GeoEye 10K/A 2005 Annual report (amended)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K/A

(Amendment No. 1)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2005

Commission File Number 000-50933

ORBIMAGE HOLDINGS INC.

(Exact name of registrant as specified in its charter)


Delaware		20-2759725
(State of other jurisdiction of Incorporation or organization)		(IRS Employer Identification Number)

21700 Atlantic Blvd Dulles, VA (Address of principal executive office)		20166 (Zip Code)

Registrant’s telephone number, including area code:

(703) 480-7500

Securities Registered Pursuant to Section 12(b) of the Act:


Title of Each Class		Name of each Exchange on which Registered

None		N/ A

Securities Registered Pursuant to Section 12(g) of the Act:

Common Stock, Par Value $0.01

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

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. Yes o No þ

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.

Check one: Large accelerated filer o Accelerated filer þ Non-accelerated filer o

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $241,433,657

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes þ No o

The number of shares outstanding of Common Stock, par value $0.01, as of May 1, 2006 was 17,454,654 shares.

DOCUMENTS INCORPORATED BY REFERENCE

None.

EXPLANATORY NOTE

ORBIMAGE Holdings Inc (the “Company,” “ORBIMAGE,” “we,” “us” or “our”) is filing this Amendment No. 1 on Form 10-K/A to our Annual Report on Form 10-K for the fiscal year ended December 31, 2005 (the “Report”) for the purpose of including information that was to be incorporated by reference from our definitive proxy statement pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We will not file our proxy statement within 120 days of our fiscal year ended December 31, 2005, and are, therefore, amending and restating in their entirety Items 11, 12, 13 and 14 of Part III of the Report. We anticipate filing our definitive proxy statement in May 2006 for our 2006 Annual Shareholder Meeting, which is currently scheduled to be held on June 8, 2006. We have also made two factual corrections to disclosures contained in Items 7 and 8. In addition, in connection with the filing of this Amendment and pursuant to Rules 12b-15 and 13a-14 under the Exchange Act, we are including with this Amendment a currently dated certification. Except as described above, no other amendments are being made to the Report. This Form 10-K/A does not reflect events occurring after the March 31, 2006 filing of our Report, nor does it modify or update the disclosure contained in the Report in any way other than as required to reflect the amendments discussed above and reflected below.

TABLE OF CONTENTS


Item 7.	*Management’s Discussion And Analysis of Financial Condition And Results Of Operations.*

The following discussion and analysis should be read in conjunction with “Selected Historical Consolidated Financial and Operating Data,” and our audited and unaudited consolidated financial statements and notes thereto appearing elsewhere in this Report.

Overview

ORBIMAGE Holdings Inc. (“ORBIMAGE,” the “Company” or the “Successor Company”), together with its consolidated subsidiaries, operates three satellites that collect, process and distribute digital imagery of the Earth’s surface, atmosphere and weather conditions. In addition to the OrbView-3 and OrbView-2 satellites, our satellite system also includes a U.S. ground system necessary to operate the satellites and to collect, process and distribute imagery from the satellites. We own the OrbView-3 satellite and have a license to operate and control the OrbView-2 satellite that we acquired from Orbital Sciences Corporation (“Orbital Sciences”), our former corporate parent. In addition, we maintain an image processing and production center at our headquarters in Dulles, Virginia, and an advanced image processing and geospatial information technology development and production center in St. Louis, Missouri. We also are constructing a next-generation high-resolution imagery satellite, which we have designatedGeoEye-1.GeoEye-1 is currently scheduled to be launched in the first quarter of 2007. Concurrent with the Space Imaging acquisition described below, we announced that the combined company would do business under the brand name GeoEye.

Our principal sources of revenue are the sale of satellite imagery to customers and regional distributors, and processing and production of imagery and geospatial information. As our business expands, we plan to also derive revenues from the use of value-added resellers. We have entered into several long-term sales contracts to provide imagery products and, in certain circumstances we will be entitled to receive contractual payments in advance of product delivery. We will initially record deferred revenue for the total amount of the advance payments under these contracts and recognize revenue over the contractual delivery period.

Our direct expenses include the costs of operating and depreciating the OrbView-3 satellite, the OrbView-2 license and the related ground systems, as well as construction costs related to distributor-owned ground stations. Labor expenses and depreciation represent the largest component of our direct expenses.

We have incurred losses from operations since our inception. We began generating revenues from OrbView-3 in the first quarter of 2004. At the end of the first quarter of 2004, we commenced OrbView-3 operations for the U.S. Government, our largest customer. Our operations in the succeeding quarters of 2004 and 2005 resulted in average quarterly revenues of $10 million and quarterly gross profit exceeding break-even levels. However, the Company has recorded losses from operations since inception. As discussed in more detail below, in April 2004, NGA announced a request for proposals under its NextView Second Vendor program for a second provider of next generation high-resolution satellite imagery (a competitor received the first NextView award in 2003). Because of the significance of the contract to the future of our industry, we decided to focus on our current operations and actively pursue a NextView contract award, temporarily suspending the active pursuit of potential new customers. On September 30, 2004, NGA announced that the Company had been awarded a contract under this NextView Second Vendor program to construct, launch and operate a new satellite, which we have designatedGeoEye-1. With the NextView pursuit completed, we then began to actively pursue potential customers for OrbView-3 imagery, particularly those in foreign markets. Revenues have developed more slowly than anticipated due to a number of factors, one of which is that many international customers have delayed purchasing decisions for long term contracts pending the outcome of the industry consolidation currently underway (see “Space Imaging Acquisition” discussion below). Management believes this delay will continue into 2006 until the Company and Space Imaging can effectively promote the combined capabilities and product portfolios of the two companies. Management currently projects that the combined company will generate earnings from operations for 2006.

Reorganization. ORBIMAGE Holdings Inc., a Delaware corporation, was organized on April 4, 2005 to enable its predecessor registrant and now its wholly-owned subsidiary, ORBIMAGE Inc., a Delaware corporation, to implement a holding company organizational structure. Effective June 21, 2005, the Company reorganized into a holding company structure, effected by a merger conducted pursuant to Section 251(g) of the General Corporation Law of the State of Delaware (the “Merger”).

Prior to the Merger, ORBIMAGE Holdings was a direct, wholly-owned subsidiary of ORBIMAGE Inc., and ORBIMAGE Merger Sub Inc., a Delaware corporation (the “Merger Sub”) was a direct, wholly-owned subsidiary of ORBIMAGE Holdings. Both ORBIMAGE Holdings and Merger Sub were organized for the purpose of implementing the holding company structure. Pursuant to the Merger, Merger Sub merged with and into ORBIMAGE Inc., with ORBIMAGE Inc. continuing as the surviving corporation. Each issued and outstanding share of common stock of ORBIMAGE Inc. was converted into one share of common stock of ORBIMAGE Holdings, each issued and outstanding share of common stock of Merger Sub was converted into one share of ORBIMAGE Inc. common stock, and the separate corporate existence of Merger Sub ceased, and all of the issued and outstanding shares of ORBIMAGE Holdings owned by ORBIMAGE Inc. were automatically canceled and retired. As a result of the Merger, each stockholder of ORBIMAGE Inc. became a holder of the common stock of ORBIMAGE Holdings, evidencing the same proportional interests, and ORBIMAGE Inc. became a direct, wholly owned subsidiary of ORBIMAGE Holdings. Accordingly, ORBIMAGE Holdings became the successor registrant of ORBIMAGE Inc. for SEC reporting purposes.

In connection with the Merger, ORBIMAGE Holdings assumed ORBIMAGE Inc.’s obligations under its stock incentive plans. In addition, ORBIMAGE Holdings assumed ORBIMAGE Inc.’s obligations under the various warrants issued December 31, 2003, the Warrant Agreement dated March 14, 2005 and the warrant certificates issued thereunder. Outstanding options and warrants to purchase ORBIMAGE Inc.’s common stock were automatically converted into options and warrants to purchase an equal number of shares at the same exercise price of ORBIMAGE Holdings common stock. ORBIMAGE Holdings also assumed ORBIMAGE Inc.’s registration obligations under (i) the Registration Rights Agreement, dated as of December 31, 2003, by and between ORBIMAGE Inc. and certain holders of ORBIMAGE Inc.’s outstanding securities, relating to securities issued to such holders pursuant to the terms of ORBIMAGE Inc.’s Plan of Reorganization and emergence from Chapter 11 bankruptcy on December 31, 2003 and (ii) the Registration Rights Agreement, dated as of November 16, 2004, by and between ORBIMAGE Inc. and certain holders of ORBIMAGE Inc.’s common stock and warrants issued on March 25, 2005.

The conversion of shares of capital stock in the Merger occurred without an exchange of certificates. The provisions of the certificate of incorporation, including, without limitation, those relating to the authorized capital stock and the bylaws of ORBIMAGE Holdings, are identical to those of ORBIMAGE Inc. prior to the Merger. The directors and executive officers of ORBIMAGE Holdings are the same individuals who were directors and executive officers of ORBIMAGE Inc. immediately prior to the Merger. The other liabilities of ORBIMAGE Inc., including contingent liabilities, were not assumed by ORBIMAGE Holdings in the transaction and therefore continue to be obligations of ORBIMAGE Inc., and the assets of ORBIMAGE Inc. were not transferred to ORBIMAGE Holdings and continue to be the assets of ORBIMAGE Inc.

NextView Program. The U.S. Government, through the National Geospatial-Intelligence Agency (“NGA”), announced in March 2003 that it intended to support the continued development of the commercial satellite imagery industry through subsidies for the engineering, construction and launch of the next generation of imagery satellites by two providers. This program is known as NextView. The first NextView award was made to a competitor of the Company in September 2003.

NGA announced a request for proposals from potential second providers in April 2004. The NextView Second Vendor program will allow NGA to have two separate providers of next generation high-resolution satellite imagery. On September 30, 2004, NGA announced that the Company had been awarded a contract under this NextView Second Vendor program. As the winning bidder, we are, as prime

contractor, constructing a new satellite, which we refer to asGeoEye-1. The Company estimates its total project cost (including financing and launch insurance costs) to bring theGeoEye-1 satellite into service will be approximately $502 million. Under the NextView contract the Company has with NGA, NGA will support the project with a cost share totaling approximately $237 million spread out over the course of the project and subject to various milestones.

The NextView contract also provides for NGA to order approximately $197 million of imagery products onGeoEye-1 for the six quarters afterGeoEye-1 goes into service, a period that we expect will end in September 2008. We anticipate that NGA will account for approximately half of the satellite’s imagery-taking capacity during this time, with the remaining capacity available to generate commercial sales, including sales to international ground station customers. Based on NGA’s public announcement of expected ongoing support, we expect NGA to continue to purchase our imagery products following expiration of the NextView contract.

The Company anticipates theGeoEye-1 satellite will be launched and placed into service in early 2007. The Company intends to purchase launch insurance and on-orbit insurance to cover the replacement cost of the satellite in the event of a lunch failure or if on-orbit anomalies prevent the satellite from being placed into service. The costs of such insurance cannot be determined with specificity at this time, but the Company believes the premium would cost approximately 20 percent of the coverage amount if the insurance market at the time such insurance is purchased is similar to the current market. Once theGeoEye-1 satellite is placed into service, the NextView award provides for NGA to purchase imagery from the satellite through September 30, 2008. NGA will have the first right to order images from the satellite, which would utilize slightly more than half of the satellite’s imagery-taking capacity at any given time, with the remainder available for commercial and state and foreign government sales by the Company. GeoEye-1 is intended to have a design life of seven years and sufficient fuel to operate for up to two additional years.

The Company believes that when it is launched and placed into service, theGeoEye-1 satellite will be the most modern, high-capacity, high-resolution commercial imaging satellite in the world.GeoEye-1 will be designed for less than 0.5 meter resolution, panchromatic (black and white) images, and less than 2.0 meter resolution, multi-spectral (color) images, with the capability to take images across 700,000 square kilometers of the earth’s surface every day.

Space Imaging Acquisition. On September 15, 2005, ORBIMAGE Holdings and ORBIMAGE Inc. (together, “ORBIMAGE”) entered into a definitive asset purchase agreement (the “Purchase Agreement”) to acquire the operating assets of Space Imaging LLC (“Space Imaging”) for approximately $58.5 million less amounts to be paid by Space Imaging on its existing debt prior to closing as well as certain other adjustments. Pursuant to the terms of the Purchase Agreement, ORBIMAGE entered into an Assignment of Rights and Obligations, dated as of January 10, 2006, with ORBIMAGE SI Opco Inc. (“SI Opco”), a Delaware corporation and a wholly-owned indirect subsidiary of ORBIMAGE Holdings Inc., whereby ORBIMAGE agreed to assign all of their rights and certain obligations in, to and under the Purchase Agreement to SI Opco.

Space Imaging was a leading supplier of visual information products and services derived from space imagery, with resellers and over a dozen international affiliates and ground stations around the world providing satellite imagery and imagery products to a wide variety of governmental and commercial customers both in the U.S. and internationally. Space Imaging launched IKONOS, the world’s first one-meter resolution, commercial Earth imaging satellite, on September 24, 1999. The Company made a $6.0 million initial payment to the sellers in September 2005 and had also incurred approximately $1.8 million of acquisition-related out-of-pocket expenditures through December 31, 2005.

On January 10, 2006, SI Opco completed the acquisition of Space Imaging pursuant to the terms of the Purchase Agreement. The $58.5 million cash purchase price was funded with a combination of (i) the issuance of $50 million of indebtedness under the Credit Agreement (as described below); (ii) debt repayment made by Space Imaging prior to the closing; and (iii) cash of Space Imaging LLC acquired in the acquisition.

Chapter 11 Reorganization. On April 5, 2002, Orbital Imaging Corporation (the “Predecessor Company”), filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code (“Chapter 11”) in the United States Bankruptcy Court for the Eastern District of Virginia (the “Bankruptcy Court”). The Predecessor Company continued business operations asdebtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of Chapter 11 and orders of the Bankruptcy Court.

On February 11, 2003, the Predecessor Company signed a Settlement Agreement with the Creditors’ Committee and Orbital Sciences to facilitate the Predecessor Company’s emergence from its Chapter 11 reorganization proceeding. Under the Settlement Agreement, the Predecessor Company agreed to suspend its pending litigation with Orbital Sciences in exchange for additional working capital and other consideration to be provided by Orbital Sciences. The Settlement Agreement provided for mutual releases of all claims among the parties, including the Predecessor Company and a significant majority of its bondholders and preferred stockholders, Orbital Sciences, and certain officers/directors of Orbital Sciences. The releases became effective upon launch of the OrbView-3 satellite by Orbital Sciences and payment by Orbital Sciences of $2.5 million to the Predecessor Company (the “Orbital Sciences Payment”). In exchange, Orbital Sciences received new notes that were equal to the Orbital Sciences Payment and rankedpari passuwith the new notes to be issued to the Predecessor Company’s pre-bankruptcy unsecured creditors. As part of the Settlement Agreement, if OrbView-3 was not launched by April 30, 2003 or on-orbit check out was not successfully completed by July 31, 2003, Orbital Sciences would pay the Predecessor Company delay penalties. Orbital Sciences also agreed to defer certain payment obligations of the Predecessor Company and to forgive others. The Predecessor Company obtained formal approval of the Settlement Agreement from the Bankruptcy Court on February 19, 2003.

The Successor Company, ORBIMAGE Inc., officially emerged from bankruptcy protection effective December 31, 2003. As part of the final reorganization, on December 31, 2003, all existing notes and shares of capital stock of the Predecessor Company were cancelled. Holders of the Predecessor Company’s old notes and the Predecessor Company’s general unsecured creditors received $50 million in new Senior Subordinated Notes due 2008 and 6 million shares of common stock. Holders of certain debt obligations incurred during the Company’s bankruptcy received approximately $19 million in new Senior Notes due 2008. Holders of the Company’s Series A Preferred Stock received warrants to purchase up to approximately 319,000 shares of common stock of ORBIMAGE at an exercise price of $28.22 per share.

In connection with the emergence from Chapter 11, ORBIMAGE reflected the terms of its Plan of Reorganization in its financial statements in accordance with American Institute of Certified Public Accountants Statement of Position 90-7, “Financial Reporting by Entities in Reorganization Under the Bankruptcy Code” (“SOP 90-7”) with respect to financial reporting upon emergence from Chapter 11 (“Fresh-Start accounting”). Upon applying Fresh-Start accounting, a new reporting entity (the “Successor Company”) is deemed to be created on the Effective Date and the recorded amounts of assets and liabilities are adjusted to reflect their estimated fair values. Such fair values represent our best estimates based on independent valuations. These valuations were based on a number of estimates and assumptions which were inherently subject to significant uncertainties and contingencies beyond our control. The reported historical financial statements of the Predecessor Company for the years ended December 31, 2003 and prior will not be comparable to those of the Successor Company.

As of April 5, 2002, the date of the Predecessor Company’s voluntary petition for reorganization under Chapter 11, the Predecessor Company adopted the financial reporting and accounting policies required for companies operating pursuant to Chapter 11 as prescribed in SOP 90-7. We have reported revenues, expenses, gains and losses relating to the reorganization separately in the accompanying statement of operations for the year ended December 31, 2003.

As a general rule, all of the Predecessor Company’s contracts and leases continued in effect in accordance with their terms, unless otherwise ordered by the Bankruptcy Court. The Bankruptcy Court provided the Predecessor Company with the opportunity to reject any executory contracts or unexpired leases that were burdensome or assume any contracts or leases that were favorable or otherwise necessary

to its business operations. Certain executory contracts were rejected by the Predecessor Company during the course of the bankruptcy proceedings.

Industry and Business Considerations

As a government contractor, we are subject to U.S. Government oversight. The government may inquire about and investigate our business practices and audit our compliance with applicable rules and regulations. The government could make claims against us if the results of such audits or investigations warrant such action. Under government procurement regulations and practices, an indictment of a government contractor could result in that contractor being fined and/or suspended from bidding on or being awarded new government contracts for a period of time or debarment for a period of time. We are not aware of any such audits or investigations against us at this time. We are also exposed to risks associated with U.S. government contracting such as technological uncertainties and obsolescence, and dependence on Congressional appropriation and allotment of funds each year. The nature of our products and services exposes us to certain risks associated with state of the art technologies such as delays, cost growth and product failure.

The nature of our international business also makes us subject to the export control regulations of the U.S. Department of Commerce. If these regulations are violated, it could result in monetary penalties and denial of export privileges. We are currently not aware of any violations of export control regulations which could have a material adverse effect on our business or our financial position.

Critical Accounting Policies

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. As such, we are required to make certain estimates, judgments and assumptions that we believe are reasonable based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Management bases their estimates and judgments on historical experience and on various other factors. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in those estimates. The following represent what we believe are the critical accounting areas that require the most significant management estimates and judgments.

