SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE

                         SECURITIES EXCHANGE ACT OF 1934


                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000



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


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



                Delaware                                        52-2008654
-----------------------------------------                  --------------------
     (State or other jurisdiction of                         (I.R.S. Employer
     incorporation or organization)                         Identification No.)



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

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

Indicate  by check  mark  whether  the  registrant:  (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __

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


                                       1
<PAGE>

PART I.  FINANCIAL INFORMATION

ITEM I.  FINANCIAL STATEMENTS

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

<TABLE>
<CAPTION>
                                                                                            MARCH 31,         DECEMBER 31,
                                                                                              2000                 1999
                                                                                              ----                 ----
                                                                                           (Unaudited)              Note
<S>                                                                                 <C>                  <C>
                                     ASSETS

Current assets:
   Cash and cash equivalents                                                        $         15,965     $         24,117
   Restricted and segregated assets                                                           25,206              187,315
   Accounts receivable (less allowance for doubtful accounts of $3,279
     and $2,257 at March 31, 2000 and December 31, 1999, respectively)                        27,650               16,797
   Prepaid expenses and other current assets                                                  11,793               11,716
   Due from CyberStar L.P.                                                                     8,256                  181
   Due from Space Systems/Loral                                                                  650                   --
                                                                                    ----------------    -----------------
Total current assets                                                                          89,520              240,126

Property and equipment at cost:
   Land                                                                                           74                   74
   Satellite and related equipment                                                           784,362              784,344
   Telecommunications equipment                                                               49,018               44,747
   Furniture and computer equipment                                                           10,198                9,910
                                                                                    ----------------    -----------------
                                                                                             843,652              839,075

Less accumulated depreciation                                                               (109,824)             (88,549)

Satellite construction in progress                                                            17,031               16,951
                                                                                    ----------------    -----------------
Net property and equipment                                                                   750,859              767,477

Costs in excess of net assets acquired                                                       589,342              593,219
Deferred income taxes                                                                         48,451               49,223
Other assets, net                                                                             31,161               34,242
                                                                                    ----------------    -----------------
TOTAL ASSETS                                                                        $      1,509,333    $       1,684,287
                                                                                    ================    =================
</TABLE>


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

            See notes to condensed consolidated financial statements.


                                       2
<PAGE>

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

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

Current liabilities:
   Current portion of long-term debt                                              $            2,155    $           2,071
   Accounts payable                                                                            4,428                3,098
   Satellite purchase price payable                                                               --              181,928
   Accrued and other current liabilities                                                      13,114               13,995
   Customer deposits                                                                           4,393                9,069
   Deferred revenue                                                                            3,420                2,624
   Interest payable                                                                           10,385               22,842
   Note payable to Loral SpaceCom                                                             83,937               74,114
   Due to Skynet Delaware                                                                     45,232               41,788
   Due to Space Systems/Loral                                                                     13                9,750
                                                                                  ------------------    -----------------
Total current liabilities                                                                    167,077              361,279

Long-term debt                                                                               971,821              963,299
Deferred revenue                                                                               6,352                5,957
Customer deposits                                                                              3,723                   --
Other long-term liabilities                                                                      150                  448
Due to Space Systems/Loral                                                                     5,900                5,900

Commitments and contingencies:
Stockholders' equity:
   Common stock, $.01 par value, 1,000 shares authorized; 100 shares outstanding                  --                   --
   Capital in excess of par value                                                            588,186              544,176
   Unearned compensation                                                                      (1,542)              (1,804)
   Accumulated other comprehensive loss                                                       (1,142)                (824)
   Accumulated deficit                                                                      (231,192)            (194,144)
                                                                                  ------------------    -----------------
Total stockholders' equity                                                                   354,310              347,404
                                                                                  ------------------    -----------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                          $      1,509,333    $       1,684,287
                                                                                    ================    =================
</TABLE>


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



            See notes to condensed consolidated financial statements.


