Title
of each class
|
Name
of each exchange on which registered
|
None.
|
None.
|
II
|
|
1
|
|
Forward
Looking Statements
|
1
|
1
|
|
Available
Information
|
1
|
General
|
1
|
Business
Strategy
|
7
|
Products
and
Services; Market
|
8
|
Components
and
Raw Materials
|
12
|
Competition
|
13
|
Regulation
|
14
|
Employees
|
16
|
Intellectual
Property
|
16
|
Quality
Assurance and Testing
|
16
|
Research
and Development
|
17
|
United
States Government Contracts
|
17
|
18
|
|
Risks
Related to our Company
|
18
|
32
|
|
33
|
|
33
|
|
34
|
|
34
|
|
Market
Information
|
34
|
Holders
of Record
|
34
|
Dividends
|
34
|
35
|
|
Overview
|
35
|
Financing
|
36
|
Selection
of
Significant Contracts
|
37
|
Results
of Operations
|
40
|
Liquidity
and
Capital Resources
|
46
|
Critical
Accounting Standards
|
48
|
Recent
Accounting Pronouncements
|
49
|
50
|
|
ITEM
8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON AND
FINANCIAL DISCLOSURE
|
50
|
ITEM
8A. CONTROLS AND PROCEDURES
|
50
|
ITEM
8B. OTHER INFORMATION
|
50
|
51
|
|
51
|
|
Committees
Of
The Board Of Directors
|
53
|
Section
16 Beneficial Ownership Reporting Compliance
|
55
|
55
|
|
Executive
Officer Compensation
|
55
|
Director
Compensation
|
57
|
Employment
Agreements, Termination of Employment Arrangements and Change
of
Control
Agreements
|
58
|
60
|
|
Equity
Compensation Plan Information
|
62
|
63
|
|
Director
Independence
|
63
|
64
|
|
68
|
|
F-1
|
· |
Small
Spacecraft.
Sophisticated small, micro- and nano- satellites for remote sensing,
military, scientific and commercial missions, and space-related technical
support services.
|
· |
Propulsion
Products and Services.
We are in the process of developing hybrid rocket-based launch vehicles,
orbital maneuvering and orbital transfer vehicles as well as safe
sub-orbital and orbital hybrid rocket-based propulsion systems. We
are
also developing commercial hybrid rocket motors for possible use
in small
launch vehicles, targets and sounding rockets, and small high performance
space vehicles and subsystems. Our non-explosive hybrid rocket motors
use
synthetic rubber as the fuel, and nitrous oxide for the oxidizer
to make
the rubber burn. Traditional rocket motors use two liquids, or a
solid
propellant that combines the fuel and oxidizer, but both types of
rocket
motors are explosive, and all solid motors produce copious quantities
of
toxic exhaust. Our hybrid rocket motors are non-toxic and do not
detonate
like solid or liquid rocket motors.
|
· |
Space
Components and Mechanisms.
We manufacture a wide range of products that include high output
paraffin
actuators, hinges, battery bypass switches, bi-axis gimbals, flat
plate
gimbals, solar array pointing mechanisms, restraint devices, thermal
switches, thermal louvers, and cover systems. These products are
sold both
as "off-the-shelf" catalog products, which represent previously qualified
devices with spaceflight history, and as custom systems that are
developed
for specific applications. Our products are typically sold directly
to
spacecraft manufacturers.
|
· |
Structures.
We
design and manufacture deployable space structures and other structural
subsystems for spacecraft, which may or may not incorporate our cover
systems or other components and
mechanisms.
|
· |
Introduce
commercial business practices into the space arena, use off-the-shelf
technology in innovative ways and standardize hardware and software
to
reduce costs and to increase reliability and
profits;
|
· |
Start
with small, practical and profitable projects, and leverage credibility
and profits into larger and ever more bold initiatives - utilizing
partnerships where appropriate;
|
· |
Bid,
win, and leverage government programs to fund our Research and Development
and product development efforts;
|
· |
Integrate
our smaller, low cost commercial spacecraft and hybrid space
transportation systems to provide one-stop turnkey payload and/or
data
delivery services to target customers;
|
· |
Apply
our low cost space products to new applications and to create new
users,
new markets and new revenue
streams;
|
· |
Join
or establish a team to build a safe, affordable sub-orbital, passenger
space plane to help initiate the space tourism business;
and,
|
· |
Establish
a team to build a safe, affordable orbital passenger vehicle as a
potential shuttle replacement.
|
· |
Enables
small-space customers to contract for end-to-end mission solutions,
reducing the need for, and complexity of finding, other contractors
for
different project tasks;
|
· |
Decreases
schedule time and lowers total project costs, thereby providing greater
value and increases return on investment for us and our customers;
and,
|
· |
Tends
to create barriers to entry by, and competition from,
competitors.
|
· |
Small
Spacecraft
-
Small Satellites, Microsatellites & Nanosatellites, Spacecraft Buses,
and Maneuvering and Orbital Transfer Vehicles.
|
Ø |
Microsatellites
and Nanosatellites - The primary benefit of small, micro, and nano
satellites is lower cost and weight. Since we can dramatically reduce
manufacturing costs and the costs to launch the satellites to earth-orbit
and deep space, we can pass those cost savings on to our customers.
Small,
inexpensive satellites were once the exclusive domain of scientific
and
amateur groups; however, smaller satellites are now a viable alternative
to larger, more expensive ones, as they provide cost-effective solutions
to traditional problems. We design and build low cost, high-performance
space-mission solutions involving microsatellites (generally less
than 100
kg) and even smaller satellites (less than 50 kg). Our approach is
to seek
to participate in a growth market by providing smaller spacecraft
and
compatible low cost, safe hybrid propulsion space systems to commercial,
government, and potentially international customers.
|
Ø |
Spacecraft
buses - We
have a qualified microsatellite bus available to sell as a standard,
fixed-price product to government and commercial customers needing
an
affordable satellite for small payloads. We began developing this
product
in 1999 when we were selected as the mission designer, spacecraft
bus
provider, integrator and mission operator of the University of California
at Berkeley Space Sciences Laboratory's Cosmic Hot Interstellar Plasma
Spectrometer ("CHIPS") mission. CHIPSat was launched on January 12,
2003. The satellite achieved 3-axis stabilization with all individual
components and systems successfully operating and continues to work
well
in orbit.
|
Ø |
Maneuvering
and Orbital Transfer Vehicle - Our Maneuvering and Orbital Transfer
Vehicle system is a family of small, throttleable, and restartable
propulsion and integrated satellite products. The Maneuvering and
Orbital
Transfer Vehicle provides the change in velocity and maneuvering
capabilities to support a wide variety of applications for on-orbit
maneuvering, proximity operations, rendezvous, inspection, docking,
surveillance, protection, inclination changes, and orbital transfers.
In
addition, our Maneuvering and Orbital Transfer Vehicle can be used
as a
standard propulsion module to transport a customer's payload to different
orbits.
|
Ø |
Spacecraft
and Subsystem Design - We also provide access to space through innovative
solutions currently lacking in the marketplace. Our approach is to
provide
smaller spacecraft - generally 250 kg mass and less - and compatible
hybrid propulsion space systems to commercial, university and government
customers. The small spacecraft market is supported by the evolution
and
enabling of microelectronics, common hardware and software interface
standards, and smaller launch vehicles. Reduction of the size and
mass of
traditional spacecraft electronics has reduced the overall spacecraft
size, mass, and volume over the past 10 to 15 years. For example,
our
miniature flight computer is only 24 cubic inches and provides 300
million
instructions per second of processing power versus a competitor's
more
"traditional" solution that requires about 63 cubic inches and only
provides 10 MIPS.
|
Ø |
Mission
Control and Operations - Our
mission control and operations center, located in our headquarters
building near San Diego, coupled with our mission control and operations
package, is Internet-based and allows for the operation and control
of
missions from anywhere in the world that has access to the Internet.
CHIPSat was the first U.S. mission to use end-to-end satellite operations
with TCP/IP and FTP. This concept can provide significant advantages.
For
example, a formation-flying cluster or constellation of TCP/IP-based
microsatellites, similar to the cluster of microsats we are developing
for
the Missile Defense Agency, can be designed to communicate directly
with
each other, as in a wide area network in space. Provided any one
satellite/node in this network is in line-of-sight with any ground
station
at any given time, the entire constellation could always maintain
ground
station connectivity, thus creating a network on-orbit and on the
web, a
direct extension of CHIPSat's elegantly simple TCP/IP mission operations
architecture.
|
Ø |
Mission
Analysis and Design - We can provide end-to-end mission design and
analysis, including the design of the mission and its science, commerce
or
technology demonstration goals, the design of an appropriate space
vehicle
(satellite or spacecraft), prototype development, construction and
testing
of the spacecraft, integration of one or more payloads (instruments,
experiments or technologies) into the spacecraft, integration of
the
spacecraft onto the launch vehicle (rocket), the launch and the mission
control, and operations during the life of the mission.
|
· |
Propulsion
Products and Services
-
Hybrid Propulsion and Launch Vehicle
Systems.
|
Ø |
Microsatellite
& Nanosatellite Launches - Teaming
with launch providers, we propose to identify and market affordable
launch
opportunities for the small satellite market and provide customers
with a
complete on-orbit data delivery service that can also involve our
spacecraft and hybrid propulsion products. These innovative, low-cost,
turnkey launch solutions will allow us to provide one-stop shopping
for
launch services, spacecraft, payload accommodation, total flight
system
integration and test, and mission operations. The customer only needs
to
provide the payload, and we have the capacity to perform all the
tasks
required for the customer to get to orbit and to begin collecting
their
data.
|
Ø |
Hybrid
Rocket Propulsion and Launch Vehicle Systems - We provide a wide
variety
of hybrid propulsion systems to safely and inexpensively enable satellites
and on-orbit delivery systems to rendezvous and maneuver on-orbit
and
deliver payloads to sub-orbital altitudes. Hybrid
rocket propulsion is a safe and low-cost technology that has tremendous
benefits for current and future space missions. Our hybrid rocket
propulsion technology features a simple design, is restartable, is
throttleable and is easy to transport, handle, and store.
|
Ø |
Hybrid
Orbital Vehicle (under development) - We have begun designing a reuseable,
piloted, sub-orbital space ship that could be scaled to transport
passengers to and from Low Earth Orbit, including the International
Space
Station. The name of the vehicle is the SpaceDev Dream Chaser™. We signed
a non-binding Space Act Memorandum of Understanding with NASA Ames
Research Center, which confirms our intention to explore novel, hybrid
propulsion based hypersonic test beds for routine human space access.
