Page 1


                           SECURITIES AND EXCHANGE COMMISSION
                                 Washington, D.C. 20549

                                        FORM 8-K

                                     CURRENT REPORT


        Pursuant to section 13 or 15 (d) of the Securities Exchange Act of 1934

            Date of Report (Date of Earliest Event Reported): June 16, 1997



                                TEKNOWLEDGE CORPORATION
                 (Exact Name of registrant as specified in its charter)



         Delaware                        0-14793                  94-2760916
(State or other jurisdiction           Commission             (I.R.S. Employer
     of incorporation)                 File Number           Identification No.)


                   1810 Embarcadero Road, Palo Alto, California 94303
                        (Address of principal executive offices)

                                     (415) 424-0500
                             Registrant's telephone number




                                     Page 2

Item 5. Other Events

     On May 15,  1997,  Teknowledge  Corporation  (the  "Company")  and  Trilogy
Development  Group, Inc.  ("Trilogy")  agreed to a settlement of all outstanding
lawsuits and debts between the companies.  On May 19, 1997, in  consideration of
the  settlement  agreement,  the United States  District  Court for the Northern
District  of  California  vacated  its  previous  summary  judgment  against the
Company. The Settlement  Agreement,  License Agreement,  and Mutual Release (the
"Agreement")   specifies  that  Teknowledge   immediately  grant  to  Trilogy  a
non-exclusive,  royalty-free  license to its United States  Patent  4,591,983 in
exchange for  2,338,969  shares of Company  stock,  which the Company  valued at
$1,000,000,  and $400,000 in cash.  The Agreement also provided for the transfer
of certain  proxy rights to the Company and other  consideration,  including the
orderly disposal of Trilogy's remaining stock ownership of approximately 900,000
shares in open market transactions through May 14, 1998.

     The transaction  will be recorded as other income,  net of legal fees. As a
result,  the Company  will record an  additional  $1,100,000  or $.04 per common
share in income for the second quarter ending June 30, 1997.






                                     Page 3

                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, hereunto duly authorized.



                                                   TEKNOWLEDGE CORPORATION
                                                      (Registrant)

                                                   DATE: June 16, 1997



                                                   /s/ Dennis A. Bugbee
                                                   Dennis A. Bugbee
                                                   Director of Finance,
                                                   Treasurer and Secretary
                                                   (Principal Financial and
                                                   Accounting Officer)