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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2001
                 Commission file number: 333-39202 and 333-65014

                             EarthWatch Incorporated
             (Exact name of registrant as specified in its charter)


            Delaware                                   31-1420852
   (State or other jurisdiction of      (I.R.S. Employer Identification Number)
   incorporation or organization)


                                 1900 Pike Road
                            Longmont, Colorado 80501
          (Address of principal executive offices, including zip code)

                                 (303) 682-3800
              (Registrant's telephone number, including area code)

Securities registered pursuant to Sections 12(b) or 12(g) of the Act: None

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 [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]

The aggregate market value of the voting and non-voting common equity held
by non-affiliates of the registrant was approximately $199,800 as of February
28, 2002. The registrant had 799,010 shares of outstanding common stock as of
February 28, 2002. Documents incorporated by reference: None

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Table of Contents
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PART I
Item 1.       Business.                                                                   3
Item 2.       Properties.                                                                17
Item 3.       Legal Proceedings.                                                         17
Item 4.       Submission of Matters to a Vote of Security Holders.                       17

PART II

Item 5.       Market for the Company's Common Equity and Related Stockholder Matters.    18
Item 6.       Selected Financial Data.                                                   21
Item 7.       Management's Discussion and Analysis of Financial Condition and
              Results of Operations.                                                     22
Item 7A.      Quantitative and Qualitative Disclosures about Market Risk.                32
Item 8.       Financial Statements and Supplementary Data.                               32
Item 9.       Changes In and Disagreements With Independent Accountants on
              Accounting and Financial Disclosure.                                       59

PART III

Item 10.      Directors and Executive Officers of the Registrant.                        59
Item 11.      Executive Compensation.                                                    64
Item 12.      Security Ownership of Certain Beneficial Owners and Management.            67
Item 13.      Certain Relationships and Related Transactions.                            68

PART IV

Item 14.      Exhibits, Financial Statement Schedules, and Reports on Form 8-K.          71
              Signatures                                                                 72
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Reference is made in this document to Digital Globe(R) and Your Planet
Online(R), which are registered trademarks owned by us and Seconds on Orbit(TM),
which is a trademark of ours.

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                                     PART I

                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

         Some of the statements in this Annual Report on Form 10-K constitute
forward-looking statements. These statements involve known and unknown risks,
uncertainties, and other factors that may cause our or our industry's results,
levels of activity, performance, or achievements to be materially different
from any future results, levels of activity, performance, or achievements
expressed or implied by such forward-looking statements. These factors include,
among others, those listed under "Business," and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and elsewhere in
this Annual Report on Form 10-K and in the other documents we file with the
Securities and Exchange Commission, including Post-Effective Amendment No. 1 to
the Registration Statement on Form S-1 File No. 333-65014 as filed in March
2002. In some cases, you can identify forward-looking statements by
terminology, such as "may," "will," "should," "expects," "plans," "intends,"
"anticipates," "believes," "estimates," "predicts," "potential," or "continue"
or the negative of these terms or comparable terminology. Although we believe
that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, events, levels of activity,
performance, or achievements. Our actual results and the timing of certain
events could differ materially from those anticipated in the forward-looking
statements.

Item 1.  Business.

         EarthWatch Incorporated was incorporated on September 30, 1994 under
the laws of the State of Colorado and, on August 21, 1995, was reincorporated
in the State of Delaware. We commenced development operations on March 31, 1995
with the contribution of the net assets of WorldView Imaging Corporation and
certain assets of Ball Corporation. We do business under the name DigitalGlobe
and therefore, in this document refer to our company under the name
DigitalGlobe as well.

         We plan to create and market a variety of information products derived
from satellite imagery of the earth's surface. We successfully launched and
deployed our QuickBird satellite on October 18, 2001. We released our first
imagery from our QuickBird satellite on December 17, 2001. We completed our
initial on-orbit calibration and commission period and commenced commercial
operations on February 1, 2002.

         Our QuickBird satellite collects high-resolution digital imagery of
the earth's surface. Our QuickBird satellite collects 0.6-meter resolution gray
scale and 2.44-meter resolution color imagery of the earth and revisits most
areas within three to five days.

         We were originally incorporated as a wholly owned subsidiary of Ball
Corporation. On March 31, 1995, we merged with WorldView Imaging Corporation,
which had been founded by Dr. Walter S. Scott, our Chief Technical Officer and
Executive Vice President. In connection with the merger, Ball contributed
certain assets and technology, in addition to making a substantial cash
investment. WorldView received the first United States government license to

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operate a high-resolution satellite for commercial use and was developing the
EarlyBird satellites (predecessor satellites to our QuickBird satellites) when
it merged with us.

         Since the merger, we have invested in research and development to
develop our satellite system and have incurred substantial operating costs and
selling, general, and administrative expenses. We completed and launched
EarlyBird 1, our first satellite, in December 1997.

         However, four days after a successful launch, we lost contact with
EarlyBird 1. We were unable to re-establish communications and determined that
the satellite was a total loss. Although we launched our first QuickBird
satellite on November 20, 2000, it failed to achieve orbit, which resulted in a
total loss of the satellite. As a result, we did not generate any revenue from
our proposed primary satellite imagery business through 2001 and did not do so
until we began selling imagery generated by our second QuickBird satellite in
February 2002. We have generated only limited revenue from other related
projects.

         EarthWatch Incorporated is a Delaware corporation. Our principal
executive offices are located at 1900 Pike Road, Longmont, Colorado 80501-6700.
Our telephone number is (303) 682-3800.

Industry overview

         We believe that access to accurate, affordable, and timely data has
been, and still is, the single largest problem facing the Geographic
Information Systems, or GIS, market. Users have few alternative sources from
which to obtain data and we believe that high-resolution satellite imagery
provided by the QuickBird system will provide an important alternative source
to aerial photography and low-resolution satellite imagery, such as Landsat and
SPOT.  Imagery with a resolution of one-meter or better can detect and locate
many objects that previously could not be identified using low-resolution
satellite imagery. High-resolution satellite imagery offers GIS customers a
number of advantages, including computer compatibility, large area coverage,
and up-to-date information.

         In addition to providing high spatial resolution gray scale
(panchromatic) imagery, high-resolution satellites can take precise color and
near infrared (multispectral) imagery, enabling a wide range of monitoring,
detection, and exploration applications. The digital format of satellite
imagery facilitates quick delivery, enables low-cost archiving, allows for
image enhancement and manipulation, and preserves much more information value
than analog imagery.

         We are not aware of any additional competitors that plan to enter this
market other than our three announced competitors:

         .    Space Imaging, Inc., which successfully launched its first
              8-meter resolution satellite in September 1999 and has begun
              serving the commercial market;

         .    Orbital Imaging Corp.or Orbimage, which is developing a 1-meter
              high-resolution imaging system, which is scheduled for launch
              during the third quarter of 2002, as publicly announced; and

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         .    ImageSat International, which successfully launched a 1.8-meter
              resolution satellite in December 2000 and has announced plans to
              launch an .8-meter high-resolution satellite for commercial use
              during the fourth quarter of 2003. ImageSat also recently
              announced that it plans to offer .6-meter resolution images from
              its 1.8-meter high-resolution satellite through software upgrades
              and new processing techniques by the second quarter of 2002.

         We believe there are significant barriers for other potential
entrants.  The design, creation, launch, and operation of an integrated
high-resolution commercial satellite system requires significant expertise and
knowledge. We, and each of our three announced competitors, have been
developing commercial satellite imagery systems for more than five years. We
believe it would take a new potential competitor more than four years and
significant capital to develop and construct a high-resolution commercial
imaging satellite. Most aerospace companies capable of constructing such a
satellite have already aligned themselves with one of the announced entrants.
As a result, we believe that DigitalGlobe, together with the other announced
entrants, will have a significant advantage over future competitors seeking to
enter this market.

         We also believe that the emergence of high-resolution commercial
remote sensing satellites will stimulate new spending to create and update GIS
databases, especially in emerging markets in Asia, Australia, the Middle East,
and South America. Furthermore, we believe that a larger, more profitable
market will evolve for value-added information products derived from raw
imagery data processed and packaged to meet the demands of specific users.
Traditionally, overhead imagery products have been marketed in the form of raw
data. We seek to be a leading provider of value-added imagery-based
applications and services, rather than just a provider of satellite imagery. We
believe our advanced image processing technology and user-friendly distribution
network will enable us to make imagery easy to use, affordable, and accessible.
We believe that our focus on developing industry-specific products will
stimulate demand and expand the market for satellite imagery and related
products.

Strategy

         We are committed to achieving leadership positions in specific markets
for digital imagery and derivative information products. Our strategy to
achieve our objectives includes the following elements:

Become a leading provider of imagery-driven solutions

         Overhead imagery products have traditionally been marketed in the form
of raw data. However, we believe that a larger, more profitable market will
evolve for value-added information products derived from raw imagery data,
processed and packaged to meet the demands of specific users. We seek to be a
leading provider of value-added imagery-based applications and services, rather
than just a provider of satellite imagery. We believe our advanced image
processing technology and user-friendly distribution network will enable us to
make imagery easy to use, affordable, and accessible. We intend to continuously
develop industry-specific value-added products, such as tailored damage
assessment products for the

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insurance industry and crop monitoring products for the agriculture industry.
We believe that our focus on industry-specific products will stimulate demand
and expand the market for satellite imagery and related products.

Pursue targeted market entry and expansion

         Recognizing that we cannot address every possible sales opportunity
ourselves, we will focus on specific customer segments and new commercial
markets. We are focusing initially on providing imagery products to the largest
potential users and early adopters, such as United States government agencies
and foreign governments, in order to rapidly build a core group of customers.
We then intend to incrementally expand our target markets by pursuing
commercial markets and applications for higher margin, value-added products
that offer prospects for long-term growth. This targeted marketing strategy
will limit the number of products that we offer initially and simplify the
logistics of supporting our customers. In addition, this focus should allow us
to avoid building the large and costly marketing and sales organization that
would be required to pursue a wide range of market opportunities simultaneously.

         In addition to our direct sales efforts, we intend to market our
products through market specific distributors, agents, value-added resellers,
and e-commerce channels. We work with value-added resellers to enhance existing
applications and develop new products based upon our imagery. This should allow
us to limit our initial sales and support infrastructure and to leverage the
value-added resellers' existing market access and customer relationships,
particularly for markets that require extensive product development, customer
education, and long sales cycles.

Maintain leadership through partnerships with leading technology companies

         We will seek to establish our technological leadership in the remote
sensing industry as an innovative provider of imagery through partnerships with
leading aerospace and information technology companies.  Our strategic
partners, including Ball Aerospace & Technologies Corp., Datron/Transco Inc.,
Hitachi, Ltd., ITT Industries, Inc., MacDonald Dettwiler & Associates, Ltd.,
and Telespazio S.p.A. have supplied us with much of the technology, components,
and services for our satellite imaging system.

Leverage our technical advantages

         We believe our QuickBird satellite system offers significant technical
advantages over the three other competitive commercial satellite-based systems
that have been announced. These advantages include:

         the highest available resolution;

         the widest imaging area; and

         the largest image storage capacity.

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         Assuming that our QuickBird satellite system continues to operate as
we expect, we believe that by the end of 2003, we will be able to archive most
key urban areas and other areas of interest worldwide.

         With the loss of our first QuickBird satellite, and the corresponding
decreased capacity, imagery, and revisit times inherent in a one-satellite
system, populating our archive will require more time than previously planned.
Even with this decrease, we believe the above technical advantages will allow
us to collect more usable imagery per day than our competitors, enabling us to
provide more imagery to our customers, and to update such imagery more
frequently.

         We believe that these advantages, taken together, will provide one of
the best commercially available systems for producing low cost,
high-resolution, map quality imagery over large areas of the earth's surface.
We have positioned our satellite in an orbit that provides revisit capability
from three to five days, so that we will be able to collect imagery on
virtually every location on the earth's surface every three to five days.
Applications that require near real-time high-resolution imagery, such as
monitoring natural disasters, civil emergencies, and regional security, will
benefit from this frequent revisit capability.

Build direct relationships with key customers and market influencers

         To build market presence and demonstrate new product applications
quickly, we will seek to identify key early adopters and influencers in each
target market and develop close customer relationships. We will seek to expand
our reach to potential customers through partnerships with leading information
technology companies, distributors, agents, value-added resellers, and
customers. For example, in addition to contributing to our systems development
program, Hitachi and Eurimage, a majority-owned unit of Telespazio, serve as
master international distributors of our products and services in Asia and
Europe, respectively. We also plan to license our products through value-added
resellers in North America and in those regions of the world not covered by
exclusive reseller distribution agreements.

         In contrast to our competitors, we intend to create an open system to
support purchasers of raw imagery data who desire to process such data using
their own facilities. We plan to provide to purchasers the detailed support
data, including our satellite camera model and downlink formats, necessary to
enable them to perform their own image processing. By supporting open systems
interoperability, we believe we can stimulate third party software developers
and value-added resellers to develop innovative products and applications that
use our imagery data. We also intend to establish relationships with one or
more leading retail websites to sell our mapping and other imagery products
directly to consumers.

Develop comprehensive DigitalGlobe archive

         We plan to create an Internet-based proprietary database of imagery
collected from our QuickBird satellite and other third party satellite and
aerial imaging companies. We plan to use the portion of our imaging capacity
not being used to address specific customer requests to prospectively collect
and archive imagery of key geographies and markets.

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         We believe that once our proprietary DigitalGlobe database of imagery
is established and combined with value-added image enhancement tools and
processing software, it will facilitate an array of new geographic information,
mapping, and multimedia applications and markets that do not currently use
geographic imagery. For example, a user could log on to our Internet site, view
the entire earth, and then focus in on a country, state, city, or town, or even
a specific neighborhood or street corner. In addition, in the future, a user
could view interactive fly-throughs of selected areas of interest, such as
popular tourism sites or golf courses for vacation planning, or residential
neighborhoods for relocation or home purchasing.

Target markets and applications

         Within the overhead imagery market, we will initially target worldwide
commercial and government applications for surveillance, GIS, and mapping.
Within the market for federal, state, and local government users, we are
serving domestic and foreign intelligence and security agencies, as well as
civilian agencies that use overhead imagery for environmental monitoring, land
use, disaster management, and infrastructure planning. We are also targeting
civilian agencies and local and municipal governments that currently use aerial
and low-resolution satellite imagery for mapping, environmental monitoring,
land use, and infrastructure planning. In the longer term, we expect that our
customers will include commercial users in industries such as mapping and
surveying, oil, gas, and mineral exploration, agriculture, forestry, scientific
and environmental monitoring, and insurance risk analysis and damage assessment.

Products and services

         We offer high-resolution panchromatic and multispectral imagery
collected from our QuickBird satellite, as well as other third-party data. In
addition, we are the exclusive distributors of SPOT Image S.A. satellite
imagery products (which are lower-resolution images), and value added products
derived from those products, to the defense and agricultural markets in the
United States and its territories.

         We also plan to develop and market specific value-added products for
commercial applications. We will incorporate into the DigitalGlobe, our master
database for imagery information, imagery collected by our satellite and other
airborne and satellite systems, providing imagery to customers primarily in
digital form that can be easily stored and processed on a computer. Our
customers may also receive products in other forms, such as on CD-ROMs or
printed copy.

         We offer sophisticated government, scientific, and commercial users
raw imagery data on a near real-time basis from customer designated
satellite-tasking assignments. Our Seconds on Orbit product, also known as SOO,
is specifically designed for customers who want high priority tasking. In
addition, we can process and enhance acquired imagery to make it more useful
for a customer.

         We price our products according to market conditions and perceived
consumer value. In addition, we retain ownership of all imagery collected by
our satellite and license our imagery to customers in a manner similar to
software licenses. See "-- Proprietary Rights."

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Sales, marketing, and distribution

         We deliver our products through direct sales, e-commerce channels, and
through our master international distributors. We are currently expanding these
channels to include value-added resellers. Our direct sales organization is
structured to provide relationship-based sales to early adopters and key market
influencers, such as large governments and commercial customers. While our
direct sales organization is not a large organization, we will supplement our
in-house sales force with third-party sales agents. These sales agents market a
variety of similar products and have extensive contacts and customer
relationships in the industries or regions they serve. Each sales agent is
dedicated to one or two customers, or to a single vertical market, such as
mapping. In addition to the direct sales force, we have a distributor sales
force that is responsible for selection, recruitment, and management of the
distributor network. They are teamed with customer service representatives to
ensure that distributors have the necessary training and support to maximize
sales.

Master international distributors

         We have formed strategic relationships with Hitachi Software in Asia
and Telespazio in Europe, through its subsidiary, Eurimage, to be our master
international distributors. Hitachi Software is developing innovative
information products to expand distribution of our imagery to both businesses
and individuals. Eurimage is the largest distributor of satellite imagery in
Europe and has an extensive distribution system in place. We believe both
master international distributors have developed, and will continue to develop,
value-added resellers in their respective regions. The master international
distributors will serve as resellers and value-added resellers in their
respective regions. Such activities include providing online distribution
channels and direct links to our headquarters in Longmont, Colorado. Eurimage
has implemented a Web-based ordering and delivery system for its existing
customers and is in the process of modifying this system to include QuickBird
products.

Value-added resellers

         We are currently selecting value-added resellers based on demonstrated
distribution capability within target market segments. We are seeking
value-added resellers who are strong product advocates, especially in markets
where the application value of high-resolution imagery remains unproven. We are
basing our selections on capability and willingness to work cooperatively with
DigitalGlobe in designing and selling market-specific information products.

Direct online distribution

         Because our products are in digital form, customers will be able to
access products in the DigitalGlobe database through the Internet or another
online service. For our master international distributors, who are expected to
regularly download large volumes of data and may require imagery immediately
upon receipt by ground stations, we plan to offer a direct network connection
to our master data facility. Our customers may access the DigitalGlobe database
by means of our Web-based user interface. Similar to widely available search
tools and browsers,

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the DigitalGlobe database will be available for browsing by customers to order
imagery and products, and to track the status of orders online.

Order processing

         We have developed an automated order processing system that verifies
and accepts direct orders. This system is linked to our tasking, production,
and accounting systems. Orders that we cannot fill with previously archived
DigitalGlobe products are prioritized according to parameters such as project
timing and size, prevailing weather conditions, and other imaging requests, and
then translated into tasking commands passed on to the satellite. After each
orbit, orders are matched with successful results obtained from the satellite
downlink. Specific orders for large areas require tasking over several orbits
and days.

QuickBird satellite and ground system operations

QuickBird satellite

         We operate one satellite. Our QuickBird spacecraft recently completed
an initial on-orbit calibration and commission period and is currently
producing imagery.

Ground stations and satellite control

         Our QuickBird satellite is supported by two ground stations located in
Fairbanks, Alaska and Tromso, Norway. We control our satellite from the mission
control center at our headquarters in Longmont, Colorado.

DigitalGlobe archive and geospatial operations

         The DigitalGlobe value-added product archive is designed to provide
customers access to a range of products, including precision corrected image
maps, digital elevation models, and terrain-corrected image maps, as well as
maps and additional geographic data. We believe that by the end of 2003, we
will be able to archive most key urban and other areas of interest worldwide,
and will be able to continually update this imagery. We also maintain a
geospatial operations facility to produce orthoimages and digital elevation
models from a variety of data sources.

Risk mitigation

Proven technology

         We have followed a low-cost design philosophy that capitalizes on the
expertise of our strategic partners while incorporating proven technology used
by other satellite systems.

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Insurance

         We have insurance policies that covered the launch of our QuickBird
satellite and that cover its operation through October 17, 2002. The launch
insurance covers total failure, as well as partial failure by the satellite to
achieve and maintain proper orbit or to perform in accordance with
specifications through October 17, 2002. We are evaluating our alternatives for
insurance covering the operation of our QuickBird satellite after October 17,
2002, but we cannot assure you that we will be able to obtain this insurance on
terms acceptable to us or at all.

Research and development

         We plan to continue to invest in research and development to develop
improved satellite technology, develop the DigitalGlobe archive, and maintain
technological leadership in geographic imagery products and related systems. We
also acquire licenses for existing technology where we determine that adapting
existing technology would be less expensive than developing it internally.

         Our research and development costs were $11.9 million in 2001, $13.4
million in 2000 and $7.0 million in 1999.

Competition

         Traditional sources of image-based information have included aerial
photography and existing low-to-medium resolution earth orbiting satellites.
Our principal competitors in high-resolution space imaging collection are Space
Imaging (United States), Orbimage (United States), and ImageSat (Israel). Space
Imaging successfully launched a satellite in September 1999 and has been
distributing imagery to its customers since that time. ImageSat successfully
launched a satellite in December 2000 and began receiving images shortly
thereafter.

         To a lesser extent, we also compete on a regional basis with
independent aerial photography companies, as well as radar and low-resolution
commercial satellite systems such as Landsat, SPOT, and the 6-meter resolution
satellite launched by the Indian Government. However, we expect our competition
in the future to come primarily from high-resolution satellite systems
developed and operated by other commercial enterprises or foreign governments.

Aerial photography

         Commercial aerial photogrammetry firms serve highly fragmented and
localized markets. Customers requiring imagery from different geographic areas
must coordinate with several providers, which increases the cost and time
necessary to obtain imagery data. For large projects, aerial photogrammetry
firms usually require substantial lead-time, resulting in a product that may be
out of date by the time it is delivered. Also, these firms typically produce
aerial imagery in analog form on photographic film rather than in digital form,
making post-image processing more difficult and hindering development of
value-added applications such as complex mosaics. Satellite imagery addresses
many of the limitations of aerial photography, allowing cost effective

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collection of data over large areas in a short time, access to remote regions
of the world and restricted airspace, and timely delivery of data in digital
form.  Nonetheless, for certain applications, aerial photography is highly
efficient and competitively priced. Since these applications tend to require a
limited geographic scope, we do not view aerial providers as direct
competitors.  Conversely, we intend to work with these companies and expect
that many may purchase, enhance, and resell our imagery to their customers. We
also expect to continue to purchase and resell aerial imagery to enrich our
DigitalGlobe archive and our product mix.

New commercial high-resolution satellite systems

         Space Imaging launched the first successful commercial high-resolution
satellite in September 1999. Other competitors include ImageSat, which
successfully launched its high-resolution satellite in December 2000, and
Orbimage, which has announced plans to launch a high-resolution satellite in
2002.

Space Imaging

         Space Imaging, a joint venture owned collectively by Lockheed Martin,
Ratheon, and Mitsubishi, has successfully launched and deployed a 0.8-meter
resolution satellite named IKONOS and a global archive for storage of imagery.
Space Imaging has access to significant technological and capital resources
through its partners and has distribution rights to both Landsat 4 and 5 within
the United States, and to Indian Remote Sensing satellite data.

Orbimage

         Orbimage is a provider of global space-based imagery. Currently, it
has two low-resolution satellites in operation: OrbView 1 and OrbView 2. It has
also acquired limited rights to market and sell imagery from RadarSat 2, a
high-resolution commercial radar imaging satellite being constructed by the
Canadian government. Orbimage also developed two 1-meter resolution satellites.
OrbView 4, which was launched in September 2001, failed to achieve orbit.
Orbimage has recently announced that it plans to launch OrbView 3, during the
third quarter of 2002.

ImageSat

         ImageSat International is a joint venture composed of government-owned
Israel Aircraft Industries, Electro-Optics Industries, and Core Software
Technology Inc. ImageSat has announced plans to launch and operate a
constellation of 1.8-meter and .8-meter resolution commercial imaging
satellites named EROS. ImageSat launched its 1.8-meter resolution satellite in
December 2000 and is currently selling 1.8-meter resolution commercial imagery.
Their 0.8-meter resolution satellite is scheduled for launch in 2003. Based
upon the announced specification for EROS satellites, we believe that they will
offer lower performance than our QuickBird satellite. However, ImageSat is
associated with the Israeli government and, if subsidized, could be able to
compete aggressively on price. ImageSat's first customer, the Israeli
government, has announced that it has reserved the full capacity of ImageSat's
first and third satellites in specific geographic areas.

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         Although the satellites of each of the companies mentioned above have
similar spatial and spectral resolutions as the QuickBird system, based on
their public announcements, we believe that our QuickBird system will offer
significant technical advantages over the competition.

         We believe that the Orbimage and ImageSat satellites appear to be
better suited for reconnaissance than for mapping. QuickBird and IKONOS qualify
as both mapping and reconnaissance satellites.

