exchange Offer

A number of holders of Loral CyberStar's 11-1/4% Senior Notes due 2007 and its
12-1/2% Senior Discount Notes due 2007 have agreed to participate in an exchange
offer that would substantially reduce the principal amount of Loral CyberStar's
outstanding debt obligations. Loral Cyberstar has in the aggregate $443 million
principal amount of senior notes outstanding and $484 principal amount of senior
discount notes outstanding as of September 30, 2001.

In the exchange offer, for every $1,000 principal amount of senior notes, plus
accrued interest tendered and accepted for exchange, each holder will receive
(i) $750.247 principal amount of new Loral CyberStar 10% Senior Notes due 2006,
guaranteed by Loral and (ii) warrants to purchase 7.40 shares of common stock of
Loral.

For every $1,000 principal amount of senior discount notes tendered and accepted
for exchange, each holder will receive (i) $707.935 principal amount of Loral
CyberStar's 10% Senior Notes due 2006, guaranteed by Loral and (ii) warrants to
purchase 6.98 shares of common stock of Loral.

If the exchange offer is accepted in full, holders will receive an aggregate of
$675 million of new notes, and warrants to purchase 6,657,096 shares of common
stock of Loral at 110% of the market price of Loral common stock calculated over
a 10 day period prior to closing of the exchange offer. The indenture governing
the new senior notes offered under the exchange offer is expected to have more
restrictive limitations on Loral CyberStar's ability to incur additional debt
and use assets as collateral for indebtedness, as compared to the existing
indentures of Loral CyberStar.

By tendering their existing notes, holders will also be consenting to the
proposed amendments to the senior note indenture and the senior discount note
indenture to eliminate substantially all of the covenants and events of default
that may be removed by majority consent of the holders consistent with the
applicable indentures and the requirements of the Trust Indenture Act of 1939,
as amended. Rights to receive principal and interest on the existing notes not
tendered will not be impaired.


                                       6


<PAGE>

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

NOTE B.  LONG-TERM DEBT (CONTINUED)

The exchange offer is subject to certain conditions including, among other
things, receiving tenders of at least 85% in principal amount of the existing
notes. To date, holders of 50.29% of the existing notes (representing 49.04% in
principal amount of the senior notes and 51.43% in principal amount of the
senior discount notes) have agreed to tender their notes and consent to the
amendment of the indentures governing any notes not tendered for exchange.

Upon consummation of the exchange offer and consent solicitation, Loral SpaceCom
Corporation, a subsidiary of Loral, has agreed to a cancellation of its $79.7
million intercompany notes issued to it by Loral CyberStar (see Note C) ranking
pari passu to senior debt and the transfer to Loral Space & Communications
Corporation of Loral CyberStar's data services business and the issuance of a
new note to Loral SpaceCom in the principal amount of $29.7 million due 2006,
having an interest rate of 10% per annum payable in kind, subordinated to the
new Loral CyberStar 10% Senior Notes and guaranteed by Loral.

Assuming the exchange offer is accepted in full, Loral CyberStar's annual cash
interest payments will be reduced by approximately $43 million. Under generally
accepted accounting principles dealing with debt restructurings, the Company
will recognize a minimal gain on completion of the transaction and the carrying
value of the new notes on the balance sheet will be approximately $996 million.
The difference between the carrying value and the face value of $675 million of
the new notes will serve to reduce interest expense for the life of the new
notes.

The securities to be issued to public bondholders in the exchange offer will be
offered or sold pursuant to a registration statement to be filed with the
Securities and Exchange Commission.

NOTE C.  NOTE PAYABLE TO LORAL

Loral CyberStar 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 (2.59 percent at September 30, 2001)
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
SpaceCom's approval. At September 30, 2001, the outstanding amount under this
note was $79.7 million (including accrued interest of $12.4 million) and is
reflected on the balance sheet as a note payable to Loral SpaceCom. Such
borrowings and accrued interest totaled $107.9 million at December 31, 2000.

