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,  2004

[   ]     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:  17,813,704 shares of Issuer's voting
common  stock  were  outstanding  on  April  26,  2004.


<PAGE>

                                 SPACEDEV, INC.
                                   FORM 10-QSB
                      FOR THE QUARTER ENDED MARCH 31, 2004
INDEX     PAGE
-----     ----
PART  I   FINANCIAL  INFORMATION                                               1
--------------------------------------------------------------------------------
ITEM  1.     FINANCIAL  STATEMENTS                                             1
--------     -------------------------------------------------------------------
Consolidated  Balance  Sheets                                                  1
--------------------------------------------------------------------------------
Consolidated  Balance  Sheets                                                  2
--------------------------------------------------------------------------------
Consolidated  Statements  of  Operations                                       3
--------------------------------------------------------------------------------
Consolidated  Statements  of  Cash  Flows                                      4
--------------------------------------------------------------------------------
Notes  to  Consolidated  Financial  Statements                                 6
--------------------------------------------------------------------------------
ITEM  2.     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF FINANCIAL CONDITION AND
RESULTS  OF  OPERATIONS                                                       13
--------------------------------------------------------------------------------
ITEM  3.  CONTROLS  AND  PROCEDURES                                           24
--------------------------------------------------------------------------------
PART  II  OTHER  INFORMATION                                                  25
--------------------------------------------------------------------------------
ITEM  1.     LEGAL  PROCEEDINGS                                               25
--------     -------------------------------------------------------------------
ITEM  2.     CHANGES  IN  SECURITIES                                          25
--------     -------------------------------------------------------------------
ITEM  3.     DEFAULTS  UPON  SENIOR  SECURITIES                               27
--------     -------------------------------------------------------------------
ITEM  4.     SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS      28
--------     -------------------------------------------------------------------
ITEM  5.     OTHER  INFORMATION                                               28
--------     -------------------------------------------------------------------
ITEM  6.     EXHIBITS  AND  REPORTS  ON  FORM  8-K                            28
--------     -------------------------------------------------------------------
SIGNATURES                                                                    29
--------------------------------------------------------------------------------

<PAGE>

                         PART I -- FINANCIAL INFORMATION

ITEM  1.     FINANCIAL  STATEMENTS

                          SPACEDEV, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

<S>                                                       <C>         <C>
At March 31, . . . . . . . . . . . . . . . . . . . . . .        2004      2003
--------------------------------------------------------  ----------  --------

 ASSETS

 CURRENT ASSETS
      Cash . . . . . . . . . . . . . . . . . . . . . . .  $  981,898  $210,856
      Accounts receivable. . . . . . . . . . . . . . . .     296,980   220,841
      Work in Progress . . . . . . . . . . . . . . . . .     135,988         -
      Costs in excess of billings and estimated earnings           -   253,819
      Inventory. . . . . . . . . . . . . . . . . . . . .       8,142         -
--------------------------------------------------------  ----------  --------
 Total current assets. . . . . . . . . . . . . . . . . .   1,423,008   685,516

 FIXED ASSETS - NET. . . . . . . . . . . . . . . . . . .     129,598   131,475

 CAPITALIZED SOFTWARE  COSTS . . . . . . . . . . . . . .           -    69,005

 OTHER ASSETS. . . . . . . . . . . . . . . . . . . . . .      43,223    31,536
--------------------------------------------------------  ----------  --------
                                                          $1,595,829  $917,532
--------------------------------------------------------  ----------  --------
--------------------------------------------------------  ----------  --------

</TABLE>
The  accompanying  notes  are  an  integral part of these consolidated financial
statements.

                                       1
<PAGE>

                          SPACEDEV, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

<S>                                                                       <C>           <C>
 At March 31,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         2004           2003
------------------------------------------------------------------------  ------------  -------------
 LIABILITIES AND STOCKHOLDERSDEFICIT

 CURRENT LIABILITIES
      Current portion of notes payable . . . . . . . . . . . . . . . . .       37,961   $     55,392
      Current portion of capitalized lease obligations . . . . . . . . .        7,012         28,382
      Note payable - related party (Note 3(b)) . . . . . . . . . . . . .       80,000         80,000
      Convertible debt notes payable (Note 4). . . . . . . . . . . . . .            -        229,955
      Accounts payable and accrued expenses. . . . . . . . . . . . . . .      254,352        321,911
      Accrued payroll, vacation and related taxes. . . . . . . . . . . .      153,913        111,489
      Customer deposits and deferred revenue . . . . . . . . . . . . . .            -        124,765
      Provision for anticipated loss (Note 2). . . . . . . . . . . . . .            -          5,173
      Income taxes payable . . . . . . . . . . . . . . . . . . . . . . .            -         40,000
      Revolving credit facility (Note 3(c)). . . . . . . . . . . . . . .    1,001,043              -
      Other accrued liabilities. . . . . . . . . . . . . . . . . . . . .      183,071              -
------------------------------------------------------------------------  ------------  -------------

 TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . .    1,717,352        997,067

 NOTES PAYABLE, LESS CURRENT MATURITIES (NOTE 3(A)). . . . . . . . . . .       37,130         76,552

 CAPITALIZED LEASE OBLIGATIONS, LESS CURRENT MATURITIES. . . . . . . . .        4,369          3,979

 NOTE PAYABLE - RELATED PARTY, LESS CURRENT MATURITIES . . . . . . . . .      500,113        528,364

 DEFERRED GAIN - ON BUILDING SALE (NOTE 3(A)). . . . . . . . . . . . . .    1,035,903      1,153,175

 DEFERRED REVENUE. . . . . . . . . . . . . . . . . . . . . . . . . . . .        5,000          5,000

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

 TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . .    3,299,867      2,764,137
------------------------------------------------------------------------  ------------  -------------
 COMMITMENTS AND CONTINGENCIES

 STOCKHOLDERSDEFICIT
      Convertible preferred stock, $.0001 par value, 10,000,000 shares
           authorized no shares issued or outstanding. . . . . . . . . .            -              -
      Common stock, $.0001 par value; 50,000,000 shares authorized, and
           17,023,704 and 15,338,907 shares issued and outstanding,
           respectively. . . . . . . . . . . . . . . . . . . . . . . . .        1,702          1,533
      Additional paid-in capital (Note 5). . . . . . . . . . . . . . . .   10,054,585      8,728,659
      Additional paid-in capital - stock options . . . . . . . . . . . .      750,000        750,000
      Deferred compensation. . . . . . . . . . . . . . . . . . . . . . .     (250,000)      (250,000)
      Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . .  (12,260,325)   (11,076,797)
------------------------------------------------------------------------  ------------  -------------
 TOTAL STOCKHOLDERSDEFICIT . . . . . . . . . . . . . . . . . . . . . . .   (1,704,038)    (1,846,605)
------------------------------------------------------------------------  ------------  -------------
                                                                            1,595,829        917,532
------------------------------------------------------------------------  ------------  -------------
------------------------------------------------------------------------  ------------  -------------

</TABLE>

The  accompanying  notes  are  an  integral part of these consolidated financial
statements.

                                       2
<PAGE>

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

<S>                                                                       <C>           <C>
 At March 31,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         2004           2003
------------------------------------------------------------------------  ------------  -------------
 LIABILITIES AND STOCKHOLDERSDEFICIT

 CURRENT LIABILITIES
      Current portion of notes payable . . . . . . . . . . . . . . . . .       37,961   $     55,392
      Current portion of capitalized lease obligations . . . . . . . . .        7,012         28,382
      Note payable - related party (Note 3(b)) . . . . . . . . . . . . .       80,000         80,000
      Convertible debt notes payable (Note 4). . . . . . . . . . . . . .            -        229,955
      Accounts payable and accrued expenses. . . . . . . . . . . . . . .      254,352        321,911
      Accrued payroll, vacation and related taxes. . . . . . . . . . . .      153,913        111,489
      Customer deposits and deferred revenue . . . . . . . . . . . . . .            -        124,765
      Provision for anticipated loss (Note 2). . . . . . . . . . . . . .            -          5,173
      Income taxes payable . . . . . . . . . . . . . . . . . . . . . . .            -         40,000
      Revolving credit facility (Note 3(c)). . . . . . . . . . . . . . .    1,001,043              -
      Other accrued liabilities. . . . . . . . . . . . . . . . . . . . .      183,071              -
------------------------------------------------------------------------  ------------  -------------
 TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . .    1,717,352        997,067

 NOTES PAYABLE, LESS CURRENT MATURITIES (NOTE 3(A)). . . . . . . . . . .       37,130         76,552

 CAPITALIZED LEASE OBLIGATIONS, LESS CURRENT MATURITIES. . . . . . . . .        4,369          3,979

 NOTE PAYABLE - RELATED PARTY, LESS CURRENT MATURITIES . . . . . . . . .      500,113        528,364

 DEFERRED GAIN - ON BUILDING SALE (NOTE 3(A)). . . . . . . . . . . . . .    1,035,903      1,153,175

 DEFERRED REVENUE. . . . . . . . . . . . . . . . . . . . . . . . . . . .        5,000          5,000
------------------------------------------------------------------------  ------------  ------------
 TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . .    3,299,867      2,764,137
------------------------------------------------------------------------  ------------  -------------
 COMMITMENTS AND CONTINGENCIES

 STOCKHOLDERSDEFICIT
      Convertible preferred stock, $.0001 par value, 10,000,000 shares
           authorized no shares issued or outstanding. . . . . . . . . .            -              -
      Common stock, $.0001 par value; 50,000,000 shares authorized, and
           17,023,704 and 15,338,907 shares issued and outstanding,
           respectively. . . . . . . . . . . . . . . . . . . . . . . . .        1,702          1,533
      Additional paid-in capital (Note 5). . . . . . . . . . . . . . . .   10,054,585      8,728,659
      Additional paid-in capital - stock options . . . . . . . . . . . .      750,000        750,000
      Deferred compensation. . . . . . . . . . . . . . . . . . . . . . .     (250,000)      (250,000)
      Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . .  (12,260,325)   (11,076,797)
------------------------------------------------------------------------  ------------  -------------
 TOTAL STOCKHOLDERSDEFICIT . . . . . . . . . . . . . . . . . . . . . . .   (1,704,038)    (1,846,605)
------------------------------------------------------------------------  ------------  -------------
                                                                            1,595,829        917,532
------------------------------------------------------------------------  ------------  -------------
------------------------------------------------------------------------  ------------  -------------
</TABLE>

The  accompanying  notes  are  an  integral part of these consolidated financial
statements.

