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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K/A
        ANNUAL REPORT AMENDMENT NO. 2 PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                            FOR THE FISCAL YEAR ENDED
                                DECEMBER 31, 1998

                           ORBITAL IMAGING CORPORATION
                         (COMMISSION FILE NO. 333-49583)

                   DELAWARE                               54-1660268
           (STATE OF INCORPORATION)              (IRS IDENTIFICATION NUMBER)

           21700 ATLANTIC BOULEVARD
            DULLES, VIRGINIA 20166                      (703) 406-5000
   (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)           (TELEPHONE NUMBER)

Securities registered pursuant to Section 12(b) of the Act:  NONE

Securities registered pursuant to Section 12(g) of the Act:  NONE

Indicate by check mark whether the registrant has (1) 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. X  Yes    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. [ ]
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                                EXPLANATORY NOTE

In consultation with its new independent auditors retained in July 1999, Orbital
Imaging Corporation ("ORBIMAGE") determined that it would restate its condensed
financial statements for the quarter ended June 30, 1998, the quarter ended
September 30, 1998, and its financial statements for the year ended December 31,
1998, and its condensed consolidated financial statements for the quarter ended
March 31, 1999, the quarter ended June 30, 1999 and the quarter ended September
30, 1999. This amendment includes in Item 14 such restated financial statements
for the year ended December 31, 1998, and other information relating to such
restated financial statements, including Selected Financial Data (Item 6),
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Item 7) and Executive Compensation (Item 11). Information regarding
the effect of the restatement on ORBIMAGE's results of operations for the year
ended December 31, 1998 is included in the Notes to Financial Statements
included in Item 14 of this amendment.

Except for Items 6, 7, 7A, 11 and 14, no other information included in the
original report on Form 10-K is amended by this amendment. For current
information regarding risks, uncertainties and other factors that may affect
ORBIMAGE's future performance, please see the "Risk Factors" included in Item 7
of ORBIMAGE's Annual Report on Form 10-K for the year ended December 31, 1999.




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ITEM 1               BUSINESS

OVERVIEW

            In 1991, Orbital Imaging Corporation (the "Company" or "ORBIMAGE")
was established as an operating division of Orbital Sciences Corporation
("Orbital") to manage the development and operation of remote imaging satellites
that would collect, process and distribute digital imagery of the world's land
areas, oceans and atmosphere. In 1992, ORBIMAGE incorporated in Delaware as a
wholly owned subsidiary of Orbital. In 1997, ORBIMAGE consummated a private
placement of Series A preferred stock with financial investors to fund a
significant portion of the remaining costs of existing projects.
Contemporaneously with this financing, ORBIMAGE acquired at historical cost all
the assets and liabilities of the operating division. Prior to May 8, 1997,
ORBIMAGE was an operating division of Orbital. Orbital now owns approximately
60.4% of ORBIMAGE (55.2% on a fully diluted basis) and has the ability to
exercise significant influence, but not control, over ORBIMAGE's operational and
financial affairs.

            ORBIMAGE is a leading provider of global space-based imagery, and
expects to provide its customers with the most comprehensive offering available
of high-resolution imagery, imagery-derived products and image processing
services at competitive prices. We are developing and currently operate a fleet
of satellites that collect, process and distribute digital imagery of the
Earth's surface (land and oceans), the atmosphere and weather conditions. Our
imagery products and services are designed to provide our customers with direct
access to timely and competitively priced information concerning, among other
things, locations and movements of military assets, urban growth, forestry and
crop health, land and ocean-based natural resources and weather patterns and
wind conditions. In April 1998, we acquired a satellite image processing company
that will complement our core imagery business by providing sophisticated image
processing software, engineering analysis capability and in-house digital
imaging production capability.

            In April 1995, we launched our first satellite, OrbView-1, which
provides dedicated weather-related imagery and meteorological products to the
National Aeronautics and Space Administration ("NASA") and other government
agencies. We launched our second satellite, OrbView-2, in August 1997. OrbView-2
provides images of land and ocean surfaces to commercial customers, as well as
to NASA and other scientific users. We believe that OrbView-2 is the only
satellite of its kind providing daily color images of the entire Earth's
surface. We expect to place two additional satellites, OrbView-3 and OrbView-4,
into operation during the first quarter of 2000 and the fourth quarter of 2000
respectively. OrbView-3 and OrbView-4 will provide high-resolution imagery based
on optical technology. We believe that OrbView-3 and OrbView-4 will be among the
first commercial satellites with high-resolution optical imagery capability and
that OrbView-4 will be the first satellite with commercially available
hyperspectral capability.

            As of December 31, 1998, we acquired the exclusive worldwide rights
to distribute and sell imagery from RadarSat-2, (the "RadarSat License") a
high-resolution "next-generation" commercial radar imaging satellite that we
expect to be operational in early 2002. Unlike optical imaging technology, radar
technology permits imagery to be collected in all weather conditions and at
night. RadarSat-2 will have unique multipolarization capabilities that enable it
to image vertical as well as horizontal features over land or water. This unique
technology can be used to detect certain features on the Earth's surface, such
as ice flows, oil seepage and metallic objects, more effectively than
conventional optical imaging systems. RadarSat-2 is a follow-on to RadarSat-1,
the Canadian Space Agency's ("CSA's") medium-resolution radar imaging satellite
that was launched in 1995. RadarSat-2 is expected to be the world's first
satellite with commercially available high-resolution radar imagery.

REMOTE IMAGERY INDUSTRY

            Remote imaging is the process of observing, measuring and recording
objects or events from a distance using a variety of sensors mounted on
satellites and aircraft. This market includes satellite development,
construction and operations by both domestic and international commercial and
government users who decide to build and operate their own satellite systems, as
well as purchased imagery and related services currently addressable by existing
imagery suppliers. Historically, in the United States, the only "commercial"
operators of remote imaging satellites were quasi-governmental programs such as
the low-resolution Landsat satellite systems in operation since the 1970s. The
opportunities for commercialization of space-based imagery expanded
significantly in 1994 when the U.S.

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government implemented a policy permitting the worldwide, commercial sale of
high-resolution satellite imagery. The U.S. government has estimated that the
worldwide market for remote imagery products and services addressable by
commercial imagery providers (excluding satellite and ground hardware sales)
will be approximately $2 billion by the year 2000. We believe that this market
will grow as the availability of low-cost, high quality satellite imagery
stimulates the demand for these products and services and encourages the
development of new satellite-imaging technologies and applications.

            Historically, all satellite imagery systems were either military
surveillance platforms or were sponsored by large national and international
civil space agencies, which used satellites to monitor meteorological conditions
and environmental changes on the Earth's surface. Currently, there are a limited
number of commercial providers of satellite imaging services, which collectively
address only a portion of the market opportunities in the remote imaging
industry. The majority of today's remote imagery comes from local or regional
aerial photography firms. Although aerial imaging companies are able to achieve
high spatial resolution and customize their products according to local needs,
their slow response time, limited coverage area, restricted ability to fly over
certain areas and high cost limit widespread use of such imagery. Many existing
maps are based on out-of-date imagery because they are expensive to update. The
remainder of current commercial imagery sales are generated by a few providers
of low-resolution satellite imaging services; however, these providers have
failed to satisfy the market's growing sophistication and timeliness
requirements.

            As the remote imaging market develops, we expect that primary
competitive factors will include:

             -   spatial and/or spectral resolution;

             -   breadth of product offering;

             -   frequency of revisit times;

             -   pricing;

             -   timeliness of imagery distribution; and

             -   extent of geographic coverage.

            OrbView-2, OrbView-3, OrbView-4 and RadarSat-2 have been or are
being designed to offer a number of strategic advantages over currently
available commercial remote imaging systems. These advantages include increased
spatial resolution and increased spectral capability. Certain markets, such as
the national security, mapping and surveying markets, require spatial resolution
of three meters or less. In addition, increased spectral resolution, or the
ability to take highly precise color and infrared images of the Earth's surface,
enables potential customers in the agriculture and fishing industries to better
detect and identify crop health and map prime fishing locations. Spectral
resolution also can be used in the exploration of natural resources. For
example, land conditions that signify the presence of oil are easier to identify
on an infrared or radar image than in a conventional black and white aerial
photograph. Currently, a commercial imagery customer, such as a
telecommunications company that wants to map a large, fairly remote area to
determine where to place cellular towers, would hire an aerial photographer to
fly an airplane over the area to take pictures, develop the film and deliver the
final map to the customer. This can be time consuming and expensive. In
contrast, we expect that OrbView-3 will be able to map over 20,000 square
kilometers at one meter resolution in a single 10-minute pass.

            Similarly, countries around the world that are unable or unwilling
to establish their own space programs can conduct complete border surveillance
only in the areas over which aerial photographers can safely fly. We expect that
OrbView-3, OrbView-4 and RadarSat-2 will be able to image areas that are not
accessible by airplanes because the air space is restricted or because the areas
are too remote. In addition, up-to-date maps are key for serving certain
high-technology segments of the national security market, such as digital
terrain modeling for aircraft and missile guidance. We believe the real-time
global satellite imagery will allow customers to efficiently and
cost-effectively map areas of the world that have never been photographed
commercially or for which existing maps are now obsolete. This imagery will also
permit users to frequently monitor agricultural, forestry and fishing areas to
provide

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timely information to enhance business and government effectiveness.

            In addition, we expect RadarSat-2 to extend ORBIMAGE's competitive
advantage over other high-resolution commercial satellite operators.
RadarSat-2's high-resolution radar imaging capability will enable ORBIMAGE to
provide imagery "on-demand" twenty-four hours a day regardless of light and
weather conditions. RadarSat-2 will also be able to detect certain materials on
the Earth's surface, such as oil seepages, ice flows and metallic objects more
effectively than optical imaging satellites.

MARKETING STRATEGY

            We have been successful in penetrating the remote imaging market by
entering into pre-launch contracts. We expect to increase our market penetration
by entering into additional pre-launch contracts, directly targeting large
customers, developing a network of international distributors and entering into
strategic relationships with value-added resellers.

            Pre-launch contracts. Approximately $214 million of advance payments
have been provided from pre-launch contracts (directly with our customers or
between Orbital and third parties) that will fund capital expenditures. These
contracts provide funding for approximately 40% of the total capital
expenditures required for the deployment of our satellite systems and our
acquisition of imagery distribution licenses. These contracts include the
following:

             -  OrbView-1 was partially paid for under an $8 million pre-launch
                contract with NASA, $5 million of which was funded prior to
                launch;

             -  OrbView-2 was partially paid for under a $43 million pre-launch
                contract between Orbital and NASA, $38 million of which was
                funded prior to launch;

             -  OrbView-4's hyperspectral modifications will be partially paid
                for under a $33 million contract between Orbital and the U.S.
                Air Force, $31 million of which will be funded prior to launch.
                The contract includes an option for additional post-launch
                imagery purchases up to $8 million; and

             -  RadarSat-2 will be partially paid for under a $140 million
                contract between Orbital and the CSA, all of which will be
                funded prior to launch.

            Direct customer sales. In October 1998, we entered into a contract
with the U.S. National Imagery and Mapping Agency ("NIMA") under which the U.S.
government authorized the purchase of up to $100 million of OrbView-2, OrbView-3
and OrbView-4 imagery and systems upgrades. Under this contract, NIMA committed
in 1998 to purchase $3 million of imagery, services and compatibility upgrades
to ORBIMAGE's ground systems.

            International distributors. Internationally, we are developing
relationships with a network of commercial distributors while also dealing
directly with potential foreign national security government customers. ORBIMAGE
has entered into a $15 million contract with Samsung Aerospace Industries, Ltd.
for the distribution of OrbView-3 and OrbView-4 imagery in South Korea. In the
first quarter of 1999, we finalized exclusive commercial regional
distributorship for Japan and Central America, and we are negotiating several
similar arrangements for Europe, the Middle East and Asia, while pursuing other
opportunities with regional distributors in Australia and South Africa. We are
also in discussions with several foreign governments regarding access to our
real-time high-resolution imagery exclusively for national security
applications.

            Value-added resellers. We are also focusing on the development of
various value-added applications for imagery products. Using OrbView-2 imagery,
we provide our proprietary fish-finding maps to approximately 110 commercial
fishing vessels. We are purchasing aerial imagery of major metropolitan areas in
the United States to supplement and develop a digital catalogue of up-to-date
mapping products that we expect to offer for sale to individual consumers and
local governments later this year. We have also entered into agreements with
several value-added resellers ("VARs") who already have established expertise in
the production of aerial and satellite imagery-based value-added products in
specific industries such as utility monitoring, oil and gas exploration,
agriculture forecasting and national security. We are working with these
value-added resellers to exploit existing

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applications and develop new products that will incorporate OrbView-3, OrbView-4
and RadarSat-2 high-resolution data.

BUSINESS STRATEGY

            The key elements of our business strategy include:

            Providing the most comprehensive offering of high-resolution
satellite imagery at competitive prices. Building on the wide range of imagery
that will be available from our fleet of OrbView satellites and RadarSat-2, we
expect to offer the most comprehensive selection of commercially available
satellite imagery products and services. The cost we expect to incur in the
deployment and operation of our satellite systems is less than the announced
costs of our competitors' high-resolution systems. We expect that our cost
structure will provide us with flexibility to competitively price our imagery
products and services.

            Penetrating existing markets and creating new markets. There is
currently a large existing market for imagery products and services (which
include mapping, construction site selection, agricultural and forestry
assessment, oil, gas, and mineral exploration, scientific and environmental
monitoring and U.S. national security applications). We believe we can gain
market share rapidly in this existing market because of the breadth and expected
pricing of our product and service offerings. Additionally, we believe that
these markets will expand and further develop as commercial high-resolution
satellite imagery becomes available. Furthermore, we believe we can develop new
commercial applications for satellite-based imagery, including real estate
assessment, travel planning and entertainment applications.

            Achieving global distribution of products and services on a timely
basis. We plan to expand our global market coverage by providing imagery to end
users both directly and through VARs and other third party distribution
channels. We intend to focus our direct distribution efforts on larger customers
in the commercial, scientific, environmental and U.S. and foreign national
security markets. We expect that value-added resellers will perform
application-specific processing of our imagery for various commercial markets.
Internationally, we intend to market primarily through regional partners who
have existing marketing and distribution infrastructures. We expect these
distributors to purchase or upgrade and operate the ground imagery receiving and
processing stations in their territories which will permit them to receive,
process and distribute imagery on a timely basis.

            Expanding the "orbimage.com" digital catalogue. We have developed a
digital catalogue located at our orbimage.com website address to collect, store
and distribute imagery collected from our satellites as well as from other
aerial sources. The digital catalogue currently includes OrbView-2 imagery
products and will ultimately be a full-service on-line digital catalogue of
OrbView high-resolution imagery products. We are currently expanding our
database of digital imagery with aerial imagery products that we expect to have
available later this year. We can deliver imagery from our digital catalogue to
customers over the Internet or on CD for a per-image fee.

            Leveraging the expertise of Orbital. Orbital, our majority
stockholder, is a space technology and satellite services company with extensive
experience designing and constructing remote imaging satellites and related
ground systems. We have used and will continue to use Orbital's integrated space
capabilities, infrastructure and experience to develop our business in a cost
effective manner.

PRODUCTS AND SERVICES

            We expect to offer the most comprehensive selection of commercially
available satellite-based imagery products and services. Such products and
services will include high-resolution optical imagery, high-resolution radar
imagery, multispectral and hyperspectral imagery and imagery processing
services.

            Weather, climate and atmospheric monitoring. The OrbView-1 satellite
provides the U.S. government with daily atmospheric and weather condition
images, including images showing both clouds and global lightning information
that can be used to improve tornado and hurricane forecasting, and for weather
monitoring and meteorological research. The OrbView-1 satellite also provides
information on the atmosphere near the Earth's horizon, including atmospheric
temperature, pressure, and water vapor profiles. Because of the radio
frequencies used by the OrbView-1 satellite, OrbView-1 imagery may only be sold
to the U.S. government.

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            Ocean and land multispectral imagery. The OrbView-2 satellite
detects subtle color changes in the Earth's oceans and land areas. Under a
five-year contract, NASA and its researchers may downlink directly certain
OrbView-2 imagery for their own research purposes. ORBIMAGE is also marketing
licenses to university researchers and other primarily scientific users around
the world to enable them to directly downlink OrbView-2 imagery.

            In addition, OrbView-2 provides value-added products that we
generally can deliver within 24 hours of collection. Such products measure
phytoplankton and sediment concentration in oceans and lakes, as well as the
vegetative health of crops and forests on land. Scientists and environmentalists
can use these and other similar imagery products to assess environmental factors
that affect the oceans (including pollution levels and toxic algae events) and
to facilitate "before and after" comparisons of land areas showing, for example,
changes in agricultural crop and forestry growth or the erosion of coastal
zones.

            We also use OrbView-2 imagery to generate commercial fishing maps.
We currently offer two types of fishing maps, a coastal product targeted at
sport and smaller commercial fishing customers and a deep ocean product targeted
at larger, high seas fishing fleets.

            High spatial resolution optical and radar imagery. High-resolution
optical imagery enables users to identify objects as small as one-meter in size
(approximately the size of a phone booth) from space. We plan to sell our
high-resolution imagery products in the form of hard copies and electronic
copies that can be stored and processed on a computer. We intend to base our
product pricing, in part, on the level of processing required and the customer's
delivery-time requirements. We will target sales of unprocessed imagery to
sophisticated end-users, such as U.S. and foreign national security customers or
value-added resellers who have internal capability to perform their own imagery
enhancement and processing. While we intend to sell unprocessed imagery through
the ORBIMAGE digital catalogue, we believe that military and intelligence
customers will procure the necessary software from ORBIMAGE to upgrade their
ground stations so that they can directly downlink and process such imagery from
the satellite.

            We may also offer various value-added precision-corrected products.
We believe that these products will have applications in all three of our target
markets, discussed below. Precision-corrected imagery is processed based upon
known geographic points, terrain, elevation and topography to enable the user to
identify the position of the image on the Earth's surface. These products will
address the needs of customers who require detailed topographical and elevation
information. One example of such a product is a digital elevation model used by
military planners for aircraft flight simulation. Other examples include maps
that analyze the health of vegetation in farm and forest areas, land use maps
that can segment land tracts based on population density, wireless communication
towers and other construction projects and other land uses.

            Hyperspectral imagery. Hyperspectral imagery provides enhanced color
and enhanced infrared imagery for additional applications, including more
precise crop health analysis and analysis of the presence of minerals that will
enable mining and natural resource exploration companies to more efficiently
detect the location of precious minerals such as gold and silver, and other
natural resources such as oil. In addition, the U.S. Air Force has stated that
it intends to use hyperspectral imagery to assist in detecting, tracking and
monitoring military vehicles and assets.

            Radar imagery. High-resolution radar imagery from RadarSat-2 with a
spatial resolution of three meters will complement the high-resolution optical
imagery available from OrbView-3 and OrbView-4. Radar and optical technology
share many of the same capabilities. However, unlike optical imaging technology,
radar technology permits imagery to be collected in all weather conditions and
at night. Additionally, radar imagery can detect certain materials on the
Earth's surface more effectively than optical imagery, such as oil seepages and
ice flows, making such technology useful for offshore and onshore oil and gas
exploration, ship navigation and crop health monitoring. RadarSat-2 will have
unique multipolarization capabilities that enable it to image vertical as well
as horizontal features over land or water.




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TARGET MARKETS

            We target our imagery product and service offerings toward three
distinct markets: the U.S. and foreign national security market, the
commercial/consumer market and the scientific/environmental market. These
markets are currently serviced by aerial photography or lower-resolution
government-operated satellite imagery systems.

            U.S. and foreign national security market. The U.S. government has
publicly stated that demand for high-resolution imagery, especially for use by
tactical military commanders in the field, far exceeds the supply currently
provided by its dedicated surveillance satellites. We believe that potential
budget cutbacks in the U.S. Department of Defense ("DoD") and the U.S. National
Reconnaissance Office ("NRO") budgets, combined with changes in military
strategies (e.g., fewer military assets dispersed over a wider geographic area),
could further increase the government's need for commercially available
high-resolution imagery. Commercial satellite imagery can augment current
classified government satellite programs that use data, imagery and related
products and services for mapping, reconnaissance, surveillance, trend analysis,
mission planning, and targeting of conventional and "smart" weapons such as
cruise missiles. We believe that our radar imagery, which can be acquired in all
weather conditions and at night, may be useful to governmental agencies during
times of international conflicts when "real time" imagery is essential
regardless of the time of day, weather or other conditions, such as smoke or
haze. We believe that we can capture a significant share of the addressable
national security market once OrbView-3 or OrbView-4 is operational.

            The U.S. government has turned to commercial providers such as
ORBIMAGE for a portion of its satellite imagery requirements. The U.S. Air Force
is funding the hyperspectral modifications to the OrbView-4 sensor under a $31
million contract (with up to $10 million in data purchases and contract options)
to acquire real-time hyperspectral imagery from OrbView-4. In October 1998, we
entered into a contract with NIMA under which the U.S. government authorized the
purchase of up to $100 million of OrbView-2, OrbView-3 and OrbView-4 imagery and
systems upgrades. Under this contract, NIMA has already committed to purchase $3
million of imagery, services and compatibility upgrades to ORBIMAGE's ground
systems. The U.S. Navy has made an initial purchase of OrbView-2 imagery and has
also expressed an interest in procuring additional OrbView-2 imagery for
measuring water clarity and for similar applications. The imagery would assist
the U.S. Navy in determining optimal times, locations and depths for performing
laser and sonar operations relating to mine detection and submarine
communication. The Canadian Navy uses RadarSat-1 imagery to detect the presence
of other ships through wave analysis and to monitor the location and movement of
ice bergs in connections with submarine and ship deployments. We expect navy
fleets to rely on RadarSat-2 imagery for similar purposes.

            In addition, many foreign countries have a strong national security
interest in obtaining real-time high-resolution satellite imagery that can be
collected during all weather conditions and at night. This imagery will be used
by national security customers to help generate up-to-date wide area maps,
gather intelligence, identify and target enemy forces and assets, plan missions
and deploy resources and assess battle damage. Many countries have aerial
reconnaissance aircraft, but these aircraft may be at risk if they penetrate
foreign air space. The vast majority of foreign countries neither own nor have
access to satellites that generate high-resolution imagery. Therefore, these
countries have only three possible options to collect high-resolution satellite
imagery:

             -   develop the technology and build and launch their own
                 satellites;

             -   purchase and operate a turn-key satellite system; or

             -   purchase "time-share" capacity from a satellite imaging
                 company.

            Developing the technology and manufacturing expertise and then
constructing a dedicated high-resolution satellite system and the infrastructure
to support it requires a sizable financial investment and may require a
substantial time commitment. Purchasing a turn-key high-resolution satellite
system from a company in the United States or another country may be difficult
due to export controls and safeguards relating to national security interests
and licensing requirements. Purchasing a portion of the total capacity of a
commercial satellite while it orbits over a foreign government customer's area
of interest provides the same high-resolution imagery capability as other
alternatives, but is less expensive and more readily attainable. This "time
share" arrangement is the one being


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offered by ORBIMAGE to its regional high-resolution OrbView imagery
distributors.

            We are currently in discussions with several foreign national
security customers, and have already entered into an agreement with Samsung for
imagery of the Korean peninsula. The interest expressed by potential regional
distributors during the course of these discussions strengthens our belief that
there exists substantial unmet demand for such imagery. We believe that our
products and services will provide an effective means for foreign governments to
acquire high-resolution imagery for national security purposes.

           Commercial/consumer market. We believe that the near-term
commercial/consumer market segment will include domestic and foreign companies
and local governmental entities such as municipalities that currently use aerial
photographs and medium-resolution satellite imagery products. In the long term
we expect this market will also include individual consumers who will use
satellite imagery from the ORBIMAGE digital catalogue in various
consumer-oriented applications such as real estate assessment, travel planning,
education and entertainment. We have already begun targeting the market
applications described below, which we believe represents attractive near-term
marketing opportunities.

