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Cray Computer Corp – ‘10-Q’ for 6/30/95

As of:  Friday, 8/18/95   ·   For:  6/30/95   ·   Accession #:  927356-95-227   ·   File #:  0-18072

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 8/18/95  Cray Computer Corp                10-Q        6/30/95    2:62K                                    Donnelley R R & S… 08/FA

Quarterly Report   —   Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      28    116K 
 2: EX-27       Financial Data Schedule                                2      6K 


10-Q   —   Quarterly Report
Document Table of Contents

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

Dates Referenced Herein   and   Documents Incorporated by Reference

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6/10/9715
9/30/95172110-Q
8/28/9522
Filed on:8/18/9528
8/11/951
7/24/951720
7/21/9518
7/20/95278-K
7/14/9516278-K
For Period End:6/30/95125NT 10-Q
4/27/9525
4/24/9515
4/4/95278-K
3/31/9582710-Q,  NT 10-K,  NT 10-Q
3/24/95627
2/28/9511
2/27/958DEF 14A
2/15/9516
1/25/958
12/31/9422410-K,  NT 10-K
6/30/942
6/10/9414
5/10/9411
1/5/949
12/31/9324
6/17/9324
1/1/9312
12/31/92724
1/31/9215
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