                                       3
<PAGE>

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

<TABLE>
<CAPTION>

<S>                                                              <C>         <C>
 Three-Months Ending March 31,. . . . . . . . . . . . . . . . .       2004          2003
---------------------------------------------------------------  ----------  ------------
 CASH FLOWS FROM OPERATING ACTIVITIES
      Net loss. . . . . . . . . . . . . . . . . . . . . . . . .  $(442,549)  $  (505,087)
      Adjustments to reconcile net loss to net cash
           used in operating activities:
           Depreciation and amortization. . . . . . . . . . . .     15,954        57,696
           Gain on on building sale . . . . . . . . . . . . . .    (29,318)      (19,545)
           Non-cash interest expense - convertible debt program          -       100,455
           Non-cash loan fees . . . . . . . . . . . . . . . . .    464,000             -
           Change in operating assets and liabilities:. . . . .   (168,910)     (364,573)
---------------------------------------------------------------  ----------  ------------
 NET CASH USED IN OPERATING ACTIVITIES. . . . . . . . . . . . .   (160,823)     (731,054)
---------------------------------------------------------------  ----------  ------------
CASH FLOWS FROM INVESTING ACTIVITIES
      Proceeds from the sale of building. . . . . . . . . . . .          -     3,150,124
      Purchases of fixed assets . . . . . . . . . . . . . . . .     (8,020)       (3,100)
---------------------------------------------------------------  ----------  ------------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES . . . . . .     (8,020)    3,147,024
---------------------------------------------------------------  ----------  ------------
 CASH FLOWS FROM FINANCING ACTIVITIES
      Principle payments on notes payable . . . . . . . . . . .    (12,500)   (2,509,853)
      Principal payments on capitalized lease obligations . . .     (4,204)       (8,853)
      Payments on notes payable - related party . . . . . . . .    (20,000)     (139,998)
      Proceeds from issuance of common stock. . . . . . . . . .     72,139       425,942
      Proceeds from revolving credit facility . . . . . . . . .    523,300             -
---------------------------------------------------------------  ----------  ------------
---------------------------------------------------------------  ----------  ------------
 NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES. . . . . .    558,735    (2,232,762)
---------------------------------------------------------------  ----------  ------------
 Net increase in cash . . . . . . . . . . . . . . . . . . . . .    389,892       183,208
---------------------------------------------------------------  ----------  ------------
 CASH AT BEGINNING OF PERIOD. . . . . . . . . . . . . . . . . .    592,006        27,648
---------------------------------------------------------------  ----------  ------------
 CASH AT END OF PERIOD. . . . . . . . . . . . . . . . . . . . .  $ 981,898   $   210,856
---------------------------------------------------------------  ----------  ------------
---------------------------------------------------------------  ----------  ------------

</TABLE>

The  accompanying  notes  are  an  integral part of these consolidated financial
statements.

                                       4
<PAGE>

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

<TABLE>
<CAPTION>

<S>                                                                                                        <C>      <C>
 Three-Months Ending March 31,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     2004    2003
---------------------------------------------------------------------------------------------------------  -------  ------
 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
     Cash paid during the period for:
           Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $14,946  $8,157
---------------------------------------------------------------------------------------------------------  -------  ------

 NONCASH INVESTING AND FINANCING ACTIVITIES:

 During the three-months ending March 31, 2004 the Company issued 500,000 shares of its common
      stock to the Laurus Master Fund from conversions under its revolving credit facility, thereby
      realizing a corresponding reduction in current liabilities of approximately $275,000.  The Company
      recorded additional non-cash loan fees of approximately $439,000 and charged these fees to expense.

 During the three-months ending March 31, 2004, the Company issued 70,035 shares of its common
      stock upon conversion of from employee stock options for $40,700 in cash.

 During the three-months ending March 31, 2004, the Company issued 7,076 shares of its common stock
      from the Company's Employee Stock Purchase Plan for approximately $6,400 in cash.

</TABLE>

The  accompanying  notes  are  an  integral part of these consolidated financial
statements.

                                       5
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       BASIS  OF  PRESENTATION

The  accompanying  consolidated  financial  statements  of  SpaceDev, Inc. ("the
Company")  include  the  accounts  of  the  Company and its inactive subsidiary,
SpaceDev  Oklahoma.  In  the  opinion  of management, the 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 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  6,  2004 and other reports the Company filed with the U.S. 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 ending March 31, 2004
are  not  necessarily  indicative of results that may be expected for the fiscal
year  ending  December  31,  2004 or any future period, and the Company makes no
representations  related  thereto.

As  of  March  31,  2004,  management  continues  the opinion that the Company's
auditors,  PKF,  expressed  in their formal auditors' opinion dated February 11,
2004  (except  for Note 11 as to which the date is April 5, 2004), that in their
opinion,  based  on their audit, the Company's consolidated financial statements
referred  to  herein  present fairly, in all material respects, the consolidated
financial position of SPACEDEV, INC. AND SUBSIDIARY as of December 31, 2003, and
the consolidated results of the Company's operations and cash flows for the year
then  ended,  in conformity with accounting principles generally accepted in the
United States of America.  The accompanying consolidated financial statements as
of  March  31,  2004  have been prepared assuming the Company will continue as a
going concern.  During the first three-months of 2004, the Company had a working
capital deficit of $294,344 and incurred a net loss of $442,549 as compared to a
working  capital  deficit  of  $305,551  and a net loss of $505,087 for the same
three-month  period  in  2003.  On  March  31,  2004,  the Company was awarded a
$43,362,271  contract from the Missile Defense Agency.  Management still intends
to  obtain  new  commercial  and  government contracts, continue to utilize (and
possibly  expand)  its  revolving  credit  facility  and  possibly  raise   some
additional  debt  or  equity  capital  in  a  public  or  private  offering   or
fund-raising  effort.  There can be no assurance that existing contracts will be
completed  successfully  or  that  new  contracts  or  additional debt or equity
financing  that  may  be  needed  to  fund  operations  will be available or, if
available, obtained in sufficient amounts necessary to meet the Company's needs.
Management  does  believe  that, if current contracts remain on schedule and are
funded  as  expected,  they will be sufficient to fund the Company through 2004.

The preparation of financial statements in conformity with accounting principles
generally  accepted  in the United States of America 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.

Beginning  in  the  second  quarter  of 2002, the Company's capitalized software
costs  were  amortized over their estimated useful lives using the straight-line
method.  Periodically  and  at  least annually, management performs a review for
impairment in accordance with SFAS No. 144.  During the three-months ended March
31,  2003,  these  capitalized  software costs were $34,503 leaving a balance of
$69,005,  which  was  fully  amortized  in  2003.

                                       6
<PAGE>

2.       REVENUE  RECOGNITION

The  Company's  revenues  for the three-months ended March 31, 2004 were derived
primarily  from  United  States  government cost plus fixed fee (CPFF) contracts
compared to a predominance of fixed price contracts for the same three-months in
2003.  Revenues  from  the  CPFF contracts during the first three-months of 2004
were  recognized as expenses were incurred compared to revenues from fixed price
contracts  for  the  same  period  in  2003,  which  were  recognized  using the
percentage-of-completion  method.  Estimated  contract  profits  are  taken into
earnings  in  proportion to revenues recorded.  Revenues under certain long-term
fixed  price  contracts, which provide for the delivery of minimal quantities or
require  significant amounts of development effort in relation to total contract
value,  are  recorded  upon  achievement  of performance milestones or using the
cost-to-cost  method of accounting where revenues and profits are recorded based
on the ratio of costs incurred to estimated total costs at completion.  Time and
material  revenues  are recognized as services are preformed and costs incurred.
Losses  on  contracts  are  recognized  when  estimated  costs  are   reasonably
determined.  Actual  results of contracts may differ from management's estimates
and such differences could be material to the consolidated financial statements.
Professional fees are billed to customers on a time and materials basis, a fixed
price  basis or a per-transaction basis depending on the terms and conditions of
the  specific  contract.  Time  and material revenues are recognized as services
are  performed  and  costs  incurred.

The  total  amount  of  costs  in  excess  of billings and estimated earning was
$253,819  at  March 31, 2003.  There were no costs in excess of billing at March
31,  2004.  Costs  in  excess of billings and estimated earning occur when costs
incurred  on  projects  exceed the allowed amount billed to the customer at that
time  and  are  booked  as  a  temporary  asset  on  the  balance  sheet.

Deferred  revenue  represents  amounts  collected  from  customers for projects,
products  or  services  to  be  provided  at  a  future  date.

In  November  1999,  the  Space  Missions Division was awarded a turnkey mission
contract  by  the  Space  Sciences Laboratory at the University of California at
Berkeley  ("UCB")  worth,  as  of December 31, 2002, approximately $7.4 million,
including change orders worth approximately $514,000.  This contract represented
14%  of  the  Company's  revenues  for  the  year ending December 31, 2003.  The
contract  concluded  on December 31, 2003.  CHIPSat continues to operate and UCB
decided  to  extend the mission.  On February 25, 2004, a new time and materials
purchase order arrangement was initiated between the University of California at
Berkeley  and  the  Company.

3.     NOTES  PAYABLE

a)     Building  and  Settlement  Notes

In  December  2002, the Company entered an agreement to sell its interest in its
facility.  The  transaction  closed  in  January  2003.  The  escrow transaction
included  the  sale  of the land and building.  Net fixed assets were reduced by
approximately  $1.9 million and notes payable were reduced by approximately $2.4
million  while  a deferred gain was recorded.  In conjunction with the sale, the
Company  entered  into  a  lease  agreement  with  the  buyer  to  leaseback its
facilities.  The  Company's Chief Executive Officer provided a guarantee for the
leaseback.  The  gain  on the sale of the facility was deferred and amortized in
proportion to the gross rental charged to expense over the lease term.  Deferred
gain  of  $1,172,720 is being amortized at the rate of $117,272 per year for ten
(10)  years ending in January 2013.  As of March 31, 2004, the deferred gain was
$1,035,903.  This  amortization  will be included in the Company's occupancy and
facility  expense  and  totaled  $29,318 and $19,545 for the three-months ending
March  31,  2004  and  2003,  respectively.

Deferred  Gain  consisted  of  the  following:

<TABLE>
<CAPTION>

Three-Months Ending March 31, 2004
<S>                                 <C>
                                    -----------
Original Deferred Gain . . . . . .  $1,172,720
Less Amortization 2003 . . . . . .    (107,499)
Less Amortization 2004 . . . . . .     (29,318)
                                    $1,035,903
                                    -----------
</TABLE>

                                       7
<PAGE>

In  2001, the Company entered into three settlement loan agreements with various
vendors.  The  total  of $171,402 for all three loans called for payment between
24 and 50 months with interest that ranges from 0% to 8%.  At March 31, 2004 and
2003,  the  outstanding  balances  on  these  notes  were  $75,091 and $131,944,
respectively,  with  interest expense for the three-months ending March 31, 2004
and  2003  of  $977  and  $1,394,  respectively.

Future  minimum  principal  payments  on  settlement  notes  are  as  follows:

<TABLE>
<CAPTION>

Period Ended March 31,
<S>                     <C>
----------------------  -------
2004 . . . . . . . . .  $37,961
2005 . . . . . . . . .   37,130
2006 . . . . . . . . .        0
Total Settlement Notes  $75,091
----------------------  -------
</TABLE>

b)     Related  Parties

The  Company  has  a  note  payable to the CEO.  At March 31, 2004 and 2003, the
balances  were  $580,113  and  $608,364,  respectively, with accrued interest or
interest  accruing  at  10%.  The note was amended on March 20, 2000 to call for
annual  payments  of  not  less than $80,000 per year with interest at 10%.  The
Company  is  currently making principle only payments on the note, with interest
payments  accruing  and  paid  at  the  end  of  the  note.

Future  minimum  principal  payments  on  note  payable,  related parties are as
follows:

<TABLE>
<CAPTION>

Period Ending March 31,
<S>                      <C>
------------------------  --------
2004 . . . . . . . . . . $  80,000
2005 . . . . . . . . . .    80,000
2006 . . . . . . . . . .    80,000
2007 . . . . . . . . . .    80,000
2008 . . . . . . . . . .    80,000
Thereafter . . . . . . .   180,113
------------------------  --------
                          $580,113
------------------------  --------
</TABLE>

Interest  expense on this note was $14,593 and $9,866 for the three-months ended
March  31,  2004  and  2003,  respectively.

c)     Revolving  Credit  Facility.

