<PAGE>

                                   FORM 10-QSB

                     U.S. SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20429


(Mark One)
[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 2001

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
         THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________________  to _______________________

Commission File Number  000-28947.
                        ---------

                                 SPACEDEV, INC.
             (Exact name of registrant as specified in its charter)


            Colorado                                             84-1374613

(State or other jurisdiction of                                 (IRS Employer
 incorporation or organization)                              Identification No.)


                   13855 Stowe Drive, Poway, California 92064

                    (Address of principal executive offices)

(Issuer's telephone number) (858) 375-2030.
                            --------------

--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

Checkmark whether the issuer (1) has filed all reports required to be filed by
Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [X]  No [ ]

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 14,139,143 SHARES OF ISSUER'S VOTING
COMMON STOCK WERE OUTSTANDING ON MAY 11, 2001.

<PAGE>

<TABLE>
                                       SPACEDEV, INC.
                                        FORM 10-QSB
                            FOR THE QUARTER ENDED MARCH 31, 2001
<CAPTION>

INDEX                                                                                  PAGE
-----                                                                                  ----
<S>                                                                                      <C>
PART I   FINANCIAL INFORMATION

   ITEM 1.   Financial Statements (Unaudited)
       Condensed Consolidated Balance Sheets at March 31, 2001 and 2000...................1
       Condensed Consolidated Statements of Operations for March 31, 2001 and 2000........3
       Condensed Consolidated Statements of Cash Flows for March 31, 2001 and 2000........4
       Notes to Condensed Consolidated Financial Statements...............................6

   ITEM 2. Management's Discussion and Analysis of Financial Condition
   and Results of Operations.............................................................10

PART II   OTHER INFORMATION

   ITEM 1. Legal Proceedings.............................................................17
   ITEM 2. Changes in Securities.........................................................17
   ITEM 3. Defaults Upon Senior Securities...............................................18
   ITEM 4. Submission of Matters to Vote of Security Holders.............................18
   ITEM 5. Other Information.............................................................18
   ITEM 6. Exhibits and Reports on Form 8-K..............................................18

Signatures...............................................................................20

                                             ii
</TABLE>
<PAGE>

ITEM 1.   FINANCIAL STATEMENTS


                         SPACEDEV, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)


 MARCH 31,                                            2001               2000
--------------------------------------------------------------------------------

 ASSETS

 CURRENT ASSETS
     Cash                                         $   22,594         $   18,546
     Accounts receivable                             114,314            210,165
     Other current assets                              6,974              6,973
--------------------------------------------------------------------------------

 Total current assets                                143,882            235,684

 FIXED ASSETS - NET (NOTE 3)                       2,225,532          2,111,160

 INTANGIBLE ASSETS - NET                           1,322,743          2,005,944

 CAPITALIZED SOFTWARE COSTS                          207,016                  -

 OTHER ASSETS                                        140,527             63,422
--------------------------------------------------------------------------------

                                                  $4,039,700         $4,416,210

================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.

                                       1
<PAGE>

<TABLE>
                                 SPACEDEV, INC. AND SUBSIDIARIES
                              CONDENSED CONSOLIDATED BALANCE SHEETS
                                           (UNAUDITED)
<CAPTION>

 MARCH 31,                                                                2001           2000
------------------------------------------------------------------------------------------------
<S>                                                                  <C>            <C>
 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 CURRENT LIABILITIES
     Line of credit                                                  $         -    $    16,000
     Current portion of notes payable (Note 3(a))                         13,000          7,200
     Current portion of capitalized lease obligations                     51,182         19,858
     Current portion of notes payable - related party (Note 3(b))         80,000        732,731
     Accounts payable and accrued expenses                               670,816        358,653
     Accrued payroll, vacation and related taxes                         125,598        106,607
     Customer deposits and deferred revenue                              191,197              -
     Billing in excess of costs incurred
       (Note 2)                                                          381,674        141,474
     Provision for anticipated loss (Note 2)                             651,168              -
------------------------------------------------------------------------------------------------

 Total current liabilities                                             2,164,635      1,382,523

 NOTES PAYABLE, LESS CURRENT MATURITIES (NOTE 3(a))
                                                                       2,267,108      2,281,080

 CAPITALIZED LEASES, LESS CURRENT MATURITIES
                                                                          72,937         46,251

 NOTES PAYABLE - RELATED PARTY, LESS CURRENT MATURITIES (NOTE 3(b))      606,032              -

 DEFERRED REVENUE                                                          5,000          5,000
------------------------------------------------------------------------------------------------

 Total liabilities
                                                                       5,115,712      3,714,854
 STOCKHOLDERS' EQUITY (DEFICIT)
     Convertible preferred stock, $.001 par value, 10,000,000
       shares authorized; no shares issued and outstanding                     -              -
     Common stock, $.0001 par value; 50,000,000 shares
       authorized; 14,072,476 and 13,906,493 shares issued
       and Outstanding, respectively                                       1,407          1,391
     Additional paid-in capital                                        7,420,994      7,199,107
     Additional paid-in capital - stock options                          750,000        750,000
     Deferred compensation                                              (250,000)      (250,000)
     Accumulated deficit                                              (8,998,413)    (6,999,142)
------------------------------------------------------------------------------------------------

