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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
[ X ] Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 [No Fee Required]
For the Fiscal Year Ended June 30, 1997.
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 [No Fee Required]
For the transition period from to
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Commission File No. 0-27206
SPACEHAB, INCORPORATED
1595 SPRING HILL ROAD, SUITE 360
VIENNA, VA 22182
(703) 821-3000
Incorporated in the State of Washington IRS Employer Identification
Number 91-1273737
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Title of Each Class Name of Each Exchange
Common Stock on which Registered
(no par value) NASDAQ National Market
Number of shares of Common Stock (no par value) outstanding as of July
25, 1997: 11,146,237.
Aggregate market value of Common Stock (no par value) held by non-affiliates
of the registrant on July 25, 1997, based upon the closing price of the
Common Stock on the Nasdaq National Market of $8.88 was approximately
$79,017,836.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 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 .
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ].
DOCUMENTS INCORPORATED BY REFERENCE:
Proxy Statement for the Annual Meeting of
Stockholders to be held October 21, 1997. Parts I, II and III of Form 10-K
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PART I
This document may contain "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, including (without limitation) under
"Products and Services," "Company Strategy," "Dependence on a Single
Customer," "Research and Development," "Competition" and "Backlog" of Item 1
and "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- General" and "--Liquidity and Capital Resources" of Item 7.
Such statements are subject to certain risks and uncertainties that could
cause actual results to differ materially from those projected in such
statements. In addition to those risks and uncertainties discussed herein,
such risks and uncertainties include, but are not limited to, whether the
Company will fully realize the economic benefits under its NASA and other
customer contracts, the successful development and commercialization of the
Science Double Module, the ICC system and related new commercial space
assets, technological difficulties, product demand and market acceptance
risks, the effect of economic conditions, uncertainty in government funding
and the impact of competition.
ITEM 1. BUSINESS
COMPANY BACKGROUND AND HISTORY
SPACEHAB, Incorporated ("SPACEHAB" or the "Company") was incorporated
in 1984 and is the first company to commercially develop, own and operate
pressurized habitable modules that provide space-based laboratory research
facilities and cargo services aboard the U.S. Space Shuttle system (the
"Space Shuttle" or "STS"). The Company presently offers its SPACEHAB Modules
in a single modular version (the "Single Module"), a logistics double modular
version (the "Logistics Double Module") and is currently developing a science
double module (the "Science Double Module") and an unpressurized logistics
carrier system for use in conjunction with its modules. A SPACEHAB Single
Module, when installed in the cargo bay of a Space Shuttle, more than doubles
the working and living space availability to astronauts for research,
experimentation, habitation and storage. All versions of the SPACEHAB
Modules can accommodate a combination of lockers, racks and soft stowage
arrangements which are provided as a service primarily to the U.S. National
Aeronautics and Space Administration ("NASA"). SPACEHAB Modules, which have
been outfitted with systems to facilitate laboratory research experiments in
the near-weightless ("microgravity") environment of space, are also capable
of transporting food, water, oxygen and other supplies (collectively,
"logistics") to the Russian Mir space station and the planned International
Space Station (the "ISS"). SPACEHAB also provides a full range of pre- and
post-flight experiment and payload processing services, and in-flight
operations support to assist astronauts and researchers, in space and on the
ground, in connection with the performance of experiments aboard SPACEHAB
Modules. From June 1993 through June 1997, SPACEHAB Modules have flown eight
successful missions on the Space Shuttle.
The Company is committed to expand its business with NASA while also
diversifying its revenue and customer base by targeting new and related space
services markets. On February 12, 1997, a wholly-owned subsidiary of
SPACEHAB acquired the operating assets and business of Astrotech Space
Operations, L.P. ("Astrotech") from Northrop Grumman Corporation. Astrotech
is the premier commercial provider of satellite payload processing facilities
in the United States providing launch site preparation of flight-ready
satellites to major U.S. space launch companies and satellite manufacturers,
including Lockheed Martin Corporation ("Lockheed Martin"), Motorola
Corporation ("Motorola"), The Boeing Company ("Boeing") and Orbital Sciences
Corporation ("Orbital Sciences"). The Astrotech acquisition diversified
SPACEHAB's customer base to include commercial customers of space satellite
payload processing services and broadened the Company's services to include
services in support of manned as well as unmanned space activities.
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INDUSTRY OVERVIEW
The U.S. space program encompasses four broad objectives: to advance
scientific research, to establish a permanent human presence in space, to
develop new technologies that contribute to U.S. economic growth and security
and to foster improved international relations through peaceful cooperation
in space with Europe, Japan, Russia and other nations. SPACEHAB is focused
on two markets: (i) microgravity and life sciences space research and (ii)
space support services such as space station logistics and resupply, ground
operations and payload processing.
Microgravity and Life Sciences Space Research
In orbit, the forces of inertia and gravity counterbalance each other,
thereby creating a condition of near weightlessness known as "microgravity."
In a microgravity environment, materials and living matter behave in
fundamentally different ways than they do on Earth. This phenomenon has
stimulated worldwide interest from scientists and commercial researchers who
are seeking improved ways to manipulate and process materials and to study
biological processes that cannot otherwise be achieved in ground-based
laboratories.
The demand for access to a microgravity environment can be divided into
two broad categories: scientific research and commercial applications. NASA
and other U.S. and international government research organizations provide
support for both basic scientific research and its commercial applications to
determine the fundamental effects that gravity has on physical processes.
For the 1997 Government fiscal year, NASA budgeted $366.1 million to conduct
scientific research and commercial microgravity applications aboard the Space
Shuttle (excluding the associated Space Shuttle launch costs for these
experiments).
Space Support Services
Space support services include providing logistics and payload
processing support to NASA, other governments and commercial customers of the
Space Shuttle and International Space Station ("ISS"). Permanently orbiting
facilities such as the Russian space station Mir and the planned ISS require
reliable sources of logistics: food, clothing, equipment and supplies
that sustain the astronauts and enable them to conduct research. NASA's current
plans call for the Space Shuttle to be launched at least seven times per year
for the foreseeable future. NASA has three more Space Shuttle logistics
missions to Mir scheduled during the Company's fiscal 1998. As currently
planned, the ISS will require approximately five Space Shuttle logistics
missions per year.
In order to support Space Shuttle and ISS operations, NASA requires
ground operations and payload support services before and after each
mission. Payload processing operations entail payload scheduling, mission
planning, safety/certification analysis, physical integration of the payload
into its carrier (such as SPACEHAB modules), the integration of the carriers
into the Space Shuttle's cargo bay, flight operations, technical data
gathering and synthesis, and launch and landing site activities. NASA
currently spends between $272 million and $315 million per year on processing
payloads for Space Shuttle operations. Space support services also involve
the provision of specialized services and support near launch sites for
commercial satellite manufacturers and launch services. These activities
include mechanical assembly or reassembly, electrical check, calibration,
liquid propellant loading and related activities.
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PRODUCTS AND SERVICES
SPACEHAB Single Modules are aluminum cylinders, measuring 10 feet in
length by 13.5 feet in diameter, that incorporate a patented design including
a truncated top and flat-end caps. These fully instrumented modules provide
experiment resources such as power, data management, thermal control and
vacuum venting. SPACEHAB Single Modules are employed primarily for research
missions. In fiscal 1996, the Company completed a development program and
introduced the Logistics Double Module. This module was optimized to carry
logistics and is now being used by NASA to carry vital supplies to the
astronauts and cosmonauts who reside on the Russian space station Mir.
SPACEHAB invested $13.4 million in the design, development, and production of
the Logistics Double Module. Additionally, during fiscal 1997, in an effort
to anticipate the need of customers, the Company began the full-scale
development and construction of its Science Module with double module
hardware, which when combined with a Single Module becomes the Science Double
Module. This Science Double Module will be fully dedicated to microgravity
research and is expected to be available in late 1999.
SPACEHAB's fundamental business strategy is based on carefully
anticipating customer requirements, investing capital to develop space-flight
assets, contracting with established aerospace companies for engineering and
asset production while retaining ownership of these assets and then providing
innovative, cost-effective solutions that meet customer requirements using
fixed-price service contracts. This strategy has been successful in obtaining
two significant contracts with NASA: a $184 million Commercial Middeck
Augmentation Module contract (the "CMAM Contract") for five missions and a
$52.2 million Mir contract (the "Mir Contract") for four missions.
The CMAM Contract, signed in November 1990, required SPACEHAB to
furnish NASA with SPACEHAB module accommodations for experiments developed by
the Centers for the Commercial Development of Space ("CCDS") on five Space
Shuttle missions. The fifth and final CMAM mission was completed
successfully during September 1996.
The basic Mir Contract, signed in July 1995, required the Company to
provide Single and Double Module accommodations for the provision of
logistics resupply to the Mir space station on four Space Shuttle missions.
The fourth and final mission was completed successfully in May 1997.
In June 1997, NASA exercised all three options for $38.0 million under
the Mir Contract, providing a firm backlog of logistics resupply missions
into 1998. The Mir Contract options call for two Logistics Double Module
missions and one Single Module mission scheduled for September 1997, January
1998 and May 1998, respectively.
In late September 1996, the Company entered into agreements with the
Japanese Space Agency (NASDA) and the European Space Agency (ESA)
(collectively, the "NASDA/ESA Contract"). Pursuant to the NASDA/ESA Contract,
SPACEHAB provided hardware and integration and operations for scientific
microgravity experiments to NASDA and ESA aboard the Logistics Double Module
on STS-84. This mission was completed in May 1997.
In fiscal 1997, SPACEHAB initiated the full-scale development of the
Science Double Module. The Company expects that this Module will be
available in late 1999 and will meet or exceed all of NASA's projected
requirements for dedicated microgravity and life sciences research that had
been performed by Spacelab, the U.S. government-owned habitable module which
is scheduled to be retired after its final mission in 1998. As a result of
the anticipated retirement of Spacelab, the Company believes that its
flight-proven assets position SPACEHAB to become the sole provider of
crew-tended microgravity research capabilities for the Space Shuttles.
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The Company believes that its success in capturing new business is
directly linked to its ability to identify and rapidly capitalize on emerging
market opportunities. The Company intends to foster this entrepreneurial
initiative by proposing new commercial business arrangements for services in
the space industry in each of its target markets. Additionally, the Company
plans to selectively pursue acquisitions of complementary businesses, such as
the Astrotech acquisition, engineering facilities and hardware to improve its
ability to perform work associated with the Space Shuttles and the ISS. The
Company intends to continue the SPACEHAB Incubator Program, which is intended
to evaluate, sponsor and invest in a portfolio of commercially focused,
promising microgravity research and development activities. The Company
believes that the demand for microgravity space research conducted on
SPACEHAB Modules will increase both before and after the ISS becomes
operational. There is a substantial and growing worldwide backlog for
microgravity experiments, both with NASA laboratories and among the
NASA-sponsored Centers for the Commercial Development of Space ("CCDS"),
which suggests that even after the ISS becomes operational, demand for
microgravity experimentation may continue to exceed capacity.
The Astrotech payload processing business serves the commercial
satellite manufacturing and launch services industries. Although payload
processing is generally associated with the final preparation of a satellite
or other space payload for launch, it is also the first step in the launch
process and requires specialized facilities and support usually located at
the launch site. Astrotech's payload processing activities provide the
necessary resources for mechanical assembly or reassembly, electrical check,
calibration, liquid propellant loading and numerous other related
activities. Additionally, Astrotech's specialized facility includes, but is
not limited to, clean rooms, airlock systems, overhead crane systems,
hazard-proof work areas and environmentally controlled rooms.
Astrotech has reached exclusive multiyear agreements with Lockheed
Martin to process all commercial Atlas payloads and with Boeing to process
all Delta payloads and all Sea Launch program payloads at Boeing's facility
in Long Beach, California.
COMPANY STRATEGY
SPACEHAB's strategy to enhance its position in its two core markets is
based on the following seven principles:
1. Focusing on Quality of Service. The Company intends to maintain its
reputation for product reliability, process innovation and performance
excellence.
2. Expanding Company-Owned Spaceflight Assets. The Company
successfully completed the Logistics Double Module that is being used by NASA
to provide logistics for the Mir space station. Initial design and
development of the Science Double Module and an unpressurized logistics
carrier system, has been initiated to expand the Company's assets.
3. Maintaining Position as Low-Cost Provider. The Company continues to
offer its payload processing and logistics support services to NASA and other
customers on a fixed-price basis that it believes to be the lowest in the
industry.
