SECURITIES AND EXCHANGE COMMISSION
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
SPACEDEV, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
COLORADO 84-1374613
(STATE OF OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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13855 STOWE DRIVE, POWAY, CALIFORNIA 92064
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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PLAN NAMES:
2004 EQUITY INCENTIVE PLAN
RICHARD B. SLANSKY WITH COPIES TO:
PRESIDENT GRETCHEN COWEN, ESQ.
SPACEDEV, INC. LAW OFFICES OF GRETCHEN COWEN, APC
13855 STOWE DRIVE 1903 WRIGHT PLACE, SUITE 250
POWAY, CA 92064 CARLSBAD, CALIFORNIA 92008
(858) 375-2030 (760) 931-0903
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(NAME, ADDRESS AND TELEPHONE NUMBER, INCLUDING AREA CODE OF AGENT FOR SERVICE)
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CALCULATION OF REGISTRATION FEE
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Proposed maximum Proposed maximum
offering price per share(2) aggregate offering price
Title of securities to be Amount to be
registered registered(1)
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Stock Options and Common
Stock (par value $.0001) 2,000,000 Shares(1) $ 1.75 (2) $3,491,864 $410.99
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(1) Pursuant to Rule 416(c) under the Securities Act of 1933, this Registration
Statement also covers an indeterminate amount of interest to be offered or sold
pursuant to the employee benefit plan(s) described herein.
(2) This estimate is made pursuant to Rule 457(h) solely for purposes of
calculating the registration fee, and is determined according to the following
offering price information: under the 2004 Equity Incentive Plan (i) 10,000
common shares are subject to outstanding options with an exercise price of $1.49
per share, (ii) 60,000 common shares are subject to outstanding options with an
exercise price of $1.54 per share, (iii) 60,000 common shares are subject to
outstanding options with an exercise price of $1.55 per share, (iv) 12,500
common shares are subject to outstanding options with an exercise price of $1.71
per share, (v) 10,000 common shares are subject to outstanding options with an
exercise price of $1.72 per share, (vi) 96,000 common shares are subject to
outstanding options with an exercise price of $1.73 per share, (vii) 30,000
common shares are subject to outstanding options with an exercise price of $1.76
per share, (viii) 37,500 common shares are subject to outstanding options with
an exercise price of $1.78 per share, (ix) 25,000 common shares are subject to
outstanding options with an exercise price of $1.80 per share, (x) 240,000
common shares are subject to outstanding options with an exercise price of $1.85
per share, (xi) 50,000 common shares are subject to outstanding options with an
exercise price of $2.09 per share, (xii) 50,000 common shares are subject to
outstanding options with an exercise price of $2.13 per share, and the remaining
1,319,000 common shares are reserved for issuance upon exercise of options to be
granted in the future (the "Plans"). Pursuant to Rule 457(h), for all shares of
common stock being registered hereunder with an exercise price which cannot be
presently determined (1,319,000 shares of common stock under the Plan), the
Proposed Maximum Offering Price is $1.75 per share of common stock, which is
based on the closing price for the Company's common stock as reported on the
Nasdaq Over-The-Counter Bulletin Board on March 14, 2005.
PAGE
PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
Item 1. Plan Information.
Pursuant to Rule 428(b)(1) under the Securities Act of 1933, as amended,
the documents containing the information specified in Part I of this
Registration Statement on Form S-8 will be sent or given to participants in each
of the following employee benefit plans of SpaceDev, Inc. (the "Company"):
- 2004 Equity Incentive Plan, as amended (the "Plan")
These documents and the documents incorporated by reference in this
Registration Statement pursuant to Item 3 of Form S-8 (Part II hereof), taken
together, constitute a prospectus that meets the requirements of Section 10(a)
of the Securities Act of 1933, as amended.
Item 2. Registrant Information and Employee Plan Annual Information.
Upon the written or oral request by a participant in the Plan listed in
Item 1 of this Part I, the Company will provide any of the documents
incorporated by reference in Item 3 of Part II of this Registration Statement
(which documents are incorporated by reference into this Section 10(a)
prospectus), any documents required to be delivered to participants pursuant to
Rule 428(b) and other additional information about such plans. All of such
documents and information will be available without charge. Any and all such
requests should be directed to the Company at 13855 Stowe Drive, Poway,
California 92064, telephone number (858) 375-2030, attention Corporate
Secretary.
EXPLANATORY NOTE
Included on the immediately following pages is a "reoffer prospectus." The
selling stockholder can use this document in connection with the reoffer and
resale of restricted securities.
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REOFFER PROSPECTUS
681,000 Shares of Common Stock under the 2004 Equity Incentive Plan
SPACEDEV, INC.
The shares of common stock, $0.0001 par value (the "Common Stock"), of
SpaceDev, Inc. (the "Company" or "we") covered by this Reoffer Prospectus may be
offered and sold to the public by stockholders of the Company (the "Selling
Stockholders"), some of whom may be deemed to be "affiliates" (as that term is
defined in Rule 405 of the General Rules and Regulations of the Securities Act
of 1933, as amended (the "Securities Act")) of the Company. The Selling
Stockholders acquired or will acquire the Shares through their exercise of stock
options or other awards granted to them under the Company's 2004 Equity
Incentive Plan (the "Plan").
All or a portion of the Shares may be offered for sale, from time to time,
on the Nasdaq OTC Bulletin Board or otherwise, at prices and terms then
obtainable, subject to certain limitations. However, any Shares covered by this
Reoffer Prospectus which qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 instead of pursuant to this Reoffer
Prospectus. See "Plan of Distribution."
We will not receive any of the proceeds from the sale of the Shares by the
Selling Stockholders, but we will receive funds in connection with the exercise
of stock options relating to such Shares, which funds will be used by the
Company for working capital. All expenses of registration incurred in
connection with this offering are being borne by the Company, but all brokerage
commissions, discounts and other expenses incurred by individual Selling
Stockholders will be borne by such Selling Stockholders.
Our Common Stock is listed on the Nasdaq OTC Bulletin Board under the
symbol "SPDV." The closing bid and ask prices of our Common Stock on the Nasdaq
OTC Bulletin Board on March 14, 2005 were $1.75 and $1.72, respectively.
See "Risk Factors" beginning on page 3 for information that should be
carefully considered by prospective investors.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Reoffer Prospectus is March 28, 2005.
PAGE
TABLE OF CONTENTS
AVAILABLE INFORMATION 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 1
PROSPECTUS SUMMARY 2
THE COMPANY 2
THE OFFERING 3
RISK FACTORS 3
RISK FACTORS 3
RISKS RELATED TO OUR BUSINESS 3
RISKS RELATED TO SHARE OWNERSHIP 11
MARKET RISKS 13
FORWARD-LOOKING STATEMENTS 15
USE OF PROCEEDS 15
SELLING STOCKHOLDERS 15
PLAN OF DISTRIBUTION 18
INDEMNIFICATION OF DIRECTORS AND OFFICERS 18
LEGAL MATTERS 19
EXPERTS 19
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AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith is required to file periodic reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). The
reports, proxy statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, Room 1024, N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices. Copies of such materials can also be obtained
by mail from the public reference facilities of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. You may obtain
information on the operation of the Public Reference Room by calling the
Commission at 1-(800)-SEC-0330. The Commission also maintains a site on the
World Wide Web that contains reports, proxy and information statements and other
information regarding registrants that file electronically. The address of such
site is http://www.sec.gov. See "Incorporation of Certain Documents by
Reference."
The Company has filed with the Commission a Registration Statement on Form
S-8 under the Securities Act with respect to the shares of Common Stock offered
by this Reoffer Prospectus. This Reoffer Prospectus does not contain all the
information set forth in or annexed as exhibits to the Registration Statement.
