<PAGE>
1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from ________ to ________
Commission File Number 0-14793
TEKNOWLEDGE CORPORATION
(Exact Name of small business issuer as specified in its charter)
Delaware 94-2760916
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1810 Embarcadero Road, Palo Alto, California 94303
(Address of principal executive offices)
(415) 424-0500
Issuer's telephone number
State whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Class Outstanding at November 1, 1996
---------------------------- -------------------------------
Common Stock, $.01 par value 26,046,145 Shares
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2
TABLE OF CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
Item 1 Unaudited Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 1996
and December 31, 1995 ............................................ 3
Condensed Consolidated Statements of Operations for the
three months and nine months ended September 30, 1996 and 1995 ... 5
Condensed Consolidated Statements of Cash Flows for the
nine months ended September 30, 1996 and 1995 .................... 6
Notes to Unaudited Consolidated Financial Statements ............. 7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations .................... 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ................................................ 11
Item 6. Exhibits and Reports on Form 8-K ................................. 12
Signatures ....................................................... 15
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3
PART I. FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
Item 1. FINANCIAL STATEMENTS
TEKNOWLEDGE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1996 1995
-------------- ---------------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 1,426,193 $ 962,724
-------------- ---------------
Receivables:
Customer - billed, net of allowance of $10,000 1,226,602 1,303,581
Customer - unbilled 90,924 17,361
Others 63,193 34,436
-------------- ---------------
Total receivables 1,380,719 1,355,378
-------------- ---------------
Deposits and prepaid expenses 72,128 56,704
-------------- ---------------
Total current assets 2,879,040 2,374,806
-------------- ---------------
Capitalized software, net of accumulated
amortization of $1,114,728
($1,063,733 - December 31, 1995) 190,425 180,974
-------------- ---------------
Equipment and improvements, at cost
Computer and other equipment 2,364,603 2,193,790
Leasehold improvements 765,929 744,315
-------------- ---------------
3,130,532 2,938,105
Less accumulated depreciation and amortization (2,838,645) (2,694,888)
-------------- ---------------
Net equipment and improvements 291,887 243,217
-------------- ---------------
Total assets $ 3,361,352 $ 2,798,997
============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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4
TEKNOWLEDGE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (CONT'D)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1996 1995
-------------- ---------------
Current liabilities:
<S> <C> <C>
Accounts payable $ 99,272 $ 181,507
-------------- ---------------
Accrued liabilities:
Payroll and bonuses 420,419 435,667
Provision for contract charges 274,567 100,567
Provision for discontinued operations 34,374 135,615
Technology purchase 50,000 100,000
Other 375,276 344,414
-------------- ---------------
Total accrued liabilities 1,154,636 1,116,263
-------------- ---------------
Total current liabilities 1,253,908 1,297,770
-------------- ---------------
Long-term liabilities:
Provision for discontinued operations 54,432 88,704
Restructuring obligations 36,610 36,610
-------------- ---------------
Total long-term liabilities 91,042 125,314
-------------- ---------------
Total liabilities 1,344,950 1,423,084
-------------- ---------------
Commitments and contingencies (Note 3)
Stockholders' equity:
Preferred stock, $.01 par value, shares authorized
2,500,000, Series A, Convertible, none issued - -
Common stock, $.01 par value, shares authorized
50,000,000, issued 26,070,145 and 25,923,674
at September 30, 1996 and December 31, 1995, respectively 260,698 259,232
Additional paid-in capital (after (i) reduction of
$57,962,379 for elimination of accumulated deficit
at December 31, 1992, as a result of quasi-reorganization;
and (ii) increase of $18,306, $105,706 and $1,001,310 in
1995, 1994 and 1993, respectively as a result of reversal
of portions of 1992 loss provisions) 1,974,343 1,968,719
Deferred compensation - (120,173)
Accumulated deficit since January 1, 1993
(following quasi-reorganization) (215,639) (728,865)
-------------- ---------------
2,019,402 1,378,913
Treasury stock, at cost, 24,000 shares (3,000) (3,000)
-------------- ---------------
Total stockholders' equity 2,016,402 1,375,913
-------------- ---------------
Total liabilities and stockholders' equity $ 3,361,352 $ 2,798,997
============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
5
TEKNOWLEDGE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 1,847,212 $ 1,479,998 $ 5,180,045 $ 3,977,651
--------------- -------------- -------------- --------------
Costs and expenses:
Cost of revenues 1,196,555 988,636 3,184,276 2,395,686
Selling and marketing 19,917 13,389 78,792 42,779