NOTE D.  RELATED PARTY TRANSACTIONS

Due from Loral companies consist of the following (in thousands):


<TABLE>
<CAPTION>

                                                               SEPTEMBER 30,    DECEMBER 31,
                                                                   2000             2001
                                                               -------------    ------------
         <S>                                                    <C>              <C>
         Due from CyberStar L.P.............................    $  6,579         $  7,960
         Due from Loral Space & Communications Corp.........       1,260            1,165
         Due from Loral Communications Services.............          43               67
         Due from Space Systems/Loral ("SS/L")                       290              353
         Due from Loral Skynet..............................         773               --
                                                                --------         --------
                                                                $  8,945         $  9,545
                                                                ========         ========

</TABLE>




                                       7

<PAGE>


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

NOTE D.  RELATED PARTY TRANSACTIONS (CONTINUED)

Due to Loral companies consist of the following (in thousands):


<TABLE>
<CAPTION>

                                                             SEPTEMBER 30,      DECEMBER 31,
                                                                 2000               2001
                                                             -------------      -------------
       <S>                                                   <C>                <C>
       Due to Loral Skynet ........................          $         --       $      4,038
       Due to Loral ...............................                    --                456
       Due to Space Systems/Loral..................                    --                  1
                                                             ------------       ------------
                                                             $         --       $      4,495
                                                             ============       ============
</TABLE>



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 $0 million and $3.4 million and a deferred tax
provision of $1.5 million and $4.0 million resulting in a net tax provision of
$1.5 million and $0.8 million for the three and nine months ended September 30,
2001 respectively.

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. Intersegment revenues consist primarily
of sales by Fixed Satellite Services to Data Services for the lease of
transponder capacity. Summarized financial information concerning the Company's
operating segments is as follows (in millions):




                                       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 (CONTINUED)

                      THREE MONTHS ENDED SEPTEMBER 30, 2001
                                   (UNAUDITED)



<TABLE>
<CAPTION>

                                                 FIXED                               TOTAL
                                               SATELLITE            DATA           REPORTABLE
                                                SERVICES          SERVICES          SEGMENTS         ELIMINATIONS      CONSOLIDATED
                                               ----------        ---------         ----------        ------------      ------------
<S>                                            <C>               <C>               <C>               <C>                <C>
Revenue from external customers .......        $     27.8        $    18.9         $     46.7        $         --       $      46.6
Intersegment revenue...................               3.8               --                3.8                (3.8)               --
                                               ----------        ---------         ----------        ------------       -----------
Gross revenue..........................        $     31.6        $    18.9         $     50.5        $       (3.8)      $      46.6
                                               ==========        =========         ==========        ============       ===========
EBITDA (1).............................        $     25.5        $    (2.4)        $     23.1        $         --       $      23.1
Depreciation and amortization .........              22.2              5.5               27.7                  --              27.7
                                               ----------        ---------         ----------        ------------       -----------
Income (loss) from operations..........        $      3.3        $    (7.9)        $     (4.6)       $         --       $      (4.6)
                                               ----------        ---------         ----------        ------------       -----------
Total assets...........................        $  1,248.6        $    72.0         $  1,320.6        $         --       $   1,321.4
                                               ==========        =========         ==========        ============       ============

</TABLE>


                      THREE MONTHS ENDED SEPTEMBER 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 .......        $     21.5        $    22.6         $     44.1        $       (0.6)      $      43.5
Intersegment revenue...................               7.6              0.6                8.2                (8.2)               --
                                               ----------        ---------         ----------        ------------       -----------
Gross revenue..........................        $     29.1        $    23.2         $     52.3        $       (8.8)      $      43.5
                                               ==========        =========         ==========        ============       ===========
EBITDA (1).............................        $     22.3        $    (7.3)        $     15.0        $       (0.6)      $      14.4
Depreciation and amortization .........              22.5              4.6               27.1                  --              27.1
                                               ----------        ---------         ----------        ------------       -----------
Loss from operations ..................        $     (0.2)       $   (11.9)        $    (12.1)       $       (0.6)      $     (12.7)
                                               ----------        ---------         ----------        ------------       -----------
Total assets...........................        $  1,359.5        $    79.2         $  1,438.7        $         --       $   1,438.7
                                               ==========        =========         ==========        ============       ============
</TABLE>


                      THREE MONTHS ENDED SEPTEMBER 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 .......        $     81.8        $    64.4         $    146.2        $       (0.1)      $     146.1
Intersegment revenue...................              15.7               --               15.7               (15.7)               --
                                               ----------        ---------         ----------        ------------       -----------
Gross revenue..........................        $     97.5        $    64.4         $    161.9        $      (15.8)      $     146.1
                                               ==========        =========         ==========        ============       ===========
EBITDA (1).............................        $     79.5        $   (14.4)        $     65.1        $       (0.1)      $      65.0
Depreciation and amortization .........              67.0             15.7               82.7                  --              82.7
                                               ----------        ---------         ----------        ------------       -----------
Income (loss) from operations..........        $     12.5        $   (30.1)        $    (17.6)       $       (0.1)      $     (17.7)
                                               ==========        =========         ==========        ============       ===========

