As filed with the Securities and Exchange Commission on October 23, 1997
Registration No. 333-36563
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to
Form S-3 Registration Statement
Under
The Securities Act of 1933
TERA COMPUTER COMPANY
(Exact name of registrant as specified in its charter)
WASHINGTON 93-0962605
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
2815 Eastlake Avenue East
Seattle, WA 98102-3027
(206) 325-0800 (telephone)
(206) 325-2433 (facsimile)
(Address, including zip code, and telephone and facsimile numbers,
including area code, of principal executive offices)
Kenneth W. Johnson, Chief Financial Officer
Tera Computer Company
2815 Eastlake Avenue
Seattle, WA 98102-3027
(206) 325-0800 (telephone)
(206) 325-2433 (facsimile)
(Name, address, including zip
code, and telephone and facsimile numbers, including
area code, of agent for service)
Copy to:
Christopher J. Voss
Stoel Rives LLP
One Union Square, 36th Floor
Seattle, WA 98101-3197
(206) 624-0900 (telephone)
(206) 386-7500 (facsimile)
Approximate date of commencement of proposed sale to the public:
From time to time after this registration statement becomes effective
If the only securities being registered on this Form are to be offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with a dividend or
interest reinvestment plan, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
==========================================================================================================================
Title of Each Amount Proposed Maximum Proposed Maximum Amount of
Class of Securities to be Offering Price Per Aggregate Offering Registration
Registered Registered Share(1) Price (1) Fee
- -------------------- ---------- ---------------------- ---------------------- ---
<S> <C> <C> <C> <C>
Common Stock, 1,367,499 shares $12.75 $17,435,612 $5,284
$.01 par value
==========================================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c).
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
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PROSPECTUS
TERA COMPUTER COMPANY
1,367,499 Shares of Common Stock
This Prospectus covers the resale of shares of Common Stock of Tera Computer
Company, a Washington corporation ("Tera" or the "Company"), by certain
shareholders (the "Selling Shareholders") of the Company. These shares were
first issued by the Company through (1) a private placement of 299,332 shares of
Common Stock and warrants to purchase an additional 68,167 shares of Common
Stock in March 1997 and (2) the issuance of warrants to purchase an aggregate of
1,000,000 shares to H.J. Meyers & Co., Inc., which warrants were subsequently
distributed to certain principals and affiliates thereof. See "Selling
Shareholders."
The shares of Common Stock may be offered or sold by the Selling Shareholders of
the Company from time to time in the over-the-counter market or otherwise at
market prices then prevailing, in negotiated transactions or otherwise. Brokers
or dealers will receive commissions or discounts from Selling Shareholders in
amounts to be negotiated immediately prior to the sale. Such resales are subject
to the prospectus delivery and other requirements of the Securities Act of 1933,
as amended (the "Securities Act"). The Company will not receive any of the
proceeds from the resale of the Common Stock but will receive the proceeds from
the cash exercises, if any, of the warrants. See "Selling Shareholders" and
"Plan of Distribution." In connection with any sales, the Selling Shareholders
and any brokers and dealers participating in such sales may be deemed to be
"underwriters" within the meaning of the Securities Act. See "Plan of
Distribution."
The Common Stock is listed on the Nasdaq SmallCap Market under the symbol TERA.
On October 22, 1997, the closing price for the Common Stock was $13.00.
These Securities Involve a High Degree of Risk. See "Risk Factors" beginning on
page 4 for Certain Factors Related to This Offering.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
No person has been authorized to give any information or to make any
representations in connection with this offering other than those contained in
this Prospectus. This Prospectus does not constitute an offering in any
jurisdiction in which such offering may not lawfully be made. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the respective dates as to which information has
been given herein.
The date of this Prospectus is October ___, 1997.
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TABLE OF CONTENTS
Section Page
- ------- ----
The Company ........................................................... 2
Incorporation of Certain Documents by Reference ....................... 3
Available Information ................................................. 3
Risk Factors .......................................................... 4
Recent Events ......................................................... 10
Capitalization ........................................................ 11
Selling Shareholders .................................................. 12
Plan of Distribution .................................................. 14
Experts ............................................................... 15
Limitation of Liability and Indemnification ........................... 15
THE COMPANY
The Company was formed to design, develop and market high performance
general purpose parallel computer systems. Tera's Multithreaded Architecture
System ("MTA system") is designed to address a wide range of scientific and
engineering applications, such as simulation and visualization of complex
mechanical and biochemical systems, as well as emerging commercial applications,
such as database mining, information-on- demand and computer-aided design and
visualization. The Company believes that its MTA system represents a significant
breakthrough in high performance computing that will enable the Company to offer
systems with several times the price/performance of currently available
commercial high performance computer systems. The Company believes that the MTA
system overcomes the limitations of currently available commercial architectures
by delivering a general purpose parallel, easy-to-program, scalable, very high
performance computer system. The MTA system is designed to combine the very high
computational price/performance levels of massively parallel processing with the
ease of use of conventional shared memory programming. Typical MTA system
configurations are expected to sell for between $5 million and $40 million. The
Company's initial delivery of an MTA system is scheduled for 1997 to the San
Diego Supercomputer Center. See, however, "RISK FACTORS - Manufacturing Risks;
Reliance On and Capacity Of Third Party Sole Source Suppliers."
The Company was incorporated in Washington in December 1987. The Company's
principal executive offices are located at 2815 Eastlake Avenue East, Seattle,
Washington 98102-3027, and its telephone number is (206) 325-0800.