General and administrative 488,254 397,614 1,547,019 1,327,653
--------------- -------------- -------------- --------------
Total costs and expenses 1,704,726 1,399,639 4,810,087 3,766,118
--------------- -------------- -------------- --------------
Operating income 142,486 80,359 369,958 211,533
Interest income and expense, net 14,842 13,519 37,235 29,428
Other income, net 33,858 47,638 113,908 150,442
--------------- -------------- -------------- --------------
Income before tax 191,186 141,516 521,101 391,403
Provision for income tax 2,625 - 7,875 3,200
--------------- -------------- -------------- --------------
Net income $ 188,561 $ 141,516 $ 513,226 $ 388,203
=============== ============== ============== ==============
Net income per share $ 0.01 $ 0.00 $ 0.02 $ 0.01
=============== ============== ============== ==============
Weighted average common
and common equivalent
shares outstanding 30,530,014 30,005,274 30,366,118 29,901,262
=============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
6
TEKNOWLEDGE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1996 1995
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income $ 513,226 $ 388,203
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of capitalized software 50,995 231,111
Depreciation 143,757 96,339
Stock compensation expense 120,173 180,259
Gain on sale of fixed assets (100) (4,559)
Changes in assets and liabilities:
Receivables (25,341) (103,052)
Deposits and prepaid expenses (15,424) 17,321
Accounts payable (82,235) (30,658)
Accrued liabilities 7,700 (341,902)
------------- ---------------
Net cash provided by operating activities 712,751 433,062
------------- ---------------
Cash flows from investing activities:
Capitalization of software costs (60,446) (63,399)
Purchase of equipment and improvements (192,427) (125,907)
Proceeds from sale of equipment 100 4,559
------------- ---------------
Net cash used for investing activities (252,773) (184,747)
------------- ---------------
Cash flows from financing activities:
Proceeds from issuance of common stock 7,090 2,644
Payments of capital lease obligations (3,599) (10,369)
------------- ---------------
Net cash provided by (used for) financing activities 3,491 (7,725)
------------- ---------------
Net increase in cash and cash equivalents 463,469 240,590
Cash and cash equivalents at beginning of period 962,724 809,169
------------- ---------------
Cash and cash equivalents at end of period $ 1,426,193 $ 1,049,759
============= ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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7
TEKNOWLEDGE CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
1. Interim Statements
The interim statements are unaudited and should be read in
conjunction with the statements and notes thereto contained in the
Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1995. In the opinion of management, these interim
statements include all adjustments, consisting of normal, recurring
adjustments, which are necessary for a fair presentation of results for
such periods. The results of operations for any interim period are not
necessarily indicative of results which may be achieved for the entire
fiscal year ending December 31, 1996.
2. Net Income Per Share
The number of shares of common stock used in the computation
of per share earnings for the three months and nine months ended
September 30, 1996 and 1995, respectively, is the weighted average
number of shares of common and common shares equivalent outstanding
during the applicable periods. Common stock options which are common
stock equivalents are included for the three months and nine months
ended September 30, 1996 and 1995 because they are dilutive. The
differences between primary and fully diluted earnings per share are
immaterial, therefore only primary earnings per share are presented in
the financial statements.
3. Contingencies - Patent Litigation
Refer to Part II Item 1. Legal Proceedings.
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8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
unaudited consolidated financial statements and notes thereto.
Forward looking statements made in this section relating to recruiting
of additional employees, increase in demand for new employees, expected growth
and revenues, mix of revenues between government and commercial, anticipated new
government contracts, and the development and announcement of commercial
products are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. All forward looking statements involve
risks and uncertainties, and actual results could differ materially from those
set forth in the forward looking statements contained herein.
Results of Operations
Revenues
Revenues for the three months and nine months ended September 30, 1996
were $1,847,212 and $5,180,045, an increase of 25% and 30% over the amount
reported in the comparable periods in 1995 of $1,479,998 and $3,977,651,
respectively. These increases in revenues result primarily from the addition of
technical employees who performed on government contracts awarded between 1994
and 1996. The Company continues to recruit for a number of open positions on
existing contracts and anticipates an increase in demand for new employees if
new contracts are awarded as anticipated in the last quarter of fiscal 1996.
