<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-KSB
                                  (Mark One)

    X       ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE
  -----
            SECURITIES EXCHANGE ACT OF 1934 (Fee Required)

            For the fiscal year ended December 31, 1996

            TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
  -----
            SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)

            For the transition period from___________ to ____________


                         Commission File Number 1-14160

                             HelpMate Robotics Inc.
             (Exact name of registrant as specified in its charter)

            Connecticut                          06-1110906
            (State or other jurisdiction         (I.R.S. Employer 
            of incorporation or organization)    Identification No.)

            Shelter Rock Lane
            Danbury, Connecticut                 06810
            (Address of principal
             executive offices)                  (Zip Code)

                    Issuer's telephone number (203) 798-8988

          Securities registered pursuant to Section 12(b) of the Act:

                                                 Name of each exchange
            Title of each class                  on which registered
            -------------------                 ---------------------
            Units                                Philadelphia Stock Exchange
            Common Stock                         Philadelphia Stock Exchange
            Warrants                             Philadelphia Stock Exchange

                 Securities registered pursuant to Section 12(g)
                       of the Act: Units, Common Stock
                                and Warrants

Check whether the issuer (1) filed all reports required to be filed by 
Section 13 or 15(d) of the Exchange Act during the past 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
   -----    -----

Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB. ___

The registrant had revenues totaling $2,617,077 during the fiscal year ended
December 31,1996.

The aggregate market value of the voting stock held by non-affiliates as of
March 11, 1997 was approximately $8,646,697

The number of shares outstanding of the registrant's common stock as of March
11, 1997 is 6,288,507 shares.

Documents incorporated by reference: None

Transitional Small Business Disclosure Format (Check One)  Yes       No  X
                                                              -----    -----
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                                    PART I

Item 1  Description of Business

Form and Year of Organization

HelpMate Robotics Inc. (the "Company"), a Connecticut corporation, was 
co-founded in 1984 as a robotics "think-tank" by its chairman, Joseph F. 
Engelberger. During its early years, the Company's primary focus was contract 
engineering and research and development for third parties. Through the 
years, however, the focus of the Company has evolved into the development of 
products having commercial applications.

Initial Public Offering

The Company completed an initial public offering on January 31, 1996 of
1,449,918 units with each unit consisting of two shares of common stock, no par
value per share, and one redeemable common stock purchase warrant, whereby
1,252,996 units were sold by the Company and 196,922 units were sold by certain
lenders who provided interim financing to the Company (the "Selling Bridge
Securityholders").  The Company received proceeds of approximately $6.1 million
net of expenses of approximately $1.7 million and has used such proceeds for,
among other things,  the expansion of its sales and marketing activities.
Further, $210,000 of the proceeds were used to redeem certain common shares
issued for rent (see "Item 2 Properties").

Immediately prior to the closing of the initial public offering, the 
following became effective: (i) all outstanding shares of preferred stock of 
the Company were converted into common stock, (ii) certain convertible notes 
issued to the Selling Bridge Securityholders in the original principal amount 
of $800,000 were converted into 196,622 units, (iii) the Company's 
certificate of incorporation was amended to increase the authorized common 
stock of the Company to 10,000,000 shares, (iv) the Company's certificate of 
incorporation was amended to eliminate the class of preferred stock, and (v) 
a 4.93599 - to - 1 stock split with respect to common stock was effected.   
Accordingly, all common share amounts have been restated to give effect to 
the 4.93599 - to - 1 stock split.

Principal Products and Services

The Company designs, manufactures and markets autonomous robot transport 
systems for use by the institutional healthcare industry. The Company's 
flagship product, called HelpMate-TM-, is an intelligent, self-navigating, 
battery-powered robot, which travels throughout a hospital free of fixed 
tracks or guidewires. HelpMate robots provide repetitive, around-the-clock 
transport of meals, medications, lab samples, supplies and medical records 
within a hospital environment, relieving staff of unscheduled 
"fetch-and-carry" tasks, and thus, the Company believes, reducing labor costs 
and improving productivity. Using proprietary sensory technology and a 
preprogrammed map of the facility, the HelpMate robot can avoid obstacles and 
people, making almost instantaneous stops when necessary, and via radio link, 
can summon elevators to travel between floors. The HelpMate system's 
technology allows it to be a more flexible and cost-effective alternative to 
systems such as dumbwaiters, pneumatic tubes or automated guided vehicles. 
HelpMate development began in 1987, and in 1991, following extensive testing 
at Danbury Hospital in Connecticut, the first HelpMate became operational.

Further, in connection with the development of its HelpMate robots, the 
Company also has developed other applications of its robotics technology. The 
Company has sold and continues to sell, on a limited basis, components of its 
autonomous robotics navigation technology to universities, laboratories and 
other research facilities. Moreover, the Company has licensed some of its 
technologies for use in floor-cleaning and automated prescription-filling 
applications. The Company also believes that there are opportunities for 
expanding its HelpMate product lines to other uses, both within the hospital 
environment and for other healthcare users such as nursing homes, and for 
developing non-healthcare related applications and products.

The Company also engages in and continues to solicit research and development 
contract opportunities in the areas of service robotics and robotics 
technology applications. However, the Company only intends to engage in such 
contract research and development to the extent that the incremental costs 
for such activities are fully funded by the contracting party or other 
outside sources.

                                         2
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Market Overview

The transportation of materials is a significant component of hospital costs 
and includes not only the routine delivery of large items such as meal carts, 
trash carts, laundry carts and even patient stretchers and wheel chairs, but 
also the less noticed but more numerous small deliveries, so-called "unit 
loads," made by nurses, food service and laundry employees, and pharmacy and 
supply personnel. Independent studies have demonstrated that a significant 
amount of the time of nurses is spent on deliveries, that as much as 
one-quarter of all hospital transport is of the unit load type, and that as 
many as ten percent of the meal tray deliveries are unit loads, single or 
small deliveries resulting from dietary changes, patient transfers and new or 
late admissions. Moreover, hospital pharmacies and central supply areas often 
have acute delivery needs on second and third shifts, when such areas are 
frequently staffed by a single professional who cannot leave to make needed 
deliveries.

Accordingly, the Company estimates that the market in the United States for 
HelpMate robots is approximately 10,000 HelpMates (or approximately one for 
every 100 beds in the nation's 2,000 largest hospitals). In addition, the 
Company's licensees estimate that the Asian and European markets are at least 
as large.   As of December 31, 1996, the Company has placed a total of 107 
HelpMates, including 55 at customers in the United States, 31 in Japan 
through a distributor, 10 at customers in Europe through a distributor, 1 at 
a customer in Canada, and 1 directly at a customer in Germany. Of the 107 
units, 59 have been sold and 48 are being rented.  In addition the Company 
has a firm backlog to install one additional sold unit and 26 additional 
rental units at December 31, 1996.

Currently, most of the HelpMates in use at hospital locations have been 
rented to end-users on a short-term basis (typically one to three years). 
This marketing strategy has helped the HelpMate gain initial market 
acceptance both by avoiding lengthy capital equipment procurement procedures 
and by facilitating decision-making at lower levels within the hospital's 
management. Domestic sales of HelpMate systems have generally been to those 
end-users who previously have rented a HelpMate robot. Renting on this basis, 
however, has required the Company to invest significant up-front capital for 
the manufacture of HelpMates. Rental rates are on a per-hour basis based upon 
the length of the rental agreement, with rates declining as hourly usage of 
the robot increases. Maintenance is included in the rent charge. Additional 
peripheral equipment adds to these basic hourly charges. 

Distribution Methods

    Domestic Marketing and Distribution

The Company's sales and marketing activity focuses principally on the North 
American hospital market for the HelpMate. To promote the HelpMate, the 
Company initially traded heavily on the name recognition and reputation of 
its co-founder and Chairman. The Company handles all marketing activity 
directly from its Danbury, Connecticut location. The Company's sales and 
marketing staff currently consists of eight people, the director of 
marketing, six full-time salespersons and one marketing administrator. Other 
officers of the Company also are employed in this function from time to time 
in the course of their travels to different regions of the country.   During 
1996, the Company hired five of the aforementioned salespersons in various 
regions of the United States, conducted presentations of the HelpMate robot 
at eleven trade shows and contracted with two health care equipment 
manufacturer's representatives to sell the product in  the greater New York  
and Los Angeles areas.

Approximately 67% of the Company's placements of robots in North America are 
rentals rather than purchases.  The rental arrangement is attractive to 
hospitals because the base rental rates for HelpMates, which range from $7.00 
per hour for 12-hour daily use to $5.50 per hour for 24-hour daily use, 
compare quite favorably with the typical rates for nurses of $22 per hour and 
for couriers of $10 per hour. The rental of HelpMates has proven to be a 
popular option among the Company's customers, one of whom has rented the same 
unit for nearly six years and recently renewed its rental agreement through 
1998. 

Customers who prefer to purchase a HelpMate robotics system typically can 
purchase a basic system for a list price of $105,000. Based upon current wage 
rates, the Company estimates the payback to a hospital purchasing a HelpMate 
to be between nine and twenty-four months, depending on the number of hours 
the system is operated and the efficiency of its utilization. The Company 
also offers annual maintenance contracts at 8% of the HelpMate system 
purchase price.