--------------------
"Tera" and "MTA" are trademarks of the Company. This Prospectus also
contains and incorporates trademarks of other companies.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the Securities
and Exchange Commission (the "Commission") pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), are incorporated in this
Prospectus by reference:
(a) The Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996;
(b) The Company's Quarterly Reports on Form 10-QSB for the quarters
ended March 31, 1997 and June 30, 1997;
(c) The Company's Current Reports on Form 8-K, filed on April 1, 1997,
May 21, 1997, July 11, 1997, and October 1, 1997; and
(d) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form SB-2 (Registration No.
33-95460-LA), including any amendment or report filed for the purpose of
updating such description, as incorporated by reference in the Company's
Registration Statement on Form 8-A (Registration No. 0-26820), including
the amendment thereto on Form 8-A/A filed by the Company.
All reports and other documents subsequently filed by the Company pursuant
to sections 13(a), 13(c), 14, and 15(d) of the Exchange Act prior to the
termination of the offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of the filing of such reports and
documents.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act with respect to the securities offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, omits
certain information contained in the Registration Statement and the exhibits and
schedules thereto on file with the Commission pursuant to the Securities Act and
the rules and regulations of the Commission thereunder. For further information
with respect to the Company and the securities offered hereby, reference is made
to the Registration Statement and the exhibits and schedules thereto. The
Registration Statement, including exhibits thereto, may be inspected and copied
at the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices at 7 World Trade Center, Suite 1300, New York, New
York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and copies may be obtained at the prescribed rates from the
Public Reference Section of the Commission at its principal office in
Washington, D.C. Copies of such documents may also be inspected at the offices
of the National Association of Securities Dealers, Inc., 1735 K Street N.W.,
Washington, D.C. 20006. Statements contained in this Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement, each such
statement being qualified in its entirety by such reference.
The Company's Common Stock is registered with the Commission under Section
12(g) of the Exchange Act and, in accordance therewith, the Company files
reports, proxy statements, and other information with the Commission. Such
filings can be inspected and copied at the Commission's public reference rooms
at the above-referenced addresses, at prescribed rates, or from the Commission's
Website at "http://www.sec.gov."
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The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, including any beneficial
owner, on the written or oral request of any such person, a copy of any or all
of the incorporated documents, other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference therein. Requests shall
be directed to Tera Computer Company, 2815 Eastlake Avenue East, Seattle, WA
98102-3027, Attention: Chief Financial Officer (telephone number (206) 325-
0800). The information relating to the Company contained in this Prospectus does
not purport to be comprehensive and should be read together with the information
contained in the incorporated documents.
RISK FACTORS
In addition to the other information in this Prospectus, each prospective
investor should carefully consider the following factors in evaluating the
Company and its business before purchasing the securities offered hereby. No
investor should participate in the offering unless such investor can afford a
complete loss of his or her investment. This Prospectus contains forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including but not limited to those
set forth in the following risk factors and elsewhere in this Prospectus.
Development Stage Enterprise; History of Losses. The Company is a development
stage enterprise that had an accumulated loss of approximately $33.4 million as
of June 30, 1997. The Company has experienced net losses in each year of
operation and expects to incur substantial further losses while it tests and
evaluates its MTA system prototype and commences production, and possibly
thereafter. The Company has had no revenue or earnings. The Company will
recognize revenue only as resource modules are delivered and accepted. Initial
deliveries under the agreement with the San Diego Supercomputer Center are
scheduled for 1997. However, given the Company's reliance on sole source
third-party vendors, it is possible that deliveries could be delayed. Whether
the Company will achieve revenue or earnings will depend upon a number of
factors, including its ability to design, develop, manufacture and market the
MTA system and to achieve broad market acceptance thereof. In addition,
profitability will be dependent on, among other things, the level of revenue in
any given period, the terms and conditions of sale or lease for an MTA system,
the system model or models sold, and the Company's expense levels and
manufacturing costs. There can be no assurance that the Company will be
successful in completing the development of, and delivering and receiving
payments for, production MTA systems, or that it will be able to generate sales
or achieve a profitable level of operations in the future.
Development Status of the MTA System. The development of a new very high
performance computer system is a lengthy and technically challenging process and
requires a significant investment of capital and other resources. Several
companies in this market have experienced extreme financial difficulty in the
past several years, including Thinking Machines Corporation, Cray Computer
Corporation, Kendall Square Research Corporation and Supercomputer Systems, Inc.
Since its inception through June 30, 1997, the Company has expended
approximately $43.7 million to design and develop the MTA system. The hardware
development effort has included design of integrated circuits, packaging and
cooling systems and at-speed testing equipment. The software development effort
has included design of compilers, an operating system and input-output software
technology. Until November 1996, when the Company announced that its initial
prototype was undergoing testing and had run its first programs, the MTA system
has been subject only to computer simulation, and the prototype system has
undergone only initial testing and evaluation. While initial testing and
evaluation of the prototype system have been successful, the Company has not
integrated multiple modules into a commercially configured system and only
recently commenced work on its initial production model.
Assuming that the MTA system prototype can be successfully developed,
modifications to the hardware components, software and the integrated system
still may be required. Development of system software is a difficult process,
and there can be no assurance that the Company will be able to meet all of the
technical challenges required to integrate and complete an MTA system that
satisfies both internal and commercially
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acceptable performance specifications. Significant delays in completing the
various hardware components or software, or in integrating the full system,
would materially and adversely affect the Company's business and results of
operations. Even if the Company is successful in developing its prototype, there
can be no assurance that the Company's products will be commercially successful.
