<PAGE>
FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20429
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to ___________________
Commission File Number 000-28947 .
-----------------
SPACEDEV, INC.
(Exact name of registrant as specified in its charter)
Colorado 84-1374613
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
13855 Stowe Drive, Poway, California 92064
(Address of principal executive offices)
(Issuer's telephone number) (858) 375-2030.
----------------
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Checkmark whether the issuer (1) has filed all reports required to be filed by
Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 13,948,993 SHARES OF ISSUER'S VOTING
COMMON STOCK WERE OUTSTANDING ON June 30, 2000.
<PAGE>
SPACEDEV, INC.
FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 2000
INDEX PAGE
----- ----
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)....................................1
Condensed Balance Sheets at June 30, 1999 and 2000..................1
Condensed Statements of Operations for June 30, 1999 and 2000.......3
Condensed Statements of Cash Flows for June 30, 1999 and 2000.......4
Notes to Condensed Financial Statements.............................6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................................10
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings..................................................15
ITEM 2. Changes in Securities..............................................15
ITEM 3. Defaults Upon Senior Securities....................................15
ITEM 4. Submission of Matters to Vote of Security Holders..................15
ITEM 5. Other Information..................................................15
ITEM 6. Exhibits and Reports on Form 8-K...................................16
Signatures....................................................................17
ii
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
SPACEDEV, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
JUNE 30, 2000 1999
--------------------------------------------------------------------------------
Assets (Note 3)
Current Assets
Cash $ 101,338 $ 11,924
Accounts receivable 185,195 2,308,253
Inventory - 243,154
Prepaid assets and other current assets 17,862 185,917
--------------------------------------------------------------------------------
Total current assets 304,395 2,749,248
Fixed Assets - Net 2,137,337 2,305,155
Intangible Assets - Net 1,829,656 4,825,595
Other Assets 64,241 136,962
--------------------------------------------------------------------------------
$ 4,335,629 $10,016,960
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
1
<PAGE>
<TABLE>
SPACEDEV, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS, CONT'D.
(UNAUDITED)
<CAPTION>
JUNE 30, 2000 1999
-------------------------------------------------------------------------------------------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities
Bank overdraft facility $ - $ 44,843
Line of credit (Note 3) 41,085 89,110
Current portion of notes payable (Note 4) 7,200 1,309,339
Current portion of acquisition price payable - 500,000
Current portion of capitalized lease obligations 38,267 30,060
Accounts payable and accrued expenses 425,469 1,088,964
Billings in excess of costs incurred
and estimated earnings (Note 2) 50,241 -
Customer deposits and deferred revenue 5,000 1,500,070
Accrued payroll, vacation and related taxes 157,827 418,859
Related party note payable (Note 4(b)) 75,964 528,000
-------------------------------------------------------------------------------------------
Total current liabilities 801,053 5,509,245
Note Payable, Less Current Maturities (Note 4(a)) 2,281,080 960,000
Related Party Note Payable, Less Current Maturities 543,992 -
(Note 4(b))
Capitalized Lease Obligations, Less Current Maturities 75,419 17,334
Acquisition Price Payable, Less Current Maturities - 500,000
Other Liabilities - 52,002
-------------------------------------------------------------------------------------------
Total liabilities 3,701,544 7,038,581
Stockholders' Equity
Convertible preferred stock, $.001 par value; 10,000,000
shares authorized; no shares issued and outstanding - -
Common stock, $.0001 par value; 50,000,000 shares
authorized; 13,948,993 and 14,507,438 shares issued
and outstanding, respectively 1,394 1,451
Additional paid-in capital 7,257,161 7,107,416
Additional paid-in capital - stock options 750,000 750,000
Deferred compensation (250,000) (250,000)
Accumulated deficit (7,124,470) (4,641,694)
Accumulated other comprehensive income:
Cumulative foreign currency translation adjustments - 11,206
-------------------------------------------------------------------------------------------
Total stockholders' equity 634,085 2,978,379
-------------------------------------------------------------------------------------------
$ 4,335,629 $ 10,016,960
===========================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
2
<PAGE>
<TABLE>
SPACEDEV, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
------------------------------ ------------------------------
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $ 865,834 $ 976,648 $ 1,944,364 $ 2,039,739
Cost of sales 438,556 441,415 1,022,118 1,009,320
---------------------------------------------------------------------------------------------------------
Gross Margin 427,278 535,233 922,246 1,030,419
Operating Expenses
General and administrative 490,398 1,395,537 969,256 2,576,712
Research and development - 173,688 - 280,999
---------------------------------------------------------------------------------------------------------
Total Operating Expenses 490,398 1,569,225 969,256 2,857,711
---------------------------------------------------------------------------------------------------------
Loss from Operations (63,120) (1,033,992) (47,009) (1,827,292)
---------------------------------------------------------------------------------------------------------
Other Income (Expense)
Interest expense (62,209) (89,509) (143,180) (155,274)
Other income - net - 82,338 - 155,505
---------------------------------------------------------------------------------------------------------
Total Other Income (Expense) (62,209) (7,171) (143,180) 231
---------------------------------------------------------------------------------------------------------
Net Loss $ (125,329) $ (1,041,163) $ (190,189) $ (1,827,061)
=========================================================================================================