                                       3
<PAGE>

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

<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED MARCH 31,
                                                 ----------------------------
                                                    2000              1999
                                                    ----              ----
<S>                                        <C>               <C>
Service revenue                            $        42,182   $       22,538

Operating expenses:
   Direct                                           16,799            6,631
   Sales and marketing                               5,899            5,902
   Engineering and technical services                2,432            2,197
   General and administrative                        4,996            3,738
   Depreciation and amortization                    26,969           17,541
                                           ---------------   --------------
     Total operating expenses                       57,095           36,009

Loss from operations                               (14,913)         (13,471)

   Interest  income                                  2,381            1,174
   Interest expense                                (23,766)         (13,896)
   Other income                                        212              124
                                           ---------------   --------------

Loss before income taxes                           (36,086)         (26,069)

Income tax (provision) benefit                        (962)           1,834
                                           ---------------   --------------

Net loss                                   $       (37,048) $       (24,235)
                                           ===============  ===============
</TABLE>


                                       4
<PAGE>

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

<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED MARCH 31,
                                                                 ----------------------------
                                                                   2000                 1999
                                                                   ----                 ----
<S>                                                         <C>                <C>
OPERATING ACTIVITIES
Net loss                                                    $        (37,048)  $       (24,235)
Adjustments to reconcile net loss to net cash
      provided by (used in) operating activities:
   Deferred income tax provision                                         772               412
   Depreciation and amortization                                      26,969            17,541
   Provision for bad debts                                             1,078               406
   Non-cash interest expense                                           9,017             8,210
   Interest earned on restricted assets                               (3,000)               --
Changes in operating assets and liabilities:
   Accounts receivable                                               (15,682)           (3,475)
   Prepaid expenses and other current assets                             (77)              564
   Other assets                                                        1,988            (3,086)
   Accounts payable, accrued liabilities and other
     current liabilities                                                (755)              439
   Interest payable                                                  (12,457)          (12,459)
   Due to Skynet Delaware                                              3,475                --
   Customer deposits                                                    (953)            2,504
   Deferred revenue                                                    2,491                (3)
   Due to Loral SpaceCom                                               9,528                --
   Due from Space System/Loral                                       (10,387)               --
   Due from CyberStar L.P.                                            (8,075)               --
                                                            ----------------   ---------------
Net cash used in operating activities                                (33,116)          (13,182)

INVESTING ACTIVITIES
Increase in restricted and segregated assets                             (64)             (762)
Uses of and transfers from restricted and
  segregated cash                                                    165,174            24,919
Satellite construction costs                                             (80)          (62,819)
Capital expenditures, net                                           (185,331)             (354)
                                                            ----------------   ---------------
Net cash used in investing activities                                (20,301)          (39,016)

FINANCING ACTIVITIES
Gain on sale of orbital slots to Loral                                34,260                --
Equity contributed from Loral                                          9,750                --
Due to Loral                                                              --            37,710
Repayment of senior notes and notes payable                             (332)             (290)
Deferred revenue                                                       2,450                --
Payment of satellite incentive obligations                               (67)              (59)
Other                                                                   (796)           (2,176)
                                                            ----------------   ---------------
Net cash provided by financing activities                             45,265            35,185

Net decrease in cash and cash equivalents                             (8,152)          (17,013)
Cash and cash equivalents at beginning of period                      24,117            35,861
                                                            ----------------   ---------------
Cash and cash equivalents at end of period                  $         15,965  $         18,848
                                                            ================  ================
</TABLE>


                                       5
<PAGE>

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

NOTE A.  BASIS OF PRESENTATION

ORGANIZATION AND BUSINESS

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

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

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

GENERAL

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


                                       6
<PAGE>

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

COMPREHENSIVE LOSS

Comprehensive loss is as follows (in thousands):

<TABLE>
<CAPTION>
                                             THREE MONTHS ENDED MARCH 31,
                                             ----------------------------
                                                 2000             1999
                                                 ----             ----
<S>                                       <C>                <C>
Net loss                                  $         37,048   $         24,235
Cumulative translation adjustment                      318                913
                                          ----------------   ----------------
Comprehensive loss                        $         37,366   $         25,148
                                          ================   ================
</TABLE>

EARNINGS PER SHARE

Earnings per share is not presented since it is not considered meaningful due to
the merger with Loral and recapitalization of the Company.