         Space Imaging's IKONOS is designed to offer mapping capability.
However, we do not believe that the IKONOS satellite will compete equally with
QuickBird in terms of collection capacity. The IKONOS satellite offers only an
11-kilometer swath and 64 gigabytes of storage. In contrast, our QuickBird
satellite offers a 16-kilometer swath width and 128 gigabytes of on-board
storage. When we are fully operational, we believe we will be able to collect
more imagery per day than Orbimage or Space Imaging. Accordingly, we should
have more images to sell and should be able to populate our digital archive
faster than these competitors.

Strategic Relationships

         We have teamed with the six strategic partners listed below. These
partners are leaders in their respective industries, and we believe that their
expertise and resources will contribute significantly to establishing
DigitalGlobe as a leader in satellite imaging technology. Our partners are
providing us with technology, components, and services that we believe will
contribute materially to our business. Each of our partners has an equity stake
in DigitalGlobe, some of which were obtained in exchange for providing
DigitalGlobe with goods or services.

ITT Industries

         ITT Industries, Inc. is a leading global supplier of sophisticated
military defense systems and industrial components for the transportation,
construction and aerospace industries. ITT Industries has provided innovative
satellite sensor systems to NASA and the National Oceanic and Atmospheric
Administration ("NOAA") for more than 25 years. In addition to making an equity
investment in DigitalGlobe in April 1999, ITT Industries entered into a 10-year
strategic supplier agreement as integrator of sensors for future DigitalGlobe
systems. ITT Industries will provide such sensors and associated services on a
best value basis. We also entered into a contract with ITT Industries under
which it provided the QuickBird satellite scheduling and tasking system, and a
QuickBird spacecraft simulator. In addition, we have contracted with ITT
Industries to assist us in developing technical specifications of the sensors
for our next generation satellites.

Ball Aerospace

         Ball Aerospace & Technologies Corp. is a leading supplier of remote
sensing, military, and space technology. Ball Aerospace has developed and
successfully executed 37 satellite-related projects. Additionally, Ball
Aerospace has developed and implemented the in-orbit solution for problems
faced by the Hubble Space Telescope's optical system.

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As the prime contractor for the QuickBird system, Ball Aerospace provided
design, construction, and integration for the imaging payload and spacecraft
bus of our QuickBird satellite.

Hitachi Software

         Hitachi Software Engineering Company, Ltd. is a leading manufacturer
of high technology products and is a major Japanese supplier of GIS software
and hardware. Hitachi Software has established relationships in both the
military and commercial GIS markets in Asia, which, we believe, are currently
the fastest growing GIS markets in the world. Hitachi Software is our master
international distributor in Asia.

Telespazio/Eurimage

         Telespazio, S.p.A. is a leading owner and operator of satellite data
downlink and control facilities in Europe. Telespazio maintains a large earth
observation division with extensive international GIS and mapping capabilities.
It is also a part owner of Eurimage, a company that manages the largest
European satellite imagery sales and distribution network. Eurimage is
Telespazio's licensed reseller in Europe.

MacDonald Dettwiler & Associates, Ltd.

         MacDonald Dettwiler & Associates, Ltd. is a leading supplier of ground
processing systems for civilian satellite data and has provided our image data
archiving and distribution capabilities.

Datron

         Datron/Transco Inc. provides products and services for emerging radio
and satellite communication markets, primarily for ground uplink facilities.
Datron supplied us with ground station equipment for our QuickBird satellite.
All three-antenna systems to be provided by Datron have been completed and the
first two ground station antenna systems have been installed in Fairbanks,
Alaska and Tromso, Norway.

Customers

U.S. Government

         During 2001, 2000 and 1999, approximately 89.8%, 92.9% and 99.2%,
respectively of our total annual revenues were derived from contracts with the
U.S. government. Most of our U.S. government contracts are funded incrementally
on a year-to-year basis. Changes in government policies, priorities or funding
levels through agency or program budget reductions by the U.S. Congress or
executive agencies or the imposition of budgetary constraints could materially
adversely affect our financial condition or results of operations.

         DigitalGlobe's major contracts with the U.S. government are firm
fixed-price contracts under commercial terms. Under firm fixed-price contracts,
work performed and products

                                     14
<PAGE>

shipped are paid for at a discount from the current published prices without
adjustment for actual costs incurred in connection with the contract.

         All our U.S. government contracts provide that such contracts may be
terminated for convenience by the U.S. government. Furthermore, any of these
contracts may become subject to a government-issued stop work order under which
we would be required to suspend production or delivery. In the event of a
termination for convenience, contractors should be entitled to receive the
purchase price for delivered items, reimbursement for allowable costs for work
in process and an allowance for reasonable profit thereon or adjustment for
loss if completion of performance would have resulted in a loss.

         The National Aeronautics and Space Administration, or NASA, accounted
for approximately $2.7 million or 23% of our revenue and the National Imagery
and Mapping Agency, or NIMA, accounted for approximately $7.8 million or 66.8%
of our revenue during the fiscal year ended December 31, 2001. Any termination
of our relationships with NASA and NIMA would have a material adverse effect on
our current operating results and financial condition. NASA and NIMA retain our
services on a case-by-case basis and may choose at any time to use another firm
to provide the services that we perform. Therefore, any shift in either NASA's
or NIMA's decisions to continue to use our services could also result in
substantially reduced revenues for us. At February 28, 2002, we had contractual
commitments from NASA and NIMA totaling $11.25 million to purchase imagery over
the next three years.

SOO Customers

         At February 28, 2002, we had contracts totaling $29.9 million from our
foreign governmental customers to purchase our premium tasked SOO products over
the next five years. The ability of our customers to meet their annual
commitments under these contracts is subject to the availability of annual
governmental appropriations.

Proprietary Rights

         We have developed proprietary technology relating to our data
processing systems, and to our imagery product processing and distribution
systems. We also have acquired the right to use technology from our strategic
partners. We plan to combine components and systems incorporating our
technology and our strategic partners' technology to produce one or more
satellites, an image archive, and a distribution network. We have applications
pending for U.S.  patents relating to our next generation remote sensing system
for the agricultural market and related products. We rely primarily upon
copyright and trade secret laws for protection of our proprietary technology.
The source code for our own proprietary software is protected as an unpublished
copyrighted work and as a trade secret.

         We also generally enter into confidentiality agreements with our
employees, consultants, vendors, customers, and licensees, and limit access to
our proprietary designs, software, and other confidential information. We own
United States trademark registrations for "DigitalGlobe," a graphic
representation of the DigitalGlobe, "Your Planet Online," and "SOO." We have
submitted, and will continue to submit, trademark applications for our
operations.

                                     15
<PAGE>

Government Regulation

         Our business is subject to regulation in the United States and abroad.

Commercial remote sensing license

         We have received our licenses from the National Oceanic and
Atmospheric Administration, or NOAA, for our QuickBird satellite operations.
The licenses contain restrictions to protect the foreign and national security
policies of the United States and to implement United States obligations under
various international agreements. Under such licenses, we must also provide the
United States government with access to, and the use of, our data at commercial
market prices. The United States government may limit the commercial
distribution of such data in certain circumstances.

Communications frequency license

         We have licenses issued by the Federal Communications Commission or
FCC, to operate radio frequency devices aboard our satellites and at ground
stations located in the United States. The FCC has allocated to us frequency
spectrum for telemetry, tracking and control operations, and data downlinks,
and we have obtained a license for our QuickBird satellite. Also, the FCC has
granted us 10-year licenses to operate the ground stations in Fairbanks, Alaska
and Longmont, Colorado. We have received from the FCC a license to launch and
operate two remote-sensing satellites. The license authorizes us to transmit
imagery to earth and to perform telemetry, tracking, and command of the
satellites.

         In order to operate internationally and comply with international
regulations, the FCC has recorded the DigitalGlobe network with the
International Telecommunications Union (ITU) on our behalf. The ITU frequency
coordination is necessary to maintain interference protection with other
international satellite systems. DigitalGlobe's use of these frequencies is now
protected.


Import authorizations and foreign government licenses

         We may be required to obtain import authorizations or licenses from
foreign governments in order to market and distribute DigitalGlobe data and
products, and to operate ground station facilities outside the United States.
NOAA must also be notified of any significant agreements with foreign
governments or companies who provide for the tasking of satellites or sensors,
for real-time direct access to unenhanced data, or for high volume data
purchase agreements.


Employees

         As of December 31, 2001, we employed 208 full-time employees. Of these
employees, 45 were in data systems, 79 were in ground, product, and space
operations, 42 were in marketing, sales, and customer service, and 42 were in
executive, finance, and administration.

                                     16
<PAGE>

None of our employees are represented by a labor union or are covered by a
collective bargaining agreement. We consider our employee relations to be good.

Item 2.  Properties.

         Our principal executive offices consist of approximately 77,988 square
feet of leased space located in Longmont, Colorado. The term of this lease runs
through April 2005. Our monthly payments under this lease are approximately
$92,720. We lease a 5000 square foot warehouse for $3,373 per month. The term
of the lease expires on May 31, 2003. We also lease approximately ten acres for
our ground station located in Fairbanks, Alaska and 400 square feet of space
for our ground station located in Tromso, Norway. The term of the Alaska lease
expires on July 10, 2005 and the term of the Norway lease expires six months
following the cessation of QuickBird operations. Our payments under these
leases are approximately $4,000 semi-annually for the Alaska lease, and
approximately $15,000 (based on current exchange rates) annually for the Norway
lease.

Item 3.  Legal Proceedings.

         We are not currently a party to any material pending legal proceedings.

Item 4.  Submission of Matters to a Vote of Security Holders.

         On November 14, 2001, we held an annual stockholders' meeting for the
election of Directors. The names of the directors and the results of the vote
for such directors are described below:

Director                            For                       Withheld
--------                            ---                       ---------
Paul M. Albert Jr.                  72,778,599                20,069,004
Henry J. Driesse                    72,737,106                20,110,497
Donald E. Foley                     72,737,106                20,110,497
Anne Karalekas                      72,736,432                20,111,171
Takatoshi Kodaira                   72,785,035                20,062,569
Michael J. Petrick                  72,784,255                20,063,348
Herbert F. Satterlee III            72,778,599                20,069,004
Walter S. Scott                     72,769,017                20,078,586
Donald W. Vanlandingham             72,778,599                20,069,004

         Based on these voting results, each of the foregoing persons was
re-elected as a director.

         On November 15, 2001, we solicited the written consent of our
stockholders in lieu of a special meeting to approve an amendment of the
Certificate of Incorporation to extend by one year the period of time during
which our board can pay dividends to the holders of the Series A, B, and C
preferred stock in additional shares of A, B or C preferred stock, as the case
may be. The amendment also extends by one year the period of time at which our
board must begin to pay dividends to the holders of the Series A, B, or C
preferred stock in cash, if declared. There were 85,333,303 votes in favor of
the amendment and 7,525,281 votes that were withheld. There

                                     17
<PAGE>

were 17,514,925 Series A votes, 36,377,152 Series B votes, 31,347,438 Series C
votes and 93,789 common votes in favor of the amendment.

                                     PART II

Item 5. Market for the Company's Common Equity and Related Stockholder Matters.

      Market information. There currently is no established public trading
market for our common stock or preferred stock.

      Holders. As of December 31, 2001, our common stock and preferred stock
were issued and outstanding as follows:
                                                         Approximate
                          Shares         Shares          Number of Record
  Stock Issued            Authorized     Outstanding     Holders

Preferred Stock /(1)/     74,000,000      56,781,696       112
Common Stock             150,000,000         562,088        73

/(1)/As of December 31, 2001, the preferred stock consists of (i) 12 million
     authorized shares of 7% cumulative convertible redeemable preferred stock
     due 2009, Series A, par value $0.001 per share, of which 8,629,830 shares
     are issued; (ii) 12 million authorized shares of 7% cumulative convertible
     redeemable preferred stock due 2009, Series B, par value $0.001 per share,
     of which 8,629,830 shares are issued; and (iii) 50 million authorized
     shares of 8.5% cumulative convertible redeemable preferred stock due 2009,
     Series C, of which 39,522,036 shares are issued.

         Dividends. The following is a summary of our dividend policy with
respect to shares of our common and preferred stock.

Common stock.

         The holders of our common stock are entitled to receive ratably such
dividends as may be declared by the board of directors out of funds legally
available to be paid. We have not paid any dividends to the holders of our
common stock and do not intend to pay dividends to such holders in the
foreseeable future.

Series A and Series B preferred stock.

         The holders of our Series A preferred stock and Series B preferred
stock are entitled to receive cumulative dividends, whether or not declared by
our board of directors, at an annual rate of 7% of the liquidation preference
amount until no later than June 15, 2003. Such dividends are payable quarterly
on March 31, June 30, September 30, and December 31, and commenced on June 30,
1999. Such dividends may be paid, subject to certain limitations, at our
option, either in cash or in additional shares of Series A preferred stock or
Series B preferred stock, as applicable. After June 15, 2003, dividends will
accrue at an annual rate of 7% of the liquidation preference amount and will be
payable when, as, and if declared by the board of directors, in cash only. If
any dividend is not paid in full in cash on a quarterly payment date after June
15, 2003, the liquidation preference of the Series A preferred stock and Series
B preferred stock will be

                                     18
<PAGE>

increased by an amount equal to the product of (a) the amount per share not
paid divided by the total amount payable per share and (b) one quarter of the
dividend rate multiplied by the effective liquidation preference. Under our
amended and restated certificate of incorporation, we are prohibited from
paying dividends on any shares of stock having rights junior to the Series A
and Series B preferred stock until all accumulated dividends have been paid on
the Series A and Series B preferred stock.

Series C preferred stock.

         Until June 15, 2003, the holders of our Series C preferred stock are
entitled to cumulative dividends, whether or not declared by the board of
directors, at an annual rate of 8.5%. Such dividends are payable quarterly on
March 31, June 30, September 30, and December 31, and commenced on June 30,
1999. Such dividends may be paid, subject to certain limitations, at our
option, either in cash or in additional shares of Series C preferred stock.
After June 15, 2003, dividends will accrue at an annual rate of 8.5% of the
liquidation preference amount and will be payable when, as, and if declared by
the board of directors, in cash only. If any dividend is not paid in full in
cash on a quarterly payment date after June 15, 2003, the liquidation
preference of the Series C preferred stock will be increased by an amount equal
to the product of (a) the amount per share not paid divided by the total amount
payable per share and (b) one quarter of the dividend rate multiplied by the
effective liquidation preference. Under our amended and restated certificate of
incorporation, we are prohibited from paying dividends on any shares of stock
having rights junior to the Series C preferred stock until all accumulated
dividends have been paid on the Series C preferred stock.

Recent Sales of Unregistered Securities.

         The following is a summary of our transactions since January 1, 2001,
involving sales of our securities that were not registered under the Securities
Act of 1933, as amended:

         During fiscal year 2001, we granted options to purchase 775,740 shares
of common stock under our 1999 Equity Incentive Plan at an exercise price of
$0.25 per share. There were 366,670 shares of common stock and 9,201 shares of
Series C preferred stock issued upon exercise of options at exercise prices
ranging from $0.25 per share to $3.81 per share. There were 3,544,193 options
outstanding under the Company's four stock option plans. All options were
granted under Rule 701 promulgated under the Securities Act or, for those
employees who are our officers or directors or that are accredited investors,
Section 4(2) of the Securities Act.

         In June 2001, we issued 10,843,297 shares of Series C preferred stock
to holders of 13% Senior Discount Notes due 2007 in partial consideration for
those holders refraining from tendering their notes in our previous tender
offer. Each of the purchasers in this transaction was an accredited investor.
Accordingly, we relied on the exemptions from registration provided by
Regulation D promulgated under the Securities Act or Section 4(2) of the
Securities Act to effect this transaction. Morgan Stanley served as our
financial advisor in connection with these and related transactions and received
$1 million in connection with its advisory role.

                                     19
<PAGE>

         In June 2001, we issued 903,608 shares of Series C preferred stock to
Ball Aerospace, an accredited investor, in connection with its provision of
vendor financing. We relied on exemptions from registration provided by
Regulation D promulgated under the Securities Act or Section 4(2) of the
Securities Act to effect this transaction.

         Appropriate legends are affixed to the stock certificates issued in
the transactions listed above. Similar legends were imposed in connection with
any subsequent sales of any such securities. Each of the purchasers that are
our employees or directors had access to information through their employment
by us.  Each purchaser was given the opportunity to ask questions of and
request information from us. Each investor represented and acknowledged to us
in writing that it had this opportunity. Some of the purchasers asked questions
and requested information. We complied with all requests that we deemed
reasonable.

                                     20
<PAGE>

Item 6.  Selected Financial Data.

         The following selected financial data are qualified by reference to,
and should be read in conjunction with, our consolidated financial statements
and notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," included in Item 7 in this Annual Report
on Form 10-K. The consolidated balance sheet data as of December 31, 2000 and
2001, and consolidated statement of operations data for each of the three years
ended December 31, 2001 and for the period from January 1, 1995 (Inception) to
December 31, 2001, have been derived from our audited consolidated financial
statements and the notes thereto included in Item 8 in this Annual Report on
Form 10-K. The consolidated statement of operations data for the years ended
December 31, 1997 and 1998, and the consolidated balance sheet data as of
December 31, 1997, 1998, and 1999, are derived from our historical consolidated
financial statements not included in this Annual Report on Form 10-K.
Historical results may not be indicative of results for any future period.

<TABLE>
<CAPTION>
                                                                                                       Period From
                                                                                                    January 1, 1995
                                                             Year Ended December 31,                 (Inception) to
                                            ---------------------------------------------------------  December 31,
                                               1997        1998       1999        2000        2001        2001
                                            ----------  ---------  -----------  ---------  ----------  -----------
                                                                       (in thousands)
<S>                                         <C>         <C>        <C>          <C>        <C>         <c>
Consolidated Statement of Operations Data:
Revenue                                     $     437   $  1,809   $    5,913   $  3,336   $  12,009   $  28,397
                                            ----------  ---------  -----------  ---------  ----------  ----------
Cost of goods sold                                382      1,905        5,120      2,099       9,392      22,533
Selling, general, and administrative            8,588      4,975       12,763     15,333      15,116      65,196
Research and development                       19,121      9,113        6,956     13,442      11,910      83,846
Gain (loss) from impairment of fixed assets,
   net of insurance recoveries                (25,519)      (599)           -    107,608           -      81,490
Gain from arbitration settlement                    -      1,515            -          -           -       1,515
Gain (loss) from operations                   (53,173)   (13,268)     (18,926)    80,070     (24,409)    (60,173)
Interest expense                                  (86)    (1,340)      (5,482)    (4,492)     (4,726)    (16,215)
Interest income                                 2,528      1,688        4,089      4,104       2,883      18,233
Income tax provision                                -          -            -     (3,000)          -      (3,000)
Extraordinary loss on early extinguishment of
   debt, net of deferred tax benefit                -          -            -          -     (23,038)    (23,038)
                                            ----------  ---------  -----------  ---------  ----------  -----------
Net income (loss)                           $ (50,731)  $(12,920)  $  (20,319)  $ 76,682   $ (49,290)  $ (84,193)
                                            ==========  =========  ===========  =========  ==========  ===========
Other Consolidated Financial Data:
Capital expenditures                        $  54,271   $ 26,037   $   75,238   $ 82,640   $  72,999   $ 354,415
Cash provided (used) by operating activities  (14,192)   (10,864)      (6,420)   (18,891)    (79,268)   (152,156)
Cash provided (used) by investing activities  (68,290)    11,471      (97,070)   (57,534)    198,296     (56,356)
Cash provided (used) by financing activities   53,668     (1,972)     180,639        (43)   (116,445)    216,820
Ratio of earnings to fixed charges                  -          -            -      2.89x           -           -
Deficiency of earnings to fixed charges       (56,401)   (18,976)     (31,659)         -     (61,698)   (147,141)

Consolidated Balance Sheet Data (end of period):
Cash and cash equivalents                   $   6,410   $  5,045   $   82,193   $  5,726   $   8,309
Total assets                                  104,299     85,328      271,469    379,378     210,632
Total debt                                     51,511     49,804      167,148    195,485      66,844
Mandatorily redeemable preferred stock              -          -      129,978    141,246     158,267
Stockholders' equity (deficit)                 39,737     26,831      (40,114)    26,387     (30,198)
</TABLE>

                                     21
<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.

Overview

        We commenced development operations on March 31, 1995 with the
contribution of the net assets of WorldView Imaging Corporation and certain
assets of Ball Corporation. We plan to create and market a variety of
information products derived from satellite imagery of the earth's surface. We
successfully launched and deployed our QuickBird satellite on October 18,
2001.  We completed our initial on-orbit calibration and commission period and
commenced commercial operations on February 1, 2002.

        On April 8, 1999, we completed a recapitalization. As a result, all of
our existing common and preferred stock were converted into shares of Series C
preferred stock at varying conversion ratios. In connection with the
recapitalization, ITT Industries, Inc., Morgan Stanley & Co. Incorporated, and
entities affiliated with Capital Research and Management Company purchased
shares of our common stock, Series A preferred stock, and Series B preferred
stock for an aggregate purchase price of approximately $50 million. This
investment by the new equity partners caused the existing stockholders,
including Ball, to become minority owners. As a result, we may have experienced
a change in control. Also, we obtained the consent of holders of the notes to
amend the indenture governing the notes and change the terms of such
securities, including extending their maturity to March 1, 2005.

        On July 12, 1999, we completed a private offering of 199,000 units,
consisting of 13% notes and shares of preferred stock. Each unit consisted of a
13% note, which had an accreted value of $684.61 and a principal value at
maturity in 2007 of $1,000, and 49.095 shares of our 8.5% Series C convertible
preferred stock. The offering resulted in aggregate gross proceeds of
approximately $136 million. In August 2000, we exchanged all of the original
13% notes for registered 13% notes. We did not receive any proceeds from this
exchange offer.

        On February 28, 2001, as required by the indentures governing the notes
and our 12 1/2% notes, we offered to purchase all of our outstanding notes at
their accreted values per their respective indentures on the date of purchase,
using the insurance proceeds relating to the loss of our first QuickBird
satellite in November 2000. The offer expired on April 2, 2001 and we
repurchased $127.4 million in principal amount at maturity of the notes and all
outstanding 12 1/2% notes on April 3, 2001, resulting in an extraordinary loss
on early extinguishment of debt of approximately $23.0 million. The combined
repurchase price totaled $172.9 million.

        In connection with the purchase offer, we entered into the
Recapitalization Agreement with certain holders of the notes. Pursuant to the
Recapitalization Agreement, these noteholders agreed to refrain from tendering
their notes in the offer, thus allowing us to have the use of the funds that
would otherwise be used to repurchase their notes. Pursuant to the
Recapitalization Agreement, we also:

     .   granted registration rights to certain holders of notes and Series C
         preferred stock;

                                     22
<PAGE>

     .   obtained the consent of the holders of notes and amended the indenture
         governing the notes in certain respects;

     .   obtained $9 million of vendor financing from Ball Aerospace;

     .   amended our certificate of incorporation in certain respects;

     .   issued 10,843,297 additional shares of our Series C preferred stock to
         the holders of the notes that signed the Recapitalization Agreement and
         their assignees;

     .   purchased launch and in-orbit insurance for our QuickBird satellite;

     .   pledged the QuickBird satellite insurance in favor of the Bank of New
         York, as collateral agent for (a) the holders of notes and for Ball
         Aerospace and (b) the holders of our Series A preferred stock and
         Series B preferred stock.

                    We have realized significant operating losses and negative
earnings before interest, taxes, depreciation, and amortization, or EBITDA. We
expect our operating expenses to increase as we develop our QuickBird satellite
and imaging network, product and service lines, and customer base. We expect
that our revenue and operating results will vary significantly from period to
period.

         Given our growth strategy, we expect to realize significant operating
losses at least through the third quarter of 2002 due to anticipated
substantial operating expenses, including costs of operating and maintaining
our QuickBird satellite and related ground stations, costs of processing and
delivering imagery products, additional research and development expenses, and
expenditures for sales and marketing, as well as increased general and
administrative expenses. Our ability to generate operating income and cash flow
is primarily dependent upon the development of related ground systems, our
ability to develop a customer base and distribution channels for our imagery
products and services, and demand for our products and services. Demand and
market acceptance for new products and services is subject to a high level of
uncertainty. We cannot assure you that our products will achieve significant
market acceptance in existing imagery markets or that new markets anticipated
by DigitalGlobe will develop in the expected time periods, if at all.

