Delaware
|
84-1374613
|
(State
or other jurisdiction of
incorporation
or organization)
|
(IRS
Employer
Identification
No.)
|
13855
Stowe Drive, Poway, California 92064
|
|
(Address
of principal executive offices)
|
Index
|
Page
|
PART
I -- FINANCIAL INFORMATION
|
1
|
ITEM
1. FINANCIAL STATEMENTS
|
1
|
Consolidated
Balance Sheets
|
1
|
Consolidated
Statements of Operations
|
2
|
Consolidated
Statements of Cash Flows
|
3
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
5
|
Overview
|
16
|
Financing
|
17
|
Results
of Operations
|
21
|
Liquidity
and Capital Resources
|
29
|
Critical
Accounting Standards
|
30
|
Recent
Accounting Pronouncements
|
31
|
Risk
Factors
|
31
|
Risks
Related to our Company
|
31
|
ITEM
3A. CONTROLS AND PROCEDURES
|
44
|
PART
II -- OTHER INFORMATION
|
45
|
ITEM
1. LEGAL PROCEEDINGS
|
45
|
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
45
|
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
|
45
|
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
45
|
ITEM
5. OTHER INFORMATION
|
45
|
ITEM
6. EXHIBITS
|
46
|
SIGNATURES
|
47
|
(Unaudited)
|
||||||||
September
30, 2007
|
December
31, 2006
|
|||||||
Assets
|
||||||||
Current
Assets
|
||||||||
Cash
|
$ |
5,092,312
|
$ |
1,438,146
|
||||
Accounts
receivable (Note 2(d))
|
7,065,771
|
7,289,720
|
||||||
Inventory
(Note 2(b))
|
1,067,530
|
309,205
|
||||||
Other
current assets (Note 6(a))
|
1,045,619
|
599,565
|
||||||
Total
Current Assets
|
14,271,232
|
9,636,636
|
||||||
Fixed
Assets - Net
|
4,447,478
|
3,793,365
|
||||||
Intangible
Assets
|
745,934
|
841,133
|
||||||
Goodwill
(Note 5)
|
11,233,665
|
11,233,665
|
||||||
Other
Assets (Note 6(b))
|
1,051,309
|
626,086
|
||||||
Total
Assets
|
$ |
31,749,618
|
$ |
26,130,885
|
||||
Liabilities
and Stockholders' Equity
|
||||||||
Current
Liabilities
|
||||||||
Accounts
payable and accrued expenses
|
$ |
1,636,777
|
$ |
1,755,985
|
||||
Current
portion of notes payable
|
61,033
|
-
|
||||||
Current
portion of capitalized lease obligations
|
75,690
|
35,441
|
||||||
Accrued
payroll, vacation and related taxes
|
1,290,631
|
1,184,457
|
||||||
Billings
in excess of costs and deferred revenue (Note 2(a))
|
2,046,245
|
2,816,072
|
||||||
Revolving
line of credit (Note 3(b))
|
2,789,574
|
805,172
|
||||||
Other
accrued liabilities (Note 2(f))
|
1,375,270
|
1,602,561
|
||||||
Total
Current Liabilities
|
9,275,220
|
8,199,688
|
||||||
Notes
Payable, Less Current Maturities
|
161,373
|
50,193
|
||||||
Capitalized
Lease Obligations, Less Current Maturities
|
260,634
|
136,709
|
||||||
Deferred
Gain - Assets held for sale (Notes 3(a))
|
625,451
|
713,405
|
||||||
Other
Long Term Liabilities (Note 2(f))
|
459,126
|
15,266
|
||||||
Total
Liabilities
|
10,781,804
|
9,115,261
|
||||||
Commitments
and Contingencies
|
||||||||
Stockholders’
Equity
|
||||||||
Convertible
preferred stock, $0.001 par value, 10,000,000
|
||||||||
shares
authorized, and 252,104 and 252,963 shares issued
|
||||||||
and
outstanding, respectively (Note 4)
|
||||||||
Series
C Convertible preferred stock (Note 4(a))
|
248
|
248
|
||||||
Series
D-1 Convertible preferred stock (Note 4(b))
|
4
|
5
|
||||||
Common
stock, $0.0001 par value; 100,000,000 shares
|
||||||||
authorized,
and 37,360,085 and 29,550,342 shares issued
|
||||||||
and
outstanding, respectively (Note 4)
|
3,736
|
2,953
|
||||||
Additional
paid-in capital
|
37,303,850
|
33,150,566
|
||||||
Accumulated
deficit
|
(16,340,024 | ) | (16,138,148 | ) | ||||
Total
Stockholders’ Equity
|
20,967,814
|