            -   Commercial fishing. We are currently marketing fishing maps
                designed to assist the commercial ocean fishing industry.
                OrbView-2's multispectral sensor has been specifically designed
                to distinguish the phytoplankton-rich oceanic regions from the
                clear oceanic regions. Many commercially important
                surface-feeding fish, such as tuna and swordfish, congregate at
                the phytoplankton-clear water boundary. Fishing fleets are using
                OrbView-2 imagery to accurately identifying this boundary in a
                timely fashion. Based on customer feedback, our fishing maps
                significantly reduce search time and related hardware and
                operating cost, and are more accurate and cover a broader area
                than existing alternatives.

                Our customers for fishing maps include 25 fishing companies
                comprising approximately 110 fishing vessels operated by
                commercial fishing companies in the United States, Asia, Europe
                and South America. Fishing captains view the maps transmitted
                daily over a satellite link to their vessels with a personal
                computer using our proprietary software, or receive the maps in
                a hard copy format via facsimile.

            -   Mapping and surveying. The key mapping and surveying markets
                that we have targeted are new construction site selection,
                utility infrastructure monitoring and local and regional tax
                assessment. High-resolution imagery is used for planning the
                optimal location for construction projects such as wireless
                communication towers, retail development, new housing
                developments and highways. For example, telecommunications
                providers use high-resolution imagery extensively to determine
                the topography and land use/land cover classifications within a
                region under consideration for new wireless service. This
                information enables optimal placement of new communications
                towers based on the radio signal transmission characteristics of
                the region. We believe that high-resolution imagery can also
                help retail businesses to select the optimal locations for new
                stores by providing valuable information such as population
                density, residential versus industrial land use patterns,
                locations of competitive businesses and other factors useful in
                the site selection process. The availability of radar technology
                which can identify metallic objects on the Earth's surface as
                well as subtle geological features (such as fault lines and land
                elevation) will enable us to more efficiently interpret
                high-resolution optical imagery from OrbView-3 and OrbView-4 and
                generate a more comprehensive product offering in these markets.

                We believe that our high-resolution OrbView imagery also will be
                used by gas and electric utilities, which are among the largest
                current high-resolution aerial imagery users. Spatial data, such
                as high-resolution maps showing precise locations of surface
                features, is critical to planning, design, construction,
                operation, marketing and regulatory compliance in connection
                with utilities' widely dispersed networks. We recently entered
                into a strategic relationship with a value-added reseller that
                currently uses aerial imagery to monitor power lines for utility
                companies. Under the agreement, we will be the preferred
                supplier of high-resolution satellite imagery and we are working
                with the VAR to develop a broad product base targeted at the
                utility market. We are also finalizing the terms of a strategic
                value-added reseller arrangement with one of the leading
                providers of value-added aerial

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                products to oil and gas companies for pipeline monitoring and
                oil field monitoring and mapping. Finally, we believe our
                high-resolution imagery will be useful to city, county and state
                tax authorities in monitoring taxable activities such as
                residential add-on construction and tree-cutting on public and
                private lands.

            -   Agricultural. We expect agricultural applications to represent
                a growing market opportunity, driven by large, commercial
                farming customers interested in obtaining up-to-date data on
                the condition of their crops and fields. Today, most
                agricultural customers either are unable to obtain the
                requisite imagery, or must rely on direct on-site inspection or
                aerial photography at substantial expense. We believe products
                based on multispectral, hyperspectral and radar satellite
                imagery will provide timely and valuable information on the
                health of crops and assist in managing the allocation of water,
                fertilizer and pesticides. In addition, we believe that our
                broad-area multispectral, hyperspectral and radar imagery could
                increase the accuracy of crop-yield forecasts and benefit
                insurance companies, commodity traders and agricultural
                products brokers.

            -   Forestry. To date, demand for aerial imagery products in the
                forestry industry has been modest due to the high cost, poor
                resolution and lack of appropriate revisit time of existing
                alternatives. The availability of ORBIMAGE's high-resolution,
                low-cost imagery products is expected to drive forestry industry
                demand for satellite imagery. In particular, we believe the
                multispectral and radar imagery generated by OrbView-2,
                OrbView-3, OrbView-4 and RadarSat-2 will be beneficial in
                monitoring the overall health of forests. In addition,
                OrbView-4's hyperspectral imagery will be useful in
                distinguishing tree plantations of different species and ages
                through pattern recognition techniques and RadarSat-2's imagery
                will be useful in monitoring deforestation and land use changes.
                We believe this information will be beneficial both to private
                forest product companies and to government agencies such as the
                U.S. Forest Service.

            -   Oil, gas and mineral exploration. We believe that OrbView-3,
                OrbView-4 and RadarSat-2 imagery will be valuable for oil, gas
                and mineral exploration companies for planning operations in
                remote regions of the world. In many locations where such
                exploration occurs there is a great need for improved mapping
                information for such activities as equipment transport planning,
                seismic field testing and drilling operations. Hyperspectral
                imagery from OrbView-4 will be useful for identifying promising
                locations for new oil, gas and mineral reserves. Spectral
                matching techniques can be used to identify specific "pathfinder
                minerals" that signify high probability locations for petroleum
                and other mineral reserves. Oil and gas exploration companies
                are using RadarSat-1 imagery products in their exploration
                endeavors. These companies should also benefit from RadarSat-2's
                multipolarization capabilities which enable the detection of oil
                seepages in the oceans as well as on land.

            -   Ice flow monitoring. We believe that imagery from RadarSat-2
                will be valuable for potential customers engaging in marine
                navigation and offshore drilling operations. RadarSat-2's
                ability to detect the presence, size and movement of icebergs
                will be useful to government agencies and private companies for
                safely routing cargo ships and fishing vessels. In addition,
                RadarSat's ability to measure the edge of and track the movement
                of major ice flows will be valuable to oil and gas companies for
                managing the operation of offshore oil rigs located in the
                arctic regions of the world.

            Scientific/environmental market. The scientific/environmental market
comprises government entities that use commercially-provided satellite imagery
to monitor environmental, climate-related and meteorological phenomena, as well
as commercial entities such as airlines, oil and gas companies and insurance
companies who need accurate, timely environmental information over wide
geographic areas. A substantial portion of the cost of development, construction
and launch of the OrbView-2 and RadarSat-2 satellites have been or are being
funded on a pre-launch basis through contracts with government agencies
intending to rely on the imagery generated by such satellites for scientific and
environmental research and monitoring. We are currently selling imagery from
OrbView-2 to national government agencies such as NASA, NIMA and the National
Oceanic and Atmospheric Administration ("NOAA"). NOAA recently has announced its
intention to purchase additional OrbView-2 imagery over a three year period. All
of these agencies currently use aerial and satellite imagery for diverse
applications, including weather prediction, monitoring of ocean conditions,
natural disaster assessment, environmental impact studies and similar
applications. Since 1995, OrbView-1 has generated information that has improved
the

                                       10
<PAGE>   11

meteorological community's ability to predict the timing and location of
severe storms including tornadoes and hurricanes. OrbView-2's ability to monitor
phytoplankton levels in the world's oceans on a global basis is being used by
scientists to study global climate change and by coastal fisheries to track
dangerous and costly "red tide" events. Scientists and government agencies are
using satellite radar imagery to map the Antarctic ice filed in order to analyze
the effects of glaciers and global climate changes in Antarctica. We believe the
imagery available from our high-resolution optical satellites and RadarSat-2
will be helpful to government agencies in a variety of environmental
applications including assessment of the damage from natural disasters such as
floods, forest fires, earthquakes, severe storms and the environmental impact of
industrial activities.

MARKETING AND DISTRIBUTION

            We currently plan to market and distribute imagery from our
satellite network through:

             -  our direct sales force;

             -  market- or application-specific value-added resellers;

             -  foreign regional distributors; and

             -  the ORBIMAGE digital catalogue.

            Direct customer sales. Our initial strategy for direct customer
sales is to market and sell our basic imagery products to U.S. government
agencies or to companies with internal image processing capabilities (e.g.,
large oil and gas producers). Since mid-1995, we have delivered OrbView-1
atmospheric imagery directly to NASA on a daily basis. Since October 1997, NASA
and its authorized researchers have been directly downlinking OrbView-2 imagery
at their own ground receiving stations. We may also directly market and will
distribute our products and services, such as fishing maps, to commercial and
scientific customers worldwide.

            We will continue to market our products and services directly to the
U.S. military services, U.S. intelligence gathering agencies, other U.S.
governmental customers and foreign governments that do not wish to purchase
imagery products through a regional distributor. We anticipate that imagery for
these customers will either be downlinked directly to the customers' existing
ground receiving stations (which will be upgraded to be OrbView-compatible), or
to our U.S. central ground system and then delivered to the applicable end user.

            International distributors. We expect to sell high-resolution
OrbView satellite imagery in international markets principally through
arrangements with various regional distributors. We expect that our distribution
agreements will give foreign regional distributors priority in "tasking" the
satellite's camera while the satellite is over its geographic region. We
generally expect to retain the right to market and sell imagery of a
distributor's territories, although we will pay the distributor a royalty for
these sales. In certain cases, we may agree that a distributor's approval is
required for certain sales of imagery, including sales to specified customers or
of specific areas. We anticipate that a single geographic distribution region
normally will have a maximum radius of approximately 2,400 kilometers from the
ground station (this is the maximum range that the satellite can communicate
with the ground station on a given orbital pass), although the precise size of
each region will be negotiable.

            In the first quarter of 1999, we finalized exclusive commercial
regional distribution agreements for Japan and Central America, and we are
negotiating similar arrangements for Europe, the Middle East and certain
countries in Asia, while pursuing opportunities with regional distributors in
Australia and South Africa. We are also in discussions with several foreign
governments regarding access to our real-time high-resolution imagery
exclusively for national security applications.

            We anticipate that our regional distribution agreements will
generally provide for significant annual minimum guaranteed royalty payments,
additional royalties for taskings or image purchases above agreed minimums, and
the purchase or upgrade of a regional ground station. We will also provide
training and technical support services to regional distributors, the extent and
price of which will be negotiated on a case-by-case basis.



                                       11
<PAGE>   12

            Value-added resellers. While we expect to perform certain
value-added services internally, we also intend to distribute our imagery to end
users through value-added resellers who process it into complex maps and other
types of enhanced products for specific markets or applications. Using OrbView-2
imagery, we provide our proprietary fish-finding maps to approximately 110
commercial fishing vessels. We have also entered into agreements with several
value-added resellers who already have established expertise in the production
of aerial and satellite imagery-based value-added products in specific
industries such as utility monitoring, agriculture monitoring and national
security. We are working with these value-added resellers to exploit existing
applications and develop new products that will incorporate OrbView-3, OrbView-4
and RadarSat-2 high-resolution data.

            ORBIMAGE digital catalogue. We also market imagery through our
on-line electronic digital catalogue. The ORBIMAGE digital catalogue will be a
comprehensive, digital-imagery catalogue in which we collect, store and
distribute imagery derived from our satellites and other satellite and aerial
sources. We may then deliver the images to customers over the Internet, on CD or
on computer tape. Through strategic alliances with existing imaging satellite
operators, aerial photography firms and imagery value-added resellers, we intend
to gain early recognition as an electronic depository for a comprehensive
digital imagery catalogue consisting of a broad range of diverse imagery
products primarily targeted to the commercial/consumer and
scientific/environmental markets. To date, we have completed distribution
agreements with three aerial imagery firms to assist us in developing an initial
high resolution imagery product line planned for release in April 1999. This
product line will initially include images of approximately 15 major U.S cities.
The ORBIMAGE digital catalogue commenced operation in the second half of 1998
offering OrbView-2 imagery products.

RISK MITIGATION

            ORBIMAGE has adopted a comprehensive strategy designed to mitigate
the market, financial, and technical risks associated with developing new and
existing markets and constructing, launching and operating its satellites.

            -   Market development. In addition to the pre-launch contracts
                described above, we are actively marketing our image processing
                capabilities while seeking to finalize pre-launch distribution
                agreements for OrbView-3 and OrbView-4 high-resolution imagery.
                We have entered into contracts with several international
                distributors to provide up to $48 million (including options) of
                OrbView-3 and OrbView-4 imagery in certain regions of Asia and
                Central America. The U.S. government has also demonstrated its
                commitment to procure imagery from commercial sources by
                authorizing NIMA to enter into a contract with us for the
                purchase of up to $100 million of OrbView-2, OrbView-3 and
                OrbView-4 imagery and systems upgrades. To further facilitate
                market penetration, we have developed our own value-added
                products using OrbView-2 imagery and are working with a number
                of VARs in various industries that use satellite or aerial
                imagery for commercial applications.

            -   Financial. Approximately $214 million of advance payments have
                been provided from pre-launch contracts (directly with our
                customers or between Orbital and third parties) that will fund
                capital expenditures. These contracts provide funding for
                approximately 40% of the total capital expenditures required for
                the deployment of our satellite systems and our acquisition of
                imagery distribution licenses. By negotiating pre-launch
                contracts with customers we have reduced, and seek to continue
                to reduce, the financial risks associated with constructing and
                operating our satellites and ground systems. We have also
                limited risks associated with our satellites by entering into
                fixed-price contracts with Orbital to build and launch the
                satellites, to acquire exclusive worldwide distribution rights
                for radar imagery from RadarSat-2 and to construct the related
                ground systems. In addition, we have insured the OrbView-2
                satellite against on-orbit failures and we intend to procure
                insurance to cover certain losses in the event of an OrbView-3,
                OrbView-4 or RadarSat-2 launch or satellite failure.

            -   Technical.  U.S. government surveillance and various other space
                programs have already successfully deployed many of the imaging
                technology and sub-system components that Orbital will use in
                OrbView-3, OrbView-4 and RadarSat-2. These satellites
                incorporate system redundancies for certain critical components.
                As a result of OrbView-3 and OrbView-4 having similar
                performance parameters they can provide back-up for each other.

                                       12
<PAGE>   13

SATELLITE AND GROUND SYSTEM OPERATIONS

            ORBIMAGE's basic system architecture consists of several major
components:

            -   a fleet of advanced-technology low-Earth orbit, small imaging
                satellites carrying sophisticated sensors that collect specific
                types of land, ocean, and atmospheric imagery;
            -   a central U.S. ground system that controls the satellites and
                that receives, processes and archives their imagery, and
                includes electronic cataloging and distribution capabilities;
                and
            -   foreign regional receiving and distribution centers with direct
                downlinking capabilities.

            We believe that our system will provide global economies of scale in
image collection, processing and distribution. In particular, we believe the
satellite system will be able to collect, produce and sell high spatial- and
spectral-resolution imagery worldwide on a daily basis.

            The OrbView satellites represent a progression in space imaging
technology and demonstrate Orbital's use of proven technologies and system
experience. The incremental progression in both spatial and spectral satellite
imaging capabilities among the OrbView satellites and RadarSat-2 mitigates
technical risks. The OrbView satellites employ lightweight structures, advanced
sensors, miniaturized electronics, and innovative technical processes designed
to provide high performance at relatively low cost. In the construction of
OrbView-3 and OrbView-4, Orbital is drawing upon its satellite imaging
experience not only from OrbView-1 and OrbView-2, but also from large national
satellite programs like Landsat 4, Landsat 5 and RadarSat-1 to minimize overall
program risk. RadarSat-2 will build on the heritage of RadarSat-1 and will use
redundant components and subsystems that were used in RadarSat-1. The OrbView-1
and OrbView-2 satellites are, and OrbView-3 and OrbView-4 will be, commanded and
controlled from ORBIMAGE's main operations center located in Dulles, Virginia.
The RadarSat-2 satellite will be operated and controlled by Orbital's
subsidiary, MacDonald, Dettwiler and Associates, Ltd. ("MDA"), and/or CSA under
a contract with CSA.

            The following table summarizes the primary technical characteristics
of the satellites.

<TABLE>
<CAPTION>

                               ORBVIEW-1           ORBVIEW-2             ORBVIEW-3              ORBVIEW-4              RADARSAT-2
                               ---------           ---------             ---------              ---------              ----------
<S>                      <C>                   <C>                <C>                    <C>                      <C>
Principal Applications    Weather, Scientific  Weather, Fishing,  Mapping, Agriculture,   Mapping,                Mapping,
                          Research             Agricultural,      Oil and Gas, National   Agriculture, Oil and    Agriculture, Oil
                                               Scientific         Security                Gas, Forestry,          and Gas, Forestry,
                                               Research                                   Mining, National        Mining, National
                                                                                          Security                Security
Best Ground Resolution    10 km Panchromatic   1 km to 4 km       1 m Panchromatic        1 m Panchromatic        3 m to 100 m
                                               Multispectral      4 m Multispectral       4 m Multispectral       Multipolarization
                                                                                          8 m Hyperspectral
Scene-Width               1,300 km             2,800 km           8 km Panchromatic and   8 km Panchromatic       20 km to 500 km
                                                                  Multispectral           and Multispectral
Image Area                N.A.                 N.A.               64 km(2) Panchromatic   5 km Hyperspectral      400 km(2) to
                                                                  and Multispectral       64 km(2) Panchromatic   250,000 km(2)
                                                                                          and Multispectral
                                                                                          100 km(2)
                                                                                          Hyperspectral
On-Board Storage          80 Megabytes         128 Megabytes      4 Gigabytes             4 Gigabytes             32 Gigabytes

Revisit Time              12 Days              1 Day              3 Days(1)               3 Days(1)               3 days(2)

Orbital Altitude          740 km               705 km             470 km                  470 km                  800 km

Design Life               3 Years(2)           7  1/2 Years       5 Years                 5 Years                 7 Years
</TABLE>

----------

(1)    The combined revisit time of both of OrbView-3 and OrbView-4 will be less
       than two days.

(2)    The combined revisit time of OrbView-3, OrbView-4 and RadarSat-2 will be
       less than one day.

(3)    As it enters its fifth year of operation, OrbView-1 has significantly
       exceeded its initial design life.

                                       13
<PAGE>   14

ORBVIEW-1 SATELLITE

            The OrbView-l satellite was launched in April 1995 and contains two
atmospheric sensors providing weather-related imagery to U.S. government
customers. The on-board solid state recorder memory permits storage of a half
day's imagery for transmission at two megabits per second to ORBIMAGE's primary
U.S. ground system. The satellite had a design life of three years, but is
currently expected to be operable for approximately two additional years into
2000.

ORBVIEW-2 SATELLITE

            The OrbView-2 satellite was launched in August 1997 and is believed
to be the only operational satellite providing global color imagery of the
entire Earth's surface on a daily basis. OrbView-2 is capable of downlinking
imagery to both ORBIMAGE's primary and backup ground stations and to various
regional receiving stations around the world. Orbital owns the OrbView-2
satellite, and ORBIMAGE operates it under the OrbView-2 License.

ORBVIEW-3 AND ORBVIEW-4 SATELLITES

            OrbView-3 and OrbView-4 have been designed to provide one-meter
panchromatic imagery and four-meter multispectral imagery of the Earth's
surface. We expect the total annual realizable capacity of each of OrbView-3 and
OrbView-4 to be approximately 400,000 to 500,000 images, depending on customer
preferences for the various images available and certain operating assumptions,
including cloud cover of targeted areas and availability of regional ground
stations.

RADARSAT-2

            The RadarSat-2 satellite will acquire imagery in all weather
conditions and at night across a range of modes that span from three-meter
spatial resolution imagery with a swath width of 20 km to 100-meter spatial
resolution imagery with a swath width of 500 km. RadarSat-2 will be capable of
providing real-time imagery within a 4,000 kilometer radius of any ground
station, and will have an annual image capacity in excess of 220,000 images.

GROUND OPERATIONS CENTERS AND IMAGE PROCESSING FACILITIES

            ORBIMAGE's central U.S. ground systems monitor the OrbView
satellites while they are in orbit and command the satellites as required to
ensure that proper orbits are maintained, that electrical power and other
operating variables stay within acceptable limits and that appropriate
communications links are maintained. MDA will operate the RadarSat-2 satellite
in Canada on similar terms.

            The image receiving and processing center for the OrbView satellites
is also located at our U.S. facility and consists of several ground antennas
capable of receiving down-linked imagery from the satellites and numerous work
stations where the digital imagery streams from the satellites are processed and
converted into useful imagery products. The center is designed to be capable of
processing and archiving 6,500 high-resolution OrbView satellite images per day.
In April 1998, we acquired an image processing company to complement our core
business by providing engineering analysis, sophisticated imaging processing
software and production of high quality digital imagery products.

COMPETITION

      ORBIMAGE's satellite and aerial imaging competitors include:

      -     small regional aerial photography firms;

      -     a limited number of existing satellite imagery providers; and

      -     several anticipated high-resolution satellite imagery providers.

            Existing aerial photography firms. The major source of commercial
high-resolution imagery today is aerial

                                       14
<PAGE>   15

photography. This market is very fragmented, with numerous small regional firms
located all over the world. Most aerial photography firms currently use
film-based technology rather than the digital camera technology used by the
OrbView satellites. We expect that our satellites will provide customers with
more timely and/or lower cost imagery than is provided by existing aerial
photography firms.

            Existing Satellite Imagery Providers. OrbView-1 and OrbView-2 have
no existing direct competitors for their daily panchromatic and multispectral
imagery. SPOT 4 (operated by SPOTImage) provides multispectral imagery that is
competitive with OrbView-2 in certain markets, such as agricultural assessment.
There are five existing satellite-based providers of low- and medium-resolution
imagery:

            -   SPOTImage S.A., a French-owned company, currently produces
                unprocessed imagery using three satellites with resolution
                capability of 10 meters in panchromatic and 20 meters in
                multispectral;

            -   Space Imaging's Landsat 4 and Landsat 5 satellites provide
                coverage in seven spectral bands covering the visible to
                infrared parts of the spectrum, but the best resolution of these
                satellites is 30 meters in multispectral;

            -   RadarSat-1, operated by CSA, provides radar imagery with a
                resolution that varies between 10 and 100 meters. RadarSat-1
                will be phased out based on its seven year design life when
                RadarSat-2 is placed into service in 2002;

            -   KVR-1000, a series of Russian government satellites, provide
                film-based, two-meter resolution panchromatic images but operate
                only on a sporadic basis; and

            -   IRS-IC, an Indian Space Agency satellite, provides six-meter
                panchromatic and 25 meter multispectral imagery.

            We view these providers as indirect competitors to our
high-resolution OrbView satellite imagery in certain markets.

            Future Satellite Competitors. The high-resolution OrbView satellites
and RadarSat-2 are expected to face significant future competition in the
satellite imagery market from two U.S. satellite competitors who are planning
imaging satellites that will have one-meter panchromatic and four-meter
multispectral capability and who have partnered with various industry
participants:

            -   Space Imaging, which is owned by Lockheed Martin Corporation,
                Raytheon Company and Mitsubishi Corporation, has announced plans
                to launch its first high-resolution (one-meter) satellite in
                mid-1999; and

            -   EarthWatch, whose major shareholders include Ball Aerospace and
                Technology Corporation, Telespazio and Hitachi, Ltd has
                announced plans to launch its high-resolution (one-meter)
                satellite in late 1999.

            In addition, the U.S. government and foreign governments may fund
the development, construction, launch and operation of remote imaging satellite
systems that may compete with OrbView-2 as well as the high-resolution OrbView
satellites and RadarSat-2. For example, NASA's Earth Science Program is
sponsoring a satellite scheduled for launch next year that will provide imagery
similar to that of OrbView-2, and the European Space Agency has announced that
it plans to launch Envisat satellite in late 1999 that will include a radar
instrument with 8-meter spatial resolution that may compete with RadarSat-2. The
U.S. Navy has also announced its intention to procure a satellite with low
resolution hyperspectral capability from Space Technology Development
Corporation, which would retain certain commercial marketing rights. There is
also an Israeli government sponsored commercial joint venture that is seeking to
market commercially high-resolution imagery using Israeli remote imaging
satellites.




                                       15
<PAGE>   16

CONTRACT COMMITMENTS

            As of March 31, 1999, approximately $214 million of advance payments
have been or are being provided from pre-launch contracts (directly with
ORBIMAGE's customers or between Orbital and third parties) that are funding
certain capital expenditures for ORBIMAGE's satellite systems. In addition, as
of March 31, 1999, ORGIMAGE has contracts (including options) from U.S.
government and international customers to purchase up to approximately $156
million of OrbView-3 and OrbView-4 imagery and related services.