Revenue Recognition and Contract Accounting. ORBIMAGE’s principal source of revenue is the sale of satellite imagery to customers, value added resellers and distributors. Such sales often require us to provide imagery over the term of multi-year sales contracts. Accordingly, we recognize revenues on imagery contracts on a straight-line basis over the delivery term of the contract. Deferred revenue is recorded when payments are received in advance of the delivery of imagery. As stated previously, NGA will support the NextView program with a cost share totaling approximately $237 million spread out over the course of the construction phase of the project and subject to various milestones. These NGA payments are recorded as deferred revenue when received and will be recognized as revenue from when theGeoEye-1 satellite is placed into service through the initial imagery purchase period under contract, which currently is through September 30, 2008.

A portion of our business is derived from long-term fixed-price contracts with the U.S. Government and commercial customers. Revenue under these contracts is recognized using the percentage of completion method of accounting. Such revenues are recorded based on the percentage of costs incurred in the applicable reporting period as compared to the most recent estimates of costs to complete each project. These incurred costs approximate the output of deliverables to our customers. Estimating future costs and, therefore, revenues and profits, is a process requiring a high degree of management judgment. Management bases its estimate on historical experience and on various assumptions that are believed to be reasonable under the circumstances. Costs to complete include, when appropriate, labor, subcontracting costs and materials, as well as an allocation of indirect costs. Reviews of the status of contracts are performed through periodic contract status and performance reviews. In the event of a change in total

estimated contract cost or profit, the cumulative effect of such change is recorded in the period in which the change in estimate occurs. ORBIMAGE has not incurred any material changes in estimates on its imagery and image processing contracts with the U.S. Government.

Some of our contracts with NGA consist of multiple elements. For contracts consisting of multiple elements, we identify these elements and consider whether the delivered item(s) has value to the customer on a standalone basis, whether there is objective and reliable evidence of the fair value of the undelivered item(s) and, if the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in our control. We evaluate such contracts to ensure that, for purposes of determining standalone value, performance of any one element of the contract is not directly contingent on performance of the other contract elements. Revenue recognition may be impacted if nonperformance of one contract element causes the customer to terminate the other element(s). Such contracts are also subject to, among other things, termination rights, refunds of payments due to unsatisfactory performance and uncertainty regarding availability of future funding.

Receivables. A significant amount of judgment is required by management in estimating the reserves required for receivables that are potentially uncollectible. We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and the customer’s current credit worthiness, as determined by our review of their current credit information. We regularly monitor collections and payments from our customers and maintain a provision for estimated credit losses based upon our historical experience and any specific customer collection issues that we have identified. If collection of the receivable is not reasonably assured at the time services are performed, we do not initially record the revenue, but rather record an allowance for customer credits to offset the receivable. If there is a change in the customer’s financial status or the receivable is collected, revenue is recorded at that time. While such credit losses described above have historically been within our expectations and the provisions established, we cannot guarantee that we will experience the same credit loss rates that we have estimated or historically experienced. As such, additional charges could be incurred in the future to reflect differences between estimated and actual collections.

Long-Lived Assets. Depreciation of the capitalized costs of our satellites begins when the satellites are placed into service. We depreciate the ground systems assets over the estimated lives of the related satellite assets. Depreciation and amortization are recognized using the straight-line method. We amortized the cost of the OrbView-2 satellite over the 7.5 year design life of the satellite. This amortization ended in the second quarter of 2005. We began depreciating the cost of the OrbView-3 satellite in February 2004.

In assessing the recoverability of our satellites, fixed assets and other long-lived assets, we evaluate the recoverability of those assets in accordance with the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” This Statement requires that certain long-lived fixed assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Changes in estimates of future cash flows could result in a write-down of the asset in a future period. Estimated future cash flows could be impacted by, among other things, changes in estimates of the useful lives of the assets (e.g., degradation in the quality of images downloaded from the satellite), changes in estimates of our ability to operate the assets at expected levels (e.g., due to intermittent loss of satellite transmissions) and by the loss of one or several significant customer contracts.

Goodwill. We evaluate the carrying value of goodwill on an annual basis in the fourth quarter of each year and when events and circumstances warrant such a review in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 requires the use of fair value in determining the amount of impairment, if any, for recorded goodwill. In assessing the recoverability of goodwill (which represents the Company’s excess reorganization value upon emergence from Chapter 11), we calculate the

fair market value of the Company based on theyear-end closing stock price. If the carrying value of goodwill exceeds the fair market value, impairment is measured by comparing the derived fair value of goodwill to its carrying value, and any impairment determined is recorded in the current period. An impairment test was performed on recorded goodwill and it was determined that no impairment existed at December 31, 2005 and 2004.

Results of Operations

As discussed above, the Company emerged from bankruptcy protection and adopted fresh-start accounting effective December 31, 2003. References to “Predecessor Company” refer to the Company prior to December 31, 2003. References to “Successor Company” refer to the Company on and after December 31, 2003, after giving effect to the cancellation of the then-existing common stock and the issuance of new securities in accordance with the Plan of Reorganization and application of fresh-start reporting. As a result of the fresh-start reporting, the Successor Company’s financial statements are not comparable with the Predecessor Company’s financial statements.

Revenues. Revenues for the years ended December 31, 2005, 2004 and 2003 were $40.7 million, $31.0 million and $9.2 million, respectively.

Approximately half of the $9.7 million increase in 2005 revenues resulted from additional sales of imagery and production services to NGA under the ClearView program in excess of the original contract award. The remaining increase resulted from the timing of the commencement ofOrbView-3 operations for the U.S. Government.OrbView-3 operations commenced effective in March 2004 under the NGA ClearView program for imagery and infrastructure enhancements, and in June 2004 for production services. Revenues generated fromOrbView-3 products and services were approximately $35.9 million and $26.2 million in 2005 and 2004, respectively. Revenues have developed more slowly than anticipated due to a number of factors, one of which is that many international customers have delayed purchasing decisions for long term contracts pending the outcome of the industry consolidation currently underway (see “Space Imaging Acquisition” discussion above). Management believes this delay will continue into 2006 until the Company and Space Imaging can effectively promote the combined capabilities and product portfolios of the two companies. In 2006, our contracts under the ClearView program provide for NGA to pay us a minimum of $36 million for IKONOS-related imagery products and $13 million forOrbView-3 related imagery products.

The significant increase in 2004 revenues as compared to 2003 was primarily due to the commencement ofOrbView-3 operations for the U.S. Government and our major international customers. In February 2004, theOrbView-3 satellite commenced regular operations for our regional distributor in Japan. In March 2004, we were awarded a contract to supply NGA with imagery and value-added products from theOrbView-3 satellite. NGA’s ClearView award provided us with guaranteed minimum revenues of $27.5 million over two years, of which approximately $10.5 million and $12 million represented minimum commitments to purchase imagery in years one and two, respectively. The contract also provided for NGA to reimburse approximately $5 million for infrastructure costs we incurred to provide the required imagery. In June 2004, we received a task order to provide $6.4 million of production services to NGA under the ClearView program during the first year of the contract.

Direct Expenses. Direct expenses include the costs of operating and depreciating theOrbView-3 satellite, the OrbView-2 license and the related ground stations and construction costs related to theOrbView-3 distributor-owned ground stations. Labor expenses and depreciation represent the largest components of direct expenses. Direct expenses for the years ended December 31, 2005, 2004 and 2003 were $38.1 million, $33.8 million and $10.7 million, respectively.

Approximately $3.1 million of the increase in direct expenses in 2005 resulted from the timing of the commencement of the depreciation of theOrbView-3 satellite in February 2004. ORBIMAGE recorded depreciation expense on theOrbView-3 satellite and related ground systems of $21.7 million and $18.6 million for the year ended December 31, 2005 and 2004, respectively. In addition, $1.7 million of the 2005 increase in direct costs resulted from the recognition of ClearView infrastructure enhancement

costs that were incurred in 2004 but had been deferred as of December 31, 2004 and amortized over the remaining contract period once the enhancements were accepted by NGA. These increases were offset by a $0.7 million decrease in OrbView-2 depreciation expense that resulted from the satellite reaching the end of its depreciable life in the second quarter of 2005.

Direct expenses increased by $23.1 million 2004 as compared to 2003. Approximately $18.6 million of the increase consisted of depreciation expense related toOrbView-3 and its related ground systems which were placed in service in early 2004. Approximately $3.8 million of the remaining increase resulted principally from increased staffing requirements in connection with the commencement of service to ourOrbView-3 customers in the U.S. and overseas. Another $2.5 million resulted from increases in materials, insurance and other direct costs associated withOrbView-3 operations that commenced in 2004. These increases were offset by a $2.4 million reduction in costs incurred related to the construction of a distributor ground station which was completed in early 2004.

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 the Company. SG&A expenses for the years ended December 31, 2005, 2004 and 2003 were $12.3 million, $11.7 million and $4.7 million, respectively. SG&A expenses increased by $2.3 million in 2005 as compared to 2004 due to increased sales and marketing expenditures to pursue business opportunities, increased staffing of both the sales and administration functions, and increased expenses associated with regulatory compliance. These increases were offset by a $1.9 million reduction in compensation expense associated with the amortization of restricted stock. Approximately half of the $7.0 million increase in SG&A expenses between 2004 and 2003 resulted from the amortization of deferred compensation associated with stock awards granted to employees. Another $0.7 million of the increase resulted from internal labor costs and consultant expenses associated with preparing the successful NextView proposal. The remaining variance consisted primarily of an increase in labor costs of $0.8 million and an increase of $1.3 million resulting from non-labor expenses associated with the commencement ofOrbView-3 business operations in 2004.

Loss on Sale of Satellite License. On September 12, 2003, the Predecessor Company signed a settlement agreement with MDA concerning its remaining marketing rights in the long-delayed CanadianRadarSat-2 satellite program. The Predecessor Company had originally paid $30 million to MDA to acquire an exclusive territorial license to distribute and sellRadarSat-2 imagery in North America (except Canada), and was obligated to pay an additional $10 million to MDA as final payment prior to the Chapter 11 filing. Under the terms of the settlement agreement, the Predecessor Company received $10 million from MDA on October 1, 2003, $1 million on October 1, 2004 and $1 million on October 1, 2005. In exchange, the Predecessor Company agreed to end its dispute with MDA and return its limited licenses in RadarSat-2 back to MDA, the prime contractor for the program. The Predecessor Company recorded a loss on the sale of theRadarSat-2 Territorial License of $18.2 million in 2003.

Interest Expense, net. Net interest expense for the year ended December 31, 2005 was $14.1 million. Interest expense on both the Senior Notes and the Senior Subordinated Notes was payable in kind at an annual rate of 13.625 percent through December 31, 2004. Beginning on January 1, 2005, the Senior Notes and Senior Subordinated Notes incurred interest at an annual rate of 11.625 percent, payable in cash on a semiannual basis. The 2005 interest expense amount represents interest expense of $13.4 million on the Company’s Senior Floating Rate Notes (which includes $1.4 million of amortized prepaid financing costs and excludes $5.8 million of capitalized interest expense) and $4.6 million of interest expense incurred on ORBIMAGE Inc.’s Senior Notes and Senior Subordinated Notes, which were repaid in the first quarter and second quarter of 2005, respectively. Interest income for 2005 was approximately $3.9 million.

We recorded net interest expense of approximately $10.3 million during the year ended December 31, 2004, which represents interest incurred on the Senior Notes and Senior Subordinated Notes. The Predecessor Company recorded net interest expense of $1.3 million for the year ended December 31, 2003. Interest expense in 2003 represented interest expense on debt incurred for the purchase of insurance

coverage for the combined risk of launch, satellite checkout and on-orbit satellite operations with respect toOrbView-3. The total amount borrowed was approximately $17.8 million. Interest accrued on the Insurance Loan at an annual rate of 13.625 percent and was added to the principal balance. This loan was converted to New Senior Notes on the effective date of the emergence from Chapter 11. Net interest expense in 2003 represents interest obligations incurred under the Predecessor Company’s Senior Notes. The Predecessor Company ceased recognizing interest expense on the date the Predecessor Company filed under Chapter 11. If the Predecessor Company had recorded interest expense on its existing debt during the Chapter 11 period, interest expense for the year ended December 31, 2003 would have increased by approximately $28.0 million.

Loss from Early Extinguishment of Debt. On March 31, 2005, ORBIMAGE repaid its Senior Notes due 2008 out of existing cash received pursuant to the exercise of warrants by certain investors during the first quarter of 2005. This payment included $0.6 million representing interest expense that would have been payable through June 30, 2005, the date of the initial interest payment, in accordance with the terms of the associated indenture agreement. Included in the loss amount is approximately $1.2 million which represents the write-off of the unamortized portion of consent fee payments paid in 2004 to the note-holders to allow the Company to use its cash flows from existing operations toward project costs for theGeoEye-1 satellite, and approximately $0.9 million represents payments to certain executive officers for refinancing the notes prior to their maturity in 2008 under the terms of an employment agreement entered into in October 2003.

Unrealized Gain on Derivative Instrument. In June 2005, the Company entered into an interest rate swap agreement, effectively hedging $250 million of its LIBOR-based floating rate term debt for three years. As a result of entering into the agreement, the interest rate to be paid by the Company relating to the hedged portion of its debt will be fixed at 13.75 percent rather than on a three-month LIBOR plus 9.5 percent. Although the interest rate swap agreement provides the Company with an economic hedge against interest rate risk, the Company, after reviewing the applicable derivative accounting rules, determined that it did not have adequate documentation at inception of the interest rate swap agreement to qualify for hedge accounting treatment under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended. Since the Company’s derivative transaction does not qualify for hedge accounting treatment, the Company is applying “mark to market” accounting, the effect of which is the inclusion in net income of any increases or decreases in the fair value of derivative instruments. The Company recorded an unrealized gain on this derivative instrument of $2.3 million for the year ended December 31, 2005.

Reorganization Items. In accordance with SOP 90-7, reorganization items have been segregated from continuing operations in the Statement of Operations. The largest component of reorganization items for 2003 is a gain of $104.8 million that was recorded on the discharge of the Predecessor Company’s old Senior Notes. Reorganization items incurred during 2003 also include legal and advisory fees incurred in conjunction with the Chapter 11 process of $6.1 million.

Benefit for Income Taxes. No income tax benefit was recorded for the years ended December 31, 2005, 2004 and 2003 due to uncertainty regarding sufficiency of taxable income in future periods. As of December 31, 2005, we had net operating loss carry-forward totaling approximately $193 million, which expire beginning in 2021. Such net operating loss carry-forwards are subject to certain limitations and other restrictions.

Backlog. Total negotiated backlog excluding the NGA’s expected remaining contribution relating toGeoEye-1 construction costs was $219.4 million at December 31, 2005. This amount includes both funded backlog (unfilled firm orders for our products and services for which funding has been both authorized and appropriated by the customer) and unfunded backlog (firm orders for which funding has not yet been appropriated). The contracts are generally for terms of up to four years, and the customers have options to renew. Negotiated backlog does not include unexercised options or task orders to be issued under indefinite-delivery/indefinite quantity (“IDIQ”) type contracts. Total funded backlog was $22.3 million at December 31, 2005. In addition, the NGA’s share ofGeoEye-1 construction costs of up to $237.4 million

will be recognized as revenue on a straight-line basis over the imagery delivery term of the program afterGeoEye-1 has been placed into service.

Liquidity and Cash Flows

Net cash provided by operating activities was $125.5 million in 2005 and $27.5 million in 2004 while cash used for operating activities was $3.0 million in 2003. Net income, after adjustments for non-cash items such as depreciation, amortization, unrealized gain on derivative instrument, loss on early extinguishment of debt and stock compensation, was $3.0 million. Changes in working capital provided cash of $127.3 million and were primarily attributable to a $103.5 million increase in deferred revenue, which represents milestone payments received from NGA for the NextView program through December 2005. The Company has achieved each of the program milestones on the NextView contract from inception through December 31, 2005 in accordance with the milestone schedule. The Company has received approximately $129.6 million of NextView milestone payments from NGA since inception, which represents all of the payments that were currently available under the milestone schedule.

In 2004, net income after adjustments for non-cash items was $13.2 million while changes in working capital provided $14.3 million in net operating cash. Working capital in 2004 was generated principally from the commencement ofOrbView-3 operations. The Predecessor Company’s net loss after adjustments for non-cash items was $10.2 million in 2003, while changes in working capital provided operating cash of $5.8 million. During 2003, the most significant source of operating cash was an $8.5 million payment received for completion of the distributor ground station in Japan.

Investing activities used cash of $179.6 million in 2005, $3.5 million in 2004 and $9.1 million in 2003. Capital expenditures associated with the NextView program were approximately $172.5 million for the year ended December 31, 2005. This amount includes $47.5 million of amounts payable to subcontractors at the end of 2004 which were paid in 2005, but does not include $30.0 million of 2005 capitalized NextView expenditures payable to subcontractors which will be paid in 2006. Cash used for investing activities in 2005 also includes an initial payment of $6.0 million for the purchase of Space Imaging and approximately $1.8 million of acquisition-related out-of-pocket expenditures. Most of the 2004 capital expenditures represent internal salary and related costs as well as external costs associated with the in-orbit checkout ofOrbView-3 and related systems and costs incurred to build theGeoEye-1 satellite. During 2004, the Company also incurred an additional $47.5 million of capitalizedGeoEye-1 costs which were owed to the program’s subcontractors at December 31, 2004 and were paid in 2005. In 2003, the Predecessor Company used $21.4 million for capital expenditures, $15.6 million of which was used to purchase launch insurance forOrbView-3. Offsetting those expenditures was the receipt of $10 million from MDA for the sale of the territorial license to distribute and sellRadarSat-2 imagery and $2.3 million of launch delay payments paid to the Predecessor Company by Orbital Sciences as a result of delays in launch and check-out of theOrbView-3 satellite.

The system procurement agreement with Orbital for our existing satellite system is now largely complete save for post-launch on-orbit milestone payments we may owe to Orbital in connection with the ongoing performance of ourOrbView-3 satellite. Under the system procurement agreement, as modified by the settlement agreement, a $1.5 million on-orbit milestone payment was paid in May 2005, the one-year anniversary of the date of acceptance by ORBIMAGE of theOrbView-3 system. In addition, annual post-launch on-orbit payments to Orbital Sciences were reduced and will now be payable in maximum amounts of up to $1.125 million on each of the first five anniversaries of the acceptance by ORBIMAGE of theOrbView-3 system, for a total possible maximum obligation of $6.375 million. The Company made an on-orbit incentive payment of $1.125 million payment to Orbital Sciences in 2005.