We
will explore with NASA collaborative partnerships to investigate
the
potential of using our proven hybrid propulsion and other technologies,
and a low cost, private space program development approach to establish
and design new piloted small launch vehicles and flight test platforms
to
enable near-term, low-cost routine space access for NASA and the
United
States. Unlike the more complex SpaceShipOne, for which SpaceDev
provided
critical proprietary hybrid rocket motor propulsion technologies
and
components, the SpaceDev Dream Chaser™ would be crewed and launch
vertically, like most launch vehicles, and would glide back for a
normal
horizontal runway landing. The sub-orbital SpaceDev Dream Chaser™ would
have an altitude goal of approximately 160 km (about 100 miles) and
would
be powered by a single, high performance hybrid rocket motor, under
parallel development by us for the SpaceDev Streaker™, a family of small,
expendable launch vehicles, designed to affordably deliver small
satellites to Low Earth Orbit. The SpaceDev Dream Chaser™ motor would
produce approximately 100,000 pounds of thrust, about six times the
thrust
of the SpaceShipOne motor, but less than one-half the thrust of the
250,000 pounds of thrust produced by hybrid rocket motors developed
several years ago by the American Rocket Company.
|
· |
Space
Components and Mechanisms
|
Ø |
Electromechanical
Components - We design and manufacture electromechanical components
(EMC)
for spacecraft applications. The EMCs are electromagnetic motors
coupled
to transmissions and sensors so as to provide the motive force to
mechanical devices or systems for spacecraft applications. Applications
include pointing systems for antennas and solar arrays, pump and
fan
motors for life support and thermal control systems, drives for planetary
rovers, robotic systems, deployment, and stowage of mechanical structures
and general drive applications.
|
Ø |
Catalog
products - Motors and actuators are required on spacecraft to move
instruments, point antennas and solar arrays, and deploy structural
elements. A significant cost of spacecraft actuators and motors is
the
non-recurring engineering required to design these devices for a
particular application. By providing these devices as an off-the-shelf
catalog product, these non-recurring costs can be reduced or eliminated,
providing a high value solution to the customer. We have a variety
of
actuators and motors that can be combined in various ways to provide
actuators and motors for a variety of applications.
|
Ø |
Design
to Requirement - Although catalog products can sometimes provide
a high
value solution, custom design is often required to meet a particular
application. We have a suite of technologies that can be combined
to meet
a wide variety of spacecraft requirements. Motor technologies include
brush motors, brushless motors, and stepper motors. Transmission
technologies include planetary gearboxes, harmonic gearboxes, and
hybrids.
We believe that our ability to integrate these technologies into
a single
actuator package is a unique capability in our
industry.
|
Ø |
Electromechanical
Systems - Electromechanical Systems are the spacecraft subsystems
that
incorporate Starsys' EMCs with control electronics, actuators, sensors,
power transfer components, and structure. These systems provide critical
spacecraft functions such as antenna pointing, solar array pointing,
instrument scanning, and telescope cover operation. Our unique suite
of
technological core competencies enable us to deliver these as turn-key
systems. Areas of expertise relevant to this product area include
actuator
design, power transfer design, control electronics, and composite
structural design. Almost all of our electromechanical systems are
designed to specific customer requirements, and are known for being
technologically innovative. One example of this is our Quiet Array
Drive
microstepping drive system technology, which is used for both antennae
pointing and solar array pointing. It provides high accuracy pointing,
with low jitter, allowing antennas and solar arrays to be pointed
while
spacecraft imaging is occurring.
|
Ø |
At
times, our customers elect to build spacecraft mechanical subsystems
in-house. For these customers, we provide components and mechanisms
that
are then integrated by our customer into their mechanical subsystems.
These components provide a wide range of capabilities and include
hinges,
latches, release mechanisms, thermal switches, battery bypass switches,
and thermal actuators. These products encompass a variety of proprietary
technologies, and in some cases we are the only supplier of these
items.
Often these products have previously been designed and qualified
for
spacecraft, and therefore are purchased to a part number rather than
to a
specification. This allows these products to be manufactured in larger
quantities.
|
· |
Structures
|
Ø |
The
ability of a spacecraft telescope or sensor to operate effectively
is
directly related to its size. The bigger the sensor, the better
it is able
to resolve what it is looking at. Since the size of a spacecraft
during
launch is limited by the diameter of the rocket, there is a need
for
spacecraft to deploy sensors to a larger size once in orbit. We
have
proprietary technology and know-how to design and manufacture large
deployable structures for spacecraft to provide this capability.
These
structures are stowed within the confines of the launch vehicle
during
launch, and then deployed to their full size once the spacecraft
reaches
orbit. With compaction ratios that can exceed 100 to 1, a structure
as
long as a football field can be deployed from a spacecraft that
is 10 feet
in diameter. We develop systems that provide capabilities such
as
extremely high compaction ratios, the ability to both extend and
retract,
and the ability to locate sensors and instruments along the full
length of
the structure. We see this business as an important area for growth
as
continually larger systems are being fielded to look down at the
earth and
up at the stars. Our deployable structures technologies enable
these
systems.
|
Product
or Technology Area
|
Competitors
|
Our
Spacecraft Products and Services
|
AeroAstro
EADS
Astrium
Microsat
Systems
Spectrum
Astro
Surrey
Satellite Technology Limited
|
Our
Propulsion Products and Services
|
Cesaroni
Technology Incorporated
Various
Academic-based Organizations
|
Our
Motors and Actuators
|
Aeroflex
(a subsidiary of UMTC)
ATK
Satellite Systems
CDA
Astro
Moog
Inc.
MPC
Products Corporation
|
Our
Electromechanical Systems
|
Aeroflex
(a subsidiary of UMTC)
Alliance
ATK
Satellite Systems
Moog
Inc.
Prime
Contractor Internal Mechanisms
Swales
Aerospace
|
Our
Components and Mechanisms
|
G&H
Technologies
NEA
Planetary
Systems Inc.
TiNi
Aerospace
|
Our
Structures Business
|
ATK
Space Systems (formerly AEC Able Engineering)
Harris
Corporation
NGST
Astro (formerly SPAR Astro
Aerospace)
|
· |
failure
to successfully manage relationships with customers and other important
relationships;
|
· |
failure
of customers to accept new services or to continue using the products
and
services of the combined company;
|
· |
difficulties
in successfully integrating the management teams and employees of
the two
companies;
|
· |
potential
incompatibility of business cultures;
|
· |
challenges
encountered in managing larger, more geographically dispersed operations;
|
· |
the
loss of key employees;
|
· |
diversion
of the attention of management from other ongoing business concerns;
|
· |
potential
incompatibilities of processes, technologies and systems;
|
· |
potential
difficulties integrating and harmonizing financial reporting systems;
and,
|
· |
potential
failure to implement systems to properly price and manage the execution
of
fixed-price contracts.
|
· |
the
unsuccessful integration of the two companies;
|
· |
the
costs of or operational difficulties arising from the merger are
greater
than anticipated;
|
· |
the
combined financial results are not consistent with expectations;
|
· |
the
anticipated operating and product synergies of the merger are not
realized; or,
|
· |
the
fixed price development contracts acquired in the merger continue
to incur
major cost overruns or remains unprofitable for other
reasons.
|
· |
include
provisions that allow the government agency to terminate the contract
without penalty;
|
· |
be
subject to purchasing decisions of agencies that are subject to political
influence;
|
· |
contain
onerous procurement procedures; and,
|
· |
be
subject to cancellation if government funding becomes unavailable.
|
· |
we
may not be awarded all stages of existing or future contracts;
|
· |
significant
contracts may be awarded to our competitors rather than to
us;
|
· |
the
timing of new technological advances and product announcements or
introductions by us and our competitors;
|
· |
changes
in the terms of our arrangements with customers or suppliers;
|
· |
reliance
on a few customers for a significant portion of our net sales;
|
· |
the
failure of our key suppliers to perform as expected;
|
· |
general
or particular political conditions that could affect spending for
the
products that we offer;
|
· |
changes
in perception of the safety of space
travel;
|
· |
cost
overruns or other delays or failures to satisfy our obligations under
our
contracts on a timely basis;
|
· |
the
failure of our products to successfully launch or operate;
|
· |
the
uncertain market for our technology and products;
|
· |
the
availability and cost of raw materials and components for our products;
and,
|
· |
the
potential loss of or inability to hire key personnel.
|
· |
designing,
constructing, integrating, or testing the small satellite, components,
or
related ground systems;
|
· |
delays
in receiving the license(s) necessary to operate the small satellite
system(s);
|
· |
delays
in obtaining our customer's payload;
|
· |
delays
related to the launch vehicle;
|
· |
weather;
and,
|
· |
other
events beyond our control.
|
· |
problems
assimilating the purchased technologies, products, or business
operations;
|
· |
problems
maintaining uniform standards, procedures, controls, and policies;
|
· |
unanticipated
costs associated with the acquisition;
|
· |
diversion
of management's attention from core businesses;
|
· |
adverse
effects on existing business relationships with suppliers and customers;
|
· |
incompatibility
of business cultures;
|
· |
risks
associated with entering new markets in which we have no or limited
prior
experience;
|
· |
dilution
of common stock and shareholder value as well as adverse changes
in stock
price;
|
· |
potential
loss of key employees of acquired businesses; and,
|
· |
increased
legal and accounting costs as a result of the rules and regulations
related to the Sarbanes-Oxley Act of
2002.
|
· |
deviations
in our results of operations from
estimates;
|
· |
changes
in estimates of our financial
performance;
|
· |
changes
in our markets, including decreased government spending or the entry
of
new competitors;
|
· |
awards
of significant contracts to competitors rather than to
us;
|
· |
our
inability to obtain financing necessary to operate our
business;
|
· |
changes
in technology;
|
· |
potential
loss of key personnel;
|
· |
short
selling;
|
· |
changes
in market valuations of similar companies and of stocks
generally;
|
· |
volume
fluctuations generally including, but not limited to, resales by
former
Starsys stockholders or by Laurus Master Fund;
and,
|
· |
other
factors listed above in "Our
operating results could fluctuate on a quarterly and annual basis,
which
could cause our stock price to fluctuate or decline."
|
· |
make
a special written suitability determination for the purchaser;
|
· |
receive
the purchaser's written agreement to a transaction prior to
sale;
|
· |
provide
the purchaser with risk disclosure documents which identify certain
risks
associated with investing in "penny stocks" and which describe the
market
for these "penny stocks" as well as a purchaser's legal remedies;
and
|
· |
obtain
a signed and dated acknowledgment from the purchaser demonstrating
that
the purchaser has actually received the required risk disclosure
document
before a transaction in a "penny stock" can be completed.
|
Quarter
Ended
|
Quarterly
High
|
Quarterly
Low
|
|
3/31/2005
|
$1.87
|
$1.56
|
|
6/30/2005
|
$1.70
|
$1.52
|
|
9/30/2005
|
$1.67
|
$1.44
|
|
12/31/2005
|
$1.62
|
$1.37
|
|
3/31/2006
|
$1.50
|
$1.11
|
|
6/30/2006
|
$1.35
|
$1.25
|
|
9/30/2006
|
$1.33
|
$0.97
|
|
12/31/2006
|
$1.14
|
$0.69
|
|
3/5/2007*
|
$1.01
|
$0.68
|
· |
General
and administrative expenses increased from approximately $1.1 million,
or
12.0% of net sales, for the year ended December 31, 2005 to approximately
$5.3 million, or 16.3%, for the year ended December 31, 2006. This
increase is attributed mainly to the acquisition of Starsys’ general and
administrative costs and the addition of our new chief executive
officer.
In addition to our new chief executive officer, we maintained two
presidents and other key management personnel, whose
expenses were charged to general and administrative expense. The
method of allocation in 2006 was different at Starsys, which also
resulted
in higher general and administrative costs, e.g., certain functions
that
we historically charged (at least partially) to cost of sales, like
quality assurance and process and systems, was charged entirely to
general
and administrative expense at Starsys and consolidated accordingly.
