<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number: 0-18072
--------------------------------------------------------------------------------
CRAY COMPUTER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 84-1120275
(State of Incorporation) (I.R.S Employer Identification Number)
1110 Bayfield Drive, Colorado Springs, Colorado 80906
(Address of principal executive offices) (Zip Code)
--------------------------------------------------------------------------------
Telephone Number: (719) 579-6464
(Registrant's telephone number, including area code)
--------------------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--------------------- --------------------
As of August 11, 1995, 46,464,987 shares of the registrant's Common Stock, $0.01
par value, were outstanding.
<PAGE>
CRAY COMPUTER CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
--------
ITEM 1. FINANCIAL STATEMENTS
Statements of Operations (unaudited) cumulative from
October 1983 (inception) through June 30, 1995, and for the
three months ended June 30, 1995 and 1994.................... 3
Balance Sheets as of June 30, 1995 (unaudited), and
December 31, 1994............................................ 4
Statements of Cash Flows (unaudited) cumulative from
October 1983 (inception) through June 30, 1995, and for the
three months ended June 30, 1995 and 1994.................... 5
Notes to Interim Financial Statements (unaudited)............ 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS..................... 12
PART II. OTHER INFORMATION
NOT APPLICABLE
SIGNATURE.......................................................... 21
2
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CRAY COMPUTER CORPORATION
(DEBTOR-IN-POSSESSION)
STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except per share data)
-------------------------------------
<TABLE>
<CAPTION>
Cumulative from Three months Six months
October 1983 ended June 30, ended June 30,
(inception) through ---------------- -----------------
June 30, 1995 1995 1994 1995 1994
-------------------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenue
Sales $ 12,760 - - - -
Service fees 1,764 81 91 171 171
Development contract revenue 2,627 103 - 502 -
Other revenue 80 - - 24 -
--------- ------ ------- ------- -------
17,231 184 91 697 171
--------- ------ ------- ------- -------
Operating costs and expenses
Cost of sales 7,686 - - - -
Cost of services 641 - - - 40
Research and development
Related parties 41,169 - 83 60 173
Other 316,552 - 9,497 7,571 20,285
--------- ------ ------- ------- -------
Total research and development 357,721 - 9,580 7,631 20,458
Marketing 3,859 - 288 362 461
General and administrative 20,461 1,686 605 2,647 1,356
--------- ------ ------- ------- -------
390,368 1,686 10,473 10,640 22,315
--------- ------ ------- ------- -------
Operating loss (373,137) (1,502) (10,382) (9,943) (22,144)
Other income (deductions), net 377 (241) (806) (531) (492)
Litigation settlement expense 1,000 - - - -
--------- ------ ------- ------- -------
Net loss $(373,760) (1,743) (11,188) (10,474) (22,636)
========= ====== ======= ======= =======
Loss per share (.04) (.29) (.23) (.60)
====== ======= ======= =======
Weighted average number of shares outstanding 46,465 38,029 45,450 37,953
====== ======= ======= =======
</TABLE>
See accompanying notes to interim financial statements
3
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CRAY COMPUTER CORPORATION
(DEBTOR IN POSSESSION)
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands, except share data) June 30, December 31,
--------------------------------- 1995 1994
---------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 433 2,372
Accounts receivable 164 711
Prepaid expenses 1,678 1,855
Other current assets 48 15
--------- --------
Total current assets 2,323 4,953
--------- --------
Property, plant and equipment 78,503 78,392
Less accumulated depreciation and amortization 59,181 57,179
--------- --------
Net property, plant and equipment 19,322 21,213
--------- --------
TOTAL ASSETS $ 21,645 26,166
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Post petition liabilities
Accounts payable $ 109 -
Accrued expenses 138 -
Liabilities not subject to compromise
Bank borrowings, including note payable to bank 6,613 7,663
Property taxes 263 502
Liabilities subject to compromise
Accounts payable 10,634 2,392
Accrued expenses 1,029 1,098
--------- --------
Total current liabilities 18,786 11,655
--------- --------
Long-term liability - 360
Note payable to bank, long-term - 5,056
--------- --------
Total liabilities 18,786 17,071
--------- --------
Stockholders' equity:
Preferred stock of $.01 par value
Authorized 20,000,000 shares - -
Common stock of $.01 par value
Authorized 120,000,000 shares,
issued and outstanding 46,464,987 and
41,905,800 shares 465 419
Additional paid-in capital 253,379 249,187
--------- --------
253,844 249,606
--------- --------
Deficit accumulated during the development stage (373,760) (363,286)
Less accumulated deficit transferred to additional
paid-in capital 122,775 122,775
--------- --------
Accumulated deficit since November 15, 1989 (250,985) (240,511)
--------- --------
Total stockholders' equity 2,859 9,095
--------- --------
Commitments and contingencies
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 21,645 26,166
========= ========
</TABLE>
See accompanying notes to interim financial statements
4
<PAGE>
CRAY COMPUTER CORPORATION
(DEBTOR IN POSSESSION)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands)
--------------
Cumulative from Six months ended
October 1983 June 30,
(inception) through ------------------
June 30, 1995 1995 1994
------------------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(373,760) (10,474) (22,636)
Adjustments to reconcile net loss
to net cash flows used by operations:
Depreciation and amortization 82,293 2,002 2,920
Loss on sale or retirement of
property, plant and equipment 5,572 - 60
Change in operating assets and liabilities:
Accounts receivable (164) 547 141
Inventories 1,574 - -
Spares, net (641) - -
Prepaid expenses (339) 177 782
Accounts payable 10,523 8,351 (878)
Accrued expenses 1,430 (170) (209)
Long-term liability - (360) (75)
--------- ------ -------
Cash flows used by operating activities (273,512) 73 (19,895)
--------- ------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of short-term investments - - 15,435
Sale of long-term marketable securities - - -
Purchase of property, plant and equipment (90,357) (111) (1,183)
Proceeds from sale of property, plant and equipment 1,653 - -
Proceeds from matured lease deposits 987 - 81
Increase in other assets (2,138) (33) -
--------- ------ -------
Cash flows provided by (used in) investing activities (89,855) (144) 14,333
--------- ------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from Cray Research, Inc., net 160,336 - -
Proceeds from the issuance of common stock 98,538 4,238 359
Proceeds from note receivable from Cray
Research, Inc. 98,640 - -
Proceeds from sale and leaseback transactions 3,874 - -
Proceeds from bank borrowings 113 (6,106) 207