Net cash provided by financing activities was $220.0 million in 2005. In February 2005, ORBIMAGE commenced a rights offering in which the Company issued to its existing shareholders transferable subscription rights to purchase up to an aggregate of approximately 3.26 million investment units, each consisting of one share of common stock and warrant to purchase a share of common stock at a cash exercise price of $10.00 per share. The subscription rights expired on March 14, 2005 and the offering was

oversubscribed. ORBIMAGE received approximately $32.6 million from the rights offering on March 24, 2005. The Company also received $42.5 million of proceeds from the exercise of warrants which were issued in November 2004 to certain private investors associated with a private placement of equity that took place in the fourth quarter of 2004.

On June 29, 2005, ORBIMAGE Holdings Inc. issued $250 million aggregate principal amount of Senior Secured Floating Rate Notes due 2012 (the “Notes”). The Notes were offered in a private placement to certain qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933. The purpose of the offering was to contribute the proceeds to the capital of its wholly-owned subsidiary, ORBIMAGE Inc., to be used for construction costs for theGeoEye-1 satellite, to mandatorily redeem all of the outstanding Senior Subordinated Notes of ORBIMAGE Inc. that were to mature in 2008 and for general working capital purposes. In connection with this issuance, on June 29, 2005, ORBIMAGE Holdings entered into a Security Agreement with The Bank of New York (“BONY”), as Collateral Agent, pursuant to which ORBIMAGE Holdings granted a first priority lien on and security interest in substantially all of the assets of ORBIMAGE Holdings. ORBIMAGE Inc. was prohibited from issuing a guarantee of the Notes at the date of issuance due to restrictions in the indenture governing its Senior Subordinated Notes.

The Notes were issued at a discount of two percent of total principal. Consequently, ORBIMAGE Holdings received $245 million of cash proceeds at closing. Concurrently with the closing of the offering, ORBIMAGE Holdings entered into an escrow agreement with BONY as Trustee and Escrow Agent whereby ORBIMAGE Holdings deposited $126.9 million into an escrow account, to remain until such time as ORBIMAGE Inc. could issue a guarantee of the Notes. Approximately $8.9 million was used to pay certain transaction-related expenses. The remaining $109.5 million was contributed by ORBIMAGE Holdings to the capital of ORBIMAGE Inc. As a result of this capital contribution, on June 30, 2005, ORBIMAGE Inc. had “Unrestricted Cash” as defined in the indenture governing its existing Senior Subordinated Notes in an amount sufficient to require ORBIMAGE Inc. to redeem the Senior Subordinated Notes pursuant to the mandatory redemption provisions of that indenture. ORBIMAGE Inc. redeemed the Senior Subordinated Notes on July 6, 2005. Upon redemption of the Senior Subordinated Notes, ORBIMAGE Inc. provided its guarantee of the Notes, and the escrow was released to ORBIMAGE Holdings on July 11, 2005. The Company recorded a loss of approximately $2.7 million relating to the early extinguishment of the Senior Subordinated Notes during 2005. Included in the loss amount is a prepayment penalty of $0.6 million in accordance with the terms of the associated Senior Notes indenture agreement. Also, approximately $1.2 million represents the write-off of the unamortized portion of consent fee payments paid in 2004 to the noteholders to allow the Company to use its cash flows from existing operations toward project costs for theGeoEye-1 satellite, and $0.9 million represents payments to certain executive officers for refinancing the Senior Notes and Senior Subordinated Notes prior to their maturity in 2008 under the terms of an employment agreement entered into in October 2003.

The Notes will bear interest at a rate per annum, reset semi-annually, equal to the greater of six-month LIBOR or three percent, plus a margin of 9.5 percent. ORBIMAGE Holdings has entered into an interest rate swap arrangement pursuant to which it has fixed its effective interest rate under the Notes at 13.75 percent through July 1, 2008. The fair value of this cash flow hedge is approximately $2.3 million and has been recorded in other assets in the consolidated balance sheets as of December 31, 2005. Under the instruments governing our senior floating rate notes, we are prohibited from paying dividends until the principal amount of all such notes have been repaid.

On June 29, 2005, ORBIMAGE Holdings entered into a Registration Rights Agreement under which ORBIMAGE Holdings was required to file a registration statement within 180 days after the issuance date of the Notes, enabling holders to exchange the notes for publicly registered notes with substantially identical terms. The failure to comply with the obligations under this agreement requires ORBIMAGE Holdings to pay additional interest on the Notes at an annual rate of one percent after the first nine months, beginning December 27, 2005.

Net cash provided by financing activities was $22.2 million in 2004 and $20.2 million in 2003. In conjunction with the NextView program, on November 16, 2004, ORBIMAGE completed a private placement in which the Company issued investment units composed of 3.25 million shares of common stock and warrants to purchase 4.25 million shares of common stock for a purchase price of $10 per share. At the closing of the private placement, the Company received $32.5 million in gross proceeds. Additionally, ORBIMAGE incurred approximately $10.2 million of investment management fees and legal and other professional costs associated with the debt offerings that was executed in 2005. The 2003 amount consists of $19.1 million of loan proceeds that were used to procure launch insurance forOrbView-3 and $2.5 million of proceeds loaned by Orbital Sciences to the Predecessor Company. The insurance loan was converted into ORBIMAGE Senior Notes and the Orbital Sciences loan was converted into Successor Company Senior Subordinated Notes upon emergence from bankruptcy.

Our operations are subject to certain risks and uncertainties that are inherent in the remote sensing industry. We have incurred net losses since inception, and we believe that we will continue to do so in 2006. As of December 31, 2005, we had $226.5 million of unrestricted cash and cash equivalents. As stated previously, approximately $30.0 million of this balance is committed for payments to subcontractors under the NextView program. The Company’s performance under the NextView Contract requires significant capital expenditures to develop, manufacture and launch theGeoEye-1 satellite. Funding of the Company’s operations and obligations under the NextView Contract requires approximately $265 million over a period of approximately two and one half years. The Company is using funds for these expenditures from a combination of sources, including (i) completed equity issuances totaling $65 million; (ii) $155 million of additional indebtedness; and (iii) cash flow generated by the Company’s existing business in the amount of approximately $45 million. ORBIMAGE secured its equity commitment through the private placement of equity which closed in November 2004 and the subscription rights offering which closed in March 2005, and secured its debt commitment through the issuance of the Notes described above.

Revenues have developed more slowly than anticipated due to a number of factors, one of which is that many international customers have delayed purchasing decisions for long term contracts pending the outcome of the industry consolidation currently underway (see “Space Imaging Acquisition” discussion above). Management believes this delay will continue into 2006 until the Company and Space Imaging can effectively promote the combined capabilities and product portfolios of the two companies. Management does not believe the delay in revenues will affect the Company’s ability to fund its portion of the NextView program.

Since our emergence from Chapter 11, we have funded our non-NextView capital expenditures and cash flows from operating activities using cash on hand and revenues from existing contracts. Our cash flows from operating activities have been positive since the commencement of fullOrbView-3 operations at the end of the first quarter of 2004. Our operating cash flows became more predictable since 2003 due to payments of guaranteed minimum amounts on our primary imagery contracts by all of our major customers, including the U.S. Government. We believe that we currently have sufficient resources to meet our operating requirements through the next twelve months, but our ability to be profitable and generate positive cash flow through our operations beyond that period is dependent on the continued expansion of commercial services, adequate customer acceptance of our products and services and numerous other factors.

Capital Structure and Resources

At December 31, 2005, our total long-term debt consisted of $250 million of Senior Secured Floating Rate Notes due 2012. On January 10, 2006, ORBIMAGE Holdings, SI Opco and ORBIMAGE SI Holdco Inc. (“SI Holdco”), an indirect wholly owned subsidiary of ORBIMAGE Holdings, entered into a Credit Agreement (the “Credit Agreement”) with the Lenders named therein, Credit Suisse, Cayman Islands Branch, as Administrative Agent and The Bank of New York, as Collateral Agent. The Credit Agreement provides for SI Opco to draw down senior secured term loans of $50 million in full on the closing date with a maturity date of July 1, 2008, at which time the principal amount of the loans will be

paid in full. The interest rate per annum applicable to loans is the Eurodollar Rate plus an applicable margin. At no time will the Eurodollar Rate be less than 3.00 percent or more than 5.00 percent.

SI Opco will also be required to prepay the loans with 100 percent excess cash flow of SI Holdco and its consolidated subsidiaries, calculated on a quarterly basis. SI Opco will be required to prepay the loans with, subject to certain exceptions and thresholds, 100 percent of the net proceeds of certain asset sales or dispositions, certain indebtedness, certain equity sales or issuances, insurance recoveries and condemnation events. Voluntary prepayments of the loans are permitted in whole or in part, in minimum amounts and subject to certain other limitations and penalties as set forth in the Credit Agreement.

The loans and other obligations under the Credit Agreement are guaranteed by SI Holdco Inc. and secured by substantially all of the tangible and intangible assets (including, without limitation, intellectual property, material owned real property and all of the capital stock of SI Opco) of each of SI Holdco and SI Opco pursuant to a Security Agreement, dated January 10, 2006, between SI Holdco, SI Opco and The Bank of New York, as Collateral Agent.

The Credit Agreement requires SI Holdco and SI Opco to comply with certain covenants restricting or limiting their ability to, among other things (i) guarantee or incur indebtedness and grant liens on our assets; (ii) engage in mergers, acquisitions or other business combinations; (iii) sell assets; (iv) declare dividends or redeem or repurchase capital stock; (v) make loans or investments; (vi) restrict our ability to pay dividends or make other shareholder distributions; (vii) enter into transactions with affiliates; (viii) amend or otherwise alter terms of certain material agreements and certain debt; (ix) make capital expenditures; (x) engage in sale leaseback transactions; (xi) change our fiscal reporting periods; and (xii) agree with other creditors not to grant liens on our properties. The Credit Agreement also contains certain customary representations and warranties, affirmative covenants and events of default, including change of control, cross-defaults to other debt and material judgments.

At December 31, 2005, we had contractual commitments to repay debt and to make payments under operating leases. Payments due under these long-term obligations and commitments are as follows:


	Payments Due by Period

			Less Than						After
	Total		1 Year		1-3 Years		4-5 Years		5 Years

	(In thousands)
Long-term debt	$	480,938	$	34,375	$	69,688	$	72,500	$	304,375
Operating lease commitments		6,990		1,106		2,292		2,046		1,546

Total contractual cash obligations(1)	$	487,928	$	35,481	$	71,980	$	74,546	$	305,921


(1)	Excludes annual post-launch OrbView-3 on orbit payments of up to $1.125 million per year for four years for which actual payment amounts are contingent on satellite performance metrics.

Under the Plan of Reorganization as confirmed by the Bankruptcy Court, all of the existing preferred stock, common stock and any options and warrants outstanding were cancelled as of the effective date of the reorganization. The capital stock of the Successor Company consists of 25.0 million authorized shares of new common stock. Holders of the Predecessor Company senior notes and the general unsecured creditors received a pro-rata distribution of 6.0 million shares of the Successor Company common stock on the Effective Date. These shares currently trade publicly in the over-the counter markets. Another 0.5 million shares of restricted stock and 0.4 million stock options have been issued as employee compensation since emergence from Chapter 11. These shares will vest over periods ranging from one to three years. The Predecessor Company’s outstanding preferred stock and outstanding warrants were cancelled as of the Effective Date. Holders of the Series A preferred stock were issued a pro-rata share of warrants to purchase up to 318,947 shares of Successor Company common stock at $28.22 per share. These warrants expire on December 31, 2007. These warrants were valued by the Successor Company at $2.04 per share. In 2004 and 2005, the Company issued 6.5 million shares of common stock and

approximately 6.5 million new warrants (of which approximately 4.3 million were exercised) in conjunction with the NextView program.

In 2006, in connection with the Credit Agreement, ORBIMAGE Holdings established a new class of preferred stock, par value $0.01 per share (the “Series A Preferred Stock”) pursuant to a Certificate of Designation filed with the Secretary of State of Delaware on January 10, 2006 (the “Certificate of Designation”), entered into a Preferred Stock Purchase Agreement, dated as of January 10, 2006 among the ORBIMAGE Holdings and the Lenders under the Credit Agreement (the “Preferred Stock Purchase Agreement”), and issued 1,000 shares of the Series A Preferred Stock to the Lenders under the Credit Agreement pursuant to the Preferred Stock Purchase Agreement. Each share of the Series A Preferred Stock will initially have a Liquidation Preference of $0.01 per share and will mature and be redeemable only when all Senior Credit Obligations (as defined in the Credit Agreement) have been paid in full. Following an event of default under the Credit Agreement, a majority of the Lenders under the Credit Agreement will have the right to elect for the aggregate Liquidation Preference of the Series A Preferred Stock to increase to an amount equal to the Senior Credit Obligations, as defined in the Credit Agreement. Following the date of such an election (the “Trigger Date”), dividends will accrue on the Liquidation Preference of the Series A Preferred Stock at a rate per annum equal to 15 percent of the Liquidation Preference, payable quarterly, which we may elect to capitalize and add to the Liquidation Preference of the Series A Preferred Stock. All payments or recoveries received by the Lenders under the Credit Agreement will reduce dollar for dollar the Liquidation Value of the Series A Preferred Stock, and, subject to certain limitations, payments and redemptions of Series A Preferred Stock will result in a corresponding decrease in the amount of Senior Credit Obligations under the Credit Agreement. After the Trigger Date, the Liquidation Preference of the Series A Preferred Stock will be redeemable at the option of the ORBIMAGE Holdings at a premium to the Liquidation Value, if redeemed between January 10, 2008 and January 9, 2010, or at 100 percent of the Liquidation Value thereafter. In addition, after the Trigger Date the ORBIMAGE Holdings will be required to redeem Preferred Stock with up to 75 percent of its Free Cash Flow semi-annually, to the extent that such a redemption would be permitted by the terms of its Senior Secured Floating Rate Notes due 2012 and to the extent that such Free Cash Flow was not used to redeem Notes as required under the Indenture. Free Cash Flow is defined to have the same meaning as under the Indenture. After the Trigger Date, the Series A Preferred Stock will mature on the later of August 1, 2010, or the earliest date on which ORBIMAGE Holdings is permitted to redeem the Series A Preferred Stock under the Indenture governing its Senior Secured Floating Rate Notes due 2012.

As additional consideration to the Lenders under the Credit Agreement for making the Loans thereunder, ORBIMAGE Holdings issued to the Lenders warrants, expiring the later of (x) January 10, 2009 and (y) the six month anniversary of the earlier of (i) the payment in full of all Senior Credit Obligations under the Credit Agreement and (ii) the redemption of all outstanding shares of Series A Preferred Stock, to purchase 500,000 shares of Common Stock of ORBIMAGE Holdings for an exercise price of $15.00 per share. The Warrants were issued pursuant to a Warrant Agreement, dated as of January 10, 2006, between ORBIMAGE Holdings and The Bank of New York, as Warrant Agent (the “Warrant Agreement”). The Warrants and the Warrant Agreement provide for anti-dilution rights, subject to certain exceptions, with respect to any issuances of Common Stock below market value, and provide for demand and “piggy-back” registration rights.

The Series A Preferred Stock and the Warrants were sold to institutional “accredited investors” as defined in Regulation D under the Securities Act of 1933, as amended (the “Act”), pursuant to an exemption to the registration requirements under the Act and were not registered under the Act, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

Recent Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123(R), “Share-Based Payments,” that, upon implementation, will impact the Company’s net earnings and earnings

per share, and change the classification of certain elements of the statement of cash flows. Effective January 1, 2006, the Company adopted SFAS No. 123(R) and related Securities and Exchange Commission rules included in Staff Accounting Bulletin No. 107 on a modified prospective basis. SFAS No. 123(R) requires stock options and other share-based payments made to employees to be accounted for as compensation expense and recorded at fair value, and to reflect the related tax benefit received upon exercise of the options in the statement of cash flows as a financing activity inflow rather than an adjustment of operating activity as currently presented. The Company will continue to use the Black-Scholes option pricing model to estimate the fair value of stock options granted subsequent to the date of adoption of SFAS No. 123(R).

The Company’s Employee Stock Incentive Plan provides for the grant of various types of stock-based incentive awards, including stock options, restricted stock and other stock-based grants. The types and mix of stock-based incentive awards are evaluated on an ongoing basis and may vary based on management’s overall strategy regarding compensation, including consideration of the impact of expensing stock option awards on the Company’s results of operations subsequent to the adoption of SFAS No. 123(R). Based on current analyses and information, the Company expects that the combination of expensing stock options upon adoption of SFAS No. 123(R) in 2006 and grants of restricted stock units will result in additional expense, net of state income tax benefits, totaling approximately $0.4 million (or a reduction of net earnings per share of $0.02) on a full-year basis.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3.” SFAS No. 154 requires retrospective application to prior period financial statements of a voluntary change in accounting principle and is effective for period beginning after December 15, 2005. The effect of adoption of SFAS No. 154 will depend upon the nature of accounting changes the Company may initiate in future periods, if any.

On February 16, 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and 140.” SFAS No. 155 permits the Company to elect to measure any hybrid financial instrument at fair value (with changes in fair value recognized in earnings) if the hybrid instrument contains an embedded derivative that would otherwise be required to be bifurcated and accounted for separately under SFAS No. 133. The election to measure the hybrid instrument at fair value is made on an instrument-by-instrument basis and is irreversible. The Statement is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. We do not expect the adoption of SFAS No. 155 to have a material impact on our financial position or results of operations.


Item 8.	*Financial Statements and Supplementary Data*

ORBIMAGE HOLDINGS INC.

INDEX TO FINANCIAL STATEMENTS


	Page

Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting		18
Report of Independent Registered Public Accounting Firm		20
Consolidated Statements of Operations — Years Ended December 31, 2005, 2004 and 2003		21
Consolidated Balance Sheets — December 31, 2005 and 2004		22
Consolidated Statements of Cash Flows — Years Ended December 31, 2005, 2004 and 2003		23
Consolidated Statements of Stockholders’ Equity — Years Ended December 31, 2005, 2004, and 2003		24
Notes to Consolidated Financial Statements		25

Report of Independent Registered Public Accounting Firm

on Internal Control over Financial Reporting

Board of Directors and Shareholders

ORBIMAGE Holdings Inc.

Dulles, VA

We have audited management’s assessment, included in the accompanying Management’s Report on the Financial Statements and Internal Control over Financial Reporting, that ORBIMAGE Holdings Inc. did not maintain effective internal control over financial reporting as of December 31, 2005, because of the effect of a material weakness identified in management’s assessment, based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). ORBIMAGE Holdings Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a control deficiency, or a combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The following material weakness has been identified and included in management’s assessment:


	Controls in place relating to the selection and application of accounting policies in conformity with generally accepted accounting principles related to non-routine and non-systematic transactions were not properly designed to provide reasonable assurance that such policies and principles would be adequately followed.