NOTE B.  RESTRICTED AND SEGREGATED CASH

As of March 31, 2000,  the Company had  approximately  $25 million of restricted
cash for an interest payment on its senior notes on July 15, 2000.

NOTE C.  LONG-TERM DEBT

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

<TABLE>
<CAPTION>
                                                                               MARCH 31,           DECEMBER 31,
                                                                                 2000                  1999
                                                                                 ----                  ----
<S>                                                                          <C>                   <C>
Senior notes (including premium of $57.2 million and $58.7 million
  at March 31, 2000 and December 31, 1999, respectively)                     $       500,184       $       501,734
Senior discount notes (principal amount at maturity $484 million and
  accreted principal amount of $390 million and $378 million at
  March 31, 2000 and December 31, 1999, respectively)                                458,976               448,408
Notes payable - TT&C Facility                                                          3,398                 3,729
Satellite incentive obligations                                                       11,061                11,129
Other                                                                                    357                   370
                                                                             ---------------       ---------------
   Total long-term debt                                                              973,976               965,370
       Less: current portion                                                          (2,155)               (2,071)
                                                                             ---------------       ---------------
   Long-term debt, less current portion                                      $       971,821       $       963,299
                                                                             ===============       ===============
</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.


                                       7
<PAGE>

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

NOTE D.  NOTE DUE TO LORAL

Loral CyberStar has obtained additional financing (via an intercompany note from
Loral  SpaceCom,) to complete the  construction  of its satellite fleet and meet
its operating  requirements.  Borrowings under this note can be made for periods
of 1, 2, 3 or 6 months and bear interest at LIBOR (6.06% at March 31, 2000) plus
275 basis  points.  The  intercompany  note can be prepaid  at any time  without
penalty and is payable on demand.  At March 31, 2000, the outstanding  borrowing
amount  under  this  intercompany  note was  $83.9  million  (including  accrued
interest  of $5.8  million)  and is  reflected  on the  balance  sheet as a note
payable to Loral SpaceCom.

NOTE E.  INCOME TAXES

The Company is included in the  consolidated  U.S.  Federal income tax return of
Loral Space & Communications  Corporation.  Pursuant to a tax sharing  agreement
for the current year with Loral Space & Communications Corporation,  the Company
is entitled to reimbursement for the use of its tax losses, when such losses are
utilized by the consolidated  group;  otherwise,  the Company is required to pay
its  separate  company  income tax  liability  to Loral  Space &  Communications
Corporation. The Company recorded a net payable under this tax sharing agreement
of  approximately  $0.2  million and a deferred tax  provision of $0.8  million,
resulting  in a total tax  provision  of $1 million for the three  months  ended
March 31, 2000.  The  Company's  effective tax rate of 2.7% for the three months
ended March 31, 2000  differs  from the federal  statutory  benefit  rate of 35%
primarily due to the tax gain  recognized upon transfer of four orbital slots to
Loral Space & Communications Corporation and the non-deductible  amortization of
costs in excess of net asset  acquired.  The deferred tax asset of $48.5 million
as of March 31, 2000 on the accompanying balance sheet arises primarily from the
tax effect of the  temporary  differences  between  the  carrying  amount of the
senior notes and the senior  discount notes payable for financial and income tax
purposes.


                                       8
<PAGE>

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

NOTE F.  SEGMENTS

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

In  evaluating  financial  performance,  management  uses  revenues and earnings
before  interest,  taxes and  depreciation  and  amortization  ("EBITDA") as the
measure of a segment's profit or loss.

