<PAGE>

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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                              --------------------

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1995

                         COMMISSION FILE NUMBER 0-14713


                                [INTERLEAF LOGO]

                                 INTERLEAF, INC.
             (exact name of registrant as specified in its charter)

             MASSACHUSETTS                               04-2729042
     (State or other jurisdiction        (I.R.S. employer identification number)
  of incorporation or organization)

PROSPECT PLACE, 9 HILLSIDE AVE., WALTHAM, MA                02154
 (Address of principal executive offices)                (Zip Code)

                                 (617) 290-0710
              (Registrant's telephone number, including area code)


  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                Yes  X   No
                                   -----    -----

                      APPLICABLE ONLY TO CORPORATE ISSUERS

  The number of shares outstanding of the issuer's Common Stock, $.01 par value,
as of January 31, 1996 was 16,664,721.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

                                 INTERLEAF, INC.

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                                           Page
                                                                                                           ----
<S>                                                                                                        <C>
PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements

Consolidated balance sheets at December 31, 1995 and March 31, 1995. . . . . . . . . . . . . . . . . . .    3

Consolidated statements of operations for the three and nine months ended December 31, 1995 and 1994 . .    4

Consolidated statements of cash flows for the nine months ended December 31, 1995 and 1994 . . . . . . .    5

Notes to consolidated financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    6

Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . .    8

PART II - OTHER INFORMATION

Item 5 - Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   12

Item 6 - Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   12

SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   12

</TABLE>


                                        2

<PAGE>

                                 INTERLEAF, INC.

                         PART I - FINANCIAL INFORMATION
                           ITEM 1. FINANCIAL STATEMENTS

                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>


                                                   December 31, 1995      March 31, 1995
In thousands, except for share and per
 share amounts                                        (unaudited)

                                      ASSETS
<S>                                                <C>                    <C>
CURRENT ASSETS
Cash and cash equivalents                               $ 12,434            $ 10,441
Accounts receivable, net                                  20,111              22,766
Prepaid expenses and other current assets                  1,778               2,122
                                                        --------            --------
TOTAL CURRENT ASSETS                                      34,323              35,329
Property and equipment, net                                8,117              11,058
Intangible assets                                          6,409               3,801
Other assets                                                 376                 605
                                                        --------            --------
TOTAL ASSETS                                            $ 49,225            $ 50,793
                                                        --------            --------
                                                        --------            --------

                       LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable                                        $  2,209            $  2,687
Accrued expenses                                          14,388              16,193
Unearned revenue                                          14,025              15,649
Other current liabilities                                  1,724               5,024
                                                        --------            --------
TOTAL CURRENT LIABILITIES                                 32,346              39,553
Other liabilities                                             17                 625
                                                        --------            --------
TOTAL LIABILITIES                                         32,363              40,178
                                                        --------            --------

SHAREHOLDERS' EQUITY
Preferred stock, par value $.10 per share,
authorized 5,000,000 shares:

  Series A Junior Participating, none
  issued and outstanding

  Senior Series B Convertible, issued and
  outstanding 923,304 at December 31, 1995
  and 1,728,573 at March 31, 1995                             92                 173

Common stock, par value $.01 per share,
  authorized 30,000,000 shares, issued and
  outstanding 16,656,421 at December 31,
  1995 and 14,203,027 at March 31, 1995                      167                 142

Additional paid-in capital                                72,194              67,382
Retained earnings (deficit)                              (55,446)            (57,269)
Cumulative translation adjustment                           (145)                187
                                                        --------            --------
TOTAL SHAREHOLDERS' EQUITY                                16,862              10,615
                                                        --------            --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY              $ 49,225            $ 50,793
                                                        --------            --------
                                                        --------            --------
</TABLE>


                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                        3

<PAGE>

                                 INTERLEAF, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                            Three months ended December 31    Nine months ended December 31
                                                  1995          1994                1995          1994
In thousands, except for per share amounts           (unaudited)                       (unaudited)

<S>                                         <C>               <C>                <C>           <C>
REVENUES:
Products                                        $ 7,915       $ 7,400             $26,625      $ 24,862
Maintenance                                       7,932         8,197              24,123        23,076
Services                                          5,408         6,226              16,945        16,137
                                                -------       -------             -------      --------
TOTAL REVENUES                                   21,255        21,823              67,693        64,075
                                                -------       -------             -------      --------

