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Cray Computer Corp – ‘10-Q’ for 9/30/95

As of: Tuesday, 11/14/95 · For: 9/30/95 · Accession #: 927356-95-316 · File #: 0-18072

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

11/14/95  Cray Computer Corp                10-Q        9/30/95    2:86K                                    Donnelley R R & S… 08/FA

Quarterly Report — Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Form 10-Q Dated Sept. 30, 1995                        38    159K 
 2: EX-27       Article 5 FDS                                          2      6K

10-Q — Form 10-Q Dated Sept. 30, 1995
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Exhibits and Reports on Form 8-K Management's Discussion and Analysis of Financial Condition and Results of Operations Notes to Interim Financial Statements (unaudited) Other Information Submission of Matters to A Vote of Security Holders
1	1st Page - Filing Submission
6	Notes to Interim Financial Statements (unaudited)
20	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
37	Item 4. Submission of Matters to A Vote of Security Holders
"	Item 5. Other Information
"	Item 6. Exhibits and Reports on Form 8-K

10-Q 1st Page of 38 TOC ↑Top Previous Next ↓Bottom Just 1st
 
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 September 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 November 10, 1995, 46,464,987 shares of the registrant's Common Stock,    
$0.01 par value, were outstanding.        

10-Q 2nd Page of 38 TOC 1st Previous Next ↓Bottom Just 2nd
CRAY COMPUTER CORPORATION 
(Debtor in Possession)  
INDEX 

       PART I.  FINANCIAL INFORMATION                                   PAGE NO.
                                                                       -------
ITEM 1.  FINANCIAL STATEMENTS                           

    Statements of Operations (unaudited) cumulative from
    October 1983 (inception) through September 30, 1995,
     and for the three and nine months ended September 30,
             1995 and 1994..........................................     3

       Statements of Deficiency in Net Assets of September 30,
             1995 (unaudited), and December 31, 1994................     4

   Statement of Changes in Deficiency (unaudited) from
             July 1, 1995 through September 30, 1995................     5

             Notes to Interim Financial Statements (unaudited)......     6

  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS...............    20

PART II.  OTHER INFORMATION                                       

NOT APPLICABLE                                                

    SIGNATURE.......................................................    38

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                 Nine  months       
                                          October 1993         ended Sept. 30,               ended Sept 30,     
                                       (inception) through  -----------------------      ---------------------  
                                          Sept. 30, 1995     1995            1994        1995            1994   
                                          --------------    -------         -------      -----           -----  
                                                                                                                
Revenue                                                                                                         
        Sales                              $  12,760              -                 -           -             - 
        Service fees                           1,846              82                90        253           261 
        Development contract revenue           2,607             (20)            1,449        482         1,449 
        Other revenue                            216             136                12        160            12 
                                            ---------       --------           --------    -------       -------
                                              17,231             198             1,551        895         1,722 
                                            ---------       --------           --------    -------       -------

Operating costs and expenses                                                                                    
        Cost of sales                          7,686              -                 -           -             - 
        Cost of services                         641              -                 -           -            40 

        Research and development                                                                                
          Related parties                     41,169              -                 78         60           251 
          Other                              316,552              -              7,644      7,571        27,929 
                                            ---------       --------           --------    -------       -------
        Total research and development       357,721              -              7,722      7,631        28,180 

        Marketing                              3,859              -                342        362           803 

        General and administrative            22,190          1,729                588      4,376         1,944 
                                            ---------       --------           --------    -------       -------
                                             392,097          1,729              8,652     12,369        30,967 
                                            ---------       --------           --------    -------       -------

Operating loss                              (374,668)        (1,531)            (7,101)   (11,474)      (29,245)

        Other income (deductions), net        (3,429)        (3,806)              (141)    (4,337)         (633)

        Litigation settlement expense          1,000              -                  -          -             - 

Net loss                                   $(379,097)        (5,337)            (7,242)   (15,811)      (29,878)
                                            =========       ========           ========    =======       =======

Loss per share                                                 (.11)              (.19)      (.35)         (.79)
                                                            ========           ========    =======       =======

Weighted average number of shares                                                                               
 outstanding                                                 46,465             38,042     45,792        37,983 
                                                            ========           ========    =======       =======


See accompanying notes to interim financial statements                          

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CRAY COMPUTER CORPORATION 
(Debtor in Possession)  

Statements of Deficiency in Net Assets  
Available in Liquidation  

(Liquidation Basis and Unaudited) 

                                                                [Download Table]


(In thousands, except share data)                           Sept 30,   December 31,
--------------------------------                              1995         1994    
                                                            --------   ------------
                                                                                   
Assets                                                                             
        Cash and cash equivalents                           $  3,104        2,372  
        Accounts receivable                                    1,826          711  
        Prepaid expenses                                          17        1,855  
        Other assets                                              38           15  
        Property, plant and equipment (net)                    8,153       21,213  
                                                            ---------    --------- 
Total assets                                                  13,138       26,166  
                                                            ---------    --------- 

Liabilities                                                                        
        Accounts payable                                      10,788        2,392  
        Accrued expenses                                       1,326        1,600  
        Lease obligations                                      3,002            -  
        Long-term liability                                        -          360  
        Bank borrowings                                            -       12,719  
        Bankruptcy administrative expense reserve                500            -  
                                                            ---------    --------- 
Total liabilities                                             15,616       17,071  
                                                            ---------    --------- 

Net deficiency in net assets available in liquidation       $ (2,478)       9,095  
                                                            =========    ========= 

Stockholders' deficiency in net assets:                                            
        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    (379,097)    (363,286) 
        Less accumulated deficit transferred to additional                         
                paid-in capital                              122,775      122,775  
                                                            ---------    --------- 
        Accumulated deficit since November 15, 1989         (256,322)    (240,511) 
                                                            ---------    --------- 
Commitments and contingencies                                                      

Stockholders' deficiency in net assets                      $ (2,478)       9,095  
                                                            =========    ========= 


See accompanying notes to interim financial statements                          

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CRAY COMPUTER CORPORATION 
(Debtor in Possession)  

Statement of Changes in Deficiency  
in Net Assets Available in Liquidation  

Quarter ended September 30, 1995 and  
period from July 1, 1995 through September 30, 1995 