On  June  3,  2003,  the  Company  entered  into  a  Security Agreement, Secured
Convertible  Note,  Registration  Rights  Agreement  and  Common  Stock Purchase
Warrant,  with Laurus Master Fund, Ltd. ("Laurus"), which were filed on Form 8-K
dated  June  18,  2003.  Pursuant  to  the agreements, the Company received a $1
million  revolving  credit facility in the form of a three-year Convertible Note
secured  by its assets.  The net proceeds from the Convertible Note are used for
general  working  capital needs.  Advances on the Convertible Note may be repaid
at the Company's option, in cash or through the issuance of the Company's shares
of  common  stock.  The  Convertible  Note carries an interest rate of WSJ Prime
plus  0.75% on any outstanding balance.  In addition, the Company is required to
pay  a  collateral  management  payment  of  0.55%  of  the  average   aggregate
outstanding  balance  during  the month plus an unused line payment of 0.20% per
annum.  Approximately  $1,700  in interest and $2,100 in fees were accrued under
the  revolving  credit  facility  in the first quarter of 2004.  The outstanding
balance  on  the  revolving  credit  facility  at March 31, 2004 was $1,001,043.

                                       8
<PAGE>

The  Company  filed  Form  SB-2  on  July  25,  2003  in  connection  with  this
transaction.  The  shares  were  registered  with  the  Securities  and Exchange
Commission  ("SEC")  for public resale on August 6, 2003.  Once the market price
exceeded 118% of the fixed conversion price, which occurred on or about July 21,
2003,  the  Company  obtained  the  ability to pay amounts outstanding under the
revolving  credit  facility  in  cash or shares of its common stock at the fixed
conversion  price  of  $0.55  per  share  on  the first $1 million of principal.

The  Convertible  Note  includes  a  right of conversion in favor of Laurus.  If
Laurus  exercises  its  conversion  right at any time or from time to time at or
prior  to maturity, on any outstanding balance at the time, the Convertible Note
is  convertible  into shares of the Company's common stock at a fixed conversion
price,  subject  to adjustments for stock splits, combinations and dividends and
for  shares  of  common  stock  issued  for less than the fixed conversion price
(unless  exempted  pursuant  to  the agreements).  The agreement was modified on
March  31,  2004  to provide for a six-month waiver to us and a fixed conversion
price  to  Laurus  of  $0.85  per share on the first $500,000 after the first $1
million.  Thereafter,  the  fixed  conversion  price  will  be  adjusted   after
conversion  of  the  first $1.5 million to 103% of the then fair market value of
our  common  stock  ("Adjusted  Fixed  Conversion  Price").

Laurus  converted  500,000 shares to reduce the debt we owed by $275,000 for the
three-months  ending March 31, 2004.  Laurus converted a total of 915,000 shares
to  reduce  the  debt  by  $503,250  since the inception of the revolving credit
facility.  For  the  three-months  ending  March  31, 2004, the Company expensed
$464,000 for the non-cash loan fee expense based on the fair market value of the
stock when Laurus converted and approximately $590,000 for the non-cash loan fee
expense  since  the  inception of the revolving credit facility. The fair market
value  used in 2003 was established using a 20% discount to the closing price on
the  date  of conversion based on the restricted and thinly-traded nature of the
Company  stock  in  2003  and the fair market value used in 2004 was established
using  the closing price on the date of conversion with no discount taken due to
the  increasing  volume  of  the  Company's  stock.

Availability  of  funds under the revolving credit facility will be based on our
accounts  receivables,  except  as  waivers  are provided by Laurus.  An initial
three  (3)  month  waiver  was offered by Laurus, under which Laurus permitted a
credit  advance  up  to  $300,000,  which  amount would otherwise have  exceeded
eligible  accounts  receivable  during the period.  Laurus subsequently extended
the  waiver  for  two  additional  six  (6)  month  periods,  under which Laurus
permitted  a  credit advance up to $1 million, which amount would otherwise have
exceeded  eligible  accounts receivable during the period.  The revolving credit
facility  is  secured  by  all  of  the  assets  of  the  Company.

In  conjunction  with this transaction, Laurus was paid a fee of $20,000 for the
first  year  which  was  expensed  as  additional interest expense in 2003.  The
Company  will  be required to pay a continuation fee of $10,000 in June 2004 and
each  year  thereafter.  In  addition,  Laurus  received  a  warrant to purchase
200,000  shares  of  the  Company's common stock, as stated herein.  The warrant
exercise price is computed as follows: $0.63 per share for the purchase of up to
125,000 shares; $0.69 per share for the purchase of an additional 50,000 shares;
and  $0.80  per  share  for  the  purchase  of an additional 25,000 shares.  The
warrant  exercise  price  may be paid in cash, in shares of the Company's common
stock,  or  by  a  combination  of both.  The warrant expiration date is June 3,
2008.  The  warrant  exercise  price  and  the  number  of shares underlying the
warrant are subject to adjustments for stock splits, combinations and dividends.

In  addition  to  the  initial  warrant,  the  Company  is obligated to issue an
additional  five-year warrant to Laurus to purchase one share of common stock at
an exercise price equal to 125% of the Adjusted Fixed Conversion Price for every
ten  dollars  ($10)  in  principal of the Convertible Note converted into common
stock  if  and  when  over  $1  million  is converted under the revolving credit
facility.  The  value  of the warrant will be determined if and when issued, and
will  be  treated  as additional interest expense and will be amortized over the
remaining  term of the Convertible Note, unless sooner terminated.  No more than
an aggregate of 100,000 shares of the Company's common stock may be purchased by
Laurus  under  such  additional  warrants.

                                       9
<PAGE>

The  Company  may  terminate  its  agreements  with Laurus before the end of the
initial  three  year  term  and  Laurus will release its security interests upon
payment  to  Laurus  of all obligations, if the Company has: (i) provided Laurus
with  an  executed  release  of  all claims which the Company may have under the
agreements;  and, (ii) paid to Laurus an early payment fee in an amount equal to
(x)  four percent (4%) of the Capital Availability Amount if such payment occurs
prior  to  the  first  anniversary of the Initial Term (i.e., June 3, 2004); (y)
three  percent  (  3%) of the Capital Availability Amount if such payment occurs
after  the  first anniversary and prior to the second anniversary of the Initial
Term;  and,  (z)  two  percent  (2%)  of the Capital Availability Amount if such
payment  occurs after the second anniversary and prior to the end of the Initial
Term.  The early payment fee is also due and payable by the Company to Laurus if
the  Company  terminates  its  Agreement  after  the  occurrence  of an Event of
Default,  as  define  in  the  agreements.

4.     CONVERTIBLE  DEBT  NOTES  PAYABLE

From  October  14, 2002 through November 14, 2002, the Company sold an aggregate
of $475,000 of 2.03% convertible debentures to various directors and officers of
the  Company.  The  total  funding  was  completed  on  November  14, 2002.  The
convertible  debentures  entitled the holder to convert the principal and unpaid
accrued  interest  into  the Company's common stock when the notes matured.  The
maturity on the notes was six (6) months from issue date.  On March 25, 2003, an
amendment  was executed which extended these notes an additional six (6) months.
The  convertible  debentures  were  exercisable  into  a number of the Company's
common  shares  at  a  conversion price that equals the 20-day average ask price
less  10%,  which  was,  established  when  the  note was issued, or the initial
conversion  price.

Concurrent  with  the issuance of the convertible debentures, the Company issued
warrants to purchase up to 1,229,705 shares of the Company's common stock to the
subscribers.  These  warrants  are exercisable for three (3) years from the date
of  issuance at the initial exercise price, which is equal to the 20-day average
ask  price  less  10%,  which was established when the notes were issued, or the
initial  conversion price of the notes.  Upon issuance, the issued warrants were
valued using the Black-Scholes pricing model based on the expected fair value at
issuance  and  the  estimated  fair  value  was recorded as debt discount.  As a
result  of  the  change  to  the  maturity  date  of  the  convertible debt, the
amortization  period  for  the debt discounts was also extended during the first
quarter  in  2003.

All  debt  discounts are to be amortized as additional interest expense over the
term of the convertible debenture.  As of March 31, 2003, $475,000 was reflected
as  debt  discount  of which $100,455 was amortized to non-cash interest expense
for  the  first  three-months  ending  March 31, 2003.  Fair market value of the
stock  was determined by discounting the closing market price on the date of the
transaction  by 20%, based on the nature of the restricted securities and thinly
traded  stock.

On September 5, 2003, the Company repaid one-half of the convertible notes, with
the condition that the note holders convert the other half. Also, as a condition
of  the partial repayment, the note holders were required to relinquish one-half
of  the previously issued warrants. Finally, as additional consideration for the
transaction,  the  note  holders were offered 5% interest on their notes, rather
than  the  stated  2.03%.  All  the  note  holders  accepted  the  offer and the
convertible  notes  were  retired.

                                       10
<PAGE>

Balances  as  of  March  31,  2004  were:

<TABLE>
<CAPTION>

<S>                                                 <C>              <C>
--------------------------------------------------  ----------       ---------
Convertible debentures - beginning balance . . . .                   $ 475,000
          Total interest expense incurred. . . . .  $  20,236
          Accrued interest paid - 2003 . . . . . .  $ (18,161)
          Accrued interest paid - 2002 . . . . . .  $  (2,075)
          Convertible debtures paid. . . . . . . .  $(237,500)
          Convertible debtures converted to equity  $(237,500)
--------------------------------------------------  ----------       ---------
                                                    $(475,000)
Convertible debentures - ending balance. . . . . .                   $       0
--------------------------------------------------  ----------       ---------
--------------------------------------------------  ----------       ---------
Debt discount (Warrants) - beginning balance . . .                   $ 475,000
          Amount forfeited . . . . . . . . . . . .  $(237,500)
          Amount expensed - 2002 . . . . . . . . .  $(125,000)
          Amount expensed - 2003 . . . . . . . . .  $(267,879)
          2003 - adjustment. . . . . . . . . . . .  $ 155,379
--------------------------------------------------  ----------       ---------
                                                    $(475,000)
Debt discount (Warrants) - ending balance. . . . .                   $       0
--------------------------------------------------  ----------       ---------
</TABLE>

5.     STOCKHOLDERS'  EQUITY  -  COMMON  STOCK  AND  WARRANTS

On  November 5, 2000, the Company commenced a private placement offering ("PPO")
for  a  maximum  of  1,000,000  shares of the Company's $0.0001 par value common
stock  and  warrants  to purchase an additional 1,000,000 shares of common stock
(the  "Units").  The offering price of the Units was the five-day average of the
bid  and ask prices for the Company's common stock on the date of issuance, with
a  minimum  per Unit price of $1.00.  The warrants allowed the holder to acquire
additional  shares at $0.50 above the offering price of the shares.  The Company
sold  to  one  related-party  investor  under  these  terms.

On  March 2, 2001, the PPO offering price was amended to the average of the high
bid  prices on the date of issuance and four preceding days, with no minimum per
share  price,  and  the  warrants  were  amended  to allow the holder to acquire
additional  shares  at  the  Unit  price.

On  January 16, 2003 and February 14, 2003, pursuant to an extension of the PPO,
the Company sold 665,188 and 196,079 Units, respectively.   The Company received
approximately  $326,000 and $100,000, respectively, for the Units sold under the
PPO  during  the  first  quarter  2003.