For further information with respect to the Company and the Shares of Common
Stock offered by this Reoffer Prospectus, reference is made to the Registration
Statement and to the financial statements, schedules and exhibits filed as part
thereof or incorporated by reference herein. Copies of the Registration
Statement, together with such financial statements, schedules and exhibits, may
be obtained from the public reference facilities of the Commission at the
addresses listed above, upon payment of the charges prescribed therefor by the
Commission. Statements contained in this Reoffer Prospectus as to the contents
of any contract or other document referred to are not necessarily complete and,
in each instance, reference is made to the copy of such contract or other
documents, each such statement being qualified in its entirety by such
reference. Copies of such contracts or other documents, to the extent that they
are exhibits to this Registration Statement, may be obtained from the public
reference facilities of the Commission, upon the payment of the charges
prescribed therefor by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Commission
pursuant to the Exchange Act are hereby incorporated by reference, except as
superseded or modified herein:
(A) The Company's annual report on Form 10-KSB (Accession No.
0001031833-05-000030) for the fiscal year ended December 31, 2004.
(B) All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the Company's annual
report referred to in (a) above.
(C) The description of the Company's common stock contained in its
Registration Statement on Form 10-SB (File No. 000-28947), pursuant to Section
12(g) of the Exchange Act, including any amendment or report filed for the
purpose of updating such description.
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In addition, all documents filed by the Company pursuant to Sections13(a),
13(c), 14 and 15(d) of the Exchange Act after the date of this Reoffer
Prospectus and prior to the termination of the offering of the Shares of Common
Stock shall be deemed to be incorporated in and made a part of this Reoffer
Prospectus by reference from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this Reoffer
Prospectus to the extent that a statement contained herein or in any
subsequently filed document that is also incorporated by reference herein
modifies or replaces such statement. Any statements so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Reoffer Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner of Shares of Common Stock, to whom this Reoffer
Prospectus is delivered, on written or oral request of any such person, a copy
of any or all of the foregoing documents incorporated herein by reference (other
than exhibits to such documents). Written or oral requests for such copies
should be directed to the Company, at 13855 Stowe Drive, Poway, California
92064, telephone number (858) 375-2030, attention Corporate Secretary.
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this Reoffer
Prospectus. This summary is not complete and may not contain all of the
information that you should consider before purchasing our Common Stock. Certain
statements made in this Reoffer Prospectus constitute "forward-looking
statements" under the Private Securities Litigation Reform Act of 1995. See
"Forward-Looking Statements."
THE COMPANY
OUR BUSINESS OBJECTIVES
SpaceDev, Inc. (the "Company," "SpaceDev," "we," "us" or "our") is engaged
in the conception, design, development, manufacture, integration and operations
of space technology subsystems, systems, products and services. We are
currently focused on the commercial and military development of low-cost
microsatellites, nanosatellites and related subsystems, hybrid rocket propulsion
for space and launch vehicles, as well as the associated engineering technical
services to government, aerospace and other commercial enterprises. Our
products and solutions are sold directly to these customers and include
sophisticated micro- and nanosatellites, 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 approach is to provide smaller spacecraft - generally 250 kg (550
pounds) mass and less - and cleaner, safer hybrid propulsion systems to
commercial, international and government customers. We are developing smaller
spacecraft and miniaturized subsystems using proven, lower cost, high-quality
off-the-shelf components. Our space products are modular and reproducible, which
allows us to create affordable space solutions for our customers. By utilizing
our innovative technology and experience, and space-qualifying commercial
industry-standard hardware, software and interfaces, we provide increased
reliability with reduced costs and risks.
We have been awarded, have successfully concluded or are successfully
concluding contracts from such esteemed government, university and commercial
customers as the Air Force Research Laboratory, Boeing, the California Space
Authority, the Defense Advanced Research Projects Agency, National Aeronautics
and Space Administration's Jet Propulsion Laboratory, Lockheed Martin, the Lunar
Enterprise Corporation, Malin Space Science Systems, the Missile Defense Agency
(formerly the Ballistic Missile Defense Organization), the National
Reconnaissance Office, Scaled Composites and the University of California at
Berkeley via NASA.
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OUR HISTORY
We were incorporated under the laws of the State of Colorado on December
23, 1996 as Pegasus Development Group, Inc. ("PDGI"). SpaceDev, LLC of Colorado
was originally formed in 1997 for commercial space exploration and was the sole
owner of shares of common stock of SpaceDev (a Nevada corporation) ("SpaceDev"),
formed on August 22, 1997. On October 22, 1997, PDGI issued 8,245,000 of its
$.0001 par value common stock for 100 percent (1,000,000 shares) of SpaceDev's
common stock owned by SpaceDev, LLC. Upon the acquisition of the SpaceDev
stock, SpaceDev was merged into PDGI and, on December 17, 1997, PDGI changed its
name to SPACEDEV, INC. After the merger, SpaceDev, LLC, changed its name to SD
Holdings, LLC on December 17, 1997. We became a publicly traded company in
October 1997 and are trading on the Nasdaq Over-the-Counter Bulletin Board
("OTCBB") under the symbol of "SPDV."
Our principal executive offices are located at 13855 Stowe Drive, Poway,
California 92064, and our telephone number is (858) 375-2000.
THE OFFERING
The Selling Stockholders may offer and sell up to 668,500 Shares of our
Common Stock under this Reoffer Prospectus. We will not receive any of the
proceeds from the sale of these Shares, but we will receive funds in connection
with the exercise of stock options relating to such Shares, which funds will be
used by the Company for working capital. See "Use of Proceeds" and "Selling
Stockholders."
RISK FACTORS
Investing in our Common Stock involves significant risks. You should
consider the information under the caption "Risk Factors" below in deciding
whether to purchase the Shares of Common Stock offered under this Reoffer
Prospectus.
RISK FACTORS
Purchasing the Shares of Common Stock offered by this Reoffer Prospectus
involves a high degree of risk. Before purchasing our Common Stock, you should
carefully consider the following risk factors and the other information
contained elsewhere in this Reoffer Prospectus. In addition to historical
information, the following discussion, including but not limited to risks as to
the Company's ability to continue as a going concern and the expectation of
financial performance, and other parts of this Reoffer Prospectus contain
forward-looking information that involves risks and uncertainties. Such
statements are based on management's current expectations and are subject to a
number of factors and uncertainties which could cause actual results to differ
materially from those described in the forward-looking statements, some of which
are described in the following risk factors.
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RISKS RELATED TO OUR BUSINESS
OUR PLAN TO REMAIN CASH FLOW POSITIVE AND BECOME PROFITABLE DEPENDS ON OUR
ABILITY TO INCREASE REVENUES, WHILE CONTROLLING COSTS IN A VARIETY OF AREAS,
HIRE NEW ENGINEERS, AS WELL AS, IMPROVE OUR PROJECT MANAGEMENT EXPERTISE.
We were cash flow positive in 2004, primarily as a result of raising over
$4 million in cash through the sale of our preferred and common stock. Our
ability to increase cash generation from operations and thereby continue as a
going concern without the need to raise equity capital depends upon our ability
to ultimately implement our business plan, which includes (but is not limited
to) generating substantial new revenue from the Missile Defense Agency by
successfully performing under our $43 million contract and continuing to attract
and successfully complete other government and commercial contracts. The Missile
Defense Agency contract is staged, and we cannot guarantee that all subsequent
phases will be awarded or will be awarded to us. Recent budget cuts may affect
government spending on these space-based contracts.
In order to perform the Missile Defense Agency contract on schedule and to
successfully execute other existing and new business opportunities, we must
substantially increase our staff and hire new engineers or subcontract the work
to third parties. Although we are actively and aggressively seeking to hire
spacecraft and propulsion engineers to fulfill existing and new business demand,
there can be no assurance that we will be able to attract such engineering
resources or if we are able to attract them, that they will be available in the
timeframe needed or for a reasonable cost.
IF WE ARE UNABLE TO RAISE CAPITAL IN THE FUTURE, WE MAY BE UNABLE TO FUND
OPERATING CASH SHORTFALLS.
