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

                                                         April 30,       January 31,
                                                           1997             1997
                                                      --------------   -------------

ASSETS
Current assets:
       Cash and cash equivalents                               $824            $457
       Marketable securities available for sale                                 982
       Trade accounts receivable, less allowances of
        $310,000 and $325,000 at April 30, 1997 and
        January 31, 1997, respectively                        2,319           2,158
       Inventory                                                325             354
       Other current assets                                     229             187
                                                      --------------   -------------
               Total current assets                           3,697           4,138
Property and equipment, net                                     667             721
Intangible assets                                               410             678
Capitalized software development costs, net                   2,745           2,532
Other assets                                                    104             104
                                                      --------------   -------------
                       Total assets                          $7,623          $8,173
                                                      ==============   =============

LIABILITIES
Current liabilities:
       Accounts payable                                      $1,287          $1,115
       Accrued expenses                                       1,884           2,100
       Current portion of other long-term liabilities         1,019           1,019
                                                      --------------   -------------
               Total current liabilities                      4,190           4,234
Other long-term liabilities                                   1,152           1,152
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  9,085,760 and 9,061,880 shares issued
   and outstanding at April 30, 1997 and
   January 31, 1997, respectively                                91              91
Additional paid-in capital                                   66,774          66,727
Accumulated deficit                                         (64,584)        (64,031)
                                                      --------------   -------------
       Total stockholders' equity                             2,281           2,787
                                                      --------------   -------------
           Total liabilities and stockholders' equity        $7,623          $8,173
                                                      ==============   =============

    The accompanying notes are an integral part of the financial statements.