4. Continuing Entrepreneurial Initiative. The Company continues to
develop and offer innovative business arrangements to meet NASA and other
customer requirements.
5. Leveraging Skills of International Partners. The Company continued
to expand its international partner base in 1997. SPACEHAB entered into an
agreement with Daimler-Benz for it to design and produce pallet attachment
hardware for the Integrated Cargo Carrier, the first commercial component of
the ISS. In August 1997, SPACEHAB also contracted with RSC Energia, the
Russian commercial space agency, to develop and produce the Integrated Cargo
Carrier pallet.
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6. Acquiring Complementary Businesses and Assets. The Company
continues to evaluate opportunities to acquire complementary businesses,
engineering facilities, and hardware to improve its ability to perform work
associated with the Space Shuttle and the ISS.
7. Attracting and Recruiting Talented Personnel. The Company hired
several highly experienced executives in 1997 to expand business development
efforts in microgravity and life sciences research, the ISS program, and
Russian space activities and seeks to recruit additional experienced and
talented personnel.
Through the Company's contracts, it continues to implement its business
strategy by identifying customer requirements, creating innovative technical
solutions, raising private capital to develop assets and providing services
pursuant to those contracts.
DEPENDENCE ON A SINGLE CUSTOMER
Approximately $49.7 million (or 88%) of the Company's fiscal year 1997
revenue was generated from two NASA contracts - the CMAM Contract and the Mir
Contract. While the acquisition of Astrotech and the NASDA/ESA Contract
represent additional revenue sources, the Company anticipates that revenue
from NASA will continue to account for a significant amount of the Company's
revenue over the next several years. There are no assurances, however, that
NASA will require the Company's module services in the future. Therefore,
the Company's failure to execute new contracts with NASA would have a
material adverse effect on the Company's financial condition and results of
operations. Accordingly, the Company continues to focus its efforts on
diversifying its customer base to include commercial companies, as evidenced
with the Astrotech acquisition.
RESEARCH AND DEVELOPMENT
The Company believes that the timely development of new products and
enhancements to existing hardware are essential to maintaining its
competitive position. In the past three fiscal years, the Company has spent
an aggregate of approximately $3.0 million on research and development.
Most of the Company's research and development funds were spent on the
design, development and qualification of the new Double Modules that are
optimized to carry cargo and science experiments. The first flight of the
Logistics Double Module was successfully completed in September 1996. The
Company also performed research and development activities to enhance the
basic capabilities of its module system with new features such as a video
system switch, a digital television downlink capability, and an experiment
data interface, which would result in time savings for astronauts while
conducting experiments inside SPACEHAB Modules.
Beginning in fiscal 1996 and continuing throughout fiscal 1997, the
Company has been working on the development of a new proprietary module
communications system that will be independent of the Space Shuttle's
existing data downlink. Once implemented, it is expected that researchers
with experiments on a SPACEHAB mission will be able to have 24-hour,
real-time monitoring and control of their experiment hardware from their
laboratories anywhere in the world.
In fiscal 1997, the Company focused its research and development
efforts on another SPACEHAB Double Module that will be designed to carry
experiments, the Science Double Module. This Module is being designed to
satisfy the Space Shuttle-based research requirements of NASA, the ISS
partners and the scientific research community beginning in late 1999.
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Additional research and development has been conducted to expand the
Company's product and service lines to meet market requirements for low-cost
unpressurized carriers for science experiments and cargo. SPACEHAB is
developing an Integrated Cargo Carrier ("ICC") to carry unpressuried cargo to
the ISS, based on a patented pallet technology (the "Unpressurized Cargo
Pallet" or "UCP") that can be used independently or in tandem with the
SPACEHAB Single or Double Modules. The ICC's design is such that it would be
located in what is ordinarily unused volume in the front of the Space
Shuttle's cargo bay. By expanding the capabilities of the Space Shuttle and
by offering flexibility in the mix of pressurized and unpressurized cargo
carried on each mission, the Company believes that the ICC could become the
preferred method for providing logistics and utilization resupply to the ISS.
COMPETITION
Currently, there are no other companies that compete directly with
SPACEHAB in providing pressurized module services that are carried aboard the
Space Shuttles. NASA has a government-owned and operated system, Spacelab,
that provides services similar to those provided by SPACEHAB modules.
However, NASA has terminated the Spacelab program with its final mission
scheduled for March 1998.
The Company has contracted for the design and construction of the
Science Double Module with Boeing (formerly McDonnell Douglas Aerospace).
The Science Double Module represents a commercial replacement for NASA's
Spacelab. The Company believes that this module will significantly
outperform Spacelab in terms of technology, capacity, functionality and
cost-effectiveness.
The Company's long-term strategy for growth is to provide research,
logistics, infrastructure and payload processing services to NASA and others
during the International Space Station era. This strategy could require the
Company to compete with commercial companies such as Lockheed-Martin, Boeing
and others who have existing NASA support contracts, greater financial
resources and manufacturing capabilities, and larger marketing, sales and
technical organizations than the Company. In fiscal 1997, SPACEHAB entered
into an agreement with United Space Alliance ("USA"), a Boeing and Lockheed
Martin joint venture, to expand the commercial use of the Space Shuttle
fleet. SPACEHAB's existing strategic relationships with Boeing, Alenia
Spazio S.p.A., Mitsubishi Corporation and Daimler-Benz A.G. may provide
additional opportunities for teaming and partnerships that management
believes will enable the Company to compete for market share.
The Italian Space Agency has contracted to build a mini pressurized
logistics module ("MPLM") intended for use in connection with the ISS. Although
the MPLM is intended to be competitive with SPACEHAB's Modules for ISS logistics
missions, SPACEHAB believes that its Modules will be able to compete
favorably for such missions.
Astrotech's payload processing facilities are located in Florida and
California. At present, management believes that Astrotech's U.S.
competition is limited to the California Vandenberg Air Force Base ("VAFB")
launch site where a competitor, California Commercial Spaceport, Inc.
("CCSI") is located. CCSI was established by obtaining surplus U.S. Air
Force facilities at the VAFB launch complex before Astrotech established its
facilities there and when no commercial alternative was available. To the
Company's knowledge, CCSI has won several contracts to process NASA
spacecraft for launch from VAFB, but CCSI does not have payload processing
facilities in Florida, where the majority of U.S. commercial satellite
launches occur.
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BACKLOG
A significant portion of the Company's revenue is currently generated
from its contract with NASA, which, similar to contracts with other agencies
of the U.S. government, contain provisions for which NASA may terminate the
agreement "for convenience." The Company's contract with NASA is conditioned
by its terms upon NASA receiving an adequate annual appropriation of funds
from the U.S. Congress. Failure to receive funds from Congress or a
withdrawal by Congress of prior appropriations would permit NASA to terminate
its contracts with SPACEHAB "for convenience." For fiscal year 1997, both
the U.S. Senate and House of Representatives have authorized and approved an
annual appropriation of $13.8 billion for NASA, including $2.1 billion for
the ISS, indicating a commitment by the government to the space industry.
SPACEHAB anticipates that a portion of future revenue will be derived
from contracts with entities other than agencies of the U.S. government which
will not be subject to federal contract regulations such as termination "for
convenience of the government" or federal government funding restrictions.
As of June 30, 1997, the Company's contract backlog is estimated to be
approximately $48.5 million, of which $38.0 million represents U.S.
government funded backlog and $10.5 million represents non-U.S government
contracts.
CERTAIN REGULATORY MATTERS
The Company is subject to federal, state and local laws and regulations
designed to protect the environment and to regulate the discharge of
materials into the environment. The Company believes that its policies,
practices and procedures are properly designed to prevent unreasonable risk
of environmental damage and consequential financial liability to the Company.
Compliance with environmental laws and regulations has not had in the past,
and, the Company believes, will not have in the future, material effects on
the capital expenditures, earnings or competitive position of the Company.
EMPLOYEES
As of June 30, 1997, the Company employed 61 regular employees, 21 of
whom are employed by the Astrotech subsidiary. Of these 61 employees, 17
(approximately 28%) hold advanced degrees and 6 (approximately 10%) hold
doctorate degrees. Additionally a significant number of the Company's
employees have experience in both the space industry and/or governmental
space agencies, with a special expertise in commercial space and human space
flight. None of the Company's employees are covered by collective bargaining
agreements. Underlying all of SPACEHAB's efforts has been the dedication and
skill of its personnel. The Company believes that the dedication of its
employees is critical to its success and that its relations with its
employees are excellent.
ITEM 2. PROPERTIES
The Company and its wholly-owned subsidiary, Astrotech, currently
occupy six locations, with the corporate headquarters located at 1595 Spring
Hill Road, Suite 360, Vienna, Virginia 22182. The corporate headquarters
occupy approximately 9,700 square-feet of office space and house SPACEHAB's
18-person executive management team. The term of the present lease expires on
March 7, 2001.
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The Company's 19-person operations management team is located at 1331
Gemini Avenue, Suites 300 & 310, Houston, Texas 77058. The Houston offices
consist of approximately 7,800 square feet of non-contiguous office space
located near the Johnson Space Center. Presently there are two leases, one
expiring on February 28, 1998 and one expiring on December 14, 1999.
The Company's payload processing facility is located near the Kennedy
Space Center in Cape Canaveral, Florida. The facility is contained in an
approximately 40,000 square-foot plant. The Company owns the building which
houses the payload processing facility but leases the land upon which it is
constructed. The payload processing facility has a prime work area of
approximately 10,000 square-feet. This work area is designed to accommodate
the SPACEHAB Single and Double Modules and includes 11 secure
experiment/payload integration and work areas from 300 square-feet to 1,000
square-feet each, two off-line modification shops, a tool room, a stock room
and a conference/training room. The term of the lease for the land expires
August 6, 1998, and is renewable at the option of the Company for two
successive five-year periods. Upon expiration of the land lease, all
improvements on the property revert at no cost to the lessor.
Astrotech, occupies three locations. Astrotech's headquarters are
located at 12510 Prosperity Drive, Suite 100, Silver Spring, Maryland 20904.
The headquarters occupy approximately 3,000 square-feet of leased office
space at this site and house a 5-person management and administrative team.
The term of the present lease expires in May 1998.
Astrotech's 12-person engineering and support team is located in a six
building owned facility at 1515 Chaffee Drive, Titusville, Florida 32780.
This 80,000 square-foot facility supports non-hazardous and hazardous
material processing, payload storage and customer offices. These buildings
presently occupy one-third of the 37.5-acre property owned by Astrotech, with
the remaining two-thirds available for expansion.
Astrotech has a 4-person technical staff located at the Vandenberg Air
Force Base in Vandenberg, California. Astrotech presently rents a 60-acre
site on the Air Force Base and owns four buildings comprising 16,500
square-feet, which are dedicated to the same functions provided at the
Florida facility. The term of the present land lease expires on July 13,
2013. Upon expiration of the land lease, all improvements on the property
revert at no cost to the lessor.
The Company believes that its current facilities and equipment are
generally well maintained and in good condition and are adequate for its
present and foreseeable needs.
ITEM 3. LITIGATION
The Company is not currently involved in any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were voted upon during the final quarter of fiscal 1997.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock (the "Common Stock") trades on the NASDAQ
National Market System under the symbol "SPAB". The Common Stock has been
publicly traded since December 22, 1995, the date of the closing of the
Company's initial public offering. The quarterly high and low stock prices
for fiscal 1997 and 1996 are as follows:
Fiscal 1997:
- ------------
High Low
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First Quarter $11 1/4 $ 8
Second Quarter $ 8 1/2 $ 5 1/2
Third Quarter $ 7 1/8 $ 5
Fourth Quarter $ 9 1/4 $ 5 3/4
Fiscal 1996:
- ------------
High Low
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First Quarter $12 1/4 $12
Second Quarter $15 1/4 $11 3/4
Third Quarter $16 $ 8 3/4
The Company has never paid cash dividends. It is the present policy of
the Company to retain earnings to finance the growth and development of its
business and, therefore, the Company does not anticipate paying cash
dividends on its Common Stock in the foreseeable future.
The Company has authorized 30,000,000 shares of Common Stock. At July
25, 1997, 11,146,237 shares of Common Stock were outstanding. The Company
had approximately 1,800 shareholders of record of its Common Stock on June
30, 1997.