Manufacturing Risks; Reliance On and Capacity Of Third Party Sole Source
Suppliers. The Company intends to subcontract the manufacture of substantially
all of its hardware components, including integrated circuits, printed circuit
boards, flex circuits and power supplies, on a sole source basis to third party
suppliers, and there can be no assurance that such suppliers will be able to
manufacture the components to the Company's design specifications. Manufacturing
difficulties and limited yields, particularly of gallium arsenide ("GaAs")
integrated circuits and advanced printed circuit boards and flex circuits, could
materially and adversely affect the Company's ability to complete and deliver
production models of the MTA system. The manufacture of integrated circuits, and
in particular the manufacture of GaAs integrated circuits, is a difficult and
complex process. Minute impurities, difficulties in the fabrication process,
defects in the masks used to print circuits on wafers or other factors can cause
a substantial percentage of wafers to be rejected or numerous die on each wafer
to be non-functional. The Company's suppliers may experience problems in
achieving acceptable manufacturing yields for these or other reasons, resulting
in substantial delays in the delivery of necessary hardware components to the
Company and unacceptably high prices for those components, with a resulting loss
of profitability or loss of competitiveness for the Company's products. The
Company has experienced such yield problems already, and these failures forced
the Company to redesign certain components for manufacture by alternative
suppliers which caused delays in the fabrication of the Company's prototype and
increased demands upon the Company's financial resources. The Company also has
experienced delays in receiving integrated circuits and printed circuit boards
from its suppliers which meet its design specifications. There can be no
assurance that the Company's efforts to obtain components in a timely manner
that meet its design specifications will be successful. Delays in obtaining such
components has adversely affected the Company's ability to deliver its first MTA
system to the San Diego Supercomputer Center on schedule and may continue to do
so. See "RECENT EVENTS - Use of Cash Resources."
Moreover, the production capacity of the Company's integrated circuit
suppliers is very limited and the availability of integrated circuits and other
components will be a limiting factor on the number and size of the MTA systems
that may be sold, assuming the receipt of additional purchase orders. Absent
improved yields, increased production capacity or a reallocation of such
suppliers' output to meet its needs, the Company may be unable to obtain a
sufficient quantity of integrated circuits or other suitable components to meet
future production and delivery schedules. In addition, some of the Company's key
suppliers are small companies with limited financial and other resources, and
may be more likely to experience financial difficulties than larger, well
established companies. Any or all of the Company's suppliers may make strategic
changes in their product lines, which may result in the delay or suspension of
manufacture of the Company's components or systems. In the event of a reduction
or interruption of supply of the Company's components, it could take the Company
a considerable period of time to identify and qualify alternative suppliers to
redesign its products as necessary and recommence manufacture. The Company's
inability to obtain sufficient sole or limited source components as required, or
to develop alternative sources if and as required in the future, could result in
the Company finding itself without a source of supply for its components; this
could materially impair the Company's ability to deliver its products, which
would materially and adversely affect the Company's business and results of
operations.
Future Capital Needs. During the next year, the Company's working capital needs
will depend primarily upon its personnel costs, the cost of components purchased
to complete the testing of its initial MTA system prototype and manufacturing
startup costs, and inventory and receivable financing associated with the
production of MTA systems. The Company has experienced delays in the development
of particular components of the MTA system that have increased the need for
working capital, and the Company could experience significant additional delays
in the manufacturing process that could further substantially increase the
Company's need for working capital. Personnel and operating costs will be
required to fund ongoing research, development and engineering efforts,
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develop a customer service organization and expand the Company's sales and
marketing efforts. Additionally, the Company's administrative functions will
increase in order to support its engineering and sales efforts.
In September 1997, the Company privately placed $5,000,000 of Series C
Convertible Preferred Stock. These funds, along with the Company's present cash
resources and funds anticipated from sales of MTA systems, are expected to be
sufficient to fund the Company for the next twelve months. See "RECENT EVENTS -
Private Placements" and " - Use of Cash Resources."
Marketing Risks; Government Funding and Regulation. The Company's first sales
targets will be U.S. and foreign government agencies and research laboratories,
which constitute more than one-half of the market for very high performance
computer systems. The United States government historically has facilitated the
development of, and has constituted a market for, new and enhanced very high
performance computer systems. A change of policy by the United States government
or foreign governments that results in a reduction of, or delays in, funding of
certain high technology programs employing high performance computing could have
a major impact on the market for very high performance computer systems, and
would materially and adversely affect the Company's business, results of
operations and need for capital.
Most of the Company's potential customers already own or lease very high
performance computer systems. Some of the Company's competitors may offer
trade-in allowances or discounts to potential customers, and the Company may not
be able to match such sales incentives. The Company may be required to provide
discounts in order to make sales or be required to finance the leasing of its
products, which would result in a deferral of the Company's receipt of cash for
such systems. These developments could materially and adversely affect the
Company's business and results of operations.
The United States government regulates the export of high performance
computing systems such as the anticipated MTA system. There can be no assurance
that the U.S. government will grant any necessary export licenses for the sale
of MTA systems to foreign buyers. The Company's prospects for growth will depend
in part on its ability to obtain export licenses for foreign sales, the delay or
denial of which could materially and adversely affect the Company's business and
results of operations.
In order to expand its market beyond the very high performance scientific
market, and particularly beyond government agencies and research laboratories,
to engineering and other commercial markets, the Company must be able to attract
independent software vendors to port their software application programs so that
they will run on the MTA system. There can be no assurance that the Company will
be able to induce independent software vendors to port their applications, and
the failure to do so could materially and adversely affect the Company's
business and results of operations.