</TABLE>
                                       9
<PAGE>



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

NOTE F.  SEGMENTS (CONTINUED)

                      THREE MONTHS ENDED SEPTEMBER 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 .......        $     57.2        $    71.0         $    128.2        $       (1.4)      $     126.8
Intersegment revenue...................              17.8              0.6               18.4               (18.4)               --
                                               ----------        ---------         ----------        ------------       -----------
Gross revenue..........................        $     75.0        $    71.6         $    146.6        $      (19.8)      $     126.8
                                               ==========        =========         ==========        ============       ===========
EBITDA (1).............................        $     53.2        $   (16.2)        $     37.0        $       (1.4)      $      35.6
Depreciation and amortization .........              67.4             13.5               80.9                  --              80.9
                                               ----------        ---------         ----------        ------------       -----------
Loss from operations...................        $    (14.2)       $   (29.7)        $    (43.9)       $       (1.4)      $     (45.3)
                                               ==========        =========         ==========        ============       ============
</TABLE>



----------------
(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.

NOTE G. COMMITMENTS AND CONTINGENCIES

In November 1995, a component on Telstar 11 (formerly Orion 1) 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, the Company would be entitled to a pro rata portion of the
insurance coverage of approximately $195 million for the satellite. In light of
the insurance coverage and the available capacity on other Company satellites,
the Company believes that this loss of capacity will not have a material adverse
effect on the consolidated financial position or results of operations of the
Company.

Telstar 12 (formerly Orion 2) was launched 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.



                                       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 (CONTINUED)

The Company's Telstar 10/Apstar IIR satellite has experienced minor losses of
power from its solar arrays. Although to date Telstar 10/Apstar IIR has not
experienced any degradation in performance, there can be no assurance that it
will not experience additional power loss that could result in performance
degradation, including loss of transponder capacity. In the event of additional
power loss, the extent of the performance degradation, if any, will depend on
numerous factors, including the amount of the additional power loss, when in the
life of Telstar 10/Apstar IIR the loss occurred and the number and type of use
being made of transponders then in service.In connection with the renewal of the
insurance for our Telestar 10/Apstar IIR satellite in October 2001, the
insurance underwriters have excluded losses due to solar array failures, since
Telstar 10/Apstar IIR was manufactured by SS/L and has the same solor array
configuration as another 1300 class satellite manufactured by SS/L that recently
experienced a solor array failure of a different nature. SS/L believes that this
failure is an isolated event and does not reflect a systematic problem in either
the satellite design or manufacturing process. Accordingly, the Company does not
believe that this anomaly will affect Telstar 10/Apstar IIR. SS/L is currently
providing the basis for this conclusion to the insurance underwriters. While the
Company anticipates that this exclusion will be removed upon further review by
the insurance underwriters, there can be no assurance that this exclusion will
be removed.

Loral CyberStar anticipates it will have additional requirements over the next
three years to fund the growth in the business, the purchase of VSATs and other
capital expenditures, senior note interest payments, the replacement of Telstar
11 which is expected to reach its end of life in 2005, and other operating
needs. Loral CyberStar will need to secure funding from Loral, or raise
additional financing to fund these requirements. Sources of additional capital
may include public or private debt, equity financings or strategic investments.
To the extent that Loral CyberStar seeks to raise additional debt financing, its
indentures limit the amount of such additional debt and prohibit Loral CyberStar
from using Telstar 10/Apstar IIR, Telstar 11 and Telstar 12 as collateral for
indebtedness (see Note B). If Loral CyberStar requires additional financing and
is unable to obtain such financing from Loral or from outside sources in the
amounts and at the times needed, there would be a material adverse effect on
Loral CyberStar. If the exchange offer is accepted, Loral CyberStar's liquidity
will improve as a result of the reduction in annual cash interest payments and
the principal amount of indebtedness (see Note B).