Our future capital requirements will depend upon many factors, including
but not limited to sales and marketing efforts, the development of new products
and services, the successful completion of existing projects, possible future
strategic acquisitions, the progress of our research and development efforts,
and the status of competitive products and services. As of December 31, 2004
and 2003, we had a working capital of $4,897,796 and a working capital deficit
of $630,805, respectively, and an accumulated deficit of $14,905,797 and
$11,817,776, respectively. As of those dates, we had $5,068,601 and $592,006,
respectively, in cash and cash equivalents and $620,097 and $187,062,
respectively, of accounts receivable, net of allowance for doubtful accounts.
We believe that current and future available capital resources will be
adequate to fund our operations for the next twelve (12) months. However, to
the extent we are in need of any additional financing, it may not be available
to us on acceptable terms, or at all. Our inability to obtain any needed
financing could result in a significant loss of ownership and/or control of our
proprietary technology and other important assets and could also hinder our
ability to fund our continued operations and our product development efforts
that historically have contributed significantly to our competitiveness.
Any financing may cause significant dilution to existing stockholders. Any
debt financing or other financing of securities senior to common stock likely
will include financial and other covenants that will restrict our flexibility.
At a minimum, we expect these covenants to include restrictions on our ability
to pay dividends on our common stock.
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SOME OF OUR GOVERNMENT CONTRACTS ARE STAGED AND WE CANNOT GUARANTEE THAT ALL
STAGES OF THE CONTRACTS WILL BE AWARDED TO US OR AT ALL.
Some of our government contracts, including our $43,362,271 MDA contract,
are phased contracts, in which the customer may determine to terminate the
contract between phases for any reason. We can give no assurance that, as to any
such agreement, the entire contract will be realized by us. In the event that
subsequent phases of some of our government contracts, including but not limited
to the MDA contract, are not awarded to us, it would have a material adverse
effect on our business operations and financial condition, unless equivalent
contracts were simultaneously awarded to us.
NO ASSURANCE OF SUCCESSFUL OR TIMELY DEVELOPMENT OF PRODUCTS.
Despite our success in designing, launching and monitoring our first
microsatellite, our products and technologies are currently under various stages
of development, including our hybrid rocket technology. Further development and
testing will be required to prove additional performance capability beyond
current tests and commercial viability. Additionally, the final cost of
development cannot be determined until development is complete. The success, if
any, will depend on the ability to timely complete our projects within estimated
cost parameters and ultimately deploy the product in a cost-effective manner.
THE MARKETPLACE FOR OUR TECHNOLOGY AND PRODUCTS IS UNCERTAIN.
There can be no assurance that there will be a demand for our technology,
products and services or that we will be successful in obtaining a sufficient
market share to sustain our business or to achieve profitable operations. Our
business plan is based on the assumption that significant revenues will be
generated in connection with the government being early adopters and deploying
microsatellites in the near-term with a long-term commercial market developing
for private manned and unmanned space exploration. Because microsatellites and
commercial space exploration are still relatively new concepts, it is difficult
to accurately predict the ultimate size of the market. We have a limited prior
operating history, and there can be no assurance that we will increase our
revenues and become profitable. Additionally, if either the demand for our
products produced or services rendered or if general economic conditions
deteriorate significantly, our business could be impacted to a substantial
degree resulting in lower profitability or losses as a direct result. Many of
our products and services are new and unproven, and the true level of consumer
demand is uncertain. Lack of significant market acceptance of our products and
services, delays in such acceptance, or failure of markets to develop could
negatively affect our business, financial condition, and results of operations.
Many of the factors, which affect us, and our business, are dictated by the
marketplace and are beyond our control.
IF WE ARE UNSUCCESSFUL IN ACHIEVING AND MAINTAINING COMPLIANCE WITH OUR
REGISTRATION OBLIGATIONS WITH REGARD TO THE PREFERRED STOCK AND WARRANTS, WE MAY
INCUR SUBSTANTIAL MONETARY PENALTIES.
The agreements we entered into in connection with our issuance of the
Preferred Stock (defined below) and the Warrants to Laurus require us to, among
other things, register for resale the shares of common stock issued or issuable
under the note and the accompanying warrant and maintain the effectiveness of
the registration statement for an extended period of time. We are subject to
liquidated damage assessment of 1.5% of the Stated Value (defined below) of the
outstanding Preferred Stock for each thirty (30) days of non-compliance
thereafter, subject to pro ration for partial months. If we are unable to
obtain and maintain effectiveness of the required registration statement, then
we may be required to pay additional liquidated damages, which could adversely
affect our business, operating results, financial condition, and ability to
service our other indebtedness by negatively impacting our cash flows.
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OUR LIMITED OPERATING HISTORY AND LACK OF EXPERIENCE IN OUR NEW OR PROPOSED
LINES OF BUSINESS MAKES IT DIFFICULT TO PREDICT OUR FUTURE SUCCESS.
We launched our first microsatellite, CHIPSat, in January 2003 and are
developing applications for our other technologies and products. We intend to
provide microsatellites to early adopters, primarily the U.S. military (e.g.,
the Missile Defense Agency), and hybrid rocket motors to government and
commercial customers (e.g., the Air Force Research Laboratory and Scaled
Composites). As a result, we have limited or no operating histories in each of
these new or proposed lines of business. Therefore, our historical financial
information is of limited value in projecting our future success in these
markets.
OUR PRODUCTS AND SERVICES ARE TECHNOLOGICALLY ADVANCED AND MAY NOT FUNCTION
UNDER CERTAIN CONDITIONS.
Most of our products are technologically advanced and sometimes novel
systems that must function under demanding operating conditions. Even though we
believe that we employ sophisticated design, manufacturing, and testing
practices, there can be no assurance that our products will be successfully
launched or operated or that they will be developed or will perform as intended.
Like most organizations that have launched satellite programs, we will likely
experience some product and service failures, schedule delays, and other
problems in connection with our products in the future. Our products and
services are and will continue to be subject to significant technological change
and innovation. Our success will generally depend on our ability to penetrate
and retain markets for our existing products and services and to continue to
conceive, design, manufacture and market new products and services on a
cost-effective and timely basis. We anticipate that we will incur significant
expenses in the design and initial manufacture and marketing of new products and
services. There can be no assurance that we will be able to achieve the
technological advances necessary to remain competitive and profitable, that new
products and services will be developed and manufactured on schedule and on a
cost-effective basis, that anticipated markets will exist or develop for new
products or services, or that our existing products and services will not become
technologically obsolete.
OUR FAILURE TO LAUNCH COULD CAUSE SERIOUS ADVERSE AFFECTS.
Although our current $43,362,271 contract to provide up to six
microsatellites to the Missile Defense Agency is a cost-plus agreement, which
shifts the risk of failure to the buyer, a launch failure could adversely affect
our cash flow in other instances, since a large portion of customer payments may
sometimes be contingent upon a successful launch. Microsatellite launches are
subject to significant risks, including causing disabling damage to or loss of a
microsatellite. Delays in the launch could also adversely affect our revenues
as the customer may have timing requirements for milestone payments or we may
have guarantee requirements. Delays could be caused by a number of factors,
including designing, constructing, integrating, or testing the micro satellite,
microsatellite components, or related ground systems; delays in receiving the
license necessary to operate the microsatellite systems; delays in obtaining the
customer's payload; delays related to the launch vehicle; weather; and other
events beyond our control. Delays and the perception of potential delay could
negatively affect our marketing efforts. There is no assurance that we will be
able to launch microsatellites on a timely basis and any delays in the launch
could have a material adverse effect on our financial position.
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OUR EXPANSION INTO OTHER NEW LINES OF BUSINESS MAY DIVERT MANAGEMENT'S
ATTENTION FROM OUR EXISTING OPERATIONS AND PROVE TO BE TOO COSTLY.
We will migrate our technology from projects into products for
microsatellites and hybrid rocket motors over the next several years. In the
meantime, we are investigating other applications of our technology and other
markets for our technologies and prospective products. Our expansion into new
lines of business may be difficult for us to manage because they may involve
different disciplines and require different expertise than our core businesses.
Consequently, this expansion may detract management's time and attention away
from our core business, and we may need to incur significant expenses in order
to develop the expertise and reputation we desire, which could prevent us from
generating revenues from these lines of business in amounts sufficient to
justify the expenses we incur in operating them.