COSTS OF REVENUES:

Products                                          1,598         2,492               4,822         7,035
Maintenance                                       1,300         1,685               3,983         4,920
Services                                          4,474         5,153              14,050        14,915
                                                -------       -------             -------      --------
TOTAL COSTS OF REVENUES                           7,372         9,330              22,855        26,870
                                                -------       -------             -------      --------
Gross Margin                                     13,883        12,493              44,838        37,205
                                                -------       -------             -------      --------

OPERATING EXPENSES:

Selling, general and administrative               9,545        14,110              31,398        43,287
Research and development                          3,992         3,985              11,849        12,684
Restructuring expense                                 -             -                   -         7,109
                                                -------       -------             -------      --------
TOTAL OPERATING EXPENSES                         13,537        18,095              43,247        63,080
                                                -------       -------             -------      --------
Income (loss) from operations                       346        (5,602)              1,591       (25,875)
Other income (expense)                              113          (227)                262          (498)
                                                -------       -------             -------      --------
Income (loss) before income taxes                   459        (5,829)              1,853       (26,373)
Provision (benefit) for income taxes                 30           (48)                 30         2,118
                                                -------       -------             -------      --------
NET INCOME (LOSS)                               $   429       $(5,781)            $ 1,823      $(28,491)
                                                -------       -------             -------      --------
                                                -------       -------             -------      --------
Net income (loss) per share                     $   .02       $  (.41)            $   .10      $  (2.05)
                                                -------       -------             -------      --------
                                                -------       -------             -------      --------
Shares used in computing net                     18,874        13,971              18,382        13,887
  income (loss) per share                       -------       -------             -------      --------
                                                -------       -------             -------      --------
</TABLE>




                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                        4

<PAGE>

                                 INTERLEAF, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>


                                                         Nine months ended December 31
                                                           1995                1994
In thousands                                                    (unaudited)

<S>                                                      <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)                                        $ 1,823            $(28,491)
Adjustments to reconcile net income (loss)
to net cash provided by
  (used in) operating activities:
Restructuring expense                                          -               7,109
Gain from settlement of legal dispute (note 4)            (1,230)                  -
Depreciation and amortization expense                      5,833               8,113
(Gain) loss from disposal of property and equipment           (2)                142
Deferred income taxes                                          -               1,860
Changes in assets and liabilities:
  Decrease in accounts receivable, net                     2,399              15,338
  (Increase) decrease in other assets                        448                (149)
  Decrease in accounts payable and accrued expenses         (189)             (1,915)
  Decrease in unearned revenue                            (1,465)               (920)
  Decrease in other liabilities                           (2,220)             (3,051)
Other, net                                                    (2)                (61)
                                                         -------            --------
  Net cash provided by (used in) operating activities      5,395              (2,025)
                                                         -------            --------

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures                                        (811)             (4,942)
Capitalized software development costs                    (3,452)             (3,062)
                                                         -------            --------
  Net cash used in investing activities                   (4,263)             (8,004)
                                                         -------            --------

CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of common stock                 2,655               1,408
Property and equipment financing                               -                 652
Repayment of long-term debt and capital leases            (1,680)             (1,703)
                                                         -------            --------
  Net cash provided by financing activities                  975                 357
                                                         -------            --------
Effect of exchange-rate changes on cash                     (114)                144
                                                         -------            --------
Net increase (decrease) in cash and cash equivalents       1,993              (9,528)
Cash and cash equivalents at beginning of period          10,441              23,364
                                                         -------            --------
Cash and cash equivalents at end of period               $12,434            $ 13,836
                                                         -------            --------
                                                         -------            --------

</TABLE>



                   SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                        5

<PAGE>

                                 INTERLEAF, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)


1.   Basis of Presentation

     The consolidated financial statements include the accounts of Interleaf,
     Inc. and its subsidiaries. All significant intercompany balances and
     transactions have been eliminated in consolidation. Interleaf, Inc. and its
     subsidiaries are collectively referred to as the "Company." Certain 1994
     amounts have been reclassified to conform to the 1995 method of
     presentation.