Proceeds from issuance of note payable to bank 6,500 - 6,500
Principal payments on capital leases (4,201) - (8)
--------- ------ -------
Cash flows provided by financing activities 363,800 (1,868) 7,058
--------- ------ -------
Increase (decrease) in cash and cash equivalents 433 (1,939) 1,496
Cash and cash equivalents at beginning of period - 2,372 4,691
--------- ------ -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 433 433 6,187
========= ====== =======
Non cash investing and investing activities:
Net transfers of property, plant and equipment
from Cray Research, Inc. at net book value $ 3,723 - -
Acquisition of equipment and process technology
from GigaBit Logic, Inc., fair market value $ 10,854 - -
Consideration (10,328) - -
--------- ------ -------
Liabilities assumed $ 526 - -
========= ====== =======
</TABLE>
See accompanying notes to interim financial statements
5
<PAGE>
CRAY COMPUTER CORPORATION
(DEBTOR IN POSSESSION)
NOTES TO INTERIM FINANCIAL STATEMENTS
(Unaudited)
(1) Bankruptcy Filing and Basis of Financial Statement Presentation
The accompanying financial statements are unaudited and have been prepared
assuming that the Company will continue as a going concern. The Company
announced that it would begin selling all or most of its assets for the benefit
of the Company's creditors and shareholders. However, management does not
believe that a liquidating distribution to shareholders is likely. (See Note 13
- Other Subsequent Events.) The financial statements do not include any
adjustments that might result from the outcome of the liquidation because
liquidation values could not be reasonably determined as of the date of this
report. The results of operations and cash flows for the six months ended June
30, 1995, are not indicative of results to be expected for the entire year.
On March 24, 1995 Cray Computer Corporation (the "Company") filed a voluntary
petition under Chapter 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the District of Colorado (the "Court") after the
Company determined it would be unable to complete a planned private placement of
up to $25 million of Common Stock with foreign and United States institutional
investors, and the Company ceased to have liquid assets which would allow it to
continue in operations. The Company's existing directors and officers have
remained in possession of the assets and business of the Company but are subject
to the supervision and orders of the Court. The Company has terminated most of
its employees and stopped work on its supercomputer systems.
The terms of the Company's secured debt financing provided for certain events of
default. The filing of Bankruptcy is stated to be an event of default. No
additional debt financing is currently available under the secured line of
credit and under the terms of the debt agreement repayment of such debt is
required. The lender is subject under the U.S. Bankruptcy Code to an automatic
stay against any action against the Company or its assets to collect its debt
without prior approval of the Bankruptcy Court.
In accordance with the Bankruptcy Code, the Company can seek court approval for
the rejection of executory contracts, including real property
6
<PAGE>
leases, its Design and Development Agreement with Seymour R. Cray, and the
development contract with the National Security Agency. Any such rejection may
give rise to a prepetition unsecured claim for breach of contract.
As of the petition date, payment of liabilities to unsecured creditors,
including trade unsecured creditors and secured noteholders, are stayed while
the Company is a Debtor in Possession.
Depending on the ultimate outcome of the Company's bankruptcy proceeding, the
Company's ability to utilize its Federal income tax net operating loss and
research and development credit carryforwards may be further restricted or
eliminated.
As a result of the bankruptcy proceedings, the Company may sell or otherwise
realize assets and liquidate or settle liabilities for amounts other than those
reflected in the accompanying financial statements, including the amounts
recorded for prepaid expenses and net property, plant, and equipment. Further, a
plan of reorganization could materially change the amounts currently recorded in
the accompanying financial statements. The accompanying financial statements do
not give effect to any adjustments to the carrying value of assets or amounts.
All liabilities are classified as current liabilities. However, as a result of
the bankruptcy filing the timing of repayment is uncertain.
See Notes 2, 4, 5, 6, 7, 8 and 9 for matters that are or may be significantly
impacted by the bankruptcy filing.
Cray Research, Inc., (CRI) distributed 90 percent of the then outstanding shares
of Cray Computer Corporation (the "Company") to its shareholders on November 19,
1989. By December 31, 1992, CRI had sold the remaining common shares of the
Company which it had owned. The accompanying financial statements include the
historical basis accounts of the Company while operating as a division of CRI
and as a separate company. These accounts do not include general unallocated
corporate expenses of CRI while the Company operated as a division of CRI.
Advances made by CRI to the Company through November 15, 1989 were transferred
to additional paid-in capital and the Company's accumulated deficit from October
1983 (inception) through November 15, 1989 was offset against additional paid-in
capital.
The Company is a development stage enterprise, having devoted substantially all
of its efforts from inception through March 24, 1995 to activities related to
the design and development of the CRAY-3, CRAY-3/Super Scalable System (SSS),
and CRAY-4 supercomputer
7
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systems. Such activities have included research and development; raising
capital; acquiring and constructing property, plant and equipment; recruiting
and training personnel; establishing sources of supply; and developing potential
markets. The Company has had no orders for or revenues from the sale of its
products. The Company will remain a development stage enterprise until
significant revenues are derived from the sale of its supercomputer systems.
These condensed financial statements should be read in conjunction with the
financial statements and related notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1994. There were no
business combinations or dispositions in the first three months of 1995.
(2) Common Stock and Warrants
On January 25, 1995, the Company completed a sale of 1,100,000 shares of its
unregistered Common Stock to foreign institutional investors and 1,165,501
shares of its unregistered Common Stock to Seymour R. Cray, Chairman of the
Board and Chief Executive Officer (net proceeds of approximately $2,295,000).
The sale of shares to the foreign institutional investors was exempt from the
registration requirements of the Securities Act (the "Securities Act") of 1933,
as amended pursuant to Regulation S. The sale of shares to Mr. Cray was exempt
from registration requirements of the Securities Act pursuant to Regulation D.