OUR SUCCESS DEPENDS ON OUR ABILITY TO RETAIN OUR KEY PERSONNEL.
Our success is dependent upon the efforts of certain key members of our
management and engineering team, including our chief executive officer, James W.
Benson, our president and chief financial officer, Richard B. Slansky, our vice
president of new business development and project manager, Randall K. Simpson
and Frank Macklin, our vice president of engineering. Each of these individuals
has substantial prior business experience and we have added other experienced
key personnel to our staff. The loss of any of these persons could have a
material adverse effect on us if suitable replacements are not found. Our
future success is likely to depend substantially on our continued ability to
attract and retain highly qualified personnel. The competition for such
personnel is intense, and our inability to attract and retain such personnel
could have a material adverse effect on us. We do not have current key man life
insurance on any of our key personnel.
THE U.S. FEDERAL GOVERNMENT MAY INCREASE REGULATION, WHICH COULD CAUSE OUR
BUSINESS TO HAVE SERIOUS ADVERSE EFFECTS.
Our business activities are regulated by various agencies and departments
of the U.S. federal government and, in certain circumstances, the governments of
other countries. Several government agencies, including NASA and the U.S. Air
Force, maintain Export Control Offices to ensure that any disclosure of
scientific and technical information complies with the Export Administration
Regulations and the International Traffic in Arms Regulations ("ITAR"). Exports
of our products, services and technical information require either Technical
Assistance Agreements or licenses from the U.S. Department of State depending on
the level of technology being transferred. This includes recently published
regulations restricting the ability of U.S. based companies to complete offshore
launches, or to export certain satellite components and technical data to any
country outside the United States. The export of information with respect to
ground-based sensors, detectors, high-speed computers, and national security and
missile technology items are controlled by the Department of Commerce. The
government is very strict with respect to compliance and has served notice that
failure to comply with the ITAR and/or the Commerce Department regulations may
subject guilty parties to fines of up to US$1 million and/or up to 10 years
imprisonment per violation. Failure to comply with any of the above mentioned
regulations could have serious adverse effects as dictated by the rules
associated with compliance to the ITAR regulations. Our conservative position is
to consider any material beyond standard marketing material to be regulated by
ITAR regulations.
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In addition to the standard local, state and national government
regulations that all businesses must adhere to, the space industry has specific
regulations. Command and telemetry frequency assignments for space missions are
regulated internationally by the International Telecommunications Union ("ITU").
In the United States, the Federal Communications Commission ("FCC") and the
National Telecommunications Information Agency ("NTIA") regulate command and
telemetry frequency assignments. All launch vehicles that are launched from a
launch site in the United States must pass certain launch range safety
regulations that are administered by the U.S. Air Force. In addition, all
commercial space launches that we would perform require a license from the
Department of Transportation. Satellites that are launched must obtain
approvals for command and frequency assignments. For international approvals,
the FCC and NTIA obtain these approvals from the ITU. These regulations have
been in place for a number of years to cover the large number of non-government
commercial space missions that have been launched and put into orbit in the last
15 to 20 years. Any commercial deep space mission that we would perform would
be subject to these regulations. At the present time, we are not aware of any
additional or unique government regulations related to commercial space
missions.
We are required to obtain permits, licenses, and other authorizations under
federal, state, local and foreign statutes, laws or regulations or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes into
the environment including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the clean-up or other
remediation thereof. At the present time, we do not have a requirement to
obtain any special environmental licenses or permits.
Also, as some of our projects with the Department of Defense proceed, we
may need special clearances to continue working on and advancing our projects.
Classified programs generally will require that we comply with various Executive
Orders, Federal laws and regulations and customer security requirements that may
include specialized facilities and restrictions on how we develop, store,
protect and share information. Laboratories, manufacturing and assembly areas,
meeting spaces, office areas, storage areas, computers systems and networks and
telecommunications systems may require modification or replacement in order to
comply with customer requirements. Classified programs may require our
employees to obtain government clearances and restrict our ability to have key
employees work on these programs until these clearances are received from the
appropriate United States government agencies. In order to staff these programs
we may need to recruit personnel with the appropriate professional training,
experience and security clearances. There are a very limited number of
individuals with all of the requirements that we seek. There is no assurance
that we can locate and recruit these individuals in a timely and cost-effective
manner. We may be required to modify existing facilities and to develop new
facilities and capabilities that will only be utilized by these classified
programs. We may be required to install computer networks, communications
systems and monitoring systems that are dedicated to these classified programs.
Some or all of these requirements may entail substantial additional expense. It
is uncertain whether we will be able to recover any of the costs of these
systems from our customers. Many of these classified programs are regulated by
Executive Orders, various Federal laws and regulations and customer
requirements. The failure of the Company to comply with any of the foregoing
Executive Orders, Federal laws and regulations and customer requirements could
have serious adverse effects. Also, our ability to successfully market and sell
into the Department of Defense markets may be severely hampered if we are unable
to meet classified program requirements. There is no assurance that we will be
able to successfully pass the criteria required in order to win a classified
program or to maintain current contracts, such as our Missile Defense Agency
contract (which may become classified), and there is no assurance that we will
maintain that status once it has been obtained. This year we began an active
program to complete the steps required in order to win preliminary certification
for classified programs. A number of our employees have received preliminary
and permanent security clearances. We received preliminary certification for
classified computer system processing in early 2005.
8
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Our failure to comply with any of the above-mentioned regulations could
have serious adverse effects.
OUR STOCK PRICE HAS BEEN AND MAY CONTINUE TO BE VOLATILE, WHICH COULD
RESULT IN SUBSTANTIAL LOSSES FOR INVESTORS PURCHASING SHARES OF OUR COMMON
STOCK.
The market prices of securities of technology-based companies like ours are
highly volatile. The market price of our common stock has fluctuated
significantly in the past. In fact, during the 52-week period ended June 11,
2004, the high and low closing price of a share of our common stock was $2.05
and $0.51, respectively. Our market price may continue to exhibit significant
fluctuations in response to a variety of factors, many of which are beyond our
control. These factors include, among others, deviations in our results of
operations from estimates, changes in estimates of our financial performance,
changes in market valuations of similar companies and stock market price and
volume fluctuations generally. Additionally, until the full effects of our cost
reduction efforts become clear, including whether those cuts have a long-term
negative impact on revenues, it is likely that our quarter-to-quarter
performance will be unpredictable and our stock price particularly volatile.
OUR NET OPERATING LOSS CARRYFORWARDS MAY BE SUBJECT TO AN ANNUAL LIMITATION
ON THEIR UTILIZATION, WHICH MAY INCREASE OUR TAXES AND DECREASE AFTER-TAX INCOME
AND CASH FLOWS.
Deferred income taxes are provided for temporary differences in recognizing
certain income and expense items for financial and tax reporting purposes. The
deferred tax asset of $2,350,000 and $2,190,000 as of December 31, 2004 and
2003, respectively, consisted primarily of the income tax benefits from net
operating loss and capital loss carryforwards, amortization of goodwill and
research and development credits. A valuation allowance has been recorded to
fully offset the deferred tax asset as it is more likely than not that the
assets will not be utilized. The valuation allowance increased approximately
$128,000 in 2004 from $2,190,000 at December 31, 2003 to $2,318,000 at December
31, 2004.
At December 31, 2004, the Company has federal and state tax net operating
loss and capital loss carryforwards of approximately $4,826,000 and $2,146,000,
respectively. The federal and state tax loss carryforwards will expire in 2012
and 2007, respectively, unless previously utilized. The State of California
suspended the utilization of net operating loss for 2002 and 2003, and limited
them for 2004.
OUR ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY IS ESSENTIAL TO THE GROWTH
AND DEVELOPMENT OF OUR PRODUCTS AND SERVICES.