The  Company has elected to account for its stock-based compensation plans under
APB  25.  However,  the Company has computed, for pro forma disclosure purposes,
the  value  of  all  options granted during the period ending March 31, 2004 and
2003  using  the  minimum  value method as prescribed by SFAS 123 and amended by
SFAS  148.  Under  this  method, the Company used the risk-free interest rate at
the  date of grant, the expected volatility, the expected dividend yield and the
expected  life  of  the  options to determine the fair value of options granted.
The  risk-free  interest  rates ranged from 6.0% to 6.5%, expected volatility of
was  117%,  the  dividend yield was assumed to be zero, and the expected life of
the  options  was assumed to be three to five years based on the average vesting
period  of  options  granted.

If  the Company had accounted for these options in accordance with SFAS 123, the
total  value of options granted during the period ending March 31, 2004 and 2003
would  be amortized on a pro forma basis over the vesting period of the options.
Thus,  the  Company's  consolidated  net  loss  would  have  been  as  follows:

                                       11
<PAGE>

<TABLE>
<CAPTION>

<S>                            <C>         <C>

Three-Months Ending March 31,       2004        2003
-----------------------------  ----------  ----------
Net loss:
-----------------------------  ----------  ----------
 As reported. . . . . . . . .  $(442,549)  $(505,087)
 Pro forma. . . . . . . . . .  $(534,614)  $(578,932)
Loss per Share:
-----------------------------  ----------  ----------
 As reported. . . . . . . . .  $    (.03)  $    (.03)
 Pro forma. . . . . . . . . .  $    (.03)  $    (.04)
-----------------------------  ----------  ----------
-----------------------------  ----------  ----------
</TABLE>

6.     NEW  ACCOUNTING  PRONOUNCEMENTS

There  were  no  recent Accounting Pronouncements that affect the Company during
the  first  quarter  2004.  For  past  pronouncements please refer the company's
10-KSB  filed  on  April  6,  2004.

                                       12
<PAGE>

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
consolidated  financial statements and the notes thereto and the other financial
information  appearing  elsewhere  in  this document.  Readers are also urged to
carefully  review  and consider the various disclosures made by us which attempt
to advise interested parties of the factors which affect our business, including
without  limitation  our  General Registration Statement on Form 10SB12G/A filed
January  28,  2000  as  well as any or all of our recent filings including prior
year  10-KSB  and  quarterly  10-QSB  filings.

In  addition to historical information, the following discussion and other parts
of this document may contain forward-looking statements. These statements relate
to  future  events  or  our future financial performance. In some cases, you can
identify  forward-looking  statements  by  terminology  such  as  "may," "will,"
"should,"  "expect,"  "plan,"  "anticipate,"  "believe,"  "estimate," "predict,"
"potential,"  or  "continue,"  the  negative  of  such terms or other comparable
terminology. These statements are only predictions. Although we believe that the
expectations  reflected  in  the  forward-looking  statements are reasonable, we
cannot   guarantee   future   results,   levels   of  activity,  performance  or
achievements.  Moreover,  neither we nor any other person assumes responsibility
for  the  accuracy  and  completeness  of  the  forward-looking  statements.  We
undertake no obligation to publicly update any of the forward-looking statements
after the date of this report to conform such statements to actual results or to
changes  in  our  expectations.

Actual  results  could  differ  materially  from   those  anticipated  by   such
forward-looking  statements.  Factors  that  could  cause  or contribute to such
differences  include,  but  are  not  limited  to,  the  level  of  sales to key
customers;  the  economic  conditions   affecting  our   industry;  actions   by
competitors;  fluctuations  in  the  price of raw materials; the availability of
outside  contractors  at  prices  favorable  to  the  Company; our dependence on
single-source  or  a  limited  number  of  suppliers; our ability to protect our
proprietary  technology;  market  conditions  influencing  prices or pricing; an
adverse  outcome in potential litigation, claims and other actions by or against
us;  technological  changes  and  introductions  of  new competing products; the
current recession; terrorist attacks or acts of war, particularly given the acts
of  terrorism  against  the  United  States on September 11, 2001 and subsequent
military  responses by the United States and coalition forces; mission disasters
such  as  the  loss of the space shuttle Columbia on February 1, 2003 during its
re-entry  into  earth's  atmosphere; ability to retain key personnel; changes in
market  demand;  exchange  rates; productivity; weather; and market and economic
conditions  in  the  areas  of  the  world  in  which  we operate and market our
products.  These  are  factors  that  we think could cause our actual results to
differ  materially  from  expected  and  historical  events.

OVERVIEW

We  are engaged in the conception, design, development, manufacture, integration
and  operation  of  space  technology  systems,  products  and services.  We are
currently  focused  on the commercial and military development of low cost micro
satellites, nano satellites and related subsystems, hybrid rocket propulsion for
space,  launch  and  human flight vehicles as well as associated engineering and
technical  services  primarily  to  government  agencies,  and  specifically the
Department  of  Defense.  Our  products  and  solutions  are  sold,  mainly on a
project-basis,  directly  to these customers and include sophisticated micro and
nano  satellites,  hybrid  rocket-based launch vehicles, Maneuvering and orbital
Transfer  Vehicles  ("MoTVs")  as  well  as  safe sub-orbital and orbital hybrid
rocket-based propulsion systems.  Although we believe there will be a commercial
market  for  our micro satellite and nano satellite products and services in the
long-term,  the  early  adopters  of  this  technology  appears to be government
military  agencies  and  our  "products"  are  considered  to  be the outcome of
specific "projects."  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  for  commercial  customers.

                                       13
<PAGE>

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."

SELECTION  OF  SIGNIFICANT  CONTRACTS

On  March  31, 2004, we were awarded a five-year, cost-plus-fixed fee indefinite
delivery/indefinite  quantity  contract for up to $43,362,271 to conduct a micro
satellite  distributed  sensing experiment, an option for a laser communications
experiment,  and  other  micro  satellite studies and experiments as required in
support  of  the  Advanced Systems Deputate of the Missile Defense Agency.  This
effort  will be accomplished in a phased approach.  The total five-year contract
has a ceiling amount of $43,362,271.  The principal place of performance will be
Poway,  California.  We  expect  to  complete the work under the contract before
March 2009.  Government contract funds will not expire at the end of the current
government  fiscal  year.  The micro satellite distributed sensing experiment is
intended  to design and build up to six responsive, affordable, high performance
micro  satellites  to  support  national  missile defense.  The milestone-based,
multiyear,  multiphase  contract  has  an effective start date of March 1, 2004.
Approximately  $62,000  of  revenue was accrued for work performed in March 2004
but  not  invoiced  until  April  2004  due  to  the  late execution date of the
contract.  The first phase is expected to be completed this year and will result
in  detailed mission and microsat designs.  The estimated first phase revenue is
$1.1  million.  The  overall  contract calls for us to analyze, design, develop,
fabricate,  integrate,  test,  operate  and support a networked cluster of three
formation-flying  boost  phase  and  midcourse tracking microsatellites, with an
option  to  design,  develop,  fabricate, integrate, test, operate and support a
second cluster of three formation flying microsats to be networked on-orbit with
high  speed laser communications technology.  The second phase is anticipated to
begin  on  or  before  October  1,  2004  and  run  through  2005.

On  October 2, 2003, we were awarded an exclusive, follow-on contract to provide
the hybrid rocket motor systems and components for SpaceShipOne.  We provide our
facilities,  resources  and  a  team  of  launch  vehicle  and hybrid propulsion
engineers  and  technical  personnel  in  continued  support of the SpaceShipOne
program.  The  contract  called  for  us  to use our best efforts to satisfy the
requirements of the SpaceShipOne program, based on our experience with the prior
phases.  We are to provide two sets of re-usable flight test hardware, including
a  bulkhead,  commonly  known  as  the SpaceDev bulkhead, machined in the flight
configuration,  a  main  oxidizer  valve  of  the  current design and associated
interfaces  and  plumbing  to  the  SpaceDev  bulkhead,  a motor control system,
igniter  housings, pressure transducers, and thermocouples as required for input
to  the  motor  control  system.  In addition, we will produce and assemble test
motors,  including but not limited to, all expendable or semi-reusable materials
as  defined  by  our  baseline  design  motor.  We  are also required to provide
on-site engineering test support and post-test analysis.  Provisions are made in
the  contract  for  minimum  monthly  payments in the event of customer schedule
slippage  as well as additional levels of support via engineering change orders,
if  required.  The total contract value is estimated at $429,000.  Approximately
$106,000 of revenue was realized in the three-months ending March 31, 2004, with
approximately  $63,000  from engineering change orders and the remaining $43,000
from  the  contract.

Also  on  July 9, 2003, we were awarded a second contract by the Missile Defense
Agency  ("MDA") to explore the use of micro-satellites ("microsats") in national
missile  defense.  Our  microsats are operated over the Internet and are capable
of pointing and tracking targets in space or on the ground.  This study explored
fast  response  microsat  launch  and  commissioning;  small,  low-power passive
sensors;  target  acquisition  and  tracking;  formation  flying  and local area
networking  within a cluster of microsats; and an extension of our proven use of
the  Internet for on-orbit command, control and data handling.  The contract was
successfully  concluded  on  February  27,  2004.  The  total contract value was
$800,000  with  approximately  $319,000  of revenue realized in the three-months
ending  March  31,  2004.  The total value of our microsatellite studies for MDA
was  over  $1  million  in  2003.  This  second  contract   was  considered   an
investigatory  phase  by  MDA.

                                       14
<PAGE>

On  July  9,  2003, we were awarded a Phase I Small Business Innovation Research
("SBIR")  contract  by  Air  Force Research Lab ("AFRL") to design and begin the
development of the SpaceDev Streaker(TM) small launch vehicle ("SLV").  SpaceDev
Streaker(TM)  will  be  designed to responsively and affordably lift up to 1,000
pounds  to  Low  Earth  Orbit ("LEO").  The SpaceDev Streaker(TM) SLV concept is
based  on  a proprietary combination of technologies to increase the performance
of  hybrid  rocket  motor technology.  Hybrid rocket motors are a combination of
solid   fuel   and   liquid   oxidizer,  and  can  be  relatively  safe,  clean,
non-explosive,  and  storable,  and  can  be throttled, shut down and restarted.
This  contract  is  valued  at   approximately   $100,000,  is  a  fixed  price,
milestone-based agreement, which should be completed within one year. We believe
that  this  SBIR  will  move  into  Phase II valued at approximately $750,000 of
carry-forward  work  for  us,  plus  an additional $750,000 of funds provided by
Congress  based  on discussions with the Air Force Research Laboratory technical
personnel.  This  money  will  be used to develop and test fire our large Common
Core  Booster  for  the  SpaceDev  Streaker(TM) launch vehicle.  We believe that
there  may be some interest by Congress in providing additional matching funding
to  expand  and  accelerate  the  scope  of  the  work; however, there can be no
assurance  that  such work will be awarded to us.  Revenues for the three-months
ending  March  31,  2004  were  approximately  $30,000.

On  July  9,  2003,  we  were  awarded  a Phase I contract to develop micro- and
nano-satellite  bus  and  subsystem  designs. This AFRL SBIR contract, valued at
approximately $100,000, will enable us to explore the further miniaturization of
our  unique  and  innovative  microsat  subsystems.  It  will  also enable us to
explore  ways  to  reduce  the  time  and cost to build small satellites through
further  standardization  in order to help define de facto standards for payload
hardware  and software interfaces.  The contract is fixed price, milestone-based
and  should  be  completed within one year.  We believe that this SBIR will move
into  Phase  II  valued  at approximately $750,000 of carry-forward work for us;
however,  there  can  be  no  assurance  that  such  work will be awarded to us.
Revenues  for the three-months ending March 31, 2004 were approximately $24,000.

