<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 March 31, 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 April 28, 1995, 46,464,987 shares of the registrant's Common Stock, $0.01
par value, were outstanding.
<PAGE>
CRAY COMPUTER CORPORATION
(DEBTOR-IN-POSSESSION)
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Statements of Operations (unaudited) cumulative from
October 1983 (inception) through March 31, 1995, and for the
three months ended March 31, 1995 and 1994................................. 3
Balance Sheets as of March 31, 1995 (unaudited), and December 31, 1994..... 4
Statements of Cash Flows (unaudited) cumulative from October 1983
(inception) through March 31, 1995, and for the three months ended
March 31, 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.............................. 15
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............. 23
ITEM 5. OTHER INFORMATION................................................ 23
None
ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K................................. 23
A) Exhibits
None
B) Reports on Form 8-K............................................ 23
SIGNATURE.................................................................. 24
</TABLE>
2
<PAGE>
CRAY COMPUTER CORPORATION
(DEBTOR-IN-POSSESSION)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands, except per share data)
------------------------------------
Cumulative from Three months
October 1983 ended March 31,
(inception) through -------------------------------
March 31, 1995 1995 1994
------------------------ --------------- --------------
<S> <C> <C> <C>
REVENUE
Sales $ 12,760 - -
Service fees 1,683 90 80
Development contract revenue 2,524 399 -
Other revenue 80 24 -
------------------------ --------------- --------------
17,047 513 80
------------------------ --------------- --------------
OPERATING COSTS AND EXPENSES
Cost of sales 7,686 - -
Cost of services 641 - 40
Research and development
Related parties 41,169 60 90
Other 316,552 7,571 10,788
------------------------ ---------------- -------------
Total research and development 357,721 7,631 10,878
Marketing 3,859 362 173
General and administrative 18,775 961 751
------------------------ ----------------- -------------
388,682 8,954 11,842
------------------------ ----------------- -------------
OPERATING LOSS (371,635) (8,441) (11,762)
Other income (deductions), net 618 (290) 314
Litigation settlement expense 1,000 - -
----------------------- ----------------- -------------
NET LOSS $ (372,017) (8,731) (11,448)
----------------------- ---------------- -------------
LOSS PER SHARE $ (0.20) $ (0.30)
--------------- --------------
Weighted average number of
shares outstanding 44,424 37,875
--------------- --------------
</TABLE>
See accompanying notes to interim financial statements
3
<PAGE>
CRAY COMPUTER CORPORATION
(DEBTOR-IN-POSSESSION)
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands, except share data) March 31, December 31,
--------------------------------- 1995 1994
---------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 478 2,372
Accounts receivable 390 711
Prepaid expenses 1,695 1,855
Other current assets 19 15
--------- ------------
Total current assets 2,582 4,953
--------- ------------
Property, plant and equipment 78,503 78,392
Less accumulated depreciation and amortization 58,207 57,179
--------- ------------
Net property, plant and equipment 20,296 21,213
--------- ------------
Other assets 12 -
TOTAL ASSETS $ 22,890 26,166
========= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Post petition liabilities
Accounts payable $ - -
Accrued expenses 1 -
Liabilities not subject to compromise
Bank borrowings, including note payable to bank 12,360 7,663
Property taxes 664 502
Liabilities subject to compromise
Accounts payable 4,323 2,392
Accrued expenses 940 1,098
--------- ------------
Total current liabilities 18,288 11,655
--------- ------------
Long-term liability - 360
Note payable to bank, long-term - 5,056
Total liabilities 18,288 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 (372,017) (363,286)
Less accumulated deficit transferred to
additional paid-in capital 122,775 122,775
--------- ------------
Accumulated deficit since November 15, 1989 (249,242) (240,511)
--------- ------------
Total stockholders' equity 4,602 9,095
--------- ------------
Commitments and contingencies
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 22,890 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 Three months ended
October 1983 March 31,
(inception) through -----------------------
March 31, 1995 1995 1994
--------------------- ---------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $ (372,017) (8,731) (11,448)
Adjustments to reconcile net loss
to net cash flows used by operations:
Depreciation and amortization 81,319 1,028 1,516
Loss on sale or retirement of
property, plant and equipment 5,572 - 42
Change in operating assets
and liabilities:
Accounts receivable (390) 321 113
Inventories 1,574 - -
Spares, net (641) - -
Prepaid expenses (356) 160 480
Accounts payable 4,605 2,433 157
Accrued expenses 1,103 (497) (247)
Long-term liability - (360) -
-------- ------ -------
Cash flows used by
operating activities (279,231) (5,646) (9,387)
-------- ------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of short-term investments - - 8,806
Sale of long-term
marketable securities - - -
Purchase of property,
plant and equipment (90,357) (111) (1,065)
Proceeds from sale of
property, plant and
equipment 1,653 - -
Proceeds from matured
lease deposits 987 - -
Increase in other assets (2,121) (16) (15)
--------- ------ -------
Cash flows provided by (used in)
investing activities (89,838) (127) 7,726
--------- ------ -------
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 5,860 (359) -
Proceeds from issuance of
note payable to bank 6,500 - -
Principal payments on
capital leases (4,201) - (5)
-------- ------ -------
Cash flows provided by
financing activities 369,547 3,879 354
-------- ------ -------
Increase (decrease) in
cash and cash equivalents 478 (1,894) (1,307)
Cash and cash equivalents
at beginning of period - 2,372 4,691
-------- ------- ------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 478 478 3,384
======== ======== ======
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's
recurring losses, continued utilization of cash flows by operating activities,
working capital deficit at March 31, 1995, and the Bankruptcy filing on March
24, 1995 raise substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty. The results of operations and cash
flows for the three months ended March 31, 1995, are not necessarily 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 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.