 Total stockholders' equity (deficit)                                 (1,076,012)       701,356
------------------------------------------------------------------------------------------------

                                                                     $ 4,039,700    $ 4,416,210
================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

                                                2
</TABLE>
<PAGE>

<TABLE>
                            SPACEDEV, INC. AND SUBSIDIARIES
                    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                      (UNAUDITED)
<CAPTION>

 THREE MONTHS ENDED MARCH 31,                                  2001            2000
--------------------------------------------------------------------------------------
<S>                                                      <C>             <C>
 NET SALES                                               $    537,260    $  1,078,530

 Cost of sales                                                383,371         583,562
--------------------------------------------------------------------------------------

 GROSS MARGIN                                                 153,889         494,968

 OPERATING EXPENSES
 General and administrative (including stock-based
     Compensation of $60,846 and $44,033, respectively)       527,528         478,858
 Research and development
                                                              198,400               -
--------------------------------------------------------------------------------------

 TOTAL OPERATING EXPENSES                                     725,928         478,858

--------------------------------------------------------------------------------------

 INCOME (LOSS) FROM OPERATIONS                               (572,039)         16,110

--------------------------------------------------------------------------------------

 OTHER INCOME (EXPENSE)
 Interest expense                                             (86,696)        (80,970)
--------------------------------------------------------------------------------------

 NET LOSS                                                $   (658,735)   $    (64,860)
======================================================================================

 NET LOSS PER SHARE:
     Net loss                                            $       (.05)   $        .00
======================================================================================

     Weighted-Average Shares Outstanding                   14,030,062      13,892,260

======================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS.

                                          3
</TABLE>
<PAGE>

                         SPACEDEV, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


 THREE MONTHS ENDED MARCH 31,                               2001         2000
--------------------------------------------------------------------------------

 CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                              $(658,735)   $ (64,860)
   Adjustments to reconcile net loss to net cash
     Provided by (used in) operating activities:
     Depreciation and amortization                         217,767      209,762
     Common stock issued for compensation and services      60,846       44,033
     Change in operating assets and liabilities:
                                                           179,229       36,211

 NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES      (200,893)     225,146
--------------------------------------------------------------------------------

 CASH FLOWS FROM INVESTING ACTIVITIES
   Purchases of fixed assets                                     -       (2,881)
--------------------------------------------------------------------------------

 CASH FLOWS FROM FINANCING ACTIVITIES
   Activity on bank line of credit                               -     (225,415)
   Activity on notes payable                                  (500)     (23,720)
   Activity on capital lease obligations                   (15,636)      (1,425)
   Activity on notes payable - related party               (20,000)     (56,046)
--------------------------------------------------------------------------------
 NET CASH USED IN FINANCING ACTIVITIES                     (36,136)    (306,606)
--------------------------------------------------------------------------------

 Net decrease in cash                                     (237,029)     (84,341)

 CASH AT BEGINNING OF PERIOD                               259,623      102,887
--------------------------------------------------------------------------------

 CASH AT END OF PERIOD                                      22,594       18,546

================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.

                                       4
<PAGE>

                         SPACEDEV, INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONT'D.
                                   (UNAUDITED)


 THREE MONTHS ENDED MARCH 31,                                 2001        2000
--------------------------------------------------------------------------------

 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
    Cash paid during the year for:
       Interest                                            $ 100,762   $  73,942

 NONCASH INVESTING AND FINANCING ACTIVITIES:
 During the three months ended March 31, 2001 and 2000, the
   Company issued 67,247 and 26,548 shares of stock for
   services and recorded expenses of $60,846 and $44,033,
   respectively.
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.

                                       5
<PAGE>

                         SPACEDEV, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.       BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements of SPACEDEV, INC.
("the Company") include the accounts of the Company and its wholly-owned
subsidiary Integrated Space Systems. Inc. (ISS) and its inactive subsidiary
SpaceDev Australia. In the opinion of management, the condensed consolidated
financial statements reflect all normal and recurring adjustments which are
necessary for a fair presentation of the Company's financial position, results
of operations and cash flows as of the dates and for the periods presented. The
condensed consolidated financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information.
Consequently, these statements do not include all disclosures normally required
by generally accepted accounting principles of the United States of America for
annual financial statements nor those normally made in an Annual Report on Form
10-KSB. Accordingly, reference should be made to the Company's Form 10-KSB filed
on April 2, 2001 and other reports the Company filed with the Securities and
Exchange Commission for additional disclosures, including a summary of the
Company's accounting policies, which have not materially changed. The
consolidated results of operations for the three months ended March 31, 2001 are
not necessarily indicative of results that may be expected for the fiscal year
ending December 31, 2001 or any future period, and the Company makes no
representations related thereto.