17,015,624
|
||||||
Total
Liabilities and Stockholders' Equity
|
$ |
31,749,618
|
$ |
26,130,885
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||||||||||||||||||
September
30,
|
2007
|
%
|
2006
|
%
|
2007
|
%
|
2006
|
%
|
||||||||||||||||||||||||
Net
Sales
|
$ |
7,606,322
|
100.0 | % | $ |
7,006,347
|
100.0 | % | $ |
25,310,938
|
100.0 | % | $ |
22,812,290
|
100.0 | % | ||||||||||||||||
Total
Cost of Sales*
|
5,402,113
|
71.0 | % |
5,123,878
|
73.1 | % |
18,519,652
|
73.2 | % |
16,718,917
|
73.3 | % | ||||||||||||||||||||
Gross
Margin
|
2,204,209
|
29.0 | % |
1,882,469
|
26.9 | % |
6,791,286
|
26.8 | % |
6,093,373
|
26.7 | % | ||||||||||||||||||||
Operating
Expenses
|
||||||||||||||||||||||||||||||||
Marketing
and sales
|
796,695
|
10.5 | % |
524,701
|
7.5 | % |
2,189,571
|
8.7 | % |
1,859,396
|
8.2 | % | ||||||||||||||||||||
Research
and development
|
101,890
|
1.3 | % |
70,754
|
1.0 | % |
265,045
|
1.0 | % |
275,592
|
1.2 | % | ||||||||||||||||||||
General
and administrative
|
1,141,599
|
15.0 | % |
1,282,775
|
18.3 | % |
3,798,169
|
15.0 | % |
3,990,450
|
17.5 | % | ||||||||||||||||||||
Total
Operating Expenses*
|
2,040,184
|
26.8 | % |
1,878,230
|
26.8 | % |
6,252,785
|
24.7 | % |
6,125,438
|
26.9 | % | ||||||||||||||||||||
Income/(Loss)
from Operations
|
164,025
|
2.2 | % |
4,239
|
0.1 | % |
538,501
|
2.1 | % | (32,065 | ) | -0.1 | % | |||||||||||||||||||
Non-Operating
Income/(Expense)
|
||||||||||||||||||||||||||||||||
Interest
income
|
13,868
|
0.2 | % |
2,714
|
0.0 | % |
44,847
|
0.2 | % |
43,466
|
0.2 | % | ||||||||||||||||||||
Interest
and other expense
|
(63,104 | ) | -0.8 | % | (7,842 | ) | -0.1 | % | (196,417 | ) | -0.8 | % | (18,471 | ) | -0.1 | % | ||||||||||||||||
Non-Cash
loan fee - (Note 3(b))
|
(86,302 | ) | -1.1 | % | (1,918 | ) | 0.0 | % | (259,865 | ) | -1.0 | % | (1,918 | ) | 0.0 | % | ||||||||||||||||
Gain
on building sale (Note 3(a))
|
29,319
|
0.4 | % |
29,319
|
0.4 | % |
87,955
|
0.3 | % |
87,956
|
0.4 | % | ||||||||||||||||||||
Total
Non-Operating Income/(Expense)
|
(106,219 | ) | -1.4 | % |
22,273
|
0.3 | % | (323,480 | ) | -1.3 | % |
111,033
|
0.5 | % | ||||||||||||||||||
Income
Before Taxes
|
57,806
|
0.8 | % |
26,512
|
0.4 | % |
215,021
|
0.8 | % |
78,968
|
0.3 | % | ||||||||||||||||||||
Income
Tax Provision
|
-
|
0.0 | % |
5,055
|
0.1 | % |
800
|
0.0 | % |
14,290
|
0.1 | % | ||||||||||||||||||||
Net
Income
|
$ |
57,806
|
0.8 | % | $ |
21,457
|
0.3 | % | $ |
214,221
|
0.8 | % | $ |
64,678
|
0.3 | % | ||||||||||||||||
Net
Income
|
57,806
|
21,457
|
214,221
|
64,678
|
||||||||||||||||||||||||||||
Less
Dividends Declared (Note 4(a) and (b))
|
(133,462 | ) | (150,842 | ) | (416,096 | ) | (446,791 | ) | ||||||||||||||||||||||||
Adjusted
Net Income (Loss) for EPS Calculation
|
(75,656 | ) | (129,385 | ) | (201,875 | ) | (382,113 | ) | ||||||||||||||||||||||||
Net
Income Per Share:
|
$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | ||||||||||||||||||||
Weighted-Average
Shares Outstanding
|
30,914,735
|
29,027,350
|
30,044,852
|
28,419,751
|
||||||||||||||||||||||||||||
Fully
Diluted Net Income Per Share:
|
$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | ||||||||||||||||||||
Fully
Diluted Weighted-Average Shares Outstanding
|
30,914,735
|
29,027,350
|
30,044,852
|
28,419,751
|
||||||||||||||||||||||||||||
*
The following table shows how the Company's stock option expenses
are
allocated to all expenses. These non-cash stock option expenses are
included in the unaudited operating results stated above.