6
<PAGE>
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.
The Company believes that the accompanying financial statements follow the
reporting recommendations of Statement of Position 90-7, Financial Reporting by
----------------------
Entities in Reorganization Under the Bankruptcy Code.
----------------------------------------------------
See Notes 3, 5, 7, 9 and 10 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 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 if the Company were to reorganize.
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.
7
<PAGE>
(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 $2,145,000).
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.
(3) Related Party Transactions
--------------------------
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) Three months ended
March 31,
------------------------
1995 1994
----------- -----------
<S> <C> <C>
Performance Semiconductor Corporation $ - 14
Seymour R. Cray 60 76
---- ----
$ 60 90
==== ====
</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.
8
<PAGE>
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 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
to assess the ramifications of the bankruptcy filing.
(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.
(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.
9
<PAGE>
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.
The Company is reviewing the terms and conditions of the stock plans to assess
the ramifications 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 - - (8,731)
------ ---------- -----------
Balance at March 31, 1995 $ 465 253,379 (249,242)
====== ========== ===========
</TABLE>
(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.
10
<PAGE>
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 March 31, 1995, the Company had a net operating loss carryforward for Federal
income tax purposes of approximately $230,000,000 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 $14,000,000 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.
(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 March 31, 1995, the Company had cumulatively
invoiced NSA approximately $2,524,000 pursuant to the terms of the joint
development contract and had related outstanding accounts receivable of
approximately $268,000. The Company's asset based lender asserts a security
interest in the outstanding accounts receivable. The Company has requested
that the United States Bankruptcy Court for the District of Colorado provide an
order authorizing the Company the use of cash collateral. The motion is
scheduled for a hearing in bankruptcy court on May 23, 1995. Development costs
incurred by the Company are charged to research and development expense.
(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 licensing agreement
with AVS to assess the ramifications of the bankruptcy filing.
11
<PAGE>
(10) Bank Borrowings
---------------
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 March 31, 1995, the Company had borrowed $5.9
million of the revolving line of credit, for a total amount of $12.4 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 ($5.1 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 $1.1 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 commenced 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 stated
events of default, which include, among other things, (i) failure to perform or
meet 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.
12
<PAGE>
See Note 1 - Bankruptcy Filing and Basis of Financial Statement Presentation.
The filing of bankruptcy is stated in the loan agreement to be 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
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
<PAGE>
The Company entered into two investment agreements with a foreign investor on
January 11, 1995, pursuant to which two blocks of 2,500,000 shares each would be
issued at a 25 percent discount from the average market price of the Common
Stock during two separate valuation periods. A provisional closing on the first
of these transactions involving 2,500,000 shares was scheduled to occur no later
than January 13, 1995. The Company did not receive timely payment in compliance
with the written terms of the first agreement, even with an oral extension of
the first closing deadline. The Company immediately notified the investor of its
breach of the agreement and declared both of the investment agreements
terminated. The investor has asserted that it attempted to wire timely payment
within the orally extended deadline, but was prevented from completing the
transfer through the fault of the Company's bank. The management of the Company
has consulted with its bank and believes the payment terms were not met.