                                     3
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Distribution Methods (continued)

    Domestic Marketing and Distribution (continued)

In addition, as longer-term rental arrangements are entered into and as 
market acceptance has been proven, the Company may elect to finance these 
rental agreements and/or offer long term leases to its customers.   These 
rental/leasing financing arrangements will permit the Company to continue to 
earn revenues and generate immediate cash flow by providing the Company with 
a one-time lump-sum payment of the discounted present value of the 
rental/lease payments otherwise payable monthly by a customer. 

    Foreign Marketing and Distribution

In exchange for certain royalties previously provided to the Company and 
certain royalties payable to the Company in the future, the Company has 
granted an exclusive license to a Danish affiliate of Otis Elevator Company 
to distribute the Company's HelpMate systems in Europe, the former Soviet 
Union, Africa and parts of the Middle East, and has granted an exclusive 
license to Yaskawa Electric Corporation, to manufacture and distribute 
HelpMate and other of its products in Japan and other Asian countries. (See 
Item 12 "Certain Relationships and Related Transactions" for additional 
information.)

Competitive Business Conditions

The Company believes its HelpMate robotics systems currently have no direct 
competitor other than human beings. The HelpMate system's technology allows 
it to be a flexible alternative to large fixed automation systems such as 
automatic box conveyors, which are impractical for small, one-off deliveries; 
dumbwaiters, which are generally very costly to install and which can only 
travel vertically and generally with only small loads; pneumatic tubes, which 
are also very costly install and which are limited in payload size and, due 
to rapid acceleration and deceleration, are not suitable for certain items 
such as blood samples; and track-guided systems such as automated guided 
vehicles, which often are feasible for installation only in new construction.

The tasks performed by the HelpMate robots are generally those which can be 
performed by unskilled workers. The Company believes, however, that HelpMate 
robotics systems compare favorably with human labor rates. The Company 
estimates that three-shift coverage, 365 days per year including weekends, 
holidays, vacations and sick time requires more than five full-time 
equivalent employees. Hospitals can compare the hourly costs of HelpMate at 
the rate of between $5.00 and $7.00 per hour with that of human labor which 
can range from $10.00- $22.00 per hour (or more depending on locale), and 
effectively "hire" one dependable 24-hour-per-day, 365-day-a-year HelpMate at 
a considerable cost savings. 

Furthermore, other major robotics entities who may have significantly greater 
financial, technical and marketing resources than the Company could enter the 
market in which the Company competes and proves to be more effective in 
selling alternative systems to potential purchasers. To date however, these 
companies generally have adhered to industrial and manufacturing applications 
of robotics. In addition, some companies have developed robotics products 
aimed at the service, rather than the industrial sector, although the Company 
believes these products currently do not compete with HelpMate in the 
hospital and healthcare industry.

Sources and Availability of  Raw Materials and Names of Principal Suppliers

All HelpMate components, fabricated parts and electronic assemblies are 
manufactured by third-party vendors. The Company's manufacturing technicians 
perform inspection, testing, final assembly and quality assurance. The 
Company has approximately four primary suppliers and several hundred 
secondary vendors. All printed circuit board assemblies, cables, and 
subassemblies are made by a single subcontractor (AB Electronics of Danbury, 
CT) for whom the Company represents approximately twenty percent of its 
business.

                                   4
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Sources and Availability of  Raw Materials and Names of Principal Suppliers 
(continued)

The Company's current small batch production mode results in sporadic 
shipments to vendors increasing the overall product lead time to six months 
from batch order to customer shipment. The Company believes that increases in 
the batch size would reduce overall product lead time to three months, would 
improve the quality, reliability and performance of its HelpMate robotics 
systems, and would allow the Company to realize cost savings through volume 
discount purchases of component parts. The Company has implemented process 
controls and quality assurance procedures in anticipation of this transition 
to a higher volume building program. 

Two suppliers, AB Electronics Inc. of Danbury, Connecticut, and Aldine Metal 
Corporation of Brookfield, Connecticut provide more than ten percent of the 
cost of the components and assembly work for the HelpMate units.

Patents, Technology, Trademarks, Licenses and Royalty Agreements

    Patents and Technology

The requirements for service robot technology are different than those for 
industrial robot technology, in which speed and precision are essential. The 
Company's technology is embodied in a core set of hardware and software 
modules for sensing and control of mobile systems as well as 
application-specific technology. The Company's component technologies include 
drive and controls, vision sensors, proximity sensors, navigation software 
and supervisory capabilities.  The Company has obtained 14 United States 
patents related to such technology to date.

The Company's success is heavily dependent on its proprietary software. The 
Company's software is not patented or copyrighted and patent and copyright 
laws offer only limited practical protection. The Company relies largely on 
its license agreements with customers and its own security systems, 
confidentiality procedures and employee nondisclosure agreements to maintain 
the trade secrecy of its products. Further, the Company does not believe that 
its operations or products infringe on the intellectual property rights of 
others.

    Trademarks

The Company currently holds registered trademarks for the names 
HelpMate-Registered Trademark- and Labmate-Registered Trademark-, a component 
of the Company's autonomous robotics navigation technology sold to 
universities, laboratories and other research facilities.

    Licenses

The Company has granted Yaskawa Electric Corporation ("Yaskawa"), a 
stockholder of the Company, an exclusive license to manufacture and sell its 
HelpMate products in Japan and other Asian countries and  has granted an 
exclusive license to a Danish affiliate of Otis Elevator (another stockholder 
of the Company) to distribute HelpMate systems in Europe, the former Soviet 
Union, Africa and parts of the Middle East. (See Item 12 "Certain 
Relationships and Related Transactions" for additional information.)

In addition, the Company has licensed certain of its intellectual property 
regarding navigation and control systems for use in various floor care 
equipment to Electrolux, who is also a stockholder and holder of a warrant to 
purchase 33,134 shares of Common Stock at an exercise price of $2.60 per 
share and which, through its subsidiary, is a stockholder of the Company. 
(See Item 12 "Certain Relationships and Related Transactions" for additional 
information.)

    Royalty Agreements

The Company has an agreement with Connecticut Innovations, Incorporated 
("CII"), a State of Connecticut sponsored development corporation, pursuant 
to which CII reimbursed the Company for $441,000 of development costs related 
to the HelpMate systems (the "Sponsored Products"). In return for such 
reimbursement, the Company must pay royalties aggregating $2,205,000 to CII.  
(See Item 12 "Certain Relationships and Related Transactions" for additional 
information.)

                                  5
<PAGE>

Research and Development

Since its inception the Company has engaged in research and development 
activities related to service robotics and robotics technology applications. 
The Company has conducted these activities on a contract basis for government 
agencies and for industrial clients. The Company also has engaged in 
internally funded research and development activities related to the 
development and enhancement of its HelpMate systems.

Under its third-party research and development contracts, the Company has 
earned fees in connection with research and development activities conducted 
for these parties. In some instances, these activities have led to the 
development of products which may also have commercial application. The 
Company sometimes has funded its own additional research and development 
activities to supplement the contract research and development activities 
performed for third parties with a view toward the commercial development of 
products arising out of such research and development. Generally, the Company 
has endeavored to retain commercial development rights to certain of the 
technologies arising out of such research and development contracts.

The Company continues to solicit research and development contract 
opportunities in the areas of service robotics and robotics technology 
applications. However, the Company only intends to engage in such contract 
research and development to the extent that the incremental costs for such 
activities are fully funded by the contracting party or other outside 
sources.  Because government agencies are under increasing pressure to cut 
spending, the Company anticipates that there will be fewer opportunities to 
engage in such research and development activities.

In 1996 and 1995, the Company spent $1,030,735 and $1,636,404, respectively, 
primarily on research and development in connection with HelpMate and 
$155,380 and $95,298, respectively, in connection with other projects, 
including its contract research and development activities. 

Backlog

As of December 31, 1996, the Company had orders to rent an additional 26 
HelpMate robotics systems, an increase from the 11 units in the rental 
backlog at December 31, 1995. It is anticipated that these systems and robots 
will be placed in service during 1997. In addition, the Company estimates 
that, as of December 31, 1996, it had a backlog of  $93,554 with respect to 
orders to purchase components for certain of its research products, backlog 
to sell one HelpMate robotic system to Otis Elevator for use at its United 
States headquarters for $60,000 and a firm fixed price contract from NASA for 
Phase II of the project entitled "Two Armed Mobile Sensate Research Robot" 
for $597,044.

Employees

As of December 31, 1996, the Company had thirty-six employees of whom thirty 
four were employed on a full-time basis. 

Item 2 Properties

The Company leases a facility in Danbury, Connecticut with approximately 
47,000 square feet from Westinghouse Electric Corporation ("Westinghouse") 
pursuant to a lease which expires in 2002. Rent for the premises was $11,666 
per month for the first three years, $13,789 per month for the following two 
years, and $17,728 per month for the final five years. The Company is also 
obligated to pay its pro-rata share of taxes, operating expenses and 
management fees for the facility. The lease does not contain any renewal 
option. Westinghouse agreed to accept a total of 34,552 shares of the Common 
Stock in lieu of an aggregate of $420,000 of rent for the period from 
December 1992 through December 1995. In connection with the issuance of these 
shares, Westinghouse received certain anti-dilution rights and piggyback and 
demand registration rights. In October 1995 Westinghouse agreed to waive 
these anti-dilution rights and to sell all of its shares of Common Stock back 
to the Company for a total purchase price of $210,000, which was paid by the 
Company from the proceeds of its public offering.

