As filed with the Securities and Exchange Commission on September 30, 1996
Registration Number: 333-
SECURITIES AND EXCHANGE COMMISSION
Registration Statement On Form S-3
Under the Securities Act of 1933
KURZWEIL APPLIED INTELLIGENCE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
04-2815079
(I.R.S. Employer Identification No.)
411 Waverley Oaks Road
Waltham, Massachusetts 02154
(617) 893-5151
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Roger M. Barzun
Secretary & General Counsel
P.O. Box 767
Concord, Massachusetts 01742-0767
(508) 287-4275
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
Page 1 of 22
Exhibit Index at Page 20
<PAGE>
Calculation of Registration Fee
<TABLE>
<CAPTION>
Proposed Proposed
Title of Each Class Maximum Maximum
of Securities to Be Amount to Be Offering Price Per Aggregate Amount of
Registered Registered Share(1) Offering Price(1) Registration Fee
<S> <C> <C> <C> <C>
Common Stock,
$0.01 par value per 2,247,550 $2.3125 $5,197,459.38 $1,792.23
share
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee.
Calculated in accordance with Rule 457(c) under the Securities Act of
1933 based on the average of the high and low sale prices of the Common
Stock reported in the consolidated trading system of the Nasdaq
National Market on September 24, 1996.
-----------------------------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment that specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
-----------------------------------
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<PAGE>
PROSPECTUS
KURZWEIL APPLIED INTELLIGENCE, INC.
2,247,550 SHARES OF COMMON STOCK, $.01 PAR VALUE
The 2,247,550 shares of Common Stock (the "Shares") of Kurzweil Applied
Intelligence, Inc., a Delaware corporation (the "Company"), offered hereby are
being sold by the selling stockholders identified herein and their pledgees,
donees, transferees or other successors in interest (the "Selling
Stockholders"). Some or all of the Shares may be offered for sale from time to
time by the Selling Stockholders at such prices and upon such terms as may then
be obtainable on one or more exchanges, in the over-the-counter market, in
negotiated transactions, short sales or otherwise, or by underwriters pursuant
to underwriting agreements in customary form, or in a combination of any such
methods of sale. The Selling Stockholders may also sell such Shares in
accordance with Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"). The Selling Stockholders are identified and certain
information with respect to them is provided under the caption "Selling
Stockholders" herein, to which reference is made. The expenses of the
registration of the Shares offered hereby, including fees of counsel for the
Company, will be paid by the Company. The following expenses will be borne by
the Selling Stockholders: commissions, fees and discounts of underwriters,
brokers, dealers and agents, if any, for the Selling Stockholders. The filing by
the Company of this Prospectus in accordance with the requirements of Form S-3
is not an admission that any person whose Shares are included herein is an
"affiliate" of the Company.
The Selling Stockholders have not advised the Company that they engaged any
person as an underwriter or selling agent for any of such Shares, but they may
in the future elect to do so, and they will be responsible for paying such a
person or persons customary compensation for so acting. The Selling Stockholders
and any broker executing sell orders on behalf of any Selling Stockholders may
be deemed to be "underwriters" within the meaning of the Securities Act, in
which event commissions received by any such broker may be deemed to be
underwriting commissions under the Securities Act. The Company has agreed to
indemnify the Selling Stockholders against certain liabilities, including
liabilities under the Securities Act. The Company will not receive any of the
proceeds from the sale of the Shares offered hereby. The Common Stock is listed
on the Nasdaq National Market ("Nasdaq") under the symbol KURZ. On September 23,
1996, the closing sale price of the Common Stock, as reported by Nasdaq, was
$2.25 per share.
-----------------------
THE SHARES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGE 3 OF THIS PROSPECTUS.
---------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION HAS PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
---------------------------------
No person has been authorized to give any information or to make any
representations in connection with this offering other than those contained in
this Prospectus and, if given or made, such other information and
representations must not be relied upon as having been authorized by the
Company. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the date hereof or that the
information contained herein is correct as of any time subsequent to its date.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the registered securities to which it
relates. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy such securities in any circumstances in which such offer or
solicitation is unlawful.
THE DATE OF THIS PROSPECTUS IS SEPTEMBER 30, 1996
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<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements, information statements and other
information with the Securities and Exchange Commission (the "Commission"), 450
Fifth Street, N.W., Washington, D.C. 20549. These reports, proxy statements,
information statements and other information filed by the Company with the
Commission can be inspected and copied and, upon payment at prescribed rates,
obtained at the Public Reference Section maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the Commission located at Seven World Trade Center, 13th
Floor, New York, New York 10048 and at Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. These reports, proxy statements,
information statements and other information filed by the Company with the
Commission may also be obtained from the Web site that the Commission maintains
at http:\\www.sec.gov.
In addition, the Company's Common Stock is listed on the Nasdaq National Market,
and reports, proxy statements, information statements and other information
concerning the Company can be inspected at the offices of the National
Association of Securities Dealers, Inc. at 1735 K Street, N.W., Washington, D.C.
20006.
The Company has filed with the Commission a registration statement on Form S-3
(together with all amendments and exhibits, the "Registration Statement") under
the Securities Act with respect to the Common Stock being offered hereby. As
permitted by the rules and regulations of the Commission, this Prospectus omits
certain of the information contained in the Registration Statement. For further
information about the Company and the securities offered hereby, reference is
made to the Registration Statement and to the exhibits filed as a part thereof.
Statements contained in this Prospectus as to the contents of any contract or
any other document are not necessarily complete, and in each instance, reference
is made to the copy of such contract or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. The Registration Statement, including exhibits thereto, may be
inspected without charge at the Commission's principal office at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of all or any
part thereof may be obtained from such office after payment of the fees
prescribed by the Commission.