|
||||||||||||||||||||||||||||||||
Cost
of sales
|
$ |
84,701
|
$ |
10,287
|
$ |
162,074
|
$ |
10,287
|
||||||||||||||||||||||||
Marketing
and sales
|
25,536
|
717
|
58,864
|
717
|
||||||||||||||||||||||||||||
Research
and development
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||||||||
General
and administrative
|
(20,197 | ) | (25,555 | ) |
81,206
|
90,138
|
||||||||||||||||||||||||||
Total
Non-Cash Stock Option Expense
|
$ |
90,040
|
$ | (14,551 | ) | $ |
302,144
|
$ |
101,142
|
Nine
Months Ended September 30,
|
2007
|
2006
|
||||
Cash
Flows From Operating Activities
|
||||||
Net
income
|
$ 214,221
|
$ 64,678
|
||||
Adjustments
to reconcile net income to net cash provided by
|
||||||
(used
in) operating activities:
|
||||||
Depreciation
and amortization
|
887,031
|
613,166
|
||||
Gain
on disposal of building sale
|
(87,954)
|
(87,956)
|
||||
Stock
option expense
|
302,144
|
103,317
|
||||
Non-cash
loan fee
|
259,865
|
1,918
|
||||
Change
in operating assets and liabilities
|
(2,355,154)
|
(2,014,912)
|
||||
Net
Cash Used In Operating Activities
|
(779,847)
|
(1,319,788)
|
||||
Cash
Flows From Investing Activities
|
||||||
Other
assets, capitalized acquisition costs
|
-
|
(1,066,564)
|
||||
Purchases
of fixed assets
|
(881,517)
|
(1,163,743)
|
||||
Net
Cash Used In Investing Activities
|
(881,517)
|
(2,230,307)
|
||||
Cash
Flows From Financing Activities
|
||||||
Principal
payments on notes payable
|
(15,991)
|
(4,675,832)
|
||||
Principal
payments on capitalized lease obligations
|
(25,424)
|
(20,789)
|
||||
Dividend
payments on Series C and Series D-1 preferred
|
(436,604)
|
(352,894)
|
||||
Proceeds
from revolving credit facility
|
1,984,402
|
1,926,853
|
||||
Employee
stock purchase plan
|
49,802
|
122,086
|
||||
Other
assets, capitalized revolving credit facility costs
|
-
|
(175,000)
|
||||
(Repurchase)
Issuance of preferred stock
|
(859,329)
|
4,316,850
|
||||
Proceeds
from issuance of common stock
|
4,618,674
|
352,395
|
||||
Net
Cash Provided by Financing Activities
|
5,315,530
|
1,493,669
|
||||
Net
Increase (Decrease) in Cash
|
3,654,166
|
(2,056,426)
|
||||
Cash
at Beginning of Period
|
1,438,146
|
5,750,038
|
||||
Cash
at End of Period
|
$ 5,092,312
|
$ 3,693,612
|
Nine
Months Ended September 30,
|
2007
|
2006
|
||||
Supplemental
Disclosures of Cash Flow Information:
|
||||||
Cash
paid during the period for:
|
||||||
Interest
|
$ 196,417
|
$ 18,471
|
||||
Taxes
|
800
|
21,000
|
||||
Noncash
Investing and Financing Activities:
|
||||||
During
the nine months ended September 30, 2007 and 2006, the Company
entered
into capital leases
in the amount of approximately $190,000 and $184,000,
respectively.
