<PAGE>   1
                                                                      EXHIBIT 13









SELECTED FINANCIAL DATA AND QUARTERLY STOCK PRICES                   5

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION      
AND RESULTS OF OPERATIONS                                          6-8

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                             8

CONSOLIDATED BALANCE SHEETS AS OF NOVEMBER 30, 1996 AND 1995         9

CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE FISCAL YEARS
ENDED NOVEMBER 30, 1996, 1995, AND 1994                             10

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE
FISCAL YEARS ENDED NOVEMBER 30, 1996, 1995, AND 1994                11

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE FISCAL YEARS          12
ENDED NOVEMBER 30, 1996, 1995, AND 1994

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                       13-20


                                      4

<PAGE>   2

<TABLE>

<CAPTION>
                             SELECTED FINANCIAL DATA


Fiscal years ended November 30,
-----------------------------------------------------------------------------------------------------
(in thousands, except per share data         1996      1995       1994       1993      1992
and employees)
-----------------------------------------------------------------------------------------------------

<S>                                       <C>        <C>        <C>        <C>       <C>  
Net sales                                 $50,826    $30,278    $12,415    $ 1,118   $     0


Income (loss) from continuing               4,833      2,345     (2,031)    (4,328)   (1,816)
operations
Income (loss) from discontinued            (6,672)     2,426      2,351         30      (642)
operations
-----------------------------------------------------------------------------------------------------
Net income (loss)                          (1,839)     4,771        320     (4,298)   (2,458)

Income (loss) per share from continuing      0.57       0.35      (0.43)     (2.03)    (0.87)
operations
Income (loss) per share from                (0.79)      0.36       0.49       0.01     (0.31)
discontinued operations
-----------------------------------------------------------------------------------------------------
Net income (loss) per share                 (0.22)      0.71       0.06      (2.02)    (1.18)

Gross margin percentage                     60.6%      58.0%      58.7%      52.1%      na

Research and development
expenses as a percentage of net sales        12.3%      15.9%      30.4%     288.6%      na

Selling, marketing, general, and
administrative expenses as a
percentage of net sales                      39.5%      36.7%      44.8%     173.9%      na

Operating income (loss) as a percentage     
of net sales                                  8.8%       5.4%     (16.5)%   (410.4)%      na
Income (loss) from continuing              
operations as a percentage of net sales       9.5%       7.7%     (16.3)%   (387.1)%      na
Income (loss) from discontinued           
operations as a percentage of net sales     (13.1)%      8.0%      18.9%       2.7%       na
-----------------------------------------------------------------------------------------------------
Net income (loss) as a percentage of        
net sales                                    (3.6)%     15.8%       2.6%    (384.4)%      na


Total assets                              $59,990    $51,123    $11,430    $ 7,807   $ 9,313

Employees at year-end *                       172         77         43         30        16

=====================================================================================================
<FN>
*    Prior to the end of fiscal year 1996 the Company shared resources with the
     Company's non-Media 100 related businesses. These employees have not been
     included in fiscal years 1995, 1994, 1993 and 1992.
</TABLE>


<PAGE>   3
<TABLE>


<CAPTION>
                             QUARTERLY STOCK PRICES

Fiscal year ended November 30,

--------------------------------------------------------------------------------
1995                                     HIGH              LOW
--------------------------------------------------------------------------------

<S>                                   <C>              <C>   
First Quarter                         11  1/4           7  1/8
Second Quarter                        16  1/4          10  3/4
Third Quarter                         17  5/8          13 1/16
Fourth Quarter                        19  3/4          16


1996
--------------------------------------------------------------------------------
First Quarter                         21               10  3/4
Second Quarter                        28  3/4          13  1/4
Third Quarter                         28  1/4           7  3/4
Fourth Quarter                        12  1/2           7  7/8
</TABLE>



The common stock of the Company trades on the Nasdaq National Market tier of The
Nasdaq Stock Market under the symbol: MDEA. Prior to December 3, 1996, the
Company traded under the symbol: DATX. The preceding table sets forth, for the
periods indicated, the last reported high and low sales prices per share of the
Company's common stock as reported on the Nasdaq National Market. The Company
has never paid a cash dividend on its common stock, and the Board of Directors
does not anticipate paying cash dividends in the foreseeable future. As of
February 14, 1997, there were 273 stockholders of record and approximately 2,200
beneficial owners of the Company's common stock. The last sale price per share
of the Company's common stock as reported on the Nasdaq National Market on
February 14, 1997 was $7.50. All share and per share data have been
retroactively restated to reflect the Company's two-for-one stock split in the
form of a stock dividend, effective on July 31, 1995.



                                      5

<PAGE>   4


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

OVERVIEW

     Media 100 Inc. is a technology and market leader in the market for personal
computer-based digital video systems. The Media 100 family of products are
analog and digital conversion systems that enable users to capture video and
audio into a personal computer, perform random-access ("nonlinear") video
editing and audio mixing, and directly produce a finished program with
broadcast-quality picture and compact disc-quality sound, all without the use of
traditional video tape equipment.


     On July 30, 1996, the Company announced its intention to separate its Media
100 digital video business from its data acquisition and imaging, commercial
products and U.K.-based networking distribution businesses. The Company
announced that it would contribute its data acquisition and imaging and
commercial products businesses to a newly-formed subsidiary, Data Translation
II, Inc. ("DTI"), the stock of which would then be distributed as a dividend to
the Company's stockholders. The Company further announced that it planned to
dispose of its networking distribution business within twelve months.


     On November 11, 1996, the Company sold substantially all of the assets
associated with its networking distribution business in connection with the
winding up of that business. On December 2, 1996, the Company distributed all of
the shares of DTI, to which it had contributed its data acquisition and imaging
and commercial products businesses and the remaining assets and liabilities of
the networking distribution business, as a dividend to the Company's
stockholders (the "Spin-Off"), in the ratio of one share of DTI common stock for
every four shares of Company common stock. In connection with the Spin-Off, the
Company retained only its Media 100 related business and changed its name to
Media 100 Inc.


     In connection with the Spin-Off and the disposal of the networking
distribution business, the Company's historical financial statements and other
financial information reflect the financial position, results from operations
and cash flows of the Company as continuing operations; the related financial
information of the businesses contributed to DTI and the networking distribution
business has been segregated and reclassified as discontinued operations.


     The Company believes that there are three general types of end-users of
digital media production systems, professional, corporate and institutional, and
mass market users. Within this market, the Company primarily targets the
corporate and institutional users. Many of these corporate and institutional
users currently rely on analog video tape editing processes. Digital editing
alternatives are relatively new and currently account for a small portion of
this market of current users. The Company also believes that the corporate and
institutional market includes a potential market of new users who currently
out-source their video production requirements.