In 2007, we will be altering the allocation method to be consistent
companywide. We have created a corporate business management group
and we expect to recognize some cost saving and efficiencies as the
companies consolidate and eliminate redundancies in certain general
and
administrative functions. We expect to incur approximately $500,000
of
expense in 2007 related to the relocation of our Colorado and North
Carolina facilities.
|
· |
Research
and development expenses increased to approximately $284,000, or
0.9% of
net sales, for the year ended December 31, 2006, from approximately
$32,000, or 0.4% of net sales, during the same period in 2005. The
total dollar value increased by approximately $252,000, mainly due
to the
creation of the chief technology officer position at the end of 2005
and
an investment in certain new technologies. With the addition of our
new chief executive officer in December 2005, James W. Benson (formerly
our chief executive officer) became our chief technology officer
for
three-quarters of 2006, with his expenses being charged to research
and
development. Mr. Benson resigned at the end of September 2006 to
found Benson Space Company but remained our consultant at a rate
equivalent to his salary for the remainder of 2006, which costs were
charged to general and administrative expenses. We have not refilled
the chief technology officer position. Most of Mr. Benson’s expenses
in 2005 were charged to marketing and sales, not research and development
or general and administrative expense. Most
of our scientific work is performed under contracts and therefore
is
accounted for as costs of sales, rather than as research and development
expense.
|
· |
Marketing
and sales expenses increased to approximately $2.2 million, or 6.8%
of net
sales, for the year ended December 31, 2006, from approximately $674,000,
or 7.5% of net sales, during the same period in 2005. The total dollar
increase of approximately $1.5 million was mainly due to costs related
to
bidding a number of proposals, including approximately $800,000 for
our
NASA COTS proposal during 2006, as well as absorbing a larger marketing
and sales organization as part of the merger with Starsys. Unfortunately,
we did not win the COTS contract. With the addition of our new chief
executive officer in December 2005, James Benson (formerly our chief
executive officer) became our chief technology officer with most
of his
2006 expenses being charged to research and development. Most of
Mr.
Benson’s expenses in 2005 were charged to marketing and sales.
|
· |
Our
stock option expense is based on a calculation using the minimum
value
method as prescribed by SFAS 123(R), otherwise known as the Black-Scholes
method. Under this method, we used a risk-free interest rate at the
date
of grant, an expected volatility, an expected dividend yield, and
an
expected life of the options to determine the fair value of options
granted. The risk-free interest rate was estimated at 4.0%, expected
volatility ranged from 86.7% to 90.8% at the time all options were
granted, the dividend yield was assumed to be zero, and the expected
life
of the options was assumed to be three years based on the average
vesting
period of options granted. The total expense for the year ended December
31, 2006 was approximately $133,000 as compared to no expense during
the
same period in 2005, as we adopted SFAS 123(R) on January 1, 2006.
All of
the 2006 option expenses relate to options actually granted in 2006,
as we
fully vested all outstanding options in December 2005. To minimize
SFAS
123(R) stock option expense, we have reduced the number of stock
options
we would otherwise be granting.
|
· |
We
expensed approximately $66,000 and $3,000 in interest for the years
ended
December 31, 2006 and 2005, respectively. The increase was due to
borrowing under our new revolving credit facility that we entered
into on
September 29, 2006. We will continue to pay interest expense on certain
capital leases and the revolving credit facility in
2007.
|
· |
We
recognized approximately $83,000 and $106,000 in interest income
in 2006
and 2005, respectively. The decrease was due to our use of cash in
our
acquisition of Starsys in January 2006; thereby, creating lower cash
balances.
|
· |
We
recognized approximately $117,000 of amortized deferred gain on the
sale
of our Poway headquarters building during each of the years ended
December
31, 2006 and 2005, and we will continue to amortize the remaining
deferred
gain of approximately $713,000 into non-operating income over the
remainder of the lease of the building, which is scheduled to expire
in
2013.
|
· |
We
recorded loan fees related to our revolving credit facility of
approximately $115,000 and $29,000 for the years ended December 31,
2006
and 2005, respectively. The increase in expense was due to the issuance
of
310,009 shares of our common stock, valued at $350,000, to Laurus
in
September 2006 under the terms of the new revolving credit facility;
we
are amortizing this expense over the life of the credit facility.
We will
continue to expense the remaining $235,000 through September 2007.
If the
facility is still in place then, we must issue another $200,000 of
shares
to Laurus.
|
For
the twelve months ended
|
December
31, 2006
|
December
31, 2005
|
December
31, 2004
|
|||||||
|
(Audited
|
)
|
(Audited
|
)
|
(Audited
|
)
|
||||
Net
Income (Loss)
|
$
|
(952,372
|
)
|
$
|
501,264
|
$
|
(3,027,054
|
)
|
||
Interest
Income
|
(83,362
|
)
|
(105,840
|
)
|
(19,497
|
)
|
||||
Cash
Interest Expense
|
65,713
|
2,873
|
52,077
|
|||||||
Non-Cash
Interest Expense
|
114,600
|
28,875
|
3,254,430
|
|||||||
Gain
on Building Sale
|
(117,274
|
)
|
(117,272
|
)
|
(117,272
|
)
|
||||
Stock
Option Expense
|
133,380
|
0
|
0
|
|||||||
Provision
for income taxes
|
19,290
|
1,600
|
1,600
|
|||||||
Depreciation
and Amortization
|
982,860
|
191,924
|
83,531
|
|||||||
EBITDA
*
|
$
|
162,835
|
$
|
503,424
|
$
|
227,815
|
SpaceDev,
Inc. and
Subsidiaries
|
||||||||||||||
Non-
GAAP Consolidated Statements of Operations - Supplemental
Schedule
|
||||||||||||||
Years
Ended December 31,
|
2006
|
2005
|
||||||||||||
GAAP
Operating Income/(Loss)
|
$
|
(953,405
|
)
|
-2.93
|
%
|
$
|
311,500
|
3.46
|
%
|
|||||
FAS
123(R) stock -based compensation
|
133,379
|
0.58
|
%
|
-
|
0.00
|
%
|
||||||||
Non-GAAP
Operating Income/(Loss)
|
(820,026
|
)
|
-2.52
|
%
|
311,500
|
3.46
|
%
|
|||||||
Non-Operating
Income/(Expense)
|
||||||||||||||
Interest
income
|
83,362
|
0.26
|
%
|
105,840
|
1.18
|
%
|
||||||||
Interest
expense
|
(65,713
|
)
|
-0.20
|
%
|
(2,873
|
)
|
-0.03
|
%
|
||||||
Gain
on building sale
|
117,274
|
0.36
|
%
|
117,272
|
1.30
|
%
|
||||||||
Non-Cash
loan fee
|
(114,600
|
)
|
-0.35
|
%
|
(28,875
|
)
|
-0.32
|
%
|
||||||
Total
Non-Operating Income
|
20,323
|
0.06
|
%
|
191,364
|
2.13
|
%
|
||||||||
Non-GAAP
Net Income/(Loss) Before Taxes
|
$
|
(799,703
|
)
|
-3.51
|
%
|
$
|
502,864
|
8.46
|
%
|
|||||
Income
tax provision
|
19,290
|
0.06
|
%
|
1,600
|
0.02
|
%
|
||||||||
Non-GAAP
Net Income/(Loss)
|
$
|
(818,993
|
)
|
-3.59
|
%
|
$
|
501,264
|
8.44
|
%
|
|||||
Non-GAAP
Net Income/(Loss)
|
(818,993
|
)
|
501,264
|
|||||||||||
Less
Preferred Dividend Payments
|
(610,287
|
)
|
(170,956
|
)
|
||||||||||
Adjusted
Net Income/(Loss) for EPS Calculation
|
(1,429,280
|
)
|
330,308
|
|||||||||||
Non-GAAP
Net Income/(Loss) Per Share
|
$
|
(0.05
|
)
|
$
|
0.01
|
|||||||||
Weighted-Average
Shares Outstanding
|
28,666,059
|
22,270,997
|
||||||||||||
Fully
Diluted Non-GAAP Net Income/(Loss) Per Share:
|
$
|
(0.05
|
)
|
$
|
0.01
|
|||||||||
Fully Diluted Weighted-Average Shares Outstanding | 28,666,059 | 29,631,118 |
Name
|
Age
|
Title
|
Mark
N. Sirangelo
|
46
|
Chairman
of the Board and Chief Executive Officer
|
Richard
B. Slansky
|
49
|
President,
Chief Financial Officer, Corporate Secretary and
Director
|
Scott
Tibbitts
|
49
|
Managing
Director and Director
|
James
W. Benson
|
61
|
Director
|
Curt
Dean Blake (1)
|
49
|
Director
|
General
Howell M. Estes, III (USAF Retired) (1)
|
65
|
Director
|
Wesley
T. Huntress (1)
|
64
|
Director
|
Scott
McClendon (1)
|
67
|
Director
|
Robert
S. Walker (1)
|
64
|
Director
|
(1) |
Denotes
Independent Director
|
Name
and principal position
|
Year
|
Salary
($
|
)
|
Bonus
($
|
)
|
Stock
awards ($
|
)
|
Option
awards ($
|
)
|
Non-equity
incentive plan compensation ($)
|
|
Change
in pension value and non-qualified deferred compensation earnings
($)
|
|
All
other compensation ($)
|
|
Total
|
|||||||||||
Mark
N. Sirangelo
|
2006
|
292,730
|
25,000
|
-
|
-
|
-
|
-
|
-
|
$
|
317,730
|
|||||||||||||||||
Chief
Executive Officer
|
2005
|
1,038
|
-
|
354,050
|
1,391,305
|
-
|
-
|
-
|
1,746,394
|
||||||||||||||||||
James
W. Benson (1)
|
2006
|
144,623
|
22,500
|
-
|
-
|
-
|
-
|
32,308
|
199,431
|
||||||||||||||||||
Former
Chief Technology Officer
|
2005
|
180,000
|
2,587
|
-
|
805,492
|
-
|
-
|
1400
|
989,480
|
||||||||||||||||||
Richard
B. Slansky
|
2006
|
195,877
|
25,000
|
-
|
-
|
-
|
-
|
101,458
|
322,335
|
||||||||||||||||||
President
and Chief Financial Officer
|
2005
|
150,000
|
2,448
|
-
|
1,334,933
|
-
|
-
|
111,254
|
1,598,635
|
||||||||||||||||||
Scott
Tibbitts
|
2006
|
140,871
|
100,000
|
-
|
-
|
-
|
-
|
2,374
|
243,245
|
||||||||||||||||||
Managing
Director
|
2005
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||
Robert
Vacek (1)
|
2006
|
224,319
|
-
|
-
|
104,795
|
-
|
-
|
3,400
|
332,514
|
||||||||||||||||||
Former
President, Starsys, Inc.
|
2005
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(1)
|
Mr.