BACKLOG

            ORBIMAGE's contract backlog of firm commitments at December 31, 1998
and 1997 was approximately $54 million and $56 million, respectively. As of
December 31, 1998 and 1997, 72% and 75%, respectively, of ORBIMAGE's backlog was
with government agencies. Contract backlog of firm commitments consists of
aggregate contract value for firm product orders, excluding the portion
previously included in operating revenues on the basis of imagery delivered.
Contract backlog of firm commitments excludes unexercised contract options at
December 31, 1998 of approximately $106 million.

EMPLOYEES

            As of March 15, 1999, ORBIMAGE had 108 full-time permanent
employees. None of our employees is represented by a collective bargaining
agreement.

ITEM 2.  PROPERTIES

            ORBIMAGE currently leases approximately 13,000 square feet of office
and operations space in Dulles, Virginia from Orbital at cost. See "Item 13 -
Certain Relationships and Related Transactions -- Services Agreement." We also
lease approximately 16,000 square feet of office and operations space in St.
Louis, Missouri.

ITEM 3.  LEGAL PROCEEDINGS

            ORBIMAGE is not a party to any pending legal proceedings material to
its financial condition or results of operations.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.




                                       16
<PAGE>   17


                                     PART II

ITEM 5.  MARKET OF, AND DIVIDENDS ON, REGISTRANT'S COMMON EQUITY AND RELATED
         STOCKHOLDER MATTERS

MARKET INFORMATION

            There is no established public trading market for ORBIMAGE's common
stock. As of December 31, 1998, there were 25,214,000 shares of common stock
issued and outstanding, and 20,437,879 shares of common stock are subject to
outstanding options or warrants to purchase, or securities convertible into,
shares of common stock.

HOLDERS

            As of December 31, 1998, there were two holders of shares of
ORBIMAGE's common stock.

DIVIDENDS

            ORBIMAGE has never declared or paid any cash dividends on its common
stock or Series A preferred stock. Moreover, the indenture governing ORBIMAGE's
senior notes restricts the payment of dividends. ORBIMAGE anticipates that it
will retain all future earnings, if any, generated from operations to develop
and expand its business. Thus, ORBIMAGE does not expect to pay cash dividends on
the common stock or Series A preferred stock at any time in the foreseeable
future.

SALES OF UNREGISTERED SECURITIES

            From September 30, 1995 to the present, the Company has sold and
issued the following securities on the dates and for the consideration stated
below:

            -   On February 25, 1998, the Company offered and sold 150,000
                units in a private offering exempt from registration pursuant to
                Rule 144A of the Securities Act. The initial purchasers were
                Bear, Stearns & Co. Inc., Merrill Lynch & Co. and NationsBanc
                Montgomery Securities LLC, who subsequently resold the units to
                "qualified institutional buyers" (as defined in Rule 144A). Each
                unit consisted of an 11 5/8% senior note due 2005 in the
                principal amount of $1,000 and a warrant to purchase 8.75164
                shares of the Company's common stock. On July 24, 1998, the
                Company filed an exchange offer registration statement offering
                to exchange a substantially similar 11 5/8% Series B senior note
                for each outstanding note held by the qualified institutional
                buyers. The proceeds from this offering were used to purchase
                certain pledged securities and are being used to develop and
                construct satellites, ground stations, market products and
                services and for working capital.

            -   Concurrently with the units offering, the Company issued
                227,295 shares of Series A preferred stock for an aggregate
                purchase price of $22.7 million to a group of "accredited
                investors."

            -   On December 30, 1997, the Company issued 14,000 shares of
                common stock for an aggregate purchase price of $58,380 to an
                individual pursuant to the exercise of certain options.

            -   On July 3, 1997, the Company issued 72,605 shares of Series A
                preferred stock for an aggregate purchase price of $7.3 million
                to the Export Development Corporation, an "accredited investor."

            -   On May 7, 1997, the Company issued 300,100 shares of Series A
                preferred stock for an aggregate purchase price of $30.0 million
                to a group of "accredited investors."

            All of the sales of Series A preferred stock described above were
made in reliance on one or more exemptions from registration under the
Securities Act, including exemptions for sales to accredited investors provided
for by Regulation D and exemptions for sales to non-U.S. persons outside the
U.S. provided for by Regulation S promulgated under the Securities Act.

                                       17
<PAGE>   18

ITEM 6.  SELECTED FINANCIAL DATA

            The following selected financial data of ORBIMAGE as of and for the
years ended December 31, 1994, 1995, 1996, 1997 and 1998 have been derived from
the audited financial statements of ORBIMAGE. The selected historical financial
data set forth below should be read in conjunction with "Item 7 - Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and notes thereto, included elsewhere in this Report.

<TABLE>
<CAPTION>

                                                                                 YEARS ENDED DECEMBER 31,
                                              -----------------------------------------------------------------------------------
                                                  1994            1995               1996               1997            1998
                                                  ----            ----               ----               ----            ----
                                                                         (IN THOUSANDS, EXCEPT SHARE DATA)
STATEMENT OF OPERATIONS DATA:                                                                                      (RESTATED) (1)
<S>                                           <C>                <C>                <C>                <C>            <C>
Revenues....................................  $      --          $   4,567          $   1,055          $   2,062       $   11,663
Direct expenses.............................        800              7,998              4,320              6,312           15,215
                                              ---------          ---------          ---------          ---------       ----------
Gross loss..................................       (800)            (3,431)            (3,265)            (4,250)          (3,552)
Selling, general and administrative
  expenses..................................      3,156              2,371              1,630              2,845            7,328
                                              ---------          ---------          ---------          ---------       ----------
Loss from operations........................     (3,956)            (5,802)            (4,895)            (7,095)         (10,880)
Interest income.............................         --                 --                 --              1,261            1,915
                                              ---------          ---------          ---------          ---------       ----------
Loss before benefit for income taxes........     (3,956)            (5,802)            (4,895)            (5,834)          (8,965)
Benefit for income taxes....................         --                 --                 --             (1,752)          (3,286)
                                              ---------          ---------          ---------          ---------       ----------
Net loss....................................  $  (3,956)         $  (5,802)         $  (4,895)         $  (4,082)      $   (5,679)
                                              =========          =========          =========          =========       ==========
Loss per common share -- basic and
  diluted (2)...............................         --                 --                 --             $(0.42)         $ (1.05)

OTHER DATA:
Capital expenditures........................  $  13,832          $  18,989          $  12,617          $  49,029       $  108,533
</TABLE>

<TABLE>
<CAPTION>
                                                                                   DECEMBER 31,
                                              --------------------------------------------------------------------------------------
                                                  1994             1995               1996              1997               1998
                                                  ----             ----               ----              ----               ----
                                                                                   (IN THOUSANDS)
BALANCE SHEET DATA:                                                                                                   (RESTATED) (1)
<S>                                           <C>                <C>                <C>                <C>               <C>
Cash, cash equivalents and
  available-for-sale securities.............  $      --         $      --           $      --        $   22,220          $    59,483
Total assets................................     51,944            63,423              72,328           137,749              308,078
Long-term obligations (3)...................         --                --                  --                --              142,622
Preferred stock subject to repurchase.......         --                --                  --            36,355               78,489
Stockholders' equity........................     11,526            19,956              26,279            49,005               33,964
</TABLE>

----------
(1)   In consultation with its new independent auditors retained in July 1998,
      Orbital Imaging Corporation ("ORBIMAGE") determined that it would restate
      its condensed financial statements for the quarter ended June 30, 1998,
      the quarter ended September 30, 1998, and its financial statements for the
      year ended December 31, 1998, and its condensed consolidated financial
      statements for the quarter ended March 31, 1999, the quarter ended June
      30, 1999 and the quarter ended September 30, 1999. See Note (3) of the
      Notes to Financial Statements.

(2)   All potentially dilutive securities, such as preferred stock subject to
      repurchase, warrants and stock options are antidilutive for each year
      presented. Prior to May 8, 1997, ORBIMAGE was an operating division of
      Orbital, and the loss per common share for the years ended December 31,
      1994, 1995 and 1996 were not considered meaningful.

(3)   Net of unamortized debt discount, estimated to be $7.4 million (restated).




                                       18
<PAGE>   19


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

OVERVIEW

            In 1991, ORBIMAGE was established as an operating division of
Orbital to manage the development of remote imaging satellites that would
collect, process and distribute digital imagery of land areas, oceans and the
atmosphere. In 1992, ORBIMAGE incorporated in Delaware as a wholly owned
subsidiary of Orbital. In 1997, ORBIMAGE consummated a private placement of
Series A preferred stock with financial investors to fund a significant portion
of the remaining costs of existing projects. Contemporaneously with this
financing, ORBIMAGE acquired at historical cost all the assets and liabilities
of the operating division. Prior to May 8, 1997, ORBIMAGE was an operating
division of Orbital. Orbital now owns approximately 60.4% of ORBIMAGE (55.2% on
a fully diluted basis) and has the ability to exercise significant influence,
but not control, over ORBIMAGE's operating and financial policies. Pursuant to
the terms of ORBIMAGE's charter and the stockholders' agreement, Orbital does
not have unilateral control over ORBIMAGE's assets.

            ORBIMAGE operates and is further developing a fleet of satellites
that collect, process and distribute digital imagery of the Earth's surface, the
atmosphere and weather conditions. ORBIMAGE has entered into a procurement
agreement with Orbital to purchase the OrbView-1, OrbView-3 and OrbView-4
satellites (including launch services) and the U.S. ground system necessary to
operate the satellites and to collect, process and distribute imagery. Under the
procurement agreement, ORBIMAGE also acquired the OrbView-2 License. The terms
of the OrbView-2 License require ORBIMAGE to operate and control the OrbView-2
satellite. ORBIMAGE has also entered into an agreement with Orbital and MDA
under which ORBIMAGE has acquired the RadarSat-2 License. Under the RadarSat-2
License, MDA will own and operate the RadarSat-2 satellite, and MDA will provide
operations, data reception, processing, archiving and distribution services to
ORBIMAGE. Orbital also provides certain administrative services to ORBIMAGE such
as accounting, tax, human resources and benefit-related services. See "Item 13 -
Certain Relationships and Related Transactions -- Services Agreement" and
"--RadarSat-2 License Agreement."

            Currently, ORBIMAGE expects OrbView-3 to be operational in the first
quarter of 2000, OrbView-4 to be operational in the fourth quarter of 2000 and
RadarSat-2 to be operational in early 2002. ORBIMAGE cannot assure the
successful deployment of these satellites. A delay or launch failure could
negatively affect ORBIMAGE's business, financial condition and results of
operations, its ability to deliver its products and services and its ability to
service its debt.

            Revenues. ORBIMAGE is performing under several long-term sales
contracts to provide imagery products and receives contractual payments in
advance of product delivery. In such circumstances, ORBIMAGE initially records
deferred revenue for the total amount of the payment and recognizes revenue over
the contractual delivery period. At December 31, 1998, ORBIMAGE had
approximately $32.2 million (restated) of deferred revenue related to advance
payments for OrbView-2 imagery. See "Item 13 - Certain Relationships and Related
Transactions -- OrbView-2 License."

            System Depreciation. ORBIMAGE depreciates its satellites over the
design life of each satellite. ORBIMAGE is amortizing the cost of the OrbView-2
License over the design life of the OrbView-2 satellite. ORBIMAGE intends to
amortize the cost of OrbView-3, OrbView-4 and the RadarSat-2 License over the
design life of the satellites, estimated to be five, five and seven years,
respectively. ORBIMAGE depreciates the ground systems used to operate the
satellites and collect, process and distribute imagery over the estimated lives
of the assets, generally eight years. Depreciation begins when the satellites
and ground systems are placed in service.

            Interest Expense. A portion of the proceeds of the units offering
representing the estimated debt discount has been accounted for as a discount to
the par value of the Notes. Amortization of this discount, together with the
stated interest on the Notes, is capitalized as the historical costs of assets
under construction, when appropriate. ORBIMAGE expects to capitalize a
significant portion of its interest expense throughout 1999 and 2000 as it
completes construction of the high-resolution OrbView satellites.

            Restatement. In consultation with its new independent auditors
retained in July 1999, ORBIMAGE determined that it would restate its condensed
financial statements for the quarter ended June 30, 1998, the quarter ended
September 30, 1998, and its financial statements for the year ended December 31,
1998, and its condensed consolidated financial statements for the quarter ended
March 31, 1999, the quarter ended June 30, 1999 and the quarter ended September
30, 1999. See Note (3) of the Notes to Financial Statements.

                                       19
<PAGE>   20

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

            Business Acquisition. In 1998, ORBIMAGE acquired substantially all
of the assets of St. Louis-based TRIFID Corporation ("TRIFID") for $5 million.
TRIFID provides sophisticated image processing software, geographic information
database and production systems, imaging sensor design and related engineering
services to both governmental and commercial customers. The acquisition provides
ORBIMAGE with the technical personnel and production capability required to
generate high-resolution imagery and derived products. The acquisition resulted
in excess of purchase price over net assets acquired of approximately $3
million, which is being amortized over ten years.

            Revenues. Revenues for the years ended December 31, 1996, 1997 and
1998 were approximately $1.1 million, $2.1 million and $11.7 million,
respectively. The increase in 1998 revenues was primarily due to the
commencement of the OrbView-2 satellite's commercial operations in November
1997. Revenues during the year ended December 31, 1998 also included $1.6
million in sales generated from the image processing business acquired from
TRIFID in April 1998.

            Revenues for the year ended December 31, 1997 consisted of
approximately $0.8 million and $1.3 million of OrbView-1 and OrbView-2 sales,
respectively. Revenues in 1996 were attributable solely to the sale of OrbView-1
imagery products to NASA and the University Corporation for Atmospheric
Research.

            Direct Expenses. Direct expenses include the costs of operating and
depreciating (i) the OrbView-1 satellite, (ii) the OrbView-2 License, and (iii)
the related ground system. Satellite operating costs primarily consist of labor
expenses. Direct expenses for the years ended December 31, 1996, 1997 and 1998
were approximately $4.3 million, $6.3 million and $15.2 million, respectively.
Direct expenses increased from 1997 to 1998 primarily as a result of the
OrbView-2 License amortization, additional ground system depreciation and
increased operating expenses primarily related to OrbView-2, all of which began
when OrbView-2 commenced commercial operations in November 1997.

            Direct expenses increased from the year ended December 31, 1996 to
the year ended December 31, 1997 as a result of the launch and placement in
operation of OrbView-2 in 1997. ORBIMAGE expects direct expenses to increase
when OrbView-3, OrbView-4 and RadarSat-2 are placed in operation.

            Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses include the costs of marketing, advertising,
promotion and other selling expenses, as well as the costs of the finance,
administrative and general management functions of ORBIMAGE. SG&A expenses were
approximately $1.6 million, $2.8 million and $7.3 million (restated) for the
years ended December 31, 1996, 1997 and 1998, respectively. The increase in SG&A
expenses in 1998 was primarily attributable to the increase in salaries and
related benefits as ORBIMAGE expanded its operations and workforce.

            The increase in SG&A expenses from the year ended December 31, 1996
to the year ended December 31, 1997 was primarily attributable to an increase in
ORBIMAGE's staffing levels as ORBIMAGE expanded its operations. SG&A expenses in
1997 included costs of approximately $0.6 million incurred to support the launch
and initial checkout of the OrbView-2 satellite. ORBIMAGE expects that launch
and initial checkout costs for OrbView-3 and OrbView-4 will be incurred at
levels generally consistent with those incurred in 1997 for OrbView-2.

            Interest Income and Interest Expense. Interest income reflects
interest earnings on investments made primarily with proceeds from ORBIMAGE's
financing activities. Interest expense reflects interest incurred on the Notes,
net of applicable capitalized interest. Net interest income for the year ended
December 31, 1998 was approximately $1.9 million (restated), which is net of
interest expense of approximately $4.8 million (restated). For the year ended
December 31, 1998, capitalized interest in connection with the construction of
the OrbView-3 and OrbView-4 satellites and related ground system totaled $10.9
million. The capitalized interest is recorded as part of the historical cost of
the assets to which it relates and will be amortized over the assets' useful
lives when placed in service. Net interest income was approximately $1.3 million
for the year ended December 31, 1997 and none in 1996.

            Benefit for Income Taxes. ORBIMAGE recorded an income tax benefit of
approximately $3.3 million for



                                       20
<PAGE>   21

the year ended December 31, 1998. ORBIMAGE recorded an income tax benefit of
approximately $1.8 million for the period May 8, 1997 through December 31, 1997.
The tax benefits result from net operating losses generated during the period in
addition to decreases in deferred tax liabilities for depreciation of satellite
assets, which were previously deducted for tax purposes. Prior to May 8, 1997,
ORBIMAGE was an operating division of Orbital and was included in Orbital's
consolidated tax return.

LIQUIDITY AND CAPITAL RESOURCES

            As of December 31, 1998, ORBIMAGE had approximately $59.5 million of
cash and cash equivalents and available-for-sale securities. On February 25,
1998, ORBIMAGE issued units consisting of the Notes and common stock warrants
raising gross proceeds of $150 million. Out of net proceeds of approximately
$144.6 million, ORBIMAGE purchased approximately $32.9 million of U.S. Treasury
securities to fund the interest on the Notes for the first four interest payment
dates, of which $24.5 million remained as of December 31, 1998. These securities
were placed in a restricted account and pledged as security for repayment of
interest on the Notes. The total effective interest rate on the Notes, including
the discount attributable to the value of the warrants and issuance expenses, is
approximately 13.4% (restated). Concurrent with the Units Offering, ORBIMAGE
completed a private placement of 227,295 shares of Series A preferred stock,
generating approximately $21.3 million of net proceeds. During 1997, ORBIMAGE
completed two private equity placements, in which it sold 372,705 shares of
Series A preferred stock, generating gross proceeds of approximately $37.3
million. Orbital also increased its common equity investment in ORBIMAGE,
bringing its total equity invested to approximately $91.5 million.

            Investing activities used cash of approximately $12.6 million, $60.4
million and $161.2 million for the years ended December 31, 1996, 1997 and 1998,
respectively. The increase in the use of cash from 1996 to 1997 and continuing
into 1998 is attributable primarily to the net purchases (net of sales and
maturities) of short- and long-term investments and increased capital
expenditures in those periods. After completion of its private equity and debt
financings in 1997 and 1998, ORBIMAGE invested the proceeds from the financings
in various short- and long-term investments, consisting primarily of commercial
paper and U.S. Treasury securities. ORBIMAGE intends to use the investments to
fund costs under the procurement agreement between ORBIMAGE and Orbital, the
RadarSat-2 License and other operating costs.

            Capital expenditures for the years ended December 31, 1996, 1997 and
1998 were approximately $12.6 million, $49 million and $97.6 million (excluding
capitalized interest) and consisted primarily of costs relating to the
acquisition of the OrbView-3 and OrbView-4 satellites and the related U.S.
ground system. Capital expenditures in 1996 consisted primarily of costs under
the procurement agreement relating to the acquisition of the U.S. ground system,
the OrbView-1 satellite and the OrbView-2 License. Beginning in 1997, capital
expenditures were also related to OrbView-3 and OrbView-4. The total cost of the
OrbView-1, OrbView-3 and OrbView-4 satellites, the OrbView-2 License and the
related U.S. ground system, is estimated to be approximately $285 million, net
of approximately $31 million which will be funded by the U.S. Air Force through
a contract with Orbital. Of this amount, as of December 31, 1998, ORBIMAGE had
spent approximately $225 million and expects to spend approximately $60 million
through the third quarter of 2000, the projected deployment date of OrbView-4.

            ORBIMAGE's acquisition of the RadarSat-2 License will cost
approximately $60 million, net of approximately $140 million which will be
funded by the CSA through a contract with Orbital. ORBIMAGE expects to use cash
on hand, cash from operations and also may consider raising additional capital
to fund RadarSat-2 License payments.

            Operating activities provided cash of approximately $6.3 million and
$9.9 million (restated) during the years ended December 31, 1997 and 1998,
respectively. Operating activities used cash during the year ended December 31,
1996 of approximately $1 million. The increase in operating cash flow from 1997
to 1998 is primarily attributable to an increase in accounts payable and accrued
expenses of $12.4 million. The increase in operating cash flows from 1996 to
1997 was primarily attributable to the receipt of advance customer payments for
imagery purchases.

            ORBIMAGE expects to fund its other future capital expenditures and
negative cash flows from operating activities using cash and cash equivalents
and securities together with cash from advance customer payments. ORBIMAGE's
ability to generate positive cash flow is dependent on the sale of its products
and services, adequate



                                       21
<PAGE>   22

customer acceptance of ORBIMAGE's products and services and numerous other
factors. ORBIMAGE does not expect to generate net positive cash flow from
operations sufficient to fund both operations and capital expenditures before
the fourth quarter of 2000, when both OrbView-3 and OrbView-4 are operational.
While ORBIMAGE believes it has sufficient resources to meet its requirements
through that time, additional funding may be necessary in the event of an
OrbView-3 or OrbView-4 launch delay, cost increases or unanticipated expenses.
We cannot assure you that additional capital will be available on favorable
terms or on a timely basis, if at all. ORBIMAGE has incurred losses since its
inception, and management believes that it will continue to do so for the
foreseeable future. ORBIMAGE's ability to become profitable and generate
positive cash flow is dependent on the continued expansion of commercial
services, adequate customer acceptance of ORBIMAGE's products and services and
numerous other factors.

"YEAR 2000" COMPLIANCE

            The year 2000 presents potential concerns for computer hardware and
software applications. The consequences of this may include systems failures and
business process interruption. The problem may exist for many kinds of software
and hardware, including mainframes, mini computers, PCs and embedded systems.

            ORBIMAGE has completed an assessment of the potential Year 2000
issues with respect to various financial, technical and operational
computer-related systems. This assessment consisted of reviewing software code
and hardware system components to determine whether a system failure or
miscalculations causing disruption of operations could occur as a result of the
system's inability to distinguish between the year 2000 and the year 1900.
ORBIMAGE intends to correct any Year 2000 issues, or develop alternative
"work-around" procedures that address the problem by June 1999. ORBIMAGE has
also inquired of its primary vendor, Orbital, as to whether products and
services provided by Orbital may be adversely affected by the Year 2000 issue.
Orbital has informed ORBIMAGE that with respect to its provision of
administrative services, no material Year 2000 issues have been identified.
Orbital is still conducting an internal review of Year 2000 issues with respect
to the satellite systems, ground systems and launch services provided or to be
provided to ORBIMAGE, and completed its initial assessment of any pertinent
issues in December 1998.

            ORBIMAGE's largest customer is NIMA. If NIMA's systems are not Year
2000 compliant on a timely basis, payments owed to ORBIMAGE could be delayed.
There can be no assurance that a significant delay in payments would not have a
material impact on ORBIMAGE's financial results.

            ORBIMAGE does not currently anticipate that addressing Year 2000
problems for its internal systems will have a material impact on its operations
or financial results. There can be, however, no assurance that costs associated
with addressing Year 2000 issues will not be greater than anticipated, or that
Year 2000 problems will be identified on a timely basis and that corrective
actions undertaken by ORBIMAGE or its primary vendor will be completed before
any Year 2000 problems occur. All costs, including the cost of internal
personnel, outside consultants, systems replacements and other equipment, will
be expensed as incurred, except for long-lived assets, which will be capitalized
in accordance with ORBIMAGE's capitalization policies. Contingency plans will be
developed if it appears ORBIMAGE or its key supplier will not be Year 2000
compliant and such noncompliance is expected to have a material adverse impact
on ORBIMAGE's operations.

OUTLOOK: ISSUES AND UNCERTAINTIES

            The Private Securities Litigation Reform Act of 1995 (the "Act")
provides a safe harbor, in certain circumstances, for forward-looking statements
made by or on behalf of ORBIMAGE. ORBIMAGE and its representatives may from
time-to-time make written or verbal forward-looking statements, including
statements contained in ORBIMAGE's filings with the Securities and Exchange
Commission. All statements that address operating performance, events, or
developments that ORBIMAGE expects or anticipates will occur in the future,
including statements relating to ORBIMAGE's sales and earnings growth or
statements expressing general optimism about future operating results, are
forward-looking statements within the meaning of the Act. The forward-looking
statements are and will be based on management's then-current views and
assumptions regarding future events and operating performance. The following are
some of the factors that could cause actual results to differ materially from
information contained in ORBIMAGE's forward-looking statements.




                                       22
<PAGE>   23

LIMITED HISTORY OF OPERATIONS AND NET LOSSES -- GIVEN OUR LIMITED OPERATING
HISTORY AND NET LOSSES, OUR FUTURE PROSPECTS ARE UNCERTAIN.