This material weakness was considered in determining the nature, timing and extent of audit tests applied in our audit of the 2005 consolidated financial statements, and this report does not affect our report dated March 31, 2006 on those consolidated financial statements.

In our opinion, management’s assessment that ORBIMAGE Holdings Inc. did not maintain effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, ORBIMAGE Holdings Inc. has not maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).


	/s/ BDO Seidman, LLP

Bethesda, Maryland

March 31, 2006

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

ORBIMAGE Holdings, Inc

Dulles, VA

We have audited the accompanying consolidated balance sheets of ORBIMAGE Holdings, Inc. (Successor Company) as of December 31, 2005 and 2004 and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years ended December 31, 2005 and 2004. We have also audited the consolidated statements of operations, stockholders’ equity and cash flows of Orbital Imaging Corporation (Predecessor to ORBIMAGE Inc.) for the year ended December 31, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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, 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 ORBIMAGE Holdings, Inc. at December 31, 2005 and 2004, and the results of its operations and its cash flows for the years ended December 31, 2005 and 2004,and the results of operations and cash flows of Orbital Imaging Corporation for the year ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of ORBIMAGE Holdings, Inc.’s internal control over financial reporting as of December 31, 2005, based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 31, 2006, expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an adverse opinion on the effectiveness of the Company’s internal control over financial reporting.


	/s/ BDO Seidman, LLP

Bethesda, Maryland

March 31, 2006

ORBIMAGE HOLDINGS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS


		Successor Company
		Years Ended
		December 31,						Predecessor Company
								Year Ended
		2005			2004			December 31, 2003

		(In thousands, except share data)
Revenues		$	40,702		$	31,020		$	9,219
Direct expenses			38,116			33,754			10,697

Gross profit (loss)			2,586			(2,734	)		(1,478	)
Selling, general and administrative expenses			12,341			11,746			4,744
Loss on sale of satellite license			—			—			18,205

Loss from operations			(9,755	)		(14,480	)		(24,427	)
Interest expense, net (excludes contractual interest of $26,156 in 2003)			14,083			10,259			1,303
Loss from early extinguishment of debt			2,758			—			—
Unrealized gain on derivative instrument			(2,341	)		—			—

Loss before reorganization items and provision (benefit) for income taxes			(24,255	)		(24,739	)		(25,730	)
Reorganization items:
	Gain on debt discharge		—			—			(116,056	)
	Professional fees		—			—			6,067
	Interest earned on accumulated cash and cash equivalents during Chapter 11 proceedings		—			—			(30	)

Earnings (loss) before provision (benefit) for income taxes			(24,255	)		(24,739	)		84,289
Provision (benefit) for income taxes			—			—			—

Net earnings (loss)		$	(24,255	)	$	(24,739	)	$	84,289

Earnings (loss) per common share — basic		$	(1.50	)	$	(3.80	)	$	3.34
Earnings (loss) per common share — diluted		$	(1.50	)	$	(3.80	)	$	1.73

See accompanying Notes to Consolidated Financial Statements.

ORBIMAGE HOLDINGS INC.

CONSOLIDATED BALANCE SHEETS


			December 31,			December 31,
			2005			2004

			(In thousands, except share data)
ASSETS
Current assets:
	Cash and cash equivalents		$	226,504		$	60,565
	Receivables net of allowances of $143 and $126, respectively			9,934			12,148
	Other current assets			1,334			2,612

		Total current assets		237,772			75,325
Property, plant and equipment, less accumulated depreciation of $7,265 and $3,751, respectively				33,262			18,263
Satellites and related rights, less accumulated depreciation and amortization of $37,514 and $18,142, respectively				241,829			116,640
Goodwill				28,490			28,490
Other assets				28,913			10,428

		Total assets	$	570,266		$	249,146


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable and accrued expenses		$	5,700		$	3,970
	Amounts payable to subcontractors			29,984			47,545
	Accrued interest payable			17,342			—
	Other current liabilities			1,719			2,234

		Total current liabilities		54,745			53,749
Long-term debt				245,361			85,018
Deferred revenue, net of current portion				129,625			24,491
Other noncurrent liabilities				3,638			—

		Total liabilities		433,369			163,258

Commitments and contingencies

Stockholders’ equity:
	Common stock, par value $0.01; 25,000,000 shares authorized, 17,442,518 shares issued and outstanding and 9,917,078 shares issued and outstanding at December 31, 2005 and 2004, respectively			175			99
	Additional paid-in-capital			186,137			112,373
	Unearned compensation			(421	)		(1,845	)
	Accumulated deficit			(48,994	)		(24,739	)

		Total stockholders’ equity		136,897			85,888

		Total liabilities and stockholders’ equity	$	570,266		$	249,146

See accompanying Notes to Consolidated Financial Statements.

ORBIMAGE HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS


			Successor Company
			Years Ended
			December 31,						Predecessor Company
									Year Ended
			2005			2004			December 31, 2003

			(In thousands)
Cash flows from operating activities:
	Net earnings (loss)		$	(24,255	)	$	(24,739	)	$	84,289
	Adjustments to reconcile net earnings (loss) to net cash provided by (used) in operating activities:
		Depreciation, amortization and other		25,381			22,575			3,356
		Loss on early extinguishment of debt		2,758			—			—
		Unrealized gain on derivative instrument		(2,341	)		—			—
		Interest expense paid in kind		—			11,903			1,403
		Stock compensation		1,424			3,452			—
		Gain on debt extinguishment		—			—			(116,056	)
		Loss on sale of satellite license		—			—			18,205
	Changes in assets and liabilities:
		(Increase) decrease in receivables and other current assets		4,802			(11,993	)		5,416
		Decrease in other assets		1,044			1,000			—
		Decrease in accounts payable and accrued expenses		13,222			(773	)		(181	)
		Increase (decrease) in deferred revenue		103,496			26,075			581

	Net cash provided by (used in) operating activities			125,531			27,500			(2,987	)
Cash flows from investing activities:
	Capital expenditures			(171,757	)		(3,530	)		(21,402	)
	Payment for business acquisition			(7,841	)		—
	Proceeds from sale of satellite license			—			—			10,000
	Proceeds from launch delay penalties			—			—			2,284

	Net cash used in investing activities			(179,598	)		(3,530	)		(9,118	)
Cash flows from financing activities:
	Issuance of long-term debt			245,000			—			—
	Issuances of common stock			73,840			32,364			—
	Extinguishment of long-term debt			(85,018	)		—			—
	Long-term debt repayment and issuance costs			(13,816	)		(10,174	)		—
	Proceeds from insurance loan			—			—			17,717
	Proceeds from Orbital Sciences note			—			—			2,500

	Net cash provided by financing activities			220,006			22,190			20,217
Net increase in cash and cash equivalents				165,939			46,160			8,112
Cash and cash equivalents, beginning of year				60,565			14,405			6,293

Cash and cash equivalents, end of year			$	226,504		$	60,565		$	14,405

Supplemental cash flow information:
	Interest paid		$	4,295		$	—		$	—

Non-cash items:
	Capital expenditures		$	(34,625	)	$	(47,545	)	$	—
	Amounts payable to subcontractors			29,984			47,545			—

See accompanying Notes to Consolidated Financial Statements.

ORBIMAGE HOLDINGS INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY


	Common Stock						Additional									Total
							Paid-In			Unearned			Accumulated			Stockholders’
	Shares			Amount			Capital			Compensation			Deficit			Equity

Balance as of December 31, 2002		25,214,000			252			87,507			—			(309,653	)		(221,894	)
Net earnings		—			—			—			—			84,289			84,289
Cancellation of Predecessor Company equity and application of Fresh-Start accounting		(25,214,000	)		(252	)		(87,507	)		—			225,364			137,605
Successor Company — Balance as of December 31, 2003 prior to capitalization		—			—			—			—			—			—

Capitalization of Successor Company		6,057,539			60			74,750			—			—			74,810
Issuance of restricted stock		275,454			3			3,399			(3,402	)		—			—

Balance as of December 31, 2003		6,332,993			63			78,149			(3,402	)		—			74,810

Net loss		—			—			—			—			(24,739	)		(24,739	)
Issuance of common stock associated with equity offering, net of issuance costs		3,405,001			34			32,330			—			—			32,364
Issuance of restricted stock		179,084			2			1,894			—			—			1,896
Compensation attributable to vesting of restricted stock		—			—			—			1,557			—			1,557

Balance as of December 31, 2004		9,917,078			99			112,373			(1,845	)		(24,739	)		85,888

Net loss		—			—			—			—			(24,255	)		(24,255	)
Issuances of common stock		3,275,234			33			31,305			—			—			31,338
Warrants exercised		4,250,206			43			42,459			—			—			42,502
Compensation attributable to vesting of restricted stock		—			—			—			1,424			—			1,424
Balance as of December 31, 2005		17,442,518		$	175		$	186,137		$	(421	)	$	(48,994	)	$	136,897

See accompanying Notes to Consolidated Financial Statements.

ORBIMAGE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005


(1)	Business Operations

ORBIMAGE Holdings Inc., a Delaware corporation (“ORBIMAGE Holdings”), together with its consolidated subsidiaries (collectively, “ORBIMAGE,” the “Company” or the “Successor Company”), is a global provider of Earth imagery products and services. ORBIMAGE Holdings operates an integrated system of digital remote sensing satellites, U.S. and international ground stations and sales channels to collect, process and distribute Earth imagery products. The Company’sOrbView-3 satellite was successfully launched on June 26, 2003 and began generating revenues in 2004, providing 1.0-meter panchromatic (black and white) and 4.0-meter multispectral (color) imagery of the Earth. This imagery supports a wide range of applications including general mapping and charting, defense and intelligence, and commercial applications. ORBIMAGE recognized revenues related to theOrbView-3 satellite of $35.9 million and $23.2 million for the years ended December 31, 2005 and 2004, respectively. The Company’s OrbView-2 satellite was launched on August 1, 1997 and collects one kilometer resolution multi-spectral imagery that supports a wide array of projects focusing on global environmental monitoring. The Company recognized revenues related to the OrbView-2 satellite of $4.6 million and $4.4 million for the years ended December 31, 2005 and 2004, respectively, while the Predecessor Company (as hereinafter defined) recognized revenues of $3.8 million for the years ended December 31, 2003.

On December 31, 2003 (the “Effective Date”), Orbital Imaging Corporation (the “Predecessor Company”) emerged from reorganization proceedings under Chapter 11 of the Federal bankruptcy laws pursuant to the terms of the Plan of Reorganization (as hereinafter defined). Upon reorganization, Orbital Imaging Corporation changed its name to ORBIMAGE Inc., a Delaware corporation. ORBIMAGE Holdings Inc. was organized on April 4, 2005 to enable its predecessor registrant and now its wholly-owned subsidiary, ORBIMAGE Inc., to implement a holding company organizational structure. Effective June 21, 2005, the Company reorganized into a holding company structure, effected by a merger conducted pursuant to Section 251(g) of the General Corporation Law of the State of Delaware (the “Merger”), which provides for the formation of a holding company structure without a vote of the stockholders of the corporation in the position of ORBIMAGE Inc.

Prior to the Merger, ORBIMAGE Holdings was a direct, wholly-owned subsidiary of ORBIMAGE Inc., and ORBIMAGE Merger Sub Inc., a Delaware corporation (the “Merger Sub”), was a direct, wholly-owned subsidiary of ORBIMAGE Holdings. Both ORBIMAGE Holdings and Merger Sub were organized for the sole purpose of implementing the holding company structure. Pursuant to the Merger, Merger Sub merged with and into ORBIMAGE Inc., with ORBIMAGE Inc. continuing as the surviving corporation. Each issued and outstanding share of common stock of ORBIMAGE Inc. was converted into one share of common stock of ORBIMAGE Holdings, each issued and outstanding share of common stock of Merger Sub was converted into one share of ORBIMAGE Inc. common stock, the separate corporate existence of Merger Sub ceased, and all of the issued and outstanding shares of ORBIMAGE Holdings owned by ORBIMAGE Inc. were automatically canceled and retired. As a result of the Merger, each stockholder of ORBIMAGE Inc. became a holder of the common stock of ORBIMAGE Holdings, evidencing the same proportional interests, and ORBIMAGE Inc. became a direct, wholly owned subsidiary of ORBIMAGE Holdings. Accordingly, ORBIMAGE Holdings became the successor registrant of ORBIMAGE Inc. for SEC reporting purposes.

ORBIMAGE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

ORBIMAGE Holdings also assumed ORBIMAGE Inc.’s registration obligations under (i) the Registration Rights Agreement, dated as of December 31, 2003, by and between ORBIMAGE Inc. and certain holders of ORBIMAGE Inc.’s outstanding securities, relating to securities issued to such holders pursuant to the terms of ORBIMAGE Inc.’s Plan of Reorganization and emergence from Chapter 11 bankruptcy on December 31, 2003 and (ii) the Registration Rights Agreement, dated as of November 16, 2004, by and between ORBIMAGE Inc. and certain holders of ORBIMAGE Inc.’s common stock and warrants issued on March 25, 2005.


	*Emergence from Chapter 11 Bankruptcy Protection*

On April 5, 2002, the Predecessor Company filed a voluntary petition for reorganization under Chapter 11 in the United States Bankruptcy Court for the Eastern District of Virginia (the “Bankruptcy Court”). The Predecessor Company had incurred losses since its inception, with an accumulated deficit of approximately $290 million as of the filing date. The Predecessor Company was in default on its senior notes and its ability to continue as a going concern was dependent on restructuring its senior notes. As of the date of the filing, the Predecessor Company’s current liabilities exceeded its current assets by approximately $230 million. The Predecessor Company had previously announced publicly that it intended to take such action in furtherance of its plan to reorganize and had been in negotiations with its senior noteholders, holders of its Series A Preferred Stock and Orbital Sciences Corporation (“Orbital Sciences”), its majority stockholder. The Predecessor Company was permitted to engage in ordinary course of business transactions without prior approval of the Bankruptcy Court.

On September 15, 2003, the Predecessor Company filed its Fourth Amended Plan of Reorganization (the “Plan”) and Fourth Amended Disclosure Statement with the Bankruptcy Court. The Plan was confirmed by the Bankruptcy Court on October 24, 2003. The Predecessor Company officially emerged from bankruptcy protection effective December 31, 2003 (the “Effective Date”). On the Effective Date, all then-outstanding equity securities of the Predecessor Company, as well as substantially all of its pre-petition liabilities, were cancelled. Holders of the Predecessor Company’s old notes and the Predecessor Company’s general unsecured creditors received $50 million in new Senior Subordinated Notes due 2008 and 6 million shares of new common stock of the Successor Company, representing approximately 99 percent of the then-outstanding capital stock of the Successor Company. In addition, Orbital Sciences received $2.5 million of Senior Subordinated Notes in full satisfaction of its claims, and certain other parties received approximately $1.5 million of Senior Subordinated Notes in exchange for advisory and other services. Holders of certain debt obligations incurred during the Predecessor Company’s bankruptcy period received approximately $19 million of new Senior Notes due 2008. Holders of the Predecessor Company’s Series A Preferred Stock receivedout-of-the-money warrants to purchase up to 318,947 shares of common stock of the Successor Company.

ORBIMAGE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

leases that were burdensome or assume any contracts or leases that were favorable or otherwise necessary to its business operations. Certain executory contracts were rejected by the Predecessor Company during the course of the bankruptcy proceedings.

(2) Significant Accounting Policies


	*Basis of Presentation*

In connection with the emergence from Chapter 11, ORBIMAGE reflected the terms of its Plan of Reorganization in its financial statements in accordance with American Institute of Certified Public Accountants Statement of Position 90-7, “Financial Reporting by Entities in Reorganization Under the Bankruptcy Code” (“SOP 90-7”) with respect to financial reporting upon emergence from Chapter 11 (“Fresh-Start accounting”). Upon applying Fresh-Start accounting, a new reporting entity (the “Successor Company”) is deemed to be created on the Effective Date and the recorded amounts of assets and liabilities are adjusted to reflect their estimated fair values. In the accompanying financial statements and footnotes, references to the years ended December 31, 2003 and prior periods refer to the Predecessor Company while the year ended December 31, 2005 and 2004 refers to the Successor Company. As a result of the fresh-start reporting, the Successor Company’s financial statements are not comparable with the Predecessor Company’s financial statements.

As of April 5, 2002, the date of the Predecessor Company’s voluntary petition for reorganization under Chapter 11, the Predecessor Company adopted the financial reporting and accounting policies required for companies operating pursuant to Chapter 11 as prescribed in SOP 90-7. Revenues, expenses, gains and losses relating to the reorganization are reported separately in the accompanying statement of operations for the year ended December 31, 2003.


	*Use of Estimates*

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amount reported in its financial statements and accompanying notes. Actual results could differ from these estimates.


	*Revenue Recognition*

The Company’s principal source of revenue is the sale of satellite imagery to customers, value-added resellers and distributors. Such sales often require us to provide imagery over the term of a multi-year sales contract. Accordingly, revenues are recognized 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. Revenue for other services is recognized as services are performed.

Revenue is recognized on contracts to provide image processing services using thepercentage-of-completion method of accounting. Revenue on these contracts is recognized based on costs incurred in relation to total estimated costs. These incurred costs approximate the output of deliverables to the Company’s customers. Revenues recognized in advance of becoming billable are recorded as unbilled receivables. Such amounts generally do not become billable until after the products have been completed and delivered. Total unbilled accounts receivable were $1.8 million and $0.3 million at December 31, 2005 and 2004, respectively. 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.

Much of the Company’s revenues are generated through contracts with the U.S. Government. U.S. Government agencies may terminate or suspend their contracts at any time, with or without cause, or

ORBIMAGE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

may change their policies, priorities or funding levels by reducing agency or program budgets or by imposing budgetary constraints. If a U.S. Government agency terminates or suspends any of its contracts with ORBIMAGE, or changes its policies, priorities, or funding levels, these actions would have a material adverse effect on the business, financial condition and results of operations. Imagery contracts with international customers generally are not cancelable.

For contracts consisting of multiple elements, the Company identifies these elements and considers whether the delivered item(s) has value to the customer on a standalone basis, whether there is objective and reliable evidence of the fair value of the undelivered item(s) and, if the arrangement includes a general right of return relative to the delivered item(s), delivery of performance of the undelivered item(s) considered probable and substantially in the Company’s control.

Allowances for doubtful accounts receivable balances are recorded when circumstances indicate that collection is doubtful for particular accounts receivable or as a general reserve for all accounts receivable. Management estimates such allowances based on historical evidence such as amounts that are subject to risk. Accounts receivable are written off if reasonable collection efforts are not successful.


	*Stock-Based Compensation*

Compensation expense for employee stock-based compensation plans is measured using the market value as of the measurement date as prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.” Compensation expense is recognized over the restriction period for the restricted stock grants to the employees. To the extent that the Company grants stock options to non-employee consultants or advisors, costs are recorded equal to the fair value of the options granted as of the measurement date as determined using a Black-Scholes model.