Management of Growth; Dependence on Key Personnel. If the Company is successful
in developing and marketing the MTA system, the Company believes it could
undergo a period of rapid growth which could place a significant strain on its
management, financial and other resources. The Company's ability to manage its
growth will require it to continue to improve its operational and financial
systems and to motivate and effectively manage its employees. If the Company
grows, it will have to implement new financial, budgeting, management
information and internal control systems. The success of the Company will depend
on the ability of management to implement effectively these changes and to
manage the Company's operations over the long term. The Company's success also
will depend in large part upon its ability to attract and retain highly skilled
technical personnel to provide technological depth and support, to complete and
enhance its first products and to develop new products. In addition, marketing
and sales personnel will be needed. Competition for highly skilled management,
technical, marketing and sales personnel is intense. There can be no assurance
that the Company will be successful in attracting and retaining key management,
technical, marketing and sales personnel, and its failure to do so would
materially and adversely affect the Company's business and results of
operations.
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The Company is dependent on Burton J. Smith, the Company's Chairman of the
Board and Chief Scientist, and James E. Rottsolk, the Company's Chief Executive
Officer, and the loss of services of either could have a material impact on the
ability of the Company to achieve its business objectives. The Company has key
man life insurance policies on the lives of Messrs. Smith and Rottsolk in the
amount of $2 million and $1 million, respectively. The Company has no employment
contracts with either Mr. Smith or Mr. Rottsolk or with any other employee.
Quarterly Performance May Vary Significantly. In the event that the Company is
able to attain broad market acceptance of the MTA system, one or a few system
sales may account for a substantial percentage of the Company's quarterly and
annual revenue because of the anticipated high average sales price of the MTA
system models and the timing of purchase orders and product acceptances. Because
a number of the Company's prospective customers receive funding from the U.S. or
foreign governments, the timing of orders from such customers may be subject to
the appropriation and funding schedules of the relevant government agencies. The
timing of orders and shipments also could be affected by other events outside
the control of the Company, such as changes in levels of customer capital
spending, the introduction or announcement of competitive products, the
availability of components, currency fluctuations and international conflicts or
economic crises. Because of these factors, revenue, expenses, net income or loss
and cash flow are likely to fluctuate significantly from quarter to quarter.
Rapid Technological Change and New Products. The market for the Company's
products is characterized by rapidly changing technology, accelerated product
obsolescence and rapidly changing industry standards. The Company's success will
depend upon its ability to complete development of the MTA system and to
introduce new products and features in a timely manner to meet evolving customer
requirements. There can be no assurance that the Company will be successful in
these efforts. The Company's business and results of operations will be
materially and adversely affected if the Company incurs delays in developing its
products or if such products do not gain broad market acceptance. In addition,
there can be no assurance that products or technologies developed by others will
not render the Company's products or technologies noncompetitive or obsolete.
Competition. The Company's competitors can be divided into two general
categories: established companies that are well-known in the high performance
computer market and new entrants capitalizing on developments in parallel
processing and increased computer performance through networking.
The high performance computer market is highly competitive and has been
dominated by Cray Research. Other participants in the market include IBM
Corporation ("IBM"), Intel Corporation ("Intel"), and foreign companies such as
Fujitsu, Ltd., Hitachi, Ltd., and NEC Corporation. Each of these competitors has
broader product lines and substantially greater research, engineering,
manufacturing, marketing and financial resources than the Company.
A number of companies, including IBM, Intel, Silicon Graphics, Inc.,
Fujitsu Ltd. and Convex Computer Corporation, have developed or plan to develop
massively parallel systems for the high performance computer market. Although to
date this kind of system architecture has been limited in applicability and
difficult to program, a breakthrough in architecture or software technology
could change this situation. There can be no assurance that such a breakthrough
will not occur, and such an advance would materially and adversely affect the
Company's business and results of operations.
There can be no assurance that the performance of the MTA system will be
competitive with the computer systems offered by the Company's competitors or
that the Company will be able to compete successfully over time against new
entrants or innovative competitors at the lower end of the market. Furthermore,
periodic announcements by the Company's competitors of new high performance
computer systems and price adjustments may materially and adversely affect the
Company's business and results of operations. The market has experienced a
recent consolidation as Convex Computer Corporation was absorbed by
Hewlett-Packard in 1995,
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Cray Research was acquired by Silicon Graphics, Inc. in 1996, and Intel has
stated that it would no longer directly market high performance computer
systems.
Proprietary Rights. The Company relies on a combination of copyright and trade
secret protection, non-disclosure agreements and licensing arrangements to
establish, protect and enforce its proprietary rights. Despite the Company's
efforts to safeguard and maintain its proprietary rights, there can be no
assurance that the Company will be successful in doing so or that the Company's
competitors will not independently develop or patent technologies that are
substantially equivalent or superior to the Company's technologies.
Although the Company is not a party to any present litigation regarding
proprietary rights, there can be no assurance that third parties will not assert
intellectual property claims against the Company in the future. Such claims, if
proved, could materially and adversely affect the Company's business and results
of operations. In addition, although any such claims may ultimately prove to be
without merit, the necessary management attention to and legal costs associated
with litigation or other resolution of such claims could materially and
adversely affect the Company's business and results of operations.
The laws of certain foreign countries do not protect intellectual property
rights to the same extent or in the same manner as do the laws of the United
States. Although the Company continues to implement protective measures and
intends to defend its proprietary rights vigorously, there can be no assurance
that these efforts will be successful.
Shares Eligible for Future Sale. Sale of substantial amounts of the Company's
Common Stock in the public market or the prospect of such sales could materially
and adversely affect the market price of the Common Stock. As of September 30,
1997, the Company had outstanding 10,677,938 shares of Common Stock; 5,000
shares of Series C Convertible Preferred Stock convertible into no less than
430,440 shares of Common Stock; and privately placed warrants to purchase
another 1,214,342 shares of Common Stock (of which 1,068,167 shares are covered
by this Prospectus). In addition, as of such date, the Company had granted
options under its option plans to purchase an aggregate of 2,082,839 shares of
Common Stock. Almost all of the Company's outstanding shares of Common Stock may
be sold without substantial restrictions, and the Company has filed a
Registration Statement on Form S-3 to register the resale of the shares of
Common Stock issuable upon the conversion of its Series C Convertible Preferred
Stock. All of the shares purchased under the stock option plans are available
for sale in the public market, subject in some cases to volume and other
limitations.