We rely, in part, on patents, trade secrets and know-how to develop and
maintain our competitive position and technological advantage. We have a program
and plan to protect our intellectual property through a combination of license
agreements, patents, trademarks, service marks, copyrights, trade secrets and
other methods of restricting disclosure and transferring title. There is no
guarantee that such applications will be granted. We have and intend to
continue entering into confidentiality agreements with our employees,
consultants and vendors; entering into license agreements with third parties;
and generally seeking to control access to and distribution of our intellectual
property.
OUR ABILITY TO SOURCE AND OBTAIN COMPONENTS AND RAW MATERIALS COULD AFFECT
OUR ABILITY TO SATISFY CUSTOMER ORDERS OR CONTRACTS.
9
PAGE
We purchase a significant percentage of our components, including
structural assemblies, electronic equipment, and computer chips, from third
parties. We also occasionally obtain from the U.S. Government parts and
equipment that are used in our projects or in the provision of our services. To
date, we have not experienced material difficulty in obtaining product
components or necessary parts and equipment. While we believe that alternative
sources of supply would be available, we may experience increased costs and
possible delays in securing alternative sources of supply. We cannot guarantee
that alternative sources of supply would be available if and when required by
us.
OUR ABILITY TO OBTAIN ONLY LIMITED INSURANCE MAY NOT COVER ALL RISKS.
We may find it difficult to insure certain risks involved in our
operations. Insurance market conditions or factors outside of our control at
the time the insurance is purchased could cause premiums to be significantly
higher than current estimates. Additionally, the U.S. Department of State has
published regulations, which could significantly affect the ability of brokers
and underwriters to place insurance for certain launches. These factors could
cause other terms to be significantly less favorable than those currently
available, may result in limits on amounts of coverage that we can obtain, or
may prevent us from obtaining insurance at all. Furthermore, there is no
assurance that proceeds from insurance that we are able to purchase will be
sufficient to cover losses.
OUR GROWTH MAY NOT BE MANAGEABLE.
Even if we are successful in obtaining new business, failure to manage the
growth could adversely affect our condition. We may experience extended periods
of very rapid growth. This growth could place a significant strain on our
management, operating, financial and other resources. Our future performance
will depend in part on our ability to manage growth effectively. We must
develop management information systems, including operating, financial, and
accounting systems and expand, train, and manage employees to keep pace with
growth. Our inability to manage growth effectively could negatively affect
results of operations and the ability to meet obligations as they come due.
OUR BUSINESS COULD BE ADVERSELY AFFECTED BY TERRORIST ATTACKS.
Our business partially depends on activities regulated by various agencies
and departments of the U.S. government and other companies that rely on the
government. In the recent past, in response to terrorists' activities and
threats aimed at the United States, transportation, mail, financial, and other
services have been slowed or stopped altogether. Further delays or stoppages in
transportation, mail, financial, or other services could have a material adverse
effect on our business, results of operations, and financial condition.
Furthermore, we may experience a small increase in operating costs, such as
costs for transportation, insurance, and security as a result of the activities
and potential activities. The U.S. economy in general has been adversely
affected by the terrorist activities and potential activities, and any economic
downturn could adversely impact our results of operations, impair our ability to
raise capital, or otherwise adversely affect our ability to grow our business.
Conversely, because of the nature of our products and services, there may be
opportunities for us to offer solutions to the government that may address some
of the problems that the country faces at this time.
10
PAGE
COMPETITION
The Company competes in markets that are new, intensely competitive and
rapidly changing. We expect to experience increasing competition from potential
competitors, many of which will have significantly greater financial, technical,
marketing and other resources. Our competitors may be able to respond more
quickly to new or emerging technologies and changes in customer requirements
than we can. Virtually all of the Company's products and services face
significant competition from existing and potential competitors, many of whom
are larger and have substantially greater resources than the Company. The
Company's satellites and satellite subsystem products compete with products and
services produced or provided by government entities and numerous private
entities, including TRW Inc., Ball Aerospace and Technology Corporation,
Lockheed-Martin, GM Hughes Electronics Corporation ("Hughes"), Orbital Sciences
Corp., Spectrum Astro, Inc., Surrey Technologies and Matra Marconi.
INSURANCE MAY NOT COVER ALL RISKS
The Company may find it difficult to insure certain risks involved in its
operations. Insurance market conditions or factors outside the Company's
control at the time the insurance is purchased could cause premiums to be
significantly higher than current estimates. Additionally, the U.S. Department
of State has recently published regulations which could significantly affect the
ability of brokers and underwriters to place insurance for off-shore launches.
These factors could cause other terms to be significantly less favorable than
those currently available, may result in limits on amounts of coverage that the
Company can obtain, or may prevent the Company from obtaining insurance at all.
Furthermore, there is no assurance that proceeds from insurance that the Company
is able to purchase will be sufficient to cover losses.
RISKS ASSOCIATED WITH ACQUISITIONS
The Company has historically made strategic acquisitions of businesses and
routinely evaluates potential acquisition candidates that it believes would
enhance its business. The Company has also historically pursued strategic
alliances through joint ventures and routinely evaluates similar opportunities.
Such transactions commonly involve certain risk including, among others,
assimilating the acquired operations, technologies, and personnel and
maintaining appropriate standards, controls, procedures, and policies, entering
markets in which we have little or no direct prior experience, and potentially
losing key employees of acquired organizations. There can be no assurance that
we will be successful in overcoming these risks in connection with its recent
acquisitions or any future transactions.
RISKS RELATED TO SHARE OWNERSHIP
OUR INVESTORS MAY NOT RECEIVE DIVIDENDS.
We have not paid dividends since our inception and do not anticipate
issuing them in the foreseeable future. There can be no guarantee or assurance
that dividends will ever be paid. In fact, our goal is to reinvest earnings in
an effort to complete development of our technologies and products, and to
increase sales and long-term profitability and value. In addition, the
revolving credit facility with Laurus or other bank lines of credit, which we
may establish in the future or other credit or borrowing arrangements may
significantly impact our ability to pay dividends to our shareholders.
11
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IF A SIGNIFICANT PORTION OF THE PREFERRED STOCK OR THE WARRANTS WERE
CONVERTED INTO SHARES OF OUR COMMON STOCK, THE VOTING POWER OF YOUR INVESTMENT
AND OUR EARNINGS PER SHARE COULD BE DILUTED.
We issued 250,000 shares of the Company's Series C Non-Redeemable
Convertible Preferred Stock, par value $0.001 per share (the "Preferred Stock"),
to Laurus Master Fund, Ltd. ("Laurus") for an aggregate purchase price of
$2,500,000 or $10.00 per share (the "Stated Value"). The Preferred Stock is
convertible into shares of the Company's $0.0001 par value common stock at a
rate of $1.54 per share at any time after the date of issuance. The Preferred
Stock is redeemable by the Company in whole or in part at any time after
issuance for (a) 115% of the Stated Value if the average closing price of the
common stock for the 22 days immediately preceding the date of conversion does
not exceed the conversion rate or (b) the Stated Value if the average closing
price of our common stock for the 22 days immediately preceding the date of
conversion exceeds the Stated Value. If the Preferred Stock is converted at the
price stated above, dilution of the voting power of your investment and of our
earnings per share could continue to occur.
In addition, in conjunction with the issuance of the Preferred Stock and
with our revolving credit facility with Laurus, we issued Laurus warrants to
purchase up to 787,000 shares of our common stock. Each warrant may be exercised
for a per share price that is lower than the current fair market value of our
common stock as traded on the Over-The-Counter Bulletin Board. Although the
exercise of those warrants will result in proceeds to the Company, significant
dilution of the voting power of your investment and of our earnings per share
could occur upon exercise.
CONTRACTUAL LIMITATIONS THAT RESTRICT LAURUS' ABILITY TO CONVERT THE
PREFERRED STOCK MAY NOT NECESSARILY PREVENT SUBSTANTIAL DILUTION OF THE VOTING
POWER AND VALUE OF YOUR INVESTMENT.