            Limited operating and financial data. We did not begin commercial
service until 1995, when we launched OrbView-1. We have a history of net losses
from operations and have generated only limited revenues from the operations of
OrbView-1 and OrbView-2 and our image processing business. Given ORBIMAGE's
limited operating history, and in light of the risks, expenses, difficulties and
delays encountered in a high technology, highly regulated industry, we cannot
assure you that OrbView-3, OrbView-4 or RadarSat-2 will be constructed and
deployed in accordance with our schedule or that we will be able to develop a
sufficiently large revenue-generating customer base to compete successfully in
the remote imaging industry.

            Expectation of continued losses. Our business strategy requires
significant capital expenditures. We will incur a substantial portion of these
expenditures before we generate significant revenues. Combined with our
operating expenses, these capital expenditures will result in a negative cash
flow until we establish an adequate revenue-generating customer base. We had an
accumulated deficit of approximately $53.1 million (restated) through December
31, 1998. We expect losses to continue through 2000, and we do not expect to
generate net positive cash flow from operations sufficient to fund both
operations and capital expenditures until both OrbView-3 and OrbView-4 are
operational, currently expected to be in the fourth quarter of 2000. We cannot
assure you that the OrbView satellites will become operational on this
timetable, or at all, or that we will achieve or sustain any positive cash flow
or profitability thereafter.

POTENTIAL ADDITIONAL CAPITAL REQUIREMENTS -- OUR INABILITY TO FUND POTENTIAL
ADDITIONAL CAPITAL REQUIREMENTS COULD DELAY SATELLITE CONSTRUCTION AND
DEPLOYMENT.

            We currently expect that we will need approximately $79 million (net
of $140 million and $31 million which will be funded by CSA and the U.S. Air
Force, respectively, through contracts with Orbital) for capital expenditures,
development and initial operating costs through the third quarter of 2000. As of
December 31, 1998, we had cash and cash equivalents and unrestricted securities
in the aggregate amount of $59.5 million. We believe that cash on hand, expected
cash flows from operations and advance payments from customers will be
sufficient to fund our operations through the fourth quarter of 2000. We cannot
assure you that we will generate sufficient cash from operations to pay for our
anticipated capital expenditures, or that these expenditures will fall within
our estimates. If we do not generate sufficient cash flow by the fourth quarter
of 2000, or if our capital expenditures exceed our estimates, we would need
additional capital.

            A significant portion of our capital requirements are related to
developing, constructing and launching the OrbView satellites, constructing and
activating the related U.S. ground systems and acquiring the RadarSat-2 License.
While most of these costs are currently fixed under agreements with Orbital, we
cannot assure you that these costs will not increase over time. In addition to
these fixed cost agreements, we will be furnished with certain items and
services on a cost-plus or cost-reimbursable basis, such as launch and in-orbit
insurance and technological assistance for OrbView-3, OrbView-4 and RadarSat-2.
Many factors outside our control influence the costs of these and other items
and services, and we may need to raise more capital if any of these costs
increase materially.

            We may also need to raise additional capital if, for example
significant delays occur in deploying OrbView-3, OrbView-4 or RadarSat-2 because
of technical difficulties, launch or satellite failure or other reasons, or we
incur significant unanticipated expenses, such as costs for resolving satellite
operational difficulties. If these or other events occur, we cannot assure you
that we could raise additional capital on favorable terms, on a timely basis or
at all. A substantial shortfall in funding would delay or prevent deployment of
one or both of the high-resolution OrbView satellites and the RadarSat-2
satellite.

SCHEDULE DELAYS -- DELAYS IN THE COMMERCIAL OPERATION OF OUR SATELLITES COULD
ADVERSELY AFFECT OUR BUSINESS.

            We could experience delays in the commercial operation of OrbView-3,
OrbView-4 and RadarSat-2 from a variety of causes, including:

             -  delays in designing, constructing, integrating or testing the
                satellites, satellite components and related


                                       23
<PAGE>   24

                ground systems;

             -  delayed or unsuccessful launches;

             -  subcontractor or manufacturer delays;

             -  delays in receiving the licenses necessary to operate the
                satellite systems;

             -  delays under our procurement agreement with Orbital, or delays
                under the CSA Contract, including delays by CSA in procuring a
                launch vehicle on a timely basis for RadarSat-2; or

             -  other events beyond our control.

            The perceived and actual timing of satellite launches may affect
competition in the remote imaging industry. We previously encountered
significant delays in the design, production and testing of the OrbView-2
satellite that was launched in August 1997. Significant delays in the deployment
of OrbView-3, OrbView-4 or RadarSat-2 could increase pre-launch operating costs,
delay revenues and negatively affect our marketing efforts. Even the perception
of potential delays could affect our marketing efforts. We cannot assure you
that any of these satellites will be launched or deployed on a timely basis.

LAUNCH FAILURES -- A LAUNCH VEHICLE FAILURE WOULD ADVERSELY AFFECT OUR ABILITY
TO DELIVER IMAGERY PRODUCTS AND SERVICES.

            Satellite launches are subject to significant risks, including
partial or complete launch vehicle failure. Launch vehicle failure may cause
disabling damage to or loss of a satellite or may result in a failure to deliver
the satellite to its proper orbit. We have contracted with Orbital to launch
OrbView-3 on a Pegasus launch vehicle, which has flown 26 missions and has a
greater than 90% success rate. However, there are several additional Pegasus
launches planned before OrbView-3's scheduled launch, and the failure of any one
of those launch vehicles could result in delayed deployment of OrbView-3. The
Pegasus is launched from beneath Orbital's modified Lockheed L-1011 aircraft. If
Orbital's L-1011 aircraft is unavailable, we could experience significant
delays. Orbital would have to acquire and modify a new carrier aircraft or we
would have to arrange to deploy OrbView-3 using an alternative launch vehicle.
We cannot assure you that Orbital could obtain another aircraft and properly
modify the aircraft or that we could obtain alternate launch services on a
timely basis, if at all. We have contracted with Orbital to launch OrbView-4 on
its Taurus launch vehicle, which has flown three missions to date, all of which
were successful. Under the CSA Contract, CSA is responsible for financing a
launch vehicle for RadarSat-2, which has not yet been identified. We cannot
assure you that Orbital will successfully launch either OrbView-3, OrbView-4 or
RadarSat-2. A launch failure of OrbView-3, OrbView-4 or RadarSat-2 could
negatively affect our business, financial condition and results of operations,
our ability to deliver our products and services.

MARKET ACCEPTANCE -- WE CANNOT ASSURE YOU THAT THE MARKET WILL ACCEPT OUR
PRODUCTS AND SERVICES.

            Our success depends on existing markets accepting our imagery
products and services and our ability to develop new markets. Our business plan
is based on the assumption that we will generate significant future revenues
from sales of high-resolution imagery produced by OrbView-3, OrbView-4 and
RadarSat-2 to existing markets and new markets. High-resolution satellite
imagery is not yet commercially available. Consequently, it is difficult to
predict accurately the ultimate size of the market and the market acceptance of
products and services based on this type of imagery.

            Our strategy to target certain markets for our satellite imagery
relies on a number of assumptions, some or all of which may be incorrect. Our
description of potential markets for our products and services and estimates of
the addressable markets that we discuss in this Report represent our view as of
the date of this Report, and actual markets could vary materially from these
markets.

            We cannot accurately predict whether our products and services will
achieve market acceptance or whether the market will demand our products and
services on terms we find acceptable. Market acceptance depends on a number of
factors, including the spatial and spectral quality, scope, timeliness,
sophistication and price of our



                                       24
<PAGE>   25

imagery products and services and the availability of substitute products and
services. Lack of significant market acceptance of our products and services,
particularly our high-resolution imagery products and services, delays in such
acceptance, or failure of certain markets to develop could negatively affect our
business, financial condition and results of operations.

TECHNOLOGICAL AND IMPLEMENTATION RISKS -- WE CANNOT ASSURE YOU THAT OUR
SATELLITES WILL OPERATE AS DESIGNED.

            The designs for OrbView-3 and OrbView-4 are complete, and the design
for RadarSat-2 is in progress. These satellites' designs may require
modifications to achieve the desired performance criteria, which could result in
delays in satellite deployment. Each of these satellites will employ advanced
technologies and sensors that will be subject to severe environmental stresses
during launch or in space that could affect the satellites' performance.
Employing advanced technologies is further complicated by the fact that the
satellites will be in space. Hardware component problems in space could require
premature satellite replacement, with attendant costs and revenue losses. In
addition, sometimes human operators may execute improper implementation commands
that negatively impact a satellite's performance.

            We cannot assure you that OrbView-3, OrbView-4 or RadarSat-2 will
not experience design-related delays during the construction process and operate
successfully in space, or that each of these satellites will perform or continue
operating throughout their expected design lives. Even if these satellites are
launched and operated properly, minor technical flaws in the satellites' sensors
could significantly degrade their performance, which could materially affect our
ability to market our products successfully.

LIMITED LIFE OF SATELLITES -- SATELLITES HAVE LIMITED DESIGN LIVES AND ARE
EXPENSIVE TO REPLACE.

            Satellites have limited useful lives. We determine a satellite's
useful life, or its design life, using a complex calculation involving the
probabilities of failure of the satellite's components from design or
manufacturing defects, environmental stresses or other causes. The expected
design lives of our satellites are affected by a number of factors, including
the quality of construction, the expected gradual environmental degradation of
solar panels, the durability of various satellite components and the orbits in
which the satellites are placed. Random failure of satellite components could
cause damage to or loss of a satellite before the end of its design life. In
rare cases, electrostatic storms or collisions with other objects could damage
our satellites. We cannot assure you that each satellite will remain in
operation for its expected design life. We expect the performance of each
satellite to decline gradually near the end of its design life, although this
has not yet happened with OrbView-1.

            We have not procured a spare high-resolution OrbView satellite, nor
do we maintain an inventory of long lead-time parts for these satellites. If one
of our high-resolution OrbView satellites were to fail prematurely, we could
experience significant delays while procuring the necessary spares or
replacement parts to replace or repair the satellite. Procurement delays would
negatively affect our business, results of operations and financial condition.
In addition, we would be required to allocate, earlier than expected, additional
capital expenditures to replace a satellite. We cannot assure you that we would
have on hand, or be able to obtain in a timely manner, the necessary funds to
cover accelerated replacement and repair costs of the satellites if they fail
prematurely.

            We do not presently have plans to construct and launch a replacement
satellite for OrbView-2 if it fails prematurely. Similarly, there is no
provision under the CSA Contract for a replacement RadarSat-2 satellite in the
event of a premature failure. Permanent loss of OrbView-2 or RadarSat-2 could
adversely affect our operations and financial condition.

            We anticipate using funds generated from operations to develop
follow-on high-resolution satellites. If we do not generate sufficient funds
from operations, and if we are unable to obtain financing from outside sources,
we will not be able to deploy follow-on satellites to replace OrbView-3 or
OrbView-4 at the end of their expected design lives. We cannot assure you that
we will be able to raise additional capital, on favorable terms or on a timely
basis, if at all, to develop follow-on high-resolution satellites.

INSURANCE -- LIMITED INSURANCE MAY NOT COVER ALL RISKS OF LOSS.

            We may find it difficult to insure certain risks, such as partial
degradation of functionality of a satellite.



                                       25
<PAGE>   26

Insurance market conditions or factors outside our control at the time we buy
the required insurance, such as failure of a satellite using similar components
or a similar launch vehicle, could cause premiums to be significantly higher
than current estimates. These factors could cause other terms to be
significantly less favorable than those currently available, may result in
limits on amounts of coverage that we can obtain or may prevent us from
obtaining insurance at all. Furthermore, we cannot assure you that proceeds from
insurance we are able to purchase will be sufficient to replace a satellite due
to cost increases and other factors beyond our control.

COMPETITION -- WE MAY BE UNABLE TO COMPETE SUCCESSFULLY IN THE REMOTE IMAGING
INDUSTRY.

            Our products and services will compete with satellite and
aircraft-based imagery and related products and services offered by a range of
private and government providers. Certain of these entities may have greater
financial, personnel and other resources than we have. Our major potential
competitors for high-resolution satellite imagery include:

             -   Space Imaging, which has announced plans to launch its first
                 high-resolution (one-meter) satellite in mid-1999; and

             -   EarthWatch, which has announced plans to launch its high-
                 resolution (one-meter) satellite in late 1999.

            The U.S. government and foreign governments also may develop,
construct, launch and operate remote imaging satellites that generate imagery
competitive with our products and services. In addition, the U.S. government
will probably continue to rely on government-owned and operated systems for
certain highly classified satellite-based high-resolution imagery.

            We believe we will have a competitive advantage because we expect to
have sufficient pricing flexibility to be a low-price commercial provider within
our targeted markets and applications due to the relatively lower cost of our
satellite systems as compared to those of our competitors. But the low marginal
cost of producing satellite imagery once a satellite is operating could cause
adverse pricing pressure, decreased profits or even losses. Our competitors or
potential competitors with greater resources than ours could in the future offer
satellite-based imagery or other products having more attractive features than
our products. New technologies, even if not ultimately successful, could
negatively affect our marketing efforts. More importantly, if competitors
develop and launch satellites with more advanced capabilities and technologies
than ours, this competition could harm our business.

DEPENDENCE ON SUPPLIER -- DEPENDENCE ON A SINGLE SUPPLIER COULD RESULT IN DELAYS
IF THE SUPPLIER FAILS TO PERFORM, AND OUR RECOURSE AGAINST THE SUPPLIER IS
LIMITED.

           We depend on one supplier, Orbital:

            -   to design, develop and launch OrbView-3 and OrbView-4 and to
                construct the U.S. ground system for these satellites;

            -   to design, develop and, through its wholly owned subsidiary
                MDA, operate RadarSat-2, and to receive, process, and archive
                RadarSat-2 imagery.

            We also rely on the OrbView-2 License from Orbital to market the
OrbView-2 imagery, and will rely on the RadarSat-2 License from Orbital's
wholly-owned subsidiary MDA to market the RadarSat-2 imagery. The terms and
conditions of the RadarSat-2 License and related contractual arrangements
between ORBIMAGE and MDA are subject to CSA review and approval. There can be no
assurances that CSA will approve these arrangements on terms that are favorable
to ORBIMAGE. ORBIMAGE, Orbital and MDA are currently negotiating an amendment to
the OrbView-2 License that, among other things, will require MDA and/or Orbital
to indemnify ORBIMAGE if CSA's actions materially impact the commercial
viability of the RadarSat-2 program. There can be no assurance that this
amendment will be finalized.

            We expect to continue to rely on third parties (including Orbital
and MDA) to design, construct or launch satellites for us and to modify the
existing ground systems to accommodate these satellites. Orbital's obligations
to



                                       26
<PAGE>   27

provide design, construction, and launch services for the OrbView satellites are
governed by a procurement agreement between us and Orbital. If Orbital fails to
perform its obligations adequately under the procurement agreement, we would be
forced to delay deployment of OrbView-3 and/or OrbView-4 until we located an
alternative provider. Orbital's liability to us for claims under the procurement
agreement, such as breach of contract or patent indemnification, is limited to
$10 million. Orbital is designing and constructing the RadarSat-2 satellite. If
Orbital fails to perform its obligations in the RadarSat-2 program, the
deployment of RadarSat-2 could be delayed. Orbital is not liable to us for any
costs or other damages arising from schedule delays in the operation of the
high-resolution OrbView satellites or RadarSat-2.

            Under a services agreement we have with Orbital, Orbital has agreed
to provide us with various administrative and operational functions on a cost
reimbursable or cost-plus fee basis. These functions include on-orbit mission
operations and anomaly resolution for OrbView-2, OrbView-3 and OrbView-4. If
Orbital fails to perform its obligations under the services agreement, we may
not be able to operate these satellites properly. The services agreement
terminates for each OrbView satellite three years after the launch of each
satellite. We cannot assure you that we will be able to renew the services
agreement on favorable terms, if at all. In addition, a material adverse change
in Orbital or its financial condition or the condition of one of its
subcontractors could adversely affect Orbital's ability to perform under the
procurement agreement or the services agreement. We have not identified any
alternate providers. In any case, we can provide no assurance that an alternate
provider would be available or, if available, would be available on terms
favorable to us or to Orbital.

DEPENDENCE ON DISTRIBUTOR -- DEPENDENCE ON A SINGLE DISTRIBUTOR FOR RADARSAT
IMAGERY COULD RESULT IN MARKETING AND DISTRIBUTION DELAYS IF THE DISTRIBUTOR
FAILS TO PERFORM.

            As of December 31, 1998, we acquired the RadarSat-2 License from
Orbital. Under an agreement with Orbital and MDA, ORBIMAGE appointed MDA as an
exclusive worldwide distribution of RadarSat-2 imagery. In connection with such
appointment we have granted to MDA an exclusive, unrestricted worldwide license
(including the right to sublicense) to promote, market and sell worldwide
RadarSat-2 data. The entire RadarSat-2 marketing operations will be performed by
MDA. All marketing and sales policies, strategies, targets and resources and
budgets shall be approved by us. If MDA fails to perform its obligations under
its agreement with us or fails to successfully implement marketing plan we may
not be able to successfully market the RadarSat-2 imagery. We cannot assure you
that MDA will perform its obligations under its agreements with us or develop a
successful marketing strategy. If MDA fails to perform these obligations,
ORBIMAGE's RadarSat-2 program and our ability to distribute radar imagery would
be negatively affected, which could materially adversely affect our business.

POTENTIAL CONFLICTS OF INTEREST WITH ORBITAL -- WE RELY ON ORBITAL FOR CERTAIN
OPERATIONS AND SERVICES THAT ARE CRITICAL TO OUR BUSINESS. ORBITAL'S INTERESTS
MAY CONFLICT WITH OURS.

            Orbital owns approximately 55% of our outstanding voting stock on a
fully diluted basis. Certain of our executive officers and directors are also
employees and/or directors of Orbital. These relationships may produce conflicts
on matters involving both ORBIMAGE and Orbital. Although we have adopted
policies we believe will prevent a conflict from arising, these policies cannot
ensure that a conflict will not arise.

            We have several agreements with Orbital, including a procurement
agreement relating to OrbView-1, OrbView-3, OrbView-4 and the ground system, the
OrbView-2 License, the RadarSat-2 License, a services agreement and a
non-compete agreement, each of which is material to our business. Orbital's
interests as an equity holder in our business may at times conflict with our
interests under these agreements, and may conflict with your interests as a
holder of the Notes. Our recourse against Orbital is limited in the event of
breaches by Orbital under the procurement agreement or the RadarSat-2 License.

            Orbital provides certain products and services to our direct
competitors. Under our non-compete agreement with Orbital, which terminates on
the earlier of June 30, 2003 or the occurrence of certain events, Orbital cannot
sell turn-key satellite optical imaging systems (i.e., satellite, sensors,
launch vehicles and ground system) to anyone other than to ORBIMAGE. Orbital
can, however, sell radar systems and components of optical systems to our
current or future customers or competitors. For example, MDA has a contract to
provide certain ground system work to EarthWatch relating to its planned
one-meter satellite system. As a result of an acquisition, Orbital holds
approximately a 4% equity interest in EarthWatch. We expect to compete directly
with EarthWatch. Orbital also



                                       27
<PAGE>   28

holds an approximate 56% equity interest in Radarsat International Inc. ("RSI"),
a low-spatial resolution satellite radar imagery provider that markets imagery
from the RadarSat-1 satellite and has an offer outstanding to acquire the
remaining shares of RSI. Although RadarSat-2 uses more advanced imaging
technology than the technology employed by RadarSat-1, these two satellites have
certain overlapping capabilities, making RSI a potential competitor.

GOVERNMENT REGULATION -- FAILURE TO OBTAIN REGULATORY APPROVALS COULD RESULT IN
SERVICE INTERRUPTIONS.

            Domestic.  Our business generally requires licenses from the U.S.
Department of Commerce ("DoC") and the U.S. Federal Communications Commission
("FCC"). Our operation of OrbView-1 does not require such licenses because the
only customer for OrbView-1 imagery is the U.S. government.

<TABLE>
<CAPTION>

             SATELLITE               STATUS OF DOC LICENSE                       STATUS OF FCC LICENSE
             ---------               ---------------------                       ---------------------
<S>                               <C>                                         <C>
             OrbView-2            DoC license obtained; expires in 2004       Operating under Orbital's
                                                                              experimental FCC license; renewal
                                                                              application submitted in November 1998

             OrbView-3            DoC license obtained; expires 2004          FCC license obtained; will expire ten
                                                                              years from certification of launch

             OrbView-4            DoC license obtained, expires 2004.         FCC license obtained; will expire ten
                                  We have applied for an amendment to         years from certification of launch
                                  this license to distribute
                                  hyperspectral imagery commercially.

             RadarSat-2           No DoC license required                     No FCC license required. CSA will
                                                                              secure the required International
                                                                              Telecommunications Union ("ITU")
                                                                              authorizations to operate RadarSat-2
                                                                              in Canada.
</TABLE>

            We cannot assure you that the DoC will renew the licenses to operate
OrbView-2, OrbView-3 and OrbView-4 when they expire in 2004. Nor can we assure
you that the DoC will amend the OrbView-4 license to allow us to distribute
hyperspectral imagery commercially. The DoC has indicated that its approval may
be subject to certain limitations, such as delaying release of imagery or
degrading spatial resolution of imagery for commercial uses. If the DoC does not
approve the license amendment on acceptable terms, our financial condition and
results of operations could be materially adversely affected.

            While we do not believe we require a DoC license to distribute
RadarSat-2 imagery and Orbital has informed us that it does not believe a DoC
license will be required in connection with MDA's operation of RadarSat-2, we
cannot assure you that the DoC will not impose a licensing requirement for
RadarSat-2. If such a requirement were imposed and a license were not obtained
on acceptable terms, our financial condition and results of operations could be
materially adversely affected.

            Under the DoC licenses, the U.S. government can interrupt service
during certain periods of national emergency. The prospect of actual or
threatened interruptions could adversely affect our ability to market our
products to certain foreign distributors or end-users. In addition, the DoC has
the right to review and approve the terms of agreements with our international
customers for high-resolution optical imagery. These reviews might delay or
prohibit us from executing these agreements. Canada does not have licensing
requirements analogous to the DoC regulatory requirements in the United States.
However, the Canadian government can interrupt RadarSat-2 service during certain
periods of national emergency.

                                       28
<PAGE>   29

            We currently operate OrbView-2 under Orbital's renewal application
for an experimental FCC license. We cannot assure you that the FCC will grant
any future renewals. If the FCC does not renew this license, we would not be
able to operate the OrbView-2 satellite in the United States. We have applied to
the FCC for a license to launch and operate the high-resolution OrbView
satellites, but we cannot assure you that the FCC will approve our applications.

            Our application with the FCC for a license to launch and operate the
OrbView-3 and OrbView-4 satellites was granted in February 1999. Because the
license has been granted, the FCC will now process our applications for licenses
to operate the associated Earth stations. We cannot assure you that we will
receive the necessary FCC authorization to operate the ground system as planned.
Failure to receive the necessary authorization could have a material adverse
effect on our business.

            International. All satellite systems operating internationally must
follow general international regulations and the specific laws of the countries
in which satellite imagery is downlinked. Applicable regulations include:

             -  ITU regulations, which define for each service the technical
                operating parameters within which users must operate;

             -  the Intelsat and Inmarsat agreements, which require that the
                operators of international satellite systems demonstrate that
                they will not cause economic or technical harm to Intelsat and
                Inmarsat; and

             -  regulations of foreign countries, which require that satellite
                operators secure appropriate licenses and operational authority
                to use the required spectrum in each country.

            The CSA has agreed to coordinate with the ITU to secure the
necessary authorizations to operate the RadarSat satellite in Canada. The CSA's
failure to obtain the necessary authorizations in a timely manner could have a
material adverse effect on our business, financial condition and results of
operations.

            Our customers or distributors are responsible for obtaining local
regulatory approval from the governments in the countries in which they do
business to receive imagery directly from the OrbView-2 satellite, the
high-resolution OrbView satellites and RadarSat-2. If these regional
distributors are not successful in obtaining the necessary approvals, we will
not be able to distribute real time remote imagery service in those regions. Our
inability to offer service in a significant number of foreign countries could
negatively affect our business. In addition, regulatory provisions in countries
where we wish to operate may impose unduly burdensome restrictions on our
operations. Our business may also be adversely affected if the national
authorities where we plan to operate adopt treaties, regulations or legislation
unfavorable to foreign companies.