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.  ACCOUNTING PRONOUNCEMENTS

Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities ("SFAS 133"), 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 key criterion for hedge accounting is that the derivative must
be highly effective in achieving offsetting changes in fair value or cash flows
of the hedged items during the term of the hedge. The Company adopted SFAS No.
133, as amended, on January 1, 2001. The adoption of this standard did not have
an effect on the Company's financial position, results of operations or cash
flows, as the Company had no stand-alone or embedded derivatives at December 31,
2000 and had not historically entered into any derivative transactions to hedge
currency or other exposures.

As a matter of policy, the Company does not currently enter into transactions
involving derivative financial instruments. In the event the Company does enter
into such transactions in the future, such items will be accounted for in
accordance with SFAS No. 133, in which case the Company will formally document
all relationships between hedging instruments and hedged items, as well as its
risk-management objective and strategy for undertaking such hedge transactions.



                                       11


<PAGE>

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

NOTE H.  ACCOUNTING PRONOUNCEMENTS (CONTINUED)

In September 2000, the FASB issued SFAS No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities. SFAS No. 140
replaces SFAS No. 125, Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities. It revises the standards for
accounting for securitizations and other transfers of financial assets and
collateral and requires certain disclosures, but it carriers over most of SFAS
No. 125's provisions without reconsideration. The Company adopted the applicable
disclosure requirements of SFAS No. 140 in its consolidated financial statements
for the year ended December 31, 2000. The Company has determined that there was
no impact relating to the adoption of the other provisions of SFAS No. 140.

In June 2001, the FASB issued SFAS No. 141, Business Combinations and SFAS No.
142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that all
business combinations initiated after June 30, 2001, be accounted for under the
purchase method and addresses the initial recognition and measurement of
goodwill and other intangible assets acquired in a business combination. SFAS
No. 142 addresses the initial recognition and measurement of intangible assets
acquired outside of a business combination and the accounting for goodwill and
other intangible assets subsequent to their acquisition. SFAS No. 142 provides
that intangible assets with finite useful lives be amortized and that goodwill
and intangible assets with indefinite lives not be amortized but will rather be
tested at least annually for impairment. The Company will adopt SFAS No. 142 on
January 1, 2002. Upon adoption of SFAS 142, the Company will stop the
amortization of goodwill with an expected net carrying value of approximately
$562 million at the date of adoption and annual amortization of approximately
$16 million that resulted from business combinations completed prior to the
adoption of SFAS 141. The Company will evaluate goodwill under the new
transitional impairment test in SFAS 142 and accordingly, has not yet determined
whether or not there will be an impairment loss. Any transitional impairment
loss will be recognized as a change in accounting principle.

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. SFAS 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. It applies to legal obligations associated
with the retirement of long-lived assets that result from the acquisition,
construction, development and the normal operation of a long-lived asset, except
for certain obligations of lessees. The Company is required to adopt SFAS 143 on
January 1, 2003. The Company has not yet determined the impact that the adoption
of SFAS 143 will have on its results of operations or its financial position.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS 144 addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. It supersedes
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, and the accounting and reporting provisions
of APB 30, Reporting the Results of Operations--Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions, for the disposal of a segment of a business.
The Company is required to adopt SFAS 144 on January 1, 2002. The Company has
not yet determined the impact that the adoption of SFAS 144 will have on its
results of operations or its financial position.




                                    12

<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 Space & Communications Ltd. ("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. The Company undertakes no obligation
to update any forward looking statements. 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 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 (see Note F to the
unaudited condensed consolidated financial statements):

     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, manages the Company's Fixed Satellite Services ("FSS") segment.

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

COMMITMENTS AND CONTINGENCIES

In November 1995, a component on Telstar 11 (formerly Orion 1) 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, the Company would be entitled to a pro rata portion of the
insurance coverage of approximately $195 million for the satellite. In light of
the insurance coverage and the available capacity on other Company satellites,
the Company believes that this loss of capacity will not have a material adverse
effect on the consolidated financial position or results of operations of the
Company.



                                       13

<PAGE>


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

Telstar 12 (formerly Orion 2) was launched 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.