                                   6
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Item 2 Properties (continued)

Currently, production of HelpMates is done on a batch-build basis, generally 
assembling HelpMates in batches of fifteen to twenty-six robots at a time. As 
placements of Helpmates increase and to the extent that the Company's 
liquidity improves, the Company intends to continue its increase in the rate 
at which robots are built. The Company believes that it has sufficient excess 
capacity in its current facility to increase the volume of its final assembly 
work to accommodate an enhanced building program. The Company further 
believes that the facilities used in its operations are in satisfactory 
condition and adequate for its current and reasonably foreseeable future 
needs.

Item 3 Legal Proceedings

NONE

Item 4 Submission of Matters to a Vote of Security Holders

NONE


                                   PART II

Item 5 Market for Common Equity and Related Stockholder Matters

Market Information

The Company's Units, Common Stock and warrants were quoted on The Nasdaq 
SmallCap Market tier of the The Nasdaq Stock Market under the symbols HELPU, 
HELP and HELPW, respectively (principal market)  on January 31, 1996 and were 
listed on The Philadelphia Stock Exchange on February 9, 1996. A recent last 
sales price for the shares of Common Stock as reported on the NASDAQ 
Composite Tape was $1.375 on March 11, 1997.

The following table sets forth the high and low sales price of the Company's 
Common Stock, as reported on the NASDAQ Composite Tape.

                                                   High         Low

       Quarter ended March 31, 1996               $5.875       $3.625

       Quarter ended June 30, 1996                 4.125        2.625

       Quarter ended September 30, 1996            3.000        1.500

       Quarter ended December 31, 1996             1.750        0.625


Holders

The Company estimates that as of March 11, 1997, there were approximately 
1,100 holders of record of the Company's Common Stock.

Dividends

The Company has not paid nor does it anticipate paying cash dividends on the 
Common Stock in the foreseeable future since currently it intends to retain 
any earnings for use in its business. In addition, in connection with certain 
financing provided to the Company by Connecticut Innovations, Incorporated 
("CII") in June 1995 and in September 1995, the Company agreed that for a 
period of six years, it would not directly or indirectly declare, order, pay 
or reserve any sum or property for the payment of any dividend or other 
distribution on the Company's capital stock until such time as the Company 
has achieved a net profit for three consecutive fiscal quarters.

                                    7
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Item 6 Management's Discussion and Analysis 

General

The Company's near-term objective is to attain profitability by establishing 
the HelpMate robotics system as a flexible, cost-efficient and preferred 
method for transporting materials within hospitals and other healthcare 
facilities. The Company's business strategy has been to (a) build a marketing 
and customer service staff that will implement its marketing program for the 
rental and sale of HelpMates to hospital users within North America, and (b) 
enhance its HelpMate robotics systems through product improvement, cost 
reduction and new feature development. To that end, during 1996, the Company 
hired five salespersons in various regions of the United States, conducted 
presentations of the HelpMate robot at eleven trade shows and contracted with 
two health care equipment manufacturer's representatives to sell the product 
in  the greater New York and Los Angeles areas.

The Company's cash requirements and overall profitability are, among other 
things, highly dependent upon the Company's mix of robot rentals and robot 
sales.  While the cost of producing and installing a unit is recouped 
immediately when a unit or its related revenue stream is sold, it currently 
takes approximately 18 months for the Company to recoup such costs when a 
unit is rented.  (This payback period has been reduced from 23 months at the 
beginning of the fiscal year due to the Company's efforts to reduce costs in 
the manufacturing and installation process. ) During the year ended December 
31, 1996, the Company has expended approximately $1.6 million to produce and 
install robots rented during the period.

Revenues

Total revenues decreased by $141,876 or 5%  from the year ended December 31, 
1995 compared to the year ended December 31, 1996.  Rental revenues however 
increased by $333,109 or 35% and sales revenues decreased by $519,980 or 31%. 
Also, revenues from research and development contracts increased  by $44,995 
or 35%.

The increase in rental revenues is reflective of the Company's expanded fleet 
of rental units which at December 31, 1996 was 48, a 50% increase from the 32 
units under rent at December 31, 1995.  The decrease in sales revenues was 
attributable to Yaskawa Electric Corporation purchasing a significant amount 
of component parts in 1995 (none purchased in 1996) so that it could begin to 
manufacture and distribute HelpMates in Japan and the Far East in accordance 
with the Company's distribution agreement with Yaskawa.  The increase in 
research and development contract revenues is primarily attributable to the 
completed contract for the first phase of a NASA sponsored program entitled 
"Two Armed, Mobile, Sensate Research Robot." (Note:  The Company has also 
been awarded the second phase contract for this program, which is for a firm 
fixed price of $597,044)

Cost of Revenues

Cost of revenues decreased by $204,943 or 9% from the year ended December 31, 
1995 compared to the year ended December 31, 1996.  The decrease in cost of 
revenues generally reflects the decrease in revenues discussed above coupled 
with the Company's ongoing efforts in reducing the cost associated with 
manufacturing and installing its HelpMate robots offset by an increase in 
depreciation and amortization of the Company's rental units and related 
installation costs, which was attributable to the increase in the rental 
fleet discussed above.

Gross Profit

Gross profit increased by 13% or $63,067 from the year ended December 31, 
1995 compared to the year ended December 31, 1996.   The increase in gross 
profit dollars for the year reflects the Company's on-going strategy to 
reduce costs (as discussed above).  Further, the increase is partially 
attributable to the fact that the sales made in 1995 were reflective of 
discounts required to be granted to the Company's distributors in the Far 
East and Europe.  Further, gross profit as a percentage of total revenues 
increased by 20% to 21% in the year ended December 31, 1996 from the year 
ended December 31, 1995.   This increase in gross profit as a percentage of 
total revenues is further reflective of the Company's on going strategy to 
reduce costs.
 
                                   8
<PAGE>

Selling General and Administrative Expenses

Selling, General and Administrative Expenses increased by $2,686,254 or 98% 
from the year ended December 31, 1995 compared to the year ended December 31, 
1996. The increase reflects an increase in staffing (including the hiring of 
five sales executives) and the implementation of a expansive marketing and 
public relations program associated with promoting the HelpMate robot 
including attendance at eleven trade shows in 1996.  The aforementioned 
increases have resulted in a significant number of rental orders being 
recently received  by the Company (6 in September, October, November and 
December of 1996 and 14 more through February of 1997). Also, the Company 
received three purchase orders for its HelpMate robot in February 1997.  
Further, the Company also incurred costs required to enhance the Company's 
HelpMate robotics systems through improved product reliability, manufacturing 
and installation cost reduction, and value engineering, which also 
contributed to the increase in selling, general and administrative expenses.  
In addition, in light of the Company's receiving relatively few orders until 
the third quarter, (see "Liquidity and Capital Resources" below) it shifted 
its planned production and installation of HelpMate robots to later in the 
year.  This caused a reduction of direct labor hours and therefore a 
requirement for more overhead to be unabsorbed  resulting in an increase in 
selling, general and administrative expenses. 

The Company also incurred $698,787 of non cash compensation expense in 1995 
related to the issuance of 148,080 shares of common stock to the Company's 
president and to his former employer, the issuance of stock options at a 
price below fair market value, the issuance of certain notes to the Company's 
chairman in satisfaction of a contingent compensation agreement and the 
issuance of 500 shares of preferred stock to Landmark Partners Inc. (formerly 
known as Landmark Ventures Inc.)

Interest Expense and Interest Income

Interest expense net of interest income decreased by $127,373 or 39% from the 
year ended December 31, 1995 compared to the year ended December 31, 1996.   
The decrease in interest expense reflects interest income earned on the 
proceeds from the Company's initial public offering offset by interest 
expense related to loans received by the Company in the latter half of 1995. 
Such declines are not expected to continue as the Company's use of cash in 
expanding its fleet of rental units will result in a decrease in the amount 
of interest income earned.

The Company also recorded $461,933 of non cash financing expense in 1995 
related to  the compensatory nature of the Selling Bridge Securityholders' 
conversion rights and the compensatory element of the warrants issued in 
connection with the two loans received by the Company in May and June 1995.

Losses

The Company incurred a net loss from continuing operations of $5,057,858 and 
$3,683,274 for each of the years ending December 31, 1996 and 1995, 
respectively.  These losses were sustained primarily because the Company has 
not achieved the volume of sales and rentals of HelpMates required to cover 
the overhead expenses associated with the commercialization of its HelpMate 
systems, and to the increase in staffing and sales and marketing expenses 
noted above. It should further be mentioned that while the Company's order 
flow continues to increase it has increased substantially for rentals not for 
sales, thereby resulting in increased losses and a more rapid depletion of 
cash than originally anticipated.  The Company anticipates that such losses 
will continue until the volume of sales and rentals of HelpMates necessary to 
cover overhead expenses is achieved.  As noted above, the overall 
profitability and cash flow of the Company is highly dependent upon its mix 
of robot rentals and robot sales, (i.e., more robot rentals than sales 
results in larger losses and a quicker depletion of cash in the short run.)