     To address the target market of corporate and institutional users the
Company initiated a plan in 1996 to introduce a family of products that were
intended to offer full video program authoring capabilities over a broad
price/performance spectrum. As a first step of this strategy, the Company began
shipments in April 1996 of Media 100 qx, a lower-cost digital video system 

                             
<PAGE>   5

based on the Company's Vincent digital video engine that enables users of Apple
QuickTime applications to create broadcast-quality video programs using Adobe
Premiere editing software.


     On December 26, 1996, the Company began shipments of six new Media 100
products, each of which is based on the Company's Vincent 601 digital video
engine, and which are differentiated by software-enabled features and
functionality. The reliance on a single hardware platform for all products
enables a software-only upgrade path throughout the Media 100 product family to
the advanced features and functionality of the Company's higher-end systems.


     The Company sells its products through a worldwide network of approximately
500 independent value added resellers ("VAR's") in over 50 countries. In 1996,
the Company embarked upon a concerted effort to increase the size of its
international VAR network in order to increase international sales of its
products and services, and in this regard, the Company established a new
European headquarters in Paris, France in October 1996.


     As a result of the Spin-Off, the Company intends to relocate its principal
executive, engineering, manufacturing and sales operations to a new facility
located in Marlboro, Massachusetts in April 1997. There may be a risk of
disruption in customer shipments if the Company is not able to maintain an
uninterrupted supply of products during the period of transition to the new
facility.

<TABLE>


RESULTS OF CONTINUING OPERATIONS

     The following table shows certain consolidated statements of 
operations data as a percentage of net sales.

Fiscal years ended November 30,
--------------------------------------------------------------------------------
<CAPTION>
                                              1996          1995          1994
Continuing operations
--------------------------------------------------------------------------------
<S>                                          <C>           <C>           <C>    
Net sales                                    100.0%        100.0%        100.0%
Gross margin                                  60.6          58.0          58.7
Research and development expenses             12.3          15.9          30.4
Selling and marketing expenses                29.6          30.0          37.5
General and administrative expenses            9.9           6.7           7.3
--------------------------------------------------------------------------------
Operating income (loss)                        8.8           5.4         (16.5)
Interest income (expense) and other, net       3.1           2.5           0.5
Provision for income taxes                     2.4           0.2           0.3
--------------------------------------------------------------------------------
Income (loss) from continuing operations       9.5%          7.7%        (16.3)%
================================================================================
</TABLE>


                                      6
<PAGE>   6
MANAGEMENT'S DISCUSSION AND ANALYSES OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (cont.)

COMPARISON OF FISCAL 1996 TO 1995

     Net sales from continuing operations for the fiscal year ended November 30,
1996 were $50,826,000, an increase of $20,548,000, or 67.9%, over the same
period a year ago. The increase was due to higher unit sales of Media 100, the
introduction of a new lower cost product, Media 100 qx, and initial shipments of
Gaudi, the Company's advanced digital video effects product. Shipments of Media
100 qx began in April 1996 and Gaudi in November 1996.

     Gross margin for fiscal 1996 was 60.6% compared to 58.0% in the comparable
period a year ago. This increase reflects improvement in the Company's product
mix as the Company realized more revenue from software products sold together
with the Company's hardware product. In addition, higher utilization of the
Company's manufacturing capacity due to higher unit volumes and reductions in
the cost of key component parts used in the manufacture of the Media 100
hardware also contributed to the gross margin improvement.

     Operating income for fiscal 1996 was $4,453,000, an increase of $2,804,000,
or 170%, over the same period of last year. Operating income reflects the higher
net sales and gross margin, partially offset by operating expenses of
$26,327,000 in fiscal 1996, an increase of $10,409,000, or 65.4%, over the same
period of last year. Research and development costs increased to $6,227,000 in
support of the Company's continued focus on improving existing products and the
introduction of Media 100 qx and Gaudi. Selling and marketing expenses increased
to $15,066,000 as the Company continued to expand its support for the sales
channel, including establishing a European headquarters in Paris, France, and
increasing marketing activities to broaden brand awareness for its products. In
addition, rollout costs associated with Media 100 qx also contributed to higher
sales and marketing expenses. General and administrative expenses increased to
$5,034,000 to support the Company's rapid growth in net sales and for the
defense of patent infringement litigation (See Note 6 to the Consolidated
Financial Statements).

     Interest income in fiscal 1996 was $1,588,000, an increase of $817,000, or
106%, over the same period of last year, reflecting an increase in cash balances
including cash equivalents and marketable securities on hand in 1996.

     The tax provision of $1,208,000 for fiscal 1996 compares to a $75,000 tax
provision in fiscal 1995. The Company's effective tax rate was 20% in fiscal
1996 reflecting the utilization of net operating loss and research and
development credit carryforwards. The Company's effective tax rate in 1995 was
3% reflecting the utilization of the net operating loss carryforwards. The
Company anticipates higher effective tax rates in the future due to lower
research and development credit carryforwards (See Note 7 to the Consolidated
Financial Statements).

     Income from continuing operations for fiscal 1996 was $4,833,000, or $0.57
per share, compared to $2,345,000, or $0.35 per share, for the prior fiscal
year. Loss from discontinued 


<PAGE>   7

operations for fiscal 1996 was $6,672,000, or $0.79 per share, compared to net
income of $2,426,000, or $0.36 per share, for the prior fiscal year. Of the
$6,672,000 loss from discontinued operations, expenses related to the Spin-Off
accounted for $1,500,000 and the loss on disposal of the networking
distribution business was estimated at $2,513,000.

COMPARISON OF FISCAL 1995 TO 1994

     Net sales from continuing operations for the fiscal year ended November 30,
1995 were $30,278,000, an increase of $17,863,000, or 143.9%, over the same
period a year ago. The increase was due to higher unit shipments of Media 100
products.

     Gross margin for fiscal 1995 was 58.0% compared to 58.7% in the comparable
period a year ago. The decline was due primarily to changes in the Company's
product mix.

     Operating income for fiscal 1995 was $1,649,000, compared to an operating
loss of $2,054,000 for fiscal 1994. Profitability was achieved through higher
net sales of Media 100. Research and development expenses increased by
$1,026,000, or 27.1%, from the comparable period, due to continued engineering
investment in Media 100 products. Total selling and marketing expenses increased
by $4,431,000, or 95.1%, from the comparable period, demonstrating the Company's
commitment to promoting Media 100 products and expanding its sales distribution
channel. General and administrative expenses increased by $1,119,000, or 123.6%,
compared to the prior period, to support the Company's expansion.

     Interest income in fiscal 1995 was $771,000, an increase of $620,000 from
fiscal 1994, reflecting the Company's increased cash balances due primarily to
public offerings of the Company's common stock.

     The tax provision of $75,000 for fiscal 1995 compares to a tax provision
for fiscal 1994 of $36,000. The Company's utilized net operating loss
carryforwards in 1995 that were not benefited in the 1994 financial statements.