Sales in the public market of substantial amounts of Common Stock,
including sales of Common Stock issued upon conversion of the Series C
Convertible Preferred Stock and the shares of Common Stock offered hereby, or
the perception that such sales could occur could depress prevailing market
prices for the Common Stock. The existence of the private warrants and any other
options or warrants may prove to be a hindrance to future equity financing by
the Company. Further, the holders of such warrants and options may exercise them
at a time when the Company would otherwise be able to obtain additional equity
capital on terms more favorable to the Company.
Possible Volatility of Stock Price. The trading price of the Company's Common
Stock could be subject to significant fluctuations in response to variations in
quarterly operating results, changes in analysts' estimates, announcements of
technological innovations by the Company or its competitors, general conditions
in the very high performance computer industry and other factors. In addition,
the stock market is subject to price and volume fluctuations that affect the
market prices for companies in general, and small capitalization, high
technology companies in particular, and are often unrelated to their operating
performance.
Possible Illiquidity of Trading Market. The Common Stock is quoted on the Nasdaq
SmallCap Market (the "Market"). The Market may be significantly less liquid than
the Nasdaq National Market. In addition, the Nasdaq has adopted more stringent
maintenance requirements and significantly increased its compliance enforcement
efforts. If the Company should continue to experience losses from operations or
for any other
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reason have insufficient net tangible assets, it may be unable to maintain the
standards for continued quotation of the Common Stock on the Market, and the
Common Stock could be subject to removal therefrom. If such removal were to
occur, trading, if any, in the Common Stock henceforth would be conducted in the
over-the-counter market on an electronic bulletin board established for
securities that do not meet the listing requirements for the Market, or in what
are commonly referred to as the "pink sheets." As a result, an investor would
find it more difficult to dispose of, or to obtain accurate quotations for the
price of, the Company's securities. In addition, such removal would subject the
Company's securities to so-called "penny stock" rules that impose additional
sales practice and market making requirements on broker-dealers who sell and/or
make a market in such securities. Consequently, removal from the Market could
affect the ability or willingness of broker-dealers to sell and/or make a market
in the Company's securities and the ability of purchasers of the Company's
securities to sell their securities in the secondary market. In addition, if the
market price of the Company's Common Stock falls to below $5.00 per share, the
Company may become subject to certain penny stock rules even if still quoted on
the Market. While such penny stock rules should not affect the quotation of the
Company's Common Stock on the Market, such rules may further limit the market
liquidity of the Common Stock and the ability of investors to sell securities in
the secondary market.
No Anticipated Dividends. The Company has not previously paid any dividends on
its Common Stock and for the foreseeable future intends to continue its policy
of retaining any earnings to finance the development and expansion of its
business.
Effect of Antitakeover Provisions. Certain provisions of the Company's Restated
Articles of Incorporation and Restated Bylaws and the laws of the State of
Washington could have the effect of making it more difficult for a third party
to acquire, or of discouraging a third party from attempting to acquire, control
of the Company. Such provisions could limit the price that certain investors
might be willing to pay in the future for shares of Common Stock. The Company is
authorized to issue preferred stock, without shareholder approval, with rights
senior to those of the Common Stock and to impose various procedural and other
requirements that could make it more difficult for shareholders to effect
certain corporate actions.
Limitations on Liability and Indemnification Matters. As permitted by the
Washington Business Corporation Act, the Company has included in its Restated
Articles of Incorporation a provision to eliminate the personal liability of its
directors for monetary damages for breach or alleged breach of their fiduciary
duties as directors, excluding, however, liability for acts or omissions
involving intentional misconduct or knowing violations of law, illegal
distributions or transactions from which the director receives benefits to which
the director is not legally entitled. In addition, the Restated Bylaws of the
Company provide that the Company is required to indemnify its directors under
certain circumstances, including those in which indemnification would otherwise
be discretionary, and the Company is required to advance expenses to its
officers and directors as incurred in connection with proceedings against them
for which they may be indemnified.
-9-
<PAGE>
RECENT EVENTS
The following summarizes significant events with respect to the Company in
1997.
1. Private Placements. The Company completed three private placements of
equity securities in 1997. In March, the Company raised $1,122,495, less
expenses, through the sale to eight accredited investors of 299,332 shares of
Common Stock and 74,833 warrants (of which 68,167 are private warrants
exercisable at $6.00 per share and 6,666 were redeemable common stock purchase
warrants, since exercised). The second private placement, which also was
completed in March, raised $3,000,000, less expenses, through the sale of 3,000
shares of Series B Convertible Preferred Stock to an institutional purchaser.
The shares of the Series B Convertible Preferred Stock were converted into an
aggregate of 740,266 shares of Common Stock upon conversion and the payment of
accrued dividends thereon, which shares have since been resold by the holder
thereof. The Company issued private warrants for 29,041 shares of Common Stock
to an investment banking firm which acted as the Company's sales agent in
connection with these two private placements. The third private placement, which
closed in September, raised $5,000,000, less expenses, through the sale of 5,000
shares of Series C Convertible Preferred Stock to an institutional purchaser.
The Company has filed a Registration Statement on Form S-3 to register the
resale of the shares of Common Stock issuable upon the conversion of the Series
C Convertible Preferred Stock.
