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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10-K
                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934


                           FOR THE FISCAL YEAR ENDED
                               DECEMBER 31, 1999


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


<TABLE>
   <S>                                                     <C>
                   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)
</TABLE>


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. [ ]

  Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 25,214,000 shares of common
stock outstanding as of March 30, 2000.


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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 Form 10-K 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
Consolidated Financial Statements included in Item 14.





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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 was 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
of the assets and liabilities of the operating division. Prior to May 8, 1997,
ORBIMAGE was an operating division of Orbital. Orbital now owns approximately
57.6% of ORBIMAGE (52.1% on a fully diluted basis) and has the ability to
exercise significant influence, but not control, over ORBIMAGE's operating and
financial policies.

            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.  In
1998, we acquired a satellite image processing company which expanded our
capibility to provide sophisticated image processing software, engineering
analysis and in-house image production.

            In 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 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 one of the only satellites of its
kind providing daily color images of the entire Earth's surface. We expect to
launch two additional satellites, OrbView-4 and OrbView-3, during the first
quarter of 2001 and the second quarter of 2001, 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.

            In 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
launched in the fourth quarter of 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") medium-resolution radar imaging satellite
that was launched in 1995. We expect RadarSat-2 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. The market for remote sensing 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.

            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 majority 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 low- and medium-resolution 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 (i.e., 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 our high-resolution satellites will be able to image
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). 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 commitments for additional post-launch
               imagery purchases of up to $10 million (including options); and

            -  RadarSat-2 will be partially paid for under a $140 million
               contract between MacDonald, Dettwiler and Associates Ltd., a
               subsidiary of Orbital ("MDA"), and CSA, all of which will be
               funded prior to launch.

            Direct customer sales. We have 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 has committed to purchase $3
million of imagery, services and compatibility upgrades to ORBIMAGE's ground
systems.

            International distributors. We are developing relationships with an
international network of commercial distributors while also dealing directly
with potential foreign national security government customers. ORBIMAGE has
entered into exclusive commercial regional distributorship agreements for the
distribution of OrbView-3 and OrbView-4 images in Europe, Japan, Korea,
Mexico, Central America and the Caribbean.

            Value-added resellers.  We are developing various value-added
applications for imagery products. For example, we provide our proprietary
fish-finding maps using OrbView-2 imagery to approximately 130 commercial
fishing vessels. We have also entered into agreements with approximately 40
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, oil and gas exploration, agriculture
forecasting 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.

BUSINESS STRATEGY

            The key elements of our business strategy include:





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            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' existing and planned 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 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 value-added resellers 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 also 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
satellite and aerial sources. The digital catalogue currently includes
high-resolution aerial imagery of approximately 20 major North American
metropolitan areas ("OrbView Cities"), as well as 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 OrbView Cities
database with high-resolution aerial imagery products, and we expect to have
imagery of 150 major U.S. and international metropolitan areas available by the
end of 2000. We can deliver imagery from our digital catalogue to customers over
the Internet or on CD.

            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

            Currently, we offer low- and medium-resolution satellite-based
imagery products, as well as high-resolution aerial imagery products. In
addition, once the OrbView-3, OrbView-4 and RadarSat-2 are operational, 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 is currently providing 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.

            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 also offers licenses
to university





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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 a deep ocean fishing map product targeted at larger high
seas fishing fleets, and are planning to offer a coastal product targeted at
sport and commercial fishing customers.

            High spatial resolution optical and radar imagery.  High-resolution
optical imagery from our OrbView-3 and OrbView-4 satellites will enable 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 our orbimage.com on-line digital
catalogue, we believe that military and intelligence customers will also 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 land
uses.

            Hyperspectral imagery.  Hyperspectral imagery from OrbView-4 will
provide enhanced color and enhanced infrared imagery for additional
applications, including environmental analysis and analysis of the presence of
minerals, which 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 and ship navigation. RadarSat-2 will have unique
multipolarization capabilities that enable it to image vertical as well as
horizontal features over land or water.

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 primarily by aerial photography or
government-operated satellite imagery systems.

            U.S. and foreign national security market.  The U.S. government has
publicly stated that demand for high-





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resolution imagery, especially for use by tactical military commanders in the
field, far exceeds the supply currently provided by its dedicated surveillance
satellites. 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 radar imagery from RadarSat-2, 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 $33
million contract (with up to $8 million in data purchases and contract options)
to acquire real-time hyperspectral imagery from OrbView-4. In 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 committed to purchase $3 million
of imagery, services and compatibility upgrades to ORBIMAGE's ground systems.
The Canadian Navy uses imagery from CSA's RadarSat-1 satellite to detect the
presence of other ships through wave analysis and to monitor the location and
movement of icebergs 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.

            High-resolution 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 turnkey 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 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 contracts with regional
distributors that provide significant minimum imagery purchase commitments. The
contract commitments made by our current regional distributors 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 our orbimage.com digital catalogue in various





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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 identify this boundary in a
               timely fashion. Based on customer feedback, our fishing maps
               significantly reduce search time and related hardware and
               operating costs, and are more accurate and cover a broader area
               than existing alternatives.

               Our customers for fishing maps include 28 fishing companies
               comprising approximately 130 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 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
               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 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





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               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 to 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 activities such 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-2's ability to measure the edge of, and track the
               movement of, major ice flows will be valuable to oil and gas
               companies in 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-1, 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 has made a multiyear commitment 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 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 field in order to analyze the effects of glaciers and global climate
changes in Antarctica. We believe the imagery available from our OrbView-3 and
OrbView-4  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





                                       10
<PAGE>   11
            -  the orbimage.com 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. ORBIMAGE has entered into
exclusive commercial regional distributorship agreements for the distribution of
OrbView-3 and OrbView-4 imagery in Europe, Japan, Korea, Mexico, Central
America and the Caribbean.

            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 imagery into complex maps and
other types of enhanced products for specific markets or applications. For
example, we provide our proprietary fish-finding maps using OrbView-2 imagery to
approximately 130 commercial fishing vessels. We have also entered into
agreements with approximately 40 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.com.  We also market imagery through our on-line
orbimage.com digital catalogue. Orbimage.com is a comprehensive, digital-imagery
catalogue of imagery derived from our satellites and other satellite and aerial
sources, which allows us to deliver imagery to customers over the Internet, on
CD or on computer tape. Through strategic alliances with existing imaging
satellite operators, aerial photography firms and 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. Currently, orbimage.com offers imagery of
approximately 20 major North American metropolitan areas through our OrbView
Cities program. OrbView Cities is currently being expanded to include
approximately 150 major U.S. and international metropolitan areas by the end of
2000. In addition to OrbView Cities, orbimage.com also contains digital color
imagery of the earth collected by OrbView-2.

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.





                                       11
<PAGE>   12
            -  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 containing minimum purchase commitments for
               OrbView-3 and OrbView-4 imagery, as well as for the purchase of
               ground stations, valued at approximately $306 million (including
               options). 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. Under this contract, NIMA
               has committed to purchase $3 million of imagery, services and
               compatibility upgrades to ORBIMAGE's ground system. To further
               facilitate market penetration, we have developed our own
               value-added products using OrbView-2 imagery and are working with
               a number of value-added resellers 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). 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 and OrbView-4 and MDA will use in 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.

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 data;

            -  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 that
the 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. The
OrbView-1 and OrbView-2 satellites are, and OrbView-3





                                       12
<PAGE>   13
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 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            Weather,            Weather, Fishing,   Mapping, Agriculture,    Mapping, Agriculture,   Mapping, Agriculture,
 Applications         Scientific          Agricultural,       Oil and Gas, National    Oil and Gas,            Oil and Gas,
                      Research            Scientific          Security                 Forestry, Mining,       Forestry, Mining,
                                          Research                                     National Security       National Security

 Best Ground          10 km               1 km to 4 km        1 m Panchromatic         1 m Panchromatic        3 m to 100 m
 Resolution           Panchromatic        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 and   20 km to 500 km
                                                              Multispectral            Multispectral

 Image Area           N.A.                N.A.                64 km(2) Panchromatic    5 km Hyperspectral      400 km(2) to 250,000
                                                              and Multispectral        64 km(2) Panchromatic   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 (3)         7  1/2 Years        5 Years                  5 Years                 7 Years
</TABLE>

----------

(1)              The combined revisit time 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)              OrbView-1 has significantly exceeded its initial three-year
                 design life.

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.

ORBVIEW-2 SATELLITE

            The OrbView-2 satellite was launched in August 1997 and we believe
it is one of the only operational satellites 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 and controls the satellite under a license from
Orbital (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. OrbView-4 will also provide hyperspectral capability. 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





                                       13
<PAGE>   14
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 system monitors the OrbView
satellites while they are in orbit and commands 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 central 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 archiving 6,500 high-resolution OrbView satellite images per day,
as well as generating a variety of geospatial products for resale.

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 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 Low/Medium-Resolution Satellite Imagery Providers.
OrbView-1 and OrbView-2 have no existing direct competitors for their daily
panchromatic and multispectral imagery. Spot 4 (operated by Spot Image S.A.)
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:

            -  Space Imaging operates the Landsat 4 and Landsat 5 satellites,
               which provide coverage in seven spectral bands covering the
               visible to infrared parts of the spectrum. The best resolution
               of these satellites is 30 meters in  the multispectral imaging
               mode;

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

            -  RadarSat-1, operated by CSA, provides radar imagery with a
               resolution that varies between 10 and 100 meters. We expect
               RadarSat-1 to be phased out based on its seven year design life
               when RadarSat-2 is placed into service in 2003;

            -  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.





                                       14
<PAGE>   15
            We view these providers as indirect competitors to our
high-resolution OrbView satellite imagery in certain markets.

            Current and Future High-Resolution Satellite Competitors.  The
high-resolution OrbView satellites and RadarSat-2 are expected to face
significant competition in the satellite imagery market from two U.S. satellite
competitors who have launched or are planning to launch high-resolution imaging
satellites that will have one-meter panchromatic and four-meter multispectral
capability:

            -  Space Imaging launched its high-resolution satellite in
               September 1999; and

            -  EarthWatch is expected to launch its first high-resolution
               satellite in mid-2000.


            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 has
launched a satellite that provides imagery similar to that of OrbView-2, and the
European Space Agency has announced that it plans to launch the Envisat
satellite in mid-2000 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. Recently,
Rosvooruzhenie, a Russian company, in partnership with the Russian Defense
Ministry, has announced plans to launch a high-resolution (one-meter) satellite
in late 2000.


BACKLOG

            ORBIMAGE's contract backlog of firm commitments at December 31,
1998 and 1999 was approximately $54 million and $116 million, respectively. As
of December 31, 1998 and 1999, 72% and 25%, 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, 1999 of approximately $175 million.

EMPLOYEES

            As of March 20, 2000, ORBIMAGE had 126 full-time permanent
employees. None of our employees is represented by a collective bargaining
agreement.

ITEM 2.  PROPERTIES

            ORBIMAGE currently leases approximately 23,000 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 a party to an administrative appeal regarding the terms
of its OrbView-4 hyperspectral license. For a full description of this
proceeding, please see "GOVERNMENT REGULATION - FAILURE TO OBTAIN REGULATORY
APPROVAL COULD RESULT IN SERVICE INTERRUPTIONS" under "OUTLOOK: ISSUES AND
UNCERTAINTIES."

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





                                       15
<PAGE>   16
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, 1999, there were 25,214,000 shares of common stock
issued and outstanding, and 23,132,961 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, 1999, 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, ORBIMAGE has sold and
issued the following securities on the dates and for the consideration stated
below:

            -  On April 19, 1999, ORBIMAGE offered and sold $75 million of 11
               5/8% senior notes due 2005 in the principal amount of $1,000, in
               a private offering exempt from registration pursuant to Rule
               144A. The initial purchasers were Bear, Stearns & Co. Inc. and
               Merrill Lynch & Co., who subsequently resold the notes to
               "qualified institutional buyers" (as defined in Rule 144A). On
               June 25, 1999, ORBIMAGE filed an exchange offer registration
               statement offering to exchange a substantially similar 11 5/8%
               Series D senior note for each outstanding note held by the
               qualified institutional buyers. The proceeds from this offering
               were used to purchase the RadarSat-2 License, for working
               capital and for general corporate purposes.