Although the dispute remains unresolved, the Company's management believes that
no timely payment was made within either the written or the orally extended
deadline and that the investment agreements are no longer in effect. However, if
such shares were issued, such issuance could result in possible dilution of the
percentage interest in the Company represented by outstanding shares of the
Company's Common Stock.
14
<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.
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 Companys
assets. This 120 day exclusive period ends by approximately July 21, 1995 and
the Company currently anticipates filing its plan no later than that date.
Management of the Company has commenced discussions with potential strategic
partners which may result in the resumption of the Company's operation, either
by the Company or a different entity. Management of the Company does not know
as of the date of this Report whether such discussions will result in a plan of
reorganization permitting the Company to resume its operations. Management
intends to resolve, as soon as possible, whether a plan of reorganization is
feasible. If such a plan does prove feasible, it will be presented for
approval, as required, to interested parties including the Bankruptcy Court by
approximately July 21, 1995, subject to possible extension.
15
<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 concern to any
potential strategic corporate partner and thus to the Companys ability to
reorganize.
The Company, a development stage enterprise, had a net loss for the three months
ended March 31, 1995 of $8.7 million. The Company had accumulated losses of
approximately $372 million from its inception through March 31, 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 ($1,683,000) 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 ($12,719,000), contract revenue
($2,524,000) 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, Chairman of the Board and Chief Executive Officer (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.
The CRAY-3, CRAY-3/SSS, and CRAY-4 incorporate a modular or building-block
architecture designed to allow customers to add processing and memory
capability. The CRAY-4 configuration can range from 4 to 64 processors with base
prices in the approximate range of $3.5 million to $40 million. The CRAY-3/SSS
is designed to utilize a 2-processor CRAY-3 in conjunction with Processor-in-
Memory (PIM) chips developed and manufactured by a third party to provide vector
parallel processing, scalable parallel processing, and the combination of both.
All of these systems are designed to incorporate advanced Gallium Arsenide
(GaAs) logic circuits, fast semiconductor Static Random Access Memory (SRAM)
circuits, advanced semiconductor packaging and interconnect technologies, and
advanced liquid cooling techniques.
16
<PAGE>
On August 17, 1994, the Company entered into a joint development contract with
the National Security Agency (NSA), to produce a CRAY-3/SSS offering vector
parallel processing, scalable parallel processing, and the combination of both.
Under the NSA contract, the Company received revenues from NSA for a portion of
the Company's costs of developing the system. The CRAY-3/SSS is designed to
utilize a CRAY-3 and a large number of Processor-In-Memory (PIM) chips developed
by the Supercomputing Research Center of the Institute for Defense Analyses and
manufactured by National Semiconductor Corporation. The system was to consist of
a dual processor 256 million word CRAY-3, and an array of 512,000 single bit
processors, 128 million byte Single Instruction Multiple Data (SIMD) array. The
Company successfully completed the first of a number of major tasks required
under the development contract which consisted of the successful test and
demonstration of an array of 256,000 single bit processors packaged using the
Company's multi-chip-module technology. Upon filing of bankruptcy, the Company
stopped work on the CRAY-3/SSS. The Company is reviewing the terms and
conditions of the development contract to assess the ramifications of the
bankruptcy filing.
Significant technical progress was made during 1994 and first quarter 1995 on
the CRAY-4, which takes advantage of technologies and manufacturing processes
developed during the design and manufacture of the CRAY-3. The Company announced
introduction of the CRAY-4 to the market on November 10, 1994. Several single
processor CRAY-4 prototype systems, each with 64 megawords of memory, were
undergoing diagnostic testing prior to the Company filing for bankruptcy. The
Company began testing individual CRAY-4 modules at the start of 1994 and planned
to be able to deliver a 4-processor CRAY-4 prototype system by approximately the
end of the second quarter of 1995. Upon filing of bankruptcy, the Company
stopped work on the CRAY-4.
Following expiration of certain restrictions in its license agreements from CRI
on July 31, 1994, the Company began to engage in discussions with potential
strategic partners. Any such partnership could include joint manufacturing
and/or marketing activities, a commitment to provide funding to the Company in
exchange for an interest in the Company's technology (which may include the
licensing of hardware, software, know-how, patents, or marketing rights to
certain products or technology), an equity or debt investment, or any
combination of the above. The Company is continuing its efforts to secure a
corporate strategic partnership. Any such relationship would require approval of
the Court and possibly the Company's lender under its secured debt financing
agreement. Although these discussions are continuing while in bankruptcy, no
agreements are currently pending. As of the date of this report no partnership
discussions have progressed beyond the preliminary stage and there can be no
assurance that a strategic partnership will be consummated, or if consummated,
on terms that are favorable to the Company.