2. Warrant Exercises/Redemption. On June 25, 1997, the Company redeemed all
of its unexercised publicly held Warrants. The Company received approximately
$10.6 million from the exercise of 2,130,527 Warrants, net of expenses, with
95,604 Warrants redeemed at $.05 per Warrant.
3. Use of Cash Resources. Since its incorporation through June 30, 1997,
the Company's principal sources of liquidity have been net proceeds from the
sale of equity of approximately $43.2 million and research funding of
approximately $18.8 million from the Defense Advanced Research Projects Agency
("DARPA"). As of September 30, 1997, and after completion of the private
placements and warrant exercises and redemptions described above, the Company
had in excess of $9 million in cash and no bank line of credit. These funds,
along with funds anticipated from sales of MTA systems, are expected to be
sufficient to fund the Company for the next twelve months. See "RISK FACTORS -
Future Capital Needs" and "- Manufacturing Risks; Reliance On and Capacity of
Third Party Sole Source Suppliers."
-10-
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) as of
June 30, 1997, and (ii) as adjusted to give effect to the private placement of
the Series C Convertible Preferred Stock and the issuance of an aggregate of
740,266 shares of Common Stock upon the conversion of the Series B Convertible
Preferred Stock and the payment of accrued dividends thereon.
June 30, 1997 (1)
-----------------
Actual As Adjusted
------ -----------
(in thousands)
<S> <C> <C>
Long-term portion of capital leases ......................................... $ 134 $ 134
Shareholders' equity:
Convertible Preferred Stock, $.01 par value: 5,000,000 shares authorized;
issued and outstanding, 3,000 shares of Series B, actual; issued and
outstanding, 5,000 shares
of Series C, as adjusted ............................................. 3,192 4,970
Common Stock, $.01 par value:
25,000,000 shares authorized; 9,868,897 shares issued and outstanding,
actual; 10,609,163 shares issued and outstanding, as
adjusted ............................................................. 39,964 43,156
Preferred stock dividend distributable .................................. 38 38
Accumulated deficit ..................................................... (33,426) (33,426)
-------- --------
Total shareholders' equity ........................................... 9,767 14,738
-------- --------
Total capitalization ............................................ $ 9,901 $ 14,872
======== ========
- ----------------------
<FN>
(1) Does not include (i) 1,774,420 shares issuable upon exercise of outstanding
stock options as of June 30, 1997 or (ii) 1,214,342 shares of Common Stock
currently issuable upon exercise of certain privately placed warrants
(including 1,068,167 shares covered by this Prospectus).
</FN>
</TABLE>
-11-
<PAGE>
SELLING SHAREHOLDERS
As part of a private placement to eight accredited investors in March
1997, the Company agreed to register the resale of 299,332 shares of Common
Stock then sold, as well as 68,167 shares of Common Stock issuable upon exercise
of warrants then issued.
In April 1997, the Company issued a warrant to H.J. Meyers & Co., Inc.
to purchase 700,000 shares of Common Stock at an exercise price of $3.9375 per
share. This warrant was issued in consideration for services rendered under a
financial consulting agreement and, in connection therewith, certain warrants
previously issued to H.J. Meyers & Co., Inc. as compensation for its services as
representative in the Company's initial public offering in September 1995 and as
sales agent for the Company's private offering completed in July 1996 were
canceled. This warrant becomes exercisable on October 23, 1997, and is
exercisable through April 21, 2002.
In June 1997, the Company issued a separate warrant to H.J. Meyers &
Co., Inc. to purchase 300,000 shares of Common Stock at an exercise price of
$4.50 per share, as compensation for certain consulting and financial advisory
services. This warrant becomes exercisable at the rate of 50,000 shares of
Common Stock per month, beginning on July 26, 1997, so that all 300,000 shares
will be exercisable as of December 26, 1997.
The warrants issued to H.J. Meyers & Co., Inc., have been distributed
to certain of its principals and affiliates, as indicated below.
The warrants issued to H.J. Meyers & Co., Inc. contain provisions which
permit "cashless exercises" pursuant to which the holders may surrender to the
Company a number of shares of Common Stock having a market value equal to the
aggregate exercise price of the warrants being exercised. The Company
understands that the holders are likely to use the cashless exercise feature so
that the total number of shares of Common Stock issuable to the holders will be
less than 1,000,000.
These shares of Common Stock may be sold at any time or from time to
time if a current prospectus relating to such Common Stock is in effect and the
securities have qualified for sale. The Company will not receive any proceeds
from the market sales of the shares of Common Stock. Sales of these shares of
Common Stock, or even the potential of such sales, could have an adverse effect
on the market prices for the Common Stock. See "RISK FACTORS - Shares Eligible
for Future Sale."
No Selling Shareholder has had a material relationship with the Company
within the past three years except for the WBW Trust Number One, which owned
more than five percent of the Company's outstanding securities at certain times
during such period. The Selling Shareholders and the number of shares of Common
Stock (including shares of Common Stock issuable upon exercise of warrants) held
by each of them and offered hereby are listed below.
-12-
<PAGE>
Shares of
Selling Shareholder Common Stock
- ------------------- ------------
Robert M. Arnold 33,335
Karl D. Dillon 16,665
First Washington Corp. Profit Sharing Trust 17,500
Kestrel Software, L.L.C. 35,000
Gainor R. Lewis and Carder R. Lewis 70,000
Preston Interests, Ltd. 133,335
Stephen B. and Laurel B. Preston 35,000
WBW Trust Number One 26,664
North Hampton Holdings Corporation III 474,000 *
Michael A. Bresner 39,500 *
Patrick W. Grady 285,000 *
Michael Bergin 5,000 *
Glenn Busch 5,000 *
Angel Cruz 29,000 *
James C. Witzel 14,100 *
Robert J. Setteducati 59,600 *
Thomas S. Parigian 32,800 *
Joseph Galigan 14,750 *
Michael Vanechanos 11,750 *
William E. Massucci 29,500 *
---------
Total 1,367,499
*Assumes that the Selling Shareholder will exercise the warrants for cash.