            -  On February 25, 1998, ORBIMAGE 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 ORBIMAGE's common stock. On July 24, 1998, ORBIMAGE
               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, ORBIMAGE 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, ORBIMAGE 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, ORBIMAGE 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."





                                       17
<PAGE>   18
            -  On May 7, 1997, ORBIMAGE 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.





                                       18
<PAGE>   19
ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

            The following selected consolidated financial data of ORBIMAGE as
of and for the years ended December 31, 1995, 1996, 1997, 1998 and 1999 have
been derived from the audited consolidated financial statements of ORBIMAGE.
The selected historical consolidated 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 consolidated financial
statements and notes thereto, included elsewhere in this Report.
<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                       ------------------------------------------------------------------------
                                           1995           1996           1997          1998            1999
                                           ----           ----           ----          ----            ----
                                                           (IN THOUSANDS, EXCEPT SHARE DATA)
CONSOLIDATED STATEMENT OF OPERATIONS                                                (RESTATED)
 DATA:                                                                                  (1)
<S>                                        <C>            <C>        <C>            <C>               <C>
 Revenues  . . . . . . . . . . . . .       $ 4,567        $ 1,055       $ 2,062        $ 11,663       $ 18,587
 Direct expenses . . . . . . . . . .         7,998          4,320         6,312          15,215         21,212
                                           -------        -------       -------        --------       --------
 Gross loss  . . . . . . . . . . . .        (3,431)        (3,265)       (4,250)         (3,552)        (2,625)
 Selling, general and administrative
   expenses  . . . . . . . . . . . .         2,371          1,630         2,845           7,328         10,362
                                           -------        -------       -------        --------       --------
 Loss from operations  . . . . . . .        (5,802)        (4,895)       (7,095)        (10,880)       (12,987)
 Interest income . . . . . . . . . .            --             --         1,261           1,915          2,636
                                           -------        -------       -------        --------       --------
 Loss before benefit for income             (5,802)        (4,895)       (5,834)         (8,965)       (10,351)
   taxes . . . . . . . . . . . . . .
 Benefit for income taxes  . . . . .            --             --        (1,752)         (3,286)        (3,629)
                                           -------        -------       -------        --------       --------
 Net loss  . . . . . . . . . . . . .       $(5,802)       $(4,895)      $(4,082)       $ (5,679)      $ (6,722)
                                           =======        =======       =======        ========       ========
Loss per common share -- basic and
 diluted (2) . . . . . . . . . . . .            --             --       $ (0.42)       $  (1.05)      $  (0.79)
OTHER DATA:
Capital expenditures  . . . . . . .        $18,989        $12,617       $49,029        $108,533       $ 92,388
</TABLE>

<TABLE>
<CAPTION>
                                                                    DECEMBER 31,
                                      -------------------------------------------------------------------------

                                           1995           1996           1997          1998            1999
                                           ----           ----           ----          ----            ----
                                                                   (IN THOUSANDS)
CONSOLIDATED BALANCE SHEET DATA:                                                   (RESTATED) (1)
<S>                                      <C>            <C>            <C>         <C>              <C>
Cash, cash equivalents and
  available-for-sale securities..        $     --       $     --       $  22,220     $   59,483     $ 37,262
Total assets.....................          63,423         72,328         137,749        308,078      359,838
Long-term obligations (3)........              --             --              --        142,622      214,575
Preferred stock subject to
  repurchase.....................              --             --          36,355         78,489       91,563
Stockholders' equity.............          19,956         26,279          49,005         33,964       14,671
</TABLE>
----------


(1) 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.  See Note (3) of the Notes
    to Consolidated 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,
    1995 and 1996 were not considered meaningful.

(3) Net of unamortized debt discount, estimated to be $7.4 million (restated)
    and $10.4 million as of December 31, 1998 and 1999, respectively.





                                       19
<PAGE>   20
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

OVERVIEW

   Orbital Imaging Corporation ("ORBIMAGE") operates and is further developing
a fleet of satellites that collect, process and distribute digital imagery of
the Earth's surface, atmosphere and weather conditions. ORBIMAGE has entered
into a procurement agreement with Orbital Sciences Corporation ("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 a license to operate and control the OrbView-2 satellite
(the "OrbView-2 License"). Under a license agreement with Orbital and its
Canadian subsidiary, MacDonald, Dettwiler and Associates Ltd. ("MDA"),
ORBIMAGE has acquired the exclusive worldwide rights to market and sell imagery
from the RadarSat-2 satellite (the "RadarSat-2 License") and has in turn
granted these rights to MDA. MDA will own and operate RadarSat-2 and provide
operations, data reception, processing, archiving, marketing and distribution
services to ORBIMAGE. RadarSat International, Inc. ("RSI"), a wholly owned
subsidiary of MDA, has also appointed ORBIMAGE as a non-exclusive distributor
of RadarSat-1 satellite imagery in the United States.  Orbital also provides
certain administrative services to ORBIMAGE such as accounting, tax, human
resources and benefit-related services.

   ORBIMAGE expects to launch OrbView-4 in the first quarter of 2001 and
OrbView-3 in the second quarter of 2001. ORBIMAGE expects that RadarSat-2 will
be launched in the fourth quarter of 2002.

   Business Acquisition.  In April 1998, ORBIMAGE acquired substantially all of
the assets of 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.

   Revenues.  ORBIMAGE's principal source of revenue is the sale of satellite
imagery to customers, value-added resellers and distributors and sales of
ground stations to distributors. ORBIMAGE has entered into several long-term
sales contracts to provide imagery products and, in certain circumstances,
receives contractual payments in advance of product delivery. ORBIMAGE
initially records deferred revenue for the total amount of the advance payments
under these contracts and recognizes revenue over the contractual delivery
period. As of December 31, 1999, ORBIMAGE had approximately $24.6 million of
deferred revenue related primarily to advance payments for OrbView-2 imagery.
In 1999, ORBIMAGE commenced construction of two OrbView-3 and OrbView-4
distributor ground stations. Revenue on these contracts is recognized using
the percentage-of-completion method of accounting.

   Direct Expenses.  Direct expenses include the costs of operating and
depreciating (i) the OrbView-1 satellite, (ii) the OrbView-2 License,  (iii)
the related ground systems, and (iv) construction costs related to the OrbView-3
and OrbView-4 distributor-owned ground stations. Satellite operating costs
primarily consist of labor expenses.

   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 seven and one-half year 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 lives 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.  In April 1999, ORBIMAGE issued $75 million in principal
amount of 11 5/8% senior notes due 2005 (the "1999 Offering"). In February
1998, ORBIMAGE issued $150 million of units (the "1998 Offering"), each unit
consisting 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. Interest on the
senior notes, together with amortization of debt discount, is capitalized as
the historical costs of assets under construction and will be amortized over
the assets' useful lives when placed in service. ORBIMAGE expects to capitalize
a significant portion of its interest expense through 2001 as it completes
construction of the OrbView-3 and OrbView-4 satellites and makes payments due





                                       20
<PAGE>   21
under the RadarSat-2 License. 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.

    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 Consolidated Financial Statements.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

   Revenues.  Revenues for the years ended December 31, 1997, 1998 and 1999
were approximately $2.1 million, $11.7 million and $18.6 million, respectively.
The increase in 1999 revenue is primarily due to the construction of OrbView-3
and OrbView-4 distributor ground stations, which generated $4.5 million in
revenue. 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 years ended December 31, 1998 and 1999 also included $1.6 million
and $3.0 million, respectively, in sales generated from the image processing
business acquired from TRIFID in 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.

   Direct expenses.  Direct expenses for the years ended December 31, 1997,
1998 and 1999 were approximately $6.3 million, $15.2 million and $21.2 million,
respectively. The increase in 1999 direct expenses is primarily due to the
construction costs of OrbView-3 and OrbView-4 distributor-owned ground
stations, which were $4.2 million. 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. 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 $2.8 million, $7.3 million (restated) and $10.4 million for the
years ended December 31, 1997, 1998 and 1999, respectively. The increases in
SG&A expenses in 1998 and 1999 were primarily attributable to the increase in
salaries and related benefits as ORBIMAGE expanded its operations and
workforce.

    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 senior notes, net
of applicable capitalized interest. Net interest income for the years ended
December 31, 1998 and 1999 was approximately $1.9 million (restated) and $2.6
million, respectively, which is net of interest expense of approximately $4.8
million (restated) and $1.6 million. Net interest income was approximately $1.3
million for the year ended December 31, 1997, and there was no interest expense
in 1997. For the years ended December 31, 1998 and 1999, capitalized interest in
connection with the construction of the OrbView-3, OrbView-4 and RadarSat-2
satellites and related ground system totaled $10.9 million and $23.7 million,
respectively. Capitalized interest for the year ended December 31, 1999
increased due to the completion of the 1999 Offering and larger balances of
assets that are under construction.

   Benefit for Income Taxes.  ORBIMAGE recorded income tax benefits of
approximately $3.3 million and $3.6 million for the years ended December 31,
1998 and 1999, respectively. 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, 1999, ORBIMAGE had approximately $37.3 million of cash
and cash equivalents and available-for-sale securities.


   In October 1999, ORBIMAGE entered into a stock purchase agreement with
Orbital, which provided for Orbital to purchase up to 2,500,000 shares of common
stock for a price of $10 per share in minimum $5 million increments whenever
ORBIMAGE's aggregate balance of cash, cash equivalents and available-for-sale
securities falls below $10 million. In March 2000 in connection with the
negotiation of certain modifications to our procurement agreement with Orbital
(described below), we amended the stock purchase agreement to reduce the number
of shares


                                       21
<PAGE>   22
required to be purchased by Orbital to 1,250,000 shares from 2,500,000 shares,
although that number may increase in the event of certain delays in the launch
of OrbView-4.

   On April 22, 1999, ORBIMAGE completed the 1999 Offering, raising gross
proceeds of $75 million. On February 25, 1998, ORBIMAGE completed the 1998
Offering, raising gross proceeds of $150 million. In connection with the 1998
and 1999 Offerings, ORBIMAGE purchased approximately $32.9 million of U.S.
Treasury securities to fund the interest on the senior notes through March 1,
2000. The total effective interest rate on the senior notes, including the
discount attributable to the value of the warrants and issuance expenses, is
approximately 13.4% (restated). Concurrent with the 1998 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 investment to approximately $91.5 million.

   Operating activities provided cash of approximately $6.3 million and $9.9
million (restated) during the years ended December 31, 1997 and 1998,
respectively, and used cash of $10.5 million during the year ended December 31,
1999. The decrease in operating cash flow from 1998 to 1999 is primarily
attributable to a decrease in the change in accounts payable and accrued
expenses of $15.1 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.

   Investing activities used cash of approximately $60.4 million, $161.2
million and $77.7 million for the years ended December 31, 1997, 1998 and 1999,
respectively. The increase in the use of cash in 1997, 1998 and 1999 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,
1998 and 1999, ORBIMAGE invested the proceeds from the financings in various
short- and long-term investments, consisting primarily of commercial paper and
U.S. Treasury securities. The investments were used 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, 1997, 1998 and 1999
were approximately $49 million, $108.5 million and $92.4 million, respectively,
and consisted primarily of costs relating to the acquisition of the OrbView-3
and OrbView-4 satellites and the related U.S. ground system. 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 $311.3 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, 1999, ORBIMAGE had
spent approximately $265 million. ORBIMAGE expects to spend approximately $22.5
million on capital expenditures through the third quarter of 2001, the projected
deployment date of OrbView-3, and an additional $24 million in post-launch,
on-orbit incentives.

   ORBIMAGE's acquisition of the RadarSat-2 License will cost $60 million, of
which $30 million was paid in 1999. Approximately $140 million of RadarSat-2's
$200 million estimated total cost will be funded by the Canadian Space Agency
("CSA") through a contract with Orbital and MDA. The remaining payments will
not exceed $15 million in 2001; $10 million in 2002; and $5 million upon the
successful on-orbit checkout of RadarSat-2. ORBIMAGE expects to use cash on
hand, cash from operations and also may consider raising additional capital to
fund RadarSat-2 License payments.