On February 27, 1995, the stockholders of the Company approved an amendment to
the Company's Restated Certificate of Incorporation increasing the number of
authorized shares of Common Stock, $0.01 par value, from 60,000,000 to
120,000,000 shares in order to have sufficient authorized unissued shares to
permit substantial additional equity financing. The Company had approximately 72
million authorized shares of Common Stock remaining available for future
issuance at March 31, 1995.
On February 27, 1995, the Company completed a sale of 2,100,000 shares of its
unregistered Common Stock to a foreign institutional investor (net proceeds of
approximately $1,764,000). This sale of shares was exempt from the registration
requirements of the Securities Act pursuant to Regulation S.
See Note 13 - "Other Subsequent Events" for information concerning the current
status of the bankruptcy filing.
(3) Related Party Transactions
8
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Below is a table which sets forth the related party transactions included in
research and development expenses for the periods indicated.
<TABLE>
<CAPTION>
(In thousands) Six months ended Three months ended
June 30, June 30,
---------------- ------------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Performance Semiconductor
Corporation (a) $ - 37 - 23
Seymour R. Cray (b) 60 136 - 60
----- ---- ---- ----
$ 60 173 - 83
===== ==== ==== ====
</TABLE>
Performance Semiconductor Corporation (PSC) supplied the Company with 4 Kilobit
and 256 Kilobit Static Random Access Memory (SRAM) circuits until August 1993.
The $14,000 reported above for 1994 represents the cost of SRAM circuits that
were used in the research and development process and expensed in 1994. The
circuits were previously classified as prepaid expenses.
In November 1991, the Company entered into an agreement with PSC to design and
develop a specialized one-megabit memory circuit. Under the terms of the
agreement, the Company would pay development fees of approximately $1,025,000 to
PSC beginning in November 1991. The Company paid $925,000 to PSC under this
agreement during 1992. No payments were made under the agreement in 1994, 1993
and 1991. The Company had the right, in its sole discretion, to cancel the
remaining payment(s) under the agreement if it was determined that adequate
progress was not or could not be made. The Company notified PSC that the
agreement was cancelled because adequate progress was not made on the part of
PSC, and no additional payments will be made.
PSC declared Chapter 11 Bankruptcy in January 1994. The Company received Chapter
11 Notice of Final Hearing on Debtor's Motion for Approval of Stipulation for
Use of Cash Collateral dated January 5, 1994 from the United States Bankruptcy
Court, Northern District of California. All outstanding purchase orders between
the Company and PSC had been fulfilled or cancelled prior to January 1994.
Seymour R. Cray, Chairman of the Board and Chief Executive Officer, serves as an
independent contractor to the Company under a Design and Development Agreement
(the "Agreement") which does not require any specific working time commitment by
Mr. Cray. The Design and Development Agreement, which is similar to his prior
agreement with CRI from 1981 to 1989, and with the Company from 1989 to 1992,
has a term expiring in June 1997. This Agreement would terminate early in the
event that the Company discontinues development funding for the CRAY-4 or for
future systems or limits or terminates agreed-upon
9
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production for the CRAY-4 or for future systems. In such event, Mr. Cray retains
the option to continue development and production of the project, subject,
however, to prior consent by the Company's asset-based lender for as long as its
loan agreement with the Company remains in effect. No "agreed-upon production"
of the CRAY-4 has been established because the CRAY-4 is still in the
development stage. The Agreement also terminates in the event Mr. Cray fails for
any reason to continue a project, in which case the Company retains the right to
fund and participate in additional projects pursued by him. Subject to prior
consent by the Company's asset-based lender, Mr. Cray could terminate his
participation in the development of the CRAY-4 at any time and would have the
right to use independently the technology relating thereto and to compete with
the Company.
The Company is reviewing the terms and conditions of the Agreement with Mr. Cray
regarding the rejection of the Agreement. The Company is reviewing the terms
and conditions of the Agreement with Mr. Cray regarding rejection of the
contract.
(4) Loss Per Common Share
Loss per common share has been computed based upon the weighted average number
of common shares outstanding. Common stock equivalents are not included in the
computation because their effect would be anti-dilutive.
See Note 13 - "Other Subsequent Events" for information concerning the current
status of the bankruptcy filing.
(5) Stock Plans
1989 Employee Benefit Stock Plan: The purpose of this plan is to provide a means
for the Company, by granting Company stock or options to purchase stock to
eligible employees and directors of the Company and its subsidiaries, to attract
and retain persons of ability and motivate them to advance the interests of the
Company and benefit its stockholders. Stock options and grants are awarded by
the Compensation Committee of the Board of Directors. Under the plan, 3,700,000
shares of the Company's Common Stock may be issued, of which 200,000 shares may
be issued to the Company's directors. Under the terms of the plan, the option
price (in the case of stock options) is equal to the fair market value on the
date of grant or, if repriced, on the date of option repricing. Options may be
exercised at a rate of 25 percent annually, beginning one year from the date of
grant, and terminate seven years from the date of grant.
10
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In the case of stock grants, the vesting terms vary. However, in most cases the
employee or director becomes vested 25 percent one year after the date of grant
and then 6.25 percent every three months thereafter. The value of grants on the
date awarded, net of the value related to grants subsequently cancelled, is
amortized on a progressive method to the statement of operations over the four
years during which the grants become vested. There was no unamortized deferred
compensation expense related to stock grants or outstanding stock grants at
December 31, 1994. No stock options were awarded in the first quarter of 1995.
1989 Qualified Stock Purchase Investment Plan: The purpose of this plan is to
facilitate capital accumulation by eligible employees in the form of the
Company's Common Stock and thereby to provide employee identification with the
commitment to the goals of the Company. Under the original plan, up to 500,000
shares of Common Stock could be issued. At the Annual Meeting of Shareholders
held on May 10, 1994, shareholders approved an amendment to the original plan
adding 1,000,000 shares for issuance under the plan bringing the total to
1,500,000 shares. The Company has registered the 1,500,000 shares with the
Securities and Exchange Commission. Eligible employees may designate from 2 to
15 percent of their earnings to be withheld through payroll deductions for the
purchase of Common Stock at 85 percent of the lower of the market price on the
first or the last day of the offering period. Directors are not eligible to
participate. Participant elections resulted in the issuance of 193,686 shares at
a per share price of $0.93 for the offering period ended February 28, 1995.