Revenues from government contracts represent 98% of total revenues for the three
months and nine months ended September 30, 1996, as compared to 98% and 94% for
the comparable periods in 1995. The Company expects the mix of revenues between
government and commercial services and products to remain about the same in
1996; however, the Company has increased significantly its software development
program for commercial Internet software.
The Company intends to leverage the knowledge it has gained and the
technology it has developed in government sponsored research programs into
commercial projects, which have potential for expanding into new business areas
and increasing sales and profit margins significantly. To this end, the Company
has invested resources in the development of commercial Internet software
products and is exploring other opportunities in the commercial arena. The
Company's long-term goal is to increase significantly the mix of commercial to
government revenues.
Costs and Expenses
Costs of revenues were $1,196,555 and $3,184,276 for the three months
and nine months ended September 30, 1996, compared to $988,636 and $2,395,686
for the comparable periods in 1995, respectively. Costs and expenses rose 21%
and 33% for the three months and nine months ended September 30, 1996 over the
comparable periods in the previous year due primarily to the aforementioned
increase in the technical workforce. Cost of revenues as a percentage of
revenues was 65% and 61%, respectively, for the three months and nine months
ended September 30, 1996, compared to 67% and 60% for the three months and nine
months ended September 30, 1995. The slight decrease in cost of revenues as a
percentage of revenues for the three months ended September 30, 1996 was
incurred as a result of an increase in bid and proposal activities which the
Company intends to use to generate new bookings.
Combined selling and marketing and general and administrative costs for
the three months and nine months ended September 30, 1996 were $508,171 and
$1,625,811, compared to $411,003 and $1,370,432 for 1995. The increase was
mainly due to the cost of implementing a shareholder Rights Agreement in January
1996, a proportional addition of administrative staff, and miscellaneous
administrative costs in support of a growing technical workforce. Combined
selling and marketing and general and administrative costs as a percentage of
revenues were 28% and 31%, respectively, for the three months and nine months
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9
ended September 30, 1996, compared to 28% and 34%, respectively, for the three
months and nine months ended September 30, 1995.
The Company recorded no material charges for research and development
("R&D") in either the three months or nine months ended September 30, 1996 or
the comparable periods in 1995. Most of its resources for research and
development were diverted to the litigation matter as discussed in Part II Item
1. Legal Proceedings. On the other hand, the Company's extensive government
sponsored contract work on distributed intelligent systems and Associate Systems
constitutes a significant amount of "sponsored R&D." The company retains all
patent and commercial rights to the technology it develops on these contracts.
The Company has capitalized software development costs from the point
at which technological feasibility was determined through general availability
of the product. For the nine months ended September 30, 1996, capitalized
software development costs were $60,446 as compared to $63,399 in the same
period last year. These costs reflect the Company's effort towards building
software products for the commercial marketplace.
Interest income was $14,842 and $37,235, respectively, for the three
months and nine months ended September 30, 1996 and $13,519 and $29,428 for the
comparable periods in 1995. Other income was $33,858 and $113,908, respectively,
for the three months and nine months ended September 30, 1996 and $47,638 and
$150,442 for the comparable periods in 1995. The majority of this other income
was from the previous sale of a product line. The product line was sold in
exchange for a note and a royalty agreement in 1990. Because of the uncertainty
surrounding the eventual collection of the note, the Company has elected to
recognize the proceeds as other income only when cash is received.
Net income for the three months and nine months ended September 30,
1996 was $188,561 and $513,226, or $.01 and $.02 per share, compared to $141,516
and $388,203, or $.00 and $.01 per share, for the three months and nine months
ended September 30, 1995. Net income represented 10% of revenues for the three
months and nine months ended September 30, 1996 and 1995, respectively. A
material portion of net income was derived from non-operating income related to
the collection of the note mentioned in the preceding paragraph. The Company
anticipates some variation in net income as a percentage of revenues among
different quarters of the year, as a result of fluctuations in the amount of
billable hours due to the technical workforce's seasonal utilization of earned
vacation time.
Certain Factors That May Affect Future Results of Operations and/or Stock Price
Currently, agencies of the U.S. Government sponsor most of the
Company's technical work. In recent years, the portion of the Company's revenues
attributed to government business has risen from 95% in fiscal 1995 to 98% for
the nine months ended September 30, 1996. Government contracts are potentially
more risky than commercial contracts because they are subject to agency funding
limitations, congressional appropriation, and changes in political priorities.