(Unaudited) 

                                                                [Download Table]


(In thousands, except share data)                                                   
---------------------------------                                                   

                                                                                    
Net assets available in liquidation at July 1, 1995                       $   2,859 

Changes in net assets available in liquidation attributed to:                       
        Increase in cash                                                      2,671 
        Increase in accounts receivable                                       1,662 
        Decrease in prepaid expenses and other assets                        (1,671)
        Write-down of net property and equipment to net realizable value    (11,169)
        Increase in accounts payable                                            (45)
        Decrease in accrued expenses                                            104 
        Bankruptcy Administrative expense reserve                              (500)
        Increase in lease obligations                                        (3,002)
        Decrease in bank borrowings                                           6,613 
                                                                          --------- 

                                                                             (5,337)
                                                                          --------- 

Deficiency in net assets available in liquidation at Sept. 30, 1995       $  (2,478)
                                                                          ========= 


See accompanying notes to interim financial statements                          

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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.  Generally accepted        
accounting principles require the adjustment of assets and liabilities to       
estimated net realizable value under the liquidation basis.  Accordingly, the   
statements of deficiency in net assets available in liquidation at September    
30, 1995 reflect assets and liabilities on this basis.  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 Company is currently finalizing a Chapter 11 Liquidating Plan (the          
"Plan")  Once the Plan is finalized, it will be mailed to all known creditors,  
shareholders, and other party in interest to make an informed decision to       
accept or reject the Plan.                                                      

The Plan proposes that a Trustee will be appointed to manage and dispose of     
the balance of the assets of the Estate on behalf of the Company.  Allowed      
priority claims shall be paid in full on the Effective Date.  Allowed unsecured 
claims shall be paid in full on the Effective Date, provided sufficient cash is 
available.  To the extent there is insufficient cash available on the Effective 
Date to pay all allowed unsecured claims in full, the holders of allowed        
unsecured claims shall be paid on a Pro Rata Basis.  Subsequent distribution(s) 
to the holders of allowed unsecured claims will be made to the extent           
additional cash becomes available until such time as all allowed unsecured      
claims are paid in full.  Equity security holders shall receive pro rate        
distribution of available cash remaining, if any, after full payment to the     
classes of Allowed Claims as provided under the Plan.  The Company's management 
believes that any liquidating distribution to shareholders is unlikely.  The    
Effective Date of the Plan means the first business day which is 15 days after  
the entry of a Bankruptcy Court order confirming the Plan which is no longer    
subject to appeal, review, or certiorari proceedings.                           

On March 24, 1995 Cray Computer Corporation (the "Company") filed a             
voluntary petition under Chapter 11 of the United States Bankruptcy             

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10-Q 7th Page of 38 TOC 1st Previous Next ↓Bottom Just 7th
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 is managed under the
director of its Board of Directors, who have served both prior to and during the
Chapter 11 case. The executive officers who have remained with the Company since
the filing of the Chapter 11 case, in addition to Seymour R. Cray as the Chief  
Executive Officer, are Terry A. Willkom, President and Chief Operating Officer  
and William G. Skolout, Vice President of Finance, Chief Financial Officer,     
Secretary and Treasurer. Messrs,. Willkom and Skolout are responsible for the   
day-to-day management of the Company and have undertaken primary responsibility 
for the investigations and negotiations pertaining to the marketing and sale of 
the Company's business and its assets.                                          

The terms of the Company's secured debt financing provided for certain          
events of default. The Filing of Bankruptcy is stated in the loan agreement 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.  
The Company does not believe that the Filing of Bankruptcy is an event of       
default.                                                                        

The Bankruptcy Code requires the Company to obtain Bankruptcy Court approval    
or the consent of the secured creditor to use cash and other liquid assets on   
which the creditor holds a lien ("Cash Collateral").  On May 5, 1995, the       
Company filed a Motion for Authorization to Use Cash Collateral in which        
Congress claimed a security interest.  As a result of discussions between the   
Company, Congress, and the Creditors Committee, a stipulation was reached in    
which Congress allowed the Company, on an interim basis, to utilize the cash    
which the Company held (or would receive as a result of collection of           
outstanding receivables) to fund the Company's reorganization efforts.          

Seymour R. Cray, the Chairman of the Board and Chief Executive Officer of       
the Company, is the designed of the CRAY-3 and CRAY-4 supercomputer systems.    
Mr. Cray devoted his full working time to the Company since its inception until 
after the petition was filed and has continued to render services since that    
date.  Mr. Cray serves as an independent contractor to the Company under a      
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, and has a term   
expiring in June 1997.  Mr. Cray has waived all                                 

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compensation under this Agreement since March 24, 1995. This Agreement provides 
for the early termination in the event that the Company discontinues development
funding for the CRAY-4 or for future systems or limits or terminates agreed upon
production of 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 the prior consent by the Company's asset based secured lender, as   
long as its loan agreement with the Company remains in effect. The Company      
believes that it has paid substantially all of the monies owed to the secured   
lender.                                                                         

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.  The contract provided that the Company may be paid up to $4.2      
million for development costs.  The Company has cumulatively invoiced NSA for   
approximately $2.6 million under the contract and no receivables are currently  
outstanding.  No additional amounts will be billed under the contract.          

The Company is reviewing the terms and conditions of the above contracts,       
and all other executory contracts and unexpired leases, with their respective   
non-debtor parties regarding assumption or rejection decisions.  In addition,   
the Company has received proposals for the purchase of its patent and other     
intellectual property assets.                                                   

As of the petition date, payment of liabilities to unsecured creditors,         
including trade unsecured creditors and secured note holders, 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.                                                                     

See Notes 3, 5, 6, 7, 8, 9, 10 and 11 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                

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accumulated deficit from October 1983 (inception) through November 15, 1989 was 
offset against additional paid-in capital.                                      

The Company was 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, CRAY3/Super Scalable System (SSS), 
and CRAY-4 supercomputer systems. Such activities 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 had no orders for or revenues     
from the sale of its products.                                                  

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 nine months of 1995.         