The Company's Telstar 10/Apstar IIR satellite has experienced minor losses of
power from its solar arrays. Although to date Telstar 10/Apstar IIR has not
experienced any degradation in performance, there can be no assurance that it
will not experience additional power loss that could result in performance
degradation, including loss of transponder capacity. In the event of additional
power loss, the extent of the performance degradation, if any, will depend on
numerous factors, including the amount of the additional power loss, when in the
life of Telstar 10/Apstar IIR the loss occurred and the number and type of use
being made of transponders then in service.In connection with the renewal of the
insurance for our Telestar 10/Apstar IIR satellite in October 2001, the
insurance underwriters have excluded losses due to solar array failures, since
Telstar 10/Apstar IIR was manufactured by SS/L and has the same solor array
configuration as another 1300 class satellite manufactured by SS/L that recently
experienced a solor array failure of a different nature. SS/L believes that this
failure is an isolated event and does not reflect a systematic problem in either
the satellite design or manufacturing process. Accordingly, the Company does not
believe that this anomaly will affect Telstar 10/Apstar IIR. SS/L is currently
providing the basis for this conclusion to the insurance underwriters. While the
Company anticipates that this exclusion will be removed upon further review by
the insurance underwriters, there can be no assurance that this exclusion will
be removed.

Loral CyberStar anticipates it will have additional requirements over the next
three years to fund the growth in the business, the purchase of VSATs and other
capital expenditures, senior note interest payments, the replacement of Telstar
11 which is expected to reach its end of life in 2005, and other operating
needs. Loral CyberStar will need to secure funding from Loral, or raise
additional financing to fund these requirements. Sources of additional capital
may include public or private debt, equity financings or strategic investments.
To the extent that Loral CyberStar seeks to raise additional debt financing, its
indentures limit the amount of such additional debt and prohibit Loral CyberStar
from using Telstar 10/Apstar IIR, Telstar 11 and Telstar 12 as collateral for
indebtedness. If Loral CyberStar requires additional financing and is unable to
obtain such financing from Loral or from outside sources in the amounts and at
the times needed, there would be a material adverse effect on Loral CyberStar.
If the exchange offer is accepted, Loral CyberStar's liquidity will improve as a
result of the reduction in annual cash interest payments and the principal
amount of indebtedness (see Other Matters).

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.

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.)



                                       14
<PAGE>


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




REVENUES (IN MILLIONS):

<TABLE>
<CAPTION>

                                             THREE MONTHS ENDED                  NINE MONTHS ENDED
                                                SEPTEMBER 30,                      SEPTEMBER 30,
                                      ---------------------------------  ---------------------------------
                                           2001               2000              2001             2000
                                      ---------------   ---------------  ---------------   ---------------
<S>                                     <C>               <C>              <C>               <C>

Fixed Satellite Services.........       $        31.6     $       29.1     $        97.5     $        75.0
Data Services(1).................                18.9             23.2              64.4              71.6
Eliminations ....................                (3.8)            (8.8)            (15.8)            (19.8)
                                        -------------     ------------     -------------     -------------
Revenues ........................       $        46.7     $       43.5     $       146.1     $       126.8
                                        =============     ============     =============     =============
</TABLE>

EBITDA(2)  (IN  MILLIONS):


<TABLE>
<CAPTION>

                                             THREE MONTHS ENDED                  NINE MONTHS ENDED
                                      ---------------------------------  ---------------------------------
                                                SEPTEMBER 30,                      SEPTEMBER 30,
                                           2001               2000              2001             2000
                                      ---------------   ---------------  ---------------   ---------------
<S>                                     <C>               <C>              <C>               <C>
Fixed Satellite Services.........       $        25.5     $        22.3    $        79.5     $        53.2
Data Services....................                (2.4)             (7.3)           (14.4)            (16.2)
Eliminations ....................                  --              (0.6)            (0.1)             (1.4)
                                        -------------     -------------    -------------     -------------
EBITDA(2)........................       $        23.1     $        14.4    $        65.0     $        35.6
                                        =============     =============    =============     =============


</TABLE>



---------------------------
(1) Equipment sales for data services were $1.5 million and $0.4 million for the
    three months ended September 30, 2001 and 2000 respectively, and
    $2.9 million and $4.7 million for the nine months ended September 30, 2001
    and 2000, respectively.

(2) 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.

Revenues for the three months ended September 30, 2001 and 2000 were $46.7
million and $43.5 million, respectively. Revenues for the nine months ended
September 30, 2001 and 2000 were $146.1 million and $126.8 million,
respectively. These increases are primarily related to the increased number of
transponders leased in 2001 as compared to 2000, on the Company's Telstar 12
satellite, which was placed into service in January 2000 and the Company's
Telstar 10/Apstar IIR satellite, which was purchased in September 1999. These
increases were offset by lower data service revenues which were in part due to
the slowdown of worldwide demand for telecommunications and Internet services.