The typical cost-type government contract performed by the Company has
a negotiated fee limit which inhibits the Company from improving profit margins
on the government contract part of the business beyond what is permitted in
government regulations. Additionally, almost all the Company's contracts contain
termination clauses which permit contract termination upon the Company's default
or at the contracting party's discretion. The Company has not experienced any
material cancellations to date; however there can be no assurance that such
cancellations will not occur in the future.
All of the Company's government contracts are the cost-plus-fixed-fee
type. Revenues, costs and earnings on government contracts are determined based
on estimated overhead rates derived from forecasted annual costs. The Company's
actual experience in headcount growth, billable efficiency, and costs may vary
from those forecasted and necessitate adjustments of estimated overhead rates.
Such adjustments are made on a cumulative basis whereby the resulting revenue
and income effects are recognized in the period of the adjustments.
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10
Generally, the Company's operating results may be affected by a wide
variety of factors, including successful commercialization of the Company's
products, competition from larger companies, staffing and recruiting
competition, general economic conditions, and the possibility of a favorable or
unfavorable outcome in pending litigations (see Part II Item 1. Legal
Proceedings.)
Bookings and Backlog
At September 30, 1996, the expected order backlog was approximately $10
million, which consisted of (i) new orders for which work has not yet begun, and
(ii) revenue remaining to be recognized on work in progress. 100% of the backlog
was from government customers. Approximately 51% of the backlog consists of
government-sponsored programs that are awarded but not yet authorized for
funding. The government normally funds a contract in incremental amounts for the
tasks that are currently in production. The Company's order backlog at December
31, 1995 was approximately $10.5 million.
Liquidity and Capital Resources
As of September 30, 1996, unused sources of liquidity of the Company
consisted of $1,426,193 of cash and cash equivalents, an increase of $463,469
from December 31, 1995. Included in the increase was $712,751 provided by
operating activities, $252,773 used for investing activities, and $3,491
provided by financing activities. Net income for the nine months ended September
30, 1996 of $513,226, after adjustments for non-cash items such as depreciation,
amortization and stock compensation expense, provided $828,151 in cash to the
Company. These funds were primarily used to acquire $192,427 in computer
equipment and improvements, reduce accounts payable by $82,235, and finance
$60,446 in software development.
The Company believes that the present level of cash and cash
equivalents is adequate to service the liquidity needs of the Company in the
next twelve months. The Company relies principally on the collection of
receivables to generate internal cash reserves. The government is capable of
temporarily disrupting the flow of cash to the Company at any time, for example,
as a result of delays associated with the annual budget process. In addition, a
judgment adverse to the Company in the legal proceedings described in Part II
Item 1 could have a negative material impact on the Company's short-term
liquidity if the Company is subject to penalties or other assessments. The
Company, however, does not consider this a likely outcome.
The Company has an unsecured line of credit from a financial
institution in the amount of $1,000,000. The Company may borrow up to a maximum
of 60% of the receivable base or $1,000,000, whichever is lower. The line is
subject to certain covenants and maintenance requirements, which have been
fulfilled. The line expires in May 1997 but is expected to be renewed. The
Company had not utilized the credit line through September 30, 1996.
Management believes the Company will be able to operate in the next
twelve months without additional financing, whether in the form of borrowings or
equity capital. Successful operations in the long term will require growth in
revenues and profitability which may require additional financing.
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11
PART II. OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 1. LEGAL PROCEEDINGS
On or about August 2, 1994, Daniel R. Robusto, a former
executive of the Company, filed a suit in the Court of Common
Pleas of Allegheny County, Pennsylvania, pursuant to Pennsylvania
Wage Payment and Collection Law, alleging breach by the Company of
an employment settlement agreement and the nonpayment of severance
wages of $107,307 plus liquidated damages of $26,827, attorney
fees and other court costs. The Company has responded to the
initial complaint and asserted defenses and certain counterclaims
against Mr. Robusto based upon his actions while in office. The
litigation process is continuing.
On December 8, 1994, a lawsuit was filed in the United
States District Court for the Northern District of California by
Trilogy Development Group, Inc. ("Trilogy") against the Company.
The subject matter of the case involves a configuration systems
patent owned by the Company (Bennett et al. U.S. Patent 4,591,983)
and a sales configuration product of Trilogy. Trilogy is seeking a
judgment against Teknowledge that it does not infringe any claim
of the Bennett et al. patent, and for actual and punitive damages
and attorney fees for alleged unfair competition under the Lanham
Act and common law for misrepresenting Teknowledge and Trilogy's
products. The Company has filed counterclaims against Trilogy for
patent infringement and for unfair competition under the Lanham
Act and common law for alleged false and misleading statements
disparaging the Bennett et al. patent.