SALES OF UNREGISTERED SECURITIES
During fiscal 1997, the Company issued warrants to purchase
53,000 shares of Common Stock to a consultant for services rendered.
Such issuance was deemed to be exempt from registration under the
Securities Act of 1933. The Company believes that the recipient of
securities in this transaction is an accredited investor who intended
to acquire the securities for investment purposes and not with a view
to or for sale in connection with any distribution thereof, and that
such recipient had adequate access to information about the Company.
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ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below are derived from the
audited consolidated financial statements of SPACEHAB. This selected
financial information should be read in conjunction with the
Consolidated Financial Statements of the Company and the notes thereto
included elsewhere in this report.
Nine
Months Year
Ended Ended
Years Ended September 30, June 30, June 30,
------------------------------------------- ------------- -------------
1993 1994 1995 1996(1) 1997
------------ --------------- -------------- ------------- -------------
(in thousands, except per share data)
Statement of Operations Data:
Revenue(2) $42,467 $ 43,800 $ 46,059 $ 56,397 $ 56,601(3)
Costs of revenue 23,204 24,227 23,349 20,985 34,120
------------ --------------- -------------- ------------- -------------
Gross profit 19,263 19,573 22,710 35,412 22,481
Marketing, general and administrative expenses 7,906 5,064 3,816 4,056 8,567
Research and development expenses 3,076 - 1,600 100 1,252
------------ --------------- -------------- ------------- -------------
Operating income 8,281 14,509 17,294 31,256 12,662
Interest expense, net of capitalized amounts 4,209 4,863 1,365 699 955
Net income 4,117 8,638(4) 15,809 29,829 13,832(5)
Net income per common share $ 0.62 $ 1.30 $ 2.37 $ 3.21 $ 1.24
Shares used in computing net income
per common share 6,650 6,660 6,671 9,303 11,133
Other Data:
Cash provided by (used for) operations $ 22,246 $ 21,831 $ 26,838 $ 13,151 $(857)
Capital expenditures 16,589 76 4,943 6,266 34,446
Balance Sheet Data (at period end):
Working capital (deficit) $(31,066) $(20,589) $ 7,192 $ 45,942 $ 5,455
Total assets 118,083 95,261 86,701 129,709 114,450
Long-term debt, excluding current portion 30,325 22,884 24,886 17,318 12,725
Stockholders' equity (deficit) (29,894) (21,184) (1,715) 71,596 86,622
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(1) Effective October 1, 1995, the Company changed its fiscal year-end to June
30.
(2) The Company recognizes revenue upon the completion of each flight under the
Mir and CMAM Contracts. For new contract awards for which the capability to
successfully complete the contract can be demonstrated at contract inception,
revenue recognition under the percentage-of-completion method is being reported
based on costs incurred over the period of the contract.
(3) Includes revenues of $2,860 generated by Astrotech subsequent to its
acquisition on February 12, 1997.
(4) Includes an extraordinary loss of $934, net of taxes, relating to the
write-off of unamortized deferred debt issuance costs, in conjunction with a
refinancing and retirement of debt on that date.
(5) Includes an extraordinary gain of $3,274, net of taxes, relating to the
amendment and restatement of a credit agreement.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL
SPACEHAB was incorporated in 1984 to commercially develop space habitat
modules to operate in the cargo bay of the Space Shuttles.
The Company currently operates under one contract with NASA, the Mir
Contract, with a total contract value of $90.2 million, including $38.0
million for the three Mir option missions scheduled to be flown in fiscal
1998. The Company's revenues for fiscal 1997 were generated primarily from
the Mir Contract, the CMAM Contract, the NASDA/ESA Contract and through the
customer contracts of Astrotech.
SPACEHAB generates revenue by leasing lockers and/or volume within the
SPACEHAB Modules and by integration and operations support services provided to
scientists and researchers responsible for the experiments and/or logistics
supplies for missions aboard the shuttle system. Under the CMAM and Mir
Contracts, the Company recognizes revenue only at the completion of each Space
Shuttle mission utilizing Company assets. Accordingly, the Company's quarterly
revenue and profits have fluctuated dramatically based on NASA's launch
schedule and will continue to do so under the Mir Contract and any other
contract for which revenue is recognized only upon completion of a mission. For
new contract awards for which the capability to successfully complete the
contract can be demonstrated at contract inception, revenue recognition under
the percentage-of-completion method is being reported based on costs incurred
over the period of the contract. The percentage-of-completion method results in
the recognition of revenue over the period of contract performance, thereby
decreasing the quarter-by-quarter fluctuations of reported revenue.
In September 1996, SPACEHAB entered into the NASDA/ESA Contract with
NASDA and ESA, pursuant to which SPACEHAB provided hardware and integration and
operations for scientific microgravity experiments aboard the SPACEHAB
Logistics Double Module on STS-84. SPACEHAB began integration work on the
NASDA/ESA Contract during the first quarter of fiscal 1997. This mission was
completed in May 1997, concurrently with the final mission under the basic Mir
Contract.
The expenses associated with the operations of SPACEHAB are recorded
differently based on the type of expense. Costs of revenue include integration
and operations expenses associated with the performance of two types of
efforts: (i) sustaining engineering in support of all missions under a contract
and (ii) mission specific experiment support. Expenses associated with
sustaining engineering are expensed as incurred. Mission specific expenses
relating to the CMAM Contract and the Mir Contract are recorded as assets and
not expensed until the specific Space Shuttle mission is flown and the related
revenue is recognized. Costs associated with performance of the NASDA/ESA
Contract were expensed as incurred. Other costs of revenue include depreciation
expense and costs associated with the Astrotech payload processing facilities.
Flight related insurance covering transportation of the SPACEHAB Modules from
SPACEHAB's payload processing facility to the Space Shuttle, in-flight
insurance and third-party liability insurance are also included in costs of
revenue and are recorded as incurred. Marketing, general and administrative and
interest and other expenses are recognized when incurred.
Astrotech revenue is derived from various multiyear fixed price
contracts with satellite and launch vehicle manufacturers. The services and
facilities Astrotech provides to its customers support the final assembly,
checkout and countdown functions associated with preparing a satellite for
launch. This preparation includes: the final assembly and checkout of the
satellite, installation of the solid rocket motors, loading of the liquid
propellant, encapsulation of the satellite in the launch vehicle,
transportation to the launch pad and command and control of the satellite
during pre-launch countdown. Revenue provided by the Astrotech payload
processing facilities is recognized ratably over the occupancy period of the
satellites in the Astrotech facilities.
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RESULTS OF OPERATIONS
In 1996, the Company elected to change its fiscal year end from
September 30 to June 30. Financial information for 1996, therefore, reflects
nine months of operations. Further, fiscal 1997 results include the operations
of Astrotech subsequent to its acquisition on February 12, 1997. Due to the
Company's rate of growth and its contract schedule, information for fiscal 1996
has not been annualized.
Fiscal 1997 as Compared to Fiscal 1996
Revenue. Revenue for the year ended June 30, 1997 increased 0.4% to
$56.6 million, as compared to $56.4 million for the nine months ended June
30, 1996. This increase is primarily due to the additional revenue generated
by Astrotech, offset by the decrease in revenue related to the completion of
the CMAM Contract during the fiscal year 1997.
Costs of Revenue. Costs of revenue for fiscal year 1997 increased
62.7% to $34.1 million, as compared to $21.0 million for the nine months
ended June 30, 1996. Integration, operations and transportation expenses for
fiscal year 1997 increased 67.4% to $23.8 million, as compared to $14.2
million for the nine months ended June 30, 1996. There were three missions
flown during fiscal year 1997, as compared to two missions flown during the
nine months ended June 30, 1996. Because mission specific expenses are
reported at the time of a flight under the Mir Contract and CMAM Contract,
these expenses are significantly higher during a period in which there are
more flights. Additionally, all of the fiscal 1997 missions were Double
Module missions, which require a significantly higher amount of integration
and operations effort and costs than a Single Module mission. Integration
costs related to the CMAM Contract and Mir Contract were $18.4 million and
$3.5 million respectively, for the year ended June 30, 1997 as compared to
$7.6 million and $6.5 million, respectively, for the nine months ended June
30, 1996.
Operating Expenses. Operating expenses for fiscal year 1997 increased
136.2% to $9.8 million, as compared to $4.2 million for fiscal year 1996.
Research and development expenses for fiscal year 1997 were $1.2 million, as
compared to $0.1 million for the nine months ended June 30, 1996. During
fiscal 1997, the Company increased its investment in research and development
in order to facilitate future contracts. Included in the Company's fiscal
1997 research and development budget was the Company's Science Double Module,
as previously discussed, and the SPACEHAB Universal Communications System
("SHUCS"), which is being developed to provide reliable and
Shuttle-independent data communication channels that are responsive to
payload user requirements. Marketing, general and administrative expenses
for fiscal year 1997 increased 111.2% to $8.6 million, as compared to $4.1
million during the nine months ended June 30, 1996. This increase is
primarily attributable to the Company's efforts to increase the strength of
its engineering, design and research and development departments and reflects
twelve months of operations as compared to nine months.
Interest Expense. Interest expense, net of capitalized amounts, for
fiscal year 1997 increased 36.6% to $1.0 million as compared to $0.7 million
for the nine months ended June 30, 1996.
Interest Income. Interest income for fiscal year 1997 increased to
$1.8 million from $1.2 million for the nine months ended June 30, 1996. This
is due to the fact that there were three additional months of interest
proceeds from short term, commercial paper and interest bearing cash accounts
in fiscal 1997.
Net Income. Net income for fiscal year 1997 decreased 53.6% to $13.8
million (or $1.24 per share), as compared to $29.8 (or $3.21 per share)
million for the nine months ended June 30, 1996. This decrease is primarily
due to an increase in costs of revenue and an increase in operating expenses,
partially offset by an extraordinary gain of $3.3 million, net of taxes (or
$0.29 per share), which was recorded in fiscal 1997 as a result of the early
retirement of debt owed to a group of senior lenders. Income tax expense for
these periods was $3.0 million and $1.9 million, respectively, due to the
Company's use of available net operating loss carryforwards, offset by
alternative minimum taxes. As of June 30, 1997, the Company had
13
14
approximately $4.4 million of available net operating loss carryforwards
expiring between 2006 and 2009 to offset future regular taxable income.
Utilization of these net operating loss carryforwards may be subject to
limitations in the event of significant changes in the stock ownership of the
Company. There are no restrictions on transfers or sales of shares of Common
Stock that would prevent such a change from occurring.
The effects of inflation and changing prices have not significantly
impacted the Company's net sales and revenue or income from continuing
operations during fiscal 1997.
Nine Months Ended June 30, 1996 as Compared to the Fiscal Year Ended September
30,1995
Revenue. Revenue for the nine months ended June 30, 1996 increased
22.4% to $56.4 million, as compared to $46.1 million for fiscal year 1995.
The results of operations for this new fiscal period include revenue for two
missions completed during the quarter ended June 30, 1996. This revenue is
attributable to the Company's completion in April 1996 of the first mission
under the Mir Contract and the completion in June 1996 of the Company's
fourth CMAM mission. In comparison, during fiscal year 1995, SPACEHAB
completed one mission under the CMAM Contract, providing all of the revenue
reported for fiscal year 1995.
Costs of Revenue. Costs of revenue for the nine months ended June 30,
1996 decreased 10.1% to $21.0 million, as compared to $23.3 million for fiscal
year 1995. Integration, operations and transportation expenses for each of the
nine months ended June 30, 1996 and the fiscal year ended September 30, 1995
were $14.2 million. These amounts are approximately equal in absolute dollars
but, when compared on a basis of nine months to twelve months, the fiscal 1996
cost is proportionately higher. First, mission specific costs of $8.4 million
for the nine months ended June 30, 1996 supported two missions, while mission
specific costs of $8.2 million in fiscal year 1995 supported only one mission.
Second, sustaining engineering costs were $5.8 million in fiscal 1996, as
compared to $6.0 million in fiscal 1995. Total integration, operations and
transportation costs were only marginally higher in fiscal 1996 even though
they supported two flights, thereby reducing the cost per flight for sustaining
engineering and reducing total costs per mission in fiscal 1996.
