Terra Energy Company Report - Business and Computer Science

1. Open Terra.docx and save the document with the name U2-PA01-Terra.
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2015
Terra Energy Company Report
Student Name
Terra Energy Corporation
2/12/2015
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Manufacturing
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deliver our products successfully to our targeted
the file named
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title TERRA ENERGY
COMPANY REPORT.
TERRA ENERGY COMPANY REPORT
T
erra Energy Corporation is a developmentstage company that was incorporated on
May 1, 2002. The Corporation and its subsidiary
(collectively referred to as the “Company”)
designs, develops, configures, and offers for sale
power systems that provide reliable, high-quality,
environmentally friendly power. The Company
has segmented the potential markets for its products into three broad categories: high-energy;
high-power uninterruptible power system; and
high-power distributed generation and utility
power-grid energy storage system. We have
available for sale several high-energy products
that deliver a low level of power over a long
period of time (typically measured in hours).
These products are tailored to the telecommunications, cable systems, computer networks, and
Internet markets.
reflect the evolution of markets and customers’
needs. Our research and development team has
worked closely with potential customers to define
product features and performance levels that
address specific needs. Our research and development expenses, including engineering expenses,
were approximately $8,250,000 in 2014;
$15,525,000 in 2013; and $10,675,000 in 2012. We
expect research and development expenses in
2015 to be lower than in 2014. As we determine
market opportunities, we may need to make significant levels of research and development
expenditures in the future. As of December 31,
2014, we employed 25 engineers and technicians
who were engaged in research and development.
Manufacturing
We are developing a new high-energy product for
potential applications in the renewable energy
market for both photovoltaic and wind turbine
uses. As part of exploring these markets, we have
committed to invest $2 million in Clear Sun
Energies, and we have purchased the inverter
electronics technology of Technology Pacific.
Historically, our manufacturing has consisted of
the welding and assembly of our products. We
have previously contracted out the manufacture
of our high-energy flywheel components, using
our design drawings and processes to facilitate
more rapid growth by taking advantage of thirdparty installed manufacturing capacity. For a
limited number of nonproprietary components,
we generate performance specifications and
obtain either standard or custom components.
We have taken significant action over the last
eighteen months to reduce our expenditures for
product development, infrastructure, and production readiness. Our headcount, development
spending, and capital expenditures have been
significantly reduced. We have continued the
preliminary design and development of potential
products for markets under consideration and
with specific approval by the Company’s board of
directors.
Our facility is underutilized as a result of reductions in development work and customer orders
for production. We are maintaining a limited
manufacturing staff, many of whom are skilled in
quality control techniques. We expect to continue
to utilize contract manufacturing and outside
suppliers in the future based on our estimate of
product demand from potential customers. The
suppliers of the mechanical flywheel and the control electronics for our high-power UPS product
are both single-source suppliers, and the loss of
Research and Development
We believe that our research and development
efforts are essential to our ability to design and
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interruption of supply from either of these
suppliers would adversely affect our ability to
market and deliver our high-power UPS product
and, thus, our financial results. To manage cost
and supplier risk, we may elect to manufacture
composite rims (the most expensive portion of
flywheel units) in our facility if we determine that
it is in our best interest to do so. We have personnel skilled in management, design, and the manufacturing of composites that will manage our
manufacturing processes.
OEMs, architects, engineers, system integrators,
electrical contractors, and power-quality personnel in electric utilities.
With respect to our existing high-energy back-up
power products, our marketing strategy has been
to identify key prospects and to work with those
companies to formulate our product plan, pricing,
initial installation, and service strategies. We will
continue to perform market analysis to identify
opportunities for installations that fit the unique
characteristics of those products and to emphasize the value proposition of our high-energy
products. Potential customers for these products
include businesses with heightened needs for
100% reliability, such as hospitals, data centers,
call centers, and other critical-use facilities. We
believe that our high-energy products will also be
attractive to customers with power sources that
are very expensive to replace or maintain due to
their location or other factors, or to customers
with power sources located where high or low
prevailing temperatures or dramatic changes in
temperatures exist.
Sales and Marketing
We are marketing our products directly to
customers and attempting to build market
interest through power-quality manufacturers’
representatives and through lead generation via
advertising, trade press articles, participation in
industry conferences, technical presentations to
potential customers, and limited direct mail to
specific power-quality customers. We believe that
this strategy could evolve into alliances and
channel partnerships, involving relationships with
power-quality manufacturers’ representatives,
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