|
||||||
|
||||||
During
the nine months ended September 30, 2007 and 2006, the Company
declared
dividends in the
amount of $416,096 and $446,791 respectively, for our Series C
and Series
D-1 Preferred Stock.
|
||||||
During
the nine months ended September 30, 2007 and 2006, the Company
converted $92,577
and $122,086 of employee stock purchase plan contributions into
126,351
and 104,845 shares
of common stock, respectively.
|
||||||
During
the nine months ended September 30, 2006, the Company issued 310,009
shares of common stock and
expensed $350,000, which was spread over the previous twelve months,
in
non-cash loan fees for
the additional expenses incurred under our revolving credit facility
with
Laurus Master Fund.
|
||||||
During
the nine months ended September 30, 2007, the Company accrued $200,000
which represented 279,600 shares
for the additional expenses incurred under our revolving credit
facility
with the Laurus Master Fund. The
$200,000 in expense will be expensed over the next twelve months,
as
non-cash loan fees
|
||||||
During
the nine months ended September 30, 2007, the Company entered into
notes
payable for
licensed software, services and hardware in the amount of approximately
$188,000.
|
||||||
During
the nine months ended September 30, 2007, the Company experienced
an
increase in fixed assets related
to tenant improvements paid by the landlord of the Company's new
Colorado
facility of approximately $375,000,
which is offset by an equivalent reduction of rent expense for
the life of
the lease.
|
(e)
|
Estimates
|
(f)
|
Other
accrued liabilities
|
Other
Accrued Liabilities - September 30,
|
2007
|
Warranty
reserve
|
$ 483,797
|
Annual
revolving credit facility fee
|
200,000
|
Rate
accrual
|
191,306
|
Preferred
dividend accrual
|
133,496
|
Provision
for anticipated loss
|
80,287
|
Deferred
rent
|
37,483
|
Accrued
taxes
|
35,750
|
All
other accrued liabilities
|
213,151
|
Total
Other Accrued Liabilities
|
$ 1,375,270
|
(g)
|
Taxes
|
·
|
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 or rate per share which floats (i.e., which
may
change over time), without the consent of a majority of the Series
D-1
preferred stockholders, so long as any shares of Series D-1 Preferred
Stock are outstanding, subject to certain
conditions.
|
Starsys
Research Total Assets
|
$ (7,851,494)
|
Starsys
Research 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
|
Total
Goodwill
|
$ 12,246,362
|
|
For
the fiscal year ended December 31, 2005, up to $350,000 in cash and
up to
an aggregate number of shares of the Company's common stock equal
to (A)
up to $3.0 million divided by (B) the volume weighted average price
of the
Company's common stock for the 20 trading days preceding the date
of the
audit opinion for the fiscal year ended December 31, 2005, but not
less
than $2.00 per share. This portion of the additional performance
consideration was not earned;
|
|
For
the fiscal year ended December 31, 2006, up to $350,000 in cash and
up to
an aggregate number of shares of the Company's common stock equal
to (A)
up to $7.5 million divided by (B) the volume weighted average price
of the
Company's common stock for the 20 trading days preceding the date
of the
audit opinion for the fiscal year ended December 31, 2006, but not
less
than $2.50 per share. This portion of the additional
performance consideration was not earned;
and,
|
|
For
the fiscal year ending December 31, 2007, up to $350,000 in cash
and up to
an aggregate number of shares of the Company's common stock equal
to (A)
up to $7.5 million divided by (B) the volume weighted average price
of the
Company's common stock for the 20 trading days preceding the date
of the
audit opinion for the fiscal year ending December 31, 2007, but not
less
than $3.00 per share. Whether the required performance criteria
were achieved will be evaluated in early 2008 based on 2007
results. If this amount is earned, goodwill may be
adjusted.