Operating Expenses. Operating expenses for the nine months ended June
30, 1996 decreased 23.3% to $4.2 million, as compared to $5.4 million for
fiscal year 1995. The decrease is primarily due to the shortened reporting
period for fiscal 1996 of nine months, as compared to the twelve-month
reporting period for fiscal year 1995, coupled with a decrease in research and
development expenses. There was $0.1 million incurred for research and
development expense for the nine months ended June 30, 1996, as compared to
$1.6 million for fiscal year 1995. The research and development expenditures
for fiscal 1995 were used in the development of the SPACEHAB Logistics Double
Module that was required to perform the Mir Contract. Expenditures for research
and development associated with the new SPACEHAB Science Double Module for
microgravity and life sciences did not commence until July 1996. Marketing,
general and administrative expenses for the nine months ended June 30, 1996
increased 6.3% to $4.1 million, as compared with $3.8 million during fiscal
year 1995. Components of the increase in fiscal 1996 include increases in
salaries and benefits of approximately $0.6 million for additional staff needed
for business development and project management, offset by a decrease of $0.4
million in expenses due to the shorter fiscal year.
Interest Expense. Interest expense, net of capitalized amounts, for
the nine months ended June 30, 1996 decreased 48.8% to $0.7 million, as
compared to $1.4 million for fiscal year 1995, primarily due to substantially
lower average revolving loan indebtedness under the Company's credit agreement
(the "Credit Agreement") for the nine months ended June 30, 1996. The lower
average revolving loan indebtedness was a result of repayments by the Company
during the nine months ended June 30, 1996 of $7.4 million on interest bearing
debt. An amount outstanding of $5.5 million due to a group of insurance
companies under the Credit Agreement during the nine months ended June 30, 1996
remained non-interest bearing.
14
15
Interest Income. Interest income for the nine months ended June 30,
1996 increased to $1.2 million from $0.1 million, due to the investment of
approximately $40.0 million of initial public offering proceeds in short term,
low risk commercial paper and interest bearing cash accounts.
Net Income. Net income for the nine months ended June 30, 1996
increased 88.7% to $29.8 million, as compared to $15.8 million for fiscal year
1995. Income tax expense for these periods was $1.9 million and $0.2 million,
respectively, due to the Company's use of available net operating loss
carryforwards, offset by alternative minimum taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its capital expenditures,
research and development and working capital requirements through payments
received under both the CMAM Contract and the Mir Contract, investments
received in private and public equity offerings and borrowings under credit
facilities. During December 1995, SPACEHAB completed an initial public offering
of 4,014,500 shares of Common Stock, which provided the Company with net
proceeds of approximately $43.3 million. On June 16, 1997, the Company signed
an agreement with a financial institution securing a $10.0 million revolving
line of credit (the "Revolving Line of Credit") that the Company may use for
working capital purposes. As of June 30, 1997, no amounts were drawn on this
line of credit. Further, on July 14, 1997, Astrotech obtained a five-year term
loan (the "Term Loan Agreement"), which is guaranteed by SPACEHAB and provides
drawdowns of up to $15.0 million for general corporate purposes.
Cash Flows From Operating Activities. Cash provided by (used for)
operations for fiscal year 1995, the nine months ended June 30, 1996 and fiscal
year 1997 was $26.8 million, $13.1 million and ($0.9) million, respectively.
Under both the CMAM Contract and the Mir Contract, progress payments are
structured such that expenses incurred under these contracts are billed to
NASA. NASA made progress payments under the CMAM Contract on specified dates
for specified amounts. Progress payments under the Mir Contract are billed to
NASA monthly at 95% of the costs incurred in the prior month. As the Company
projected, net cash flows were used in completing the CMAM Contract and Mir
Contract for which significant progress payments had previously been received.
Additionally, cash flows were used for operating activities during fiscal year
1997 due to increases in research and development costs associated with
expanding the client base of the Company.
Cash Flows Used in Investing Activities. For fiscal years 1995, the
nine months ended June 30, 1996 and fiscal 1997, cash flows used in investing
activities consisted only of capital expenditures of $4.9 million, $6.3 million
and $34.4 million, respectively. Expenditures during fiscal year 1995 and the
nine months ended June 30, 1996 were for (i) the development and construction
of a tunnel and an adapter ring to be used in conjunction with the Logistics
Double Module and (ii) structural upgrade work performed on the SPACEHAB
structural test article so that it can be attached to an existing Single Module
to form a Logistics Double Module. The Company invested a total of $11.9
million in the development and construction of the Logistics Double Module
during fiscal 1995 and the nine months ended June 30, 1996. The Company paid
approximately $20.1 million for Astrotech during fiscal 1997. In addition,
during fiscal 1997, the Company began the construction of its Science Double
Module. The Company spent approximately $12.7 million on the project during
fiscal 1997 and anticipates that it will spend between $35.0 million and $38.0
million in the aggregate to complete this project.
The Company expects to continue funding any additional capital
expenditures and working capital requirements from internally generated cash
flow, drawdowns on existing credit facilities and through future debt and/or
equity offerings.
Cash Flows From Financing Activities. For fiscal 1995, the nine months
ended June 30, 1996 and fiscal 1997, cash flows provided by (used for)
financing activities were ($1.2) million, $36.9 million and
15
16
($2.6) million, respectively. On August 20, 1996, an existing credit agreement
was amended and restated. Under this amendment, the revolving credit commitment
from McDonnell Douglas was canceled and, in exchange for the full satisfaction
of two term loans owed to a group of insurance companies, the Company paid $2.5
million to said companies at closing and agreed to pay an additional $2.0
million under a new non-interest bearing term loan. The new term loan is due in
installments of $0.5 million in each of August 1997 and 1998, and $0.3 million
in each of August 1999, 2000 and 2001. Under this new agreement, all prior
liens and encumbrances on the Company's assets and all prior restrictive
covenants pursuant to this credit agreement were released.
The Company believes that its available cash and cash equivalents plus
borrowings under its existing credit facilities will be sufficient to meet
its cash flow from operations and other funding requirements for at least the
next 12 months. The Company anticipates requirements for additional financing
to complete the design and development of additional spaceflight hardware and
will initiate such financing as the timing of its asset development efforts
and financial market conditions dictate.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 128, "Earnings per
Share," (Statement 128). Statement 128 supersedes Accountings Principles Board
Opinion No. 15, "Earnings per Share" (APB 15) and its related interpretations
and promulgates new accounting standards for the computation and manner of
presentation of the Company's earnings per share. The Company is required to
adopt the provisions of Statement 128 during the second quarter of fiscal 1998.
Earlier application is not permitted; however, upon adoption the Company will
be required to restate previously reported annual and interim earnings per
share data in accordance with the provisions of Statement 128. The Company does
not believe that the adoption of Statement 128 will have a material impact on
the computation or manner of presentation of its earnings per share data as
currently of previously presented under APB 15.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" (Statement 130). Statement 130 establishes standards for the reporting
and display of comprehensive income and its components in the financial
statements. The Company is required to adopt the provisions of Statement 130
for the year ended June 30, 1999. Earlier application is not permitted;
however, upon adoption, the Company will be required to reclassify previously
reported annual and interim financial statements. The Company believes that the
disclosure of comprehensive income in accordance with the provisions of
Statement 130 will not materially impact the manner of presentation of its
financial statements as currently and previously reported.
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SPACEHAB, INCORPORATED AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1997
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
17
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INDEPENDENT AUDITORS' REPORT
The Board of Directors
SPACEHAB, Incorporated and Subsidiary:
We have audited the accompanying consolidated balance sheets of SPACEHAB,
Incorporated and subsidiary (the Company) as of June 30, 1996 and 1997, and the
related consolidated statements of income, stockholders' equity (deficit), and
cash flows for the year ended September 30, 1995, the nine months ended June
30, 1996 and the year ended June 30, 1997. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of SPACEHAB,
Incorporated and subsidiary as of June 30, 1996 and 1997, and the results of
their operations and their cash flows for the year ended September 30, 1995,
the nine months ended June 30, 1996 and the year ended June 30, 1997, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
McLean, Virginia
August 15, 1997
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SPACEHAB, INCORPORATED AND SUBSIDIARY
Consolidated Balance Sheets
==============================================================================================
June 30,
------------------------
ASSETS 1996 1997
- ----------------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 50,795,548 12,886,731
Accounts receivable (note 4) 5,445,765 5,176,255
Prepaid expenses and other current assets 184,660 199,247
- ----------------------------------------------------------------------------------------------
Total current assets 56,425,973 18,262,233
- ----------------------------------------------------------------------------------------------
Property and equipment:
Flight modules 94,477,790 95,045,548
Module improvements in progress - 13,012,819
Payload processing facility 3,384,667 17,650,915
Furniture, fixtures and equipment 615,036 3,368,211
- ----------------------------------------------------------------------------------------------
98,477,493 129,077,493
Less accumulated depreciation (27,987,042) (38,115,620)
- ----------------------------------------------------------------------------------------------
Property and equipment, net 70,490,451 90,961,873
Goodwill, net of accumulated amortization of $55,947 - 3,394,773
Deferred mission costs 2,705,422 1,438,910
Other assets 86,769 392,587
- ----------------------------------------------------------------------------------------------
Total assets $129,708,615 114,450,376
==============================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------
Current liabilities:
Loans payable under credit agreement, current portion (note 6) $ 2,500,000 500,000
Accounts payable and accrued expenses 3,270,882 2,408,111
Accrued consulting and subcontracting services due to McDonnell
Douglas 4,712,733 9,052,308
Advanced billings - 846,855
- ----------------------------------------------------------------------------------------------
Total current liabilities 10,483,615 12,807,274
Loans payable under credit agreement, net
of current portion (note 6) 6,179,063 1,500,000
Notes payable to shareholder (note 7) 9,968,503 11,225,246
Convertible note payable (note 8) 1,170,338 -
Deferred flight revenue 30,311,227 2,295,898
- ----------------------------------------------------------------------------------------------
Total liabilities 58,112,746 27,828,418
- ----------------------------------------------------------------------------------------------
Commitments (notes 9, 14, 15 and 16)
Stockholders' equity (notes 8, 12 and 13):
Common stock, no par value, authorized 30,000,000 shares, issued
and outstanding 11,069,237 and 11,146,237 shares, respectively 79,862,700 81,057,164
Additional paid-in capital 16,299 16,299
Retained earnings (deficit) (8,283,130) 5,548,495
- ----------------------------------------------------------------------------------------------
Total stockholders' equity 71,595,869 86,621,958
- ----------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $129,708,615 114,450,376
==============================================================================================
See accompanying notes to consolidated financial statements.
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SPACEHAB, INCORPORATED AND SUBSIDIARY
Consolidated Statements of Income
=======================================================================================================
Year ended Nine months ended Year ended
September 30, 1995 June 30, 1996 June 30, 1997
- -------------------------------------------------------------------------------------------------------
Revenue $ 46,059,000 56,397,000 56,600,766
- -------------------------------------------------------------------------------------------------------
Costs of revenue:
Integration, operations and transportation 14,155,419 14,220,334 23,799,089
Depreciation 8,256,417 6,192,313 9,824,535
Insurance and other 937,250 572,500 496,400
- -------------------------------------------------------------------------------------------------------
Total costs of revenue 23,349,086 20,985,147 34,120,024
- -------------------------------------------------------------------------------------------------------
Gross profit 22,709,914 35,411,853 22,480,742
- -------------------------------------------------------------------------------------------------------
Operating expenses:
Marketing, general and administrative 3,815,536 4,055,680 8,567,268
Research and development 1,600,000 100,000 1,251,394
- -------------------------------------------------------------------------------------------------------
Total operating expenses 5,415,536 4,155,680 9,818,662
- -------------------------------------------------------------------------------------------------------
Income from operations 17,294,378 31,256,173 12,662,080
Interest expense, net of capitalized interest (note 3) (1,364,520) (698,997) (955,015)
Interest and other income, net 114,662 1,183,462 1,821,472
- -------------------------------------------------------------------------------------------------------
Net income before income taxes and extraordinary item 16,044,520 31,740,638 13,528,537
Income tax expense (note 14) 235,664 1,911,895 2,970,943
- ----------------------------------------------------------------------- ------------------------------
Net income before extraordinary item 15,808,856 29,828,743 10,557,594
Extraordinary item - gain on early retirement of debt,
net of taxes and legal fees (note 6) - - 3,274,031
- -------------------------------------------------------------------------------------------------------
Net income $ 15,808,856 29,828,743 13,831,625
- -------------------------------------------------------------------------------------------------------
Net income per common and common equivalent share:
Net income before extraordinary item $ 2.37 3.21 0.95
Extraordinary item - - 0.29
- -------------------------------------------------------------------------------------------------------
$ 2.37 3.21 1.24
=======================================================================================================
Shares used in computing net income per common
and common equivalent share 6,671,346 9,303,487 11,133,243
=======================================================================================================
See accompanying notes to consolidated financial statements.
