The proceeds of this financing will be used to pay certain transaction expenses incurred in connection with SpaceDev's acquisition of Starsys, to pay the cash consideration to Starsys shareholders, to repay certain outstanding indebtedness of Starsys and to fund the working capital needs of the combined company.

On October 26, 2005, SpaceDev and Starsys Research Corporation announced the signing of a merger agreement whereby SpaceDev would acquire Starsys as a wholly owned subsidiary of SpaceDev.

The companies filed a combined registration statement relating to the transaction that was declared effective by the Securities and Exchange Commission on December 29, 2005. Each company has scheduled a meeting of its shareholders to be held on January 30, 2006, and is currently soliciting proxies to vote for approval of the transaction.

The transaction is subject to a number of other conditions, but if approved by shareholders, each company expects the transaction to be completed by early February 2006.

"This is an exciting time for SpaceDev because this financing gives us the capital needed to complete the merger with Starsys and provides additional working capital to grow the much larger combined company," said Richard Slansky, president and chief financial officer of SpaceDev.

"As we embark on the next phase of growth for SpaceDev, we are very pleased to welcome several new institutional investors to our growth story, as well as, renew support from valued existing institutional investors."

Mark Sirangelo, chief executive officer and vice-chairman of SpaceDev also commented, "Starsys' two decades of successful expertise in the development and manufacturing of various mechanical systems aboard spacecraft, combined with SpaceDev's core competencies in space technology with a focus on microsatellites and hybrid rocket propulsion, make this combination a particularly exciting one. The acquisition reaffirms SpaceDev's continued commitment to achieving rapid and profitable growth by providing unique and cost effective solutions to the space industry."

Mr. Slansky also stated, "The financing is really a complex series of transactions with a number of inter-related conditions. SpaceDev has issued to the investors 'units' comprised of shares of preferred stock that are convertible into shares of SpaceDev common stock and warrants to purchase additional shares of SpaceDev common stock. SpaceDev is required to file a registration statement within the next 30 days covering the shares of common stock issuable in connection with this transaction and our previous common stock transaction with the Laurus Master Fund, which was filed on November 3, 2005 on Form 8-K. Another aspect of the financing is that the investors have the right to invest an additional $2 million in units on similar terms. SpaceDev can also require that additional investment under certain conditions. We encourage anyone who is interested in obtaining information about the financing to review the current report on Form 8-K that we filed with the SEC today."

Additional Information and Where to Find It

SpaceDev filed with the SEC a current report on Form 8-K related to this event earlier today. A free copy of the report and the documents filed as exhibits to the report can be obtained at the SEC's web site at www.sec.gov or from SpaceDev by contacting Investor Relations at (858) 375-2026.

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