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 additional equity financing.
17
<PAGE>
As of the date of this report, the Company's Common Stock is listed and trading
on the NASDAQ Stock Market--National Market. NASDAQ By-Laws state that "should
an issuer file under any of the sections of the Bankruptcy Act or announce that
liquidation has been authorized by its Board of Directors and that it is
committed to proceed, the Association may suspend or terminate the issuers
securities unless it is determined that the public interest and the protection
of investors would be served by continued designation." Again, the Company has
filed a voluntary petition under Chapter 11 of the United States Bankruptcy
Code. No liquidation has been authorized by the Company's Board of Directors, as
of the date of this report, and Management has submitted information to the
NASDAQ Stock Market supporting its position that the Company's Common Stock
should continue to be listed. There can be no assurance that the Company's
Common Stock will continue to be listed on the NASDAQ National Market or the
NASDAQ SmallCap Market.
BANKRUPTCY STATUS
The Company believes it is complying with the reporting requirements and
operating guidelines for Debtors-in-Possession under Chapter 11 proceedings.
Management is having discussions with its secured lender and with the official
Unsecured Creditors Committee regarding the possibility of the Company securing
a strategic partner and reorganizing or if this is not feasible, the disposition
of its assets. 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.
On May 5, 1995 the Company filed a motion for Bankruptcy Court authorization to
use cash collateral consisting of the proceeds of the accounts receivable from
the Companys Development Contract with the National Security Agency ($268,000).
The collection and use of this cash is critical to the Companys ability to
reorganize, and if this proves not to be feasible, to the orderly disposition of
its assets to maximize the amounts realized. This motion has been set for
hearing on May 23, 1995. While the Company believes this motion should be
approved by the Court, there can be no assurance that this will occur. If it is
not approved, this will have a material adverse impact on the Companys ability
to reorganize or to have an orderly disposition of its assets.
18
<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 March 31, 1995 totaled $90,000 compared with $80,000 for the
first quarter of 1994. The $10,000 increase 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 April 30, 1995 and is currently being negotiated to be effective through
March 31, 1996. Services under the maintenance agreement are performed by Cray
Research, Inc. as a subcontractor and have not been interrupted by the
bankruptcy filing. The service fee revenues described herein are net of payments
to the subcontractor.
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 March 31, 1995 totaled
$399,000. As of March 31, 1995, the Company had cumulatively invoiced the NSA
approximately $2,524,000 pursuant to the terms of the joint development contract
and had related outstanding accounts receivable of approximately $268,000. The
Company's asset based lender asserts a security interest in this outstanding
accounts receivable. The Company filed a motion requesting that the United
States Bankruptcy Court for the District of Colorado provide an order
authorizing the Company the use of this cash collateral. The motion is pending
as of the date of this report.
Other revenue of $24,000 for the quarter ended March 31, 1995 relates to GaAs
wafer qualification work performed for a third party.
Cost of services for the quarter ended March 31, 1995 totaled $0 compared with
$40,000 for the first quarter of 1994. The $40,000 decrease in cost of services
results from maintenance spare parts that became fully depreciated in 1994.
Research and development expenses: Research and development expenses for the
quarter ended March 31, 1995 relate 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.
Research and development expenses for the quarter ended March 31, 1995 totaled
$7,631,000 compared with $10,878,000 for the first quarter of 1994. The
$3,247,000 decrease in research and development expenses is primarily due to
decreases in depreciation of approximately $463,000 as a result of assets
becoming fully depreciated in 1994, reduced material charges of approximately
$1,617,000 due to decreased CRAY-3 manufacturing, reduced mask fabrication and
PCB drill bits of approximately $483,000, and reduced employee labor and benefit
expenses of approximately $732,000.
Research and development expenses include certain related party transactions.
Related party expenses for the quarter ended March 31, 1995 totaled $60,000.
19
<PAGE>
Marketing: Marketing expenses for the quarter ended March 31, 1995 totaled
$362,000 compared with $173,000 for the first quarter of 1994. The $189,000
increase in marketing expenses was the result in part of increased labor and
benefit expenses of approximately $127,000 and increased fixed charges for
leased office space of approximately $12,000 associated with the addition of
employees to the marketing staff. Additional increases were associated with
increased marketing activities, such as travel expenses which increased
approximately $17,000 and charges for consulting services which increased
approximately $42,000.
