New L&H Investment Company plays Tech Farming chess with VoiceCommander 99 transaction

Ieper 11 January 1999 The two co-founders and current chairmen of Lernout & Hauspie Speech Products have set up a new investment company to speed up growth in the speech, language, artificial intelligence and related industries by way of strategic investments. The L&H Investment Company (LHIC) will operate independently from Lernout & Hauspie Speech Products and forms a major building block in the revolutionary concept of "Tech Farming". The LHIC market philosophy consists of delivering financial support at three different stages: seed financing; venture capital financing that is earmarked for research and development; and long-term investments. One of the first examples in this creative line of business constitutes the LHIC investment in Applied Voice Recognition Inc., a Houston-based provider of innovative voice recognition solutions for the health care information technology industry and designer of the Internet-based VoiceCommander 99 system.

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The two co-founders and current chairmen of Lernout & Hauspie Speech Products have set up a new investment company to speed up growth in the speech, language, artificial intelligence and related industries by way of strategic investments. The L&H Investment Company (LHIC) will operate independently from Lernout & Hauspie Speech Products and forms a major building block in the revolutionary concept of "Tech Farming". The LHIC market philosophy consists of delivering financial support at three different stages: seed financing; venture capital financing that is earmarked for research and development; and long-term investments. One of the first examples in this creative line of business constitutes the LHIC investment in Applied Voice Recognition Inc., a Houston-based provider of innovative voice recognition solutions for the health care information technology industry and designer of the Internet-based VoiceCommander 99 system.

LHIC will invest up to $8.75 million in Applied Voice Recognition, referred to as AVRI. This amount will be in $5 million of preferred stock and the remainder in common stock. At $1.50 per share, the preferred stock is convertible into common stock while being subject to restrictions on transfer for three years. Under the terms of the investment agreement, AVRI will receive $3 million at the start and $2 million by February 28, depending on the achievement of certain milestones. Investment of the remainder of the funds is based upon the exercise of warrants to purchase up to 3 million shares of AVRI common stock at the discretion of LHIC. There will be two LHIC executives serving as members of the AVRI Board of Directors, one of whom is Jo Lernout. In addition, AVRI has also closed a licensing and co-development deal with Lernout & Hauspie Speech Products.

The decision to complete the investment in AVRI has been prompted by the success of VoiceCommander 99, a medical transcription technology which is based on Internet-enabled voice recognition. As such, the quality of medical transcription can be enhanced while reducing the cost in the vertical health care market. AVRI aims at the acquisition of medical transcription providers in order to integrate VoiceCommander 99. The production cost of medical documents thus will be substantially lowered. Next to the publicly traded AVRI company, LHIC has also made investments in four private businesses. The Minnesota-based ViA Inc. is a manufacturer of wearable computing and communications products for people in dynamic work environments. The San Jose headquartered Mindmaker Inc. is a designer of artificial intelligence technology components and related products.

Mediacom Technologies Pte. Ltd. and Star + Globe Technologies Pte. Ltd. are two companies which are based in Singapore, the first being a developer of telecommunications products and the second a multilingual software and solutions provider. LHIC aims at the acquisition of about 15 percent of the shares in the targeted companies without necessarily aspiring to their full ownership. The major investors in the investment company are evidently Jo Lernout and Pol Hauspie, who have placed just over half of their 20 percent personal holding in Lernout & Hauspie Speech Products in LHIC. In the very near future, a restricted number of other strategic investors will be added. Sanford Robertson, founder and former chairman of Robertson Stephens, has agreed to join LHIC's board of directors.

Within the "Tech Farming" concept, LHIC will take a prominent position, next to the Flanders Language Valley Foundation business and education project, which is rooted in Belgium; the FLV venture capital fund; and a "seed" financing capability. Lernout & Hauspie have been inspired by the large drug and pharmaceutical companies, such as Johnson & Johnson, which have invested for years in early stage biotechnology firms in exchange for exclusive marketing or royalty rights. The leading medical-device company Medtronics has performed a range of similar transactions with promising ventures, such as Vista Medical Technologies, a designer of minimally invasive heart surgery products. Please, find more news on the life and times of Lernout & Hauspie in the article Health care transaction booms in Flanders Language Valley in the VMW November 1998 issue.


Leslie Versweyveld

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