Benson resigned as an officer on September 26, 2006 to found Benson
Space
Company. Mr. Vacek resigned on November 20, 2006, with an effective
departure date of December 15, 2006.
|
Name
|
Number
of securities underlying unexercised options exercisable
(#)
|
Number
of securities underlying unexercised options unexercisable
(#)
|
Equity
incentive plan award: number of securities underlying unexercised
unearned
options (#)
|
Option
exercise price($)
|
Option
expiration date
|
Mark
N. Sirangelo
|
1,900,000
|
-
|
-
|
$
1.40
|
12/20/2010
|
James
W. Benson (1)
|
1,100,000
|
-
|
-
|
1.40
|
12/20/2010
|
500,000
|
-
|
-
|
1.00
|
1/18/2010
|
|
Richard
B. Slansky
|
1,400,000
|
-
|
-
|
1.40
|
12/20/2010
|
|
330,000
|
-
|
-
|
0.51
|
2/10/2009
|
|
395,000
|
-
|
-
|
0.92
|
3/25/2010
|
Scott
Tibbitts
|
-
|
-
|
-
|
-
|
-
|
Robert
Vacek (2)
|
125,000
|
-
|
700,000
|
1.46
|
3/15/2007
|
(1) |
Mr.
Benson resigned as an officer on September 26, 2006 to found Benson
Space
Company;
however, he remained a consultant to the
Company.
|
(2) |
Mr.
Vacek resigned on November 20, 2006, with
an effective departure date of December 15, 2006 and all options
expired
unexercised on March 15, 2007.
|
Name
|
Fees
Earned or Paid in Cash ($)
|
Stock
Awards ($)
|
Option
Awards
|
Non-Equity
Incentive Plan Compensation ($)
|
Nonqualified
Deferred Compensation Earnings ($)
|
All
other Compensation ($)
|
Total
($)
|
Mark
N. Sirangelo
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Richard
B. Slansky
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
James
W. Benson (1)
|
19,385
|
-
|
-
|
-
|
-
|
-
|
19,385
|
Scott
Tibbitts
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Curt
Dean Blake
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
General
Howell M. Estes, III
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Wesley
T. Huntress
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Scott
McClendon
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Robert
S. Walker
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Susan
Benson (2)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Stuart
Schaffer (2)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(1) |
Mr.
Benson resigned as Chairman
of the Board
on September 26, 2006 to found Benson Space Company;
however,
he remained a member of the Board of Directors of SpaceDev,
Inc.
|
(2) |
On
August 10, 2006,
Ms. Benson and Mr. Schaffer, who in connection with the reduction
of our
Board
Of
Directors'
size from 11 to 9, agreed not to seek
re-election.
|
Name
and Address of Beneficial Owner
|
Amount
and Nature of Beneficial Ownership(1)
|
|
Percent
of Ownership
|
Mark
N. Sirangelo
|
2,142,500
|
(2)
|
6.81%
|
Richard
B. Slansky
|
2,237,886
|
(3)
|
7.06%
|
James
W. Benson
|
7,407,707
|
(4)
|
23.77%
|
Susan
C. Benson
|
7,675,907
|
(5)
|
24.63%
|
Scott
F. Tibbitts
|
845,501
|
|
2.86%
|
Wesley
T. Huntress Jr.
|
284,530
|
(6)
|
0.95%
|
Curt
Dean Blake
|
298,452
|
(7)
|
1.00%
|
General
Howell M. Estes, III
|
219,667
|
(8)
|
0.74%
|
Robert
S. Walker
|
166,190
|
(9)
|
0.56%
|
Scott
McClendon
|
272,460
|
(10)
|
0.91%
|
Officers
and Directors as a group (9 Persons)
|
16,833,093
|
(11)
|
46.42%
|
(1) |
Where
persons listed on this table have the right to obtain additional
shares of
our common stock through the exercise of outstanding options or warrants
or the conversion of convertible securities within 60 days from March
5,
2007, these additional shares are deemed to be outstanding for the
purpose
of computing the percentage of common stock owned by such persons,
but are
not deemed outstanding for the purpose of computing the percentage
owned
by any other person. Percentages are based on total outstanding shares
of
29,560,342 on March 5, 2007.
|
(2) |
Represents
242,500 shares to which he has direct beneficial ownership interest,
these
shares are held by The Quanstar Group LLC. Mr. Sirangelo also holds
vested
options to purchase up to an aggregate of 1,900,000 shares.
|
(3) |
Includes
vested options to purchase up to an aggregate of 2,125,000 shares.
|
(4) |
Represents
2,690,000 shares held directly by Mr. James W. Benson as a result
of a
stipulated order entered May 24, 2005 identifying the shares as a
separate
property asset of Mr. Benson, plus beneficial ownership in 2,620,294
shares held jointly with Susan C. Benson, as to which he shares voting
and
investing power with Ms. Benson, indirect beneficial ownership interest
in
497,413 shares held in Space Development Institute (where Mr. Benson
is a
member of the Board of Directors along with Susan C. Benson), as
to which
he shares voting and investing power with Ms. Benson, and beneficial
ownership in vested options to purchase up to an aggregate of 1,600,000
shares (which may constitute as community property with Susan C.
Benson).
Excludes approximately 1.2 million shares held by children of Mr.
Benson,
for which Mr. Benson disclaims beneficial ownership.
|
(5) |
Represents
2,658,200 shares held directly by Ms. Susan Benson as a result of
a
stipulated order entered May 24, 2005 identifying the shares as a
separate
property asset of Ms. Benson, plus beneficial ownership in 2, 620,294
shares held jointly with James W. Benson, as to which she shares
voting
and investing power with Mr. Benson, indirect beneficial ownership
interest in 497,413 shares held in Space Development Institute (where
Ms.
Benson is a member of the Board of Directors along with James W.
Benson),
as to which she shares voting and investing power with Mr. Benson,
and
beneficial ownership in vested options issued in the name of James
W.
Benson on 1,600,000 shares (which may constitute as community property
with James W. Benson), but as to which she no longer has shared voting
and
investment power. Excludes approximately 1.2 million shares held
by
children of Ms. Benson, for which Ms. Benson disclaims beneficial
ownership.
|
(6) |
Includes
vested options to purchase up to an aggregate of 239,647 common
shares.
|
(7) |
Includes
vested options to purchase up to an aggregate of 231,000 common shares.
|
(8) |
Includes
vested options to purchase up to an aggregate of 183,000 common
shares.
|
(9) |
Includes
vested options to purchase up to an aggregate of 150,000 common
shares.
|
(10) |
Includes
vested options to purchase up to an aggregate of 272,460 common shares.
|
(11) |
Executive
officers and directors as a group include our nine Board members,
two of
whom are also executive officers.
|
(a)
|
(b)
|
(c)
|
|
Plan
category
|
Number
of securities
|
Weighted-average
|
Number
of securities
|
|
to
be issued upon
|
exercise
price of
|
remaining
available for
|
|
exercise
of outstanding
|
outstanding
|
future
issuance under
|
|
options,
warrants, and
|
options,
warrants
|
equity
compensation plans
|
|
rights
|
and
rights
|
(excluding
securities
|
|
|
|
reflected
in column (a))
|
|
|||
Equity
|
|||
compensation
plans
|
7,495,098
|
$1.17
|
2,180,284
|
approved
by
|
|||
security
holders
|
|||
Equity
|
4,900,000
|
1.36
|
-
|
compensation
plans
|
|||
not
approved by
|
|||
security
holders
|
|||
Total
|
12,395,098
|
$1.24
|
2,180,284
|
Exhibit
No.
|
Description
|
Filed
Herewith
|
Incorporated
by Reference
|
Form
|
Date
Filed with SEC
|
Exhibit
No.
|
2.1
|
Agreement
and Plan of Merger and Reorganization dated October 24, 2005
(Starsys)
|
X
|
8-K
|
Oct.
26, 2005
|
2.1
|
|
2.2
|
Amendment
No. 1 to the Agreement and Plan of Merger and Reorganization dated
December 7, 2005 (Starsys)
|
X
|
8-K
|
Dec.
13, 2005
|
2.1
|
|
2.3
|
Amendment
No. 2 to the Agreement and Plan of Merger and Reorganization dated
January
31, 2006 (Starsys)
|
X
|
8-K
|
Feb.
6, 2006
|
2.3
|
|
2.4
|
Escrow
Agreement dated January 31, 2006 (Starsys)
|
X
|
8-K
|
Feb.
6, 2006
|
2.4
|
|
3.1
|
Articles
of Incorporation dated December 20, 1996
|
X
|
10-SB
|
Jan.
18, 2000
|
2.1
|
|
3.2
|
Articles
of Amendment to Articles of Incorporation dated November 4,
1997
|
X
|
10-SB
|
Jan.
18, 2000
|
2.2
|
|
3.3
|
Articles
of Amendment to Articles of Incorporation dated December 17,
1997
|
X
|
10-SB
|
Jan.
18, 2000
|
2.3
|
|
3.4
|
Articles
of Amendment to Articles of Incorporation dated February 1,
2006
|
X
|
10-KSB
|
March
28, 2006
|
3.4
|
|
3.5
|
Amended
and Restated Bylaws
|
X
|
8-K
|
Dec.
23, 2005
|
3.1
|
|
3.6
|
Certificate
of Designation of Series C Convertible Preferred Stock
|
X
|
8-K
|
Aug.
30, 2004
|
3.1
|
|
3.7
|
Certificate
of Designations of Series D-1 Preferred Stock
|
X
|
8-K
|
Jan.
17, 2006
|
3.1
|
|
3.8
|
Certificate
of Designations of Series D-2 Preferred Stock
|
X
|
8-K
|
Jan.
17, 2006
|
3.2
|
|
3.9
|
Form
of Warrant issued to Laurus Master Fund August 25, 2004
|
X
|
8-K
|
Aug.
30, 2004
|
4.2
|
|
4.1
|
Form
of Common Stock Certificate
|
X
|
10-SB
|
Jan.
18, 2000
|
3.1
|
|
4.2
|
Laurus
Secured Revolving Note dated as of September 29, 2006
|
X
|
8-K/A
|
Oct.
10, 2006
|
99.1
|
|
10.1
|
Secured
Loan Agreement with Starsys Research Corporation dated September
8,
2005
|
X
|
10-QSB
|
Nov.
14, 2005
|
10.1
|
|
10.2
|
Promissory
Note with Starsys Research Corporation dated September 8,
2005
|
X
|
10-QSB
|
Nov.
14, 2005
|
10.2
|
10.3
|
Subcontract
Agreement with Andrews Space, Inc. awarded June 27, 2005
|
X
|
10-QSB/A
|
Dec.
22, 2005
|
10.1
|
|
10.4
|
Sublease
between Gateway and SpaceDev dated March 31, 2005
|
X
|
8-K
|
April
15, 2005
|
10.1
|
|
10.5
|
Consent
to Sublease between Gateway and SpaceDev dated April 1, 2005
|
X
|
8-K
|
April
15, 2005
|
10.2
|
|
10.6
|
Missile
Defense Agency Contract with SpaceDev dated March 31, 2004
|
X
|
10-KSB
|
April
6, 2004
|
10.40
|
|
10.7
|
Common
Stock Purchase Warrant issued June 3, 2003 by SpaceDev to Laurus
Master
Fund, Ltd.
|
X
|
8-K
|
June
18, 2003
|
10.3
|
|
10.8
|
Registration
Rights Agreement between SpaceDev and Laurus Master Fund, Ltd.
dated June
3, 2003
|
X
|
8-K
|
June
18, 2003
|
10.4
|
|
10.9
|
Securities
Purchase Agreement with Laurus Master Fund, Ltd. dated August 25,
2004
|
X
|
8-K
|
Aug.
30, 2004
|
10.1
|
|
10.10
|
Registration
Rights Agreement with Laurus Master Fund, Ltd. dated August 25,
2004
|
X
|
8-K
|
Aug.