                                       9
<PAGE>

Earnings (Loss) Per Share

Earnings (loss) per share of common stock for the year ended December 31, 
1996 and 1995 was ($0.88) and ($2.76), respectively. The reduction in the net 
loss per share is attributable to the increase in number of shares 
outstanding from the aforementioned initial public offering.  Earnings per 
common share is computed using the treasury stock method based on the 
weighted average number of common shares and common stock equivalent shares 
outstanding during the period, as adjusted  for the stock split that occurred 
in conjunction with the initial public offering.   Shares from the assumed 
exercise of options and warrants granted by the Company and shares issuable 
in  connection with the Company's convertible preferred stock have been 
included in the computations of earnings per share for all periods unless 
their inclusion would be anti-dilutive. However, for purposes of computing 
net loss per share, options and warrants granted by the Company during the 12 
months preceding the initial public offering date, including those shares 
issuable in connection with the anti-dilution provisions of certain warrant 
agreements, have been included in the calculation of common stock and common 
stock equivalent shares outstanding as if they were outstanding for all 
periods presented using the treasury stock method and the public offering 
price of $6.25 per unit or $3.00 per share and $0.25 per warrant.

Supplemental net loss per share of common stock for the year ended December, 
1996 was ($0.84).  Supplemental net loss per share of common stock is 
computed using the if-converted method based on the pro forma weighted 
average number of shares of common stock and common stock equivalent as 
defined above, and convertible preferred shares that were converted into 
common stock on a 1-4.55 basis upon the closing of the initial public 
offering, adjusted retroactively for the aforementioned stock split.  Net 
loss per share used in the supplemental loss per share calculation was 
decreased for dividend requirements on preferred shares. 

Liquidity and Capital Resources

The Company historically has been dependent upon sources other than 
operations to finance its working capital requirements.  These sources 
include loans and/or investments from stockholders and their affiliates, 
private placements of its debt and equity securities, the Company's initial 
public offering and  certain financing transactions pursuant to which the 
Company assigned the revenue stream from certain HelpMate robots and assigned 
the existing rental agreements related thereto in exchange for lump sum 
payments to the Company.

As of December 31, 1996, the Company's capital requirements in connection 
with the design, development and commercialization of its HelpMate system 
continue to be significant. (Principally due to the increased rate at which 
rental orders are being received (discussed above). As of December 31, 1996, 
the Company had orders to rent an additional 26 HelpMate robotics systems, an 
increase from the 11 units in the rental backlog at December 31, 1995. 
However, the manufacture and installation of the units required to satisfy 
this backlog is expected to utilize a significant amount of cash.  Further, 
as the Company's trend of rapid rental order receipts continues, it will 
continue to put pressure on the Company's limited cash liquidity.

In addition, by mid 1996, the Company had determined that the results that it 
expected to experience had varied from the Company's estimates in that (i.) 
Otis Elevator had reduced its forecast of purchases from 26 units to 6 units 
(and for fiscal 1996 only purchased 4 units); (ii.) the distribution 
agreement established with Bell & Howell Mailmobile Company had resulted in 
no placements of HelpMates and was consequently terminated; (iii.) the mix of 
robot rentals versus robot sales was significantly weighted to rentals, 
resulting in a slower replenishment of cash, and (iv.) the time by which the 
Company was able to fully train its sales force and establish its marketing 
program was delayed by three months until June 30, 1996.

In light of the foregoing liquidity issues, the Company took the following 
actions effective November 1, 1996; a) the Company terminated ten employees 
from all of its departments;  b) nine senior executives of the Company, 
including the Company's Chairman, its President, Vice President of 
Engineering and Controller agreed to partial salary deferrals for a period of 
up to six months. (The Chairman has elected to receive no pay and the 
President has elected to receive 25% of his pay.)   If not then repaid, it is 
anticipated that the salary deferred by these executives would be exchanged 
sometime in the Spring of 1997 for non-qualified options to purchase the 
Company's Common Stock.  The terms of such options have not yet been 
finalized, although it is anticipated that they will have a below market 
exercise price and will be exercisable for no more than 100,000 shares of the 
Company's Common Stock in 

                                        10

<PAGE>

the aggregate, and that their issuance would 
require the approval by the Company's stockholders of an amendment to the 
Company's existing Amended and Restated 1995 Stock Option Plan;  c) the 
Company's Chairman agreed to a grace period of up to six months for which 
principal and interest due on outstanding obligations owed him be waived 
until such time as the Company is better able to satisfy such obligations; 
and d)  the Company postponed research and development related to new 
products until such time that the Company would be better able to finance the 
projects.  The foregoing actions were taken with the objective of ensuring 
that the Company's cash on hand and cash generated from operations would be 
sufficient to satisfy its contemplated cash requirements until such time as 
it was able to complete the sale and leaseback transaction described below.

On February 7, 1997, the Company entered into a Purchase, Security and 
Remarketing Agreement and a Master Lease Agreement with Leasing Technologies 
International, Inc. ("LTI") for the sale and leaseback of fifteen of its 
robotic courier systems which are currently under rent from the Company to 
hospitals across the United States  ("sold units").  The total proceeds 
obtained from this transaction was $1,230,000.  As part of the transaction, 
the Company assigned all of its right, title and interest in the underlying 
rental agreements for the sold units and granted a security interest in 
fifteen additional rental agreements for units that were not sold to LTI 
("collateral units"). The Purchase, Security and Remarketing Agreement 
requires the Company to, among other things,  refurbish any sold unit that 
ceases to be rented by a hospital and place that sold unit on rent with 
another hospital prior to the Company placing one of its own units with 
another hospital. In addition, the Company is responsible for the maintenance 
of  both the sold units and the collateral units.  Upon the expiration of the 
Master Lease Agreement (36 months), the Company shares in residual rental 
payments from the sold units in the following manner: a)75% for the Company 
and 25% for LTI until such time as the Company receives an additional 
$372,032 and b) 50% for the Company and 50% for LTI thereafter.  Finally, the 
Company has no right to repurchase the sold units from LTI. Concurrent with 
the closing of the above transaction, the Company a) hired two employees, b) 
restored the salaries of the nine senior executives discussed above and c) 
resumed making principal and interest due on outstanding obligations.   The 
Company has continued to postpone research and development related to new 
products until such time and the Company would be better able to finance the 
projects.

The Company anticipates obtaining additional working capital financing during 
the Spring or Summer of 1997 which will allow HRI to utilize an existing 
commitment for up to $5 million in additional rental financing and up to $10 
million in lease financing.  The Company has however taken actions and will 
institute other measures such as employee termination, salary deferrals, and 
the curtailment of sales, marketing and production activity to ensure that 
operations would continue throughout 1997 if the additional financing 
transactions are not consummated.  These actions could however impact the 
Company in the following manner: a) reduce the time in which  the Company 
will be able to fulfill its backlog requirements, b) negatively impact the 
Company's reputation in the marketplace and consequently negatively impact 
order receipts and  c) indefinitely postpone the Company's ability to 
generate positive cash flow and / or income.  However, the Company believes 
that even at a reduced level of operations, it will be able to produce, rent 
and/or sell, and install those units for which it has received firm orders.  
The Company continues to actively seek additional financing alternatives in 
order to strengthen its liquidity situation in the short term, and although 
the Company has identified some potential sources of such financing,  the 
Company has no current commitments or agreements with respect to such and 
there can be no assurance that any additional financing will be available to 
the Company on acceptable terms, or at all.   Such alternatives include, but 
are not limited to transactions similar in nature to that entered into with 
LTI; private placement of  the Company's securities in the United States or 
abroad; and / or mezzanine type financing (including senior or subordinated 
debt). Further, additional equity financing may involve substantial dilution 
of the stock ownership of the Company's existing stockholders.  Moreover, 
financial or other covenants imposed by future financing sources might 
further adversely affect the Company's ability to pay dividends and 
management's ability to control the Company.  Additionally, by transferring 
the title and rental agreements to a third party for an immediate cash 
payment, the Company could lose all or a portion of its opportunity to 
benefit from ongoing rentals in the future or from the residual value of the 
units upon the expiration of the rental agreements.  Finally, no assurances 
can be given that any such financing will provide sufficient cash required 
for the Company to attain an operating revenue stream of cash sufficient to 
support the Company's continued operations. It is also not anticipated that 
current stockholders will provide any additional financing.  (This paragraph 
contains forward looking statements and the Company's actual results may 
differ if (a) the mix of robot rentals versus sales changes; (b) existing 
orders get canceled; (c) the Company's own order/installation forecast 
changes; (d) the Company is unable to secure additional financing and (e) the 
actions and measures described above are not sufficient to ensure that 
operations will continue throughout 1997.)

