Tangram Announces Fourth Quarter 2003 and Year-End Operating Results

Tangram Announces Fourth Quarter 2003 and Year-End Operating Results Net Cash Provided by Operating Activities grows to $2.7 million in 2003 from $290,000 in 2002 CARY, N.C., Feb. 12 /PRNewswire-FirstCall/ -- Tangram Enterprise Solutions, Inc. (BULLETIN BOARD: TESI) , a leading provider of IT asset management software and services, today announced operating results for the fourth quarter and the year ended December 31, 2003. For the year ended December 31, 2003, total revenues fell 8% to $10.6 million, down from $11.6 million in 2002. Net loss for the year ended December 31, 2003 was $1.8 million, or ($0.09) per share. This compares to a net loss of $3.0 million, or ($0.15) per share, in 2002. Excluding the software impairment charge, as discussed below, the company's net loss in 2003 was $112,000, or ($0.01) per share, compared to a net loss of $2.2 million, or ($0.11) per share in 2002. For the year ended December 31, 2003, net cash provided by operating activities improved significantly to $2.7 million, up from $290,000 for the year ended December 31, 2002. For the quarter ended December 31, 2003, the company reported total revenues of $3.0 million, compared with $2.8 million in the fourth quarter of 2002, an increase of 7%. Net loss for the fourth quarter of 2003 was $1.7 million, or ($0.08) per share, which includes a charge to operations of $1.7 million related to an impairment charge for the Enterprise Insight product (due to limited sales and strong competition). This compares with a net loss of $1.3 million, or ($0.06) per share, in the fourth quarter 2002. In 2002, the Company recognized a $760,000 impairment charge for its investment in Enterprise Insight product as such investment was judged to have experienced an other than temporary decline in value. The software impairment charges are included in cost of revenue in the accompanying statements of operations. Excluding the software impairment charge in 2003 and 2002, the company's net earnings in the fourth quarter of 2003 were $68,000, or $0.00 per share, compared to a net loss of $491,000, or ($0.02) per share in the fourth quarter of 2002. On December 4, 2003 Tangram announced that it had entered into an Agreement and Plan of Reorganization with Opsware Inc., and TES Acquisition Corp., a wholly-owned subsidiary of Opsware. Pursuant to this merger agreement, TES Acquisition Corp. will be merged with and into Tangram, with Tangram continuing as a wholly-owned subsidiary of Opsware. In the merger, all of Tangram's outstanding debt will be satisfied through the issuance of Opsware common stock to the debt holders, and all outstanding shares of Tangram's convertible preferred stock and common stock will be exchanged for shares of Opsware common stock at an exchange ratio set forth in the merger agreement. The value of the transaction is $10 million, subject to certain adjustments and conditions contained in the merger agreement. The merger with Opsware is expected to be completed on February 20, 2004, subject to receiving the required shareholder approval. About Tangram Enterprise Solutions, Inc. (OTC:TESI.OB) (BULLETIN BOARD: TESI.OB) Tangram Enterprise Solutions, Inc., is a leading provider of cohesive, automated IT asset management software solutions and services for large and midsize organizations across all industries, in both domestic and international markets. Tangram's core business strategy and operating philosophy center on delivering world-class customer care, creating a more personal and productive IT asset management experience through a phased solution implementation, tailored solutions that support evolving customer needs, and leading-edge technical position. Today, Tangram's solutions manage more than two million workstations, servers, and other related assets. Tangram is a majority owned subsidiary of Safeguard Scientifics, Inc. ( http://www.safeguard.com/ ) (NYSE:SFE), an operating company that creates long-term value by taking controlling interest in and developing its companies through superior