30, 2004
|
10.2
|
|
10.11
|
Letter
Agreement with Laurus Master Fund Ltd. dated August 25, 2004
|
X
|
8-K
|
Aug.
30, 2004
|
10.3
|
|
10.12
|
Agreement
of License and Purchase of Technology between SpaceDev and AMROC
dated
August 1998
|
X
|
10-SB
|
Jan.
18, 2000
|
6.4
|
|
10.13
|
1999
Stock Option Plan #
|
X
|
SB-2
|
July
25, 2003
|
4.8
|
|
10.14
|
First
Amendment to 1999 Stock Option Plan #
|
X
|
SB-2
|
July
25, 2003
|
4.14
|
|
10.15
|
1999
Employee Stock Purchase Plan #
|
X
|
10-SB
|
Jan.
18, 2000
|
6.7
|
|
10.16
|
2004
Equity Incentive Plan #
|
X
|
S-8
|
Mar.
29, 2005
|
99.1
|
|
10.17
|
First
Amendment to 1999 Employee Stock Purchase Plan #
|
X
|
10-KSB
|
Mar.
28, 2006
|
10.39
|
|
10.18
|
Executive
Employment Agreement between SpaceDev, Inc., and James W. Benson
dated
December 20, 2005 #
|
X
|
8-K
|
Dec.
23, 2005
|
10.3
|
|
10.19
|
Executive
Employment Agreement between SpaceDev, Inc., and Mark N. Sirangelo
dated
December 20, 2005 #
|
X
|
8-K
|
Dec.
23, 2005
|
10.1
|
|
10.20
|
Amended
and Restated Executive Employment Agreement between SpaceDev, Inc.,
and
Richard B. Slansky dated December 20, 2005 #
|
X
|
8-K
|
Dec.
23, 2005
|
10.2
|
10.21
|
Non-Plan
Stock Option Agreement with James W. Benson (evidencing an option
to
purchase up to 950,000 shares) dated December 20, 2005 #
|
X
|
8-K
|
Dec.
23, 2005
|
10.6
|
|
10.22
|
Non-Plan
Stock Option Agreement with Mark N. Sirangelo dated December 20,
2005
#
|
X
|
8-K
|
Dec.
23, 2005
|
10.4
|
|
10.23
|
Non-Plan
Stock Option Agreement with Richard B. Slansky dated December 20,
2005
#
|
X
|
8-K
|
Dec.
23, 2005
|
10.5
|
|
10.24
|
Falcon
Launch Services Agreement with Space Exploration Technologies Corporation
dated November 15, 2005 *
|
X
|
8-K/A
|
Dec.
22, 2005
|
10.1
|
|
10.25
|
Amendment
No. 1 to the Secured Promissory Note with Starsys Research Corporation,
dated December 20, 2005
|
X
|
8-K
|
Dec.
23, 2005
|
10.11
|
|
10.26
|
Non-Plan
Stock Option Agreement with James W. Benson (evidencing an option
to
purchase up to 150,000 shares) dated December 20, 2005 #
|
X
|
8-K
|
Dec.
23, 2005
|
10.7
|
|
10.27
|
Statement
of Work with Andrews Space, Inc. awarded June 27, 2005
|
X
|
10-QSB/A
|
Dec.
23, 2005
|
10.2
|
|
10.28
|
Securities
Purchase Agreement dated January 11, 2006 (Omicron et. al.)
|
X
|
8-K
|
Jan.
17, 2006
|
99.1
|
|
10.29
|
Registration
Rights Agreement dated January 17, 2006 (Omicron et. al.)
|
X
|
8-K
|
Jan.
17, 2006
|
99.2
|
|
10.30
|
Form
of Preferred Stock Warrant (Omicron et. al.)
|
X
|
8-K
|
Jan.
17, 2006
|
99.3
|
|
10.31
|
Form
of Common Stock Warrant (Omicron et. al.)
|
X
|
8-K
|
Jan.
17, 2006
|
99.4
|
|
10.32
|
Executive
Employment Agreement with Scott Tibbitts dated January 31, 2006
#
|
X
|
8-K
|
Feb.
6, 2006
|
99.1
|
|
10.33
|
Executive
Employment Agreement with Robert Vacek dated January 31, 2006
#
|
X
|
8-K
|
Feb.
6, 2006
|
99.2
|
|
10.34
|
Non-Competition
Agreement with Scott Tibbitts dated January 31, 2006
|
X
|
8-K
|
Feb.
6, 2006
|
99.3
|
|
10.35
|
Form
of Standstill and Lock-up Agreement
|
X
|
8-K
|
Feb.
6, 2006
|
99.4
|
|
10.36
|
Amendment
No. 2 to the SpaceDev 2004 Equity Incentive Plan #
|
X
|
8-K
|
Feb.
6, 2006
|
99.5
|
|
10.37
|
Security
Agreement dated as of September 29, 2006 (Laurus)
|
X
|
8-K/A
|
Oct.
10, 2006
|
99.2
|
|
14.1
|
Code
of Ethics
|
X
|
10-KSB
|
Mar.
28, 2003
|
10.15
|
99.1
|
Audited
Financial Statements of Starsys Research Corporation for the years
ended
December 31, 2004 and 2003
|
X
|
8-K
|
Feb.
6, 2006
|
99.6
|
|
99.2
|
Unaudited
Financial Statements of Starsys Research Corporation for the nine-month
period ended September 30, 2005
|
X
|
8-K
|
Feb.
6, 2006
|
99.7
|
|
99.3
|
Unaudited
Pro Forma Combined Consolidated Financial Statements of SpaceDev,
Inc. and
Starsys Research Corporation for the nine-month period ended September
30,
2005 and for the year ended December 31, 2004
|
X
|
8-K
|
Feb.
6, 2006
|
99.8
|
|
21.1
|
List
of Subsidiaries
|
X
|
||||
23.1
|
Consent
of PKF, Certified Public Accountants A Professional
Corporation
|
X
|
||||
31.1
|
Rule
13a-14(a) certification of Principal Executive Officer
|
X
|
||||
31.2
|
Rule
13a-14(a) certification of Principal Financial Officer
|
X
|
||||
32.1
|
Section
1350/Rule 13a-14(b) certifications
|
X
|
2006
|
2005
|
||||||
Audit
Fees
|
$
|
101,690
|
$
|
46,380
|
|||
Audit
Related Fees
|
$
|
82,445
|
$
|
-
|
|||
Tax
Fees
|
$
|
24,088
|
$
|
7,500
|
|||
All
Other Fees
|
$
|
285
|
$
|
42,275
|
|||
Total
|
$
|
208,507
|
$
|
96,155
|
Date:
April 2, 2007
|
By:
|
/s/
Mark N. Sirangelo
|
Mark
N. Sirangelo, CEO (Principal Executive Officer) and Chairman of
the Board
of Directors
|
||
Date:
April 2, 2007
|
By:
|
/s/
Richard B. Slansky
|
Richard
B. Slansky, President and CFO (Principal Financial and Accounting
Officer)
|
Date:
April 2, 2007
|
/s/
Mark N. Sirangelo
|
Mark
N. Sirangelo, Chairman of the Board of Directors
|
|
Date:
April 2, 2007
|
/s/
James W. Benson
|
James
W. Benson, Director
|
|
Date:
April 2, 2007
|
/s/
Curt D. Blake
|
Curt
D. Blake, Director
|
|
Date:
April 2, 2007
|
/s/
Howell M. Estes, III
|
Gen.
Howell M. Estes, III, Director
|
|
Date:
April 2, 2007
|
/s/
Wesley T. Huntress
|
Wesley
T. Huntress, Director
|
|
Date:
April 2, 2007
|
/s/
Scott McClendon
|
Scott
McClendon, Director
|
|
Date:
April 2, 2007
|
/s/
Richard B. Slansky
|
Richard
B. Slansky, Director
|
|
Date:
April 2, 2007
|
/s/
Scott Tibbitts
|
Scott
Tibbitts, Director
|
|
Date:
April 2, 2007
|
/s/
Robert S. Walker
|
Robert
S. Walker, Director
|
Report
of Independent Registered Public Accounting Firm
|
F-2
|
Financial
Statements
|
|
Consolidated
Balance Sheets
|
F-3
|
Consolidated
Statements of Operations
|
F-4
|
Consolidated
Statements of Stockholders' Equity
|
F-5
|
Consolidated
Statements of Cash Flows
|
F-6
|
Notes
to Consolidated Financial Statements
|
F-8
|
SpaceDev,
Inc. and
Subsidiaries
|
|||||||
|
|||||||
Consolidated
Balance Sheets
|
|||||||
December
31,
|
2006
|
2005
|
|||||
Assets
|
|||||||
Current
Assets
|
|||||||
Cash
and cash equivalents (Notes 1(o) and 9(a))
|
$
|
1,438,146
|
$
|
5,750,038
|
|||
Accounts
receivable (Notes 1(d) and 9(b))
|
7,289,720
|
1,279,027
|
|||||
Inventory
(Note
1(q))
|
309,205
|
21,340
|
|||||
Other
current assets (Note 1(n))
|
599,565
|
-
|
|||||
Note
receivable (Note 10)
|
-
|
1,353,440
|
|||||
Total
Current Assets
|
9,636,636
|
8,403,845
|
|||||
Assets
-
Net (Notes 1(f) and 2)
|
3,793,365
|
1,073,773
|
|||||
Intangible
Assets (Notes 1(f) and 3)
|
841,133
|
-
|
|||||
Goodwill
(Notes 3)
|
11,233,665
|
-
|
|||||
Other
Assets (Note 1 (n))
|
626,086
|
1,531,031
|
|||||
Total
Assets
|
$
|
26,130,885
|
$
|
11,008,649
|
|||
Liabilities
and Stockholders' Equity
|
|||||||
Current
Liabilities
|
|||||||
Accounts
payable and accrued expenses
|
$
|
1,755,985
|
$
|
1,237,099
|
|||
Current
portion of notes payable (Note 4(a))
|
-
|
9,457
|
|||||
Current
portion of capitalized lease obligations (Note 8(a))
|
35,441
|
1,469
|
|||||
Accrued
payroll, vacation and related taxes
|
1,184,457
|
290,914
|
|||||
Billings
in
excess of costs and deferred revenue (Note 1(r))
|
2,816,072
|
153,440
|
|||||
Revolving
line
of credit (Note 4(b))
|
805,172
|
-
|
|||||
Other
accrued liabilities (Note 1(e) and 8(b))
|
1,602,561
|
516,380
|
|||||
Total
Current Liabilities
|
8,199,688
|
2,208,759
|
|||||
Notes
Payable, Less Current Maturities
|
50,193
|
-
|
|||||
Capitalized
Lease Obligations, Less Current Maturities (Note 8(a))
|
136,709
|
-
|
|||||
Deferred
Gain - Assets held for sale (Notes 2 and 4)
|
713,405
|
830,677
|
|||||
Other
Long Term Liabilities
|
15,266
|
-
|
|||||
Total
Liabilities
|
9,115,261
|
3,039,436
|
|||||
Commitments
and Contingencies (Note 8)
|
|||||||
Stockholders’
Equity (Note 7)
|
|||||||
Convertible
preferred stock, $.001 par value, 10,000,000 shares
authorized,
|
|||||||
and
252,963 and 248,460 shares issued and outstanding, respectively
|
|||||||
Series
C Convertible Preferred Stock (Note 7(a))
|
248
|
248
|
|||||
Series
D-1 Convertible Preferred Stock (Note 7(b))
|
5
|
-
|
|||||
Common
stock, $.0001 par value; 100,000,000 shares authorized, and
|
|||||||
29,550,342
and
24,606,275 shares issued and outstanding, respectively (Note 7(c))
|
2,953 | 2,460 | |||||
Additional
paid-in capital
|
33,150,566
|
22,541,994
|
|||||
Accumulated
deficit
|
(16,138,148
|
)
|
(14,575,489
|
)
|
|||
Total
Stockholders’ Equity
|
17,015,624
|
7,969,213
|
|||||
Total
Liabilities and Stockholders' Equity
|
$
|
26,130,885
|
$
|
11,008,649
|
SpaceDev,
Inc. and Subsidiaries
|
|||||||||||||
Consolidated
Statements of Operations
|
|||||||||||||
Years
Ended December 31,
|
2006
|
|
2005
|
|
|||||||||
Net
Sales
|
$
|
32,555,570
|
100.0
|
%
|
$
|
9,005,011
|
100.0
|
%
|
|||||
Cost
of Sales*
|
25,720,581
|
79.0
|
%
|
6,905,902
|
76.7
|
%
|
|||||||
Gross
Margin
|
6,834,989
|
21.0
|
%
|
2,099,109
|
23.3
|
%
|
|||||||
Operating
Expenses
|
|||||||||||||
Marketing
and
sales
|
2,196,838
|
6.7
|
%
|
673,636
|
7.5
|
%
|
|||||||
Research
