Securities and Exchange Commission
Washington, DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________
Commission file number 0-20256
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KURZWEIL APPLIED INTELLIGENCE, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 04-2815079
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(State or other jurisdiction of RS Employer Identification Number)
incorporation or organization)
411 Waverley Oaks Road, Waltham, Massachusetts (02154)
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(Address of principal executive offices)
(617) 893-5151
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(Issuer's telephone number)
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(Former name, former address and former fiscal year, if changed since last
report)
Check 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 [ ]
As of April 30, 1997, there were 9,085,760 shares of Common Stock outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
Exhibit index on Page 16
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KURZWEIL APPLIED INTELLIGENCE, INC.
FORM 10-QSB
INDEX
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Part I - Financial Information
Item 1. Financial Statements
Balance Sheets as of April 30, 1997 and January 31, 1997 3
Statements of Operations for the Three Month Period
Ended April 30, 1997 and 1996 4
Statements of Cash Flows for the Three Month Period
Ended April 30, 1997 and 1996 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
Part II - Other Information
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
Exhibit Index 16
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
KURZWEIL APPLIED INTELLIGENCE, INC.
CONDENSED BALANCE SHEETS
Unaudited
(in thousands)
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<CAPTION>
April 30, January 31,
1997 1997
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ASSETS
Current assets:
Cash and cash equivalents $824 $457
Marketable securities available for sale 982
Trade accounts receivable, less allowances of
$310,000 and $325,000 at April 30, 1997 and
January 31, 1997, respectively 2,319 2,158
Inventory 325 354
Other current assets 229 187
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Total current assets 3,697 4,138
Property and equipment, net 667 721
Intangible assets 410 678
Capitalized software development costs, net 2,745 2,532
Other assets 104 104
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Total assets $7,623 $8,173
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LIABILITIES
Current liabilities:
Accounts payable $1,287 $1,115
Accrued expenses 1,884 2,100
Current portion of other long-term liabilities 1,019 1,019
-------------- -------------
Total current liabilities 4,190 4,234
Other long-term liabilities 1,152 1,152
Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 1,000,000 shares
authorized; none issued and outstanding
Common stock, $.01 par value; 15,000,000 shares
authorized 9,085,760 and 9,061,880 shares issued
and outstanding at April 30, 1997 and
January 31, 1997, respectively 91 91
Additional paid-in capital 66,774 66,727
Accumulated deficit (64,584) (64,031)
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Total stockholders' equity 2,281 2,787
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Total liabilities and stockholders' equity $7,623 $8,173
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The accompanying notes are an integral part of the financial statements.
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KURZWEIL APPLIED INTELLIGENCE, INC.
CONDENSED STATEMENTS OF OPERATIONS
Unaudited
(in thousands, except for per share amounts)
Three Months Ended
April 30,
----------------------------
1997 1996
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Revenues:
Product and license revenue $2,006 $1,238
Maintenance revenue 443 472
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Total revenues 2,449 1,710
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Operating costs and expenses:
Cost of product, license and maintenance 991 880
revenue
Sales and marketing 940 950
Research and development 733 678
General and administrative 350 532
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Total operating costs and expenses 3,014 3,040
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Operating loss (565) (1,330)
Interest income 12 30
Other income, net 6
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Net loss ($553) ($1,294)
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Net loss per common share ($0.06) ($0.19)
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Weighted average number of common
shares outstanding 9,069,930 6,774,430
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The accompanying notes are an integral part of the condensed financial
statements.
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KURZWEIL APPLIED INTELLIGENCE, INC.
CONDENSED STATEMENTS OF CASH FLOWS
Unaudited
(in thousands)
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Three Months Ended April 30,
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1997 1996
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Cash flows from operating activities:
Net loss ($553) ($1,294)
Adjustments to reconcile net loss to net cash
(used in) operating activities:
Depreciation 121 141
Amortization 601 428
Change in operating assets and liabilities:
(Increase) in accounts receivable (161) (173)
Decrease (increase) in inventory 29 (4)
(Increase) in other assets (56) (124)
Increase in accounts payable 172 306
(Decrease) increase in accrued expenses
and other liabilities (217) 144
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Net cash (used in) operating activities (64) (576)
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Cash flows from investing activities:
Sale of marketable securities available for
sale 982 501
Payments for property and equipment, net (67) (78)
Capitalized software development costs (531) (515)
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Net cash provided by (used in) investing 384 (92)
activities ------------ ----------
Cash flows from financing activities:
Payments on capital lease
obligations (12)
Proceeds from issuance of capital stock, net 47 37
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Net cash provided by financing activities 47 25
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Net increase (decrease) in cash 367 (643)
Cash and cash equivalents, beginning of period 457 2,084
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Cash and cash equivalents, end of period $824 $1,441
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The accompaying notes are an integral part of the condensed financial statements
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KURZWEIL APPLIED INTELLIGENCE
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
For purposes of this Form 10-QSB, all references to "Fiscal 1998" mean the
fiscal year of Kurzweil Applied Intelligence, Inc. (the "Company") ending
January 31, 1998. All references to "Fiscal 1997" mean the Company's fiscal year
ended January 31, 1997.