     Income from continuing operations for fiscal 1995 was $2,345,000, or $0.35
per share, compared to a loss of $2,031,000, or $0.43 per share, for the prior
fiscal year. Income from discontinued operations for fiscal 1995 was $2,426,000,
or $0.36 per share, compared to $2,351,000, or $0.49 per share, for the prior
fiscal year.

                                      7

<PAGE>   8
MANAGEMENT'S DISCUSSION AND ANALYSES OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (cont.)

LIQUIDITY AND CAPITAL RESOURCES

     During fiscal 1996, net cash provided by continuing operating activities
was $5,897,000, primarily comprised of income from continuing operations of
$4,833,000. Net cash provided by financing activities was $4,812,000, of which  
$3,450,000 was the proceeds from the overallotment option exercise associated
with the Company's public offering of common stock in November 1995 and
$1,362,000 was the proceeds from the Company's stock plans. The net purchase of
equipment of $1,951,000 was primarily for capital equipment for new employees
to support the growth in sales. In addition, the Company had net purchases of
marketable securities of $21,336,000. Net cash used in discontinued operating
activities was $13,560,000.

     The Company believes its existing cash balance and cash generated from
future operations will be sufficient to meet the Company's cash requirements for
the foreseeable future.


CERTAIN FACTORS THAT MAY AFFECT FUTURE PERFORMANCE


     Except for the historical information contained herein, the matters
discussed in this Management's Discussion and Analysis and elsewhere in this
Annual Report to Stockholders are forward-looking statements based on current
expectations, and involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements of the
Company, or industry results, to be materially different from those expressed in
such forward-looking statements. The risks and uncertainties associated with
such statements include the following: the dependence of the Company on a single
product family; the uncertainty as to the market acceptance of digital video
products generally or the Company's products in the emerging commercial and
institutional market; the high level of competition and rapid technological
change characteristic of the Company's industry; the risks associated with the
development and introduction of new products and the management of product
transitions; the risks associated with sole source suppliers; the risks
associated with the Company's dependence on an indirect sales channel of
independent resellers; the risks associated with international operations; the
uncertainty of patent and proprietary technology protection; the risks of third
party claims of infringement, particularly with respect to certain pending
litigation described in Note 6 to the Consolidated Financial Statements; the
Company's dependence on the retention and attraction of key employees,
especially in research and development; the risks associated with the relocation
of the Company's facilities and implementation of new information systems; and
general economic and business conditions.



<PAGE>   9


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To Media 100 Inc.:

     We have audited the accompanying consolidated balance sheets of Media 100
Inc. (a Delaware corporation) and subsidiaries as of November 30, 1996 and 1995,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended November 30, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free from
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Media 100 Inc. and
subsidiaries as of November 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
November 30, 1996, in conformity with generally accepted accounting principles.




                                                             ARTHUR ANDERSEN LLP


Boston, Massachusetts
January 9, 1997 (except with respect 
to the matter discussed in 
Note 6(b)(ii), as to which the date 
is February 12, 1997)


                                      8
   
<PAGE>   10

<TABLE>

<CAPTION>
                           CONSOLIDATED BALANCE SHEETS

--------------------------------------------------------------------------------
                                                   November 30,     November 30,
        in thousands except share amounts                 1996             1995
--------------------------------------------------------------------------------

<S>                                                    <C>              <C>    
Current assets:
         Cash and cash equivalents                     $ 2,733          $28,602
         Marketable securities                          27,983            6,559
         Accounts receivable, net of reserves of        11,665            6,062
            $328 in 1996 and $203 in 1995
         Inventories                                     1,473            1,900
         Prepaid expenses                                  567              339
         Prepaid income taxes                               --               60
--------------------------------------------------------------------------------
         Total current assets                           44,421           43,522

Equipment, net                                           2,467            1,414

Other assets, net                                          112               85

Net assets of discontinued operations (Note 12)         12,990            6,102
--------------------------------------------------------------------------------

         Total assets                                  $59,990          $51,123
================================================================================

Current liabilities:
         Accounts payable                              $ 1,981          $   516
         Accrued expenses                                5,791            2,853
         Deferred revenue                                2,153            1,010
--------------------------------------------------------------------------------
         Total current liabilities                       9,925            4,379


Commitments and contingencies (Note 6)

Deferred income taxes                                        -                3

Stockholders' equity:
         Preferred stock, $.01 par value,
         Authorized - 1,000,000 shares, none                 -                -
            issued
         Common stock, $.01 par value, 
         Authorized - 25,000,000 shares, 
         Issued - 8,087,884 in 1996 and
            8,491,208 in 1995                               81               85
         Capital in excess of par value                 40,035           37,062
         Retained earnings                               9,826           11,665
         Cumulative translation adjustment                 123            (173)
         Treasury stock, at cost,0 shares in 1996
            and 869,096 shares in 1995                       -          (1,843)
         Unrealized holding loss on available for
            sale securities                                  -             (55)

--------------------------------------------------------------------------------
         Total stockholders' equity                     50,065           46,741

         Total liabilities and stockholders' equity    $59,990          $51,123
================================================================================
[/FN]
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>

                                       9
<PAGE>   11


<TABLE>


<CAPTION>
                      CONSOLIDATED STATEMENTS OF OPERATIONS


Fiscal years ended November 30,
--------------------------------------------------------------------------------
in thousands except per share amounts
                                          1996            1995            1994
--------------------------------------------------------------------------------

<S>                                     <C>             <C>             <C>    
Net sales                               $50,826         $30,278         $12,415

Cost of sales                            20,046          12,711           5,127
--------------------------------------------------------------------------------

Gross profit                             30,780          17,567           7,288

Research and development                  
    expenses                              6,227           4,806           3,780

Selling and marketing expenses           15,066           9,088           4,657

General and administrative                
    expenses                              5,034           2,024             905
--------------------------------------------------------------------------------

Operating income (loss)                   4,453           1,649          (2,054)

Interest income                           1,588             771             151

Other expense                                --              --              92
--------------------------------------------------------------------------------

Income (loss) from continuing             
operations before tax provision           6,041           2,420          (1,995)

Tax provision                             1,208              75              36
--------------------------------------------------------------------------------

Income (loss) from continuing             4,833           2,345          (2,031)
    operations

Income (loss) from discontinued          
    operations, net of tax of $318,
    $10 and $163 in 1996, 1995 and
    1994, respectively (Note 12)         (6,672)          2,426           2,351
--------------------------------------------------------------------------------

Net income (loss)                       $(1,839)        $ 4,771         $   320
================================================================================


Income (loss) per common and            $  0.57         $  0.35         $ (0.43)
    common equivalent share from
    continuing operations
Income (loss) per common and            $ (0.79)        $  0.36         $  0.49
    common equivalent share from
    discontinued operations
--------------------------------------------------------------------------------

Net income (loss) per common and        $ (0.22)        $  0.71         $  0.07
    common equivalent share
================================================================================

Weighted average number of common         8,470           6,701           4,764
    and common equivalent shares
    outstanding
================================================================================
</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.