     The accompanying unaudited consolidated financial statements have been
     prepared in accordance with generally accepted accounting principles for
     interim financial information and with the instructions to Form 10-Q and
     Rule 10-01 of Regulation S-X. Accordingly, they do not include all
     financial information and disclosures required by generally accepted
     accounting principles for complete financial statements. In the opinion of
     management, these financial statements include all adjustments (consisting
     only of normal recurring accruals) necessary for a fair presentation of the
     results of operations for the interim periods reported and of the financial
     condition of the Company as of the date of the interim balance sheet. The
     results of operations for interim periods are not necessarily indicative of
     the results to be expected for the full year.

     These financial statements should be read in conjunction with the Company's
     audited consolidated financial statements and related notes included in the
     Company's Annual Report on Form 10-K for the year ended March 31, 1995.

     2.   Net Income (Loss) Per Share

     Per share amounts are calculated using the weighted average number of
     common shares and common share equivalents outstanding during periods of
     net income. Common share equivalents are attributable to stock options,
     common stock warrants and convertible preferred stock. Per share amounts
     are calculated using only the weighted average number of common shares
     outstanding during periods of net loss. Fully diluted earnings per share is
     not materially different from reported primary earnings per share.

     3.   Noncash Financing Activities

     Senior Series B Convertible Preferred Stock holders converted 805,269  and
     57,142 shares of preferred stock into 1,082,081 and 76,784 shares of the
     Company's common stock during the nine months ended December 31, 1995 and
     1994, respectively. The Company issued 366,113 shares of common stock,
     during the nine months ended December 31, 1995, in connection with the
     exercise of warrants. The Company received no proceeds upon the conversion
     of the warrants into common stock. There are no warrants outstanding as of
     December 31, 1995.

     4.   Research and Development Agreements

     In October 1988, the Company entered into a joint venture (the "Venture")
     with PruTech Research and Development Partnership III ("PruTech"), for the
     purpose of developing and marketing certain products. PruTech contributed
     approximately $2,950,000 in cash to the Venture; the Company licensed to
     the Venture certain base technology and was required to perform certain
     development, marketing and administrative services for the Venture.

     In March 1994, PruTech commenced an arbitration action against the Company
     alleging, among other things, (i) that the Company had mismanaged the
     Venture; (ii) that PruTech was entitled to cash distributions of 30% of
     Venture revenues; and (iii) that certain Venture-owned technology was used
     in the Company's other products. The Company denied such allegations.

                                        6

<PAGE>

                                 INTERLEAF, INC.


     In November 1995, the Company  and PruTech reached an agreement. The
     Company paid PruTech $2.1 million (the "Purchase Price") solely in
     consideration of (i) the acquisition by the Company of PruTech's interest
     in the Venture, and (ii) the settlement of the pending arbitration action
     and the release by PruTech of all claims that it may have had against the
     Company arising out of the formation and operation of the Venture. The
     Company issued to PruTech 190,000 Common Stock shares for payment of the
     Purchase Price. The settlement of the arbitration action resulted in an
     expense reduction of approximately $1.2 million, which is included in
     selling, general and administrative expenses in the Consolidated Statements
     of Operations. The Venture-owned technology acquired by the Company was
     valued at $1.4 million and is included in Intangible assets in the
     Consolidated Balance Sheets.

     5.   Contingencies

     Interleaf's German subsidiary, Interleaf GmbH, has been notified that it is
     liable for certain German withholding taxes related to payments remitted to
     the United States from Germany. The Company is appealing this assessment,
     however, approximately $1.1 million of the cash and cash equivalents
     balance at December 31, 1995 has been restricted for potential payment of
     the German withholding taxes. The Company believes the final outcome will
     not have a material adverse effect on the financial position or results of
     operations of the Company.

                                        7

<PAGE>

                                 INTERLEAF, INC.

                                    ITEM 2.

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS


RESULTS OF OPERATIONS

OVERVIEW

The Company recorded net income of approximately $0.4 million and $1.8 million
for its third quarter and nine months ended December 31, 1995, respectively,
compared with a net loss of approximately $5.8 million and $28.5 million for the
corresponding periods of fiscal 1995. The improvement in the Company's operating
results was primarily attributable to a significant reduction in operating
expenses, due to a reduction in personnel and facility expenses arising from the
Company's fiscal 1995 restructuring. The third quarter of fiscal 1996 was
positively impacted by the settlement of a long-term dispute with a joint
venture partner, which resulted in an expense reduction of approximately $1.2
million. The second quarter of fiscal 1995 was adversely affected by a
restructuring charge of approximately $7.1 million and a $1.9 million charge
related to the revaluation of the Company's deferred tax asset. Further
reductions in operating expenses from their current levels are not anticipated
as the majority of the benefits from the previous year's restructuring have been
realized.