On  December  18,  2003,  we  were  awarded  a  contract by the Defense Advanced
Research  Projects  Agency  ("DARPA")  for  the  study  of Novel Satcom Microsat
Constellation  Deployment.  The  contract  is  a  milestone-based,  fixed  price
contract  with  total consideration of approximately $200,000.  Revenues for the
three-months  ending  March  31,  2004 were approximately $91,000.  We expect to
either expand this award or obtain new awards under this program; however, there
can  be no assurance as to whether such work will be awarded to us or, if it is,
the  amounts  or  terms  of  the  awards.

On  April  30,  2002,  we  were  awarded  Phase  I  of  a  contract to develop a
Shuttle-compatible  propulsion  module  for  the AFRL.  We received an award for
Phase  II of the contract on March 28, 2003, and will use the project to further
expand  our  product  line   to  satisfy   commercial   and   government   space
transportation requirements.  The first two phases of the contract (including an
additional  add-on  option) are worth up to approximately $2.5 million, of which
$100,000 was awarded for Phase I, and approximately $1.4 million was awarded for
Phase  II.  AFRL Phase II is a cost-plus fixed fee contract.  We anticipate that
to  complete  AFRL  Phase  II,  approximately four months of additional time and
approximately $240,000 of additional funding will be required.  We are currently
negotiating  with  AFRL  for  the extension of Phase II in order to complete the
work,  which  we  anticipate  will be granted in the second quarter of 2004.  In
addition  to  the  Phase  I  and  Phase  II  awards,  there  is  an option worth
approximately  $1  million  pending initiation.  The option has been awarded and
work  will begin once certain milestones are met to the satisfaction of the AFRL
project manager.  The additional funding to complete AFRL Phase II may come from
the  $1  million option; thereby, requiring a reduction in the original scope of
the  option.  Revenues  for  the  three-months   ending  March   31,  2004  were
approximately  $412,000  for  AFRL  Phase  II.

                                       15
<PAGE>

In  November  1999,  we won a $4.9 million turnkey mission contract by the Space
Sciences  Laboratory  ("SSL") at UCB.  We were competitively selected by UCB/SSL
to  design,  build,  integrate,  test  and  operate,  for  one  year,  a   small
NASA-sponsored scientific, Earth-orbiting spacecraft called CHIPSat.  CHIPSat is
the  first  and  only  successful  mission  of  NASA's low-cost University-Class
Explorer  ("UNEX") series to date.  CHIPSat launched as a secondary payload on a
Delta-II  rocket  on   January  12,   2003.  The   satellite   achieved   3-axis
stabilization,  meaning  it  was  pointing  and  tracking  properly,  with   all
individual  components  and systems successfully operating, and is continuing to
work  well in orbit after one year.  In 2000, we reviewed the contract status at
year-end and determined that the total estimated costs at the end of the program
would  exceed  the  likely  revenue.  As  a  result,  we  accrued  a   loss   of
approximately  $860,000 based on the expected contract modification of $600,000,
which  was  approved  on June 15, 2001.  On November 28, 2001, a second contract
modification  was signed with UCB, which added approximately $1.2 million to the
contract  as  well  as  an increase in contract scope.  This increased the total
contract  revenue  to  approximately $6.8 million and reduced the total expected
loss  on  the  contract  to  approximately $460,000.  During 2002, an additional
contract  modification  for  approximately  $400,000  was  signed,  which   also
increased  the  contract  value  and  increased the scope of the contract to the
current  value  of  the  CHIPSat  project of approximately $7.4 million, thereby
increasing  the  total  expected loss to approximately $514,000.  In retrospect,
some  of  the  CHIPSat  expenses  creating  the loss could have been recorded as
research  and development costs associated with our ongoing satellite design and
development  programs.  As  of  December 31, 2003, the total contract costs were
expended,  mainly  as cost of goods sold.  The original support contract expired
on December 31, 2003.  CHIPSat is still operating successfully and providing UCB
with  new  and  interesting  data.  UCB  requested  to extend the program and we
recently  negotiated a new time and materials contract in the form of a purchase
order  with  UCB  for  continuing  support  of  this  project.  Revenues for the
three-months  ending  March  31,  2004  and  2003 were approximately $12,000 and
$112,000,  respectively.

RESULTS  OF  OPERATIONS

Please  refer to the consolidated financial statements, which are a part of this
report,  for  further  information  regarding  the  results  of  operations.

  Three-Months Ending March  31, 2004 -vs.- Three-Months Ending March 31, 2003

During the three-months ending March 31, 2004, we had net sales of approximately
$1,015,000  as  compared  to  net  sales  of approximately $533,000 for the same
three-month  period in 2003, an increase of over 90%.  Sales increased primarily
due  to the addition and expansion of government contacts such as those for AFRL
and  MDA,  which  created  new  revenue  opportunities  for us.  Revenues in the
three-months ending March 31, 2004 were comprised of approximately $412,000 from
AFRL  Phase  II,  $319,000  from  MDA Phase II, $106,000  from the new exclusive
proprietary  propulsion  contracts  (SpaceShipOne),  $91,000   from   our  DARPA
contract, $54,000 from the two SBIR contracts listed above, and $33,000 from all
other  programs.  During  the  same  period  of  2003,  sales  were comprised of
approximately  $237,000  from  the  SpaceShipOne contract, $157,000 from the MDA
project,  $112,000  from  the  CHIPSat program, $20,000 from Phase I of the AFRL
project  and  approximately  $7,000  from  all  other  programs.

For  the  three-months  ending March 31, 2004, we had costs of sales (direct and
allocated costs associated with individual contracts) of approximately $807,500,
or  79.6%  of  net  sales, as compared to approximately $462,000 or 86.6% of net
sales,  during  the  same  period  in  2003.  The  increase in cost of sales was
primarily due to higher revenues since the majority of our current contracts are
cost  plus  fixed  fee  contracts as well as the implementation of stronger cost
controls  and  project  monitoring.  We  continue to focus efforts on developing
project  management  skills and reports to assist in the efficient and effective
management  of  our  projects.  The gross margin percentage for the three-months
ending March 31, 2004 was 20.4% of net sales, an increase of 7% of net sales, as
compared  to  13.4%  of  net  sales  for  the  same  three-month period in 2003.

We  experienced  a decrease of approximately $240,000 in operating expenses from
approximately $435,000, or 81.6% of net sales, for the three-months ending March
31,  2003  to approximately $195,000 or 19.2% of net sales, for the three-months
ending  March  31,  2004.  Operating expenses include general and administrative
expenses  ("G&A"),  marketing  and  sales  expenses and research and development
expenses  as  well  as  stock  and  stock  option  based  compensation expenses.
Fluctuations in operating expenses for 2004 from 2003 are primarily attributable
to  the  following:

                                       16
<PAGE>

-     Marketing  and  sales  expenses  increased during the first three-month of
2004  compared  to the same period in 2003.  The increase in marketing and sales
expense, from approximately $65,000, or 12.2% of net sales, for the three months
ending  March  31,  2003, to approximately $99,000, or 9.8% of net sales, during
the  same period in 2004, mainly due to our decision to expand our marketing and
sales  department.

-     Research  and  development  ("R&D")  expenses  increased  during the first
three-months  of  2004  from  no  research  and  development  costs  in  2003 to
approximately $15,000 or 1.5% of net sales for the three-months ending March 31,
2004.

-     The  decrease of approximately $289,000 in G&A expenses from approximately
$370,000 for the three-months ending March 31, 2003 to approximately $81,000 for
the  same  three month period in 2004 was primarily due to software amortization
expense  of $34,500 during the first quarter of 2003, which is no longer present
in  2004  as  well as a more appropriate classification of certain expenses into
cost  of  goods  sold.

Non-operating  expense  (income)  consists  of  interest  expense, non-cash debt
discount  expense  and  deferred  gain  on the sale of our building, as well as,
other  loan  fees  and  expenses.

-     Interest  expense  for the three-months ending March 31, 2004 and 2003 was
approximately  $19,800, or 2.0% of net sales, and $20,400, or 3.8% of net sales,
respectively.  The  slight  decrease  was  due  to  lower  interest  rates and a
reduction in settlement notes and capital leases.  Interest expense is comprised
of  interest  on  our  note  to  our  CEO,  interest  on  our  revolving  credit
facility/convertible  debt  and interest on our settlement notes/capital leases.
For  the  three-months  ending  March 31, 2004 and 2003, interest expense on our
note  to  our  CEO  was $14,600 and $10,000, respectively.  For the three-months
ending  March  31,  2004  and  2003,  interest  expense  on our revolving credit
facility/convertible  debt  was  $4,000  and $2,400, respectively.  And interest
expense on our settlement notes/capital leases for the three-month period ending
March  31,  2004  and  2003  were  $1,200  and  $8,000,  respectively.

-     We  recognized  approximately  $29,300 and $19,500 of the deferred gain on
the sale of the building during the three-months ending March 31, 2004 and 2003,
respectively,  and  we  will continue to amortize the remaining deferred gain of
approximately  $1,036,000  into  non-operating  income over the remainder of the
lease.  In  relation to the gain we received on the building, we also accrued an
income  tax  payable expense of $40,000 at March 31, 2003 of which none remained
at  December  31,  2003.  The  reduction  of the income tax payable was due to a
change  in  estimate  based  on  the  loss  we  experienced  during  the  year.

-     During  the three-months ending March 31, 2003, we expensed in conjunction
with  our  convertible  notes,  part  of  the existing convertible debt discount
related  to  warrants  that  accompanied  the  convertible debt issue in 2002 of
approximately  $475,000, of which approximately $100,000 was expensed during the
three-months  ended  March  31,  2003  and  paid or converted in September 2003.
There  was  no  debt  discount  for  the  first  three-months  of  2004.

-     We  realized  loan  fees  related  to  our  revolving  credit facility and
expenses  related  to  the conversion of notes to common stock below fair market
value  of approximately $464,000 for the three-months ending March 31, 2004.  We
accrued  approximately  $4,000 of interest for the three-months ending March 31,
2004.  We  anticipate  additional  expenses  related  to  similar note to equity
conversions.

During  the  three-months  ending  March  31,  2004,  we  incurred a net loss of
approximately  $442,500,  or  43.6%  of  net  sales,  compared  to a net loss of
approximately  $505,000,  or 94.8% of net sales, for the same three-month period
in  2003.  During  the three-months ending March 31, 2004, we incurred an EBITDA
(earnings  before interest taxes depreciation and amortization) of approximately
$28,000,  or  2.7%  of  net  sales,  compared to an EBITDA loss of approximately
<$306,000>,  or  <30.2>  %  of  net sales, for the three-months ending March 31,
2003.

