Message from Lieutenant Governor Jennifer Carroll, Space Florida Chair...3. Message from Frank DiBello, Space Florida President/CEO...

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3 TABLE OF CONTENTS: Message from Lieutenant Governor Jennifer Carroll, Space Florida Chair...3 Message from Frank DiBello, Space Florida President/CEO Space Florida Leadership Team Board of Directors...5 Executive Staff...6 Timeline of Major Accomplishments...7 Executive Summary...9 Customer Narratives The Boeing Company...10 Cella Energy...11 Embraer...12 Lockheed Martin...13 SpaceX...14 XCOR Aerospace...15 Growing Florida s Spaceports...17 Vision Customer Satisfaction...19 ATTACHMENTS Customer Satisfaction Survey Results Space Florida Financial Statements For the Years Ended June 30, 2012 and

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5 MESSAGE FROM SPACE FLORIDA PRESIDENT & CEO, FRANK DIBELLO: November 27, 2012 Space Florida Stakeholders, We ve had an excellent year at Space Florida. Even in the challenging economic climate that continues its recovery here in our state, we have worked closely with federal, state and local leaders, as well as numerous partners in industry and our financial networks to leverage significant benefit for the State of Florida. Not only have we achieved solid wins that benefit us immediately, the projects we are cultivating in the business development pipeline are also expected to bring thousands of new jobs to Florida in the coming years. Diversification of the marketplace continues to be our key to success, and this year, we had six project announcements that I believe deserve special recognition. Each is a little different and point to both traditional and innovative aerospace-related wins. Within this report, I m pleased to provide you with personal narratives from leadership at each of these six companies. We feel that hearing the point of view of the customer speaks volumes, as you review our progress from FY2012. The close working partnerships we hold with Governor Rick Scott, our Lt. Governor and Board Chair Jennifer Carroll, our Board of Directors, Enterprise Florida, Workforce Florida, the Florida Department of Transportation, local EDCs, industry partners, and federal and state government officials, are the lifeblood of our success. I hope you will enjoy reading the highlights of the Space Florida story this year, and I look forward to sharing more outstanding accomplishments with you in Sincerely, Frank A. DiBello President & CEO Space Florida 4

6 SPACE FLORIDA LEADERSHIP BOARD OF DIRECTORS: Lt. Governor Jennifer Carroll Chair State of Florida Jay Beyrouti President Monicarla, Ltd. Debra Duvall Partner Water Pointe Realty Group Chris Kise Partner Foley Larner 51 Jesse Biter President/CEO Biter Enterprises, LLC. Ron Campbell Director The Seminole Companies William T. Dymond, Jr. Danny Gaekwad President, CEO and Managing Partner Chief Executive Officer Lowndes, Drosdick, Doster, Kantor & Reed NDS USA Information Technology & MGM Hotels, LLC Fred Leonhardt Senior Partner Gray-Robinson PA Henry Rodriguez Founder and Chief Executive Officer Woodmere Capital Management Hayden Dempsey Chair Florida Governmental Affairs Practice Greenberg Taurig Belinda Keiser Vice Chancellor Keiser University Hal Valeche President York Street Capital Advisors

7 SPACE FLORIDA LEADERSHIP SENIOR STAFF: Frank DiBello President and CEO Howard Haug Executive Vice President, Treasurer and Chief Investment Officer Percy Luney Vice President, Education, Research and Development, and Workforce Denise Swanson Chief Financial Officer and Chief Administrative Officer Jim Kuzma Senior Vice President and Chief Operating Officer Bernie McShea Vice President, Business Development Mark Bontrager Vice President, Spaceport Operations Chris Snow Senior Director, Government Relations Dale Ketcham Chief of Strategic Alliance Keevin Williams Vice President, Special Projects and Strategic Initiatives 6

8 SPACE FLORIDA is the State of Florida s spaceport authority and aerospace economic development agency. Our mission is to advance the state s aerospace industry and ensure Florida maintains global leadership in the aerospace marketplace. FLORIDA S RECENT AEROSPACE ECONOMIC DEVELOPMENT ACCOMPLISHMENTS SPACE FLORIDA provides $35 million investment for Lockheed Martin refurbishment of the Kennedy Space Center (KSC) Operations and Checkout Facility, creating a modernized processing site for the Orion Crew Exploration Vehicle Program. First two vehicles delivered July F E B RUA RY : SPACE FLORIDA and Bigelow Aerospace sign Memorandum Of Understanding to market its inflatable, orbiting R&D complex. M AY : Masten Space Systems signs contract with SPACE FLORIDA to conduct demonstration launches from Launch Complex 36 at Cape Canaveral. O CTO B E R : Boeing, SPACE FLORIDA and NASAKSC announce the establishment of its Commercial Crew Program Office in Florida. SPACE FLORIDA and the Instituto Nacional de Técnica Aeroespacial (INTA) sign a Memorandum Of Understanding during a Spanish trade mission to further enhance business development opportunities between Florida and Spain in the aerospace sector. SPACE FLORIDA and UK-Based A D S sign Memorandum Of Understanding during overseas trade mission. DEC EM B ER : Eisenhower Center For Space And Defense Studies Hosts First Annual U.S Space Forum, sponsored by SPACE FLORIDA JANUARY : SPACE FLORIDA Receives IDIQ Contract from Department Of Defense with a maximum $48 million value to provide Florida-based Minotaur launches for the federal government from Launch Complex 46 at Cape Canaveral. A P RIL : SPACE FLORIDA provides $1.1 million to AAR for hangar space at Melbourne International Airport and announces 225 new jobs within six months. S E PT E M B E R : SPACE FLORIDA invests $1 million in Cella Energy Limited to establish a new facility at KSC. SPACE FLORIDA, the Space Coast Energy Consortium, Brevard Workforce and the Technological Research and Development Association (TRDA) awarded $2.2 million in Federal grants to develop a clean energy hub in Central Florida. NASA finalizes Cooperative Agreement with Floridabased CASIS to manage the International Space Station (ISS) U.S. National Laboratory SPACE FLORIDA and TRDA partner to present the Igniting Innovation Showcase enabling 10 high-tech start-ups to present to national financers in Cape Canaveral, resulting in several partnerships to grow these businesses. N OV E M B ER : Florida-based L2 Aerospace s Instant Eyes mini UAV technology receives Popular Science Best Of What s New honor. SPACE FLORIDA and Lockheed Martin announce project to manufacture and test Marlin autonomous underwater vehicles (AUVs) at Riviera Beach site. SPACE FLORIDA is enabling significant growth of the aerospace industry in Florida and continues 7

9 In the last 12 months alone, Space Florida has enabled 15 new or growing aerospace-related programs to thrive in our state, resulting in an anticipated 1,791 jobs within the next five years. This has been accomplished with Space Florida JAN UARY 2012: SPACE FLORIDA announces Sub-Orbital Flight Incentive Program providing partial reimbursement for customers to fly research payloads from Florida. Florida s major aerospace players represented at Florida Space Day in Tallahassee. SPACE FLORIDA provides $62+ million in conduit financing to support the build-out of the Space Shuttle Atlantis exhibit at Kennedy Space Center Visitors Complex. Groundbreaking occurs in January M AY : SpaceX successfully launches the Falcon 9/Dragon Capsule mission from Florida that leads the way for next-generation U.S. commercial space initiatives reducing our dependence on other countries to ferry cargo to and from the ISS. Exploration Park a cutting-edge R&D complex on KSC grounds achieves milestone in horizontal infrastructure build with the opening of the park s first road, providing more direct access to the Space Life Sciences Lab. Sierra Nevada Corporation announces interest in Florida as a base for its commercial human spaceflight programs and facilities. providing only 9 percent of the overall investment for these companies. Currently, the agency has more than 80 working projects in the pipeline, representing the potential for an additional 7,609 jobs within five years. JU LY : Rocket Crafters announces intention to bring Corporate Headquarters to the Space Coast Regional Airport in Titusville. SPACE FLORIDA Signs Agreement With ENSCO, Inc. to lead a statewide Unmanned Aerial Systems (UAS) Initiative. SPACE FLORIDA meets with 22+ companies at the Farnborough International Air Show to explore new opportunities for Florida. SPACE FLORIDA and the FAA announce findings from a Tauri Group 10-year study on the potential of the suborbital marketplace. AUGU ST 201 2: NASA announces Commercial Crew Integration Capability (CCiCap) winners as The Boeing Company, SpaceX and Sierra Nevada all having or planning a Florida presence and working with SPACE FLORIDA on infrastructure and/or program support to lead next-generation U.S. commercial space initiatives M ARC H 2012: Embraer announces new Engineering and Technology Center USA, bringing 200+ new engineering jobs with average salaries of $70,000. A P RIL : CoreNet Global, a leading association of corporate real estate executives, presents SPACE FLORIDA with its 2012 Economic Development Leadership award for the Boeing Commercial Crew facility project at KSC. CASIS and Nanoracks sign agreement to conduct commercial research on ISS. HB 59 is signed into law by Gov. Scott that adds Cecil Field to the statutorily designated Florida Spaceport Territory J U NE : Craig Technologies signs a NASA Space Act Agreement for utilization of KSC equipment and facilities tied to the Space Shuttle program. SPACE FLORIDA and the Economic Development Commission of Florida s Space Coast to assist with marketing these capabilities to outside companies. The Center for the Advancement of Science in Space (CASIS), the Florida-based manager of ISS utilization, announces its first Solicitation For Proposals: Advancing Protein Crystallization In Microgravity. CASIS and The American Astronautical Society organize the 1st Annual ISS Research and Development Conference, fostering interest from industry in conducting cutting-edge research about the National Lab. FOR MORE INFORMATION: to work hard to ensure our state remains a global leader in space and aerospace initiatives. 82

10 WELCOME TO THE 2012 ANNUAL REPORT SPACE FLORIDA This has been a significant year for the growth of Florida s space and aerospace industries. Florida Governor Rick Scott and Lt. Governor STRATEGIC INVESTMENTS FOR CAPTURED PROJECTS and Space Florida Chairman of the Board Jennifer Carroll played a significant role in this growth, leading the effort with Space Florida to engage companies across Space Florida s ten industry sectors of focus. As a result, we have captured deals that are estimated to result in 1,716 jobs over the next five years. During FY 2012, we showed a major strength in leveraging our financing networks and State-granted empowerments. This resulted in Space Florida providing only 8% of total necessary investments, which led to a prosperous year. While there are numerous wins to talk about in FY2012 there were a select number of accomplishments that we are particularly proud of. Within the pages of this report, you will see personal narratives by leadership from these companies, that help to tell the story of their UPDATED AUGUST 2012 EMPLOYMENT FOR CAPTURED PROJECTS PROJECTED OVER FIVE YEARS success in working with our organization. UPDATED AUGUST 2012 nadvanced Materials and New Products nadventure Tourism nagriculture, Climate and Environmental ncivil Protection and Emergency Management nclean Energy ncommunications, Cybersecurity and Robotics nground Operations and Support ninternational Space Station and Human Life Sciences nsatellite Systems and Payloads nspace Transportation and Advanced Aerospace Vehicles 9