         Initially, we expect to provide imagery primarily to foreign
governments, U.S. government agencies, and large commercial users. We will also
target local and municipal governments that currently use aerial and
low-resolution satellite imagery for mapping, environmental monitoring, and
land use and infrastructure planning. We expect that revenue from government
customers will account for a majority of our revenues for the first few years
after we begin selling products based on our QuickBird satellite imagery.
However, we believe that over the next several years, commercial sales will
account for an increasing portion of our revenue as our industry demonstrates
the utility of satellite imagery-based products.

         We began generating revenue from our satellite imagery in February
2002. In the first year of operations, we expect most of our revenues to come
from government customers who

                                     23
<PAGE>

enter into long-term contracts with us. Many customers have waited until our
QuickBird satellite was operational to enter into contracts with us.

         We expect that a number of our customers will eventually want to have
their own ground stations to receive imagery. However, we expect that many of
these customers will wait until full satellite operations are assured before
investing in new and upgraded ground stations. Although construction time
varies, it usually ranges from six months for an upgrade, to two years for a
new facility. Until these customers upgrade or construct their own ground
stations, they will need to receive delivery of our imagery through our ground
stations and distribution systems.  Critical Accounting Policies

Revenue

         Revenue is recognized when the product has been delivered to our
customers. We have generated our revenues primarily from the processing and
sale of geographic imagery purchased from third party suppliers. Now that our
satellite and production facilities are operational, we expect that our
principal source of revenue will be from the licensing of our own satellite
imagery and imagery enhancement for end users, value-added resellers, and
distributors.

         Seconds on Orbit contracts are designed to establish a fixed dollar
amount for priority tasking on the satellite, which is billed on a quarterly
basis, whether or not the rental time or resulting images are used. We believe
that our first-come, first-served approach to contracting Seconds on Orbit on
our QuickBird satellite will appeal to customers who want high priority
tasking.  We have designed our Seconds on Orbit contracts to establish
long-term relationships with customers and to encourage them to make
significant investments in their ground systems and make significant upfront
cash payments.  Our Seconds on Orbit sales represent a majority of our customer
commitments for the sale of QuickBird data imagery to date, and we expect that
Seconds on Orbit will represent our largest source of revenue over the next
several years.

         We believe that our planned value-added imagery products represent the
greatest potential for long-term growth. Such products include licensing of
archived DigitalGlobe and third party imagery, and image processing and
enhancement services, and market specific information products. Since
familiarity with high-resolution satellite imagery is limited, we expect the
markets for these products to develop more slowly than for our Seconds on Orbit
and customer requested image products. However, in the longer term, we believe
these products have the potential for significant revenue and margins.


Cost of Goods Sold

         We do not believe that our historical costs are indicative of our
anticipated costs. Cost of goods sold for 2001 and prior periods includes third
party geographic imagery sold under contract. Now that our satellite and
production facilities are operational, cost of goods sold will also include
expenses incurred to operate the data and value-added production facilities,
ground stations, and satellite operations, as well as depreciation for these
facilities. In addition, cost of goods sold will include depreciation of the
satellite and ground systems on a straight-line basis over seven years.

                                     24
<PAGE>

         We do not expect our operating cost of goods sold, including labor in
production, satellite operations, and ground operations, to vary significantly
with revenues. We expect the costs associated with the purchase and resale of
third party data to increase as sales of these products increase.


Selling, General, and Administrative Expenses

         Selling, general, and administrative expenses include the salaries,
benefits, and sales commissions of our distribution, marketing, and customer
service personnel, as well as expenses associated with marketing, advertising,
and sales programs to support distributor and end user sales. We expect these
expenses to increase significantly in the future due to sales staff additions
and increased marketing efforts.

         We intend to focus our direct selling efforts on the United States
government, foreign national security markets, local governments, and large
commercial users. We will market to other users through market specific
distributors, value-added resellers, and e-commerce channels. We expect to
perform certain value-added services internally, and intend to distribute our
imagery to end users through value-added resellers. These resellers can process
such data into complex maps and other products for specific applications. As a
result, we can limit our initial sales and support infrastructure and leverage
the value-added resellers' existing market access and customer relationships,
particularly in markets requiring extensive product development, customer
education, and long sales cycles.

         Selling, general, and administrative expenses also include the
salaries and benefits of the executive staff, accounting, and other corporate
expenses.  We expect these expenses to increase in the future as we begin our
planned commercial operations. As these expenses are primarily fixed, we
believe they will decrease as a percentage of revenue over time.


Research and Development

         Research and development costs are principally expensed as incurred
and reflect the cost of the design of satellites, data processing, value-added
production facilities, and ground station systems. We record as research and
development expense all engineering costs associated with the preliminary
design of our satellites where we maintain the risk associated with design
failure.  Once the design of the satellite is stable and not subject to
significant additional modifications, we capitalize additional costs as
investments in satellite equipment. Also included are the costs of research and
development for ongoing operational improvements and new product and
application development. It is our intention to continue to fund the
development of new products, processes, and image applications in addition to
developing next generation satellite systems.

                                     25
<PAGE>

Satellite Failure

         Due to the loss of our first QuickBird satellite on November 20, 2000,
we wrote off approximately $157 million of satellite costs in fiscal 2000. The
impact was a decrease in balance sheet values, specifically, construction in
progress (satellite) assets in the year-end consolidated financial statements
for 2000. We also recognized in fiscal 2000 a receivable in the amount of $265
million for insurance proceeds due to the loss of our first QuickBird
satellite, resulting in a net gain on the loss of our satellite of
approximately $108 million.

Income Taxes

         In connection with our start up expenditures and costs related to the
development of the EarlyBird and QuickBird satellites, we have generated
significant net operating losses. Our ability to use these net operating losses
to offset net income that we may earn in the future may be limited, as we may
have experienced an ownership change as defined in the Internal Revenue Code as
a result of subsequent stock issuances.


Capital Expenditures

         Property and equipment are recorded at cost. Pursuant to SFAS No. 34,
Capitalization of Interest Cost, the cost of significant assets includes
capitalized interest incurred during the construction and development period.
The costs of satellites under construction are capitalized during the
construction phase, assuming the eventual successful launch and in-orbit
operation of the satellite. If a satellite were to fail during launch or while
in-orbit, the resultant loss would be charged to expense in the period such
loss was incurred. The amount of any such loss would be reduced to the extent
of insurance proceeds received as a result of the launch or in-orbit failure.

         Depreciation is computed using the straight-line method over the
estimated useful lives of the respective assets (three to seven years).
Leasehold improvements and assets acquired pursuant to capital-lease
obligations are amortized on a straight-line basis over the shorter of their
useful lives or lease terms; such amortization is included in depreciation
expense. Repairs and maintenance are expensed as incurred.

         We have incurred significant capital expenditures to construct and
launch the second QuickBird satellite, and upgrade both our ground stations and
other operating systems. Our QuickBird satellite has now begun initial
operations and has an expected useful life of seven years.

         We have begun to develop plans for the satellites that will augment
our QuickBird satellite capabilities. The first replacement satellite is
tentatively planned for launch by 2005. We expect to incur significant research
and development costs and capital expenditures to develop these next generation
satellites. We believe these satellites will provide significant additional
capacity and significantly increase our revenue opportunities compared to the
QuickBird system.

                                     26
<PAGE>

Results of Operations

Year ended December 31, 2000 compared with year ended December 31, 2001

         Revenue. Our revenue has been generated primarily from the processing
and sale of geographic imagery purchased from third-party suppliers. These
sources of revenue increased from $3.3 million for the year ended December 31,
2000 to $12.0 million for the year ended December 31, 2001, due to increased
quantities of images sold. Revenue from the resale of third-party data was $2.7
million for 2000 and $11.8 million for 2001. Revenue from service contracts was
approximately $600,000 for 2000 and $250,000 for 2001.

         Cost of Goods Sold. Our cost of goods sold includes third party
geographic imagery sold under contract. As a result of our increased revenue,
our cost of goods sold consequently increased from $2.1 million for the year
ended December 31, 2000 to $9.4 million for the year ended December 31, 2001.
Costs for both periods were primarily the direct costs associated with
obtaining third-party geographic imagery for resale.

         Selling, General, and Administrative Expenses. Selling, general, and
administrative expenses were $15.3 million for the year ended December 31, 2000
and $15.1 million for the year ended December 31, 2001. We expect these costs
to increase in the future as we increase staff levels and implement new
procedures as we begin full-scale operations and market entry of our products
and services.

         Research and Development. Our research and development costs were
$13.4 million for the year ended December 31, 2000 and $11.9 million for the
year ended December 31, 2001. These expenses decreased due to staff reductions
and reduced operating activities following the loss of our first QuickBird
satellite.

         Loss (Gain) from Impairment of Fixed Assets, net of insurance
recoveries. No gains or losses from impairment of fixed assets were recognized
in 2001, but due to the loss of our first QuickBird satellite on November 20,
2000, we wrote off approximately $157 million of QuickBird costs in 2000. The
impact was a decrease in balance sheet values, specifically, construction in
progress (satellite) assets in the year-end consolidated financial statements
for 2000. We also recognized in the year 2000, a receivable in the amount of
$265 million for insurance proceeds due to the loss of the first QuickBird
satellite, resulting in a net gain on the loss of our satellite of
approximately $108 million.

         Interest Expense. Interest expense was $4.5 million for the year ended
December 31, 2000 and $4.7 million for the year ended December 31, 2001. These
amounts are net of interest capitalized as part of the cost of building the
QuickBird satellites. Interest expense is expected to increase in 2002
due to the cessation of interest capitalization.

         Interest Income. Interest income decreased from $4.1 million for the
year ended December 31, 2000 to $2.9 million for the year ended December 31,
2001. Higher average investment balances outstanding during 2001 were offset by
lower rates of return.

                                     27
<PAGE>

         Provision for Income Taxes. Due to losses incurred each year since
inception, there was no provision for income taxes recorded until 2000. We
recorded a provision for income taxes in 2000 for alternative minimum taxes. We
had net operating loss carryforwards for federal income tax purposes of $134.5
million and $171.5 million as of December 31, 2000 and 2001, respectively;
however, such deferred tax benefits and the fiscal 2000 alternative minimum tax
credit were not recorded as assets because we have no history of profitability.
In addition, utilization of net operating loss carryforwards may be subject to
limitation, depending on changes in our ownership.

         Net Income ( Loss). We had net income of $76.7 million for the year
ended December 31, 2000 and a net loss of $49.3 million for the year ended
December 31, 2001. The results for fiscal 2000 were favorably impacted by the
gain recognized on the satellite insurance recovery. The results for fiscal
2001 were unfavorably impacted by the extraordinary loss on early
extinguishment of debt incurred in April 2001, as discussed in Note 1 to our
consolidated financial statements.


Year ended December 31, 1999 compared with year ended December 31, 2000

         Revenue. Revenue decreased from $5.9 million in 1999 to $3.3 million
in 2000. The decrease is attributable to a lack of contract revenue during the
last three quarters of 2000. New and existing contracts contained few scheduled
product deliveries during that time, so little revenue was realized. Revenue
from the resale of third-party data was $5.5 million for 1999 and $2.7 million
for 2000. Revenue from service contracts and sales from archives was $400,000
for 1999 and $600,000 for 2000.

         Cost of Goods Sold. Our cost of goods sold decreased from $5.1 million
in 1999 to $2.1 million in 2000. Costs for both periods primarily consisted of
the direct costs associated with obtaining third-party geographic imagery for
resale. We do not believe that these costs reflect our anticipated costs of
generating satellite imagery once our initial satellite and production
facilities are operational, or when acquiring imaging and other data from other
sources.

         Selling, General, and Administrative Expenses. Selling, general, and
administrative expenses were $12.8 million in 1999 and $15.3 million in 2000.
General and administrative expenses remained relatively consistent at $9.9
million for 1999 and $9.6 million for 2000. Selling and marketing expenses
increased from $2.9 million in 1999 to $5.7 million in 2000 as a result of
increases in sales staff and increased marketing efforts in preparation for
market entry of the Company's products and services, originally anticipated for
year end 2000.

         Research and Development. Research and development costs increased
from $7.0 million for the year ended December 31, 1999 to $13.4 million for the
year ended December 31, 2000. The increase was attributable to additional staff
and systems development for launch and satellite systems.

         Loss (Gain) from Impairment of Fixed Assets, net of insurance
recoveries. No gains or losses from impairment of fixed assets were recognized
in 1999, but due to the loss of our QuickBird 1 satellite on November 20, 2000,
we wrote off approximately $157 million of

                                     28
<PAGE>

QuickBird 1 costs in 2000. The impact was a decrease in balance sheet values,
specifically, construction in progress (satellite) assets in the year end
consolidated financial statements for 2000.  We also recognized in the year
2000, a receivable in the amount of $265 million for insurance proceeds due to
the loss of QuickBird 1, resulting in a net gain on the loss of our satellite
of approximately $108 million.

         Interest Expense. Interest expense decreased from approximately $5.5
million in 1999 to $4.5 million in 2000, as a result of increased
capitalization of interest on the higher average balance of construction in
progress during 2000.

         Interest Income. Interest income of approximately $4.1 million was
substantially consistent in 1999 and 2000. Cash available for investment has
steadily declined since the unit offering in July 1999 as we have drawn upon
these amounts to fund our operations. Although a greater amount of cash was
available for investment in the latter half of 1999, interest income for 2000
was approximately the same due to having more funds available during a longer
portion of 2000 than in 1999 and overall higher interest rates in 2000.

         Provision for Income Taxes. Due to losses incurred each year since
inception, there was no provision for income taxes recorded until 2000. We
recorded a provision for income taxes in 2000 for alternative minimum taxes. We
had net operating loss carryforwards of $89.0 million as of December 31, 1999
and $134.5 million as of December 31, 2000; however, such deferred tax benefits
and the fiscal 2000 alternative minimum tax credit were not recorded as assets
because we have no history of profitability. In addition, utilization of net
operating loss carryforwards may be subject to limitation, depending on changes
in our ownership.

         Net Income (Loss). We had a net loss of $20.3 million in 1999 versus
net income of $76.7 million in 2000. Our net income in 2000 was the result of
the recognition of the insurance proceeds from the loss of our QuickBird 1
satellite.


Year ended December 31, 1998 compared with year ended December 31, 1999

         Revenue. Our revenue increased from $1.8 million in 1998 to $5.9
million in 1999. Our revenue generated from service contracts and sales from
archives for 1998 and 1999 was $400,000 for each year.

         Cost of Goods Sold. Our cost of goods sold increased from $1.9 million
in 1998 to $5.1 million in 1999. Our costs for third-party geographic imagery
increased from $1.2 million in 1998 to $5.1 million in 1999. Our costs for
providing services under other service contracts decreased from $700,000 in
1998 to zero in 1999. We do not believe that these costs reflect our
anticipated costs of generating satellite imagery once our initial satellite
and production facilities are operational, or when acquiring imaging and other
data from other sources.

         Selling, General, and Administrative Expenses. Selling, general, and
administrative expenses increased from $5.0 million in 1998 to $12.8 million in
1999. General and administrative expenses increased from $3.2 million in 1998
to $9.9 million in 1999. These increased during 1999 as we implemented new
systems and procedures in preparation for full-

                                     29
<PAGE>

scale operations. Selling and marketing expenses increased from $1.8 million in
1998 to $2.9 million in 1999. These increased in 1999 as a result of increases
in sales staff and increased marketing efforts in preparation for anticipated
market entry of our products and services in 2000.

         Research and Development. Research and development costs decreased
from $9.1 million in 1998 to $7.0 million in 1999. Costs associated with the
design of the satellites decreased from $3.3 million in 1998 to $2.5 million in
1999.  The remaining research and development costs were associated with the
design of the archival and value-added production facilities for image data,
ground stations, and satellite control operations.

         Interest Expense. Interest expense increased from approximately $1.3
million in 1998 to $5.5 million in 1999, as a result of increased
capitalization of interest on the higher average balance of construction in
progress during 1999 and the additional debt outstanding.

         Interest Income. Interest income increased from approximately $1.7
million in 1998 to $4.1 million in 1999. As a result of the unit offering in
July of 1999, there was a significantly greater amount of cash available for
investment during the latter half of 1999.

         Provision for Income Taxes. Due to losses incurred during 1999, there
was no provision for income taxes recorded. As of December 31, 1999, we had
approximately $89.0 million in net operating loss carryforwards; however, such
deferred tax benefits were not recorded as an asset because we have no history
of profitability. In addition, utilization of net operating loss carryforwards
may be subject to limitation, depending on changes in our ownership.

         Net Income (Loss). We had net losses of $12.9 million in 1998 and
$20.3 million in 1999.


Liquidity and Capital Resources

         Net cash used by operating activities increased from $18.9 million for
the year ended December 31, 2000 to $79.3 million for the year ended December
31, 2001. This increase was primarily the result of the payment of accrued
interest and the extraordinary loss incurred in conjunction with the redemption
of notes in 2001. The accrued liabilities at December 31, 2001 include the
remaining premiums of $5.7 million due in April 2002 for the launch and
on-orbit insurance related to our second QuickBird satellite.

         Net cash used by investing activities of $57.5 million for the year
ended December 31, 2000 increased to net cash provided by investing activities
of $198.3 million for the year ended December 31, 2001. This increase was
primarily the result of the receipt of insurance proceeds from the loss of our
first QuickBird satellite.

         Net cash used by financing activities increased from $42,815 for the
year ended December 31, 2000 to $116.4 million for the year ended December 31,
2001. This increase was primarily the result of the redemption of notes in 2001.

                                     30
<PAGE>

         In February 2001, we secured a commitment for a $20.75 million
borrowing facility with Boeing Capital Services Corporation. If drawn, the
facility would accrue interest at LIBOR plus 4% to 6%, depending upon the
duration of the borrowing. The commitment is subject to the negotiation and
execution of a credit agreement and DigitalGlobe having $125 million of
contractually committed orders or some form of facility guarantee in place. As
we have not yet met these requirements, these funds are not currently
available.  The facility is available through September 30, 2002, will have a
two and a half year term and has an annual commitment fee of 50 basis points
payable quarterly in arrears. At December 31, 2001, we had incurred deferred
financing costs of approximately $500,000 related to this facility.

         The Company's contractual obligations at December 31, 2001, including
future interest payment requirements on debt obligations, were as follows:


<TABLE>
<CAPTION>
                                                                                                  2006 and
                                     2002            2003            2004           2005         Thereafter
                                  ----------      ----------      ----------      ---------      ----------
<S>                                <C>             <C>             <C>             <C>            <C>
Long-term debt                     $  7,067        $ 12,648        $  9,315        $ 9,315        $ 85,622
Accounts payable and
   accrued liabilities*               15,719               -               -              -               -
Operating leases                      1,008             970             913            350               -
Unconditional purchase
   obligations                        4,545              45               -              -               -
Other                                 2,000               -               -              -               -
                                  ----------      ----------      ----------      ---------      ----------
Total contractual obligations      $ 30,339        $ 13,663        $ 10,228        $ 9,665        $ 85,622
                                  ==========      ==========      ==========      =========      ==========
</TABLE>
* This amount includes our final insurance premium of $5.7 million due in April
  2002. If we do not make the premium payment, we will be in default of the
  indenture governing our outstanding notes.


         On January 25, 2002, the Company acquired exclusive rights for the
distribution of satellite products and services to the United States
agriculture and defense markets from SPOT Image Corporation, a subsidiary of
SPOT Image S.A., in exchange for approximately $50.0 million of cash and
certain data purchase commitments. The data purchase commitments vary by period
during the six and one-half year term of the agreement. If we do not meet 80%
of our data purchase obligations after any contract year of the agreement, we
may terminate the agreement. However, upon termination we remain obligated for
45% of the next year's minimum data purchase commitment. Minimum payments under
the agreement are currently approximately $7.0 million and $3.8 million in 2002
and 2003, respectively.

         We do not expect to generate positive cash flow from operations until
at least the third quarter of 2002. Accordingly, our existing capital resources
will not be sufficient to meet our anticipated cash needs in fiscal 2002,
including the payment of an insurance premium due in April 2002 as set forth in
the above contractual obligation table. We believe that we currently have an
agreement in principle with our existing investors to loan to us funds
sufficient to meet our anticipated cash needs in fiscal 2002 and beyond. Failure
to consummate the agreement in principle or obtain additional financing capital
when needed would significantly diminish or eliminate our ability to continue as
a going concern.

                                     31
<PAGE>

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

         We invest our cash and cash equivalents and restricted investments in
short-term, U.S. dollar interest-bearing, investment grade securities with
maturities less than 90 days. As of December 31, 2001, the interest rates on
these investments have not fluctuated more than one percentage point since they
were purchased. We do not currently hold any derivative instruments and do not
engage in hedging activities. Also, we are not obligated for any variable
interest rate debt or lines of credit, and currently do not generally enter
into transactions denominated in a foreign currency. Therefore, our exposure to
interest rate and foreign exchange fluctuations is minimal.


Item 8.  Financial Statements and Supplementary Data.

                          INDEX TO FINANCIAL STATEMENTS

                                                                           Page
Report of Independent Accountants                                            33
Consolidated Balance Sheet                                                   34
Consolidated Statement of Operations                                         35
Consolidated Statement of Cash Flows                                         36
Consolidated Statement of Stockholders' Equity (Deficit)                     37
Notes to Consolidated Financial Statements                                   38

                                     32
<PAGE>

EarthWatch Incorporated, dba DigitalGlobe
(A Development Stage Company)

Report of Independent Accountants
-------------------------------------------------------------------------------


To the Board of Directors and Stockholders of EarthWatch Incorporated, dba
DigitalGlobe:

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of stockholders' equity (deficit) and of
cash flows present fairly, in all material respects, the financial position of
EarthWatch Incorporated (a development stage company) and its subsidiaries
("DigitalGlobe") at December 31, 2000 and 2001, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001 and for the period from January 1, 1995 (Inception) to
December 31, 2001, in conformity with accounting principles generally accepted
in the United States of America. These financial statements are the
responsibility of the company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has recently begun its planned principal
operations and without significant cash flows being generated from operations
it does not currently have sufficient resources with which to sustain
operations on an on-going basis. This raises substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to this matter are also described in Note 1. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.