Net Loss Per Share $ (.01) $ (.09) (.01) $ (.20)
---------------------------------------------------------------------------------------------------------
Weighted-Average Shares Outstanding 13,936,246 12,044,975 13,921,369 9,073,483
=========================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
<TABLE>
SPACEDEV, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
------------------------------ ------------------------------
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities
Net loss $ (125,329) $(1,041,163) $ (190,189) $(1,827,06)
Adjustments to reconcile net loss
to net cash provided by (used
in) operating activities:
Depreciation and amortization 208,164 476,600 417,926 937,728
Common stock issued for
compensation and services 45,057 151,349 89,090 153,015
Change in operating assets
and liabilities (17,709) 608,641 18,502 503,338
-----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in)
operating activities 110,183 195,427 335,329 (232,980)
-----------------------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities
Purchases of fixed assets (2,747) (16,041) (5,628) (28,647)
-----------------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities
Proceeds (payments) from bank
lines of credit 25,085 - (200,330) -
Proceeds (payments) from notes
payable - related party (42,000) 106,000 (98,046) 291,000
Payments on notes payable - (25,287) (23,720) (41,324)
Payments on capitalized lease
obligations (7,729) (12,242) (9,154) (24,623)
Change in bank lines of credit - (28,691) - (10,890)
Proceeds from notes payable - - - 143,000
Proceeds from issuance of common
stock - 177,002 - 241,936
Decrease in bank overdraft
facility - (425,211) - (432,455)
-----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (24,644) (208,429) (331,250) 166,644
-----------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash - 1,580 - 368
-----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash 82,792 (27,463) (1,549) (94,615)
-----------------------------------------------------------------------------------------------------------------------
Cash at Beginning of Period 18,546 39,387 102,887 106,539
-----------------------------------------------------------------------------------------------------------------------
Cash at End of Period $ 101,338 $ 11,924 $ 101,338 $ 11,924
=======================================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
4
<PAGE>
<TABLE>
SPACEDEV, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONT'D.
(UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
------------------------------ ------------------------------
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Supplemental Disclosures of Cash Information:
Cash paid during the period for:
Interest $ 46,643 $ 82,018 $ 120,586 $ 141,241
Noncash Investing and Financing Activities:
During the three months ended June 30, 2000 and 1999, the Company issued 26,548 and 22,861 shares of stock for
expense of $45,057 and $151,349, respectively.
During the six months ended June 30, 2000 and 1999, the Company issued 69,048 and 23,582 shares of stock for expense
of $89,090 and $153,015, respectively.
During the three months and six months ended June 30, 2000, the Company financed the acquisition of $55,306 and
$93,733, respectively, of fixed assets with capitalized leases.
During the six months ended June 30, 1999, the Company financed $317,000 of additions to construction in progress
with a long-term loan.
=======================================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
5
<PAGE>
SPACEDEV, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
The accompanying condensed consolidated financial statements of SpaceDev, Inc.
("the Company") include the accounts of the Company and its wholly-owned
subsidiaries. The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, Integrated Space Systems, Inc. (ISS)
(a California corporation) and Space Innovations Limited (SIL) (a United Kingdom
entity). The Company disposed of its interest in Space Innovations Limited on
December 17, 1999. All significant intercompany transactions and balances have
been eliminated in consolidation. In the opinion of management, the condensed
consolidated financial statements reflect all normal and recurring adjustments
which are necessary for a fair presentation of the Company's financial position,
results of operations and cash flows as of the dates and for the periods
presented. The condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Consequently, these statements do not include all disclosures
normally required by generally accepted accounting principles for annual
financial statements nor those normally made in an Annual Report on Form 10-KSB.
Accordingly, reference should be made to the Company's Form 10 filed on April
28, 2000 and other reports the Company filed with the Securities and Exchange
Commission for additional disclosures, including a summary of the Company's
accounting policies, which have not materially changed. The consolidated results
of operations for the three months and the six months ended June 30, 2000 and
1999 are not necessarily indicative of results that may be expected for the
fiscal year ending December 31, 2000 or any future period, and the Company makes
no representations related thereto.
The accompanying condensed consolidated financial statements as of June 30, 2000
and 1999 have been prepared assuming the Company will continue as a going
concern. However, the Company had a working capital deficit of $496,658 as of
June 30, 2000, and incurred a net loss of $190,189 for the six months then
ended. These conditions raise doubt about the Company's ability to continue as a
going concern. Subsequent to June 2000, management intends to raise additional
financing through a combination of public and private equity placements,
commercial project financing and government program funding to fund future
operations and commitments. There is no assurance that additional debt and
equity financing needed to fund operations will be consummated or obtained in
sufficient amounts necessary to meet the Company's needs.
The accompanying condensed consolidated financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the possible inability of the Company to continue as a going
concern. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosures of contingent assets and liabilities and the results of operations
during the reporting period. Actual results could differ materially from those
estimates.