REVENUES

Total revenues decreased approximately $0.6 million (3%)  for the third quarter
ended December 31, 1995, when compared with the same period a year ago. During
the third quarter of fiscal 1995, the Company recorded a $1.8 million write-off
of a customer contract. Excluding the write-off, this quarter's revenues
declined approximately $2.4 million (10%) primarily due to a decline in product
license and services revenue. Revenues increased approximately $3.6 million (6%)
for the nine months ended December 31, 1995, when compared with the same period
a year ago.

Product license revenue increased approximately $0.5 million (7%) for the third
quarter ended December 31, 1995, when compared with the same period a year ago.
Excluding the product license portion of the contract write-off, approximately
$1.6 million, product license revenue decreased approximately $1.1 million
(12%).  This was attributable to declines in the North American and European
regions, partially offset by an increase in Asia/Pacific/Japan.  During fiscal
1996, the Company has concentrated on rebuilding and strengthening its worldwide
sales force. The improvement in sales force productivity has taken longer than
expected, resulting in lower than anticipated revenues. Product license revenues
increased approximately $1.8 million (7%) for the nine months ended December 31,
1995, when compared with the same period a year ago. This increase was primarily
attributable to the major decline in product license revenues during the first
quarter of fiscal 1995, which resulted in the reorganization and restructuring
of the Company initiated in September 1994, and the contract write-off discussed
above. Product license revenue increased in Europe and Asia/Pacific/Japan,
offset by a decline in North America.

Maintenance revenue, resulting from contracts to provide telephone support and
upgrades to the Company's software products, decreased approximately $0.3
million (3%) for the third quarter ended December 31, 1995, when compared with
the same period a year ago.  Maintenance revenue increased approximately $1.0
million (5%) for the nine months ended December 31, 1995, when compared with the
same period a year ago. The increase for the nine months was primarily due to
increased contract renewals during the second quarter of fiscal 1996. Future
maintenance revenue is dependent on the Company's ability to maintain its
existing customer base and to increase maintenance contract volume related to
the new products being shipped. This will be necessary to offset the general
downward pricing pressure on maintenance in the software industry.

                                        8

<PAGE>

                                 INTERLEAF, INC.

Services revenue, consisting of consulting and customer training revenue,
decreased approximately $0.8 million (13%) for the third quarter ended December
31, 1995, when compared with the same period a year ago. Excluding the services
portion of the contract write-off discussed above, approximately $0.2 million,
services revenue decreased approximately $1.0 million (16%). This decrease was
primarily attributable to a decrease in consulting services personnel and the
decline in product license revenues. Services revenue increased approximately
$0.8 million (5%) for the nine months ended December 31, 1995, when compared
with the same period a year ago. This was primarily related to price increases
and increased customer demand for the Company's consulting services to implement
document management solutions, partially offset by a decline in training
services.

Revenues from the Company's international operations were approximately $7.6
million (36%) and $24.8 million (37%) of total revenues for the third quarter
and nine months ended December 31, 1995, respectively, compared with $9.1
million (42%) and $22.2 million (35%) of total revenues for the corresponding
periods of fiscal 1995. These trends were primarily due to a significant
increase in product license revenues in Japan and Europe during the first six
months of fiscal 1996, partially offset by declines in Europe and Canada during
the third quarter of fiscal 1996.

Growth in revenues for the remainder of fiscal 1996 and fiscal 1997 will be
largely dependent on improving sales force productivity, customer acceptance of
product upgrades and new products that shipped in fiscal 1996 and that are
planned for the next year, and the Company's success in leveraging product
license revenues with services to provide integrated document management
solutions to its customers. The Company recently announced Intellecte/Business
Web, which provides easy access to business information by enabling the use of
all popular web browsers to locate and retrieve documents from enterprise
document repositories utilizing the Company's document management product (RDM).
In addition, the Company continued its aggressive program of product releases by
completing enhancements to five products and introducing Liaison, a new
strategic open Application Programming Interface for simplifying the creation of
integrated document management solutions, during the third quarter of fiscal
1996.

The Company's sales cycles have become longer as the Company provides more
integrated document management solutions combined with expert services to
satisfy its customers' requirements. In addition, a high percentage of the
Company's revenues are generally realized in the last month of a quarter and can
be difficult to predict until the end of a quarter. Accordingly, given the
Company's relatively fixed cost structure, a shortfall or increase in product
license revenue will have a significant impact on the Company's operating
results.