|
Other
Current Assets - September 30,
|
2007
|
Prepaid:
|
|
Financing
Fees
|
$ 658,493
|
Computer
& Software
|
119,092
|
Director
& Officers Prepaid Insurance
|
9,023
|
General
Liability & Workers Comp - Prepaid Insurance
|
52,087
|
Rent
|
112,281
|
Other
Prepaid Expenses
|
94,643
|
Total
Other Current Assets
|
$ 1,045,619
|
b)
|
Other
Assets
|
Other
Assets - September 30,
|
2007
|
Deposits
|
$ 108,600
|
Facility
Letter of Credit
|
527,003
|
Building
Deposits
|
228,469
|
Deferred
Expenses
|
184,623
|
Capital
Lease Deposits
|
2,614
|
Total
Other Assets
|
$ 1,051,309
|
For
the Nine Months Ended
|
|||||||||||||
September
30, 2006
|
|||||||||||||
Consolidated
|
Pro
Forma Adjustments
|
Consolidated
Pro Forma
|
|||||||||||
Net
Sales
|
$ |
24,649,426
|
$ | (265,224 | ) | $ |
24,384,202
|
||||||
Cost
of Sales *
|
$ |
18,081,469
|
(86,972 | ) | $ |
17,994,497
|
|||||||
Gross
Margin
|
6,567,957
|
(178,253 | ) | $ |
6,389,704
|
||||||||
Operating
Expenses
|
|||||||||||||
Marketing
and sales expense
|
2,093,230
|
(178,253 | ) |
1,914,978
|
|||||||||
Research
and development
|
270,310
|
-
|
270,310
|
||||||||||
General
and administrative
|
4,300,929
|
-
|
4,300,929
|
||||||||||
Total
Operating Expenses *
|
6,664,469
|
(178,253 | ) |
6,486,216
|
|||||||||
Loss
from Operations
|
(96,512 | ) |
-
|
(96,512 | ) | ||||||||
Non-Operating
Income
|
|||||||||||||
Interest
income
|
71,772
|
-
|
71,772
|
||||||||||
Interest
expense
|
(40,954 | ) |
-
|
(40,954 | ) | ||||||||
Non-cash
interest expense
|
(1,918 | ) |
-
|
(1,918 | ) | ||||||||
Gain
on Building Sale
|
87,956
|
-
|
87,956
|
||||||||||
Total
Non-Operating Income/(Expense)
|
116,856
|
-
|
116,856
|
||||||||||
Income
Before Income Taxes
|
20,344
|
-
|
20,344
|
||||||||||
Income
tax provision
|
14,290
|
-
|
14,290
|
||||||||||
Net
Income
|
$ |
6,054
|
$ |
-
|
6,054
|
||||||||
*
The following table shows how the Company's stock option expense
would be
allocated to all expenses.
|
|||||||||||||
Cost
of Sales
|
$ |
10,287
|
$ |
-
|
10,287
|
||||||||
Marketing
and sales
|
717
|
-
|
717
|
||||||||||
Research
and development
|
-
|
-
|
-
|
||||||||||
General
and administrative
|
90,138
|
-
|
90,138
|
||||||||||
$ |
101,142
|
$ |
-
|
101,142
|
·
|
General
and administrative expenses decreased approximately $200,000 from
approximately $4.0 million, or 17.5% of net sales, for the nine months
ended September 30, 2006 to approximately $3.8 million, or 15.0%
of net
sales, for the same nine month period in 2007. The decrease can
be attributed mainly to the utilization of certain general and
administrative resources to support new business development efforts
and
our bid and proposal process, thereby classifying those charges directly
to marketing and sales. On a pro-forma basis, general and
administrative expenses would have decreased approximately $503,000,
from
approximately $4.3 million for the nine months ended September 30,
2006 to
$3.8 million for the same period in
2007. .
|
·
|
Research
and development expenses decreased slightly to approximately $265,000,
or
1.0% of net sales, for the nine months ended September 30, 2007,
from
approximately $276,000, or 1.2% of net sales, during the same period
in
2006. The decrease was primarily due to lower personnel costs
and our focus on operations rather than research and
development.
|
·
|
Marketing
and sales expenses increased to approximately $2.2 million, or 8.7%
of net
sales, for the nine months ended September 30, 2007, from approximately
$1.9 million, or 8.2% of net sales, during the same period in
2006. The total dollar increase of approximately $330,000 was
mainly due to an investment in additional proposal activity and a
focus on
new business development and
marketing.
|
·
|
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. For stock options granted during the nine
months ending September 30, 2007, the risk-free interest rate ranged
from
4.08% to 4.75%, expected volatility ranged from 92% to 104%, the
dividend
yield was assumed to be zero, and the expected life of the options
was
assumed to be four years based on the average vesting period of options
granted. The total expense for the nine months ended September
30, 2007 and 2006 was approximately $302,000 and $101,000,
respectively.