Upon a written or oral request, the Company will provide without charge to each
person to whom a copy of this Prospectus has been delivered a copy of any
information that was incorporated by reference in the Prospectus (other than
exhibits to documents, unless such exhibits are specifically incorporated by
reference into the information incorporated by reference in the Prospectus).
Requests for such copies should be directed to Thomas B. Doherty, Vice President
& Chief Financial Officer, Kurzweil Applied Intelligence, Inc., 411 Waverley
Oaks Road, Waltham, Massachusetts 02154, (617) 893-5151 (Ext. 423).
THE COMPANY
The Company was incorporated in 1983 in Delaware as a successor by merger to
Kurzweil Alpha Systems, Inc., a Massachusetts corporation which had been formed
in 1982. The Company's principal executive offices are located at 411 Waverley
Oaks Road, Waltham, Massachusetts 02154, and its telephone number is (617)
893-5151.
The Company develops, markets and supports automated speech recognition systems
used to create documents and interact with computers by voice and structured
report generating software systems. The Company's speech recognition technology
is speaker-independent, in that in most cases a user does not have to "train"
the system on his or her voice to achieve satisfactory initial accuracy, and it
is speaker-adaptive, in that the system is able to adapt with use to the
acoustic, phonetic and linguistic patterns of individual users and thereby
increase accuracy. The Company's large vocabulary systems, which recognize up to
60,000 words, accept discrete speech, which requires the user to pause briefly
between words. The Company's software technology is designed to run on 386, 486
or
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<PAGE>
Pentium(TM)-based industry standard personal computers running on an MS-DOS(R)
or Windows(R) platform.
The Company has two main product groups, which sell and distribute the Company's
products to two distinct markets.
The Medical Products Group sells, markets and distributes the VoiceMED(R) and
Clinical Reporter(TM) products to the health care market. This vertical product
line provides clinical software systems utilizing voice recognition input to
create structured text documents.
The PC Applications Group sells, markets and distributes the Kurzweil VOICE(TM)
for Windows(R) product to the general personal computer marketplace. This
horizontal product line voice enables most Windows applications to produce voice
generated text and documents.
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. In addition to the other information contained in this
Prospectus or incorporated herein by reference, prospective investors should
consider carefully the following risk factors before purchasing the shares of
Common Stock offered hereby.
From time to time the information provided by the Company in its public filings,
in press releases or in oral public statements made by its officers and
directors which is not historical fact (including, but not limited to statements
concerning anticipated sales, profit levels, customers and cash flows) may
contain so-called "forward looking" statements (within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934) that involve risks and uncertainties. In connection with the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995, the
Company believes that the following important factors, among others, could cause
the Company's actual future results for its 1997 fiscal year and beyond to
differ significantly from those stated in any forward- looking statements made
by, on behalf of, or with respect to the Company, and should be considered by
investors when reviewing such statements. Factors that may cause such
differences include, but are not limited to the factors discussed below as well
as the accuracy of the Company's internal estimates of revenue and operating
expense levels. Each of these factors and others are discussed from time to time
in the Company's Securities and Exchange Commission filings. Reference is made
in particular to the discussion set forth under "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Certain Factors
That May Affect Future Results" in the Company's Annual Report on Form 10-KSB
for the fiscal year ended January 31, 1996 and the Quarterly Reports on Form
10-QSB for the quarters ended April 30, 1996 and July 31, 1996, incorporated by
reference in this Prospectus.
History of Losses
Since its inception in 1982 through July 31, 1996, the Company has sustained net
losses aggregating approximately $61.9 million, principally as a result of
start-up costs, substantial investment in research and development, selling and
administrative costs, and the delay in the introduction of new and enhanced
products. The Company incurred a loss of approximately $2.58 million in fiscal
1996 and approximately $2.03 million in the first two quarters of fiscal 1997,
and operating losses are expected to continue in 1997.
Future Capital Needs
The availability of additional financial resources will be critical to the
Company's future operations. At July 31, 1996, the Company's principal sources
of liquidity were cash and cash equivalents of approximately $3.18 million and
the Company had working capital of approximately $1.67 million. In May 1996 the
Company sold approximately 1.3 million shares of Common Stock in a private
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<PAGE>
placement to a New York-based investment fund and raised net proceeds of
approximately $2.37 million, and on July 31, 1996 the Company sold an additional
927,500 shares of Common Stock in a second private placement to accredited
investors and raised additional net proceeds of approximately $1.67 million. The
Company's long term financial stability and future growth will be dependent upon
obtaining additional adequate financing and achieving profitable operations. The
Company currently anticipates that its existing capital resources will be
adequate to satisfy its capital requirements through at least the end of fiscal
1997. The Company's future capital requirements will depend on many factors,
including its ability to market new and enhanced products successfully, the size
of its research and development programs, and competing technological and market
developments. There can be no assurance that the Company will be able to raise
any additional funds required for the conduct of its business or that if
available, such funds would be on terms acceptable to the Company. In addition,
if the Company is able to sell additional shares of its equity securities, it
may be required by circumstances then existing to do so at a price that is less
than the then current market value. If losses continue and additional financing
is not obtained when needed, the Company will likely be required to restructure
its operations, curtail its spending in research and development or attempt a
merger or other strategic alliance with another company or seek protection under
the bankruptcy laws.
New Markets
The market to which the Company's products are addressed, the large vocabulary
(10,000 words or more) speech recognition market, is relatively new. The
Company's success depends upon the expansion of this market, which will depend
in part on the advancement of speech recognition technology by the Company and
continuing price and performance improvements in personal computers, as new
generations of microprocessors are developed and introduced. The Company's
speech recognition products generally will continue to compete with more
conventional means of information processing. Accordingly, there can be no
assurance that the market for the Company's current and future products will
expand, that such products will find general acceptance in that market, or that
sales of the Company's products will become profitable.