COSTS OF REVENUES

Cost of product revenues includes amortization of capitalized software
development costs; product media, documentation materials, packaging and
shipping costs; and royalties paid for licensed technology. Cost of product
revenues declined approximately $0.9 million (36%) and $2.2 million (31%) for
the third quarter and nine months ended December 31, 1995, respectively, when
compared with the same periods a year ago. The decline was primarily related to
decreased amortization of capitalized software development costs due to the
write-down of capitalized software development costs in the fourth quarter of
fiscal 1995 associated with older software products for which revenue
projections did not support the capitalized amounts. Also contributing to the
decrease in cost of product revenues was a decline in royalties associated with
certain time-based royalty agreements. Cost of maintenance revenues declined
approximately $0.4 million (23%) and $0.9 million (19%) for the third quarter
and nine months ended December 31, 1995, respectively, when compared to the same
periods a year ago, primarily due to a decrease in customer support personnel
related to the Company's fiscal 1995 restructuring. Cost of services revenue
decreased approximately $0.7 million (13%) and $0.9 million (6%) for the third
quarter and nine months ended December 31, 1995, respectively, when compared to
the same periods a year ago, primarily attributable to a decline in services
personnel.


                                        9

<PAGE>


                                 INTERLEAF, INC.

OPERATING EXPENSES

Selling, general and administrative ("SG&A") expenses decreased approximately
$4.6 million (32%) and $11.9 million (27%) for the third quarter and nine months
ended December 31, 1995, respectively, when compared with the same periods a
year ago. This was primarily due to significant personnel and facilities expense
reductions related to the Company's fiscal 1995 restructuring. Additionally, the
settlement of a long-term dispute with a joint venture partner resulted in an
expense reduction of approximately $1.2 million in the third quarter of fiscal
1996.  Excluding the contract write-off in fiscal 1995 and the dispute
settlement in fiscal 1996, SG&A expenses were approximately 51% and 60% of total
revenues for the third quarters ended December 31, 1995 and 1994, respectively.
The Company intends to increase its investment in marketing expenditures to
increase its visibility and create new sales opportunities.

Research and development ("R&D") expenses consist primarily of personnel
expenses to support product development offset by capitalized software
development costs. R&D expenses remained relatively stable for the third quarter
ended December 31, 1995, when compared with the same period a year ago. For the
third quarters ended December 31, 1995 and 1994, R&D expenses were approximately
19% and 18%, respectively, of total revenues. R&D spending, which excludes the
offset for capitalized software development costs, represented approximately 24%
and 23% of total revenues, respectively.  R&D expenses decreased approximately
$0.8 million (7%) for the nine months ended December 31, 1995, when compared
with the same period a year ago. This was primarily due to reduced personnel
expenses associated with the Company's fiscal 1995 restructuring and increased
capitalization of software development costs through the second quarter of
fiscal 1996. Capitalized software development costs in the third quarter of
fiscal 1996 declined from the previous quarter as several major product releases
were completed near the end of the second quarter. The Company continues to work
on several product upgrades and new products which are expected to be released
during the fourth quarter of fiscal 1996 and beginning of fiscal 1997.

LIQUIDITY AND CAPITAL RESOURCES

The Company had approximately $12.4 million of cash and cash equivalents at
December 31, 1995, an increase of approximately $2.0 million from March 31,
1995. The increase was primarily attributable to the Company's profitability for
the nine months ended December 31, 1995 and proceeds from common stock issuances
related to its stock option plans and employee stock purchase plan of
approximately $2.7 million.   This positive impact was partially offset by
significant expenditures to liquidate collateralized and other lease obligations
of approximately $1.7 million and restructuring payments of approximately $1.6
million. Capital expenditures were approximately $0.8 million, a significant
reduction from the prior fiscal year. Future commitments consist primarily of
operating leases related to both open and closed facilities. As discussed in
note 5 to the consolidated financial statements, approximately $1.1 million of
the cash and cash equivalents balance at December 31, 1995 has been restricted
for potential payment of German withholding taxes.