Net loss per common share has been computed on the basis of the weighted average
number of shares outstanding, according to the rules of Statement of Financial
Accounting Standards No. 128, "Earnings per Share." Diluted net loss per share
has not been presented as the computation would result in anti-dilution.
Certain reclassifications have been made to the prior period financial
statements to conform to the current period presentation.
6
<PAGE>
2. Revenue Recognition
The Company's revenues are derived primarily from fixed price contracts and are
recognized using the percentage-of-completion method of contract accounting
based on the ratio of incurred costs to total estimated costs. Losses on
contracts are recognized when they become known and reasonably estimable. Actual
results of contracts may differ from management's estimates and such differences
could be material to the consolidated financial statements. Professional fees
are billed to customers on a time and materials basis, a fixed price basis or a
per-transaction basis. Time and materials revenues are recognized as services
are performed.
Billings in excess of costs incurred and estimated earnings represent the excess
of amounts billed in accordance with the contractual billing terms. At June 30,
2000, billings in excess of costs incurred and estimated earnings were $50,241.
3. Line of Credit
In November 1998, the Company (through ISS) obtained a bank line of credit in
the amount of $250,000 which matured in November 1999 and was renewed until July
26, 2000. At June 30, 2000 and 1999, the outstanding balance on the line of
credit was $41,085 and $89,110, respectively.
The line of credit is secured by all of the assets of ISS. The line is also
guaranteed by the Company and a major stockholder. The interest rate under the
line of credit is prime (9.50% at June 30, 2000) plus 2.00%.
4. Notes Payable
(a) BUILDING NOTES
On December 21, 1998, the Company borrowed $1,300,000 from a lender to finance
the purchase of its facility in Poway, California. The note called for monthly
payments and a balloon payment on December 21, 1999. The note accrued interest
at 13%. The note continued on a month-to-month basis until it was paid in full
on February 23, 2000.
On February 23, 2000, the Company signed a $1,330,000 note with a new lender to
refinance the aforementioned debt. The note calls for 300 monthly payments with
interest at the bank's prime rate (9.50% at June 30, 2000) plus 1.50%. The note
matures on March 1, 2025. The outstanding balance on this loan at June 30, 2000
was $1,330,000.
In December 1998, the CEO of the Company entered into a $500,000 loan agreement
with another lender to finance additional costs of its new facility. This
liability was assigned to the Company and calls for 59 monthly interest payments
at 12.23% and a balloon payment of $505,000, including interest, on December 17,
2003. At June 30, 2000 and 1999, the outstanding balance on this loan was
$499,671 and $500,000, respectively.
In 1999, the Company entered into a second loan agreement with this lender. The
$460,000 loan calls for 59 monthly interest payments at 10.5% and a balloon
payment of $464,000, including interest, in March 2004. At June 30, 2000 and
1999, the outstanding balance on this loan was $458,609 and $460,000,
respectively.
7
<PAGE>
(b) RELATED PARTIES
The Company had notes payable to the Chairman and a former key employee. At June
30, 2000 and 1999, the balances were $619,956 and $528,000, respectively, with
interest between 4% and 10%. The notes, due in March 1999, were converted to
demand notes. As part of a February 2000 Separation and Release Agreement with
the former key employee, $70,000 of principal and accrued interest was paid in
monthly installments through July 2000.
Future minimum principal payments on all notes payable are
as follows:
YEAR ENDING JUNE 30,
---------------------------------------------------------
2001 $ 84,759
2002 83,670
2003 85,021
2004 1,044,800
2005 88,208
Thereafter 1,521,778
---------------------------------------------------------
$ 2,908,236
=========================================================
5. Operating Segments
The Company's operating structure included two operating segments for 2000 and
three operating segments for 1999.
SEGMENT PRODUCTS AND SERVICES
The Company has the following reportable segments: Space Missions Division
(SMD), ISS and SIL. SMD is in the process of developing deep space science
exploration satellites. ISS provides engineering services, launch integration
services and space vehicle integration services. SIL developed low-cost
satellites and satellite subsystems for use in space. The Company disposed of
SIL on December 17, 1999.
The following is a summary of operating results and assets by
segment.