/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Denver, Colorado
March 1, 2002

                                     33
<PAGE>

EarthWatch Incorporated, dba DigitalGlobe
(A Development Stage Company)

Consolidated Balance Sheet
===============================================================================

<TABLE>
<CAPTION>
                                                                                                        December 31,
                                                                                                ---------------------------------
                                                                                                      2000              2001
                                                                                                ---------------  ----------------
                                               ASSETS
<S>                                                                                             <C>               <C>
Current Assets:
    Cash and cash equivalents                                                                   $    5,725,779    $    8,308,566
    Accounts receivable, net of allowance for doubtful accounts of zero                                251,408         2,002,941
    Insurance proceeds receivable - restricted                                                     265,000,000                 -
    Investment securities - restricted                                                               6,295,382                 -
    Other current assets                                                                               398,101         1,471,752
                                                                                                ---------------  ----------------
        Total current assets                                                                       277,670,670        11,783,259
                                                                                                ---------------  ----------------
Property, plant, and equipment:
    Construction in progress                                                                        89,716,474       182,349,821
    Computer equipment and software                                                                 15,365,444         8,247,329
    Machinery and equipment                                                                          5,770,640         4,016,110
    Furniture and fixtures                                                                           1,281,911         1,400,535
                                                                                                ---------------  ----------------
        Total property, plant, and equipment                                                       112,134,469       196,013,795
    Accumulated depreciation and amortization                                                      (15,419,714)       (8,262,828)
                                                                                                ---------------  ----------------
        Net property, plant, and equipment                                                          96,714,755       187,750,967
                                                                                                ---------------  ----------------

Debt issuance costs, net                                                                             4,682,127        11,008,165
Other assets                                                                                           310,664            89,971
                                                                                                ---------------  ----------------
        TOTAL ASSETS                                                                            $  379,378,216    $  210,632,362
                                                                                                ===============  ================

LIABILITIES, MANDATORY REDEEMABLE PREFERRED STOCK, AND STOCKHOLDERS' EQUITY (DEFICIT)
Liabilities
Current Liabilities:
    Accounts payable                                                                            $   11,289,385    $    3,132,960
    Accounts payable to related parties                                                                982,232           128,253
    Accrued liabilities                                                                              3,988,060        11,757,356
    Accrued liabilities to related party                                                                     -           700,000
    Current portion of long-term debt                                                              195,484,650         5,971,025
                                                                                                ---------------  ----------------
        Total current liabilities                                                                  211,744,327        21,689,594
Long-term debt, net                                                                                          -        60,872,872
                                                                                                ---------------  ----------------
        Total liabilities                                                                          211,744,327        82,562,466
                                                                                                ---------------  ----------------

Commitments (Note 10)
Mandatorily redeemable preferred stock due 2009
    7% Cumulative convertible - Series A; $.001 par value; 10,000,000  and 12,000,000 shares
       authorized and 8,051,273, and 8,629,830 shares issued and outstanding as of December
       31, 2000 and 2001, Respectively; aggregate liquidation preference of $30,204,405 as of
       December 31, 2001                                                                            27,473,699        29,584,007
    7% Cumulative convertible - Series B; $.001 par value; 10,000,000 and 12,000,000 shares
       authorized  and 8,051,273, and 8,629,830 shares issued and outstanding as of December
       31, 2000 and 2001, respectively; aggregate liquidation preference of $30,204,405 as
       of December 31, 2001                                                                         27,473,699        29,584,007
    8.5% Cumulative convertible - Series C; $.001 par value; 25,000,000 and 50,000,000 shares
       authorized and 25,000,000, and 39,522,036 shares issued and outstanding as of December
       31, 2000 and 2001, respectively; aggregate liquidation preference of $138,327,126 as
       of December 31, 2001                                                                         86,298,993        99,099,453
                                                                                                ---------------  ----------------
        Total mandatorily redeemable preferred stock                                               141,246,391       158,267,467
                                                                                                ---------------  ----------------

Stockholders' equity (deficit)
    Common stock; $.001 par value; 100,000,000 and 150,000,000 shares authorized and 195,420
      and 562,088 shares issued and outstanding at December 31, 2000 and 2001, respectively                195               562
    Additional paid-in capital                                                                      61,824,829        54,327,601
    Deferred stock compensation                                                                       (534,600)         (332,636)
    Deficit accumulated during the development stage                                               (34,902,926)      (84,193,098)
                                                                                                ---------------  ----------------
        Total stockholders' equity (deficit)                                                        26,387,498       (30,197,571)
                                                                                                ---------------  ----------------
        TOTAL LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK, AND
            STOCKHOLDERS' EQUITY (DEFICIT)                                                      $  379,378,216    $  210,632,362
                                                                                                ===============  ================
</TABLE>

The accompanying notes are in integral part of these consolidated financial
statements.

                                     34
<PAGE>

EarthWatch Incorporated, dba DigitalGlobe
(A Development Stage Company)

Consolidated Statement of Operations
===============================================================================

<TABLE>
<CAPTION>
                                                                                                       Period from
                                                                                                     January 1, 1995
                                                              Year Ended December 31,                 (Inception) to
                                                 --------------------------------------------------     December 31,
                                                       1999              2000             2001              2001
                                                 ----------------- ---------------- ---------------- -----------------

<S>                                               <C>               <C>             <C>               <C>
Revenue                                           $    5,913,310    $   3,336,052   $   12,009,472    $    28,396,963

Cost of goods sold                                     5,120,575        2,098,513        9,392,616         22,532,855
                                                 ----------------- ---------------- ---------------- -----------------
    Gross profit (loss)                                  792,735        1,237,539        2,616,856          5,864,108
                                                 ----------------- ---------------- ---------------- -----------------

Expenses:
  Selling, general, and administrative                12,762,636       15,332,973       15,115,732         65,196,247
  Research and development                             6,956,244       13,442,214       11,910,026         83,845,808
  Loss (gain) from impairment of fixed assets,
    net of insurance recoveries                                -     (107,607,601)               -        (81,489,890)
  Gain from arbitration settlement                             -                -                -         (1,514,776)
                                                 ----------------- ---------------- ---------------- -----------------
    Total expenses                                    19,718,880      (78,832,414)      27,025,758         66,037,389
                                                 ----------------- ---------------- ---------------- -----------------

Gain(loss)from operations                            (18,926,145)      80,069,953      (24,408,902)       (60,173,281)
Interest expense                                      (5,481,820)      (4,492,399)      (4,726,377)       (16,215,287)
Interest income                                        4,089,199        4,104,378        2,883,472         18,233,835
                                                 ----------------- ---------------- ---------------- -----------------
    Income (loss) before provision
      for income taxes                               (20,318,766)      79,681,932      (26,251,807)       (58,154,733)

Provision for income taxes                                     -       (3,000,000)              -          (3,000,000)
                                                 ----------------- ---------------- ---------------- -----------------
    Loss before extraordinary loss on early
      extinguishment of debt                         (20,318,766)      76,681,932      (26,251,807)       (61,154,733)

Extraordinary loss on early extinguishment of debt             -                -      (23,038,365)       (23,038,365)
                                                 ----------------- ---------------- ---------------- -----------------
    Net income (loss)                                (20,318,766)      76,681,932      (49,290,172)       (84,193,098)

Mandatorily redeemable preferred stock
  dividends and accretion                             (6,690,537)     (11,268,058)      (7,623,552)       (25,582,147)
                                                 ----------------- ---------------- ---------------- ------------------
    Net income (loss) attributable to
      common stockholders                         $  (27,009,303)   $  65,413,874   $  (56,913,724)   $  (109,775,245)
                                                 ================= ================ ================ ==================
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
  statements.

                                     35
<PAGE>

EarthWatch Incorporated, dba DigitalGlobe
(A Development Stage Company)

Consolidated Statement of Cash Flows
===============================================================================

<TABLE>
<CAPTION>
                                                                                                                    Period from
                                                                                                                  January 1, 1995
                                                                                                                   (Inception) to
                                                                             Year Ended December 31,                 December 31,
                                                                  -----------------------------------------------
                                                                        1999            2000            2001             2001
                                                                  ---------------- -------------- ---------------  ---------------
<S>                                                                <C>             <C>            <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)                                                  $ (20,318,766)  $ 76,681,932   $ (49,290,172)   $ (84,193,098)
Adjustments to reconcile net loss to net cash provided (used) by
   operating activities:
  Depreciation expense                                                 3,885,611      3,775,680       3,370,616       20,372,361
  Non-cash interest expense                                            4,752,339      4,428,974       4,725,976       14,823,356
  Non-cash extraordinary loss on early extinguishment of  debt                 -              -       3,148,098        3,148,098
  Non-cash (gain) loss from disposals and impairments of property
    plant, and equipment, net of insurance recoveries                      3,346   (107,607,601)              -      (79,886,959)
  Non-cash stock compensation                                                  -        921,400         201,964        1,123,364
  Changes in assets and liabilities:
    Accounts receivable, net                                             (47,995)       516,621      (1,751,533)      (1,003,816)
    Other assets                                                        (458,088)       588,541        (852,958)      (1,339,349)
    Accounts payable                                                   8,001,287     (1,018,055)     (8,156,425)       2,620,351
    Accounts payable to related parties                                 (763,291)       336,768        (853,979)         128,253
    Accrued interest payable to related parties                                -              -     (38,279,332)     (38,279,332)
    Accrued liabilities                                               (1,474,643)     2,484,652       7,769,296        9,630,566
    Accrued liabilities to related party                                       -              -         700,000          700,000
                                                                  ---------------- -------------- ---------------  ---------------

      Net cash provided (used) by operating activities                (6,420,200)   (18,891,088)    (79,268,449)    (152,156,205)
                                                                  ---------------- -------------- ---------------  ---------------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investment securities                                   (27,686,994)              -   (236,760,935)    (281,909,267)
Proceeds from maturities of investment securities                      5,853,910      25,105,946    243,056,317      281,751,173
Proceeds from sales of property, plant, and equipment                      1,213               -              -        4,216,978
Insurance proceeds from loss of satellites                                     -               -    265,000,000      294,000,000
Construction in progress additions                                   (72,681,412)    (78,888,733)   (71,225,666)    (337,079,620)
Other property, plant, and equipment additions                        (2,557,024)     (3,750,845)    (1,773,479)     (17,334,947)
                                                                  ---------------- -------------- ---------------  ---------------

      Net cash provided (used) by investing activities               (97,070,307)    (57,533,632)   198,296,237      (56,355,683)
                                                                  ---------------- -------------- ---------------  ---------------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from (payments related to) issuance of long-term notes, net  97,450,086               -     (1,830,418)     143,887,956
Proceeds from issuance of preferred and common stock, net             83,512,114          49,929        126,701      191,299,035
Cash acquired in merger                                                        -               -              -          916,457
Principal payments on debt                                              (322,984)        (92,744)  (114,741,284)    (119,282,994)
                                                                  ---------------- -------------- ---------------  ---------------

      Net cash provided (used) by financing activities               180,639,216         (42,815)  (116,445,001)     216,820,454
                                                                  ---------------- -------------- ---------------  ---------------

      Net increase (decrease) in cash and cash equivalents            77,148,709     (76,467,535)     2,582,787        8,308,566
Cash and cash equivalents, beginning of period                         5,044,605      82,193,314      5,725,779                -
                                                                  ---------------- -------------- ---------------  ---------------
Cash and cash equivalents, end of period                           $  82,193,314   $   5,725,779  $   8,308,566    $   8,308,566
                                                                  ================ ============== ===============  ===============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  Interest paid                                                    $   3,150,575   $       3,153  $         799    $  12,672,460

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
  Assets acquired pursuant to capital-lease and  financing
     obligations                                                   $           -   $           -  $   9,000,000    $  13,599,935
  Net book value of assets acquired in merger                                  -               -              -        4,290,496
  Liabilities assumed in merger                                                -               -              -        3,738,588
  Stockholder advances converted to equity                                     -               -              -        1,030,000
  Property in-kind contributed by stockholder                                  -               -              -        7,521,028
  Non-cash interest capitalized in construction in progress           11,340,000      24,328,936     12,407,681       59,947,617
  Issuance of mandatorily redeemable preferred stock                  39,765,364      10,940,902     15,667,528       66,373,794
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
  statements.

                                     36
<PAGE>

 EarthWatch Incorporated, dba DigitalGlobe
(A Development Stage Company)

Consolidated Statement of Stockholders' Equity (Deficit)
===============================================================================

<TABLE>
<CAPTION>

                                                        Convertible                 Convertible                Convertible Senior
                                                          Series A                    Series B                     Series C
                                                       Preferred Stock             Preferred Stock               Preferred Stock
                                             -------------------------------  --------------------------   ------------------------
                                                 Shares           Amount         Shares         Amount        Shares       Amount
                                             -------------  ----------------  ----------  --------------   ----------  ------------
<S>                                           <C>           <C>                 <C>       <C>             <C>          <C>
Balance at January 1, 1995 (inception)                  -   $           -             -   $          -             -   $        -
Issuance of stock in exchange for future
   cash contributions and contributions
   of property in-kind                          8,000,000      14,400,000             -              -             -            -
Contribution of net assets in merger            5,362,285         551,908             -              -             -            -
Issuance of common stock for services
   and for stock options exercised                      -               -             -              -             -            -
Issuance of preferred stock                     5,475,001      21,712,635       189,040      1,890,400             -            -
Property in-kind, conversion of debt, and
   cash contributions from stockholder                  -               -             -              -             -            -
Net and comprehensive income (loss)                     -               -             -              -             -            -
                                             -------------  ----------------  ----------  --------------   ----------  ------------

Balance at December 31, 1995                   18,837,286      36,664,543       189,040      1,890,400             -            -
Restatement of capital stock and additional
   paid-in capital for reincorporation as
   of January 1, 1996                                   -     (36,645,706)            -     (1,890,211)            -            -
Issuance of stock in exchange for property
   in-kind and other, net                         513,124             513        22,260             22             -            -
Issuance of preferred stock                             -               -       100,000            100     7,000,000        7,000
Property in-kind contributed by stockholder             -               -             -              -             -            -
Net and comprehensive income (loss)                     -               -             -              -             -            -
                                             -------------  ----------------  ----------  --------------   ----------  ------------

Balance at December 31, 1996                   19,350,410          19,350       311,300            311     7,000,000        7,000
Issuance of common stock                                -               -             -              -             -            -
Issuance of common stock for services
   and for stock options exercised                      -               -             -              -             -            -
Issuance of preferred stock                             -               -             -              -             -            -
Other                                                   -               -             -              -             -            -
Net and comprehensive income (loss)                     -               -             -              -             -            -
                                             -------------  ----------------  ----------  --------------   ----------  ------------

Balance at December 31, 1997                   19,350,410          19,350       311,300            311     7,000,000        7,000
Issuance of preferred and common stock for
   stock options exercised                         17,916              18             -              -             -            -
Net and comprehensive income (loss)                     -               -             -              -             -            -
                                             -------------  ----------------  ----------  --------------   ----------  ------------
Balance at December 31, 1998                   19,368,326          19,368       311,300            311     7,000,000        7,000
Issuance of preferred and common stock for
   stock options exercised                              -               -             -              -             -            -
Issuance of common stock for warrants
   exercised                                            -               -             -              -             -            -
Surrender and cancellation of shares from
   Ball Technologies Holdings Corp.            (2,761,983)         (2,762)            -              -             -            -
Reclassification of preferred and common
   stock into Series C 8.5% Cumulative
   Convertible Redeemable Preferred Stock
   Due 2009 in connection with the
   recapitalization                           (16,606,343)        (16,606)     (311,300)          (311)   (7,000,000)      (7,000)
Issuance of preferred and common stock
   in connection with the recapitalization              -               -             -              -             -            -
Mandatorily redeemable preferred stock
   dividends and accretion                              -               -             -              -             -            -
Net and comprehensive income (loss)                     -               -             -              -             -            -
                                             -------------  ----------------  ----------  --------------   ----------  ------------
Balance at December 31, 1999                            -               -             -              -             -            -
Issuance of preferred and common stock
   for stock options exercised                          -               -             -              -             -            -
Deferred stock compensation                             -               -             -              -             -            -
Amortization of deferred stock compensation             -               -             -              -             -            -
Mandatorily redeemable preferred stock
   dividends and accretion                              -               -             -              -             -            -
Net and comprehensive income (loss)                     -               -             -              -             -            -
                                             -------------  ----------------  ----------  --------------   ----------  ------------
Balance at December 31, 2000                            -               -             -              -             -            -
Issuance of preferred and common stock
   for stock options exercised                          -               -             -              -             -            -
Amortization of deferred stock
   compensation                                         -               -             -              -             -            -
Mandatorily redeemable preferred stock
   dividends and accretion                              -               -             -              -             -            -
Net and comprehensive income (loss)                     -               -             -              -             -            -
                                             -------------  ----------------  ----------  --------------   ----------  ------------
Balance at December 31, 2001                            -   $           -             -   $          -             -   $        -
                                             =============  ================  ==========  ==============   ==========  ============

<CAPTION>
                                                     Convertible
                                                      Series D                                                Additional
                                                    Preferred Stock                 Common Stock               Paid-in
                                             -------------------------------  --------------------------   ------------------------
                                                  Shares          Amount         Shares         Amount          Capital
                                             -------------  ----------------  ----------  --------------   --------------
<S>                                            <C>          <C>              <C>          <C>             <C>
Balance at January 1, 1995 (inception)                  -   $           -             -   $          -    $           -
Issuance of stock in exchange for future
   cash contributions and contributions
   of property in-kind
Contribution of net assets in merger                    -               -             1              -                -
Issuance of common stock for services                   -               -             -              -                -
   and for stock options exercised                      -               -        79,500         63,600                -
Issuance of preferred stock                             -               -             -              -                -
Property in-kind, conversion of debt, and
   cash contributions from stockholder                  -               -             -              -                -
Net and comprehensive income (loss)                     -               -             -              -                -
                                             -------------  ----------------  ----------  --------------   --------------
                                                        -               -        79,501         63,600                -
Balance at December 31, 1995
Restatement of capital stock and additional
   paid-in capital for reincorporation
   of January 1, 1996                                   -               -             -        (63,521)      38,599,438
Issuance of stock in exchange for
   in-kind and other, net                               -               -             -              -        2,288,561
Issuance of preferred stock                       400,000             400             -              -       69,833,305
Property in-kind contributed by stockholder             -               -             -              -          (25,944)
Net and comprehensive income (loss)                     -               -             -              -                -
                                             -------------  ----------------  ----------  --------------   --------------
Balance at December 31, 1996                      400,000             400        79,501             79      110,695,360
Issuance of common stock                                -               -             -              -        1,229,240
Issuance of common stock for services
   and for stock options exercised                      -               -        69,416             70           55,463
Issuance of preferred stock                       600,000             600             -              -        5,999,400
Other                                                   -               -             -              -           (4,773)
Net and comprehensive income (loss)                     -               -             -              -                -
                                             -------------  ----------------  ----------  --------------   --------------
Balance at December 31, 1997                    1,000,000           1,000       148,917            149      117,974,690
Issuance of preferred and common stock for
   stock options exercised                              -               -        54,631             55           50,799
Net and comprehensive income (loss)                     -               -             -              -                -
                                             -------------  ----------------  ----------  --------------   --------------
Balance at December 31, 1998                    1,000,000           1,000       203,548            204      118,025,489
Issuance of preferred and common stock for
   stock options exercised                              -               -         1,000              1              799
Issuance of common stock for warrants
   exercised                                            -               -     1,556,000          1,556           14,004
Surrender and cancellation of shares from
   Ball Technologies Holdings Corp.                     -               -             -              -            2,762
Reclassification of preferred and common
   stock into Series C 8.5% Cumulative
   Convertible Redeemable Preferred Stock
   Due 2009 in connection with the
   recapitalization                            (1,000,000)         (1,000)   (1,760,548)        (1,761)     (39,765,364)
Issuance of preferred and common stock
   in connection with the recapitalization              -               -             1              -                -
Mandatorily redeemable preferred stock
   dividends and accretion                              -               -             -              -      (6,690,537)
Net and comprehensive income (loss)                     -               -             -              -                -
                                             -------------  ----------------  ----------  --------------   --------------
Balance at December 31, 1999                            -               -             1              -       71,587,153
Issuance of preferred and common stock
   for stock options exercised                          -               -       195,419            195           49,734
Deferred stock compensation                             -               -             -              -        1,456,000
Amortization of deferred stock compensation             -               -             -              -                -
Mandatorily redeemable preferred stock
   dividends and accretion                              -               -             -              -      (11,268,058)
Net and comprehensive income (loss)                     -               -             -              -                -
                                             -------------  ----------------  ----------  --------------   --------------
Balance at December 31, 2000                            -               -       195,420            195       61,824,829
Issuance of preferred and common stock
   for stock options exercised                          -               -       366,668            367          126,324
Amortization of deferred stock
   compensation                                         -               -             -              -                -
Mandatorily redeemable preferred stock
   dividends and accretion                              -               -             -              -       (7,623,552)
Net and comprehensive income (loss)                     -               -             -              -                -
                                             -------------  ----------------  ----------  --------------   --------------
Balance at December 31, 2001                            -   $           -       562,088   $        562     $ 54,327,601
                                             =============  ================  ==========  ==============   ==============

<CAPTION>
                                                            Accumulated        Deficit Accumulated
                                                               Other               During the         Total
                                                            Comprehensive         Development     Stockholders'
                                               Other        Income (Loss)            Stage        Equity (Deficit)
                                            --------------  ----------------    -----------------  ----------------
<S>                                         <C>             <C>                  <C>               <C>

Balance at January 1, 1995 (inception)      $           -   $           -        $            -    $            -
Issuance of stock in exchange for future
   cash contributions and contributions
   of property in-kind                        (14,400,000)              -                     -                 -
Contribution of net assets in merger                    -               -                     -           551,908
Issuance of common stock for services
   and for stock options exercised                      -               -                     -            63,600
Issuance of preferred stock                             -               -                     -        23,603,035
Property in-kind, conversion of debt, and
   cash contributions from stockholder         13,381,523               -                     -        13,381,523
Net and comprehensive income (loss)                     -               -            (3,909,208)       (3,909,208)
                                            --------------  ----------------    -----------------  ----------------
                                               (1,018,477)              -            (3,909,208)       33,690,858
Balance at December 31, 1995
Restatement of capital stock and additional
   paid-in capital for reincorporation as
   of January 1, 1996                                   -               -                     -                 -
Issuance of stock in exchange for property
   in-kind and other, net                               -               -                     -         2,289,096
Issuance of preferred stock                             -               -                     -        69,840,805
Property in-kind contributed by stockholder     1,018,477               -                     -           992,533
Net and comprehensive income (loss)                     -               -           (23,706,344)      (23,706,344)
                                            --------------  ----------------    -----------------  ----------------
Balance at December 31, 1996                            -               -           (27,615,552)       83,106,948
Issuance of common stock                                -               -                     -         1,229,240
Issuance of common stock for services
   and for stock options exercised                      -               -                     -            55,533
Issuance of preferred stock                             -               -                     -         6,000,000
Other                                                   -               -                     -            (4,773)
Net and comprehensive income (loss)                     -          80,400           (50,730,985)      (50,650,585)
                                            --------------  ----------------    -----------------  ----------------

Balance at December 31, 1997                            -          80,400           (78,346,537)       39,736,363
Issuance of preferred and common stock for
   stock options exercised                              -               -                     -            50,872
Net and comprehensive income (loss)                     -         (36,971)          (12,919,555)      (12,956,526)
                                            --------------  ----------------    -----------------  ----------------
Balance at December 31, 1998                            -          43,429           (91,266,092)       26,830,709
Issuance of preferred and common stock for
   stock options exercised                              -               -                     -               800
Issuance of common stock for warrants
   exercised                                            -               -                     -            15,560
Surrender and cancellation of shares from
   Ball Technologies Holdings Corp.                     -               -                     -                 -
Reclassification of preferred and common
   stock into Series C 8.5% Cumulative
   Convertible Redeemable Preferred Stock
   Due 2009 in connection with the
   recapitalization                                     -               -                     -       (39,792,042)
Issuance of preferred and common stock
   in connection with the recapitalization              -               -                     -                 -
Mandatorily redeemable preferred stock
   dividends and accretion                              -               -                     -        (6,690,537)
Net and comprehensive income (loss)                     -        (159,382)          (20,318,766)      (20,478,148)
                                            --------------  ----------------    -----------------  ----------------
Balance at December 31, 1999                            -        (115,953)         (111,584,858)      (40,113,658)
Issuance of preferred and common stock
   for stock options exercised                          -               -                     -            49,929
Deferred stock compensation                    (1,456,000)              -                     -                 -
Amortization of deferred stock compensation       921,400               -                     -           921,400
Mandatorily redeemable preferred stock
   dividends and accretion                              -               -                     -       (11,268,058)
Net and comprehensive income (loss)                     -         115,953            76,681,932        76,797,885
                                            --------------  ----------------    -----------------  ----------------
Balance at December 31, 2000                     (534,600)              -           (34,902,926)       26,387,498
Issuance of preferred and common stock
   for stock options exercised                          -               -                     -           126,691
Amortization of deferred stock
   compensation                                   201,964               -                     -           201,964
Mandatorily redeemable preferred stock
   dividends and accretion                              -               -                     -        (7,623,552)
Net and comprehensive income (loss)                     -               -           (49,290,172)      (49,290,172)
                                            --------------  ----------------    -----------------  ----------------
Balance at December 31, 2001                $    (332,636)  $           -        $  (84,193,098)   $  (30,197,571)
                                            ==============  ================    =================  ================
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                     37
<PAGE>

EarthWatch Incorporated, dba DigitalGlobe
(A Development Stage Company)

Notes to Consolidated Financial Statements
-------------------------------------------------------------------------------

1.       General Information and Financial Condition

                  EarthWatch Incorporated and its subsidiaries ("DigitalGlobe"
         or the "Company"), a development stage company, was incorporated on
         September 30, 1994 under the laws of the State of Colorado and, on
         August 21, 1995, was reincorporated in the State of Delaware. The
         Company commenced operations on March 31, 1995 with the contribution
         of the net assets of WorldView Imaging Corporation ("WorldView") and
         certain assets of Ball Corporation ("Ball") (see below). The Company
         is a supplier of digital geographic imagery and is building
         high-resolution commercial imaging satellites to generate high-quality,
         direct-to-desktop digital imagery of the earth's surface. The Company's
         current and anticipated customers include utility, real estate,
         engineering, transportation, agricultural, and media companies as well
         as federal, state, and local governments.