The Company relocated part of its headquarters operations in October 1995. The
Company expended approximately $1.1 million related to prepaid rent, leasehold
improvements and moving costs to the new building through December 1995. The
reduction in office space and rental rate and sub-lease of the vacated space
will result in annual cash and expense savings slightly in excess of $1.0
million beginning in fiscal 1997.

Accrued restructuring charges are approximately $1.7 million at December 31,
1995. This reserve should be sufficient to cover remaining expenditures,
primarily attributable to operating lease payments for closed facilities, which
are expected to continue until the year 2000. The Company has sub-leased all
major closed facilities.

                                       10

<PAGE>

                                 INTERLEAF, INC.

In May 1995, the Company obtained a revolving line of credit from a major
commercial lender. Borrowings from the line of credit are secured by
substantially all domestic assets of the Company. The credit agreement limits
borrowing based upon the level of North American accounts receivable, modified
by the previous quarter's cash collections. As of January 31, 1996, the amount
available for borrowings was approximately $3.6 million. The agreement contains
certain financial covenants as well as restrictions on certain additional
indebtedness, acquisitions, capital expenditures, and dividend payments. At
December 31, 1995, there were no loans outstanding under this line of credit.

As discussed in note 4 to the consolidated financial statements, the Company and
PruTech Research and Development Partnership III ("PruTech") reached a
settlement to end their joint venture (the "Venture") agreement. The Company
paid PruTech $2.1 million (the "Purchase Price") solely in consideration of (i)
the acquisition by the Company of PruTech's interest in the Venture, and (ii)
the settlement of the pending arbitration action and the release by PruTech of
all claims that it may have against the Company arising out of the formation and
operation of the Venture. The Company issued to PruTech 190,000 Common Stock
shares for payment of the Purchase Price.

The Company believes that existing cash and cash equivalents and borrowing
availability, together with cash generated from operations, will provide
sufficient funds to meet the Company's planned operations for the foreseeable
future.

                                       11

<PAGE>

                                 INTERLEAF, INC.

                           PART II - OTHER INFORMATION

Item 5. Other Information

On November 22, 1995, the Company accepted the resignation of Paul English as
Senior Vice President, Product Management. Eric Severson was appointed Vice
President and Chief Strategist on January 8, 1996.

Item 6. Exhibits and Reports on Form 8-K

        (a)    The exhibits listed in the accompanying Exhibit Index are filed
               as part of this Quarterly Report on Form 10-Q.

        (b)    No reports were filed on Form 8-K by the Company during the
               quarter ended December 31, 1995.

                                    SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                        INTERLEAF, INC.

February 12, 1996




                                        /s/ G. Gordon M. Large
                                        --------------------------------------
                                        G. Gordon M. Large
                                        Executive Vice President and
                                        Chief Financial Officer
                                        (Principal Financial Officer)



                                       12

<PAGE>

                                 INTERLEAF, INC.

                                  EXHIBIT INDEX


Exhibit
Number                             Description                  Method of Filing
-------                            -----------                  ----------------
10(a)     Company's 1983 Stock Option Plan, as amended                [v]

10(a1)    1994 Employee Stock Option Plan                             [vi]

10(a2)    1993 Incentive Stock Option Plan, as amended                [viii]

10(b)     Company's 1989 Director Stock Option Plan                   [i]

10(b2)    Company's 1987 Employee Stock Purchase Plan, as             [v]
          amended

10(c)     Company's 1989 Officer and Employee Severance               [i]
          Benefit Plans

10(cc)    Company's 1993 Director Stock Option Plan                   [v]

10(d)     Agreements between PruTech Research and Development         [ii]
          Partnership III and the Company, dated October 21,
          1988.

10(e)     Exclusive Marketing and Licensing Agreement, between        [i]
          Interleaf South America, Ltd. and the Company, and
          related Option Agreement, dated March 31, 1989.

10(f)     Distribution and License Agreement between Interleaf        [i]
          Italia, S.r.l. and the Company, and related Joint
          Venture Agreement, dated October 31, 1988.

10(g)     Preferred Stock Purchase Agreements, for the issuance       [ii]
          of 2,142,857 shares of the Company's Senior Series B
          Convertible Preferred Stock, dated September 29, 1989.

10(h)     Notification to Preferred Shareholder of increase in        [iii]
          conversion ratio, dated May 18, 1992.

10(i)     Lease of Prospect Place, Waltham, MA, between Prospect      [iv]
          Place Limited Partnership and Interleaf, Inc., and
          related Agreements, dated March 30, 1990.

