SOURCE: Texas Prototypes

November 14, 2006 15:33 ET

TXP Reports Third Quarter Financial Results and Provides Update on LOI to Acquire Siemens' ONT Business

Third Quarter Gross Margin Increases to 41 Percent

RICHARDSON, TX -- (MARKET WIRE) -- November 14, 2006 -- TXP Corporation (OTCBB: TXPO), a global provider of Pre-Manufacturing Services for the electronics and telecommunications industries, today announced results for the three and nine months ended September 30, 2006.

Michael C. Shores, president and chief executive officer of TXP, commented, "I am quite pleased with the progress we made during the third quarter, as we stepped up our sales and marketing activities and are in active discussions with a number of large corporate customers to adopt our Pre-Manufacturing Services model enterprise-wide. As previously discussed, the third quarter of 2005 included a one-time project, which accounted for $5.2 million of last year's revenue. Excluding this project, our core revenues increased over 120 percent. Moreover, our gross margin increased to 41 percent for the third quarter, compared to 22 percent for the same period last year. In addition, we believe that our recent financing significantly enhances our capital structure and improves our financial flexibility."

Mr. Shores continued, "We are also encouraged by the progress of our recently announced letter of intent to acquire Siemens' Optical Network Terminal (ONT) business, which we expect to complete before year-end. We already hired Siemens' former ONT development team and the integration has gone seamlessly. Upon completion of the proposed acquisition, our new iPhotonics division will be responsible for overseeing all development and manufacturing of the technology and will have rights to market the ONT technology. The major carriers have committed billions of dollars over the next three years to delivering 'fiber-to-the-home' and new 'triple-play' services that bring voice, video and data to the home at much faster speeds than traditional networks. We believe this proposed acquisition positions us at the forefront of this rapidly emerging industry."

Total revenue for the third quarter of 2006 was $1.7 million, compared with $5.9 million for the same period in 2005. Revenue for the third quarter of 2005 included $5.2 million related to a one-time project with a single customer. Operating loss for the third quarter was $215,000, compared to operating income of $676,000 for the same period last year. Net income for the third quarter of 2006 was $2.2 million, or $0.02 per share, compared to net income of $405,000 or $0.00 per share, for the same period in 2005. Net income for the third quarter of 2006 included a non-cash gain of $2.7 million related to a change in the fair value of derivative financial instruments.

Total revenue for the nine months ended September 30, 2006 was $5.1 million, compared with $8.5 million for the same period in 2005. Operating loss for the nine months was $346,000, compared to operating income of $332,000 for the same period last year. Net loss for the nine months was $2.1 million, or $0.02 per share, compared to net loss of $21,000 or $0.00 per share, for the same period in 2005. Net loss for the nine months ended September 30, 2006 included non-cash charges of $1.7 million related to a change in the fair value of derivative financial instruments, and a gain of $465,000 related to the early extinguishment of debt.

About TXP

TXP, based in Richardson, Texas, is a global provider of Pre-Manufacturing Services for the electronics industry, supporting original equipment manufacturers, original design manufacturers, contract manufacturers and new technology innovators. The company excels in both design and supply chain solutions services for new product development which include prototyping and quick-turn electronic assembly, new product introduction, pilot production, material supply chain management as well as the transfer of product into production. TXP's core technology focus is on complex printed circuit board assemblies, photonics, optoelectronics, and advanced packaging solutions, while forging profitable business opportunities with well-positioned high speed, digital, analog, and RF technologies and industries that require complementary service requirements. By working closely with its customers and being highly responsive to their requirements throughout the design processes, TXP believes that it can be an integral part of its customers' operations, accelerate their time-to-market and time-to-volume production and reduce their product costs. TXP has three operating divisions that build on its core Design for Manufacturability foundation: TXP-Texas Prototypes, TXP-Solutions and iPhotonics. For more information visit www.txpcorporation.com.