11 THE BOEING COMPANY AT OPF-3: Space Florida worked an innovative, award-winning lease agreement through NASA/KSC and Boeing to establish The Boeing Company s Commercial Crew Program office at Orbiter Processing Facility (OPF- 3), legacy Space Shuttle infrastructure. The Boeing Company announced plans to consolidate its Commercial Crew Program Office, m a n u f a c t u r i n g capabilities and overall operation at Kennedy Space Center in October The OPF-3 was secured through a unique leasing arrangement between NASA/KSC and Space Florida. In FY2012, the facility was maintained by Space Florida to ensure readiness for initiation of manufacturing, assembly and test of the company s Crew Space Transportation (CST-100) spacecraft. Agreements between Space Florida and NASA/KSC were finalized this year for an official transfer of facilities, operational responsibilities and maintenance at OPF-3 (now called the C3PF - Commercial Crew and Cargo Processing Facility ), and development of operations and maintenance agreements and RFPs are currently in progress. In August 2012, The Boeing Company was named by NASA as one of the three winners in the Commercial Crew Integration Capability (CCiCap) procurement selection process, ensuring a ramp-up of the C3PF utilization via Space Florida in FY2013. The Boeing Company anticipates creating up to 550 new jobs over the next several years. Space Florida was presented with the Economic Development Leadership Award by CoreNet Global the world s leading association for corporate real estate and workplace professionals, service providers and economic developers for the lease agreement the organization facilitated through NASA/ KSC for Boeing to establish their Commercial Crew Program office at Orbiter Processing Facility OPF-3, also known as Project Syros. The Economic Development Leadership Award recognizes best practice and innovations in economic development representing national, state, regional and local interests. Today, the C3PF is in the midst of demolition work to prepare the building for its new, commercial manufacturing focus. MARK JAGER Director of Florida Operations and CAPPS Program Manager (Checkout and Payload Processing Services) THE BOEING COMPANY Working with Space Florida has provided a significant benefit for Boeing s Florida Operations as we grow our Commercial Crew footprint at Kennedy Space Center. When Boeing started looking for a location to establish its nextgeneration Commercial Crew Program, several states were considered. We wound up choosing Florida not only because of the site s close proximity to the launch vehicle and the talented workforce already positioned in the area but also because of the unique incentive packages (financial and otherwise) Space Florida put together in partnership with NASA-KSC for utilization of excessed Shuttle-era infrastructure. In any project like this, where state and federal agencies work together with commercial industry, there will be challenges to overcome. This particular scenario was completely groundbreaking in the sense that Space Florida was able to work with KSC officials to successfully and quickly secure management over NASA infrastructure for commercial use. This was a first-of-its-kind deal, winning numerous awards from the International Economic Development Council and CoreNet for its innovation. I believe that the partnership that enabled this project will serve as an example for many other U.S. companies moving forward. I am a big fan of Space Florida. They are a truly unique organization doing an excellent job of educating stakeholders about the key role of the aerospace industry in meeting the State s economic and workforce development goals. Space Florida s leadership is vocal when it comes to the needs of the commercial sector they are an advocate for us and that assistance is exactly what our company needs to thrive here as we establish and expand our Commercial Space Transportation (CST-100) program. We look forward to continuing our work with Space Florida to ensure success of our new Commercial Crew operations here. 102

12 CELLA ENERGY: Space Florida supported U.K.-based Cella Energy in the establishment of its first U.S. R&D facility aimed at commercializing breakthrough hydrogen storage technologies in the North American market. Space Florida provided the investment funding to develop four proof-of-concept projects and expand operations for Cella. The company is obtaining matching funds from the U.K. Government as well. Space Florida also worked with Cella to provide a mutually beneficial lease for space at the Space Life Sciences Lab at KSC, where the company established its U.S. operations. Cella s ground breaking technology could lead one day to lower priced fuel at the pumps, and improve energy security in the United States, the European Union, and throughout NATO. Cella plans to develop its safe, low-cost hydrogen storage materials both at the British Government s prestigious Science and Technology Facilities Council s (STFC s) Rutherford Appleton Laboratory near Oxford, U.K. and in its new facility at the Space Life Sciences Lab at KSC. Over 30 years NASA/KSC has become one of the largest users of hydrogen, and has built unique expertise in this area. Cella s technology allows hydrogen to be stored without high pressure tanks and other potential safety hazards normally involved with hydrogen gas. Hydrogen, which produces only pure water when burned, is considered an ideal solution to cutting carbon emissions from road vehicles. This process causes 25 percent of the carbon release in developed countries like the U.S. and U.K.. Companies like Cella are leading the way in keeping Florida a driving force in alternative energy. Space Florida will continue to leverage its financing relationships to help companies like Cella succeed. DR. STEPHEN PERUSICH Senior Scientist and Lab Manager, CELLA ENERGY U.S., INC. Cella was conceptualized by Stephen Voller and Professor Steve Bennington in England in January After less than a year in business, they wanted to expand the company and start a laboratory in the U.S. When we decided to do this, Space Florida stepped in and discussed some opportunities at Kennedy Space Center (KSC). For the work Cella had in mind, KSC was the perfect location, considering the unique infrastructure resources and workforce capabilities stemming from the area s 50-year history in space. Florida had a lot to offer in addition to the incentive packages that we were able to secure through the aggressive work of Space Florida and the state. The lack of a state income tax, the quality of life here, the outstanding educational institutions, beautiful weather were all reasons to establish out U.S. operations here. But honestly, it was the fact that Florida s Lt. Governor and Space Florida leadership took the time to travel to England to meet with Cella and learn how to most effectively meet the unique needs of our growing business. During the process of establishing our U.S. lab, several scientists from Cella s U.K. Operations would travel (sometimes for months at a time) to Florida. Space Florida was always there for us throughout the transition facilitating KSC badging for our foreign nationals, moving equipment, and managing laboratory expansion challenges. The organization s leaders are some of the nicest individuals I ve had the pleasure of working with here, and continue to be available to assist our ongoing start-up needs. In the past year, Cella s U.S. lab has been growing with the addition of Dr. Sean McGrady and Dr. Gang Liu. We are doing some exciting work to Space Radiation Shielding and UAV developments at the Space Life Sciences Lab, which is managed by Space Florida. We are thankful that Space Florida and the State of Florida decided to make a strategic investment in Cella Energy, and I am confident they will continue to do what it takes to help us succeed. The work that Space Florida does is crucial, because if we continue to grow (and other Space Florida-supported businesses like us continue to succeed) I believe you will see a significant commercial revitalization of the local economy. We look forward to being part of that growth. As we grow our U.S. operations, Space Florida continues to make important introductions for us in the civil, military and commercial sectors. When we have questions about the local business environment, they provide us with the intelligence we need to refine our U.S. market strategy. Space Florida is our landlord, investor, problem solver, and in many ways a collaborator, helping us and cheering us on to succeed. 11

13 EMBRAER: In March 2012, Embraer, a Brazil-based aircraft manufacturer focused on commercial, defense and executive aviation, partnered with Space Florida to announce plans to construct a 67,000 sq. ft. engineering design center focused on aviation R&D and design work at Melbourne International Airport. Space Florida will finance, build and own the Embraer facility, which is expected to employ about 200 engineers and other highly skilled workers, with average annual salaries of $70,000. Space Florida will finance $18.2 million for the project with another $6 million coming from the Innovation Incentive Fund. The Research and Development Center is the third recent investment for Embraer in Florida. Embraer officially began its Melbourne operations in February 2011 at its 80,000 sq. ft. final At the announcement, Florida Governor Rick Scott noted, Embraer s continued investment in Florida is evidence we are doing the right things to attract job-growing businesses. The new Embraer facility will house R&D for the company s Executive Jets business. The company broke ground on its new facility in November The development of the Embraer Engineering and Technology Center U.S.A, Inc. was a perfect example of a team effort between agencies Space Florida, Enterprise Florida and the local EDC. assembly facility at Melbourne International Airport. Embraer manufactures the Phenom 100 executive jet at this location. It dedicated its 58,000 sq. ft. global Embraer Executive Jets Customer Center in December 2011, rounding out the company s $50 million investment in the Space Coast to date. GARY J. SPULAK President, Embraer Aircraft Holding EMBRAER About a year and a half ago we started conversing with Space Florida about establishing an engineering office in Florida one that would serve as our first engineering and technology center outside of Brazil. Space Florida showed us that there were many benefits to creating an operational site at Melbourne International Airport. We were connected to an extremely qualified, existing high-tech workforce, and given access to a greenfield area that was in fairly close proximity to our Ft. Lauderdale headquarters. The site became more and more appealing as we learned of these capabilities. During our transition to the Space Coast, Space Florida acted as an important partner in maximizing our utilization of Melbourne International Airport as we looked to develop our first U.S. based engineering and technology office. Today, we already have 10 employees working at the R&D center s temporary offices, and we continue to evaluate additional job candidates. We plan to hire up to 200 individuals making average salaries of $70,000 per year for the facility by the end of We are thrilled with our decision to establish our first U.S. Engineering and Technology Center in Brevard County and are eager to move into our new home. Space Florida aided us in selection and strategic planning of this center over the past few years, and they have been a critical partner to us throughout the process. We look forward to continuing our relationship with the Space Florida leadership team as Embraer continues to broaden its Florida footprint in the years to come. 12

14 LOCKHEED MARTIN S PROJECT MARLIN : Space Florida and Lockheed Martin announced the Marlin project in Riviera Beach in November As a result of the Space Florida investment, Lockheed Martin Undersea Vehicle Systems constructed two final stage prototypes of its Marlin Autonomous Underwater Vehicle (AUV) at its Palm Beach County facility, creating more than 50 new jobs to date. Lockheed will test these vehicles in both the Atlantic and Gulf waters around Florida. Target market applications for the Marlin AUV include inspection of underwater oil and gas infrastructure and military operations. Lockheed Martin conservatively estimates the potential market for the Marlin AUV as several billion dollars annually, with commercial production of the vehicles to take place at the Riviera Beach site. Space Florida provided a $3 million equity contribution from the Financing Fund provided by the Florida Legislature, and secured $5 million in commercial financing to fund the balance of the project s cost. The technology emplyed in several areas of the Marlin AUV, e.g., sensor and guidance systems, has much in common with aerospace vehicles. This business model fits well with Space Florida s strategy of leveraging aerospace-related technology in growing the industry. EDMUND SHEA Senior Manager, Business Operations, Missions and Unmanned Systems LOCKHEED MARTIN I ve been with Lockheed Martin for more than three decades, and our new autonomous underwater vehicle program Marlin is one of the most exciting technological developments we ve had the opportunity to bring into the commercial marketplace. When we decided in 2010 to take this defense technology to the market, it was clear to us that Space Florida was the right partner to discuss next steps with. Space Florida made it possible for us to get Marlin to market earlier than Lockheed could have done on its own. Space Florida acted as an enabler in this project with their infusion of capital, at an extremely critical time, to facilitate production of this innovative, new technology. Space Florida utilized its State empowerments to facilitate a unique sale/leaseback arrangement for our facilities and also provided aggressive incentives for Marlin s platform inspection systems. In the 4th Quarter of FY2012, Lockheed went to market with the Marlin AUV. In August 2012, we were contracted by a Chevronsponsored company to inspect 14 decommissioned oil platforms. Last week Chevron presented details of this project to industry, and we are happy to report that the design phase on this project is now complete. We have moved on to the development phase of Project Marlin now, and have already had the opportunity create significant jobs in the area as a result, with more to come. Not only did a dynamic product come of this project, but also a prosperous relationship. We at Lockheed are very proud of our partnership with Space Florida, and we look forward to discovering future opportunities with with the organization here at the Riviera Beach site. 13

15 SPACEX: In May 2012, SpaceX launched a Falcon 9 rocket from Cape Canaveral that led to the successful demonstration of the capsule s docking capabilities to the International Space Station (ISS). This mission paved the way for next-generation U.S. commercial space initiatives, reducing our dependence on other countries to ferry cargo to and from the ISS. To date, SpaceX is leading the pack from a Florida-based launch facility in demonstrating cost-effective and timely cargo delivery capabilities to the ISS, reducing our reliance on Russia to provide this service. The successful docking of the Dragon capsule a major milestone in NASA s Commercial Orbital Transportation Services (COTS) program also marked the beginning of commercially enabled, cutting edge research opportunities and access on board the unparalleled microgravity environment of the U.S. National Lab. Space Florida is working closely with companies like SpaceX to ensure that they have the infrastructure, incentives, workforce and political credibility they need to help Florida continue to shine as the birthplace of next-generation U.S. commercial space launch and exploration initiatives. BRIAN MOSDELL Director of Florida Launch Operations SPACEX As the Director of Operations for SpaceX here in Florida, I have had the pleasure of working closely with Space Florida for the past few years. The organization played a key role in facilitating the establishment and growth of our Florida site since I joined SpaceX in Early on, during our start-up phase here, Space Florida provided us state-of-the-art office space close to the launch site a critical element to getting our program up and running. The Launch Control Center at Space Florida s South Campus, enables us to operate in a comfortable, private control room and launch operations environment with easy access that doesn t require badging to get on-site a plus when it comes to customer access prior to, during and following launch. With the financial help of Space Florida over the years, SpaceX was also able to build a world-class launch facility, creating well-paying construction jobs in the area. We were also able to implement an offsite processing capability at Hangar X in the Cape Canaveral industrial area, used to check out flight hardware. Space Florida also arranged to secure surplus NASA rail cars and pressure vessels to optimize our operations on a lean budget. Most recently, SpaceX worked with Space Florida to facilitate support from the Florida Department of Transportation on some sizeable upcoming projects - including developing out Launch Complex 40 with a payload processing facility, and building heavylift launch pad infrastructure at Complex 40 North. As you can imagine, the success of these projects will greatly increase launch throughput over the coming years, which only benefits the local and state economies. Currently, SpaceX anticipates bringing on hundreds of additional employees in the next three to five years, assuming our programs continue as planned. Ultimately, our goal is to launch and recover the first stage and Dragon capsule, then refurbish them here in Florida which will create additional jobs. Currently, we have five launches scheduled for 2013, and that number will likely double within the next two years. If all goes as planned, SpaceX will continue to grow quickly, with the continued assistance of Space Florida. Moving forward, we will continue to work with Space Florida to optimize land and facility acquisitions and refurbishments, giving us additional offline processing capabilities and possibly even additional launch pad capabilities. Together, Space X and Space Florida have broken a lot of barriers and overcome many challenges. Understanding the commercial model as Space Florida does, gives us confidence that they will continue to aid in our success. 142