On August 27, 1996, Teknowledge and Trilogy Development
Group, Inc. agreed to a settlement of their disputes. On August
29, 1996, Trilogy's attorneys provided written notification to the
Federal District Court that the companies had reached a
settlement. Under the agreement, Trilogy would provide
consideration to Teknowledge and Teknowledge would grant a license
to Trilogy to use the technology covered by the patent-in-suit.
The agreement also provided that all lawsuits between the parties
would be dismissed and that all previously existing debt between
the parties would be canceled. The other details of the agreement
are to be kept confidential by both parties.
Nevertheless, on August 30, 1996, before formal
documentation memorializing the settlement agreement was
finalized, but after Trilogy's lawyers confirmed to the Court in
writing that the case had been settled, the U.S. District Court
entered an order granting Trilogy's motion for summary judgment
invalidating the patent. In view of the Court's order, Trilogy has
taken the position that no settlement yet exists and that it need
not abide by the terms to which the parties agreed and represented
to the Court. The Company has informed Trilogy that the Company
intends to enforce the settlement agreement, and believes that
Trilogy has breached the settlement agreement. Accordingly, on
September 20, 1996, the Company filed a motion to vacate the
judgment in light of the prior settlement. The Company and Trilogy
engaged in discussions regarding the settlement agreement in light
of the Court's judgment. There is no assurance that the parties
will be able to resolve the issues without further litigation,
that the Company's motion to vacate and dismiss will be
successful, or that the Company will be able to enforce the
settlement agreement.
On September 19, 1995, Trilogy filed a suit in the
Delaware Superior Court alleging breach of contract by the Company
in relation to $125,000 in deferred payments under a 1987
agreement between BMW Vision Associates Limited Partnership
("BMW") and American Cimflex Corporation ("ACC"), a predecessor to
the Company. The agreement provided for the sale of technology by
BMW to ACC for a consideration including certain deferred
payments. In July 1995, Trilogy acquired by assignment for
$276,786 BMW's right to the remaining deferred payments and then
demanded payment of $525,000 from the Company. In September 1995,
the Company paid Trilogy $400,000 in full satisfaction of the
<PAGE>
12
$525,000, disclaiming the obligation to pay the balance of
$125,000 which the Company believes to be barred by statute of
limitation. Trilogy filed a suit seeking the $125,000, subsequent
deferred payments, interest and attorney fees. On August 20, 1996,
the Court denied the Company's motion for partial summary judgment
on the choice of law issue, deciding that California law, instead
of Pennsylvania law, should apply to the issue of accord and
satisfaction. The Company is preparing a motion for summary
judgment on its statute of limitations defense. However, the final
outcome of this litigation may be decided by the ultimate
enforceability of the settlement agreement between the Company and
Trilogy described in the preceding paragraph, which provides for
the dismissal of this lawsuit and the settlement of the underlying
claim.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Set forth below is a list of all exhibits filed herewith or
incorporated by reference as part of this Quarterly Report on Form 10-QSB.