                                      10

<PAGE>   12

<TABLE>


<CAPTION>
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                                                 
                                                 
                                                 
  in thousands except         Common Stock          Capital in   Retained  Cumulative   Treasury   Unrealized
     share amounts           $.01 Par Value         Excess of    Earnings  Translation    Stock   Holding Gain
                        -------------------------   Par Value              Adjustment              (Loss) on
                            Shares      Amount                                                      Available
                                                                                                    for Sale
                                                                                                    Securities
---------------------------------------------------------------------------------------------------------------

<S>                      <C>              <C>       <C>           <C>        <C>        <C>            <C>
Balance, November 30,    
1993                      6,563,450       $66       $ 8,289       $ 6,574    $(106)     $(4,781)       $  -

Proceeds from issuance
of common stock under       
stock plans                 248,986         2           761             -        -            -           -
                                                                                        
Effect of                                                                               
stock-for-stock                                                                         
exercise                    (46,964)        -          (311)            -        -            -           -
                                                                                        
Translation adjustment            -         -             -             -      143            -           -
                                                                                        
Net income                        -         -             -           320        -            -           -
                                                    
--------------------------------------------------------------------------------------------------------------

Balance, November 30,
1994                      6,765,472       $68       $ 8,739       $ 6,894    $  37      $(4,781)       $  -

Proceeds from issuance                                
of common stock under                               
stock plans                 325,736         3         1,166             -        -            -           - 
                                                    
Public sale of                                                                        
treasury stock, net of                              
issuance costs of $375            -         -         5,864             -        -        2,938           -
                                                    
Public sale of common                               
stock, net of issuance                              
costs of $400             1,400,000        14        21,293             -        -            -           -
                                                                                      
Translation adjustment            -         -             -             -     (210)           -           -
                                                                                      
Net income                        -         -             -         4,771        -            -           -
                                                                                      
Unrealized holding                                                                                      
loss on available for                                                                 
sale securities                   -         -             -             -        -            -         (55)

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

Balance, November 30,
1995                      8,491,208       $85       $37,062       $11,665    $(173)     $(1,843)       $(55)

Proceeds from issuance                                
of common stock under       
stock plans                 242,272         3         1,359             -        -            -           -

Retirement of treasury                               
stock                      (869,096)       (9)       (1,834)            -        -        1,843           -

                                     
Issuance of common          
stock                       223,500         2         3,448             -        -            -           -
                                                                                              
Translation adjustment            -         -             -             -      296            -           - 
                                                                                              
Net loss                          -         -             -        (1,839)       -            -           -
                                                                                              
Unrealized holding                                                                                        
gain on available for                                                                         
sale securities                   -         -             -             -        -            -          55

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

Balance, November 30,  
1996                      8,087,884       $81       $40,035       $ 9,826    $ 123      $     -        $  -
                                                     
===============================================================================================================

The accompanying notes are an integral part of these consolidated financial
statements.

</TABLE>

                                      11
                                           
<PAGE>   13

<TABLE>

<CAPTION>
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


Fiscal years ended November 30,
--------------------------------------------------------------------------------
in thousands                                   1996           1995          1994
--------------------------------------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                            <C>         <C>          <C>    
Net income (loss)                              $ (1,839)   $  4,771     $   320
(Income) loss from discontinued operations        6,672      (2,426)     (2,351)
                                             -----------------------------------
Income (loss) from continuing operations          4,833       2,345      (2,031)

Adjustments to reconcile income (loss) from 
 operations to net cash provided by (used in)
 operating activities
Depreciation and amortization                       898         878         820
Deferred income taxes                               (3)           1          --
Loss on sale of equipment                            --           2           4
(Gain) loss on sale of marketable securities        (33)         35           3

Changes in assets and liabilities
Accounts receivable                              (5,603)     (3,035)     (2,401)
Inventories                                         427      (1,248)       (367)
Prepaid income taxes                                (61)          1         182
Accounts payable, accruals and prepaid expenses   4,296       1,383       1,249
Deferred revenue                                  1,143         785         225
                                             -----------------------------------
Net cash provided by (used in) continuing         5,897       1,147      (2,316)
 operating activities
Net cash provided by (used in) discontinued     (13,560)      1,274       2,423
 operating activities
--------------------------------------------------------------------------------
Net cash provided by (used in) operating       $ (7,663)    $ 2,421     $   107
 activities
--------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Net purchase of equipment                        (1,951)     (1,425)     (1,179)
Increase in other assets                            (27)        (68)        (54)
Purchases of marketable securities              (78,620)    (13,270)       (943)
Proceeds from sales of marketable securities     57,284       9,108       1,042
--------------------------------------------------------------------------------
Net cash used in investing activities          $(23,314)    $(5,655)    $(1,134)
--------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock plans                         1,362       1,169         452
Net proceeds from public sale of treasury
 stock                                               --       8,802
Net proceeds from public sale of common
stock                                             3,450      21,307
--------------------------------------------------------------------------------
Net cash provided by  financing activities     $  4,812     $31,278     $   452
--------------------------------------------------------------------------------


EFFECT OF EXCHANGE RATE CHANGES ON CASH             296        (220)        139

NET INCREASE (DECREASE) IN CASH AND CASH        (25,869)     27,824        (436)
EQUIVALENTS

CASH AND CASH EQUIVALENTS,
 beginning of period                             28,602         778       1,214
--------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of period       $  2,733     $28,602     $   778
================================================================================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for income taxes                     $    743     $    46     $    11
================================================================================

OTHER TRANSACTIONS NOT PROVIDING
(USING) CASH:
Retirement of treasury stock                   $  1,843     $    --     $   --
Change in value of marketable securities       $    (55)    $    55     $   --

The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>

                                      12

<PAGE>   14


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


     Media 100 Inc. designs, develops, manufactures and markets personal
computer-based digital video system products. The Media 100 family of products
are analog and digital conversion systems that enable users to capture video
and audio into a personal computer, perform random-access ("nonlinear") video
editing and audio mixing, and directly produce a finished program with
broadcast-quality picture and compact disc-quality sound, all without the use
of traditional video tape equipment.


     On July 30, 1996, the Company announced its intention to separate its Media
100 digital video business from its data acquisition and imaging, commercial
products and U.K.-based networking distribution businesses. The Company
announced that it would contribute its data acquisition and imaging and
commercial products businesses to a newly-formed subsidiary, Data Translation
II, Inc. ("DTI"), the stock of which would then be distributed as a dividend to
the Company's stockholders. The Company further announced that it planned to
dispose of its networking distribution business within twelve months.