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SPACEHAB, INCORPORATED AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit)
===================================================================================================================================
Convertible preferred stock Common stock
--------------------------------- -------------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1994 4,011,345 $ 2,310,670 4,908,427 $ 30,410,094
Common stock issued upon stock option exercises - - 25,000 60,000
Common stock issued in private placement (note 12) - - 150,000 3,600,000
Net income - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1995 4,011,345 2,310,670 5,083,427 34,070,094
Common stock issued upon stock option exercises - - 75,000 180,000
Common stock issued in public offering, net of expenses
(note 12) - - 4,014,500 43,301,936
Common stock issued upon conversion of preferred
stock (note 12) (4,011,345) (2,310,670) 1,671,312 2,310,670
Common stock issued in private placement guarantee (note 12) - - 224,998 -
Net income - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1996 - - 11,069,237 79,862,700
Common stock issued upon stock option exercises - - 2,000 24,000
Common stock issued upon conversion of debt (note 8) - - 75,000 1,170,464
Net income - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1997 - $ - 11,146,237 $ 81,057,164
===================================================================================================================================
====================================================================================================================
Additional Retained Total
paid-in earnings stockholders'
capital (deficit) equity (deficit)
- --------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1994 16,299 (53,920,729) (21,183,666)
Common stock issued upon stock option exercises - - 60,000
Common stock issued in private placement (note 12) - - 3,600,000
Net income - 15,808,856 15,808,856
- --------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1995 16,299 (38,111,873) (1,714,810)
Common stock issued upon stock option exercises - - 180,000
Common stock issued in public offering, net of expenses
(note 12) - - 43,301,936
Common stock issued upon conversion of preferred
stock (note 12) - - -
Common stock issued in private placement guarantee (note 12) - - -
Net income - 29,828,743 29,828,743
- --------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1996 16,299 (8,283,130) 71,595,869
Common stock issued upon stock option exercises - - 24,000
Common stock issued upon conversion of debt (note 8) - - 1,170,464
Net income - 13,831,625 13,831,625
- --------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1997 16,299 5,548,495 86,621,958
====================================================================================================================
See accompanying notes to consolidated financial statements.
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SPACEHAB, INCORPORATED AND SUBSIDIARY
Consolidated Statements of Cash Flows
====================================================================================================================================
Year ended Nine months ended Year ended
September 30, 1995 June 30, 1996 June 30, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 15,808,856 29,828,743 13,831,625
Adjustments to reconcile net income to net cash provided by
(used for) operating activities:
Depreciation and amortization 8,489,642 6,387,245 10,184,525
Gain on early retirement of debt -- -- (4,092,537)
Interest converted to notes payable 1,480,772 1,424,513 1,300,077
Changes in assets and liabilities:
Decrease (increase) in accounts receivable (5,565,092) 119,327 1,842,565
Decrease (increase) in prepaid expenses and
other current assets (9,360) (131,686) (14,587)
Decrease in deferred mission costs 251,494 445,267 1,266,512
Decrease (increase) in other assets (227,872) 193,490 (256,887)
Increase (decrease) in deferred flight revenue 3,955,856 (27,752,069) (28,015,329)
Increase (decrease) in accounts payable and
accrued expenses 674,600 1,993,470 (1,003,796)
Decrease in advanced billings -- -- (239,040)
Increase in accrued consulting and
subcontracting services 1,978,940 642,753 4,339,575
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) operating activities 26,837,836 13,151,053 (857,297)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Payments for modules under construction -- -- (13,580,577)
Purchase of Astrotech, net of cash acquired -- -- (20,133,945)
Purchases of property and equipment (4,942,876) (6,266,330) (731,138)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (4,942,876) (6,266,330) (34,445,660)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from note payable to insurers 150,000 -- --
Payments of note payable to insurers (9,707,045) (3,854,079) (2,520,000)
Proceeds from note payable to shareholder 11,229,054 7,358,661 --
Payments of note payable to shareholder (21,537,965) (10,116,713) --
Payments of legal fees on early retirement of debt -- -- (109,860)
Proceeds from exercise of stock options 60,000 180,000 24,000
Proceeds from issuance of common stock, net of expenses 3,600,000 43,301,936 --
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities (16,205,956) 36,869,805 (2,605,860)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 5,689,004 43,754,528 (37,908,817)
Cash and cash equivalents at beginning of year 1,352,016 7,041,020 50,795,548
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 7,041,020 50,795,548 12,886,731
====================================================================================================================================
See accompanying notes to consolidated financial statements.
22
23
SPACEHAB, INCORPORATED AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1996 and 1997
- ------------------------------------------------------------------------------
(1) DESCRIPTION OF THE COMPANY
SPACEHAB, Incorporated (the Company) is the first company to
commercially develop, own and operate habitable modules that provide
space-based laboratory research facilities and cargo services aboard
the U.S. Space Shuttle system. The Company currently owns and operates
three pressurized laboratory and logistics supply modules which
significantly enhance the capabilities of the Space Shuttle fleet. The
Company is currently constructing a new science module with associated
double module hardware. The Company's modules are unique to the U.S.
Space Shuttle.
To date, the Company has successfully completed eight missions aboard
the Space Shuttle and substantially all of the Company's revenue has
been generated under contracts with NASA. The Company's contracts are
subject to periodic funding allocations by NASA. NASA's funding is
dependent on receiving annual appropriations from the United States
government.
On February 12, 1997, the Company acquired the assets and certain of
the liabilities of Astrotech Space Operations, L.P., a subsidiary of
Northrop Grumman, nationally recognized as the leading provider of
commercial satellite launch processing services and payload processing
facilities in the United States. These services are provided at the
Astrotech facilities in Cape Canaveral, Florida and Vandenberg Air
Force Base in California, and are provided to launch service providers
on a fixed-price basis. Additionally, Astrotech provides management
and consulting services to the Boeing Company for its Sea Launch
program at the Boeing facility in Long Beach, California.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of SPACEHAB,
Incorporated and its wholly owned subsidiary, Astrotech Space
Operations, Inc. (Astrotech). All significant intercompany
transactions have been eliminated in consolidation.
FISCAL YEAR
Effective October 1, 1995, the Company changed its fiscal year-end from
September 30 to June 30. Accordingly, the accompanying consolidated
financial statements present the Company's results of operations for
the year ended September 30, 1995, the nine months ended June 30, 1996,
and the year ended June 30, 1997.
(Continued)
23
24
SPACEHAB, INCORPORATED AND SUBSIDIARY
Notes to Consolidated Financial Statements
- ------------------------------------------------------------------------------
(2) CONTINUED
CASH AND CASH EQUIVALENTS
For purposes of its statements of cash flows, the Company considers
short-term investments with original maturities of 3 months or less to
be cash equivalents. The Company intends to hold all of these
investments to maturity and as such are recognized at cost plus accrued
interest, which approximates market value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. The Company's flight
modules are depreciated over a ten-year period using the straight-line
method. All furniture, fixtures and equipment are depreciated using
the straight-line method over the estimated useful lives of the
respective assets. The Company's payload processing facilities are
depreciated using the straight-line method over their estimated useful
lives ranging from sixteen to thirty years.
During fiscal year 1997, SPACEHAB adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to be Disposed Of"
(Statement 121). Statement 121 requires that long-lived assets to be
held and used, including goodwill, be reviewed by the Company for
impairment whenever events or circumstances indicate that the carrying
amount of an asset may not be recoverable. An impairment loss is
recognized when the undiscounted net cash flows associated with the
asset are less than the asset's carrying amount. Impairment losses, if
any, are measured as the excess of the carrying amount of the asset
over its estimated fair market value. The adoption of Statement 121
did not have a material impact on the Company's results of operations
for the year ended June 30, 1997.
GOODWILL
The excess of the cost over the fair value of Astrotech's net tangible
and identifiable intangible assets acquired has been assigned to
goodwill. Goodwill is being amortized on a straight-line basis over
twenty years.
DEFERRED MISSION COSTS
Deferred mission costs are expenses directly related to specific
missions and are recognized as costs of revenue as the respective
missions are completed.
(Continued)
24
25
SPACEHAB, INCORPORATED AND SUBSIDIARY
Notes to Consolidated Financial Statements
- ------------------------------------------------------------------------------
(2) CONTINUED
STOCK-BASED COMPENSATION
During fiscal year 1997, the Company adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-based Compensation"
(Statement 123), which encourages, but does not require, the
recognition of stock-based employee compensation at fair value. The
Company has elected to continue to account for stock-based employee
compensation using the intrinsic value method as prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for
Stock-Issued to Employees", and related interpretations. Accordingly,
compensation cost for options to purchase common stock granted to
employees is measured as the excess, if any, of the fair value of
common stock at the date of the grant over the exercise price an
employee must pay to acquire the common stock.
Warrants to purchase common stock granted to other than employees as
consideration for goods or services rendered are recognized at fair
market value.
REVENUE RECOGNITION
Revenue is recognized upon completion of each module flight for the
CMAM and Mir contracts. Total contract price is allocated to each
flight based on the amount of services the Company provides on the
flight relative to the total services provided for all flights under
contract. Obligations associated with a specific mission, e.g.,
integration services, are also recognized upon completion of the
mission. For new contract awards for which the capability to
successfully complete the contract can be reasonably assured and costs
at completion can be reliably estimated at contract inception, revenue
recognition under the percentage-of-completion method is being reported
based on costs incurred over the period of the contract. Revenue
provided by the Astrotech payload processing facilities is recognized
ratably over the occupancy period of the facilities.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
INCOME TAXES
The Company recognizes income taxes under the asset and liability
method. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable
to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
(Continued)
25
26
SPACEHAB, INCORPORATED AND SUBSIDIARY
Notes to Consolidated Financial Statements
- ------------------------------------------------------------------------------
(2) CONTINUED
NET INCOME PER SHARE
Income per common and common equivalent share is calculated by dividing
net income by the weighted average number of common and common
equivalent shares, to the extent dilutive, during the period. Common
stock equivalents are comprised of common stock options and warrants.
Pursuant to Securities and Exchange Commission Staff Accounting
Bulletin Topic 4:D, stock issued and stock options granted during the
12-month period preceding the date of the Company's initial public
offering have been included in the calculation of weighted average
shares of common and common equivalent shares outstanding for all
periods through the date of the initial public offering using the
treasury stock method, based on the initial public offering price per
share (note 12).
The computation of income per common and common equivalent share,
assuming full dilution, includes all other common stock that
potentially may be issued as a result of conversion privileges,
including the convertible note payable (note 8). Any reduction of less
than 3 percent in the aggregate has not been considered dilutive in the
presentation of income per common share, assuming full dilution.
All computations of income per common share include the effect of the 1
for 2.4 reverse split of common stock (note 12).
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per
Share," (Statement 128). Statement 128 supersedes Accounting
Principles Board Opinion No. 15, "Earnings per Share" (APB 15) and its
related interpretations, and promulgates new accounting standards for
the computation and manner of presentation of the Company's earnings
per share. The Company is required to adopt the provisions of
Statement 128 during the year ending June 30, 1998. Earlier
application is not permitted; however, upon adoption the Company will
be required to restate previously reported annual and interim earnings
per share data in accordance with the provisions of Statement 128. The
Company does not believe that the adoption of Statement 128 will have a
material impact on the computation or manner of presentation of its
earnings per share data as currently or previously presented under APB
15.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the consolidated financial statements and the reported amounts
of revenue and expenses during the reported periods. Actual results
could differ from these estimates.
(Continued)
26
27
SPACEHAB, INCORPORATED AND SUBSIDIARY
Notes to Consolidated Financial Statements
- ------------------------------------------------------------------------------
(2) CONTINUED
RECLASSIFICATIONS
Certain 1995 and 1996 amounts have been reclassified to conform to the
1997 consolidated financial statement presentation.
(3) STATEMENTS OF CASH FLOWS - SUPPLEMENTAL INFORMATION
Cash paid for interest costs was approximately $513,000, $264,000 and
$1,300,000 for the year ended September 30, 1995, the nine months ended
June 30, 1996, and the year ended June 30, 1997, respectively. The
Company capitalized interest of approximately $262,000, $766,000 and
$345,000 during the year ended September 30, 1995, the nine months
ended June 30, 1996, and the year ended June 30, 1997, respectively,
related to the module improvements in progress.