FOR THE SIX MONTHS ENDED JUNE 30, 2000
--------------------------------------------------------------
(IN THOUSANDS) SMD ISS Total
--------------------------------------------------------------
Net revenue from
External customers $ 1,359 $ 585 $ 1,944
Depreciation and
Amortization expense 54 364 418
--------------------------------
Segment profit (loss) $ 23 $ (213) $ (190)
================================
Total segment assets $ 2,556 $ 1,944 $ 4,500
Less intersegment assets (164) - (164)
--------------------------------
Net segment assets $ 2,392 $ 1,944 $ 4,336
================================
8
<PAGE>
SEGMENT PRODUCTS AND SERVICES, CONT'D
FOR THE SIX MONTHS ENDED JUNE 30, 2000
--------------------------------------------------------------
(IN THOUSANDS) SMD ISS Total
--------------------------------------------------------------
Geographic Information:
Revenue
--------------------------------------------------------------
United States $ 1,359 $ 585 $ 1,944
Europe - - -
--------------------------------
$ 1,359 $ 585 $ 1,944
================================
Long-lived Assets
--------------------------------------------------------------
United States $ 107 $ 1,788 $ 1,895
Europe - - -
--------------------------------
$ 107 $ 1,788 $ 1,895
--------------------------------
================================
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1999
-------------------------------------------------------------------------------------
(IN THOUSANDS) SMD ISS SIL Total
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenue from external customers $ - $ 457 $ 1,583 $ 2,040
Depreciation and
amortization expense 38 368 531 937
---------------------------------------------
Segment profit (loss) $(1,210) $ 7 $ (624) $(1,827)
=============================================
Total segment assets $ 2,236 $ 2,930 $ 5,172 $10,338
Less intersegment assets (92) (229) - (321)
---------------------------------------------
Net segment assets $ 2,144 $ 2,701 $ 5,172 $10,017
=============================================
Geographic Information:
Net revenue
-------------------------------------------------------------------------------------
Europe $ - $ - $ 1,267 $ 1,267
United States - 457 316 773
---------------------------------------------
$ - $ 457 $ 1,583 $ 2,040
=============================================
Long-lived Assets
-------------------------------------------------------------------------------------
United States $ 2,144 $ 2,556 $ - $ 4,700
Europe - - 2,568 2,568
---------------------------------------------
$ 2,144 $ 2,556 $ 2,568 $ 7,268
=============================================
</TABLE>
9
<PAGE>
6. New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"). The
new standard requires companies to record derivatives on the balance sheet as
assets or liabilities measured at fair value. Gains or losses resulting from
changes in the values of those derivatives will be reported in the statement of
operations or as a deferred item, depending on the use of the derivatives and
whether they qualify for hedge accounting. The key criterion for hedge
accounting is that the derivative must be highly effective in achieving
offsetting changes in fair value or cash flows of the hedged items during the
term of the hedge. The Company is required to adopt FAS 133 in 2001 and has not
yet determined the impact, if any, that the adoption of FAS 133 will have on the
consolidated financial statements.
In December 1999 the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB 101). SAB
101 is effective no later than the quarter ended December 31, 2000. The Company
is in the process of determining the impact that adoption of SAB 101 will have
on the consolidated financial statements.
In March 2000, the FASB issued FASB Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation, an Interpretation of APB
Opinion No. 25" (the "Interpretation"). The Interpretation is intended to
provide guidance for certain issues that have arisen in practice since the
issuance of APB 25. The Company will adopt the Interpretation for all
transactions entered into after July 1, 2000 and has not yet determined the
impact, if any, that the adoption of the Interpretation will have on the
consolidated financial statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the
Company's financial statements and the notes thereto and the other financial
information appearing elsewhere in this document. In addition to historical
information, the following discussion and other parts of this document contain
forward-looking information that involves risks and uncertainties. Actual
results could differ materially from those anticipated by such forward-looking
information due to a number of factors beyond the Company's control.
OVERVIEW
During 1998, SpaceDev acquired Integrated Space System (ISS) and Space
Innovation Limited (SIL). On February 7, 1998, the Company issued 2,000,000
shares of restricted common stock and acquired all of the outstanding shares of
common stock of ISS. ISS provides engineering and technical services related to
space-based systems, primarily launch vehicle integration. The fair value of the
shares issued was $1.8125 per share, calculated using the average daily closing
prices for a period surrounding the acquisition date. The acquisition price was
not reduced for the Rule 144 restrictions on the shares of common stock. The
total purchase price was valued at $3,625,000. The excess of the calculated
purchase price of the approximately $164,000 of net assets acquired was
capitalized as goodwill and is being amortized over sixty months.
On October 1, 1998, the Company issued 1,000,000 shares of restricted
common stock and acquired all of the outstanding shares of common stock of SIL.
SIL develops low-cost satellites and satellite subsystems for use in space. The
fair value of the shares issued was $1.75 per share and was calculated using the
average daily closing prices for a period surrounding the acquisition date. The
acquisition price was not reduced for the Rule 144 restrictions on the shares of
common stock. The total purchase price was valued at $3,182,000, including
approximately $432,000 of liabilities in excess of the value of assets acquired.
Also included in the total goodwill was an acquisition price payable of
$1,000,000. To satisfy the payable, the Company was to issue $1,000,000 of
restricted common stock to the former shareholders of SIL in four equal
semi-annual installments. The fair market value of the common stock at specified
dates would be used to determine the number of shares to be issued. The
resulting goodwill amount of $3,182,000 was to be amortized over sixty months.
In 1998, operating activities included engineering technical services
work for aerospace customers and continued development of NEAP preliminary
designs and mission analysis. During 1999, operating activities included
preliminary design and conceptual studies for the CHIPSat program, engineering
technical services and continued work on the NEAP mission. SpaceDev's employee
base increased with the acquisition of ISS to 20 employees in February 1998.