16 XCOR AEROSPACE: Space Florida engaged in extensive negotiations with XCOR a leader in the horizontal, reusable space launch market to assemble an infrastructure and financing package that will support the establishment of the company s assembly and launch operations here in Florida. An estimated 150 new jobs will be created through A formal announcement of the company s decision to establish its East Coast manufacturing and assembly center for the XCOR Lynx Mark II suborbital vehicle took place in August 2013, featuring U.S. Senator Bill Nelson, Florida Lt. Governor and Space Florida Board Chair Jennifer Carroll, and NASA Chief of Staff, David Radzanowski. In the coming months, Space Florida will continue to work closely with XCOR to ensure their Florida-based business plan is realized. There is significant economic potential for the suborbital marketplace in Florida, and Space Florida will continue to leverage its public and private sector partnerships to improve Florida s aerospace economy through the growth of companies like XCOR. ANDREW NELSON Chief Operating Officer XCOR AEROSPACE At XCOR, I am responsible for marketing the business and establishing operational sites around the world. Since I joined the company in 2008, I ve had contact with Space Florida many times to determine if the state of Florida was a solid match for XCOR Aerospace to establish an operational site. After establishing a good rapport with Space Florida s leadership and learning the competitive advantages of locating within the state, we decided to take the next step. Throughout the process, Space Florida provided us with institutional support and facilitated critical relationships with NASA-KSC and the 45th Space Wing that enabled us to identify infrastructure that might be utilized to get our operations up and running. Even more importantly however, Space Florida was able to bring an aggressive financial component made up of highly competitive loans and guarantees that enabled us to expedite the establishment of an XCOR footprint here. In addition to financial and infrastructure incentives Space Florida brought to the table, the Space Coast itself has a true advantage over so many other sites a distinctive pool of uniquely skilled technical and operational personnel stemming from NASA-related activities that have taken place in the area for the past 50 years. The technical skills we require for our own workforce seems as though it s integral in the local DNA already. Kennedy Space Center and Cape Canaveral Air Force Station also provide a distinct advantage when it comes to the environment of safety engrained here through years of spaceflight execution. We are excited to contribute to the dynamic space marketplace in Florida and look forward to being a part of the revitalization of the industry here. The growth we are experiencing would not have been possible without the assistance of an organization like Space Florida. We are thankful for their commitment to commercial space and look forward to continue partnering with them as our company grows. 15

17 A BRIGHT FUTURE In addition to the projects highlighted in the previous section, there were other significant wins for Florida in FY2012. In August, NASA announced the winners of the (CCiCap) as The Boeing Company, SpaceX and Sierra Nevada Corporation. CCiCap supports NASA s next-generation Human Spaceflight Program promoting the development of a renewed human crew transportation capability to and from the International Space Station enabled by U.S. commercial space transportation partners. The selection of these companies all having or planning a Florida presence, and working with Space Florida on infrastructure and/or program support is a huge win for the State of Florida. While the wins noted in this report are merely a highlight of Space Florida s accomplishments over the past year, they reflect the diversification strategy that the organization believes will serve as the key factor to the growth of Florida s aerospace economy moving forward. By supporting the efforts of both large government contractors (i.e. Lockheed Martin and The Boeing Co.), emerging commercial space transportation providers (i.e. SpaceX and XCOR), and diversified companies developing new technology and products (i.e. Embraer and Cella), Florida will achieve a greater level of success in developing new jobs in our state. ESTIMATED EMPLOYMENT FOR PROJECTS IN THE PIPELINE PROJECTED OVER FIVE YEARS UPDATED AUGUST 2012 nadvanced Materials and New Products nadventure Tourism nagriculture, Climate and Environmental ncivil Protection and Emergency Management nclean Energy ncommunications, Cybersecurity and Robotics nground Operations and Support ninternational Space Station and Human Life Sciences nsatellite Systems and Payloads nspace Transportation and Advanced Aerospace Vehicles SPACE FLORIDA ESTIMATED STRATEGIC INVESTMENTS It is important to note that most of the accomplishments highlighted here were made possible by spaceports infrastructure and business finance funding provided to Space Florida by Florida s Legislature. The foundational funding our organization receives from the State is critical to the success of any of our business development initiatives. For that reason, we look forward to working with incoming Senate President Dan Gaetz and incoming House Speaker Will Weatherford to make sure that similar resources are available in the coming years to continue to support high-potential projects currently in our business development pipeline. We extend special thanks to outgoing Senate President Mike Haridopolos and House Speaker Dean Cannon for their support and leadership over the last two years UPDATED AUGUST

18 GROWING FLORIDA S SPACEPORTS Spaceport Systems Plan and the Florida Spaceport Master Plan. In vertical, commercial-friendly spaceports across the state, giving Florida of aerospace assets and a facility infrastructure agreement for the a competitive edge in the U.S. marketplace. A few significant initiatives development of the LC-40 Integration and Encapsulation facility. Space took place in FY2012 to ensure the continued growth of this network. Florida released an RFP for the Spaceport Systems Plan and selected Space Florida is dedicated to creating a network of horizontal and these documents, Space Florida proposed a statewide inventory a lead contractor. The plan will be developed with FDOT guidance and Spaceport Direction for FDOT (SB643): Representative Workman and is expected to be completed by first quarter of FY2013. Senator Benacquisto sponsored Senate Bill 643 in FY2012, helping to institutionalize the process of pursuing spaceport projects through the Project 21 GSP: At Kennedy Space Center work continues to enhance FDOT. Within this Bill, language defined launch support facilities in and repurpose existing onsite facilities and infrastructure to support broader terms, enabling critical spaceport infrastructure funding to be the development of a 21st Century Spaceport that is friendly to included within FDOT s Five-Year Work Program. These funds included commercial business, In FY2012 Space Florida participated in numerous $15 million for specific Spaceport infrastructure projects. On August 4, technical interchange meetings with Kennedy Space Center (KSC) on 2012, this Bill was signed into law by Governor Rick Scott. their 21st Century Ground Systems Program (GSP) effort (formerly known as 21stCentury Space Launch Complex ). NASA defined Cecil Spaceport: In FY2012, Space Florida worked hand in hand with improvements that would enhance the effectiveness and access to the State Legislature, the Jacksonville Aviation Authority (JAA) and the KSC and the Eastern Range by commercial launch providers. The FAA to award Cecil Field an FAA horizontal spaceport license. House program plan included a process to define the improvements and Bill 59 (sponsored by Senator Wise and Representative Ray) allowed associated investment strategies, a plan to re-purpose excess facilities, Space Florida to include Cecil in its Master Planning efforts and deem and it required immediate and continuing engagement with commercial it an official Spaceport Territory. This bill allowed for space-specific and other spaceflight providers to assist in the identification and infrastructure upgrades to Cecil Field, preparing it for future horizontal prioritization of activities. launch customers. Space Florida will continue to work with NASA/KSC leadership to FDOT Partnership: Space Florida worked closely with the FDOT explore the Future State Definition (FSD) of how to accommodate office in FY2012 to draft Scopes of Work associated with the Florida 17 multiple users at the Spaceport.

19 VISION 2020 As a result of the dynamic nature of Florida s space industry and the retirement of NASA s Space Shuttle program, Space Florida developed, in 2009, a strategic plan ( Vision 2020 ) a strategy that targets a number of diversified commercial market segments for integration of space technology that has not been previously pursued with a focused state effort (i.e. life sciences/pharmaceuticals, agriculture/climate monitoring, cyber security and robotics, clean energy, adventure tourism, civil protection and crisis management). These markets receive direct benefits through utilization of the current space program, or have shown great interest in the potential to benefit from opportunities in next-generation space initiatives and utilization of microgravity environments. Space Florida has already gained significant interest from major players in these markets, and will continue to increase its efforts to attract and secure these businesses. We will do this, in part, by utilizing our operational budget to focus staff efforts on business development opportunities in these emerging sectors, with the goal of tripling the size of the space industry and our economic impact in Florida by In addition to supporting a number of commercial aerospace market segments, the funding also supports the care and maintenance of the State s spaceport operations, and enables opportunities for financing, research, workforce and business development efforts enhancing supply chain and other diverse business constellations. 182

20 CUSTOMER SATISFACTION Space Florida distributed its 2012 Customer Satisfaction Survey to 447 partners, customers and stakeholders that have regularly worked with the organization over the past 12 months. Space Florida received a 14% response rate from an extremely well qualified group during the four-week survey window. Critical insight was garnered into the needs of current and potential customers, as they made up more than 52% of the respondents. In addition to current and potential customers, additional stakeholders from commercial, civil and military sectors participated. These organizations provided important insight into the perception of the overall effectiveness of Space Florida as a State public-private partnership, and the competitiveness of the AREAS OF STRENGTH FOR SPACE FLORIDA Overall, Space Florida and the State of Florida were rated highly by respondents, consistent with last year. In the area of Business Climate in particular, 85% of respondents believe Florida s business climate is competitive with that of other states. This is a slight increase from the 77% of participants in 2011 that felt Space Florida was either somewhat or very competitive with that of other states. We believe this is directly attributable to broader communication of the organization s financing tools and State-empowerments. In open-ended questions, respondents said that they viewed Texas, Virginia, and New Mexico as the top competitors to Florida. aerospace industry in Florida as a whole. In FY2012, diversification of the marketplace and providing aggressive financing packages remained a key strategy for Space Florida to increase aerospace-related job growth in the state. This year s Customer Satisfaction Survey reflected that Space Florida remained if not became more competitive among contending states in FY2012. Participants were asked to rate how successful they felt Space Florida s business development efforts were in FY2012, given the current state of the economy in Florida and Space Florida s budget and funding mechanisms. More than 65% of participants responded that they believed Space Florida s business development efforts were successful in FY2012. Also of note this year, 70% of respondents ranked Space Florida s overall performance over the past 12 months as either good or very good, and 74% said that they would definitely recommend Space Florida as a business resource to others. A majority, 62% of the participants, contacted Space Florida times over the past 12 months showing that a majority of our respondents had regular contact with the organization throughout the year. In addition, 59% of respondents rated Space Florida s overall performance in communicating regularly and effectively with customers and stakeholders either good or very good for FY2012. Overall, a majority of Space Florida clients appear There was also a small, but significant, shift in what respondents felt was the most important financing tool for Space Florida to provide to new and expanding aerospace businesses in Florida. Early stage investment and low-interest financing topped this year s list at a combined 70%, reflecting a real need in the marketplace for financing assistance. to be satisfied with the overall interaction and attention they are receiving. Within the last year, 64% of participants have approached Space Florida with a project to expand, relocate, or create an aerospace or related business in Florida, and nearly 50% have expansion needs that could be supported by Space Florida in the coming 19

21 year. With the majority of this year s respondents being current and potential customers, there is a real opportunity to apply Space Florida s financing tools in the months ahead. AREAS FOR GROWTH While overall ratings on this year s survey were strong, a few areas were noted where Space Florida and the State of Florida have some room for improvement. Two target stakeholder groups were under-represented in the survey responses this year DoD/Military (0.00%) and Federal Government Agency representatives (non-nasa, non-dod individuals 0.00%). These remain important stakeholders to our business and we must look to engage more of them in future surveys. Only a combined 19.05% of respondents felt that Space Florida s most valuable role was as a liaison to NASA/KSC or the USAF/ Eastern Range, yet from Space Florida s perspective, one if its primary functions and benefits to the marketplace is this role. In relation to open-ended questions, respondents continued to stress the timeliness of responses in accordance with Business Development funding applications and inquiries. EFFECTIVENESS OF LEGISLATIVE INITIATIVES Respondents felt Space Florida s ability to achieve proactive State and Federal support for business development in the state was slightly improved from last year, but still had plenty of room for growth. CONCLUSION Overall, the 2012 Customer Satisfaction Survey reflected a stakeholder base with growing confidence in Space Florida s strategic business strategies and recent accomplishments. While the numbers are positive, there remains room for improvement. Space Florida will gauge customer opinion on these same questions in 2013, to demonstrate continued upward momentum in overall business perceptions. 20

22 CONTACT INFORMATION: Main Number: Fax: MAILING ADDRESS: PO Box 656, Cape Canaveral, FL CORPORATE OFFICE/PHYSICAL ADDRESS: 505 Odyssey Way, Exploration Park, FL SOUTH CAMPUS OFFICE (CAPE CANAVERAL): 100 Space Port Way, Cape Canaveral, FL