The accompanying condensed consolidated financial statements as of March 31,
2001 and 2000 have been prepared assuming the Company will continue as a going
concern. However, the Company had a working capital deficit of $2,020,753 as of
March 31, 2001, and incurred a net loss of $658,735 for the three months then
ended. These conditions raise "substantial" doubt about the Company's ability to
continue as a going concern. Subsequent to March 2001, management intends to
raise additional financing through a combination of public and private equity
placements, commercial project financing and government program funding to fund
future operations and commitments. There is no assurance that additional debt
and equity financing needed to fund operations will be consummated or obtained
in sufficient amounts necessary to meet the Company's needs.

The accompanying condensed consolidated financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the possible inability of the Company to continue as a going
concern.

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosures of contingent assets and liabilities and the results of operations
during the reporting period. Actual results could differ materially from those
estimates.

Certain reclassifications have been made to the prior period financial
statements to conform to the current period presentation. These
reclassifications had no effect on reported total assets or net loss.

                                       6
<PAGE>

2.       REVENUE RECOGNITION

In November 1999, the Space Missions Division was awarded a turnkey mission
contract by the Space Sciences Laboratory (SSL) at University of California,
Berkeley (UCB) worth approximately $5.6 million. This contract represented 71%
and 60% of the Company's revenue in 2001 and 2000, respectively. The contract
will conclude on December 31, 2003. The payments on the contract are made on a
monthly basis according to a preset payment schedule and resulted in billings in
excess of costs incurred and estimated earnings of approximately $333,000. At
December 31, 2000, the total costs estimated to complete the contract was
approximately $6,461,000. As a result, the Company accrued a provision for an
anticipated loss of approximately $861,000. As of March 31, 2001, the
anticipated costs were reviewed and reduced to approximately $6,246,000 and the
accrued loss was reduced to $651,000 to reflect this change. The decrease in
costs was due to a reduction of costs to complete the contract. We also are
continuing to negotiate additional contract changes with our CHIPSat customer
that would increase contract revenues. There is no certainty that we will be
successful in these negotiations.

3.       NOTES PAYABLE

(a)      BUILDING NOTES

On December 21, 1998, the Company borrowed $1,300,000 from a lender to finance
the purchase of its facility in Poway, California. The note called for monthly
payments and a balloon payment on December 21, 1999. The note accrued interest
at 13%. The note continued on a month-to-month basis until it was paid in full
on February 23, 2000.

On February 23, 2000, the Company signed a $1,330,000 note with a new lender to
refinance the aforementioned debt. The note calls for 300 monthly payments with
interest at the bank's prime rate (8.5% at March 31, 2001) plus 1.50%. The note
matures on March 1, 2025. The outstanding balance on this loan at March 31, 2001
and 2000 was $1,321,828 and $1,330,000, respectively.

In December 1998, the CEO of the Company entered into a $500,000 loan agreement
with another lender to finance additional costs of its new facility. This
liability was assigned to the Company and calls for 59 monthly interest payments
at 12.23% and a balloon payment of $505,000, including interest, on December 17,
2003. At March 31, 2001 and 2000, the outstanding balance on this loan was
$499,671 and $499,671, respectively.

In 1999, the Company entered into a second loan agreement with this lender. The
$460,000 loan calls for 59 monthly interest payments at 10.5% and a balloon
payment of $464,000, including interest, in March 2004. At March 31, 2001 and
2000, the outstanding balance on this loan was $458,609 and $458,609,
respectively.

         Future minimum principal payments on all notes payable are as follows:

         TWELVE MONTHS ENDING MARCH 31,
         ----------------------------------------------------------------
                    2002                                          13,000
                    2003                                          13,000
                    2004                                         993,225
                    2005                                          13,000
                    2006                                          13,000
                    Thereafter                                 1,172,447
         ----------------------------------------------------------------
                                                              $2,217,672
         ================================================================

                                       7
<PAGE>

(b)      RELATED PARTIES

The Company had notes payable to the Chairman and a former key employee. At
March 31, 2001 and 2000, the balances were $686,032 and $661,956, respectively,
with interest between 4% and 10%. As part of a February 2000 Separation and
Release Agreement with the former key employee, $70,000 of principal and accrued
interest was paid in monthly installments through July 2000.

         Future minimum principal payments on all notes payable are as follows:

         TWELVE MONTHS ENDING MARCH 31,
         ----------------------------------------------------------------
                    2002                                        $ 80,000
                    2003                                          80,000
                    2004                                          80,000
                    2005                                          80,000
                    2006                                          80,000
                    Thereafter                                   286,032
         ----------------------------------------------------------------
                                                                $686,032
         ================================================================

                                       8
<PAGE>

4.       OPERATING SEGMENTS

The Company's operating structure included two operating segments for 2001 and
2000.

         SEGMENT PRODUCTS AND SERVICES

The Company has the following reportable segments: Space Missions Division
(SMD), and ISS. SMD is in the process of developing deep space science
exploration satellites. ISS provides small hybrid propulsion space systems and
engineering services.