10
<PAGE>
In 1998, SpaceDev entered into a fixed price contract with the Jet
Propulsion Laboratory (JPL) to provide mission support for the Deep Space
Tracking Network. JPL's main task was to coordinate the NEAP mission trajectory
analysis into their Deep Space Network Plan. SpaceDev paid JPL $10,000 for this
phase of work. The nature of the contract is highly technical. Quoting from the
statement of work: "Supported work will focus on NEAP telecommunications system
analysis and Deep Space Network/Advanced Multi-Mission Operations System
(DSN/AMMOS) mission support assessment." In plain English, this means JPL will
work to understand NEAP communications needs in relation to other missions which
might be flying at the same time, relative to the Deep Space Network capacity to
handle multiple missions simultaneously. This is a standard study performed in
advance of all proposed deep space missions.
On November 20, 1998 SpaceDev initiated its DSN support contract with
JPL. The total cost of the effort was agreed to be $35,000. Approximately
one-third of the work has been performed to-date at a cost to SpaceDev of
$10,000. As additional planning work is required to be performed by JPL under
the contract, to stay current with the NASA and JPL planning process as it moves
forward, more of the agreed upon tasks will be performed by JPL. SpaceDev will
pay the remaining balance of $25,000 as those tasks are completed by JPL. This
period could cover through the end of 2001.
On June 23, 1999, the Company filed for a registration statement with
the State of Colorado for units consisting of one share of $.0001 par value
common stock and one re-pricing warrant to purchase one share of common stock.
The primary purpose of the offering was to raise $350,000 under Rule 504 of the
Securities Act of 1933 to finance development of a hybrid rocket. That
registration statement was made effective by the State of Colorado on August 26,
1999, providing for a per unit price of $1.50 per share. Due to fluctuations in
the market price of the Company's common stock, the Company was forced to
negotiate a per unit price based on the five-day trading average, less thirty
percent. The entire offering of $350,000 was sold to a single investor in
Colorado at a price of $0.91 per unit. Following that sale, the Company
determined to raise the aggregate offering price in order to allow it to obtain
funding during preparation of its Form 10-SB Registration Statement. The
registration statement was amended for a total aggregate offering price of
$730,000, with a per unit price based on the negotiated amount paid by the
initial investor, and was made effective by the State of Colorado on October 13,
1999. Following effectiveness of the post-effective amendment, the Company sold
an additional $10,000 in units under the offering at a price of $0.83 per unit.
The repricing warrants were convertible into common stock of the
Company if the market price of the Company's common stock dropped below the
price paid per unit in the offering during the 150 days immediately following
issuance. The conversion formula was to be based on a minimum market price of
$1.25 per share. If the 150-day average closing bid price of the common stock
exceeded the unit price in the offering, the warrants would automatically
expire. Since the units were issued to investors at a discount, the warrants are
not convertible under the conversion formula, which uses a minimum market price
of $1.25, since any calculation under the formula results in a negative number.
As a result, no further shares will be issued as a result of the issuance of the
re-pricing warrants.
In November 1999 SpaceDev was awarded a $4,995,868 turnkey mission
contract by the Space Sciences Laboratory (SSL) at University of California,
Berkeley (UCB). SpaceDev was competitively selected by UCB/SSL to design, build,
integrate, test and operate for one year a small scientific, Earth-orbiting
spacecraft called CHIPSat. The CHIPSat contract will conclude on December 31,
2003. Revenues for 2000, 2001 and 2002 are expected to be approximately, $2.0
million, $ 1.4 million and $1.1 million. The payments on the contract are made
on a monthly basis according to a preset payment schedule. This is the Company's
first production contract. As a result, the Company is taking a conservative
approach and will not earn a profit on the contract in 2000. The Company will
review this position on a quarterly basis and will evaluate its position when it
has a better assessment of the costs related to the project.
On December 17, 1999, the Company's Board of Directors entered into a
Mutual Release and Rescission of Agreement ("Release Agreement") to rescind the
original acquisition of SIL, effective October 1, 1998. Subsequent to SIL's
acquisition and prior to December 17, 1999, the accounts of SIL were included in
the consolidated financial statements of the Company.
The Release Agreement resulted in the retirement of the 1,000,000
shares of the Company's common stock which had been issued to the former
shareholders of SIL, the cancellation of all outstanding options for Company
stock and the cancellation of the acquisition price payable. The transaction was
recorded as a purchase of treasury stock. In accordance with Accounting
Principles Board Opinion No. 29, "Accounting for Non-monetary Transactions," the
transaction was recorded as a decrease to stockholders' equity. Therefore,
$423,345 was recorded as a decrease in the Company's additional paid-in-capital
on December 17, 1999.
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The significant components of the amount recorded in 1999 as a
reduction to additional paid-in capital are as follows:
Loss on un-amortized goodwill $ (1,929,000)
Gain on extinguishment of acquisition price payable 1,000,000
Net liabilities disposed of from SIL 506,000
-------------
$ (423,000)
=============
The Company was previously a guarantor on a bank line of credit used to
finance SIL's operations. Under terms of the Release Agreement, SIL agreed to
apply 25 percent of the proceeds from each payment received on a specific
contract until the bank loan was paid in full. Once the loan had been paid in
full, the loan agreement was to be terminated, releasing the Company's guarantor
obligation. At December 31, 1999, the outstanding balance on the bank line of
credit was approximately $386,000, maturing on January 18, 2001 with interest at
the bank's prime (8.5% at December 31, 1999) plus 1.25 percent. On April 14,
2000, the amount of the line guaranteed by the Company was paid down to $0 and
the loan agreement has been terminated.