23 SPACE FLORIDA (A COMPONENT UNIT OF THE STATE OF FLORIDA) FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2012 AND 2011

24 SPACE FLORIDA Table of Contents June 30, 2012 and 2011 Introductory Section Title Page 1 Table of Contents 2 Financial Section Independent Auditors' Report 3 Management s Discussion and Analysis 5 Basic Financial Statements Statements of Net Assets 12 Statements of Revenues, Expenses, and Changes in Net Assets 14 Statements of Cash Flows 15 Notes to the Financial Statements 17 Supplementary Information Schedule of Travel, Entertainment, and Incidental Expenses 33 Additional Elements Required by Government Auditing Standards and the Rules of the Auditor General Independent Auditors' Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 35 Independent Auditors' Report on Compliance with Requirements that Could Have a Direct and Material Effect on Each Major Federal Program and State Project and on Internal Control over Compliance in Accordance with OMB Circular A-133 and Chapter , Rules of the Auditor General 37 Schedule of Findings and Questioned Costs 39 Schedule of Expenditures of Federal Awards and State Financial Assistance 41 Independent Auditors' Management Letter 43 Page 2

25 Carr, Riggs & Ingram, LLC 215 Baytrree Drive Melbourne, Florida (321) (321) (fax) Independent Auditors Report The Board of Directors Space Florida Cape Canaveral, Florida We have audited the accompanying basic financial statements of Space Florida, a component unit of the State of Florida, as of and for the year ended June 30, 2012, as listed in the table of contents. These financial statements are the responsibility of Space Florida s management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Space Florida as of and for the year ended June 30, 2011, were audited by other auditors whose report dated September 7, 2012, expressed an unqualified opinion on those statements. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. 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 principals used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Space Florida as of June 30, 2012 and the changes in its financial position and its cash flows for the year then ended in conformity with accounting principals generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated September 7, 2012, on our consideration of Space Florida's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Accounting principals generally accepted in the United States of America require that management s discussion and analysis on pages 5 through 10 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. 3

26 The Board of Directors Space Florida Page Two Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The schedule of travel, entertainment and incidental expenses is presented for purposes of additional analysis and is not a required part of the financial statements. The accompanying schedule of expenditures of federal awards and state financial assistance is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and Chapter and is also not a required part of the financial statements. The schedule of expenditures of federal awards and state financial assistance is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. The schedule of travel, entertainment and incidental expenses has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it. Carr, Riggs & Ingram, LLC Melbourne, Florida September 7,

27 Management's Discussion and Analysis As management of Space Florida, we offer readers of Space Florida s financial statements this narrative overview and analysis of the financial activities of Space Florida for the years ended June 30, 2012, 2011, and Effective September 1, 2006, Pursuant to Chapter , Laws of Florida, a law enacted by the Florida Legislature during its 2006 Regular Session, Space Florida was created as an independent special district and subdivision of the State. Space Florida serves as the State s principal government space entity, responsible for space related infrastructure development, industry recruitment, and education/research in partnership with federal agencies and private industry; for providing leadership for development of space transportation infrastructure; and for implementation of space commercialization and development programs. Space Florida utilizes funds to operate programs that retain, attract, and expand new business to Florida, and to promote Florida as the world s premier space business destination. Space Florida is responsible for accelerating the growth of space-related economic development and supports Florida s economic goals through targeted space business retention, expansion, and diversification efforts in addition to promoting innovative educational, research and development and workforce development programs and space related infrastructure development projects. As a result of the dynamic nature of Florida s space industry and the retirement of NASA s Space Shuttle program, Space Florida has developed a strategic plan ( Vision 2020 ) that targets a number of diversified commercial market segments for integration of space technology that has not been previously pursued with a focused state effort. These markets receive direct benefit through utilization of the current space program, or have shown great interest in the potential for benefitting from opportunities in next-generation space initiatives. Space Florida has already gained significant interest from major players in these markets, and will continue to increase its efforts to attract and secure these businesses. It will do this, in part, by focusing staff efforts on business development opportunities in these emerging sectors, with the goal of tripling the size of the space industry and its economic impact in Florida by Financial Highlights The assets of Space Florida exceeded its liabilities for the years ended June 30, 2012 and 2011 by $82,501,342 and $82,886,194 (net assets), respectively. Of this amount, $12,269,185 and $12,048,482 (unrestricted net assets), respectively, may be used to meet Space Florida s ongoing obligations to citizens and creditors. Space Florida s total net assets decreased by $384,852 for the year ended June 30, 2012 and increased by $11,944,758 for the year ended June 30, For the year ended June 30, 2012 the decrease in net assets consisted of a net loss from operations and a capital asset contribution to another governmental entity offset by other non-operating grant revenue. For the year ended June 30, 2011 the increase was primarily due to state appropriations received for targeted business development support services and business recruitment, financing, workforce retention, and capital improvement projects. For the years ended June 30, 2012 and 2011, unrestricted net assets were 55 percent and 87 percent, respectively, of total operating expenditures. Space Florida s state appropriated revenue for operations for fiscal year 2012 and 2011 was $10,039,943 and $20,039,943, respectively. 5

28 Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to Space Florida s basic financial statements. Space Florida s basic financial statements are comprised of two components: financial statements and notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. The basic financial statements report information using the full accrual accounting methods as utilized by similar business activities in the public sector. The financial statements include a statement of net assets, a statement of revenues, expenses, and changes in net assets, and a statement of cash flows. The statement of net assets presents information on all of Space Florida s assets and liabilities, with the difference between the two reported as net assets. Over time, changes in net assets may serve as an indicator of the financial status of Space Florida. The statement of revenues, expenses, and changes in fund net assets presents information showing how Space Florida s net assets changed for the years ended June 30, 2012 and All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. The statement of cash flows presents changes in cash and cash equivalents from operational, financing, and investing activities. This statement presents cash receipt and disbursement information without consideration of the earnings event, when an obligation arises, or depreciation of capital assets. The basic financial statements can be found on pages of this report. The notes provide additional information that is essential to a full understanding of the data provided in the basic financial statements and thus are an integral part of these financial statements. The notes to the financial statements can be found on pages of this report. In addition to the basic financial statements and accompanying notes, this report also presents other supplementary information. This supplementary information can be found on pages 33 and 41 of this report. Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of an entity s financial status. Assets exceeded liabilities as of June 30, 2012, 2011, 2010 by $82,501,342, $82,886,194, and $70,941,436, respectively. 6

29 The following table reflects the condensed statement of net assets. Space Florida Net Assets Cash $ 5,095,811 $ 6,481,948 $ 2,395,173 Receivables 6,790,158 6,806,910 1,168,299 Investments 4,189,520 3,196,600 - Other current assets 804, , ,885 Capital assets 69,847,259 67,548,759 66,997,610 Lease receivable 5,000, Other assets 1,723, , ,496 Total assets 93,450,658 85,293,617 71,524,463 Liabilities 10,949,316 2,407, ,027 Total liabilities 10,949,316 2,407, ,027 Net assets: Invested in capital assets, net of related debt 69,847,259 67,548,759 66,997,610 Restricted 384,898 3,288, ,648 Unrestricted 12,269,815 12,048,482 3,156,178 Total net assets $ 82,501,342 $ 82,886,194 $ 70,941,436 The largest portion of Space Florida net assets as of June 30, 2012 (85 percent), as of June 30, 2011 (81 percent), and as of June 30, 2010 (94 percent) reflects its investment in capital assets (e.g., buildings, equipment, and construction in progress), less any related debt used to acquire those assets that are still outstanding. Although Space Florida s investment in its capital assets is reported net of related debt above, Space Florida has no outstanding debt. If such debt existed, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of Space Florida net assets as of June 30, 2012 (.05 percent), as of June 30, 2011 (4 percent), and June 30, 2010 (1 percent) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets may be used to meet Space Florida's ongoing obligations. As of June 30, 2012, 2011, and 2010 Space Florida was able to report positive balances in all three categories of net assets. Net Assets 7

30 The following table shows condensed revenue and expense data: Space Florida Changes in Net Assets Operating revenues: Fees and charges for services $ 2,662,362 $ 2,670,769 $ 2,806,006 State appropriated funding 10,039,943 20,039,943 3,839,943 Grant revenue 3,161, ,590 - Total operating revenue 15,863,770 23,094,302 6,645,949 Non-operating revenues: Other grant revenue 7,722,185 2,708,537 - Other 16,714 11,105 2,151 Total non-operating revenues 7,738,899 2,719,642 2,151 Total revenues 23,602,669 25,813,944 6,648,100 Operating expenses: Business development activities 11,807,606 * 5,022,679 * 1,862,927 Educational research development and workforce activities 2,769,219 * 2,266, ,053 Operations 3,272,603 * 2,826,294 * 3,522,922 General, administrative, and depreciation 4,542,223 * 3,737,995 * 2,968,489 Total operating expenses 22,391,651 13,853,026 9,327,391 Non-operating expenses: Total non-operating expenses 1,595,870 16, ,748 Total expenses 23,987,521 13,869,186 10,056,139 Change in net assets (384,852) 11,944,758 (3,408,039) Net assets beginning 82,886,194 70,941,436 74,349,475 Net assets ending $ 82,501,342 $ 82,886,194 $ 70,941,436 (*) Amounts have been reclassified to conform to the 2012 presentation. Changes in Net Assets. The net assets balance decreased $384,852, increased $11,944,758, and decreased $3,408,039 for the years ended June 30, 2012, 2011 and 2010, respectively. For the year ended June 30, 2012, the decrease in net assets consisted of $6,527,881 net loss from operations offset by $6,143,029 in net non-operating revenues that consisted of $7,722,185 of other grant revenue from the Department of Economic Development, $16,714 of interest income, less $1,479,521 for a capital asset contributed to another governmental entity, $105,272 in interest expense, and $11,077 foreign currency translation loss. For the year ended June 30, 2011, the increase in net assets consisted of a $9,241,276 net gain from operations and $2,703,482 in net non-operating revenues that included $2,708,537 in other grant revenue and $11,105 in interest income, less $16,160 due to a loss on the disposal of fixed assets. Operating revenues totaled $15,863,770, $23,094,302, and $6,645,949 for the years ended June 30, 2012, 2011, and 2010, respectively, and were primarily provided by State appropriated funding (63, 87, and 58 percent of total operating revenues, respectively), with the remaining being generated from fees, charges for service, and other grant revenues. In addition, Space Florida reported non-operating revenues of $7,738,899, $2,719,642, and $2,151 for the years ended June 30, 2012, 2011, and 2010 respectively. Non-operating revenues in 2012 and 2011 consisted primarily of other grant revenues received for launch complex 36 and exploration park capital improvement projects. 8

31 Operating expenses were $22,391,651 for the year ended June 30, 2012, $13,853,026 for the year ended June 30, 2011, and $9,327,391 for the year ended June 30, Of those totals, 15 percent for the year ended June 30, 2012, and 20 percent for the year ended June 30, 2011, related to general operations, which consist of support for the execution of Space Florida s responsibilities as a state-created entity, facilities management and policy-related responsibilities. In addition, and related to ownership and management of the operation and its facilities, depreciation totaled $3,132,930, $3,130,515, and $2,478,673 for the years ended June 30, 2012, 2011, and 2010 respectively. Space Florida s strategic goal is to operate as a high performance public sector organization by tripling the size of the space industry and its economic impact in Florida by In addition, an important element of Space Florida s mission is to promote federal and state policies that increase space enterprise within the State. As directed by statute, Space Florida is also responsible for fostering the growth and development of a sustainable and world-leading aerospace industry in the State and thus is responsible for accelerating the growth and diversification of aerospace-related economic development throughout the State. Space Florida is partnering with other State entities such as Enterprise Florida to accomplish these directives. During the period of June 30, 2012 June 30, 2011, and June 30, 2010 Space Florida expended 53 percent, 36 percent, and 20 percent, respectively, of its operating expenditures to create and direct activities and programs that retain, attract and help expand aerospace businesses in Florida. Lastly, 12, 16, and 10 percent, respectively, was expended education, research and development, and workforce development projects for the years ended June 30, 2012, 2011, and Space Florida s role in workforce development assistance relates to meeting the specific requirements of a new or expanding business or program. Space Florida facilitates workforce opportunities through the appropriate regional workforce agency depending on the company s requirements. We continue to invest in R&D and education programs that advance the State s goals of attracting higher quality proposals and expand program impact throughout the State. These initiatives work together to pursue development of strategies that best leverage Florida s aerospace assets. Total Revenues and Expenses Capital Asset and Debt Administration Capital assets. Space Florida s investment in capital assets as of June 30, 2012, 2011, and 2010 amounted to $69,847,259, $67,548,759, and $66,997,610 (net of accumulated depreciation), respectively. This investment in capital assets includes buildings, improvements, construction in progress, and equipment. Construction in progress as of June 30, 2012 and 2011 primarily consisted of capital improvements to Exploration Park and Launch Complex 36. 9

