SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


                                    FORM 10-Q

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


                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 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>
                                                                                        MARCH 31,              DECEMBER 31,
                                                                                          2001                     2000
                                                                                       -----------             -----------
                                                                                       (UNAUDITED)                 NOTE
<S>                                                                                    <C>                     <C>
                                       ASSETS

Current assets:
   Cash and cash equivalents                                                           $    32,046             $    37,169
   Accounts receivable, net                                                                 18,110                  22,204
   Prepaid expenses and other current assets                                                 6,670                   8,218
   Due from Loral companies                                                                  7,777                   9,545
                                                                                       -----------             -----------
Total current assets                                                                        64,603                  77,136

Property and equipment, net                                                                681,188                 702,311
Costs in excess of net assets acquired                                                     573,833                 577,710
Deferred income taxes                                                                       43,755                  44,982
Other assets, net                                                                           26,879                  26,810
                                                                                       -----------             -----------

TOTAL ASSETS                                                                           $ 1,390,258             $ 1,428,949
                                                                                       ===========             ===========

                        LIABILITIES AND STOCKHOLDER'S EQUITY

Current liabilities:
   Current portion of long-term debt                                                   $     2,771             $     2,551
   Accounts payable                                                                          5,672                   7,368
   Accrued and other current liabilities                                                    14,420                  11,366
   Customer deposits                                                                         4,327                   7,062
   Deferred revenue                                                                          4,874                   5,691
   Interest payable                                                                         10,384                  22,846
   Note payable to Loral SpaceCom                                                          109,030                 107,866
   Due to Loral companies                                                                    3,327                   4,495
                                                                                       -----------             -----------
Total current liabilities                                                                  154,805                 169,245

Long-term debt                                                                           1,007,131                 997,991
Deferred revenue                                                                               929                     998
Customer deposits                                                                            4,817                   5,413
Other long-term liabilities                                                                    125                     125

Commitments and contingencies
Stockholder's equity:

   Common stock, $.01 par value                                                                 --                      --
   Capital in excess of par value                                                          588,197                 588,197
   Accumulated deficit                                                                    (363,823)               (331,562)
   Accumulated other comprehensive loss                                                     (1,923)                 (1,458)
                                                                                       -----------             -----------
Total stockholder's equity                                                                 222,451                 255,177
                                                                                       -----------             -----------

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY                                             $ 1,390,258             $ 1,428,949
                                                                                       ===========             ===========
<FN>
----------
Note: The December 31, 2000 balance sheet has been derived from the audited consolidated financial statements at that date.
</FN>
</TABLE>

            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)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                              THREE MONTHS ENDED
                                                                                   MARCH 31,
                                                                          ----------------------------
                                                                            2001                2000
                                                                          --------            --------
<S>                                                                       <C>                 <C>
Revenues                                                                  $ 50,219            $ 42,182

Operating expenses:
   Direct                                                                   15,855              16,799
   Sales and marketing                                                       6,209               5,899
   Engineering and technical services                                        4,080               2,432
   General and administrative                                                4,391               4,996
   Depreciation and amortization                                            27,264              26,969
                                                                          --------            --------
Total operating expenses                                                    57,799              57,095
                                                                          --------            --------

Loss from operations                                                        (7,580)            (14,913)

   Interest  income                                                            214               2,381
   Interest expense                                                        (25,239)            (23,766)
   Other income                                                                108                 212
                                                                          --------            --------

Loss before income taxes                                                   (32,497)            (36,086)

Income tax benefit (expense)                                                   236                (962)
                                                                          --------            --------