The accompanying condensed unaudited financial statements of the Company have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and Item
310 of Regulation S-B. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for the fair presentation
have been included. The results of operations of any interim period are not
necessarily indicative of the results of operations for the fiscal year. For
further information, refer to the financial statements and footnotes thereto
included in the Company's 1997 Annual Report on Form 10-KSB for the fiscal year
ended January 31, 1997.
2. MERGER
On April 14, 1997, the Company entered into an Agreement and Plan of Merger with
Lernout & Hauspie Speech Products, N.V. (" L&H") a Belgian corporation listed on
the Nasdaq National Market (Nasdaq symbol: LHSPF), and a subsidiary of L&H
pursuant to which the L&H subsidiary would be merged into the Company and each
outstanding share of the Company's Common Stock will be exchanged for $4.20 in
cash and $1.05 in common stock of L&H, subject to adjustment in certain
circumstances. The closing of the business combination is subject to certain
conditions and approvals, including the approval of the stockholders of the
Company.
Pursuant to the terms of a Loan Agreement dated April 14, 1997 (the "Loan
Agreement"), a subsidiary of L&H ("the L&H subsidiary") agreed to loan to the
Company up to $1.5 million under a line of credit (the "Loan") to finance the
Company's working capital needs, including certain license payments due to
Dragon Systems, Inc. The Company may, subject to the terms and conditions
contained in the Loan Agreement, draw on the line of credit until June 30, 1997.
The Loan is evidenced by a line of credit note dated April 14, 1997 in the
original principal amount of $1.5 million (the "Note"). The Note bears interest
at a rate of 8.5% per annum. On May 2, 1997, the Company drew down the full
amount of the loan. All outstanding principal and interest under the Note is due
and payable in full on October 31, 1997. Once repaid, the Loan may not be
reborrowed. The Company's obligations under the Loan Agreement and the Note are
secured by a security interest in all of its assets.
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In consideration for the commitment to make the Loan, the Company issued to the
L&H subsidiary a warrant to purchase 185,000 shares of the Company's Common
Stock at a price of $3.21 per share pursuant to the terms of a common stock
warrant (the "Warrant") dated April 14, 1997. The Warrant is immediately
exercisable and expires on the earlier occurrence of the consummation of the
merger or April 14, 2002.
3. LEGAL PROCEEDINGS
Litigation On September 11, 1995, one of the Company's shareholders who
elected not to be included in the shareholder class action litigation against
the Company, which was subsequently settled in April of 1995, filed a complaint
in Dallas County, Texas against the Company and certain of its current and
former directors and officers. The matter is entitled Caffey v. Kurzweil Applied
Intelligence, Inc. et.al. The complaint asserts that the defendants committed
fraud and violated Texas state law and unnamed federal securities laws. The
shareholder seeks $1,500,000 in damages as a result of his purchase of 1,000
shares of the Company's Common Stock.
The Company moved the case to the United States District Court for the Northern
District of Texas on November 6, 1995. The case was assigned Docket No.
3:95-CV-2660-J. 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
original price he paid for such shares plus interest and certain attorneys'
fees. Mr. Caffey has rejected the Company's offer. This case is in the
deposition and pre-trial discovery stage, and although there can be no
assurances, the Company does not believe that the outcome will have a material
adverse effect on the financial position of the Company.
