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                       KURZWEIL APPLIED INTELLIGENCE, INC.
                            STATEMENTS OF CASH FLOWS
                                    Unaudited
                                 (in thousands)

                                                          Three Months Ended
                                                               April 30,
                                                       ------------------------
                                                           1996         1995
                                                       ----------   -----------

Cash flows from operating activities:
  Net loss                                               ($1,294)        ($237)
  Adjustments to reconcile net loss to net cash
   (used) provided by operating activities:
  Depreciation                                               141           124
  Amortization                                               428           500
  Change in operating assets and liabilities:
    (Increase) in accounts receivable                       (173)          (31)
    (Increase) decrease in inventory                          (4)          247
    (Increase) in other assets                              (124)         (130)
    Increase in accounts payable                             306           261
    Increase (decrease) in accrued expenses
      and other liabilities                                  144          (378)
                                                       ----------   -----------
     Net cash (used) provided by operating activities       (576)          356
                                                       ----------   -----------
Cash flows from investing activities:
  Sale of marketable securities available for sale           501
  Payments for property and equipment, net                   (78)         (235)
  Capitalized software development costs                    (515)         (341)
                                                       ----------   -----------
     Net cash (used) in investing activities                 (92)         (576)
                                                       ----------   -----------
Cash flows from financing activities:
  Payments on capital lease obligations                      (12)          (16)
  Proceeds from issuance of capital stock, net                37             5
                                                       ----------   -----------
  Net cash provided by (used) in financial activities         25           (11)
                                                       ----------   -----------
Net (decrease) in cash                                      (643)         (231)
Cash and cash equivalents, beginning of period             2,084         4,307
                                                       ----------   -----------
Cash and cash equivalents, end of period                  $1,441        $4,076
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