Net loss                                                                  $(32,261)           $(37,048)
                                                                          ========            ========
</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>
                                                                                                     THREE MONTHS ENDED MARCH 31,
                                                                                                   --------------------------------
                                                                                                      2001                  2000
                                                                                                   ---------              ---------
<S>                                                                                                <C>                    <C>
OPERATING ACTIVITIES
Net loss                                                                                           $ (32,261)             $ (37,048)
Non-cash items:
   Deferred income tax provision                                                                       1,227                    772
   Depreciation and amortization                                                                      27,264                 26,969
   Provision for bad debts                                                                             1,185                  1,078
   Non-cash interest expense                                                                           9,903                  9,017
   Interest earned on restricted cash                                                                     --                 (3,000)
Changes in operating assets and liabilities:
   Accounts receivable                                                                                 2,909                (15,682)
   Prepaid expenses and other current assets                                                           1,548                    (77)
   Due from Loral companies                                                                            1,489                (18,462)
   Other assets                                                                                       (1,426)                 1,988
   Accounts payable and accrued and other current liabilities                                          1,358                   (755)
   Customer deposits                                                                                  (3,331)                  (953)
   Deferred revenue                                                                                     (886)                 4,941
   Interest payable                                                                                  (12,462)               (12,457)
   Due to Loral companies                                                                               (889)                 3,475
                                                                                                   ---------              ---------
Net cash used in operating activities                                                                 (4,372)               (40,194)

INVESTING ACTIVITIES
Property and equipment                                                                                (1,565)              (185,411)
Increase in restricted and segregated cash                                                                --                    (64)
Use and transfers from restricted and segregated cash                                                     --                165,174
                                                                                                   ---------              ---------
Net cash used in investing activities                                                                 (1,565)               (20,301)

FINANCING ACTIVITIES
Increase in note payable to Loral SpaceCom                                                             1,164                  9,528
Repayment of notes payable                                                                              (380)                  (332)
Payment of satellite incentive obligation                                                               (109)                   (67)
Proceeds from sale of orbital slots to Loral, net                                                         --                 34,260
Equity contributed from Loral                                                                             --                  9,750
Other                                                                                                    139                   (796)
                                                                                                   ---------              ---------
Net cash provided by financing activities                                                                814                 52,343
                                                                                                   =========              =========

Net decrease in cash and cash equivalents                                                             (5,123)                (8,152)
Cash and cash equivalents at beginning of period                                                      37,169                 24,117
                                                                                                   ---------              ---------
Cash and cash equivalents at end of period                                                         $  32,046              $  15,965
                                                                                                   =========              =========
</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.

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 United States of America 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 months ended March 31, 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):

<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED MARCH 31,
                                                    ----------------------------
                                                         2001          2000
                                                       -------       -------
<S>                                                    <C>           <C>
Net loss .........................................     $32,261       $37,048
Foreign currency translation adjustment ..........         465           318
                                                       -------       -------
Comprehensive loss ...............................     $32,726       $37,366
                                                       =======       =======
</TABLE>

EARNINGS PER SHARE

Earnings per share is not presented since it is not considered meaningful due to
the merger of Orion with a subsidiary of Loral, 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>
                                                                                                    MARCH 31,           DECEMBER 31,
                                                                                                      2001                 2000
                                                                                                   -----------          -----------
<S>                                                                                                <C>                  <C>
11.25% Senior Notes (principal amount at maturity $443 million and
   premium of $50.7 million and $52.4 million at March 31, 2001 and
   December 31, 2000, respectively) ......................................................         $   493,689          $   495,377
12.5% Senior Discount Notes (principal amount at maturity $484 million
   and accreted principal amount of $440 million and $427 million at
   March 31, 2001 and December 31, 2000, respectively) ...................................             503,432              491,841
Note payable - TT&C Facility .............................................................               1,951                2,331
Satellite incentive obligations ..........................................................              10,740               10,848
Other ....................................................................................                  90                  145
                                                                                                   -----------          -----------
   Total debt ............................................................................           1,009,902            1,000,542
Less current portion .....................................................................              (2,771)              (2,551)
                                                                                                   -----------          -----------
   Long-term debt ........................................................................         $ 1,007,131          $   997,991
                                                                                                   ===========          ===========
</TABLE>