(2) Property and Equipment                                                      
--------------------------                                                      

Property and equipment are stated at estimated net realizable value at          
September 30, 1995.                                                             

(3) 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.                                                     

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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.                                        

(4) Related Party Transactions                                                  
------------------------------                                                  

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)                 Nine months ended       Three months ended  
                                 September 30,            September 30,    
                           -------------------------  ---------------------
                           1995                1994   1995            1994 
                           ----                ----   ----            ---- 
                                                                           
Performance Semiconductor                                                  
   Corporation (a)         $   -                 45     -               8  
Seymour R. Cray (b)           60                206     -              70  
                           -----                ---   ----            ---  
                           $  60                251     -              78  
                           =====                ===   ====            ===  


Performance Semiconductor Corporation (PSC) supplied the Company with 4         
Kilobit and 256 Kilobit Static Random Access Memory (SRAM) circuits until       
August 1993. The $45,000 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                                   

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California. All outstanding purchase orders between the Company and PSC had been
fulfilled or cancelled prior to January 1994.                                   

Seymour R. Cray, the Chairman of the Board and Chief Executive Officer of       
the Company, is the designed of the CRAY-3 and CRAY-4 supercomputer systems.    
Mr. Cray devoted his full working time to the Company since its inception until 
after the petition was filed and has continued to render services since that    
date.  Mr. Cray serves as an independent contractor to the Company under a      
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, and has a term   
expiring in June 1997.  Mr. Cray has waived all compensation under this         
Agreement since March 24, 1995.  This Agreement provides for the early          
termination in the event that the Company discontinues development funding for  
the CRAY-4 or for future systems or limits or terminates agreed upon production 
of 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 the prior consent by the Company's asset based secured lender, as long as    
its loan agreement with the Company remains in effect.                          

The Company is reviewing the terms and conditions of the Agreement with Mr.     
Cray regarding the rejection of the Agreement.                                  

(5) 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.                                        

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(6) 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.                                                                          

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.                                        

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(7) 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                                           -           -     (15,811)  
                                             -------     -------    ---------  

Balance at September 30, 1995                $   465     253,379    (256,322)  
                                             =======     =======    =========  


See Note 13 - "Other Subsequent Events" for information concerning the          
current status of the bankruptcy filing.                                        

(8) 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                         

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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.                                        

(9) 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 September 30, 1995, the Company 
had cumulatively invoiced the NSA approximately $2,607,000 pursuant to the      
terms of the joint development contract.  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.                                               

Accounts receivable also reflect an estimated amount of net proceeds of         
$1,750,000 from the Company's equipment auction held on October 26, 1995.       

See Note 13 - "Other Subsequent Events" for information concerning the          
current status of the bankruptcy filing.                                        

(10) 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                                  

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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.                                        

(11) 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 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 September 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 in   
the loan agreement 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.  The Company does not believe that the Filing of Bankruptcy   
is an event of default.                                                         

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                  

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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 were 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 provided for certain          
events of default, which include, among other things, (i) failure to perform or 
meet certain covenants, such as maintaining a minimum working capital and net   
worth, as defined by the agreement, (ii) any change in the controlling          
ownership of the Company, (iii) the failure of Seymour R. Cray to provide       
services to the Company substantially similar to those he currently provides,   
other than such failure by reason of death, disability, sickness, or injury,    
(iv) any material adverse change in the Company's business, assets, or          
prospects and (v) the Filing of Bankruptcy. If the Company were to default      
under the financing, the lender may take possession of the Company's assets,    
charge higher interest rates on the outstanding debt, demand immediate          
repayment of all obligations and/or take other actions as specified in the loan 
agreement.                                                                      

On April 24, 1995 the secured lender, as a result of the bankruptcy filing,     
called on the standby letters of credit (totalling $6 million) issued in their  
favor by Mr. Cray which reduces the amount owed by the Company on its line of   
credit to the secured lender. The Company now has an unsecured liability to Mr. 
Cray for an approximate amount of $6 million.                                   

See Note 1 - Bankruptcy Filing and Basis of Financial Statement Presentation.   

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            

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also pay a service fee of $50,000 for each year the loan agreement is effective 
and certain other fees.                                                         

Per the terms of the Loan and Security Agreement between the Company and        
Congress Financial Corporation, the Company must pay a success fee of $175,000  
on June 10, 1997 or, if sooner, upon termination of the loan. The success fee   
owed is recorded as a current liability at March 31, 1995.                      

(12) Commitments and Contingencies                                              
-----------------------------                                         

The Securities and Exchange Commission (the "Commission") has issued a formal   
order for a non-public investigation relating to trading in the Common Stock of 
the Company during the period from September 1, 1990 through January 31, 1992,  
which is the approximate period during which the Company was negotiating or had 
in effect a purchase order for a 16-processor CRAY-3 supercomputer system from  
the National Energy Research Supercomputer Center (NERSC) at Lawrence Livermore 
National Laboratory. The announced loss of this purchase order in December 1991 
caused a major drop in the market price of the Company's Common Stock. The      
formal order states that the Commission staff has information tending to show   
that during the period under investigation certain individuals and entities may 
have traded stock of the Company while in possession of material non-public     
information and that the Company and others may have made false and misleading  
statements in filings with the Commission or in other public documents          
concerning this purchase order or the progress of development of the CRAY-3,    
which allegations, if true, would result in possible violation of Section 17 (a)
of the Securities Act of 1933 and Sections 10 (b) and 13 (a) of the Securities  
Exchange Act of 1934. The staff of the Central Regional Office of the Commission
has notified the Company of its intention to recommend that the Commission seek 
permanent injunctions and civil penalties against the Company, Seymour R. Cray  
and a former officer of the Company for alleged violations of these Sections and
to seek similar relief against Terry Willkom, the President of the Company,     
under two of them. The staff of the Central Regional Office has informed the    
Company and the corporate officers that they may file 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.              

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(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 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 extensions of its exclusive right to   
file a Chapter 11 Plan through November 15, 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.  