Laurus may convert the Preferred Stock into shares of our common stock at a
rate of $1.54 per share. The contractual limitations that restrict Laurus'
ability to convert the Preferred Stock into shares of our common stock are
limited in their application and effect and may not prevent dilution of your
investment. Laurus is subject to a contractual 4.99% beneficial ownership
limitation that prohibits Laurus from converting the note if and to the extent
that the conversion would result in Laurus, together with its affiliates,
beneficially owning more than 4.99% of our outstanding common stock. However,
this 4.99% limitation can be waived by Laurus upon 75 days' advance notice to
us. In addition, this 4.99% limitation does not prevent Laurus from converting
the Preferred Stock into shares of common stock and then reselling those shares
in stages, over time, where Laurus and its affiliates do not, at any given time,
beneficially own shares in excess of the 4.99% limitation. Consequently, these
limitations will not necessarily prevent dilution of the voting power and value
of your investment.
THE CONCENTRATION OF OWNERSHIP OF OUR COMMON STOCK GIVES A FEW INDIVIDUALS
SIGNIFICANT CONTROL OVER IMPORTANT POLICY DECISIONS AND COULD DELAY OR PREVENT
CHANGES IN CONTROL.
As of March 1, 2005, our executive officers and directors and their family
members together beneficially owned approximately 43% of the issued and
outstanding shares of our common stock, including all shares they have the right
to obtain through the exercise of options during the successive 60-day period.
As a result, these persons could have the ability to exert significant
influential control over matters that could include the election of directors,
changes in the size and composition of the board of directors, and mergers and
other business combinations involving us. In addition, through control of the
board of directors and voting power, they may be able to control certain
decisions, including decisions regarding the qualification and appointment of
officers, dividend policy, access to capital (including borrowing from
third-party lenders and the issuance of additional equity securities), and the
acquisition or disposition of our assets. In addition, the concentration of
voting power in the hands of those individuals could have the effect of delaying
or preventing a change in control of our company, even if the change in control
would benefit our stockholders. A perception in the investment community of an
anti-takeover environment at our company could cause investors to value our
stock lower than in the absence of such a perception.
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PAGE
MARKET RISKS
THE MARKET PRICE OF OUR COMMON STOCK AND THE VALUE OF YOUR INVESTMENT COULD
SUBSTANTIALLY DECLINE IF ALL OR A SIGNIFICANT PORTION OF THE PREFERRED STOCK
AND/OR WARRANTS WERE CONVERTED INTO COMMON SHARES WHICH WERE RESOLD INTO THE
MARKET, OR IF A PERCEPTION EXISTS THAT SUCH SALES COULD OCCUR.
If the conversion prices at which our Preferred Stock is converted, or the
exercise prices on warrants, are lower than the price at which you made your
investment, immediate dilution of the value of your investment will occur. In
addition, sales of a substantial number of shares of common stock issued upon
conversion of the Preferred Stock or exercise of the warrants, or even the
perception that such sales could occur, could adversely affect the market price
of our common stock. You could, therefore, experience a decline in the value of
your investment as a result of both the actual and potential conversion of
Preferred Stock and/or the exercise of the warrants.
MARKET VOLATILITY
The market price of our Common Stock may be significantly affected by
factors including announcement of funding, contract, and launch dates by the
Company or its competitors; corporate partner affiliations; changes in the
regulatory environment; technical performance of our products; market acceptance
of our products and services; variations in our operating results; changes in
reports of securities analysts; and publicity regarding the industry or the
Company. In addition, the stock market in recent years has experienced broad
price and volume fluctuations that often have been unrelated to the operating
performance of particular companies, which may adversely affect the market price
of the shares of Common Stock.
RISK OF DELISTING
Our Common Stock is quoted on the Nasdaq Over-the-Counter Bulletin Board
("OTCBB"). Under the rules of the National Association of Securities Dealers,
Inc., which monitors the OTCBB, we are required to maintain our status as a
reporting company under the Securities Exchange Act of 1934. Failure to
maintain those standards could result in our Common Stock being delisted from
the OTCBB. Any delisting of our Common Stock may adversely affect your ability
to dispose of, or to obtain quotations as to the market value of, our Common
Stock. In addition, any delisting may cause our Common Stock to be subject to
the "penny stock" regulations of the Commission. Under such regulations,
broker-dealers would be required to, among other things, comply with disclosure
and special suitability determinations prior to the sale of our Common Stock. If
our Common Stock becomes subject to these regulations, the market price of our
Common Stock and your ability to dispose of it could be adversely affected.
EFFECT OF FUTURE SALES OF COMMON STOCK
As of the date of this Reoffer Prospectus, we have 21,363,980 shares of
Common Stock outstanding. Future sales of shares of Common Stock, or the
perception that such sales are going to occur, could cause the market price of
our Common Stock to drop significantly.
In addition, as of the date of this Reoffer Prospectus, we had outstanding
stock options and warrants to purchase an aggregate of 8,742,593 shares of
Common Stock. Of such number, 6,378,766 represented shares of Common Stock
issuable upon the exercise of outstanding stock options, 681,000 of which shares
are being offered hereby, and 2,363,827 represented shares issuable upon the
exercise of outstanding warrants. In addition, we have 2,155,387 shares of
common stock available for grant under the Plans and the Employee Stock Purchase
Plan of 1999, which may be granted as stock awards in the future from time to
time to persons eligible to participate in such plans. These options are also
being registered under the Company's Form S-8 registration statement.
13
PAGE
BLUE SKY REGISTRATION REQUIREMENTS
We believe that this Reoffer Prospectus, which is part of our registration
statement, may be used by the Selling Stockholders for the sale of the Shares
offered hereby for a period of nine months after the date on the cover page
hereof, provided that the information contained herein (including our financial
statements) is not more than 16 months old from the date of such Reoffer
Prospectus and we otherwise comply with applicable securities laws. We cannot
assure you, however, that our registration statement will remain effective as we
intend. The value of the Shares being offered by this Reoffer Prospectus could
deteriorate if a current Reoffer Prospectus covering the Shares is not part of
an effective registration statement, or if the Common Stock is not registered
for sale or exempt from registration in the jurisdictions governing the sales
made under this Reoffer Prospectus.
BECAUSE OUR STOCK IS SUBJECT TO THE SEC'S PENNY STOCK RULES, BROKER-DEALERS
MAY EXPERIENCE DIFFICULTY IN COMPLETING CUSTOMER TRANSACTIONS AND TRADING
ACTIVITY IN OUR SECURITIES MAY BE ADVERSELY AFFECTED.
Because we currently have less than $6,000,000 in net tangible assets and
the market price of our common stock is less than $5.00 per share, transactions
in our common stock are subject to the "penny stock" rules promulgated under the
Securities Exchange Act of 1934. Under these rules, broker-dealers who
recommend our securities to persons other than institutional accredited
investors:
- must 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.
As a result of these rules, broker-dealers may find it difficult to effectuate
customer transactions and trading activity in our securities may be adversely
affected. As a result, the market price of our securities may be depressed, and
you may find it more difficult to sell our securities.
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PAGE
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Reoffer Prospectus, including, without
limitation, statements containing the words "believes," "anticipates," "may,"
"intends," "expects" and words of similar import, constitute"forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, performance
or achievements (or industry results, performance or achievements) expressed or
implied by such forward-looking statements to be substantially different from
those predicted. Such factors might include, among others, the following:
- general economic and business conditions, both nationally and in the
regions in which we operate;
- competition;
- changes in business strategy or development plans;
- delays in the development or testing of our products;
- technological, manufacturing, quality control or other problems
which could delay the sale of our products;
- our inability to obtain appropriate licenses from third parties,
protect our trade secrets, operate without infringing upon the
proprietary rights of others and prevent others from infringing on our
proprietary rights;
- our inability to obtain sufficient financing to continue operations;
and
- changes in demand for products of our customers.
Certain of these factors are discussed in more detail elsewhere in this
Reoffer Prospectus, including, without limitation, under the caption "Risk
Factors."
We do not undertake any obligation to publicly update or revise any
forward-looking statements contained in this Reoffer Prospectus or incorporated
by reference, whether as a result of new information, future events or
otherwise. Because of these risks and uncertainties, the forward-looking events
and circumstances discussed in this Reoffer Prospectus might not transpire.