For purposes of pro forma disclosures, the options’ estimated fair values are amortized to expense over the options’ vesting periods. The Company’s pro forma information follows:


							Predecessor
	Successor Company						Company

	2005			2004			2003

Net earnings (loss):
Net earnings (loss) available to common stockholders	$	(24,255	)	$	(24,739	)	$	84,289
Fair value-based compensation cost, net of taxes		(396	)		(95	)		—

Pro forma net earnings (loss) available to common stockholders	$	(24,651	)	$	(24,834	)	$	84,289

Earnings (loss) per common share — basic
As reported	$	(1.50	)	$	(3.80	)	$	3.34

Pro forma	$	(1.52	)	$	(3.81	)	$	3.34

Earnings (loss) per common share — diluted
As reported	$	(1.50	)	$	(3.80	)	$	1.73

Pro forma	$	(1.52	)	$	(3.81	)	$	1.73

Effective January 1, 2006, the Company adopted SFAS No. 123(R), “Share-Based Payments,” and related Securities and Exchange Commission rules included in Staff Accounting Bulletin No. 107 on a modified prospective basis. SFAS No. 123(R) requires stock options and other share-based payments made to employees to be accounted for as compensation expense and recorded at fair value, and to reflect the related tax benefit received upon exercise of the options in the statement of cash flows as a financing

ORBIMAGE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

activity inflow rather than an adjustment of operating activity as currently presented. The Company will continue to use the Black-Scholes option pricing model to estimate the fair value of stock options granted subsequent to the date of adoption of SFAS No. 123(R).


	*Cash and Cash Equivalents*

The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.


	*Concentrations of Credit Risk*

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of operating cash in excess of FDIC insured limits and temporary cash investments. ORBIMAGE places temporary cash investments with high credit quality financial institutions that invest primarily in U.S. Government instruments.


	*Recovery of Long-Lived Assets*

The Company’s policy is to review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” Impairment losses are recognized when the sum of expected undiscounted net future cash flows is less than the carrying amount of the assets. The amount of the impairment is measured as the difference between the asset’s estimated fair value and its book value. Fair market value is determined primarily using the projected future cash flows discounted at a rate commensurate with the risk involved.


	*Goodwill and Intangible Assets*

As part of the Fresh-Start accounting as discussed in Note 3, the Company recorded goodwill based on an independent enterprise valuation. This goodwill is evaluated for potential impairment annually by comparing the fair value of the Company, based on the closing stock price at year end, to its carrying value. If the carrying value exceeds the fair value, impairment is measured by comparing the derived fair value of goodwill to its carrying value, and any impairment determined is recorded in the current period. The Company performed an impairment test of its goodwill and determined that no impairment of recorded goodwill existed at December 31, 2005 and 2004, respectively.

Intangible assets that have finite useful lives continue to be amortized over those useful lives. Accumulated amortization expense related to intangible assets is expected to be approximately $0.3 million over the next five years.

ORBIMAGE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	*Income Taxes*

The Company recognizes income taxes using the asset and liability method in accordance with SFAS No. 109, “Accounting for Income Taxes.” Under this method, deferred tax assets and liabilities are determined based on the 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 be applied to taxable income in the years in which those temporary differences are expected to reverse. 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. The deferred tax assets are reviewed periodically for recoverability and valuation allowances are provided as necessary.


	*Derivative Instruments and Hedging Activities*

In 2005, the Company used a derivative financial instrument to manage its exposure to fluctuations in interest rates on its long-term debt. The Company does not hold or issue derivative financial instruments for trading or speculative purposes. The Company accounts for interest rate swaps in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended. Under SFAS No. 133, all derivatives are recorded on the balance sheet as assets or liabilities and measured at fair value. For derivatives designated as cash flow hedges, the effective portion of the changes in fair value of the derivatives is recorded in other comprehensive income and subsequently recognized in earnings when the hedged transaction occurs and the entire transaction is recognized in earnings. The ineffective portion of cash flow hedges are recorded in current earnings. For derivatives not designated as cash flow hedges, changes in the fair value of the derivatives are recorded in net earnings


	*Satellites and Related Rights and Property, Plant and Equipment*

The Predecessor Company purchased the OrbView-2 License, the OrbView-3 satellite and the ground system assets from Orbital Sciences pursuant to the System Procurement Agreement, discussed in Note 6 below. Amortization of the capitalized costs begins when the assets are placed in service. Capitalized costs include the cost of any applicable launch insurance.

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


Ground system assets		8 years
Furniture and equipment		3 to 7 years
OrbView-2		7¹/2 years
OrbView-3		5 years
Leasehold improvements		Shorter of estimated useful life or lease term


	*Recent Accounting Pronouncements*

In May 2005, the Financial Accounting Standards Board issued SFAS No. 154, “Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3.” SFAS No. 154 requires retrospective application to prior period financial statements of a voluntary change in accounting principle and is effective for periods beginning after December 15, 2005. The effect of adoption of SFAS No. 154 will depend upon the nature of accounting changes the Company may initiate in future periods, if any.

ORBIMAGE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

bifurcated and accounted for separately under SFAS No. 133. The election to measure the hybrid instrument at fair value is made on an instrument-by-instrument basis and is irreversible. The Statement is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. We do not expect the adoption of SFAS No. 155 to have a material impact on our financial position or results of operations.


(3)	Fresh-Start Accounting, Reporting and Reorganization

The emergence from Chapter 11 resulted in a new reporting entity and adoption of Fresh-Start accounting in accordance with SOP 90-7. The Successor Company allocated the reorganization value to its net assets based on their estimated fair values in accordance with SFAS No. 141, “Business Combinations,” as of December 31, 2003, the Effective Date. Such fair values represented the Company’s best estimates based on independent valuations. These valuations were based on a number of estimates and assumptions which are inherently subject to significant uncertainties and contingencies beyond the Company’s control. Immaterial differences between estimated pre-petition liabilities assumed by the Successor Company and the final settlement amounts were recognized as they occurred.

The Company developed a set of financial projections to facilitate the calculation of the enterprise value of the Successor Company. The enterprise value was determined with the assistance of a third party financial advisor using a discounted cash flow analysis. The discounted cash flow analysis was based upon five years projected financial results, including an assumption for terminal values using cash flow multiples, discounted at our estimated post restructuring weighted-average cost of capital. The estimated enterprise value of the Company on the effective date of the Plan of Reorganization (“POR”) was determined to be approximately $140 million to $155 million. The Company selected the midpoint of the range, approximately $148 million, as the estimated enterprise value. Pursuant to SOP 90-7, the reorganization value of the Company on the effective date of the POR was determined to be approximately $153 million, which represented the enterprise value of $148 million plus the fair value of the current liabilities on December 31, 2003. The reorganization equity value of $74.8 million was calculated by subtracting the Successor Company’s debt of $73.1 million on the Effective Date from the estimated enterprise value. On December 31, 2003 all liabilities subject to compromise were settled in accordance with the POR by either being discharged by the Bankruptcy Court or settled as ongoing obligations.

As stated previously, the Company’s post-emergence financial statements are not comparable with the Predecessor Company’s pre-emergence financial statements.


(4)	NextView Program

The U.S. Government, through the National Geospatial-Intelligence Agency (“NGA”), announced in March 2003 that it intended to support the continued development of the commercial satellite imagery industry through subsidies for the engineering, construction and launch of the next generation of imagery satellites by two providers. This program is known as NextView. The first NextView award was made to a competitor of the Company in September 2003.

NGA announced a request for proposals from potential second providers in April 2004. The NextView Second Vendor program allows NGA to have two separate providers of next generation high-resolution satellite imagery. On September 30, 2004, NGA announced that the Company had been awarded a contract under this NextView Second Vendor program. As the winning bidder of the NextView Second Vendor award, the Company is the prime contractor constructing a new satellite to be referred to asGeoEye-1. The Company estimates its total project cost (including financing and launch insurance costs) to bring theGeoEye-1 satellite into service will be approximately $502 million. Under the NextView contract, NGA will support the project with a cost share totaling approximately $237 million spread out over the course of the project and subject to various milestones. As of December 31, 2005, NGA had paid

ORBIMAGE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the Company approximately $129.6 million. ORBIMAGE is deferring recognition of the cost share amounts as revenue untilGeoEye-1 is put into service and then will recognize revenue on a straight-line basis over the imagery delivery term of the program. Total annual incurred costs of theGeoEye-1 satellite and related ground systems incurred were approximately $149.0 million and $48.3 million during 2005 and 2004, respectively. Approximately $30.0 million and $47.5 million of these amounts were payable to subcontractors at December 31, 2005 and 2004, respectively.

The Company anticipates theGeoEye-1 satellite will launch and go into service in early 2007. The Company intends to purchase launch insurance and on-orbit insurance to cover the replacement cost of the satellite in the event of a launch failure or if on-orbit anomalies prevent the satellite from being placed into service. The costs of such insurance cannot be determined with specificity at this time, but the Company believes the premium will cost approximately 20 percent of the coverage amount if the insurance market at the time such insurance is purchased is similar to the current market. Once theGeoEye-1 satellite is placed into service, the NextView award provides for NGA to purchase imagery from the satellite through September 30, 2008. NGA will have the first right to order images from the satellite, which the Company anticipates will utilize slightly more than half of the satellite’s imagery-taking capacity at any given time, with the remainder available for commercial and state and foreign government sales by the Company.

The Company’s performance under the NextView Contract requires significant capital expenditures to develop, manufacture and launch theGeoEye-1 satellite. Funding of the Company’s operations and obligations under the NextView contract requires approximately $265 million over a period of approximately two and one half years. The Company is using funds for these expenditures from a combination of (i) an issuance of $65 million of equity raised through a combination of a private offering and a rights offering to its existing stockholders, (ii) an issuance of $155 million of additional indebtedness, and (iii) cash flow generated by the Company’s existing business in the amount of approximately $45 million.

The first portion of this funding was raised in a private placement to certain private investors which closed on November 16, 2004, in which the Company issued 3.25 million shares of common stock and warrants to purchase 3.25 million shares of common stock for a purchase price of $10 per share. At the closing of the private placement, the Company received $32.5 million in gross proceeds. In addition, on that date the Company issued warrants to purchase an additional 1.0 million shares to the private investors as consideration for their commitment to backstop this rights offering. All of these warrants were exercised in the first quarter of 2005, with the Company receiving $42.5 million of proceeds. The second portion of this funding was raised in a rights offering that commenced in February 2005 in which the Company issued to its existing shareholders transferable subscription rights to purchase up to an aggregate of approximately 3.26 million investment units, each consisting of one share of our common stock and one warrant to purchase a share of common stock at a cash exercise price of $10.00 per share. The subscription rights expired on March 14, 2005 and the offering was oversubscribed. The Company received approximately $32.5 million from the rights offering on March 24, 2005. The Company raised the $155 million debt portion of the funding as part of a refinancing of the Company’s long-term debt, which closed on June 29, 2005 as discussed further in Note 13 below.


(5)	Space Imaging Acquisition

On September 15, 2005, ORBIMAGE Holdings and ORBIMAGE Inc. (together, “ORBIMAGE”) entered into a definitive asset purchase agreement (the “Purchase Agreement”) to acquire the operating assets of Space Imaging LLC (“Space Imaging”) for approximately $58.5 million less amounts to be paid by Space Imaging on its existing debt prior to closing as well as certain other adjustments. Pursuant to the terms of the Purchase Agreement, ORBIMAGE entered into an Assignment of Rights and Obligations,

ORBIMAGE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

dated as of January 10, 2006, with ORBIMAGE SI Opco Inc. (“SI Opco”), a Delaware corporation and a wholly-owned indirect subsidiary of ORBIMAGE Holdings Inc., whereby ORBIMAGE agreed to assign all of their rights and certain obligations in, to and under the Purchase Agreement to SI Opco.

On January 10, 2006, ORBIMAGE Holdings, SI Opco and ORBIMAGE SI Holdco Inc. (“SI Holdco”), an indirect wholly owned subsidiary of ORBIMAGE Holdings, entered into a Credit Agreement (the “Credit Agreement”) with the Lenders named therein, Credit Suisse, Cayman Islands Branch, as Administrative Agent and The Bank of New York, as Collateral Agent. The Credit Agreement provides for SI Opco to draw down senior secured term loans of $50 million in full on the closing date with a maturity date of July 1, 2008, at which time the principal amount of the loans will be paid in full. The interest rate per annum applicable to loans is the Eurodollar Rate plus an applicable margin. At no time will the Eurodollar Rate be less than 3.00 percent or more than 5.00 percent.

SI Opco will be required to prepay the loans with 100 percent excess cash flow of SI Holdco and its consolidated subsidiaries, calculated on a quarterly basis. SI Opco will also be required to prepay the loans with, subject to certain exceptions and thresholds, 100 percent of the net proceeds of certain asset sales or dispositions, certain indebtedness, certain equity sales or issuances, insurance recoveries and condemnation events. Voluntary prepayments of the loans are permitted in whole or in part, in minimum amounts and subject to certain other limitations and penalties as set forth in the Credit Agreement.

ORBIMAGE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In connection with the Credit Agreement, ORBIMAGE Holdings established a new class of preferred stock, par value $0.01 per share (the “Series A Preferred Stock”) pursuant to a Certificate of Designation filed with the Secretary of State of Delaware on January 10, 2006 (the “Certificate of Designation”), entered into a Preferred Stock Purchase Agreement, dated as of January 10, 2006 among the ORBIMAGE Holdings and the Lenders under the Credit Agreement (the “Preferred Stock Purchase Agreement”), and issued 1,000 shares of the Series A Preferred Stock to the Lenders under the Credit Agreement pursuant to the Preferred Stock Purchase Agreement. Each share of the Series A Preferred Stock will initially have a Liquidation Preference of $0.01 per share and will mature and be redeemable only when all Senior Credit Obligations (as defined in the Credit Agreement) have been paid in full. Following an event of default under the Credit Agreement, a majority of the Lenders under the Credit Agreement will have the right to elect for the aggregate Liquidation Preference of the Series A Preferred Stock to increase to an amount equal to the Senior Credit Obligations, as defined in the Credit Agreement. Following the date of such an election (the “Trigger Date”), dividends will accrue on the Liquidation Preference of the Series A Preferred Stock at a rate per annum equal to 15 percent of the Liquidation Preference, payable quarterly, which we may elect to capitalize and add to the Liquidation Preference of the Series A Preferred Stock. All payments or recoveries received by the Lenders under the Credit Agreement will reduce dollar for dollar the Liquidation Value of the Series A Preferred Stock, and, subject to certain limitations, payments and redemptions of Series A Preferred Stock will result in a corresponding decrease in the amount of Senior Credit Obligations under the Credit Agreement. After the Trigger Date, the Liquidation Preference of the Series A Preferred Stock will be redeemable at the option of ORBIMAGE Holdings at a premium to the Liquidation Value, if redeemed between January 10, 2008 and January 9, 2010, or at 100 percent of the Liquidation Value thereafter. In addition, after the Trigger Date ORBIMAGE Holdings will be required to redeem Preferred Stock with up to 75 percent of its Free Cash Flow semi-annually, to the extent that such a redemption would be permitted by the terms of its Senior Secured Floating Rate Notes due 2012 and to the extent that such Free Cash Flow was not used to redeem Notes as required under the Indenture. Free Cash Flow is defined to have the same meaning as under the Indenture. After the Trigger Date, the Series A Preferred Stock will mature on the later of August 1, 2010, or the earliest date on which ORBIMAGE Holdings is permitted to redeem the Series A Preferred Stock under the Indenture governing its Senior Secured Floating Rate Notes due 2012.

As additional consideration to the Lenders under the Credit Agreement for making the Loans thereunder, the ORBIMAGE Holdings issued to the Lenders warrants, expiring the later of (x) January 10, 2009 and (y) the six month anniversary of the earlier of (i) the payment in full of all Senior Credit Obligations under the Credit Agreement and (ii) the redemption of all outstanding shares of Series A Preferred Stock, to purchase 500,000 shares of Common Stock of the ORBIMAGE Holdings for an exercise price of $15.00 per share. The Warrants were issued pursuant to a Warrant Agreement, dated as of January 10, 2006, between the ORBIMAGE Holdings and The Bank of New York, as Warrant Agent (the “Warrant Agreement”). The Warrants and the Warrant Agreement provide for anti-dilution rights, subject to certain exceptions, with respect to any issuances of Common Stock below market value, and provide for demand and “piggy-back” registration rights.


(6)	Relationship with Orbital Sciences

The Predecessor Company was initially established as a wholly-owned subsidiary of Orbital Sciences. The Predecessor Company had three significant contracts with Orbital Sciences: (i) the ORBIMAGE

ORBIMAGE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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”), and (iii) the Amended and Restated Administrative Services Agreement dated May 8, 1997 (the “Administrative Services Agreement”).

Under the System Procurement Agreement, the Predecessor Company purchased (i) the OrbView-1 satellite, (ii) an exclusive license entitling the Predecessor Company 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, the Predecessor Company committed to purchase various satellites, rights and ground systems for approximately $279.9 million, net of $31.0 million to be funded by the U.S. Air Force through a contract with Orbital Sciences. The System Procurement Agreement originally called for the OrbView-3 satellite to be constructed and launched before OrbView-4; however, continuing schedule delays resulted in OrbView-4 being constructed and delivered first. The OrbView-4 satellite suffered a launch failure in September 2001 and did not reach its intended orbit. On the date of the Bankruptcy Filing, $4.4 million of costs previously incurred under the System Procurement Agreement were outstanding.

On February 11, 2003, the Predecessor Company signed a Settlement Agreement with the Creditors’ Committee and Orbital Sciences to facilitate the Predecessor Company’s emergence from its Chapter 11 reorganization proceeding. Under the Settlement Agreement, the Predecessor Company agreed to suspend its pending litigation with Orbital Sciences in exchange for additional working capital and other consideration to be provided by Orbital Sciences. The Settlement Agreement provided for mutual releases of all claims among the parties, including the Predecessor Company and a significant majority of its bondholders and preferred stockholders, Orbital Sciences, and certain officers/directors of Orbital Sciences. The releases became effective upon launch of the OrbView-3 satellite by Orbital Sciences and payment by Orbital Sciences of $2.5 million to the Predecessor Company (the “Orbital Sciences Payment”). In exchange, Orbital Sciences received new notes that were equal to the Orbital Sciences Payment and rankedpari passuwith the new notes to be issued to the Predecessor Company’s pre-bankruptcy unsecured creditors. As part of the Settlement Agreement, if OrbView-3 was not launched by April 30, 2003 or on-orbit check out was not successfully completed by July 31, 2003, Orbital Sciences would pay the Predecessor Company delay penalties. Orbital Sciences also agreed to eliminate the $4.4 million obligation discussed above and further agreed to defer a $1.5 million on-orbit milestone payment due Orbital Sciences until May 7, 2005, the one-year anniversary of the date of acceptance by ORBIMAGE of the OrbView-3 system. In addition, the maximum amount of the annual post-launch on-orbit payments to Orbital Sciences was reduced from $2.25 million to $1.125 million on each of the first five anniversaries of the acceptance by ORBIMAGE of the OrbView-3 system, for a total maximum obligation of $6.375 million. The Predecessor Company obtained formal approval of the Settlement Agreement from the Bankruptcy Court on February 19, 2003.