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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 extensions for its exclusive right to file a    
Chapter 11 plan through November 15, 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.                                            

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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.  Generally accepted accounting principles 
require the adjustment of assets and liabilities to estimated net realizable    
value under the liquidation basis.  Accordingly, the statements of deficiency   
in net assets available in liquidation at September 30, 1995 reflect assets and 
liabilities on this basis.                                                      

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 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 is managed under the     
director of its Board of Directors, who have served both prior to and during    
the Chapter 11 case.  The executive officers who have remained with the Company 
since the filing of the Chapter 11 case, in addition to Seymour R. Cray as the  
Chief Executive Officer, are Terry A. Willkom, President and Chief Operating    
Officer and William G. Skolout, Vice President of Finance, Chief Financial      
Officer, Secretary and Treasurer.  Messrs,. Willkom and Skolout are responsible 
for the day-to-day management of the Company and have undertaken primary        
responsibility for the investigations and negotiations pertaining to the        
marketing and sale of the Company's business and its assets.                    

The Company is currently finalizing a Liquidating Plan (the "Plan")  Once       
the Plan is finalized, it will be mailed to all known creditors, shareholders,  
and other party in interest to make an informed decision to accept or reject    
the Plan.                                                                       

The Plan proposes that a Trustee will be appointed to manage and dispose of     
the balance of the assets of the Estate on behalf of the Company.  Allowed      
priority claims shall be paid in full on the Effective Date.  Allowed unsecured 
claims shall be paid in full on the Effective Date, provided sufficient cash is 
available.  To the extent there is                                              

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insufficient cash available on the Effective Date to pay all allowed unsecured  
claims in full, the holders of allowed unsecured claims shall be paid on a Pro  
Rata Basis. Subsequent distribution(s) to the holders of allowed unsecured      
claims will be made to the extent additional cash becomes available until such  
time as all allowed unsecured claims are paid in full. Equity security holders  
shall receive pro rate distribution of available cash remaining, if any, after  
full payment to the classes of Allowed Claims as provided under the Plan. The   
Company's management believes that any liquidating distribution to shareholders 
is unlikely. The Effective Date of the Plan means the first business day which  
is 15 days after the entry of a Bankruptcy Court order confirming the Plan which
is no longer subject to appeal, review, or certiorari proceedings.              

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 extensions for its exclusive right to file a Chapter 11 plan  
through November 15, 1995.  The motion is pending as of the date of this report.

The development of a new generation of scientific supercomputers is a           
lengthy and technically challenging process.  The CRAY-3, CRAY-3/SSS, and       
CRAY-4 were technically complex super computers.  The performance               
specifications of these supercomputers require a unique computer design, and    
unique manufacturing techniques and testing processes.                          

Because the Company pioneered the technological development in all of these     
areas, it experienced various developmental delays in each area and in          
combining all of the advanced components into a complete supercomputer system.  
Some of these delays were lengthy.  In total, they resulted in an approximately 
two-year delay in the market introduction of the CRAY-3 from management's       
estimate at the time the Company was spun off from CRI in 1989.                 

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The Company believes that this delay was one of the principal causes of its     
inability to secure orders for the purchase of the CRAY-3 when it became        
available for sale in 1993.  Also, as a result of this delay in market          
introduction and associated sales, the Company was repeatedly required to raise 
additional capital to continue the funding of design, development and marketing 
activities for the CRAY-4, development of the CRAY-3/SSS, and the manufacture   
and marketing of the CRAY-3 systems.                                            

Through the development of the CRAY-3, CRAY-3/SSS and CRAY-4 computers, the     
Company sought to address the high performance, large scale scientific          
computing segment of the supercomputer market.  The number of potential         
customers in this market is and always has been limited.  In addition, the      
market for supercomputers has always been characterized by continuing           
advancement of technology and the development of increasingly sophisticated and 
powerful systems which render existing systems obsolete within a few years.     

The Company, Debtor in Possession, had a net loss for the nine months ended     
September 30, 1995 of $15.8 million.  The Company had accumulated losses of     
approximately $379 million from its inception through September 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 ($1,846,000) 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 ($2,607,000) 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).                           

In early 1995, 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.  In March 1995, the Company  
ceased to have sufficient liquid assets which would allow it to continue        
operations.  The Company terminated most of its 350 employees and stopped work  
on its supercomputer systems.  The Board of Directors                           

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authorized the Company to file a petition for protection under Chapter 11. The  
Company filed its Chapter 11 petition on March 24, 1995 in order to preserve its
assets and to equitably provide for all creditors and parties in interest.      

The commencement of a case under Chapter 11 subjected the Company and all of    
its property wherever located to the jurisdiction of the Bankruptcy Court for   
administration in accordance with the provisions of the Bankruptcy Code.  Since 
filing its petition, the Company has continued to operate as a debtor in        
possession.  It has filed all statements, schedules and lists required by the   
Bankruptcy Code and Rules, and all interim monthly financial reports required   
by the Office of the United States Trustee.                                     

Bankruptcy Status                                                               

The commencement of a case under Chapter 11 subjected the Company and all of    
its property wherever located to the jurisdiction of the Bankruptcy Court for   
administration in accordance with the provisions of the Bankruptcy Code.  Since 
filing its petition, the Company has continued to operate as a debtor in        
possession.  It has filed all statements, schedules and listed required by the  
Bankruptcy Code and Rules, and all interim monthly financial reports required   
by the Office of the United States Trustee.                                     

Retention of Bankruptcy Counsel and Accountants by Company                      

On March 24, 1995, the Company filed a Motion pursuant to Bankruptcy Code       
Section 327 and Rule 2014, seeking to retain Holland & Hart ("H&H"), 555        
Seventeenth Street, Suite 3200, Denver, Colorado 80202 as bankruptcy counsel to 
represent the Company in the bankruptcy proceedings and to continue its         
representation on other general matters. Prior to the filing, the Company paid  
H&H a retainer of $100,800 for costs and professional services rendered or to be
rendered in connection with this bankruptcy case. After deducting payment for   
pre-petition services rendered in preparation for the bankruptcy filing in the  
amount of $16,099.96 and payment of the $800 Chapter 11 filing fee, H&H         
deposited the amount of $83,900.04 in its trust account pending application to  
court approved fees and costs. On March 28, 1995, the Court entered its Order   
authorizing the Company to retain H&H.                                          