USE OF PROCEEDS
All of the Shares of Common Stock are being offered by the Selling
Stockholders. We will not receive any proceeds from the sale of the Shares by
the Selling Stockholders, but we will receive funds in connection with the
exercise of stock options relating to such Shares. The Company will use these
funds for working capital.
SELLING STOCKHOLDERS
The Shares offered under this Reoffer Prospectus are being registered for
reoffers and resales by Selling Stockholders of the Company who have and may in
the future acquire such Shares under the Plan. The Selling Stockholders named in
the following table may resell all, a portion, or none of such Shares. There is
no assurance that any of the Selling Stockholders will sell any or all of the
Shares offered by them hereunder.
Participants under the Plans who are deemed to be "affiliates" of the
Company who acquire Shares of Common Stock under the Plans may be added to the
Selling Stockholders listed below from time to time by use of a prospectus
supplement filed pursuant to Rule 424(b) under the Securities Act.
The following table sets forth certain information concerning the Selling
Stockholders as of the date of this Reoffer Prospectus, and as adjusted to
reflect the sale by the Selling Stockholders of the Shares offered hereby,
assuming all of the Shares offered hereby are sold:
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PAGE
Percentage of Shares of Common Stock Beneficially Owned
Number of Number of Shares Upon
Shares Exercise of Options to be
Owned(1) Offered(2)(3)
---------------------------- ---------------- -------------------------- --------------- ---------
NAME . . . . . . . . . . . . BEFORE OFFERING AFTER OFFERING
---------------------------- ---------------- -------------------------- --------------- ---------
Curt D. Blake(4) . . . . . . 169,430 46,000 * *
---------------------------- ---------------- -------------------------- --------------- ---------
Wesley T. Huntress(5). . . . 124,015 43,500 * *
---------------------------- ---------------- -------------------------- --------------- ---------
Scott McClendon(6) . . . . . 64,460 29,000 * *
---------------------------- ---------------- -------------------------- --------------- ---------
Robert S. Walker(7). . . . . 77,167 32,500 * *
---------------------------- ---------------- -------------------------- --------------- ---------
Gen. Howell M. Estes, III(8) 88,167 38,500 * *
---------------------------- ---------------- -------------------------- --------------- ---------
Stuart E. Schaffer(9). . . . 218,206 24,000 * *
---------------------------- ---------------- -------------------------- --------------- ---------
John Campbell. . . . . . . . 5,000 30,000 * *
---------------------------- ---------------- -------------------------- --------------- ---------
Jeanette Arrigo. . . . . . . 6,000 60,000 * *
---------------------------- ---------------- -------------------------- --------------- ---------
Arnold Holmquist . . . . . . 5,000 50,000 * *
---------------------------- ---------------- -------------------------- --------------- ---------
Michelle Crouch. . . . . . . - 25,000 * *
---------------------------- ---------------- -------------------------- --------------- ---------
Matthew Smiley . . . . . . . 1,250 12,500 * *
---------------------------- ---------------- -------------------------- --------------- ---------
David J. Streich . . . . . . 24,000 240,000 * *
---------------------------- ---------------- -------------------------- --------------- ---------
Frank Taylor . . . . . . . . 5,000 50,000 * *
---------------------------- ---------------- -------------------------- --------------- ---------
---------------------------- ---------------- -------------------------- --------------- ---------
* Represents less than 1%.
(1) Represents shares beneficially owned by the named individual, including
shares that such person has the right to acquire within 60 days of the date
of this Reoffer Prospectus. Unless otherwise noted, all persons referred to
above have sole voting and sole investment power.
(2) Includes all outstanding options to purchase Shares of Common Stock granted
to the named individuals under the Plan, whether or not vested or
exercisable within 60 days of the date of this Reoffer Prospectus. Also
includes all Shares issued to such named individuals upon the exercise of
options granted under the Plan. All of such Shares are being registered
hereunder. Does not include any shares that may be acquirable under future
grants of options under the Plan.
(3) Does not constitute a commitment to sell any or all of the stated number of
Shares of Common Stock. The number of Shares offered shall be determined
from time to time by each Selling Stockholder at his sole discretion.
(4) Mr. Blake is an independent director of the Company, chairman of the
Company's Audit Committee, and a member of the Company's Compensation
Committee.
(5) Dr. Huntress is an independent director of the Company, a member of the
Company's Audit Committee and a member of the Company's Nominating &
Corporate Governance Committee.
(6) Mr. McClendon is an independent director of the Company, a member of the
Company's Audit Committee, and a chairman of the Company's Compensation
Committee.
(7) Mr. Walker is an independent director of the Company and a member of the
Company's Nominating & Corporate Governance Committee.
(8) Gen. Estes is an independent director of the Company and chairman of the
Company's Nominating & Corporate Governance Committee and a member of the
Company's Compensation Committee.
(9) Mr. Schaffer is a director of the Company.
16
PAGE
PLAN OF DISTRIBUTION
The sale of the Shares by the Selling Stockholders may be effected in
transactions on the Nasdaq OTC Bulletin Board, in negotiated transactions, or a
combination of such methods of sale. The Shares may be sold at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. In addition, the Shares of Common Stock covered
by this Reoffer Prospectus may also be sold pursuant to Rule 144 under the
Securities Act, rather than pursuant to this Reoffer Prospectus. Because the
Company does not satisfy the requirements for use of Form S-3 under the
Securities Act, the number of Shares to be sold by any Selling Stockholder (or
any person with whom such Selling Stockholders is acting in concert for the
purpose of selling securities of the Company) selling "control securities" or
"restricted securities" (as such terms are defined under the Securities Act),
whether pursuant to this Reoffer Prospectus or otherwise, may not exceed, during
any three month period, the amount specified by Rule144(e) under the Securities
Act.
The Selling Stockholders may effect such transactions by selling the Shares
directly to purchasers or through underwriters or broker-dealers who may act as
agents or principals. Such underwriters or broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
Selling Stockholders or the purchasers of the Shares for whom such underwriters
or broker-dealers may act as agent or to whom they may sell as principal, or
both (which compensation as to a particular underwriter or broker-dealer may be
in excess of customary compensation).
We will not receive any of the proceeds from the sale of the Shares, but we
will receive funds in connection with the exercise of stock options relating to
such Shares. While all expenses of registration incurred in connection with this
offering are being borne by the Company, all brokerage commissions and other
expenses incurred by individual Selling Stockholders will be borne by such
Selling Stockholders.
Under the rules and regulations promulgated under the Exchange Act, subject
to certain exceptions, any person engaged in a distribution of securities may
not simultaneously engage in market making activities with respect to such
securities for a period of one business day (if such securities have an average
daily trading volume over a two-month period of $100,000 and the public float
value of the issuer's equity securities is $25 million or more) or five business
days (in all other cases) prior to the day of the pricing of the securities that
are the subject of the distribution. Trading in "actively traded securities" by
persons other than the issuer (or selling stockholder) and affiliates is exempt
from such restrictions. "Actively traded securities" are securities with an
average daily trading volume of $1,000,000 issued by companies with a public
float of at least $150 million. In addition, and without limiting the foregoing,
the Selling Stockholders and any other person participating in such distribution
will be subject to other applicable provisions of the Exchange Act, including
without limitation, Rules 100 through 105 of Regulation M promulgated under the
Exchange Act, which provisions may limit the timing of purchases and sales of
any of the Shares of Common Stock by the Selling Stockholders and any other such
person.
There can be no assurance that any of the Selling Stockholders will sell
any or all of the Shares of Common Stock offered by them hereunder.
An investor may only purchase the Shares of Common Stock being offered
hereby if such shares are qualified for sale or are exempt from registration
under the applicable securities laws of the state in which such prospective
purchaser resides. We have not registered or qualified the Common Stock under
any state securities laws and, unless the sale of such Shares to a particular
investor is exempt from registration or qualification under applicable state
securities laws, the sale of such Shares to an investor may not be effected
until such Shares have been registered or qualified with applicable state
securities authorities.