Because the OrbView-3 launch did not occur by April 30, 2003, the terms of the Settlement Agreement required that Orbital Sciences pay the Predecessor Company daily launch delay penalties of $16,430 beginning May 1, 2003 until Launch had occurred. Furthermore, because the Predecessor Company did not accept the OrbView-3 System as provided in the System Procurement Agreement by July 31, 2003, Orbital Sciences was required to pay the Predecessor Company daily checkout delay penalties of $16,430 until October 2003 when it was mutually agreed that Orbital Sciences had made all commercially reasonable efforts to achieve on-orbit verification. Orbital Sciences paid the Predecessor Company delay penalties of approximately $2.3 million during the year ended December 31, 2003.

Under the OrbView-2 License Agreement, Orbital Sciences has granted an exclusive worldwide license to ORBIMAGE to use and sell OrbView-2 imagery. Pursuant to the terms of the OrbView-2

ORBIMAGE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

License Agreement, Orbital Sciences assigned to ORBIMAGE all amounts that are due or become due to Orbital Sciences under a contract Orbital Sciences had with NASA to deliver OrbView-2 imagery, and ORBIMAGE has sole responsibility for operating and controlling the OrbView-2 satellite. This contract expires on March 31, 2007.

Under the Administrative Services Agreement, the Predecessor Company paid Orbital Sciences for office space and other administrative services, as well as certain direct and indirect operating services provided by Orbital Sciences. The Administrative Services Agreement was terminated on March 31, 2002. As part of the Settlement Agreement, the Predecessor Company and Orbital Sciences executed a sublease agreement which permitted the Company to continue subleasing its current office space from Orbital Sciences through April 2005, at which point the Company secured a lease for this space directly with the building’s owner.


(7)	Loss on Sale of Satellite License

In 1998, the Predecessor Company entered into an agreement with MDA, then a Canadian subsidiary of Orbital Sciences, under which the Predecessor Company acquired the exclusive worldwide distribution rights for the RadarSat-2 satellite imagery (the “RadarSat-2 License”). Under the RadarSat-2 License, MDA would own and operate the RadarSat-2 satellite, and would provide operations, data reception, processing, archiving and distribution services to the Predecessor Company. The Company’s acquisition of the RadarSat-2 License was to cost $60 million, of which $30 million was paid in 1999. The RadarSat-2 License Agreement was terminated on February 9, 2001 and replaced with a new RadarSat-2 Territorial License agreement (the “RadarSat-2 Territorial License”), pursuant to which MDA granted to the Predecessor Company an exclusive territorial license to distribute and sell RadarSat-2 imagery in North America (except Canada) for $40 million. The $30 million of payments previously remitted to MDA under the original RadarSat-2 License agreement were applied to the $40 million license fee under the RadarSat-2 Territorial License. The License required the Predecessor Company to pay the remaining $10 million license fee obligation in 2002. The Predecessor Company did not pay the remaining $10 million obligation because of numerous program delays and began to pursue litigation against MDA related to the RadarSat-2 Territorial License, seeking, among other things, rescission of the RadarSat-2 License and the return of the $30 million that the Predecessor Company paid to MDA. The Predecessor Company entered into a settlement agreement with MDA dated September 12, 2003 whereby the RadarSat-2 Territorial License Agreement was returned to MDA for $12 million. MDA paid $10 million in October 2003 to the Predecessor Company and $1 million in October 2004 and $1 million in October 2005. The Predecessor Company recorded a loss on the sale of the RadarSat-2 Territorial License of $18.2 million in 2003.


(8)	Comprehensive Income (Loss)

For the years ended December 31, 2005, 2004 and 2003, there were no material differences between net earnings (loss) as reported and comprehensive income (loss).

ORBIMAGE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


(9)	Earnings (Loss) Per Common Share

The computations of basic and diluted loss per common share were as follows for the years ended December 31, 2005, 2004, and 2003 (in thousands, except share data):


							Predecessor
	Successor Company						Company

	2005			2004			2003

Numerator for basic and diluted earnings (loss) per common share:
Net earnings (loss) available to common stockholders	$	(24,255	)	$	(24,739	)	$	84,289

Denominator for basic and diluted earnings (loss) per common share:
Average number of common shares outstanding for basic computations		16,213,446			6,513,231			25,214,000
Average number of common shares assuming conversion of Series A 12% cumulative convertible preferred stock		n/a			n/a			23,389,664

Average number of common shares outstanding for diluted computations		16,213,446			6,513,231			48,603,664
Earnings (loss) per common share — basic	$	(1.50	)	$	(3.80	)	$	3.34

Earnings (loss) per common share — diluted(a)	$	(1.50	)	$	(3.80	)	$	1.73


(a)		All warrants, nonvested restricted stock and employee and stock options of the Successor Company are antidilutive because the Successor Company incurred a net loss for the years ended December 31, 2005 and 2004. All warrants and employee stock options of the Predecessor Company are antidilutive since such warrants and options had exercise prices in excess of the average market value of the Predecessor Company’s common stock.


(10)	Property, Plant and Equipment

Property, plant and equipment consisted of the following at December 31, 2005 and 2004 (in thousands):


		2005			2004

Land		$	213		$	213
Ground system assets			36,543			19,289
Furniture and equipment			2,604			1,968
Leasehold improvements			1,167			544
Accumulated depreciation and amortization			(7,265	)		(3,751	)

	Total	$	33,262		$	18,263

Depreciation and amortization expense was $3.8 million, $3.8 million, and $1.1 million for the years ended December 31, 2005, 2004 and 2003, respectively.

During the second quarter of 2005, the Company paid to Orbital Sciences $1.5 million for an on-orbit milestone payment due on the OrbView-3 system. The Company is also responsible under the Settlement Agreement to make annual post-launch on-orbit payments to Orbital Sciences of up to $1.275 million, payable on each of the first five anniversaries of the acceptance by the Company of the OrbView-3

ORBIMAGE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

system, for a total maximum obligation of $6.375 million. During the second quarter of 2005, the Company paid Orbital Sciences the maximum annual obligation payment of $1.275 million. Management believes that, based upon the performance of the OrbView-3 system to date, it is likely that the Company will pay the remaining on-orbit payment obligation. Accordingly, the Company capitalized the net present value of the remaining obligations and will depreciate them over the remaining design life of the OrbView-3 system. The Company also established a liability for the net present value of the remaining obligation to Orbital Sciences and will reduce the liability as payments are made.


(11)	Satellites and Related Rights

Satellites and related rights consisted of the following at December 31, 2005 and 2004 (in thousands):


		2005			2004

In service:
	OrbView-2 License	$	3,054		$	3,054
	OrbView-3 Satellite		93,958			86,468
	Accumulated depreciation and amortization		(37,514	)		(18,142	)

			59,498			71,380
Satellites in process			182,331			45,260

	Total	$	241,829		$	116,640

During the first quarter of 2004, the OrbView-3 system became fully operational. The total capitalized cost of the OrbView-3 system is being depreciated over its five-year design life. Total satellite depreciation and amortization expense was $19.4 million, $21.9 million, and $2.3 million for the years ended December 31, 2005, 2004 and 2003, respectively.


(12)	Income Taxes

The Company recorded no income tax expense for the years ended December 31, 2005, 2004 and 2003 as a result of tax operating losses incurred in those years. The differences between the tax provision (benefit) calculated at the statutory Federal income tax rate and the actual tax provision (benefit) for each of those years are as follows:


							Predecessor
	Successor Company						Company

	2005			2004			2003

U.S. Federal tax at statutory rate	$	(8,247	)	$	(8,411	)	$	24,833
State income taxes, net		(1,059	)		(1,041	)		3,068
Adjustment of deferred tax liabilities		8,219			—			—
Valuation allowance		1,399			9,452			(27,901	)
Other		(312	)		—			—

Total tax provision	$	—		$	—		$	—

ORBIMAGE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The primary components of federal deferred tax assets and liabilities were as follows (in thousands):


		2005			2004

Deferred tax assets related to:
	Net operating loss carryforward	$	73,698		$	60,318
	Property, plant and equipment		—			7,125
	NextView satellite		49,528			—
	Other		561			606

Deferred tax assets			123,787			68,049
Less: valuation allowance			(69,192	)		(67,961	)

Net deferred tax assets			54,595			88
Deferred tax liabilities related to:
	Property, plant and equipment		(4,900	)
	NextView satellite		(49,528	)		—
	Amortization		(167	)		(88	)

Net deferred tax assets		$	—		$	—

The decrease in valuation allowance is principally the result of the utilization of net operating loss carryforwards for the discharge of the Predecessor Company debt. We believe it is more likely than not that our existing deferred tax assets will not be realized. As of December 31, 2005, we had net operating loss carryforwards totaling approximately $193 million which expire beginning in 2021. Such net operating loss carryforwards are subject to certain limitations and other restrictions.


(13)	Long-Term Debt

Long-term debt consisted of the following as December 31, 2005 and 2004 (in thousands):


		Maturity Date		2005		2004

Senior Secured Floating Rate Notes			July 1, 2012	$	250,000	$	—
Senior Subordinated Notes			June 30, 2008		—		62,774
Senior Notes			June 30, 2008		—		22,244

	Total			$	250,000	$	85,018

Prior to the Bankruptcy filing, the Predecessor Company had approximately $225 million of senior notes outstanding. Interest on the senior notes accrued at an annual rate of 11.625 percent and was payable semi-annually in arrears on March 1 and September 1. These senior notes were to mature on March 1, 2005. In accordance with SOP 90-7, interest expense was not recorded during the Chapter 11 period because it was considered probable that a claim for payment of interest would not be allowed. If the Predecessor Company had recorded interest expense during the Chapter 11 period, interest expense for the year ended December 31, 2003 would have increased by approximately $28.0 million. In conjunction with the issuance of the senior notes, the Predecessor Company incurred debt financing costs which had been deferred and were being amortized over the term of the senior notes. Such amortization was reported as a component of interest expense. As a result of the Chapter 11 filing, the Predecessor Company ceased amortizing these costs and wrote them off.

In June 2003, the Predecessor Company purchased insurance coverage for the combined risk of launch, satellite checkout and on-orbit satellite operations with respect to OrbView-3. The Predecessor Company paid approximately $14.8 million to purchase insurance coverage of $51 million on behalf of the

ORBIMAGE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

senior note holders. Certain of the members of the informal committee of holders of the senior notes loaned the Predecessor Company the funds necessary to purchase the insurance coverage (the “Insurance Loan”). The Predecessor Company also borrowed funds required to pay a 20 percent commitment fee to the Insurance Loan lenders for securing the loan. The total amount borrowed under the Insurance Loan was approximately $17.8 million. Interest accrued on the Insurance Loan at an annual rate of 13.625 percent and was added to the principal balance. The Predecessor Company recognized interest expense on the insurance loan of approximately $1.3 million during the year ended December 31, 2003.

On the Effective Date of the Company’s emergence from bankruptcy protection, holders of the Predecessor Company’s senior notes and the Predecessor Company’s qualified general unsecured creditors received $50 million of the Successor Company’s new Senior Subordinated Notes. In addition, Orbital Sciences received $2.5 million of Senior Subordinated Notes in full satisfaction of its claims, and certain other parties received approximately $1.5 million of Senior Subordinated Notes in exchange for advisory and other services. Each holder of the Predecessor Company’s Insurance Loan received, in full satisfaction of its Insurance Loan claim, its pro rata share of the Successor Company’s new Senior Notes totaling approximately $19.1 million. The Senior Notes and the Senior Subordinated Notes both matured on June 30, 2008 and could be prepaid in full at any time without penalty.

At September 30, 2004 the Company had received consents from the holders of its Senior Notes and Senior Subordinated Notes that permitted the Company to use up to $45 million of its cash flow from existing operations toward project costs for theGeoEye-1 satellite. The consenting holders who held notes on the record date of July 29, 2004 received a consent fee in additional notes equal to 200 basis points on the principal amount of the notes to which the holders’ consents relate. The Company modified certain provisions of its indenture governing its Senior Subordinated Notes and the note and security agreement covering its Senior Notes to allow the Company to perform its obligations under the NextView contract.

Both the Senior Notes and the Senior Subordinated Notes accrued interest at an annual rate of 13.625 percent, payable only in kind, on a semiannual basis through December 31, 2004. Total interest expense paid in kind was $10.4 million for the year ended December 31, 2004. Effective January 1, 2005, interest became payable in cash on a semiannual basis at an annual rate of 11.625 percent, with such payments to commence June 30, 2005. The Company had total indebtedness of $85.0 million at December 31, 2004, which consisted of $22.2 million of Senior Notes and $62.8 million of Senior Subordinated Notes.

On March 31, 2005, the Company repaid the Senior Notes out of existing cash received pursuant to the exercise of warrants by certain investors during the first quarter of 2005. The Company recorded a loss of $0.6 million on the early extinguishment of this debt, which represented a prepayment penalty payable in accordance with the terms of the associated Senior Notes indenture agreement.

ORBIMAGE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Notes were issued at a discount of two percent of total principal; consequently, ORBIMAGE Holdings received $245 million of cash proceeds at closing. Concurrently with the closing of the offering, ORBIMAGE Holdings entered into an escrow agreement with BONY as Trustee and Escrow Agent whereby ORBIMAGE Holdings deposited $126.9 million into an escrow account, to remain until such time as ORBIMAGE Inc. could issue a guarantee of the Notes. Approximately $8.9 million was used to pay certain transaction-related expenses. The remaining $109.5 million was contributed by ORBIMAGE Holdings to the capital of ORBIMAGE Inc. As a result of this capital contribution, on June 30, 2005, ORBIMAGE Inc. had “Unrestricted Cash” as defined in the indenture governing its existing Senior Subordinated Notes in an amount sufficient to require ORBIMAGE Inc. to redeem the Senior Subordinated Notes pursuant to the mandatory redemption provisions of that indenture. ORBIMAGE Inc. redeemed the Senior Subordinated Notes on July 6, 2005. Upon redemption of the Senior Subordinated Notes, ORBIMAGE Inc. provided its guarantee of the Notes, and the escrow was released to ORBIMAGE Holdings on July 11, 2005. The Company recorded a loss of approximately $2.1 million relating to the early extinguishment of the Senior Subordinated Notes during 2005. Of this loss, approximately $1.2 million represented the write-off of the unamortized portion of consent fee payments paid in 2004 to the noteholders to allow the Company to use its cash flows from existing operations toward project costs for theGeoEye-1 satellite, and $0.9 million represented payments to an executive officer for refinancing the Senior Notes and Senior Subordinated Notes prior to their maturity in 2008 under the terms of an employment agreement entered into in October 2003.

The Notes bear interest at a rate per annum, reset semi-annually, equal to the greater of six-month LIBOR or three percent, plus a margin of 9.5 percent. ORBIMAGE Holdings entered into an interest rate swap arrangement in June 2005 pursuant to which it has fixed its effective interest rate under the Notes at 13.75 percent through July 1, 2008. The fair value of this cash flow hedge is approximately $2.3 million and has been recorded in other assets in the consolidated balance sheet at December 31, 2005 and in unrealized gain on derivative instrument in the consolidated statement of operations for the year ended December 31, 2005. Under the instruments governing the Notes, the Company is prohibited from paying dividends until the principal amount of the Notes has been repaid.

The Company is a holding company and does not have any independent assets or operations other than its ownership in all of the capital stock of ORBIMAGE Inc., the subsidiary guarantor of the Notes. In 2005, all of the Company’s operations were conducted through its wholly-owned subsidiary, ORBIMAGE Inc. ORBIMAGE Inc.’s guarantee of the Notes is full and unconditional, and all other subsidiaries of the Company other than ORBIMAGE Inc. are considered minor. There are no significant restrictions on the ability of ORBIMAGE Holdings to obtain funds from ORBIMAGE Inc. by dividend or loan. There are also no significant restrictions on the ability of ORBIMAGE Inc. to obtain funds from ORBIMAGE Holdings by dividend or loan.

Expenses associated with the issuance of the Notes were capitalized during 2005 and are amortized over the term of the Notes using the effective interest rate method. As of December 31, 2005, total unamortized prepaid financing costs were $18.3 million.

Each of the Company’s long-term debt agreements contained covenants requiring the Company to maintain an on-orbit insurance policy on OrbView-3 prior to the launch ofGeoEye-1 (the “Continuing Insurance”) for a coverage amount equal to the lesser of the book value of the satellite or the maximum amount available to be underwritten in the insurance market. ORBIMAGE paid approximately $2.1 million and $1.5 million in 2005 and 2004, respectively, to procure the Continuing Insurance.

On June 29, 2005, ORBIMAGE Holdings entered into a Registration Rights Agreement under which ORBIMAGE Holdings was to file a registration statement within 180 days after the issuance date of the Notes, enabling holders to exchange the notes for publicly registered notes with substantially identical terms. As of December 31, 2005, the Company had not filed a registration statement. The failure to

ORBIMAGE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

comply with the obligations under this agreement resulted in the Company paying additional interest on the Notes at an annual rate of one percent after the first nine months, effective December 27, 2005. The Registration Rights are “clearly and closely” related to the Notes. Per SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended, the Registration Rights are not considered embedded derivatives and will not be accounted for as such.

ORBIMAGE capitalized interest costs associated with the debt incurred for the construction of theGeoEye-1 satellite and related ground segment and system beginning in the third quarter of 2005. 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 into service. Capitalized interest totaled approximately $5.8 million at December 31, 2005.


(14)	Leases

Total rental expense under operating leases was $1.0 million, $0.8 million, and $0.7 million for the years ended December 31, 2005, 2004, and 2003. Aggregate minimum rental commitments under non-cancelable operating leases (primarily for office space and equipment) as of December 31, 2005 were as follows (in thousands):


2006	$	1,071
2007		1,090
2008		1,113
2009		1,007
2010		945
Thereafter		1,471

	$	6,697


(15)	Employee Benefit Plan

The Company’s employees participate in the Orbital Imaging Corporation Retirement Savings Plan, as amended, a defined contribution plan (the “Retirement Plan”) in accordance with Section 401(k) of the Internal Revenue code of 1986, as amended. The Company’s contributions to the Retirement Plan are made based on certain plan provisions and at the discretion of the Board of Directors. The annual contribution expense was $0.4 million, $0.3 million and $0.2 million for the years ended December 31, 2005, 2004, and 2003, respectively.