See Note 13 - "Other Subsequent Events" for information concerning the current
status of the bankruptcy filing.
(6) Statement of Stockholders' Equity
<TABLE>
<CAPTION>
(In thousands)
Additional
Common Paid-in Accumulated
Stock Capital Deficit
------ ---------- -----------
<S> <C> <C> <C>
Balance at December 31, 1994 $419 249,187 (240,511)
Issuance of common stock @ $0.93 (avg), net 44 4,014
Shares issued for purchases under the
1989 Qualified Stock Purchase
Investment Plan 2 178
Net loss - - (10,474)
---- ------- --------
Balance at June 30, 1995 $465 253,379 (250,985)
==== ======= ========
</TABLE>
11
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See Note 13 - "Other Subsequent Events" for information concerning the current
status of the bankruptcy filing.
(7) Income Taxes
The Financial Accounting Standards Board has issued the Statement of Financial
Accounting Standard (SFAS) No. 109, Accounting for Income Taxes. Under the asset
and liability method of SFAS 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to the differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in the period that includes the enactment date.
Effective January 1, 1993, the Company adopted SFAS 109. There was no effect on
the financial statements as a result of this change in accounting for income
taxes.
At December 31, 1994, the Company had a net operating loss carryforward for
Federal income tax purposes of approximately $226,985,000 which it believes may
be available to offset future taxable income, if any, through 2009. The Company
also has a research and development tax credit carryforward for Federal income
tax purposes of approximately $13,773,000 which it believes will be available to
offset future Federal income taxes, if any, through 2009. The use of these
carryforwards would be severely limited by the terms of Section 382 of the
Internal Revenue Code if there is an "ownership change" as defined by Section
382.
Depending on the ultimate outcome of the Company's bankruptcy proceeding, the
Company's ability to utilize its Federal income tax net operating loss and
research and development credit carryforwards may be further restricted or
eliminated.
See Note 13 - "Other Subsequent Events" for information concerning the current
status of the bankruptcy filing.
(8) Accounts Receivable
In August 1994, the Company and the National Security Agency (NSA) entered into
a cost sharing development contract for the Company to produce a CRAY-3/SSS.
Under the terms of the contract, the Company may be paid up to $4,200,000 for
development costs, and the Government will provide approximately $400,000 in
software consulting services. As of June 30, 1995,
12
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the Company had cumulatively invoiced the NSA approximately $2,627,000 pursuant
to the terms of the joint development contract and had related outstanding
accounts receivable of approximately $103,000. No additional amounts will be
billed under the joint development contract. The Company is reviewing the terms
and conditions of the joint development contract with NSA regarding termination
of the contract.
The Company's asset based lender asserts a security interest in the outstanding
accounts receivable. The Company requested and the United States Bankruptcy
Court for the District of Colorado provided an order, subject to terms and
conditions stated in the order, authorizing the Company the use of cash
collateral. Development costs incurred by the Company are charged to research
and development expense.
See Note 13 - "Other Subsequent Events" for information concerning the current
status of the bankruptcy filing.
(9) Licensing Agreement
In June 1993, the Company entered into a systems distributorship and license
agreement with Advanced Visual Systems, Inc. (AVS). The agreement grants the
Company a license to use AVS software and AVS documentation internally to make
distributor versions of AVS software. The agreement also grants the Company a
license to sublicense distributor versions of AVS software. The agreement
expires after three years and can be automatically renewed on a year-to-year
basis. The Company has the right to cancel the agreement upon 90 days written
notice to AVS. Under the terms of the license agreement a one-time,
nonrefundable licensing fee of $300,000 was incurred by the Company. The Company
paid $50,000 of this fee upon the execution of the agreement with the remaining
amount of $250,000 due in 1996. The total license fee of $300,000 was charged to
research and development expense in 1993.
The Company is reviewing the terms and conditions of the license agreement with
AVS to assess the ramifications of the bankruptcy filing and forthcoming Chapter
11 Plan.
See Note 13 - "Other Subsequent Events" for information concerning the current
status of the bankruptcy filing.
(10) Bank Borrowings
In June 1994, the Company obtained a $17.5 million secured line of credit
commitment from an asset-based lender, comprised of a $6.5 million term loan and
a revolving line of credit of up to $11.0 million. The amount advanced is
secured by a senior security interest in all the assets of the
13
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Company, including the Company's plant, equipment, technology, and intellectual
property rights. Additional collateral was provided by Seymour R. Cray, Chairman
of the Board and Chief Executive Officer, in the form of a $5.0 million standby
letter of credit in June 1994 and a $1.0 million standby letter of credit in
December 1994. As of June 30, 1995, approximately $6.6 million was outstanding
under the line of credit. The terms of the Company's secured debt financing
provided for certain events of default. The Filing of Bankruptcy is stated to be
an event of default. The lender is subject under the U.S. Bankruptcy Code to an
automatic stay against any action against the Company or its assets to collect
its debt without prior approval of the Bankruptcy Court. No additional debt
financing is currently available under the secured line of credit.
In June 1994, the Company obtained a $17.5 million secured line of credit
commitment from a lender. The commitment is comprised of a $6.5 million term
loan and an $11.0 million revolving line of credit. The commitment is secured by
a senior security interest in all the assets of the Company. Additional
collateral was provided by Seymour R. Cray, Chairman of the Board and Chief
Executive Officer, in the form of a $5.0 million standby letter of credit in
June 1994 and a $1.0 million standby letter of credit in December 1994. The
Company received the funds from the $6.5 million term loan upon closing of the
transaction in June 1994. As of December 31, 1994, the Company had borrowed $6.2
million of the revolving line of credit, for a total amount of $12.7 million
borrowed against the available line of credit of $17.5 million. The Company
could have borrowed the remaining amount of the available revolving line of
credit ($4.8 million) only by providing additional collateral in the form of
standby letter(s) of credit (up to $4.0 million) and/or 70 percent of eligible
accounts receivable (up to $.8 million). The revolving line of credit is for a
term of three years from June 10, 1994 and from year to year thereafter, unless
sooner terminated pursuant to the terms of the Loan and Security Agreement.