                                       17
<PAGE>

The  following  table  reconciles EBITDA to net loss for the three-months ending
March  31,  2004  and  2003, respectively:

<TABLE>
<CAPTION>

<S>                                     <C>              <C>

FOR THE THREE-MONTHS ENDING. . . . . .  MARCH 31, 2004   March 31, 2003
                                            (UNAUDITED)      (Unaudited)
--------------------------------------  ---------------  ---------------
NET LOSS (INCOME). . . . . . . . . . .        (442,549)        (505,087)
--------------------------------------  ---------------  ---------------

Interest Expense . . . . . . . . . . .          19,788           20,449
Non-Cash Interest exp. (Debt Discount)               -          100,455
Gain on Building Sale. . . . . . . . .         (29,318)         (19,545)
 Loan Fee - Equity Conversion. . . . .         464,000                0
Provision for income taxes . . . . . .               -           40,000
Depreciation and Amortization. . . . .          15,954           57,696
--------------------------------------  ---------------  ---------------
EBITDA . . . . . . . . . . . . . . . .          27,875         (306,032)
--------------------------------------  ---------------  ---------------
</TABLE>

EBITDA  should  not be considered as an alternative to net income or loss (as an
indicator  of  operating  performance)  or  as an alternative to cash flow (as a
measure  of  liquidity or ability to service debt obligations).  We believe that
EBITDA  provides  an  important additional perspective on our operating results,
our ability to service our long-term obligations, our ability to fund continuing
growth,  and  our  ability  to  continue  as  a  going  concern.

                                       18
<PAGE>

LIQUIDITY  AND  CAPITAL  RESOURCES

  CASH POSITION FOR THREE-MONTHS ENDING MARCH 31, 2004 -VS.- THREE-MONTHS ENDING
                                 MARCH 31, 2003

Net  cash  increased  during  the  three-months  ending   March  31,   2004   by
approximately  $390,000,  compared  to  approximately  $183,000  for  the   same
three-month  period  in  2003.  Net  cash  used  in operating activities totaled
approximately $161,000 for the three-months ending March 31, 2004, a decrease of
approximately  $570,000  as compared to approximately $731,000 used in operating
activities  during  the  same  three-month  period  in  2003,  mainly due to the
decrease  in  operating  expenses for the first three-months of 2004 compared to
the  same  period  in  2003.

Net  cash  used  in  investing  activities  totaled approximately $8,000 for the
three-months ending March 31, 2004, compared to $3,147,000 provided by investing
activities  during  the  same  three-month period in 2003.  The decrease in cash
provided  by investing activities is attributable to the sale of the building on
January  31,  2003  and  no  comparable  transaction  in  2004.

Net cash provided by financing activities totaled approximately $559,000 for the
three-months  ending  March  31,  2004,  which  is  an increase of approximately
$2,792,000 from the approximately $2,233,000 used in financing activities during
the  same  period  in  2003.  This is primarily attributable to the repayment of
notes  payable  associated  with  the  building  sale, advances on our revolving
credit  facility, conversions under our revolving credit facility, as well as an
increase  in  issuance  of  common  stock from the exercise of stock options and
warrants.

At March 31, 2004, our cash, which includes cash reserves and cash available for
investment, was approximately $982,000, as compared to approximately $211,000 at
March 31, 2003, an increase of approximately $771,000, mainly due to advances on
and/or  conversions  under  our  revolving  credit  facility.

As  of  March  31,  2004,  our  backlog  of  funded  and non-funded business was
approximately  $45 million due to the follow-on, five-year contract from MDA for
up  to  $43,362,271.  We expect approximately $2 million in revenue from the MDA
program  in  2004.  Although the MDA contract was awarded to us, there can be no
assurance  that  the  contract  will  be  continued  through  all phases, and if
continued,  that it will generate the amounts anticipated.  Backlog for the same
three-month  period  in  2003  was  $3.2  million.

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  $2,360,000  and  $2,190,000  as  of March 31, 2004 and
December  31, 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
$170,000 in 2004 from $2,190,000 at December 31, 2003 to $2,360,000 at March 31,
2004.

At  March 31, 2004, the Company has federal and state tax net operating loss and
capital  loss  carryforwards  of  approximately   $4,673,000   and   $1,847,000,
respectively.  The  federal and state tax loss carryforwards will expire in 2023
and 2013, respectively, unless previously utilized.  The State of California has
suspended  the  utilization  of  net  operating  loss  for  2002  and  2003.

                                       19
<PAGE>

CRITICAL  ACCOUNTING  STANDARDS

Our  revenues  transitioned  in 2003 from being primarily fixed-price contracts,
where  revenues  are  recognized  using  the  percentage-of-completion method of
contract  accounting  based  on  the  ratio  of  total  costs  incurred to total
estimated costs, to cost-plus fixed fee contracts, where revenues are recognized
as  costs  are  incurred  and  services  are performed.  Losses on contracts are
recognized  when  they  become  known and reasonably estimable (see Notes to the
Consolidated Financial Statements).  Actual results of contracts may differ from
management's  estimates  and  such  differences  could   be  material   to   the
consolidated financial statements.  Professional fees are billed to customers on
a  time-and-materials  basis,  a  fixed-price  basis or a per-transaction basis.
Time-and-materials  revenues are recognized as services are performed.  Deferred
revenue  represents amounts collected from customers for services to be provided
at  a  future  date.  Research  and  development costs are expensed as incurred.

In October 1995, the Financial Accounting Standards Board (FASB) issued SFAS No.
123,  "Accounting  for  Stock-Based  Compensation."  We  adopted SFAS No. 123 in
1997.  We  have  elected  to  measure  compensation  expense for our stock-based
employee  compensation  plans using the intrinsic value method prescribed by APB
Opinion  25,  "Accounting  for  Stock Issued to Employees" and have provided pro
forma  disclosures  as if the fair value based method prescribed in SFAS No. 123
has  been  utilized.  (See  Notes to the Consolidated Financial Statements.)  We
have  valued  our  stock,  stock options and warrants issued to non-employees at
fair  value  in accordance with the accounting prescribed in SFAS No. 123, which
states  that  all  transactions  in which goods or services are received for the
issuance of equity instruments shall be accounted for based on the fair value of
the  consideration  received or the fair value of the equity instruments issued,
whichever  is  more  reliably  measurable.

SFAS  No.  148,  Accounting  for  Stock-Based  Compensation  -  Transition   and
Disclosure,  which amends SFAS No. 123, Accounting for Stock-Based Compensation,
was published by Financial Accounting Standards Board on December 31, 2002.  The
effective  date of FASB No. 148 is December 15, 2002.  SFAS No. 123 prescribes a
"fair  value"  methodology to measure the cost of stock options and other equity
awards.  Companies  may  elect  either  to  recognize  fair  value   stock-based
compensation  costs  in  their financial statements or to disclose the pro forma
impact  of  those  costs  in the footnotes.  We have chosen the latter approach.
The  immediate  impact of SFAS No. 148 is more frequent and prominent disclosure
of  stock-based  compensation  costs, starting with financial statements for the
year  ended  December  31,  2002 for companies whose fiscal year is the calendar
year.  SFAS  No.  148  also  provides  some flexibility for the transition, if a
company  chooses  the  fair-value  cost  recognition  of employee stock options.

CASH  POSITION  AND  REMOVAL  OF  GOING  CONCERN

As  of  March  31,  2004,  we believe that the opinion our auditors expressed in
their formal auditors' opinion dated February 11, 2004 (except for Note 11 as to
which  the  date is April 5, 2004) is still accurate.  PKF stated, that in their
opinion, based on their audit, our consolidated financial statements referred to
herein  present  fairly,  in  all  material respects, the consolidated financial
position  of  SPACEDEV,  INC.  AND  SUBSIDIARY  as of December 31, 2003, and our
consolidated results of operations and cash flows for the year then ended are in
conformity with accounting principles generally accepted in the United States of
America.  Our ability to continue as a going concern depends upon our ability to
ultimately implement our plan, which includes (but is not limited to) generation
of  substantial  new revenue from MDA by successfully performing under the newly
awarded  contract  and  continuing  to  attract  and successfully complete other
government  and  commercial  contracts,  development  of  a  project  management
expertise  to  profitably execute on new business contracts and reduction of the
working  capital deficit by raising additional capital.  We are working with our
revolving  credit facility provider and investigating the possibility of raising
additional  capital  to further support operations as new contracts and business
opportunities  materialize.  The  prospective  funding,  as well as new business
opportunities,  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 or contracts as needed or, if such funding or contracts are
available,  that we can obtain them on terms favorable to us.  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 and industry in
which  we  operate.

                                       20
<PAGE>

On  January  31,  2003,  we  closed escrow on the sale of our facility in Poway,
California  and  entered  into  a  ten-year leaseback.  The selling price of the
facility  was  $3.2  million.  The total debt repayment from the transaction was
approximately $2.4 million.  The net proceeds to us for working capital purposes
was  approximately  $636,000.

At  the  end  of  2002,  we  raised  $475,000  from certain of our directors and
officers  by  issuing  2.03% convertible debentures.  The convertible debentures
entitled  the  holder  to convert the principal and unpaid accrued interest into
our  common stock when the note matured.  The original maturity on the notes was
six  (6)  months  from issue date; however, on March 19, 2003, the maturity date
was  extended to twelve (12) months from issue date.  The convertible debentures
were exercisable into common shares at a conversion price that equals the 20-day
average  asking  price  less 10%, which was established when the debentures were
issued,  or  the  initial conversion price.  Concurrent with the issuance of the
convertible debentures, we issued warrants to purchase up to 1,229,705 shares of
our  common  stock to the subscribers.  These warrants are exercisable for three
(3)  years  from  the  date  of  issuance  at the initial exercise price, or the
initial  conversion  price  on  the debentures.  On September 5, 2003, we repaid
one-half  of  the  convertible  notes,  with the condition that the note holders
would  convert  the  other half.  Also, as a condition of the partial repayment,
the  note holders were required to relinquish one-half of the 1,229,705 warrants
previously  issued.  As  additional  consideration for the transaction, the note
holders  were  offered 5% interest on their notes, rather than the stated 2.03%.
All  the  note holders accepted the offer and the convertible notes were retired
in  2003.

During  the three-months ending March 31, 2003, we raised approximately $426,000
from  accredited  investors  by  selling  861,267  units of our common stock and
common  stock  purchase  warrants  under in a private placement offering ("PPO")
made  under  Section  4(2)  of  the  Securities  Act  of  1933, and Rule 506, to
accredited  investors  only.  We  subsequently  closed  the  PPO.

We have sustained ourselves over the last few years with a mixture of government
and  commercial  contracts  and  capital  raised  in  the  private  market.   In
particular,  we anticipated and received an award for AFRL Phase II on March 28,
2003.  AFRL  Phase  II  is  a cost-plus contract, which has required us to incur
certain costs in advance of regular contract reimbursements from AFRL.  Although
we  have  needed  a  certain  amount  of  cash  to  fund advance payments on the
contract,  we  have  been  entitled, as a small business concern, to recover our
costs  on  a  weekly  basis  and we established the Laurus Master Fund revolving
credit  facility  at  the end of the second quarter of 2003, in part, to support
our advance payment needs.  In addition, we anticipated and received the initial
investigatory  contract  from  the MDA to explore the use of micro-satellites in
national  missile  defense.  On  February  29,  2004,  we concluded the study to
explore a mission with a fast response microsat launch and commissioning; small,
low-power  passive  sensors; formation flying and local area networking within a
cluster  of  microsats;  and  an extension of our proven use of the Internet for
on-orbit  command,  control and data handling.  The purchase order was valued at
$800,000  and  was a cost plus fixed fee agreement.  The final retention payment
of approximately $33,000 will be made after the final report is approved by MDA.
In  anticipation  that  the  new $43,362,271 contract would be awarded to us, we
agreed  to  begin  work on the MDA program on March 1, 2004.  MDA agreed to make
the  effective  date  of the agreement March 1, 2004 and it was awarded to us on
March 31, 2004.  Our newly awarded $43,362,271 MDA contract is a phased contract
and  we  can  give no assurance that the entire contract will be realized by us,
even though we have begun work on the next phase and we currently anticipate the
successful  completion  of  future  phases.