On April 7, 1995, the Company filed an Application seeking to employ KPMG       
Peat Marwick LLP ("KPMG") as the Company's independent certified public         
accountants and consultants.  On April 12, 1995, the Court entered its Order    
authorizing the employment of KPMG.                                             

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Suspension of Operations                                                        

As of the Petition Date, the Company suspended its business operations and      
laid off approximately 350 employees.  These employees were paid their accrued  
salary to the Petition Date, but were not paid for accrued vacation time.  In   
the Plan, the Company anticipates paying these unpaid employee claims for       
amounts representing:  (1) accrued vacation time; (2) certain 401(k) plan       
administration and asset management fees which have been charged to             
participating employees on an individual account basis; and (3) amounts owed to 
certain employees for reimbursement of expenses.  Once Court approval is        
obtained, payments will be made as priority claims up to the amount of $4,000   
for each employee, with any excess or non-priority portion being treated as an  
unsecured claim.                                                                

Appointment of Creditors' Committee and Its Counsel                             

On April 13, 1995, the United States Trustee's Office appointed the             
following creditors to serve on the Official Creditors' Unsecured Committee     
(the "Committee") in this Chapter 11 case:                                      

Toshiba America Electronic Components, Inc. 
Omnetics Connector Corporation              
Colorado Springs Utilities                  
Air Liquide                                 
Visual Numerics, Inc.                       

On or about April 21, 1995, the Creditors' committee filed a Motion seeking     
to retain the law firm of Faegre & Benson, P.L.L.P., 370 Seventeenth Street,    
Suite 2500, Denver, Colorado 80202 as general bankruptcy counsel to represent   
the Committee in the bankruptcy proceedings.  On May 17, 1995, the Court        
entered its Order authorizing the Committee to retain Faegre & Benson.          

Cash Collateral Agreement                                                       

As a result of the shutdown of active operations, the Company's operating       
expenses were greatly reduced, involving the maintenance and preservation of    
assets and the search for investment partners or purchasers.  Nevertheless, the 
Company required the use of funds to pay the ongoing costs of its limited       
operations and reorganization efforts.  The Bankruptcy Code requires the        
Company to obtain Bankruptcy Court approval or the consent of the secured       
creditor to use cash and other liquid assets on which the creditor holds a lien 
("Cash Collateral").                                                            

On June 10, 1994, the Company entered into a secured loan transaction with      
Congress Financial Corporation ("Congress").  In that transaction, the Company  
obtained a term loan from Congress in the amount of $6,500,000, a               

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revolving line of credit, and certain letter of credit accommodations. The terms
of the loan are set forth in a Loan and Security Agreement dated June 10, 1994. 
The Company's loan from Congress is secured by collateral including the         
Company's real estate, equipment, intellectual property and accounts receivable.
Standby letters of credit in the amount of $6 million were also posted by       
Seymour R. Cray in favor of Congress to provide additional security for the     
loan. As of the Petition Date, the Company owed Congress approximately $12.4    
million. Since that time, Congress has drawn on the standby letter of credit,   
reducing the amount of Congress' secured loan by $6 million and creating instead
an unsecured debt to Seymour Cray in that amount. During the pendency of this   
case, the Company has paid Congress an additional $6.7 million. It is the       
Company's position that Congress has been paid substantially, if not all, of its
secured claim in this case.                                                     

On May 5, 1995, the Company filed a Motion for Authorization to Use Cash        
Collateral in which Congress claimed a security interest.  As a result of       
discussions between the Company, Congress, and the Creditors Committee, a       
stipulation was reached in which Congress allowed the Company, on an interim    
basis, to utilize the cash which the Company held (or would receive as a result 
of collection of outstanding receivables) to fund the Company's reorganization  
efforts.                                                                        

Delisting of Company's Stock                                                    

The Company's common stock is quoted on the NASDAQ National Market under the    
symbol "CRAY".  Because of the Company's bankruptcy filing, the National        
Association of Securities Dealers ("NASD"), suspended the listing of the        
Company's common stock on the NASDAQ Stock Market.  Effective April 11, 1995,   
the Company's NASDAQ symbol was change to "CRAYQ".                              

Sale and Lease of Assets                                                        

Prior to and since the commencement of this Chapter 11 case, the Company        
engaged in extensive efforts to lay the groundwork for a confirmable plan of    
reorganization.  These efforts sought to (1) find investment capital or an      
investment partner, which would permit the Company to satisfy its creditors and 
resume operations; or, (2) find potential purchasers or lessees of all or a     
substantial portion of its assets on terms which would permit the Company to    
satisfy its secured debt, and make the maximum possible distributions to        
unsecured creditors, if possible thereafter to equity holders.                  

The Company contacted numerous companies that manufacture computers and         
related products as part of an extensive search for purchasers or investment    
partners.  To assist in the marketing process, and with Bankruptcy Court        
authorization, the Company hired certain appraisers, consultants, and           
auctioneers to provide valuations of the Company's real and                     

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personal property assets. The Committee also employed its own consultant for the
valuation and marketing of the Company's business and assets.                   

As of the Petition Date, the Company's assets include:  (1) its headquarters    
and operations building located at 1110 Bayfield Drive in Colorado Springs,     
Colorado; (2) the equipment located at the headquarters facility consisting of  
a "clean room" and associated equipment used in the manufacture and assembly of 
computer components, commonly referred to as the "FAB Facility"; (3) other      
technical, manufacturing, and assembly equipment not related to the FAB         
Facility; (4) general office furniture and equipment; (5) a leased facility at  
a different location in Colorado Springs which is equipped to operate as a      
printed circuit board manufacturing facility; and (6) certain intellectual      
property associated with its operations and the products it was developing.     