On April 8, 1997, the Company was served with a complaint in an action entitled
R. E. Thomason General Hospital District v. Kurzweil Applied Intelligence, Inc.
No. EP-97-CA-129, which is pending in the United States District Court for the
Western District of Texas, El Paso Division. The plaintiff seeks approximately
$160,000 in actual damages, plus interest, attorneys fees, and court costs and
such other relief as it is entitled to. The complaint arises out of the sale by
the Company of a VoiceMED system to the plaintiff in April 1993, which the
plaintiff claims failed to perform as warranted. The Company believes that the
complaint is without merit and intends to vigorously defend this law suit.
By letter dated April 16, 1997, the Company received a "Notice of Consumer Legal
Action, Notice of Class Action and Demand for Remedy" from the "American Justice
Center" of Irvine, California notifying the Company and other defendants of a
claim under various sections of the California Civil Code that the Company's
VoicePad product does not perform as advertised. The plaintiff demands that the
Company recall all VoicePad products sold to date, refund to purchasers their
purchase price, reimburse the plaintiff for its legal costs, cease the
activities complained of, and otherwise comply with the California Civil Code.
The notice and demand was filed in the California Superior Court for the County
of Los Angeles and is styled Melanie Shah & all purchasers of VOICEPAD Software,
the American Justice Center, et al. Plaintiff(s) v. CompUSA; Best Buy Co. Inc.;
Alpha Software Corp.; SoftQuad International, Inc.; Kurzweil Applied
Intelligence, Inc.; Andrea Electronics Corp.; et al. Defendant(s).
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The plaintiff purports to represent a class consisting of all purchasers of the
Company's VoicePad product. The Company believes that the demand is without
merit and intends to vigorously defend against this action.
On December 10, 1996, David Earl, the Company's former Vice President of
Operations, filed a complaint in Middlesex Superior Court in Massachusetts,
Civil Action No. 96-07037, asserting claims against the Company and the
Lexington Insurance Company ("Lexington"), an insurer that issued an insurance
policy as to the directors and officers of Kurzweil. The complaint alleged that
the Company breached the Massachusetts Consumer Protection Act (M.G.L.c.93A) and
various contractual duties allegedly owed to Mr. Earl by refusing to indemnify
Mr. Earl against claims brought by the United States Attorney's Office, the
Securities and Exchange Commission and Mr. Caffey. The complaint also alleges
that the Company improperly refused to permit Mr. Earl to exercise certain stock
options and that Lexington breached contractual duties by refusing to reimburse
Mr. Earl for costs associated with those claims. Mr. Earl seeks and unspecified
amount of damages.
On January 13, 1997, Lexington filed and Answer to the complaint and asserted
cross-claims against the Company, alleging that the policy should be rescinded
and that the Company violated M.G.L.c.93A because it obtained the insurance
policy by fraudulent means. Lexington also asserted a claim for common law
indemnification, claiming that to the extent Lexington is liable to Mr. Earl,
the Company is liable to Lexington.
On January 28, 1997, the Company filed an Answer to Mr. Earl's complaint and
Lexington's cross-claim and asserted counterclaims against Mr. Earl and
cross-claims against Lexington. The parties have recently commenced discovery.
Nasdaq Regulatory Requirements
At April 30, 1997, the Company was not in compliance with the Nasdaq net worth
requirements for the continued listing of the Company's Common Stock on the
Nasdaq National Market. On May 28, 1997, the Nasdaq Stock Market notified the
Company that the Company's Common Stock would be delisted from the Nasdaq
National Market effective with the opening of business on June 4, 1997. The
Company requested an oral hearing from Nasdaq to reconsider such determination
and the Company's Common Stock will continue to be listed and traded on the
Nasdaq National Market pending the outcome of the hearing or if the merger is
consummated prior to such hearing. On June 11, 1997, Nasdaq notified the Company
that a hearing will be held on July 17, 1997. If the merger is not consummated
and as a result of the hearing Nasdaq determines to delist the Company's Common
Stock from the Nasdaq National Market, the Company may not again qualify for
listing on the Nasdaq National Market for an undetermined period of time. Any
delisting of the Company's Common Stock from trading on the Nasdaq National
Market may adversely affect the price thereof.