         The following is a summary of operating results and assets by segment.
<TABLE>
<CAPTION>
         FOR THE THREE MONTHS ENDED MARCH 31, 2001
         -------------------------------------------------------------------------------
         (IN THOUSANDS)                            SMD          ISS              Total
         -------------------------------------------------------------------------------
<S>                                            <C>           <C>               <C>
         Net revenue from external
           Customers                           $     383     $    154          $    537
         Depreciation and
           Amortization expense                       42          176               218
         Segment profit (loss)                 $    (421)    $   (238)         $   (659)
                                               =========================================

         -------------------------------------------------------------------------------
         MARCH 31, 2001
         -------------------------------------------------------------------------------
         Total segment assets                  $   2,817     $  1,387          $  4,204
         Less intersegment assets                   (164)           -              (164)
                                               -----------------------------------------
         Net segment assets                    $   2,653     $  1,387          $  4,040
                                               =========================================

         FOR THE THREE MONTHS ENDED MARCH 31, 2000
         -------------------------------------------------------------------------------
         (IN THOUSANDS)                            SMD          ISS              Total
         -------------------------------------------------------------------------------
         Net revenue from external
           Customers                           $     606     $    473          $  1,079
         Depreciation and
           Amortization expense                     (183)         (27)             (210)
         Segment profit (loss)                 $     (58)    $     (7)         $    (65)
                                               =========================================

         -------------------------------------------------------------------------------
         MARCH 31, 2000
         -------------------------------------------------------------------------------
         Total segment assets                  $   2,441     $  2,139          $  4,580
         Less intersegment assets                   (164)           -              (164)
                                               -----------------------------------------
         Net segment assets                    $   2,277     $  2,139          $  4,416
                                               =========================================
</TABLE>

                                       9
<PAGE>

5.       NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"). The
new standard requires companies to record derivatives on the balance sheet as
assets or liabilities measured at fair value. Gains or losses resulting from
changes in the values of those derivatives will be reported in the statement of
operations or as a deferred item, depending on the use of the derivatives and
whether they qualify for hedge accounting. The key criterion for hedge
accounting is that the derivative must be highly effective in achieving
offsetting changes in fair value or cash flows of the hedged items during the
term of the hedge. The Company is required to adopt FAS 133 in 2001 and has not
yet determined the impact, if any, that the adoption of FAS 133 will have on the
consolidated financial statements.

In December 1999 the Securities and Exchange Commission issued Staff Accounting
Bulletin no. 101, "Revenue Recognition in Financial Statements" (SAB 101). SAB
101 is effective no later than the quarter ended December 31, 2000. The Company
is in compliance with SAB 101 and the adoption did not have a material effect on
the consolidated financial statements.

In March 2000, the FASB issued FASB Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation, an Interpretation of APB
Opinion No. 25" (the "Interpretation"). The Interpretation is intended to
provide guidance for certain issues that have arisen in practice since the
issuance of APB 25. The Company adopted the Interpretation for all transactions
entered into after July 1, 2000 and the adoption of the Interpretation did not
have a material impact on the consolidated financial statements.


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion should be read in conjunction with the Company's
financial statements and the notes thereto and the other financial information
appearing elsewhere in this document. In addition to historical information, the
following discussion and other parts of this document contain forward-looking
information that involves risks and uncertainties. Actual results could differ
materially from those anticipated by such forward-looking information due to a
number of factors beyond the Company's control.

OVERVIEW

During 1998, SpaceDev acquired Integrated Space System ("ISS"). On February 7,
1998, the Company issued 2,000,000 shares of restricted common stock and
acquired all of the outstanding shares of common stock of ISS. ISS provides
small hybrid propulsion space systems. The fair value of the shares issued was
$1.8125 per share, calculated using the average daily closing prices for a
period surrounding the acquisition date. The acquisition price was not reduced
for the Rule 144 restrictions on the shares of common stock. The total purchase
price was valued at $3,625,000. The excess of the calculated purchase price of
the approximately $164,000 of net assets acquired was capitalized as goodwill
and is being amortized over sixty months.

In 1998, operating activities included engineering technical services work for
aerospace customers and continued development of NEAP preliminary designs and
mission analysis. During 1999, operating activities included preliminary design
and conceptual studies for the CHIPSat program, engineering technical services
and continued work on the NEAP mission. SpaceDev's employee base increased with
the acquisition of ISS to 20 employees in February 1998.

                                       10
<PAGE>

In 1998, SpaceDev entered into a fixed price contract with the Jet Propulsion
Laboratory ("JPL") to provide mission support for the Deep Space Tracking
Network. JPL's main task was to coordinate the NEAP mission trajectory analysis
into their Deep Space Network Plan. SpaceDev paid JPL $10,000 for this phase of
work. The nature of the contract is highly technical. Quoting from the statement
of work: "Supported work will focus on NEAP telecommunications system analysis
and Deep Space Network/Advanced Multi-Mission Operations System ("DSN/AMMOS")
mission support assessment." In plain English, this means JPL will work to
understand NEAP communications needs in relation to other missions which might
be flying at the same time, relative to the Deep Space Network capacity to
handle multiple missions simultaneously. This is a standard study performed in
advance of all proposed deep space missions.