(16)	Capital Stock

Under the POR as confirmed by the Bankruptcy Court, all of the Predecessor Company’s existing preferred stock, common stock and any options and warrants outstanding were cancelled as of the Effective Date. The capital stock of the Successor Company consists of 25,000,000 authorized shares of new common stock. Holders of the Predecessor Company senior notes and the general unsecured creditors received a pro-rata distribution of 6,000,000 shares of the Successor Company common stock on the Effective Date. Outstanding preferred stock was cancelled as of the Effective Date. Holders of the Series A preferred stock were issued a pro-rata share of warrants to purchase up to 318,947 shares of new common stock at $28.22 per share on the Effective Date. These warrants expire on December 31, 2007. The fair value of the warrants were $1.26 and $4.73 per share using the Black-Scholes options pricing model at December 31, 2005 and 2004, respectively. This model utilizes certain information, such as the interest rate on a risk-free security maturing generally at the same time as the warrant being valued, and requires certain assumptions, such as the expected amount of time a warrant will be outstanding until it is

ORBIMAGE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

exercised or it expires, to calculate the fair value per share of warrants issued. The assumptions used to determine the value of the warrants at December 31, 2005 and 2004 were as follows:


	2005		2004

Volatility		62.5%		47.3%
Dividend yield		0.0%		0.0%
Risk-free interest rate		4.4%		3.6%
Expected average life		2 years		4 years
Exercise price per warrant		$28.22		$28.22

On November 16, 2004, the Company issued 3.25 million shares of common stock and warrants to purchase 3.25 million shares of common stock for a purchase price of $10 per share in a private placement to certain private investors. At the closing of the private placement, the Company received $32.5 million in gross proceeds. In addition, on that date the Company issued warrants to purchase an additional 1.0 million shares to the private investors as consideration for their commitment to backstop this rights offering. All of these warrants were exercised in the first quarter of 2005, with the Company receiving $42.5 million of proceeds. In February 2005, the Company issued to its existing shareholders transferable subscription rights to purchase up to an aggregate of approximately 3.26 million investment units, each consisting of one share of the Company’s common stock and one warrant to purchase a share of common stock at a cash exercise price of $10.00 per share. The subscription rights expired on March 14, 2005. The Company received approximately $32.5 million from the rights offering.


(17)	Stock Incentive Plans

On December 31, 2003, ORBIMAGE adopted the Employee Stock Incentive Plan (the “Stock Plan”), under which stock options, restricted stock and other stock-based awards may be granted to employees, officers, directors, consultants or advisors. As of December 31, 2003, the Company authorized 826,364 shares and made them available for grant under the Stock Plan. On December 31, 2003, ORBIMAGE issued 275,454 shares of restricted stock. These shares vest in three tranches as follows: 45,909 shares on June 30, 2004, 137,727 shares on January 3, 2005 and 91,818 shares on January 3, 2006. The fair market value of the restricted stock was valued at the reorganization equity value of ORBIMAGE on the Effective Date divided by the number of common shares issued to the creditors upon reorganization. ORBIMAGE issued 156,424 shares in a restricted stock grant to employees on July 1, 2004. The restricted shares will vest entirely between December 31, 2004 and December 31, 2008.

During 2004, ORBIMAGE granted stock options that generally will vest in annual increments of 20 percent commencing December 31, 2004. The options have a grant-date fair value calculated by the Company between $5.28 and $11.27 per option using the Black-Scholes options pricing model. This model utilizes certain information, such as the interest rate on a risk-free security maturing generally at the same time as the expected life of the option being valued, and requires certain assumptions, such as the expected amount of time the option will be outstanding until it is exercised or it expires, to calculate the fair value per share of options issued. The assumptions used to determine the value of the options at the date of grant were as follows:


Volatility		62.5%
Dividend yield		0.0%
Risk-free interest rate		3.7% - 3.9%
Expected average life		6.24 - 6.33 years
Weighted average exercise price per option		$6.50 - $18.25

ORBIMAGE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table details the stock option activity during 2004 and 2005:


						Weighted
						Average		Outstanding
	Number of			Option Price		Exercise		and
	Shares			Per Share		Price		Exercisable

Outstanding at December 31, 2003		—			—		—
Granted		317,559			6.50-18.25		7.33
Cancelled or expired		(687	)		6.50		6.50

Outstanding at December 31, 2004		316,872			6.50-18.25		7.33		59,059
Exercised		(9,199	)		6.50		6.50
Cancelled or expired		(12,335	)		6.50		6.50

Outstanding at December 31, 2005		295,338		$	6.50-18.25	$	7.36		111,415

Through the Predecessor Company’s stock option plan, as amended (the “Prior Stock Plan”), the Predecessor Company could issue to its employees, Orbital Sciences’ employees, consultants or advisors incentive or non-qualified options to purchase shares of the Predecessor Company’s common stock. The Prior Stock Plan was terminated on the Effective Date, and all options issued were cancelled.


(18)	Information on Industry Segments and Major Customers

ORBIMAGE operated as a single segment for the years ended December 31, 2005 and 2004. The Predecessor Company operated as a single segment for the year ended December 31, 2003.

Total domestic and foreign sales for the years ended December 31, 2005, 2004 and 2003 were as follows (in thousands):


					Predecessor
	Successor Company				Company

	2005		2004		2003

Domestic	$	25,392	$	16,567	$	3,525
Foreign		15,310		14,453		5,694

Total	$	40,702	$	31,020	$	9,219

In March 2004, the Company was awarded a contract to supply NGA with imagery and value-added products from the OrbView-3 satellite. The total value of the contract is $27.5 million over two years, of which approximately $10.5 million and $12 million represent minimum commitments to purchase imagery in years one and two, respectively. The contract also provides for NGA to reimburse up to approximately $5.0 million for infrastructure costs the Company incurred and will incur to provide the required imagery. In June 2004, ORBIMAGE received an additional task order to provide $6.4 million of production services to NGA under the program during the first two years of the contract. The Company recognized revenues of $23.2 million and $11.8 million for the years ended December 31, 2005 and 2004, respectively, related to this contract.

ORBIMAGE recognized revenue related to contracts with the U.S. Government, its largest customer, of $24.7 million and $15.9 million for the years ended December 31, 2005 and 2004, representing 61 percent and 51 percent of total revenues, respectively. The Predecessor Company recognized revenue related to contracts with the U.S. Government of $2.7 million, or 29 percent, of total revenues recognized during 2003.

ORBIMAGE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During 2004, ORBIMAGE commenced revenue recognition from contracts to supply OrbView-3 imagery to its regional distributors in Asia. These contracts provide for guaranteed annual minimum imagery purchases totaling approximately $13.0 million for terms ranging from one to four years excluding option periods. ORBIMAGE recognized revenue during 2005 of $5.0 million, $3.6 million and $2.8 million associated with sales to its three largest international customers, which represents 12 percent, 9 percent and 7 percent of total revenues recognized, respectively. During 2004, ORBIMAGE recognized revenue of $3.8 million, $3.2 million and $4.5 million to the same customers, which represents 12 percent, 10 percent and 14 percent, respectively, of total revenues recognized.


(19)	Summary of Quarterly Information (Unaudited)


	2005 Quarters

	First			Second			Third			Fourth

	(In thousands, except share data)
Revenues	$	8,659		$	8,501		$	11,197		$	12,345
Gross profit (loss)		(241	)		(757	)		1,512			2,072
Net loss		(5,522	)		(6,816	)		(6,840	)		(5,077	)
Loss per diluted share		(0.43	)		(0.39	)		(0.40	)		(0.28	)


	2004 Quarters

	First			Second			Third			Fourth

	(In thousands, except share data)
Revenues	$	2,010		$	9,749		$	8,891		$	10,370
Gross profit (loss)		(4,566	)		376			(157	)		1,613
Net loss		(8,389	)		(4,428	)		(6,140	)		(5,782	)
Loss per diluted share(a)		(1.32	)		(0.70	)		(0.95	)		(0.74	)


(a)		For 2004, the sum of each quarter’s loss per diluted share does not equal earnings per diluted share reported for the full year due to the effect of the issuance of 3.4 million shares in the fourth quarter of 2004.

PART III


Item 11.	*Executive Compensation.*

Set forth below is information regarding the compensation of the Company’s Chief Executive Officer (the “CEO”) and the other executive officers of the Company (together with the CEO, the “named officers”).

Summary Compensation Table. The summary compensation table set forth below contains information regarding the combined salary, bonus and other compensation of each of the named officers for services rendered to the Company in 2005, 2004 and 2003.

SUMMARY COMPENSATION TABLE


									Long-Term Compensation

				Annual Compensation (1)					Restricted			Securities
									Share			Underlying		All Other
Name and Principal Position		Year		Salary		Bonus			Awards			Options		Compensation

Matthew M. O’Connell			2005	$	350,000	$	957,465	(2)		—			—	$	24,920	(3)
	President and		2004	$	350,000	$	87,500		$	58,322	(4)		45,307	$	9,720	(5)
	Chief Executive Officer		2003	$	350,000	$	87,500		$	3,489,357	(6)		—	$	78,587	(7)
William Schuster			2005	$	242,500		42,438			—			—	$	10,189	(8)
	Chief Operating Officer		2004	$	13,990		—		$	182,500	(9)		22,262		—
			2003				—			—			—
Lee Demitry			2005	$	192,923		28,960			—			—	$	7,665	(10)
	Vice President—Satellite		2004	$	185,640	$	50,123		$	68,752	(11)		24,031	$	7,623	(12)
	Engineering and Operations		2003	$	173,923	$	48,195		$	5,355	(13)		—	$	25,578	(14)
Alex J. Fox			2005	$	188,881		28,373			—			—	$	5,712	(15)
	Vice President—Products		2004	$	175,139	$	47,288		$	58,994	(16)		24,031	$	5,338	(17)
	And Solutions and		2003	$	144,840	$	41,119		$	4,569	(18)		—	$	20,129	(19)
	Chief Information Officer
William L. Warren			2005	$	178,200		26,730			—			—	$	6,712	(21)
	Vice President General		2004	$	161,827	$	57,400		$	25,050	(20)		21,359	$	6,146	(22)
	Counsel and Secretary		2003		—		—			—			—		—


	(1)	Compensation is reportable in the year in which the compensable service was performed even if the compensation was paid in a subsequent year.


	(2)	Includes $869,965 bonus payable upon refinancing of Company’s old notes as required by Mr. O’Connell’s employment agreement


	(3)	Includes $15,000 car allowance, $8,400 matching contribution to 401(k) plan, and $1,520 payment for life insurance premiums.

	(4)	Includes $4,761 shares of restricted stock granted as the stock portion of Mr. O’Connell’s 2004 bonus.

	(5)	Includes $8,200 matching contribution to 401(k) plan and $1,520 payment for life insurance premium.

	(6)	Total includes 275,454 shares of restricted stock granted on December 31, 2003 pursuant to Mr. O’Connell’s employment agreement. Of such shares, 45,909 vested on June 30, 2004, 137,727 vested on January 3, 2005 and 91,818 vested on January 3, 2006. Total also includes 7,085 shares of restricted stock granted as the stock portion of Mr. O’Connell’s 2003 bonus. Such shares vested on June 30, 2005. To the extent that we pay dividends on our shares of Common Stock, Mr. O’Connell will be entitled to dividends only on the shares which are then vested.

	(7)	Includes $67,375 retention bonus, $9,692 matching contribution to 401(k) plan and $1,520 payment for life insurance premium.


	(8)	Includes $8,400 matching contributions to 401(k) plan and $1,789 payment for life insurance premiums.

	(9)	Includes 10,000 shares of restricted stock granted on December 6, 2004, 2500 shares of which each vests on December 31, 2005, 2006, 2007 and 2008.


(10)	Includes $7,665 matching contribution to 401(k) plan.

(11)	Total includes 6,504 shares of restricted stock granted on July 1, 2004, 2,168 shares of which vest on each of December 31, 2004, 2005 and 2006. To the extent we pay dividends on our shares of Common Stock, Mr. Demitry will be entitled to dividends only on the shares which are then vested. Also included in the total are 303 shares of restricted stock granted as the stock portion of Mr. Demitry’s 2004 stock bonus. Such shares vested on March 24, 2005.

(12)	Includes $7,623 matching contribution to 401(k) plan.

(13)	Total includes 434 shares of restricted stock granted as the stock portion of Mr. Demitry’s 2003 bonus. Such shares vested on June 30, 2005. To the extent that we pay dividends on our shares of Common Stock, Mr. Demitry’s will be entitled to dividends only on the shares which are then vested.

(14)	Includes $18,700 retention bonus and $6,878 matching contribution to 401(k) plan.

(15)	Includes $5,712 matching contribution to 401(k) plan.

(16)	Total includes 5,549 shares of restricted stock granted on July 1, 2004, 1,850 shares of which vest on each of December 31, 2004 and 2005 and 1,849 shares which will vest on December 31, 2006. To the extent that we pay dividends on our shares of Common Stock, Mr. Fox will be entitled to dividends only on the shares which are then vested.

(17)	Includes $5,338 matching contribution to 401(k) plan.

(18)	Total includes 370 shares of restricted stock granted as the stock portion of Mr. Fox’s 2003 bonus. Such shares vested on June 30, 2005. To the extent that we pay dividends on our shares of Common Stock, Mr. Fox will be entitled to dividends only on the shares which are then vested.

(19)	Includes $15,230 retention bonus and $4,899 matching contribution to 401(k) plan.

(20)	Total includes 2,505 shares of restricted stock granted on July 1, 2004, which, 1,670 has vested and of which 835 will vest on December 31, 2006.

(21)	Includes $6,712 matching contribution to 401(k) plan.

(22)	Includes $6,146 matching contribution to 401(k) plan.

Stock Option Exercises and Holdings. The table below shows information with respect to the number of stock options exercised by the officers named below during 2005 and the value of unexercised stock options granted under the 2003 Employee Stock Option Plan (as described in Item 12 below).

Aggregated Option Exercises During 2005 and December 31, 2005 Option Values


					Number of Securities				Value of Unexercised
					Underlying Unexercised				In-the-Money
					Option Shares at				Options at
	Shares				December 31, 2005				December 31, 2005
	Acquired on		Value
Name	Exercise		Realized		Exercisable		Unexercisable		Exercisable		Unexercisable

Matthew M. O’Connell		—		—		18,123		27,184	$	80,647	$	120,969
William Schuster		—		—		5,566		16,696		—		—
Lee Demitry		—		—		9,612		14,419		42,773		64,165
Alex J. Fox		—		—		9,612		14,419		42,773		64,165
William L. Warren		—		—		8,544		12,815		38,021		57,027

Director Remuneration

The 2005 annual compensation of each director who was not an employee of the Company or a subsidiary (a “Non-employee Director”) consisted of an annual retainer of $15,000. Under the Company’s Non-employee Director Stock Incentive Plan, which was approved by the Board in June 2004, each Non-Employee Director receives annually an award of 1,000 “restricted” shares of Common Stock. The amount and type of awards to directors under the Non-employee Director Stock Incentive Plan may be changed at any time by majority vote of the Compensation Committee. In addition, each Non-employee Director receives a fee of (i) $1,000 for attendance at each in-person meeting of the Board and (ii) $500 for attendance at each telephonic meeting of the Board and each meeting of a committee of the Board. Each of the Chairman of the Board and the Chairman of the Audit Committee also receive a $5,000 annual fee, and the Chairman of the Compensation Committee receives a $3,000 annual fee. All directors are also reimbursed for out-of-pocket expenses incurred in attending meetings of the Board or Board committees and for other legitimate expenses incurred in their capacity as directors.

Employment Agreements

The Company and Matthew O’Connell entered into an employment agreement effective as of October 27, 2003, pursuant to which Mr. O’Connell serves as our President and Chief Executive Officer. The employment agreement calls for a base salary of $350,000, an annual target bonus, a special bonus if the company refinances the current outstanding senior notes and senior subordinated notes prior to their maturity in 2008, Mr. O’Connell’s initial restricted stock grant, a company paid life insurance policy and eligibility for stock options. The annual bonus is subject to review of the Board on an annual basis, and the award of the annual bonus is based upon the achievement of performance objectives of Mr. O’Connell personally and the company as a whole. In the event Mr. O’Connell is terminated without cause, he will have a one year severance period, during which he will receive an amount equal to his base salary for one year, payment of the annual bonus for the current year to which he would be entitled (pro-rated for the number of months he was employed during the year), and continuation of all health and life insurance benefits during his one year severance period.

The Company and William Schuster entered into an employment agreement effective as of December 6, 2004, pursuant to which Mr. Schuster serves as Chief Operating Officer. The employment agreement calls for a base annual salary of $242,500 and an annual target bonus. The agreement also provides for Mr. Schuster to receive an initial restricted stock grant of 10,000 shares of Common Stock to vest in equal installments over a four year period beginning with December 31, 2005, options to purchase 22,262 shares of Common Stock to vest in equal installments over a four year period beginning with December 31, 2005, and a company paid life insurance policy. The annual bonus is subject to review of the Chief Executive Officer and the Board on an annual basis and the award of the annual bonus is based upon the achievement of performance objectives of Mr. Schuster personally and the company as a whole. In the event Mr. Schuster is terminated without cause, he will have a nine month severance period, during which he will receive an amount equal to his base salary for such period, payment of the annual bonus for the current year to which he would be entitled (pro-rated for the number of months he was employed during the year), and continuation of all health and life insurance benefits during his nine month severance period.

The Company and Timothy Puckorius entered into an employment agreement effective as of October 27, 2003, pursuant to which Mr. Puckorius serves as our Senior Vice President – Worldwide Marketing and Sales. The employment agreement calls for a base salary of $200,000, an annual target bonus, a company paid life insurance policy and eligibility for stock options. The annual bonus is subject to review of the Chief Executive Officer and the Board on an annual basis, and the award of the annual bonus is based upon the achievement of performance objectives of Mr. Puckorius personally and the company as a whole. In the event Mr. Puckorius is terminated without cause, he will have a six month severance period during which he will receive an amount equal to his base salary for such period, payment of the annual bonus for the current year to which he would be entitled (pro-rated for the number of

months he was employed during the year), and continuation of all health and life insurance benefits during his six month severance period.

The Company and Henry Dubois entered into an employment agreement effective as of January 3, 2006, pursuant to which Mr. Dubois serves as an Executive Vice President and the Chief Financial Officer of the Company. The employment agreement calls for a base salary of $250,000, an annual target bonus, a company paid life insurance policy and eligibility for stock options. The annual bonus is subject to review of the Chief Executive Officer and the Board on an annual basis, and the award of the annual bonus is based upon the achievement of performance objectives of Mr. Dubois and the company as a whole. In the event Mr. Dubois is terminated without cause, he will have a one year severance period during which he will receive an amount equal to his base salary for such period, payment of the annual bonus for the current year to which he would be entitled (pro-rated for the number of months he was employed during the year), and continuation of all health and life insurance benefits during his one year severance period.