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

NOTE C.  NOTE PAYABLE 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 (5.96 percent at March 31, 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's
approval. At March 31, 2001, the outstanding amount under this note was $109.0
million (including accrued interest of $14.8 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>
                                                                                          MARCH 31,             DECEMBER 31,
                                                                                            2001                    2000
                                                                                          ---------             ------------
<S>                                                                                        <C>                     <C>
Due from CyberStar L.P. .........................................................          $6,509                  $7,960
Due from Loral Space and Communications Corp. ...................................           1,164                   1,165
Due from Loral Communications Services ..........................................             104                      67
Due from Space Systems/Loral ....................................................              --                     353
                                                                                           ------                  ------
                                                                                           $7,777                  $9,545
                                                                                           ======                  ======
</TABLE>


                                       6
<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>
                                                                                            MARCH 31,              DECEMBER 31,
                                                                                              2001                     2000
                                                                                            ---------              ------------
<S>                                                                                          <C>                       <C>
Due to Loral Skynet ............................................................             $2,870                    4,038
Due to Loral Space and Communications Ltd. .....................................                456                      456
Due to Space Systems/Loral .....................................................                  1                        1
                                                                                             ------                   ------
                                                                                             $3,327                   $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 $1.5 million and a deferred tax provision of $1.2
million resulting in a net tax benefit of $0.2 million for the three months
ended March 31, 2001.

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):


                                       7
<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 MARCH 31, 2001
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                          FIXED                          TOTAL
                                                        SATELLITE          DATA        REPORTABLE
                                                         SERVICES        SERVICES       SEGMENTS       ELIMINATIONS    CONSOLIDATED
                                                        ---------        --------       --------       ------------    ------------
<S>                                                      <C>             <C>            <C>              <C>            <C>
Revenue from external customers ....................     $   26.4        $   23.8       $   50.2         $     --       $   50.2
Intersegment revenue ...............................          6.4              --            6.4             (6.4)            --
                                                         --------        --------       --------         --------       --------
Gross revenue ......................................     $   32.8        $   23.8       $   56.6         $   (6.4)      $   50.2
                                                         ========        ========       ========         ========       ========
EBITDA (1) .........................................     $   26.4        $   (6.7)      $   19.7         $     --       $   19.7
Depreciation and amortization ......................         22.5             4.8           27.3               --           27.3
                                                         --------        --------       --------         --------       --------
Income (loss) from operations ......................     $    3.9        $  (11.5)      $   (7.6)        $     --       $   (7.6)
                                                         --------        --------       --------         --------       --------
Total assets .......................................     $1,311.2        $  436.5       $1,747.7         $ (357.4)      $1,390.3
                                                         ========        ========       ========         ========       ========
</TABLE>

                        THREE MONTHS ENDED MARCH 31, 2000
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                          FIXED                          TOTAL
                                                        SATELLITE          DATA        REPORTABLE
                                                         SERVICES        SERVICES       SEGMENTS       ELIMINATIONS    CONSOLIDATED
                                                        ---------        --------       --------       ------------    ------------
<S>                                                      <C>             <C>            <C>              <C>            <C>
Revenue from external customers ...................      $   17.4        $   24.8       $   42.2         $     --       $   42.2
Intersegment revenue ..............................           4.6              --            4.6             (4.6)            --
                                                         --------        --------       --------         --------       --------
Gross revenue .....................................      $   22.0        $   24.8       $   46.8         $   (4.6)      $   42.2
                                                         ========        ========       ========         ========       ========

EBITDA (1) ........................................      $   14.8        $   (2.8)      $   12.0         $     --       $   12.0
Depreciation and amortization .....................          22.5             4.5           27.0               --           27.0
                                                         --------        --------       --------         --------       --------
Loss from operations ..............................      $   (7.7)       $   (7.3)      $  (15.0)        $     --       $  (15.0)
                                                         --------        --------       --------         --------       --------
Total assets ......................................      $1,434.7        $  643.4       $2,078.1         $ (568.8)      $1,509.3
                                                         ========        ========       ========         ========       ========
<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>

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 the other Company
satellites, the loss of capacity will not have a material adverse effect on the
consolidated financial position or results of operations of the Company.