On  March  31,  2004, we negotiated an amendment to our Secured Convertible Note
dated  June  3, 2003 with the Laurus Master Fund to add a fixed conversion price
at  $0.85  per  share for the next $500,000 converted under the revolving credit
facility,  after  the  initial  $1  million  conversion.  In  exchange  for  the
amendment,  Laurus  granted  us a six-month waiver to utilize the full revolving
credit  facility in advance of eligible accounts.  At March 31, 2004, Laurus had
converted  500,000 shares under the revolving credit facility, which represented
approximately  $275,000  of  debt  converted  to  equity.

We realized a small positive cash flow from operations during the fourth quarter
of  2003 and first quarter of 2004.  We are focusing attention on our EBITDA, as
an  indicator  of  our  improving  financial performance.  We expect to continue
realizing  net  losses  in  2004, primarily due to non-cash interest expense and
other  fees related to our revolving credit facility.  Therefore, by focusing on
EBITDA  as one important measure of performance, we can illustrate the improving
results  of  our core business.  We recorded EBITDA of approximately $28,000 for
the  three-month  period ending March 31, 2004, compared to a negative EBITDA of
$306,000  for the same period in 2003, an improvement of approximately $334,000.

                                       21
<PAGE>

In addition, we are focusing attention on our profits or losses from operations,
as  an  additional indicator of our improving financial performance.  Therefore,
by  focusing  on  operating results as another important measure, we can monitor
the  performance  of our core business.  We recorded a profit from operations of
approximately  $12,000  in  the  first  quarter of 2004, compared to a loss from
operations  of  $364,000  in  the first quarter of 2003.  Profits or losses from
operations  are  derived  from  all expenses excluding interest, taxes, non-cash
expenses  tied  to  our  revolving  credit facility and other non-cash financing
activities.

We  expect  to  continue  showing  a  positive  trend in cash flow and operating
profits  in 2004.  We anticipate that with the projected increase in revenue and
backorders  from  near  term  contracts,  combined with our fiscally responsible
budget  and project controls and borrowings under our revolving credit facility,
that  net  positive  cash  flow  from operations will be sufficient to fund both
operations  and  capital  expenditures in 2004.  There is no assurance, however,
that  we  will achieve or sustain any positive cash flow or profitability now or
thereafter.

RECENT  ACCOUNTING  PRONOUNCEMENTS

There  were  no  recent Accounting Pronouncements that affect the Company during
the  first  quarter of 2004.  For past pronouncements please refer the company's
10KSB  filed  on  April  6,  2004.

FORWARD-LOOKING  STATEMENTS  AND  RISK  ANALYSIS

During  the  first  three-months  of  2004, we submitted two bids for government
programs,  continued  our work with the US Congress to identify directed funding
for  our programs and are actively working to win several significant commercial
programs.  We  believe  that  we  will  win  some of these programs, which would
enable  us to continue to grow and broaden our business base, although there can
be  no  assurance  that  these  contracts  will  be  awarded  to  us.

To  date,  we  have  maintained a mix of government and commercial business.  In
2003,  we  had about 82% government or government-related work.  In 2002, we had
about  64% government and government-related work.  In 2004, we expect the ratio
to  be  about 90% government or government-related work.  We will continue to do
both  government  and  commercial  business and anticipate the mix of government
revenues  to  continue to be above 70% for the next several years as we increase
our  government  and commercial marketing efforts for both of our product lines.
Currently,  we  are  focusing  on  the domestic U.S. government market, which we
believe  is  only  about  one-half  of  the  global  government  market  for our
technology,  products  and  services.  Although  we  are interested in exploring
international  revenue  and  contract opportunities, we are restricted by export
control  regulations,  e.g., International Traffic in Arms Regulations ("ITAR"),
which  may  limit our ability to develop market opportunities outside the United
States.

While  we  do  not  expect  a  reduction  of government sales, a majority of our
government  work  is  contract  related.  We are beginning to develop commercial
products  with  the  long-term  idea  and  vision of becoming a product-oriented
company;  however,  in  the short-term, a majority of our revenue is expected to
come  from  government  cost plus fixed fee and firm fixed price contracts.  Our
definition  of  short-term is the next three to five years and long-term is five
to ten years and beyond.  We anticipate winning contracts in both the government
and  commercial  market  segments,  although  there can be no assurance that the
contracts  will  be  awarded  to  us.  If  they  are not awarded to us, based on
current  trends and proposals, we believe that we can offset fluctuations in one
market  segment  with  contracts  from  the other; however, our inability to win
business in both markets would have a negative effect on our business operations
and  financial  condition.

We  believe that we will experience an accelerated growth in sales over the next
few  years.  At  this  time, over 90% of the forecasted sales for 2004 are under
contract  or  near  contract  award.  There  is no guarantee and there can be no
assurance  that  we  will win enough new business to achieve our targeted growth
projection  or to maintain our positive cash flow position.  Additionally, there
is  no  guarantee that awarded contracts will not be altered or terminated prior
to  us  recognizing  our projected revenue from them.  Many contracts have "exit
ramps,"  i.e., provides the customer the right to terminate the contract for any
of a variety of reasons, including but not limited to non-performance by us.  We
do  not  believe  that  any  of our contracts will be terminated early; however,
there  can be no assurance that they will not be terminated early in the future.
Finally,  we  do  not  believe  that  significant  capital  expenditures will be
required  to achieve this increase in sales; however, additional capital will be
required  to  support  and  sustain  our  growth.

                                       22
<PAGE>

During  the  year  ended  December  31,  2003,  we raised approximately $654,000
through a combination of private sales of our stock (approximately $426,000) and
conversions  on  our revolving credit facility (approximately $228,000).  During
the  year  ended  December  31,  2002, we raised approximately $475,000 from our
convertible  debt  offering, of which $237,500 plus interest was repaid in 2003.
To  execute  our  strategy  of growing our Company with small, capable, low-cost
micro and nano satellites, hybrid propulsion products and new commercial revenue
sources,  we  require  additional  funding  and/or  the  win of both significant
government  and commercial programs.  We believe investor or customer funding of
$5  to  $15  million  may  be  required,  which could come from a combination of
private  and/or public equity placements or government and commercial customers.
At  this  time,  we  do not have any ongoing private or public equity offerings.

The  amount  of  capital  we  need to raise is dependent upon many factors.  For
example,  the need for additional capital will be greater if (i) we do not enter
into  agreements  with  our  customers  on the terms we anticipate; (ii) our net
operating deficit increases because we incur significant unanticipated expenses;
or (iii) we incur additional costs from modifying our microsatellite products or
our  hybrid-related  propulsion systems to meet changed or unanticipated market,
regulatory, or technical requirements.  If these or other events occur, there is
no  assurance  that  we  could raise additional capital on favorable terms, on a
timely  basis  or  at all.  If additional capital is not raised, it could have a
significant  negative effect on our business operations and financial condition.

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

Our  business  partially depends on activities regulated by various agencies and
departments of the U.S. government and other companies and agencies that rely on
the  federal  government.  Recently,  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  is being 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, 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.

                                       23
<PAGE>

ITEM  3.  CONTROLS  AND  PROCEDURES

Within  90  days  prior  to  the  filing  date of this report, we carried out an
evaluation,  under the supervision and with the participation of our management,
including  our  Chief  Executive  Officer  and  Chief  Financial Officer, of the
effectiveness  of  the  design  and  operation  of  our  disclosure controls and
procedures.  Based  upon  that evaluation, our Chief Executive Officer and Chief
Financial Officer have concluded that our disclosure controls and procedures are
effective  to  ensure  that  information  required  to be disclosed by us in the
reports  that  we file under the Exchange Act is accumulated and communicated to
management,  including  our Chief Executive Officer and Chief Financial Officer,
as  appropriate  to allow timely decisions regarding required disclosure.  There
have  been  no  significant changes in our internal controls or in other factors
that  could significantly affect internal controls subsequent to the date of our
evaluation,  including  any  significant actions regarding any deficiencies.  We
intend  to  review  our controls and procedure regularly with our management and
Board  of  Directors.

                                       24
<PAGE>

                          PART II -- OTHER INFORMATION

ITEM  1.     LEGAL  PROCEEDINGS

On  June  18,  2001,  we entered into a relationship with two individuals (doing
business  as  EMC  Holdings  Corporation  ("EMC")),  whereby  EMC was to provide
certain consulting and advisory services to us in exchange for our common stock.
EMC received the first installment of 500,000 shares of our common stock on June
26,  2001.  Total  expense  for the initial stock issuance through September 30,
2001 was valued at approximately $455,000.  Pursuant to a demand for arbitration
filed by us on November 7, 2001, we sought the return of all or a portion of the
shares  issued  to EMC.  EMC filed a its own claim with the American Arbitration
Association  on  November  13, 2001, alleging that we owed EMC $118,000 in fees,
plus  damages.

A  three-day  arbitration  hearing was held in May and June 2002 with respect to
claims arising out of consulting and advisory service agreements between EMC and
us.  On  July  17, 2002, an interim award was issued in favor of us against EMC,
ordering  the  return  of  the initial installment of 500,000 shares and denying
EMC's claim for $118,000.  On October 22, 2002, a status conference was held and
a  tentative  final award was issued again in the favor of us.  Included in this
tentative  final  ruling  was  an award of approximately $83,000 in attorney and
arbitration  fees to us.  The tentative final ruling became effective on October
29,  2002, and was submitted to the Superior Court of California, Orange County,
for  entry  of  judgment.

Because collection of the attorney and arbitration fees award is not assured, we
expensed  all  of our fees related to this matter.  Any recovery of fees will be
recorded  as  income in the period they are received.  The return of the 500,000
shares,  as  provided in the interim award issued on July 17, 2002, was recorded
in  the  third  quarter  of 2002 as a reversal of the original expense recorded.
See  "Results  of  Operations."  In  June 2003, we ceased efforts to recover the
awarded  fees,  as it was determined that the cost to pursue collection exceeded
the  likelihood  of  collection.

ITEM  2.     CHANGES  IN  SECURITIES

On  August  8,  2003,  we  issued  10,000  shares of our common stock to Laurus,
pursuant  to  our  Security  Agreement,  Secured  Convertible Note, Registration
Rights  Agreement  and  Common  Stock Purchase Warrant with Laurus dated June 3,
2003, for a corresponding $5,500 reduction in our revolving credit facility.  As
part  of  the  transaction,  the  shares were registered with the Securities and
Exchange  Commission  ("SEC")  for  public  resale  on  August  6,  2003.

On  August  19, 2003, pursuant to our 1999 Stock Option Plan, we granted options
to purchase up to 50,000 shares of our common stock to one of our new engineers.
These  options  were  issued with an exercise price of $1.00 per share (based on
the  closing  price  of  our  common stock on the date of grant), will vest over
five  years  and  will  expire  on  the six-year anniversary date of the date of
grant.

On  September  1,  2003, we issued warrants to purchase 200,000 shares of common
stock  to  Dian  Grisel  of the Investor Relations Group ("IRG"), for public and
investor relations services.  The warrants will vest ratably over one year at an
exercise  price  of  $1.05  per  share.