RESULTS OF OPERATIONS
Numbers reflected in the following discussion have been rounded to the
nearest one thousandth. Please refer to the financial statements, which are a
part of this report for further information regarding the results of operations
of the Company.
SIX MONTH PERIOD ENDED JUNE 30, 2000 COMPARED TO JUNE 30, 1999
During the six months ended June 30, 2000, the Company had net sales of
$1.9 million as compared to net sales of $2.0 million for the same six months in
1999. Sales in 2000 were comprised of $1.1 million from the CHIPSat contract,
$325,000 from research and development performed for the Office of Space Launch
(OSL) and $570,000 from all other programs. In 1999, $1.6 million of sales
resulted from the activities of SIL, which is no longer a part of the Company in
2000. The remainder of the $460,000 in 1999 sales was made up of $145,000 from a
contract with the Jet Propulsion Laboratory and the balance on other projects.
During the six months ended June 30, 2000, the Company had cost of
sales (direct and allocated costs associated with individual contracts) of $1.0
million and $1.0 million in the same period in 1999. The changes from
year-to-year were due to higher CHIPSat and other project sales volume
($340,000) and the absorption of certain overhead costs (such as building
expense, equipment depreciation, utilities and operating supplies) to cost of
goods sold ($410,000), all of which was offset by a $750,000 reduction in cost
of goods sold due to the SIL rescission.
During the six months ended June 30, 2000, the Company had a net loss
of $190,000, compared to a net loss of $1.8 million for the same period in 1999.
The reduction in the net loss was due to the rescission of the SIL agreement,
which reduced the loss by $625,000, and an increase in the volume of sales from
the CHIPSat program and the Office of Space Launch, which absorbed a significant
portion of the company's overhead costs.
The Company experienced a decrease in general and administrative
expenses from $2.6 million for the six months ended June 30, 1999 to $1.0
million for the same period ended June 30, 2000. General and administrative
expenses consist primarily of salaries for administrative personnel, fees for
outside consultants, goodwill amortization, insurance, legal and accounting fees
and other overhead. The reduction was primarily attributable to the SIL
rescission ($1.1 million), the absorption of certain overhead costs to costs of
goods sold ($410,000), other cost reductions of $110,000 ,partially offset by
increased legal and accounting expenses of $50,000 related to the preparation
and filing of the Company's registration statement on Form 10-SB.
Research and development expense decreased from $281,000 for the period
ended June 30, 1999 to $0 for the period ended June 30, 2000. For 2000, all of
the Company's research and development efforts have been paid through contracts
with various customers.
THREE MONTH PERIOD ENDED JUNE 30, 2000 COMPARED TO JUNE 30, 1999
During the three months ended June 30, 2000, the Company had net sales
of $865,000 as compared to net sales of $976,000 for the same three months in
1999. Sales in 2000 were comprised of $508,000 from CHIPSat, a $112,000 study
contract with the Boeing Company and $245,000 from all other programs. In 1999,
$858,000 of sales were from the SIL subsidiary, which is not a part of the
company in 2000. The remainder of 1999 sales from other projects was $118,000.
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<PAGE>
During the three months ended June 30, 2000, the Company had cost of
sales (direct and allocated costs associated with individual contracts) of
$438,000 and $441,000 in the same period in 1999. This slight reduction was due
to CHIPSat and other project sales volume ($223,000) and the absorption of
certain overhead costs (such as building expense, equipment depreciation,
utilities and operating supplies) to cost of goods sold ($122,000), all of which
was offset by a $348,000 reduction in cost of goods sold due to the SIL
rescission.
During the three months ended June 30, 2000, the Company had a net loss
of $125,000 compared to a net loss of $1.0 million for the same period in 1999.
The reduction in the net loss was due to the rescission of the SIL agreement,
which reduced the loss by $300,000, and an increase in the volume of sales from
the CHIPSat program and the Office of Space Launch, which absorbed a significant
portion of the company's overhead costs.
The Company experienced a decrease in general and administrative
expenses from $1.4 million for the three months ended June 30, 1999 to $490,000
for the same period ended June 30, 2000. General and administrative expenses
consist primarily of salaries for administrative personnel, fees for outside
consultants, goodwill amortization, insurance, legal and accounting fees and
other overhead. The reduction was primarily attributable to the SIL rescission
($670,000), the absorption of certain overhead costs to costs of goods sold
($122,000), other cost reductions of $121,000, partially offset by increased
legal and accounting expenses of $10,000 related to the preparation and filing
of the Company's registration statement on Form 10-SB.
Research and development expense decreased from $174,000 for the period
ended June 30, 1999 to $0 for the period ended June 30, 2000. For 2000, all of
the Company's research and development efforts have been paid through contracts
with various customers.
LIQUIDITY AND CAPITAL RESOURCES
Numbers reflected in the following discussion have been rounded to the
nearest one thousandth. Please refer to the financial statements which are a
part of this report for further information regarding the liquidity and capital
resources of the Company.