|
·
|
Interest
expense and loan fees for the nine months ended September 30, 2007
and
2006 was approximately $196,000 and $18,000, respectively. The
increase was mainly attributable to utilization of our revolving
credit
facility in 2007; whereas, we did not borrow any significant amount
until
the very end of the same period in 2006. We generated interest
and other income in the nine months ended September 30, 2007 and
2006 of
approximately $45,000 and $43,000, respectively, the slight increase
was
primarily due to lower cash balances in
2007.
|
·
|
We
recognized approximately $88,000 of the deferred gain on the 2003
sale of
our Poway headquarters building during each of the nine month periods
ended September 30, 2007 and 2006, and we will continue to amortize
the
remaining deferred gain of approximately $625,000 into non-operating
income over the remainder of the leaseback, which expires in January
2013.
|
·
|
We
recorded non-cash loan fees related to our revolving credit facility
of
approximately $260,000 for the nine month period ended September
30,
2007. The 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, which we amortized
over
the initial term of the credit facility which started on September
29,
2006 and ended on September 29, 2007. In September 2007, the
revolving credit facility was automatically extended for another
year, and
we were required to issue an additional 279,600 shares of our common
stock
to Laurus, which was valued at $200,000. We plan to amortize
this cost over the twelve month period starting September 29, 2007
and
ending on September 29, 2008.
|
For
the nine months ending
|
September
30, 2007
|
September
30, 2006
|
||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Net
Income
|
$ |
214,221
|
$ |
64,678
|
||||
Interest
Income
|
(44,847 | ) | (43,466 | ) | ||||
Interest
Expense
|
196,416
|
18,471
|
||||||
Provision
for Income Taxes
|
800
|
14,290
|
||||||
Non-Cash
Loan Fee
|
259,865
|
1,918
|
||||||
Depreciation
and Amortization
|
887,031
|
613,166
|
||||||
Stock
Option Expense
|
302,144
|
101,142
|
||||||
Gain
on Building Sale
|
(87,955 | ) | (87,956 | ) | ||||
EBITDA
*
|
$ |
1,727,675
|
$ |
682,243
|
SpaceDev,
Inc.
|
||||||||||||||||
and
Subsidiaries
|
||||||||||||||||
Consolidated
Statements of Operations - Supplemental Schedule
|
||||||||||||||||
Nine
Months Ended
|
||||||||||||||||
September
30,
|
2007
|
%
|
2006
|
%
|
||||||||||||
GAAP
Operating Income
|
$ |
538,501
|
2.1 | % | $ | (32,065 | ) | -0.1 | % | |||||||
SFAS
123(R) stock -based compensation
|
302,144
|
1.2 | % |
101,142
|
0.4 | % | ||||||||||
Non-GAAP
Operating Income
|
840,645
|
3.3 | % |
69,077
|
0.3 | % | ||||||||||
Non-Operating
Income/(Expense)
|
||||||||||||||||
Interest
income
|
44,847
|
0.2 | % |
43,466
|
0.2 | % | ||||||||||
Interest
and other expense
|
(196,417 | ) | -0.8 | % | (18,471 | ) | -0.1 | % | ||||||||
Gain
on building sale (Note 3(a))
|
(259,865 | ) | -1.0 | % | (1,918 | ) | 0.0 | % | ||||||||
Non-Cash
loan fee - (Note 3(b))
|
87,955
|
0.3 | % |
87,956
|
0.4 | % | ||||||||||
Total
Non-Operating Income
|
(323,480 | ) | -1.3 | % |
111,033
|
0.5 | % | |||||||||
Non-GAAP
Net Income Before Taxes
|
$ |
517,165
|
2.0 | % | $ |
180,110
|
0.8 | % | ||||||||
Income
Tax Provision
|
(800 | ) | 0.0 | % |
14,290
|
0.1 | % | |||||||||
Non-GAAP
Net Income
|
$ |
517,965
|
2.0 | % | $ |
165,820
|
0.7 | % | ||||||||
Non-GAAP
Net Income
|
517,965
|
165,820
|
||||||||||||||
Less
Preferred Dividend Payments
|
(416,096 | ) | (446,791 | ) | ||||||||||||
Adjusted
Net Income/(Loss) for EPS Calculation
|
101,869
|
(280,971 | ) | |||||||||||||
Non-GAAP
Net Income Per Share
|
$ |
0.00
|
$ | (0.01 | ) | |||||||||||
Weighted-Average
Shares Outstanding
|
30,044,852
|
28,419,751
|
·
|
General
and administrative expenses decreased approximately $141,000 from
approximately $1.3 million, or 18.3% of net sales, for the three
months
ended September 30, 2006 to approximately $1.1 million, or 15.0%
of net
sales, for the same three month period in 2007. The decrease
can be attributed mainly to improving our cost allocation processes;
thereby refining our ability to charge expenses directly to programs,
departments and cost pools, which were partially offset with
Sarbanes-Oxley compliance requirement
costs.