If the Selling Shareholder uses the cashless exercise alternative, the actual
number of shares of Common Stock issued thereto will be fewer, depending on the
market value of the underlying shares of Common Stock on the date of exercise.
-13-
<PAGE>
PLAN OF DISTRIBUTION
The shares of Common Stock may be sold from time to time by the Selling
Shareholders or by pledgees, donees, transferees or other successors in
interest. Such sales may be made in open market transactions on stock exchanges
(including the Market) or otherwise at prices and at terms then prevailing, at
prices related to the then current market price or in negotiated transactions.
These securities may be sold by one or more of the following methods: (a) block
trades in which the broker or dealer so engaged will attempt to sell the
securities as agent but may position and resell a portion of the block as
principal to facilitate the transaction; (b) purchases by a broker or dealer as
principal, in a market maker capacity or otherwise, and resale by such broker or
dealer for its account pursuant to this Prospectus; and (c) ordinary brokerage
transactions and transactions in which the broker solicits purchasers. In
effecting sales, brokers or dealers engaged by the Selling Shareholders may
arrange for other brokers or dealers to participate. Brokers or dealers will
receive commissions or discounts from the Selling Shareholders in amounts to be
negotiated immediately prior to the sale.
If any of the following events occurs, this Prospectus will be amended to
include additional disclosure before offers and sales of these shares of Common
Stock are made: (a) to the extent such securities are sold at a fixed price or
by option at a price other than the prevailing market price, such price would be
set forth in the Prospectus; (b) if the securities are sold in block
transactions and the purchaser wishes to resell, such arrangements would be
described in the Prospectus; and (c) if the compensation paid to broker-dealers
is other than usual and customary discounts, concessions or commissions,
disclosure of the terms of the transaction would be included in the Prospectus.
The Prospectus also would disclose if there are other changes to the stated plan
of distribution, including arrangements that either individually or as group
that would constitute an orchestrated distribution of the securities.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of these shares of Common Stock may not
simultaneously engage in market making activities with respect to any securities
of the Company for a period of at least two (and possibly nine) business days
prior to the commencement of such distribution. Accordingly, in the event that
any broker-dealer, including H.J. Meyers & Co., Inc., is engaged in a
distribution of these shares of Common Stock, it will not be able to make a
market in the Company's securities during the applicable restrictive period.
However, no broker-dealer that is a market maker has agreed to and none are
obligated to act as broker-dealer in the sale of these shares of Common Stock,
and the Selling Shareholders likely will be required, to sell such securities
through a broker-dealer that is not a market maker. In addition, each Selling
Shareholder desiring to sell these shares of Common Stock will be subject to the
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including without limitation Regulation M, which provisions may
limit the timing of the purchases and sales of shares of the Company's
securities by such Selling Shareholders.
The Selling Shareholders, such brokers or dealers, and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In addition, any
securities covered by this Prospectus which later qualify for sale pursuant to
Rule 144 under the Securities Act may be sold under that Rule rather than
pursuant to this Prospectus.
-14-
<PAGE>
The Company is bearing all costs relating to the registration of the shares
of Common Stock offered hereby other than certain fees and expenses, if any, of
counsel or other advisors to the Selling Shareholders. Any commissions,
discounts or other fees payable to brokers or dealers in connection with any
sale of the Shares will be borne by the Selling Shareholder, the purchasers
participating in such transaction, or both.
EXPERTS
The financial statements of the Company as of December 31, 1995 and 1996
and for each of the two years in the period ended December 31, 1996,
incorporated by reference into this Prospectus, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports with respect
thereto. Such financial statements have been so incorporated in reliance on the
reports of such firm given upon their authority as experts in accounting and
auditing.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Company's Restated Articles of Incorporation provide that, to the
fullest extent permitted by the Washington Business Corporation Act, the
Company's directors will not be liable for monetary damages to the Company or
its shareholders, excluding, however, liability for acts or omissions involving
intentional misconduct or knowing violations of law, illegal distributions or
transactions from which the director receives benefits to which the director is
not legally entitled. The Company's Restated Bylaws provide that the Company
will indemnify its directors and, by action of the Board of Directors, may
indemnify its officers, employees and other agents of the Company to the fullest
extent permitted by applicable law, except for any legal proceeding that is
initiated by such directors, officers, employees or agents without authorization
of the Board of Directors. See "RISK FACTORS - Limitations on Liability and
Indemnification Matters."
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
-15-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
All expenses in connection with the issuance and distribution of the
securities being registered will be paid by the Company. The following is an
itemized statement of these expenses (all amounts are estimated except for the
SEC and Nasdaq listing fees):
SEC Registration fee .................................. $ 5,284
Nasdaq listing fee .................................... $ 7,500
Blue Sky filing fees & expenses ....................... $ 2,500
Legal fees ............................................ $13,000
Accountant's Fees ..................................... $ 1,000
Printing Fees ......................................... $ 400
Miscellaneous ......................................... $ 316
-------
Total ................................................. $30,000
=======
Item 15. Indemnification of Officers and Directors.
Article XII of the Company's Restated Articles of Incorporation and Section
11 of the Company's Restated Bylaws require indemnification of directors,
officers, employees and agents of the Company to the fullest extent permitted by
the Washington Business Corporation Act (the "Act"). Sections 23B.08.500 through
23B.08.000 of the Act authorize a court to award, or a corporation's board of
directors to grant, indemnification to directors and officers on terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities arising under the Securities Act.