Summarized financial information  concerning the Company's operating segments is
as follows (in millions):

                        THREE MONTHS ENDED MARCH 31, 2000

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                              FIXED                                 TOTAL
                                            SATELLITE             DATA           REPORTABLE        INTERSEGMENT
                                             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  ........................     $     1,429.0      $       80.3      $    1,509.3      $          --      $    1,509.3
                                           =============      ============      ============      =============      ============
</TABLE>



                        THREE MONTHS ENDED MARCH 31, 1999
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                              FIXED                                 TOTAL
                                            SATELLITE             DATA           REPORTABLE        INTERSEGMENT
                                             SERVICES           SERVICES          SEGMENTS         ELIMINATIONS      CONSOLIDATED
                                             --------           --------          --------         ------------      ------------
<S>                                        <C>                <C>               <C>               <C>                <C>
Revenue from external customers ......     $         7.3      $       15.2      $       22.5      $          --      $       22.5
Intersegment revenue .................               1.8              --                 1.8               (1.8)               --
                                           -------------      ------------      ------------      -------------      ------------
Gross revenue ........................     $         9.1      $       15.2      $       24.3      $        (1.8)     $       22.5
                                           =============      ============      ============      =============      ============

EBITDA(1).............................     $         6.3      $       (2.3)     $        4.0      $          --      $        4.0
Depreciation and amortization ........              14.2               3.3              17.5                 --              17.5
                                           -------------      ------------      ------------      -------------      ------------
Loss from operations .................     $        (7.9)     $       (5.6)     $      (13.5)     $          --      $      (13.5)
                                           =============      ============      ============      =============      ============
Total assets  ........................     $     1,349.4      $       72.7      $    1,422.1      $          --      $     1,422.1
                                           =============      ============      ============      =============      ============
</TABLE>


(1)  EBITDA (which is equivalent to operating income (loss) before  depreciation
     and  amortization) 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.


                                       9
<PAGE>

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

NOTE G. COMMITMENTS AND CONTINGENCIES

Telstar 11  (formerly  Orion 1) -- In November  1995,  a component on Telstar 11
malfunctioned,  resulting in a 2-hour service  interruption.  The malfunctioning
component  supported nine  transponders  serving the European portion of Telstar
11's  footprint.  Full service was restored using a back-up  component.  If that
back-up component fails,  Telstar 11 would lose a significant  amount of useable
capacity.  In such  event,  while the Company  would be  entitled  to  insurance
proceeds  of  approximately  $195  million as of March 31,  2000 and could lease
replacement  capacity and function as a reseller with respect to such  capacity,
the loss of capacity would have a material adverse effect on the Company.

Telstar  12  (formerly  Orion 2) - Telstar  12, a high power  satellite  with 38
Ku-band  transponders,  expands Loral CyberStar's  European coverage and extends
coverage to portions of the former Soviet Union, Latin America,  the Middle East
and South Africa.  Telstar 12 was launched  aboard an Ariane  launch  vehicle in
October 1999 into 15 degrees  W.L.,  and  commenced  operations in January 2000.
Although Telstar 12 was originally intended to operate at 12 degrees W.L., Loral
Cyberstar reached an agreement with Eutelsat to operate Telstar 12 at 15 degrees
W.L.  while  Eutelsat  continued  to develop its  services at 12.5  degrees W.L.
Eutelsat has in turn agreed not to use its 14.8 degrees W.L. orbital slot and to
assert its priority rights at such location on Loral CyberStar's behalf. As part
of this coordination  effort, Loral CyberStar agreed to provide to Eutelsat four
transponders on Telstar 12 for the life of the satellite.  Eutelsat also has the
right to acquire,  at cost, four transponders on the next replacement  satellite
for Telstar 12. As part of the international  coordination  process, the Company
continues to conduct discussions with various administrations  regarding Telstar
12's  operations  at 15 degrees W.L. If these  discussions  are not  successful,
Telstar 12's useable capacity may be reduced.