|
·
|
Research
and development expenses increased approximately $31,000 from
approximately $71,000, or 1.0% of net sales, for the three months
ended
September 30, 2006 to approximately $102,000, or 1.3% of net sales,
for
the same three month period in 2007. The slight increase was
attributed to our internal development efforts to explore vertical
integration of certain key satellite materials as well as supplement
certain internal development efforts on our lunar investigatory
study.
|
·
|
Marketing
and sales expenses increased to approximately $797,000, or 10.5%
of net
sales, for the three months ended September 30, 2007, from approximately
$525,000, or 7.5% of net sales, during the same period in
2006. The increase of approximately $272,000 was mainly due to
additional proposal activity and a focus on new business development
and
marketing as well as refining our cost allocation
processes.
|
·
|
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. For stock options granted during the three
months ending September 30, 2007, the risk-free interest rate ranged
from
4.08% to 4.72%, expected volatility ranged from 100% to 104%, the
dividend
yield was assumed to be zero, and the expected life of the options
was
assumed to be four years based on the average vesting period of options
granted. The total expense for the three months ended September
30, 2007 and 2006 was approximately $90,000 and ($15,000),
respectively.
|
·
|
Interest
expense and loan fees for the three months ended September 30, 2007
and
2006 were approximately $63,000 and $7,800, respectively. The
increase was mainly attributable to utilization of our revolving
credit
facility in 2007; whereas, we did not borrow any significant amount
until
the very end of the same period in 2006. We generated interest
and other income in the three months ended September 30, 2007 and
2006 of
approximately $14,000 and $2,700,
respectively.
|
·
|
We
recognized approximately $29,000 of the deferred gain on the 2003
sale of
our Poway headquarters building during each of the three month periods
ended September 30, 2007 and 2006, and we will continue to amortize
the
remaining deferred gain of approximately $625,000 into non-operating
income over the remainder of the leaseback, which expires in January
2013.
|
·
|
We
recorded non-cash loan fees related to our revolving credit facility
of
approximately $86,000 and $2,000 for the three month periods
ended
September 30, 2007 and 2006, respectively. The 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, which we amortized over the initial term of the credit
facility
which started on September 29, 2006 and ended on September 29,
2007. In September 2007, the revolving credit facility
was automatically extended for another year, and we were required
to issue
an additional 279,600 shares of our common stock to Laurus, which
was
valued at $200,000. We plan to amortize this cost over the
twelve month period starting on September 29, 2007 and ended
September 29,
2008.
|
For
the three months ended
|
September
30, 2007
|
September
30, 2006
|
||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Net
Income
|
$ |
57,806
|
$ |
21,457
|
||||
Interest
Income
|
(13,868 | ) | (2,714 | ) | ||||
Interest
Expense
|
63,104
|
7,842
|
||||||
Provision
for Income Taxes
|
-
|
5,055
|
||||||
Non-Cash
Loan Fee
|
86,302
|
1,918
|
||||||
Depreciation
and Amortization
|
294,110
|
240,665
|
||||||
Stock
Option Expense
|
90,040
|
(14,551 | ) | |||||
Gain
on Building Sale
|
(29,319 | ) | (29,319 | ) | ||||
EBITDA
|
$ |
548,175
|
$ |
230,353
|
SpaceDev,
Inc.