                  On March 31, 1995, Ball and WorldView consummated the merger
         pursuant to an Agreement and Plan of Merger (the "Agreement"), which
         was entered into on January 25, 1995. Pursuant to this Agreement, the
         stockholders of WorldView contributed assets and liabilities of
         WorldView with a net carrying value of $551,908 in exchange for
         5,362,285 shares of the Company's Series A preferred stock ("Series A
         Preferred Stock"). Pursuant to this Agreement, Ball provided two
         gimbaled mirror systems in exchange for 875,000 shares of Series A
         Preferred Stock. Ball also provided $10,000,000 of cash in exchange for
         7,125,000 shares of Series A Preferred Stock. The contributed net
         assets were recorded by the Company at amounts equal to Ball's and
         WorldView's basis in such net assets.

                  On November 20, 2000, the first QuickBird satellite was
         launched from Plesetsk, Russia. The satellite failed to achieve orbit,
         which resulted in a total loss of the satellite and its write off
         totaling $157 million in fiscal 2000. In December 2000, the Company
         filed insurance claims for the loss of the satellite with its various
         insurance carriers totaling $265 million (the full amount of which was
         received as of March 26, 2001), resulting in a net gain on the loss of
         the satellite of approximately $108 million in fiscal 2000.

                  On February 28, 2001, as required by the indentures governing
         our 12 1/2% Senior Notes due 2005 and our 13% Senior Discount Notes due
         2007, respectively, we offered to purchase all of our outstanding notes
         at their accreted values per their respective indentures on the date of
         purchase, using the insurance proceeds relating to the loss of our
         QuickBird 1 satellite in November 2000. The offer expired on April 2,
         2001, and we repurchased $127.4 million in principal amount at maturity
         of outstanding 13% notes and all outstanding 12 1/2% notes on April 3,
         2001, resulting in an extraordinary loss on early extinguishment of
         debt of approximately $23.0 million. The extraordinary loss on early
         extinguishment of debt was the result of the write-off of unamortized
         debt discount and deferred financing costs associated with the redeemed
         notes. The combined repurchase price totaled $172.9 million.

                                     38
<PAGE>

EarthWatch Incorporated, dba DigitalGlobe
(A Development Stage Company)

Notes to Consolidated Financial Statements (Continued)
-------------------------------------------------------------------------------

                  In connection with the offer, we entered into a
         Recapitalization Agreement and Consent dated as of April 2, 2001 (the
         "Recapitalization Agreement") with certain holders of our 13% notes.
         Pursuant to the Recapitalization Agreement, these note holders agreed
         to refrain from tendering their notes in the offer, thus allowing us to
         have the use of the funds that would otherwise be used to repurchase
         their notes. Pursuant to the Recapitalization Agreement, we also:

            .     granted registration rights to certain holders of notes and

                  Series C preferred stock;
            .     obtained the consent of the holders of notes and amended the
                  indenture governing the notes in certain respects;

            .     amended our certificate of incorporation to (a) require that
                  we purchase, at each holder's option, that holder's shares of
                  our Series A and B preferred stock, if an insurable event
                  occurs under the QuickBird 2 insurance policy, (b) increase
                  the number of authorized shares of our common stock and each
                  series of our preferred stock, and (c) extend the time period
                  by one year during which holders of our preferred stock may
                  convert their shares into shares of our common stock;

            .     issued 10,843,297 additional shares of our Series C preferred
                  stock to the holders of the notes that signed the
                  Recapitalization Agreement and their assignees;

            .     purchased launch and in-orbit insurance for our QuickBird 2
                  satellite; and

            .     pledged the insurance on the second QuickBird satellite in
                  favor of The Bank of New York, as collateral agent for (a) the
                  holders of notes and for Ball, and (b) the holders of our
                  Series A preferred stock and Series B preferred stock.

                  In April 2001, we secured a $9.0 million borrowing facility
         with Ball Aerospace and Technologies Corp. ("Ball Aerospace"), a wholly
         owned subsidiary of Ball and one of our stockholders, which we used to
         fund the completion of the second QuickBird satellite.

                  We do not expect to generate positive cash flow from
         operations until at least the third quarter of 2002. Accordingly, our
         existing capital resources will not be sufficient to meet our
         anticipated cash needs in fiscal 2002, including the payment of an
         insurance premium due in April 2002. We believe that we currently have
         an agreement in principle with our existing investors to loan to us
         funds sufficient to meet our anticipated cash needs in fiscal 2002 and
         beyond. Failure to consummate the agreement in principle or obtain
         additional financing capital when needed would significantly diminish
         or eliminate our ability to continue as a going concern.

                                     39
<PAGE>

EarthWatch Incorporated, dba DigitalGlobe
(A Development Stage Company)

Notes to Consolidated Financial Statements (Continued)
-------------------------------------------------------------------------------

2.       Summary of Significant Accounting Principles

         Principles of Consolidation

                  The consolidated financial statements include the accounts of
         the Company and its wholly owned subsidiaries. All significant
         intercompany investments, accounts, and transactions have been
         eliminated upon consolidation.

         Cash and Cash Equivalents

                  The Company considers all highly liquid investments, excluding
         restricted investment securities, purchased with an original maturity
         of three months or less to be cash equivalents. Cash equivalents are
         carried at amortized cost.

         Investment Securities

                  The Company accounts for its investment securities in
         accordance with Statement of Financial Accounting Standards ("SFAS")
         No. 115, Accounting for Certain Investments in Debt and Equity
         Securities, which requires that individual debt and equity securities
         be classified into one of three categories: trading, held to maturity,
         or available for sale. The Company determines the appropriate
         classification of investment securities at the time of purchase and
         reevaluates such designation at each balance sheet date.

         Property and Equipment

                  Property and equipment are recorded at cost. Pursuant to SFAS
         No. 34, Capitalization of Interest Cost, the cost of significant assets
         includes capitalized interest incurred during the construction and
         development period. The costs of satellites under construction are
         capitalized during the construction phase, assuming the eventual
         successful launch and in-orbit operation of the satellite. If a
         satellite were to fail during launch or while in-orbit, the resultant
         loss would be charged to expense in the period such loss was incurred.
         The amount of any such loss would be reduced to the extent of insurance
         proceeds received as a result of the launch or in-orbit failure

                  Depreciation is computed using the straight-line method over
         the estimated useful lives of the respective assets (three to seven
         years). Leasehold improvements and assets acquired pursuant to
         capital-lease obligations are amortized on a straight-line basis over
         the shorter of their useful lives or lease terms; such amortization is
         included in depreciation expense. Repairs and maintenance are expensed
         as incurred.

         Long-Lived Assets

                  The Company evaluates the recoverability of its long-lived
         assets based on undiscounted cash flows whenever events or changes in
         circumstances occur which

                                     40
<PAGE>

EarthWatch Incorporated, dba DigitalGlobe
(A Development Stage Company)

Notes to Consolidated Financial Statements (Continued)
-------------------------------------------------------------------------------

         indicate the carrying amount of an asset may not be recoverable.
         Impairments are recognized as the excess of the carrying amount of the
         asset over its fair value as estimated, based on the present value of
         expected future cash flows.

         Revenue Recognition

                  Revenue is primarily derived from the sale of third-party
         imagery under contracts to customers. Revenue is also earned processing
         third-party data, such as aerial photography, into usable digital
         imagery. Revenue from these sales is recognized when the product has
         been delivered to the customer.

         Research and Development Costs

                  The Company records as research and development expense all
         engineering costs associated with the design of its satellites where
         the Company maintains the risk associated with design failure. Once the
         satellite is ready for commercial production, engineering costs are
         capitalized as investments in satellite equipment.

         Advertising Costs

                  Advertising costs are expensed as incurred and historically
                   have been immaterial.

         Stock-Based Compensation

                  Employee stock awards under the Company's stock option plan
         are accounted for in accordance with Accounting Principles Board
         Opinion ("APB") No. 25, Accounting for Stock Issued to Employees and
         related interpretations. Stock-based awards to nonemployees, if any,
         are accounted for in accordance with SFAS No. 123, Accounting for
         Stock-Based Compensation and related interpretations.

         Income Taxes

                  Deferred income taxes are recognized for the tax consequences
         in future years of differences between the tax bases of assets and
         liabilities and their financial reporting amounts at each year-end
         based on enacted tax laws and statutory tax rates applicable to the
         periods in which the differences are expected to affect taxable
         earnings. Valuation allowances are established when necessary to reduce
         deferred tax assets to the amount more likely than not to be realized.

         Comprehensive Income (Loss)

                  Comprehensive income or loss includes all changes in equity
         during a period from non-owner sources. Total comprehensive income
         (loss), which includes unrealized gains and losses on investments
         classified as available-for-sale securities, was ($20,478,148),

                                     41
<PAGE>

EarthWatch Incorporated, dba DigitalGlobe
(A Development Stage Company)

Notes to Consolidated Financial Statements (Continued)
-------------------------------------------------------------------------------

         $76,797,885, and ($49,290,172) for the years ended December 31, 1999,
         2000, and 2001, respectively.

         Fair Values of Financial Instruments

                  The Company's financial instruments include cash and cash
         equivalents, investment securities, accounts receivable, accounts
         payable, accrued liabilities, and debt. The carrying amounts of
         financial instruments, other than investments and its 13% Senior
         Discount Notes, approximate fair value due to their short-term
         maturities. The Company's investment securities were accounted for at
         fair value. As the 13% Senior Discount Notes are not regularly traded,
         the Company estimated their fair value of approximately $62.1 million
         at December 31, 2001, using a discounted cash flow model and a 15%
         discount rate.

         Concentration of Credit Risk and Significant Customers

                  The Company's cash and cash equivalents and investment
         securities are maintained in various financial institutions. The
         Company has not experienced any losses in such accounts and believes it
         is not exposed to any significant credit risk in this area.

                  Revenue percentages from each of the Company's significant
         customers were as follows for the years ended December 31:

                                 1999                2000                 2001
                                 ----                ----                 ----
         Customer A              90.1%               38.6%                66.8%
         Customer B               9.1%               54.3%                23.0%

         Use of Estimates

                  The preparation of financial statements in conformity with
         generally accepted accounting principles requires management to make
         significant estimates and assumptions that affect the reported amounts
         of assets and liabilities and disclosure of contingent assets and
         liabilities as of the date of the financial statements and the reported
         amounts of revenue and expenses during the periods. Actual results
         could differ from these estimates, making it reasonably possible that a
         change in these estimates could occur in the near-term.

         Reclassifications

                  Certain items previously reported in specific financial
         statement captions have been reclassified to conform to the current
         presentation. New Accounting Pronouncements

                                     42
<PAGE>

EarthWatch Incorporated, dba DigitalGlobe
(A Development Stage Company)

Notes to Consolidated Financial Statements (Continued)
-------------------------------------------------------------------------------

                  SFAS No. 141, "Business Combinations," was issued in June 2001
         and revises the financial accounting and reporting for business
         combinations. This statement is effective for all business combinations
         initiated after June 30, 2001 and for all business combinations
         accounted for using the purchase method for which the acquisition date
         is July 1, 2001, or later. The adoption of this standard did not have a
         material impact on the Company's financial statements.

                  SFAS No. 142, "Goodwill and Other Intangible Assets," was
         issued in June 2001 and revises the financial accounting and reporting
         for intangible assets. This statement is effective for financial
         statements issued for fiscal years beginning after December 15, 2001.
         The Company will adopt this standard in the first quarter of 2002 and
         anticipates that the adoption will not have a material impact on its
         financial statements.

                  SFAS No. 143, "Accounting for Asset Retirement Obligations,"
         was issued in June 2001 and revises the financial accounting and
         reporting for obligations associated with the retirement of tangible
         long-lived assets and the associated asset retirement costs. This
         statement is effective for financial statements issued for fiscal years
         beginning after June 15, 2002. The Company will adopt this standard in
         the first quarter of 2003 and anticipates that the adoption will not
         have a material impact on its financial statements.

                  SFAS No. 144, "Accounting for the Impairment or Disposal of
         Long-Lived Assets," was issued in August 2001 and revises the financial
         accounting and reporting for the impairment of long-lived assets and
         for long-lived assets to be disposed of. This statement is effective
         for financial statements issued for fiscal years beginning after
         December 15, 2001. The Company will adopt this standard in the first
         quarter of 2002 and anticipates that the adoption will not have a
         material impact on its financial statements.


3.       Investment Securities

                  In connection with the issuance of the 13% senior discount
         notes (the "Senior Discount Notes"), the Company purchased U.S.
         Treasury notes to be held in escrow as security for the premiums on the
         launch insurance on the QuickBird 1 satellite.
<TABLE>
<CAPTION>
                                                                             Gross
                                                                           Unrealized
                                                                             Gains
           Investment Securities - Restricted                    Cost       (Losses)   Fair Value
           ----------------------------------                    ----       --------   ----------
<S>                                                          <C>           <C>         <C>

U.S. Government securities as of December 31, 2000:
      Maturing in one year or less                           $ 6,295,382    (none)     $ 6,295,382
                                                             ===========               ===========

U.S. Government securities as of December 31, 2001:
      Maturing in one year or less                             (none)       (none)       (none)
</TABLE>

                                     43
<PAGE>

EarthWatch Incorporated, dba DigitalGlobe
(A Development Stage Company)

Notes to Consolidated Financial Statements (Continued)
-------------------------------------------------------------------------------

4.       Construction In Progress, Losses from Impairments of Fixed Assets and
         Insurance Recoveries

                  Construction in progress consists primarily of satellite
         construction and launch costs, ground station construction costs, and
         third-party developed software. Construction in progress consisted of
         the following at December 31:

                                                      2000             2001
                                                      ----             ----
                  QuickBird satellites            $55,952,495     $ 146,550,743
                  DigitalGlobe software            26,570,191        26,900,191
                  Ground station equipment          7,193,788         8,898,887
                                                  -----------     -------------
                                                  $89,716,474     $ 182,349,821
                                                  ===========     =============

                  In 1997, the Company launched and lost contact with its
         EarlyBird 1 satellite. As a result, the Company wrote off in fiscal
         1997 accumulated construction costs for the EarlyBird satellite program
         of approximately $25.5 million, net of insurance recoveries of $29
         million.

                  During the year ended December 31, 1998, the Company
         determined that certain software would not be used with the QuickBird
         satellite system. Accordingly, the total accumulated development costs
         of $599,000 are included in the Statement of Operations as a loss from
         impairment of fixed assets for the year ended December 31, 1998.

                  On November 20, 2000, the first QuickBird satellite was
         launched from Plesetsk, Russia. This satellite failed to achieve orbit,
         which resulted in a total loss of the satellite and its write off
         totaling $157 million in fiscal 2000. In December 2000, the Company
         filed insurance claims for the loss of the satellite with its various
         insurance carriers totaling $265 million, resulting in a net gain on
         the loss of the satellite of approximately $108 million in fiscal 2000.

5.       Debt

         12 1/2% Senior Notes and Warrant Issuance

                  On March 19, 1997, the Company issued $50,000,000 in Senior
         Notes representing 50,000 units. Each Unit included one warrant (the
         "Warrants") to purchase 31.12 shares of Common Stock at an exercise
         price of $0.01 per share, subject to adjustment. The Senior Notes
         ranked pari passu in right of payment with all existing and future
         unsubordinated unsecured indebtedness of the Company.

                  In April 1999, the Company amended and restated the Senior
         Notes Indenture, dated as of March 1997. Under the amended and restated
         Senior Notes Indenture, the maturity date was extended from March 1,
         2001 to March 1, 2005. The Company was to accrete the next six
         semi-annual interest payments, which would have resulted in an increase
         of the principal of the securities to $72 million. The interest rate
         remained at 12 1/2%. The Company recorded an additional discount on the
         Senior Notes equal to the

                                     44
<PAGE>

EarthWatch Incorporated, dba DigitalGlobe
(A Development Stage Company)

Notes to Consolidated Financial Statements (Continued)
-------------------------------------------------------------------------------

         difference between the current principal balance and the principal
         balance at maturity. In conjunction with the recapitalization and
         restructuring of the debt, the Warrants were exercised for the purchase
         of 1,556,000 shares of Common Stock. The Senior Notes were redeemed on
         April 3, 2001 (see Note 1).


         13% Senior Discount Notes and Series C 8 1/2% Convertible Redeemable
         Preferred Stock Issuance

                  On July 12, 1999 the Company received $136,237,390 gross
         proceeds from a debt and equity offering. This offering represented
         199,000 units, each of which consisted of one Senior Discount Note due
         July 15, 2007 ("Senior Discount Note") and 49.095 shares of the
         Company's Series C 8 1/2% Cumulative Convertible Redeemable Preferred
         Stock ("Series C Convertible Preferred Stock"). Each note had an
         initial accreted value of $684.61 and has a principal amount at
         maturity of $1,000.00. The Senior Discount Notes do not begin to accrue
         cash interest until July 15, 2002. Beginning on January 15, 2003,
         interest will be payable on January 15 and July 15 of each year.

                  Issuance costs of $6.0 million were incurred in connection
         with the issuance of the units. Of these costs, $4.5 million were
         allocated to the Senior Discount Notes and $1.5 million were allocated
         to the Series C Convertible Preferred Stock. The Company allocated the
         gross proceeds between the debt and equity securities issued using
         their relative fair values. This allocation resulted in additional debt
         discount of $34,195,000.

                  The Senior Discount Notes rank equally with the other
         unsubordinated indebtedness of the Company. The Senior Discount Notes
         will be senior to any subordinated indebtedness of the Company. The
         Senior Discount Notes are secured by the insurance policies covering
         the launch and on-orbit performance of our QuickBird satellite. In
         conjunction with the recapitalization and restructuring of the debt
         (see Note1), the Company repurchased $127.4 million in principal amount
         at maturity of the Senior Discount Notes.


         Vendor Financing Facilities

                  In April 2001, we secured a $9.0 million borrowing facility
         with Ball Aerospace & Technologies Corp., one of our stockholders,
         which we used to fund the completion of our second QuickBird satellite.
         This vendor financing facility accrues interest at an annual rate of
         11%, which becomes payable in May 2002. Beginning in June 2002 and
         ending in March 2003, principal, in equal monthly amounts, and interest
         are payable in cash each month. In conjunction with this arrangement,
         we agreed to issue to Ball Aerospace & Technologies Corp. 903,608
         shares of Series C preferred stock.

                                     45
<PAGE>

EarthWatch Incorporated, dba DigitalGlobe
(A Development Stage Company)

Notes to Consolidated Financial Statements (Continued)
-------------------------------------------------------------------------------

                  In February 2001, we secured a commitment for a $20.75 million
         borrowing facility with Boeing Capital Services Corporation ("BCSC").
         If drawn, the facility would accrue interest at LIBOR plus 4% to 6%,
         depending upon the duration of the borrowing, and would be payable
         quarterly in arrears. The commitment is subject to the execution of a
         credit agreement and the Company having $125 million of contractually
         committed orders or some form of facility guarantee in place. As we
         have not yet met these requirements, these funds are not currently
         available. The facility is available through September 30, 2002, will
         have a two and a half year term and has an annual commitment fee of 50
         basis points payable quarterly in arrears. At December 31, 2001, the
         Company had incurred deferred financing costs of approximately $500,000
         related to this facility.

                  The Company's debt is comprised of the following at December
         31:

<TABLE>
<CAPTION>
                                                                     2000                  2001
                                                                     ----                  ----
<S>                                                             <C>                     <C>
13% Senior Discount Notes, net of unamortized discount of
     $64,852,862, and $13,892,769, respectively, effective
     rate of 18.3%                                              $ 134,147,138           $57,757,231
12 1/2% Senior Notes, net of unamortized discount of
     $10,731,089 and none, respectively, effective rate of
     12.9%                                                         61,268,911                     -
 11% Vendor financing facility, net of unamortized discount
      of zero and $458,137, respectively, effective rate of
      17.5%                                                                 -             9,086,666
 Capital-lease obligations                                             68,601                     -
                                                                -------------           -----------
                                                                  195,484,650            66,843,897
 Less: current portion                                           (195,484,650)           (5,971,025)
                                                                -------------           -----------
                                                                $           -           $60,872,872
                                                                =============           ===========
</TABLE>

6.       Stockholders' Equity

                  In conjunction with the Company's reincorporation in Delaware
         on August 21, 1995, the Company changed the par value of its
         outstanding common stock ("Common Stock") and all convertible preferred
         stock from no par value to a par value of $0.001.


         Recapitalization

                  A special meeting of the Company's stockholders was called in
         April 1999 to discuss a preferred stock financing and recapitalization
         of the Company. The stockholders approved and adopted an Amended and
         Restated Certificate of Incorporation and a Recapitalization Agreement,
         which resulted in three new series of EarthWatch Preferred Stock. At
         the closing, shares of the Company's new Series A 7% Cumulative
         Convertible Redeemable Preferred Stock ("Series A Convertible Preferred
         Stock"), Series B 7% Cumulative Convertible Redeemable Preferred Stock
         ("Series B

                                     46
<PAGE>

EarthWatch Incorporated, dba DigitalGlobe
(A Development Stage Company)

Notes to Consolidated Financial Statements (Continued)
-------------------------------------------------------------------------------

         Convertible Preferred Stock"), and new Common Stock were sold and
         issued for an aggregate cash payment of $50,000,000. In accordance with
         the Recapitalization Agreement, all outstanding shares of Common Stock
         and former Series A, B, C, and D preferred stock were exchanged (at a 1
         to .44116 ratio for all outstanding Preferred Stock and at a 1 to
         .210202 ratio for all outstanding Common Stock) for an aggregate of
         11,042,075 shares of new Series C Convertible Preferred Stock.

         Additional Funding

                  As discussed in Note 5--Debt, 199,000 units, each of which
         consisted of one Senior Discount Note and 49.095 shares of Series C
         Convertible Preferred Stock were issued in July 1999.

         Description of EarthWatch Stock

                  The following description summarizes certain terms of the
         Company's capital stock and certain provisions of the Company's amended
         and restated certificate of incorporation and bylaws.

         Old Series A and B Convertible Preferred Stock

                  Each share of Series A Convertible Preferred Stock (the "Old
         Series A Preferred Stock") and Series B Convertible Preferred Stock
         (the "Old Series B Preferred Stock") was, as of December 31, 1998,
         convertible into one share of Common Stock, subject to future
         adjustment in the event of recapitalizations or dividends of Common
         Stock. The holders of Old Series A Preferred Stock had the contractual
         right to receive additional shares upon certain issuances of stock for
         a price less than $4.00 per share. The conversion ratio of Old Series B
         Preferred Stock was subject to adjustment upon certain issuances of
         stock for a price less than $10.00 per share.

                  All Old Series A and B Preferred Stock, by their terms, were
         convertible at the option of the holder at any time and converted into
         Common Stock simultaneously upon an initial public offering with gross
         proceeds of at least $5,000,000 or with the written notice to the
         Company from holders of a majority of the outstanding shares of either
         of the two series of participating preferred stock consenting thereto.
         Upon conversion, all accrued and unpaid dividends, whether or not
         declared, were canceled.

                  All Old Series A and B Preferred Stock were voting and had
         liquidation preferences (Old Series A Stock and Series B Stock at $4.00
         and $10.00 per share, respectively, plus an amount equal to all
         declared but unpaid dividends on each share).

                  When, and only if, dividends were declared by the Company's
         Board of Directors, the Series A Stock and Series B Stock participated
         pari passu and had a right to receive dividends of $0.32 per share per
         annum prior to any dividends paid to holders of

                                     47
<PAGE>

EarthWatch Incorporated, dba DigitalGlobe
(A Development Stage Company)

Notes to Consolidated Financial Statements(Continued)
-------------------------------------------------------------------------------

         Common Stock. Upon the distribution to each common stockholder of an
         amount per share equal to $4.00 divided by the Old Series A Stock
         conversion ratio, the Old Series A Stock, Old Series B Stock, and
         Common Stock shared in any remaining liquidation distributions on a pro
         rata as-converted basis.

         Old Series C Senior Convertible Preferred Stock Issuance

                  On April 30, 1996, the Company issued 7,000,000 shares of 12%
         Series C Convertible Senior Preferred Stock (the "Old Series C
         Preferred Stock") at a price of $10.00 per share. Holders of the Old
         Series C Preferred Stock were entitled to dividends at an annual rate
         of 12% of the accreted liquidation preference on a quarterly basis
         commencing June 30, 1996. All unpaid dividends compounded quarterly at
         the annual dividend rate. The Company did not declare or pay in cash
         the dividends accrued as of December 31, 1998. Accordingly, the
         liquidation preference increased from $10.00 to $13.72 per share as of
         December 31, 1998.