   ORBIMAGE expects to fund its future capital expenditures and negative cash
flows from operating activities using cash on hand and the proceeds from
Orbital's additional $12.5 million equity commitment. ORBIMAGE believes that,
with Orbital's additional investment, it currently has sufficient resources to
meet its requirements through the fourth quarter of 2000. ORBIMAGE does not
expect to generate net positive cash flow from operations sufficient to fund
both operations and capital expenditures until the third quarter of 2001, when
both OrbView-3 and OrbView-4 are currently expected to be operational. We are
currently pursuing other financing sources. Further, additional funding may be
necessary in the event of any additional OrbView-3 or OrbView-4





                                       22
<PAGE>   23
launch delays, cost increases or unanticipated expenses. ORBIMAGE cannot
assure you that such additional financing or funding 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 a timely launch of one of the OrbView
high-resolution satellites and the continued expansion of commercial services,
adequate customer acceptance of ORBIMAGE's products and services and numerous
other factors.

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 launch
dates, sufficiency of and ability to raise capital and 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.





                                       23
<PAGE>   24
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 preliminary 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.

     Our business plan depends upon:

-     the timely construction and deployment of OrbView-3, OrbView-4 and
      RadarSat-2 and development of the related ground systems; and

-     our ability to develop a customer base, distribution channels and
      value-added enhancements for our imagery products and services.

  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 cause negative cash flow until we establish an
adequate revenue-generating customer base. We had an accumulated deficit of
approximately $72.9 million through December 31, 1999. We expect losses to
continue through the second quarter of 2001, 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 third quarter of 2001. 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.

  ORBIMAGE expects to fund its future capital expenditures and negative cash
flows from operating activities using cash on hand and the proceeds from
Orbital's additional $12.5 million equity commitment. ORBIMAGE believes that,
with Orbital's additional investment, it currently has sufficient resources to
meet its requirements through the fourth quarter of 2000. ORBIMAGE does not
expect to generate net positive cash flow from operations sufficient to fund
both operations and capital expenditures until the third quarter of 2001, when
both OrbView-3 and OrbView-4 are currently expected to be operational. We are
currently pursuing other financing sources. Further, additional funding may be
necessary in the event of any additional OrbView-3 or OrbView-4 launch delays,
cost increases or unanticipated expenses. ORBIMAGE cannot assure you that such
additional financing or funding will be available on favorable terms or on a
timely basis, if at all.

  In October 1999, we entered into a stock purchase agreement with Orbital,
which provided for Orbital to purchase up to 2,500,000 shares of common stock
for a price of $10 per share. In March 2000 in connection with the negotiation
of certain modifications to our procurement agreement with Orbital, we amended
the stock purchase agreement to reduce the number of shares required to be
purchased by Orbital to 1,250,000 shares, although that number may increase in
the event of certain delays in the launch of OrbView-4. There can be no
assurance that Orbital will be able to fulfill its purchase commitment.
Orbital's inability to fulfill its purchase commitment could have a material
effect on ORBIMAGE's financial condition and results of operations.  In such an
event, we cannot assure you that additional capital will be available on
favorable terms or on a timely basis, if at all.

  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





                                       24
<PAGE>   25
License. While most of these costs are currently fixed under agreements with
Orbital and MDA, we cannot assure you that these costs will not increase over
time. For example, in March 2000, we agreed to a cost increase of $14 million
under our procurement agreement with Orbital. In exchange for allowing us to pay
this cost increase in the form of post-launch, on-orbit incentives, we also
amended our stock purchase agreement with Orbital to reduce Orbital's stock
purchase commitment to $12.5 million from $25 million, as described above. We
will pay for launch and on-orbit insurance and technological assistance for
OrbView-3, OrbView-4 and RadarSat-2 on a cost-plus or cost-reimbursable basis.
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;

          -  we do not enter into agreements with customers, value-added
             resellers or distributors for high-resolution imagery in the time
             frames or on the terms that we anticipate;

          -  our estimated net operating deficit increases because we incur
             significant unanticipated expenses, such as costs for resolving
             satellite operational difficulties;

          -  we have to modify all or part of OrbView-3 and OrbView-4 or ground
             system designs to meet changed or unanticipated market, regulatory
             or technical requirements;

          -  we decide to increase our value-added product development costs;
             or

          -  we decide to further expand our fleet of satellites or to acquire
             additional imagery distribution rights through licensing
             arrangements or otherwise.

  If these or other events occur, we cannot assure you that we could raise
additional capital on favorable terms or on a timely basis or at all. A
substantial shortfall in funding would delay or prevent deployment of
OrbView-3, OrbView-4 or RadarSat-2.

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

  We have previously experienced delays in the launch schedules of OrbView-3 and
OrbView-4. We have recently experienced additional delays in the production
schedules of OrbView-3 and RadarSat-2, which have resulted in the delay in the
launch dates of OrbView-3 and RadarSat-2 to the second quarter of 2001 and
fourth quarter of 2002, respectively. We previously encountered significant
delays in the design, production and testing of the OrbView-2 satellite that
was launched in August 1997.

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

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

       -  delayed or unsuccessful launches;

       -  subcontractor or manufacturer delays;

       -  delays in receiving, or restrictions on, the licenses necessary to
          construct and operate the satellite systems;

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





                                       25
<PAGE>   26
       -  other events beyond our control.

  The perceived and actual timing of satellite launches may affect competition
in the remote imaging industry. Additional delays in the deployment of
OrbView-3, OrbView-4 or RadarSat-2 could increase pre-launch operating costs,
delay revenues, result in revocation of our OrbView-3 or OrbView-4 FCC licenses
and negatively affect our marketing efforts. The perception of potential delays
also could affect our marketing efforts. We cannot assure you that any of these
satellites will be launched or deployed on a timely basis.

  In addition, under our existing agreements with certain OrbView-3 and
OrbView-4 regional distributors, the distributors have the right to terminate
their agreements because of the recent OrbView-3 launch delay. In the event
these distributors terminate these agreements, we cannot assure you that we will
be able to find replacement distributors on terms acceptable to us or in a
timely manner, if at all. Our ability to replace such distributors could have an
adverse effect on our business.

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 28 missions and has a
success rate of approximately 90%. 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 five
missions to date, all of which were successful. We expect CSA to provide a
launch vehicle for RadarSat-2, which has not yet been identified. We cannot
assure you that OrbView-3, OrbView-4 or RadarSat-2 will be successfully
launched. A launch failure of OrbView-3, OrbView-4 or RadarSat-2, or the failure
of CSA to provide a launch vehicle for RadarSat-2, could negatively affect our
business, financial condition, results of operations and our ability to deliver
our products and services and service our debt.

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 has only
very recently become 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. Actual markets could vary materially
from the potential markets that we have identified.

  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 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 acceptance, or failure of certain markets to develop would
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, human operators may execute improper implementation commands that
negatively impact a satellite's





                                       26
<PAGE>   27
performance.

  We cannot assure you that OrbView-3, OrbView-4 or RadarSat-2 will 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.

  We have not procured a spare high-resolution OrbView satellite, nor do we
maintain an inventory of long lead-time parts for the high-resolution OrbView
satellites. If there is a failure in an OrbView-4 satellite subsystem that is
common to the OrbView-3 satellite (e.g., the sensor), such failure may result in
a delay of the OrbView-3 launch.

  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 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.

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 design lives of our satellites are
as follows:

<TABLE>
<CAPTION>
                       Satellite        Expected Design Life
                       ---------        --------------------
                      <S>               <C>
                       OrbView-1        3 years (launched in April 1995), although
                                        it continues to operate
                       OrbView-2        7 1/2 years (launched in August 1997)
                       OrbView-3        5 years
                       OrbView-4        5 years
                      RadarSat-2        7 years
</TABLE>

  The expected design lives of these 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.

  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 maintain or expect to maintain the following insurance policies:

       -  OrbView-1.  OrbView-1 is not insured.

       -  OrbView-2.  We have a renewable on-orbit insurance policy for
          OrbView-2 to cover losses up to $12 million for its current
          operational year. We have not yet determined the amounts and types
          of coverage, if any, we will purchase for OrbView-2 in the future.





                                       27
<PAGE>   28

       -  OrbView-3 and OrbView-4.  The senior note indentures require us to
          maintain launch, on-orbit checkout and on-orbit operations insurance
          for OrbView-3 and OrbView-4. This insurance may not be sufficient to
          cover the cost of a replacement high-resolution satellite.

       -  RadarSat-2.  We will purchase up to $60 million of insurance coverage
          for the RadarSat-2 License against launch or on-orbit failure of the
          RadarSat-2 satellite. This insurance would allow us to recover our
          initial capital investment in the RadarSat-2 License, but would not
          be sufficient to cover additional business losses or the cost of a
          replacement radar satellite.

  We may find it difficult to insure certain risks, such as partial degradation
of functionality of a satellite. 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 REPAY THE SENIOR NOTES IF WE DO NOT
SUCCESSFULLY COMPETE 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 existing and potential
competitors for high-resolution satellite imagery include:

          -  Space Imaging EOSAT, which launched its high-resolution satellite
             in September 1999;

          -  EarthWatch, which is expected to launch its first high-resolution
             satellite in mid-2000; and

          -  West Indian Space, Ltd., which has announced plans to launch and
             operate the Earth Remote Observation System constellation of
             high-resolution commercial imaging satellites.

  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 ONE PRIMARY SUPPLIER COULD RESULT IN
DELAYS IF THE SUPPLIER FAILS TO PERFORM, AND OUR RECOURSE AGAINST THE SUPPLIER
IS LIMITED.

  We depend on one primary supplier, Orbital:

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





                                       28
<PAGE>   29
             satellites;

          -  through its subsidiary, MDA, to construct the OrbView-3 and 4
             distributor ground system;

          -  through its subsidiary, MDA, to design, develop and construct
             RadarSat-2 and the related Canadian ground system, integrate and
             operate RadarSat-2, and 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 MDA to market the RadarSat-2 imagery pursuant to a
sublicense of our exclusive marketing rights under the RadarSat-2 License. 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 provide
design, construction and launch services for the OrbView satellites are
governed by a procurement agreement between Orbital and us. 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 is limited to $10 million. In addition, if MDA fails to
perform its obligations under the OrbView-3 and 4 distributor ground system
agreement, it could have a material adverse effect on ORBIMAGE's business. We
also rely on MDA to design and construct the RadarSat-2 satellite. Neither
Orbital nor MDA is liable to us for any costs or other damages arising from
schedule delays in the operation of OrbView-3, OrbView-4 or RadarSat-2.

  Under a services agreement 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-2
IMAGERY COULD RESULT IN MARKETING AND DISTRIBUTION DELAYS IF THE DISTRIBUTOR
FAILS TO PERFORM.

  We acquired the RadarSat-2 License from MDA and granted MDA an exclusive
unrestricted worldwide sublicense, including the right to sublicense with our
prior consent, to market and sell RadarSat-2 imagery. MDA will perform all
RadarSat-2 marketing operations, subject to our supervision and approval. MDA's
failure to successfully market RadarSat-2 imagery would have a material adverse
effect on our ability to distribute and sell radar imagery, which would
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 52.1% of our outstanding voting stock on a fully diluted basis,
and has agreed to acquire up to an additional 1,250,000 shares of common stock.
Two of our directors are also directors of Orbital, and one of our officers is
also an employee 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 related 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. We also have
an agreement with Orbital's subsidiary, MDA, pursuant to which MDA will provide
the OrbView-3 and 4 distributor ground system. Orbital's interests as an equity
holder in our business may at times conflict with our interests under these
agreements, and may conflict with the interests of the senior noteholders. Our
recourse against Orbital is limited in the event of





                                       29
<PAGE>   30
breaches by Orbital under the procurement agreement and 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, the first anniversary of an initial public offering of our
common stock or the occurrence of certain other 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. MDA also owns 100% of the capital stock of RSI, a company that
markets imagery from the RadarSat-1 satellite. RSI has appointed ORBIMAGE as a
non-exclusive distributor of RadarSat-1 imagery in the United States. 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 these licenses because the only
customer for OrbView-1 imagery is the U.S. government. Our DoC licenses to
operate OrbView-2, OrbView-3 and OrbView-4 expire in 2004. We cannot assure you
that the DoC will renew these licenses when they expire. If the DoC does not
renew these licenses our business would be materially adversely affected.