SIX MONTHS ENDED JUNE 30, 2000 -VS- SIX MONTHS ENDED JUNE 30, 1999
Net decrease in cash during the six months ending June 30, 2000 was
$2,000, compared to a net decrease of $95,000 for the six months ended June 30,
1999. Net cash provided by operating activities totaled $335,000 for the six
months ended June 30, 2000, an increase of $568,000 as compared to $233,000 used
by operating activities during the six months ended June 30 1999. This
improvement is attributable primarily to increased sales volume generated by the
CHIPSat program, sales to the Office of Space Launch and other programs as well
as the elimination of negative operating cash flows generated by the SIL
subsidiary.
Net cash used in investing activities totaled $6,000 during the six
months ended June 30, 2000, compared to $28,000 used during the six months ended
June 30, 1999, a decrease in cash used of $22,000. This difference is
attributable to a reduction in the purchase of fixed assets.
Net cash used in financing activities totaled $331,000 for the
six-month period ending June 30, 2000, a decrease of $498,000 from the $167,000
provided by financing activities during the six-month period ending June 30,
1999. This decrease is attributable to a difference of $242,000 in the issuance
of common stock, a difference of $389,000 in funds provided by related parties,
a reduction of $143,000 in proceeds from notes payable offset by a difference of
$276,000 in all other financing activities.
At June 30, 2000, the Company's cash was $101,000 as compared to
$12,000 at June 30, 1999, an increase of $89,000. At June 30, 2000, the Company
has accounts receivable of $185,000 and accounts payable with accrued expenses
of $425,000.
THREE MONTHS ENDED JUNE 30, 2000 -VS- THREE MONTHS ENDED JUNE 30, 1999
Net increase in cash during the three months ending June 30, 2000 was
$83,000, compared to a net decrease of $27,000 for the three months ended June
30, 1999. Net cash provided by operating activities totaled $110,000 for the
three months ended June 30, 2000, a reduction of $85,000 as compared to $195,000
provided by operating activities during the three months ended June 30 1999.
This reduction is primarily the result of increases in customer deposits at SIL
in 1999.
Net cash used in investing activities totaled $3,000 during the three
months ended June 30, 2000, compared to $16,000 used during the three months
ended June 30, 1999, a decrease in cash used of $13,000. This difference is
attributable to a reduction in the purchase of fixed assets.
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<PAGE>
Net cash used in financing activities totaled $25,000 for the three
month period ending June 30, 2000, a decrease of $183,000 from the $208,000 used
by financing activities during the three-month period ending June 30, 1999. This
decrease is attributable primarily to the reduction of a bank overdraft facility
in 1999.
At June 30, 2000, the Company's cash was $101,000 as compared to
$12,000 at June 30, 1999, an increase of $89,000. At June 30, 2000, the Company
has accounts receivable of $185,000 and accounts payable with accrued expenses
of $425,000.
YEAR 2000
The Company has not experienced any year 2000 problems as a result of
the year change to 2000.
FORWARD-LOOKING STATEMENTS
The Company's business strategy requires significant capital
expenditures. The Company will incur a substantial portion of these expenditures
before it generates significant sales. Combined with operating expenses, these
capital expenditures will result in a negative cash flow until the Company
establishes an adequate revenue-generating customer base. The Company expects
losses through 2000 and does not expect to generate net positive cash flow from
operations sufficient to fund both operations and capital expenditures until the
launch of its first commercial spacecraft or launch vehicle. There is no
assurance that the Company will achieve or sustain any positive cash flow or
profitability thereafter.
To execute the Company's total strategy of small, capable, low-cost
satellites and propulsion systems, the Company requires significant funding. The
current estimate is over $20 million which could come from a combination of
private or public equity placements, commercial project financing and government
program funding. At this time, the Company does not have a commitment from any
placement agent or underwriter to implement any additional public offering or
from any government agency to obtain significant additional program funding for
its products.
On November 1, 1999, the Company signed an agreement with the Regents
of the University of California Berkeley for the CHIPSat project. During the
term of the agreement, the Company will receive fixed compensation for the
above-referenced services in a total amount of $4,995,868, of which about $2.0
million is expected to be generated in 2000. The fixed price will be paid in
increments over the term of the contract.
The Company's opportunity to continue as a going concern depends upon
its ability to consummate additional funding. This funding can come from a
variety of sources, including public or private equity markets, state and
federal grants and government and commercial customer program funding. As of
June 30, 2000, the Company's backlog of business was approximately $4.1 million.
During the first six months of 2000, the Company has won $500,000 of additional
business and obtained $305,000 in California grant funds. It currently has over
$15 million in outstanding commercial and government proposals and is preparing
to submit an additional $20 million by the end of August 2000. The Company has
outstanding grant proposals of $250,000.
The Company may also need to raise additional capital if, for
example,(i) significant delays occur in deploying its first deep-space mission
due to technical difficulties, launch, or satellite failure, or other reasons;
(ii) the Company does not enter into agreements with customers on the terms the
Company anticipates; (iii) the Company's net operating deficit increases because
it incurs significant unanticipated expenses; or (iv) the Company incurs
additional costs from modifying all or part of NEAP or its proposed
hybrid-related systems to meet changed or unanticipated market, regulatory, or
technical requirements. If these or other events occur, there is no assurance
that the Company could raise additional capital on favorable terms, on a timely
basis or at all. A substantial shortfall in funding would delay or prevent
deployment of NEAP and/or the hybrid-related systems.