On November 20, 1998, SpaceDev initiated its DSN support contract with JPL. The
total cost of the effort was agreed to be $35,000. Approximately one-third of
the work has been performed to-date at a cost to SpaceDev of $10,000. As
additional planning work is required to be performed by JPL under the contract,
to stay current with the NASA and JPL planning process as it moves forward, more
of the agreed upon tasks will be performed by JPL. SpaceDev will pay the
remaining balance of $25,000 as those tasks are completed by JPL, which could
extend through the end of 2001.

On June 23, 1999, the Company filed for a registration statement with the State
of Colorado for units consisting of one share of $.0001 par value common stock
and one re-pricing warrant to purchase one share of common stock. The primary
purpose of the offering was to raise $350,000 under Rule 504 of the Securities
Act of 1933 to finance development of a hybrid rocket. The registration
statement was made effective by the State of Colorado on August 26, 1999,
providing for a per unit price of $1.50 per share. Due to fluctuations in the
market price of the Company's common stock, the Company negotiated a per unit
price based on the five-day trading average, less thirty percent. The entire
offering of $350,000 was sold to a single investor in Colorado at a price of
$0.91 per unit. Following that sale, the Company determined to raise the
aggregate offering price in order to allow it to obtain funding during
preparation of its Form 10-SB Registration Statement. The registration statement
was amended for a total aggregate offering price of $730,000, with a per unit
price based on the negotiated amount paid by the initial investor, and was made
effective by the State of Colorado on October 13, 1999. Following effectiveness
of the post-effective amendment, the Company sold an additional $10,000 in units
under the offering at a price of $0.83 per unit.

The repricing warrants were convertible into common stock of the Company if the
market price of the Company's common stock dropped below the price paid per unit
in the offering during the 150 days immediately following issuance. The
conversion formula was to be based on a minimum market price of $1.25 per share.
If the 150-day average closing bid price of the common stock exceeded the unit
price in the offering, the warrants would automatically expire. Since the units
were issued to investors at a discount, the warrants are not convertible under
the conversion formula, which uses a minimum market price of $1.25, since any
calculation under the formula results in a negative number. As a result, no
further shares will be issued as a result of the issuance of the re-pricing
warrants.

In November 1999, SpaceDev was awarded a $5,595,868 million mission contract by
the Space Sciences Laboratory ("SSL") at University of California, Berkeley
("UCB"). SpaceDev was competitively selected by UCB/SSL to design, build,
integrate, test and operate for one year a small scientific, Earth-orbiting
spacecraft called CHIPSat. The CHIPSat contract will conclude on December 31,
2003. Revenues for 2001 and 2002 are expected to be approximately, $ 1.4 million
and $1.1 million. The payments on the contract are made on a monthly basis
according to a preset payment schedule. This was the Company's first production
contract. As we reported we would do in the Third Quarter 2000 10QSB, the

                                       11
<PAGE>

Company reviewed this position at year-end and determined that the total costs
at the end of the program will exceed the likely revenue. As a result, the
Company has taken a write-off to earnings of $861,000, we believe that this
action covers all possible contingencies through the life of the program. In the
first quarter 2001 the costs on the CHIPSat program were reviewed and found to
be overstated due to overestimating certain costs. The accrued loss as of March
31, 2001 was $651,168.

In July 2000, the Company was awarded two contracts from the Office of Space
Launch of the National Reconnaissance Office for a total of approximately
$800,000. These contracts are expected to be completed in the second quarter of
2001. This work is a continuation of a previous contract concerning the
development of hybrid space propulsion technology.

In January 2001, the Company's majority-owned subsidiary, SpaceDev Australia,
Ltd. lodged a prospectus with the Australian Securities and Investments
Commission (ASIC) for a total offering of approximately $8,000,000 AUS (the
equivalent of $4,600,000 U.S.). The prospectus was the joint effort of the
Company and Space Projects Australia, Ltd, (SPA), in which SpaceDev Australia
Ltd. would have received approximately $2,600,000 in U.S. dollars, and SPA would
have received the remaining amount of approximately $1,800,000 in U.S. dollars.
The Company planned to used the proceeds of the offering to open the SpaceDev
Australia office in Sydney, establish Australia as a base to expand its sales
and marketing efforts in Australia and throughout the Asian region and to
partner with one or more established Australian space companies for
micro-satellite assembly and testing activities using Registrant's
micro-satellite designs and subsystems and to initiate an intern program to
identify outstanding Australian space engineering students as potential future
employees. SPA would have used its portion of the proceeds to (1) establish
capital asset acquisitions such as launch site research and development
facilities, telemetry/GPS and communications, mission control and payload
integration facilities at Woomera; (2) establish capital works such as launch
site clearance and preparation, environmental and bio-diversity compliance and
development planning costs; and (3) support administration, marketing and
personnel operations of SpaceDev Australia.

On April 16, 2001, ASIC placed a final stop order on a prospectus following two
hearings in which it raised concerns regarding the relationship of the Company
to SPA, and the division of funds raised in the offering between the two
entities. In addition, ASIC voiced concerns regarding the use of forecasts and
projections prepared on behalf of SpaceDev Australia, Ltd, which were prepared
by management and reviewed by an outside Australian accountant for use in the
offering. The use of forecasts has become more limited under recent regulations
adopted by ASIC.