and
development
|
284,346
|
0.9
|
%
|
31,940
|
0.4
|
%
|
|||||||
General
and administrative
|
5,307,210
|
16.3
|
%
|
1,082,033
|
12.0
|
%
|
|||||||
Total
Operating Expenses*
|
7,788,394
|
23.9
|
%
|
1,787,609
|
19.9
|
%
|
|||||||
Income/(Loss)
from Operations
|
(953,405
|
)
|
-2.9
|
%
|
311,500
|
3.5
|
%
|
||||||
Non-Operating
Income/(Expense)
|
|||||||||||||
Interest
and
other income
|
83,362
|
0.3
|
%
|
105,840
|
1.2
|
%
|
|||||||
Interest
expense
|
(65,713
|
)
|
-0.2
|
%
|
(2,873
|
)
|
0.0
|
%
|
|||||
Gain
on
building sale (Note 4(a))
|
117,274
|
0.4
|
%
|
117,272
|
1.3
|
%
|
|||||||
Non-Cash
loan
fee (Note 4(b))
|
(114,600
|
)
|
-0.4
|
%
|
(28,875
|
)
|
-0.3
|
%
|
|||||
Total
Non-Operating Income/(Expense)
|
20,323
|
0.1
|
%
|
191,364
|
2.1
|
%
|
|||||||
Income
(Loss) Before Income Taxes
|
(933,082
|
)
|
-2.9
|
%
|
502,864
|
5.6
|
%
|
||||||
Income
tax provision (Notes 1(h) and 5)
|
19,290
|
0.1
|
%
|
1,600
|
0.0
|
%
|
|||||||
Net
Income/(Loss)
|
$
|
(952,372
|
)
|
-2.9
|
%
|
$
|
501,264
|
5.6
|
%
|
||||
Net
Income/(Loss)
|
(952,372
|
)
|
501,264
|
||||||||||
Less:
Preferred Dividend Payments
|
(610,287
|
)
|
(170,956
|
)
|
|||||||||
Adjusted
Net Income (Loss) for EPS Calculation
|
(1,562,659
|
)
|
330,308
|
||||||||||
Net
Income/(Loss) Per Share:
|
$
|
(0.05
|
)
|
$
|
0.01
|
||||||||
Weighted-Average
Shares Used in Calculation
|
28,666,059
|
22,270,997
|
|||||||||||
Fully
Diluted Net Income/(Loss) Per Share:
|
$
|
(0.05
|
)
|
$
|
0.01
|
||||||||
Fully
Diluted Weighted-Average Shares Outstanding
|
28,666,059
|
24,606,882
|
|||||||||||
*
The following table shows how the Company's stock option expense
would be
allocated to all expenses.
|
|||||||||||||
Cost
of sales
|
$
|
24,339
|
$
|
-
|
|||||||||
Marketing
and sales
|
4,840
|
-
|
|||||||||||
Research
and development
|
-
|
-
|
|||||||||||
General
and administrative
|
104,200
|
-
|
|||||||||||
$
|
133,379
|
$
|
-
|
SpaceDev,
Inc. and Subsidaries
|
||||||||||||||||||||||||||||
Consolidated
Statements of Stockholders' Equity
|
||||||||||||||||||||||||||||
Additional
|
||||||||||||||||||||||||||||
|
Paid-In
|
|
||||||||||||||||||||||||||
|
Additional
|
Capital
-
|
||||||||||||||||||||||||||
|
Preferred
Stock
|
Common
Stock
|
Paid-in
|
Stock
|
Deferred
|
Accumulated
|
||||||||||||||||||||||
|
Shares |
Amount
|
Shares
|
Amount
|
Capital
|
Options
|
Compensation
|
Deficit
|
Total
|
|||||||||||||||||||
Balance
at January 1, 2005
|
250,000
|
$
|
250
|
21,153,660
|
$
|
2,114
|
$
|
18,739,090
|
$
|
750,000
|
$
|
(250,000
|
)
|
$
|
(14,905,797
|
)
|
$
|
4,335,657
|
||||||||||
Preferred
stock issued for cash (Note 7(a) and 7(b))
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||
Common
stock issued for cash from employee stock purchase plan (Note 6(c)
and
7(c))
|
-
|
-
|
27,540
|
3
|
38,323
|
-
|
-
|
-
|
38,326
|
|||||||||||||||||||
Common
stock issued from conversion of preferred stock (Note 7(a) and
7(b))
|
(1,540
|
)
|
(2
|
)
|
10,000
|
1
|
1
|
-
|
-
|
-
|
-
|
|||||||||||||||||
Common
stock issued from employee stock options (Notes 6(b) and
7(e))
|
-
|
-
|
237,000
|
24
|
241,021
|
-
|
-
|
-
|
241,045
|
|||||||||||||||||||
Common
stock issued from private placement memorandum warrants (Note
7(d))
|
-
|
-
|
1,014,327
|
101
|
500,840
|
-
|
-
|
-
|
500,941
|
|||||||||||||||||||
Common
stock issued from convertible debt program warrants (Notes 4 and
7(d))
|
-
|
-
|
17,607
|
2
|
28,874
|
-
|
-
|
-
|
28,876
|
|||||||||||||||||||
Common
stock issued from securities purchase agreement (Note
7(c))
|
-
|
-
|
2,032,520
|
204
|
2,318,880
|
-
|
-
|
-
|
2,319,084
|
|||||||||||||||||||
Common
stock issued from conversion of declared dividends (Note 7(a) and
7(b))
|
-
|
-
|
113,621
|
11
|
174,965
|
-
|
-
|
-
|
174,976
|
|||||||||||||||||||
Stock
option forfeiture (Notes 6(b) and 7(e))
|
-
|
-
|
-
|
-
|
500,000
|
(750,000
|
)
|
250,000
|
-
|
-
|
||||||||||||||||||
Declared
dividends
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(170,956
|
)
|
(170,956
|
)
|
|||||||||||||||||
|
||||||||||||||||||||||||||||
|
-
|
-
|
-
|
-
|
-
|
-
|
501,264
|
501,264
|
||||||||||||||||||||
|
-
|
-
|
||||||||||||||||||||||||||
Balance
at December 31, 2005
|
248,460
|
248
|
24,606,275
|
2,460
|
22,541,994
|
-
|
-
|
(14,575,489
|
)
|
7,969,213
|
||||||||||||||||||
Preferred
stock issued for cash (Note 7(a) and 7(b))
|
5,150
|
6
|
-
|
-
|
3,587,984
|
-
|
-
|
3,587,990
|
||||||||||||||||||||
Common
stock issued for acquisition and acquisition costs (Note 3 and
7(c))
|
-
|
-
|
4,046,756
|
405
|
5,943,641
|
-
|
-
|
-
|
5,944,046
|
|||||||||||||||||||
Common
stock issued for cash from employee stock purchase plan (Note 6(c)
and
7(c))
|
-
|
-
|
104,845
|
10
|
133,256
|
-
|
-
|
-
|
133,266
|
|||||||||||||||||||
Common
stock issued from conversion of preferred stock (Note 7(a) and
7(b))
|
(647
|
)
|
(1
|
)
|
50,676
|
5
|
74,995
|
-
|
-
|
-
|
74,999
|
|||||||||||||||||
Common
stock issued from employee stock options (Notes 6(b) and
7(e))
|
-
|
-
|
230,281
|
21
|
173,193
|
-
|
-
|
-
|
173,214
|
|||||||||||||||||||
Common
stock issued for services (Note 7(c))
|
-
|
-
|
1,500
|
0
|
2,175
|
-
|
-
|
-
|
2,175
|
|||||||||||||||||||
Common
stock issued from warrants (Notes 4(b) and 7(d))
|
-
|
-
|
200,000
|
20
|
209,980
|
-
|
-
|
-
|
210,000
|
|||||||||||||||||||
Common
stock issued under revolving credit facility (Note 4(b) and
7(c))
|
-
|
-
|
310,009
|
31
|
349,969
|
-
|
-
|
-
|
350,000
|
|||||||||||||||||||
Common
stock issued from conversion of declared dividends (Note 7(a) and
7(b))
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||
Stock
option expense under SFAS 123(R) (Notes 6(b) and 7(e))
|
-
|
-
|
-
|
-
|
133,379
|
-
|
-
|
-
|
133,379
|
|||||||||||||||||||
Declared
dividends
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(610,287
|
)
|
(610,287
|
)
|
|||||||||||||||||
|
-
|
-
|
-
|
-
|
-
|
-
|
(952,372
|
)
|
(952,372
|
)
|
||||||||||||||||||
Balance
at December 31, 2006
|
252,963
|
$
|
253
|
29,550,342
|
$
|
2,953
|
$
|
33,150,566
|
$
|
-
|
$
|
-
|
$
|
(16,138,148
|
)
|
$
|
17,015,624
|
|
|||||||
SpaceDev,
Inc. and Subsidaries
|
|||||||
Consolidated
Statements of Cash
Flows
|
|||||||
Years
Ended December 31,
|
2006
|
2005
|
|||||
Cash
Flows From Operating Activities
|
|||||||
Net
income/(loss)
|
$
|
(952,372
|
)
|
$
|
501,264
|
||
Adjustments
to reconcile net loss to net cash
|
|||||||
provided
by (used in) operating activities:
|
|||||||
Depreciation
and amortization
|
982,860
|
191,978
|
|||||
Gain
on disposal of building sale
|
(117,274
|
)
|
(117,272
|
)
|
|||
Stock
option expense
|
133,379
|
-
|
|||||
Non-cash
loan fees
|
114,600
|
28,874
|
|||||
Common
stock issued for compensation and services
|
2,175
|
-
|
|||||
Change
in operating assets and liabilities:
|
|||||||
Accounts
receivable
|
(783,250
|
)
|
(658,930
|
)
|
|||
Inventory
|
(58,136
|
)
|
(21,340
|
)
|
|||
Prepaid
and other assets
|
979,059
|
(605,721
|
)
|
||||
Accounts
payable and accrued expenses
|
(1,162,717
|
)
|
898,290
|
||||
Accrued
payroll, vacation and related taxes
|
(99,523
|
)
|
95,869
|
||||
Billings
in excess of costs incurred and deferred revenue
|
1,292,145
|
(5,000
|
)
|
||||
Other
accrued liabilities
|
(2,318,851
|
)
|
89,008
|
||||
Net
cash provided by (used in) operating activities
|
(1,987,905
|
)
|
397,020
|
||||
Cash
Flows From Investing Activities
|
|||||||
Notes
receivable
|
-
|
(1,353,440
|
)
|
||||
Acquisition
costs, net of cash
|
(1,408,134
|
)
|
(375,930
|
)
|
|||
Purchases
of fixed assets
|
(1,389,293
|
)
|
(986,370
|
)
|
|||
Net
cash used in investing activities
|
(2,797,427
|
)
|
(2,715,740
|
)
|
|||
Cash
Flows From Financing Activities
|
|||||||
Principal
payments on notes payable
|
(4,675,832
|
)
|
(36,670
|
)
|
|||
Principal
payments on capitalized lease obligations
|
(35,749
|
)
|
(3,784
|
)
|
|||
Proceeds
from revolving credit facility
|
805,172
|
-
|
|||||
Employee
stock purchase plan
|
133,266
|
58,369
|
|||||
Other
assets, capitalized preferred stock issuance costs
|
(175,000
|
)
|
(78,828
|
)
|
|||
Proceeds
from issuance of preferred stock
|
4,038,361
|
-
|
|||||
Proceeds
from issuance of common stock
|
383,222
|
3,061,070
|
|||||
Net
cash provided by financing activities
|
473,440
|
3,000,157
|
|||||
Net
Increase/(Decrease) in Cash and Cash Equivalents
|
(4,311,892
|
)
|
681,437
|
||||
Cash
and Cash Equivalents at Beginning of Year
|
5,750,038
|
5,068,601
|
|||||
Cash
and Cash Equivalents at End of Year
|
$
|
1,438,146
|
$
|
5,750,038
|
SpaceDev,
Inc. and Subsidaries
|
|||||||
Consolidated
Statements of Cash Flows
|
|||||||
Years
Ended December 31,
|
2006
|
2005
|
|||||
Supplemental
Disclosures of Cash Flow Information:
|
|||||||
Cash
paid during the year for:
|
|||||||
Interest
|
$
|
65,713
|
$
|
2,873
|
|||
Income
Taxes
|
19,290
|
1,600
|
|||||
Noncash
Investing and Financing Activities:
|
|||||||
During
2006, the Company entered into capital leases in the amount of
approximately $225,000.