Exhibit
No. Description
--- -----------
3.1 Amended and Restated Certificate of Incorporation of
Teknowledge Corporation (6)
3.2 Amended and Restated Bylaws of Teknowledge Corporation (10)
3.3 Certificate of Designation, Preferences and Rights of the
Terms of the Series A Preferred Stock (8)
4.1 Rights Agreement dated January 29, 1996 between the Company
and Registrar and Transfer Company as Rights Agent (8)
10.1 Teknowledge Corporation 1989 Stock Option Plan (9)
10.2 Development Agreement Amendment, dated December 22, 1987,
between American Cimflex Corporation and Ford Motor Company (1)
10.3 License Agreement, dated February 11, 1987, between American
Cimflex Corporation and BMW Technologies, Inc. (1)
10.4 Technology Sale and Stock Purchase Agreement, dated February
11, 1987, between American Cimflex Corporation and BMW Vision Associates
Limited Partnership (1)
10.5 Stock Option Agreement, effective as of September 1, 1988,
between American Cimflex Corporation and Romesh T. Wadhwani (1)
10.6 Amendment to Stock Option Agreement, dated November 30, 1988,
between American Cimflex Corporation and Romesh T. Wadhwani (1)
10.7 Lease, dated March 30, 1989, between American Automated
Factories, Inc. and Third Copley-Franklin Trust (2)
10.8 Purchase and Sales Agreement, dated September 13, 1990,
between Cimflex Teknowledge Corporation, PaineWebber R&D Partners L.P. and
Applied Diagnostics, Inc. (3)
<PAGE>
13
Exhibit
No. Description
--- -----------
10.9 Employment Agreement, dated as of December 13, 1990, between
Cimflex Teknowledge Corporation and Daniel R. Robusto (3)
10.10 Asset Purchase Agreement, dated December 14, 1990, between
American Automated Factories, Inc. and Control Automation, Inc. (3)
10.11 Lease, dated June 10, 1991, between Cimflex Teknowledge
Corporation and Pittsburgh Great Southern Company (3)
10.12 Amended Employment Agreement, dated as of January 21, 1992,
between Cimflex Teknowledge Corporation and Daniel R. Robusto (3)
10.13 Settlement Agreement, General Release, and Waiver of Claims,
dated November 21, 1992, between Daniel R. Robusto and Cimflex Teknowledge
Corporation (4)
10.14 Settlement Agreement, dated May 21, 1993, between Cimflex
Teknowledge Corporation and Third Copley-Franklin Trust (5)
10.15 Settlement Agreement, dated September 1, 1993, between
Cimflex Teknowledge Corporation and Pittsburgh Great Southern Company (5)
10.16 Settlement Agreement, dated December 15, 1993, between
Cimflex Teknowledge Corporation and Heitman Michigan Trustee I Corporation
(5)
10.17 Change of Control Agreement, dated November 21, 1994,
between Teknowledge Corporation and Frederick Hayes-Roth and Neil Jacobstein (7)
10.18 Executive Incentive Compensation Plan, dated January 16,
1996, between Teknowledge Corporation and Frederick Hayes- Roth and Neil
Jacobstein (9)
27 Financial Data Schedule
References
----------
(1) Filed as an Exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1989.
(2) Filed as an Exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1990.
(3) Filed as an Exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1991.
(4) Filed as an Exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1992.
(5) Filed as an Exhibit to the Company's Annual Report on Form
10-KSB, as amended, for the fiscal year ended December 31, 1993.
(6) Filed as an Exhibit to the Company's Quarterly Report on Form
10-QSB for the quarter ended June 30, 1994.
<PAGE>
14
(7) Filed as an Exhibit to the Company's Annual Report on Form
10-KSB, for the fiscal year ended December 31, 1994.
(8) Filed as an Exhibit to the Company's Current Report on Form 8-K
dated February 12, 1996, related to the adoption of a 12(g) Shareholder Rights
Agreement dated January 29, 1996.
(9) Filed as an Exhibit to the Company's Annual Report on Form
10-KSB, for the fiscal year ended December 31, 1995.
(10) Filed as an Exhibit to the Company's Quarterly Report on Form
10-QSB for the quarter ended March 31, 1996.
b) The registrant did not file a report on Form 8-K during the quarter
ended September 30, 1996.
<PAGE>
15
SIGNATURES
Pursuant to the requirements of the Exchange Act, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TEKNOWLEDGE CORPORATION
-----------------------
(Registrant)
/s/ Frederick Hayes-Roth Chairman of the Board November 12, 1996
- ------------------------ of Directors and Chief
Frederick Hayes-Roth Executive Officer
(Principal Executive
Officer)
/s/ Neil A. Jacobstein President and Chief November 12, 1996
- ------------------------ Operating Officer
Neil A. Jacobstein
/s/ Dennis A. Bugbee Director of Finance, November 12, 1996
- ------------------------ Treasurer and Secretary
Dennis A. Bugbee (Principal Financial and
Accounting Officer)
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1996
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<SECURITIES> 0
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<ALLOWANCES> 10,000
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<PP&E> 3,130,532
<DEPRECIATION> 2,838,645
<TOTAL-ASSETS> 3,361,352
<CURRENT-LIABILITIES> 1,253,908
<BONDS> 0
<COMMON> 260,698
0
0
<OTHER-SE> 1,755,804
<TOTAL-LIABILITY-AND-EQUITY> 3,361,352
<SALES> 0
<TOTAL-REVENUES> 5,180,045
<CGS> 0
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<INCOME-TAX> 7,875
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