IGIT,
Tera is a floorless convertible with multiple convertibles. While I can not predict the timing of their demise, I'm confident that their price will fall.
Series A convertibles
sec.gov
On December 23, 1997, the Company sold 10,000 shares of its Series A Convertible Preferred Stock, $.01 par value (the "Preferred Stock"), and warrants to purchase 125,000 shares of Common Stock (the "Warrants") to the Selling Shareholders in a private transaction. The Shares being offered hereby by the Selling Shareholders may be acquired, from time to time, upon conversion of the Preferred Stock, payment of dividends on the shares of the Preferred Stock, exercise of the Warrants, or upon all three transactions. The Shares include such presently indeterminate number of additional shares of Common Stock as may be issued on conversion of or in payment of dividends on the shares of its Preferred Stock held by the Selling Shareholders pursuant to the provisions of the Statement of Rights and Preferences of the Preferre Stock regarding determination of the applicable conversion price and dividend rate. The actual number of shares of Common Stock issued or issuable upon conversion of the Preferred Stock and the payment of dividends thereon is subject to adjustment depending on factors which cannot be predicted by the Company at this time, including, among others, the future market prices of the Common Stock.
Series B convertibles sec.gov
On June 30, 1998, the Company sold an aggregate of 6,000 shares of its Series B Convertible Preferred Stock, $.01 par value (the "Series B Stock"), and warrants to purchase an aggregate of 100,000 shares of Common Stock (the "Warrants") to the Selling Shareholders in a private transaction. In addition, pursuant to the terms of the Subscription Agreement, dated as of June 30, 1998, between the Company and Advantage, the Company may exercise an option to sell up to an additional 6,000 shares of Series B Stock at a purchase price of $950.00 per share, and to issue up to an additional 100,000 Warrants, to Advantage at any time between September 30, 1998 and December 31, 1998, subject to the certain conditions precedent. See "Recent Events."
RECENT EVENTS
The following summarizes significant events with respect to the Company since March 31, 1998:
1. Private Placement. On June 30, 1998, the Company raised $5,700,000, less expenses, through the sale to the Selling Shareholders of 6,000 shares of Series B Stock and the issuance of the Warrants. See "Selling Shareholders." Pursuant to the terms of the Subscription Agreement, dated as of June 30, 1998 between the Company and Advantage (the "Advantage Subscription Agreement"), the Company may exercise an option to sell up to an additional 6,000 shares of Series B Stock (the "Option Shares") at a purchase price of $950.00 per share, and to issue up to an additional 100,000 Warrants (the "Additional Warrants"), to Advantage at any time between September 30, 1998 and December 31, 1998, subject to the satisfaction by the Company of certain conditions precedent to Advantage's obligation to purchase the Option Shares and acquire the Additional Warrants.
2. Delivery of Two-Processor MTA System. On April 27, 1998, the San Diego Supercomputer Center ("SDSC") accepted delivery of a two-processor MTA system, permitting the Company to recognize its first revenue from system sales in the 1998 second fiscal quarter. At a supercomputer conference in Mannheim, Germany, held in June 1998, SDSC researchers Allan Snavely and Jay Boisseau presented the benchmark results in a paper entitled: "Cray T90 vs. Tera MTA: The Old Champ Faces a New Challenger." The presentation can be found on SDSC's Website at "www.sdsc.edu/~allans." Further information on the results can be found at "www.hoise.com/primeur." The Company plans to upgrade the MTA system at SDSC in stages to larger configurations as it receives production printed circuit boards and other components from its vendors which are then integrated into a commercially acceptable system. See "Risk Factors Manufacturing Risks; Reliance On and Capacity Of Third Party Sole Source Suppliers."
3. Use of Cash Resources. Since its incorporation through June 30, 1998, the Company's principal sources of liquidity have been net proceeds from the sale of equity of approximately $65.0 million and research funding of approximately $19.0 million from the Defense Advanced Research Projects Agency.
As of June 30, 1998, the Company had approximately $8.95 million line of credit. Although the Company believes its current cash resources, together with funds anticipated from sales of MTA systems, to be sufficient to continue anticipated levels of business operations through 1998, the Company may require further additional working capital if sales of the MTA system, including additional deliveries to SDSC, are substantially delayed. The Company may raise additional capital in 1998, through equity or debt financing transactions, even if revenues are received from the sale of MTA systems when anticipated, in order to enhance its financial position for future operations. Except with respect to the funds payable to the Company upon exercise of its option under the Advantage Subscription Agreement, there can be no assurance that any additional financings will be available on acceptable terms when needed or that such financings will not be dilutive to the Company's shareholders. See "Risk Factors Future Capital Needs" and "- Manufacturing Risks; Reliance On and Capacity of Third Party Sole Source Suppliers."
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