                                       8
<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)

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.

The Company's Telstar 10/Apstar IIR satellite has experienced minor losses of
power from its solar arrays. Space Systems/Loral ("SS/L") is currently
investigating the cause of these failures. 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. A complete or partial
loss of Telstar 10/Apstar IIR (which is fully insured) would result in a loss of
revenues and profits to the Company. Based upon information currently available,
the Company believes that this matter will not have a material adverse effect on
the consolidated financial position or results of operations to the Company.

Based upon its current expectations for growth, Loral CyberStar anticipates it
will have additional funding requirements over the next three years to fund the
streaming media investment, the purchase of VSATs, senior note interest
payments, replacement of Telstar 11 which is expected to reach it's end of life
in 2005, other capital expenditures 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 for
money borrowed. If Loral CyberStar requires additional financing and is unable
to obtain such financing from Loral or from outside sources in the amounts and
at the times needed, there would be a material adverse effect on Loral
CyberStar.

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 statement 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.



                                       9
<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)

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.

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 requirements certain disclosures, but it carriers over most of
SFAS No. 125's provisions without reconsideration. The Company has adopted the
applicable disclosure requirements of SFAS No. 140 in its consolidated financial
statements as of December 31, 2000. The Company is currently evaluating the
impact of adopting the remaining provisions of SFAS No. 140, which is effective
for transactions entered into after March 31, 2001.


                                       10
<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 subsidiaries 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 the other Company
satellites, the loss of capacity will not have a material adverse effect on the
consolidated financial position or results of operations of the Company.


                                       11
<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. Space Systems/Loral ("SS/L") is currently
investigating the cause of these failures. 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. A complete or partial
loss of Telstar 10/Apstar IIR (which is fully insured) would result in a loss of
revenues and profits to the Company. Based upon information currently available,
the Company believes that this matter will not have a material adverse effect on
the consolidated financial position or results of operations to the Company.

Based upon its current expectations for growth, Loral CyberStar anticipates it
will have additional funding requirements over the next three years to fund the
streaming media investment, the purchase of VSATs, senior note interest
payments, replacement of Telstar 11 which is expected to reach it's end of life
in 2005, other capital expenditures 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 for
money borrowed. If Loral CyberStar requires additional financing and is unable
to obtain such financing from Loral or from outside sources in the amounts and
at the times needed, there would be a material adverse effect on Loral
CyberStar.

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.)


                                       12
<PAGE>

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


OPERATING REVENUES (IN MILLIONS):

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED
                                                                MARCH 31,
                                                         ----------------------
                                                          2001             2000
                                                         -----            -----
<S>                                                      <C>              <C>
Fixed Satellite Services .....................           $32.8            $22.0
Data Services ................................            23.8             24.8
Eliminations .................................            (6.4)            (4.6)
                                                         -----            -----
Operating revenues ...........................           $50.2            $42.2
                                                         =====            =====
</TABLE>


EBITDA(1) (IN MILLIONS):

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED
                                                               MARCH 31,
                                                         ----------------------
                                                          2001             2000
                                                         -----            -----
<S>                                                      <C>              <C>
Fixed Satellite Services .....................           $26.4            $14.8
Data Services ................................            (6.7)            (2.8)
                                                         -----            -----
EBITDA(1) ....................................           $19.7            $12.0
                                                         =====            =====
<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>

Revenues for the three months ended March 31, 2001 and 2000 were $50.2 million
and $42.2 million, respectively. This increase is primarily attributable to the
increased utilization of Telstar 12 and Telstar 10/Apstar IIR.