The Company paid approximately $140,000, $248,000, and $2,385,000 for
income taxes during the year ended September 30, 1995, the nine months
ended June 30, 1996 and the year ended June 30, 1997, respectively.
During fiscal year 1997, the Company's convertible note payable, with a
carrying value of approximately $1.2 million, was converted into 75,000
shares of common stock (note 8).
(4) ACCOUNTS RECEIVABLE
At June 30, 1996 and 1997, accounts receivable consisted of:
1996 1997
- ------------------------------------------------------------------
U.S. government contracts:
Billed $ 3,724,476 -
Unbilled 1,721,289 3,520,742
- ------------------------------------------------------------------
Total U.S. government contracts 5,445,765 3,520,742
- ------------------------------------------------------------------
Commercial contracts:
Billed - 1,344,302
Unbilled - 311,211
- ------------------------------------------------------------------
Total commercial contracts - 1,655,513
- ------------------------------------------------------------------
Total accounts receivable $ 5,445,765 5,176,255
==================================================================
The Company anticipates collecting substantially all receivables within
one year.
(Continued)
27
28
SPACEHAB, INCORPORATED AND SUBSIDIARY
Notes to Consolidated Financial Statements
- ------------------------------------------------------------------------------
(5) ACQUISITION OF ASTROTECH
The Company paid $20,135,987, including transaction costs, to acquire
substantially all of the assets and certain of the liabilities of
Astrotech. The purchase was effective on February 12, 1997. The
business combination has been accounted for using the purchase method.
The purchase price has been allocated to the assets and liabilities
acquired based on appraisals and other studies. The purchase price was
allocated as follows:
Cash $ 2,042
Receivables 1,573,055
Land 580,000
Buildings 13,389,000
Furniture, fixtures and equipment 2,319,159
Goodwill 3,450,720
Other assets 48,931
Accounts payable (141,025)
Advanced billings (1,085,895)
- ----------------------------------------------------------------
Total purchase price $ 20,135,987
================================================================
The following represents pro forma combined results of operations for
the current year and preceding year as if the acquisition of Astrotech
had occurred as of October 1, 1995:
Nine months ended Year ended
June 30, 1996 June 30, 1997
- ----------------------------------------------------------------------
Revenue $ 62,716,117 59,980,318
Gross profit 39,902,147 23,531,400
Income before extraordinary item 31,621,920 10,309,377
Net income 31,621,920 13,583,408
- ----------------------------------------------------------------------
Net income per common and common
equivalent share $ 3.40 1.21
======================================================================
The Company has generated revenues of approximately $2,900,000 from
Astrotech's operations since the date of acquisition.
(6) LOANS PAYABLE UNDER CREDIT AGREEMENT
Previous to an August 1996 amendment, the Company's credit agreement
consisted of a $6,458,000 term loan bearing interest at 1 percent per
month and a $5,495,000 noninterest-bearing term loan with several
insurance companies. In addition, a revolving credit commitment with
McDonnell Douglas, a shareholder, provided a maximum outstanding
balance of $6,000,000 and bore interest at a rate of 1 percent per
month.
(Continued)
28
29
SPACEHAB, INCORPORATED AND SUBSIDIARY
Notes to Consolidated Financial Statements
- ------------------------------------------------------------------------------
(6) CONTINUED
In August 1996, the Company's credit agreement was amended. Under the
amendment, the revolving credit commitment from McDonnell Douglas was
canceled. In exchange for the full satisfaction of the Company's term
loans with the various insurance companies, the Company paid the
insurance companies $2,500,000 and agreed to pay an additional
$2,000,000 under a new noninterest-bearing term loan. The new term
loan is due in installments of $500,000 on each of August 1, 1997 and
1998, and $333,333 on each of August 1, 1990, 2000 and 2001. As a
result of this amended and restated agreement, the Company recognized
an extraordinary gain of $3,274,031, net of income taxes and other
related expenses of $818,506 and $109,860, respectively, during the
year ended June 30, 1997.
Aggregate interest cost incurred on the debts due under the various
credit agreements was approximately $524,000, $561,000, and $64,000 for
the year ended September 30, 1995, the nine months ended June 30, 1996
and the year ended June 30, 1997, respectively.
(7) NOTES PAYABLE TO SHAREHOLDER
The Company issued subordinated notes for a portion of the amount due
to Alenia Spazio S.p.A. (Alenia), a shareholder, under a previously
completed construction contract for the Company's flight modules. Such
notes had aggregate outstanding balances of $9,968,503 and $11,225,246
at June 30, 1996 and 1997, respectively. The notes bear interest at an
annual rate of 12 percent, compounded quarterly with all accrued
interest originally payable 45 days after the first mission under the
CMAM contract and semiannually thereafter. During the year ended
September 30, 1995, Alenia agreed to defer the payment of interest and
principal until November 1998. Principal on the notes was due at the
earlier of 45 days after the seventh launch under the Mir contract, or
June 15, 1997; however, no amount of principal or interest on the notes
is due until all amounts under the amended and restated credit
agreement (note 6) are repaid. As such, no principal payments are due
under these notes until August 1, 2001. Interest cost accrued on the
notes to Alenia was approximately $1,017,000, $846,000, and $1,300,000
for the year ended September 30, 1995, the nine months ended June 30,
1996 and the year ended June 30, 1997, respectively.
(Continued)
29
30
SPACEHAB, INCORPORATED AND SUBSIDIARY
Notes to Consolidated Financial Statements
- ------------------------------------------------------------------------------
(8) CONVERTIBLE NOTE PAYABLE
On August 12, 1992, the Company issued a subordinated promissory note
to an investment bank in the amount of $900,000, carrying interest at
LIBOR plus 3 percent, and maturing six months after the payment of all
other indebtedness due under the amended and restated credit agreement
and the subordinated notes to Alenia. Through June 30, 1996, the
Company had elected to defer the payment of interest under the note,
which accrued and was converted to additional outstanding principal.
The note was convertible at the option of the holder into 75,000 shares
of the Company's common stock at any time prior to maturity. On
October 25, 1996, the investment bank exercised its option to convert
the note into the Company's common stock. In accordance with the terms
of the agreement, interest that accrued during fiscal year 1997 of
approximately $25,000 through the date of conversion was waived.
Interest cost incurred on this note was approximately $82,000 and
$58,000 for the years ended September 30, 1995 and the nine months
ended June 30, 1996, respectively.
(9) CREDIT FACILITIES
On June 16, 1997, the Company entered into a $10,000,000 line of credit
agreement with a financial institution. Outstanding balances on the
line of credit accrue interest at either the lender's prime rate or a
LIBOR-based rate. This loan is collateralized by certain assets of the
Company. The term of the agreement is through October 1998. At June
30, 1997, the Company has not drawn against the line of credit.
On July 14, 1997, the Company's subsidiary, Astrotech, entered into
another credit facility for loans of up to $15,000,000 with a financial
institution. This loan is collateralized by the assets of Astrotech
and certain other assets of the Company, and is guaranteed by the
Company. Interest accrues at LIBOR plus three percent.
(10) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair
values of the Company's financial instruments as of June 30, 1997 in
accordance with Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments."
Carrying Fair
amount value
- --------------------------------------------------------------------
Financial liabilities:
Loans payable under credit
agreement $ 2,000,000 1,629,679
Notes payable to shareholder 11,225,246 11,225,246
====================================================================
(Continued)
30
31
SPACEHAB, INCORPORATED AND SUBSIDIARY
Notes to Consolidated Financial Statements
- ------------------------------------------------------------------------------
(10) CONTINUED
The fair value of the Company's long-term debt is estimated based on
the current rates offered to the Company for debt of the same remaining
maturities. The carrying amounts of cash and cash equivalents,
short-term investments, receivables, and accounts payable and accrued
expenses approximate their fair market value because of the relatively
short duration of these instruments.
(11) NASA CONTRACTS
COMMERCIAL MIDDECK AUGMENTATION MODULE CONTRACT
On November 30, 1990, NASA and the Company entered into the Commercial
Middeck Augmentation Module contract (CMAM) to lease to NASA a portion
of the middeck augmentation modules and related integration services at
an aggregate firm fixed price of $184,236,000 over six missions.
During the year ended September 30, 1994, the terms of the CMAM
contract were amended to reduce the number of missions from six to
five, although the total locker space leased by NASA and the contract
value remained the same.
NASA paid the Company progress payments based on achieving certain
integration milestones. During the year ended September 30, 1995, the
nine months ended June 30, 1996, and the year ended June 30, 1997, NASA
made progress payments of $35,377,000, $8,857,000, and $0,
respectively, to the Company.
During the year ended September 30, 1995, and the nine months ended
June 30, 1996 and the year ended June 30, 1997, the Company recognized
approximately $46,059,000, $45,634,000, and $7,963,000, respectively,
of revenue under the CMAM contract. The CMAM contract was completed
during fiscal year 1997.
MIR SPACE STATION CONTRACT
On July 14, 1995, NASA and the Company completed final negotiations to
lease the Company's flight modules and provide related integration
services over four missions to the Russian Space Station Mir during
1996 and 1997, at an aggregate firm fixed price of $53,980,000. During
December 1995, the contract was amended whereby the contract price was
adjusted to $52,506,600 in exchange for the indemnification by NASA of
certain damage to, or loss of, the modules during flight.
During July 1997, the Company and NASA further amended the terms of the
basic contract to provide for three additional missions to take place
in September 1997, January 1998, and May 1998, for an additional
$38,000,000.
(Continued)
31
32
SPACEHAB, INCORPORATED AND SUBSIDIARY
Notes to Consolidated Financial Statements
- ------------------------------------------------------------------------------
(11) CONTINUED
NASA pays the Company progress payments on a monthly basis. During the
year ended September 30, 1995, the nine months ended June 30, 1996, the
year ended June 30, 1997, the Company received approximately
$9,073,000, $19,907,000, and $20,438,000, respectively, from NASA
relating to the contract.
During the nine months ended June 30, 1996 and the year ended June 30,
1997, the Company recognized $10,772,000 and $41,734,600, respectively,
of revenue under the original contract relating to completion of the
first four missions. As of June 30, 1997, the Company has $2,940,513
of unbilled retainages due from NASA. These amounts are expected to be
collected within the next 12 months.
(12) STOCKHOLDERS' EQUITY
INITIAL PUBLIC OFFERING
In December 1995 and January 1996, the Company sold, through an
underwritten initial public offering, 4,014,500 common shares at $12.00
per share, which resulted in net proceeds to the Company of $43,301,936
after associated commissions and discounts, and other expenses of the
offering.
REVERSE STOCK SPLIT
Prior to the initial public offering, on December 11, 1995, the
Company's Board of Directors effected a 1 for 2.4 reverse split of
common stock whereby each 2.4 shares of existing common stock were
exchanged for one share of common stock. All share and per share data
appearing in the consolidated financial statements and notes thereto
have been retroactively adjusted for this reverse split.
PRIVATE EQUITY PLACEMENT
During August 1995, the Company completed the sale of 150,000 shares of
its common stock to five investors for an aggregate price of
$3,600,000. The terms of sale included a guarantee by the Company that
in the event of the completion of an initial public offering prior to
December 31, 1996, the investors would realize no less than a 25
percent premium on their investment based on the initial offering
price. Based on the initial public offering price, the Company issued
an aggregate of 224,998 common shares to the investors in settlement of
the guarantee.
(Continued)
32
33
SPACEHAB, INCORPORATED AND SUBSIDIARY
Notes to Consolidated Financial Statements
- ------------------------------------------------------------------------------
(12) CONTINUED
CONVERTIBLE PREFERRED STOCK
As a result of the initial public offering of the Company's common
stock, all of the Company's preferred stock was automatically converted
into common stock on a 2.4 shares of common stock for each share of
preferred stock in accordance with the terms of the preferred stock.
(13) COMMON STOCK OPTION AND STOCK PURCHASE PLANS
NON-QUALIFIED OPTIONS
Prior to the adoption of the 1994 Stock Incentive Plan (the 1994 Plan),
stock options granted to the Company's officers and employees were part
of their employment contract or offer. The number and price of the
options granted was defined in the employment agreements and such
options vest incrementally over a period of four years and generally
expire within ten years of the date of grant.