     On November 11, 1996, the Company sold substantially all of the assets
associated with its networking distribution business in connection with the
winding up of that business. On December 2, 1996, the Company distributed all of
the shares of DTI, to which it had contributed its data acquisition and imaging
and commercial products businesses and the remaining assets and liabilities of
the networking distribution business, as a dividend to the Company's
stockholders (the "Spin-Off"), in the ratio of one share of DTI common stock for
every four shares of Company common stock. In connection with the Spin-Off, the
Company retained only its Media 100 related business and changed its name to
Media 100 Inc.

     In connection with the Spin-Off and the disposal of the networking
distribution business, the Company's historical financial statements and other
financial information reflect the financial position, results from operations
and cash flows of the Company as continuing operations; the related financial
information of the businesses contributed to DTI and the networking distribution
business has been segregated and reclassified as discontinued operations. (Note
12).

     The consolidated financial statements reflect the application of certain
significant accounting policies as described in this note and elsewhere in the
accompanying consolidated financial statements and notes.

(a)  Principles of Consolidation

     The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All material intercompany
accounts and transactions have been eliminated in consolidation.

(b)  Cash and Cash Equivalents and Marketable Securities

                             
<PAGE>   15

     Cash equivalents are carried at cost, which approximates market value, and
have original maturities of less than three months. Cash equivalents include
money market accounts and repurchase agreements with overnight maturities.

     Effective December 1, 1994, the Company adopted the provisions of Statement
of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities. Under this standard, the Company is
required to classify all investments in debt and equity securities into one or
more of the following three categories: held-to-maturity, available-for-sale or
trading. Available-for-sale securities are recorded at fair market value with
unrealized gains and losses excluded from earnings and reported to
stockholders' equity. All of the Company's marketable securities are 
classified as available-for-sale.

<TABLE>
     Marketable securities held as of November 30, 1996, consist of the
following (in thousands):

<CAPTION>
                                          
 
                                             Maturity               Market Value
<S>                                         <C>                        <C>    
Investments available for sale:
  U.S. Treasury Bonds                       less than 1                $   399
                                            year
  U.S. Treasury Bonds                       1 - 3 years                    760
--------------------------------------------------------------------------------

  Total U.S. Treasury Bonds                                              1,159

  U.S. Treasury Notes                       less than 1                  4,012
                                            year
  U.S. Treasury Notes                       1 - 5 years                  2,973
--------------------------------------------------------------------------------

  Total U.S. Treasury Notes                                              6,985

  Municipal Bonds                           less than 2                  2,997
                                            years
  Municipal Bonds                           more than 2 years            2,502
--------------------------------------------------------------------------------

  Total Municipal Bonds                                                  5,499

  Asset-Backed Securities                   less than 2                  1,010
                                            years
  Asset-Backed Securities                   more than 2 years            5,710
--------------------------------------------------------------------------------

  Total Asset-Backed Securities                                          6,720


  Corporate Bonds                           1 - 5 years                  7,620
--------------------------------------------------------------------------------

Total investments available for sale                                   $27,983
================================================================================
</TABLE>

     Marketable securities had a cost of $27,983 and $6,614 at November 30, 1996
and 1995, respectively, and a market value of $27,983 and $6,559, respectively.
To reduce the carrying amount of the 1995 marketable securities portfolio to
market value, a valuation allowance has been reflected as a separate component
of stockholders' equity on November 30, 1995 pursuant to the provisions of 
SFAS No. 115.

                                      13
<PAGE>   16
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)

             
<TABLE>
(c)  Inventories

     Inventories are stated at the lower of first-in, first-out (FIFO) cost or
market and consist of the following (in thousands):

<CAPTION>
November 30,
--------------------------------------------------------------------------------
                                                       1996                1995

<S>                                                  <C>                 <C>   
Raw Materials                                        $  780              $1,087
Work-in-Process                                         302                 444
Finished Goods                                          391                 369
--------------------------------------------------------------------------------
                                                     $1,473              $1,900
================================================================================
</TABLE>

     Work-in-process and finished goods inventories include material, labor and
manufacturing overhead. Management performs periodic reviews of inventory and
disposes of items not required by their manufacturing plan.

(d)  Depreciation and Amortization

<TABLE>
     The Company provides for depreciation and amortization, using the
straight-line and declining balance methods, by charges to operating expenses in
amounts that allocate the cost of the equipment over the following estimated
useful lives:

<CAPTION>
               Description                              Useful Lives
              ------------------------------------------------------
               <S>                                      <C>
               Machinery and equipment                  3 to 7 years
               Furniture and fixtures                   7 years
               Vehicles                                 3 years
</TABLE>

(e)  Equipment, net

<TABLE>
     Equipment, net is stated at cost, less accumulated depreciation and
amortization, and consists of the following (in thousands):


<CAPTION>
November 30,
---------------------------------------------------------------------------
                                             1996                     1995

<S>                                        <C>                      <C>   
   Machinery and equipment                 $4,251                   $2,731
   Furniture and fixtures                     480                       63
   Vehicles                                    14                        -
---------------------------------------------------------------------------
                                           $4,745                   $2,794
   Less accumulated depreciation            
   and amortization                         2,278                    1,380
---------------------------------------------------------------------------
                                           $2,467                   $1,414
===========================================================================
</TABLE>
(f)  Foreign Currency

     The Company translates the assets and liabilities of its foreign
subsidiaries at the rates of exchange in effect at year-end. Revenues and
expenses are translated using exchange rates in effect during the year. Gains
and losses from foreign currency translation are credited or charged to
"Cumulative translation adjustment" included in stockholders' equity in the
accompanying consolidated balance sheets. Net realized foreign currency
transaction gains for the year ended November 30, 1996 were $144,000 and are
classified in general and administrative expenses. For fiscal years ended
November 30, 1995 and 1994 these gains and losses were not significant.

(g)  Revenue Recognition

     The Company recognizes revenue when products are shipped or, for
postcontract support agreements, ratably over the terms of the agreements. The
Company's policy is to defer the revenue associated with any vendor and
postcontract support obligations remaining at the time of shipment until the
related obligations are satisfied. Costs of service and warranty are not
significant and are charged to operations as incurred. Revenues from hardware
systems with other than incidental software components and stand alone software
sales are recognized upon shipment, provided that no significant vendor or
postcontract support obligations remain outstanding and collection of the
resulting receivable is deemed probable.

                                      14
<PAGE>   17
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) 



(h)  Capitalized Software Development Costs

     The Company capitalizes certain computer software development costs.
Capitalization of costs commences upon establishing technological feasibility.
Capitalized costs, net of accumulated amortization, were approximately $104,000
and $84,000 as of November 30, 1996 and 1995, respectively, and are included in
other assets. These costs are amortized on a straight-line basis over two years,
which approximates the economic life of the product. Amortization expense,
included in cost of sales in the accompanying consolidated statements of
operations, was $40,000, $81,000 and $80,000 in 1996, 1995 and 1994,
respectively.