Direct expenses for the three months ended September 30, 2001 and 2000 were
$12.1 million and $15.3 million, respectively. Direct expenses for the nine
months ended September 30, 2001 and 2000 were $41.4 million and $48.5 million,
respectively. These decreases were primarily attributable to cost savings
realized from reduced headcount, site consolidation and rationalization of
satellite capacity.



                                       15


<PAGE>

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

Sales and marketing expenses were $3.9 million and $5.4 million for the three
months ended September 30, 2001 and 2000, respectively. Sales and marketing
expenses for the nine months ended September 30, 2001 and 2000 were $15.4
million and $18.3 million, respectively. These decreases were primarily
attributable to cost savings realized from reduced headcount and site
consolidation.

Engineering and technical services expenses were $2.8 million and $2.7 million
for the three months ended September 30, 2001 and 2000, respectively.
Engineering and technical expenses for the nine months ended September 30, 2001
and 2000 were $9.2 million and $7.8 million, respectively. The increase for the
nine months ended September 30, 2001 was primarily due to $0.5 million of
charges recorded in 2001 associated with closing the Company's German operation,
including involuntary terminations and other exit costs (of which $0.1 million
remains unpaid as of September 30, 2001), and increased salaries supporting data
services operations.

General and administrative expenses were $4.8 million and $5.8 million for the
three months ended September 30, 2001 and 2000, respectively. General and
administrative expenses for the nine months ended September 30, 2001 and 2000
were $15.1 million and $16.6 million, respectively. These decreases were
primarily attributable to cost savings realized from reduced headcount and site
consolidation.

Depreciation and amortization were $27.7 million and $27.1 million for the three
months ended September 30, 2001 and 2000, respectively. Depreciation and
amortization expense for the nine months ended September 30, 2001 and 2000 were
$82.7 million and $81.0 million, respectively. In 2002, amortization expense is
expected to decrease by approximately $3.9 million per quarter, as a result of
the Company's adoption of SFAS No. 142 (see Accounting Pronouncements).

Interest income was $0.3 million and $0.3 million for the three months ended
September 30, 2001 and 2000, respectively. Interest income for the nine months
ended September 30, 2001 and 2000 was $0.9 million and $3.3 million,
respectively. The decrease for the nine months ended September 30, 2001, is due
to a reduction in the balances held in the Company's restricted and segregated
funds, which was used for satellite acquisition and for interest payments on the
Company's senior notes.

Interest expense was $25.0 million and $24.8 million for the three months ended
September 30, 2001 and 2000, respectively. Interest expense for the nine months
ended September 30, 2001 and 2000 was $75.1 million and $72.6 million,
respectively. These increases are primarily due to the amortization of the
discount on the Senior Discount Notes. If the Loral CyberStar exchange offer is
accepted in full, Loral Cyberstar does not expect it will recognize any interest
expense on the new senior notes and as a result, its interest expense will be
reduced significantly (Note B).

The Company recorded an income tax expense of $1.5 million and an income tax
benefit of $1.9 million on a loss before income taxes of $29.2 million and $37.0
million for the three months ended September 30, 2001 and 2000, respectively,
and an income tax expense of $0.8 million and an income tax benefit of $3.9
million on a loss before income taxes of $91.6 million and $114.0 million for
the nine months ended September 30, 2001, and 2000, respectively. When comparing
2001 to 2000, the reduction in the current year benefit is primarily
attributable to a lower amount received from Loral Space & Communications
Corporation under the tax sharing agreement, as a result of reduced usage by
Loral (see Note E).

As a result of the above, the Company incurred net losses of $30.8 million and
$35.0 million for the three months ended September 30, 2001 and 2000,
respectively. Net losses for the nine months ended September 30, 2001 and 2000
were $92.3 million and $110.2 million, respectively.