The Company's ability to execute a public offering or otherwise obtain
funds is subject to numerous factors beyond the Company's control, including,
without limitation, a receptive securities market and appropriate governmental
clearances. No assurances can be given that the Company will be profitable, or
that any additional public offering will occur, that the Company will be
successful in obtaining additional funds from any source or that the Company
will be successful in implementing an acceptable exit strategy on behalf of its
investors. Moreover, additional funds, if obtainable at all, may not be
available on terms acceptable to the Company when the Company needs such funds
or may be on terms which are significantly adverse to the Company's current
shareholders. The unavailability of funds when needed would have a material
adverse effect on the Company.
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PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of the date of this Report, there is no material litigation,
threatened or pending, against the Company. The Company's management is not
aware of any disagreements, disputes or other matters which may lead to the
filing of legal proceedings involving the Company.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 17, 2000, stockholders at the Company's Annual Meeting of
Shareholders, voted to:
1. Re-elect James W. Benson, Charles H. Lloyd, Stanley W. Dubyn and
Wesley T. Huntress as members of the Board of Directors;
2. Approve Nation Smith Hermes Diamond, Accountants and Consultants,
P.C. as the Company's independent public accountants for the fiscal
year ending December 31, 2000; and
3. To approve an amendment to the Company's Stock Option Plan of 1999
to increase the number of common shares subject to the plan from one
million to thirty percent of the total outstanding shares, to be
adjusted annually by the Company's Board of Directors.
ITEM 5. OTHER INFORMATION
On May 9, 2000, SpaceDev announced that its Form 10-SB registration statement
cleared comments with the U.S. Securities & Exchange Commission. As a result of
the filing and effectiveness of the registration statement, SpaceDev, Inc. is
now a fully reporting company under the Securities Exchange Act of 1934.
Effective June 26, 2000 SpaceDev was added to the securities traded on the
Nasdaq OTCBB quotation system, and currently trades under the symbol "SPDV."
On June 29, 2000 SpaceDev announced that Mr. David B. Smith had been named to
the newly created position of Chief Technical Officer. He assumed the role as
Vice President of Engineering with responsibility for consolidating overall
company technical activities, and to ensure the development of quality hardware
and flight systems.One of Smith's first duties was to assume management
responsibilities for the company's commercial deep space missions, including the
company's commercial Lunar, asteroid and Mars exploration initiatives. Mr.
Smith's thirty-eight year career has focused on multiple deep space and
Earth-orbiting missions including Apollo, MVM, Viking, Voyager, Galileo, and two
shuttle radar missions: STS 59 & 68. He was awarded NASA's Exceptional
Achievement medal for his leadership and management skills for the Earth
orbiting shuttle missions. His activities on these missions ranged from
navigation, mission design, systems engineering to the development and delivery
of the central computer system (CDS) to the Galileo spacecraft.
On July 31, 2000, SpaceDev announced that the National Reconnaissance Office
(NRO) granted SpaceDev two separate, follow-on awards of over $400,000 each for
further hybrid rocket engine design and development. These awards directly
follow SpaceDev's recently completed NRO contracts related to SpaceDev advanced
hybrid rocket applications and its orbital transfer vehicle work. California's
Western Commercial Space Center (WCSC) has awarded SpaceDev a $200,000 grant to
help build-out and equip its satellite and space vehicle manufacturing
facilities.
Under NRO contracts and a recent $105,000 award from the California Space &
Technology Alliance (CSTA), SpaceDev will perform hybrid motor test firings and
evaluation. Hybrid motors could be a critical technology for on-orbit maneuvers
and orbital transfers, and long-term on-orbit storage for SpaceDev and its
government and commercial customers. SpaceDev will also develop specific mission
and utility analyses to support NRO objectives.
The Employment contract for Mr. James Benson was amended by the SpaceDev Board
of Directors at its meeting on July 16, 2000. The amended agreement provides for
the grant of options to purchase up to 4,000,000 shares of the Company's common
stock upon the occurrence of certain events. Such options would be immediately
exercisable upon grant.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Employment Agreement between James W. Benson and Registrant
27.1 Financial Data Schedule
(b) Reports on Form 8-K
A Current Report on Form 8-K dated May 19, 2000 was filed with the
Commission under Item 5 (other events), regarding the resignation of
its Vice-President, Jan A. King.
A Current Report on Form 8-K dated June 28, 2000 was filed with the
Commission under Item 5 (other events), regarding the appointment of
its Chief Technical Officer, Dave Smith, and reinstatement of its
common stock on the OTCBB.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SPACEDEV, INC.
Registrant
Dated: August 9, 2000 /S/ James W. Benson
----------------------------
James W. Benson
Chief Executive Officer
Dated: August 9, 2000 /S/ Charles H. Lloyd
----------------------------
Charles H. Lloyd
Chief Financial Officer
17