            Launch license. Commercial U.S. space launches require licenses from
the U.S. Department of Transportation ("DoT"). Under our procurement agreement
with Orbital, Orbital must ensure that the appropriate DoT commercial launch
licenses are in place for the OrbView-3 and OrbView-4 satellite launches. We
cannot assure you that Orbital will continue to be successful in its efforts to
obtain the necessary licenses or regulatory approvals. Orbital's inability to
secure necessary licenses or approvals could delay launches. Delays could harm
our business, financial condition and results of operations and our ability to
service our debt.

            Export License. In connection with certain distributor agreements,
we expect to supply to our international customers with ground stations that
enable these customers to downlink data directly from the high-resolution
OrbView satellites. Exporting these ground stations may require that we obtain
an export license from the DoC or the U.S. Department of State. If we are
unsuccessful in obtaining the necessary export licenses, or if such licenses are
significantly delayed, then we may have to renegotiate existing distributor
agreements on less favorable terms.

RISKS ASSOCIATED WITH DISTRIBUTORS AND RESELLERS -- FOREIGN DISTRIBUTORS AND
VALUE-ADDED RESELLERS MAY NOT EXPAND COMMERCIAL MARKETS.

            We will rely on foreign regional distributors to market and
distribute internationally a significant portion of our imagery from OrbView-3,
OrbView-4 and RadarSat-2. We expect our existing and future foreign regional
distributors to act on behalf of, or contract directly with, foreign governments
to sell imagery for national security



                                       29
<PAGE>   30

and related purposes. These regional distributors may not have the skill or
experience to develop regional commercial markets for our products and services.
If we fail to enter into regional distribution agreements on a timely basis or
if our foreign regional distributors fail to market our imagery products and
services successfully, these failures would negatively impact our business,
financial condition and results of operations, and our ability to service our
debt.

            We intend to rely on value-added resellers to develop and market our
products and services to address certain targeted markets. If our value-added
resellers fail to develop and market OrbView products and services successfully,
this failure would negatively affect our business, financial condition and
results of operations, and our ability to service our debt.

RISK ASSOCIATED WITH INTERNATIONAL OPERATIONS -- OUR INTERNATIONAL BUSINESS
EXPOSES US TO RISKS RELATING TO INCREASED REGULATION AND POLITICAL OR ECONOMIC
INSTABILITY IN FOREIGN MARKETS.

            We expect to derive substantial revenues from international sales of
products and services. International operations are subject to certain risks,
such as:

             -  changes in domestic and foreign governmental regulations and
                licensing requirements;

             -  deterioration of once-friendly relations between the United
                States and the foreign entity;

             -  increases in tariffs and taxes and other trade barriers; and

             -  changes in political and economic stability, including
                fluctuations in the value of foreign currencies, which may make
                payment in U.S. dollars more expensive for foreign customers.

            These risks are beyond our control and could have a large negative
impact on our business.

CONTRACT REVENUE -- CUSTOMERS, INCLUDING THE U.S. GOVERNMENT, MAY TERMINATE
CONTRACTS FOR A VARIETY OF REASONS. TERMINATION OF CONTRACTS WOULD RESULT IN A
LOSS OF CONTRACT REVENUES.

            At December 31, 1998, contracts with U.S. government agencies
constituted approximately 72% of our total contracts for imagery backlog.
Government agencies may terminate or suspend their contracts at any time, with
or without cause, or may change their policies, priorities or funding levels by
reducing agency or program budgets or by imposing budgetary constraints. If a
government agency terminates or suspends any of its contracts with us or
Orbital, or changes its policies, priorities, or funding levels, these actions
would negatively impact our business. Specifically, if the Air Force terminates
or suspends its contract with Orbital and we wish to proceed with our
hyperspectral program, we would incur the remaining cost of upgrading OrbView-4
with hyperspectral capability. Similarly, if the CSA terminates the CSA Contract
and we wish to proceed with our own radar program, we would have to incur the
cost of constructing, deploying and operating our own radar satellite system.

            We have an agreement with Samsung that grants Samsung an exclusive
license to receive, process and sell high resolution OrbView-3 imagery of the
Korean peninsula. This agreement also grants Samsung a non-exclusive license to
receive, process and sell high-resolution OrbView-4 imagery of South Korea.
Samsung may terminate the agreement if OrbView-3 has not been launched by
December 31, 1999 (with liquidated damages payable under certain circumstances).
If Samsung terminates the agreement, we would lose revenues, which could
negatively affect our business, financial condition and results of operations,
and our ability to service our debt.

CHANGE OF CONTROL -- THE HOLDERS OF SERIES A PREFERRED STOCK COULD TAKE CONTROL
OF OUR BOARD OF DIRECTORS UPON CERTAIN EVENTS.

            We are a party to a stockholders' agreement with the holders of our
Series A preferred stock. This stockholders' agreement and our charter contain
provisions relating to the election of directors. Under certain circumstances,
the Series A holders are entitled to designate additional directors which would
comprise a majority of the Company's directors. If the Series A holders
designated additional directors, then the Series A Directors would control our
management and policies, and could make decisions affecting the control of
ORBIMAGE. These



                                       30
<PAGE>   31

additional directors would serve until the event giving rise to their
appointment has been resolved. Even without the appointment of these additional
directors, the Series A holders have de facto control over certain corporate
actions enumerated in the stockholders' agreement, because these actions require
the approval of at least one of the Series A Directors. Such actions include the
merger, consolidation, liquidation or sale of substantially all of our assets,
the issuance of equity securities in certain circumstances, and the incurrence
of certain indebtedness.

FINANCING CHANGE OF CONTROL OFFER -- WE MAY NOT HAVE THE ABILITY TO RAISE THE
FUNDS NECESSARY TO FINANCE THE CHANGE OF CONTROL OFFER REQUIRED BY THE
INDENTURE.

            Upon the occurrence of certain specific kinds of change of control
events, we will be required to offer to repurchase all outstanding Notes at a
price equal to 101% of the principal amount and offer to repurchase all of the
outstanding Series A preferred stock (subject to the senior rights of the Note
holders). It is possible that we will not have sufficient funds at the time of
the change of control to make the required repurchases. If we are not able to
make the required repurchases, we would be in default under the Indenture.

YEAR 2000 COMPLIANCE -- YEAR 2000 PROBLEMS COULD HAVE AN ADVERSE IMPACT ON OUR
BUSINESS.

            The year 2000 presents potential concerns for our computer hardware
and software applications. If our computer-related systems cannot distinguish
between the year 2000 and the year 1900, we may experience systems failures and
business process interruption. The problem may exist for many kinds of our
software and hardware, including mainframes, mini computers, PCs and embedded
systems. We have completed an assessment of Year 2000 issues with respect to our
computer-related systems. By June 1999, we intend to have our systems Year 2000
compliant or to have "work-around" procedures in place to address any
noncompliance that remains as of that date.

            Our largest customers are U.S. government agencies. If these
agencies' systems are not Year 2000 compliant, payments they owe to us could be
delayed. A significant delay in payments could have a material adverse impact on
our financial results.

            We cannot assure you that costs associated with addressing Year 2000
issues will not exceed our current estimates, that we will identify all Year
2000 problems on a timely basis or that our corrective actions or those
undertaken by Orbital (our primary vendor) will be completed before any Year
2000 problems occur. Thus, our operations and financial condition could be
adversely affected by problems associated with the Year 2000 issue.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

            As of December 31, 1998, ORBIMAGE had senior notes outstanding of
$142.6 million (restated) with a fair value of $150.0 million as estimated by
quoted market prices. The senior notes mature on March 1, 2005. Interest on the
senior notes accrues at a rate of 11 5/8% per annum and is payable semi-annually
in arrears on March 1 and September 1. ORBIMAGE purchased U.S. Treasury
securities in an amount sufficient to pay the interest on the senior notes for
the first four periods. As of December 31, 1998, held-to-maturity securities
restricted for the payment of interest oon the senior notes totaled $24.5
million.

            ORBIMAGE does not have any derivative financial instruments as of
December 31, 1998, and believes that the interest rate risk associated with its
senior notes and the market risk associated with its securities are not material
to the results of operations of ORBIMAGE. The available-for-sale securities
subject ORBIMAGE's financial position to interest rate risk.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

            Reference is made to the financial statements listed under heading
"(a) (1) Financial Statements" of Item 14 hereof, which financial statements are
incorporated herein by reference in response to this Item 8.




                                       31
<PAGE>   32

                                OTHER INFORMATION

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

           Not applicable.

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

            The following table sets forth the directors and executive officers
of ORBIMAGE as of the date of this Report.

<TABLE>
<CAPTION>

                                    NAME                AGE                                POSITIONS
                                    ----                ---                                ---------
<S>                                                     <C>   <C>
                 David W. Thompson                       44    Chairman of the Board and Chief Executive Officer
                 Gilbert D. Rye                          58    President and Chief Operating Officer
                 Edward D. Nicastri                      51    Vice President, Engineering and Operations
                 Armand D. Mancini                       40    Vice President, Chief Financial Officer
                 James A. Abrahamson                     65    Director
                 Bruce W. Ferguson                       44    Director
                 Richard Reiss, Jr                       54    Director
                 William W. Sprague                      41    Director
</TABLE>

            DAVID W. THOMPSON is our Chairman of the Board and Chief Executive
Officer, a position he has held since 1993. He is also the Chairman, President
and Chief Executive Officer of Orbital. Mr. Thompson co-founded Orbital in 1982.
Prior to founding Orbital, Mr. Thompson was employed by Hughes Electronics
Corporation as Special Assistant to the President of its Missile Systems Group
and by NASA at the Marshall Space Flight Center as a project manager and
engineer, and also worked at the Charles Stark Draper Laboratory on the Space
Shuttle's autopilot design.

            GILBERT D. RYE is our President and Chief Operating Officer, a
position he has held since 1993. From 1990 to 1993, he was Orbital's Senior Vice
President for Marketing and Business Development. Between 1985 and 1989, Mr. Rye
was President of Comsat Government Systems (a subsidiary of Comsat Corporation)
and Vice President and General Manager of Space and Technology for BDM
International. Mr. Rye is a retired Colonel from the U.S. Air Force with over 25
years of experience in various intelligence and space-related program management
and policy-making positions.

            EDWARD D. NICASTRI has been our Vice President of Engineering and
Operations since 1997. From 1994 to early 1997, Mr. Nicastri served as Vice
President for Advanced Projects with Orbital's Space Systems Division. Prior to
joining Orbital in 1994, Mr. Nicastri was Director of Space Systems at the
Defense Advanced Research Projects Agency from 1988 to 1993. Prior to 1988 Mr.
Nicastri served as a Colonel in the U.S. Air Force, holding positions in the
development and operation of several military, satellites and other national
space systems.

            ARMAND D. MANCINI was appointed Vice President, Chief Financial
Officer of ORBIMAGE in March 1998. He had been the Vice President of Finance
since October 1994. From September 1991 to September 1994, Mr. Mancini was the
Vice President of Finance for Orbital's Communications and Information Systems
Group and Space Systems Division. Prior to that, Mr. Mancini worked as a senior
manager with various defense contractors who provide training and classified
weapons systems to the U.S. government.

            GENERAL (RET.) JAMES A. ABRAHAMSON has been a member of the Board
since April 1998. General Abrahamson currently serves as Chairman and Chief
Executive Officer of StratCom, LLC and Air Safety Consultants. From 1992 to
1995, he served as Chairman of Oracle Corporation. He served as Executive Vice
President for Corporate Development for Hughes Aircraft Company from October
1989 to April 1992 and President of the Transportation Sector for Hughes
Aircraft Company from April 1992 to September 1992. General Abrahamson directed
the Strategic Defense Initiative from April 1984 until he retired from the Air
Force in January 1989 at the rank of Lieutenant General. General Abrahamson is
also a director of Western Digital Corporation and



                                       32
<PAGE>   33

Stratesec Corporation.

            BRUCE W. FERGUSON has been a member of the Board since 1993. Mr.
Ferguson is a co-founder of Orbital and a member of its Board of Directors. He
has been Senior Vice President, Special Projects of Orbital since 1997.
Previously, he was Executive Vice President and General Manager/ Communications
and Information Services Group of Orbital from 1993 until 1997. Mr. Ferguson was
Executive Vice President and Chief Operating Officer of Orbital from 1989 to
1993 and Senior Vice President/Finance and Administration and General Counsel of
Orbital from 1985 to 1989.

            RICHARD REISS, JR. has been a member of the Board since 1997. Mr.
Reiss founded Georgica Advisors LLC in 1997, a private investment firm, to make
both public and private investments in the communications, media and
entertainment industries. From 1982 to 1997, Mr. Reiss was the Managing Partner
of Cumberland Associates, a private investment firm that he joined in 1978, and
Cumberland Partners and LongView Partners, both investment partnerships. From
1969 to 1977, Mr. Reiss was Senior Vice President and Director of Research for
Shearson Lehman Brothers. Mr. Reiss is a Trustee and Treasurer of Barnard
College and a Trustee of the Manhattan Institute. He is also a Director of The
Lazard Funds, Inc., a Director of nStor Technologies and Chairman of the
Executive Committee and a Director of O'Charley's.

            WILLIAM W. SPRAGUE has been a member of the Board since 1997. Mr.
Sprague is the founder and President of Crest Communications Holdings LLC, a
private investment firm that invests in media and communications companies. From
1989 to 1996, Mr. Sprague served in various positions at Smith Barney, Inc.,
including as a Managing Director and head of the Media and Telecommunications
Group, as co-head of the Mergers and Acquisitions Group and as a senior member
of Smith Barney Inc.'s high yield group. From 1985 to 1989, Mr. Sprague was a
Vice President at Kidder Peabody & Co. Incorporated in the High Yield/Merchant
Banking Group. Mr. Sprague is currently a director of Centennial Communication
Inc., Ethan Allan Interiors Inc., Wave Transnational LLC, One-On-One Sports,
Inc. and Communications Resources, Inc.

ITEM 11.  EXECUTIVE COMPENSATION

            The following table sets forth all compensation earned for services
rendered to ORBIMAGE in the fiscal years ended December 31, 1997 and 1998, by
ORBIMAGE's Chief Executive Officer and the most highly compensated executive
officers in all capacities in which they served (the "Named Officers").




                                       33
<PAGE>   34

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                                    LONG TERM COMPENSATION
                                                                                                    ----------------------
                                                                                               SECURITIES
                                                                   ANNUAL COMPENSATION         UNDERLYING
                                                                   -------------------          OPTIONS               ALL OTHER
                  NAME AND PRINCIPAL POSITIONS                 SALARY               BONUS         (#)               COMPENSATION
                  ----------------------------                 ------               -----         ---               ------------
                                                                                                                         (1)
<S>                                                      <C>                 <C>                 <C>           <C>
         David W. Thompson
            Chairman and Chief Executive Officer(2)
            1998.....................................    $             --    $             --    50,000         $            --
            1997.....................................                  --                  --    40,000                      --
         Gilbert D. Rye
            President and Chief Operating Officer
            1998.....................................             215,000              97,200    60,000                  15,120
            1997.....................................             200,000             110,000    50,000                  11,658
         Edward D. Nicastri
            Vice President, Engineering and Operations
            1998.....................................             162,500              48,260    20,000                  11,271
            1997.....................................             116,000              64,500    90,000                   8,488
         Armand D. Mancini
            Vice President, Chief Financial Officer
            1998.....................................             132,000              39,200    20,000                   8,774
            1997.....................................             115,000              39,300    15,000                   6,789
</TABLE>

----------

(1)    Includes matching and profit-sharing contributions earned under a 401(k)
       Plan and the dollar value of premiums paid by ORBIMAGE with respect to
       life insurance for their benefit.

(2)    Mr. Thompson's salary, bonus and long-term compensation (other than
       options) are paid by Orbital. Except as set forth in the above table, Mr.
       Thompson is not compensated for services rendered in his capacity as an
       officer of ORBIMAGE.

            ORBIMAGE pays Gen. Abrahamson a $1,000 director's fee for each
meeting of the Board that he attends. In addition, ORBIMAGE reimburses all
directors for out of pocket expenses incurred for their services rendered as
directors.

INDEMNIFICATION AGREEMENTS

            We have entered into an indemnification agreement with each of our
executive officers and directors. Each agreement provides that if an executive
officer or director is or is threatened to be made a party to an actual or
threatened civil, criminal, administrative or investigative action, suit or
proceeding (other than an action brought by or in the right of ORBIMAGE), we
will indemnify that executive officer or director against expenses (including
attorneys' fees), judgments, fines and amounts actually and reasonably incurred
by him or her in connection with that action, suit or proceeding, if he or she
acted in good faith and in a manner that he or she reasonably believed to be in,
or not opposed to, the best interests of ORBIMAGE. With respect to any criminal
action or proceeding, our obligation to indemnify the executive officer or
director applies so long as he or she had no reasonable cause to believe that
his or her conduct was unlawful. If an executive officer or director is or is
threatened to be made a party to an actual or threatened action or suit that is
brought by or in the right of ORBIMAGE, we are still obligated to indemnify that
officer or director unless he or she is determined to be liable to ORBIMAGE.



                                       34
<PAGE>   35

STOCK OPTION PLAN

            In November 1996, the Board adopted the Stock Option Plan, which
provides for grants of either incentive or non-qualified stock options to
officers, directors and employees of ORBIMAGE and Orbital. Under the terms of
the Stock Option Plan, incentive stock options may not be granted at less than
100% of the fair market value at the date of grant, and non-qualified options
may not be granted at less than 85% of the fair market value at the date of
grant. Each option under the Stock Option Plan vests at a rate set by the Board
in each individual's option agreement, generally in one-third increments over a
three-year period following the date of grant. Options expire no more than ten
years following the grant date.

            As of December 31, 1998, 4,800,000 shares of common stock were
authorized for issuance under the Stock Option Plan, of which 2,636,500 options
were outstanding at exercise prices ranging from $3.60 to $5.10 per share. Of
the total number of options outstanding, 1,181,451 were currently exercisable.

OPTION GRANTS IN LAST FISCAL YEAR

            Shown below is information on grants of stock options to the Named
Officers pursuant to the Stock Option Plan during the fiscal year ended December
31, 1998, which options are reflected in the Summary Compensation Table.

<TABLE>
<CAPTION>
                                                 INDIVIDUAL GRANTS
                       -------------------------------------------------------------------

                                       PERCENT OF
                         NUMBER OF    TOTAL OPTIONS                   MARKET                 POTENTIAL REALIZED VALUE AT ASSUMED
                        SECURITIES     GRANTED TO                   VALUE PER                     ANNUAL RATES OF STOCK PRICE
                        UNDERLYING    EMPLOYEES IN     EXERCISE      SHARE AT                       APPRECIATION FOR OPTION TERM
                          OPTIONS      FISCAL YEAR     PRICE PER     DATE OF    EXPIRATION          ----------------------------
         NAME           GRANTED (1)       1998         SHARE (2)    GRANT (2)      DATE         0%            5%              10%
         ----           -----------       ----         ---------    ---------      ----         --            --              ---
                                                      (RESTATED)    (RESTATED)              (RESTATED)    (RESTATED)      (RESTATED)
<S>                     <C>                <C>           <C>        <C>           <C>     <C>           <C>            <C>
 David W. Thompson....     50,000           7%            $4.17     $6.00         1/14/08  $    91,500   $    280,168   $    569,623
 Gilbert D. Rye.......     60,000           8%             4.17      6.00         1/14/08      109,800        336,202        683,547
 Edward D. Nicastri...     20,000           3%             4.17      6.00         1/14/08       36,600        112,067        227,849
 Armand D. Mancini....     20,000           3%             4.17      6.00         1/14/08       36,600        112,067        227,849
</TABLE>

----------

(1)    Options generally vest in one-third increments over a three-year period.

(2)    Base Price of the underlying common stock was valued at $6.00 per share
       using a valuation prepared by an independent third party. The $6.00 Base
       Price is used in computing the Potential Realized Value at Assumed Annual
       Rates of Stock Price Appreciation for Option Term. Options were granted
       with an exercise price of $4.17 on the date of grant, as determined by
       the Board. Certain factors considered by the Board in determining the
       fair market value of options include, without limitation: (i) valuations
       done in connection with recent financings; (ii) the conversion price of
       the Company's Series A preferred stock; (iii) results of operations; (iv)
       whether ORBIMAGE has entered into any new contracts; and (v) the lack of
       a market for ORBIMAGE common stock.

            The Board has implemented an incentive bonus plan. Members of senior
management are eligible for bonuses equal to between 10% and 50% of their base
salary, based upon their success in meeting certain team and individual
incentives that are defined by the Board.

            ORBIMAGE awarded options to purchase 10,000 shares of common stock
to one non-employee director in April 1998, when that director was elected to
serve on the Board.




                                       35
<PAGE>   36

AGGREGATED OPTIONS; YEAR END OPTION VALUES

            The following table sets forth the number of options and the value
of unexercised and exercised options held by the Named Officers as of December
31, 1998.

<TABLE>
<CAPTION>
                                        NUMBER OF SECURITIES UNDERLYING                        VALUE OF UNEXERCISED IN-
                                             UNEXERCISED OPTIONS AT                              THE-MONEY OPTIONS AT
                                               DECEMBER 31, 1998                                DECEMBER 31, 1998 (1)
                                   -----------------------------------------        ----------------------------------------------
                                     EXERCISABLE             UNEXERCISABLE               EXERCISABLE               UNEXERCISABLE
                                     -----------             -------------               -----------               -------------
                                                                                         (RESTATED)                 (RESTATED)
<S>                                      <C>                     <C>                     <C>                        <C>
David W. Thompson.............           141,111                 148,889                 $  331,066                 $  313,634
Gilbert D. Rye................           204,167                 155,833                    480,501                    320,799
Edward D. Nicastri............            30,000                  80,000                     54,900                    146,400
Armand D. Mancini.............            80,000                  55,000                    189,150                    114,900
</TABLE>

----------

(1)    The value of unexercised in-the-money options at December 31, 1998
       assumes a fair value of $6.00 (restated) for ORBIMAGE's common stock.




                                       36
<PAGE>   37

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

            The following table sets forth certain information regarding the
beneficial ownership of the common stock and Series A preferred stock as of
December 31, 1998: (i) by each person who beneficially owns more than five
percent of the Series A preferred stock (which votes as a class on certain
matters); (ii) by each person who beneficially owns more than five percent of
the common stock (including the Series A preferred stock on an as-converted
basis); (iii) by each director and Named Officer; and (iv) by all executive
officers and directors as a group.

            All persons listed below have an address in care of ORBIMAGE's
principal executive offices unless otherwise noted.

<TABLE>
<CAPTION>
                                                 SHARES OF PREFERRED             SHARES OF COMMON
                                                 STOCK BENEFICIALLY             STOCK BENEFICIALLY
                                                      OWNED(1)                      OWNED(1)(2)
                                             ----------------------------    --------------------------
          NAME OF BENEFICIAL OWNER                NUMBER         PERCENT        NUMBER        PERCENT
          ------------------------                ------         -------        ------        -------
<S>                                          <C>                <C>         <C>             <C>
Orbital Sciences Corporation ..........               --           --%       25,200,000       60.4%
  21700 Atlantic Boulevard
  Dulles, VA 20166
Merrill Lynch KECALP L.P. .............          245,813(3)       35.8        5,894,796       14.1
  225 Liberty Street
  South Tower, 23rd Floor
  New York, NY 10080-6123
Crest Funding Partners, L.P.(4) .......          195,520(5)       28.4        4,688,729       11.2
  320 Park Avenue
  New York, NY 10022
Morgan Guaranty Trust Company
  of New York .........................          145,386(6)       21.1        3,486,475        8.4
  522 Fifth Avenue
  New York, NY 10036
Georgica Advisors LLC(7) ..............           74,295(8)       10.8        1,781,655        4.3
  1114 Avenue of the Americas
  New York, NY 10036
David W. Thompson(9) ..................               --            --          157,778          *
Gilbert D. Rye(9) .....................               --            --          224,167          *
Armand D. Mancini(9) ..................               --            --           86,667          *
Edward D. Nicastri(9) .................               --            --           36,667          *
James A. Abrahamson ...................               --            --               --         --
Bruce W. Ferguson(9)(10) ..............               --            --          151,667          *
William W. Sprague(4)(9) ..............               --            --            1,667          *
Richard Reiss, Jr.(7)(9) ..............               --            --            1,667          *
All executive officers and directors as
  a Group(9)(10) ......................               --            --          660,280        1.6
</TABLE>

----------

*      Less than one percent.

