Commercial massively-parallel systems builder Kendall Square Research Corp has had a far from clean bill of health from its new auditors in the wake of the company’s over-ambitious revenue reporting efforts. Its new auditors, Coopers & Lybrand, warn that recurring losses and legal problems raise substantial doubt about the company’s ability to continue as a going concern. Kendall Square said it doesn’t expect to be profitable for the current year, but William Koch, now chairman and chief executive as well as the company’s largest investor, told the Wall Street Journal We have the company on a good course for a turnaround. He said that Kendall Square is negotiating with various universities for payment for computers valued at $20m, but does not have any assurance of receiving cash for the machines – it had a tendency to ship machines to interested colleges and book them as sales with no guarantee that they would be paid for. The company also disclosed that on December 8, the Securities & Exchange Commission entered a formal order directing an investigation of the company and its current and former officers and directors. The investigation covers both public reports and trading in the company’s shares but Koch is confident that everything will be cleared up: We have addressed many of the problems that have plagued the company and are working on any that remain, he said. Even so, he admitted that sales had ground to a halt because of customer concerns about the accounting scandal and the fact that the KSR2 computer unveiled last autumn wasn’t really ready to ship until late February. He has promised a $25m investment when the shareholder class action settlement is complete, and has provided a bridging loan in the meantime. But in its filing with the Commission, Kendall Square disclosed that an additional class-action lawsuit had been filed recently by other shareholders; Mr Koch characterised the latest attack as a nuisance suit designed to try to extort a little more money.