                                            11

<PAGE>

Other (including 1995 and 1996 financing transactions)

In 1995 and 1994, the Company entered into three agreements with Hospital 
Tranporters Limited Partnership ("HTLP"), a limited partnership whose limited 
partners include the Chairman, the Chairman's brother and the President of 
the Compnay, whereby the Company transferred title to thirteen of its 
HelpMate robotic courier systems to HTLP to provide the Company with 
additional capital to fund its operations. The total proceeds obtained from 
these agreements approximated $1,170,000. (See Item 12 "Certain Relationships 
and Related Transactions" for additional information.)

In October, 1995, four entities which previously provided equity financing to 
the Company, Connecticut Innovations Incorporated, Minnesota Mining and 
Manufacturing, Landmark Partners Inc. and Connecticut Financial Developments, 
L.P. (collectively, the "Selling Bridge Security Holders") advanced an 
aggregate of $800,000 to the Company in exchange for, among other things, 
certain notes which, immediately prior to the Company's initial public 
offering of securities were convertible at a rate of one unit for each $4.06 
advanced or 196,922 units. (See Item 12 "Certain Relationships and Related 
Transactions" for additional information.)

During the period August-December 1995, the Company assigned the operating 
leases for four HelpMate-Registered Trademark- robotics courier systems to 
Center Capital to provide the Company with additional capital to fund its 
operations.  The total proceeds obtained from such financings approximated 
$228,000. (See Note 5 of the Notes to Financial Statements, which are 
attached hereto and made part hereof for additional information).

In 1995, the Company entered into an agreement with Westinghouse Electric 
Corporation ("Westinghouse"), the owner of its Danbury facility, to 
repurchase, for $210,000, all of the shares of the Company's Common Stock 
previously issued to Westinghouse in lieu of approximately $420,000 of rental 
obligations from the Company to Westinghouse. Such repurchase took place upon 
the closing of the Company's initial public offering.

In addition, during 1995 the Company received two loans, one from CII and one 
from its chairman for a total of $820,000. Such loans are payable over terms 
from four to five years, bear interest at 10% per annum and only interest is 
due on such loans for the first year. (See Item 12 "Certain Relationships and 
Related Transactions" for additional information.)

The Company's liquidity is also affected by its royalty obligations to 
Connecticut Innovations, Incorporated ("CII"). (See Item 12 "Certain 
Relationships and Related Transactions" for additional information.)

For the foreseeable future, the Company does not anticipate paying dividends 
and the Company anticipates retaining any earnings to fund its operations. 
Moreover, the ability of the Company to pay dividends is subject to 
contractual restrictions through September 2001. Specifically, during that 
period, the Company may not, unless otherwise approved by one of its lenders, 
directly or indirectly declare, order, pay or reserve any sum or property for 
the payment of any dividend or other distribution on the Company's capital 
stock until such time as the Company has achieved a net profit for three 
consecutive fiscal quarters.

INCOME TAXES

The Company accounts for income taxes in accordance with Financial Accounting 
Standards Board Statement No. 109, "Accounting for Income Taxes" ("SFAS 
109"), SFAS 109.  The Company's net operating loss carryforwards of 
approximately $17.3 million at December 31, 1995 expire during the years 
1997-2011.  The related deferred tax asset has been fully reserved because 
the ability of the Company to realize a future tax benefit from its net 
operating loss carryforwards may be limited.

INFLATION

The Company does not believe that the relatively moderate levels of inflation 
which have been experienced in the United States has had or will have a 
significant effect on its revenues or operations.

                                         12
<PAGE>

IMPACT OF NEW ACCOUNTING STANDARDS

In March, 1995 the Financial Accounting Standards Board (FASB) issued 
Statement No.121, Accounting for the Impairment of Long-Lived Assets and 
Long-Lived Assets to be Disposed Of.  Accordingly, the Company adopted the 
accounting treatment prescribed by this statement for its 1996 fiscal year. 
Consequently, in the event that circumstances indicate that the carrying 
value of the Company's long lived assets may be impaired, an evaluation of 
the recoverability would be performed. If such an evaluation is required, the 
estimated future undiscounted cash flow associated with the asset would be 
compared to the carrying value of the asset to determine if a write-down to 
net realizable value is required.  To date, such write-downs have not been 
material.

In 1995, the Financial Accounting Board also issued Statement No. 123 
"Accounting for Stock Based Compensation" ("SFAS 123").  However, the Company 
continues to account for its stock based compensation under APB 25 and will 
only make the financial statement disclosures required by SFAS 123, if 
material or otherwise required.  Accordingly, the aforementioned new 
accounting standard did not have any effect on the Company's results of 
operations.

Item 7 Financial Statements

The information required by Item 7 of Part II is incorporated herein by 
reference to the financial statements filed with this report. See item 13 of 
Part III.

Item 8  Changes in and Disagreements with Accountants on Accounting and 
Financial Disclosure 

NONE

                                        13

<PAGE>

                                   PART III

Item 9 Directors, Executive Officers, Promoters and Control Persons, 
Compliance with Section 16(a) of the Exchange Act.

Directors, Executive Officers, Promoters and Control Persons:

The Company's executive officers and directors are as follows:

NAME                      AGE     POSITION

Joseph F. Engelberger     71      Chairman and Director

Thomas K. Sweeny          59      President, Chief Executive Officer, 
                                  Treasurer and Director
John M. Evans, Jr.        55      Vice President, Engineering, Secretary
                                  and Director
John F. Barry             44      Director

Nobuo Saita               52      Director

Kevin F. Littlejohn       34      Director

Theodore Sall             70      Director

Sheldon Sandler           52      Director

Marc D. Greenberg         31      Controller and Assistant Treasurer

Mr. Engelberger co-founded the Company in 1984 and has served as a Director 
and the Chairman since that time. Prior to that, Mr. Engelberger founded and 
served as the first president of Unimation, Inc., the first industrial 
robotics company, which was acquired by Westinghouse Electric Corporation. He 
also founded and was the first president of Consolidated Controls 
Corporation, which was ultimately acquired by Eaton Corporation. Mr. 
Engelberger has written extensively on the subjects of instrumentation and 
robotics. Mr. Engelberger is the father of Gay Engelberger, the Company's 
director of marketing. Mr. Engelberger formerly served as a director of 
Anderson Group, Inc. and currently serves as a director of EDO Corporation.

Mr. Sweeny, a director of the Company since 1987, joined its management team 
in February 1995. From 1987 to February, 1995, Mr. Sweeny had been a partner 
and a managing director at Landmark Ventures Inc., a venture capital firm 
and, through an affiliate, one of the original investors in the Company. 
While at Landmark, Mr. Sweeny served as a director of eleven companies, 
including Infodex, Inc. and Nova Technologies, Inc., and acted in the 
capacity of CEO for Vortech Data Systems, Inc. and occupied the office of the 
president at Metallon Engineered Materials, Inc. From 1986 to 1987, Mr. 
Sweeny was employed by the Holley Division of Coltec Industries as Vice 
President of Joint Ventures and Acquisitions and later as Vice President of 
Engineering. From 1981 until 1986 he was employed by the Diesel Systems 
Division of United Technologies Corporation. He is also a past Chairman and 
past President of the Connecticut Venture Group and the founder and first 
Chairman of the Connecticut Venture Fair.

Dr. Evans co-founded the Company in 1984, and has served as a Director since 
that time. Dr. Evans served as the President of the Company from 1984 until 
February 1995. Dr. Evans currently serves as the Company's Vice President of 
Engineering. Prior to joining the Company, Dr. Evans founded Nova Robotics. 
From 1978 to 1981, Dr. Evans was Vice President of Engineering and Operations 
at a subsidiary of Gerber Scientific, Inc. From 1970 to 1978, Dr. Evans was 
employed by the National Bureau of Standards and Technology of the United 
States Department of Commerce where he started the Automation Technology 
program.

Mr. Barry has been a Director of the Company since June 1993. Mr. Barry is 
currently a Vice President of Prospect Street Connecticut Capital, Inc. and 
has served in that capacity for the past five years. Mr. Barry currently 
serves as a director of Prospect Street High Income Shares and Skyline 
Multimedia Company.

Mr. Saita has been a director of the Company since May 1996. He currently is 
employed by Yaskawa Electric Corporation, one of the Company's stockholders, 
as the Tokyo plant manager and a Director and has served in those capacities 
for the last five years.

Mr. Littlejohn has been a director of the Company since June 1995. He 
currently is a Vice President and Principal of Prospect Street Connecticut 
Capital, Inc. and has served in that capacity for the past five years.

                                      14
<PAGE>

Dr. Sall has been a director of the Company since March 1996. He currently is 
a Professor Emeritus at Ramapo College of New Jersey.  Prior to holding this 
position, Dr. Sall was an Adjunct Professor of Clinical Medicine at the 
University of Medicine and Dentistry, New Jersey School of Nursing from 1991 
to July 1995.  Dr. Sall is also a Director of International Vitamin 
Corporation and Fluro Scan Inc.

Mr. Sandler has been a director of the Company since March 1996. He has been 
the Managing Director of Corporate Finance for Ladenburg Thalmann & Co., 
Inc., an investment banking firm located in New York City since 1991.  Prior 
to joining Ladenburg, Mr. Sandler was the Managing Partner of two investment 
firms, Carnegie Securities and Sandler, Trench & Co., both located in 
Princeton, NJ Mr. Sandler was also a chief examiner at the Securities and 
Exchange Commission. 