(1)    The persons named in this table have sole voting power with respect to
       all shares shown as beneficially owned by them, except as indicated in
       other footnotes to this table. In computing the number of shares
       beneficially owned by a person and the percentage ownership of that
       person, shares of common stock subject to options held by that person
       that are currently exercisable or exercisable within 60 days after
       December 31, 1998, are deemed outstanding.

(2)    Each of Crest Funding Partners, L.P., Merrill Lynch KECALP L.P., Morgan
       Guaranty Trust Co. and Georgica Advisors LLC or their respective
       affiliates currently owns shares of Series A preferred stock. Each share
       of Series A preferred stock is convertible into approximately 24 shares
       of common stock.

                                       37
<PAGE>   38

(3)    Includes 150,775 shares owned by Merrill Lynch KECALP L.P. 1997, 49,685
       shares owned by Merrill Lynch KECALP L.P. 1999, 28,790 shares owned by
       Merrill Lynch KECALP International L.P. 1997, and 16,563 shares owned by
       Merrill Lynch KECALP International L.P. 1999.

(4)    William W. Sprague, an ORBIMAGE director, is the founder and President of
       Crest Management Company, LLC, the manager of Crest Funding Partners,
       L.P.

(5)    Includes 142,166 shares owned by Crest Funding Partners, L.P., and 53,354
       shares owned by Crest Management Company LLC.

(6)    Includes 103,085 shares owned by Morgan Guaranty Trust Company of New
       York, as Trustee of the Commingled Pension Trust Fund (Multi-Market
       Special Investment Fund II) of Morgan Guaranty Trust Company of New York;
       20,494 shares owned by Morgan Guaranty Trust Company of New York, as
       Trustee of the Multi-Market Special Investment Trust Fund of Morgan
       Guaranty Trust Company of New York; and 21,807 shares owned by Morgan
       Guaranty Trust Company of New York, as Investment Manager and Agent for
       the Alfred P. Sloan Foundation (Multi-Market Account).

(7)    Richard Reiss, Jr., an ORBIMAGE director, is the founder and President of
       Georgica Advisors LLC.

(8)    Includes 63,256 shares owned by Georgica Partners, 8,662 shares owned by
       Georgica International Fund and 2,337 shares owned by Georgica Advisors
       LLC.

(9)    Consists of shares of common stock issuable upon the exercise of options.

(10)   Includes 14,000 shares of common stock issued pursuant to option
       exercises.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

STOCK PURCHASE AGREEMENT

            During 1997, we sold 372,705 shares of our Series A Cumulative
Convertible Preferred Stock for $100 per share pursuant to a stock purchase
agreement, generating net proceeds of approximately $33.5 million. We used these
proceeds to fund a portion of the purchase of the OrbView satellite systems and
the OrbView-2 License, and for initial operating expenses and other general
corporate purposes. During 1998, the Series A holders exercised their rights
under the stock purchase agreement to purchase an additional $22.7 million of
Series A preferred stock. This Series A offering generated net proceeds of
approximately $21.3 million.

            Capital Contributions. As part of the initial sale of Series A
preferred stock in 1997, Orbital contributed approximately $91.5 to our capital
and paid us $40.9 to purchase OrbView-1 and OrbView-2 imagery, for total
payments to us of $132.4 million. These payments were offset by approximately
$95 million that we owed to Orbital under the procurement agreement and the
services agreement, resulting in net payments to us of $37.4 million. See "--
Procurement Agreement," and "-- Services Agreement."

            Change of Control. We have certain obligations to our Series A
holders upon a "change of control" as defined in the stock purchase agreement If
a change of control occurs before the latest of:

            -   the successful in-orbit checkout of OrbView-3,

            -   the closing of an initial public offering that meets certain
                criteria, or

            -   the end of a 180-day period in which the average price of the
                common stock exceeds a certain level relative to the conversion
                price of the Series A preferred stock,

then we must offer to purchase, subject to the rights of the holders of the
Notes, all outstanding shares of Series A preferred stock for a purchase price
of 101% of the liquidation amount of the stock. If the change of control occurs


                                       38
<PAGE>   39

before the fourth anniversary of the initial 1997 sale of the Series A preferred
stock, then we must also pay each Series A holder an amount equal to the
dividends that would have accrued on such holder's shares of Series A preferred
stock from the date of the change of control through the fourth anniversary of
the initial 1997 sale of the Series A preferred stock.

STOCKHOLDERS' AGREEMENT

            In connection with the 1997 sale of our Series A preferred stock, we
entered into a stockholders' agreement with Orbital and the Series A holders.
The stockholders' agreement governs certain voting rights of, and restrictions
upon transfer on, the Series A preferred stock.

            Board of Directors. The stockholders' agreement provides that the
Board shall consist of up to five members. The majority of the Series A holders
have the right to elect two directors, and may be entitled to elect two
additional directors upon the occurrence of certain events described in
"Description of Capital Stock -- Series A Preferred Stock -- Voting." The
majority of the holders of the common stock also have the right to elect two
directors. The fifth member of the Board must be an independent director,
elected by a majority vote of all stockholders, where each Series A holder is
entitled to vote the number of shares of common stock into which such holder's
Series A preferred stock would be convertible. However, as long as Orbital holds
50% of the voting stock of ORBIMAGE, it has the right to appoint the independent
member of the Board with the consent of one of the Series A directors, and as
long as Orbital holds 20% of the voting stock of ORBIMAGE, it may appoint one of
the two common directors. The stockholders' agreement provides for vacancies to
be filled using the same nomination procedures that are used for elections.

            A majority vote of the Board, including in some cases the
affirmative vote of at least one Series A director, is required before we can,
among other things:

            -   merge, consolidate, liquidate or sell all or substantially all
                of our assets;

            -   modify the stock purchase agreement or the stockholders'
                agreement, or the procurement agreement, the services agreement
                or the OrbView-2 License, if such modifications would affect
                satellite performance or increase our costs by more than $1
                million;

            -   issue or commit to issue equity securities or securities
                convertible into or exchangeable or exercisable for equity
                securities;

            -   incur indebtedness for borrowed money or any capital lease in
                excess of $0.5 million;

            -   select, approve or remove any officer; or

            -   declare any dividends on the common stock.

            Restrictions on Transfer. Subject to limited exceptions, the
stockholders have agreed not to transfer, pledge, mortgage, hypothecate or
otherwise encumber any shares of common stock or Series A preferred stock. The
stockholders have also agreed as follows:

            Right of First Purchase. Any stockholder desiring to transfer common
stock or Series A preferred stock must first give Orbital the right to purchase
such shares.

            Right of First Refusal. Conversely, if Orbital desires to transfer
common stock or Series C preferred stock, it must give stockholders the right to
purchase a proportionate amount of such common stock or Series C preferred
stock.

            Tag-Along Rights. If Orbital proposes to transfer any shares of
common stock or Series C preferred, the Series A holders will have the right to
"tag along" in the transfer by requiring Orbital to sell a proportionate amount
of their Series A preferred stock.

                                       39
<PAGE>   40

            Drag-Along Rights. If 70% of the common holders (on a fully diluted
basis) propose to transfer 70% or more of their common stock, the Series A
holders may be required to convert their Series A preferred stock into common
stock and transfer such common stock to the proposed transferee.

            Subscription Rights. If we plan to offer to issue private equity
securities (including warrants, options or other rights to acquire equity
securities), we must notify our Series A holders of the terms of the offering
and offer a proportionate amount of the securities being offered (based on each
Series A holders current ownership) to each Series A holder. These subscription
rights will expire upon a public offering of the common stock.

            Registration Rights. Holders of more than 35% of our outstanding
common stock may demand that we file up to three registration statements to
permit the sale and distribution of their common stock. Also, if we register any
of our common stock (excluding registrations on Form S-8 or Form S-4, or that
are incident to the registration of convertible securities), the common holders
may require us to include their common stock within such registration statement.
These registration rights are subject to customary underwriters' cutbacks and
other standard exceptions, and are not exercisable until (i) 180 days after an
initial public offering of common stock or (ii) after June 30, 2002, if we have
not consummated an initial public offering of our common stock by that time.

PROCUREMENT AGREEMENT

            ORBIMAGE and Orbital are parties to a procurement agreement. The
procurement agreement, as amended requires Orbital to:

            -   design, develop, construct and launch OrbView-1, OrbView-3 and
                OrbView-4;

            -   grant us a license to market OrbView-2 imagery, including the
                right to receive all payments to Orbital from NASA under
                Orbital's contract to provide OrbView-2 imagery to NASA;

            -   build the U.S. central imagery receiving, processing and command
                and control ground segment and any necessary infrastructure
                upgrades for all four OrbView satellites.

            Orbital (or its subcontractors) will retain ownership of all
intellectual property rights underlying the OrbView satellites and related
ground systems, and has granted us a license to use the necessary intellectual
property to operate the OrbView satellites.

            Contract Costs. We estimate that the total cost of the OrbView-1,
OrbView-3 and OrbView-4 satellites, the OrbView-2 License and the related U.S.
ground systems will be approximately $285 million, net of $31 million which will
be funded by the U.S. Air Force through an agreement with Orbital ($280 million
of which we have agreed to pay under the procurement agreement). These estimated
costs include all satellite design, construction and launch costs and
hyperspectral capability, but exclude insurance costs. Of this amount, we had
spent approximately $225 million as of December 31, 1998. We expect to spend
approximately $43 million to complete OrbView-3 and OrbView-4 and $17 million to
complete modifications to the related U.S. ground systems. We generally pay our
costs under the procurement agreement on a monthly schedule based on the costs
incurred by Orbital, and pay the remaining amounts upon completion of specified
project milestones, such as critical design review and launch events. Our costs
under the procurement agreement include an extended performance incentive to
Orbital of: (a) up to $1 million per year during each year of the five-year
design lives of OrbView-3 and OrbView-4, based on the operational efficiency of
the satellites, for a maximum payment of up to $10 million; and (b) an
additional $1 million per year per satellite for each year that OrbView-3 or
OrbView-4 remains in operation beyond its five year design life. See "Risk
Factors -- Contract Revenue -- Contracts may be terminated for a variety of
reasons which would result in a loss of contract revenues."

            Termination. We may terminate the procurement agreement if Orbital
fails to comply with the material terms of the agreement and does not cure such
failure within 60 days of our notice. Orbital may terminate the procurement
agreement if we fail to make the payments required by the agreement.

            Limited Remedies. Orbital has made certain one-year warranties to us
regarding the workmanship of the



                                       40
<PAGE>   41

items delivered by it under the procurement agreement. It has also assigned to
us certain third-party warranties that it has or may have with respect to these
items. However, for OrbView-3 and OrbView-4, following launch, our sole remedy
for launch failure, defects, failure to conform with applicable specifications
or any other requirements is limited to insurance proceeds. Orbital's liability
to us for all claims under the procurement agreement, including breach of its
warranties, is limited to $10 million. Orbital is not liable to us for any costs
or other damages arising from schedule delays.

SERVICES AGREEMENT

            ORBIMAGE and Orbital are parties to a services agreement, under
which Orbital has agreed to provide to us, upon our request, for three years
from the date of launch of each OrbView satellite:

            -   general and administrative, accounting, tax, legal, regulatory,
                and other similar services on a cost-reimbursable basis with no
                additional fee;

            -   office and other facilities-related services on a
                cost-reimbursable basis with no additional fee; and

            -   in-orbit satellite operations for the OrbView satellites on a
                cost plus 10% fee basis.

NON-COMPETITION AND TEAMING AGREEMENT

            Under a non-compete agreement, Orbital has agreed that it will not,
and will not allow any of its affiliates to, enter into contracts to provide
integrated remote sensing satellite-based systems consisting of satellite bus,
payload, launch services and ground systems. Orbital may respond to a request
for a proposal for such an integrated system only if Orbital allows us to have
primary responsibility for the provision of imagery services from the system. In
addition, Orbital must offer us any satellite-based remote imaging project that
emerges from its research and development.

            The non-compete agreement permits Orbital to provide components for
integrated systems or subsystems, but does not permit Orbital to design, develop
or construct sensors capable of generating imagery similar, or technologically
superior, to the imagery of OrbView-2, OrbView-3, OrbView-4 or any satellite
that we purchase from Orbital or its affiliates. Subject to certain exceptions,
Orbital has also agreed not to invest, and not to let its affiliates invest,
more than $10 million in any entity that gathers and distributes satellite-based
imagery similar, or technologically superior, to the imagery of OrbView-2,
OrbView-3, OrbView-4, or any similar satellite that we purchase from Orbital or
its affiliates. The non-compete agreement will terminate on the earlier of (i)
June 30, 2003, the date on which the procurement agreement is terminated, (ii)
the first anniversary of an initial public offering by ORBIMAGE, or (iii) the
end of a 180-day period in which the Company's average common stock price
exceeds certain thresholds.

ORBVIEW-2 LICENSE

            Orbital has granted us an exclusive worldwide license to use and
sell OrbView-2 imagery (and to sublicense third parties to distribute OrbView-2
imagery) for a license fee of approximately $62.7 million. The OrbView-2 License
is subject to the limitations imposed by Orbital's contract with NASA for
OrbView-2 imagery and the DoC license applicable to OrbView-2. Orbital has
agreed to use reasonable commercial efforts to obtain and maintain the permits
and licenses that are necessary for the continued operation of the OrbView-2
satellite. Orbital also has assigned to us all amounts that are due or will
become due to Orbital under Orbital's contract with NASA. We have the sole
responsibility for operating and controlling the OrbView-2 satellite.

RADARSAT-2 LICENSE

            We have entered into a license agreement with Orbital and MDA, dated
as of December 31, 1998, under which MDA has granted us:

            -   a ten-year exclusive worldwide license to distribute and market
                RadarSat-2 imagery products and services, with an option to
                renew this license for two years at a renewal price of $10,000
                per year;

                                       41
<PAGE>   42

            -   a ten-year non-exclusive, royalty-free worldwide sublicense to
                use the mark "RadarSat" to promote, market, sell and distribute
                RadarSat-2 imagery; and

            -   a perpetual, fully paid non-exclusive license for all RadarSat-2
                image processing and archiving software.

           Under the license agreement, MDA has further agreed to:

            -   construct and operate the RadarSat-2 satellite;

            -   provide us with RadarSat-2 imagery reception, processing and
                archiving services; and

            -   market RadarSat-2 imagery and serve as our exclusive worldwide
                distributor of RadarSat-2 imagery.

            Purchase Price. The RadarSat-2 License will cost $60 million, net of
approximately $140 million funded by CSA through a contract with Orbital. We
will pay the $60 million purchase price in installments based on progress
payments during the satellite construction phase. Such payments will not exceed:
$15 million per year in 1999-2001; $10 million in 2002; and $5 million upon the
successful checkout of RadarSat-2.

            Other Fees and Arrangements. We will pay MDA 12% of our annual net
revenues from RadarSat-2 imagery sales for data reception, processing and
archiving services. We will also pay MDA its costs plus 10% for marketing and
distribution services, and no more than $10 million per year to operate the
RadarSat-2 satellite.

            Termination. Either ORBIMAGE or MDA may terminate the license
agreement governing the RadarSat-2 License if the other party defaults on its
obligations to pay amounts when due, breaches its representations or warranties,
or fails to perform any other of its material obligations under the license
agreement. In addition, either party may terminate the agreement if the CSA
Contract is terminated for any reason, including by the Canadian government for
convenience.

            Effects of Termination. Upon termination of the license agreement,
our exclusive license to market and distribute RadarSat-2 imagery will
terminate, except with respect to imagery we have already received, for which we
will continue to hold a non-exclusive license. In addition, MDA will have no
further imagery purchase obligations under the agreement.

            If we terminate the license agreement because the CSA Contract
terminates or because MDA fails to obtain the regulatory approvals needed for it
to perform its obligations under the license agreement, MDA must reimburse us
for the amount of our payments toward the purchase price of the RadarSat-2
License as of the date of termination. In addition, if MDA has not selected a
launch vehicle by December 31, 1999, we are not required to make any more
payments under the license agreement until MDA has selected a launch vehicle. If
MDA has not selected a launch vehicle by June 30, 2000, we are entitled to a
refund of 50% of the license fee that we have paid as of that date.

            If MDA terminates the license agreement because of our default
before RadarSat-2 becomes operational, we must pay MDA the balance of the
purchase price of the RadarSat-2 License. If our default occurs after RadarSat-2
is operational, we do not have to pay MDA any additional amounts for the
RadarSat-2 License.

            Indemnification. MDA has agreed to indemnify us for breaches of its
representations and warranties and other covenants under the license agreement.
We have agreed to indemnify MDA for breaches of our representations and
warranties and other covenants under the license agreement. These indemnities
survive expiration or termination of the RadarSat-2 License, but are limited to
$10 million.

            Guarantee.  Orbital has unconditionally guaranteed MDA's full and
timely performance of its obligations under the RadarSat-2 License. If MDA
defaults, Orbital agrees to pay all amounts due to us.

            Follow-on projects. Orbital and MDA have agreed to offer us (subject
to negotiation) exclusive commercial distribution rights with respect to any
follow-on RadarSat-2 or similar project before June 30, 2003, if MDA or



                                       42
<PAGE>   43

Orbital obtains such rights.

OTHER AGREEMENTS

            The distributorship contracts that we expect to offer to foreign
high-resolution imagery distributors may require the distributor to purchase
from us an imagery ground station or an OrbView upgrade to an existing ground
station. We are contractually obligated to procure any such ground stations or
upgrades from MDA, provided that the price is commercially competitive.

            Orbital has guaranteed our performance under our distribution
agreement with Samsung. This agreement grants Samsung an exclusive license to
receive, process and sell high resolution OrbView-3 imagery of the Korean
peninsula, and a non-exclusive license to receive, process and sell
high-resolution OrbView-4 imagery of South Korea.




                                       43
<PAGE>   44

                                   PART IV

      ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

      (a)(1)  FINANCIAL STATEMENTS

      The following financial statements of Orbital Imaging Corporation and the
Independent Auditors' Report are included in Item 8 above:

<TABLE>
<CAPTION>

<S>                                                                                                                            <C>
        Independent Auditors' Report....................................................................................        F-2
        Balance Sheets as of December 31, 1997 and 1998.................................................................        F-3
        Statements of Operations for the years ended December 31, 1996, 1997 and 1998...................................        F-4
        Statements of Stockholders' Equity for the years ended December 31, 1996, 1997 and 1998.........................        F-5
        Statements of Cash Flows for the years ended December 31, 1996, 1997 and 1998...................................        F-6
        Notes to Financial Statements...................................................................................        F-7
</TABLE>

      (a)(2)  FINANCIAL STATEMENT SCHEDULES

      Not applicable.

      (a)(3)  EXHIBITS

      A complete listing of exhibits required is given in the Exhibit Index that
precedes the exhibits filed with this report.

      (b)  REPORTS ON FORM 8-K

                     Not applicable.




                                       44
<PAGE>   45
                                   SIGNATURES

Pursuant to the requirements 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.

                           ORBITAL IMAGING CORPORATION


          DATED:   March 30, 2000       By:         /s/ DAVID W. THOMPSON
                                        ---------------------------------
                                        David W. Thompson, Chairman of the Board

          DATED:   March 30, 2000       By:         /s/ GILBERT D. RYE
                                        ------------------------------
                                        Gilbert D. Rye, President
                                        and Chief Executive Officer

          DATED:   March 30, 2000       By:         /s/ ARMAND D. MANCINI
                                        ---------------------------------
                                        Armand D. Mancini, Vice President
                                        and Chief Financial Officer

          DATED:   March 30, 2000       By:         /s/ JAMES A. ABRAHAMSON
                                        -----------------------------------
                                        James A. Abrahamson, Director

          DATED:   March 30, 2000       By:         /s/ BRUCE W. FERGUSON
                                        ---------------------------------
                                        Bruce W. Ferguson, Director

          DATED:   March 30, 2000       By:         /s/ RICHARD REISS, JR.
                                        ----------------------------------
                                        Richard Reiss, Jr., Director

          DATED:   March 30, 2000       By:         /s/ WILLIAM W. SPRAGUE
                                        ----------------------------------
                                        William W. Sprague, Director

                                       45
<PAGE>   46

                          INDEX TO FINANCIAL STATEMENTS

                           ORBITAL IMAGING CORPORATION

<TABLE>
<CAPTION>

<S>                                                                                                                          <C>
    Independent Auditors' Report............................................................................................  F-2
    Balance Sheets as of December 31, 1997 and 1998.........................................................................  F-3
    Statements of Operations for the years ended December 31, 1996, 1997 and 1998...........................................  F-4
    Statements of Stockholders' Equity for the years ended December 31, 1996, 1997 and 1998.................................  F-5
    Statements of Cash Flows for the years ended December 31, 1996, 1997 and 1998...........................................  F-6
    Notes to Financial Statements...........................................................................................  F-7
</TABLE>



                                      F-1
<PAGE>   47


                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Orbital Imaging Corporation:

     We have audited the accompanying balance sheets of Orbital Imaging
Corporation ("ORBIMAGE") as of December 31, 1997 and 1998, and the related
statements of operations, stockholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1998. These financial
statements are the responsibility of ORBIMAGE's management. Our responsibility
is to express an opinion on these financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Orbital Imaging Corporation
as of December 31, 1997 and 1998, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1998, in
conformity with generally accepted accounting principles.

                                    KPMG LLP

January 22, 1999, except for the second paragraph of
Note 3 which is as of March 23, 2000
Washington, D.C.




                                      F-2
<PAGE>   48

                           ORBITAL IMAGING CORPORATION
                                 BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                                            DECEMBER 31,
                                                                                                            ------------
                                                                                                      1997                1998
                                                                                                      ----                ----
                                        ASSETS                                                                         (RESTATED)
<S>                                                                                                 <C>                <C>
Current assets:
   Cash and cash equivalents..................................................................      $   10,883         $   25,082
   Available-for-sale securities, at fair value...............................................          11,337             34,401
   Restricted held-to-maturity securities, at amortized cost..................................              --             16,724
   Receivables and other current assets, net of allowances of $0 and
       $165, respectively.....................................................................             134              2,291
                                                                                                    ----------         ----------
         Total current assets.................................................................          22,354             78,498
Restricted held-to-maturity securities, at amortized cost.....................................              --              8,201
Property, plant and equipment, at cost, less accumulated
   depreciation of $5,144 and $7,630, respectively............................................          11,054             15,956
Satellites and related rights, at cost, less accumulated depreciation
   and amortization of $12,947 and $22,367, respectively......................................         104,226            196,709
Other assets..................................................................................             115              8,714
                                                                                                    ----------         ----------
         Total assets.........................................................................      $  137,749         $  308,078
                                                                                                    ==========         ==========

             LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued expenses.......................................................      $    4,335         $   16,879
  Current portion of deferred revenue.........................................................           7,725              8,522
  Deferred tax liabilities....................................................................             468                580
                                                                                                    ----------         ----------
        Total current liabilities.............................................................          12,528             25,981
Senior notes..................................................................................              --            142,622
Deferred revenue, net of current portion......................................................          29,667             23,698
Deferred tax liabilities......................................................................          10,194              3,216
Capitalized lease obligation, net of current portion..........................................              --                108
                                                                                                    ----------         ----------
        Total liabilities.....................................................................          52,389            195,625

Preferred stock subject to repurchase, par value $0.01; 10,000,000
     shares authorized; Series A 12% cumulative convertible,
     2,000,000 shares authorized, 392,887 and 687,576 shares issued
     and outstanding, respectively (liquidation value of $40,074 and
     $70,133, respectively)...................................................................          36,355             78,489

Stockholders' equity:
     Common stock, par value $0.01; 75,000,000 shares authorized; 25,214,000
         shares issued and outstanding........................................................             252                252
     Additional paid-in-capital...............................................................          75,285             86,782
     Accumulated deficit......................................................................         (26,532)           (53,070)
                                                                                                    ----------         ----------
        Total stockholders' equity............................................................          49,005             33,964
                                                                                                    ----------         ----------
            Total.............................................................................      $  137,749         $  308,078
                                                                                                    ==========         ==========
</TABLE>

                 See accompanying notes to financial statements.