  The DoC license for OrbView-4 hyperspectral imagery restricts the resolution
of the OrbView-4 hyperspectral imagery sold commercially and restricts our
ability to process and distribute imagery outside of the United States. These
resolution restrictions and other limitations may affect our ability to market
and sell hyperspectral imagery, and accordingly could have an adverse effect on
our financial condition and results of operations. ORBIMAGE has appealed for
a relaxation of the terms of the OrbView-4 hyperspectral license.  We cannot
assure you that we will prevail in our appeal.

  The DoC has informed ORBIMAGE that Orbital must obtain a DoC license for the
RadarSat-2 satellite by virtue of its controlling ownership of MDA.
Additionally, the DoC has informed ORBIMAGE that it is not required to obtain a
DoC license to function as a RadarSat-2 distributor. If Orbital cannot obtain
the DoC license on acceptable terms, our financial condition and results of
operations would be materially adversely affected.

  The DoC licenses provide that the U.S. government can interrupt service
during periods of national emergency. Actual or threatened interruptions could
adversely affect our ability to market our products abroad. In addition, the
DoC has the right to review and approve our agreements with international
customers for high-resolution optical imagery. These reviews could delay or
prohibit us from executing these agreements. Canada does not currently have
licensing requirements similar to the DoC's requirements, but has proposed
legislation, which would regulate the ownership and operation of remote sensing
satellites. Currently, the Canadian government can interrupt RadarSat-2 service
during certain periods of national emergency.

  Our renewal application for an experimental FCC license for OrbView-2 was
granted effective January 1999. This license expires in January 2003 and may be
revoked for failure to comply with its terms.

  Our application with the FCC for a license to launch and operate OrbView-3
and OrbView-4 was granted in February 1999 and our applications to operate the
associated ground systems were granted in May 1999. These licenses will expire
in 10 years, but may be revoked for failure to comply with their terms or
failure to meet certain construction and launch milestones.

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

  The CSA has agreed to coordinate with the International Telecommunication
Union to secure the necessary authorizations to operate RadarSat-2 in Canada
and the FCC is undertaking the ITU coordination process on behalf





                                       30
<PAGE>   31
of OrbView-3 and OrbView-4. The CSA's or the FCC's failure to obtain the
necessary coordination 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 OrbView-2, OrbView-3, OrbView-4 and RadarSat-2.
If these regional distributors are not successful in obtaining the necessary
approvals, we will not be able to distribute real time OrbView or RadarSat-2
imagery in those regions. Our inability to offer real time 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 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 our international customers with ground stations that enable these
customers to downlink data directly from OrbView-3 and OrbView-4. Exporting
these ground stations may require that we obtain an export license from the DoC
or the U.S. Department of State. If the DoC or the State Department does not
issue these export licenses, or if these licenses are significantly delayed, or
if restrictions are imposed on these licenses, our financial condition and
results of operations could be materially adversely affected.

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 sell
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 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 and sell 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, market and sell our
products and services to address certain target markets. If our value-added
resellers fail to develop, market and sell 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 a particular foreign country;

       -  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





                                       31
<PAGE>   32
          may make payment in U.S. dollars more expensive for foreign
          customers.

  These risks are beyond our control and could have a material adverse effect
on our business.

GOVERNMENT CONTRACTS -- WE DEPEND ON CONTRACTS WITH GOVERNMENT AGENCIES FOR A
SUBSTANTIAL PORTION OF OUR REVENUES. GOVERNMENT AGENCIES CAN TERMINATE THEIR
CONTRACTS AT ANY TIME.

  Revenues from government contracts accounted for approximately 95%, 94% and
66% of our revenues for the years ended December 31, 1997, 1998 and 1999,
respectively. As of December 31, 1999, contracts with U.S. government agencies
constituted approximately 25% of our 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 Orbital or ORBIMAGE, or changes its
policies, priorities, or funding levels, these actions would have a material
adverse effect on our business, financial condition and results of operations.
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 for RadarSat-2 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. In addition, our
approximately $0.6 million per year contract with NASA for the provision of
OrbView-1 imagery  expires on April 17, 2000 and may not be renewed.

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

  Our charter permits the Series A holders to designate additional members to
the board of directors and thus gain control of the board of directors if we
fail to pay timely dividends or to repurchase the Series A preferred stock in
some circumstances.

  If the Series A holders designated these additional directors, the Series A
directors would control our management and policies and could make decisions
affecting the control of ORBIMAGE. These 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. These actions include the merger, consolidation,
liquidation or sale of all or substantially all of our assets, the issuance of
equity securities in certain circumstances, and the incurrence of certain
indebtedness of more than $500,000.

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 SENIOR
NOTE INDENTURES.

  Upon the occurrence of certain change of control events, we will be required
to offer to repurchase all outstanding senior notes at a price equal to 101% of
the principal amount and to offer to repurchase all of the outstanding Series A
preferred stock, subject to the senior rights of the senior 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 senior note indentures.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

            As of December 31, 1999, ORBIMAGE had senior notes outstanding of
$214.6 million with a fair value of $155.3 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 through March
1, 2000. As of December 31, 1999, held-to-maturity securities restricted for
the payment of interest on the senior notes totaled $12.9 million.





                                       32
<PAGE>   33
            ORBIMAGE does not have any derivative financial instruments as of
December 31, 1999, 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.





                                       33
<PAGE>   34
                               OTHER INFORMATION

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

            On April 22, 1999, KPMG LLP ("KPMG") resigned as the auditors for
ORBIMAGE. KPMG's reports on ORBIMAGE's financial statements for the fiscal years
ended December 31, 1997 and 1998 did not contain any adverse opinion or a
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles.

            During the fiscal year ended December 31, 1997, there were no
disagreements with KPMG on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of KPMG, would have caused
KPMG to make reference to the subject matter of the disagreements in connection
with KPMG's reports.

            During the fiscal year ended December 31, 1998 and the interim
period ended April 22, 1999, ORBIMAGE and KPMG had certain disagreements
regarding prospective accounting treatment for recognizing revenue on certain
customer purchase contracts. Those disagreements related to (1) the correct
application of the revenue accounting for certain related party contracts in
future periods and (2) disclosure of the nature of the contracts in certain of
ORBIMAGE's registration statements and an offering memorandum issued in
connection with an exempt debt securities offering in April 1999. ORBIMAGE
ultimately disclosed these transactions in the exempt offering in such a manner
so that the offering memorandum did not suggest that these contracts would
result in revenues in the future and clearly identified these contracts as
between Orbital Science Corporation and the customer rather than ORBIMAGE and
the customer. ORBIMAGE authorized KPMG to respond fully to the inquiries of
its successor accountant concerning the subject matter of the disagreements.

            There were no reportable events (as defined in SEC Regulation S-K,
Item 304(a)(1)(v)) during the fiscal years ended December 31, 1997 and 1998 and
the interim period ended April 22, 1999.

            KPMG issued a letter to the SEC as an exhibit to the Form 8-K/A
dated June 10, 1999 stating that they agreed with the above statements.

            On July 21, 1999, ORBIMAGE engaged PricewaterhouseCoopers LLP
("PricewaterhouseCoopers") as ORBIMAGE's independent accountant to audit its
consolidated financial statements for the year ended December 31, 1999. During
the two most recent fiscal years of ORBIMAGE, and during the subsequent interim
period preceding the engagement of PricewaterhouseCoopers, neither ORBIMAGE nor
anyone on its behalf consulted with PricewaterhouseCoopers regarding (a) the
application of accounting principles to any transactions, either completed or
proposed, or the type of audit opinion that might be rendered on ORBIMAGE's
financial statements, or (b) any matters that were the subject of disagreements
between ORBIMAGE and KPMG, its former certifying accountant, which disagreements
were described in Amendment No. 2 to ORBIMAGE's Current Report on Form 8-K/A
filed on June 10, 1999. Neither any written report nor any oral advice was
provided to ORBIMAGE by PricewaterhouseCoopers regarding any of the above.

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 . . . . . . . .     46    Chairman of the Board and Director

                 Gilbert D. Rye  . . . . . . . .       59    President and Chief Executive Officer

                 Edward D. Nicastri  . . . . . .       52    Vice President, Engineering and Operations

                 Armand D. Mancini . . . . . . . .     41    Vice President, Chief Financial Officer

                 Alan R. Schwartz Ocio . . . . . .     39    Vice President, General Counsel and Assistant
                                                               Secretary
                 James A. Abrahamson . . . . . . .     66    Director
                 Bruce W. Ferguson . . . . . . . .     45    Director
                 Richard Reiss, Jr . . . . . . . .     56    Director
                 William W. Sprague  . . . . . . .     42    Director
</TABLE>

            DAVID W. THOMPSON has served as Chairman of the Board and a director
since 1993. Mr. Thompson also served as the Chief Executive Officer from 1993
through February 2000.  He is also the Chairman, Chief Executive Officer and a
director 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 Executive Officer, a
position he has held since February 2000. From 1993 through February 2000, Mr.
Rye served as President and Chief Operating Officer. 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.

             ALAN R. SCHWARTZ OCIO was appointed Vice President, General
Counsel and Assistant Secretary of ORBIMAGE in April 1999.  Prior to joining
ORBIMAGE, he was an associate with Piper & Marbury LLP from 1997 to March 1999,
and Cole, Corette & Abrutyn from 1988 to 1997.


                                       34
<PAGE>   35
            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 Stratesec Corporation.

            BRUCE W. FERGUSON has been a member of the Board since 1993. Mr.
Ferguson is Chairman, President and Chief Executive Officer of Edenspace
Systems Corporation, an environmental services company he co-founded in 1998.
He is a co-founder of Orbital and a member of its Board of Directors. Mr.
Ferguson was Senior Vice President, Special Projects of Orbital from 1997 to
1999 and 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, 1998 and
1999, by ORBIMAGE's Chief Executive Officer and the most highly compensated
executive officers in all capacities in which they served (the "Named
Officers").





                                       35
<PAGE>   36
                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                                   LONG TERM COMPENSATION
                                                                                                   ----------------------

                                                                                               SECURITIES
                                                                ANNUAL COMPENSATION            UNDERLYING
                                                                -------------------              OPTIONS           ALL OTHER
                      NAME AND PRINCIPAL POSITIONS           SALARY            BONUS              (#)            COMPENSATION
                      ----------------------------           ------            -----               ---           ------------
                                                                                (1)                                   (2)
                 <S>                                     <C>              <C>                    <C>           <C>
                 David W. Thompson
                   Chairman of the Board (3)
                      1999 . . . . . . . . . . . . .     $         --     $         --           60,000        $         --
                      1998 . . . . . . . . . . . . .               --               --           50,000                  --
                      1997 . . . . . . . . . . . . .               --               --           40,000                  --
                 Gilbert D. Rye
                   President and Chief Executive
                      Officer (4)
                      1999 . . . . . . . . . . . . .          230,000           80,500           90,000              13,659
                      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
                      1999 . . . . . . . . . . . . .          171,500           39,617           25,000               9,686
                      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
                      1999 . . . . . . . . . . . . .          140,000           29,400           40,000               7,558
                      1998 . . . . . . . . . . . . .          132,000           39,200           20,000               8,774
                      1997 . . . . . . . . . . . . .          115,000           39,300           15,000               6,789

                 Alan R. Schwartz Ocio
                   Vice President, General Counsel and
                      Assistant Secretary (5)
                      1999 . . . . . . . . . . . . .          109,615           31,500           90,000                 211
</TABLE>
----------

(1) Includes bonuses earned in 1999 and paid in 2000.

(2) 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.