Forward-looking statements such as "believe," "expect," "may," "plan," "intend," etc., contained herein are within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties and are based on the company's beliefs and assumptions it made using information currently available to it and which reflect current views concerning those future events. Actual results could differ materially. Therefore, undue reliance should not be placed on any forward-looking statements, since they apply only as of today's date, and accordingly, reference should be made to the company's periodic filings with the SEC.

                              TXP CORPORATION
                        CONSOLIDATED BALANCE SHEETS
                 September 30, 2006 and December 31, 2005



                                                       2006        2005
                                                   (unaudited)  (audited)
                                                   ----------- -----------
               ASSETS
Current assets
Cash                                               $   107,000 $   342,000
Accounts receivable, net of allowance of $7,400      1,012,000     695,000
Inventory                                              301,000     118,000
Other assets                                           303,000      79,000
                                                   ----------- -----------
Total current assets                                 1,723,000   1,234,000

Property and equipment, net                            953,000     914,000
Deferred offering costs                                697,000     688,000
Other assets                                            13,000      25,000
                                                   ----------- -----------

TOTAL ASSETS                                       $ 3,386,000 $ 2,861,000
                                                   =========== ===========

     LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities
Current maturities of notes payable                $   171,000 $   143,000
Current capital lease obligation                        44,000      19,000
Line of credit                                         400,000     250,000
Accounts payable                                       453,000     477,000
Accrued expenses                                       322,000     174,000
                                                   ----------- -----------
Total current liabilities                            1,390,000   1,063,000

Notes payable, net of current maturities                     —      15,000

Capital lease obligation, net of current obligation     44,000      33,000
Convertible debentures, net of unamortized discount
 of $1,797,000 and $163,000 as of September 30,2006
 and December 31, 2005, respectively.                  585,000   2,187,000

Derivative financial instruments                     3,698,000           —

Deferred tax liability                                  48,000      48,000
                                                   ----------- -----------

TOTAL LIABILITIES                                    5,765,000   3,346,000
                                                   ----------- -----------

STOCKHOLDERS' DEFICIT:
Common stock, $.001 par value, 300,000,000 shares
 authorized, 97,068,282 and 94,295,715 shares
 issued and outstanding as of September 30, 2006
 and December 31, 2005, respectively.                   97,000      94,000

Additional paid in capital                             205,000      12,000
Retained earnings                                   (2,688,000)   (598,000)
Accumulated other comprehensive income                   7,000       7,000
                                                   ----------- -----------

TOTAL STOCKHOLDERS' DEFICIT                         (2,379,000)   (485,000)
                                                   ----------- -----------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT        $ 3,386,000 $ 2,861,000
                                                   =========== ===========



                              TXP CORPORATION
                   CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months and Nine Months Ended September 30, 2006 and 2005 (unaudited)


                            Three Months Ended       Nine Months Ended
                               September 30,            September 30,
                          -----------------------  -----------------------
                              2006        2005         2006        2005
                          (unaudited) (unaudited)  (unaudited) (unaudited)
                          ----------- -----------  ----------- -----------
Revenues
   Prototyping
    and assembly          $ 1,232,000 $ 5,660,000  $ 3,487,000 $ 6,968,000
Material management
 services                     427,000     286,000    1,614,000   1,535,000
                          ----------- -----------  ----------- -----------
   Total Revenues           1,659,000   5,946,000    5,101,000   8,503,000
                          ----------- -----------  ----------- -----------

Cost of sales                 984,000   4,613,000    3,199,000   6,320,000
                          ----------- -----------  ----------- -----------
Gross profit                  675,000   1,333,000    1,902,000   2,183,000
                          ----------- -----------  ----------- -----------

Costs and expenses
   Selling, general &
    administrative            866,000     642,000    2,182,000   1,810,000
   Depreciation                24,000      15,000       66,000      41,000
                          ----------- -----------  ----------- -----------
      Total costs and
       expenses               890,000     657,000    2,248,000   1,851,000
                          ----------- -----------  ----------- -----------

Operating income (loss)      (215,000)    676,000     (346,000)    332,000
                          ----------- -----------  ----------- -----------