All loans under the revolving line of credit are subject to the lender's
continuing right to establish lending reserves. These reserves, if imposed,
could have reduced the amount of revolving line of credit loans which otherwise
would have been available to the Company under the lending formulas.
The $6.5 million term loan has a five-year term under which the Company made
interest only payments from June 1994 through December 1994. Principal plus
interest payments commence in January 1995. Annual maturities on the term loan
are as follows: 1995 through 1998 - $1,444,440, 1999 - $722,240.
The terms of the Company's secured debt financing provide for certain events of
default, which include, among other things, (i) failure to perform or meet
14
<PAGE>
certain covenants, such as maintaining a minimum working capital and net worth,
as defined by the agreement, (ii) any change in the controlling ownership of the
Company, (iii) the failure of Seymour R. Cray to provide services to the Company
substantially similar to those he currently provides, other than such failure by
reason of death, disability, sickness, or injury, (iv) any material adverse
change in the Company's business, assets, or prospects and (v) the filing of
bankruptcy. If the Company were to default under the financing, the lender may
take possession of the Company's assets, charge higher interest rates on the
outstanding debt, demand immediate repayment of all obligations and/or take
other actions as specified in the loan agreement.
On April 24, 1995 the secured lender, as a result of the bankruptcy filing,
called on the standby letters of credit (totalling $6 million) issued in their
favor by Mr. Cray which reduces the amount owed by the Company on its line of
credit to the secured lender. The Company now has an unsecured liability to Mr.
Cray for an approximate amount of $6 million.
See Note 1 - Bankruptcy Filing and Basis of Financial Statement Presentation.
The filing of bankruptcy is an event of default.
The term loan and the revolving line of credit bear interest at prime (as
publicly announced by Philadelphia National Bank from time to time) plus 2 1/2
percent and prime plus 1 1/2 percent, respectively. The Company must also pay a
service fee of $50,000 for each year the loan agreement is effective and certain
other fees.
Per the terms of the Loan and Security Agreement between the Company and
Congress Financial Corporation, the Company must pay a success fee of $175,000
on June 10, 1997 or, if sooner, upon termination of the loan. The success fee
owed is recorded as a current liability at March 31, 1995.
(12) Commitments and Contingencies
The Securities and Exchange Commission (the "Commission") has issued a formal
order for a non-public investigation relating to trading in the Common Stock of
the Company during the period from September 1, 1990 through January 31, 1992,
which is the approximate period during which the Company was negotiating or had
in effect a purchase order for a 16-processor CRAY-3 supercomputer system from
the National Energy Research Supercomputer Center (NERSC) at Lawrence Livermore
National Laboratory. The announced loss of this purchase order in December 1991
caused a major drop in the market price of the Company's Common Stock. The
formal order states that the Commission staff has information tending to show
that during the period under investigation certain individuals and entities may
have traded stock of the Company while in possession of material non-public
15
<PAGE>
information and that the Company and others may have made false and misleading
statements in filings with the Commission or in other public documents
concerning this purchase order or the progress of development of the CRAY-3,
which allegations, if true, would result in possible violation of Section 17 (a)
of the Securities Act of 1933 and Sections 10 (b) and 13 (a) of the Securities
Exchange Act of 1934. The staff of the Central Regional Office of the Commission
has notified the Company of its intention to recommend that the Commission seek
permanent injunctions and civil penalties against the Company, Seymour R. Cray
and a former officer of the Company for alleged violations of these Sections and
to seek similar relief against Terry Willkom, the President of the Company,
under two of them. The staff of the Central Regional Office has informed the
Company and the corporate officers that they may file a written statement
("Wells Submission") to the Commission setting forth their positions and
arguments concerning the proposed recommendation, and such a statement was filed
with the Central Regional Office on February 15, 1995. The staff has also
indicated its willingness to consider a proposed compromise resolution of the
issues. Management of the Company is actively seeking to resolve these matters
and does not believe that the investigation has uncovered violations by the
Company or any of its officers and directors of any of the cited provisions of
law or that the investigation will result in a material adverse effect on the
business, operating results, or financial position of the Company. However, the
Company cannot predict whether a prompt resolution will be reached or what the
ultimate outcome of the investigation will be.
(13) Other Subsequent Events
On July 14, 1995 the Company's Board of Directors passed a resolution whereby
the Company requested voluntary delisting from the NASDQ Market. The delisting
request is directly related to the Company's forthcoming Chapter 11 plan whereby
the Company will liquidate its assets with approval of the Bankruptcy Court.
The NASDAQ Stock Market, Inc. was notified of this request on July 14, 1995.
The Company's Board of Directors authorized and directed Officers of the Company
to take all steps they deem necessary or appropriate to prepare and implement a
Chapter 11 Plan pursuant to which all or most of the assets of the Company will
be sold for the benefit of the Company's creditors and, to the extent feasible,
the benefit of the shareholders of the Company. Management of the Company
believes that a liquidating distribution to its shareholders is unlikely.
Since filing under Chapter 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the District of Colorado on March 24, 1995, the
Officers of the Company have pursued the possibility that the Company could
emerge from Chapter 11 bankruptcy as a going concern. These Officers
16
<PAGE>
have concluded, and the Board of Directors has agreed, that the Company will not
be able to continue its business. The Company will pursue the liquidation of its
assets pursuant to a Chapter 11 Plan to be prepared and presented to the
Bankruptcy Court. The Company requested an extension of its exclusive right to
file a Chapter 11 Plan through September 30, 1995. The motion is pending as of
the date of this report.
On July 24, 1995 the Company notified creditors, shareholders and parties in
interest of:
(1) Proposed sale and lease of assets, free and clear of liens, of the hearing
on approval thereof, and of procedures for the submission of competitive
bids. The Company proposed to enter a sale and lease (the "Sale and
Lease") transaction with M/A-COM, Inc. (M/A-COM) and Quantum Corporation
("Quantum"), under which the Company would: (a) sell equipment and other
personal property constituting the "FAB Facility," including a "clean room"
for the manufacture and assembly of computer components, to M/A-COM for
$5,860,000 payable as set forth in the Motion. The Company would also
lease to M/A-COM the FAB Facility (approximately 40,000 square feet) for
two years at $320,000 per annum, triple net, with an option for up to three
more years. (b) lease to Quantum 128,000 square feet of its building,
triple net, for two years at a rent of $2,248,000 payable as set forth in
the Motion, with an option for up to three more years.