                                      F-3
<PAGE>   49


                           ORBITAL IMAGING CORPORATION
                            STATEMENTS OF OPERATIONS

                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                           YEARS ENDED DECEMBER 31,
                                                                                           -----------------------
                                                                                   1996             1997              1998
                                                                                   ----             ----              ----
                                                                                                                   (RESTATED)
<S>                                                                           <C>             <C>               <C>
 Revenues...............................................................      $      1,055    $      2,062      $     11,663
 Direct expenses........................................................             4,320           6,312            15,215
                                                                              ------------    ------------      ------------
 Gross loss.............................................................            (3,265)         (4,250)           (3,552)
 Selling, general and administrative expenses...........................             1,630           2,845             7,328
                                                                              ------------    ------------      ------------
 Loss from operations...................................................            (4,895)         (7,095)          (10,880)
 Interest income, net of interest expense of $4,790 in 1998.............                --           1,261             1,915
                                                                              ------------    ------------      ------------
 Loss before benefit for income taxes...................................            (4,895)         (5,834)           (8,965)
 Benefit for income taxes...............................................                --          (1,752)           (3,286)
                                                                              ------------    ------------      ------------
 Net loss...............................................................      $     (4,895)   $     (4,082)     $     (5,679)
                                                                              ============    ============      ============
 Loss per common share - basic and diluted (1)..........................      $         --    $      (0.42)     $      (1.05)
 Loss available to common stockholders..................................      $         --    $     (6,890)     $    (26,538)

 Weighted average shares outstanding - basic and diluted (1)............                --      16,431,854        25,214,000
</TABLE>

----------

(1)  All potentially dilutive securities, such as preferred stock subject to
     repurchase, warrants and stock options, are antidilutive for each year
     presented. Prior to May 8, 1997, ORBIMAGE was an operating division of
     Orbital, and loss per common share for the year ended December 31, 1996 was
     not considered meaningful.

                 See accompanying notes to financial statements.



                                      F-4
<PAGE>   50
                           ORBITAL IMAGING CORPORATION
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>


                                                          COMMON STOCK                 ADDITIONAL
                                                          ------------                   PAID-IN     ACCUMULATED
                                                      SHARES             AMOUNT          CAPITAL       DEFICIT          TOTAL
                                                      ------             ------          -------       -------          -----
<S>                                                 <C>                    <C>         <C>            <C>             <C>
     BALANCE AS OF DECEMBER 31, 1995...........               --           $   --      $  34,703      $  (14,747)     $  19,956

     Capital contributed.......................               --               --         13,625              --         13,625
     Tax-sharing charge........................               --               --         (2,407)             --         (2,407)
     Net loss..................................               --               --             --          (4,895)        (4,895)
                                                      ----------           ------      ---------      ----------      ---------

     BALANCE AS OF DECEMBER 31, 1996...........               --               --         45,921         (19,642)        26,279

     Shares issued to Orbital..................       25,200,000              252         31,066              --         31,318
     Shares issued to director.................           14,000               --             50              --             50
     Preferred stock dividends.................               --               --             --          (2,808)        (2,808)
     Tax-sharing charge........................               --               --         (1,752)             --         (1,752)
     Net loss..................................               --               --             --          (4,082)        (4,082)
                                                      ----------           ------      ---------      ----------      ---------

     BALANCE AS OF DECEMBER 31, 1997...........       25,214,000              252         75,285         (26,532)        49,005

     Common stock warrants issued, net.........               --               --          7,594              --          7,594
     Deemed dividend on issuance of preferred
        stock subject to repurchase............               --               --             --          (9,975)        (9,975)
     Issuance of compensatory stock options....               --               --            323              --            323
     Preferred stock dividends.................               --               --             --         (10,884)       (10,884)
     Capital contributed.......................               --               --          3,580              --          3,580
     Net loss..................................               --               --             --          (5,679)        (5,679)
                                                      ----------           ------      ---------      ----------      ---------


     BALANCE AS OF DECEMBER 31, 1998 (RESTATED)       25,214,000           $  252      $  86,782      $  (53,070)     $  33,964
                                                     ===========           ======      =========      ==========      =========
</TABLE>

                 See accompanying notes to financial statements.




                                      F-5
<PAGE>   51




                           ORBITAL IMAGING CORPORATION
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                          YEARS ENDED DECEMBER 31,
                                                                                          ------------------------
                                                                             1996                   1997                   1998
                                                                             ----                   ----                   ----
                                                                                                                        (RESTATED)
<S>                                                                        <C>                   <C>                    <C>
 CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss...........................................................    $  (4,895)            $    (4,082)           $    (5,679)
    Adjustments to reconcile net loss to net cash (used in)
       provided by operating activities:
       Depreciation, amortization and other............................        3,981                   5,541                 12,857
       Deferred tax benefit............................................           --                  (1,752)                (3,286)
    Changes in assets and liabilities:
       Increase in receivables and other current assets................          150                     (84)                  (700)
       (Increase) decrease in other assets.............................         (419)                    371                   (532)
       Increase in accounts payable and accrued expenses...............           --                   4,335                 12,370
       Increase (decrease) in deferred revenue.........................          175                   2,005                 (5,172)
                                                                           ---------             -----------            -----------
          NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES..........       (1,008)                  6,334                  9,858
 CASH FLOWS FROM INVESTING ACTIVITIES:
    Capital expenditures...............................................      (12,617)                (49,029)              (108,533)
    Purchases of restricted held-to-maturity securities................           --                      --                (32,185)
    Purchases of available-for-sale securities.........................           --                (115,751)              (119,783)
    Maturities of restricted held-to-maturity securities...............           --                      --                  7,568
    Maturities of available-for-sale securities........................           --                 102,442                 60,905
    Sales of available-for-sale securities.............................           --                   1,972                 35,818
    Payment for business acquisition...................................           --                      --                 (5,000)
                                                                           ---------             -----------            -----------
         NET CASH USED IN INVESTING ACTIVITIES.........................      (12,617)                (60,366)              (161,210)
 CASH FLOWS FROM FINANCING ACTIVITIES:
    Net proceeds from issuance of long-term obligations................           --                      --                136,682
    Net proceeds from issuance of common stock warrants................           --                      --                  7,594
    Net proceeds from issuance of preferred stock subject to repurchase           --                  33,547                 21,275
    Net proceeds from issuance of common stock.........................           --                  31,368                     --
    Capital contributed................................................       13,625                      --                     --
                                                                           ---------             -----------            -----------
         NET CASH PROVIDED BY FINANCING ACTIVITIES.....................       13,625                  64,915                165,551
                                                                           ---------             -----------            -----------
 NET INCREASE IN CASH AND CASH EQUIVALENTS.............................           --                  10,883                 14,199
 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR..........................           --                      --                 10,883
                                                                           ---------             -----------            -----------
 CASH AND CASH EQUIVALENTS, END OF YEAR................................    $      --             $    10,883            $    25,082
                                                                           =========             ===========            ===========
 SUPPLEMENTAL CASH FLOW INFORMATION:
    Interest paid......................................................    $      --             $        --            $     9,009
                                                                           =========             ===========            ===========
 NON-CASH ITEMS:
    Preferred stock dividends..........................................           --             $     2,808            $    10,884
    Deemed dividend on issuance of preferred stock subject to
      repurchase.......................................................           --                      --                  9,975
    Capital contributed--tax basis adjustment..........................           --                      --                  3,580
    Capitalized lease obligation.......................................           --                      --                    223
    Capitalized compensatory stock options.............................           --                      --                    119
</TABLE>

                 See accompanying notes to financial statements.




                                      F-6
<PAGE>   52

                           ORBITAL IMAGING CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

(1) RELATIONSHIP WITH ORBITAL

     In 1991, the ORBIMAGE operating division of Orbital Sciences Corporation
("Orbital") was established to manage the development of remote imaging
satellites which would collect, process and distribute digital imagery of land
areas, oceans and the atmosphere. In 1992, Orbital Imaging Corporation
("ORBIMAGE") was incorporated in Delaware as a wholly-owned subsidiary of
Orbital. On May 8, 1997, and July 3, 1997, ORBIMAGE issued preferred stock to
private investors to fund a significant portion of the remaining costs of
existing projects (the "Private Placement"). Orbital purchased additional common
stock, bringing its total common equity invested to approximately $91.5 million.
Also on May 8, 1997, ORBIMAGE executed certain contracts with Orbital whereby
all assets and liabilities of Orbital's operating division, ORBIMAGE, were sold
to ORBIMAGE at the historical cost. Accordingly, the accompanying financial
statements incorporate the historical accounts and operations of the operating
division prior to May 8, 1997, as predecessor financial statements of ORBIMAGE.

     ORBIMAGE has three contracts with Orbital: the ORBIMAGE System Procurement
Agreement dated November 18, 1996, as amended (the "System Procurement
Agreement"), the OrbView-2 License Agreement dated May 8, 1997 (the "License
Agreement") and the Amended and Restated Administrative Services Agreement dated
May 8, 1997 (the "Administrative Services Agreement"). Under the System
Procurement Agreement, ORBIMAGE purchased (i) the OrbView-1 satellite, (ii) an
exclusive license entitling ORBIMAGE to all of the economic rights and benefits
of the OrbView-2 satellite, (iii) the OrbView-3 satellite and launch service,
(iv) the OrbView-4 satellite and launch service and (v) the ground system assets
used to command and control the satellites as well as receive and process
imagery. Under the License Agreement, Orbital has granted an exclusive worldwide
license to ORBIMAGE to use and sell OrbView-2 imagery. Pursuant to the terms of
the License Agreement, Orbital has assigned to ORBIMAGE all amounts that are due
or become due to Orbital under a contract Orbital has with NASA to deliver
OrbView-2 imagery, and ORBIMAGE has sole responsibility for operating and
controlling the satellite. Under the Administrative Services Agreement, ORBIMAGE
is reimbursing Orbital for management, accounting, legal, financial services,
office space and other administrative services, as well as certain direct
operating services provided by Orbital.

     ORBIMAGE has also entered into an agreement with Orbital and MacDonald,
Dettwiler and Associates, Ltd. ("MDA"), a wholly-owned Canadian subsidiary of
Orbital, under which ORBIMAGE has acquired the exclusive worldwide distribution
rights for the RadarSat-2 satellite imagery (the "RadarSat-2 License"). Under
the RadarSat-2 License, MDA will own and operate the RadarSat-2 satellite, and
MDA will provide operations, data reception, processing, archiving and
distribution services to ORBIMAGE. ORBIMAGE's acquisition of the RadarSat-2
License will cost $60.0 million, net of approximately $140.0 million which will
be funded by the Canadian Space Agency through a contract with Orbital. ORBIMAGE
will pay the $60.0 million purchase price in installments based on progress
payments during the satellite construction phase. Such payments will not exceed
$15.0 million per year in 1999-2001; $10.0 million in 2002; and $5.0 million
upon the successful checkout of RadarSat-2.

     Pursuant to the System Procurement Agreement as amended, ORBIMAGE has
committed to purchase various satellites, rights and ground systems for
approximately $279.9 million, net of $31.0 million which will be funded by the
U.S. Air Force through a contract with Orbital. ORBIMAGE incurred costs of
approximately $12.6 million, $47.6 million and $94.3 million for the years ended
December 31, 1996, 1997 and 1998, respectively, under the System Procurement
Agreement. As of December 31, 1998, ORBIMAGE has remaining commitments under the
System Procurement Agreement of $55.4 million, net of $31.0 million which will
be funded by the U.S. Air Force through a contract with Orbital.

     ORBIMAGE incurred costs of approximately $2.0 million, $3.2 million and
$2.7 million for the years ended December 31, 1996, 1997 and 1998, respectively,
under the Administrative Services Agreement. The term of the Administrative
Services Agreement is expected to terminate on or before December 31, 2001.

     Amounts due to Orbital of $3.7 million and $9.2 million as of December 31,
1997 and 1998, respectively were included in accounts payable and accrued
expenses.

                                      F-7
<PAGE>   53

     Certain officers and directors of ORBIMAGE are also officers and directors
of Orbital.

(2)  NATURE OF OPERATIONS

     The OrbView-1 satellite was launched in 1995 and provides severe weather
and atmospheric images, including global lightning information and measurements
used in analyzing atmospheric temperature information. The OrbView-2 satellite
was launched on August 1, 1997, and completed its on-orbit checkout in October
1997. ORBIMAGE recognized revenues related to the OrbView-2 satellite of $1.3
million and $9.1 million for the years ended December 31, 1997 and 1998,
respectively. The OrbView-3 satellite is currently scheduled to begin operations
in the first quarter of 2000 and will provide one-meter panchromatic and
four-meter multispectral imagery of the Earth. The OrbView-4 satellite will
provide one-meter and two-meter panchromatic, four-meter multispectral, and
eight-meter hyperspectral imagery of the Earth and is expected to be operational
in the last quarter of 2000. The imagery provided by both OrbView-3 and
OrbView-4 will have a broad range of applications for U.S. and foreign national
security and many commercial and scientific markets.

(3)  SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates. Certain
amounts in prior years' financial statements have been reclassified to conform
to the current year presentation.

     On February 25, 1998, ORBIMAGE issued $150 million of units (the "1998
Offering"), each unit consisted of $1,000 principal amount of 11 5/8% senior
notes due 2005 and one warrant to purchase 8.75164 shares of ORBIMAGE common
stock. In consultation with its new independent auditors retained in July 1999,
the valuation of the warrants issued in connection with the 1998 Offering was
restated from $9.0 million to $7.9 million based on an independent third party
valuation, which resulted in reducing the debt discount and additional paid in
capital. The Series A Preferred Stock sold on February 25, 1998 was deemed to
have a beneficial conversion feature totaling $10.0 million as a result of the
difference between the common stock fair value based on an independent third
party valuation and the conversion price of the preferred stock. This difference
is a deemed dividend to the holders of the preferred stock. The preferred stock
dividends paid in shares during 1998 were also deemed to have a beneficial
conversion feature as a result of the difference between the conversion price of
the preferred stock and the underlying value of the common stock. Additionally,
the stock options issued to employees during 1998 were deemed to be compensatory
based on the difference between the exercise price and the common stock fair
value based on an independent third party valuation. As a result of these
changes, ORBIMAGE's loss before income taxes, benefit for income taxes, net
loss, preferred stock dividends, loss available to common stockholders and loss
per common share - basic and diluted were restated as follows for the year ended
December 31, 1998 (in thousands, except per share data):

<TABLE>
<S>                                                                           <C>
             ORIGINALLY REPORTED:
                Loss before income taxes..............................        $       (8,831)
                Benefit for income taxes..............................                (3,312)
                                                                              ---------------
                Net loss..............................................                (5,519)
                Preferred stock dividends.............................                (7,324)
                                                                              ---------------
                Loss available for common stockholders................        $      (12,843)
                                                                              ===============
                Loss per common share - basic and diluted (1).........        $        (0.51)
                                                                              ==============

             RESTATED:
                Loss before income taxes..............................        $       (8,965)
                Benefit for income taxes..............................                (3,286)
                                                                              ---------------
                Net loss..............................................                (5,679)
                Preferred stock dividends.............................               (20,859)
                                                                              ---------------
                Loss available for common stockholders................        $      (26,538)
                                                                              ===============
                Loss per common share - basic and diluted (1).........        $        (1.05)
                                                                              ===============
</TABLE>

(1)  All potentially dilutive securities, such as preferred stock subject to
     repurchase, warrants and stock options, are antidilutive for each year
     presented.

Revenue Recognition

     ORBIMAGE's principal source of revenue is the sale of satellite imagery to
customers, value-added resellers and distributors. Such sales often require
ORBIMAGE to provide imagery over the term of a multi-year sales contract.
Accordingly, ORBIMAGE recognizes revenues on imagery contracts on a
straight-line basis over the delivery term of the contract. Deferred revenue
represents receipts in advance of the delivery of imagery.


                                      F-8
<PAGE>   54

Services Provided by Orbital

     A substantial part of ORBIMAGE's administrative services, including legal,
accounting, human resources and purchasing is provided to ORBIMAGE at cost by
Orbital. Such costs include both specifically identifiable services and certain
pooled costs allocated by Orbital based on ORBIMAGE's proportional use. ORBIMAGE
believes that the cost of these services, as provided for in the accompanying
statements of operations, approximates the cost of similar services if obtained
directly by ORBIMAGE.

Stock-Based Compensation

     Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation ("SFAS 123") requires companies to recognize as expense
the fair value of all stock-based awards on the date of grant, or (ii) continue
to apply the provisions of Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB 25") and provide pro forma net
income (loss) disclosures for employee stock option grants made in 1995 and
future years as if the fair-value-based method defined in SFAS 123 had been
applied.

ORBIMAGE has elected to continue to apply the provision of APB 25 and provide
the pro forma disclosure provisions of SFAS 123 (see Note 16). Compensation
expense is recognized over the vesting period for stock option grants to
employees that have market values in excess of the strike price. To the extent
that ORBIMAGE grants stock options to non-employee consultants or advisors,
ORBIMAGE records costs equal to the fair value of the options granted as of the
measurement date as determined using a Black-Scholes model.

Cash and Cash Equivalents

     ORBIMAGE considers all highly liquid investments with original maturities
of three months or less to be cash equivalents.

Securities

     Management determines the appropriate classification of securities at the
time of purchase and reevaluates such designation as of each balance sheet date.
Debt securities are classified as held-to-maturity when ORBIMAGE has the
positive intent and ability to hold the securities to maturity. Held-to-maturity
securities are stated at amortized cost, adjusted for amortization of premiums
and accretion of discounts to maturity. Such amortization and accretion are
included in interest income. The held-to-maturity securities are restricted by
provisions of the senior notes. (See Note 12.)

     Securities not classified as held-to-maturity are classified as
available-for-sale. Available-for-sale securities are carried at fair value,
with the unrealized gains and losses, net of tax, reported in a separate
component of stockholders' equity. The amortized cost of available-for-sale
securities is adjusted for amortization of premiums and accretion of discounts
to maturity. Amortization, accretion, and realized gains and losses are included
in interest income. The cost of securities sold is based on the specific
identification method.

     Securities with original maturities of more than three months, but not more
than one year, are classified as current assets. Securities with original
maturities of more than one year are classified as long-term assets.

Financial Instruments

     The carrying amounts for ORBIMAGE's cash and cash equivalents, receivables,
accounts payable and accrued expenses approximate fair value. The fair values
for securities (see Note 8) and senior notes (see Note 12) were based on quoted
market prices.

     ORBIMAGE does not have any derivative financial instruments as of December
31, 1998, and believes that the interest rate risk associated with its senior
notes and the market risk associated with its securities are not material to the
results of operations of ORBIMAGE. The available-for-sale securities subject
ORBIMAGE's financial position

                                      F-9
<PAGE>   55

to interest rate risk.

Satellites and Related Rights and Property, Plant and Equipment

     ORBIMAGE is purchasing the OrbView-1, OrbView-3 and OrbView-4 satellites,
the OrbView-2 license and the ground system assets pursuant to the System
Procurement Agreement. ORBIMAGE is constructing the ORBIMAGE digital catalogue,
a digital imagery catalogue and processing system, to support OrbView-2,
OrbView-3 and OrbView-4 imagery processing and distribution. ORBIMAGE
capitalizes certain direct and indirect costs incurred in the construction of
the ORBIMAGE digital catalogue. Amortization of the capitalized costs will begin
when the ORBIMAGE digital catalogue is placed in service.

     ORBIMAGE capitalizes interest costs in connection with the construction of
satellites, related ground system assets, and the ORBIMAGE digital catalogue.
The capitalized interest is recorded as part of the historical cost of the asset
to which it relates and will be amortized over the asset's useful life when
placed in service. For the year ended December 31, 1998, capitalized interest
totaled $10.9 million. No interest was capitalized for the years ended December
31, 1996 or 1997.

     Depreciation and amortization are provided using the straight-line method
as follows:

<TABLE>
<CAPTION>
<S>                                                                       <C>
                   Ground system assets.................................  8 years
                   Furniture and equipment..............................  3 to 5 years
                   OrbView-1............................................  3 years
                   OrbView-2............................................  7 1/2 years
                   Leasehold improvements...............................  Shorter of estimated useful life
                                                                          of lease or lease term
</TABLE>

Income Taxes

     ORBIMAGE recognizes income taxes using the asset and liability method.
Under the asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.

(4)  BUSINESS ACQUISITION

     In 1998, ORBIMAGE acquired substantially all of the assets of TRIFID
Corporation ("TRIFID") for $5.0 million. The acquisition was accounted for using
the purchase method of accounting and resulted in excess of purchase price over
net assets acquired of approximately $3.0 million, which is being amortized on a
straight-line basis over ten years. The financial results of TRIFID have been
included in ORBIMAGE's results since April 30, 1998.

     The following unaudited supplemental financial information presents
ORBIMAGE's results of operations for the years ended December 31, 1997 and 1998,
on a pro forma basis, as though the TRIFID acquisition were consummated on
January 1, 1997 (in thousands, except share data):

<TABLE>
<CAPTION>
                                                                                   YEARS ENDED
                                                                                  DECEMBER 31,
                                                                                  ------------
                                                                              1997             1998
                                                                              ----             ----
                                                                                            (RESTATED)
<S>                                                                     <C>               <C>
           Revenues...................................................  $      5,531      $     12,486
           Net loss...................................................        (4,213)           (5,681)
           Loss per common share -- basic and diluted (1).............  $      (0.43)         $  (1.05)
</TABLE>

----------

(1)  All potentially dilutive securities, such as preferred stock subject to
     repurchase, warrants and stock options, are antidilutive for each year
     presented.

                                      F-10
<PAGE>   56

(5)  EMPLOYEE BENEFIT PLAN

     In February 1998, the FASB issued Statement No. 132, Employers' Disclosures
about Pensions and Other Postretirement Benefits, that supersedes the disclosure
requirements of Statement No. 87, Employers' Accounting for Pensions, and
Statement No. 106, Employers' Accounting for Postretirement Benefits Other Than
Pensions. ORBIMAGE adopted Statement No. 132 effective January 1, 1998. Adoption
of the new benefits disclosure rules did not impact ORBIMAGE's financial
position, results of operations or cash flows.

     ORBIMAGE's employees participate in the Orbital Imaging Corporation
Retirement Savings Plan, a defined contribution plan (the "Plan") in accordance
with Section 401(k) of the Internal Revenue Code of 1986, as amended. ORBIMAGE's
contributions to the Plan are made based on certain plan provisions and at the
discretion of the Board of Directors. For the years ended December 31, 1997 and
1998, ORBIMAGE's contribution expense was $44,000 and $257,000, respectively.
ORBIMAGE's contribution to the Plan for the year ended December 31, 1998
includes contributions to accounts of employees who joined ORBIMAGE as part of
the TRIFID acquisition. (See Note 4.)

(6)  COMPREHENSIVE INCOME (LOSS)

     As of January 1, 1998, ORBIMAGE adopted Statement of Financial Accounting
Standard ("SFAS") No. 130, Reporting Comprehensive Income. SFAS No. 130
establishes new rules for the reporting and display of comprehensive income and
its components; however, the adoption of SFAS No. 130 had no impact on
ORBIMAGE's net loss or stockholders' equity. For the years ended December 31,
1996, 1997 and 1998, there were no material differences between net loss as
reported and comprehensive income (loss).

(7)  LOSS PER COMMON SHARE

     The computations of basic and diluted loss per common share for the years
ended December 31, 1997 and 1998 were as follows (in thousands, except share
data):

<TABLE>
<CAPTION>

                                                                                              YEARS ENDED DECEMBER 31,
                                                                                              ------------------------
                                                                                           1997                       1998
                                                                                           ----                       ----
                                                                                                                   (RESTATED)
<S>                                                                             <C>                         <C>
    Numerator for basic and diluted loss per common share:
       Net loss...............................................................  $            (4,082)        $            (5,679)
       Preferred stock dividends..............................................               (2,808)                    (20,859)
                                                                                -------------------         -------------------
    Loss available to common stockholders.....................................  $            (6,890)        $           (26,538)
                                                                                ===================         ===================

     Denominator for basic and diluted loss per common share -- weighted
       average shares (1).....................................................           16,431,854                  25,214,000

    Loss per common share -- basic and diluted (1)............................  $             (0.42)        $             (1.05)
                                                                                ===================         ===================
</TABLE>

----------

(1)  All potentially dilutive securities, such as preferred stock subject to
     repurchase, warrants and stock options, are antidilutive for each year
     presented. Prior to May 8, 1997, ORBIMAGE was an operating division of
     Orbital, and loss per common share for the year ended December 31, 1996 was
     not considered meaningful.