                  Each share of Old Series C Preferred Stock was convertible, at
         the option of the holder, at any time into one share of Common Stock of
         the Company, subject to adjustment in certain events. Accrued and
         unpaid dividends may be converted concurrently with the conversion of
         the Old Series C Preferred Stock, at the option of the holder only upon
         certain events, at a conversion price equal to 85% of the market price
         of the Company's Common Stock.

         Old Series D Convertible Preferred Stock

                  The Old Series D Convertible Preferred Stock (the "Old Series
         D Preferred Stock") had the same terms as the Old Series B Stock but
         excluded anti-dilution protection.

         Series A and Series B Convertible Redeemable Preferred Stock

                  Except with respect to the voting rights and representation on
         the board of directors, the Company's Series A Convertible Preferred
         Stock and Series B Convertible Preferred Stock are identical in all
         respects.

                  Rank. Series A Convertible Preferred Stock and Series B
         Convertible Preferred Stock are pari passu and rank senior to Series C
         Convertible Preferred Stock and Common Stock with respect to dividends,
         liquidation preference, and redemption.

                  Dividends. The holders of Series A Convertible Preferred Stock
         and Series B Convertible Preferred Stock are entitled to receive
         cumulative dividends, whether or not declared by the Company's board of
         directors, at an annual rate of 7% until no later than June 15, 2003.
         Such dividends are payable quarterly on March 31, June 30, September
         30, and December 31, and commenced on June 30, 1999. Such dividends may
         be paid,

                                     48
<PAGE>

EarthWatch Incorporated, dba DigitalGlobe
(A Development Stage Company)

Notes to Consolidated Financial Statements (Continued)
-------------------------------------------------------------------------------

         subject to certain limitations, at the Company's option, either in
         cash or in additional shares of Series A Convertible Preferred Stock
         or Series B Convertible Preferred Stock, as applicable, until June 15,
         2003. After June 15, 2003, dividends will accrue at an annual rate of
         7% of the liquidation preference and will be payable, when, as, and if
         declared by the board of directors, in cash only.

                  If any dividend is not paid in full in cash on a quarterly
         payment date after June 15, 2003, the liquidation preference of the
         Series A Convertible Preferred Stock and Series B Convertible Preferred
         Stock will be increased by an amount equal to the product of (a) the
         amount per share not paid divided by the total amount payable per share
         and (b) one quarter of the dividend rate multiplied by the effective
         liquidation preference. The Company is prohibited from paying dividends
         on any shares of stock having rights junior to the Series A and Series
         B Convertible Preferred Stock until all accumulated dividends have been
         paid on the Series A and Series B Convertible Preferred Stock.

                  Liquidation Preference. Upon liquidation, dissolution, or
         winding up, the holders of Series A Convertible Preferred Stock and
         Series B Convertible Preferred Stock will be entitled to receive out of
         the assets available for distribution prior to and in preference of the
         Series C Convertible Preferred Stock, an amount equal to $3.50 per
         share, plus all accrued and unpaid dividends, subject to adjustment.

                  Conversion. From June 15, 1999 and until June 15, 2003, each
         share of Series A Convertible Preferred Stock and Series B Convertible
         Preferred Stock is convertible at the option of the holder into that
         number of shares of Common Stock obtained by dividing the applicable
         liquidation preference, plus any accumulated but unpaid dividends by
         $3.50, subject to anti-dilution adjustments. Prior to June 15, 2003,
         each share of Series A Convertible Preferred Stock and Series B
         Convertible Preferred Stock will automatically convert into Common
         Stock at the applicable conversion ratio upon the earlier of (a) an
         initial public offering of shares of Common Stock with an aggregate
         public offering price of at least $35,000,000 and (b) the listing of
         shares of the Company's Common Stock under certain circumstances. After
         June 15, 2003, each share of Series A Preferred Stock and Series B
         Preferred Stock shall not be convertible into common stock.

                  Anti-dilution. The conversion price of the Series A
         Convertible Preferred Stock and Series B Convertible Preferred Stock is
         subject to adjustment under certain circumstances, including upon any
         subsequent issuance of capital stock. The issuance of the Series C
         Convertible Preferred Stock resulted in an adjustment in the conversion
         prices of the Series A and Series B Convertible Preferred Stock.

                  Redemption. The Company is required to redeem all of the
         Series A Convertible Preferred Stock and Series B Convertible Preferred
         Stock outstanding on March 31, 2009, at a redemption price equal to
         100% of the then existing applicable liquidation

                                     49
<PAGE>

EarthWatch Incorporated, dba DigitalGlobe
(A Development Stage Company)

Notes to Consolidated Financial Statements(Continued)
-------------------------------------------------------------------------------

         preference, plus accrued and unpaid dividends to the date of
         redemption, subject to the legal availability of funds therefor.

                  Voting Rights. Each holder of Series A Convertible Preferred
         Stock is entitled to .65 (subject to adjustment) votes per share held
         (on an as-converted basis) and each holder of Series B Convertible
         Preferred Stock is entitled to 1.35 (subject to adjustment) votes per
         share held (on an as-converted basis).

                  Board Representation. The holders of Series A Convertible
         Preferred Stock has the right to elect two persons to the board of
         directors and the holders of the Series B Convertible Preferred Stock
         have the right to elect four persons to the board of directors.

         Series C Convertible Redeemable Preferred Stock

                  Rank. The Series C Convertible Preferred Stock is junior to
         the Series A Convertible Preferred Stock and Series B Convertible
         Preferred Stock, but senior to the Common Stock, with respect to
         dividends, liquidation preference, and redemption.

                  Dividends. The holders of Series C Convertible Preferred Stock
         are entitled to cumulative dividends, whether or not declared by the
         board of directors, at an annual rate of 8.5% until no later than June
         15, 2003. Such dividends are payable quarterly on March 31, June 30,
         September 30, and December 31, and commenced on June 30, 1999. Until
         June 15, 2003, such dividends may be paid, subject to certain
         limitations, at the Company's option, either in cash or in additional
         shares of Series C Convertible Preferred Stock. After June 15, 2003,
         dividends will accrue at an annual rate of 8.5% of the liquidation
         preference and will be payable, when, as, and if declared by the board
         of directors, in cash only.

                  If any dividend is not paid in full in cash on a quarterly
         payment date after June 15, 2003, the liquidation preference of the
         Series C Convertible Preferred Stock will be increased by an amount
         equal to the product of (a) the amount per share not paid divided by
         the total amount payable per share and (b) one quarter of the dividend
         rate multiplied by the effective liquidation preference. The Company is
         prohibited from paying dividends on any shares of stock having rights
         junior to the Series C Convertible Preferred Stock until all
         accumulated dividends have been paid on the Series C Convertible
         Preferred Stock.

                  Liquidation Preference. Upon liquidation, dissolution, or
         winding up, the holders of the Series C Convertible Preferred Stock
         will be entitled to receive out of the assets available for
         distribution, following payment of the Series A and Series B
         liquidation preference, an amount equal to $3.50 per share, plus all
         accrued and unpaid dividends, subject to adjustment.

                                     50
<PAGE>

EarthWatch Incorporated, dba DigitalGlobe
(A Development Stage Company)

Notes to Consolidated Financial Statements(Continued)
-------------------------------------------------------------------------------

                  Conversion. Until June 15, 2003, each share of Series C
         Convertible Preferred Stock will be convertible at the option of the
         holder into that number of shares of Common Stock obtained by dividing
         the Series C liquidation preference, plus any accumulated but unpaid
         dividends by $3.50, subject to anti-dilution adjustments. Prior to June
         15, 2003, each share of Series C Convertible Preferred Stock will
         automatically convert into Common Stock at the applicable conversion
         ratio upon the earlier of (a) an initial public offering of shares of
         Common Stock with an aggregate public offering price of at least
         $35,000,000 and (b) the listing of shares of the Company's Common Stock
         under certain circumstances. After June 15, 2003, each share of Series
         C preferred stock shall not be convertible into common stock.

                  Antidilution. The conversion price of the Series C Convertible
         Preferred Stock is subject to adjustment under certain circumstances.

                  Redemption. The Company is required to redeem all of the
         Series C Convertible Preferred Stock outstanding on March 31, 2009, at
         a redemption price equal to 100% of the effective liquidation
         preference, plus accrued and unpaid dividends to the date of
         redemption, subject to the legal availability of funds therefor.

                  Voting Rights. Each holder of DigitalGlobe Series C
         Convertible Preferred Stock is entitled to one (subject to adjustment)
         vote per share on an "as-converted" basis.

                  Board Representation. The holders of the Series C Convertible
         Preferred Stock are entitled to elect three members of the board of
         directors.

                  Tag-along Rights. If one stockholder or a group of
         stockholders proposes to sell any shares of capital stock in one
         transaction such that, following such sale, shares of capital stock
         representing more than 35% of the then outstanding shares (on a
         fully-diluted basis) will have been sold to one holder or a group of
         related holders, then each holder of Series C Convertible Preferred
         Stock shall have the right to receive notice of such a transaction and
         shall also have the right to participate in the transaction and sell a
         proportionate number of such holders' Series C Convertible Preferred
         Stock in such transaction.

         Common Stock

                  Holders of Common Stock are entitled to one vote for each
         share held of record at all meetings of the stockholders. Holders of
         Common Stock are not entitled to cumulative voting rights with respect
         to the election of directors. Subject to preferences that are
         applicable to outstanding shares of preferred stock, holders of Common
         Stock are entitled to receive ratably such dividends as may be declared
         by the board of directors out of funds legally available to be paid.

                                     51
<PAGE>

EarthWatch Incorporated, dba DigitalGlobe
(A Development Stage Company)

Notes to Consolidated Financial Statements(Continued)
-------------------------------------------------------------------------------

                  In the event of a liquidation, dissolution, or winding up,
         holders of Common Stock are entitled to share ratably in all assets
         remaining after payment of liabilities and the liquidation preference
         of the outstanding preferred stock. Holders of Common Stock have no
         preemptive rights and no right to convert their Common Stock into any
         other securities. There are no redemption provisions applicable to the
         Common Stock. The outstanding shares of Common Stock are fully paid and
         nonassessable.


7.       Stock Options and Warrants

                  The Company maintains a 1995 Stock Option/Stock Issuance Plan
         (the "95 Plan") pursuant to which incentive and nonqualified stock
         options to purchase shares of the Company's stock or the stock itself
         have been issued to employees, officers, directors, and consultants.
         Under the 95 Plan, incentive stock options were granted with exercise
         prices not less than the fair value of the stock on the various dates
         of grant, as determined by the Company's Board of Directors. Options
         granted pursuant to the 95 Plan are subject to certain terms and
         conditions as contained in the 95 Plan itself, have a ten-year term,
         generally vest over a four-year period, and are immediately
         exercisable. Upon termination of services to the Company by optionees,
         any acquired but unvested shares are subject to repurchase by the
         Company at the original exercise price. During 1999, the Board of
         Directors amended the 95 Plan eliminating future grants. As a result of
         the Recapitalization Agreement adopted in 1999, the stock from any
         exercised options under the 95 Plan automatically convert to the new
         Series C Convertible Preferred Stock at the rates established in the
         Recapitalization Agreement.

                  On February 15, 2000, the Board of Directors approved the
         written 1999 Equity Incentive Plan (the "99 Plan") pursuant to which
         incentive and nonqualified stock options to purchase shares of the
         Company's stock or the stock itself may be issued to employees,
         officers, directors, and consultants. Under the 99 Plan, incentive
         stock options are granted with exercise prices not less than the fair
         value of the stock on the various dates of grant, as determined by the
         Company's Board of Directors. Options granted pursuant to the 99 Plan
         are subject to certain terms and conditions as contained in the 99 Plan
         itself, have a ten-year term, generally vest over a four-year period,
         and are immediately exercisable. Upon termination of services to the
         Company by optionees, any acquired but unvested shares are subject to
         repurchase by the Company at the original exercise price. At December
         31, 2001, there were 6,122,816 shares available for grant under the 99
         Plan.

                                      52
<PAGE>

EarthWatch Incorporated, dba DigitalGlobe
(A Development Stage Company)

Notes to Consolidated Financial Statements(Continued)
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                             Number        Weighted-              Weighted-    Number      Weighted
                                            of Series A     Average    Number      Average   of Series C    Average
                                             Preferred     Exercise   of Common    Exercise   Preferred     Exercise
                                              Shares        Price      Shares       Price      Shares        Price
                                              ------        -----      ------        -----     ------        -----
<S>                                         <C>            <C>    <C>              <C>       <C>              <C>
Outstanding at January 1, 1997                37,800       $0.05    1,158,300      $0.80
   Granted                                        --          --      620,295       0.80
   Exercised                                      --          --      (10,282)      0.80
   Expired                                        --                 (117,571)      0.80
                                            --------               ----------
Outstanding at December 31, 1997              37,800        0.05    1,650,742       0.80
   Granted                                        --          --      798,655       0.80
   Exercised                                 (17,916)       0.05      (54,631)      0.80
   Expired or terminated                      (2,084)       0.05   (1,019,595)      0.80
                                            --------               ----------
Outstanding at December 31, 1998              17,800        0.05    1,375,171       0.80
   As converted                              (17,800)       0.05   (1,375,171)      0.80      296,916         $3.71
   Adjustment for conversion rounding             --          --           --         --           (5)         3.71
   Granted                                        --          --           --         --       12,297          3.71
   Exercised                                                  --           --         --       (5,025)         3.71
   Expired or terminated                          --          --           --         --      (10,859)         3.71
                                            --------               -----------               ---------
Outstanding at December 31, 1999                  --          --           --         --      293,324          3.71
   Granted                                        --          --    3,719,075       0.25           --            --
   Exercised                                      --          --     (195,419)      0.25         (293)         3.81
   Expired or terminated                          --          --     (284,329)      0.25      (39,731)         3.81
                                            --------               ----------                ---------
Outstanding at December 31, 2000                  --                3,239,327       0.25      253,300          3.69
   Granted                                        --          --      775,740       0.25           --            --
   Exercised                                      --          --     (366,670)      0.25       (9,201)         3.81
   Expired or terminated                          --          --     (333,302)      0.25      (15,001)         3.81
                                            --------                ---------                ---------
Outstanding at December 31, 2001                  --                3,315,095       0.25      229,098          3.68
                                            ========                =========                =========

Weighted-average remaining contractual life                         8.5 years                5.0 years
Range of exercise prices                                                            0.25                    0.05 - 3.81
Outstanding options vested                                          2,173,316       0.25      229,098          3.68

</TABLE>

         Weighted-average grant-date fair values were as follows:

                                         1999       2000      2001
                                         ----       ----      ----
Exercise price * market value              --      $0.57        --
Exercise price = market value           $0.94       0.07     $0.05

                  The fair value of each option grant was estimated on the date
         of grant using the Black-Scholes option-pricing model with the
         following assumptions:

                                         1999       2000      2001
                                         ----       ----      ----
Expected dividend yield                  0.00%      0.00%     0.00%
Expected stock price volatility          0.00%      0.00%     0.00%
Risk free interest rate                  4.60% -    6.50%     3.90% -
                                         5.14%                4.90%
Expected life of options (years)         5.00       5.00      5.00

                  Prior to fiscal 2000, the Company had not recognized any stock
         compensation expense in its financial statements. As part of its fiscal
         2000 yearend close process, the Company recorded approximately $1.5
         million of deferred stock compensation expense in accordance with APB
         No. 25. Had compensation expense for the Company's stock

* less than
                                     53
<PAGE>

EarthWatch Incorporated, dba DigitalGlobe
(A Development Stage Company)

Notes to Consolidated Financial Statements(Continued)
-------------------------------------------------------------------------------

         options been determined based on the fair values at the grant dates for
         awards under the plan consistent with the method of accounting
         prescribed by SFAS No. 123, Accounting for Stock-based Compensation,
         the Company's net loss would have been as follows for the year ended
         December 31 (in thousands):

                                                1999        2000         2001
                                                ----        ----         ----
         Net income (loss) - as reported     $(20,319)      $76,682   $(49,290)
         Net loss - pro forma                 (20,396)       76,402    (49,505)


8.       Income Taxes

                  The provision for income taxes consistof the following for
         the fiscal years ended December 31:

                                                 1999       2000         2001
                                                 ----       ----         ----
         Current provision
           Federal                             $   --    $2,500,000       $ --
           State                                   --       500,000         --
                                               -------   ----------      -----
               Provision for income taxes      $   --    $3,000,000       $ --
                                               =======   ==========      =====


                  At December 31, 2001, the Company had net operating loss
         carryforwards for federal income tax purposes of approximately $171.5
         million. In addition, the Company has research and development tax
         credits of approximately $1.6 million. If unused, the carryforwards and
         credits will begin to expire in 2010. The Internal Revenue code places
         certain limitations on the annual amount of net operating loss
         carryforwards, which can be utilized if certain changes in the
         Company's ownership occurs. The Company believes that such changes have
         occurred and could occur in the future to further limit the utilization
         of the carryforwards.

                  The Company's deferred tax assets and liabilities are
         comprised of the following as of December 31:

                                                    2000             2001
                                                    ----             ----

         Deferred tax assets:
            Net operating loss carryforwards      $ 52,615,023     $ 67,037,921
            Fixed assets                                    --               --
            Other                                    5,859,826        4,782,873
                                                  ------------     ------------
                Gross deferred tax assets           58,474,849       71,820,794
                                                  ------------     ------------

         Deferred tax liabilities:
            Fixed assets                           (41,707,211)     (35,873,919)
                                                   ------------     ------------
         Net deferred tax assets                    16,767,638       35,946,875
                                                   (16,767,638)     (35,946,875)
                                                  -------------    -------------
           Net deferred tax assets (liabilities)  $         --     $         --
                                                  =============    =============

                                     54
<PAGE>

EarthWatch Incorporated, dba DigitalGlobe
(A Development Stage Company)

Notes to Consolidated Financial Statements(Continued)
-------------------------------------------------------------------------------

                  Net deferred tax assets have been reduced to zero by a
         valuation allowance based on current evidence which indicates that it
         is considered more likely than not that these benefits will not be
         realized.

                  The following is a reconciliation of the statutory U.S.
         federal income tax rate to the Company's effective income tax rate of
         continuing operations for the fiscal years ended December 31:
                                                   1999     2000         2001
                                                   ----     ----         ----
Federal income tax rate                            34.0%     35.0%       35.0%
State income tax rate, net of federal benefit       5.0       4.7         3.9
Meals and entertainment                            (0.2)     (1.0)        0.4
Disqualified interest                               --        1.2        (0.5)
Effect of change in valuation allowance and
    other items                                   (38.8)    (36.1)      (38.8)
                                                 -------   -------      ------
      Effective income tax rate                      --%      3.8%         --%
                                                 =======   =======      ======

9.       Benefit Plan

                  In October 1995, the Company adopted a 401k Savings and
         Retirement Plan (the "401k Plan"), a tax-qualified plan covering all of
         its employees. Employees may elect to contribute, subject to certain
         limitations, up to 60% of their annual compensation to the 401k plan.
         The 401k Plan provides that the Company may contribute matching or
         additional contributions to the 401k Plan at the discretion of the
         Board of Directors. The Company has not made any contributions to the
         401k Plan since its inception.


10.      Commitments

                  The Company leases its facilities under various operating
         lease arrangements. Future minimum lease payments under noncancelable
         operating leases and other contractual commitments as of December 31,
         2001 are summarized below:

         2002                        $ 7,553,409
         2003                          1,015,138
         2004                            913,068
         2005                            349,885
         2006 and thereafter                   -
                                    ------------
               Total                 $ 9,831,500
                                    ============

                  The Company has minimum purchase requirements in 2002 and 2003
         under the SPOT Image Corporation agreement discussed below and under
         other agreements in effect at December 31, 2001. Rent expense
         approximated $888,305, $1,451,324, and $1,071,709 for the years ended
         December 31, 1999, 2000, and 2001, respectively.

                                     55
<PAGE>

EarthWatch Incorporated, dba DigitalGlobe
(A Development Stage Company)

Notes to Consolidated Financial Statements(Continued)
-------------------------------------------------------------------------------

11.      Material Relationships and Related Party Transactions

         Ball Aerospace & Technologies Corp.

                  The Company has had various contracts with Ball Aerospace &
         Technologies Corp., a stockholder of the Company, since inception for
         the design and manufacture of satellites. The Company made payments to
         Ball Aerospace totaling $33,455,000, $16,225,217, $4,080,214 and
         $89,374,969 under these contracts for the years ended December 31,
         1999, 2000, and 2001, and for the period from January 1, 1995
         (inception) through December 31, 2001, respectively. At December 31,
         2000 and 2001, amounts totaling $537,298 and $40,066 are included in
         accounts payable to Ball Aerospace. In addition, see discussion of
         financing provided by Ball Aerospace in Notes 1 and 5.

                  Mr. Vanlandingham, a director of EarthWatch, is the President
         and Chief Executive Officer of Ball Aerospace.


         Hitachi, Ltd./Hitachi Software Engineering Company, Ltd.

                  Hitachi, Ltd. ("Hitachi"), a stockholder of the Company,
         currently is a master international distributor of our products, and
         the exclusive distributor in most of Asia. Under the Company's
         distribution agreement, Hitachi will be entitled to purchase our
         products at significant discounts. Additionally, the Company has
         entered into an agreement with Hitachi Software Engineering Company,
         Ltd. ("Hitachi Software"), an affiliate of Hitachi, Ltd., for the
         development and delivery of a product processor and to cross-license
         certain intellectual property rights related to the Company's ground
         system and the proprietary software of Hitachi Software. The license
         grants Hitachi Software the right to offer customers ground systems
         that permit them to receive data directly from the Company's QuickBird
         satellite. The Company made payments to Hitachi Software totaling
         $2,167,000 under this agreement for the year ended December 31, 2000.
         No other payments have been made to Hitachi or Hitachi Software nor are
         any amounts owed as of December 31, 2001.

                  Mr. Kodaira, a director of DigitalGlobe, is the General
         Manager of the Geospatial Information Division of Hitachi Software.


         ITT Industries, Inc.

                  Since December 1998, the Company has had various contracts
         with the ITT Systems division of ITT Industries, Inc. ("ITT"), a
         stockholder of the Company, for system engineering and other efforts
         associated with the scheduling and tasking module of the QuickBird
         satellites, the development of a satellite simulator and certain other
         research and development efforts. The Company made payments to ITT
         totaling $2,946,117, $3,083,399, 171,175 and 6,200,691 under these
         contracts for the years

                                     56
<PAGE>

EarthWatch Incorporated, dba DigitalGlobe
(A Development Stage Company)

Notes to Consolidated Financial Statements(Continued)
-------------------------------------------------------------------------------

         ended December 31, 1999, 2000 and 2001, and for the period from
         January 1, 1995 (inception) through December 2001 respectively. At
         December 31, 2000 and 2001, amounts totaling $28,020 and $712,560 are
         included in accounts payable and accrued liabilities to ITT.

                  Mr. Foley, a director of DigitalGlobe, is the Treasurer of ITT
         Industries. Mr. Driesse, a director of DigitalGlobe, is the President
         of ITT Industries' Defense Division.


         MacDonald Dettwiler and Associates

                  Since June 1996, the Company and MacDonald Dettwiler and
         Associates ("MDA"), a stockholder of the Company, have had an agreement
         whereby the Company has purchased various goods and services from MDA.
         Amounts totaling $3,091,653, $2,034,831, $772,386 and $7,218,197 have
         been paid to MDA during the years ended December 31, 1999, 2000, and
         2001, and for the period from January 1, 1995 (inception) through
         December 31, 2001, respectively. At December 31, 2000 and 2001, amounts
         totaling $236,220 and $75,626, respectively, are included in accounts
         payable and accrued liabilities to Ball Aerospace.