Other than the agreements described above, the Company is not presently a party to an employment, termination of employment, or change of control agreement with any of its executive officers nor were any such agreements in effect during the fiscal year ended December 31, 2005.


Item 12.	*Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.*

Equity Compensation Plan Information. The following table provides certain information with respect to all of the Company’s equity compensation plans in effect as of December 31, 2005. Amounts set forth opposite “Equity compensation plan not approved by security holders” relate to the 2003 Employee Stock Incentive Plan (the “ORBIMAGE Plan”), which is described below.

(a)

(b)

(c)

Number of securities

remaining available for

Number of securities to

future issuance under

be issued upon exercise

Weighted average exercise

equity compensation plans

of outstanding options,

price of outstanding options,

(excluding securities

Plan Category

warrants and rights(1)

warrants and rights(2)

reflected in column (a))(3)

Equity compensation plans approved by security holders(1)

N/A

Equity compensation plan not approved by security holders(1)

295,442

129,927

Total

295,442

6.50

129,927


(1)	The shares set forth in column (a) are comprised of shares of Common Stock that may be issued in the future pursuant to currently outstanding options for the purchase of Common Stock.


(2)	The calculations of weighted average exercise prices are exclusive of restricted stock awards.


(3)	All of the shares set forth in column (c) with respect to the Incentive Plan may be issued pursuant to stock awards, including stock options, restricted stock grants and stock appreciation rights.

2003 Employee Stock Incentive Plan. As of December 31, 2003, at the effectiveness of our plan of reorganization, 12% of our fully diluted common equity (consisting of 826,363 shares of Common Stock) was set aside for officers and other employees for the issuance of stock awards under the 2003 Employee Stock Incentive Plan of the Company. Out of the shares reserved under this employee stock incentive plan, 275,454, representing 4% of the fully diluted common equity, was granted on December 31, 2003 to the Chief Executive Officer in the form of restricted stock vesting in three tranches as follows: 45,909 shares on June 30, 2004, 137,727 shares on January 3, 2005 and 91,818 shares to vest on January 3, 2006. The remaining shares were left available for issuance under the plan and may be issued from time to time as approved by the Board and the Compensation Committee. On July 1, 2004, we issued an aggregate 9,709 shares of restricted stock to our officers as part of their 2003 annual performance bonuses, all of which vested on June 30, 2005. In addition, on July 1, 2004, in recognition of

past performance by employees for their work done during our Chapter 11 bankruptcy case, all employees who had served during the bankruptcy case received awards of restricted stock in an aggregate amount of 100,269 shares. These shares of restricted stock, granted under the special reorganization stock bonus, vested as to all non-officer employees on December 31, 2004. For all officers, the shares of restricted stock granted under the special reorganization stock bonus, vested one third on December 31, 2004, one third on December 31, 2005 with an additional one third to vest on December 31, 2006. On September 24, 2004, all employees were granted options to purchase an aggregate 297,600 shares of Common Stock for a purchase price of $6.50 per share. These options will vest 20% per year on each December 31, with the first 20% having vested on December 31, 2004, and an additional 20% vesting on December 31, 2005.

2004 Non-Employee Director Stock Incentive Plan. On June 24, 2004, the Company established a 2004 Non-Employee Directors Incentive Stock Plan under which 70,000 shares of Common Stock were reserved for issuance to non-employee directors. Each non-employee director was granted 5,000 shares of restricted stock which vest 1,000 shares each July 1st, beginning July 1, 2004.

401(k) Employee Savings Plan. The Company has a tax-qualified 401(k) Employee Savings Plan (the “401(k) Plan”) for its employees generally, in which the executive officers also participate. Under the 401(k) Plan, eligible employees are permitted to defer receipt of their compensation up to the maximum amount allowed by law, with the employee’s contribution not to exceed $14,000 for the current year (subject to certain limitations imposed under the Internal Revenue Code of 1986, as amended (the “Code”)). The 401(k) Plan provides that a discretionary match of employee deferrals may be made by the Company in cash or stock. Pursuant to the 401(k) Plan, the Company has elected to match 50% of the first 8% of employee deferral, subject to limitations imposed by the Internal Revenue Service. The amounts held under the 401(k) Plan (except for matching contributions by the Company in Common Stock) are invested among various investment funds maintained under the 401(k) Plan in accordance with the directions of each participant. Except for customary “blackout” periods imposed from time to time by the Company on all employees including executive officers, the 401(k) Plan does not restrict employees from selling vested shares of the Company’s Common Stock held in the plan. Salary deferral contributions by employees under the 401(k) Plan are 100% vested. Company contributions vest 50% at the completion of the first year of employment with the remaining 50% vesting at the completion of the second year of employment. All company contributions after the completion of the second year of employment are fully vested. Participants or their beneficiaries are entitled to payment of vested benefits upon termination of employment.

Security Ownership of Certain Beneficial Owners and Management. The following table shows the beneficial ownership of shares of the Common Stock as of May 1, 2006 by (i) each director of the Company; (ii) the Chief Executive Officer and the four other most highly compensated executive officers

of the Company for the year ended December 31, 2005; (iii) all directors and executive officers of the Company, as a group; and (iv) holders of 5% or more of the Common Stock.

As of May 1, 2006, 17,454,654 shares of Common Stock were issued and outstanding.


	Number of Shares			Percent of
Name and Business Address of Beneficial Owner	Beneficially Owned			All Shares

Directors and Executive Officers*
Matthew M. O’Connell		269,884	(1)		1.5
William Schuster		15,564	(2)
Lee Demitry		16,572	(3)
Alex J. Fox		15,591	(4)
William L. Warren		11,533	(5)
James A. Abrahamson		5,000	(6)
Joseph M. Ahearn		5,000	(6)
Talton R. Embry		6,186	(6)
Lawrence A. Hough		5,000	(6)
James M. Simon, Jr.		3,331	(6)(7)
William W. Sprague		5,000	(6)
All directors and executive officers as group (16 persons)		376,981	(1)(2)(3)(4)(5)(6)(8)(9)		2.2

5% Holders
Harbert Distressed Master Fund, Ltd.(10)		5,991,800	(11)		34.3
River Run Management(12)		2,019,595	(13)		11.6
Redwood Master Fund(14)		1,544,137	(15)		8.9
Deephaven Distressed Opportunities Trading, Ltd.(16)		1,042,962	(17)		7.4
Whitebox Advisors, LLC (18)		1,086,562	(19)		6.2
Ahab Partners (20)		1,000,000	(21)		5.7



*	Unless otherwise indicated, the address is c/o ORBIMAGE Holdings Inc., 21700 Atlantic Boulevard, Dulles, Virginia 20166.


(1)	Total includes (i) 237,117 shares of restricted stock granted pursuant to Mr. O’Connell’s employment agreement (ii) 7,143 shares as the stock portion of his 2005 annual performance bonus, which vested January 3, 2006 (iii) 45,307 options to purchase Common Stock of which 18,124 options as of December 31, 2005 and of which the remaining options which will vest equally on December 31, 2006, 2007 and 2008 and (iv) warrants to purchase 7,500 shares of Common Stock.


(2)	Total includes (i) 10,000 shares of restricted stock granted pursuant to Mr. Schuster’s employment agreement, which vest 2,500 shares on each of December 31, 2005, 2006, 2007 and 2008, (ii) 22,262 options to purchase Common Stock, of which 5,564 vested as of December 31, 2005 and of which the remaining options will vest equally on December 31, 2006, 2007 and 2008.



(3)	Total includes (i) 6,504 shares of restricted stock granted on July 1, 2004 pursuant to the Company’s reorganization bonus, of which 4,336 shares have vested and of which 2,168 shares will vest on December 31, 2006, (ii) 455 shares of restricted stock granted as the stock portion of Mr. Demitry’s 2005 annual performance bonus, which vested on January 3, 2006, and (iii) 24,031 options to purchase Common Stock, of which 9,613 vested as of December 31, 2005 and the remaining options will vest equally on December 31, 2006, 2007 and 2008



(4)	Total includes (i) 5,549 shares of restricted stock granted on July 1, 2004 pursuant to the Company’s reorganization bonus, of which 3,699 shares have vested and of which 1,850 shares will vest on December 31, 2006, (ii) 429 shares of restricted stock granted as the stock portion of Mr. Fox’s 2005 annual performance bonus, which vested January 3, 2006, and (iii) 24,031 options to


	purchase Common Stock, of which 9,613 vested as of December 31, 2005 and the remaining options will vest equally on December 31, 2006, 2007 and 2008


(5)	Total includes (i) 2,505 shares of restricted stock granted on July 1, 2004 pursuant to the Company’s reorganization bonus, of which 1,670 shares have vested and of which 835 shares will vest on December 31, 2006, (ii) 485 shares of restricted stock granted as the stock portion of Mr. Warren’s 2005 annual performance bonus, which vested January 3, 2006, and (iii) 21,359 options to purchase Common Stock of which 8,543 vested as of December 31, 2005 and the remaining will vest equally on December 31, 2006, 2007 and 2008.



(6)	Each of the non-employee directors received a grant of 5,000 shares of restricted stock which vest 1,000 shares per year on each July 1, beginning July 1, 2004.



(7)	Mr. Simon disclaims ownership of 1,466 of the 3,331 shares listed above.



(8)	Includes warrants to purchase 1,186 shares of Common Stock.



(9)	Includes 18,320 options to purchase Common Stock issued to executive officers (other than Messrs. O’Connell, Schuster, Demitry, Fox, and Puckorius).


(10)	Includes Harbert Distressed Investment Master Fund, Ltd. (the “Master Fund”), HMC Distressed Investment Offshore Manager, L.L.C. (“HMC Management”), the sole investment manager of the Master Fund, HMC Investors, L.L.C. (“HMC Investors”), the managing member of both HMC Management and the Master Fund, Ltd. and the investment manager of Harbert Event Driven Master Fund, Ltd., Philip Falcone, a member of HMC Management, Distressed Investment Offshore Manager, L.L.C. who acts as the portfolio manager of the Master Fund on behalf of HMC Management and is the portfolio manager of Alpha US Sub Fund VI, LLC (which is a separate managed account), Raymond J. Harbert, a member of HMC Investors, and Michael D. Luce, a member of HMC Investors. The address of HMC Management and Philip Falcone is 555 Madison Avenue, 16th Floor, New York, NY 10022. The address for the Master Fund is c/o International Fund Services (Ireland) Limited, Third Floor, Bishop’s Square, Redmond’s Hill, Dublin 2, Ireland. The address for HMC Investors, Raymond J. Harbert, and Michael D. Luce is One Riverchase Parkway South, Birmingham, AL 35244.

(11)	Based on publicly available filings with the SEC through January 6, 2006, including Schedule 13D and Company records.

(12)	Includes River Run Partners L.P., Cold Springs L.P. and River Run Fund Ltd. The address for River Run Management LLC, the management company for the funds is 152 West 57th Street, 52nd Floor, New York, NY 10019.

(13)	Based on information provided to the Company by such beneficial owner, as adjusted to give effect to (i) the issuance of shares and warrants in a private placement on November 16, 2004 and the subsequent exercise of such warrants and (ii) an additional issuance of shares as consideration for such beneficial owner’s commitment to purchase additional debt securities of the Company in the future.

(14)	Address is 910 Sylvan Avenue, Englewood Cliffs, NJ 07632.

(15)	Based on information provided to the Company by such beneficial owner, as adjusted to give effect to (i) the issuance of shares and warrants in a private placement on November 16, 2004 and the subsequent exercise of such warrants and (ii) an additional issuance of shares as consideration for such beneficial owner’s commitment to purchase additional debt securities of the Company in the future.

(16)	Address is 130 Cheshire Lane — Suite 102, Minnetonka, MN 55305.

(17)	Based on information provided to the Company by such beneficial owner, as adjusted to give effect to (i) the issuance of shares and warrants in a private placement on November 16, 2004 and the subsequent exercise of such warrants and (ii) an additional issuance of shares as consideration for such beneficial owner’s commitment to purchase additional debt securities of the Company in the future.


(18)	Includes Whitebox Advisors, LLC (“WA”), Whitebox Convertible Arbitrage Advisors, LLC (“WCAA”), Whitebox Convertible Arbitrage Partners, L.P. (“WCAP”), Whitebox Convertible Arbitrage Fund, L.P. (“WCAFLP”), Whitebox Convertible Arbitrage Fund, Ltd. (“WCAFLTD”), Whitebox Hedged High Yield Advisors, LLC (“WHHYA”), Whitebox Hedged High Yield Partners, L.P. (“WHHYP”), Whitebox Hedged High Yield Fund, L.P. (“WHHYFLP”), Whitebox Hedged High Yield Fund, Ltd. (“WHHYFLTD”), AJR Financial, LLC (“AJR”), Pandora Select Advisors, LLC (“PSA”), Pandora Select Partners, L.P. (“PSP”), Pandora Select Fund, L.P. (“PSFLP”), and Pandora Select Fund, Ltd. (“PSFLTD”). WA, the managing member and sole owner of WCAA and WHHYA, has the power to direct the affairs of WCAA and WHHYA which manages accounts for the benefit of its clients WCAP, WCAFLP, WCAFLTD, WHHYP, WHHYFLP and WHHYFLTD. WCAA has the power to direct the affairs of WCAP and WHHYA has the power to direct the affairs of WHHYP including decision making power with respect to the disposition of the proceeds from the sale of the Common Stock. AJR, the managing member and sole owner of PSA, has the power to direct the affairs of PSA which manages accounts for the benefit of its clients PSP, PSFLP and PSFLTD. PSA has the power to direct the affairs of PSP including decision making power with respect to the disposition of the proceeds from the sale of the Common Stock. The address of WA, WCAA, WCAFLP, WHHYA, WHHYFLP, AJR, PSA, and PSFLP is 3033 Excelsior Boulevard, Suite 300, Minneapolis, MN 55416. The address of WCAP, WCAFLTD, WHHYP, WHHYFLTD, PSP, and PSFLTD is Trident Chambers, P.O. Box 146, Waterfront Drive, Wickhams Cay, Road Town, Tortolla, British Virgin Islands.

(19)	Based on information provided to the Company by such beneficial owner, as adjusted to give effect to (i) the issuance of shares and warrants in a private placement on November 16, 2004 and the subsequent exercise of such warrants and (ii) an additional issuance of shares as consideration for such beneficial owner’s commitment to purchase additional debt securities of the Company in the future.

(20)	Ahab Partners L.P. and Ahab International Ltd own shares. Jonathan Gallen directs disposition of shares. The address for Jonathan Gallen is 299 Park Avenue, New York, NY 10171

(21)	Based on SEC filings as of December 9, 2005, Ahab Partners L.P. and Ahab International Ltd. own 800,000 shares and 200,000 warrants of Company stock. Jonathan Gallen possesses sole power to vote and direct disposition of all securities and is deemed the beneficial owner under Rule 13d-3 of the Exchange Act.


Item 13.	*Certain Relationships and Related Transactions.*

The Company has not been a party to any transaction exceeding $60,000 in value with any of the Company’s directors, nominees for election as a director, executive officers, holders of more than 5% of the Company’s common stock or any member of the immediate family of any such persons, other than normal compensation arrangements that are described under the“Executive Compensation”section of this report.


Item 14.	*Principal Accountant Fees and Services.*

Independent Public Accountants’ Fees. Fees for all services provided by BDO Seidman, LLP, the Company’s independent auditors, in fiscal years 2005 and 2004 are as follows:

Audit Fees: BDO Seidman, LLP billed the Company for audit services in fiscal years 2005 and 2004 in the amounts of $438,768 and $261,652 respectively. Audit fees principally include annual audits of the financial statements and internal controls for the Company, reviews of the Company’s financial statements included in the quarterly reports on Form 10-Q, SEC registration statements and other filings, and consultation on accounting matters.

Audit-Related Fees: BDO Seidman, LLP billed the Company for audit-related services in fiscal years 2005 and 2004 in the amounts of $12,000 and $22,000, respectively. Audit-related fees principally include the employee benefit plan.

All Other Fees: There were no other fees billed for other professional services rendered or products provided by BDO Seidman LLP to the Company for 2005 and 2004.

Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services. Before the independent auditor is engaged by the Company or its subsidiaries to render audit or non-audit services, the Audit Committee shall pre-approve the engagement. Audit Committee pre-approval of audit and non-audit services will not be required if the engagement for the services is entered into pursuant to pre-approval policies and procedures established by the Audit Committee regarding the Company’s engagement of the independent auditor, provided the polices and procedures are detailed as to the particular service, the Audit Committee is informed of each service provided and such polices and procedures do not include delegation of the Audit Committee’s responsibilities under the Exchange Act to the Company’s management. The Audit Committee may delegate to one or more designated members of the Audit Committee the authority to grant pre-approvals, provided such approvals are presented to the Audit Committee at a subsequent meeting. If the Audit Committee elects to establish pre-approval policies and procedures regarding non-audit services, the Audit Committee must be informed of each non-audit service provided by the independent auditor. Audit Committee pre-approval of non-audit services (other than review and attest services) also will not be required if such services fall within available exceptions established by the SEC.

None of the audit and non-audit services described above were approved by the audit committee because they are subject to the waiver of pre-approval provisions set forth in applicable rules of the SEC.


Item 15.	*Exhibits and Financial Statement Schedules.*

(a)(3)Exhibits

The exhibits listed in the accompanying Index to Exhibits are filed or incorporated by reference as part of this Amendment No. 1 on Form 10-K/ A to our Annual Report on Form 10-K for the fiscal year ended December 31, 2005.

SIGNATURES

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


	ORBIMAGE HOLDINGS INC.


	By:	/s/MATTHEW M. O’CONNELL



	Matthew M. O’Connell,
	President, Chief Executive Officer and Director

May 1, 2006

INDEX TO EXHIBITS


Exhibit Number			Exhibit Title

	10	.1	Employment Agreement for Henry E. Dubois
	31	.1	Rule 13a-14(a) Certification of Matthew M. O’Connell
	31	.2	Rule 13a-14(a) Certification of Henry E. Dubois
	31	.3	Rule 13a-14(a) Certification of Tony A. Anzilotti
	32	.1	Certification Pursuant to 18 U.S.C. Section 1350 of Matthew M. O’Connell
	32	.2	Certification Pursuant to 18 U.S.C. Section 1350 of Henry E. Dubois
	32	.3	Certification Pursuant to 18 U.S.C. Section 1350 of Tony A. Anzilotti

GeoEye (GEOYE) Inactive 10-K/A2005 FY Annual report (amended)