The Company is reviewing the situation and continuing discussions with potential
partners and its investment bankers, and will determine the proper course of
action for the SpaceDev Australia subsidiary and the possible lodgement of a new
prospectus.

The Company announced on April 16, 2001 that it is part of a Boeing-led team
that was awarded one of four $1 million contracts from NASA's Jet Propulsion
Laboratory in Pasadena, Calif. to study options for a potential Mars sample
return mission in 2011. The contract runs from April through October.

                                       12
<PAGE>

RESULTS OF OPERATIONS

Numbers reflected in the following discussion have been rounded to the nearest
one thousandth. Please refer to the financial statements, which are a part of
this report for further information regarding the results of operations of the
Company.

THREE MONTHS ENDED MARCH 31, 2001-VS.- THREE MONTHS ENDED MARCH 31, 2000

During the three months ended March 31, 2001, the Company had net sales of
$537,000 as compared to net sales of $1,079,000 for the same three months in
2000. Sales in 2001 were comprised of $383,000 from the CHIPSat program,
$132,000 from research and development performed for the Office of Space Launch
(OSL) and $22,000 from all other programs. In 2000, there was $540,000 of sales
from CHIPSat, $325,000 from the OSL, $55,000 from Lockheed Martin and $158,000
from all other programs. The current OLS contracts are winding down. Last year
the contracts were in an ongoing phase. There are 6 proposals for $400,000 each
into the OSL to continue the hybrid propulsion efforts for the National
Reconnaissance Office (NRO).

During the three months ended March 31, 2001, the Company had cost of sales
(direct and allocated costs associated with individual contracts) of $383,000
and $584,000 in the same period in 2000. These changes were primarily due to
reallocation of the loss on the CHIPSat program, and a reclassification of
certain overhead costs (such as building expense, equipment depreciation,
utilities and operating supplies) to cost of goods sold. Gross profit
percentages in the first quarter of 2001 were lower than during the same period
in 2000 due to higher costs to perform the OSL contracts. During the three
months ended March 31, 2001, the Company had a net loss of $659,000 compared to
a net loss of $65,000 for the same period in 2000. The increase in the net loss
was due to lower sales on the CHIPSat program and the OSL project. In addition,
the Company's overhead costs increased by $49,000 and the Company expended
$198,000 in development costs to build a prototype hybrid propulsion based
orbital transfer vehicle.

The Company experienced an increase in general and administrative expenses from
$479,000 for the three months ended March 31, 2000 to $528,000 for the same
period ended March 31, 2001. General and administrative expenses consisted
primarily of salaries for administrative personnel, fees for outside
consultants, goodwill amortization of acquisition costs, insurance, legal and
accounting fees and other overhead. The increase was primarily due to the
payment of a salary to the Chairman in 2001 versus no salary in 2000.

Research and development expense increased from $0 for the period ended March
31, 2000 to $198,000 for the period ended March 31, 2001. The increase was due
to Research and Development costs associated with the Hybrid Motor technology
under contract with the OSL.

LIQUIDITY AND CAPITAL RESOURCES

The Company's auditors have expressed a formal auditors' opinion that the
Company's December 31, 2000 financial position raises "substantial" doubt about
its ability to continue as a going concern. Management believes that this
condition remains at March 31, 2001. The Company's opportunity to continue as a
going concern depends upon our ability to consummate additional funding and new
profitable business. This funding can come from a variety of sources, including
public or private equity markets, state and federal grants and government and
commercial customer program funding. However, there can be no assurance that we
will be able to obtain such funding as needed. The likelihood of our success
must be considered in light of the expenses, difficulties and delays frequently
encountered in connection with the developing businesses, those historically
encountered by us, and the competitive environment in which we will operate.

                                       13
<PAGE>

In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"). The
new standard requires companies to record derivatives on the balance sheet as
assets or liabilities measured at fair value. Gains or losses resulting from
changes in the values of those derivatives will be reported in the statement of
operations or as a deferred item, depending on the use of the derivatives and
whether they qualify for hedge accounting. The key criterion for hedge
accounting is that the derivative must be highly effective in achieving
offsetting changes in fair value or cash flows of the hedged items during the
term of the hedge. The Company is required to adopt FAS 133 in 2001 and has not
yet determined the impact, if any, that the adoption of FAS 133 will have on the
consolidated financial statements.

In December 1999 the Securities and Exchange Commission issued Staff Accounting
Bulletin no. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB
101 is effective no later than the quarter ended December 31, 2000. The Company
is in compliance with SAB 101 and the adoption did not have a material effect on
the consolidated financial statements.

In March 2000, the FASB issued FASB Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation, an Interpretation of APB
Opinion No. 25" (the "Interpretation"). The Interpretation is intended to
provide guidance for certain issues that have arisen in practice since the
issuance of APB 25. The Company adopted the Interpretation for all transactions
entered into after July 1, 2000 and the adoption of the Interpretation did not
have a material impact on the consolidated financial statements.

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 $2,426,000 consisted primarily of the income tax benefits
from net operating 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 $260,000 in the first
quarter, from $2,166,000 at December 31, 2000 to $2,426,000 at March 31, 2000.