(3) Mr. Thompson's salary, bonus and long-term compensation (other than
    options) are paid by Orbital. During the three years ended December 31,
    1999, Mr. Thompson served as Chief Executive Officer. Effective February
    2000, Mr. Thompson no longer serves as Chief Executive Officer. Except as
    set forth in the above table, Mr. Thompson was not compensated for services
    rendered in his capacity as an officer of ORBIMAGE.

(4) During the three years ended December 31, 1999, Mr. Rye served as President
    and Chief Operating Officer.  Effective February 2000, Mr. Rye serves as
    President and Chief Executive Officer.

(5) Mr. Schwartz Ocio joined ORBIMAGE in March 1999.

            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.





                                       36
<PAGE>   37
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.

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, 1999, 4,800,000 shares of common stock were
authorized for issuance under the Stock Option Plan, of which 3,293,572 options
were outstanding at exercise prices ranging from $3.60 to $6.25 per share. Of
the total number of options outstanding, 1,916,611 were currently exercisable.

    On February 14, 2000, ORBIMAGE granted 412,347 options to purchase shares
of common stock to employees, directors and consultants. The stock options were
granted with an exercise price of $7.25 and generally vest in one-third
increments over a three-year period. ORBIMAGE will expense the value of the
2,000 compensatory options that were issued to consultants over the three-year
vesting period of the options.


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, 1999, which options are reflected in the Summary Compensation
Table.

<TABLE>
<CAPTION>
                                                              INDIVIDUAL GRANTS
                                         -----------------------------------------------------------
                                                                                     POTENTIAL REALIZED
                                         PERCENT OF                                  VALUE AT ASSUMED
                         NUMBER OF       TOTAL OPTIONS                               ANNUAL RATES OF STOCK
                         SECURITIES      GRANTED TO                                  PRICE APPRECIATION FOR
                         UNDERLYING      EMPLOYEES IN   EXERCISE OR                  OPTION TERM
                         OPTIONS         FISCAL YEAR    BASE PRICE      EXPIRATION   -----------
         NAME            GRANTED(1)        1999         PER SHARE(2)       DATE          5%          10%
         ----            ----------        ----         ------------       ----          --          ---
<S>                         <C>           <C>              <C>            <C>        <C>          <C>
David W. Thompson......     60,000           8%            $6.25          4/26/09    $ 235,835    $ 597,653
Gilbert D. Rye.........     90,000          11%             6.25          4/26/09      353,753      896,480
Edward D. Nicastri.....     25,000           3%             6.25          4/26/09       98,265      249,022
Armand D. Mancini .....     40,000           5%             6.25          4/26/09      157,224      398,436
Alan R. Schwartz-Ocio..     90,000          11%             6.25          4/26/09      353,753      896,480
</TABLE>

----------

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





                                       37
<PAGE>   38
(2) Options are granted at the fair market value 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 ORBIMAGE'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.

            In April 1999, ORBIMAGE awarded options to purchase 7,500 shares of
common stock to each of the four non-employee directors.  These stock options
were granted with an exercise price of $6.20 and vest over a one-year period.

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, 1999:

<TABLE>
<CAPTION>
                            NUMBER OF SECURITIES UNDERLYING               VALUE OF UNEXERCISED IN-
                                UNEXERCISED OPTIONS AT                      THE-MONEY OPTIONS AT
                                  DECEMBER 31, 1999                        DECEMBER 31, 1999(1)
                           ----------------------------             -------------------------------
                           EXERCISABLE         UNEXERCISABLE          EXERCISABLE          UNEXERCISABLE
                           -----------         -------------          -----------          -------------
<S>                              <C>                 <C>                <C>                    <C>
David W. Thompson . . .          221,111             128,889            $  561,244             $ 155,956
Gilbert D. Rye  . . . .          303,334             146,666               773,435               117,865
Edward D. Nicastri  . .           66,667              68,333               138,667                90,133
Armand D. Mancini . . .          116,667              58,333               299,667                38,133
Alan R. Schwartz-Ocio .               --              90,000                    --                    --
</TABLE>
----------

(1)      The value of unexercised in-the-money options at December 31, 1999
         assumes a fair value of $6.25 for ORBIMAGE's common stock.





                                       38
<PAGE>   39
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
March 30, 2000: (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            57.6%
                   21700 Atlantic Boulevard
                   Dulles, VA 20166
                 Merrill Lynch KECALP L.P  . . .      276,195 (3)             35.8            6,623,381            15.1
                   225 Liberty Street
                   South Tower, 23rd Floor
                   New York, NY 10080-6123
                 Crest Funding Partners, L.P. (4)     219,686 (5)             28.4            5,268,249            12.0
                   320 Park Avenue
                   New York, NY 10022
                 Morgan Guaranty Trust Company
                   of New York . . . . . . . . .      163,355 (6)             21.1            3,917,386             9.0
                   522 Fifth Avenue
                   New York, NY 10036
                 Georgica Advisors LLC (7) . . .       83,477 (8)             10.8            2,001,847             4.6
                   1114 Avenue of the Americas
                   New York, NY 10036
                 Gilbert D. Rye (9)  . . . . . .              --                --              353,334               *
                 David W. Thompson (9) . . . . .              --                --              257,778               *
                 Bruce W. Ferguson (9)(10) . . .              --                --              210,834               *
                 Armand D. Mancini (9) . . . . .              --                --              136,668               *
                 Edward D. Nicastri (9)  . . . .              --                --              106,668               *
                 Alan R. Schwartz Ocio (9) . . .              --                --               30,000               *
                 James A. Abrahamson (9).. . . .              --                --               14,167               *
                 William W. Sprague (4)(9) . . .              --                --               10,834               *
                 Richard Reiss, Jr. (7)(9) . . .              --                --               10,834               *
                 All executive officers and
                  directors as a Group (9)(10)                --                --            1,131,117             2.5
</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
         March 30, 2000, 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.





                                       39
<PAGE>   40
(3)      Includes 169,411 shares owned by Merrill Lynch KECALP L.P. 1997,
         55,826 shares owned by Merrill Lynch KECALP L.P. 1999, 32,348 shares
         owned by Merrill Lynch KECALP International L.P. 1997, and 18,610
         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 159,738 shares owned by Crest Funding Partners, L.P., and
         59,948 shares owned by Crest Management Company LLC.

(6)      Includes 115,826 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; 23,027 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 24,502 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 73,744 shares owned by Georgica Partners and 9,733 shares
         owned by Georgica International Fund.

(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 million to our
capital and paid us $40.9 million 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
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





                                       40
<PAGE>   41
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.





                                       41
<PAGE>   42
            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 $311.3 million, net of $31 million which
will be funded by the U.S.  Air Force through an agreement with Orbital ($292
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 $265 million as of December 31, 1999. We expect to spend
approximately $22.5 million through the third quarter of 2001, the projected
deployment date of OrbView-3 and an additional $24 million in post-launch,
on-orbit incentives. 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 a performance incentive to Orbital of: (a) up to $2.25 million
for OrbView-4 and $2.55 million for OrbView-3 during each year of the five-year
design lives of the satellites, based on the operational efficiency of the
satellites, for a maximum payment of up to $24 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 items delivered by it under the procurement
agreement. It has also assigned to us certain third-party warranties that it





                                       42
<PAGE>   43
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, (ii) the date on which the
procurement agreement is terminated, (iii) the first anniversary of an initial
public offering by ORBIMAGE, (iv) the end of a 180-day period in which
ORBIMAGE's average common stock price exceeds certain thresholds, or (v) the
date on which ORBIMAGE procures a follow-on high-resolution satellite from a
provider other than Orbital or its affiliates.

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

            In 1998, we entered into a license agreement with Orbital and MDA,
under which MDA 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;





                                       43
<PAGE>   44
            -  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 pursuant to a sublicense of our
               distribution rights.

              Purchase Price. ORBIMAGE's acquisition of the RadarSat-2 License
will cost $60 million. Approximately $140 million of RadarSat-2's $200 million
estimated total cost will be funded by the CSA through a contract with MDA.
ORBIMAGE will pay the $60 million purchase price in installments based on
progress payments during the satellite construction phase. In October 1999,
ORBIMAGE, Orbital and MDA amended the RadarSat-2 License, pursuant to which
amendment ORBIMAGE agreed to pay in October 1999 a $15 million payment that
would have otherwise been due in 2000. During the year ended December 31, 1999,
ORBIMAGE paid a total of $30 million to MDA. The remaining payments will not
exceed $15 million in 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
contract between CSA and MDA 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, because CSA had not
selected a launch vehicle by December 31, 1999, we are not required to make any
more payments under the license agreement until CSA has selected a launch
vehicle. As of March 30, 2000, CSA has not selected a launch vehicle for
RadarSat-2. If CSA 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 RadarSat-2 License.
We have agreed to indemnify MDA for breaches of our representations and
warranties and other covenants under the RadarSat-2 License. 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.





                                       44
<PAGE>   45
            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
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.





                                       45
<PAGE>   46
                                    PART IV

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

   (a)(1)  FINANCIAL STATEMENTS

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

<TABLE>
    <S>                                                                                               <C>
    Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       F-2
    Independent Auditors' Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       F-3
    Consolidated Balance Sheets as of December 31, 1998 and 1999  . . . . . . . . . . . . . . .       F-4
    Consolidated Statements of Operations for the years ended December 31, 1997, 1998 and 1999        F-5
    Consolidated Statements of Stockholders' Equity for the years ended December 31, 1997, 1998
        and 1999  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       F-6
    Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1998 and 1999        F-7
    Notes to Consolidated Financial Statements  . . . . . . . . . . . . . . . . . . . . . . . .       F-8
</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.





                                       46
<PAGE>   47

                                   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.

<TABLE>
<CAPTION>
                                                     ORBITAL IMAGING CORPORATION
                 <S>      <C>                        <C>
                 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
</TABLE>





                                       47
<PAGE>   48

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                          ORBITAL IMAGING CORPORATION

<TABLE>
<S>                                                                                                                    <C>
Report of Independent Accountants  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           F-2
Independent Auditors' Reports  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           F-3
Consolidated Balance Sheets as of December 31, 1998 and 1999 . . . . . . . . . . . . . . . . . . . . . . . .           F-4
Consolidated Statements of Operations for the years ended December 31, 1997, 1998 and 1999 . . . . . . . . .           F-5
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1997, 1998 and 1999 . . . .           F-6
Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1998 and 1999 . . . . . . . . .           F-7
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           F-8
</TABLE>





                                      F-1
<PAGE>   49





                       REPORT OF INDEPENDENT ACCOUNTANTS


To  The Board of Directors and Stockholders
    Orbital Imaging Corporation


In our opinion, the accompanying balance sheet as of December 31, 1999 and the
related statements of operations, stockholders' equity, and cash flows present
fairly, in all material respects, the financial position of Orbital Imaging
Corporation and its subsidiary at December 31, 1999, and the results of their
operations and their cash flows for the year then ended conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation.  We believe that our audit provides a reasonable basis
for the opinion expressed above.


PricewaterhouseCoopers LLP
March 24, 2000
McLean, Virginia





                                      F-2
<PAGE>   50





                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Orbital Imaging Corporation:

     We have audited the accompanying consolidated balance sheet of Orbital
Imaging Corporation ("ORBIMAGE") as of December 31, 1998, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the two-year period ended December 31, 1998. These
consolidated financial statements are the responsibility of ORBIMAGE's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Orbital
Imaging Corporation as of December 31, 1998, and the results of their
operations and their cash flows for each of the years in the two-year period
ended December 31, 1998, in conformity with generally accepted accounting
principles.

     As discussed in Note 3, the accompanying consolidated balance sheet as of
December 31, 1998 and the consolidated statements of operations, stockholders'
equity and cash flows for the year then ended have been restated.