On  September  23,  2003, we issued 50,000 shares of our common stock to Laurus,
pursuant  to  our  Security  Agreement,  Secured  Convertible Note, Registration
Rights  Agreement  and  Common  Stock Purchase Warrant with Laurus dated June 3,
2003,  for  a  corresponding $27,500 reduction in our revolving credit facility.
As  part  of the transaction, the shares were registered with the Securities and
Exchange  Commission  ("SEC")  for  public  resale  on  August  6,  2003.

On  September  29,  2003,  pursuant  to  our  1999 Stock Option Plan, we granted
options  to  purchase  up to 50,000 shares of our common stock to one of our new
engineers.  These  options were issued with an exercise price of $0.94 per share
(based on the closing price of our common stock on the date of grant), will vest
over  five years and will expire on the six-year anniversary date of the date of
grant.

                                       25
<PAGE>

On  October  3,  2003,  we  issued  55,000 shares of our common stock to Laurus,
pursuant  to  our  Security  Agreement,  Secured  Convertible Note, Registration
Rights  Agreement  and  Common  Stock Purchase Warrant with Laurus dated June 3,
2003,  for  a  corresponding $30,250 reduction in our revolving credit facility.
As  part  of the transaction, the shares were registered with the Securities and
Exchange  Commission  ("SEC")  for  public  resale  on  August  6,  2003.

On  October  14,  2003,  we issued 100,000 shares of our common stock to Laurus,
pursuant  to  our  Security  Agreement,  Secured  Convertible Note, Registration
Rights  Agreement  and  Common  Stock Purchase Warrant with Laurus dated June 3,
2003,  for  a  corresponding $55,000 reduction in our revolving credit facility.
As  part  of the transaction, the shares were registered with the Securities and
Exchange  Commission  ("SEC")  for  public  resale  on  August  6,  2003.

On  October 20, 2003, pursuant to our 1999 Stock Option Plan, we granted options
to purchase up to 50,000 shares of our common stock to one of our new engineers.
These  options  were  issued with an exercise price of $1.15 per share (based on
the closing price of our common stock on the date of grant), will vest over five
years  and  will  expire  on the six-year anniversary date of the date of grant.

On  November  6,  2003,  pursuant to our independent director compensation plan,
adopted  January  16,  2000, we granted options to purchase 5,000 shares each to
Howell  M.  Estes,  III  and Scott McClendon and 10,000 shares each to Curt Dean
Blake,  Robert  Walker  and  Wesley  T.  Huntress  for  their   attendance   and
participation at the Board of Directors meeting held on November 6, 2003.  These
options  were  issued  with  an exercise price of $0.94 per share, (based on the
closing  price  of  our  common  stock on the date of grant), will vest over two
years  and  will  expire on the five-year anniversary date of the date of grant.

On November 11, 2003, pursuant to our 1999 Stock Option Plan, we granted options
to purchase up to 30,000 shares of our common stock to one of our new engineers.
These  options  were  issued with an exercise price of $0.95 per share (based on
the closing price of our common stock on the date of grant), will vest over five
years  and  will  expire  on the six-year anniversary date of the date of grant.

On  December 8, 2003, pursuant to our 1999 Stock Option Plan, we granted options
to  purchase  up to 250,000 shares of our common stock to our new vice president
of  engineering.  These options were issued with an exercise price of $1.05  per
share  (based  on  the  closing price of our common stock on the date of grant),
will  vest  over five years and will expire on the six-year anniversary date  of
the  date  of  grant.

On  December  11,  2003, we issued 100,000 shares of our common stock to Laurus,
pursuant  to  our  Security   Agreement,  Secured Convertible Note, Registration
Rights  Agreement  and  Common  Stock Purchase Warrant with Laurus dated June 3,
2003,  for  a  corresponding $55,000 reduction in our revolving credit facility.
As  part  of the transaction, the shares were registered with the Securities and
Exchange  Commission  ("SEC")  for  public  resale  on  August  6,  2003.

On  December  29,  2003, we issued 100,000 shares of our common stock to Laurus,
pursuant  to  our  Security  Agreement,  Secured  Convertible Note, Registration
Rights  Agreement  and  Common  Stock Purchase Warrant with Laurus dated June 3,
2003,  for  a  corresponding $55,000 reduction in our revolving credit facility.
As  part  of the transaction, the shares were registered with the Securities and
Exchange  Commission  ("SEC")  for  public  resale  on  August  6,  2003.

On  January  9,  2004,  we  issued 300,000 shares of our common stock to Laurus,
pursuant  to  our  Security  Agreement,  Secured  Convertible Note, Registration
Rights  Agreement  and  Common  Stock Purchase Warrant with Laurus dated June 3,
2003,  for  a corresponding $165,000 reduction in our revolving credit facility.
As  part  of the transaction, the shares were registered with the Securities and
Exchange  Commission  ("SEC")  for  public  resale  on  August  6,  2003.

                                       26
<PAGE>

On February 23, 2004, we issued 7,076 shares of our common stock pursuant to our
1999  Stock  Purchase  Plan  to  four  employees  enrolled  in  the   plan   for
approximately  $6,400  in  cash.

On  March  3,  2004,  we  issued  200,000  shares of our common stock to Laurus,
pursuant  to  our  Security  Agreement,  Secured  Convertible Note, Registration
Rights  Agreement  and  Common  Stock Purchase Warrant with Laurus dated June 3,
2003,  for  a corresponding $110,000 reduction in our revolving credit facility.
As  part  of the transaction, the shares were registered with the Securities and
Exchange  Commission  ("SEC")  for  public  resale  on  August  6,  2003.

Pursuant to our independent director compensation plan, adopted January 16, 2000
and modified March 25, 2004, we granted options to purchase 5,000 shares each to
Curt Dean Blake, Wesley T. Huntress and Scott McClendon for their attendance and
participation  at  the  Audit  Committee  Meeting held on March 23, 2004.  These
options  were  issued  with  an exercise price of $0.92 per share, (based on the
closing  price  of  our  common  stock  on  the  date  of grant), will vest over
two-years  and  will  expire  on  the three-year anniversary date of the date of
grant.

Pursuant to our independent director compensation plan, adopted January 16, 2000
and  modified  March 25, 2004, we granted options to purchase 12,000 shares each
to Howell M. Estes, III, Wesley T. Huntress and Scott McClendon and 6,000 shares
to  Curt  Dean  Blake  for  their  attendance  and participation at the Board of
Directors  meeting  held  on  March 25, 2004.  These options were issued with an
exercise  price  of  $0.92  per share, (based on the closing price of our common
stock  on  the  date  of grant), will vest over two years and will expire on the
three-year  anniversary  date  of  the  date  of  grant.

On March 25, 2004, pursuant to our 1999 Stock Option Plan, we granted options to
purchase  up  to 1,104,000 shares of our common stock to employees and officers.
These  options  were  issued with an exercise price of $0.92 per share (based on
the  closing  price  of  our  common  stock  on  the date of grant).  Options to
purchase  781,500  shares  of  our common stock will vest over five-years in ten
semi-annual  installments  and  options to purchase the remaining 322,500 shares
will  vest  based  on  performance criteria established by the CEO.  All options
will expire on the six-year anniversary date of the date of grant, unless sooner
forfeited,  exercised  or  otherwise  terminated.

Also,  on  March  25,  2004,  pursuant to our 1999 Stock Option Plan, we granted
options  to  purchase  up to 25,000 shares of our common stock each to Curt Dean
Blake,  Wesley  T.  Huntress  and  Scott  McClendon  for  their  previous  work,
attendance  and  participation  on  the  Audit  Committee.

On  April  1,  2004,  we  issued  250,000  shares of our common stock to Laurus,
pursuant  to  our  Security  Agreement,  Secured  Convertible Note, Registration
Rights  Agreement  and  Common  Stock Purchase Warrant with Laurus dated June 3,
2003,  for  a corresponding $137,500 reduction in our revolving credit facility.
As  part  of the transaction, the shares were registered with the Securities and
Exchange  Commission  ("SEC")  for  public  resale  on  August  6,  2003.

On  April  20,  2004,  we  issued  300,000 shares of our common stock to Laurus,
pursuant  to  our  Security  Agreement,  Secured  Convertible Note, Registration
Rights  Agreement  and  Common  Stock Purchase Warrant with Laurus dated June 3,
2003,  for  a corresponding $165,000 reduction in our revolving credit facility.
As  part  of the transaction, the shares were registered with the Securities and
Exchange  Commission  ("SEC")  for  public  resale  on  August  6,  2003.

                                       27
<PAGE>

ITEM  3.     DEFAULTS  UPON  SENIOR  SECURITIES
None.

ITEM  4.     SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS
None.

ITEM  5.     OTHER  INFORMATION

At  our  annual  meeting  on  July  16,  2000,  our Board of Directors adopted a
compensation  plan  for  independent directors whereby they will receive options
for attending meetings of the Board as follows: each such director shall receive
an  option to purchase 5,000 shares for each of two telephonic meetings attended
per  year,  and  an  option  to  purchase 10,000 shares for each of two meetings
attended  in  person  per  year.  These  directors  will  not receive additional
compensation  for  attending  meetings  in  excess  of those described above. In
addition  to  the above, independent directors will receive $5,000 in options on
the date of election or appointment. All such options will be issued pursuant to
the  Plan at fair market value as of the date of the meeting attended, will vest
50%  on  the  first  anniversary date of the date of grant and 50% on the second
anniversary  date  of  the  date  of  grant  and  will  expire  on the five-year
anniversary  of  the  grant  date. We do not compensate any of our directors for
their  services  as  members  of  the  Board  through non-standard arrangements.

On  March  25,  2004,  our Board of Directors modified our compensation plan for
independent  directors.  Under  the  modified  plan,  independent directors will
receive  options  for attending meetings of the Board as follows:  each director
shall  receive  an  option  to purchase 6,000 shares for each telephonic meeting
attended  and  an  option to purchase 12,000 shares for each meeting attended in
person,  with  a  cap  of options on 36,000 shares per year.  Our directors will
also  receive  compensation  for  attending  committee meetings as follows: each
director  shall  receive  an  option  to  purchase  5,000  shares for each Audit
Committee  meeting  attended,  each director shall receive an option to purchase
2,500  shares for each Compensation Committee meeting attended and each director
shall  receive an option to purchase 2,500 shares for each Nominating/Governance
Committee  meeting  attended,  which options shall not be subject to a cap.   In
addition  to  the above, independent directors will receive 5,000 options on the
date of election or appointment. All such options will be issued pursuant to the
Plan  at fair market value as of the date of the meeting attended, will vest 50%
on  the  first  anniversary  date  of  the  date  of grant and 50% on the second
anniversary  date  of  the  date  of  grant  and  will  expire  on  the
three-year  anniversary  of  the  grant  date.

ITEM  6.     EXHIBITS  AND  REPORTS  ON  FORM  8-K
(a)     Exhibits
<TABLE>
<CAPTION>

<S>                                                                                                 <C>
Certificate of James W. Benson Pursuant to Section 1350 of Chapter 63 of Title 18 U.S. Code         99.1

Certificate of Richard B. Slansky Pursuant to Section 1350 of Chapter 63 of Title 18 U.S. Code      99.2

</TABLE>

(b)     Reports  on  Form  8-K

None.

                                       28
<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  10,  2004                                       /s/ James W. Benson
                                                       -------------------------
                                                               James  W.  Benson
                                                       Chief  Executive  Officer




Dated:  May  10,  2004                                    /s/ Richard B. Slansky
                                                        ------------------------
                                                              Richard B. Slansky
                                                       Chief  Financial  Officer

                                       29
<PAGE>