The proposed Sale and Lease is subject to competitive bids. The competitive
bidding may result in a sale or lease of most or all of the Company's assets.
Any assets not sold pursuant to competitive bidding will be held for subsequent
sale by the Company at auction or private sale. The proposed Sale and Lease, by
itself, will not result in proceeds sufficient to allow a distribution to
shareholders. The Company's management believes that neither the competitive
bidding nor the proposed sale and lease, together with any other sale of any
remaining assets, will generate enough proceeds to allow a distribution to
shareholders.
(2) Request for extension of debtor's exclusive right to file a Chapter 11
Plan. The Company has requested an extension of its exclusive right to
file a Chapter 11 plan through September 30, 1995.
(3) Order fixing last date for filing proofs of claim as September 30, 1995.
The Bankruptcy Court has entered its order fixing September 30, 1995, as
the last day for filing proofs of claim.
17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is a discussion of the historical results of operations and
financial condition of Cray Computer Corporation. This discussion should be
read in conjunction with the discussions and historical financial statements and
notes thereto included in the Annual Report on Form 10-K for the year ended
December 31, 1994 and the historical financial statements and notes thereto
included elsewhere in this Form 10-Q. These financial statements do not include
any adjustments that might result from the planned liquidation of the Company's
assets.
OVERVIEW
On March 24, 1995 Cray Computer Corporation (the "Company") filed a voluntary
petition under Chapter 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the District of Colorado (the "Court") after the
Company determined it would be unable to complete a planned private placement
financing of up to $25 million of Common Stock with foreign and United States
institutional investors and the Company ceased to have sufficient liquid assets
which would allow it to continue in operation. The Company terminated most of
its employees and stopped work on its supercomputer systems on March 24, 1995.
The Company's existing directors and officers have remained in possession of the
assets and business of the Company, but are subject to the supervision and
orders of the Court. The Company believes it is complying with the reporting
requirements and operating guidelines for debtors-in-possession under Chapter 11
proceedings.
Under Chapter 11 the Company may attempt to reorganize, enabling it to resume
operations, or it may dispose of assets followed by distribution of the amount
realized to creditors and, if any excess remains, to shareholders of the
Company. If the assets of the Company are disposed of, that disposition may be
accomplished by the management of the Company as Debtor-in-Possession or by an
appointed trustee following conversion of the Chapter 11 proceeding to a
liquidation under Chapter 7 of the United States Bankruptcy Code.
Also, under Chapter 11, the Company as Debtor-in-Possession, has the exclusive
right to file a plan during the 120 days from the initial bankruptcy filing
date. This plan may be to either reorganize or to liquidate the Company's
assets. The 120 day exclusive period ended July 21, 1995. The Company
requested an extension of its exclusive right to file a Chapter 11 plan through
September 30, 1995. The motion is pending as of the date of this report.
18
<PAGE>
The development of a new generation of high performance supercomputers is
lengthy and a technically challenging process that requires substantial amounts
of capital and talented personnel. The amount of capital required to reorganize
and the fact that the Company has terminated most of its employees and may not
be able to rehire or find suitable replacements will be a major obstacle to the
Company's ability to reorganize.
The Company, a development stage enterprise, had a net loss for the three months
ended June 30, 1995 of $1.7 million. The Company had accumulated losses of
approximately $374 million from its inception through June 30, 1995.
Approximately $123 million of its cumulative deficit was incurred while the
Company was a division or wholly owned subsidiary of Cray Research, Inc. (CRI).
Substantially all of the Company's funding since its incorporation in 1989 has
come from CRI ($98,640,000) between October 1989 and October 1991, the sale of a
CRAY-2 supercomputer ($12,760,000) in December 1990, a public stock offering
(net proceeds of approximately $61,088,000) in July 1991, ongoing maintenance
revenues ($1,764,000) on the CRAY-2 supercomputer, a sale of shares of Common
Stock to institutional and private investors (net proceeds of approximately
$27,805,000) in June 1993, loan proceeds ($6,613,000), letter of credit provided
by Seymour R. Cray, Chairman of the Board and Chief Executive Officer
($6,000,000), contract revenue ($2,627,000) on the cost sharing development
contract with the National Security Agency (NSA) entered into in August 1994,
sales of shares of Common Stock to private and foreign institutional investors
(net proceeds of approximately $3,822,000) in the fourth quarter of 1994, and
sales of shares of Common Stock to Seymour R. Cray (1,165,501 shares and to
foreign institutional investors (3,200,000 shares) in the first quarter of 1995
(aggregate net proceeds of approximately $3,909,000).
Until the date of its bankruptcy filing, the Company was engaged in the design,
development, manufacture and marketing of the CRAY-3/Super Scalable System (SSS)
and CRAY-4 high-performance computer system and the marketing of the CRAY-3
supercomputer system. The CRAY-3 and CRAY-4 are modular upgradeable general
purpose supercomputers designed to provide balanced, high-performance computing
for many types of scientific and engineering applications. The Company was
addressing the high-performance, large-scale scientific and engineering segment
of the supercomputer market. The number of potential customers in this market
is and always has been limited. The market for supercomputers has been
characterized by continuing advancement of technology and the development of
increasingly sophisticated and powerful systems which render existing systems
obsolete within a few years.
BANKRUPTCY STATUS
19
<PAGE>
On July 14, 1995 the Company's Board of Directors passed a resolution whereby
the Company requested voluntary delisting from the NASDQ Market. The delisting
request is directly related to the Company's forthcoming Chapter 11 plan whereby
the Company will liquidate its assets with approval of the Bankruptcy Court.
The NASDAQ Stock Market, Inc. was notified of this request on July 14, 1995.
The Company's Board of Directors authorized and directed Officers of the Company
to take all steps they deem necessary or appropriate to prepare and implement a
Chapter 11 Plan pursuant to which all or most of the assets of the Company will
be sold for the benefit of the Company's creditors and, to the extent feasible,
the benefit of the shareholders of the Company. Management of the Company
believes that a liquidating distribution to its shareholders is unlikely.