Section 23B.08.320 of the Act authorizes a corporation to limit a
director's liability to the corporation or its shareholders for monetary damages
for acts or omissions as a director, except in certain circumstances involving
intentional misconduct, self-dealing or illegal corporate loans or
distributions, or any transaction from which the director personally receives a
benefit in money, property or services to which the director is not legally
entitled. Article XI of the Company's Restated Articles of Incorporation
contains provisions implementing, to the fullest extent permitted by Washington
law, such limitations on a director's liability to the Company and its
shareholders.
-16-
<PAGE>
Item 16. Exhibits.
3.1 Restated Articles of Incorporation of the Company(l)
3.2 Restated Bylaws of the Company(l)
5 Opinion on Legality
23 Consent of Deloitte & Touche LLP
24 Power of Attorney(2)
- ---------------------
(1) Incorporated by reference to Amendment No. 3 to the Company's Registration
Statement on Form SB-2 Registration No. 33-95460-LA, filed with the
Commission on September 22, 1995
(2) Incorporated by reference to the Company's Registration Statement on Form
S-3, Registration No. 333- 36563, filed with the Commission on September
26, 1997.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or
the most recent post-effective amendment thereof) that,
individually or in the aggregate, represent a fundamental
change in the information set forth in this Registration
Statement; and
(iii) To include any additional or changed material information
with respect to the plan of distribution;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the information required to be included in a
post-effective amendment by those paragraphs is incorporated by
reference from periodic reports filed by the registrant pursuant
to Section 13 or Section 15(d) of the Exchange Act.
(2) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment shall be deemed to
be a new registration statement relating to the securities
offered therein, and the offering of such
-17-
<PAGE>
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered that remain
unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question,
whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
-18-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Seattle, State of Washington, on October 22, 1997.
TERA COMPUTER COMPANY
By: /s/ JAMES E. ROTTSOLK
-----------------------------------------
James E. Rottsolk
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated below on the 22nd day of October, 1997:
Signature and Title
/s/ BURTON J. SMITH
- ----------------------------------- *
Burton J. Smith ---------------------------------------
Chairman of the Board of Directors Daniel J. Evans, Director
/s/ JAMES E. ROTTSOLK
- ----------------------------------- *
James E. Rottsolk ---------------------------------------
Chief Executive Officer Kenneth W. Kennedy, Director
and Director
/s/ KENNETH W. JOHNSON
- ----------------------------------- *
Kenneth W. Johnson ---------------------------------------
Chief Financial Officer John W. Titcomb, Jr., Director
* /s/ JAMES E. ROTTSOLK
- ----------------------------------- ---------------------------------------
David N. Cutler, Director * By: James E. Rottsolk
Attorney-in-fact
-19-
<PAGE>
EXHIBIT INDEX
SEQUENTIAL
EX. NO. DESCRIPTION PAGE NO.
3.1 Restated Articles of Incorporation of the Company(l)
3.2 Restated Bylaws of the Company(l)
5 Opinion on Legality
23 Consent of Deloitte & Touche LLP
24 Power of Attorney (2)
- ------------------------
(1) Incorporated by reference to Amendment No. 3 to the Company's Registration
Statement on Form SB-2, Registration No. 33-95460-LA, filed on September
22, 1995.
(2) Incorporated by reference to the Company's Registration Statement on Form
S-3, Registration No. 333-36563, filed on September 26, 1997.
-20-
October 22, 1997
Board of Directors of
Tera Computer Company
Dear Sirs:
I have supervised the corporate proceedings of Tera Computer Company, a
Washington corporation (the "Company"), in connection with the March 1997
issuance to eight accredited investors of 299,332 shares of Common Stock (the
"March Shares") and warrants exercisable into 68,167 shares of Common Stock; the
April 1997 issuance to H.J. Meyers & Co., Inc., of a warrant to purchase 700,000
shares of Common Stock; and the July 1997 issuance to H.J. Meyers & Co., Inc.,
of a warrant to purchase 300,000 shares of Common Stock. The warrants referenced
above are collectively referred to herein as the "Warrants."
I also am familiar with the corporate proceedings relative to the
incorporation of the Company and its present corporate status. Based upon the
foregoing and having regard for such legal considerations as I have deemed
relevant, I am of the opinion that:
1. The Company is a corporation duly organized and validly existing under
the laws of the State of Washington, with full corporate power to issue the
March Shares, the Warrants, and the shares of Common Stock reserved for issuance
upon exercise of the Warrants.
2. The March Shares have been duly authorized and validly issued and are
fully paid and nonassessable.
3. The Warrants have been duly authorized and validly issued.
4. The shares of Common Stock issuable upon exercise of the Warrants have
been duly authorized and reserved for such purpose by appropriate corporate
action and, when issued upon such exercise, will be validly issued, fully paid,
and nonassessable.
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement on Form S-3 filed with the Securities and Exchange
Commission relating to the shares of Common Stock issued in March 1997 and
issuable upon exercise of the Warrants, and the use of this opinion in
connection with the qualification of such shares of Common Stock under the
applicable securities laws of any state.
Very truly yours,
KENNETH W. JOHNSON
Kenneth W. Johnson
General Counsel
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement No. 333-36563 of Tera Computer Company on Form S-3 of
our report dated February 7, 1997, appearing in the Annual Report on Form 10-KSB
of Tera Computer Company for the year ended December 31, 1996, and to the
reference to us under the heading "Experts" in the Prospectus, which is part of
this Registration Statement.
/s/ DELOITTE & TOUCHE
Seattle, Washington
October 21, 1997