General and administrative expenses: General and administrative expenses for
the quarter ended March 31, 1995 totaled $961,000 compared with $751,000 for the
first quarter of 1994. The $210,000 increase in general and administrative
expenses was due primarily to the Company's efforts to acquire equity financing,
such as employee travel expenses which increased approximately $13,000 and other
business expenses which increased approximately $174,000.
Other income (deductions), net: Other income (deductions), net for the quarter
ended March 31, 1995 totaled ($290,000) compared with $314,000 for the first
quarter of 1994. The $604,000 decrease in other income, net is a result in part
of reduced interest income of approximately $122,000 resulting from decreased
cash and short-term investments. Interest expense increased approximately
$337,000 as a result of acquiring the secured line of credit financing. (See
"NOTES TO FINANCIAL STATEMENTS - (9) Bank Borrowings"). Other income decreased
approximately $145,000 due to miscellaneous tax refunds received in 1994.
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 utilized $5,646,000 for operating activities in the first quarter of
1995, and had a deficit in working capital at March 31, 1995 of $15,706,000, all
liabilities are classified as current. The Company needed substantial additional
funds to continue operations past March 1995, which it 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 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.
20
<PAGE>
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. The Company received the funds from the $6.5 million term loan upon
closing of the transaction in June 1994. As of March 31, 1995, the Company had
borrowed $5.9 million of the revolving line of credit, for a total of $12.4
million borrowed against the available line of credit of $17.5 million. As of
March 24, 1995, approximately $12.4 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 $6,000,000 issued in its favor by Mr. Cray. This drawing reduces 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 approximate amount of
$6,000,000.
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 $2,145,000).
The sales of shares to the foreign institutional investors were made pursuant to
Regulation S of the Securities Act (the "Securities Act") of 1933, as amended.
The sale of shares to Mr. Cray was made pursuant to Regulation D under the
Securities Act.
On February 27, 1995, the Company sold 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 made pursuant to Regulation S under the
Securities Act.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
have permitted additional equity financing. The Company had approximately 72
million authorized shares of Common Stock remaining available for future
issuance at March 31, 1995.
21
<PAGE>
Capital equipment expenditures for first quarter 1995 totaled $111,000 compared
with $704,000 for first quarter 1994. The 1995 expenditures relate primarily to
the purchase of test equipment, GaAs fabrication equipment and computer
equipment. If the Company had continued operations, it expected such capital
and other expenditures to continue and expected continued losses at a rate of
approximately $3 million per month unless the Company began to receive
substantial revenue from the sale of supercomputers. As discussed above, the
Company terminated most of its employees concurrent with the Filing on March 24,
1995. The Company currently has 8 full time and 5 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 management to determine whether there will be any distributions to
shareholders of any residual values available in the event of liquidation.
The Company has had no orders for or revenues from the sale of its products,
although through March 31, 1995, $2.5 million of revenues had been generated
from a development contract on the CRAY-3/SSS.
22
<PAGE>
PART II. OTHER INFORMATION
---------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A Special Meeting of Stockholders was held on February 27, 1995. The matter
voted on and approved at the Special Meeting was as follows:
(i) To approve an amendment to ARTICLE IV of the Company's Restated
Certificate of Incorporation increasing the Company's authorized Common Stock
from 60,000,000 to 120,000,000 shares.
The following table summarizes the votes cast at the Special Meeting of
Shareholders:
VOTES
FOR AGAINST ABSTAIN
---------- ------- -------
Approval of the amendment 27,196,240 492,151 221,157
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 January 25, 1995 was filed by the Company
which reported that on January 24, 1995 Cray Computer Corporation announced a
private equity financing and the scheduling of a Special Meeting of
Stockholders.
(2) A report on Form 8-K dated February 17, 1995 was filed by the Company
which reported other events, the current status of Securities and Exchange
Commission Inquiry.
(3) A report on Form 8-K dated March 1, 1995 was filed by the Company which
reported that on February 27, 1995 A Special Meeting of Stockholders of Cray
Computer Corporation was held. At the meeting, Stockholders approved an
amendment to ARTICLE IV of the Company's Restated Certificate of Incorporation
increasing the Company's authorized Common Stock from 60,000,000 to 120,000,000
shares. The Form 8-K also reported that on February 23, 1995 Cray Computer
Corporation announced that CRAY-4 price/performance leadership affirmed by
competitive announcement.
(4) 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.
23
<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 May 22, 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.
24
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<PERIOD-END> MAR-31-1995
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<RECEIVABLES> 390
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<OTHER-SE> 376154
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