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

                             Three Months Ended      Nine Months Ended
                                  Oct. 31,               Oct. 31,
                              1996        1995       1996        1995

Revenues:
 Product and license
  revenue                  $ 1,963     $ 1,589    $ 4,936     $ 6,016
 Maintenance revenue           484         452      1,418       1,248
Total revenues               2,447       2,041      6,354       7,264  
Operating costs and
 expenses:
 Cost of product, license
  and maintenance revenue    1,038       1,001      2,779       3,256
 Sales and marketing           950         899      2,889       2,704
 Research and development      816         646      2,248       1,762
 General and administrative    344         310      1,240       1,049 
Total operating costs and
 expenses                    3,148       2,856      9,156       8,771
Operating loss                (701)       (815)    (2,802)     (1,507)
Interest expense                 1           3          3          10
Interest income                 19          37         77         150 
Other (expense) income, net      1          12         13          63
Net loss                     ($682)      ($769)   ($2,715)    ($1,304)
 Net loss per common share  ($0.07)     ($0.11)    ($0.33)     ($0.19)
 Weighted average number
  of common shares out-
  standing               9,058,595   6,766,466  8,100,946   6,752,178