         Morgan Stanley & Co. Incorporated

                  Morgan Stanley & Co. Incorporated ("Morgan Stanley"), a
         stockholder of the Company, acted as placement agent in connection with
         the Company's offering in April 1996 of 7,000,000 shares of the
         Company's former Series C preferred stock and the Company's offering in
         March 1997 of 50,000 units, each consisting of one note and one warrant
         to purchase 31.12 shares of the Company's common stock. Morgan Stanley
         also acted as placement agent in connection with the Company's offering
         in July 1999 of 199,000 units, each consisting of one 13% note and
         49.095 shares of the Company's existing Series C preferred stock. In
         connection with its role in these offerings, Morgan Stanley received
         customary commissions and discounts in its capacity as placement agent.

                  Morgan Stanley acts as exclusive financial advisor to
         EarthWatch under a five-year agreement. Morgan Stanley received
         $750,000 and $1.0 million in connection with its advisory role in the
         recapitalizations in April 1999 and 2001, respectively.

                  Mr. Petrick, a director of DigitalGlobe, is a Managing
         Director of Morgan Stanley.

                                     57
<PAGE>

EarthWatch Incorporated, dba DigitalGlobe
(A Development Stage Company)

Notes to Consolidated Financial Statements(Continued)
-------------------------------------------------------------------------------

         SPOT Image Corporation

                  On January 25, 2002, the Company acquired exclusive rights for
         the distribution of satellite products and services to the United
         States agriculture and defense markets from SPOT Image Corporation, a
         subsidiary of SPOT Image S.A., in exchange for approximately $50.0
         million of cash and certain data purchase commitments. The data
         purchase commitments vary by period during the six and one-half year
         term of the agreement. If we do not meet 80% of our data purchase
         obligations after any contract year of the agreement, we may terminate
         the agreement. However, upon termination we remain obligated for 45% of
         the next years' minimum data purchase commitment. Minimum payments
         under the agreement are currently approximately $7.0 million and $3.8
         million in 2002 and 2003, respectively.


         United Start Corporation/Assured Space Access, Inc

                  In 1998, the Company entered into an agreement with United
         Start Corporation ("United Start") pursuant to which United Start
         provided launch and associated services for the QuickBird 1 satellite
         launch and we have an option to launch another satellite. The Company
         made payments to United Start under this agreement of approximately
         $3.3 million, $5.2 million, $2.3 million and $10.8 million in 1999,
         2000, and 2001, and for the period from January 1, 1995(inception)
         through December 31, 2001, respectively. At December 31, 2000, amounts
         totaling $2,240,000 are included in accounts payable and accrued
         liabilities to United Start. In addition, the Company made payments to
         Assured Space Access, Inc., which performed services in connection with
         the launch of the first QuickBird satellite, of approximately $1.1
         million in 1999 and $662,781 in 2000.

                  Mr. Lushtak, a former director of DigitalGlobe, was
         Co-Chairman and Chief Executive Officer of United Start, and is
         Chairman and Chief Executive Officer of Assured Space Access.


12.      Summary of Activity by Geographical Area

                                        U.S.          Other      Consolidated
                                        ----          -----      ------------
Net Sales (in thousands)
------------------------
           1999                     $  5,913.3     $     --       $  5,913.3
           2000                        3,336.1           --          3,336.1
           2001                       11,802.6        206.9         12,009.5

Long-Lived Assets (in thousands)
--------------------------------
           1999                     $161,093.6     $1,678.3       $162,771.9
           2000                      110,047.7      2,086.8        112,134.5
           2001                      194,325.5      1,688.3        196,013.8

                                     58
<PAGE>

Item 9.  Changes in and Disagreements With Independent Accountants on Accounting
and Financial Disclosure.

         There were no matters required to be reported under this item.

                                    PART III

Item 10. Directors and Executive Officers of the Registrant.

         The following table provides information concerning our directors,
executive officers, and certain key employees as of December 31, 2001:

<TABLE>
<CAPTION>

            Name                 Age      Position
            ----                 ---      ---------

<S>                              <C>      <C>
Herbert F. Satterlee III......    46      Chief Executive Officer, President, and Director
Henry E. Dubois...............    40      Chief Operating Officer, Chief Financial Officer, and
                                          Executive Vice President
Walter S. Scott...............    43      Chief Technical Officer, Executive Vice President, and
                                          Director
Neal T. Anderson..............    57      Vice President Space and Ground Systems
Mark A. Hargrove..............    45      Chief Information Officer and Vice President of Operations
Jeffrey S. Kerridge...........    40      Vice President Sales
Kari L. Blanchard.............    42      Vice President Data Systems
Gregory E. Knoblauch..........    43      Vice President Agriculture Business
Jolyon Thurgood...............    45      Vice President Marketing
Shawn R. Thompson, Esq........    47      Secretary of the Board
Paul M. Albert, Jr............    59      Director
Henry J. Driesse..............    58      Director
Donald E. Foley...............    50      Director
Anne Karalekas................    55      Director
Takatoshi Kodaira.............    54      Director
Michael J. Petrick............    40      Director
Donald W. Vanlandingham.......    62      Director

</TABLE>

         Herbert F. Satterlee III has served as Chief Executive Officer,
President, and a director since he joined DigitalGlobe in June 1998. From August
1995 to April 1998, Mr. Satterlee served as President of RESOURCE 21 LLC, a
Denver-based remote sensing information products company, where Mr. Satterlee
led the development of aircraft-derived imagery information products for the
agriculture industry in preparation for the 2001 launch of that company's
Earth-observing satellite. Additionally, from October 1978 to June 1998, Mr.
Satterlee spent 19 years with The Boeing Company, holding senior management
positions on programs such as Teledesic, UK/ROF AWACS (international defense),
and the B-1 Bomber Simulator (United States defense).

         Henry E. Dubois has served as Chief Operating Officer, Chief Financial
Officer, and Executive Vice President since September 1999. From June 1995 to
December 1998, Mr. Dubois

                                     59
<PAGE>

served as Advisor to the Board of Directors, Chief Executive Officer, and Chief
Financial Officer of P.T. Centralindo Panca Sakti, a telecommunication and
multimedia company in Indonesia. From March 1993 to February 1995, Mr. Dubois
served as Senior Vice President of P.T. Ongko Multi Corpora, a diversified
conglomerate based in Indonesia. From October 1987 to February 1993, he served
as a consultant and in financial functions for Booz Allen and Hamilton in Asia.
From August 1985 to September 1987, he served in financial functions for Exxon
Corporation.

         Walter S. Scott has served as Chief Technical Officer and Executive
Vice President since we merged with WorldView in March 1995. Dr. Scott has
served as a director of DigitalGlobe since June 1999 and from March 1995 until
April 1999. From May 1998 to June 1998, Dr. Scott served as our interim Chief
Executive Officer. Dr. Scott founded WorldView, our predecessor, in January 1992
and served as its Chief Technical Officer, Chairman of the Board, and Chief
Financial Officer from January 1992 to March 1995. From January 1986 to February
1993, he served in a variety of positions at the Lawrence Livermore National
Laboratory, including program leader of the Brilliant Pebbles Strategic Defense
Initiative program. In addition, he developed low-cost lightweight satellite
technology, managed the successful launch of several space flight experiments,
and developed computer automated design tools for the manufacture of hybrid
wafer scale integrated circuits. From June 1982 to December 1985, he was founder
and president of Scott Consulting, a software and consulting firm.

         Neal T. Anderson has served as Vice President of Space and Ground
Systems since September 1999.  Mr. Anderson is responsible for overall
management of the development, production, test, and launch of the QuickBird
spacecrafts. From March 1995 to September 1999, Mr. Anderson served as Senior
Director, Space Segment. Mr. Anderson's experience includes marketing,
engineering, and management of over 25 spacecraft programs. From January 1994 to
March 1995, Mr. Anderson served as a Director of Advanced Programs with
Spectrum Astro Inc., an aerospace company. From November 1978 to December 1993,
he served in a variety of positions with Ball Aerospace. From May 1967 to
November 1978, he served in the U.S. Air Force.

         Mark A. Hargrove has served as Vice President of Operations and Chief
Information Officer since May 2000. Mr. Hargrove is responsible for managing all
aspects of corporate information systems at DigitalGlobe. From December 1997 to
May 2000, Mr. Hargrove served as Vice President and Chief Information Officer of
Computer Curriculum Corporation, a publisher of educational software. From
September 1996 to December 1997, he served as Director of Software Engineering
at BayStone Software, a start-up developer of customer relationship management
software. From June 1995 to September 1996, Mr. Hargrove consulted with various
companies on large-scale MIS integration. Prior to that time, he served as
Director of Technical Services at 3Com Corporation.

         Jeffrey S. Kerridge has served as our Vice President Sales since August
1998 and as our Vice President Marketing from August 1998 to February 1999. Mr.
Kerridge joined DigitalGlobe in September 1996 as our Director,
Defense/Intelligence Programs. His responsibilities in that position included
managing DigitalGlobe's direct sales and marketing efforts with the United
States Department of Defense and Intelligence Community and with Middle East and
European

                                     60
<PAGE>

foreign government accounts. From February 1984 until August 1996, Mr. Kerridge
served in a variety of capacities for the Central Intelligence Agency's National
Photographic Interpretation Center, including strategic planning, division level
officer, program management, branch chief, and analyst.

         Kari L. Blanchard has served as Vice President of Data Systems since
August 2001. Ms. Blanchard is responsible for overall management of our major
software development efforts and for systems analysis activities including
sensor calibration and product verification. From June 1999 to august 2001, she
served as Software Development Manager and then as Senior Director of Data
Systems. From August 1996 to June 1999, she served as Senior Systems Engineer
and Software Development Manager for Logicon space and Information Operations
(now a subsidiary of Northrop Grumman Corp., a major aerospace and engineering
firm).

         Gregory E. Knoblauch has served as Vice President of Agriculture
Business since May 2000. Mr. Knoblauch is responsible for our AgroWatch product
and market development in the agricultural market. From July 1991 to April 2000
he served as Vice President of Marketing for RESOURCE 21, a remote sensing
satellite company where he initiated and conducted marketing and sales
activities in the agricultural market. Prior to 1991, Mr. Knoblauch served as
President of ACC of Wisconsin, an agribusiness service company.

         Jolyon Thurgood has served as Vice President of Marketing since August
2001. He also serves as Senior Director, New Products Research and Development,
a position he has held from July 2000 to the current time. Mr. Thurgood is
responsible for developing marketing strategy and executing all marketing
programs in support of DigitalGlobe's business goals, including: product
development priorities, product rollout, marketing communications, and industry
marketing focused on specific government and commercial customer sets. Prior to
joining DigitalGlobe, Mr. Thurgood served as Director of Product Marketing
(January 1995 to July 1996), and Director of International Business Development
and Director of International Marketing (September 1996 to June 2000), for Space
Imaging. From July 1982 until December 1994, Mr. Thurgood worked for Wild
Heerbrugg (now known as Leica Geosystems) in a variety of positions with
responsibilities for photogrammetry and Geographic Information Systems (GIS)
software development and marketing.

         Shawn R. Thompson, Esq. has served as Secretary of the Board since
August 1999, as Director of Contracts since October 1996, and is responsible for
contract administration, negotiations, and compliance. Mr. Thompson is an
attorney licensed to practice in the state of Colorado. Previously, Mr. Thompson
served as Contract Manager for Tenera Rocky Flats from September 1995 to October
1996 and as Manager of Contract Administration for NFT Inc. from September 1990
to September 1995.

         Paul M. Albert, Jr. has served as a director of DigitalGlobe since June
1999. Mr. Albert is a finance and capital markets consultant primarily engaged
in educating bankers at global financial institutions, and a private investor.
From December 1998 to August 1999 he served as a director of CAI Wireless and
from December 1999 to April 2001 he served as director of Teletrac Inc. From
1970 to 1996 he was an investment banker, holding senior officer positions at
Morgan Stanley & Co. and Prudential Securities..

                                     61
<PAGE>

         Henry J. Driesse has served as a director of DigitalGlobe since April
2001. Mr. Driesse has served as President of ITT Industries' Defense Division
since August 2000. Prior to his current position, Mr. Driesse served in a
variety of capacities for ITT Industries since 1981, most recently as President
of the Avionics Division.

         Donald E. Foley has served as a director of DigitalGlobe since June
1999. Since June 2001, Mr. Foley has served as the Treasurer and Director of Tax
for ITT Industries. From May 1996 to June 2001, Mr. Foley has served as the Vice
President and Treasurer of ITT Industries. From July 1989 to May 1996, Mr. Foley
served as the Assistant Treasurer of International Paper Company, where he
helped manage that company's global expansion. Additionally, Mr. Foley has held
executive positions with the Mobil Corporation and the General Electric Company.
He also is the Director/Chairman of the New York Corporate Treasury Association.

         Anne Karalekas has served as a director of DigitalGlobe since November
1999. From September 1996 until October 1999, Ms. Karalekas served as General
Manager for Microsoft's online guide, MSN Sidewalk Washington. From 1989 until
1996, Ms. Karalekas held several positions at the Washington Post newspaper,
including Director of Marketing, Publisher of the Washington Post Magazine, and
Director of the Specialty Products Group. Between 1978 and 1985, Ms. Karalekas
was a member of McKinsey & Co., a management consulting firm. From 1975 until
1978, she served as Senior Staff member of the Senate Select Committee on
Intelligence.

         Takatoshi Kodaira served as a director of DigitalGlobe from June 1995
to April 1999, and since June 1999. Since April 1999, Mr. Kodaira has served as
the General Manager, Geospatial Information Division of Hitachi Software
Engineering Co., Ltd. From August 1994 to April 1999, Mr. Kodaira served as the
Department Manager of the New Business Development Department of Hitachi, where
he was responsible for identifying and developing new business opportunities.
From August 1992 to August 1994, Mr. Kodaira was a Department Manager of the
Defense Systems Department of Hitachi, where he established a military tactical
trainer business and commercial satellite-based image exploitation systems for
the Japanese government.

         Michael J. Petrick has served as a director of DigitalGlobe since June
1999. Mr. Petrick is a Managing Director of Morgan Stanley and has been with
Morgan Stanley since 1989. Mr. Petrick also serves as a director of Marvel
Enterprises, Inc., CHI Energy, Inc., TVN Entertainment Corporation, and Premium
Standard Farms, Inc.

         Donald W. Vanlandingham has served as a director of DigitalGlobe since
October 1996. Mr. Vanlandingham has served as President and Chief Executive
Officer of Ball Aerospace since January 1997. Mr. Vanlandingham has been an
employee of Ball Aerospace since July 1967.

Board Composition

         The composition of our board of directors is governed by a
stockholders' agreement entered into in connection with our recapitalization in
April 1999. The stockholders' agreement

                                     62
<PAGE>

provides for a board of directors consisting of 11 members. The holder of the
Series A preferred stock is entitled to designate two directors, the holders of
the Series B preferred stock are entitled to designate four directors, our Chief
Executive Officer is entitled to designate two directors, Ball Technologies
Holding Corp. is entitled to designate one director, and a majority of the
holders of the Series C preferred stock are entitled to designate the remaining
two directors. The numbers of directors to be designated by the holders of
Series A preferred stock and Series B preferred stock may be adjusted if the
holders' percentage ownership changes. Currently, the board consists of nine
members, as the Series B stockholders have only designated three members and the
Series C stockholders have only designated one member.

         The holder of the Series A  preferred stock has designated Mr. Foley
and Mr. Driesse as its representatives. The holders of the Series B preferred
stock have designated Messrs. Albert and Petrick, and Ms. Karalekas as their
representatives, and are entitled to designate one additional director. The
holders of the Series C preferred stock have designated Mr. Kodaira as one of
their representatives, and have the right to designate one further
representative. Our Chief Executive Officer has designated Mr. Satterlee and Dr.
Scott to serve on the board of directors. Ball Technologies Holding Corp has
designated Donald Vanlandingham to serve on the board of directors.

         During fiscal year 2001, our board of directors held 11 meetings, and
its committees held a total of 6 meetings. Each of the directors attended at
least 75% of the aggregate of all meetings of the board of directors and the
total number of meetings held by all committees of the board of directors of
which each respective director was a member during the time he or she was
serving as such during fiscal year 2001.

Committees of the board of directors

         The Compensation Committee consists of Messrs. Petrick, Foley, Kodaira
and Vanlandingham, and Ms. Karalekas. The Compensation Committee is chaired by
Mr. Petrick and is responsible for the review of our company's equity and bonus
plans, as well as compensation plans for executive officers with base salaries
in excess of $125,000.

         The Audit Committee consists of Messrs. Albert, Petrick, Vanlandingham,
and Driesse, and is chaired by Mr. Albert. The Audit Committee makes
recommendations to the board of directors regarding the selection of independent
accountants, reviews the results and scope of the audit, and reviews the annual
financial statements before their submission to the board for approval.

         The Governance Committee consists of Messrs. Albert, Driesse, Kodaira,
Ms. Karalekas, and Dr. Scott. The Governance Committee is chaired by Mr. Albert
and is responsible for advising the board of directors on our company's
compliance with relevant laws and regulations, including without limitation,
export controls, the Foreign Corrupt Practices Act, matters relating to the
environment, worker's health and safety, and employment law.

                                     63
<PAGE>

         The Finance Committee is chaired by Mr. Foley, and consists of Messrs.
Albert, Foley, Petrick, Kodaira and Satterlee. The Finance Committee is
responsible for oversight of our company's financial policies.


Section 16(a) Beneficial Ownership Reporting Compliance

         Not applicable.

Item 11. Executive Compensation.

Summary of cash and certain other compensation

         The following table sets forth information concerning the compensation
received for services rendered to us during fiscal 1999, 2000, and 2001 by our
Chief Executive Officer and our four next most highly compensated executive
officers whose total compensation in fiscal 2001 equaled or exceeded $100,000:

<TABLE>
<CAPTION>

                                                                                             Long-term
                                                                                           Compensation
                                                            Annual Compensation            ------------
                                                            -------------------               Securities
Name and Principal Position                        Year     Salary ($)     Bonus ($)    Underlying Options//1/
---------------------------                        ----     ----------     ---------    ----------------------

<S>                                                <C>      <C>            <C>          <C>
Herbert F. Satterlee III,
   Chief Executive Officer, President, and
     Director.................................     2001     269,897         9,600                   --
                                                   2000     256,250            --              370,919
                                                   1999     203,333        40,000                   --
Walter S. Scott,
   Chief Technical Officer and Director.......     2001     192,038         6,100                   --
                                                   2000     181,500            --              538,595
                                                   1999     165,000        45,000                   --
Henry E. Dubois,
   Chief Operating Officer, Chief Financial
     Officer, and Executive Vice President /3/     2001     243,192        13,500               20,000
                                                   2000     231,000        37,500              230,000
                                                   1999      75,000        30,000                   --
Jeffrey S. Kerridge,
   Vice President Sales ......................     2001    266,983/2/       7,800                   --
                                                   2000    220,048/2/          --              126,266
                                                   1999    198,690/2/      30,000                   --
Mark A. Hargrove,
   Vice President of Operations and Chief
     Information Officer .....................     2001     175,385         5,000                   --
                                                   2000      94,808        25,000              130,000
                                                   1999          --            --                   --

</TABLE>

     /1/ The options granted to each of the named executive officers in 2000 and
         2001 are stock options to purchase shares of common stock at the
         initial exercise price of $0.25 that were issued under our 1999 Stock
         Option/Stock Issuance Plan. The options granted prior to 2000 are stock
         options to purchase shares of Series C preferred stock at an initial
         exercise price of $3.81 that were issued under our 1995 Stock
         Option/Stock Issuance Plan.
     /2/ The compensation paid to Mr. Kerridge for his services includes sales
         commissions of $57,205 in 1999, $41,048 in 2000 and $81,559 in 2001.
     /3/ We have agreed to grant Mr. Dubois a severance payment equal to six
         months of his current salary in the event the Company ceases business
         activities before September 1, 2002.

                                     64
<PAGE>

Option grants in 2001

         The following table sets forth certain information regarding options
that we granted during the year ended December 31, 2001 to the named executive
officers:

<TABLE>
<CAPTION>

                                    Option Grants in Last Fiscal Year

                                    Percent of Total                                               Potential Realizable Value At
                       Number of    Options Granted       Exercise                             Assumed Annual Rates of Stock Price
                        Options     to Employees in        Price                                  Appreciation for Option Term
                                                                                                   ----------------------------
           Name         Granted      Fiscal Year (1)     Per Share (2)     Expiration Date         5%              10%
           ----        --------      ---------------     -------------     ---------------         --              ---

<S>                    <C>          <C>                  <C>              <C>                     <C>             <C>
Henry E. Dubois         20,000             2.6              0.25          December 21, 2011       $3,144          $7,969

</TABLE>

/1/      Based on 775,740 options granted during 2001.
/2/      The exercise price per share of options granted was equal to the fair
         market value of the Common Stock on the date of grant as determined by
         the Board of Directors.


2001 option exercises and year end option values

         The following table sets forth information concerning the value
realized upon exercise of options during 2001 and the number and value of
unexercised options held by each of the named executive officers at December 31,
2001.

<TABLE>
<CAPTION>

                                                                          Number of                  Value of Unexercised In
                                       Shares        Value         Unexercised Options at              the Money Options at
                                    Acquired on                       December 31, 2001                 December 31, 2001
                                                                      -----------------                 -----------------
                                      Exercise     Realized    Exercisable/(1)/    Unexercisable   Exercisable     Unexercisable
                                      --------     --------    ---------------     -------------   -----------     -------------

<S>                                 <C>            <C>         <C>                 <C>             <C>             <C>
Herbert F. Satterlee III               22,000         --            433,000            --              --               --
Walter S. Scott                         --            --            543,850            --              --               --
Henry E. Dubois                         --            --            250,000            --              --               --
Jeffrey S. Kerridge                     --            --            138,300            --              --               --
Mark A. Hargrove                        --            --            130,000            --              --               --

</TABLE>

/1/      All options are immediately exercisable, subject to repurchase by
         DigitalGlobe of any unvested shares at the exercise price upon
         cessation of the optionee's service to DigitalGlobe.


Director Compensation

         The majority of the directors on the board is compensated by their
respective employers and is not directly compensated by our company for
attendance at board or committee meetings. In 1999, two independent directors,
Mr. Paul Albert and Ms. Anne Karalekas, were elected to the board. We have
committed to an annual stipend of $24,000, board attendance fees of $3,750 per
meeting, for quarterly meetings, and annual committee attendance fees of $7,500
per committee, to be paid to such outside directors for their service on the
board. Mr. Albert and Ms. Karalekas, as outside and unaffiliated directors, have
each received non-qualified stock options to purchase 33,750 and 31,875 shares
of common stock, respectively, at a price of $0.25 per share. Additionally, Mr.
Albert and Ms. Karalekas will each receive grants of options to purchase 7,500
shares of

                                     65
<PAGE>

common stock at the end of each calendar year in which they serve as directors,
prorated for their period of service as a director during the first year in
which they served as a director.

Compensation Committee Interlocks and Insider Participation

         The members of the Compensation Committee of our board of directors for
the 2001 fiscal year were those named above in response to Item 10. No member of
this Committee was at any time during the 2001 fiscal year or at any other time
an officer or employee of DigitalGlobe.

         No executive officer or director of DigitalGlobe has served on the
board of directors or compensation committee of any other entity that has or has
had one or more executive officers serving as a member of the board of directors
or compensation committee of DigitalGlobe. Except for Ms. Karelekas, each member
of the Compensation Committee is employed by an entity that is either a
stockholder of or maintains a business relationship with DigitalGlobe. See
"Certain Relationships and Related Transactions."

                                     66
<PAGE>

Item 12. Security Ownership of Certain Beneficial Owners and Management.

         The following table sets forth certain information with respect to
beneficial ownership of our voting capital stock as of February 28, 2002 for:

     .   each person (or group of affiliated persons) known to us to own
         beneficially more than 5% of the outstanding shares of common stock or
         of any series of preferred stock;

     .   each of our directors;

     .   each of our named executive officers; and

     .   all of our directors and executive officers as a group.

     Unless otherwise indicated, the address of all persons and entities named
     below is c/o DigitalGlobe 1900 Pike Road, Longmont, Colorado 80501.

