RICHARDSON, TEXAS (November 10, 2004)– TeraForce Technology Corporation (OTCBB: TERA) today announced financial results for the third quarter ended September 30, 2004.
Financial Results
Net revenues in the third quarter of 2004 amounted to $1,439,000 versus $1,699,000 in the third quarter of 2003. Operating loss for the three months ended September 30, 2004 amounted to $1,143,000 versus an operating loss of $1,611,000 in the same period of 2003. For the first nine months of 2004 net revenues amounted to $8,414,000 and operating profit totaled $130,000. This compares with net revenues of $4,037,000 and an operating loss of $4,762,000 in the first nine months of 2003. The results for the first nine months of 2004 reflect product shipments of $5,014,000 and license fees of $3,400,000.
Engineering and development expenses in the third quarter of 2004 were $512,000 as compared to $582,000 in the third quarter of 2003. Selling and administrative expenses decreased to $1,101,000 in the third quarter of 2004 versus $1,171,000 in the third quarter last year.
Herman Frietsch, chairman and chief executive officer of TeraForce Technology Corporation commented, “The slight dip in net revenues for this period, following quarterly increases, reflects the variability in order flow during the early stages of production stemming from our design wins. The business we anticipate from design wins has not diminished. However, as we have indicated previously, variability will continue to be seen as we progress into more consistent production phases.
“Our base of business continues to grow and we are increasing our number of new program pursuits. Our recent transition to a direct sales force coupled with our new products are beginning to make a significant contribution to our growth expectations.
“From a broader perspective, the overall political and budgetary environment appears very promising for our target segments of the defense and homeland security markets. In addition we are seeing considerable consolidation activity within our industry. While this activity may present certain challenges, we believe it provides us with important opportunities that we can exploit effectively.”
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Conference Call Scheduled The Company will host a management conference call Thursday, November 11, 2004 at 3:30 p.m. Central Standard Time, to review the matters discussed in this release. Shareholders and investors interested in attending the conference call should dial 816-650-0765 ten minutes prior to the call and enter reservation code 28809669. A live webcast of the conference call will also be available on the TeraForce website athttp://www.teraforcetechnology.com/ and click on “Investor Relations.”
A replay of the conference call will be available later that day from 5:00 p.m. Eastern Standard Time through 5:00 p.m. Eastern Standard Time on December 10, 2004. To access the playback, please call 402-220-2491. The reservation code for the replay is 2880669. A replay will be available online through the TeraForce website athttp://www.teraforcetechnology.com/ and click on “Investor Relations.”
About TeraForce Technology Corporation Based in Richardson, Texas, TeraForce Technology Corporation (OTCBB: TERA) designs, develops, produces and sells high-density embedded computing platforms and digital signal processing products, primarily for applications in the defense electronics industry. TeraForce’s primary operating unit is DNA Computing Solutions, Inc.
Except for the historical information contained herein, the statements in this announcement are forward looking statements which involve risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, the forward looking statements. Factors that might cause such a difference include, but are not limited to, those relating to: general economic conditions in the markets in which the Company operates; success in the development and market acceptance of new and existing products; dependence on suppliers, third party manufacturers and channels of distribution; contingent liabilities; customer and product concentration; fluctuations in customer demand; maintaining access to external sources of capital; ability to attract and retain key management and technical personnel; issues regarding intellectual property rights; overall management of the Company’s expansion; and other risk factors detailed from time to time in the Company’s filings with the Securities and Exchange Commission.
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TERAFORCE TECHNOLOGY CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (Thousands of dollars, except share and per share data)
September 30,
December 31, 2003
2004
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
1
$
165
Accounts receivable net of allowance of $30 in 2004 and 2003
660
1,935
Inventories
1,161
1,595
Prepaid expenses and other current assets
552
537
Total current assets
2,374
4,232
Property and equipment, net
293
378
Investment in affiliate
100
250
Other assets
804
488
$
3,571
$
5,348
Liabilities and Stockholders’ Deficit
Current liabilities:
Current portion of notes payable$
6,520
$
700
Accounts payable
952
552
Deferred revenue
—
1,550
Accrued liabilities
2,222
2,629
Total current liabilities
9,694
5,431
Long-term notes payable
765
5,909
Other long-term liabilities
150
795
Stockholders’ deficit:
Common Stock, $.01 par value; authorized 250,000,000 shares; 133,561,526 and 130,837,186 shares issued in 2004 and 2003, respectively
1,336
1,308
Additional paid-in capital
189,994
189,194
Accumulated deficit
(196,781
)
(195,702
)
(5,451
)
(5,200
)
Less 400,474 shares of common stock in treasury at cost
(1,587
)
(1,587
)
Total stockholders’ deficit
(7,038
)
(6,787
)
$
3,571
$
5,348
3
TERAFORCE TECHNOLOGY CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations (Thousands of dollars, except share and per share data)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2004
2003
2004
2003
(unaudited)
Net revenues
$
1,439
$
1,699
$
8,414
$
4,037
Cost of revenues
969
1,108
3,013
2,765
Gross profit
470
591
5,401
1,272
Expenses:
Engineering and development
512
582
1,531
2,063
Selling and administrative
1,101
1,171
3,740
3,522
Write-off of receivable from unconsolidated affiliate
—
449
—
449
1,613
2,202
5,271
6,034
Operating profit (loss)
(1,143
)
(1,611
)
130
(4,762
)
Other income (expense):
Litigation costs, net of insurance reimbursement
(50
)
(292
)
(50
)
(417
)
Share of loss and adjustment to carrying value of unconsolidated affiliate
—
(333
)
(50
)
(702
)
Interest expense
(364
)
(407
)
(1,099
)
(775
)
Other
(2
)
(16
)
(10
)
(81
)
(416
)
(1,048
)
(1,209
)
(1,975
)
Net loss
$
(1,559
)
$
(2,659
)
$
(1,079
)
$
(6,737
)
Basic and diluted loss per share
$
(.01
)
$
(.02
)
$
(.01
)
$
(.06
)
Weighted average number of common shares outstanding (thousands) – basic and diluted
133,161
118,138
132,184
117,102
4
TERAFORCE TECHNOLOGY CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (Thousands of dollars)
Nine Months Ended September 30,
2004
2003
(unaudited)
Cash flows from operating activities:
Net loss $
$
(1,079
)
$
(6,737
)
Adjustments to reconcile net loss to net cash used in operating activities:
Utilization of prepaid services
—
193
Depreciation and amortization
165
190
Amortization of deferred financing costs
713
510
Loss related to unconsolidated affiliate
50
1,151
Other
(248
)
(462
)
Changes in operating assets and liabilities:
Accounts receivable
1,275
(469
)
Inventories
434
564
Deferred revenue
(1,550
)
—
Accounts payable and accrued liabilities
(291
)
155
Net cash used in operating activities
(531
)
(4,905
)
Cash flows from investing activities:
Capital expenditures
(63
)
(22
)
Investment in temporary cash investments
—
457
Proceeds from sale of partial interest in affiliate
100
—
Software development costs
(9
)
(105
)
Net cash provided by investing activities
28
330
Cash flows from financing activities:
Proceeds from issuance of notes payable
575
4,260
Proceeds from issuance of common stock
64
516
Principal payments on notes payable
(300
)
(225
)
Net cash provided by financing activities
339
4,551
Net decrease in cash and cash equivalents
(164
)
(24
)
Cash and cash equivalents, beginning of period
165
55
Cash and cash equivalents, end of period
$
1
$
31
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