Despite its efforts, the Company has been unable to find the investment         
capital or an investment partner that would permit the Company to resume its    
business operations.  The Company contacted and had discussions with numerous   
prospective purchasers of its assets and after conferring with Congress and the 
Committee, the Company entered into a transaction for the sale and lease of     
certain of its assets as offering the best prospect to commence the process of  
maximizing the sale value of its assets for the benefit of the Estate and all   
parties in interest.                                                            

On July 6, 1995, the Company executed a Letter of Interest, providing for       
the sale of certain personal property and for the lease of the Company's real   
property, with M/A-COM, Inc. ("M/A-COM") and Quantum Corporation ("Quantum").   
The key terms of this proposed transaction with M/A-COM and Quantum (the "Sale  
and Lease") provided for the Company's sale to M/A-COM of all the equipment and 
fixtures, including the "clean room" and its support equipment, located in the  
FAB Facility as well as any other equipment or intellectual property necessary  
for such operation.  In addition, the Company proposed to lease to M/A-COM the  
portion of its building occupied by the FAB Facility, which consists of         
approximately 40,000 square feet.  Finally, the Company proposed to lease to    
Quantum the portion of its building known as the "Western Manufacturing Wing",  
which contains approximately 128,000 square feet.  These leases permit M/A-COM  
and/or Quantum to occupy the Company's office building for an initial two year  
lease term on a triple net basis with an option for up to an additional three   
years.                                                                          

On July 13, 1995, the Company filed a Motion, which primarily sought court      
authority to approve the Sale and Lease and to establish procedures for a       
competitive bidding process for the sale and/or lease of all or a portion of    
the Company's remaining assets outside the ordinary course of business, free    
and                                                                             

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clear of liens. A Court-approved notice of these proposed actions was mailed to 
all creditors, equity holders and other parties in interest.                    

On August 29, 1995, the Bankruptcy Court approved the Sale and Lease as         
subsequently modified by negotiations during the competitive bidding process.   
Thereafter the Company, M/A-COM and Quantum closed the Sale and Lease as more   
definitively described in the transactional agreements between the parties      
filed with the Court.  At closing, the Company received a total of $7,275,000   
from M/A-COM and $2,573,000 from Quantum for a total consideration of           
$9,848,000.  Congress was paid the amount of $6,734,343.83 on account of its    
secured claim and liens covering the Company's assets.  Also, a tax reserve for 
payment of the Company's pre-petition real and personal property taxes in the   
amount of $1 million was established, pending final resolution of these claims. 
Finally, after payment of closing expenses and personal property taxes arising  
from the Sale and Lease, the Company received the net amount of $2,724,096.37   
for eventual payment to creditors under the Plan.                               

Assets Remaining To Be Sold                                                     

As a result of the Sale and Lease, the Company was required to vacate its       
corporate office complex at 1110 Bayfield Drive, Colorado Springs, Colorado.    
The Company has moved to smaller offices located at 202 East Cheyenne Mountain  
Boulevard, Suite C, Colorado Springs, Colorado 80906 (P.O. Box 61003, 80960).   
The Company has continued to seek purchasers for its remaining personal         
property and equipment assets and the Bayfield complex (approximately 60        
acres), subject to the M/A-COM and Quantum leases.                              

The Company removed all of its equipment and other personal property not        
covered in the Sale and Lease from the Bayfield Complex.  To commence an        
orderly Chapter 11 liquidation of assets, the Company solicited numerous        
proposals from auctioneers and equipment purchasers.                            

After the Company's discussions with third party plan investors and             
purchasers of all remaining assets did not result in offers for adequate value, 
the Company determined that the value of its remaining equipment would be       
maximized by an auction process.  Thereafter, the Company sought and received   
Bankruptcy Court approval to hire Koll-Dove Global Disposition Services, LLC    
("Koll-Dove") to conduct the auction.  Koll-Dove is a full service auctioneer   
located in Foster City, California, specializing in the sale of high technology 
capital assets and having over 50 years of experience with the auction,         
appraisal and liquidation of equipment and other capital assets.  The Company   
leased a warehouse to conduct the auction, consisting of approximately 40,000   
square feet of space for up to 90 days.  The auction was held on October 26,    
1995.  The property sold included printed circuit boards, data processing       
equipment, furniture, industrial machinery and other                            

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miscellaneous capital assets. The assets were sold piece by piece or by lot as  
determined by Koll-Dove so as to best maximize the return to the Estate. The    
total gross amount realized by the auction is estimated to have been            
approximately $1.8 million.                                                     

In addition, the Company continues to seek purchasers for the Bayfield          
Office Complex subject to the M/A-Com and Quantum leases.  The Complex totals   
approximately 60 acres of real estate, consisting of the office building and    
other improvements.                                                             

Also, at December 31, 1994, the Company had a net operating loss                
carryforward for Federal Income Tax purposes of approximately $227 million      
which it believes may be available to offset future taxable income, if any,     
through 2009.  The Company also has a research and development tax credit       
carryforward for Federal Income Tax purposes of approximately $14 million 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.  Such an ownership change may occur should a 
prospective investor seek to acquire the Company to continue its supercomputer  
business.  Accordingly, depending on the outcome of the Company's bankruptcy    
case, the Company's ability to utilize its Federal Income tax net operating     
loss and research and development credit carryforwards may be severely          
restricted or eliminated.  To date, the Company has been unable to finalize a   
satisfactory arrangement which would allow utilization of its net operating     
losses for the benefit of the Estate, and such an arrangement appears to be     
unlikely.                                                                       

Bar Date for Filing Claims                                                      

The Bankruptcy Court set September 30, 1995 as the last date to file proofs     
of claim and proofs of interest against the Estate.  Notice of the claims bar   
date was given to all creditors, shareholders, and other parties in interest.   
This requirement for filing claims applies to all pre-petition claims or claims 
which arose prior to March 24, 1995 which were not scheduled, or were scheduled 
as disputed, contingent or unliquidated in the schedules of liabilities filed   
with the Bankruptcy Court by the Company, or were scheduled and such creditor   
disagreed with the amount of the scheduled claim.  Claims arising on account of 
the rejection of an executory contract must be filed within 30 days of the      
order allowing rejection.  Since September 30, 1995 was a Saturday, any         
creditor required to file a proof of claims and who failed to do so by 4:30     
p.m. Denver time, October 2, 1995, will not be treated as a creditor for the    
purposes of voting on or distribution under the Plan, and any claim by such     
creditor shall be forever barred.                                               

Extension of the Exclusive Period To File a Plan                                

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The Bankruptcy Code provides that only the Company may file a Plan within       
the first 120 days after the entry of the Order For Relief.  This is known as   
the exclusive period.  If the Company files a plan within this time frame, then 
the exclusive period is extended an additional 60 days to permit the Company to 
gain acceptance of the Plan.  The exclusive period may be extended by the Court 
for cause.                                                                      

On July 20, 1995, the Company filed a Motion seeking an order of the Court      
extending the exclusive period for the Company to file the Plan from July 24,   
1995 to September 30, 1995.  On September 13, 1995 the Court entered its Order  
granting the requested extension.  Since the Company and the Committee were     
continuing to negotiate with third parties on a potential plan of               
reorganization and additional asset sales, on September 29, 1995 the Company    
filed its Second Motion to extend the exclusive period for an additional month  
from September 30 to October 31, 1995.  On October 31, 1995 the Company filed   
its Third Motion seeking an extension until November 15, 1995.                  