Since filing under Chapter 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the District of Colorado on March 24, 1995, the
Officers of the Company have pursued the possibility that the Company could
emerge from Chapter 11 bankruptcy as a going concern. These Officers have
concluded, and the Board of Directors has agreed, that the Company will not be
able to continue its business. The Company will pursue the liquidation of its
assets pursuant to a Chapter 11 Plan to be prepared and presented to the
Bankruptcy Court. The Company requested an extension of its exclusive right to
file a Chapter 11 Plan through September 30, 1995. The motion is pending as of
the date of this report.
On July 24, 1995 the Company notified creditors, shareholders and parties in
interest of:
(1) Proposed sale and lease of assets, free and clear of liens, of the hearing
on approval thereof, and of procedures for the submission of competitive
bids. The Company proposed to enter a sale and lease (the "Sale and
Lease") transaction with M/A-COM, Inc. (M/A-COM) and Quantum Corporation
("Quantum"), under which the Company would: (a) sell equipment and other
personal property constituting the "FAB Facility," including a "clean room"
for the manufacture and assembly of computer components, to M/A-COM for
$5,860,000 payable as set forth in the Motion. The Company would also
lease to M/A-COM the FAB Facility (approximately 40,000 square feet) for
two years at $320,000 per annum, triple net, with an option for up to three
more years. (b) lease to Quantum 128,000 square feet of its building,
triple net, for two years at a rent of $2,248,000 payable as set forth in
the Motion, with an option for up to three more years.
The proposed Sale and Lease is subject to competitive bids. The competitive
bidding may result in a sale or lease of most or all of the Company's assets.
Any assets not sold pursuant to competitive bidding will be held for
20
<PAGE>
subsequent sale by the Company at auction or private sale. The proposed Sale and
Lease, by itself, will not result in proceeds sufficient to allow a distribution
to shareholders. The Company's management believes that neither the competitive
bidding nor the proposed sale and lease, together with any other sale of any
remaining assets, will generate enough proceeds to allow a distribution to
shareholders.
(2) Request for extension of debtor's exclusive right to file a Chapter 11
Plan. The Company has requested an extension of its exclusive right to
file a Chapter 11 plan through September 30, 1995.
(3) Order fixing last date for filing proofs of claim as September 30, 1995.
The Bankruptcy Court has entered its order fixing September 30, 1995, as
the last day for filing proofs of claim.
The Company believes it is complying with the reporting requirements and
operating guidelines for Debtors-in-Possession under Chapter 11 proceedings.
21
<PAGE>
RESULTS OF OPERATIONS
Revenue and cost of revenue: Service fees revenue and cost of services relate
to the maintenance of the CRAY-2 supercomputer installed at the National Energy
Research Supercomputer Center (NERSC) in April 1990. Service fees revenue for
the quarter ended June 30, 1995 totaled $81,000 compared with $91,000 for the
second quarter of 1994. The $10,000 decrease in service fees revenue results
from the terms of a new NERSC maintenance agreement which was signed in March
1994 and renewed through March 31, 1995. The maintenance agreement was extended
through August 28, 1995.
The Company is reviewing the terms and conditions of the maintenance agreement
with NERSC regarding the transfer of its maintenance agreement to CRI. Services
under the maintenance agreement are performed by CRI as a subcontractor and have
not been interrupted by the bankruptcy filing. CRI requested that the United
States Bankruptcy Court for the District of Colorado provide an order
authorizing termination of the subcontractor agreement between CRI and the
Company. The Company and the Unsecured Creditors Committee objected to the
request and the Company is currently negotiating an alternative agreement with
CRI. The motion is pending as of the date of this report. The service fee
revenues described herein are net of payments to the subcontractor. Service
fees revenue for the six months ended June 30, 1995 totaled $171,000 compared
with $171,000 for the first six months of 1994.
Development contract revenue relates to the joint development contract entered
into between the Company and the NSA in August 1994. The contract provided that
the Company would be paid up to $4,200,000 for development costs, and the
Government would provide approximately $400,000 in software consulting services.
Development contract revenue for the quarter ended June 30, 1995 totaled
$103,000. As of June 30, 1995, the Company had cumulatively invoiced the NSA
approximately $2,627,000 pursuant to the terms of the joint development contract
and had related outstanding accounts receivable of approximately $103,000. No
additional amounts will be billed under the joint development contract. The
Company is reviewing the terms and conditions of the joint development contract
with NSA regarding termination of the contract. The Company's asset based
lender asserts a security interest in the outstanding accounts receivable. The
Company requested and the United States Bankruptcy Court for the District of
Colorado provided an order, subject to terms and conditions stated in the order,
authorizing the Company the use of cash collateral. Development contract
revenue for the six months ended June 30, 1995 totaled $502,000.
22
<PAGE>
Other revenue reported for the first quarter of 1995 relates to GaAs wafer
qualification work performed for a third party.
Cost of services for the quarter ended June 30, 1995 totaled $0 compared with $0
for the second quarter of 1994. The $0 cost of services results from maintenance
spare parts that became fully depreciated in 1994.
Research and development expenses: Research and development expenses related
primarily to the design and development of the CRAY-3/SSS and CRAY-4 high-
performance computer systems, including costs associated with the manufacture of
prototype systems, and depreciation expenses on facilities and equipment used in
research and development activities.
No research and development expenses were incurred by the Company in the second
quarter of 1995 because research and development activities were discontinued on
March 24, 1995 when the Company filed a voluntary petition under Chapter 11 of
the United States Bankruptcy Code. The Company terminated most of its employees
and stopped work on its supercomputer systems. Research and development
expenses for the six months ended June 30, 1995 totaled $7,631,000 compared with
$20,458,000 for the first six months of 1994.
Research and development expenses include certain related party transactions.
Related party research and development expenses for the six months ended June
30, 1995 totaled $60,000 compared with $173,000 for the first six months of
1994.
Marketing: No marketing expenses were incurred by the Company in the second
quarter of 1995 because marketing activities were discontinued on March 24, 1995
when the Company filed a voluntary petition under Chapter 11 of the United
States Bankruptcy Code. The Company terminated most of its employees and
stopped work on its supercomputer systems. Marketing expenses for the six
months ended June 30, 1995 totaled $362,000 compared with $461,000 for the first
six months of 1994.
