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                       KURZWEIL APPLIED INTELLIGENCE, INC.
                                 BALANCE SHEETS
                                    Unaudited
                                 (in thousands)

                                                                April 30,        January 31,
                                                                  1996             1996
                                                              --------------   -------------

ASSETS
Current assets:
 Cash and cash equivalents                                           $1,441          $2,084
 Marketable securities available for sale                                               501
 Trade accounts receivable, less allowances  of $258,000
  and $287,000 at April 30, 1996 and January 31, 1996,
  respectively                                                        1,394           1,221
 Inventory                                                              402             398
 Other current assets                                                   373             262
                                                              --------------   -------------
       Total current assets                                           3,610           4,466
Property and equipment, net                                             861             924
Intangible assets                                                     1,472           1,745
Capitalized software development costs, net                           1,961           1,593
Other assets                                                            141             136
                                                              --------------   -------------
               Total assets                                          $8,045          $8,864
                                                              ==============   =============

LIABILITIES
Current liabilities:
 Accounts payable                                                      $971            $665
 Accrued expenses                                                     2,355           2,211
 Capital lease obligations                                               17              29
 Current portion of other long-term liabilities                         902             902
                                                              --------------   -------------
       Total current liabilities                                      4,245           3,807
Other long-term liabilities                                           2,169           2,169
Commitments and contingencies

STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 1,000,000 shares
 authorized; none issued and outstanding
Common stock, $.01 par value; 10,000,000 shares authorized;
 6,790,367 and 5,733,387 shares issued and outstanding
 at April 30, 1996 and January 31, 1996, respectively                    68              57
Additional paid-in capital                                           62,748          57,647
Common stock to be issued                                                             5,075
Accumulated deficit                                                 (61,185)        (59,891)
                                                              --------------   -------------
       Total stockholders' equity                                     1,631           2,888
                                                              --------------   -------------
            Total liabilities and stockholders' equity               $8,045          $8,864
                                                              ==============   =============