|
|||||||
During
2006 and 2005, the Company converted $133,266 and $38,326 of employee
stock purchase plan
|
|||||||
contributions
into 104,845 and 27,540 shares of common stock, respectively.
|
|||||||
During
2006 and 2005, the Company declared preferred stock dividends payable
of
$610,287 and $170,956,
|
|||||||
respectively
to the holder's of its series C and series D-1 preferred stock.
|
|||||||
During
2006, the Company issued 310,009 shares of its common stock and
expensed
$114,600 as well as accrued
|
|||||||
$233,482
to be spread over the next nine months in non-cash loan fees for
the
addition expenses
|
|||||||
incurred
under our new revolving credit facilty with the Laurus Master Fund.
|
|||||||
During
2005, the Company converted preferred stock dividends payable in
the
amount of
|
|||||||
$174,976
into 113,621 shares of common stock, for its preferred stockholders.
|
|||||||
During
2005, the Company issued 17,607 shares of its common stock to the
participants in its' prior convertible
|
|||||||
dept
program. In this noncash transaction, 25,000 warrants were converted
into
17,607 shares of common stock.
|
|||||||
The
Company recorded additional non-cash loan fees of $28,875 for the
difference between the warrant price
|
|||||||
and
the current share price, and charged these fees to expense.
|
· |
Small
Spacecraft.
Sophisticated small, micro- and nano- satellites for remote sensing,
military, scientific, and commercial missions and space-related technical
support services.
|
· |
Launch
Vehicles.
The Company is in the process of developing hybrid rocket-based launch
vehicles, orbital maneuvering and orbital transfer vehicles, as well
as
safe sub-orbital and orbital hybrid rocket-based propulsion systems.
It is
also developing commercial hybrid rocket motors for possible use
in small
launch vehicles, targets and sounding rockets, and small high performance
space vehicles and subsystems.
|
· |
Space
Components and Mechanisms.
The Company manufactures a wide range of products that include High
Output
Paraffin ("HOP") actuators, hinges, battery bypass switches, bi-axis
gimbals, flat plate gimbals, solar array pointing mechanisms, restraint
devices, and cover systems. These products are sold both as
"off-the-shelf" catalog products, which represent previously qualified
devices with spaceflight history, and as custom systems that are
developed
for specific applications. The Company’s products are typically sold
directly to spacecraft manufacturers.
|
· |
Structures.
The Company designs and manufactures deployable booms, separation
systems
and, thermal louvers.
|
(e)
|
Revenue,
expense, and profitability
recognition
|
(f)
|
Depreciation
and amortization
|
(g)
|
Research
and development
|
(h)
|
Income
taxes
|
(i)
|
Stock-based
compensation
|
Net
Income
|
2005
|
|||
As
reported
|
$
|
501,264
|
||
Less:
Preferred Dividend Payments
|
$
|
(170,956
|
)
|
|
Adjusted
Net Income (Loss) for EPS Calculation
|
330,308
|
|||
Add:
Stock based employee compensation expense included in reported
net income
|
-
|
|||
Deduct:
Stock based employee compensation expense determined under
the fair value
based method for all awards
|
(7,488,859
|
)
|
||
Pro
forma
|
$
|
(6,987,595
|
)
|
|
Net
Income (Loss) Per Share:
|
||||
As
reported - basic
|
$
|
0.01
|
||
As
reported - diluted
|
$
|
0.01
|
||
Pro
forma - basic
|
$
|
(0.31
|
)
|
|
Pro
forma - diluted
|
$
|
(0.31
|
)
|
Year
Ended December 31,
|
||||||
2006
|
2005
|
|||||
Numerator:
|
||||||
Net
income (loss)
|
$
|
(952,372
|
)
|
$
|
501,264
|
|
Minus:
Dividends on convertible preferred stock
|
(610,287
|
)
|
(170,956
|
)
|
||
$
|
(1,562,659
|
)
|
$
|
330,308
|
||
Denominator:
|
||||||
Weighted-average
shares used to compute basic EPS
|
28,666,059
|
22,270,997
|
||||
Adjusted
weighted-average shares for conversion and exercise of preferred
stock,
options, and warrants
|
N/A
|
2,335,885
|
||||
Weighted-average
shares used to compute diluted EPS
|
28,666,059
|
24,606,882
|
||||
Net
earnings per share:
|
||||||
Basic
|
$
|
(0.05
|
)
|
$
|
0.01
|
|
Diluted
|
$
|
N/A
|
$
|
0.01
|
Year
Ended December 31,
|
||||
2006
|
2005
|
|||
Incremental
shares from assumed conversions and exercises:
|
||||
Warrants
|
N/A
|
-
|
||
Options
|
N/A
|
2,335,885
|
||
Convertible
preferred stock
|
N/A
|
1,722,158
|
||
Dilutive
potential common shares
|
N/A
|
4,058,043
|
||
Anti-dilutive
shares
|
N/A
|
(1,722,158
|
)
|
|
Adjusted
weighted-average shares
|
N/A
|
2,335,885
|
(k)
|
Financial
instruments
|
(l)
|
Segment
reporting
|
(m)
|
New
accounting standards
|
(n)
|
Other
assets
|
Other
Current Assets - December 31,
|
2006
|
2005
|
|||||
Financing
Fees
|
$
|
303,174
|
$
|
-
|
|||
Software
Prepaid License
|
93,009
|
-
|
|||||
Insurance
Prepaid
|
60,435
|
-
|
|||||
2006
Property Tax Prepayment
|
3,210
|
-
|
|||||
Rental
Prepaid Short Term
|
40,103
|
-
|
|||||
All
Other Deposits
|
99,634
|
-
|
|||||
Total
Other Current Assets
|
$
|
599,565
|
$
|
-
|
Other
Assets - December 31,
|
2006
|
2005
|
|||||
Prepaid
Rent
|
$
|
188,130
|
$
|
-
|
|||
Cost
Accrued in Conjunction with Starsys Acquisition
|
-
|
724,127
|
|||||
Cost
Accrued in Conjunction with 2006 Securities Purchase
Agreement
|
-
|
78,828
|
|||||
Financing
Fees
|
116,666
|
-
|
|||||
Deposits
|
321,290
|
728,076
|
|||||
Total
Other Assets
|
$
|
626,086
|
$
|
1,531,031
|
December
31,
|
2006
|
2005
|
|||||
Deferred
Gain
|
$
|
1,172,720
|
$
|
1,172,720
|
|||
Less
Amortization to date
|
(459,315
|
)
|
(342,043
|
)
|
|||
$
|
713,405
|
$
|
830,677
|
Fixed
assets consisted of the following:
|
|||||||
December
31,
|
2006
|
2005
|
|||||
Capital
leases
|
$
|
472,687
|
$
|
155,499
|
|||
Computer
equipment
|
952,895
|
699,592
|
|||||
Building
improvements
|
1,959
|
-
|
|||||
Furniture
and fixtures
|
2,525,833
|
241,564
|
|||||
Rocket
Motor Test Center
|
1,205,468
|
446,621
|
|||||
5,158,843
|
1,543,276
|
||||||
Less
accumulated depreciation and amortization
|
(1,365,478
|
)
|
(469,503
|
)
|
|||
$
|
3,793,365
|
$
|
1,073,773
|
Starsys
Total Assets
|
$
|
(7,851,494
|
)
|
|
Starsys
Total Liabilities
|
13,054,140
|
|||
Cash
to Starsys Stockholders
|
410,791
|
|||
Equity
to Starsys Stockholders
|
5,576,846
|
|||
Fees
Associated with Acquisition
|
1,056,079
|
|||
$
|
12,246,362
|
December
31,
|
2006
|
2005
|
|||||
Deferred
tax assets:
|
|||||||
Net
operating loss carryforwards
|
$
|
3,715,800
|
$
|
3,941,400
|
|||
Deferred
gain on sale of building
|
291,000
|
338,000
|
|||||
Reserve
for loss on contracts
|
285,000
|
608,500
|
|||||
Other
|
200,500
|
307,900
|
|||||
Tax
credit carryforwards
|
3,537,700
|
1,966,800
|
|||||
Gross
deferred tax assets
|
8,030,000
|
7,162,600
|
|||||
Fixed
Assets and Intangibles
|
-744,600
|
-593,400
|
|||||
7,285,400
|
6,569,200
|
||||||
Valuation
allowance
|
-7,285,400
|
-6,569,200
|
|||||
|
$ | - |
$
|
-
|
2006
|
2005
|
||||||
Current
|
|||||||
Federal
|
$
|
15,000
|
$
|
-
|
|||
State
|
4,200
|
1,600
|
|||||
19,200
|
1,600
|
||||||
Deferred
|
|||||||
Federal
|
-
|
-
|
|||||
State
|
-
|
-
|
|||||
Income
tax expense
|
$
|
19,200
|
$
|
1,600
|
Years
Ended December 31,
|
2006
|
2005
|
|||||
Statutory
U.S. federal rate
|
35.00
|
%
|
35.00
|
%
|
|||
State
income taxes - net of federal benefit
|
3.79
|
%
|
5.70
|
%
|
|||
Permanent
differences
|
-14.42
|
%
|
7.40
|
%
|
|||
NOL
and tax credit prior year true up
|
-15.99
|
%
|
|||||
Other
|
.82
|
%
|
|||||
Tax
Credits
|
91.18
|
%
|
|||||
Change
in valuation allowance
|
-100.38
|
%
|
-48.10
|
%
|
|||
Provision
for income taxes
|
0.00
|
%
|
0.00
|
%
|
(b)
|
Stock
option plans
|
· |
A
grant of preemptive rights to the investors to participate in future
financings; however, this right expired on January 13, 2007;
and,
|
· |
An
agreement not to effect any transaction involving the issuance of
securities convertible, exercisable or exchangeable for the Company's
common stock at a price per share or rate which may change over time,
so
long as any shares of Series D-1 Preferred Stock are
outstanding.