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4. INTANGIBLE ASSETS AND OTHER LONG-TERM LIABILITIES
On September 23, 1993, the Company and Dragon Systems, Inc. ("Dragon") settled
certain patent infringement litigation between the two companies. As part of
such settlement agreement, the Company licensed certain Dragon patents related
to continuous speech and other aspects of speech recognition technology. The
Company paid Dragon $1,331,250 in fiscal 1994, $798,000 in fiscal 1996 and
$901,810 in Fiscal 1997. Under the terms of this agreement, the Company was
committed to make aggregate payments of $5,202,000 including $625,000 in
settlement of amounts due for products sold during periods prior to September
23, 1993. The following mandatory payments remain outstanding as of April 30,
1997:
June 1, 1997 $1,019,460
June 1, 1998 1,151,523
---------------
Total $2,170,983
===============
The Company expensed $1,107,600 during fiscal year 1997, and will amortize the
remaining asset of $92,300 on a straight-line basis through May 31, 1997, at
which time the Company will decide whether or not to extend the license for a 1
year term. The Company expensed $276,900 relating to the Dragon agreement for
the three months ended April 30, 1997. According to the agreement, the Company,
if it chooses not to extend the license, has use of the licensed technology
through June 28, 1997. The final payment will then be made in Fiscal 1999.
The Company, at its option, can annually extend the license of the technology
through fiscal 2006, at which time the license would be fully paid. Total
additional annual payments increasing at a rate of 13% per year during the
extension period would approximate $13.5 million. Under the terms of the
settlement agreement, the Company may terminate its payment obligations by
notifying Dragon in writing, effective one year after the date of the last
payment made by the Company prior to the notice of termination, provided that
the Company would remain obligated for two additional payments beyond the
payments already made by the Company.
5. CAPITAL STOCK
On April 14, 1997, the Company entered into a Loan Agreement with the L&H
subsidiary. In consideration for the commitment to make the Loan, the Company
issued to the L&H subsidiary a warrant to purchase 185,000 shares of the
Company's Common Stock at a price of $3.21 per share pursuant to the terms of a
common stock warrant (the "Warrant") dated April 14, 1997. The Warrant is
immediately exercisable and expires on the earlier occurrence of the
consummation of the merger or April 14, 2002.
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Item 2. Management's Discussion And Analysis Of Financial Condition And
Results Of Operations
RESULTS OF OPERATIONS
Total Revenues. The Company's total revenues consist of revenue from the sale
and licensing of Company products and revenue from maintenance contracts.
Revenues for the three months ended April 30, 1997 totaled $2,449,000,
43% higher than the $1,710,000 of revenue in the same period of the
prior year. The increase in revenue was largely a result of increased
sales of the Kurzweil VOICE for Windows products. Included in revenue
for the period ended April 30, 1996 was $400,000 in licensing fees from
a customer for the Kurzweil VOICE for Windows product.
Maintenance revenue for the three month period ended April 30, 1997
decreased to $443,000 from $472,000 in the same period of the prior
year. This decrease was largely a result of a decline in customer
maintenance renewals.
Cost of Product, License and Maintenance Revenue. Cost of product, license and
maintenance revenue includes hardware costs, manufacturing overhead, system
replacement parts associated with maintenance contracts, third party software
royalties and license fees, and amortization of capitalized software.
Cost of product, license and maintenance revenue for the three months
ended April 30, 1997 totaled $991,000 or 40% of total revenues,
compared to $880,000 or 51% of total revenues in the same period of the
prior year. The decrease in cost of product, license and maintenance
revenue as a percentage of total revenues was largely a result of an
increase in the higher margin, "software only" sales, as compared to
the same period of the prior year, particularly relating to the product
sales of Kurzweil VOICE for Windows.
Sales and Marketing Expenses. Sales and marketing expenses include the costs for
marketing, selling and supporting the Company's products.
Sales and marketing expenses decreased to $940,000 for the three months
ended April 30, 1997 from $950,000 in the same period of the prior
year, representing 38% and 55% of total revenues, respectively. The
decrease in sales and marketing expenses as a percentage of total
revenues is attributable to the higher revenue recorded for the period
ended April 30, 1997.
Research and Development Expenses. Research and development expenditures consist
principally of personnel costs, allocated facility costs, and associated
equipment amortization and depreciation. A portion of the total research and
development expenditures are capitalized in accordance with Financial Accounting
Standards No. 86, "Accounting for the Costs of Computer Software to be
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Sold, Leased or Otherwise Marketed," the amortization of which is included in
cost of product, license and maintenance revenue.