Numbers reflected in the following discussion have been rounded to the nearest
one thousandth. Please refer to the financial statements, which are a part of
this report for further information regarding the liquidity and capital
resources of the Company.

THREE MONTHS ENDED MARCH 31, 2001 -VS.- THREE MONTHS ENDED MARCH 31, 2000

Net decrease in cash during the three months ending March 31, 2001 was $237,000,
compared to a net decrease of $84,000 for the three months ended March 31, 2000.
Net cash used by operating activities totaled ($201,000) for the three months
ended March 31, 2001, a decrease of $426,000 as compared to $225,000 generated
by operating activities during the three months ended March 31, 2000. This is
attributable primarily to decreased sales volume, the CHIPSat loss and an
increase in General and Administrative expenses.

Net cash used in investing activities totaled $0 during the three months ended
March 31, 2001, compared to ($3,000) used during the three months ended March
31, 2000, a decrease in cash used of $3,000. This difference is attributable to
a reduction in the purchase of fixed assets.

                                       14
<PAGE>

Net cash used in financing activities totaled ($36,000) for the three-month
period ending March 31, 2001, a decrease of $270,000 from the ($306,000) used by
financing activities during the three-month period ending March 31, 2000. This
decrease is attributable to paying the line of credit.

At March 31, 2001, the Company's cash, which includes cash reserves and cash
available for investment, was $23,000 as compared to $19,000 at March 31, 2000,
an increase of $4,000. At March 31, 2001, the Company had accounts receivable of
$114,000 and accounts payable of $801,000.

FORWARD-LOOKING STATEMENTS

The Company's business strategy requires significant capital expenditures. The
Company will incur a substantial portion of these expenditures before it
generates significant sales. Combined with operating expenses, these capital
expenditures will result in a negative cash flow until the Company establishes
an adequate revenue-generating customer base. The Company expects losses through
2001 and does not expect to generate net positive cash flow from operations
sufficient to fund both operations and capital expenditures until the launch of
its first commercial spacecraft or launch vehicle. There is no assurance that
the Company will achieve or sustain any positive cash flow or profitability
thereafter.

During the years ended December 31, 2000, December 31, 1999 and December 31,
1998, the Company raised approximately $1.1 million (including proceeds from the
504 Colorado offering described above) through private sales of stock. To
execute the Company's total strategy of small, capable, low-cost micro
satellites, hybrid propulsion products and new commercial revenue sources, the
Company requires significant funding. The current estimate is over $20 million,
which could come from a combination of private or public equity placements,
commercial project financing and government program funding. At this time, the
Company does not have a commitment from any placement agent or underwriter to
implement any additional public offering or from any government agency to obtain
significant additional program funding for its products.

The Company may also need to raise additional capital if, for example,(i)
significant delays occur in deploying its first deep-space mission due to
technical difficulties, launch, or satellite failure, or other reasons; (ii) the
Company does not enter into agreements with customers on the terms the Company
anticipates; (iii) the Company's net operating deficit increases because it
incurs significant unanticipated expenses; or (iv) the Company incurs additional
costs from modifying all or part of NEAP or its proposed hybrid-related systems
to meet changed or unanticipated market, regulatory, or technical requirements.
If these or other events occur, there is no assurance that the Company could
raise additional capital on favorable terms, on a timely basis or at all. A
substantial shortfall in funding would delay or prevent deployment of the Lunar
Orbiter, NEAP and/or the hybrid-related systems.

The Company's ability to execute a public offering or otherwise obtain funds is
subject to numerous factors beyond the Company's control, including, without
limitation, a receptive securities market and appropriate governmental
clearances. No assurances can be given that the Company will be profitable, or
that any additional public offering will occur, that the Company will be
successful in obtaining additional funds from any source or that the Company
will be successful in implementing an acceptable exit strategy on behalf of its
investors. Moreover, additional funds, if obtainable at all, may not be
available on terms acceptable to the Company when the Company needs such funds
or may be on terms which are significantly adverse to the Company's current
shareholders. The unavailability of funds when needed would have a material
adverse effect on the Company.

                                       15
<PAGE>

The Company will receive fixed compensation on the CHIPSat project in a total
amount of $5,595,868, of which about $2.1 million was generated in 2000. The
fixed price will be paid in increments over the term of the contract. In 2000,
as we reported in the Company's Annual Report on Form 10-KSB, the Company
reviewed this position at year-end and determined that the total costs at the
end of the program will exceed the likely revenue. As a result, the Company
accrued a loss of $861,000. We believe that this action covers all possible
contingencies through the life of the program. Included in the review was the
increase of $600,000 to the contract value to reflect added scope that was
approved by the customer on May 7, 2001.

As of March 31, 2001, the Company's backlog of business was approximately
$3,400,000 million, as opposed to approximately $4,400,000 million as of March
31, 2001. To date in 2001, the Company has added about $1,000,000 million in new
business including almost $200,000 in additional California grant funds. It
currently has almost $15,000,000 in outstanding or pending commercial and
government proposals and is working with potential partners for over $20,000,000
in additional bids to be submitted for the Lunar Orbiter and the Low Earth Orbit
Space Plane.