General and administrative expenses: General and administrative expenses for
the quarter ended June 30, 1995 totaled $1,686,000 compared with $605,000 for
the second quarter of 1994. The $1,081,000 increase in general and
administrative expenses was due primarily to depreciation and maintenance for
the Company's assets and utilities. Prior to the bankruptcy filing, these
expenses were allocated principally to research and development expenses.
General and administrative expenses for
23
<PAGE>
the six months ended June 30, 1995 totaled $2,647,000 compared with $1,356,000
for the first six months of 1994.
Other income (deductions), net: Other income (deductions), net for the quarter
ended June 30, 1995 totaled ($241,000) compared with ($806,000) for the second
quarter of 1994. The $565,000 decrease in other (deductions), net is a result in
part of decreased interest income of approximately $55,000 resulting from
decreased cash and short-term investments. Interest expense increased
approximately $199,000 as a result of acquiring the secured line of credit
financing. Miscellaneous expense decreased approximately $814,000 primarily for
costs relating to the debt financing (i.e., broker fees, legal fees, travel,
title insurance and loan fees) that were incurred in 1994. (See "NOTES TO
FINANCIAL STATEMENTS - (9) Bank Borrowings"). Other income (deductions), net
for the six months ended June 30, 1995 totaled ($531,000) compared with
($492,000) for the first six months of 1994.
Litigation settlement: On June 17, 1993, the Company reached a final settlement
with the consolidated plaintiffs in a lawsuit against the Company. The Company
paid $1,000,000 in April 1993 towards the settlement and the Company's
directors' and officers' liability insurer paid an additional $4,000,000. The
Company accrued its share of the tentative settlement, $1,000,000, in its
financial statements as of and for the year ended December 31, 1992.
LIQUIDITY AND CAPITAL RESOURCES
The Company's Independent Auditors in their report for the year ended December
31, 1994, stated that because of the Company's recurring losses, continued
utilization of cash flows, working capital deficit at December 31, 1994, and the
bankruptcy filing on March 24, 1995 by the Company, substantial doubt is raised
about the Company's ability to continue as a going concern and that the
Company's historical Financial Statements do not include any adjustments that
might result from the outcome of this uncertainty. The Auditors' Report for the
year ended December 31, 1993, and 1992 also stated there was substantial doubt
about the Company's ability to continue as a going concern.
The Company had a deficit in working capital at June 30, 1995 of $16,174,000,
all liabilities are classified as current. The Company needed substantial
additional funds to continue operations past March 1995, which is was unable to
obtain.
After the Company determined it would be unable to complete a planned private
placement financing of up to $25 million of Common Stock with foreign and United
States institutional investors, and the Company ceased to
24
<PAGE>
have sufficient liquid assets which would allow it to continue in operation on
March 24, 1995 it filed a voluntary petition under Chapter 11 of the United
States Bankruptcy Code in the United States Bankruptcy Court for the District of
Colorado (the "Court"). The Company's existing directors and officers have
remained in possession of the assets and business of the Company but are subject
to the supervision and orders of the Court.
The Company terminated on March 24, 1995 most of its employees and stopped work
on its supercomputer systems. The Company's cash resources are very limited and
it will incur continuing administrative expenses. The Company is operating
within the requirements of the U.S. Bankruptcy Code and the Rules thereunder.
In June 1994, the Company obtained a $17.5 million secured line of credit
commitment from an asset-based lender, comprised of a $6.5 million term loan and
a revolving line of credit of up to $11.0 million. The amount advanced is
secured by a senior security interest in all the assets of the Company,
including the Company's plant, equipment, technology, and intellectual property
rights. Additional collateral was provided by Seymour R. Cray, Chairman of the
Board and Chief Executive Officer, in the form of a $5.0 million standby letter
of credit in June 1994 and a $1.0 million standby letter of credit in December
1994. As of June 30, 1995, approximately $6.6 million was outstanding under the
line of credit. The terms of the Company's secured debt financing provided for
certain events of default. The Filing of Bankruptcy is stated to be an event of
default. The lender is subject under the U.S. Bankruptcy Code to an automatic
stay against any action against the Company or its assets to collect its debt
without prior approval of the Bankruptcy Court. No additional debt financing is
currently available under the secured line of credit.
On April 27, 1995 the secured lender drew down the standby letters of credit
totaling $6 million issued in its favor by Mr. Cray. This drawing reduced the
amount owed by the Company on its line of credit to the secured lender and
creates an unsecured liability to Mr. Cray for an approximately amount of $6
million.
As discussed above, the Company terminated most of its employees concurrent with
the Filing on March 24, 1995. The Company currently has 10 full time and two
part time employees. In the event the Company were to resume operations, the
extent of operations and related costs have not been determined. There can be
no assurance that the Company will resume operations, even on a limited basis,
and that it will not be required to liquidate its assets to satisfy its
liabilities. In the event of liquidation, management has not determined if
sufficient amounts will be realized to satisfy the Company's liabilities.
Furthermore, it is not possible for
25
<PAGE>
management to determine whether there will be any distributions to shareholders
of any residual values available in the event of liquidation.
26
<PAGE>
PART II. OTHER INFORMATION
---------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
The following Exhibits are filed as part of this Quarterly Report:
None
(b) Reports on Form 8-K
-------------------
Reports on Form 8-K filed during the quarter ended March 31, 1995.
(1) A report on Form 8-K dated April 4, 1995 was filed by the Company which
reported that on March 24, 1995 Cray Computer Corporation filed a voluntary
petition under Chapter 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the District of Colorado.
(2) A report on Form 8-K dated July 20, 1995 was filed by the Company which
reported that on July 14, 1995 the Company's Board of Directors passed a
resolution whereby the Company requested voluntary delisting from the NASDQ
Market. Also on July 14, 1995 Cray Computer Corporation announced that its
Board of Directors Authorized Chapter 11 Plan.
27
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CRAY COMPUTER CORPORATION
(A Development Stage Enterprise)
Date August 18, 1995 by /s/ WILLIAM G. SKOLOUT
--------------------------------- --------------------------------
William G. Skolout
Vice President
Chief Financial Officer
Signing on behalf of the
registrant and as principal
financial officer.
28
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