<TABLE>
<CAPTION>

                                           Number of Shares Beneficially Owned
                                           -----------------------------------
                                       as of February 28, 2002 and Percent of Class/1/
                                       -----------------------------------------------
                             Series A                 Series B                Series C
Directors, Named Executive  Convertible   Percent    Convertible   Percent   Convertible    Percent             % of
       Officers and          Preferred      of        Preferred      of       Preferred       of       Common  Common  % of total
     5% Stockholders           Stock     Series (%)     Stock     Series (%)    Stock      Series (%)   Stock   Stock  voting power
     ---------------           -----     ----------     -----     ----------    -----      ----------   -----   -----  ------------

<S>                         <C>          <C>         <C>          <C>        <C>           <C>         <C>     <C>     <C>
ITT Industries, Inc. /2/..    8,629,893      100.0         --          --       2,534,339      6.4        --       --       20.7
Morgan Stanley & Co.
Incorporated /3/ .........        --          --        5,177,898     60.0      5,343,619     13.4         1        *       28.0
Affiliated Entities of Capital
  Research and Management         --          --        3,451,932     40.0          --          *         --       --       15.0
  Company /4/
Ball Technologies & Holdings      --          --           --          --       5,771,928     14.5        --       --        5.8
  Corp. /5/
Hitachi, Ltd. /6/.........        --          --           --          --       4,695,210     11.8        --       --        4.8
Walter S. Scott /7/.......        --          --           --          --         678,451      1.7      538,595   13.4       1.2
Herbert F. Satterlee III /8/      --          --           --          --                       *       370,919    9.3        *
Henry E. Dubois /9/.......        --          --           --          --           --          --      230,000    6.2        *
Jeffrey S. Kerridge /10/..        --          --           --          --          12,034       *       126,266    3.2        *
Mark Hargrove /11/........        --          --           --          --           --          --      130,000    3.2        *
Paul M. Albert, Jr. /12/..        --          --           --          --           --          --       33,750     *         *
Henry J. Driesse  /13/ ...        --          --           --          --           --          --        --       --        --
Donald E. Foley /14/......        --          --           --          --           --          --        --       --        --
Anne Karalekas /15/ ......        --          --           --          --           --          --       31,875     *         *
Takatoshi Kodaira /16/....        --          --           --          --       4,695,210     11.8        --       --        4.8
Michael J. Petrick /17/...        --          --        5,177,898     60.0      5,343,619     13.4         1        *       28.0
Donald W. Vanlandingham /18/      --          --           --          --       5,771,928     14.5        --       --        5.8
All non-named executive
officers..................        --          --           --          --         13,035       *        408,500   11.5        *
All executive officers
and directors as a group
(17 persons)..............        --          --           --          --      16,598,358     41.8    1,940,325   48.4      18.8

</TABLE>

         * Less than 1%.
         ----------------------
         /1/ Beneficial ownership is determined in accordance with the rules of
             the Securities and Exchange Commission and generally includes
             voting or investment power with respect to securities. Shares of
             common stock and preferred stock subject to warrants and options
             currently exercisable or exercisable within 60 days of February 28,
             2002, are deemed outstanding for computing the percentage of the
             person or entity holding such securities, but are not outstanding
             for computing the percentage of any other person or entity. Except
             as indicated by footnote, and subject to community property laws
             where applicable, the persons named in the table above have sole
             voting and investment power with respect to all shares of common
             stock and preferred stock shown as beneficially owned by them.
         /2/ The address of ITT Industries, Inc. is 4 West Red Oak Lane, White
             Plains, New York 10604.

                                     67
<PAGE>

         /3/ The address of Morgan Stanley & Co. Incorporated is 1585 Broadway,
             New York, New York 10036. Morgan Stanley also holds one share of
             common stock.
         /4/ The shares of Series B preferred stock reflected as being held by
             Capital Research Management Company, a registered investment
             advisor, are held by the following entities to whom Capital
             Research Management Company provides investment services:
             Bridgecabin & Co., 86,299 shares; Cudd & Co., 1,984,860 shares;
             Movepass & Co., 345,193 shares; and Waterfish & Co., 1,035,580
             shares. The address of Capital Research and Management Company and
             its affiliated entities is 11100 Santa Monica Boulevard, Los
             Angeles, California 90025.
         /5/ The address of Ball Technologies Holdings Corp. is 10 Longs Peak
             Drive, Broomfield, Colorado 80021.
         /6/ The address of Hitachi, Ltd., is 6 Kanda-Surugadai, 4-Chome,
             Chiyoda-Ku Tokyo, 101 Japan.
         /7/ Includes 5,255 shares of Series C convertible preferred stock and
             538,595 shares of common stock issuable on exercise of outstanding
             options. Includes as beneficial ownership the shares held by The
             Leona A. Rose Trust, Kenneth E. Scott & Shelly A. Scott, and Jean
             Scott Crowell & Luther Crowell. Mr. Scott disclaims beneficial
             ownership of shares held by the trust.
         /8/ Consists of 84,081 shares of Series C convertible preferred stock
             and 348,919 shares of common stock issuable upon exercise of
             outstanding options.
         /9/ Consists of 250,000 shares of common stock issuable on exercise of
             outstanding options.
         /10/Includes 12,034 shares of Series C convertible preferred stock and
             126,266 shares of common stock issuable upon exercise of
             outstanding options.
         /11/Includes 130,000 shares of common stock issuable on exercise of
             outstanding options.
         /12/The address of Mr. Albert is 135 Main Street, South Salem, New York
             10590.
         /13/The address of Mr. Driesse is c/o ITT Industries, Inc., 4 West Red
             Oak Lane, White Plains, New York 10604. Mr. Driesse is a Vice
             President of ITT Industries and President and General Manager of
             ITT Industries' Defense Division and may be viewed as the
             beneficial owner of the shares of stock held by ITT Industries. Mr.
             Driesse disclaims beneficial ownership of shares held by ITT
             Industries.
         /14/The address of Mr. Foley is c/o ITT Industries, Inc., 4 West Red
             Oak Lane, White Plains, New York 10604. Mr. Foley is Treasurer and
             Director of Tax of ITT Industries and may be viewed as the
             beneficial owner of the shares of stock held by ITT Industries. Mr.
             Foley disclaims beneficial ownership of shares held by ITT
             Industries.
         /15/Consists of 31,875 shares of common stock issuable upon exercise of
             outstanding options. The address of Ms. Karalekas is 2126
             Connecticut Avenue, N.W., Suite 25, Washington, DC 20008.
         /16/The address of Mr. Kodaira is Hitachi Software Engineering Co.,
             Ltd. 6-81 Onoe-cho, Naka-ku, Yokohama, Japan 231-8475. Mr. Kodaira
             has served as the General Manager, Geospatial Information Division
             of Hitachi Software Engineering Co., Ltd., and may be viewed as the
             beneficial owner of the shares of stock held by Hitachi Software
             Engineering Co., Ltd. Mr. Kodaira disclaims beneficial ownership of
             shares held by Hitachi Software Engineering Co., Ltd.
         /17/Consists of shares held by Morgan Stanley & Co. The address of Mr.
             Petrick is c/o Morgan Stanley & Co. Incorporated, 1585 Broadway,
             New York, New York 10036.
         /18/The address of Mr. Vanlandingham is c/o Ball Technologies Holdings
             Corp., 10 Longs Peak Drive, Broomfield, Colorado 80021. Mr.
             Vanlandingham is the President and Chief Executive Officer of Ball
             Aerospace, an affiliate of Ball Technologies, and may be viewed as
             the beneficial owner of the shares stock held by Ball Technologies
             Holdings Corp. Mr. Vanlandingham disclaims beneficial ownership of
             shares held by Ball Technologies.

Item 13. Certain Relationships and Related Transactions.

         Transactions with Ball Corporation

         In March 1996, we entered into a contract with Ball Aerospace, an
affiliate of Ball Technologies Holdings Corp., which holds in excess of 5% of
our outstanding capital stock, for engineering services in connection with our
first QuickBird satellite. This agreement currently remains in effect. We made
payments to Ball Aerospace for engineering services of approximately $770,034 in
2001.

         In October 1997, we entered into an agreement with Ball Aerospace that
granted us an option to purchase either one or two QuickBird spacecraft at
varying prices, depending on the timing of our exercise of that option. Under
the agreement, Ball Aerospace is permitted to sell spacecraft based on the
QuickBird design to third parties under specified circumstances. Ball Aerospace
did not perform any work under the agreement from October 1997 through May 1998,
and we did not make any payments to Ball Aerospace during that period. Under the
agreement, we issued to Ball Aerospace a promissory note in the principal amount
of $1.6 million. We repaid this note in May 1998.

         In June 1998, we entered into a new agreement with Ball Aerospace. This
agreement restarted work on our first QuickBird satellite, with a total fixed
cost of $34.1 million. In April

                                     68
<PAGE>

1999, we exercised our option to purchase a second QuickBird satellite. The
total cost of our second QuickBird satellite was $36.5 million. We made payments
to Ball Aerospace under these Ball Aerospace agreements of approximately $3.3
million in 2001.

         In April 1999, Ball Technologies exercised its option in connection
with the recapitalization to purchase 714,286 shares of our Series C preferred
stock for an aggregate purchase price of $2.5 million. The purchase was
consummated in July 1999.

         In April 2001, we entered into a new $9.0 million financing agreement
with Ball Aerospace, which we used to fund the completion of our second
QuickBird satellite. This financing facility accrues interest at an annual rate
of 11%, which becomes payable seven months following the launch of our QuickBird
satellite. Beginning in June 2002 and ending in April 2003, principal, in equal
monthly amounts, and interest are payable in cash each month. Our obligations
under the financing facility, together with the notes, are secured by the
insurance policy for our QuickBird satellite launch and operations. In
conjunction with this arrangement, we issued 903,608 shares of Series C
preferred stock in June 2001 to Ball Technologies.

         Mr. Vanlandingham, a director of DigitalGlobe, is the President and
Chief Executive Officer of Ball Aerospace.


Transactions with Hitachi Software

         Hitachi, Ltd., which holds approximately 4.8% of our outstanding
capital stock, currently is a master international distributor of our products,
and the exclusive distributor in most of Asia. Additionally, we have entered
into an agreement with Hitachi Software Engineering Company, Ltd. an affiliate
of Hitachi, Ltd., for the development and delivery of a product processor and to
cross-license certain intellectual property rights related to our ground system
and the proprietary software of Hitachi Software. The license grants Hitachi
Software the right to offer customers ground systems that permit them to receive
data directly from our QuickBird satellite.

         Hitachi Software was a party to our recapitalization transactions in
April 2001, as the holder of $13 million in principal amount at maturity of
notes. In connection with these transactions, we issued 1,967,381 shares of
Series C preferred stock in June 2001 to Hitachi Software.

         Mr. Kodaira, a director of DigitalGlobe, is the General Manager of the
Geospatial Information Division of Hitachi Software.


Transactions with ITT Industries

         In December 1998 and January 1999, we entered into agreements with ITT
Industries, Inc., which holds in excess of 10% of our outstanding capital stock,
for system engineering and development of a scheduling and tasking model of our
QuickBird satellites and the development

                                     69
<PAGE>

of a satellite simulator. We made payments to ITT Industries under these
agreements of approximately $171,175 in 2001.

         In February 1999, we entered into a strategic supplier agreement with
ITT Industries. In exchange for our commitment to use ITT Industries as the
provider and integrator of sensors for ten years, ITT Industries will provide
such sensors and associated services on a best value basis. Additionally, we
have qualified ITT Systems as a preferred DigitalGlobe supplier for certain
goods and services during the term of the strategic supplier agreement.

         In June 1999, we entered into an agreement with the
Aerospace/Communications division of ITT Industries to assist us in evaluating
our options for our next generation satellite system. At December 31, 2001, we
owed ITT Industries $712,560 for their services.

         ITT Industries was an assignee of certain rights of Morgan Stanley in
our recapitalization transactions in April 2001. In connection with these
transactions, we issued 2,421,392 shares of Series C preferred stock in June
2001 to ITT Industries.

         Mr. Driesse, a director of DigitalGlobe, is a Vice President of ITT
Industries and the President of ITT Industries' Defense Division. Mr. Foley, a
director of DigitalGlobe, is the Treasurer of ITT Industries.

Transactions with Morgan Stanley

         Morgan Stanley & Co. Incorporated, which holds in excess of 10% of our
outstanding capital stock, acted as placement agent in connection with our
offering in April 1996 of 7,000,000 shares of our former Series C preferred
stock and our offering in March 1997 of 50,000 units, each consisting of one
note and one warrant to purchase 31.12 shares of our common stock. Morgan
Stanley also acted as placement agent in connection with our offering in July
1999 of 199,000 units, each consisting of one 13% note and 49.095 shares of our
existing Series C preferred stock. In connection with its role in these
offerings, Morgan Stanley received customary commissions and discounts in its
capacity as placement agent.

         On February 28, 2002, Morgan Stanley held 5,177,898 shares of Series B
preferred stock, had beneficial ownership of 5,343,619 shares of Series C
preferred stock, and one share of common stock. In addition, Morgan Stanley acts
as exclusive financial advisor to DigitalGlobe under a five-year agreement. In
connection with its advisory role in the 1999 recapitalization, Morgan Stanley
received $750,000 in April 1999, and in connection with its advisory role in the
2001 recapitalization it received $1.0 million in April 2001.

         Morgan Stanley was also a party to our recapitalization transactions in
April 2001, as the holder of approximately $44.7 million in principal amount at
maturity of our notes. In connection with these transactions, we issued to
Morgan Stanley 3,806,126 shares of Series C preferred stock. We issued an
additional 2,951,072 shares of Series C preferred stock to certain assignees of
Morgan Stanley, including ITT Industries. We also granted certain additional
registration rights to Morgan Stanley's transferees for the notes that Morgan
Stanley held at the

                                     70
<PAGE>

time of the recapitalization, and agreed to maintain current a market-making
prospectus for Morgan Stanley with respect to the notes.

         Mr. Petrick, a director of DigitalGlobe, is a Managing Director of
Morgan Stanley.


Transactions with United Start Corporation

         In 1998, we entered into an agreement with United Start Corporation
under which United Start provided launch and associated services for our first
QuickBird satellite launch and granted us an option to obtain launch services
for another satellite. We never exercised our option for additional launch
services. We made our final payments to United Start under this agreement of
approximately $2,283,375 in 2001. Mr. Lushtak, a former director of
DigitalGlobe, was Co-Chairman and Chief Executive Officer of United Start.


         We believe that all of the transactions set forth above were made on
terms no less favorable than would be obtained for similar services provided to
unrelated third parties. Any future transactions between us and our executive
officers, directors, and their affiliates will be on terms no less favorable to
us than can be obtained from unaffiliated third parties, and any material
transactions with such persons will be approved by a majority of the
disinterested members of our board of directors.

                                     PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a)      1.   Financial Statements.

         The financial statements listed in the Index to Financial Statements
that appears in Item 8 on Page 32 of this Report on Form 10-K are filed as part
of this report.

         2.   Financial Statement Schedules.

         Schedules are not listed above because the information to be set forth
therein is not applicable or is shown in the financial statements or the notes
thereto.

         3.   Exhibits.     See the Index to Exhibits which appears at the end
of this document and which is incorporated by reference herein.

(b) Reports on Form 8-K.

         A report on Form 8-K was filed on December 26, 2001 to report that we
solicited our stockholders' consent to an amendment to our Certificate of
Incorporation. The amendment, which was approved by our stockholders, extends by
one year the period of time during which we may pay dividends to holders of the
Series A, B or C preferred stock, as the case may be, in

                                     71
<PAGE>

cash or in additional shares of Series A, B or C preferred stock, as the case
may be. The amendment also extends by one year the date by which we must begin
to pay dividends to the holders of the Series A, B or C preferred stock in cash.
The report also reported our press release announcing the release of our first
commercial imagery from our QuickBird satellite, which was successfully launched
on October 18, 2001.

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                           EARTHWATCH INCORPORATED d/b/a
                                           DIGITALGLOBE
                                          (Registrant)

                                           By: /s/ Herbert F. Satterlee III
                                           ----------------------------------
                                           Herbert F. Satterlee III
                                           President and Chief Executive Officer
                                           March 29, 2002


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.


<TABLE>
<CAPTION>
            Signature                                 Title                                    Date
            ---------                                 -----                                    ----
<S>                                         <C>                                          <C>
/s/  Herbert F. Satterlee III               President and Chief Executive Officer        March 29, 2002
-----------------------------
Herbert F. Satterlee III                    Director, Chairman
                                            (Principal Executive Officer)
                                            -----------------------------


/s/ Henry E. Dubois                         Chief Operating Officer,                     March 29, 2002
--------------------
Henry E. Dubois                             Chief Financial Officer,
                                            Executive Vice President
                                            (Principal Financial and
                                            Accounting Officer)


/s/ Walter S. Scott                         Chief Technical Officer,                     March 29, 2002
-------------------
Walter S. Scott                             Director


/s/ Paul M. Albert Jr.                      Director                                     March 29, 2002
----------------------
Paul M. Albert, Jr.
</TABLE>

                                      72

<PAGE>

<TABLE>
<S>                                         <C>                                          <C>
/s/  Donald E. Foley                        Director                                     March 29, 2002
--------------------
Donald E. Foley


/s/ Henry J. Driesse                        Director                                     March 29, 2002
---------------------
Henry J. Driesse


/s/ Anne Karalekas                          Director                                     March 29, 2002
------------------
Anne Karalekas


/s/ Takatoshi Kodaira                       Director                                     March 29, 2002
---------------------
Takatoshi Kodaira


 /s/ Michael J. Petrick                     Director                                     March 29, 2002
-----------------------
Michael J. Petrick


/s/  Donald W. Vanlandingham                Director                                     March 29, 2002
----------------------------
Donald W. Vanlandingham

</TABLE>

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<PAGE>

                   EARTHWATCH INCORPORATED d/b/a DIGITALGLOBE
                           Annual Report on Form 10-K
                      For the year ended December 31, 2001
                               Index to Exhibits

    Exhibit
   Number         Description of Exhibits

Exhibit Number             Description
-----------           ---------

2.1*                       Recapitalization Agreement dated as of April 8, 1999
                           by and among EarthWatch, Morgan Stanley & Co.
                           Incorporated, Capital Research and Management
                           Company, for the benefit of American High-Income
                           Trust, American Variable Insurance Series Asset
                           Allocation Fund, American Variable Insurance Series
                           Bond Fund, American Variable Insurance Series
                           High-Yield Bond Fund and Bond Fund of America, Inc.,
                           Ball Technologies Holdings Corp. and ITT Industries,
                           Inc.
2.2**                      Recapitalization Agreement and Consent dated as of
                           April 2, 2001 by and among EarthWatch Incorporated,
                           Morgan Stanley & Co. Incorporated, Post Balanced
                           Fund, Post High Yield LP, Post Total Return Fund,
                           Opportunity Fund, Dickstein & Co., L.P., Dickstein
                           International Limited, Hitachi Software Engineering
                           Co., Ltd., Sun America High Income Fund and Sun
                           America Series Trust High Yield Portfolio.
3.1*                       Amended and Restated Certificate of Incorporation, as
                           amended, of EarthWatch, as currently in effect.
3.2*                       Bylaws, as currently in effect.
3.3****                    Certificate of Amendment to Amended and Restated
                           Certificate of Incorporation.
3.4*****                   Certificate of Amendment to Amended and Restated
                           Certificate of Incorporation
4.1*                       Stockholders' Agreement dated as of April 8, 1999
                           among EarthWatch, Morgan Stanley & Co. Incorporated,
                           Capital Research and Management Company, for the
                           benefit of American High Income Trust, American
                           Variable Insurance Series Asset Yield Bond Fund and
                           Bond and Bond Fund of America, Inc., ITT Industries,
                           Inc. and the other persons listed on the signature
                           pages thereto.
4.3*                       Indenture dated as of July 12, 1999, by and between
                           EarthWatch and The Bank of New York, including form
                           of 13% Senior Discount Note Due 2007.
4.6*                       Series C Preferred Registration Rights Agreement
                           dated as of July 7, 1999 between EarthWatch and
                           Morgan Stanley & Co. Incorporated.
4.7*                       Notes registration rights agreement dated as of July
                           12, 1999 between EarthWatch and Morgan Stanley & Co.
                           Incorporated.
4.8*                       Specimen 13% Senior Discount Note Due 2007.

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<PAGE>

4.10**                     Notes Registration Rights Agreement dated as of April
                           3, 2001 by and among EarthWatch, The Bank of New York
                           and Morgan Stanley & Co. Incorporated.
4.11**                     Series C Preferred Registration Rights Agreement
                           dated as of April 3, 2001 by and among EarthWatch,
                           Morgan Stanley & Co.  Incorporated, Post Balanced
                           Fund, Post High Yield LP, Post Total Return Fund,
                           Opportunity Fund, Dickstein & Co., L.P., Dickstein
                           International Limited, Sun America High Income Fund,
                           Sun America Series Trust High Yield Portfolio,
                           Hitachi Software Engineering Co., Ltd. and Ball
                           Technologies Holdings Corp.
4.12**                     Pledge Agreement dated as of April 3, 2001 by and
                           among EarthWatch, The Bank of New York, as trustee,
                           and The Bank of New York, as securities intermediary.
4.13**                     First Supplemental Indenture dated April 16, 2001, by
                           and between EarthWatch and The Bank of New York, as
                           trustee.
4.14****                   Senior Collateral Pledge and Security Agreement,
                           dated as of June 15, 2001, between EarthWatch
                           Incorporated and The Bank of New York, as collateral
                           agent.
4.15****                   Junior Collateral Pledge and Security Agreement,
                           dated as of June 15, 2001, between EarthWatch
                           Incorporated and The Bank of New York, as collateral
                           agent.
10.1*                      EarthWatch Incorporated 1995 Stock Option Stock
                           Issuance Plan.
10.2*                      EarthWatch Incorporated 1999 Equity Incentive Plan.
10.3*                      Ball-EarthWatch Agreement dated as of April 8, 1999
                           by and between EarthWatch and Ball Technologies
                           Holdings Corp.
10.4*                      Contract for QuickBird Spacecraft dated as of June 9,
                           1998, as amended, by and between EarthWatch and Ball
                           Aerospace & Technologies Corp.
10.5*                      Engineering Services Agreement dated as of March 6,
                           1996, as amended, by and between EarthWatch and Ball
                           Aerospace & Technologies Corp.
10.6*                      Strategic Supplier Agreement dated as of February 26,
                           1999, by and between EarthWatch and ITT Industries,
                           Inc.
10.7*                      Agreement for the EarthWatch QuickBird Sensor
                           Subsystem dated as of October 15, 1996, as amended,
                           by and between EarthWatch and Eastman Kodak Company.
10.8*                      EarthWatch-Hitachi Imaging Distribution Agreement
                           dated as of June 4, 1995, as amended, by and between
                           EarthWatch and Hitachi, Ltd.
10.9*                      Distributor Agreement dated as of August 1, 1997, by
                           and between Nuovo Telespazio, S.p.A.
10.10*                     Launch Services Agreement dated as of April 1, 1999,
                           by and between EarthWatch and United Start
                           Corporation.
10.11*                     Lease Agreement between EarthWatch and Pratt Land
                           Limited Liability Company.
10.12***                   Delta II Launch Services Agreement between Earthwatch
                           and Delta Launch Services, Inc. (Confidential
                           treatment has been provided for portions of this
                           document until March 31, 2005)

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<PAGE>

10.13***                   Credit Agreement, dated as of April 20, 2001, by and
                           between EarthWatch and Ball Aerospace & Technologies
                           Corp.
10.14*                     Amendment Seven to Contract 9602-0117 (Engineering
                           Services Agreement), dated January 4, 2001, by and
                           between EarthWatch and Ball Aerospace & Technologies
                           Corp.
12.1                       Statements Regarding Computation of Ratio of Earnings
                           to Fixed Charges.
21.1                       Subsidiaries of the Registrant.

* Incorporated by reference to the exhibits with the corresponding exhibit
numbers in EarthWatch's registration statement on Forms S-4 (File No.
333-39202) and S-1/A (File No. 333-65014).
** Incorporated by reference to the exhibits with the corresponding exhibit
numbers in EarthWatch's Form 8-K filed with the SEC on April 25, 2001.
***Incorporated by reference to the exhibits with the corresponding exhibit
numbers in EarthWatch's Form 10-Q for the quarterly period ended March 31, 2001.
 **** Incorporated by reference to the exhibits with the corresponding exhibit
numbers in EarthWatch's Form 8-K filed with the SEC on June 20, 2001.
*****Incorporated by reference to the exhibits with the corresponding exhibit
numbers in EarthWatch's Form 8-K filed with the SEC on December 26, 2001.

(b) Financial Statement Schedules

         Schedules are not listed above because the information to be set forth
therein is not applicable or is shown in the financial statements or the notes
thereto.

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