New Products and Technological Change
The speech recognition market is characterized by rapid technological advances.
Accordingly, the Company's future success will depend upon its ability to
continually enhance its current products and to develop and introduce new
products that keep pace with technological developments and address the
increasingly sophisticated needs of the marketplace. There can be no assurance
that others will be successful in developing future generations of technology on
which the Company's products will depend, that the Company will be successful in
developing and marketing product enhancements or new products that incorporate
technological advances on a timely basis, or that its new products will
adequately address the needs of the marketplace.
Dependence on Principal Products
To date, the Company has derived substantially all of its revenue from its
medical reporting software products. In 1994, the Company commenced shipment of
its Kurzweil VOICE(TM) for Windows(R) product that is designed for the personal
computer market. Accordingly, the Company's results depend on continued market
acceptance of its medical reporting software products and the acceptance of its
Kurzweil VOICE products, and a failure to achieve such acceptance could have a
material adverse effect on the Company's financial condition and results of
operations.
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<PAGE>
Dependence on Distribution
The Company's Kurzweil VOICE(TM) for Windows(R) products are dependent for their
distribution on the relationships established by the Company with distributors
and resellers. Were a significant number of such distributors or resellers to
elect not to carry these products for any reason, such as a decision to carry
only a competitor's product, it could have a material adverse effect on the
Company's revenues and earnings. The Company's VoiceMED products are sold
primarily by the Company's own sales force.
Dependence on Certain Customers
The Company is dependent to a significant extent upon sales to certain
customers. In fiscal years 1994, 1995 and 1996, sales to military and veterans
hospitals owned by the United States government totaled $1,922,000, $3,525,000
and $1,127,000, respectively, representing 20%, 28% and 12%, respectively, of
the Company's total revenues. In the first six months of fiscal 1997, sales to
those customers totaled 7% of revenues. The Company believes that the decline in
sales of the Company's VoiceMED systems to military and veterans' hospitals in
fiscal 1996 and the first six months of fiscal 1997 was primarily the result of
the general uncertainties surrounding the federal budget. Future uncertainties
or reductions in military or veterans' hospital spending generally could again
adversely affect the Company's revenues.
Competition
The speech recognition industry is highly competitive and characterized by
rapidly advancing technology and frequent new product introductions that can
render existing products obsolete or unmarketable. The Company expects
competition to intensify in the future. In order to maintain or improve its
position in this industry, the Company must enhance its current products
continually and develop and introduce new products that address the rapidly
changing needs of the marketplace. No assurance can be given that the Company
will be able to do so. In the health care market, the Company's medical
reporting software products competes with traditional clinical report generation
methodologies (such as handwritten notes, tape dictation, transcription,
keyboard entry systems, pen-based task systems, and mouse entry systems) as well
as a limited number of speech recognition systems. The principal competitive
factors in the clinical reporting market are product functionality, performance,
ease of use, support services and price. Many of the Company's potential
competitors in this market have financial, technical and marketing resources
that are substantially greater than those available to the Company.
With the introduction of its Kurzweil VOICE(TM) for Windows(R) product, the
Company has begun to compete in the personal computer software market, a broad
market in which the Company expects to encounter significant competition for
voice recognition systems. The principal competitive factors in this market are
integration of the product with other applications, the interface with the user,
ease of use, overall product functionality and price. In addition, the Company
has relatively less experience in this market than in the health care clinical
reporting market. The Company can make no assurances as to the acceptance or
success of its personal computer software products in this market.
The successful commercialization of new products in the Company's markets
involves many risks, including the identification of new product opportunities,
the timely completion of the development process, the control and recoupment of
development costs, and acceptance by customers of the Company's products. There
can be no assurance that the Company will be successful in commercializing its
new products.
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<PAGE>
Reliance on Key Technical Personnel
The Company's success depends to a significant extent on the performance of
senior management and a small number of key technical employees. The loss of any
of the key technical employees could have a material adverse effect on the
Company's operations. The Company does not have employment contracts with any of
these key employees. All employees have entered into confidentiality, technology
assignment and non-competition agreements with the Company. In addition, the
Company's future success will also depend in part on its ability to attract and
retain highly skilled technical personnel. Competition for such personnel is
intense and the Company's poor financial performance to date may put the Company
at a disadvantage in attracting and/or retaining such personnel. Consequently,
there can be no assurance that the Company will be successful in attracting and
retaining the personnel it requires to successfully develop and market its
products.
Protection of Technology; Patents
The Company's success is heavily dependent upon its proprietary software
technology. The Company enters into confidentiality, technology assignment and
non-competition agreements with its employees, and confidentiality and/or
license agreements with certain of its distributors and customers, and limits
access to, and distribution of, its software, documentation and other
proprietary information. The Company has claimed copyright protection for
certain of the software products that it has developed to date, but existing
copyright laws afford only limited practical protection. The Company has been
granted thirteen United States patents with respect to its products and has nine
patent applications pending. There can be no assurance that any patents will be
granted pursuant to such applications, and there can be no assurance that any
patents issued to the Company will provide the Company with significant
protection against competitors. The absence of patent protection or of
meaningful protection under the copyright laws could adversely affect the
Company. Certain of the Company's competitors have obtained, and the Company
believes that certain of its competitors are seeking to obtain patent protection
on various aspects of their speech recognition technology. In addition, pursuant
to the settlement in 1993 of a patent infringement lawsuit commenced by a
competitor, the competitor and the Company entered into cross licenses of each
other's patents.
There is no assurance that others will not assert that the Company's technology
and products infringe their patents or other intellectual property rights or
that any such assertion, if successfully pursued, would not have a material
adverse impact on the Company.