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

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

NOTE H.  SALE OF Ka-BAND SLOTS

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

NOTE I.  RECLASSIFICATIONS

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


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

GENERAL

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

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

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

Ka-BAND SLOTS

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


                                       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

Telstar 12 (formerly  known as Orion 2), a high power  satellite with 38 Ku-band
transponders,  expands Loral Cyberstar's  European coverage and extends coverage
to portions of the former Soviet Union, Latin America, the Middle East and South
Africa.  Telstar 12 was  launched  in  October  1999 into 15  degrees  W.L.  and
commenced revenue generating 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.  Eutelsat also has the
right to acquire,  at cost, four transponders on the next replacement  satellite
for  Telstar  12.  As  part of the  international  coordination  process,  Loral
CyberStar  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.

TELSTAR 10

To replace Orion 3, on September 28, 1999,  Loral  CyberStar  purchased from APT
Satellite  Company  Limited  ("APT") all  transponder  capacity  (except for one
C-band  transponder  retained by APT) and existing customer leases on the Apstar
IIR satellite for  approximately  $273 million.  In March 2000, the Company made
the final payment to APT.


                                       12
<PAGE>

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

RESULTS OF OPERATIONS

In  evaluating  financial  performance,  management  uses  revenues and earnings
before interest, taxes, depreciation and amortization ("EBITDA") as a measure of
a segment's profit or loss. See Note F to the unaudited  condensed  consolidated
financial statements for additional information on segment results.

OPERATING REVENUES (IN MILLIONS):

                                             THREE MONTHS ENDED
                                                  MARCH 31,
                                             ------------------
                                           1999                2000
                                           ----                ----
Fixed satellite services  ..........    $        22.0     $        9.1
Data services  .....................             24.8             15.2
Intersegment elimination ...........             (4.6)            (1.8)
                                        -------------     ------------
Operating revenues .................    $        42.2     $       22.5
                                        =============     ============



EBITDA(1) (IN  MILLIONS):

                                             THREE MONTHS ENDED
                                                  MARCH 31,
                                             ------------------
                                           2000              1999
                                           ----              ----
Fixed satellite services  ..........    $        14.8     $        6.3
Data services  .....................             (2.8)            (2.3)
                                        -------------     ------------
EBITDA .............................    $        12.0     $        4.0
                                        =============     ============

--------

(1)  EBITDA (which is equivalent to operating income (loss) before  depreciation
     and  amortization) 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.

                                       13
<PAGE>

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

Revenue and  Backlog.  Total  revenues for the three months ended March 31, 2000
and 1999 were $42.2  million  and $22.5  million,  respectively,  an increase of
$19.7  million or 88 percent.  This  increase is primarily  attributable  to the
private communications network services operations,  which included the addition
of 221  customer  sites in  service  compared  to the same  period in 1999,  the
service  commencement  of Telstar 12 and  Telstar  10/Apstar  IIR and a one-time
equipment sale of $3.3 million.

At March 31, 2000, the Company had backlog  (representing  future revenues under
contract) of  approximately  $834.8 million  compared to $360.1 million at March
31, 1999. Revenue from customer contract backlog is typically earned over two to
five years.

Direct Expenses. Direct expenses for the three months ended March 13, 2000, were
$16.8 million  compared to $6.6 million for the same period in 1999, an increase
of $10.2 million or 155 percent.  These increases are primarily  attributable to
Internet access, satellite transponder leasing and terrestrial link charges that
support the Worldcast Internet access product ("Worldcast").

Sales and Marketing Expenses. Sales and marketing expenses were $5.9 million for
the three months ended March 31, 2000 and 1999.

Engineering and Technical Services Expenses.  Engineering and technical services
expenses for the three months ended March 31, 2000 were $2.4 million compared to
$2.2 million for the same period in 1999.

