UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) January 14, 2002
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TeraForce Technology Corporation
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(Exact name of registrant as specified in its charter)
Delaware 0-11630 76-0471342
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1240 East Campbell Road, Richardson, Texas 75081
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (469) 330-4960
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1
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On January 14, 2002, TeraForce Technology Corporation (the "Company")
and its wholly-owned subsidiary, DNA Enterprises, Inc. ("DNA") entered into an
Asset Purchase Agreement with Flextronics Design S.D., Inc., a unit of
Flextronics International, Ltd. ("Flextronics") whereby Flextronics acquired the
design services business conducted by DNA. Concurrently, the Company and
Flextronics entered into a Design/Engineering Services Agreement.
The accompanying Pro Forma Condensed Balance Sheet as of September 30,
2001 reflects the financial position of the Company as if this transaction had
been completed as of that date. The Pro Forma Condensed Statements of Operations
for the Year ended December 31, 2000 and for the Nine Months ended September 30,
2001 reflect the results of operations of the Company as if the transaction had
been completed as of January 1, 2000.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business to Be Acquired: N/A
(b) Pro Forma Financial Information
Pro Forma Condensed Balance Sheet as of September 30, 2001
Pro Forma Condensed Statement of Operations for the Nine
Months ended September 30, 2001
Pro Forma Condensed Statement of Operations for the Year
ended December 31, 2000
(c) Exhibits:
None
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2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TeraForce Technology Corporation
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(Registrant)
Date: March 25, 2002 By: /s/ Herman M. Frietsch
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(Signature)
Herman M. Frietsch
Chairman of the Board and CEO
3
FINANCIAL STATEMENT INDEX
Page No.
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Basis of Presentation F-2
Consolidated Condensed Pro Forma Balance Sheet as of September 30, 2001 F-3
Pro Forma Consolidated Condensed Statement of Operations for the
Nine Months Ended September 30, 2001 F-4
Pro Forma Consolidated Condensed Statement of Operations for the
Year Ended December 31, 2000 F-5
Pro Forma Adjustments F-6
F-1
BASIS OF PRESENTATION
On January 14, 2002, TeraForce Technology Corporation (the "Company")
and its wholly-owned subsidiary, DNA Enterprises, Inc. ("DNA") entered into an
Asset Purchase Agreement with Flextronics Design S.D., Inc., a unit of
Flextronics International, Ltd. ("Flextronics") whereby Flextronics acquired the
design services business conducted by DNA. Concurrently, the Company and
Flextronics entered into a Design/Engineering Services Agreement.
Under the Asset Purchase Agreement Flextronics acquired the assets
related to DNA's design services business, including tangible assets, software,
contracts and customer lists. Consideration for the assets amounted to
$2,800,000, consisting of $1,800,000 in cash and a hold-back of $1,000,000 to be
applied against amounts related to the Design/Engineering Services Agreement. Of
the $1,800,000 cash amount, $140,000 will be retained by Flextronics as a
hold-back against potential indemnity claims for a period of six months. As is
customary in transactions of this nature, the Company and DNA have indemnified
Flextronics for losses it may incur resulting from the breach of representations
and warranties contained in the agreement.
Concurrently with the completion of this transaction 25 of DNA's design
engineers became employees of Flextronics. The balance of DNA's technical
engineering staff has been terminated and DNA no longer provides engineering
design services.
Pursuant to the Design/Engineering Services Agreement, Flextronics will
provide the Company with design services at a discounted rate for a
predetermined number of hours. The Company has agreed to purchase not less than
$1,000,000 worth of such services during a 12 month period following the closing
of the transaction.
The accompanying pro forma financial statements reflect the financial
position of the Company as of September 30, 2001 as if the transaction had been
completed as of that date and the results of operations for the Company for the
year ended December 31, 2000 and for the nine months ended September 30, 2001 as
if the transaction had been completed as of January 1, 2000.