Potential Fluctuations in Quarterly Results
The Company believes that its quarterly operating results may vary significantly
depending on factors such as the size and timing of purchase orders from
significant customers and the timing of product enhancements and introductions
by the Company and its competitors. The Company historically has realized a
disproportionate amount of its revenue and income in the last month of each
fiscal quarter and, as a result, the magnitude of quarterly fluctuations may not
become evident until late in, or at the end of, a given quarter.
Accounts Receivable
At July 31, 1996, the accounts receivable of the Company included a receivable
in the amount of $400,000 pertaining to revenue recorded by the Company in its
first quarter of fiscal 1997. The revenue relates to a contract pursuant to
which the Company has fulfilled all performance obligations. The Company has
become aware that the customer may resist or delay paying. The Company does not
believe that the customer has any valid basis on which to resist or delay
payment and that it is financially able to do so. The Company believes its
customers are, in general, creditworthy and that the Company's reserves for
uncollectible accounts receivable are adequate. If such reserves are not
adequate, the Company's financial position and results of operations could be
materially and adversely affected.
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<PAGE>
Legal Proceedings
Shareholder Litigation. The Company and certain of its current and former
officers and directors were defendants in class action lawsuits filed in the
United States District Court for the District of Massachusetts in 1994 by
purchasers of the Company's Common Stock pursuant or traceable to the Company's
Prospectus dated August 17, 1993 (in connection with its initial public
offering) and in its aftermarket through April 28, 1994. In accordance with the
settlement of this litigation, the class members and their counsel received, in
the aggregate, 1,475,827 shares of Common Stock having a value of $7,250,000
based on the average price of shares of Common Stock prior to the settlement. In
June 1995, the class members' counsel received their portion of the shares
(442,748 shares) and in March 1996, the remaining 1,033,079 shares were
distributed to class members. In addition, as part of the settlement, the
Company made a cash payment of $250,000.
The Company was also the subject of an investigation by the Securities and
Exchange Commission, which was settled in July 1995. Although the Company
believes these proceedings are now concluded as to the Company's involvement,
and all persons believed to be involved in the irregularities that gave rise to
the litigation are no longer with the Company, there can be no assurance that
there will not be a continuing effect on the financial and business reputation
of the Company as a result of these events.
Indemnity Claims. Four of the Company's former officers were the subject of
federal indictments related to the activities that were the basis of the
shareholder litigation described above. One of such officers entered a guilty
plea, two were convicted and one was acquitted. The officer who was acquitted
has made a claim for indemnity by the Company in the amount of approximately
$175,000 based on his acquittal, which the Company intends to resist. While the
Company has established reserves relating to claims for indemnity generally,
there can be no assurance that they will be adequate should the other officers
establish the right to indemnification through a reversal of their convictions
or otherwise.
Texas Litigation. On September 11, 1995, one of the Company's shareholders who
elected not to be included in the settlement of the shareholder class action
litigation filed a complaint in Dallas County, Texas. The matter is entitled
Caffey v. Kurzweil Applied Intelligence. Inc. et al. Mr. Caffey's complaint
asserts that the Company and certain former officers and directors committed
fraud and violated Texas state law and unnamed federal securities laws. The
complaint seeks $1,500,000 in damages. The Company moved the case to the United
States District Court for the Northern District of Texas on November 6, 1995. On
November 13, 1995, the Company filed an answer to the complaint, which contained
an offer of settlement pursuant to which the Company offered to repurchase from
Mr. Caffey his 1,000 shares of Company stock at the price he paid for them plus
interest and certain attorneys' fees. Mr. Caffey has rejected the Company's
offer and has filed amended complaints to include additional defendants
including two of the Company's incumbent directors, who were also defendants in
the class action litigation described above. The Company has moved to have the
case transferred to the United States District Court for the District of
Massachusetts. Management of the Company does not believe that there is a
reasonable possibility of a material adverse outcome that will exceed the
amounts already reserved. If any additional loss occurs, management believes
that the loss would not have a material adverse impact on the Company's
financial position or results of operations.
Nasdaq National Market Listing
At January 31, 1996 and April 30, 1996, the Company was not in compliance with
the minimum net worth requirements of the NASD By-Laws for the continued listing
of its Common Stock on the Nasdaq National Market. Pursuant to an extension in
which to comply that was granted by Nasdaq, the Company was able to achieve
compliance as a result of the funds raised through the May and July 1996 private
placements.
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<PAGE>
From November 14 to December 27, 1994 the Company's Common Stock was traded on
the Nasdaq SmallCap Market as a result of the very late filing of its Annual
Report on Form 10-K (and subsequent quarterly reports) for its 1994 fiscal year.
The delay was caused by the financial irregularities committed by former
management that were the subject of the shareholder litigation. This delisting
had an immediate and adverse effect on the trading price of the Common Stock. If
the Company's shares were again to be delisted from the Nasdaq National Market
for any reason, it is anticipated that the effect would be the same, and the
Company might be unable to meet the higher standards for readmission to the
Nasdaq National Market at a future date.
Possible Volatility of Stock Price
The stock market has from time to time experienced extreme price and volume
fluctuations, particularly in the high-technology sector, which may be unrelated
to the operating performance of particular companies. Factors such as
announcements of technological innovations or new products by the Company or by
its competitors, as well as market conditions in the computer software or
hardware industries, may have a significant impact on the market price of the
Company's Common Stock.
Shares Eligible for Future Sale
Sales of large numbers of such shares of the Company's Common Stock in the
public market can adversely affect its market price. In addition to the shares
registered in the Registration Statement of which this Prospectus is a part, a
substantial number of outstanding shares of Common Stock and shares of Common
Stock issuable upon exercise of outstanding stock options and warrants will over
time become available for resale in the public market. In addition, the Company
currently has approximately 3.8 million shares of Common Stock as well as
1,000,000 shares of preferred stock, $0.01 par value per share, (the "Preferred
Stock") available for issuance in the discretion of the Board of Directors.