Actions on Executory Contracts                                                  

The Company is a party to several executory contracts, unexpired leases, and    
licenses.  To date, the Company has entered into an agreement with CRI          
regarding the rejection of an executory contract for the maintenance of a       
CRAY-2 computer utilized at Lawrence Livermore Laboratories in Los Angeles,     
California.  The Company continues to have discussions with various interested  
purchasers of its unexpired leases, executory contracts, licenses, intellectual 
property and other patent assets.  The Company intends to make its final        
decision regarding the assumption or rejection of these unexpired leases,       
executory contracts and licenses as part of the confirmation of its plan.       

The Bankruptcy Code provides that the Company must assume or reject             
unexpired leases of nonresidential real property wherein the Company is the     
lessee ("Lease") within sixty days after the entry of the Order for Relief.  If 
a Lease is not assumed or rejected within the sixty day period, the Lease is    
deemed automatically rejected.  The Bankruptcy Code provides that the sixty day 
period may be extended by the Court.  The Company has received from the Court   
two previous extensions of time to assume or reject the real property lease     
covering the printed circuit board plant located in Colorado Springs, Colorado  
until October 31, 1995.  On October 20, 1995, the Company filed its third       
motion for an extension, requesting an additional month or until December 15,   
1995 within which to make its decision on this lease.  The reason for these     
requested delays was that the Company hoped it could realize more value for its 
creditors if it can locate a successor to this lease, rather than terminating   
the lease and selling the contents of the premises separately.  On              

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October 26, 1995, the Court entered its Third Order, pursuant to the Company's  
motion, extending the time to assume or reject this lease until December 15,    
1995 .                                                                          

Seymour R. Cray, the Chairman of the Board and Chief Executive Officer of       
the Company, is the designed of the CRAY-3 and CRAY-4 supercomputer systems.    
Mr. Cray devoted his full working time to the Company since its inception until 
after the petition was filed and has continued to render services since that    
date.  Mr. Cray serves as an independent contractor to the Company under a      
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, and has a term   
expiring in June 1997.  Mr. Cray has waived all compensation under this         
Agreement since March 24, 1995.  This Agreement provides for the early          
termination in the event that the Company discontinues development funding for  
the CRAY-4 or for future systems or limits or terminates agreed upon production 
of 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 the prior consent by the Company's asset based secured lender, as long as    
its loan agreement with the Company remains in effect.                          

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.  The contract provided that the Company may be paid up to $4.2      
million for development costs.  The Company has cumulatively invoiced NSA for   
approximately $2.6 million under the contract and no receivables are currently  
outstanding.  No additional amounts will be billed under the contract.          

The Company is reviewing the terms and conditions of the above contracts,       
and all other executory contracts and unexpired leases, with their respective   
non-debtor parties regarding assumption or rejection decisions.  In addition,   
the Company has received proposals for the purchase of its patent and other     
intellectual property assets.                                                   

Status of Pending Litigation                                                    

As of the date of this report, the Company was involved in two litigation       
matters in this bankruptcy case.  To the Company's knowledge, no other legal    
actions are outstanding except the bankruptcy case.                             

On September 28, 1995, Congress filed a Complaint asking the Bankruptcy         
Court to declare its loan agreement with the Company terminated, to determine   
the extent and validity of its claims, and for other relief.  By this action,   
Congress seeks payment of a Loan Termination Fee in the amount of $875,000 plus 
additional interest and fees.  The Company disputes Congress'                   

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claim for a termination fee and anticipates that the Committee will seek to     
intervene to support the Company's position in this adversary. To date, this    
matter has not been set for trial and no pretrial scheduling order is in place. 

The second matter involves an appeal to the United States District Court for    
the district of Colorado by William Kuntz, III, an equity security holder of    
the Company.  The appeal concerns the Company requested orders be entered by    
the Bankruptcy Court (1) granting the Company an extension until October 31,    
1995 in which to assume or reject the printed circuit board facility lease; and 
(2) granting the Company an extension of its exclusive period to file a plan    
until September 30, 1995.  When the Bankruptcy Court denied Mr. Kuntz'          
objections and granted these extension requests, Mr. Kuntz filed the appeal.    
The parties have filed their respective designations of record and upon         
transmittal of the record by the Bankruptcy Court to the District Court, the    
appellate briefing schedule will begin.  The Company believes that this appeal  
is interlocutory in nature and should be mooted by subsequent events and        
decisions in the Chapter 11 case.                                               

The Company believes it is complying with the reporting requirements and        
operating guidelines for Debtors-in-Possession under Chapter 11 proceedings.    

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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 September 30, 1995 totaled $82,000 compared with  
$90,000 for the third quarter of 1994. The $8,000 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 has entered into an agreement with CRI regarding the rejection      
of an executory contract for the maintenance of a CRAY-2 computer utilized at   
Lawrence Livermore Laboratories in Los Angeles, California.  Services under the 
maintenance agreement were performed by CRI as a subcontractor and were not     
interrupted by the bankruptcy filing.  The service fee revenues described       
herein are net of payments to the subcontractor.  Service fees revenue for the  
nine months ended September 30, 1995 totaled $253,000 compared with $261,000    
for the first nine 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 September 30, 1995 
totaled ($20,000), which reflects a correction to an invoice accrued in second  
quarter of 1995.  As of September 30, 1995, the Company had cumulatively        
invoiced the NSA approximately $2,607,000 pursuant to the terms of the joint    
development contract and had no related outstanding accounts receivable.  No    
additional amounts will be billed under the joint development contract.         