32 Space Florida Capital Assets (net of depreciation) SRMU storage facility $ 6,057,627 $ 6,485,461 $ 6,908,327 RLV hangar and office space 2,533,163 2,946,328 3,360,091 Orion facility 29,032,417 30,256,789 31,481,160 Space Life Sciences Lab 19,884,049 20,899,186 21,929,600 Furniture, equipment and vehicles 1,054, , ,646 Construction in progress 11,285,664 6,512,179 2,878,786 Total $ 69,847,259 $ 67,548,759 $ 66,997,610 Additional information on Space Florida capital assets can be found in Note 6 on pages 22 to 23 of this report. Space Florida entered into an agreement in fiscal year 2012 to purchase two research vehicles from a third party. In addition, Space Florida secured a $5,000,000 loan to be used for the completion of the vehicles. Upon completion of the prototypes, Space Florida will lease them back to the third party at the loan repayment rate. Additional information regarding the lease arrangement and can be found in Notes 5 and 8 on pages 21 and 24, respectively. Space Florida entered into agreements in fiscal year 2011 to purchase prototypes from third parties to test the technology and capabilities of the prototype. Upon completion of the testing period of one of the prototypes in fiscal year 2012, Space Florida leased back the prototype for a nominal lease rate. At the end of the lease the prototype can be purchased for a nominal value by the third party. As consideration for the lease and option to purchase, the third party issued ownership interest in the third party through common stock and/or warrants. Upon completion of the remaining prototypes, the same lease back and ownership interest agreement will take place. Additional information can be found in Note 14 (Seller 1, 2, & 3) on page Space Florida also entered in to an agreement with a third party to purchase three production vehicles in fiscal year In fiscal year 2012, this agreement was changed to support a new prototype vehicle. Upon completion of the production of the vehicle Space Florida will lease back the prototype for a nominal lease rate. At the end of the lease the prototype may be purchased for a nominal value by the third party. As consideration for the lease and option to purchase the third party has issued ownership interest in the third party through common stock and/or warrants. Additional information can be found in Note 14 (Seller 1) on page 27 of this report. Space Florida has agreements with the Cape Canaveral Air Force Station Center for the right to use Space Launch Complexes 36 and 46 for the development of multi-use vertical launch capabilities related to governmental, educational, and commercial initiatives. Space Florida also has an enhanced use lease agreement with NASA John F. Kennedy Space Center for 60 acres with an optional 139 additional acres to develop a mixed-use multitenant technology and commerce park referred to as Exploration Park. Requests for Information This financial report is designed to provide a general overview of Space Florida s finances for all those with an interest in Space Florida s financial operations. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to Space Florida, SPFL, Building M6-306, Room 9030, Kennedy Space Center, Florida,

33 BASIC FINANCIAL STATEMENTS 11

34 SPACE FLORIDA Statements of Net Assets June 30, 2012 and 2011 ASSETS Current assets Cash: Unrestricted $ 5,042,716 $ 1,473,745 Restricted 53,095 5,008,203 Accounts receivable, net of allowance for uncollectible accounts of $0 and $50,000 at June 30, 2012 and 2011, 210, ,092 Due from other governments: Unrestricted 2,509,986 6,579,818 Restricted 4,069,211 - Investments 4,189,520 3,196,600 Loans receivable, current 22,223 - Lease receivable, current 901,404 - Other current assets 804, ,656 Total current assets 17,803,493 16,978,114 Noncurrent assets Capital assets (net of accumulated depreciation): SRMU storage facility 6,057,627 6,485,461 Orion facility 29,032,417 30,256,789 Reusable Launch Vehicle (RLV) hangar and office space 2,533,163 2,946,328 Space Life Sciences Lab 19,884,049 20,899,186 Furniture, equipment, and vehicles 1,054, ,816 Construction in progress 11,285,664 6,512,179 Loans receivable, less current portion 1,676, ,848 Lease receivable, less current portion 4,098,596 - Other noncurrent assets 24,412 40,896 Total noncurrent assets 75,647,165 68,315,503 Total assets 93,450,658 85,293,617 The accompanying notes are an integral part of these financial statements. 12

35 SPACE FLORIDA Statements of Net Assets (continued) June 30, 2012 and LIABILITIES Current liabilities Accounts payable 1,113, ,100 Salaries payable 102, ,813 Unearned revenue 144, ,501 Accrued retirement payable 11, Compensated absences, current portion 70,197 55,026 Deposits 21,751 - Payable from restricted assets: Accounts payable 3,737,408 1,719,250 Line of credit 677,012 - Note payable, current portion 901,404 - Total current liabilities 6,779,820 2,360,128 Noncurrent liabilities Compensated absences, long-term portion 70,900 47,295 Note payable, long-term portion 4,098,596 - Total noncurrent liabilities 4,169,496 47,295 Total liabilities 10,949,316 2,407,423 NET ASSETS Invested in capital assets 69,847,259 67,548,759 Restricted for: Special purpose 384,898 3,288,953 Unrestricted 12,269,185 12,048,482 Total net assets $ 82,501,342 $ 82,886,194 $ - $ - The accompanying notes are an integral part of these financial statements. 13

36 SPACE FLORIDA Statements of Revenues, Expenses, and Changes in Net Assets For the years ended June 30, 2012 and Operating revenues Fees and charges for services $ 2,662,362 $ 2,670,769 State appropriated funding 10,039,943 20,039,943 State grant revenue 2,446,145 - Federal grant revenue 715, ,590 Total operating revenues 15,863,770 23,094,302 Operating expenses Business development activities 11,807,606 5,022,679 Educational research development and workforce activities 2,769,219 2,266,058 Operations 3,272,603 2,826,294 General and administrative 1,409, ,480 Depreciation 3,132,930 3,130,515 Total operating expenses 22,391,651 13,853,026 Income (loss) from operations (6,527,881) 9,241,276 Non-operating revenues (expenses) Interest income 16,714 11,105 Other grant revenue 7,722,185 2,708,537 Interest expense (105,272) - Foreign currency translation loss (11,077) - Loss on disposal of capital assets - (16,160) Capital assets contributed to another governmental entity (1,479,521) - Total non-operating revenues (expenses) 6,143,029 2,703,482 Change in net assets (384,852) 11,944,758 Net assets, beginning of year 82,886,194 70,941,436 Net assets, end of year $ 82,501,342 $ 82,886,194 $ - The accompanying notes are an integral part of these financial statements. 14

37 SPACE FLORIDA Statements of Cash Flows For the years ended June 30, 2012 and Cash flows from operating activities: Cash received from customers and users $ 2,729,212 $ 2,514,056 Cash paid to suppliers for goods and services (16,381,237) (7,630,583) Cash payments to employees for services (2,387,794) (2,499,719) Loans issued (1,475,654) (628,848) Operating grant receipts 17,271,240 14,842,355 Net cash provided by (used in) operating activities (244,233) 6,597,261 Cash flows from capital and related financing activities: Capital related grant receipts 3,652,974 2,708,537 Purchase and construction of capital assets (4,892,793) (5,230,128) Line of credit draws and payments (net) 677,012 - Net cash used in capital and related financing activities (562,807) (2,521,591) Cash flows from investing activities: Interest received 16,714 11,105 Interest paid (105,272) - Purchase of common stock (490,539) - Net cash provided by (used in) investing activities (579,097) 11,105 Net increase (decrease) in cash (1,386,137) 4,086,775 Cash, beginning of year 6,481,948 2,395,173 Cash, end of year $ 5,095,811 $ 6,481, Cash for the purposes of this statement consists of the following at June 30, 2012 and 2011: Cash $ 5,042,716 $ 1,473,745 Restricted cash 53,095 5,008,203 Total cash $ 5,095,811 $ 6,481,948 $ - $ - The accompanying notes are an integral part of these financial statements. 15

38 SPACE FLORIDA Statements of Cash Flows (continued) For the years ended June 30, 2012 and 2011 Reconciliation of income (loss) from operations to net cash provided by (used in) operating activities: Income (loss) from operations $ (6,527,881) $ 9,241,276 Adjustment to reconcile income (loss) from operations to net cash provided by (used in) operating activities Depreciation expense 3,132,930 3,130,515 Educational expense related to rocket launches 16, ,600 Bad debt expense 525, ,078 Foreign currency translation loss (11,077) - (Increase) decrease in assets: Accounts receivable (509,664) (465,511) Due from other governments 4,069,832 (5,581,178) Loans receivable (1,475,654) (628,848) Other current assets (311,721) (245,771) Increase (decrease) in liabilities: Accounts payable 758,320 63,954 Accrued expenses - (589) Accrued compensated absences 38,776 15,515 Salaries payable (12,268) 83,327 Deferred revenue 28,968 (2,280) Deposits 21,751 - Accrued retirement payable 11, Total adjustments 6,283,648 (2,644,015) Net cash provided by (used in) operating activities $ (244,233) $ 6,597, SUMMARY OF NON-CASH CAPITAL AND RELATED FINANCING ACTIVITIES, AND INVESTING ACTIVITIES: During fiscal year 2011, capital leases were entered into with three companies. Fixed assets in the amount of $3,200,000 were returned to the lessee in exchange for capital lease agreements in the amount of $3,400, and the receipt of $3,196,600 in common stock (45,000 shares) and warrants (to purchase 45,300 shares) of the lessee companies. During fiscal year 2012, Space Florida converted a loan receivable of $502,381 into common stock (17,686 shares). During fiscal year 2012, $5,000,000 of proceeds from a note payable were sent directly from the bank to the lessee under a direct financing lease. The payments Space Florida receives from the lease receivable of $5,000,000 will be used to pay the note payable over the repayment term. The accompanying notes are an integral part of these financial statements. 16

39 SPACE FLORIDA Notes to the Financial Statements June 30, 2012 and 2011 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REPORTING ENTITY Space Florida is an independent special district, a body politic and corporate, and subdivision of the State of Florida, which was created pursuant to the Space Florida Act, Sections , Florida Statutes, as amended. Space Florida's purpose is to foster the growth and development of a sustainable and world-leading aerospace industry in the State of Florida. Space Florida accomplishes its purpose by promoting aerospace business development, facilitating business financing, spaceport operations, research and development, workforce development, and innovative education programs. Space Florida is not considered an agency of the State for budgeting, as defined in Florida Statutes and The 2010 Florida Legislature passed House Bill 451, which changed the structure of the governing body of Space Florida. Effective August 2010, the Board of Directors was comprised of nine voting members appointed by the Governor, four statutorily designated voting members, and two ex-officio, nonvoting members. One of the exofficio members was appointed by the President of the Senate and was required to be a member of the Senate, and the other ex-officio member was appointed by the Speaker of the House of Representatives and was required to be a member of the House of Representatives. As of June 30, 2011, no board members had been appointed. Effective July 1, 2011, Space Florida is governed by a 12 member independent board of directors that consists of the appointed members of the Enterprise Florida, Inc. by the Governor, the President of the Senate, and the Speaker of the House of Representatives pursuant to Florida Statute The Board of Directors accomplishes its oversight of Space Florida through its appointment of a President who implements the policies and directives of the Board of Directors. The President is responsible for the management of the operations of Space Florida. Space Florida has the authority to purchase or construct facilities, to set rates, fees and charges for the use of facilities and to undertake joint financing with municipalities or private sector entities for projects. Space Florida also has the power to issue bonds and other instruments of indebtedness. The full faith and credit of the State of Florida does not secure any bonds issued by Space Florida. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION Space Florida s financial statements are reported using the economic resources measurement focus, which is concerned with the inflow and outflow of resources that effect an entity. The Statement of Net Assets reflects those resources available to meet current obligations and to be used in the delivery of goods and services in subsequent periods. The Statement of Revenues, Expenses, and Changes in Net Assets summarize those resources received and those consumed during the current period. The fund distinguishes between operating and non-operating revenues and expenses. Operating revenues generally result from leases, administrative fees, and operating grants. Operating expenses include the costs for space business development activities, educational research development and workforce activities, operations, administrative expenses, and depreciation. All revenues and expenses not meeting the definition of operating are reported as non-operating revenues and expenses. Space Florida is applying all applicable GASB pronouncements and only FASB Statements and Interpretation, Accounting Principals Board Opinions and Accounting Research Bulletins issued on or before November 30, 1989, unless they conflict with or contradict GASB pronouncements. Space Florida accounts for all of its activities within one enterprise fund. 17

