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                 KURZWEIL APPLIED INTELLIGENCE, INC.
                           BALANCE SHEETS
                            (unaudited)
               (in thousands, except for per share data)


                                 Jan. 31, 1997      Jan. 31, 1996

ASSETS
Current assets:
 Cash and cash equivalents           $456                  $2,084
 Marketable securities available
  for sale                            982                     501
 Trade accounts receivable, net     2,158                   1,221
 Inventory                            354                     398
 Other current assets                 188                     262
  Total current assets              4,138                   4,466

Property and equipment, net           721                     924
Intangible assets                     678                   1,745
Capitalized software development
 costs, net                         2,532                   1,593
Other assets                          104                     136
  Total assets                     $8,173                  $8,864

LIABILITIES
Current liabilities:
 Accounts payable                  $1,115                    $665
 Accrued expenses                   2,100                   2,211
 Capital lease obligations                                     29
 Current portion of other
  long-term liabilities             1,019                     902
  Total current liabilities         4,234                   3,807

Capital lease obligations
Other long-term liabilities         1,152                   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;
 15,000,000 shares authorized;
 9,061,880 and
 5,773,387 shares issued and
 outstanding, respectively             91                      57

Additional paid-in capital         66,727                  57,647
Common stock to be issued                                   5,075
Accumulated deficit               (64,031)                (59,891)
 Total stockholders' equity         2,787                   2,888
  Total liabilities and
   stockholders' equity            $8,173                  $8,864