|
(c)
|
Common
stock
|
(d) |
Warrant
|
|
Weighted
|
||||||
|
Options
|
Average
|
|||||
|
Outstanding
|
Exercise
Prices
|
|||||
Balance
at January 1, 2005
|
6,353,766
|
$
|
1.39
|
||||
Granted
|
6,368,000
|
1.45
|
|||||
Exercised
|
(237,000
|
)
|
(1.02
|
)
|
|||
Expired
|
(2,162,206
|
)
|
(2.19
|
)
|
|||
Balance
at December 31, 2005
|
10,322,560
|
1.27
|
|||||
Granted
|
3,307,000
|
1.18
|
|||||
Exercised
|
(230,281
|
)
|
(0.83
|
)
|
|||
Expired
|
(1,004,181
|
)
|
(1.35
|
)
|
|||
Balance
at December 31, 2006
|
12,395,098
|
$
|
1.24
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
|
Range
of
|
|
|
|
|
|
Remaining
Contractual
|
|
|
|
|
|
|
|
Exercise
|
|
|
Number
of Shares
|
|
|
Life
of Shares
|
|
|
Number
of Shares
|
|
|
Weighted-Average
|
|
Price
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
Exercisable
|
|
|
Exercisable
Price
|
|
$0.42-0.99
|
3,774,271
|
2.98
|
1,944,271
|
$
|
0.72
|
||||||||
1.00-1.99
|
8,478,605
|
3.73
|
7,883,105
|
1.40
|
|||||||||
2.00-2.99
|
102,222
|
3.72
|
102,222
|
2.11
|
|||||||||
3.00-3.99
|
20,000
|
4.59
|
20,000
|
3.20
|
|||||||||
4.00-4.80
|
20,000
|
5.92
|
20,000
|
4.80
|
|||||||||
12,395,098
|
3.50
|
9,969,598
|
$
|
1.29
|
December
31,
|
2006
|
2005
|
|||||
Computer
and office equipment
|
$
|
452,481
|
$
|
155,499
|
|||
Less
accumulated depreciation
|
(226,535
|
)
|
(152,960
|
)
|
|||
$
|
225,947
|
$
|
2,539
|
Year
Ending December 31, 2006
|
||||
2007
|
$
|
48,755
|
||
2008
|
48,755
|
|||
2009
|
48,755
|
|||
2010
|
48,755
|
|||
2011
|
10,562
|
|||
Total
minimum lease payments
|
205,582
|
|||
Amount
representing interest
|
33,432
|
|||
Present
value of minimum lease payments
|
172,150
|
|||
Total
obligation
|
172,150
|
|||
Less
current portion
|
(35,441
|
)
|
||
Long-term
portion
|
$
|
136,709
|
Other
Accrued Liabilities - December 31,
|
2006
|
2005
|
|||||
Employee
Accruals
|
$
|
145,847
|
$
|
160,000
|
|||
Legal,
Royalty and Customer Accuals
|
316,231
|
243,608
|
|||||
Customer
deposits and Other Accruals
|
184,080
|
-
|
|||||
Property
and Income Tax Accruals through 12-31-05
|
30,730
|
26,452
|
|||||
Employee
Stock Purchase Plan
|
52,462
|
29,375
|
|||||
Provision
for Anticipated Loss
|
719,125
|
-
|
|||||
Laurus
- Dividend (Preferred Stock Series C)
|
42,898
|
56,945
|
|||||
Laurus
- Dividend -All Series D
|
111,188
|
-
|
|||||
Total
Other Accrued Liabilities
|
$
|
1,602,561
|
$
|
516,380
|
Building
Leases - Year Ending December 31,
|
||||
2007
|
$
|
1,204,818
|
||
2008
|
|
1,257,675
|
||
2009
|
1,309,548
|
|||
2010
|
1,373,882
|
|||
2011
|
1,422,052
|
|||
Thereafter
|
4,977,711
|
|||
Total
minimum lease payments
|
$
|
11,545,686
|
For
the Twelve Months Ended December
31, 2006
|
|||||||||||||
|
Consolidated |
Pro
Forma Adjustments
|
Consolidated
Pro Forma
|
|
%
|
||||||||
Net
Sales
|
$
|
34,397,113
|
$
|
(257,205
|
)
|
$
|
34,139,909
|
100.00
|
%
|
||||
Cost
of Sales *
|
27,087,542
|
(91,380
|
)
|
26,996,162
|
79.08
|
%
|
|||||||
Gross
Margin
|
7,309,572
|
(165,825
|
)
|
$
|
7,143,747
|
20.92
|
%
|
||||||
Operating
Expenses
|
|||||||||||||
Marketing
and sales expense
|
2,430,673
|
(165,825
|
)
|
2,264,848
|
6.63
|
%
|
|||||||
Research
and development
|
279,063
|
-
|
279,063
|
0.82
|
%
|
||||||||
General
and administrative
|
5,617,689
|
-
|
5,617,689
|
16.45
|
%
|
||||||||
Total
Operating Expenses *
|
8,327,425
|
(165,825
|
)
|
8,161,600
|
23.91
|
%
|
|||||||
Income/(Loss)
from Operations
|
(1,017,853
|
)
|
-
|
(1,017,853
|
)
|
-2.98
|
%
|
||||||
Non-Operating
Income/(Expense)
|
|||||||||||||
Interest
income
|
111,668
|
-
|
111,668
|
0.33
|
%
|
||||||||
Interest
expense
|
(88,196
|
)
|
-
|
(88,196
|
)
|
-0.26
|
%
|
||||||
Non-cash
interest expense
|
(114,600
|
)
|
-
|
(114,600
|
)
|
-0.34
|
%
|
||||||
Gain
on Building Sale
|
117,274
|
-
|
117,274
|
0.34
|
%
|
||||||||
Total
Non-Operating Income/(Expense)
|
28,935
|
-
|
28,935
|
0.08
|
%
|
||||||||
Income
(Loss) Before Income Taxes
|
(988,918
|
)
|
-
|
(988,918
|
)
|
-2.90
|
%
|
||||||
Income
tax provision
|
19,290
|
-
|
19,290
|
0.06
|
%
|
||||||||
Net
Income (Loss)
|
$
|
(1,008,208
|
)
|
$
|
-
|
$
|
(1,008,208
|
)
|
-2.95
|
%
|
|||
Less:
Preferred Dividend Payments
|
(610,287
|
)
|
-
|
(610,287.00
|
)
|
||||||||
Adjusted
Net Income (Loss) for EPS Calculation
|
(1,618,495
|
)
|
-
|
(1,618,495
|
)
|
||||||||
Net
Income/(Loss) Per Share:
|
$
|
(0.06
|
)
|
-
|
$
|
(0.06
|
)
|
||||||
Weighted-Average
Shares Outstanding
|
28,666,059
|
-
|
28,666,059
|
||||||||||
Fully
Diluted Net Income/(Loss) Per Share:
|
$
|
(0.06
|
)
|
-
|
(0.06
|
)
|
|||||||
Fully
Diluted Weighted-Average Shares Outstanding
|
28,666,059
|
-
|
28,666,059
|
||||||||||
*
The following table shows how the Company's amortization expense
of stock
options would be allocated to all expenses.
|
|||||||||||||
Cost
of Sales
|
$
|
24,339
|
$
|
-
|
$
|
24,339
|
0.07
|
%
|
|||||
Marketing
and sales
|
4,840
|
-
|
4,840
|
0.01
|
%
|
||||||||
Research
and development
|
-
|
-
|
-
|
0.00
|
%
|
||||||||
General
and administrative
|
104,201
|
-
|
104,201
|
0.31
|
%
|
||||||||
$
|
133,379
|
$
|
-
|
$
|
133,379
|
0.39
|
%
|
For
the twelve months ended December 31, 2005
|
||||||||||
Consolidated
|
Adjustments
|
Consolidated
Pro Forma
|
||||||||
Net
Sales
|
$
|
26,767,741
|
$
|
-
|
$
|
26,767,741
|
||||
Cost
of sales
|
$
|
21,627,078
|
-
|
21,627,078
|
||||||
Gross
Margin
|
5,140,663
|
-
|
5,140,663
|
|||||||
Operating
Expenses
|
||||||||||
Marketing
and sales expense
|
673,636
|
-
|
673,636
|
|||||||
Research
and development
|
31,940
|
-
|
31,940
|
|||||||
General
and administrative
|
7,082,709
|
-
|
7,082,709
|
|||||||
Total
Operating Expenses
|
7,788,285
|
-
|
7,788,285
|
|||||||
Income/(Loss)
from Operations
|
(2,647,622
|
)
|
-
|
(2,647,622
|
)
|
|||||
Non-Operating
Income/(Expense)
|
||||||||||
Interest
income
|
105,840
|
-
|
105,840
|
|||||||
Rental
income
|
88,146
|
88,146
|
||||||||
Interest
expense
|
(509,398
|
)
|
-
|
(509,398
|
)
|
|||||
Gain
on building sale
|
117,272
|
-
|
117,272
|
|||||||
Loan
fee - equity compensation
|
(28,875
|
)
|
-
|
(28,875
|
)
|
|||||
Total
Non-Operating Income/(Expense)
|
(227,015
|
)
|
-
|
(227,015
|
)
|
|||||
Income/(Loss)
Before Income Taxes
|
(2,874,637
|
)
|
-
|
(2,874,637
|
)
|
|||||
Income
tax provision
|
1,600
|
-
|
1,600
|
|||||||
Net
Income/(Loss)
|
$
|
(2,876,237
|
)
|
$
|
-
|
(2,876,237
|
)
|
|||
Net
Income/(Loss) Per Share:
|
||||||||||
Net
Income/(Loss)
|
$
|
(0.08
|
)
|
$
|
(0.08
|
)
|
||||
Shares
Outstanding
|
29,551,305
|
4,836,696
|
34,388,001
|