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.  The contract provided that the Company may be paid up to $4.2      
million for development costs.  The Company has cumulatively invoiced NSA for   
approximately $2.6 million under the contract and no receivables are currently  
outstanding.  No additional amounts will be billed under the 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                                      

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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 nine months ended  
September 30, 1995 totaled $482,000 .                                           

Other revenue reported for the third quarter of 1995 relates primarily to       
recognition of deferred lease obligations.                                      

Research and development expenses:  Research and development expenses           
related primarily to the design and development of the CRAY3/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        
third 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 nine months ended September 30, 1995 totaled   
$7,631,000 compared with $28,180,000 for the first nine months of 1994.         

Research and development expenses include certain related party                 
transactions. Related party research and development expenses for the nine      
months ended September 30, 1995 totaled $60,000 compared with $251,000 for the  
first nine months of 1994.                                                      

Marketing:    No marketing expenses were incurred by the Company in the         
third 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 nine 
months ended September 30, 1995 totaled $362,000 compared with $803,000 for the 
first nine months of 1994.                                                      

General and administrative expenses:  General and administrative expenses       
for the quarter ended September 30, 1995 totaled $1,729,000 compared with       
$588,000 for the third quarter of 1994. The $1,141,000 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                                                      

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expenses for the nine months ended September 30, 1995 totaled $4,376,000        
compared with $1,944,000 for the first nine months of 1994.                     

Other income (deductions), net:  Other income (deductions), net for the         
quarter ended September 30, 1995 totaled ($3,806,000) compared with ($141,000)  
for the third quarter of 1994. The $3,665,000 increase in other (deductions),   
net is a result of the write down of assets and prepaid production supplies to  
estimated net realizable value ($8,342,000).  The write down was partially      
offset by a gain on the sale of assets to M/ACom and Quantum ($4,536,000).      
Other income (deductions), net for the nine months ended September 30, 1995     
totaled ($4,337,000) compared with ($633,000) for the first nine 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.                                                                        

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 is managed under the     
director of its Board of Directors, who have served both prior to and during    
the Chapter 11 case.  The executive officers who have remained with the Company 
since the filing of the Chapter 11 case, in addition to Seymour R. Cray as the  
Chief Executive Officer, are Terry A. Willkom, President and Chief              

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Operating Officer and William G. Skolout, Vice President of Finance, Chief      
Financial Officer, Secretary and Treasurer. Messrs,. Willkom and Skolout are    
responsible for the day-to-day management of the Company and have undertaken    
primary responsibility for the investigations and negotiations pertaining to the
marketing and sale of the Company's business and its assets.                    

The Company had a deficit deficiency in net assets available in liquidation     
at September 30, 1995 of $2,478,000.  Generally accepted accounting principles  
require the adjustment of assets and liabilities to estimated net realizable    
value under the liquidation basis.  Accordingly, the statements of deficiency   
in net assets available in liquidation at September 30, 1995 reflect assets and 
liabilities on this basis.  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.                                         

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 September 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 in   
the loan agreement 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.  The Company does not believe that the Filing of Bankruptcy   
is an event of default.                                                         

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.                                                                        

The Company terminated most of its employees concurrent with the Filing on      
March 24, 1995.  The Company currently has two full time and three part         

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time employees. In the event the Company were to resume operations, the extent  
of operations and related costs have not been determined. There can be no       
assurance that the Company will resume operations, even on a limited basis, and 
that it will not be required to liquidate its assets to satisfy its liabilities.
In the event of liquidation, management has not determined if sufficient amounts
will be realized to satisfy the Company's liabilities. Furthermore, it is not   
possible for management to determine whether there will be any distributions to 
shareholders of any residual values available in the event of liquidation.      

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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 September 30, 1995.      

None                                                            

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SIGNATURES  

PursuantRegistrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.                                          

                                         CRAY COMPUTER CORPORATION
                                      (Debtor in Possession)

Date                November 14, 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.

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10-Q’ Filing	Date	First	Last	Other Filings

	6/10/97	17
	12/15/95	29	30
	11/15/95	18	29
Filed on:	11/14/95	38		8-K
	11/10/95	1
	10/31/95	29	31
	10/26/95	14	30
	10/20/95	29
	10/2/95	28
For Period End:	9/30/95	1	37
	9/29/95	29
	9/28/95	30
	9/13/95	29
	8/29/95	27
	8/28/95	32
	7/24/95	18	29
	7/21/95	21
	7/20/95	29		8-K
	7/14/95	18		8-K
	7/13/95	26
	7/6/95	26
	7/1/95	2	5
	5/17/95	24
	5/5/95	7	25
	4/27/95	35
	4/24/95	16
	4/21/95	24
	4/13/95	24
	4/12/95	23
	4/11/95	25
	4/7/95	23
	3/31/95	9	32	10-Q, NT 10-K, NT 10-Q
	3/28/95	23
	3/24/95	6	35
	2/28/95	12
	2/27/95	9	10	DEF 14A
	2/15/95	17
	1/25/95	9
	12/31/94	2	34	10-K, NT 10-K
	9/30/94	2
	6/10/94	16	25
	5/10/94	12
	1/5/94	10
	12/31/93	34
	6/17/93	34
	1/1/93	13
	12/31/92	8	34
	1/31/92	17
				List all Filings

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Filing Submission 0000927356-95-000316 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Cray Computer Corp – ‘10-Q’ for 9/30/95

As of: Tuesday, 11/14/95 · For: 9/30/95 · Accession #: 927356-95-316 · File #: 0-18072

Previous ‘10-Q’: ‘10-Q’ on 8/18/95 for 6/30/95 · Latest ‘10-Q’: This Filing

Quarterly Report — Form 10-QFiling Table of Contents

10-Q — Form 10-Q Dated Sept. 30, 1995Document Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Quarterly Report — Form 10-Q
Filing Table of Contents

10-Q — Form 10-Q Dated Sept. 30, 1995
Document Table of Contents