                                                    KPMG LLP

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





                                      F-3
<PAGE>   51
                          ORBITAL IMAGING CORPORATION
                          CONSOLIDATED BALANCE SHEETS

                       (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                                          DECEMBER 31,
                                                                                                          ------------
                                                                                                      1998            1999
                                                                                                      ----            ----
                                                 ASSETS                                            (RESTATED)
<S>                                                                                                <C>             <C>
                 Current assets:
                    Cash and cash equivalents  . . . . . . . . . . . . . . . . . . . . . . .       $  25,082       $   4,855
                    Available-for-sale securities, at fair value . . . . . . . . . . . . . .          34,401          32,407
                    Restricted held-to-maturity securities, at amortized cost  . . . . . . .          16,724          12,932
                    Receivables and other current assets, net of allowances of $165 and
                        $80, respectively  . . . . . . . . . . . . . . . . . . . . . . . . .           2,291           5,525
                                                                                                   ---------       ---------
                          Total current assets . . . . . . . . . . . . . . . . . . . . . . .          78,498          55,719
                 Restricted held-to-maturity securities, at amortized cost . . . . . . . . .           8,201               -
                 Property, plant and equipment, at cost, less accumulated
                    depreciation of $7,630 and $10,841, respectively . . . . . . . . . . . .          15,956          31,937
                 Satellites and related rights, at cost, less accumulated depreciation
                    and amortization of $22,367 and $30,973, respectively  . . . . . . . . .         196,709         261,622
                 Other assets  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           8,714          10,560
                                                                                                   ---------       ---------
                          Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . .       $ 308,078       $ 359,838
                                                                                                   =========       =========

                              LIABILITIES AND STOCKHOLDERS' EQUITY
                 Current liabilities:
                   Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . .       $  16,879       $  14,341
                   Current portion of deferred revenue . . . . . . . . . . . . . . . . . . .           8,522           9,277
                   Deferred tax liabilities  . . . . . . . . . . . . . . . . . . . . . . . .             580               -
                                                                                                   ---------       ---------
                         Total current liabilities . . . . . . . . . . . . . . . . . . . . .          25,981          23,618
                 Senior notes  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         142,622         214,575
                 Deferred revenue, net of current portion  . . . . . . . . . . . . . . . . .          23,698          15,334
                 Deferred tax liabilities  . . . . . . . . . . . . . . . . . . . . . . . . .           3,216              77
                 Capitalized lease obligation, net of current portion  . . . . . . . . . . .             108               -
                                                                                                   ---------       ---------
                         Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . .         195,625         253,604

                 Preferred stock subject to repurchase, par value $0.01; 10,000,000 shares
                     authorized; Series A 12% cumulative convertible, 2,000,000 shares
                     authorized, 687,576 and 772,561 shares issued and outstanding,
                     respectively (liquidation value of $70,133 and $78,801, respectively)            78,489          91,563

                 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  . . . . . . . . . . . . . . . . . . . . . .          86,782          87,285
                     Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . .         (53,070)        (72,866)
                                                                                                   ---------       ---------
                         Total stockholders' equity  . . . . . . . . . . . . . . . . . . . .          33,964          14,671
                                                                                                   ---------       ---------
                             Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       $ 308,078       $ 359,838
                                                                                                   =========       =========
</TABLE>





          See accompanying notes to consolidated financial statements.





                                      F-4
<PAGE>   52
                          ORBITAL IMAGING CORPORATION
                     CONSOLIDATED STATEMENTS OF OPERATIONS

                       (IN THOUSANDS, EXCEPT SHARE DATA)


<TABLE>
<CAPTION>
                                                                                              YEARS ENDED DECEMBER 31,
                                                                                              ------------------------
                                                                                         1997          1998           1999
                                                                                         ----          ----           ----
                                                                                                    (RESTATED)
                  <S>                                                                <C>          <C>          <C>
                  Revenues . . . . . . . . . . . . . . . . . . . . . . . . . .       $    2,062    $  11,663     $   18,587
                  Direct expenses  . . . . . . . . . . . . . . . . . . . . . .            6,312       15,215         21,212
                                                                                     ----------    ---------      ---------
                  Gross loss . . . . . . . . . . . . . . . . . . . . . . . . .           (4,250)      (3,552)        (2,625)
                  Selling, general and administrative expenses . . . . . . . .            2,845        7,328         10,362
                                                                                     ----------    ---------      ---------
                  Loss from operations . . . . . . . . . . . . . . . . . . . .           (7,095)     (10,880)       (12,987)
                  Interest income, net of interest expense of $4,790
                    and $1,684 in 1998 and 1999, respectively   . . . . . . .             1,261        1,915          2,636
                                                                                     ----------    ---------      ---------
                  Loss before benefit for income taxes . . . . . . . . . . . .           (5,834)      (8,965)       (10,351)
                  Benefit for income taxes . . . . . . . . . . . . . . . . . .           (1,752)      (3,286)        (3,629)
                                                                                     ----------    ---------      ---------
                  Net loss . . . . . . . . . . . . . . . . . . . . . . . . . .       $   (4,082)   $  (5,679)    $   (6,722)
                                                                                     ==========    =========      =========

                  Loss per common share -- basic and diluted (1) . . . . . . .       $    (0.42)   $   (1.05)    $    (0.79)
                  Loss available to common stockholders ...... . . . . . . . .       $   (6,890)   $ (26,538)    $  (19,796)
                  Weighted average shares outstanding - basic and diluted(1)         16,431,854   25,214,000     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.





          See accompanying notes to consolidated financial statements.





                                      F-5
<PAGE>   53
                          ORBITAL IMAGING CORPORATION
                CONSOLIDATED 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, 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 dividends 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

Issuance of stock options . . . .               --          --             413                 --          413
Capital contributed . . . . . . .               --          --              90                 --           90
Preferred stock dividends . . . .               --          --              --            (13,074)     (13,074)
Net loss  . . . . . . . . . . . .               --          --              --             (6,722)      (6,722)
                                       -----------       -----         -------           --------     --------

BALANCE AS OF DECEMBER 31, 1999 .       25,214,000       $ 252         $87,285           $(72,866)    $ 14,671
                                    ==============       =====         =======           ========     ========
</TABLE>





          See accompanying notes to consolidated financial statements.





                                      F-6
<PAGE>   54

                          ORBITAL IMAGING CORPORATION
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                   YEARS ENDED DECEMBER 31,
                                                                                   ------------------------
                                                                          1997               1998               1999
                                                                          ----               ----               ----
                                                                                          (RESTATED)
 <S>                                                                   <C>                <C>                <C>
 CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss . . . . . . . . . . . . . . . . . . . . . .               $  (4,082)         $  (5,679)         $  (6,722)
    Adjustments to reconcile net loss to net cash (used in)
       provided by operating activities:

       Depreciation, amortization and other  . . . . . .                   5,541             12,857             14,258
       Deferred tax benefit  . . . . . . . . . . . . . .                  (1,752)            (3,286)            (3,629)
    Changes in assets and liabilities:
       Increase in receivables and other current assets                      (84)              (700)            (4,502)
       (Increase) decrease in other assets . . . . . . .                     371               (532)               357
       Increase (decrease) in accounts payable and accrued
         expenses  . . . . . . . . . . . . . . . . . . .                   4,335             12,370             (2,686)
       Increase (decrease) in deferred revenue . . . . .                   2,005             (5,172)            (7,609)
                                                                       ---------          ---------          ---------
          NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES              6,334              9,858            (10,533)
 CASH FLOWS FROM INVESTING ACTIVITIES:
    Capital expenditures . . . . . . . . . . . . . . . .                 (49,029)          (108,533)           (92,388)
    Purchases of restricted held-to-maturity securities                       --            (32,185)            (7,306)
    Purchases of available-for-sale securities . . . . .                (115,751)          (119,783)           (53,698)
    Maturities of restricted held-to-maturity securities                      --              7,568             19,691
    Maturities of available-for-sale securities  . . . .                 102,442             60,905             38,362
    Sales of available-for-sale securities . . . . . . .                   1,972             35,818             17,671
    Payment for business acquisition . . . . . . . . . .                      --             (5,000)                --
                                                                       ---------          ---------          ---------
         NET CASH USED IN INVESTING ACTIVITIES . . . . .                 (60,366)          (161,210)           (77,668)
 CASH FLOWS FROM FINANCING ACTIVITIES:
    Net proceeds from issuance of long-term obligations                       --            136,682             68,082
    Repayment of capitalized lease obligation                                 --                 --               (108)
    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                 --                 --
                                                                       ---------          ---------          ---------
         NET CASH PROVIDED BY FINANCING ACTIVITIES . . .                  64,915            165,551             67,974
                                                                       ---------          ---------          ---------

 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS  .                  10,883             14,199            (20,227)

 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR  . . . . .                      --             10,883             25,082
                                                                       ---------          ---------          ---------
 CASH AND CASH EQUIVALENTS, END OF YEAR  . . . . . . . .               $  10,883          $  25,082          $   4,855
                                                                       =========          =========          =========

 SUPPLEMENTAL CASH FLOW INFORMATION:
   Interest paid . . . . . . . . . . . . . . . . . . . .               $      --          $   9,009          $  20,582
                                                                       =========          =========          =========

 NON-CASH ITEMS:
   Preferred stock dividends                                           $   2,808          $  10,884          $  13,074
   Deemed dividend on issuance of preferred stock subject to
     repurchase  . . . . . . . . . . . . . . . . . . . .                      --              9,975                 --
   Capital contributed -- tax basis adjustment . . . . .                      --              3,580                 90
   Capitalized compensatory stock options                                     --                119                174
   Capitalized lease obligation  . . . . . . . . . . . .                      --                223                 --
</TABLE>


          See accompanying notes to consolidated financial statements.





                                      F-7
<PAGE>   55
                          ORBITAL IMAGING CORPORATION
                   NOTES TO CONSOLIDATED 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 also purchased additional
common stock, bringing its total common equity investment 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 four contracts with Orbital: (i) the ORBIMAGE System
Procurement Agreement dated November 18, 1996, as amended (the "System
Procurement Agreement"), (ii) the OrbView-2 License Agreement dated May 8, 1997
(the "OrbView-2 License"), (iii) the Amended and Restated Administrative
Services Agreement dated May 8, 1997 (the "Administrative Services Agreement"),
and (iv) the Stock Purchase Agreement dated October 26, 1999, as amended (the
"Stock Purchase 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. Pursuant to the System Procurement Agreement
through December 31, 1999, 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 $47.6 million, $94.3 million
and $33.0 million for the years ended December 31, 1997, 1998 and 1999,
respectively, under the System Procurement Agreement. As of December 31, 1999,
ORBIMAGE has remaining commitments under the System Procurement Agreement of
$22.4 million, net of $31.0 million, which will be funded by the U.S. Air Force
through a contract with Orbital. In March 2000, the System Procurement Agreement
was amended to increase the cost of the OrbView-3 and OrbView-4 satellites by
$14 million. In exchange for permitting ORBIMAGE to pay this cost increase in
the form of post-launch, on-orbit incentives, the Stock Purchase Agreement was
amended to reduce Orbital's stock purchase commitment to $12.5 million from
$25.0 million.

    Under the OrbView-2 License Agreement, Orbital has granted an exclusive
worldwide license to ORBIMAGE to use and sell OrbView-2 imagery. Pursuant to
the terms of the OrbView-2 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 and indirect operating
services provided by Orbital. ORBIMAGE incurred costs of approximately $3.2
million, $2.7 million and $2.1 million for the years ended December 31, 1997,
1998 and 1999, respectively, under the Administrative Services Agreement. The
term of the Administrative Services Agreement is expected to terminate on or
before December 31, 2001.

    Under the Stock Purchase Agreement, Orbital was originally required to
purchase up to 2,500,000 shares of common stock for a price of $10 per share in
minimum $5.0 million increments whenever ORBIMAGE's aggregate balance of cash,
cash equivalents and available-for-sale securities falls below $10.0 million. In
March 2000, in connection with the March 2000 amendment to the System
Procurement Agreement, the Stock Purchase Agreement was amended to reduce the
number of shares required to be purchased by Orbital to 1,250,000 from 2,500,000
shares, although that number may increase in the event of certain delays in the
launch of OrbView-4.