|
||||||||||||||||
and
Subsidiaries
|
||||||||||||||||
Consolidated
Statements of Operations - Supplemental Schedule
|
||||||||||||||||
Three
Months Ended
|
||||||||||||||||
September
30,
|
2007
|
%
|
2006
|
%
|
||||||||||||
GAAP
Operating Income
|
$ |
164,025
|
2.2 | % | $ |
4,239
|
0.0 | % | ||||||||
SFAS
123(R) stock -based compensation
|
90,040
|
1.2 | % | (14,551 | ) | -0.1 | % | |||||||||
Non-GAAP
Operating Income
|
254,065
|
1.0 | % | (10,312 | ) | 0.0 | % | |||||||||
Non-Operating
Income/(Expense)
|
||||||||||||||||
Interest
income
|
13,868
|
0.1 | % |
2,714
|
0.0 | % | ||||||||||
Interest
and other expense
|
(63,104 | ) | -0.2 | % | (7,842 | ) | 0.0 | % | ||||||||
Gain
on building sale (Note 3(a))
|
(86,302 | ) | -0.3 | % | (1,918 | ) | 0.0 | % | ||||||||
Non-Cash
loan fee - (Note 3(b))
|
29,319
|
0.1 | % |
29,319.00
|
0.1 | % | ||||||||||
Total
Non-Operating Income
|
(106,219 | ) | -0.4 | % |
22,273
|
0.1 | % | |||||||||
Non-GAAP
Net Income Before Taxes
|
$ |
147,846
|
0.6 | % | $ |
11,961
|
0.1 | % | ||||||||
Income
Tax Provision
|
-
|
0.0 | % |
5,055
|
0.0 | % | ||||||||||
Non-GAAP
Net Income
|
$ |
147,846
|
0.6 | % | $ |
6,906
|
0.0 | % | ||||||||
Non-GAAP
Net Income
|
147,846
|
6,906
|
||||||||||||||
Less
Preferred Dividend Payments
|
(133,462 | ) | (150,842 | ) | ||||||||||||
Adjusted
Net Income/(Loss) for EPS Calculation
|
14,384
|
(143,936 | ) | |||||||||||||
Non-GAAP
Net Income Per Share
|
$ |
0.00
|
$ | (0.00 | ) | |||||||||||
Weighted-Average
Shares Outstanding
|
30,914,735
|
29,027,350
|
·
|
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
integration of the two companies is
unsuccessful;
|
·
|
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, or new
fixed
price contracts entered into after the merger incur major cost overruns
or
remain 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;
|
·
|
regular
stock selling programs established and executed by
insiders;
|
·
|
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.
|
Nominee
|
For
|
Withheld
|
Sirangelo,
Mark
|
27,722,179
|
150,390
|
Slansky,
Richard
|
19,066,072
|
8,806,497
|
Benson,
Jim
|
24,598,458
|
3,274,111
|
Blake,
Curt
|
19,045,451
|
8,827,118
|
Estes,
Howell
|
19,061,562
|
8,811,007
|
Huntress,
Wesley
|
19,045,836
|
8,826,733
|
McClendon,
Scott
|
27,650,603
|
221,966
|
Tibbitts,
Scott
|
19,000,791
|
8,871,778
|
Walker,
Robert
|
19,144,131
|
8,728,438
|
For
|
Against
|
Abstain
|
27,690,037
|
83,085
|
99,446
|
For
|
Against
|
Abstain
|
Broker
Nonvotes
|
16,806,009
|
552,863
|
103,241
|
10,410,456
|
Exhibit
No.
|
Description
|
Filed
Herewith
|
Incorporated
by Reference
|
Form
|
Date
Filed with SEC
|
Exhibit
No.
|
3.1
|
Certificate
of Incorporation of SpaceDev, Inc., a Delaware corporation
|
X
|
8-K
|
Aug.
24, 2007
|
3.1
|
|
3.2
|
Bylaws
of SpaceDev, Inc., a Delaware corporation
|
X
|
8-K
|
Aug.
24, 2007
|
3.2
|
|
10.1
|
Agreement
and Plan of Merger, dated as of August 20, 2007, between SpaceDev
Colorado
and SpaceDev Delaware
|
X
|
8-K
|
Aug.
24, 2007
|
10.1
|
|
10.2
|
Stock
Purchase Agreement, entered into as of September 14, 2007, by and
between
SpaceDev, Inc. and MT Aerospace AG and OHB Technology AG.
|
X
|
8-K
|
Sep.
19, 2007
|
99.1
|
|
10.3
|
Stockholder
Agreement, entered into as of September 19, 2007, by and between
SpaceDev,
Inc. and MT Aerospace AG and OHB Technology AG.
|
X
|
8-K
|
Sep.
19, 2007
|
99.2
|
|
31.1
|
Rule
13a-14(a) certification of Chief Executive Officer
|
X
|
||||
31.2
|
Rule
13a-14(a) certification of Chief Financial Officer
|
X
|
||||
32.1
|
Section
1350/Rule 13a-14(b) certifications
|
X
|