(i)  Use of Estimates in the Preparation of Financial Statements

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

(j)  Disclosure About the Fair Value of Financial Instruments

     SFAS No. 107, Disclosures About the Fair Value of Financial Instruments,
which was adopted by the Company effective December 1, 1995, requires that
disclosure be made of estimates of the fair value of each class of financial
instrument. Financial instruments held by the Company as of November 30, 1996
consist primarily of short-term trade receivables and payables, for which the
carrying amounts approximate fair values, cash equivalents and marketable
securities.


2.  NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE

     Net income (loss) per common and common equivalent share is determined by
dividing net income (loss) by the weighted average number of common and common
equivalent shares outstanding during each period. Common equivalent shares have
been calculated in accordance 

with the treasury stock method and are included for all periods where their
effect is dilutive. Fully diluted net income (loss) per common and common
equivalent share has not been separately presented, as the amounts would not be
materially different from net income (loss) per common and common equivalent
share.


3.  STOCKHOLDERS' EQUITY

(a)  Stock Split

     On June 28, 1995, the Board of Directors approved a 2-for-1 stock split
effected in the form of a dividend for all shareholders of record as of July 17,
1995. All share and per share data included in these financial statements have
been retroactively restated to reflect the stock split.

(b)  Stock Options

     Prior to April 1992, options were granted under the Company's 1982 Key
Employee Incentive Plan (the "1982 Plan"). Subject to certain limitations
imposed by the 1982 Plan, options were granted at a price determined by the
Board. The Board resolved to issue options under the 1982 Plan at not less than
100% of fair market value. The options expire six years from the date of grant
and become exercisable at the rate of 20% per year beginning one year from the
date of grant. No further options may be granted under the 1982 Plan.

     In 1992, the Company adopted the 1992 Key Employee Incentive Plan (the
"1992 Plan"), and 1,000,000 shares of common stock were reserved for issuance.
At the Company's Annual Meeting on April 10, 1996 an increase of 1,000,000
shares for a total of 2,000,000 shares were approved for grant. Options granted
pursuant to the 1992 Plan may, at the discretion of the Board, be incentive
stock options as defined by the Internal Revenue Code. Subject to the provisions
of the 1992 Plan, options granted are at a price as specified by the Board. The
Board has, to date, issued options under the 1992 plan at not less than 100% of
fair market value. The options become exercisable at a rate of 20% per year
beginning one year from the date of grant unless otherwise specified by the
Board. The Board will determine when the options will expire, but in no event
will the option period exceed ten years. No options may be granted under the
1992 Plan on or after February 20, 2002.

                                      15
<PAGE>   18
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) 



<TABLE>
     Information concerning stock options for each of the three years ended
November 30, 1996 follows:
--------------------------------------------------------------------------------
<CAPTION>
                                              Number of               Option
                                               Options             Price Ranges
--------------------------------------------------------------------------------

<S>                                         <C>                  <C>        <C> 
Outstanding at November 30, 1993              972,202            $1.38 -    6.75
                Granted                       356,700             4.13 -    7.38
                Exercised                    (208,490)            1.38 -    6.75
                Expired/canceled              (90,436)            1.38 -    7.00

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

Outstanding at November 30, 1994            1,029,976            $1.38 -    7.38
</TABLE>


<TABLE>

<S>                                         <C>                  <C>        <C> 
                Granted                       338,000             7.50 -   17.00
                Exercised                    (305,806)            1.38 -    7.38
                Expired/canceled              (15,290)            1.50 -   11.00

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

Outstanding at November 30, 1995            1,046,880            $1.38 -   17.00
                Granted                       595,000             8.13 -   17.75
                Exercised                    (215,310)            1.38 -   11.19
                Expired/canceled             (210,740)            1.50 -   17.75

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

Outstanding at November 30, 1996            1,215,830             1.38 -   17.75

================================================================================

Exercisable at November 30, 1996              215,031            $1.81 -   17.00

================================================================================

Available for grant at
November 30, 1996                             618,960

================================================================================
</TABLE>
<PAGE>   19
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) 



     In 1994, the Company amended the 1986 Employee Stock Purchase Plan (the
"Plan") pursuant to which an additional 200,000 shares of common stock were
reserved for issuance for a total of 600,000 shares. Effective July 1, 1995,
employees who have worked for the Company for at least one month are eligible to
participate in the Plan. The Plan allows participants to purchase common stock
of the Company at 85% of the fair market value as defined. Under the Plan, the
Company issued 26,962, 22,930 and 38,222 shares in fiscal years 1996, 1995 and
1994, respectively. At November 30, 1996, there were 166,642 shares available
for issuance under the Plan.

     In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, Accounting for Stock-Based Compensation, which requires the measurement of
the fair value of stock options or warrants to be included in the statement of
income or disclosed in the notes to the financial statements. The Company has
determined that it will continue to account for stock-based compensation for
employees under Accounting Principles Board Opinion No. 25 and elect the
disclosure-only alternative under SFAS No. 123. The Company does not expect this
adoption to have a material effect on the Company's financial position or
results of operations.

4.  RETIREMENT PLAN

     In November 1985, the Company adopted an employee savings plan (the
"Savings Plan") in compliance with Section 401(k) of the Internal Revenue Code.
Effective April 1, 1995, the Savings Plan provides for annual Company
contributions of up to 15% of the first 6% of total compensation per
participant. On July 1, 1993, the Company suspended Company contributions to the
Savings Plan. The Company resumed contributions to the Savings Plan in fiscal
year 1995. These contributions vest incrementally over a five-year period. The
Company's contributions to the Savings Plan were $50,000, $16,000 and $0 in
1996, 1995 and 1994, respectively.

     The Company does not provide postretirement benefits to any employees as
defined under SFAS No. 106, Employer's Accounting for Postretirement Benefits
Other Than Pensions.

5.  BANK FACILITIES

     The Company entered into an irrevocable standby letter of credit agreement
for a sum not to exceed $300,000 effective January 16, 1997 and terminating
March 31, 1998. This facility was entered into in connection with the lease of
Company's new office and manufacturing facility (Note 6(a)). This letter of
credit is automatically extended without amendment annually from the termination
date, unless written notice is provided electing not to renew for any such
additional period. Notwithstanding the above, this letter of credit expires on
March 31, 2002. The Company's obligation is secured by a pledge of cash in the 
amount of $350,000.


                                      16
<PAGE>   20
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) 



6.  LEASE COMMITMENTS AND CONTINGENCIES

(a)  Lease Commitments

     The Company's principal executive, engineering, manufacturing and sales
operations occupy approximately 31,000 square feet in a facility (the "Locke
Drive Facility") which the Company currently shares with DTI. Prior to December
2, 1996, the effective date of the Spin-Off, the Locke Drive Facility was leased
directly to the Company under a lease with a related party trust. In connection
with the Spin-Off, the Company assigned its leasehold interest in the Locke
Drive Facility to DTI, which in turn granted a license to the Company to use a
portion of the facility so as to enable the Company to conduct its operations at
that location. Such use and occupancy agreement remains in effect until April
30, 1997, and the Company pays DTI a monthly license fee for the use and
occupancy of the Locke Drive Facility and the use of certain manufacturing
equipment transferred to DTI. Total rental expense for the Locke Drive Facility
charged to continuing operations was $546,000, $459,000 and $360,000 for each of
the fiscal years ended November 30, 1996, 1995 and 1994.