40 SPACE FLORIDA Notes to the Financial Statements June 30, 2012 and 2011 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) USE OF ESTIMATES The process of preparing financial statements in conformity with U.S. generally accepted accounting principals requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Upon settlement, actual results may differ from those estimates. CASH Consists of cash on hand and demand deposits that are restricted and unrestricted. ACCOUNTS RECEIVABLE The receivables are funds due to Space Florida from customers. Space Florida does not charge interest on late payments. An allowance of $50,000 was recorded at June 30, 2011, based on management s estimate of collectability of outstanding accounts receivable balances. At June 30, 2012, management believes that all receivables are collectible. INVESTMENTS Investments are valued at cost, as permitted by GASB 31, since the stock and warrants are with privately held companies and therefore the fair market value is not readily determinable. Space Florida is allowed to invest in common stock and warrants under Florida Statute OTHER CURRENT ASSETS Consist of deposits and prepaid expenses. RESTRICTED ASSETS Consist primarily of cash received and unexpended in connection with specific State-funded projects. CAPITAL ASSETS Are defined as assets with an initial cost of more than $1,000 and an estimated useful life in excess of one year. Capital assets are recorded at cost when purchased or at fair market value when donated. Additions, improvements and expenditures for repairs and maintenance that extend the lives of assets are capitalized. Other expenditures for repairs and maintenance are charged to expense as incurred. The carrying amount and accumulated depreciation of assets that are sold or retired are removed from the accounts in the year of disposal and any resulting gain or loss is included in results of operations. Depreciation is provided using the straight-line method over the useful lives of the various classes of depreciable assets. The estimated useful lives of the property and equipment range from 1 to 27 years. OTHER NONCURRENT ASSETS Consist of donated Super Loki rockets stated at the lower of cost or market. ACCRUED COMPENSATED ABSENCES Space Florida's reporting of accrued compensated absences has been recorded in accordance with GASB Statement No. 16. A liability is accrued for an employee's right to receive compensation for future absences when certain conditions are met. UNEARNED REVENUES Include amounts collected before the revenue recognition criteria are met. The unearned items consist of refundable prepaid launch fees. DEPOSITS Consist of amounts held for tenants of SLSL, and escrow for a loan receivable. NET ASSETS Net assets are restricted when constraints placed on them are either externally imposed or are imposed by constitutional provisions or enabling legislation. Internally imposed designations of resources are not presented as restricted net assets. At June 30, 2012 and 2011, restricted net assets consist primarily of cash received and unexpended in connection with specific State-funded projects. When both restricted and unrestricted resources are available for use, generally it is Space Florida's policy to use restricted resources first, then unrestricted resources as needed. 18

41 SPACE FLORIDA Notes to the Financial Statements June 30, 2012 and 2011 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CAPITAL ASSETS CONTRIBUTED TO ANOTHER GOVERNMENTAL ENTITY During the year ended June 30, 2012, Space Florida contributed some capital assets that it was no longer going to use to NASA. NOTE 2 CASH AND INVESTMENTS At June 30, 2012 and 2011, the carrying amount of Space Florida's deposits was $5,095,811 and $6,481,948, respectively, and the bank balance was $5,240,510, and $8,115,100, respectively. These deposits consist of interest and non-interest bearing demand accounts that are covered by federal depository insurance corporation (FDIC) up to $250,000. Effective October 3, 2008, the federal government increased the FDIC deposit insurance from $100,000 to $250,000 per depositor through December 31, Effective July 21, 2010, the federal government made the temporary FDIC limit of up to $250,000 per depositor permanent. Monies invested in amounts greater than FDIC limits are secured by collateral held by Space Florida's agent, pursuant to the Florida Security for Public Deposits Act (the Act ). The Act requires that Space Florida maintain deposits only in qualified public depositories. All qualified public depositories must deposit with the State Treasurer eligible collateral in such amounts as required by the Act. Should a default or insolvency occur, the State Treasurer would implement procedures for payment of losses according to the validated claims of Space Florida. Therefore, Space Florida's deposits are considered to be fully insured. Florida Statute authorizes Space Florida to select as a depository any qualified public depository as defined in Florida Statute Space Florida may also deposit funds with the State Treasury. Cash at June 30, 2012 and 2011, consists of the following: Credit risk Demand deposits $ 5,095,811 $ 6,481,948 Classified as: Cash $ 5,042,716 $ 1,473,745 Restricted cash 53,095 5,008,203 $ 5,095,811 $ 6,481,948 Florida Statue authorizes Space Florida to invest in funds backed by the federal, and local governments, or any investment authorized in Florida Statute Interest rate risk Space Florida s investment policy and Florida Statute do not limit the maturities of investments to reduce the interest rate risk. Foreign currency risk Space Florida has common stock with a fair value of $992,920 that is denominated in English Pounds. Florida Statute authorizes Space Florida to purchase interest in foreign corporations. 19

42 SPACE FLORIDA Notes to the Financial Statements June 30, 2012 and 2011 NOTE 2 CASH AND INVESTMENTS (CONTINUED) Concentration of credit risk Space Florida s investment policy and Florida Statute does not limit the concentration of types of investments. At June 30, 2012 and 2011, Space Florida had the following investments that were greater than 5% of their total investments: Cella Energy Limited- 35,374 shares of common stock $ 992,920 $ - Instant Eyes, Inc. - 20,000 shares of common stock 249, ,650 Instant Eyes, Inc.- warrants to purchase 20,000 shares of common stock 249, ,650 Rivian Automotive, Inc. - warrants to purchase 300 shares of common stock 1,498,000 1,498,000 Speed of Need Solutions, Inc. - 25,000 shares of common stock 500, ,000 Speed of Need Solutions, Inc.- warrants to purchase 25,000 shares of common stock 699, ,300 Total $ 4,189,520 $ 3,196,600 Custodial credit risk Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty, Space Florida will not be able to recover the value of the investments that are in the possession of an outside party. Space Florida does not have a formal policy for custodial credit risk. Space Florida s investments of $4,189,520 and $3,196,600, as of June 30, 2012 and 2011, respectively, are for securities uninsured, unregistered, and are being held by the individual companies that have issued the stock. NOTE 3 DUE FROM OTHER GOVERNMENTS Due from other governments is comprised of $6,579,197 and $6,579,818 of State appropriations for operations at June 30, 2012 and 2011, respectively. At June 30, 2012, $4,069,211 was restricted for infrastructure and job creation. NOTE 4 LOANS RECEIVABLE Space Florida entered into several loan agreements with a Company and loaned them a total of $1,036,925 through June 30, 2011, and charged 1% interest per year. During February 2012, the previous loans were refinanced, and an additional $399,076 was loaned to the Company. The loan is secured by collateral in an engine. Interest only payments are due monthly beginning March 2013, and 1% principal payments are due annually beginning February 2014 with a balloon payment due in No payments are due until March 2013 on the loans receivable; however, Space Florida s management has estimated a portion of the receivable will most likely not be collected and has recorded an allowance of $836,880, and $311,077, at June 30, 2012 and 2011, respectively. Space Florida entered into a loan agreement with another Company (Company 2) and loaned them $1,000,000 on May 24, Company 2 can make two other draws for $1,000,000 each during the next 18 months if they choose. The principal and interest is due in one payment 4 years after the last payment of principal. Space Florida can elect to have the interest paid to them in the form of common stock of Company 2. The interest accrues at rate of 4%. As additional compensation for the loan, Space Florida will receive warrants in the future based upon when Company s first flight occurs. As of June 30, 2012, Space Florida did not have any warrants. 20

43 SPACE FLORIDA Notes to the Financial Statements June 30, 2012 and 2011 NOTE 4 LOANS RECEIVABLE (CONTINUED) Space Florida entered into a loan agreement with another Company (Company 3) and loaned them $100,000 on November 9, The loan accrues interest at 2% per year. The payments are interest only beginning June 2012 for six months followed by 24 monthly payments of $2,833, and a final balloon payment of any remaining principal and interest. Space Florida entered into a loan and stock purchase agreement with another Company (Company 4). Space Florida loaned Company 4 $498,272 on July 1, The principal ($482,272) and interest ($4,110) were converted into 17,686 shares of stock on September 28, In addition on September 28, 2011, Space Florida purchased an additional 17,688 shares at $490,539 of Company 4 s stock. Company 4 s stock is foreign stock. There was a foreign currency translation loss on the initial loan of $1,728, a foreign currency translation gain of $112 for the interest earned on the loan, and a $9,461 loss on the stock purchase. NOTE 5 LEASE RECEIVABLE Space Florida entered into a direct financing lease agreement with a Company for two research vehicles in September The lease began on July 2, The lease agreement requires 60 monthly payments of $90,959, including interest at a rate of 3.15%, beginning July 2, The lease proceeds are being used to repay the note payable. The same equipment is collateral for the note payable (See Note 8). There were no executory costs, unguaranteed residual values, deferred initial direct costs, or unearned income. The future payments are as follows: Year ending June 30, Principal Interest Total 2013 $ 901,404 $ 190,101 $ 1,091, , ,901 1,091, ,006,528 84,977 1,091, ,041,602 49,903 1,091, ,077,862 13,938 1,091,800 Totals $ 5,000,000 $ 457,820 $ 5,457,820 21

44 SPACE FLORIDA Notes to the Financial Statements June 30, 2012 and 2011 NOTE 6 CAPITAL ASSETS Capital asset activity for the year ended June 30, 2012 was as follows: 2012 Balance June 30, 2011 Increases Decreases Balance June 30, 2012 Capital assets, not being depreciated: Construction in progress $ 6,512,179 $ 6,232,683 $ (1,459,198) $ 11,285,664 Total capital assets not being depreciated 6,512,179 6,232,683 (1,459,198) 11,285,664 Capital assets, being depreciated: SRMU storage facility 8,546, ,546,920 RLV hangar and office space 4,696, ,696,984 Orion facility 32,032, ,032,069 Space Life Sciences Lab 25,463, ,463,414 Launch complex 36-20,210-20,210 Furniture, equipment and vehicles 873, ,268 (47,415) 1,504,593 Total capital assets being depreciated 71,613, ,478 (47,415) 72,264,190 Less accumulated depreciation for: SRMU storage facility (2,061,459) (427,834) - (2,489,293) RLV hangar and office space (1,750,656) (413,165) - (2,163,821) Orion facility (1,775,280) (1,224,372) - (2,999,652) Space Life Sciences Lab (4,564,228) (1,015,137) - (5,579,365) Launch complex 36 - (20,210) - (20,210) Furniture, equipment and vehicles (424,924) (52,422) 27,092 (450,254) Total accumulated depreciation (10,576,547) (3,153,140) 27,092 (13,702,595) Total capital assets, being depreciated, net 61,036,580 (2,454,662) (20,323) 58,561,595 Capital assets, net $ 67,548,759 $ 3,778,021 $ (1,479,521) $ 69,847,259 22

45 SPACE FLORIDA Notes to the Financial Statements June 30, 2012 and 2011 NOTE 6 CAPITAL ASSETS (CONTINUED) Capital asset activity for the year ended June 30, 2011 was as follows: 2011 Balance June 30, 2010 Increases Decreases Balance June 30, 2011 Capital assets, not being depreciated: Construction in progress $ 2,878,786 $ 6,833,393 $ (3,200,000) $ 6,512,179 Total capital assets not being depreciated 2,878,786 6,833,393 (3,200,000) 6,512,179 Capital assets, being depreciated: SRMU storage facility 8,541,951 4,969-8,546,920 RLV hangar and office space 4,696, ,696,984 Orion facility 32,032, ,032,069 Space Life Sciences Lab 25,463, ,463,414 Furniture, equipment and vehicles 863,776 3,259,462 (3,249,498) 873,740 Total capital assets being depreciated 71,598,194 3,264,431 (3,249,498) 71,613,127 Less accumulated depreciation for: SRMU storage facility (1,633,624) (427,835) - (2,061,459) RLV hangar and office space (1,336,893) (413,763) - (1,750,656) Orion facility (550,909) (1,224,371) - (1,775,280) Space Life Sciences Lab (3,533,814) (1,030,414) - (4,564,228) Furniture, equipment and vehicles (424,130) (34,132) 33,338 (424,924) Total accumulated depreciation (7,479,370) (3,130,515) 33,338 (10,576,547) Total capital assets, being depreciated, net 64,118, ,916 (3,216,160) 61,036,580 Capital assets, net $ 66,997,610 $ 6,967,309 $ (6,416,160) $ 67,548,759 NOTE 7 LINE OF CREDIT Space Florida entered into a line of credit in September 2011, and has available $3,000,000. At June 30, 2012, $677,012 was outstanding under this line of credit. The line of credit matures on September 30, Interest on the line of credit's outstanding balance is charged on a monthly basis and is at the LIBOR rate plus a 3.25% percent margin (3.5% as of June 30, 2011). Interest expense under this line of credit was $19,936 for the year ended June 30, Short-term liability activity for the year ended June 30, 2012, was as follows: Balance Balance June 30, June 30, 2011 Additions Reductions 2012 Line of Credit $ - $ 2,660,425 $ (1,983,413) $ 677,012 23