                                       16

<PAGE>


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


RESULTS BY OPERATING SEGMENT

Fixed Satellite Service

FSS revenues for the three months ended September 30, 2001 were $31.6 million as
compared to $29.1 million for the three months ended September 30, 2000.
Revenues for the nine months ended September 30, 2001 were $97.5 million as
compared to $75.0 million for the nine months ended September 30, 2000. EBITDA
for the three months ended September 30, 2001 was $25.5 million, or 81 percent
of revenues, as compared to $22.3 million, or 77 percent of revenues, for the
three months ended September 30, 2000. EBITDA for the nine months ended
September 30, 2001 was $79.5 million, or 82 percent of revenues, as compared to
$53.2 million, or 71 percent of revenues, for the nine months ended September
30, 2000. These increases are primarily due to the increased number of
transponders leased in 2001 as compared to 2000, offset by lower intercompany
leasing revenues from data services for capacity. At September 30, 2001, FSS had
contracted backlog of approximately $674.4 million, as compared to $739.4
million at December 31, 2000.

Data Services

Data services revenues for the three months ended September 30, 2001 were $18.9
million as compared to $23.2 million for the three months ended September 30,
2000. Revenues for the nine months ended September 30, 2001 were $64.4 million
as compared to $71.6 million for the nine months ended September 30, 2000.
Revenues decreased in part due to the slowdown of worldwide demand for
telecommunications and Internet services. EBITDA for the three months ended
September 30, 2001 was a loss of $2.4 million as compared to a loss of $7.3
million for the three months ended September 30, 2000. EBITDA for the nine
months ended September 30, 2001 was a loss of $14.4 million as compared to a
loss of $16.2 million for the nine months ended September 30, 2000. The
decreases in EBITDA losses were primarily due to cost savings realized from
reduced headcount, site consolidation and rationalization of satellite capacity
offset, by lower revenues. At September 30, 2001, data services had contracted
backlog of approximately $126 million, as compared to $190.8 million at December
31, 2000. The decrease in backlog resulted from de-bookings, due to the
continued softness in the Internet business globally.

OTHER MATTERS

Exchange Offer

A number of holders of Loral CyberStar's 11-1/4% Senior Notes due 2007 and its
12-1/2% Senior Discount Notes due 2007 have agreed to participate in an exchange
offer that would substantially reduce the principal amount of Loral CyberStar's
outstanding debt obligations. Loral Cyberstar has in the aggregate $443 million
principal amount of senior notes outstanding and $484 principal amount of senior
discount notes outstanding as of September 30, 2001.

In the exchange offer, for every $1,000 principal amount of senior notes, plus
accrued interest tendered and accepted for exchange, each holder will receive
(i) $750.247 principal amount of new Loral CyberStar 10% Senior Notes due 2006,
guaranteed by Loral and (ii) warrants to purchase 7.40 shares of common stock of
Loral.

For every $1,000 principal amount of senior discount notes tendered and accepted
for exchange, each holder will receive (i) $707.935 principal amount of Loral
CyberStar's 10% Senior Notes due 2006, guaranteed by Loral and (ii) warrants to
purchase 6.98 shares of common stock of Loral.

If the exchange offer is accepted in full, holders will receive an aggregate of
$675 million of new notes, and warrants to purchase 6,657,096 shares of common
stock of Loral at 110% of the market price of Loral Common stock calculated over
a 10 day period prior to closing of the exchange offer. The indenture governing
the new senior notes offered under the exchange offer is expected to have more
restrictive limitations on Loral CyberStar's ability to incur


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<PAGE>


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

additional debt and use assets as collateral for indebtedness, as compared to
the existing indentures of Loral CyberStar.

By tendering their existing notes, holders will also be consenting to the
proposed amendments to the senior note indenture and the senior discount note
indenture to eliminate substantially all of the covenants and events of default
that may be removed by majority consent of the holders consistent with the
applicable indentures and the requirements of the Trust Indenture Act of 1939,
as amended. Rights to receive principal and interest on the existing notes not
tendered will not be impaired.

The exchange offer is subject to certain conditions including, among other
things, receiving tenders of at least 85% in principal amount of the existing
notes. To date, holders of 50.29% of the existing notes (representing 49.04% in
principal amount of the senior notes and 51.43% in principal amount of the
senior discount notes) have agreed to tender their notes and consent to the
amendment of the indentures governing any notes not tendered for exchange.

Upon consummation of the exchange offer and consent solicitation, Loral SpaceCom
Corporation, a subsidiary of Loral, has agreed to a cancellation of its $79.7
million intercompany notes issued to it by Loral CyberStar (see Note C) ranking
pari passu to senior debt and the transfer to Loral Space & Communications
Corporation of Loral CyberStar's data services business and the issuance of a
new note to Loral SpaceCom in the principal amount of $29.7 million due 2006,
having an interest rate of 10% per annum payable in kind, subordinated to the
new Loral CyberStar 10% Senior Notes and guaranteed by Loral.