                                       16
<PAGE>

                            PART II OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

         There have been no material developments in any of the claims reported
in the Company's Annual Report on Form 10-KSB, filed April 2, 2001.

ITEM 2.  CHANGES IN SECURITIES

         On January 15, 2001, the Company entered into an employment agreement
Allen Newcomb, pursuant to which he received an option to purchase up to 60,000
shares of the Company's common stock at a purchase price of $0.95. Mr. Newcomb's
options vest at a rate of 15,000 options every six months, beginning on the
six-month anniversary date of the date of grant.

         On January 22, 2001, the Company entered into an employment agreement
with Ken Rubio, pursuant to which he received an option to purchase up to 25,000
share of the Company's common stock at a purchase price of $0.8938. Mr. Rubio's
options vest at a rate of 5,000 beginning on the six-month anniversary date,
then 5,000 on October 22, 2201, 5,000 on January 22, 2002 and finally 10,000 on
January 22, 2003.

         On February 3, 2001, the Company issued options to purchase a total of
9,700 shares of its common stock to certain of its employees pursuant to a
policy adopted by the Board of Directors in 2000 whereby these employees will
receive a total of five installments of options to be granted every three months
of employment. All options issued pursuant to this policy are issued at the
five-day average closing price of the company's common stock on the
Over-The-Counter Bulletin Board ("OTCBB"). All options issued pursuant to this
policy will vest on the third-month anniversary of the date of grant and will
expire after five years. The options issued on February 3, 2001 represent the
fourth installment of options under the policy, and were issued with an exercise
price of $0.975 per share.

         On February 28, 2001, the Company issued options to purchase 1,000
shares of its common stock to one of its employees, Robert Davis, who is to
receive a total of five installments of options pursuant to his employment
agreement with the company, for a total of 5,000 shares. The February 28, 2001
grant represents the fourth installments of options and was issued with an
exercise price of $0.925 (the five-day average closing price of the Company's
common stock on the OTCBB).

         On February 9th and February 28th, 2001, the Company issued options to
one of its part time employees for services rendered in the maintenance and
design of its websites. These non-statutory options were all issued at the
five-day average closing price of the Company's common stock on the OTCBB, and
vested on the grant date.

         On March 1, 2001, the Company entered into an employment agreement with
Calvin Lindsay, pursuant to which he received an option to purchase up to 12,000
shares of the Company's common stock at a purchase price of $0.925 (the five-day
average closing price of the Company's common stock on the OTCBB). Mr. Lindsay's
options vest at a rate of 2,000 beginning on the six-month anniversary date,
then 2,000 on march 1, 2002, then 3,000 on March 1, 2003 and 5,000 on march 1,
2004.

                                       17
<PAGE>

         On March 2, 2001, the Company issued 50,000 shares of its common stock
to its President, Mr. Stanley W. Dubyn, according to the terms of his employment
agreement with the Company.

         During the first quarter of 2001, the Company issued a total of 17,247
shares to consultants in exchange for services rendered to the Company.

         Pursuant to its independent director compensation plan, adopted January
16, 2000, the Company granted options to purchase 10,000 shares each to Wesley
T. Huntress and Curt Dean Blake for their attendance at the Board of Directors
meeting held February 9, 2001. These options were issued with an exercise price
of $0.87 per share and will expire on the five-year anniversary date of the date
of grant.

         All of the above options were issued pursuant to the Company's Form S-8
Registration Statement for its Employee Stock Option Plan of 1999.

         On February 9, 2001, the Company purchased all rights to the name
"ExploreSpace" and the Website www.explorespace.com in an isolated transaction
under section 4(2) of the Securities Act whereby the Company purchased all of
the outstanding common stock of ExploreSpace.com, Inc. in exchange for options
to purchase a total of 80,000 common shares of SpaceDev for $1.00 per share.

         In April 2001 the Company issued 66,667 shares of common stock and
warrants to purchase an additional 66,667 shares of common stock at an exercise
price of $0.75 per share to Lunar Enterprise Corporation in exchange for an
investment of $50,000. This purchase was made as a part of an accredited
investor only, private placement transaction under Rule 506 of Regulation D of
the Securities Act of 1933.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         Reference is made to the Company's report on Form 10-QSB filed August
10, 2000.

ITEM 5.  OTHER INFORMATION

         None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

Exhibit No.
-----------

None.

                                       18
<PAGE>

(b)      Reports on Form 8-K

         A Current Report on Form 8-K was filed with the Commission on February
28, 2001 under Item 5 (other events), regarding the lodgement of the Australian
Securities and Investments Commission on the SpaceDev Australia prospectus.

                                       19
<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                             SPACEDEV, INC.
                                             Registrant



Dated:  May 15, 2001                         /S/ James W. Benson
                                             ---------------------------------
                                             James W. Benson
                                             Chief Executive Officer



Dated: May 15, 2001                          /S/ Charles H. Lloyd
                                             ---------------------------------
                                             Charles H. Lloyd
                                             Chief Financial Officer

                                       20