46 SPACE FLORIDA Notes to the Financial Statements June 30, 2012 and 2011 NOTE 8 LONG-TERM DEBT Note Payable On September 16, 2011, Space Florida entered into a loan agreement with a bank in the amount of $5,000,000. The note was issued for a period of 5 years with an interest rate of 3.15%. Monthly payments of $90, are due on the 30 th of every month beginning July 30, The outstanding principal balance as of June 30, 2012 is $5,000,000. Payment of principal and interest on the note payable is secured by collateral of equipment (in Note 5). Annual debt service requirements to maturity for the note payable outstanding are as follows: Year ending June 30, Principal Interest Total 2013 $ 901,404 $ 190,101 $ 1,091, , ,901 1,091, ,006,528 84,977 1,091, ,041,602 49,903 1,091, ,077,862 13,938 1,091,800 Totals $ 5,000,000 $ 457,820 $ 5,457,820 Changes In Long-Term Liabilities Long-term liability activity for the years ended June 30, 2012 and 2011, was as follows: Balance Balance June 30, June 30, Due Within 2011 Additions Reductions 2012 One Year Notes payable $ - $ 5,000,000 $ - $ 5,000,000 $ 901,404 Compensated absences 102, ,656 (75,880) 141,097 70,197 Total $ 102,321 $ 5,114,656 $ (75,880) $ 5,141,097 $ 971,601 Balance Balance June 30, June 30, Due Within 2010 Additions Reductions 2011 One Year Compensated absences $ 86,806 $ 121,062 $ (105,547) $ 102,321 $ 55,026 Total $ 86,806 $ 121,062 $ (105,547) $ 102,321 $ 55,026 NOTE 9 CONDUIT DEBT As defined by GASB Interpretation No. 2, conduit debt obligations are certain limited obligation debt instruments issued by a state or local governmental entity for the express purpose of providing capital financing for a specific third party that is not a part of the issuer's financial reporting entity. Although the conduit debt obligations bear the name of the governmental entity, the entity has no obligation to repay the conduit debt beyond the resources provided by a lease or loan to the third party. GASB has concluded that conduit debt does not create a liability for the governmental entity and, therefore, is not reflected on the entity's basic financial statements. Space Florida has participated in the issuance of conduit debt projects that are not reflected on the statement of net assets of its basic financial statements. 24

47 SPACE FLORIDA Notes to the Financial Statements June 30, 2012 and 2011 NOTE 9 CONDUIT DEBT (CONTINUED) The conduit debt transactions discussed below are limited obligation debts of Space Florida and are payable solely from the pledged revenues described in the respective debt agreements. Neither the faith nor credit, nor the taxing power of Space Florida, the State of Florida, nor any subdivision thereof is pledged to the payment of the debts. During January 2000, the Florida Space Authority entered into an agreement to assist in the financing and modification of Launch Complex 41 for use of the Atlas V rocket. This project was completed during the year ended June 30, The original value of the Florida Space Authority assisted financing on this project was approximately $294,117,000. With the dissolution of the Florida Space Authority on September 1, 2006, the conduit debt was assigned to Space Florida. The debt was refinanced in November 2010 with a principal balance of $100,000,000. As of June 30, 2012 and 2011, respectively, the outstanding balance was approximately $76,851,661 and $83,694,570. Rental revenue received on the Atlas V facility was being used to pay off the debt. During July 2005, the Florida Space Authority entered into an agreement to assist in the financing related to the construction of a Shuttle Launch Experience facility to be located at the Kennedy Space Center. With the dissolution of the Florida Space Authority on September 1, 2006, the conduit debt was assigned to Space Florida. The project was completed during the year ended June 30, 2009, at which point the total value of the Florida Space Authority assisted financing on this project was approximately $35,000,000. As of June 30, 2011, the outstanding balance on Space Florida assisted financing was approximately $10,698,000. During March 2007, Space Florida entered into an agreement to assist in additional financing related to the construction of a Shuttle Launch Experience facility to be located at the Kennedy Space Center. The project was completed during the year ended June 30, 2009, at which point the total value of the Florida Space Authority assisted financing on this project was approximately $5,000,000. As of June 30, 2011, the outstanding balance on Space Florida assisted financing was approximately $4,567,000. During March 2012, Space Florida entered into an agreement to assist with financing related to the construction of the facility to house Atlantis. This is being attached to the Shuttle Launch Experience facility. The $35,000,000, and $5,000,000 were refinanced into one loan with an additional $22,500,000. The total amount of assisted financing is $62,500,000. As of June 30, 2012, the outstanding balance on Space Florida assisted financing was approximately $18,238,811. The debt will be repaid from a percentage of ticket sale revenues at the Kennedy Space Center Visitor Complex. NOTE 10 SRMU STORAGE FACILITY On May 15, 2007, Space Florida entered into an agreement to lease the Titan IV Solid Rocket Motor Upgrade (SRMU) storage facility constructed at Camp Blanding, Florida. The lease is currently extended through September 30, 2012, and may be extended for up to seven additional one year periods. However, the tenant may terminate the lease with a 90-day written notice. During the years ended June 30, 2012 and 2011, Space Florida recorded lease revenue of $512,013 and $504,401, respectively. The SRMU storage facility was constructed on land owned by the State of Florida Armory Board. The annual land use fee for fiscal years 2012 and 2011 is approximately $227,000 and $206,000, respectively, and is payable by Space Florida in monthly installments of approximately $19,000 and $17,000, respectively. 25

48 SPACE FLORIDA Notes to the Financial Statements June 30, 2012 and 2011 NOTE 10 SRMU STORAGE FACILITY (CONTINUED) If the current tenant chooses not to renew the lease and no suitable lease agreement is secured with another tenant, management believes the service utility of the facility would be significantly reduced. Under such circumstances, and in accordance with GASB No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries, Space Florida would be required to report an impairment loss, not to exceed the then carrying value of the facility, which is $6,057,627 as of June 30, However, management believes the current tenant will continue to renew the lease. Accordingly, no impairment loss has been recorded as of June 30, 2012 or Space Florida also stores the majority of its inventory of Super Loki rockets (Note 1) at the Camp Blanding facility. Depending on how the facility is ultimately utilized, as described above, Space Florida may be forced to either destroy or donate its stock of Super Loki rockets. If such circumstances occurred, Space Florida would be required to record a loss of approximately $21,712, the carrying value of the rockets stored at its Camp Blanding facility. As of June 30, 2012, management believes it will be able to continue to store the rockets at its Camp Blanding facility and have, therefore, not recorded a contingent loss. NOTE 11 SPACE LIFE SCIENCES LAB Space Florida leases the Space Life Sciences Lab (SLSL) to NASA and other lessees under lease agreements that end between September 30, 2012 and April 30, The net carrying value of the facility at June 30, 2012 and 2011 was $19,884,049, and $20,899,186, respectively. During the years ended June 30, 2012 and 2011, Space Florida recorded lease revenue of $1,057,000 and $1,277,770, respectively. The SLSL lease agreement also provides that the tenants are responsible for the operation and maintenance of the facility. However, Space Florida makes monthly payments to the tenant to cover such expenses. During the years ended June 30, 2012 and 2011, Space Florida recorded operations and maintenance expenses related to the SLSL facility of $1,691,145 and $726,859, respectively. NOTE 12 HANGAR LEASE During fiscal year 2011, Space Florida entered into lease agreements to rent hangars in order to attract new business to Brevard County. The leases expire in December 2012, with monthly payments ranging from $5,637 to $12,600. Minimum future rental payments under non-cancelable operating leases as of June 30, 2012 of $223,470, are all due during the year ending June 30, The rent expense for the years ended June 30, 2012 and 2011 was $425,925 and $223,469, respectively. 26

49 SPACE FLORIDA Notes to the Financial Statements June 30, 2012 and 2011 NOTE 13 RIGHTS AND ACCESS Launch Complex 36 Space Florida was granted a license (right to use) to Space Launch Complex 36 at Cape Canaveral Air Force Station from the Secretary of the Air Force for a period of five years commencing in November 2009 and ending November Space Florida anticipates renewal of the license in five year increments. The intended purpose of the complex, with certain limitations as described in the license agreement, is for the construction and operation of a multi-use vertical launch complex capable of supporting several launch vehicle configurations ranging from light to medium lift. The license is revocable at the will of the Secretary of the Air Force. Launch Complex 46 Space Florida was granted a license (right to use) to Space Launch Complex 46 (SLC-46) at Cape Canaveral Air Force Station from the Secretary of the Air Force for a period of five years from September 2008 and ending September Space Florida anticipates renewal of the license in five year increments. The intended purpose of the complex, with certain limitations as described in the license agreement, is for the construction and operating of a launch complex that is capable to support space launches and other directly related activities for government, education, and commercial purposes. Through an agreement with the Air Force and Navy, Space Florida shares SLC-46 site with the Naval Ordnance Test Unit (NOTU). The license is revocable at the will of the Secretary of the Air Force. Exploration Park On January 1, 2009, Space Florida entered into a 60 year enhanced use lease agreement, including additional extension options, with NASA s John F. Kennedy Space Center for 60 acres and an optional 139 additional acres located adjacent to the SLSL. The intended purpose of this property, with certain limitations as described in the lease agreement, is for the development of a mixed-use, multi-tenant technology, and commerce park referred to as Exploration Park. The park is intended to host diverse aerospace-related activities for commercial, civil, and military tenants. NOTE 14 PROTOTYPE TESTING AGREEMENTS During June 2010, Space Florida entered into an agreement to purchase an ultra efficient vehicle prototype from a third party entity (Seller 1) for $500,000, for the purpose of testing the technology and capabilities of the prototype. Seller 1 delivered the prototype on October 15, 2010, and the testing period began. Under the terms of the agreement, upon expiration of the testing period, Space Florida was to lease back the prototype to the seller. The sales lease back began on October 15, 2010 at the rate of $100 per year for 10 years. At the end of the lease, Seller 1 has the option to repurchase the prototype for $100. As additional consideration for the lease and option to purchase, the Seller issued to Space Florida a warrant with a 10 year term to acquire 100 shares of Seller 1 s common stock, which is estimated to equal a 1% ownership interest in Seller 1. The common stock warrants allow shares to be purchased for $1,000 per share. During March 2011, Space Florida entered into an additional and separate agreement with Seller 1 to purchase three vehicles for $1,000,000. As of June 30, 2011, the vehicles were in the final design and construction phase and were expected to be completed during fiscal year ended June 30, In May 2012, Space Florida and Seller 1 agreed to change the deliverable of this agreement to a new Prototype and extend the commencement date of the lease to December 31, 2013 in order to provide a more appropriate response to the market. At the completion of the prototype, the vehicle will be leased back to Seller 1 at $100 per year for 10 years. Seller 1 has an option to purchase the vehicle the end of the lease for $100. Seller 1 issued Space Florida a warrant with a 10 year term to acquire 200 shares of the Seller s common stock. The warrants allow common stock shares to be purchased for $1,843 per share and is equal to a 2% ownership interest in Seller 1. 27