Anti-Takeover Effects of Certain Charter Provisions
Certain provisions of the Company's Restated Certificate of Incorporation
permitting the issuance of Preferred Stock without stockholder approval could
make more difficult a merger, tender offer or proxy contest involving the
Company, even if such events would be beneficial to the interests of the
stockholders. Shares of Preferred Stock may be issued in the future without
further stockholder approval and upon such terms and conditions, and having such
rights, privileges and preferences, as the Board of Directors may determine. The
rights of the holders of Common Stock will be subject to, and may be adversely
affected by, the rights of the holders of any Preferred Stock that may be issued
in the future. Although providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, the issuance of Preferred
Stock could have the effect of making it more difficult for a third party to
acquire, or of discouraging a third party from attempting to acquire, a majority
of the outstanding capital stock of the Company. The Company has no present
plans to issue any shares of Preferred Stock.
Limitations on the Availability of Net Operating Loss Carryforwards
At January 31, 1996, the Company had cumulative net operating loss carryforwards
of $49 million and federal tax credit carryforwards of $900,000 (collectively,
"NOLs"). The Company believes that it is subject to an annual limit on
utilization of NOLs of $1.7 million under the provisions of Section 382 of the
Internal Revenue Code of 1986 and that the utilization of the NOLs may be
further limited. Accordingly, no assurance can be given as to the availability
of the NOLs to the Company.
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<PAGE>
Absence of Dividends
The Company has not paid, and in the foreseeable future does not expect to pay,
cash dividends.
Limitation of Officers' and Directors' Liabilities under Delaware Law
Pursuant to the Company's Restated Certificate of Incorporation (the
"Certificate"), as authorized under Delaware law, officers and directors of the
Company are not liable for monetary damages for breach of fiduciary duty, except
in connection with a breach of the duty of loyalty; for acts or omissions not in
good faith or that involve intentional misconduct or knowing violation of law;
for dividend payments or stock repurchases not permitted under Delaware law; or
for any transaction in which a director or officer has derived an improper
personal benefit. In addition, the Certificate provides that the Company is
required to indemnify its officers and directors to the fullest extent permitted
by Delaware law for all expenses incurred in any actions against such persons in
connection with their having served as officers or directors of the Company.
Four of the Company's former officers were the subject of federal indictments
related to the activities that were the basis of the shareholder litigation
described above. One of such officers entered a guilty plea, two were convicted
and one was acquitted. The officer who was acquitted has made a claim for
indemnity from the Company in the amount of approximately $175,000 based on his
acquittal, which the Company intends to resist. While the Company has
established reserves relating to claims for indemnity generally, there can be no
assurance that they will be adequate should the other officers establish the
right to indemnification through a reversal of their convictions or otherwise.
Dilution
Dilution is likely to occur upon the exercise of outstanding stock options and
warrants.
-------------------------
- 11 -
<PAGE>
SELLING STOCKHOLDERS
The Shares offered hereby were acquired from the Company by the Selling
Stockholders in private placements in May and July, 1996. The following table
sets forth certain information regarding the beneficial ownership of the
Company's Common Stock as of September 1, 1996 based on information furnished to
the Company and as adjusted to reflect the sale of the Common Stock offered
hereby, by each of the Selling Stockholders.
None of the Selling Stockholders has had any position, office or other material
relationship within the past three years with the Company or its affiliates.
<TABLE>
<CAPTION>
Shares Beneficially Shares
Owned Prior to Being Shares Owned After
Name of Selling Stockholder Offering(1) Offered the Offering
Number Percent(2) Number Percent(2)
<S> <C> <C> <C> <C> <C>
Special Situation Cayman Fund L.P. 343,750 3.8 321,250 12,500 *
Special Situation Fund III L.P. 1,022,800 11.3 988,800 34,000 *
OSL Orthopedic Surgery LTD.
Pension Plan DRA CC/VOL 10,000 * 10,000 -0- -0-
Joyce E. Guinther & Marie S. Ackerman JT
TEN 10,000 * 10,000 -0- -0-
John S. Rydberg 10,000 * 10,000 -0- -0-
Robert A. Kay D.D.S, M.S.D.,
S.C. Robert A. Kay Pension 20,000 * 20,000 -0- -0-
James N. Owens REV TRUST
James N. Owens TTEE dtd 9/10/70 25,000 * 25,000 -0- -0-
Robert & Harriet Terhaar 10,000 * 10,000 -0- -0-
John Albers 50,000 50,000 -0- -0-
Kenneth Benson 5,000 * 5,000 -0- -0-
Paul Owings 10,000 * 10,000 -0- -0-
Paul & Lenore Owings JTTEN 10,000 * 10,000 -0- -0-
Scott Drill 10,000 * 10,000 -0- -0-
Stephen Benedict 5,000 * 5,000 -0- -0-
Kevin Roberg 5,000 * 5,000 -0- -0-
Steven Richard Hamm 5,000 * 5,000 -0- -0-
Lowell R. Singerman 5,000 * 5,000 -0- -0-
Bruce Christensen 5,000 * 5,000 -0- -0-
Craig Christensen 5,000 * 5,000 -0- -0-
Howard B. Bergerud 5,000 * 5,000 -0- -0-
Dan Dryer 7,500 * 7,500 -0- -0-
Tom Reaser 5,000 * 5,000 -0- -0-
Dan Brattland 2,500 * 2,500 -0- -0-
Laurie A. Chozen 5,000 * 5,000 -0- -0-
Scott Bullock 5,000 * 5,000 -0- -0-
Mandrill Partners 5,000 * 5,000 -0- -0-
Clint Hill Partners 10,000 * 10,000 -0- -0-
Douglas A. Becker 25,000 * 25,000 -0- -0-
Tim Bullock 5,000 * 5,000 -0- -0-
Kevin McHale 10,000 * 10,000 -0- -0-
Jeff Dobbs 25,000 * 25,000 -0- -0-
- 12 -
<PAGE>
Shares Beneficially Shares
Owned Prior to Being Shares Owned After
Name of Selling Stockholder Offering(1) Offered the Offering
Number Percent(2) Number Percent(2)
