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                       KURZWEIL APPLIED INTELLIGENCE, INC.
                            STATEMENTS OF OPERATIONS
                                    Unaudited
                  (in thousands, except for per share amounts)


                                                      Three Months Ended                  Six Months Ended
                                                           July 31,                           July 31,
                                                  ---------------------------        -------------------------
                                                      1996             1995             1996           1995
                                                  ------------      ---------        ----------      ---------
Revenues:                                                                                            
       Product and license revenue                     $1,735         $2,101            $2,973         $4,427
       Maintenance revenue                                462            415               934            797
                                                  ------------      ---------        ----------      ---------
Total revenues                                          2,197          2,516             3,907          5,224
                                                  ------------      ---------        ----------      ---------
Operating costs and expenses:                                                                        
       Cost of product, license and                                                                  
        maintenance revenue                               860            961             1,741          2,256
       Sales and marketing                                989            873             1,939          1,803
       Research and development                           753            638             1,431          1,116
       General and administrative                         364            404               896            740
                                                  ------------      ---------        ----------      ---------
Total operating costs and expenses                      2,966          2,876             6,007          5,915
                                                  ------------      ---------        ----------      ---------
Operating loss                                           (769)          (360)           (2,100)          (691)
Interest expense                                            1              4                 2              6
Interest income                                            27             53                58            112
Other (expense) income, net                                 5             13                12             50
                                                  ============      =========        ==========      =========
Net loss                                                ($738)         ($298)          ($2,032)         ($535)
                                                  ============      =========        ==========      =========
       Net loss per common share                       ($0.09)        ($0.04)           ($0.27)        ($0.08)
                                                  ============      =========        ==========      =========
       Weighted average number of common                                                             
               shares outstanding                   8,440,978       6,757,632        7,616,860       6,744,916
                                                  ============      =========        ==========      =========