Assuming the exchange offer is accepted in full, Loral CyberStar's annual cash
interest payments will be reduced by approximately $43 million. Under generally
accepted accounting principles dealing with debt restructurings, the Company
will recognize a minimal gain on completion of the transaction and the carrying
value of the new notes on the balance sheet will be approximately $996 million.
The difference between the carrying value and the face value of $675 million of
the new notes will serve to reduce interest expense for the life of the new
notes.

The securities to be issued to public bondholders in the exchange offer will be
offered or sold pursuant to a registration statement to be filed with the
Securities and Exchange Commission.

Insurance Costs

The Company has received preliminary indication that the satellite industry will
likely be faced with significantly higher premiums on launch and in-orbit
insurance in the future. Any such increases will increase the cost of doing
business for the Company. The Company intends to pass on such increased cost to
its customers. There can be no assurance, however, that it will be able to do
so.

Accounting Pronouncements

Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities ("SFAS 133"), 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 key criterion for hedge accounting is that the derivative must
be highly effective in achieving offsetting changes in fair value or cash flows,
of the hedged items during the term of the hedge. The Company adopted SFAS No.
133, as amended, on January 1, 2001. The adoption of this standard did not have
an effect on the Company's financial position, results of operations or cash
flows, as the Company had no stand-alone or embedded derivatives at December 31,
2000 and had not historically any derivative transactions to hedge currency or
other exposures.

In September 2000, the FASB issued SFAS No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities. SFAS No. 140
replaces SFAS No. 125, Accounting for Transfers and Servicing


                                       18


<PAGE>

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

of Financial Assets and Extinguishments of Liabilities. It revises the standards
for accounting for securitizations and other transfers of financial assets and
collateral and requires certain disclosures, but it carriers over most of SFAS
No. 125's provisions without reconsideration. The Company adopted the applicable
disclosure requirements of SFAS No. 140 in its consolidated financial statements
for the year ended December 31, 2000. The Company has determined that there was
no impact relating to the adoption of the other provisions of SFAS No. 140.

In June 2001, the FASB issued SFAS No. 141, Business Combinations and SFAS No.
142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that all
business combinations initiated after June 30, 2001, be accounted for under the
purchase method and addresses the initial recognition and measurement of
goodwill and other intangible assets acquired in a business combination. SFAS
No. 142 addresses the initial recognition and measurement of intangible assets
acquired outside of a business combination and the accounting for goodwill and
other intangible assets subsequent to their acquisition. SFAS No. 142 provides
that intangible assets with finite useful lives be amortized and that goodwill
and intangible assets with indefinite lives not be amortized but will rather be
tested at least annually for impairment. The Company will adopt SFAS No. 142 on
January 1, 2002. Upon adoption of SFAS 142, the Company will stop the
amortization of goodwill with an expected carrying value of approximately $562
million at the date of adoption and annual amortization of approximately $16
million that resulted from business combinations completed prior to the adoption
of SFAS 141. The Company will evaluate goodwill under the new transitional
impairment test in SFAS 142 and accordingly, has not yet determined whether or
not there will be an impairment loss. Any transitional impairment loss will be
recognized as a change in accounting principle.

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. SFAS 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. It applies to legal obligations associated
with the retirement of long-lived assets that result from the acquisition,
construction, development and the normal operation of a long-lived asset, except
for certain obligations of lessees. The Company is required to adopt SFAS 143 on
January 1, 2003. The Company has not yet determined the impact that the adoption
of SFAS 143 will have on its results of operations or its financial position.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS 144 addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. It supersedes
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, and the accounting and reporting provisions
of APB 30, Reporting the Results of Operations--Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions, for the disposal of a segment of a business.
The Company is required to adopt SFAS 144 on January 1, 2002. The Company has
not yet determined the impact that the adoption of SFAS 144 will have on its
results of operations or its financial position.




                                       19

<PAGE>


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



PART II. OTHER INFORMATION

ITEM 6.  REPORTS ON FORM 8-K

         (a)  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:  November 12, 2001                /s/    RICHARD J. TOWNSEND
                               -------------------------------------------------
                                             Richard J. Townsend
                               Senior Vice President and Chief Financial Officer
                                 (Principal Financial Officer and Registrant's
                                            Authorized Officer)





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