Total research and development expenses, net of capitalization, for the
three month period ended April 30, 1997 increased to $733,000 or 29% of
total revenues, compared to $678,000 or 39% of total revenues in the
same period of the prior year. The increase was primarily the result of
expenses related to the increased staffing of the research and
development group. The Company has continued its commitment to the
development and enhancement of new products and technology. The
research and development group including technical documentation
personnel totaled 67 people at April 30, 1997, as compared to 57 at the
end of April of the prior year.
General and Administrative Expenses. General and administrative expenses include
those costs associated with general corporate needs and administrative
functions.
General and administrative expenses decreased to $350,000 for the three
months ended April 30, 1997 from $532,000 in the same period of the
prior year, representing 14% and 31% of total revenues, respectively.
For the three month period ended April 30, 1996, the Company recorded a
$200,000 reserve relating to a potential obligation under its
indemnification agreement with David Earl, the Company's former Vice
President of Operations. (See Note 3 "Legal Proceedings" of Notes to
Condensed Financial Statements.)
Income Taxes. At January 31, 1997, the Company had federal net operating loss
carryforwards of approximately $54,000,000. In addition, at January 31, 1997,
the Company had federal tax credit carryforwards of approximately $900,000. The
net operating loss carryforwards and the tax credit carryforwards expire during
the years 1998 through 2010. Substantially all of the Company's net operating
loss and tax credit carryforwards are subject to limitation under the provisions
of Section 382 of the Internal Revenue Code.
LIQUIDITY AND CAPITAL RESOURCES
At April 30, 1997, the Company's principal source of liquidity was cash and cash
equivalents of $824,000, as compared to cash and cash equivalents of $1,439,000
at January 31, 1997.
The Company's operating activities used cash of $64,000 for the three months
ended April 30, 1997. The Company will be required to pay $1,019,000 to Dragon
by June 30, 1997 as part of the patent cross license agreement. (See Note 4
"Intangible Assets and Other Long - Term Liabilities" of Notes to Condensed
Financial Statements.)
At April 30, 1997 the Company had a working capital deficit of $493,000 as
compared to a working capital deficit of $97,000 at January 31, 1997. The
increase in the deficit is primarily the result of the Company's need to fund
its continued operating losses and other commitments.
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On April 14, 1997, the Company entered into an Agreement and Plan of Merger with
Lernout & Hauspie Speech Products, N.V. (" L&H") a Belgian corporation listed on
the Nasdaq National Market (Nasdaq symbol: LHSPF), and a subsidiary of L&H
pursuant to which the L&H subsidiary would be merged into the Company and each
outstanding share of the Company's Common Stock will be exchanged for $4.20 in
cash and $1.05 in common stock of L&H, subject to adjustment in certain
circumstances. The closing of the business combination is subject to certain
conditions and approvals, including the approval of the stockholders of the
Company.
Pursuant to the terms of a Loan Agreement dated April 14, 1997 (the "Loan
Agreement"), a subsidiary of L&H ("the L&H subsidiary") agreed to loan to the
Company up to $1.5 million under a line of credit (the "Loan") to finance the
Company's working capital needs, including certain license payments due to
Dragon. The Company may, subject to the terms and conditions contained in the
Loan Agreement, draw on the line of credit until June 30, 1997. The Loan is
evidenced by a line of credit note dated April 14, 1997 in the original
principal amount of $1.5 million (the "Note"). The Note bears interest a rate of
8.5% per annum. On May 2, 1997, the Company drew down the full amount of the
loan.. All outstanding principal and interest under the Note is due and payable
in full on October 31, 1997. Once repaid, the Loan may not be reborrowed. The
Company's obligations under the Loan Agreement and the Note are secured by a
security interest in all of its assets.
The longer term financial stability of the Company is dependent on its ability
to consummate the merger, achieve profitable operations and, if necessary,
obtain additional financing. The Company's future capital requirements will
depend on many factors, including the progress and scope of its research and
development programs and the level and profitability of sales. To the extent
that the Company is not able to fund its future operations through the sale of
its products, the Company will need to obtain additional funds through private
or public financing. There is no assurance that the Company can obtain such
additional financing. If the Company requires additional financing, or
additional financing is not obtained, or the Company fails to consummate the
merger, 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. Public financing would be subject to
market conditions and other uncertainties, and no assurance can be given that
the Company could obtain public financing at any time. Either public or private
equity financing is likely to result in dilution of the Company's existing
stockholders.