Mr. Greenberg has been Controller of the Company since November 1995. Prior 
to joining the Company, Mr. Greenberg was employed as the Controller of 
FlexiInternational Software, Inc., a software publisher from March 1995 to 
November 1995 and by the international professional services firm of Ernst & 
Young LLP from 1987 to 1995, where he provided audit, accounting and business 
services to a broad range of clients from start-ups to large publicly traded 
multinationals in diverse industries, including the Company and others in the 
high tech industry. Mr. Greenberg is a member of the American Institute of 
Certified Public Accountants and the Connecticut Society of Certified Public 
Accountants.

Board of Directors - Committees and Meetings

General

The board of directors held seven meetings in 1996.   All of the directors 
attended at least 75% of the meetings of the board and the respective 
committees of the board of which they were a member during 1996 or in the 
case of Mssrs. Sall, Sandler, and Saita during the period in which they were 
directors, with the exception of Mr. Saita and Mr. Komiyama (Mr. Saita's 
predecessor), who did not attend any meetings.

Compensation

The Company does not pay any additional remuneration to employees serving as 
directors nor does it pay any such remuneration to Mssrs. Barry, Littlejohn 
or Saita.  Mssrs. Sall and Sandler however receive an annual retainer of 
$5,000 plus fees of $500 per day for attendance at meetings of the board of 
directors and their respective committees.  Directors' out of pocket expenses 
are not reimbursed by the Company.

Committees

The Board of Directors has the following standing Committees: 

Audit Committee

The Audit Committee, which met two times in 1996,  consists of three 
directors of the Company, all of whom are independent. The Audit Committee is 
responsible for the engagement of the Company's independent auditors and 
reviews with them the scope and timing of their audit services and any other 
services which they are asked to perform, their report on the Company's 
accounts following completion of the audit and the Company's policies and 
procedures with respect to internal accounting and financial control. The 
board of directors has appointed Messrs. Barry, Littlejohn and Sandler as the 
members of the Audit Committee.

                                     15
<PAGE>

Compensation Committee

The Compensation Committee, which met three times in 1996, is responsible for 
making recommendations to the board of directors with respect to compensation 
and benefit levels of executive officers of the Company. The board has 
appointed Messrs. Barry, Littlejohn and Sall as the members of the 
Compensation Committee.

Stock Option Committee

The Stock Option Committee, which met three times in 1996, is responsible for 
administering the Company's 1984, 1988 and 1995 Stock Option Plans. The board 
has appointed Messrs. Barry and Littlejohn to the Stock Option Committee.

Compliance with Section 16(a) of the Exchange Act:

Joseph F. Engelberger, Chairman and Director of the Company, filed his 
August, 1996 Form 4 in October 1996.  Such form reported one purchase of 
1,000 shares of the Company's Common Stock.

Item 10 Executive Compensation

The following table sets forth certain information regarding compensation 
awarded to, earned by, or paid to the Company's chief executive officer and 
each other executive officer and employee whose salary and bonus for the 
fiscal year ended December 31, 1996 exceeded $100,000.

                           FISCAL                  SECURITIES UNDERLYING
NAME AND POSITION           YEAR      SALARY            OPTIONS/SARS

Joseph F. Engelberger       1996      $100,000                -
Chairman of the Board       1995      $113,333              32,345
                            1994      $126,000               9,872

Thomas K. Sweeny            1996      $150,000                -
President/Chief             1995      $ 37,500              24,680
 Executive Officer          1994          -                   -

John M. Evans               1996      $139,000                -
Vice President              1995      $139,000               1,145
 of Engineering             1994      $127,000                -

Bala Krishnamurthy          1996      $103,750                -
Director of                 1995      $100,000                 824
 Software Engineering       1994      $100,000                -

Fred Cordano                1996      $101,750                -
Director of                 1995      $ 98,000                 805
 Manufacturing              1994      $ 98,000                -

The Company has entered into employment agreements with Messrs. Engelberger, 
Sweeny, and Evans and Ms. Krishnamurthy as well as one other employee not 
listed above. Each of these agreements contains noncompetition, nondisclosure 
and noninterference provisions.

Mr. Engelberger's employment agreement initially runs until December 31, 1998 
and is automatically renewable from year to year thereafter. Mr. Engelberger 
is employed at seventy percent of normal working hours and receives an annual 
salary of $100,000. After the initial term, the agreement may be terminated 
by Mr. Engelberger at any time and by the Company with at least twelve months 
prior notice. If the Company provides less than tweleve months notice, it 
must continue to compensate Mr. Engelberger through the twelve-month period. 
In May 1995, the Company executed a promissory note for $320,000 in favor of 
Mr. Engelberger in connection with $200,000 of new financing provided to the 
Company and the refinancing of contingent compensation obligation to Mr. 
Engelberger for $120,000. See "Certain Relationships and Related 
Transactions."
 
                                      16
<PAGE>

Mr. Sweeny's employment agreement initially runs until December 31, 1998 and 
is automatically renewable from year to year thereafter. His annual base 
salary under the agreement is $150,000, and he is eligible for performance 
bonuses in amounts determined by the board of directors in its sole 
discretion. The agreement may be terminated by the Company for cause at any 
time with thirty days prior notice; after December 31, 1998, either party may 
terminate the agreement without cause with thirty days prior notice, 
provided, however, that if the Company terminates the agreement without 
cause, Mr. Sweeny is entitled to continue receiving his salary for a period 
of twelve months. In connection with this employment agreement, Mr. Sweeny 
received an option under the Company's 1988 Stock Option Plan to purchase up 
to 24,680 shares of its Common Stock for $1.01 per share. The option may be 
exercised in installments until October 31, 2005. (See Item 12 "Certain 
Relationships and Related Transactions" for additional information.)

Mr. Evans' employment agreement runs until December 31, 1998 and is 
automatically renewable from year to year thereafter. Under his agreement, 
Mr. Evans will be considered for annual salary increases based upon his 
performance and that of the Company. The agreement may be terminated by the 
Company for cause at any time with thirty days prior notice; after December 
31, 1998, either party may terminate the agreement without cause with thirty 
days prior notice, provided, however, that if the Company terminates the 
agreement without cause, Mr. Evans is entitled to continue receiving his 
salary for a period of twelve months.

Ms. Krishnamurthy's employment agreement runs until December 31, 1997 and is 
automatically renewable from year to year thereafter. Under her agreement, 
Ms. Krishnamurthy will be considered for annual salary increases based upon 
her performance and that of the Company. The agreement may be terminated by 
either party without cause with thirty days prior notice, provided, however, 
that if the Company terminates the agreement without cause, Ms. Krishnamurthy 
is entitled to continue receiving her salary for a period of three months.

No grants of stock options or warrants were made during fiscal 1996 to the 
individuals named in the executive compensation table.

The following table sets forth information on the exercise of stock options 
and warrants issued to individuals named in the executive compensation table.

<TABLE>
<CAPTION>
                              Shares               Number of                   Value of
                          acquired upon            Securities                unexercised
                           exercise of       underlying unexercised         in the money
                          Options during         Options/SARS at           Options/SARS at
Name                        fiscal 1996         December 31, 1996         December 31, 1996
------------              --------------   ---------------------------  --------------------------
                          Number   Value   Exercisable   Unexercisable  Exercisable  Unexercisable
<S>                       <C>      <C>     <C>           <C>            <C>          <C>
Joseph F. Engelberger       0       $0     107,132        5,923         $13,397         $  866

Thomas K. Sweeny            0       $0       4,936       19,744         $   722         $2,888

John M. Evans, Jr.          0       $0      15,499          0           $ 6,824         $    0

Bala Krishnamurthy        12,054  $17,025      0            0           $     0         $    0

Fred Cordano                0       $0      15,934          0           $ 5,241         $    0

</TABLE>
                                            17
<PAGE>

Item 11 Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information with respect to beneficial 
ownership of the Company's Common Stock as of December 31, 1996 by each of 
the individuals named in the executive compensation table,  the Company's 
directors and nominees, all directors and officers as a group and each person 
who is known by the Company to beneficially own five percent or more of the 
Company's voting securities.

<TABLE>
<CAPTION>
                                               Shares Beneficially    Percent
Beneficial Owner                                     Owned           Ownership
----------------                              --------------------  -----------
<S>                                            <C>                  <C>
Connecticut Financial Developments, LP             1,014,188           12.05%
c/o Prospect Street Connecticut Capital.
250 Park Avenue, 17th Floor
New York, NY 10177

Transitions Two Limited Partnership                  492,161            5.85%
c/o Landmark Partners, Inc.
760 Hopmeadow Street
Simsbury, CT 06070 (1)

Joseph F. Engelberger (2)(6)                         633,848            7.65%

Thomas K. Sweeny (3)(6)                              164,408            1.98%

John M. Evans Jr. (4)(6)                              97,353            1.18%

Bala Krishamurthy (6)                                 32,044             (8)

Fred Cordano (5)(6)                                   20,870             (8)

John F. Barry (7)                                      -0-               -0-
Prospect Street Connecticut Capital Inc.
250 Park Avenue, 17th Floor
New York, NY 10177

Kevin F. Littlejohn (7)                                -0-               -0-
Prospect Street Connecticut Capital Inc.
Exchange Place, 37th Floor
Boston, MA 02109

Nobuo Saita (7)                                        -0-               -0-
Yaskawa Electric Corporation
1-6-1, Ohtemachi Building
Chiyoda-ku, Tokyo 100, Japan

Theodore Sall (9)                                      3,000             (8)
47 Lake View Drive
Old Tappan, NJ 07675

Sheldon Sandler (9)                                    -0-               -0-
Ladenburg, Thalmann & Co. Inc.
540 Madison Avenue
New York, NY 10022

All Directors and Officers as a Group                955,087           11.52%

</TABLE>
                                          18
<PAGE>

(1) Includes 81,894 warrants which are currently exercisable

(2) Includes 72,589 shares of common stock owned by Mr. Engelberger's wife, 
Margaret Engelberger, but does not include shares beneficially owned by Mr. 
Engelberger's adult children or his brother. Also includes 89,777 warrants 
which are currently exercisable and 17,355 options which are currently 
exercisable but does not include 5,923 options which are not currently 
exercisable.