(8)  SECURITIES

     As of December 31, 1997 and 1998, ORBIMAGE had available-for-sale
securities invested primarily in commercial paper with an amortized cost basis
of $11.3 million and $34.4 million, respectively. There were no differences
between the amortized cost basis of the available-for-sale securities and their
fair values.

     As of December 31, 1998, ORBIMAGE had held-to-maturity securities invested
in U.S. Treasury securities with a fair value of $25.1 million and an amortized
cost basis of $24.9 million, resulting in an unrealized gain of $0.2 million.
These securities have maturities ranging from six months to two years and are
pledged as security for repayment of interest on the senior notes. There were no
held-to-maturity securities as of December 31, 1997.

                                      F-11
<PAGE>   57

     Included in cash and cash equivalents was $8.9 million and $24.0 million of
commercial paper as of December 31, 1997 and 1998, respectively.

(9)  PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment as of December 31, 1997 and 1998 consisted of
the following (in thousands):

<TABLE>
<CAPTION>
                                                                                              DECEMBER 31,
                                                                                              ------------
                                                                                         1997              1998
                                                                                         ----              ----
<S>                                                                                    <C>               <C>
               Land..............................................................      $     213         $     213
               Ground system assets..............................................         15,985            21,450
               Furniture and equipment...........................................             --             1,293
               Leasehold improvements............................................             --               630
               Accumulated depreciation and amortization.........................         (5,144)           (7,630)
                                                                                       ---------         ---------
                         Total...................................................      $  11,054         $  15,956
                                                                                       =========         =========
</TABLE>

     Depreciation and amortization totaled $1.6 million, $1.7 million and $2.5
million for the years ended December 31, 1996, 1997 and 1998, respectively.

(10)  SATELLITES AND RELATED RIGHTS

     Satellites and related rights as of December 31, 1997 and 1998 consisted of
the following (in thousands):

<TABLE>
<CAPTION>
                                                                             DECEMBER 31,
                                                                             ------------
                                                                        1997               1998
                                                                        ----               ----
                                                                                        (RESTATED)
<S>                                                              <C>                 <C>
             In service:
               OrbView-1........................................ $       12,327      $       12,327
               Accumulated depreciation.........................        (11,513)            (12,327)
                                                                 --------------      --------------
                                                                            814                  --
               OrbView-2 License................................         64,543              64,543
               Accumulated amortization.........................         (1,434)            (10,040)
                                                                 --------------      --------------
                                                                         63,109              54,503
             Satellites in process..............................         40,303             142,206
                                                                 --------------      --------------
                       Total.................................... $      104,226      $      196,709
                                                                 ==============      ==============
</TABLE>

     Satellite depreciation and amortization totaled $2.4 million, $3.9 million
and $9.4 million for the years ended December 31, 1996, 1997 and 1998,
respectively.

(11)  INCOME TAXES

     ORBIMAGE's losses for income tax purposes for the year ended December 31,
1996 and the period from January 1, 1997 through May 7, 1997 (during which
ORBIMAGE was an operating division, and was included in the consolidated tax
return, of Orbital) were significantly greater than pre-tax financial statement
losses, primarily due to expense associated with satellites and related rights
deducted currently for income tax purposes. Prior to May 8, 1997, ORBIMAGE had a
tax-sharing arrangement with Orbital under which tax deductions for satellites
and related rights, and the associated net operating loss carryforwards,
remained with Orbital. As a result, ORBIMAGE recorded tax-sharing charges of
$2.4 million and $1.8 million for the years ended December 31, 1996 and 1997,
respectively, as a direct charge to additional paid-in capital.




                                      F-12
<PAGE>   58

     The benefit for income taxes for the years ended December 31, 1996, 1997
and 1998 consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                                                                      YEARS ENDED DECEMBER 31,
                                                                                      ------------------------
                                                                             1996               1997               1998
                                                                             ----               ----               ----
                                                                                                                (RESTATED)
<S>                                                                          <C>          <C>                <C>
           Current benefit:
             U.S. Federal...........................................           --         $          --      $          --
             State..................................................           --                    --                 --
                                                                              ---         -------------      -------------
                     Total current benefit..........................           --                    --                 --
           Deferred benefit:
             U.S. Federal...........................................           --                 1,533              2,979
             State..................................................           --                   219                307
                                                                              ---         -------------      -------------
                     Total deferred benefit.........................           --                 1,752              3,286
                                                                              ---         -------------      -------------
                     Total benefit for income taxes.................           --         $       1,752      $       3,286
                                                                              ===         =============      =============
</TABLE>

     The income tax benefit for the years ended December 31, 1996, 1997 and 1998
were different from those computed using the statutory U.S. Federal income tax
rate as follows:

<TABLE>
<CAPTION>
                                                                                  YEARS ENDED DECEMBER 31,
                                                                                  ------------------------
                                                                          1996               1997               1998
                                                                          ----               ----               ----
                                                                                                              (RESTATED)
<S>                                                                      <C>                <C>                <C>
          U.S. Federal statutory rate............................        (34.0)%            (34.0)%            (34.0)%
          Tax sharing agreement with Orbital.....................         34.0                 --                 --
          State income taxes.....................................           --                 --               (2.3)
          Other..................................................           --                4.0               (0.4)
                                                                    ----------          ---------         ----------
          Effective rate.........................................          0.0%             (30.0)%            (36.7)%
                                                                    ==========          =========         ==========
</TABLE>

     The tax effects of significant temporary differences as of December 31,
1997 and 1998 were as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                                      DECEMBER 31,
                                                                                                      ------------
                                                                                                 1997             1998
                                                                                                 ----             ----
                               Deferred tax assets:                                                            (RESTATED)
<S>                                                                                         <C>              <C>
                                  Differences in revenue recognition......................  $     14,949     $     12,162
                                  Net operating loss carryforward.........................           585            5,878
                                  Other...................................................            62              172
                                                                                            ------------     ------------
                               Deferred tax assets........................................  $     15,596     $     18,212
                                                                                            ============     ============
                               Deferred tax liabilities:
                                  Differences in the tax treatment of satellites and
                                      related rights......................................  $     26,258     $     22,008
                                                                                            ============     ============
</TABLE>

     As of December 31, 1998, ORBIMAGE had U.S. Federal net operating loss
carryforwards totaling $16.6 million (restated), which expire beginning the year
ending December 31, 2012.

(12)  SENIOR NOTES

General

     On February 25, 1998, ORBIMAGE issued 150,000 units consisting of senior
notes and 1,312,746 warrants for common stock, raising net proceeds of
approximately $144.6 million. The gross proceeds of the units offering of $150.0
million were allocated: $142.1 million (restated) to the senior notes and $7.9
million (restated) to the value of the warrants recorded as a debt discount. The
debt discount is amortized as an adjustment to interest expense over the term of
the senior notes resulting in an effective yield of approximately 13.4%
(restated). As of December 31, 1998, the senior notes had a fair value of $150.0
million as estimated by quoted market prices.

Interest

                                      F-13
<PAGE>   59

     Interest on the senior notes accrues at a rate of 11 5/8% per annum and is
payable semi-annually in arrears on March 1 and September 1. ORBIMAGE purchased
U.S. Treasury securities in an amount sufficient to pay the interest on the
senior notes for the first four periods. As of December 31, 1998, held-
to-maturity securities restricted for the payment of interest on the senior
notes totaled $24.5 million.

Mandatory Redemption

     The senior notes mature on March 1, 2005. ORBIMAGE will not be required to
make mandatory redemption or sinking fund payments with respect to the senior
notes. However, ORBIMAGE may be obligated, under certain circumstances, to make
an offer to purchase: (i) all outstanding senior notes at a redemption price of
101% of the principal amount thereof, plus accrued and unpaid interest and
liquidated damages (if any) to the date of purchase, upon a change of control,
and (ii) outstanding senior notes with a portion of the net proceeds of certain
asset sales at a redemption price of 100% of the principal amount thereof, plus
accrued and unpaid interest and liquidated damages (if any) to the date of the
purchase.

Covenants

     The indenture for the senior notes restricts, among other things,
ORBIMAGE's ability to pay dividends.

(13)  LEASE COMMITMENTS

     Aggregate minimum rental commitments under non-cancelable operating and
capital leases (primarily for office space and equipment) as of December 31,
1998 were as follows (in thousands):

<TABLE>
<CAPTION>

                                                    OPERATING             CAPITAL
                                                    ---------             -------
<S>                                                <C>                  <C>
             1999...........................       $     132            $      135
             2000...........................              11                   115
                                                   ---------            ----------
                                                   $     143                   250
                                                   =========
             Less: Interest at 12%..........                                   (26)
             Less: Current portion..........                                  (116)
                                                                        ----------
             Total..........................                            $      108
                                                                        ==========
</TABLE>

(14)  PREFERRED STOCK SUBJECT TO REPURCHASE

     ORBIMAGE has authorized 10,000,000 shares of $0.01 par value preferred
stock, of which: (a) 2,000,000 shares of the Series A preferred stock have been
authorized, of which 687,576 shares were issued and outstanding as of December
31, 1998; (b) 2,000,000 shares of the Series B preferred stock have been
authorized, none of which have been issued and (c) 2,000,000 shares of the
Series C preferred stock have been authorized, none of which have been issued.

Dividends

     The Series A preferred stock is assigned a stated value of $100 per share
and is entitled to a cumulative dividend of 12% per annum payable semi-annually
on May 1 and November 1 of each year, in cash or, in lieu thereof, payable
in-kind in shares of Series A preferred stock on the basis of 120 shares of
Series A preferred stock for each 1,000 shares of Series A preferred stock
outstanding. To date, all dividends have been paid in-kind. As of December 31,
1998, cumulative preferred stock dividends in arrears totaled 13,752 shares.
Upon mandatory conversion prior to the fourth anniversary of the issuance of any
Series A preferred stock, a Series A holder shall also receive the dividends
with respect to the Series A preferred stock that would have accrued from the
date of the mandatory conversion to the fourth anniversary of the initial
issuance of the Series A preferred stock.

Ranking

     Series A holders have certain preferences upon dividend distributions,
distributions upon liquidation or



                                      F-14
<PAGE>   60

distributions upon merger, consolidation or sale of assets over the holders of
Series B preferred stock (if and when issued), Series C preferred stock (if and
when issued), the common holders and any other class of stock ranking junior to
the Series A preferred stock.

Voting Rights

     Each Series A holder is entitled to such number (rounded to the nearest
whole number) of votes as such Series A holder would be entitled if such Series
A holder had converted its Series A preferred stock into shares of common stock.

Conversion Rights

     The Series A holders have the option, at any time, or from time to time, to
convert their Series A preferred stock into fully paid and non-assessable shares
of common stock. The number of shares of common stock issued upon such
conversion will be determined by multiplying each Series A holder's number of
Series A preferred stock by a fraction, the numerator of which is the Series A
preferred stock Stated Value and the denominator of which is a conversion price,
subject to anti-dilutive adjustments. The per share conversion price is
currently $4.17. The Series A preferred stock shall be automatically converted
into shares of common stock upon the earliest to occur of any one of the
following events:

        -   the closing, under certain circumstances, of a public offering of
            the common stock;

        -   the culmination of a 180-day period in which the average price of
            the common stock exceeds a certain level relative to the conversion
            price or

        -   the proposed sale of no less than 70% of the common stock on a fully
            diluted basis.

Change of Control

     Although not redeemable at the option of the holders, we have certain
obligations to our Series A holders upon a "change of control" as deemed in the
stock purchase agreement. If a change of control occurs before the latest of:

        -   the successful in-orbit checkout of OrbView-3,

        -   the closing of an initial public offering that meets certain
            criteria, or

        -   the end of a 180-day period in which the average price of the common
            stock exceeds a certain level relative to the conversion price of
            the Series A preferred stock,

then we must offer to purchase, subject to the rights of the holders of the
senior notes, all outstanding shares of Series A preferred stock for a purchase
price of 101% of the liquidation amount of the stock. If the change of control
occurs before the fourth anniversary of the initial 1997 sale of the Series A
preferred stock, then we must also pay each Series A holder an amount equal to
the dividends that would have accrued on such holder's shares of Series A
preferred stock from the date of the change of control through the fourth
anniversary of the initial 1997 sale of the Series A preferred stock.




                                      F-15
<PAGE>   61


The activity in the preferred stock subject to repurchase was as follows for the
years ended December 31, 1997 and 1998 (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                                 SHARES                 AMOUNT
                                                                                                 ------                 ------
<S>                                                                                             <C>              <C>
                        BALANCE AS OF DECEMBER 31, 1996................................                    -       $            -
                              Shares issued in private offering, net.                                372,705               33,547
                              Preferred stock dividends paid in shares.................               20,182                2,018
                              Accrual of preferred stock dividends.....................                    -                  790
                                                                                          ------------------       --------------

                        BALANCE AS OF DECEMBER 31, 1997................................              392,887               36,355
                              Shares issued in private offerings, net                                227,295               21,275
                              Deemed dividend on issuance of preferred stock subject
                                to repurchase....................................                          -                9,975
                              Preferred stock dividends paid in shares.................               67,394                8,906
                              Accrual of preferred stock dividends.....................                    -                1,978
                                                                                          ------------------       --------------

                        BALANCE AS OF DECEMBER 31, 1998 (RESTATED).....................              687,576       $       78,489
                                                                                          ==================       ==============
</TABLE>

There was no preferred stock subject to repurchase prior to December 31, 1996.

(15)  COMMON STOCK WARRANTS

     In connection with the units offering on February 25, 1998, ORBIMAGE issued
150,000 warrants, which entitle the holders to acquire 1,312,746 shares of
ORBIMAGE's common stock. The exercise price is $0.01 per share. Each warrant
entitles the holder to buy 8.75164 shares of common stock. The warrants are
exercisable at any time on or after February 25, 1999, or on the occurrence of a
Company change in control, which ever happens first. The warrants expire on
March 1, 2005.

(16)  STOCK OPTION PLAN

     Through ORBIMAGE's stock option plan (the "Plan"), ORBIMAGE may issue to
its employees, Orbital's employees, consultants or advisors incentive or
non-qualified options to purchase up to 4,800,000 shares of ORBIMAGE's common
stock. Under the Plan, stock options may not be granted with an exercise price
less than 85% of the stock's fair market value at the date of the grant as
determined by the Board of Directors. ORBIMAGE's options generally vest in
one-third increments over a three-year period. The following table summarizes
the activity relating to the Plan for the years ended December 31, 1996, 1997
and 1998:

<TABLE>
<CAPTION>
                                                                                                WEIGHTED
                                                     NUMBER OF           OPTION PRICE           AVERAGE            OUTSTANDING AND
                                                       SHARES             PER SHARE          EXERCISE PRICE          EXERCISABLE
                                                       ------             ---------          --------------          -----------
<S>                                                   <C>            <C>                   <C>                    <C>
OUTSTANDING AS OF DECEMBER 31, 1995..........                --                   --                   --                        --
    Granted..................................         1,408,000      $          3.60          $      3.60
    Exercised................................                --                   --                   --
    Canceled or expired......................                --                   --                   --
                                                 --------------      ---------------       --------------         -----------------
OUTSTANDING AS OF DECEMBER 31, 1996..........         1,408,000                 3.60                 3.60                   352,000
    Granted..................................           498,000                 4.17                 4.17
    Exercised................................           (14,000)                3.60                 3.60
    Canceled or expired......................            (8,000)                3.60                 3.60
                                                 --------------      ---------------       --------------         -----------------
OUTSTANDING AS OF DECEMBER 31, 1997..........         1,884,000            3.60-4.17                 3.75                   707,250
    Granted..................................           761,500            4.17-5.10                 4.55
    Exercised................................                --                   --                  --
    Canceled or expired......................            (9,000)           4.17-5.10                 4.69
                                                 --------------      ---------------       --------------         -----------------
OUTSTANDING AS OF DECEMBER 31, 1998..........         2,636,500      $     3.60-5.10       $         3.98                 1,181,451
                                                 ==============      ===============       ==============         =================
</TABLE>

                                      F-16
<PAGE>   62

     As of December 31, 1998, the weighted average remaining contractual life of
the options outstanding was 8.4 years.

     ORBIMAGE uses the minimum value method for options issued to employees and
directors to determine the pro forma impact to its net loss. The model utilizes
certain information, such as the interest rate on a risk-free security maturing
generally at the same time as the option being valued, and requires certain
assumptions, such as the expected amount of time an option will be outstanding
until it is exercised or it expires, to calculate the weighted-average fair
value per share of stock options granted. The assumptions used to determine the
pro forma impact for the years ended December 31, 1996, 1997 and 1998 were as
follows:

<TABLE>
<CAPTION>
                                                                                        YEARS ENDED DECEMBER 31,
                                                                                        ------------------------
                                                                            1996                  1997                  1998
                                                                            ----                  ----                  ----
<S>                                                                   <C>                   <C>                   <C>
                      Volatility..................................            0.0%                  0.0%                  0.0%
                      Dividend yield..............................            0.0%                  0.0%                  0.0%
                      Risk-free interest rate.....................            5.8%                  6.0%                  5.5%
                      Expected average life.......................      4.5 years             4.5 years             6.0 years
                      Weighted average exercise price per share...     $     3.60            $     3.75            $     3.98
</TABLE>

     ORBIMAGE previously estimated the impact of employee and director stock
options based upon an assumed volatility of 30%. Prior year amounts have been
adjusted to reflect the use of the minimum value method. The fair value of the
options granted to employees and directors during the years ended December 31,
1996, 1997 and 1998 were estimated at $0.82 per share, $0.97 per share and $1.26
per share, respectively.

     Had ORBIMAGE determined compensation expense based on the fair value at the
grant date for its stock options in accordance with the fair value method
prescribed by SFAS 123, ORBIMAGE's pro forma net loss and pro forma basic loss
per common share would have been approximately $4.4 million and $0.44,
respectively, for the year ended December 31, 1997 and $6.3 million (restated)
and $1.08 (restated), respectively, for the year ended December 31, 1998. Pro
forma diluted loss per common share for the years ended December 31, 1997 and
1998 would be the same as the pro forma basic loss per share shown above since
all potentially dilutive securities are antidilutive. Had ORBIMAGE determined
compensation expense based on the fair value at the grant date for its stock
options in accordance with the fair value method prescribed by SFAS 123,
ORBIMAGE's net loss would have been approximately $5.3 million for the year
ended December 31, 1996. Prior to May 8, 1997, ORBIMAGE was an operating
division of Orbital, and pro forma loss per common share for the year ended
December 31, 1996 was not considered meaningful. Pro forma net loss as stated
above is not necessarily representative of the effects of reported net income
(loss) for future years due to, among other things, the vesting period of the
stock options and the fair value of the additional stock options in future
years.

(17)  SEGMENT INFORMATION

     In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information, which
establishes reporting standards for a company's operating segments and related
disclosures about its products, services, geographic areas and major customers.
ORBIMAGE adopted SFAS No. 131 effective January 1, 1998. SFAS No. 131 requires
comparative segment information; however, ORBIMAGE operated as a single segment
for the years ended December 31, 1996, 1997 and 1998.

ORBIMAGE recognized revenues related to contracts with the National Aeronautics
and Space Administration of approximately $0.8 million, $2.0 million and $9.6
million for the years ended December 31, 1996, 1997 and 1998, respectively,
representing approximately 76%, 95% and 82%, respectively, of total revenues
recognized during those years.




                                      F-17
<PAGE>   63

                                  EXHIBIT INDEX

(a)  EXHIBITS

<TABLE>
<CAPTION>
        Exhibit
        Number                                        Description
        --------    -----------------------------------------------------------------------------
<S>                 <C>
          3.1+      Second Amended and Restated Certificate of Incorporation of
                    the Company.
          3.2+      Bylaws of the Company.
          4.2*      Specimen of the Company's common stock certificate.
          4.3+      Indenture dated as of February 25, 1998, by and among the
                    Company and Marine Midland Bank, as Trustee, with respect to
                    the 11 5/8% Senior Notes due 2005 of the Company.
          4.4+      Warrant Agreement dated as of February 25, 1998, by and
                    between the Company and Marine Midland Bank as warrant
                    agent.
          4.5       Specimen of the Company's warrant certificate (included in
                    Exhibit 4.4).
          4.6+      Warrant Registration Rights Agreement, dated as of February
                    25, 1998 by and among the Company, Bear, Stearns & Co. Inc.,
                    Merrill Lynch & Co., and NationsBanc Montgomery Securities
                    LLC as the initial purchasers.
          4.7+      Pledge Agreement dated February 25, 1998, by and between the
                    Company and Marine Midland Bank as collateral agent.
          4.8+      Amended and Restated Stock Purchase Agreement dated as of
                    February 25, 1998, by and among the Company, Orbital
                    Sciences Corporation and the holders of Series A preferred
                    stock named therein.
          4.9+      Amended and Restated Stockholders' Agreement dated as of
                    February 25, 1998, by and among the Company, Orbital
                    Sciences Corporation and the holders of Series A preferred
                    stock named therein.
          10.1+     Purchase Agreement, dated as of February 20, 1998 by and
                    among the Company, Bear, Stearns & Co. Inc., Merrill Lynch &
                    Co., and NationsBanc Montgomery Securities LLC as the
                    Initial Purchasers.
         10.2+**    Amended and Restated Procurement Agreement dated February
                    26, 1998 by and between the Company and Orbital.
          10.3+     Amended and Restated Administrative Services Agreement dated
                    December 31, 1997 by and between the Company and Orbital.
          10.4+     Non-Competition and Teaming Agreement dated as of May 8,
                    1997 by and between the Company and Orbital.
          10.5+     OrbView-2 License Agreement dated as of May 8, 1997 by and
                    between the Company and Orbital.
         10.6+**    Distributor Licensee Agreement dated as of January 31, 1997,
                    as amended from time to time, by and between the Company
                    and Samsung Aerospace Industries, Ltd.
          10.7+     Form of Indemnification Agreement between the Company and
                    its directors and officers.
          10.8+     ORBIMAGE 1996 Stock Option Plan.
          10.9+     Agreement between National Aeronautics and Space
                    Administration and Orbital Sciences Corporation, dated March
                    29, 1991, as amended.
          10.10*    RadarSat-2 Master Agreement dated as of December 31, 1998 by
                    and among Orbital Sciences Corporation, MacDonald, Dettwiler
                    and Associates Ltd. and Orbital Imaging Corporation.
          10.11*    Hyperspectral Imaging Data Agreement dated December 31, 1998
                    by and between Orbital Sciences Corporation and Orbital
                    Imagining Corporation.
          10.12*    Amendment No. 1 to Amended and Restated Orbimage System
                    Procurement Agreement dated as of December 31, 1998 by and
                    between Orbital Sciences Corporation and Orbital Imaging
                    Corporation.
          11        Statement re Computation of Loss Per Common Share (included
                    in Notes to Financial Statements).
          21        Subsidiaries of the Registrant
          27        Financial Data Schedule.
</TABLE>

----------

+   Incorporated by reference to the identically numbered exhibit to the
    Company's Registration Statement on Form S-4, as amended (Reg. No.
    333-49583).

*   Incorporated by reference to the identically numbered exhibit to the
    Company's Registration Statement on Form S-1, as amended (Reg. No.
    333-67697).

**  Confidential treatment was granted pursuant to Rule 406 under the Securities
    Act of 1933, as amended, in


<PAGE>   64

    connection with the Company's registration statement on Form S-4, as amended
    (Reg. No. 333-49583). Certain portions of the exhibit have been omitted. The
    omitted portions of such exhibits have been separately filed with the
    Securities and Exchange Commission.

     (b)    FINANCIAL STATEMENT SCHEDULES

     All schedules have been omitted because they are not applicable or not
required or the required information is included in the financial statements or
notes thereto.