17
PAGE
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation contain a provision which, in
accordance with Colorado law, eliminates or limits the personal liability of
directors and officers of the Company for monetary damages for certain breaches
of their duty of care or other duty if he or she acted in good faith and in a
manner they believed to be in, or not opposed to, the best interests of the
Company, except that no indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable
for negligence or misconduct in the performance of his or her duty to the
Company unless otherwise determined by the court before which such action was
brought. The Company believes this provision is essential to maintain and
improve its ability to attract and retain competent directors. These
indemnification provisions do not reduce the exposure of directors and officers
to liability under federal and state securities laws, nor do they limit the
shareholders' ability to obtain injunctive relief or other equitable remedies
for a violation of a director's or officer's duty to the Company or its
shareholders, although such equitable remedies may not be an effective remedy in
certain circumstances.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company is informed that it is
the opinion of the Securities and Exchange Commission that such indemnification
is against public policy and therefore unenforceable.
LEGAL MATTERS
The validity of the Shares of Common Stock offered hereby will be passed
upon for the Company by the Law Offices of Gretchen Cowen, APC, Carlsbad,
California.
EXPERTS
The financial statements incorporated by reference in this Prospectus have
been audited by PKF, Certified Public Accountants, A Professional Corporation,
an independent registered public accounting firm, to the extent and for the
period set forth in their report (which contains an explanatory paragraph
regarding the Companys ability to continue as a going concern), incorporated
herein by reference, and are incorporated herein in reliance upon such report
given upon the authority of said firm as experts in auditing and accounting.
18
PAGE
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The following documents previously filed by SpaceDev, Inc. (the "Company")
with the Securities and Exchange Commission are incorporated by reference into
this Registration Statement:
(A) The Company's annual report on Form 10-KSB (Accession No.
0001031833-05-000030) for the fiscal year ended December 31, 2004.
(B) All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the Company's annual
report referred to in (a) above.
(C) The description of the Company's common stock contained in its
Registration Statement on Form 10-SB (File No. 000-28947), pursuant to Section
12(g) of the Exchange Act, including any amendment or report filed for the
purpose of updating such description.
All reports and documents subsequently filed by it pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934 shall be deemed to be
incorporated by reference in the registration statement and to be part thereof
from the date of filing of such documents.
Item 4. Description of Securities
Not applicable.
Item 5. Interests of Named Experts and Counsel
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by the Law Offices of Gretchen Cowen, APC, Carlsbad,
California.
Item 6. Indemnification of Directors and Officers
The Company's Articles of Incorporation contain a provision which, in
accordance with Colorado law, eliminates or limits the personal liability of
directors and officers of the Company for monetary damages for certain breaches
of their duty of care or other duty if he or she acted in good faith and in a
manner they believed to be in, or not opposed to, the best interests of the
Company, except that no indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable
for negligence or misconduct in the performance of his or her duty to the
Company unless otherwise determined by the court before which such action was
brought. The Company believes this provision is essential to maintain and
improve its ability to attract and retain competent directors. These
indemnification provisions do not reduce the exposure of directors and officers
to liability under federal and state securities laws, nor do they limit the
shareholders' ability to obtain injunctive relief or other equitable remedies
for a violation of a director's or officer's duty to the Company or its
shareholders, although such equitable remedies may not be an effective remedy
incertain circumstances.
II-1
PAGE
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company is informed that it is
the opinion of the Securities and Exchange Commission that such indemnification
is against public policy and therefore unenforceable.
Item 7. Exemption from Registration Claim
The Company has granted options to purchase 681,000 shares of its common
stock pursuant to Rule 701 of the Securities Act of 1933 as follows:
RECIPIENT . . . . . . . . EXERCISE PRICE NO. OF SHARES
------------------------- --------------- -------------
Curt D. Blake . . . . . . $ 1.66 46,000
------------------------- --------------- -------------
Wesley T. Huntress. . . . $ 1.69 43,500
------------------------- --------------- -------------
Scott McClendon . . . . . $ 1.62 29,000
------------------------- --------------- -------------
Robert S. Walker. . . . . $ 1.67 32,500
------------------------- --------------- -------------
Gen. Howell M. Estes, III $ 1.68 38,500
------------------------- --------------- -------------
Stuart E. Schaffer. . . . $ 1.74 24,000
------------------------- --------------- -------------
John Campbell . . . . . . $ 1.76 30,000
------------------------- --------------- -------------
Jeanette Arrigo . . . . . $ 1.54 60,000
------------------------- --------------- -------------
Arnold Holmquist. . . . . $ 2.13 50,000
------------------------- --------------- -------------
Michelle Crouch . . . . . $ 1.80 25,000
------------------------- --------------- -------------
Matthew Smiley. . . . . . $ 1.71 12,500
------------------------- --------------- -------------
David J. Streich. . . . . $ 1.85 240,000
------------------------- --------------- -------------
Frank Taylor. . . . . . . $ 2.09 50,000
------------------------- --------------- -------------
II-3
The exercise price of each of these options is the closing price of the
Company's common stock on the date of grant.
Item 8. Exhibits
No. Exhibit
--- -------
5.1 Opinion of Law Offices of Gretchen Cowen, A Professional Corporation
23.1 Consent of PKF, Certified Public Accountants, A Professional
Corporation, an Independent Registered Accounting Firm.
23.2 Consent of Law Offices of Gretchen Cowen, A Professional Corporation.
Reference is made to Exhibit 5.1
99.1 The Company's 2004 Equity Incentive Plan
99.2 Form of Incentive or Non-statutory Stock Option Grant Notice under the
2004 Equity Incentive Plan, as amended
Item 9. Undertakings
1. The undersigned registrant hereby undertakes:
(A) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
II-2
PAGE
(I) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(II) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post- effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) (230.424(b) of this chapter)
if, in the aggregate, the changes in volume and price represent no more than a
20% change in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement.
(III) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
Provided, however, that paragraphs (a)(I) and (a)(II) do not apply if the
registration statement is on Form S-3 or Form S-8 and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the issuer pursuant to section 13 or section 15(d) of
the Exchange Act that are incorporated by reference in the registration
statement.
(B) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(C) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
2. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. In so far as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-3
PAGE
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the Poway, State of California, on March 28, 2005.
SpaceDev, Inc.
By: /s/ James W. Benson
----------------------
James W. Benson
Chairman of the Board of Directors and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
----------------------------- ---------------------------------- --------------
/s/ James W. Benson . . . . . Chairman of Board of March 28, 2005
----------------------------- Directors and Chief Executive
James W. Benson . . . . . . . Officer
/s/ Richard B. Slansky. . . . President, Chief Financial Officer March 28, 2005
----------------------------- and Director
Richard B. Slansky. . . . . .
/s/ Gen. Howell M. Estes, III Director March 28, 2005
-----------------------------
Gen. Howell M. Estes, III
/s/ Wesley T. Huntress. . . . Director March 28, 2005
-----------------------------
Wesley T. Huntress
/s/ Curt D. Blake . . . . . . Director March 28, 2005
-----------------------------
Curt D. Blake
/s/ Robert S. Walker. . . . . Director March 28, 2005
-----------------------------
Robert S. Walker
/s/ Stuart E. Schaffer. . . . Director March 28, 2005
-----------------------------
Stuart E. Schaffer
/s/ Scott McClendon . . . . . Director March 28, 2005
-----------------------------
Scott McClendon
EXHIBIT INDEX
Exh. Description
---- -----------
5.1 Opinion of Law Offices of Gretchen Cowen, APC
23.1 Consent of PKF, Certified Public Accountants, A Professional
Corporation, an Independent Registered Accounting Firm.
23.2 Consent of Law Offices of Gretchen Cowen, APC
Reference is made to Exhibit 5.1
99.1 The Company's 2004 Equity Incentive Plan
99.2 Form of Incentive and Nonstatutory Stock Option Grant Notice under the
2004 Equity Incentive Plan, as amended
PAGE