operations and management. Safeguard operates businesses that provide business decision and life science software-based product and service solutions. To learn more about Tangram, visit http://www.tangram.com/ or call 1-800-4TANGRAM. About Opsware Inc. (NASDAQ:OPSW) Opsware Inc., formerly Loudcloud, is the leading provider of data center automation software, offering a complete solution for enterprises, government agencies, and service providers looking to reduce costs and increase IT efficiencies. The Opsware System uniquely combines process automation with built-in operations knowledge on numerous technologies. Opsware was the foundation of Loudcloud's software-powered managed services business and has been proven to lower costs, accelerate change, and increase service quality. For more information on Opsware Inc., please visit www.opsware.com . Statements of Operations (in thousands, except per share amounts) Three months Year ended ended Dec. 31 Dec. 31 2003 2002 2003 2002 (unaudited) (unaudited) Revenues Licenses and product $1,228 $1,047 $3,555 $4,581 Services 1,798 1,780 7,079 6,999 Total revenues 3,026 2,827 10,634 11,580 Cost of revenues Cost of licenses and product 13 16 39 58 Cost of services 425 336 1,376 1,527 Amortization of software cost 736 552 2,550 2,161 Software impairment 1,727 760 1,727 760 Total cost of revenues 2,901 1,664 5,692 4,506 Gross profit 125 1,163 4,942 7,074 Operating expenses Sales and marketing985 907 3,547 4,879 General and administrative 251 446 1,464 1,982 Research and development 430 281 1,232 1,499 Depreciation and amortization 17 88 127 340 Restructuring charge - 582 - 906 Total operating expenses 1,683 2,304 6,370 9,606 Loss from operations (1,558) (1,141) (1,428) (2,532) Other expenses, net (27) (42) (125) (180) Loss before income taxes (1,585) (1,183) (1,553) (2,712) Provision for income taxes - -- - Net loss $(1,585) $(1,183) $(1,553) $(2,712) Per share calculation Net loss $(1,585) $(1,183) $(1,553) $(2,712) Less-preferred stock dividend (74) (68) (286) (264) Net loss available to common shareholders $(1,659) $(1,251) $(1,839) $(2,976) Loss per common share Basic and diluted $(0.08) $(0.06) $(0.09) $(0.15) Weighted average number of common shares outstanding Basic and diluted 19,802 19,802 19,802 19,739 **Weighted average number of common shares outstanding on a diluted basis for the three-month periods ended December 31, 2003 and 2002 and the years ended December 31, 2003 and 2002 does not include common stock equivalents because the effect of inclusion of the exercise of stock options would be to reduce the loss per common share. Condensed Statements of Cash Flows (in thousands) Twelve Months Ended Dec. 31 2003 2002 Operating Activities Net loss $(1,553) $(2,712) Adjustments to reconcile net loss to net cash provided by operating activities: 4,365 3,101 Cash provided by changes in working capital items: (121) (99) Net cash provided by operating activities 2,691 290 Net cash used in investing activities (1,073) (1,494) Net cash (used in) provided by financing activities (686) 1,300 Net increase in cash and cash equivalents $932 $96 Condensed Balance Sheets (in thousands) Dec. 31, 2003 Dec. 31, 2002 Assets Current assets: Cash and cash equivalents $1,350 $418 Accounts receivable, net 2,965 2,671 Other 701 296 Total current assets 5,016 3,385 Property and equipment, net 135 100 Intangible assets and other, net 3,076 6,449 Total assets $8,227 $9,934 Liability and Shareholders' Equity Current portion of long-term debt-shareholders $1,839 $ 467 Accounts payable and accrued expenses 1,540 1,060 Deferred revenue 3,295 3,281 Total current liabilities 6,674 4,808 Long-term debt-shareholders - 1,954 Other long-term liabilities 762 542 Total shareholders' equity 791 2,630 Total liabilities and stockholders' equity $8,227 $9,934 All product names are the registered trademarks of their respective owners. DATASOURCE: Tangram Enterprise Solutions, Inc. CONTACT: John N. Nelli, Chief Financial Officer of Tangram Enterprise Solutions, Inc., +1-919-653-1265, or Web site: http://www.tangram.com/ http://www.opsware.com/