(3) Includes 4,936 options which are currently exercisable but does not 
include 19,744 options which are not currently exercisable.

(4) Includes 15,499 options which are currently exercisable.

(5) Includes 15,934 options which are currently exercisable.

(6) The address for these individuals is in care of HelpMate Robotics Inc., 
Shelter Rock Lane, Danbury, CT 06810.

(7) Does not include shares beneficially owned by these individuals' 
employers.

(8) Less than one percent.

(9) Does not include 10,000 options which are currently not exercisable.

Item 12 Certain Relationships and Related Transactions

LOANS and FINANCING TRANSACTIONS

Hospital Transporters Limited Partnership

In 1995 and 1994, the Company entered into three agreements with Hospital 
Tranporters Limited Partnership ("HTLP"), a limited partnership whose limited 
partners include the Chairman, the Chairman's brother and the President of 
the Company, whereby the Company sold thirteen of its HelpMate robotic 
courier systems to HTLP to provide the Company with additional capital to 
fund its operations.  Under the agreements, the Company guaranteed payments 
to HTLP of aggregating $2,020,829 over  a five year period and at the 
expiration of the five year period the Company can repurchase from HTLP the 
HelpMate robotic courier systems. The total proceeds obtained from these 
agreements approximated $1,170,000 and as stipulated by these agreements, the 
Company remains responsible for the maintenance of the systems for which HTLP 
agreed to pay $3,500 per unit per year to the Company.  The Company accounted 
for these transactions as a financing,  recognizing the proceeds received as 
obligations at the discounted present value of the guaranteed payments having 
an effective interest rate of approximately 24%.  The related assets are 
being depreciated over their estimated economic life (five years)

Connecticut Innovations Incorporated

In June, 1995, Connecticut Innovations Incorporated ("CII"), a shareholder, 
extended a loan ("CII Loan") to the Company in the amount of $500,000 with an 
annual interest rate of 10%.  Interest alone was payable on the note in its 
first year and thereafter principal and interest is payable in forty eight 
equal installments.  In connection with this loan, the Company granted to CII 
security interests in certain of its assets, including all of its 
intellectual property relating to HelpMate in the North and South American 
markets, and issued to CII warrants to purchase an aggregate of 74,074 shares 
of Common Stock at an exercise price of $2.70 per share, which expire on June 
14, 2005.  By virtue of this loan agreement, the Company is also required to, 
among other things, retain its principal place of business, and a majority of 
its employees and operations in the State of Connecticut until June, 2001.  
In November 1996, the Company received from CII permission to postpone the 
repayment schedule on this loan for a period not to exceed six months. 

In November, 1990, the Company entered into a loan agreement with CII.  The 
agreement provided the Company with a $500,000 secured note, which is secured 
by the Company's property and equipment.  The note is payable monthly, 
including interest at 12% in  60 equal installments commencing January 1, 
1992.  As additional consideration for entering into the loan agreement, the 
Company issued to CII warrants to purchase an aggregate of 40,947 shares of 
Common Stock at an exercise price of $2.44 per share, which expire on July 1, 
2000. In November 1996, the Company received from CII permission to postpone 
the repayment schedule on this loan for a period not to exceed six months. 

                                       19
<PAGE>

Chairman 

In June, 1995, the Company entered into a financing transaction ("Loan 
Agreement") with the Company's Chairman in the amount of $200,000 on 
substantially the same terms as the CII Loan.  Concurrently, the Company had 
committed to make a lump sum payment of $120,000 to its Chairman upon the 
occurrence of certain events.  The Company and its Chairman however agreed to 
add the $120,000 obligation to the term of Loan Agreement in the form of a 
promissory note and subsequently in conjunction with the Company's initial 
public offering, the $120,000 obligation was converted into 19,200 units 
which consists of two shares of Common Stock and a Warrant to purchase one 
additional share of Common Stock at $5.75 per share.

Accordingly, the Company recorded $120,000 as non cash compensation expense 
in the year ended December 31, 1995.   In consideration for making the Loan 
Agreement, the Company issued to its Chairman additional warrants to purchase 
an aggregate of 29,630 shares of Common Stock at an exercise price of $2.70 
per share, which expire on May 25, 2005.  The Loan Agreement relieved the 
Company of any previous obligations with its Chairman.  In November 1996, the 
Company received from its  Chairman, permission to delay the repayment 
schedule on this loan for a period not to exceed six months.  No additional 
interest accrued on this obligation by virtue of the delay in repayment. The 
Company also recognized $31,166 as a non-cash financing expense in the year 
ended December 31, 1995 to account for the compensatory nature of the 
issuance of the aforementioned warrants.

Selling Bridge Security Holders

In October 1995, CII, Minnesota Mining and Manufacturing ("3M"), Connecticut 
Financial Developments, L.P. ("CFD"), and Landmark Ventures Inc. 
("Landmark"), each a stockholder of the Company, loaned the Company $300,000, 
$250,000, $100,000 and $150,000, respectively, and were issued warrants to 
purchase 29,616, 24,680, 9,872 and 14,808 shares, respectively, of the Common 
Stock at an exercise price of $4.05 per share. Interest only is due on each 
of these loans for the first year, and thereafter, they are payable over four 
years in monthly installments of principal and interest. Immediately prior to 
the closing of the Company's initial public offering, these warrants were 
canceled and these loans were converted into Units at a rate of one Unit for 
each $4.0625 of principal outstanding. Accordingly, the Company recorded 
$430,767 as an additional financing cost related to the issuance of these 
notes.

ROYALTY AND LICENSING ARRANGEMENTS

Connecticut Innovations Incorporated

During 1986, the Company entered into a contract with an independent 
corporation (the "Corporation") to assist in the development and 
manufacturing of a trackless robotic courier to be used primarily in the 
healthcare industry to transport materials ("HelpMate").  The Corporation had 
entered into a development agreement with CII, a state sponsored development 
corporation, in which CII would reimburse the Corporation for a portion of 
the development costs for the HelpMate-Registered Trademark- robotics courier 
system (the "sponsored products").  The contract between the Corporation and 
the Company granted the Company the right to assume the Corporation's rights 
under the agreement with CII.

During 1987, the Company assumed the Corporation's rights under the 
agreement, pursuant to which CII reimbursed the Company for $441,000 of 
development costs related to the sponsored products.   In return for such 
reimbursement, the Company must pay royalties aggregating $2,205,000 to CII 
as follows: (i) five percent of the Company's net sales of Sponsored 
Products, and (ii) fifty percent of any royalties received by the Company for 
payments against shipments of Sponsored Products by licensees of the Company. 
Thereafter, the Company must continue to pay royalties for a period equal to 
the period of time taken to satisfy this $2,205,000 royalty obligation, 
except that the royalty rate on the Company's net sales of Sponsored Products 
shall be reduced to one-half of one percent during such period. Such 
royalties are payable only to the extent that sales and license fees are 
realized. Through December 31, 1996, the Company had paid approximately 
$250,000 in royalties to CII.

                                       20
<PAGE>

In January 1996, the Company and CII agreed that during the two-year period 
commencing on the closing of the Company's initial public offering, the 
obligation to pay a royalty at a rate of five percent of sales of Sponsored 
Products would be reduced so that the payment with respect thereto would not 
exceed the greater of (i) one and one-half percent of the net sales of 
Sponsored Products or (ii) twenty percent (20%) of the Company's pre-tax 
profits  (but in no event would such payment be more than five percent of net 
sales of Sponsored Products.) In addition, the Company will receive a credit 
of $300,000 against the $2,205,000 royalty obligation. In consideration of 
this modification, the Company issued to CII 50,000 shares of its Common 
Stock and a warrant to purchase 25,000 additional shares at $5.75 per share 
immediately prior to the closing of the Company's initial public offering. In 
addition, the Company may, at its option, extend the period permitting 
reduced royalty payments for an additional two years and receive another 
$300,000 credit against the royalty obligation by issuing to CII an 
additional 50,000 shares of Common Stock and warrants to purchase an 
additional 25,000 shares exercisable at $5.75 per share. Under the agreement, 
if the Company relocates its business outside the State of Connecticut, among 
other things, the Company must grant CII a nonexclusive right to all existing 
and future patents pertaining to the Sponsored Products. CII also may 
exercise a nonexclusive, worldwide and royalty-free license to manufacture, 
use and sell the Sponsored Products and to use all patent and trademark 
rights, technical information and know-how relating to the Sponsored Products 
in the event the Company defaults under the agreement. Accordingly, the 
Company recorded $156,250 of non-cash royalty expense in the year ended 
December 31, 1996 related to the issuance of these securities.