Bruce Hubbard 7,000 * 7,000 -0- -0-
Union Bank & Trust Co FBO 62-2243-01 10,000 * 10,000 -0- -0-
Union Bank & Trust Co. FBO 60-2242-03 4,000 * 4,000 -0- -0-
Eugene Christensen 5,000 * 5,000 -0- -0-
Union bank & Trust Co. FBO 62-2243-03 4,000 * 4,000 -0- -0-
PaineWebber Custodian
FBO Michael R. Giordano IRA Rollover 25,000 * 25,000 -0- -0-
Atwell & Co FBO Collins Group Trust I 100,000 1.1 100,000 -0- -0-
JMG Capital Partners, L. P. 50,000 * 50,000 -0- -0-
Industricorp & Co. Inc. FBO TC Carpenters 75,000 * 75,000 -0- -0-
Richard C. Perkins 25,000 * 25,000 -0- -0-
David R. Weir 12,500 * 12,500 -0- -0-
Pyramid Partners, LP 125,000 1.4 125,000 -0- -0-
Dave M. Westrum 12,500 * 12,500 -0- -0-
Quest Venture Partners 50,000 * 50,000 -0- -0-
Steve Shulman 10,000 * 10,000 -0- -0-
Earl B. Olson 25,000 * 25,000 -0- -0-
Kenneth R. Parker 37,500 * 37,500 -0- -0-
Roy O. Christenson 5,000 * 5,000 -0- -0-
VBS General Partnership 20,000 * 20,000 -0- -0-
Pamela Lund 5,000 * 5,000 -0- -0-
Everett Jensen REV TRUST
Everett Jensen TTEE 3\7\95 10,000 * 10,000 -0- -0-
--------- --- --------- ------ ---
TOTAL 2,294,050 100 2,247,550 46,500 *
========= === ========= ======
</TABLE>
- ---------
* Less than 1%.
(1) Except as provided herein, the Company believes, based on information
provided by the Selling Stockholders, that each Selling Stockholder has
sole voting and investment power with respect to the shares
beneficially owned.
(2) Based on 9,056,916 shares of the Company's Common Stock outstanding on
September 1, 1996.
-------------------------------------------
PLAN OF DISTRIBUTION
The Shares offered hereby may be offered and sold from time to time by the
Selling Stockholders, or by pledgees, donees, transferees or other successors in
interest. Such offers and sales may be made from time to time on one or more
exchanges or in the over-the-counter market, or otherwise, at prices and on
terms then prevailing or at prices related to the then-current market price, or
in negotiated transactions. The methods by which the Shares may be sold may
include, but not be limited to, the following: (a) a block trade in which the
broker or dealer so engaged will attempt to sell the shares as agent but may
position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account; (c) an exchange distribution in accordance
with the rules of such exchange; (d) ordinary brokerage transactions and
transactions in which the broker solicits purchasers; (e) privately negotiated
transactions; (f) short sales; and (g) a combination of any such methods of
sale. In effecting sales, brokers, dealers or agents engaged by the Selling
Stockholders may
- 13 -
<PAGE>
arrange for other brokers, dealers or agents to participate. Brokers, dealers or
agents may receive commissions or discounts from Selling Stockholders or from
the purchasers in amounts to be negotiated immediately prior to the sale. The
Selling Stockholders and any brokers, dealers or agents that participate in the
distribution of the Shares may be deemed to be underwriters under the Securities
Act, and any profit on the sale of Shares by them and any discounts, concessions
or commissions received by any such underwriters, brokers, dealers or agents may
be deemed to be underwriting discounts and commissions under the Securities Act.
The Selling Stockholders may also sell Shares in accordance with Rule 144 under
the Securities Act.
The Company has agreed to use its best efforts to maintain the effectiveness of
the registration of the Shares being offered hereunder until the earlier of the
date upon which all of the Shares offered hereby have been sold or the date on
which the Selling Stockholders who are not deemed to be "affiliates" of the
Company, as defined in Rule 144 under the Securities Act, are permitted to
publicly resell such Shares under Rule 144(k) under the Securities Act, as the
same may be amended from time to time, or any successor regulation.
Under the securities laws of certain states, the Shares may be sold in such
states only through registered or licensed brokers or dealers. In addition, in
certain states the Shares may not be sold unless the Shares have been registered
or qualified for sale in such state or an exemption from registration or
qualification is available and is complied with.
The Company will pay all of the expenses incident to the registration, offering
and sale of the Shares to the public hereunder other than commissions, fees and
discounts of underwriters, brokers, dealers and agents. The Company has agreed
to indemnify the Selling Stockholders against certain liabilities, including
liabilities under the Securities Act. The Company will not receive any of the
proceeds from the sale of any of the Shares by the Selling Stockholders.
Certain of the underwriters, dealers, brokers or agents may have other business
relationships with the Company and its affiliates in the ordinary course.
LEGALITY OF THE COMMON STOCK
The validity of the shares of Common Stock offered hereby is being passed upon
for the Company by Roger M. Barzun, Esq., Secretary and General Counsel of the
Company.
EXPERTS
The financial statements of Kurzweil Applied Intelligence, Inc. included in
Kurzweil Applied Intelligence, Inc.'s Annual Report on Form 10-KSB/A for the
fiscal year ended January 31, 1996 have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon (which contains an
explanatory paragraph with respect to the Company's ability to continue as a
going concern) included therein and incorporated herein by reference. Such
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
---------------------------
- 14 -
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated in this Prospectus by reference thereto:
(1) The description of the Company's Common Stock contained in a
registration statement on Form 8-A (file number 0-20256) filed
pursuant to the Securities Exchange Act of 1934 (the "Exchange
Act") dated August 9, 1993 and any amendments or reports filed
for the purpose of updating such description.
