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

                                          Oct. 31,        Oct. 31,
                                            1996            1995 
ASSETS
Current assets:
 Cash and cash equivalents                 $2,350          $2,177
 Marketable securities available for sale                   1,494
 Trade accounts receivable, net             2,328           1,439
 Inventory                                    370             672
 Other current assets                         348             310
  Total current assets                      5,396           6,092 
Property and equipment, net                   785             840 
Intangible assets                             933           2,007   
Capitalized software development 
 costs, net                                 2,376           1,560 
Other assets                                  115             163
    Total assets                          $ 9,605         $10,662

LIABILITIES
Current liabilities:
 Accounts payable                          $  898          $  927
 Accrued expenses                           2,326           2,438  
 Capital lease obligations                                     62
 Current portion of other long-term
  liabilities                               1,019             902
    Total current liabilities               4,243           4,329 
Other long-term liabilities                 1,152           2,171
Commitments and contingencies 

STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 
 1,000,000 shares authorized; none issued
 and outstanding
Common stock, $.01 par value; 15,000,000
 and 10,000,000 shares authorized, 
 respectively; 9,059,448 and 5,733,387
 shares issued and outstanding                 91              57 
Additional paid-in capital                 66,725          57,647
Common stock to be issued, respectively                     5,075
Adjustment to unrealized gains/(losses)
 on securities available for sale                              (7)
Accumulated deficit                       (62,606)        (58,610)
    Total stockholders' equity              4,210           4,162
       Total liabilities and stock-
        holders' equity                   $ 9,605         $10,662