10(k)     Letter Agreement between the Company and Richard P.         [v]
          Delio, the Company's former Sr. Vice President of
          Finance and Administration and Chief Financial
          Officer, dated March 30, 1994, concerning his
          employment and severance with the Company.

10(l)     Letter of Separation and Management Consulting              [vi]
          Agreement between the Company and Mark K. Ruport,
          the Company's former President, Chief Executive
          Officer and Director, dated July 25, 1994,
          concerning his separation and consulting obligations
          to the Company.

10(m)     Letter Agreement between the Company and Richard P.         [vi]
          Delio, the Company's former Sr. Vice President of
          Finance and Administration and Chief Financial Officer
          and Acting President, dated August 3, 1994, concerning
          his employment and severance with the Company.

10(n)     Letter of Separation and Management Consulting              [vi]
          Agreement between the Company and Peter Cittadini, the
          Company's former Sr. Vice President Worldwide
          Operations, dated July 27, 1994, concerning his
          separation and consulting obligations to the Company.

10(o)     Executive Compensation Arrangement for David A.             [vi]
          Boucher, the Company's Chairman of the Board, dated
          July 20, 1994.

10(p)     Letter of Separation and Management Consulting              [vi]
          Agreement between the Company and Lawrence S. Bohn,
          the Company's former Sr. Vice President, Marketing
          and Business Development, dated September 20, 1994,
          concerning his separation and consulting obligations
          to the Company.

10(q)     Employment and severance agreement between the              [vii]
          Company and Edward Koepfler, the Company's President,
          dated October 3, 1994.

                                       13

<PAGE>

                                 INTERLEAF, INC.

Exhibit
Number                             Description                  Method of Filing
-------                            -----------                  ----------------
10(r)     Loan and Security Agreement between the Company and         [ix]
          Foothill Capital Corporation, dated May 2, 1995.

10(s)     Employment and severance agreement between the              [ix]
          Company and G. Gordon M. Large, the Company's
          Executive Vice President and Chief Financial Officer,
          dated June 5, 1995

10(t)     Net Lease, dated August 14, 1995, between Principal         [x]
          Mutual Insurance Company and the Company.

10(u)     Sublease, dated September 15, 1995, between Parametric      [x]
          Technology Corporation and the Company.

10(v)     Employment and severance agreement between the Company      [xi]
          and Mark Cieplik, the Company's Vice President,
          Americas, dated March 17, 1995.

10(w)     Agreement between PruTech Research and Development        Included
          Partnership III and the Company, dated November 14,
          1995.

11        Computation of Earnings Per Share                         Included

27        Financial Data Schedule                                   Included

_______________________





[i] Incorporated herein by reference is the applicable Exhibit to
Company's Annual Report on Form 10-K for the year ended March 31,
1989, File Number 0-14713.

[ii] Incorporated herein by reference is the applicable Exhibit to
Company's Annual Report on Form 10-K for the year ended March 31,
1990, File Number 0-14713.

[iii] Incorporated herein by reference is the applicable Exhibit to
Company's Annual Report on Form 10-K for the year ended March 31,
1992, File Number 0-14713.

[iv] Incorporated herein by reference is the applicable Exhibit to
Company's Report on Form 8-K filed April 13, 1990, File Number
0-14713.

[v] Incorporated herein by reference is the applicable Exhibit to
Company's Annual Report on Form 10-K for the year ended March 31,
1994, File Number 0-14713.

[vi] Incorporated herein by reference is the applicable Exhibit to
Company's Report on Form 10-Q for the quarter ended September 30,
1994, File Number 0-14713.

[vii] Incorporated herein by reference is the applicable Exhibit to
Company's Report on Form 10-Q for the quarter ended December 31,
1994, File Number 0-14713.

[viii] Incorporated herein by reference is the applicable Exhibit
to Company's Annual Report on Form 10-K for the year ended March
31, 1995, File Number 0-14713.

[ix] Incorporated herein by reference is the applicable Exhibit to
Company's Report on Form 10-Q for the quarter ended June 30, 1995,
File Number 0-14713.

[x] Incorporated herein by reference is the applicable Exhibit to
Company's Registration Statement on Form S-2, File Number 33-63785.

[xi] Incorporated herein by reference is the applicable Exhibit to
Company's Report on Form 10-Q for the quarter ended September 30,
1995, File Number 0-14713.

                                       14