(2) The Company's Annual Report on Form 10-KSB, as amended, for
the fiscal year ended January 31, 1996 (File Number 0-20256).
(3) The Company's Quarterly Report on Form 10-QSB for the fiscal
quarter ended April 30, 1996.
(4) The Company's Quarterly Report on Form 10-QSB for the fiscal
quarter ended July 31, 1996.
(5) The Company's Current Report on Form 8-K dated May 9, 1996.
(6) The Company's Current Report on Form 8-K dated June 28, 1996.
(7) The Company's Current Report on Form 8-K dated July 31, 1996.
All reports and other documents subsequently filed by the Company with
the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act prior to the filing of a post-effective amendment that
indicates that all securities covered by this Prospectus have been sold
or that de- registers all such securities then remaining unsold shall
be deemed incorporated by reference herein and to be part hereof from
the date of the filing such reports and documents.
Any statement contained herein or in a document, all or a portion of
which is incorporated or deemed to be incorporated by reference herein,
shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any
other subsequently filed document or portion thereof that also is or is
deemed to be incorporated herein by reference modifies or supersedes
such statement. Any such statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
----------------------------------------
- 15 -
<PAGE>
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Expenses of the Registrant in connection with the issuance and distribution of
the securities being registered, other than registration fee, are estimated as
follows:
SEC Registration Fee .................................. $1,695
Legal Fees and Expenses ............................... 3,500
Accountants' Fees and Expenses ........................ 3,000
Miscellaneous ......................................... 1,000
------
Total ................................................. $9,195
======
Item 15. Indemnification of Directors and Officers
Section 145 ("Section 145") of the Delaware General Corporation Law provides a
detailed statutory framework covering indemnification of directors and officers
against liabilities and expenses arising out of legal proceedings brought
against them by reason of their status or service as Directors or officers. The
Registrant's By-Laws provides for indemnification of Directors and officers to
the full extent permitted by Section 145. Section 145 generally provides that a
director or officer of a corporation (i) shall be indemnified by the corporation
for all expenses of such legal proceedings when he or she is successful on the
merits; (ii) may be indemnified by the corporation for the expenses, judgments,
fines and amounts paid in settlement of such proceedings (other than a
derivative suit), even if he or she is not successful on the merits, if he or
she acted in good faith and in a manner he or she reasonably believed to be in
or not opposed to the best interests of the corporation (and, in the case of a
criminal proceeding, had no reasonable cause to believe his or her conduct was
unlawful), and (iii) may be indemnified by the corporation for expenses of a
derivative suit (a suit by a stockholder alleging a breach by a director or
officer of a duty owed to the corporation), even if he or she is not successful
on the merits, if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation. No indemnification may be made under clause (iii) above, however,
if the Director or officer is adjudged liable for negligence or misconduct in
the performance of his or her duties to the corporation, unless a court
determines that, despite such adjudication, but in view of all of the
circumstances, he or she is entitled to indemnification. The indemnification
described in clauses (ii) and (iii) above may be made only upon a determination
that indemnification is proper because the applicable standard has been met.
Such a determination may be made by a majority of a quorum of disinterested
Directors, independent legal counsel, the stockholders or a court of competent
jurisdiction. The Board of Directors may authorize advancing litigation expenses
to a Director or officer upon receipt of an undertaking by such Director or
officer to repay such expenses if it is ultimately determined that he or she is
not entitled to be indemnified for them.
The Restated Certificate of Incorporation (the "Charter") and By-Laws of the
Company provide for the indemnification of the Company's directors and officers
to the fullest extent permitted by law. In addition, the agreements between the
Company and the selling agent for the May and July 1996 private placements and
related agreements (filed as Exhibits 99.1 to 99.4 hereto) contain provisions
for the indemnification by the Registrant of the selling agent and the Selling
Stockholders and their officers, directors and controlling persons against
certain liabilities under the Securities Act.
------------------------------
- 16 -
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
The following is a list of exhibits filed as a part of this Registration
Statement:
Exhibit
Number Description
4.1 Restated Certificate of Incorporation (filed as Exhibit 3.1 to the
Company's Quarterly Report on Form 10-QSB for the quarter ended
July 31, 1996).
4.2 Form of Common Stock Certificate (filed as Exhibit 4.1 to the
Company's Registration Statement on Form S-1, Registration
Number 33-48103).
*5 Opinion of Roger M. Barzun, Esq. with respect to the legality of the
shares being registered.
*23.1 Consent of Ernst & Young LLP.
*23.3 Consent of Roger M. Barzun, Esq. (included in Exhibit 5).
*24 Power of Attorney (included under the heading "Signatures").
99.1 Selling Agency Agreement between the Company and Miller, Johnson &
Kuehn, Incorporated dated May 7, 1996 (filed as Exhibit 10.1 to the
Company's Quarterly Report on Form 10-QSB for the quarter ended
April 30, 1996).
99.2 Stock Purchase Agreement dated as of May 9, 1996 between the Company
and Special Situations Fund, L.P. (filed as Exhibit 10.2 to the
Company's Quarterly Report on Form 10-QSB for the quarter ended
April 30, 1996).
99.3 Selling Agency Agreement between the Company and Miller, Johnson &
Kuehn, Incorporated dated July 3, 1996 (filed as Exhibit 10.1 to the
Company's Quarterly Report on Form 10-QSB for the quarter ended
July 31, 1996).
99.4 Form of Subscription Agreement and Letter of Investment Intent
(filed as Exhibit 10.2 to the Company's Quarterly Report on Form
10-QSB for the quarter ended July 31, 1996).