At April 30, 1997, the Company was not in compliance with the Nasdaq net worth
requirements for the continued listing of the Company's Common Stock on the
Nasdaq National Market. On May 28, 1997, the Nasdaq Stock Market notified the
Company that the Company's Common Stock would be delisted from the Nasdaq
National Market effective with the opening of business on June 4, 1997. The
Company requested an oral hearing from Nasdaq to reconsider such determination
and the Company's Common Stock will continue to be listed and traded on the
Nasdaq National Market pending the outcome of the hearing or if the merger is
consummated prior to such hearing. On June 11, 1997, Nasdaq notified the Company
that a hearing will be held on July 17, 1997. If the merger is not consummated
and as a result of the hearing Nasdaq
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determines to delist the Company's Common Stock from the Nasdaq National Market,
the Company may not again qualify for listing on the Nasdaq National Market for
an undetermined period of time. Any delisting of the Company's Common Stock from
trading on the Nasdaq National Market may adversely affect the price thereof.
Certain Factors that May Affect Future Results
The Company's future results are subject to substantial risks and uncertainties.
The Company currently derives substantially all of its revenue from the sale of
software licenses that utilize speech recognition to create text documents.
The Company believes that factors affecting the ability of the Company's
products to achieve general market acceptance include product performance,
price, ease of adoption and learning. To be successful in the future the Company
must respond promptly and effectively to the challenges of technological change
and its competitors' innovations by continually enhancing its current products
and developing new products on a timely basis. Certain current and potential
competitors of the Company are more established, benefit from greater market
recognition and have substantially greater financial, development and marketing
resources than the Company. Competitive pressures or other factors, including
entry into new markets, may result in significant price erosion that could have
a material adverse effect on the Company's results of operations.
The Company believes that its operating results could vary significantly from
quarter to quarter. The Company's revenues in any quarter are substantially
dependent on orders booked and shipped in that quarter. The timing of revenue
receipts is influenced by a number of factors, including: the timing of
individual orders and shipments of its products, customer buying patterns,
changes and delays in product development, and the amount and timing of sales
and marketing expenditures. Because the Company's operating expenses are based
on anticipated revenue levels and a high percentage of the Company's expenses
are relatively fixed in the short-term, variations in revenues can cause
significant fluctuations in operating results from quarter to quarter and may
result in anticipated quarterly earnings shortfalls or losses.
Cautionary Statement
From time to time, information provided by the Company or statements made by its
employees may contain "forward-looking" information which involves risk and
uncertainties. In particular, statements contained herein, which are not
historical facts (including, but not limited to statements concerning
anticipated operating expense levels and such expense levels relative to the
Company's total revenues and expected losses) are "forward-looking statements."
The Company's actual future results may differ significantly from those stated
in any forward-looking statements. Factors that may cause such differences
include, but are not limited to the factors discussed above 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.
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Part II - OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Footnote 3 of Notes to the Condensed Financial Statements
for a description of certain litigation and other legal proceedings.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit No. Description
27 Financial Data Schedule (EDGAR Filing only)
(b) Reports on Form 8-K. During the first quarter of fiscal 1998, the
following report on Form 8-K was filed:
Date: April 14, 1997
Item Reported: Item 5. Other Events (Execution of a Merger Agreement
and related agreements)
No financial statements were filed with the foregoing report.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date June 13, 1997 KURZWEIL APPLIED INTELLIGENCE, INC.
By: /s/ Thomas E. Brew, Jr.
-------------------------------------
Thomas E. Brew, Jr.
President and Chief Executive Officer
By: /s/ Thomas B. Doherty
-------------------------------------
Thomas B. Doherty
Chief Financial Officer, Vice President of
Finance and Treasurer
(principal financial and accounting
officer)
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EXHIBIT INDEX
Exhibit No. Description At Page
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27 Financial Data Schedule (EDGAR Filing only)
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<TABLE> <S> <C>
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<CURRENCY> U.S. Dollars
<S> <C>
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<PERIOD-START> FEB-1-1997
<PERIOD-END> APR-30-1997
<EXCHANGE-RATE> 1
<CASH> 824
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<PP&E> 667
<DEPRECIATION> 0
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<BONDS> 0
0
0
<COMMON> 91
<OTHER-SE> 2,190
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<SALES> 2,449
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<CGS> 991
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<INCOME-PRETAX> (533)
<INCOME-TAX> 0
<INCOME-CONTINUING> (533)
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<NET-INCOME> (533)
<EPS-PRIMARY> (0.06)
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</TABLE>