    ORBIMAGE has also entered into an agreement with Orbital and MacDonald,
Dettwiler and Associates Ltd. ("MDA"), a Canadian subsidiary of Orbital, under
which ORBIMAGE has acquired the exclusive worldwide





                                      F-8
<PAGE>   56
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, of which $30.0
million was paid in 1999. Approximately $140.0 million of RadarSat-2's $200
million estimated total cost will be funded by the Canadian Space Agency through
a contract with Orbital and MDA. The remaining payments will not exceed $15.0
million in 2001; $10.0 million in 2002; and $5.0 million upon the successful
on-orbit checkout of RadarSat-2.

     Amounts due to Orbital of $9.2 million and $0.6 million as of December 31,
1998 and 1999, respectively, were included in accounts payable and accrued
expenses.

     For the year ended December 31, 1999, ORBIMAGE recorded revenue of $0.5
million on contracts with Orbital.

     Two ORBIMAGE directors are also directors of Orbital, and one of ORBIMAGE's
officers is also an employee 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, $9.1 million and $10.5 million for the years ended December 31, 1997,
1998 and 1999, respectively. The OrbView-4 satellite is currently scheduled to
be launched in the first quarter of 2001 and will provide one-meter
panchromatic and four-meter multispectral imagery of the Earth. The OrbView-3
satellite will provide one-meter panchromatic, four-meter multispectral and
eight-meter hyperspectral imagery of the Earth and is currently expected to be
launched in the second quarter of 2001. 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. In 1998,
ORBIMAGE acquired the RadarSat License. RadarSat-2 will provide
high-resolution commercial radar imaging and is currently expected to be
launched in the fourth quarter of 2002.

(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.






                                      F-9
<PAGE>   57

  In consultation with its new independent auditors retained in July 1999, the
valuation of the warrants issued on February 25, 1998 in connection with the
senior notes (Note 12) 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 to 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 to 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.

Principles of Consolidation

  The consolidated financial statements include the accounts of ORBIMAGE and, in
1999, its wholly owned subsidiary. All material intercompany transactions and
accounts have been eliminated in consolidation.

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.

  ORBIMAGE recognizes revenue on the contracts to construct OrbView-3 and
OrbView-4 distributor ground stations using the percentage-of-completion method
of accounting. Revenue on these contracts is recognized based on costs incurred
in relation to total estimated costs. To the extent that estimated costs of
completion are adjusted, revenue and profit recognized from a particular
contract will be affected in the period of the adjustment. Anticipated contract
losses are recognized as they become known.

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.





                                      F-10
<PAGE>   58
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) are
based on quoted market prices.

  Two foreign distributors have issued letters of credit to ORBIMAGE as credit
enhancements for the construction of regional distributor ground stations. One
letter of credit has a face value of $13.5 million and expires on January 31,
2001 and the other letter of credit has a face value of $4.0 million and
expires on May 4, 2001.  The face values for the letters of credit approximate
fair value.

     ORBIMAGE does not have any derivative financial instruments as of December
31, 1999, 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.





                                      F-11
<PAGE>   59
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 purchasing the RadarSat-2 License pursuant
to a separate agreement with Orbital and MDA. 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 begins when the assets are 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 years ended December 31, 1998 and 1999,
capitalized interest totaled $10.9 million and $23.7 million, respectively. No
interest was capitalized for the year ended December 31, 1997.

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

<TABLE>
                 <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-12
<PAGE>   60
(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, as amended, 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, 1998 and 1999, ORBIMAGE's contribution expense was $44,000,
$0.3 million and $0.5 million, respectively. ORBIMAGE's contribution to the
Plan for the years ended December 31, 1998 and 1999 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,
1997, 1998 and 1999, 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, 1998 and 1999 were as follows (in thousands, except
share data):

<TABLE>
<CAPTION>
                                                                             YEARS ENDED DECEMBER 31,
                                                                             ------------------------
                                                                      1997             1998             1999
                                                                      ----             ----             ----
                                                                                    (RESTATED)
 <S>                                                            <C>              <C>              <C>
 Numerator for basic and diluted loss per common share:
    Net loss . . . . . . . . . . . . . . . . . . . . . . . .    $       (4,082)  $      (5,679)   $      (6,722)

    Preferred stock dividends  . . . . . . . . . . . . . . .            (2,808)        (20,859)         (13,074)
                                                                --------------   -------------    -------------
 Loss available to common stockholders . . . . . . . . . . .    $       (6,890)  $     (26,538)   $     (19,796)
                                                                ==============   =============    =============

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

 Loss per common share -- basic and diluted (1)  . . . . . .    $        (0.42)  $       (1.05)   $       (0.79)
                                                                ==============   =============    =============
</TABLE>
----------

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

(8)  SECURITIES

     As of December 31, 1998 and 1999, ORBIMAGE had available-for-sale
securities invested primarily in commercial paper with an amortized cost basis
of $34.4 million and $32.4 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, 1999, the available-for-sale securities had
maturities less than one year.

     As of December 31, 1998 and 1999, ORBIMAGE had held-to-maturity securities
invested in U.S. Treasury securities with fair values of $25.1 million and
$12.9 million, respectively and amortized cost bases of $24.9 million and $12.9
million, respectively, resulting in unrealized gains of $0.2 million and $0,
respectively. These securities are pledged as security for repayment of
interest on the senior notes. As of December 31, 1999, the held-to-maturity





                                      F-13
<PAGE>   61
securities had maturities less than one year.

     Included in cash and cash equivalents was $24.0 million and $2.4 million
of commercial paper as of December 31, 1998 and 1999, respectively.

(9)  PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment as of December 31, 1998 and 1999 consisted
of the following (in thousands):

<TABLE>
<CAPTION>
                                                                                 DECEMBER 31,
                                                                                 ------------
                                                                              1998           1999
                                                                              ----           ----
                 <S>                                                        <C>            <C>
                 Land  . . . . . . . . . . . . . . . . . . . . . . . .      $   213        $   213
                 Ground system assets  . . . . . . . . . . . . . . . .       21,450         38,189
                 Furniture and equipment . . . . . . . . . . . . . . .        1,293          2,569
                 Leasehold improvements  . . . . . . . . . . . . . . .          630          1,807
                 Accumulated depreciation and amortization . . . . . .       (7,630)       (10,841)
                                                                            -------        -------
                           Total . . . . . . . . . . . . . . . . . . .      $15,956        $31,937
                                                                            =======        =======
</TABLE>

     Depreciation and amortization totaled $1.7 million, $2.5 million and $3.2
million for the years ended December 31, 1997, 1998 and 1999, respectively.

(10)  SATELLITES AND RELATED RIGHTS

     Satellites and related rights as of December 31, 1998 and 1999 consisted
of the following (in thousands):

<TABLE>
<CAPTION>
                                                                                DECEMBER 31,
                                                                                ------------
                                                                            1998            1999
                                                                            ----            ----
                 <S>                                                   <C>             <C>
                 In service:
                   OrbView-1 ........................................   $    12,327    $    12,327
                   Accumulated depreciation..........................       (12,327)       (12,327)
                                                                         ----------    -----------
                   OrbView-2 License.................................        64,543         64,543
                   Accumulated amortization..........................       (10,040)       (18,646)
                                                                        -----------    -----------
                                                                             54,503         45,897
                 Satellites and rights in process...                        142,206        215,725
                                                                        -----------    -----------
                           Total                                        $   196,709    $   261,622
                                                                        ===========    ===========
</TABLE>

     Satellite depreciation and amortization totaled $3.9 million, $9.4 million
and $8.6 million for the years ended December 31, 1997, 1998 and 1999,
respectively.

(11)  INCOME TAXES

     ORBIMAGE's losses for income tax purposes for 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 a tax-sharing charge of $1.8 million for the year
ended December 31, 1997, as a direct charge to additional paid-in capital.





                                      F-14
<PAGE>   62
     The benefit for income taxes for the years ended December 31, 1997, 1998
and 1999 consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                                                             YEARS ENDED DECEMBER 31,
                                                                             ------------------------
                                                                       1997            1998            1999
                                                                       ----            ----            ----
                                                                                    (RESTATED)
                 <S>                                              <C>             <C>             <C>
                 Current benefit:
                   U.S. Federal.......................            $       --      $       --      $       --
                   State..............................                    --              --              --
                                                                  ----------      ----------      ----------
                           Total current benefit......                    --              --              --
                 Deferred benefit:
                   U.S. Federal.......................                 1,533           2,979           3,460
                   State..............................                   219             307             169
                                                                  ----------      ----------      ----------
                           Total deferred benefit.....                 1,752           3,286           3,629
                                                                  ----------      ----------      ----------
                           Total benefit for income taxes         $    1,752      $    3,286      $    3,629
                                                                  ==========      ==========      ==========
</TABLE>

     The income tax benefit for the years ended December 31, 1997, 1998 and
1999 were different from those computed using the statutory U.S. Federal income
tax rate as follows:

<TABLE>
<CAPTION>
                                                                            YEARS ENDED DECEMBER 31,
                                                                            ------------------------
                                                                      1997            1998             1999
                                                                      ----            ----             ----
                                                                                   (RESTATED)
                 <S>                                                <C>              <C>             <C>
                 U.S. Federal statutory rate . . . . . . . . .      (34.0)%          (34.0)%         (34.0)%
                 State income taxes  . . . . . . . . . . . . .         --             (2.3)           (1.7)
                 Other . . . . . . . . . . . . . . . . . . . .        4.0             (0.4)            0.6
                                                                 --------        ----------       --------
                 Effective rate  . . . . . . . . . . . . . . .      (30.0)%          (36.7)%         (35.1)%
                                                                 ========        =========        ========
</TABLE>

     The tax effects of significant temporary differences as of December 31,
1998 and 1999 were as follows (in thousands):

<TABLE>
<CAPTION>
                                                                           DECEMBER 31,
                                                                           ------------
                                                                       1998           1999
                                                                       ----           ----
                 Deferred tax assets:                               (RESTATED)
                 <S>                                               <C>            <C>
                    Differences in revenue recognition . . . . .   $   12,162     $   8,866
                    Net operating loss carryforward  . . . . . .        5,878         9,726
                    Other  . . . . . . . . . . . . . . . . . . .          172           830
                                                                   ----------     ---------
                 Deferred tax assets . . . . . . . . . . . . . .       18,212        19,422
                 Deferred tax liabilities:
                   Differences in the tax treatment of
                      satellites and related rights  . . . . . .       22,008        19,499
                                                                   ----------     ---------
                 Net deferred tax liability  . . . . . . . . . .   $    3,796     $      77
                                                                   ==========     =========
</TABLE>

     As of December 31, 1999, ORBIMAGE had net operating loss carryforwards
totaling $27.3 million, 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 to the senior notes and $7.9
million to the value of the warrants recorded as a debt discount. On April 22,
1999, ORBIMAGE completed an add-on debt offering raising net proceeds of
approximately $68.1 million. The debt discount and issuance costs are amortized
using the interest method as an adjustment to interest expense over the term of
the senior notes resulting in an effective yield of approximately 13.4%. As of
December 31, 1999, the senior notes had a fair value of $155.3 million as
estimated by quoted market prices.





                                      F-15
<PAGE>   63
Interest

     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 through March 1, 2000. As of December 31, 1999, held- to-maturity
securities restricted for the payment of interest on the senior notes totaled
$12.9 million.  On March 1, 2000, restricted held-to-maturity securities and
the related accrued interest were used to pay the semi-annual interest due on
the senior notes of $13.0 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,
1999 were as follows (in thousands):

<TABLE>
<CAPTION>
                                                OPERATING         CAPITAL
                                                ---------         -------
                 <S>                            <C>             <C>
                 2000..................         $   223         $     115
                 2001..................             212                 -
                 2002..................             211                 -
                 2003..................             199                 -
                 2004..................             211                 -
                 Thereafter............             952                 -
                                                -------         ---------
                                                $ 2,008               115
                                                =======
                 Less:  interest at 12%                                (7)
                 Less:  current portion                              (108)
                                                                ---------
                 Total.................                         $       -
                                                                =========
</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 772,561 shares were issued and outstanding as of December
31, 1999; (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,
1999, cumulative preferred stock dividends in arrears totaled 15,451 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





                                      F-16
<PAGE>   64
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 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, ORBIMAGE has 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 on-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 ORBIMAGE 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 ORBIMAGE 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-17
<PAGE>   65
  The activity in the preferred stock subject to repurchase was as follows for
the years ended December 31, 1997, 1998 and 1999 (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
     Preferred stock dividends paid in shares  . . .                   84,985               10,758
     Accrual of preferred stock dividends  . . . . .                        -                2,316
                                                                      -------              -------

 BALANCE AS OF DECEMBER 31, 1999 . . . . . . . . . .                  772,561              $91,563
                                                                      =======              =======
</TABLE>

(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 and as of
December 31, 1999, the warrants are exercisable. Each warrant entitles the
holder to buy 8.75164 shares of common stock. The warrants expire on March 1,
2005.