* Filed herewith.
Item 17. Undertakings
(A) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
- 17 -
<PAGE>
424(b) (ss.230.424(b) of this chapter) if, in the aggregate,
the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply
if the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the
registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(B) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(C) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
---------------------------------------
- 18 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Waltham, Massachusetts on September 23, 1996.
Kurzweil Applied Intelligence, Inc.
By: /s/Thomas E. Brew, Jr.
------------------------------
Thomas E. Brew, Jr.
President, & Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints Thomas E. Brew, Jr., Thomas B. Doherty and Roger
M. Barzun jointly and severally his true and lawful attorneys-in-fact and agents
with full powers of substitution for him and in his name, place and stead in any
and all capacities to sign any and all amendments (including post-effective
amendments) to this Registration Statement and to file the same with all
exhibits thereto and all documents in connection therewith with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents and
each of them full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises as fully as
he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or substitutes
may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement on Form S-3 has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signatures Title Date
<S> <C> <C>
/s/ Thomas E. Brew, Jr. Chairman of the Board of Directors September 23, 1996
- -------------------------- President & Chief Executive Officer
Thomas E. Brew, Jr.
Chief Financial Officer, Vice September 23, 1996
/s/ Thomas B. Doherty President of Finance & Treasurer
- -------------------------- (principal accounting and financial
Thomas B. Doherty officer)
/s/ Raymond C. Kurzweil Chief Technology Officer,
- -------------------------- Director September 23, 1996
Raymond C. Kurzweil
/s/ Steven F. Kaplan
- -------------------------- Director September 23, 1996
Steven F. Kaplan
/s/ William R. Lonergan
- -------------------------- Director September 23, 1996
William R. Lonergan
/s/ David R. A. Steadman
- -------------------------- Director September 23, 1996
David R. A. Steadman
/s/ James W. Storey
- -------------------------- Director September 23, 1996
James W. Storey
</TABLE>
- 19 -
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description At Page
<S> <C> <C>
4.1 Restated Certificate of Incorporation (filed as Exhibit 3.1 to the
Company's Quarterly Report on Form 10-QSB for the quarter
ended July 31, 1996).
4.2 Form of Common Stock Certificate (filed as Exhibit 4.1 to the
Company's Registration Statement on Form S-1, Registration Number
33-48103).
*5 Opinion of Roger M. Barzun, Esq. with respect to the legality of the
shares being registered. 21
---
*23.1 Consent of Ernst & Young LLP. 22
---
*23.3 Consent of Roger M. Barzun, Esq., (included in Exhibit 5). 21
---
*24 Power of Attorney (included under the heading "Signatures"). 19
---
99.1 Selling Agency Agreement between the Company and Miller,
Johnson & Kuehn, Incorporated dated May 7, 1996 (filed as
Exhibit 10.1 to the Company's Quarterly Report on Form
10-QSB for the quarter ended April 30, 1996).
99.2 Stock Purchase Agreement dated as of May 9, 1996 between the
Company and Special Situations Fund, L.P. (filed as Exhibit
10.2 to the Company's Quarterly Report on Form 10-QSB for
the quarter ended April 30, 1996).
99.3 Selling Agency Agreement between the Company and Miller,
Johnson & Kuehn, Incorporated dated July 3, 1996 (filed as
Exhibit 10.1 to the Company's Quarterly Report on Form
10-QSB for the quarter ended July 31, 1996).
99.4 Form of Subscription Agreement and Letter of Investment
Intent (filed as Exhibit 10.2 to the Company's Quarterly
Report on Form 10-QSB for the quarter ended July 31, 1996).
</TABLE>
* Filed herewith.
- 20 -
EXHIBIT 5
ROGER M. BARZUN
ATTORNEY AT LAW
60 HUBBARD STREET
CONCORD, MASSACHUSETTS 01742
TELEPHONE: (508) 287-4275
FACSIMILE: (508) 287-4276
September 27, 1996
Kurzweil Applied Intelligence, Inc.
411 Waverley Oaks Road
Waltham, Massachusetts 02154
Gentlemen:
I am General Counsel of Kurzweil Applied Intelligence, Inc. (the "Company") and
in that capacity this opinion is delivered to you in connection with the
registration statement on Form S-3 (as amended from time to time, the
"Registration Statement") to be filed with the Securities and Exchange
Commission on or about September 30, 1996 under the Securities Act of 1933
relating to 2,247,550 shares (the "Shares") of the common stock, $0.01 par value
per share (the "Common Stock") of the Company offered by certain stockholders of
the Company listed in the Registration Statement.
I am familiar with the Company's Amended and Restated Certificate of
Incorporation, By-Laws and its corporate minute book as well as the Registration
Statement. I have also examined such other documents, records and certificates
and made such further investigation as I have deemed necessary for the purposes
of this opinion.
Based upon the foregoing, I am of the opinion that the Shares have been validly
issued and are fully paid and non-assessable.
I understand that this opinion is to be used in connection with the Registration
Statement and accordingly I consent to the filing of this opinion as an exhibit
to the Registration Statement. I further consent to the reference to me under
the heading "Legal Matters" in the prospectus included in the Registration
Statement.
Very truly yours,
/s/ Roger M. Barzun
- 21 -
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related prospectus of Kurzweil Applied
Intelligence, Inc. for the registration of 2,247,550 shares of its common stock
and to the incorporation by reference therein of our report dated March 29, 1996
(except Note 3, as to which the date is May 9, 1996) with respect to the
financial statements and schedules of Kurzweil Applied Intelligence, Inc.
included in its Annual Report (Form 10-KSB/A) for the fiscal year ended January
31, 1996, filed with the Securities and Exchange Commission.
Ernst & Young LLP
Boston, Massachusetts
September 23, 1996
- 22 -