50 SPACE FLORIDA Notes to the Financial Statements June 30, 2012 and 2011 NOTE 14 PROTOTYPE TESTING AGREEMENTS (CONTINUED) Also, in March 2011, Space Florida entered into an agreement to purchase a prototype from Seller 2 for $1,200,000, for the purpose of testing the technology and capabilities of the prototype. Of the $1,200,000, $500,000 was a loan convertible into common stock of Seller 2. Space Florida converted the loan during the fiscal year ended June 30, 2012 and obtained 25,000 shares of common stock of Seller 2. A sales lease back will begin on the completion of the construction of the prototype. Seller 2 will lease the vehicle for 7 years for $100 a year, and at the end of the lease can purchase the prototype for $100. As additional consideration for the lease, Seller 2 gave Space Florida warrants to purchase 25,000 shares of common stock in Seller 2, this is an estimated ownership of 2.5% in Seller 2. The warrants can be exercised for $0.01 a share. In June 2011, Space Florida entered into an agreement to purchase a prototype from a third party (Seller 3) for $500,000, for the purpose of testing the technology and capabilities of the prototype. A sales lease back will begin upon the completion of the construction of the prototype. Seller 3 will lease the vehicle for 7 years for $100 a year, and at the end of the lease can purchase the prototype for $100. As additional consideration for the lease, Seller 3 gave Space Florida warrants to purchase 20,000 shares of common stock in Seller 3, this is an estimated ownership of 2% in Seller 3. The warrants can be exercised for $0.01 a share. As of June 30, 2012 and 2011, the warrants and common stock are recorded in investments, and the receivables for the capital leases are included in other current assets. NOTE 15 RETIREMENT PLAN Effective September 1, 2006, Space Florida established a Simplified Employee Pension Plan (the Plan ). The Plan eliminates the taxation required for the social security element of the Federal Insurance Contributions Act (FICA) for all participants and for Space Florida. Employees may not contribute to social security while participating in the Plan. All employees of Space Florida are eligible to participate in the Plan immediately. Participants vest at 100% upon entering the Plan and retirement is set at age 65. The Plan is non-contributory for employees and, therefore, all contributions are the obligation of Space Florida. Contributions to the Plan for the years ended June 30, 2012 and 2011 were $372,148 and $327,624, respectively, and represented 15% of total eligible employee gross compensation for each period. NOTE 16 COMMITMENTS AND CONTINGENCIES Commitments Contract commitments at June 30, 2012 and 2011 were approximately $3,762,033 and $4,204,533, respectively, and related to the prototype testing agreement (Note 14) and certain other consulting agreements. Economic Dependency Space Florida received approximately 87% and 88% of its total support from State legislative appropriations, and grants during the years ended June 30, 2012 and 2011, respectively. State Appropriated Funds & Federal Contracts Amounts received from State and Federal agencies are subject to audit and adjustment at the discretion of these entities. If expenditures are disallowed as a result of these audits, the claims for reimbursement to the agency would become a liability of Space Florida. 28

51 SPACE FLORIDA Notes to the Financial Statements June 30, 2012 and 2011 NOTE 17 RELATED PARTY TRANSACTIONS On August 8, 2011, Space Florida gave $1,250,000 to a related party for start-up costs. Space Florida will also provide office space at SLSL, at no cost, to the third party for three years. Space Florida provided consulting and administrative services to a related party. These fees totaled $15,200 during fiscal year NOTE 18 RECLASSIFICATION Some expenses for the year ending June 30, 2011 have been reclassified to conform to the current year presentation. 29

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53 SUPPLEMENTARY INFORMATION 31

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55 SPACE FLORIDA Schedule of Travel, Entertainment, and Incidental Expenses For the year ended June 30, 2012 Domestic: Travel and incidental (1) $ 311,865 Entertainment 38,627 Total domestic 350,492 Foreign: Travel and incidental (1) 167,250 Entertainment 4,557 Total foreign 171,807 Total $ 522,299 (1) Incidental expenses consist of telephone charges and gratuities. 33

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57 Carr, Riggs & Ingram, LLC 215 Baytrree Drive Melbourne, Florida (321) (321) (fax) The Board of Directors Space Florida Independent Auditors Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards We have audited the financial statements of Space Florida as of and for the year ended June 30, 2012, and have issued our report thereon dated September 7, We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting Management of Space Florida is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered Space Florida s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Space Florida s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of Space Florida s internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented or detected and corrected on a timely basis. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses and therefore, there can be no assurance that all deficiencies, significant deficiencies, or material weaknesses have been identified. We did not identify any deficiencies in internal control that we consider to be material weaknesses as defined above. Compliance and Other Matters As part of obtaining reasonable assurance about whether Space Florida s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. 35

58 The Board of Directors Space Florida Page Two This report is intended solely for the information and use of management, Space Florida s Board of Directors, others within the entity, Federal and State awarding agencies, specific legislative or regulatory bodies, and the State of Florida Office of the Auditor General and is not intended to be and should not be used by anyone other than these specified parties. Carr, Riggs & Ingram, LLC Melbourne, Florida September 7,

59 Carr, Riggs & Ingram, LLC 215 Baytrree Drive Melbourne, Florida (321) (321) (fax) Independent Auditors Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Federal Awards Program and State Project and on Internal Control over Compliance in Accordance with OMB Circular A-133 and Chapter , Rules of the Auditor General The Board of Directors Space Florida Compliance We have audited Space Florida s compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement and the State Projects Compliance Supplement that could have a direct and material effect on each of Space Florida s major federal programs and state projects for the year ended June 30, Space Florida's major federal programs and state projects are identified in the summary of auditors' results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs and state projects is the responsibility of Space Florida's management. Our responsibility is to express an opinion on Space Florida's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; OMB Circular A-133; and Chapter , Rules of the Auditor General. Those standards, OMB Circular A-133 and Chapter , Rules of the Auditor General, require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program or state project occurred. An audit includes examining, on a test basis, evidence about Space Florida's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of Space Florida's compliance with those requirements. In our opinion, Space Florida complied, in all material respects, with the requirements referred to above that could have a direct and material effect on each of its major federal programs and state projects for the year ended June 30, Internal Control Over Compliance Management of Space Florida is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal programs and state projects. In planning and performing our audit, we considered Space Florida's internal control over compliance with requirements that could have a direct and material effect on a major federal program or state project to determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133 and Chapter , Rules of the Auditor General, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Space Florida's internal control over compliance. 37

60 The Board of Directors Space Florida Page Two A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program or state project on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program or state project will not be prevented, or detected and corrected, on a timely basis. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of management, Space Florida s Board of Directors, others within the entity, Federal and State awarding agencies, specific legislative or regulatory bodies, and the State of Florida Office of the Auditor General and is not intended to be and should not be used by anyone other than these specified parties. Carr, Riggs & Ingram, LLC Melbourne, Florida September 7,

61 SPACE FLORIDA Schedule of Findings and Questioned Costs For the year ended June 30, 2012 Financial Statements Section I Summary of Auditors Results Type of auditors report issued: Unqualified Internal control over financial reporting: Material weakness(es) identified? yes X no Significant deficiency(ies) identified? yes X none reported Noncompliance material to financial statements noted? yes X no Federal Awards and State Projects Internal control over major federal programs and state projects: Material weakness(es) identified? yes X no Significant deficiency(ies) identified? yes X none reported Type of auditors report issued on compliance for major federal programs and state projects: Unqualified Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of OMB Circular A-133 and/or Chapter ? yes X no Identification of major federal programs and state projects: Federal CFDA Numbers Federal Program or Cluster Economic Adjustment Assistance 43.AAA Launch Complexes 36 and 48 and Thermal Vacuum Chamber State CSFA Numbers Name of State Project Space Florida Dollar threshold used to distinguish between type A and B programs was $300,000 for major federal programs and $807,536 for major state projects. Auditee qualified as a low-risk auditee for federal purposes? yes X no 39

62 SPACE FLORIDA Schedule of Findings and Questioned Costs (continued) For the year ended June 30, 2012 No matters were reported. No matters were reported. No matters were reported. Section II Financial Statement Findings Section III Federal Award Findings and Questioned Costs Section IV State Project Findings and Questioned Costs Section V Other Issues No Summary Schedule of Prior Audit Findings is required because there were no prior audit findings related to Federal award or State financial assistance projects. No Corrective Action Plan is required because there were no findings required to be reported under either OMB Circular A-133 or the Florida Single Audit Act. 40

63 SPACE FLORIDA Schedule of Expenditures of Federal Awards and State Financial Assistance For the year ended June 30, 2012 Federal /State Agency CFDA/ CSFA Number Contract/Grant Number Expenditures Transfer to Subrecipients National Aeronautics and Space Administration Direct Projects, FY10 Earmark Request for Proposal Launch Complexes 36 and AAA NNX10AH23G $ 55,800 $ - Thermal Vacuum Chamber 43.AAA NNX10AH24G 186,439 - Total National Aeronautics and Space Administration 242,239 - U.S. Department of Commerce Economic Development Administration Direct Projects, Economic Adjustment Assistance Space Coast Clean Energy Jobs Accelerator , ,706 FL Space Coast Region ,000 - Total U.S. Department of Commerce 363, ,706 U.S. Small Business Administration Direct Projects, Technical Assistance Space Coast Clean Energy Cluster SBAHQ-11-J ,375 - Total Expenditures of Federal Awards $ 715,320 $ 234,706 Florida Department of Economic Opportunity Direct Projects, Space Florida Funding & Program Agreement SB $ 8,442,724 $ - Jobs Agreement OT ,055,991 - Infrastructure Agreement OT ,686,429 - Florida Department of Transportation Direct Projects Space Florida FM/# ,079,301 - Space Florida FM/# ,500 - Space Florida FM/# ,433 - Total CSFA number ,401,378 - Florida Economic Development Council Direct Projects Defense Infrastructure Grants DIG ,606 - Defense Infrastructure Grants DIG ,870 - Total Florida Economic Development Council 516,476 - Total Expenditures of State Financial Assistance $ 26,917,854 $ - Note: This schedule is prepared on the accrual basis of accounting. 41

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65 Carr, Riggs & Ingram, LLC 215 Baytrree Drive Melbourne, Florida (321) (321) (fax) Independent Auditors Management Letter The Board of Directors Space Florida We have audited the financial statements of Space Florida as of and for the fiscal year ended June 30, 2012, and have issued our report thereon dated September 7, We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; OMB Circular A-133, Audits of States, Local Governments, and Non- Profit Organizations; and Chapter , Rules of the Florida Auditor General. We have issued our Independent Auditors Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards, Independent Auditors Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Federal Program and State Project and on Internal Control over Compliance in Accordance with OMB Circular A-133 and Chapter , Rules of the Auditor General, and Schedule of Findings and Questioned Costs. Disclosures in those reports and schedule, which are dated September , should be considered in conjunction with this management letter. Additionally, our audit was conducted in accordance with Chapter , Rules of the Auditor General, which governs the conduct of local governmental entity audits performed in the State of Florida. This letter includes the following information, which is not included in the aforementioned auditors reports or schedule: Section (l)(i)1., Rules of the Auditor General, requires that we determine whether or not corrective actions have been taken to address findings and recommendations made in the preceding annual financial audit report. There were no corrective actions to be taken as there were no findings and recommendations made in the preceding annual financial audit report. Section (l)(i)2., Rules of the Auditor General, requires our audit to include a review of the provisions of Section , Florida Statutes, regarding the investment of public funds. In connection with our audit, we determined that Space Florida complied with Section , Florida Statutes. Section (1)(i)3., Rules of the Auditor General, requires that we address in the management letter any recommendations to improve financial management. In connection with our audit, we did not have any such recommendations. Section (l)(i)4., Rules of the Auditor General, requires that we address violations of provisions of contracts or grant agreements, or abuse, that have occurred, or are likely to have occurred, that have an effect on the financial statements that is less than material but more than inconsequential. In connection with our audit, we did not have any such findings. 43

66 The Board of Directors Space Florida Page Two Section (1)(i)5., Rules of the Auditor General, provides that the auditor may, based on professional judgment, report the following matters that have an inconsequential effect on financial statements, considering both quantitative and qualitative factors: (1) violations of provisions of contracts or grant agreements, fraud, illegal acts, or abuse, and (2) deficiencies in internal control that are not significant deficiencies. In connection with our audit, we did not have any such findings. Section (l)(i)6., Rules of the Auditor General, requires that the name or official title and legal authority for the primary government and each component unit of the reporting entity be disclosed in this management letter, unless disclosed in the notes to the financial statements. The legal authority of Space Florida is disclosed in the footnotes. Section (l)(i)7.a., Rules of the Auditor General, requires a statement be included as to whether or not the local governmental entity has met one or more of the conditions described in Section (1), Florida Statutes, and identification of the special condition(s) met. In connection with our audit, we determined that Space Florida did not meet any of the conditions described in Section (1), Florida Statutes. Section (l)(i)7.b., Rules of the Auditor General, requires that we determine whether the annual financial report for Space Florida for the fiscal year ended June 30, 2012, filed with the Florida Department of Financial Services pursuant to Section (1)(a), Florida Statutes, is in agreement with the annual financial audit report for the fiscal year ended June 30, In connection with our audit, we determined that these two reports were in agreement. Pursuant to Sections (1)(i)7.c. and (7), Rules of the Auditor General, we applied financial condition assessment procedures. It is management's responsibility to monitor Space Florida's financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provided by same. This report is intended solely for the information and use of management, Space Florida s Board of Directors, others within the entity, Federal and State awarding agencies, specific legislative or regulatory bodies, and the State of Florida Office of the Auditor General and is not intended to be and should not be used by anyone other than these specified parties. Carr, Riggs & Ingram, LLC Melbourne, Florida September 7,

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