THE 1994 PLAN
Under the terms of the 1994 Plan, the number and price of the options
granted to employees is determined by the Board of Directors and such
options vest, in most cases, incrementally over a period of four years
and expire no more than ten years after the date of grant.
THE DIRECTORS' STOCK OPTION PLAN
Under the terms of the Directors' Stock Option Plan (the Directors'
Plan), each nonemployee member of the Board of Directors is annually
granted options to purchase 5,000 shares of common stock at exercise
prices equal to the fair market value at the date of grant. Options
under the Directors' Plan vest after one year and expire seven years
from the date of grant.
1997 EMPLOYEE STOCK PURCHASE PLAN
During the year ended June 30, 1997, the Company adopted, pending
shareholder approval, an employee stock purchase plan that permits
eligible employees to purchase shares of common stock of the Company at
prices no less than 85 percent of the current market price. The plan
will be implemented, and all full-time employees will be eligible to
participate, effective October 1, 1997.
(Continued)
33
34
SPACEHAB, INCORPORATED AND SUBSIDIARY
Notes to Consolidated Financial Statements
- ------------------------------------------------------------------------------
(13) CONTINUED
STOCK OPTION ACTIVITY SUMMARY
The following table summarizes the Company's stock option plans:
Non-qualified Options 1994 Plan Directors' Plan
--------------------------- ------------------------- ----------------------
Weighted Weighted Weighted
average average average
Shares exercise Shares exercise Shares exercise
outstanding price outstanding price outstanding price
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding at 9/30/94 723,444 $ 10.72 212,492 $ 12.00 - $ -
Granted 235,408 12.16 43,664 12.00 - -
Exercised 25,000 2.40 - - - -
Forfeited - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding at 9/30/95 933,852 11.31 256,156 12.00 - -
Granted 8,133 24.00 744,582 13.85 - -
Exercised 75,000 2.40 - - - -
Forfeited 246,523 12.00 - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding at 6/30/96 620,462 12.28 1,000,738 13.35 - -
Granted 14,166 8.88 1,027,350 6.90 50,000 7.00
Exercised - - 2,000 12.00 - -
Forfeited 186,309 12.00 776,088 13.14 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding at 6/30/97 448,319 12.01 1,250,000 8.20 50,000 7.00
Options exercisable at:
September 30, 1995 708,862 11.09 45,831 12.00 - -
June 30, 1996 543,585 12.07 58,247 12.00 - -
June 30, 1997 442,219 12.15 819,132 8.49 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted-average fair value at
date of grant during the
fiscal year ended:
June 30, 1996 8,133 $ 24.00 744,582 $ 13.85 - $ -
June 30, 1997 14,166 8.88 1,027,350 6.90 50,000 7.00
====================================================================================================================================
(Continued)
34
35
SPACEHAB, INCORPORATED AND SUBSIDIARY
Notes to Consolidation Financial Statements
- --------------------------------------------------------------------------------
(13) CONTINUED
The following table summarizes information about the Company's stock
options outstanding at June 30, 1997:
Options outstanding Options exercisable
------------------------------------- -----------------------
Weighted-
average Weighted- Weighted-
remaining average average
Range of exercise Number contractual exercise Number exercise
prices outstanding life (years) price exercisable price
- -----------------------------------------------------------------------------------
$24.00 8,133 4.01 $24.00 2,033 $24.00
$12.00 to $14.88 682,454 2.48 $12.70 656,890 $12.62
$5.75 to $8.88 1,057,732 5.73 $ 6.78 602,428 $ 5.73
- -----------------------------------------------------------------------------------
1,748,319 1,261,351
===================================================================================
The Company applies APB Opinion 25 and related interpretations in
accounting for its plans. Accordingly, as all options have been
granted at exercise prices equal to the fair market value as of the
date of grant, no compensation cost has been recognized under these
plans in the accompanying consolidated financial statements. Had
compensation cost been determined consistent with Statement 123, the
Company's net income and earnings per common share would have been
reduced to the pro forma amounts indicated below:
Nine months ended Year ended
June 30, 1996 June 30, 1997
- -----------------------------------------------------------------------------------
Net income before extraordinary item:
As reported $ 29,828,743 10,557,594
Pro forma 29,256,916 8,964,083
===================================================================================
Net income per common and common equivalent
share:
As reported $ 3.21 0.95
Pro forma 3.14 0.80
===================================================================================
The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
weighted average assumptions used for grants in fiscal years 1996 and
1997: 0.0 percent dividend growth; expected volatility of 38 percent;
risk-free interest rates ranging from 5.50 percent to 6.82 percent; and
expected lives ranging from two to six years.
(Continued)
35
36
SPACEHAB, INCORPORATED AND SUBSIDIARY
Notes to Consolidated Financial Statements
- ------------------------------------------------------------------------------
(13) CONTINUED
The effects of compensation cost as determined under Statement 123 on
net income in fiscal year 1996 and 1997 may not be representative of
the effects on pro forma net income in future periods.
WARRANTS
The Company also has 744,246 currently exercisable warrants outstanding
to purchase the Company's common stock at prices ranging from $9.00 to
$14.40 per share, with various expiration dates through February 2002.
All such warrants were issued at exercise prices equivalent to, or in
excess of, the determined fair market value of the Company's common
stock at the date of issuance.
(14) INCOME TAXES
The components of income tax expense are as follows:
Year ended Nine months ended Year ended
September 30, 1995 June 30, 1996 June 30, 1997
- -----------------------------------------------------------------------------------------
Current:
Federal $ 235,664 1,911,895 3,084,500
State and local - - 704,949
=========================================================================================
235,664 1,911,895 3,789,449
- -----------------------------------------------------------------------------------------
Deferred:
Federal - - -
State and local - - -
- -----------------------------------------------------------------------------------------
- - -
- -----------------------------------------------------------------------------------------
Income tax expense $ 235,664 1,911,895 3,789,449
=========================================================================================
(Continued)
36
37
SPACEHAB, INCORPORATED AND SUBSIDIARY
Notes to Consolidated Financial Statements
- ------------------------------------------------------------------------------
(14) CONTINUED
A reconciliation of the expected amount of income tax expense
calculated by applying the statutory federal income tax rate, of
34 percent to income before taxes, to the actual amount of income
tax expense recognized follows:
Year ended Nine months ended Year ended
September 30, 1995 June 30, 1996 June 30, 1997
- --------------------------------------------------------------------------------
Expected expense $ 5,455,137 10,791,817 5,865,338
Change in valuation (5,222,201) (8,884,006) (2,639,848)
allowance
State income tax -- -- 563,959
Other 2,728 4,084 --
- --------------------------------------------------------------------------------
Income tax expense $ 235,664 1,911,895 3,789,449
================================================================================
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities as of
June 30, 1996 and 1997 are presented below:
1996 1997
- -----------------------------------------------------------------------------
Deferred tax assets:
Net operating loss carryforwards $ 6,791,224 1,503,751
General business credit carryforwards 2,189,414 2,189,414
Alternative minimum tax credit carryforwards 2,270,234 5,043,547
Capitalized research and development costs 6,099,099 4,222,712
Other 248,000 63,588
- -----------------------------------------------------------------------------
Total gross deferred tax assets 17,597,971 13,023,012
Less - valuation allowance 6,712,732 2,058,156
- -----------------------------------------------------------------------------
Net deferred tax assets 10,885,239 10,964,856
- -----------------------------------------------------------------------------
Deferred tax liabilities:
Property and equipment, principally due to
differences in depreciation
10,819,784 10,873,300
Other 65,455 91,556
- -----------------------------------------------------------------------------
Total gross deferred tax liabilities 10,885,239 10,964,856
- -----------------------------------------------------------------------------
Net deferred taxes $ - -
=============================================================================
(Continued)
37
38
SPACEHAB, INCORPORATED AND SUBSIDIARY
Notes to Consolidated Financial Statements
- ------------------------------------------------------------------------------
(14) CONTINUED
The valuation allowances for deferred tax assets as of October 1, 1994
and 1995 were $23,028,141 and $16,857,228, respectively. The net
changes in the total valuation allowance for the year ended September
30, 1995, the nine months ended June 30, 1996, and the year ended June
30, 1997 were decreases of $6,170,913, $10,144,496, and $4,654,576,
respectively.
At June 30, 1997, the Company had accumulated net operating losses of
$4,422,796 available to offset future regular taxable income. These
operating loss carryforwards expire between the years 2006 and 2009.
Utilization of these net operating losses may be subject to limitations
in the event of significant changes in stock ownership of the Company.
Additionally, the Company has approximately $10,556,779 and $5,043,547
of research and experimentation and alternative minimum tax credit
carryforwards, respectively, available to offset future regular tax
liabilities. The research and experimentation credits expire between
the years 2001 and 2007; the alternative minimum tax credits
carryforward indefinitely.
(15) EMPLOYEE BENEFIT PLAN
The Company has a defined contribution retirement plan which covers all
employees and officers. The Company contributed $85,114 into the Plan
during the year ended June 30, 1997. No contributions were made by the
Company during the year ended September 30, 1995 or the nine months
ended June 30, 1996. The Company has the right, but not the
obligation, to make contributions to the plan in future years at the
discretion of the Company's Board of Directors.
(16) COMMITMENTS
INTEGRATION AND OPERATIONS CONTRACTS
During fiscal year 1994, the Company entered into a cost-plus-fee
contract, as amended, with McDonnell Douglas, a shareholder, for
standard integration and operation services for up to seven missions
aboard the Space Shuttle relating to missions to the Mir Space
Station. The maximum estimated amount to be payable under this
contract is approximately $48,500,000. The period of performance on
this contract began in November 1994 and continues through July 1998.
As of June 30, 1996 and 1997, approximately $11,700,000 and
$28,300,000, respectively, had been cumulatively incurred by the
Company under this contract.
(Continued)
38
39
SPACEHAB, INCORPORATED AND SUBSIDIARY
Notes to Consolidated Financial Statements
- ------------------------------------------------------------------------------
(16) CONTINUED
MODULE CONSTRUCTION CONTRACT
During fiscal year 1997, the Company entered into a $36,800,000
cost-plus-fee contract with McDonnell Douglas, a shareholder, to
construct a new science module with associated double module hardware.
The Company expects to take delivery of the module in the spring of
1999. The Company has incurred approximately $12,700,000 in
construction costs through June 30, 1997.
LEASES
The Company is obligated under noncancelable operating leases for
office space, storage space, and the land for a payload processing
facility. Future minimum payments under these noncancelable operating
leases are as follows:
Year ending June 30,
-------------------------------------------
1998 $ 623,000
1999 421,000
2000 313,000
2001 223,000
2002 and thereafter 414,000
-------------------------------------------
$ 1,994,000
===========================================
Rent expense for the year ended September 30, 1995, the nine months
ended June 30, 1996, and the year ended June 30, 1997, was
approximately $211,000, $183,000, and $456,000, respectively.
- ------------------------------------------------------------------------------
39
40
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information concerning the Company's directors and executive
officers; as well as with respect to Item 405 of Regulation S-K will be
contained in the Company's definitive 1997 Proxy Statement in accordance with
the Company's annual meeting of stockholders and is hereby incorporated by
reference thereto.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item will be contained in the
Company's definitive 1997 Proxy Statement with respect to the Company's
annual meeting of stockholders and is hereby incorporated by reference
thereto.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item will be contained in the
Company's definitive 1997 Proxy Statement with respect to the Company's
annual meeting of stockholders and is hereby incorporated by reference
thereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item will be contained in the
Company's definitive 1997 Proxy Statement with respect to the Company's
annual meeting of stockholders and is hereby incorporated by reference
thereto.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of the report:
1. Financial Statements.
The following consolidated financial statements of SPACEHAB,
Incorporated and subsidiary and related notes, together with the
report thereon of KPMG Peat Marwick LLP, the Company's independent
auditors, are set forth herein as indicated below.
PAGE
Report of KPMG Peat Marwick LLP, Independent Public 18
Accountants
Consolidated Balance Sheets 19
Consolidated Statements of Income 20
Consolidated Statements of Stockholders' Equity 21
Consolidated Statements of Cash Flows 22
Notes to Consolidated Financial Statements 23
40
41
2. Financial Statement Schedules.
All financial statement schedules required to be filed in Part IV, Item
14 (a) have been omitted because they are not applicable, not required,
or because the required information is included in the financial
statements or notes thereto.