General and Administrative  Expenses.  General and administrative  expenses were
$5.0 million for the three months ended March 31, 2000  compared to $3.7 million
for the same  period in 1999,  an increase  of $1.3  million or 35 percent.  The
increase is associated  with  additional bad debt costs for the FSS business and
recruiting costs for the Data Network Services business.

Depreciation and  Amortization.  Depreciation  and amortization  expense for the
three months ended March 31, 2000 was $27.0  million  compared to $17.5  million
for the same  period in 1999,  an increase  of $9.5  million or 54 percent.  The
increase  was  primarily  due to the  acquisition  of Telstar  10/Apstar  IIR on
September 28, 1999 and from Telstar 12 being placed in service in December 1999.

Interest.  Interest income was $2.4 million for the three months ended March 31,
2000,  compared to $1.2 million for the three  months ended March 31, 1999.  The
increase was  primarily due to the interest  earned on the increased  segregated
cash balance in 2000.  Interest expense,  net of capitalized  interest of $0 and
$7.3 million,  respectively,  was $23.8 million for the three months ended March
31, 2000,  and $13.9  million for the three  months  ended March 31,  1999.  The
increase in interest  expense is due to the interest expense on the intercompany
debt from Loral SpaceCom and the decrease in capitalized interest in 2000.

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 payable under
this tax sharing  agreement  of  approximately  $0.2  million and a deferred tax
provision of $0.8 million,  resulting in a total tax provision of $1 million for
the three months ended March 31, 2000. The Company's  effective tax rate of 2.7%
for the three months  ended March 31, 2000  differs  from the federal  statutory
benefit rate of 35%  primarily due to the tax gain  recognized  upon transfer of
four  orbital  slots  to  Loral  Space  &  Communications  Corporation  and  the
non-deductible  amortization  of costs in  excess  of net  asset  acquired.  The
deferred  tax asset of $48.5  million as of March 31,  2000 on the  accompanying
balance sheet arises primarily from the tax effect of the temporary  differences
between the carrying  amount of the senior notes and the senior  discount  notes
payable for financial and income tax purposes.


                                       14
<PAGE>

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

Net Loss.  As a result of the above,  the Company  incurred  net losses of $37.0
million  and $24.2  million  for the three  months  ended  March  2000 and 1999,
respectively.

RESULTS BY OPERATING SEGMENT

Fixed Satellite Service

FSS revenue for the three months ended March 31, 2000 was $22.0  million  versus
$9.1 million for three months ended March 31, 1999.  EBITDA for the three months
ended March 31, 2000 was $14.8 million,  or 67 percent of revenues,  versus $6.3
million, or 69 percent of revenues, for the three months ended March 31, 1999.

Data Services

Revenues for the Data Network  Services segment for the three months ended March
31, 2000 was $24.8 million versus $15.2 million for the three months ended March
31,  1999.  EBITDA  for the three  months  ended  March  31,  2000 was a loss of
approximately  $2.8  million  versus a loss of $2.3 million for the three months
ended March 31, 1999.

OTHER MATTERS

ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial  Accounting Standards Board issued Statement No. 133
Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"), which
requires  that all  derivative  instruments  be recorded on the balance sheet at
their fair value.  Changes in the fair value of  derivatives  are recorded  each
period in current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge  transaction and, if it is, the type
of hedge  transaction.  The Company has not yet  determined  the impact that the
adoption  of SFAS 133 will  have on its  earnings  or  financial  position.  The
Company is required to adopt SFAS 133 on January 1, 2001.


                                       15
<PAGE>

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

PART II. OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits:

                  27 Financial Data Schedule

         (b)      Reports on Form 8-K:

                  None.


                                       16
<PAGE>

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

                                    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 15, 2000           /s /    RICHARD J. TOWNSEND
                         ----------------------------------------
                                   Richard J. Townsend
                        Senior Vice President and Chief Financial Officer
               (Principal Financial Officer and Registrant's Authorized Officer)






                                       17