At March 31, 2001, the Company had contracted backlog of approximately $966.3
million, compared to $834.8 million at March 31, 2000, an increase of 16
percent. Revenue from contracted backlog is typically earned over two to five
years.

Direct expenses for the three months ended March 31, 2001 and 2000 were $15.9
million and $16.8 million, respectively. This decrease is primarily attributable
to the cost of equipment related to an equipment sale in 2000.

Sales and marketing expenses were $6.2 million and $5.9 for the three months
ended March 31, 2001 and 2000, respectively.

Engineering and technical services expenses were $4.1 million and $2.4 million
for the three months ended March 31, 2001 and 2000, respectively. This increase
is primarily due to $0.5 million restructuring charges recorded in 2001
associated with closing the Company's German operations (which remained unpaid
as of March 31, 2001), including involuntary terminations and other exit costs,
and increased salaries supporting Data Services operations.


                                       13
<PAGE>

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


General and administrative expenses were $4.4 million and $5.0 million for the
three months ended March 31, 2001 and 2000, respectively. This decrease relates
primarily to cost efficiencies.

Depreciation and amortization was $27.3 million and $27.0 million for the three
months ended March 31, 2001 and 2000, respectively.

Interest income was $0.2 million and $2.4 million for the three months ended
March 31, 2001 and 2000, respectively. The decrease 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 $25.2 million and $23.8 million for the three months ended
March 31, 2001 and 2000, respectively. The increase is primarily due to the
interest incurred on the loan from Loral.

The Company recorded an income tax benefit of $0.2 million on a loss before
income taxes of $32.5 million for the three months ended March 31, 2001 and an
income tax provision of $1.0 million on a loss of $36.1 million for the three
months ended March 31, 2000. When comparing 2001 to 2000, the change is
primarily due to a recovery recorded in 2001 under the tax sharing agreement
with Loral Space & Communications Corporation as opposed to a payment made in
2000 for the alternative minimum tax associated with the tax gain recognized
upon the transfer of four orbital slots to Loral Space and Communications
Corporation.

As a result of the above, the Company incurred net losses of $32.3 million and
$37.0 million for the three months ended March 31, 2001 and 2000, respectively.

RESULTS BY OPERATING SEGMENT

Fixed Satellite Service

FSS revenue for the three months ended March 31, 2001 was $32.8 million versus
$22.0 million for the three months ended March 31, 2000. EBITDA for the three
months ended March 31, 2001 was $26.4 million, or 80 percent of revenues, versus
$14.8 million, or 67 percent of revenues, for the three months ended March 31,
2000. These increases are due to the increased utilization of Telstar 12 and
Telstar 10/Apstar IIR and the intercompany leasing revenues from Data Services
for capacity.

Data Services

Data Services revenue for the three months ended March 31, 2001 was $23.8
million versus $24.8 million for the three months ended March 31, 2000. EBITDA
for the three months ended March 31, 2001 was a loss of $6.7 million versus a
loss of $2.8 million for the three months ended March 31, 2000. The increase in
EBITDA loss is primarily due to the increased direct costs from both third party
and intercompany leasing activities, the restructuring costs associated with the
Company's German operations, as well as increased engineering and technical
services costs incurred in connection with the expansion of the business.


                                       14
<PAGE>

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


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 statement 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.

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 requirements certain disclosures, but it carriers over most of
SFAS No. 125's provisions without reconsideration. The Company has adopted the
applicable disclosure requirements of SFAS No. 140 in its consolidated financial
statements as of December 31, 2000. The Company is currently evaluating the
impact of adopting the remaining provisions of SFAS No. 140, which is effective
for transactions entered into after March 31, 2001.


                                       15
<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:  May 14, 2001                      /s / RICHARD J. TOWNSEND
                               -------------------------------------------------
                                             Richard J. Townsend
                               Senior Vice President and Chief Financial Officer
                                        (Principal Financial Officer
                                                     and
                                       Registrant's Authorized Officer)




                                       16