F-2
TERAFORCE TECHNOLOGY CORPORATION AND SUBSIDIARIES
Consolidated Condensed Pro Forma Balance Sheet
September 30, 2001
Unaudited
(Thousands of dollars, except share data)
Pro Forma
Historical Adjustments Pro Forma
---------- ------------- ----------
Debit(Credit)
Assets
Current assets:
Cash, cash equivalents and investments $ 242 $ A)1,660 $ 1,902
Accounts receivable, net 1,928 A)1,019 2,947
Inventories 3,952 3,952
Prepaid expenses 205 A)(14) 191
---------- ------------- ----------
Total current assets 6,327 2,665 8,992
Property and equipment, net 1,282 A)(410) 872
Goodwill, net 2,850 A)(2,850) --
Investment in joint venture 1,250 1,250
Other assets 275 275
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$ 11,984 (595) $ 11,389
========== ============= ==========
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ 4,850 $ 4,850
Accounts payable 1,799 1,799
Accrued liabilities 1,394 A)557 1,951
---------- ------------- ----------
Total current liabilities 8,043 557 5,694
Stockholders' equity 3,941 A)(1,152) 2,789
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$ 11,984 (595) $ 11,389
========== ============= ==========
F-3
TERAFORCE TECHNOLOGY CORPORATION AND SUBSIDIARIES
Pro Forma Consolidated Condensed Statements of Operations
Nine Months Ended September 30, 2001
Unaudited
(Thousands of dollars, except per share data)
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
Net revenues $ 8,831 $ A)(3,000) $ 5,831
Cost of revenue 10,239 A)(3,642) 6,597
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Gross profit (loss) (1,408) 642 (766)
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Expenses:
Engineering and development 4,033 B)1,000 5,033
Selling and administrative 8,385 A)(1,155) 7,230
Costs related to sale of assets 1,570
Amortization of goodwill 504 (504) --
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14,492 (659) 13,833
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Operating loss (15,900) 1,301 (14,599)
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Other income (expense):
Interest expense (88) (88)
Interest income and other (9) (9)
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(97) (97)
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Loss before income taxes (15,997) 1,301 (14,696)
Income tax expense -- --
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Net loss $ (15,997) $ 1,301 (14,696)
========== =========== =========
Basic and diluted loss per share:
Net loss per share $ (.19) (.17)
========== =========
Weighted average number of common shares
outstanding (thousands) 86,242 86,242
========== =========
F-4
TERAFORCE TECHNOLOGY CORPORATION AND SUBSIDIARIES
Pro Forma Consolidated Condensed Statements of Operations
Year Ended December, 2000
Unaudited
(Thousands of dollars, except per share data)
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
Net revenues $ 18,750 $ A)(4,596) $ 14,154
Cost of revenue 19,658 A)(5,140) 14,518
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Gross profit (loss) (908) 544 (364)
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Expenses:
Engineering and development 5,258 B)1,000 6,258
Selling and administrative 13,973 A)(1,499) 12,474
Asset writedowns 9,251 9,251
Amortization of goodwill 672 A)(672) --
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29,154 (1,171) 27,983
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Operating loss (30,062) 1,715 (28,347)
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Other income (expense):
Interest expense (798) (798)
Interest income and other 1,288 1,288
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490 490
---------- ----------- ---------
Loss before income taxes (29,572) 1,715 (27,857)
Income tax expense -- -- --
Net loss $ (29,572) 1,715 $ (27,857)
Dividends on preferred stock 966 -- 966
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Loss allocable to common
stockholders $ (30,538) $ 1,715 $ (28,823)
========== =========== =========
Basic and diluted loss per share:
Net loss per share $ (.37) $ (.35)
========== =========
Weighted average number of
common shares
outstanding (thousands) 83,229 83,229
========== =========
F-5
Pro Forma Adjustments
The pro forma adjustments in the accompanying pro forma financial
statements are described below.
Balance Sheet:
A) To record sale of assets related to engineering design services business.
Statements of Operations:
A) To eliminate results of operations related to engineering design services
business.
B) To reflect services provided under Design / Engineering Services Agreement.
F-6