   Interest expense, net     (388,000)   (271,000)    (714,000)   (354,000)
   Change in fair value of
    derivative financial
    instruments             2,660,000           —   (1,663,000)          —
   Gain on early
    extinguishment of debt          —           —      465,000           —
   Other Income               150,000           —      150,000           —
   Gain on sale of fixed
    assets                          —           —       18,000           —
                          ----------- -----------  ----------- -----------

Income (loss) before
 income taxes               2,207,000     405,000   (2,090,000)    (22,000)
                          ----------- -----------  ----------- -----------

Income tax expense                  —           —            —           —
                          ----------- -----------  ----------- -----------

Net Income (loss)           2,207,000     405,000   (2,090,000)    (22,000)
                          ----------- -----------  ----------- -----------

Foreign currency
 translation
 adjustment                         —           —            —       1,000
                          ----------- -----------  ----------- -----------

Comprehensive income
 (loss)                   $ 2,207,000 $   405,000  $(2,090,000)$   (21,000)
                          =========== ===========  =========== ===========

Basic earnings per share          .02           —         (.02)         (—)
                          =========== ===========  =========== ===========
Diluted earnings per share        .02           —         (.02)         (—)
                          =========== ===========  =========== ===========

Basic weighted average
 shares outstanding:       96,971,108  94,295,715   95,409,963  94,295,715
                          =========== ===========  =========== ===========

Diluted weighted average
 shares outstanding:       97,349,482  94,295,715   95,409,963  94,295,715
                          =========== ===========  =========== ===========



                              TXP CORPORATION
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
          Nine Months Ended September 30, 2006 and 2005 (unaudited)


                                                 2006            2005
                                              (unaudited)     (unaudited)
                                            --------------  --------------
CASH FLOWS USED IN OPERATING ACTIVITIES
   Net loss                                 $   (2,090,000) $      (22,000)
Adjustments to reconcile net loss to cash
 used in operating activities:
    Depreciation                                   187,000         161,000
    Gain on sale of fixed assets                   (18,000)              —
    Amortization of discount on convertible
     notes                                         557,000          57,000
    Gain on extinguishment of debt                (465,000)              —
    Stock compensation                              69,000          45,000
   Changes in assets and liabilities:
     Accounts receivable                          (317,000)     (1,982,000)
     Inventory                                    (183,000)         12,000
     Other current assets                         (103,000)              —
     Other assets                                   12,000          99,000
     Accounts payable                              (24,000)        697,000
     Accrued expenses                               15,000          63,000
     Change in fair value of derivative
      financial instruments                      1,663,000               —
     Deferred revenue                                    —          24,000
                                            --------------  --------------

CASH FLOWS USED IN OPERATING ACTIVITIES           (697,000)       (846,000)
                                            --------------  --------------

CASH FLOWS USED INVESTING ACTIVITIES
   Capital expenditures                           (206,000)       (325,000)
   Proceeds from sale of fixed assets               60,000               —
                                            --------------  --------------

CASH FLOWS USED IN INVESTING ACTIVITIES           (146,000)       (325,000)
                                            --------------  --------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Deferred offering costs                          (9,000)        (79,000)
   Proceeds from convertible debenture             480,000         485,000
   Line of credit, net                             150,000          80,000
   Proceeds from notes payable                     150,000         250,000
   Repayment of notes payable and capital lease
    obligation                                    (163,000)       (117,000)
                                            --------------  --------------

CASH FLOWS FROM FINANCING ACTIVITIES               608,000         619,000
                                            --------------  --------------

Effect of currency translation on cash
 balances                                                —           1,000
                                            --------------  --------------

NET DECREASE IN CASH                              (235,000)       (551,000)
                                            --------------  --------------

Cash, beginning of period                          342,000         649,000
                                            --------------  --------------

Cash, end of period                         $      107,000  $       98,000
                                            ==============  ==============

Contact Information

  • Media:
    Eric Miscoll
    TXP Corporation
    (214) 575-9300

    Investor Relations:
    David K. Waldman
    Crescendo Communications
    (212) 671-1020 x101