     In January, the Company entered into an operating lease agreement expiring
on March 31, 2002 for approximately 56,500 square feet in a new facility, into
which the Company intends to relocate all the operations currently conducted in
the Locke Drive Facility, beginning in April 1997.

<TABLE>
Future minimum lease payments excluding operating costs, under all operating
leases including the new operating lease agreement are as follows 
(in thousands):

<CAPTION>
Fiscal years ended November 30,
                                                                      Amount

          <S>                                                          <C> 
          1997                                                         $873
          1998                                                          525
          1999                                                          527
          2000                                                          556
          2001                                                          584
          Thereafter                                                    198
</TABLE>

<PAGE>   21
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) 


<TABLE>

--------------------------------------------------------------------------------
          <S>                                                        <C>   
          Total minimum lease payments                               $3,263
================================================================================
</TABLE>

(b)  Contingencies

     (i) On June 7, 1995, a lawsuit was filed against the Company by Avid
Technology, Inc. ("Avid") in the United States District Court for the District
of Massachusetts. The complaint generally alleges patent infringement by the
Company arising from the manufacture, sale, and use of the Company's Media 100
product. The complaint includes requests for injunctive relief, treble damages,
interest, costs and fees. In July 1995, the Company filed an Answer and
Counterclaim denying any infringement and asserting that the Avid patent in
question is invalid. The Company intends to vigorously defend the lawsuit. In
addition, Avid is seeking reissue of the patent, including claims that it
asserts are broader than in the existing patent, and these reissue proceedings
remain pending before the U.S. Patent and Trademark Office. On July 31, 1996,
the court ordered a stay of all proceedings in the lawsuit pending conclusion of
the reissue proceedings referred to above. There can be no assurance that the
Company will prevail in the lawsuit asserted by Avid or that the expense or
other effects of the lawsuit, whether or not the Company prevails, will not have
a material adverse effect on the Company's business, operating results and
financial condition.

     (ii) On February 12, 1997, a lawsuit was filed in Germany against the
Company's former German subsidiary, Data Translation GmbH ("DT GmbH") and its
managing director, by Lex Computer and Management Corporation ("Lex"). The
complaint generally alleges patent infringement by DT GmbH arising from the
manufacture, sale and use of the Company's Media 100 products. The complaint
includes requests for injunctive relief, damages, costs and fees. DT GmbH is
currently a subsidiary of DTI. Under the terms of the Spin-Off, the Company has
agreed to indemnify DTI and its affiliates (including DT GmbH) against
liabilities arising out of the Company's Media 100 business. The Company
currently intends to vigorously defend the lawsuit. There can be no assurance
that the Company will prevail in the lawsuit asserted by Lex or that the expense
or other effects of the lawsuit, whether or not the Company prevails, will not
have a material adverse effect on the Company's international operations and,
consequently, on the Company's business and operating results.

     (iii) From time to time the Company is involved in other disputes and/or
litigation encountered in its normal course of business. The Company does not
believe that the ultimate impact of the resolution of such other outstanding
matters will have a material effect on the Company's business, operating results
or financial condition.

7.  INCOME TAXES

<TABLE>
    The Company accounts for income taxes in accordance with the provisions of
SFAS No. 109, Accounting for Income Taxes. The components of the net deferred
tax liability recognized in the accompanying consolidated balance sheets are as
follows (in thousands):

<CAPTION>
November 30,
---------------------------------------------------------------------------
                                                  1996                1995

<S>                                            <C>                 <C>   
 Deferred tax assets                           $ 1,595              $2,372

</TABLE>

<TABLE>


<S>                                            <C>                  <C>   
 Deferred tax liabilities                          (27)                (27)
---------------------------------------------------------------------------
                            subtotal             1,568               2,345
===========================================================================
 Valuation allowance                           $(1,568)            $(2,345)
===========================================================================
</TABLE>


     Due to the uncertainty surrounding the realization of the benefits of its
favorable tax attributes in future income tax returns, the Company has placed a
valuation allowance against its deferred tax assets.


                                      17
<PAGE>   22
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) 



<TABLE>
     The approximate tax effect of each type of temporary difference and
carryforward before allocation of the valuation allowance is summarized as
follows (in thousands):

November 30,
---------------------------------------------------------------------------
<CAPTION>
                                                1996                  1995
---------------------------------------------------------------------------

<S>                                           <C>                     <C> 
Net operating loss carryforwards              $    -                  $508
Other temporary differences, principally       1,096                   374
 nondeductible reserves
Research and development credits                 447                 1,438
Alternative minimum tax credits                   25                    25
---------------------------------------------------------------------------
                                              $1,568                 $2,345
===========================================================================
</TABLE>

     The tax credits carryforwards expire at various dates through 2008. The Tax
Reform Act of 1986 contains provisions that may limit the tax credit
carryforwards available to be used in any given year in the event of significant
changes in ownership, as defined.

<TABLE>
     The income (loss) from continuing operations before tax provision in the
accompanying consolidated statements of operations consisted of the following
(in thousands):
<CAPTION>

                            1996              1995                 1994

<S>                       <C>               <C>                 <C>     
United States             $6,819            $2,761              $(1,965)
Foreign                     (778)             (341)                 (30)
                  ------------------------------------------------------
                          $6,041            $2,420              $(1,995)
                  ======================================================
</TABLE>

<TABLE>
     The income tax provision shown in the accompanying consolidated statements
of operations is comprised of the following (in thousands):

<CAPTION>
Fiscal years ended November 30,
----------------------------------------------------------------------------
                                 1996               1995                1994
<S>                            <C>                  <C>          <C>        
 Federal:
 Current                       $1,008               $70          $         -
 Deferred                           -                 -                    -
----------------------------------------------------------------------------
                                1,008                70                    -
----------------------------------------------------------------------------
 State:
 Current                          100                 1                    -
 Deferred                           -                 -                    -
----------------------------------------------------------------------------
                                  100                 1                    -
----------------------------------------------------------------------------
 Foreign - Current                100                 4                   36
</TABLE>

<PAGE>   23
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) 


<TABLE>

<S>                            <C>                  <C>                  <C>
                               $1,208               $75                  $36
============================================================================
</TABLE>


<TABLE>
     The effective income tax rate varies from the amount computed using the
statutory U.S. income tax rate as follows:

<CAPTION>
Fiscal years ended November 30,
---------------------------------------------------------------------------
                                              1996        1995        1994
---------------------------------------------------------------------------
<S>                                           <C>         <C>        <C>    
Tax provision (benefit) at statutory rate     34.0%       34.0%      (34.0)%
Federal benefit from loss carryforward        (5.6)      (33.0)          -
Federal losses not benefited                     -           -        34.0
Utilization of research and development      (14.8)          -           -
credits                                                     
State taxes                                    1.6           -           -
Foreign taxes                                  1.6         0.2         1.8
Other                                          3.2         1.9           -
--------------------------------------------------------------------------
                                              20.0%        3.1%        1.8%
==========================================================================
</TABLE>

                                      18
<PAGE>   24

               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)

<TABLE>
8.  GEOGRAPHIC INFORMATION

     Operations in various geographic areas for the three years ended November
30, 1996 are summarized as follows (in thousands):

<CAPTION>
                                                United States     Europe      Eliminations  Consolidated

<S>                                               <C>             <C>           <C>             <C>    
FISCAL 1994
Sales to unaffiliated customers (1)               $10,692         $1,723        $     -         $12,415
Sales or transfers between geographic areas         1,224              -         (1,224)              -
-------------------------------------------------------------------------------------------------------
Net sales                                         $11,916         $1,723        $(1,224)        $12,415
------------------------------------------------------------------------------------------------------- 
Income (loss) from continuing operations          $(2,049)        $  (30)       $    25         $(2,054)
Identifiable assets of continuing                 $ 7,488         $1,619        $(1,121)        $ 7,986
operations
=======================================================================================================

FISCAL 1995
Sales to unaffiliated customers (1)               $26,651         $3,627       $     -          $30,278
Sales or transfers between geographic areas         2,507             -         (2,507)               -
-------------------------------------------------------------------------------------------------------
Net sales                                         $29,158         $3,627       $(2,507)         $30,278
------------------------------------------------------------------------------------------------------- 
Income (loss) from continuing operations          $ 1,983         $ (341)      $     7          $ 1,649
Identifiable assets of continuing                 $44,892         $1,876        (1,747)          45,021
operations
=======================================================================================================

FISCAL 1996
Sales to unaffiliated customers (1)               $44,677         $6,149       $      -         $50,826
Sales or transfers between geographic areas         4,780             -         (4,780)               -
------------------------------------------------------------------------------------------------------- 
Net sales                                         $49,457         $6,149       $ (4,780)        $50,826
------------------------------------------------------------------------------------------------------- 
Income (loss) from continuing operations          $ 5,314         $ (778)      $    (83)        $ 4,453
Identifiable assets of continuing                 $46,601         $3,647       $ (3,248)        $47,000
operations
=======================================================================================================

<FN>
(1) Export sales from the United States to unaffiliated customers for the years
ended November 30, 1996, 1995 and 1994 were approximately $13,317, $8,243 and
$3,606, respectively.
</TABLE>  

9.  ACCRUED EXPENSES

<TABLE>
     Accrued expenses consist of the following (in thousands):

<CAPTION>
November 30,
------------------------------------------------------------------------------
                                              1996                       1995

<S>                                         <C>                        <C>   
Accrued commissions                         $  133                     $  111
Payroll and related taxes                    1,190                        599
Expenses relating to Spin-Off of               737                          -
Data Translation II, Inc.
Accrued marketing, legal and other
expense                                      3,731                      2,143
==============================================================================
                                            $5,791                     $2,853
==============================================================================
</TABLE>

10.  VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
     The following table sets forth activity in the Company's accounts
receivable reserve account (in thousands):

--------------------------------------------------------------------------------
<CAPTION>
                        Balance at    Charges to     Deductions   Balance at
                       Beginning of    Cost and                   End of Year
                           Year        Expense
--------------------------------------------------------------------------------

<S>                         <C>           <C>           <C>          <C> 
For the Year Ended          $107          $ 18          $ 2          $123
November 30, 1994
================================================================================

For the Year Ended          $123          $ 85          $ 5          $203
November 30, 1995
================================================================================

For the Year Ended          $203          $177          $52          $328
November 30, 1996
================================================================================
</TABLE>


                                      19
<PAGE>   25
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D) 





11.  SELECTED QUARTERLY INFORMATION (UNAUDITED)
<TABLE>

<CAPTION>
For the fiscal quarter ended (in thousands except per share amounts):
---------------------------------------------------------------------------------------------------------

1996                                               February 29        May 31       August 31  November 30   
----------------------------------------------------------------------------------------------------------


<S>                                                   <C>            <C>           <C>          <C>    
Net sales                                             $10,690        $12,921       $13,066      $14,149
Gross profit                                            6,377          7,673         8,119        8,611
Income from continuing operations                       1,001          1,211         1,232        1,389
=======================================================================================================
Income per share from continuing operations           $  0.12        $  0.13       $   0.15     $  0.17
=======================================================================================================


1995                                               February 28        May 31       August 31  November 30   
----------------------------------------------------------------------------------------------------------

Net sales                                             $ 5,212        $ 6,978       $ 8,137      $ 9,951
Gross profit                                            2,700          4,179         4,761        5,927
Income (loss) from continuing operations                (159)            526           585        1,393
=======================================================================================================
Income (loss) per share from continuing operations    $(0.02)         $  0.08      $   0.09     $  0.20
=======================================================================================================
</TABLE>

12. DISCONTINUED OPERATIONS


<TABLE>
     The components of net assets of discontinued operations included in the
accompanying consolidated balance sheets at November 30, 1996 and 1995 follow
(in thousands):


<CAPTION>
November 30,
-------------------------------------------------------------------------
                                                 <S>                 <C>
                                                 1996                1995
</TABLE>

<PAGE>   26
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)

<TABLE>

<S>                                           <C>                  <C>    
Current assets                                $14,090              $ 4,722
Equipment, net                                  2,351                2,250
Other assets, net                                 260                  133
Current liabilities                            (2,317)              (3,067)
Net assets (liabilities) of networking         
 distribution business                         (1,424)               2,232
Cumulative translation adjustment                  30                 (168)
                                         =================================
                                              $12,990              $ 6,102
                                         =================================
</TABLE>

<TABLE>
     The components of discontinued operations included in the accompanying
consolidated statements of operations for fiscal 1996, 1995 and 1994, 
respectively, follow (in thousands):

<CAPTION>
November 30,
--------------------------------------------------------------------------------
                                                 1996        1995         1994

<S>                                          <C>          <C>          <C>    
Net sales                                    $21,201      $21,826      $22,440
Income (loss) from  operations of
  discontinued businesses                     (2,659)       2,426        2,351  
Loss on disposal of networking 
  distribution business                       (2,513)           -            -
Spin-Off transaction costs                    (1,500)           -            -
                                           -------------------------------------
Income (loss) from discontinued
  operations                                 $(6,672)      $2,426      $ 2,351
                                           -------------------------------------
</TABLE>

The loss for the year ended November 30, 1996 also reflects an  allocation of 
$560 of interest income relating to the $9,168 of cash contributed to DTI by 
the Company.


                                      20