3. Exhibits.
EXHIBIT NO. DESCRIPTION OF EXHIBIT
2.1*/ Asset Purchase Agreement, dated February 5, 1997, by and among
Spacehab Acquisition Corp.; SPACEHAB, Incorporated; Astrotech
Space Operations, L.P.; and Northrop Grumman Corporation.
2.2*/ Amendment No. 1 to Asset Purchase Agreement, dated as of February
12, 1997, by and among Spacehab Acquisition Corp; SPACEHAB,
Incorporated; Astrotech Space Operations, L.P.; and Northrop
Grumman Corporation.
3.1* Amended and Restated Articles of Incorporation of the Company.
3.2* Amended and Restated By-Laws of the Company.
10.1* NAS 9-18371, dated November 30, 1990, between the National
Aeronautics and Space Administration ("NASA") and the Registrant
(including the amendments thereto) (the "CMAM Contract").
10.2* Cost Plus Incentive Fee Contract (Number SHB 1002), dated July
11, 1990, between the Registrant and McDonnell Douglas
Corporation, McDonnell Douglas Aerospace-Huntsville Division
("McDonnell Douglas") (including the amendments thereto) (the
"CMAM I/O Contract").
10.3* Cost Plus Incentive Fee Contract (Number SHB 1009), dated
November 23, 1994, between the Registrant and McDonnell Douglas
(including the amendments thereto) (the "Mir I/O Contract").
10.4* Cost Plus Incentive Fee Contract (Number SHB 1010), dated
November 23, 1994, between the Registrant and McDonnell Douglas
(including the amendments thereto) (the "Double Module Contract").
10.5* NAS 9-19250, dated July 14, 1995, between NASA and the Registrant
(including amendments thereto) (the "Mir Contract").
10.6* Amended and Restated Representation Agreement, dated August 15,
1995, by and between the Registrant and Mitsubishi Corporation.
10.7* Letter Agreement dated August 15, 1995, by and between the
Registrant and Mitsubishi Corporation.
10.8* Exclusive European Broker Agreement, dated February 15, 1989, by
and between Intospace, GmbH and the Registrant.
41
42
10.9* Memorandum of Agreement, dated July 28, 1995, between the
Registrant and McDonnell Douglas Corporation.
10.10* Amended and Restated Credit Agreement (the "Credit Agreement"),
dated December 29, 1993, among the Registrant, the Insurers
listed therein, McDonnell Douglas Corporation, the Chase
Manhattan Bank (National Association), as agent.
10.11* Amendment No. 1 to the Credit Agreement, dated July 18, 1995.
10.12*** Amended and Restated Credit Agreement, dated August 20, 1996
among the Registrant, the Insurers listed therein and the Chase
Manhattan Bank (National Association), as agent.
10.13* SPACEHAB, Incorporated Directors' Stock Option Plan.
10.14* SPACEHAB, Incorporated 1994 Stock Incentive Plan.
10.15*** Office Building Lease Agreement, dated November 30, 1995, between
The Equitable Life Assurance Society of The United States and the
Registrant (Vienna, Virginia headquarters lease).
10.16* Agreement of Sublease, dated April 9, 1991, by and between
Eastern American Teak Corporation and the Registrant (land lease
for Cape Canaveral, Florida facility).
10.17* Letter Agreement, dated March 24, 1995, between Alenia Spazio and
the Registrant.
10.18* Consulting Agreement, dated August 7, 1995, by and between CSP
Associates, Inc. and the Registrant.
10.19*** Extension of Consulting Agreement between CSP Associates, Inc.
and the Registrant, dated February 21, 1996.
10.20*** Consulting Agreement, dated August 14, 1996, by and between
Gordon S. Macklin and the Registrant.
10.21** Employment and Non-Interference Agreement, dated December 27,
1995, between the Company and Chester M. Lee.
10.22** Employment and Non-Interference Agreement, dated December 27,
1995, between the Company and David A. Rossi.
10.23** Employment and Non-Interference Agreement, dated December 27,
1995, between the Company and Nelda J. Wilbanks.
10.24** Employment and Non-Interference Agreement, dated December 27,
1995, between the Company and M. Dale Steffey.
10.25** Employment and Non-Interference Agreement, dated December 27,
1995, between the Company and Margaret E. Grayson.
10.26** Employment and Non-Interference Agreement, dated December 27,
1995, between the Company and Richard P. Hora.
42
43
10.27** Indemnification Agreement, dated December 27, 1995, between the
Company and Dr. Shelley A. Harrison.
10.28** Indemnification Agreement, dated December 27, 1995, between the
Company and Dr. Edward E. David, Jr.
10.29** Indemnification Agreement, dated December 27, 1995, between the
Company and Richard P. Hora.
10.30** Indemnification Agreement, dated December 27, 1995, between the
Company and Robert A. Citron.
10.31** Indemnification Agreement, dated December 27, 1995, between the
Company and Alvin L. Reeser.
10.32** Indemnification Agreement, dated December 27, 1995, between the
Company and James R. Thompson.
10.33** Indemnification Agreement, dated December 27, 1995, between the
Company and Jeffrey Schuss.
10.34** Indemnification Agreement, dated December 27, 1995, between the
Company and Dr. Brad S. Meslin.
10.35** Indemnification Agreement, dated December 27, 1995, between the
Company and Chester M. Lee.
10.36** Indemnification Agreement, dated December 27, 1995, between the
Company and David A. Rossi.
10.37** Indemnification Agreement, dated December 27, 1995, between the
Company and Dr. Shi H. Huang.
10.38** Indemnification Agreement, dated December 27, 1995, between the
Company and Nelda J. Wilbanks.
10.39** Indemnification Agreement, dated December 27, 1995, between the
Company and M. Dale Steffey.
10.40** Indemnification Agreement, dated December 27, 1995, between the
Company and Margaret E. Grayson.
10.41** Indemnification Agreement, dated December 27, 1995, between the
Company and Dr. Udo Pollvogt.
10.42** Indemnification Agreement, dated December 27, 1995, between the
Company and Ernesto Vallerani.
10.43** Indemnification Agreement, dated December 27, 1995, between the
Company and Hironori Aihara.
10.44***** NASDA Contract, dated July 1996, between the Registrant and
Mitsubishi Corporation (the "NASDA/ESA Contracts").
43
44
10.45***** ESA Contract, dated September 1996, between the Registrant and
INTOSPACE GmbH (the "NASDA/ESA Contracts").
10.46 Amendment to the Agreement, dated as of August 27, 1996, between
the Registrant and Mitsubishi Corporation.
10.47 Letter Contract Number SHB 1014, dated August 13, 1997, between
the Registrant and McDonnell Douglas Aerospace - Huntsville.
10.48 Letter Agreement, dated July 23, 1997, between the Registrant and
Daimler-Benz.
10.49 Cost Plus Fee Contract (Number SHB 1013), dated July 31, 1997,
between the Registrant and McDonnell Douglas Corporation,
McDonnell Douglas Aerospace Huntsville Division (the "Science
Double Module Contract").
10.50 Amendment dated March 8, 1996, to Office Building Lease
Agreement, dated November 30, 1995, between The Equitable Life
Assurance Society of the United States and the Registrant
(Vienna, Virginia headquarters lease).
10.51 Agreement of Sublease, dated February 26, 1996, by and between
Barrios Technology, Inc. and the Registrant (Expansion of Houston
Facility).
10.52 Office Building Lease Agreement, dated October 6, 1993, between
Astrotech and the Secretary of the Air Force (Lease number SPCVAN
-2-94-0001).
10.53 Office Building Lease Agreement, dated May 30, 1983, between
Astrotech and Randolph Park Associates II Limited Partnership
(Silver Spring, Maryland headquarters lease).
10.54 Loan and Security Agreement, dated June 16, 1997, between the
Registrant, Astrotech and Signet Bank. (the "Revolving Credit
Agreement").
10.55 Loan and Security Agreement, dated July 14, 1997, between
Astrotech and the CIT Group/Equipment Financing, Inc. (the "Term
Loan Agreement").
10.56 Employment and Non-Interference Agreement, dated April 1, 1997,
between the Company and Dr. Shelly A. Harrison.
10.57 Employment and Non-Interference Agreement, dated April 10, 1997,
between the Company and John M. Lounge.
10.58 Indemnification Agreement, dated October 22, 1996, between the
Company and John M. Lounge.
10.59 Consulting Agreement, dated August 15, 1997, between Gordon S.
Macklin and the Registrant.
10.60 Extension of Consulting Agreement, dated August 18, 1997, between
CSP Associates, Inc. and the Registrant.
10.61 Consulting Agreement, dated October 24, 1996, between Harbor
Securities and the Registrant.
44
45
10.62 Teaming Agreement, dated May 29, 1997, between United Space
Alliance, LLC (USA) and the Registrant.
10.63 Letter Agreement, dated July 30, 1997, between RSC Energia
(Energia) and the Registrant.
10.64 Letter of Cancellation, dated June 10, 1997, of the Memorandum of
Agreement, dated July 28, 1995, between McDonnell Douglas and the
Registrant (with attachment thereto).
10.65 Royalty Agreement, dated May 1, 1997, between the University of
Maryland Biotechnical Institute (UMBI) and the Registrant.
10.66 Agreement, dated July 15, 1997, between UAB Research Foundation
on behalf of the University of Alabama at Birmingham, Center for
Macromolecular Crystallography and the Registrant (including
amendments thereto).
10.67 Letter Agreement, dated April 26, 1996, between Pennsylvania
State University, Center for Cell Research and the Registrant.
10.68 SA42, dated July 16, 1997, between NASA and the Registrant
(Amendment to the Mir Contract).
11. Statement regarding Computation of Per Share Earnings.
21. Subsidiary of the Registrant.
23. Consent of KPMG Peat Marwick LLP.
27. Financial Data Schedule.
* Incorporated by reference to the Registrant's Registration
Statement on Form S-1 (File No. 33- 97812) and all amendments
thereto, originally filed with the Securities and Exchange
Commission on October 5, 1995.
** Incorporated by reference to the Registrant's Report on Form 10-Q
for the quarter ended December 31, 1995, filed February 14, 1996.
*** Incorporated by reference to the Registrant's Report on Form 10-K
for the fiscal year ended June 30, 1996, filed with the
Securities and Exchange Commission on September 17, 1996.
**** Incorporated by reference to the Registrant's Annual Report on
Form 10-K/A for the year ended June 30, 1996, filed with the
Securities and Exchange Commission on December 20, 1996.
***** Incorporated by reference to the Registrant's Report on Form
10-Q/A for the quarter ended September 30, 1996, filed with the
Securities and Exchange Commission on December 20, 1996.
*/ Incorporated by reference to the Registrant's Report on Form 8-K
filed with the Securities and Exchange Commission on February 27,
1997.
45
46
(b) The following report on Form 8-K was filed by the Registrant
during the period covered by this report.
1. Report on Form 8-K filed on February 27, 1997 disclosing
the Registrant's acquisition of substantially all of the
assets of Astrotech Space Operations, L.P.
46
47
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, hereunto duly authorized.
SPACEHAB, Incorporated
By: /S/ DR. SHELLY A. HARRISON
---------------------------------
Dr. Shelley A. Harrison
Chairman of the Board and
Chief Executive Officer
Date: September 12, 1997
By: /S/ MARGARET E. GRAYSON
----------------------------------
Margaret E. Grayson Vice
President of Finance, Treasurer
and Assistant Secretary (Principal
Accounting Officer and CFO)
Date: September 12, 1997
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on
behalf of this registrant in the capacities and on the dates indicated.
Director
- ------------------------------
Hironori Aihara
/s/ Robert A. Citron Director September 12, 1997
- ------------------------------
Robert A. Citron
/s/ Dr. Edward A. David, Jr. Director September 12, 1997
- ------------------------------
Dr. Edward A. David, Jr.
- ------------------------------
Dr. Shi H. Huang Director
/s/ Chester M. Lee Director September 12, 1997
- ------------------------------
Chester M. Lee
/s/ Dr. Brad M. Meslin Director September 12, 1997
- ------------------------------
Dr. Brad M. Meslin
/s/ Gordon S. Macklin Director September 12, 1997
- ------------------------------
Gordon S. Macklin
/s/ Dr. Udo Pollvogt Director September 12, 1997
- ------------------------------
Dr. Udo Pollvogt
/s/ Alvin L. Reeser Director September 12, 1997
- ------------------------------
Alvin L. Reeser
47
48
Director
- ------------------------------
James R. Thompson
Director
- ------------------------------
Prof. Ernesto Vallerani
48