                                      F-18
<PAGE>   66
(16)  STOCK OPTION PLAN

     Through ORBIMAGE's stock option plan, as amended (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,
1997, 1998 and 1999:


<TABLE>
<CAPTION>
                                                                                   WEIGHTED        OUTSTANDING
                                                NUMBER OF       OPTION PRICE        AVERAGE            AND
                                                  SHARES         PER SHARE      EXERCISE PRICE     EXERCISABLE
                                                  ------         ---------      --------------     -----------
 <S>                                            <C>           <C>               <C>                   <C>
 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
     Granted . . . . . . . . . . . . . . .        786,323              6.25          6.25
     Exercised . . . . . . . . . . . . . .             --               --             --
     Canceled or expired . . . . . . . . .       (129,251)        4.17-6.25          4.92
                                              -----------     -------------     ---------        --------------
 OUTSTANDING AS OF DECEMBER 31, 1999 . . .      3,293,572     $   3.60-6.25     $    4.48             1,916,611
                                              ===========     =============     =========        ==============
</TABLE>

     As of December 31, 1999, the weighted average remaining contractual life
of the options outstanding was 7.8 years.

     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; $6.3 million (restated) and
$1.08 (restated), respectively, for the year ended December 31, 1998; and $7.7
million and $0.82, respectively, for the year ended December 31, 1999. Pro
forma diluted loss per common share for the years ended December 31, 1997, 1998
and 1999 would be the same as the pro forma basic loss per share shown above
since all potentially dilutive securities are antidilutive. 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.





                                      F-19
<PAGE>   67
     ORBIMAGE used the Black-Scholes options pricing model for the year ended
December 31, 1999 for options issued to employees and directors to determine
the pro forma impact to its net loss. For the years ended December 31, 1997 and
1998, ORBIMAGE used the minimum value method, which does not consider
volatility. Both models utilize 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, 1997, 1998 and 1999 were as follows:

<TABLE>
<CAPTION>
                                                                     YEARS ENDED DECEMBER 31,
                                                                     ------------------------
                                                             1997              1998              1999
                                                             ----              ----              ----
<S>                                                       <C>                <C>               <C>
Volatility . . . . . . . . . . . . . . . . . . . .               0.0%              0.0%             30.0%
Dividend yield . . . . . . . . . . . . . . . . . .               0.0%              0.0%              0.0%
Risk-free interest rate  . . . . . . . . . . . . .               6.0%              5.5%              6.6%
Expected average life  . . . . . . . . . . . . . .        4.5 years          6.0 years         6.0 years
Weighted average exercise price per share  . . . .
                                                          $     3.75         $    3.98         $    4.48
</TABLE>

  The fair value of the options granted to employees and directors during the
years ended December 31, 1997, 1998 and 1999 were estimated at $0.97 per share,
$1.26 per share and $2.69 per share, respectively.  Compensation expense
recognized during each of the years ended December 31, 1998 and 1999 on stock
options granted to employees and directors was $0.2 million. There was no
compensation expense recognized during the year ended December 31, 1997 on
stock options granted to employees and directors.

   On February 14, 2000, ORBIMAGE granted 412,347 options to purchase shares of
common stock to employees, directors and consultants. The stock options were
granted with an exercise price of $7.25 and generally vest in one-third
increments over a three-year period. ORBIMAGE will expense the value of the
2,000 compensatory options that were issued to consultants over the three-year
vesting period of the options.

(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, 1997, 1998 and 1999.

ORBIMAGE recognized revenues related to contracts with the National Aeronautics
and Space Administration of approximately $2.0 million, $9.6 million and $9.4
million for the years ended December 31, 1997, 1998 and 1999, respectively,
representing approximately 95%, 82% and 51%, respectively, of total revenues
recognized during those years.





                                      F-20
<PAGE>   68

                                 EXHIBIT INDEX

The following exhibits are filed as part of this report.

<TABLE>
<CAPTION>
                 EXHIBIT NUMBER                                   DESCRIPTION
                 ---------------------------------------------------------------------------------
                 <S>                  <C>
                 3.1+                 Second Amended and Restated Certificate of Incorporation of
                                      ORBIMAGE.

                 3.2+                 Bylaws of ORBIMAGE.

                 4.2+++               Specimen certificate of 11 5/8% Series D Senior Notes due 2005.

                 4.3+                 Indenture dated as of February 25, 1998, by and between ORBIMAGE
                                      and Marine Midland Bank, n/k/a HSBC Bank USA, as trustee, for the
                                      11 5/8% Senior Notes due 2005 of ORBIMAGE.

                 4.4++                Amended and Restated Stockholders' Agreement dated as of February
                                      25, 1998, by and among ORBIMAGE, Orbital and the holders of
                                      Series A preferred stock named therein.

                 4.5+++               Indenture dated as of April 22, 1999 by and between ORBIMAGE and
                                      HSBC Bank USA, f/k/a Marine Midland Bank, as trustee, for the 11
                                      5/8% Senior Notes due 2005 of ORBIMAGE.

                 4.6+++               Registration Rights Agreement dated as of April 22, 1999, by and
                                      among ORBIMAGE, Bear Stearns & Co. and Merrill Lynch & Co. as the
                                      initial purchasers.

                 4.7+++               Pledge Agreement dated as of April 22, 1999 by and between HSBC
                                      Bank USA, f/k/a Marine Midland Bank, as collateral agent.

                 4.8(b)               Amended and Restated Orbital Imaging Corporation 1996 Stock
                                      Option Plan as amended and restated through August 18, 1999.

                 4.9(b)               Stock Purchase Agreement dated as of October 26, 1999 by and
                                      between ORBIMAGE and Orbital.

                 10.2+**              Amended and Restated Procurement Agreement dated February 26,
                                      1998 by and between ORBIMAGE and Orbital.

                 10.3+                Amended and Restated Administrative Services Agreement dated
                                      December 31, 1997 by and between ORBIMAGE and Orbital.

                 10.4+                Non-Competition and Teaming Agreement dated as of May 8, 1997 by
                                      and between ORBIMAGE and Orbital.

                 10.5+                OrbView-2 License Agreement dated as of May 8, 1997 by and
                                      between ORBIMAGE and Orbital.

                 10.6+**              Distributor License Agreement dated as of January 31, 1997, as
                                      amended from time to time, by and between ORBIMAGE and Samsung
                                      Aerospace Industries, Ltd.

                 10.7+                Form of Indemnification Agreement between ORBIMAGE and its
                                      directors and officers.
</TABLE>





<PAGE>   69
<TABLE>
                 <S>                  <C>
                 10.10*               RadarSat-2 Master Agreement dated as of December 31, 1998 by and
                                      among Orbital, MDA and ORBIMAGE.

                 10.11*               Hyperspectral Imaging Data Agreement dated December 31, 1998 by
                                      and between Orbital and ORBIMAGE.

                 10.12*               Amendment No. 1 to Amended and Restated ORBIMAGE System
                                      Procurement Agreement dated as of December 31, 1998 by and
                                      between Orbital and ORBIMAGE.

                 10.14+++             Amendment No. 1 dated as of April 1, 1999 to the RadarSat-2
                                      Master Agreement dated as of December 31, 1998 by and among
                                      Orbital, MDA and ORBIMAGE.

                 10.15(a)**           ORBIMAGE Distribution Agreement dated March 18, 1999 by and
                                      between ORBIMAGE and NTT Data Corporation.

                 10.16(a)**           ORBIMAGE Distribution Agreement dated February 8, 1999 by and
                                      between ORBIMAGE and Geographic Information Services and
                                      Technology Transfer NetCorp, Inc.

                 10.17(a)**           Amendment No. 1 dated as of March 17, 1999 to the Distribution
                                      Agreement dated February 8, 1999 by and among ORBIMAGE and
                                      Geographic Information Services and Technology Transfer NetCorp,
                                      Inc.

                 10.18(a)**           ORBIMAGE Ground Station Contract No. OGS-99-02-01 dated as of May
                                      26, 1999 by and between ORBIMAGE and MDA.

                 10.19(b)***          OGS Order and Amendment No. 1 to ORBIMAGE Ground Stations
                                      Contract No. OGS-99-02-01 dated August 10, 1999 by and between
                                      ORBIMAGE and MDA.

                 10.20(b)***          OGS Order and Amendment No. 2 to ORBIMAGE Ground Stations
                                      Contract No. OGS-99-02-01 dated September 30, 1999 by and between
                                      ORBIMAGE and MDA.

                 10.21(b)***          Amendment No. 3 to ORBIMAGE Ground Stations Contract No.
                                      OGS-99-02-01 dated October 6, 1999 by and between ORBIMAGE and
                                      MDA.

                 10.22(b)***          ORBIMAGE Ground Station Contract Contract Number:
                                      OGS-IMI-C-01-301 dated July 26, 1999 by and between ORBIMAGE and
                                      Image Measurements, Inc.

                 10.23(b)***          ORBIMAGE Distribution Agreement dated as of August 4, 1999 by and
                                      between ORBIMAGE and Spot Image.

                 10.24(b)***          ORBIMAGE Ground Station Contract (Contract Number:
                                      OGS-Spot-C-01-300) dated as of August 4, 1999 by and between
                                      ORBIMAGE and Spot Image.

                 10.25(b)***          VAR Agreement dated as of August 4, 1999 between ORBIMAGE and
                                      Spot Image Corporation.

                 10.26(b)             Amendment No. 2 to RadarSat-2 Master Agreement dated as of
                                      October 26, 1999 among ORBIMAGE, Orbital and MDA.

                 10.27(b)***          Amendment No. 2 to Amended and Restated ORBIMAGE System
                                      Procurement Agreement dated as of September 15, 1999 between

</TABLE>





<PAGE>   70

<TABLE>
                 <S>                  <C>
                                      Orbital and ORBIMAGE.

                 10.28(b)***          Data License and Distribution Agreement dated November 3, 1999
                                      between RadarSat International, Inc. and ORBIMAGE.

                 11                   Statement re computation of loss per common share (included in
                                      the notes to condensed consolidated financial  statements).

                 27(c)                Financial Data Schedule.
</TABLE>

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

++   Incorporated by reference to Exhibit 4.9 to ORBIMAGE's registration
     statement on Form S-4, as amended (Reg. No. 333-49583).

+++  Incorporated by reference to the identically numbered exhibit to
     ORBIMAGE's quarterly report on Form 10-Q for the three months ended March
     31, 1999 (Commission file No. 333-49583).

*    Incorporated by reference to the identically numbered exhibit to
     ORBIMAGE'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, in connection with ORBIMAGE'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 Commission.

***  Confidential treatment was granted pursuant to Rule 406 under the
     Securities Act of 1933, in connection with ORBIMAGE's Quarterly Report on
     Form 10-Q for the three months ended September 30, 1999 (Commission File
     No. 333-49583). Certain portions of the exhibit have been omitted. The
     omitted portions of the exhibit have been separately filed with the
     Commission.

(a)  Incorporated by reference to the identically numbered exhibit to ORBIMAGE's
     registration statement on Form S-4, as amended (Registration No.
     333-80035).

(b)  Incorporated by reference to the identically numbered exhibit to
     ORBIMAGE's quarterly report on Form 10-Q for the three months
     ended September 30, 1999 (Commission File No. 333-49583).

(c)  Filed herewith.





<PAGE>   71
  (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.