Yaskawa Electric Corporation

The Company has two agreements with Yaskawa Electric Corporation ("Yaskawa"), 
one of Japan's largest manufacturers of industrial robots and a shareholder 
of the Company.

Under its 1991 agreement with Yaskawa, the Company appointed Yaskawa as its 
exclusive distributor in Japan and certain other countries throughout Asia 
("Yaskawa Territory") to sell its HelpMate robots and LabMate.  This 
Agreement, which automatically renews for three-year terms unless a party 
elects not to renew, permits Yaskawa to purchase these products at a discount 
from the Company's then current published prices.

Under its 1992 agreement, the Company granted Yaskawa an exclusive license to 
manufacture, market and sell, in the Yaskawa Territory, systems which 
incorporate or make use of certain of the Company's technology and products 
used in the HelpMate robot system (collectively, the "Components"). This 
agreement permits Yaskawa to purchase the Company's products at their then 
current published prices. In exchange for this license, Yaskawa paid the 
Company a one-time nonrefundable and non-creditable fee of $500,000 in 1992, 
and until May 2002 will pay the Company a royalty based upon the sales of 
Yaskawa systems in the Yaskawa Territory and the relative proportion of the 
Components incorporated therein. At the end of this period, and assuming 
Yaskawa has fully paid all royalties due to the Company, Yaskawa will retain 
a royalty-free license to manufacture, market and sell systems that 
incorporate or make use of the Components.

In addition, the Company has granted Yaskawa a right of first refusal to 
become the exclusive distributor in the Yaskawa Territory of those future 
products of the Company having public, commercial and domestic service 
applications, including those used in healthcare, social welfare, cleaning 
and transportation. This right of first refusal does not apply to products 
that (i) are licensed to Electrolux pursuant to the Electrolux Agreements 
described below, (ii) are the subject of the Company's agreements with APS 
described below, or (iii) otherwise have been developed for the United States 
government under certain research and development agreements. Yaskawa has 
determined that building design and personal tastes in Japan require certain 
design modifications related to the size of the HelpMates.

                                       21
<PAGE>

Otis A/S, a Danish affiliate of Otis Elevator Company 

The Company has granted Otis A/S ("Otis"), a Danish affiliate of Otis 
Elevator Company ("Otis Elevator"), a shareholder of the Company, an 
exclusive license to sell and/or rent HelpMates and peripheral equipment in 
Europe, the former Soviet Union, Africa, parts of the Middle East and certain 
other regions (the "Otis Territory"). In exchange for this license, Otis paid 
the Company a non-refundable and non-creditable $150,000 fee in six quarterly 
installments during the 24-month period beginning January 1, 1995 for 
technical training provided by the Company, and will pay the Company a fee 
equal to 5% of the gross sales of the products by Otis during the 18-month 
period beginning July 1, 1997. The training fee is recognized as revenue as 
it is earned ($25,000 per quarter). Otis has the right to purchase these 
products from the Company generally at a discount which approximates 58% of 
the Company's list prices. Further, if certain mutually agreed upon cost 
savings are achieved by the Company, the price of these products will be 
reduced by a portion of such savings. Otis also is entitled to a six percent 
finder's fee for successfully referring potential HelpMate customers in the 
United States to the Company. Otis also has the right, at no additional cost, 
to become the Company's exclusive distributor of HelpMates and peripheral 
equipment on a worldwide basis, other than in the United States and the 
Yaskawa Territory (unless these other areas become available in the future). 
Otis also has the right to match any third-party offer to become the 
Company's exclusive distributor in the Otis Territory (including any 
territory added to the Otis Territory as described above) of other products 
used for the transport of goods and people. The agreement with Otis expires 
in 2001, but will be extended until 2004 if Otis previously has purchased at 
least 250 HelpMate units. Thereafter, the agreement will be renewed 
automatically for three-year terms unless either party elects not to renew. 
If the Company elects not to renew the agreement, it must repurchase the 
shares of the Common Stock owned by Otis Elevator at a mutually agreed upon 
price. In the event the Company fails to meet Otis' annual production 
requirements, Otis may terminate the agreement and obtain the world-wide 
non-exclusive, irrevocable license to the intellectual property, rights, 
know-how and technology used in the products covered by the agreement (the 
"Product Technology") upon the payment to the Company of (i) a one time fee 
of up to $300,000, and (ii) royalties of six percent on net revenues from the 
sale or rental of covered products by Otis for a period of five years. 
Further, Otis may obtain a license to certain technical information related 
to the Products Technology currently held in escrow by Otis Elevator without 
any payment on its part in the event the Company materially breaches this 
agreement. The Company has agreed that ownership of trademark rights for the 
"HelpMate" name will belong to Otis in the Otis Territory.

Electrolux

Beginning in 1985, the Company entered into a series of license and 
development agreements with Electrolux, a stockholder and warrant holder of 
the Company, pursuant to which Electrolux was granted an exclusive worldwide 
license to manufacture, use, sell or lease (i) mobile robots containing a 
Company-developed navigation and control system (a "Company Controller") and 
having cleaning or mowing as their principal function; (ii) autonomous and 
semi-autonomous vacuum cleaners containing a Company Controller, and (iii) 
mobile robots developed with Company Controller technology and having indoor 
or outdoor floor care as their principal function. The Company and Electrolux 
have retained non-exclusive, worldwide licenses to manufacture, use, sell or 
lease such cleaner/mowers and vacuum cleaners so long as cleaning, mowing or 
vacuuming are only minor parts of their principal function. The licenses of 
the parties with respect to cleaner/mowers are royalty-free. Electrolux must 
pay royalties to the Company not to exceed $150,000 under its licenses for 
vacuum cleaners through April 1997 and must pay royalties to the Company not 
to exceed $3,000,000 under its licenses for floor cleaning machines through 
December 2002. The Company must pay royalties to Electrolux not to exceed 
$50,000 under its licenses for vacuums having vacuuming as only a minor 
function through April 1997. In connection with the license granted to 
Electrolux for floor cleaning machines, Electrolux received a right of first 
refusal to engage in projects with the Company for lawn care products using 
the Company's technology. 

Through December 31, 1996, cumulative revenues, which are recognized upon 
shipment, from its agreements with the Otis affiliate and Yaskawa affiliates 
were $695,642 and $1,421,693, respectively.

                                         22
<PAGE>

EMPLOYMENT MATTERS

In February, 1995, Landmark agreed to make the services of its employee, 
Thomas K. Sweeny available to the Company as its President and Chief 
Executive Officer for a period of three years.  To that end, since November, 
1, 1995, the Company has directly employed Mr. Sweeny as its President and 
Chief Executive Officer pursuant to an employment agreement.  From February 
1, 1995 to October 31, 1995, Mr. Sweeny's services as President and Chief 
Executive Officer were provided to the Company pursuant to a service 
agreement between the Company and Landmark. As consideration, Landmark 
received an aggregate sum of $100,000 and 37,020 shares of the Company's 
common stock and Mr. Sweeny received 111,060 shares of the Company's common 
stock. Accordingly, the Company recognized non-cash compensation expense of 
$444,200 relating to the issuance of these shares during the year ended 
December 31, 1995.

The Company currently employs Mr. Engelberger's brother, John Engelberger, as 
a part-time Senior Sales Executive. Under the terms of John Engelberger's 
employment agreement, which is automatically renewable from year to year 
unless sooner terminated, he is entitled to an annual salary of $54,000 plus  
a commissions of $5,000 per robotic courier system that he sells or rents and 
is successfully installed. He is also eligible to participate in the 
Company's regular bonus plans and fringe benefit programs.  Total 
compensation paid to John Engelberger for the years ended December 31, 1996 
and 1995 was $79,000 and $76,000, respectively.

The Company also employs Mr. Engelberger's daughter, Gay Engelberger, as the 
Director of Marketing. Ms Engelberger receives an annual salary of $70,000 
and is eligible to participate in the Company's regular bonus plans and 
fringe benefit programs.

The Company further employs Mr. Sweeny's  son, Thomas K. Sweeny III, as a 
Sales Executive, who receives an annual salary of $25,000 and is  eligible to 
participate in the Company's regular bonus and commission plans, as well as 
the Company's fringe benefit programs.  No commissions were paid to Mr. 
Sweeny in 1996 or 1995.

OTHER STOCKHOLDER AGREEMENTS

In 1993 the Company authorized the issuance of $50,000 in equity securities 
to Landmark Partners, Inc. as payment for advisory services rendered by 
Landmark in 1992 and 1993. In fulfillment of its obligation to issue those 
securities, the Company issued, at the direction of Landmark Partners, Inc., 
5,609 Shares of Common Stock to Mr. Sweeny and 5,610 shares to other 
stockholders of Landmark. On October 1, 1995, 500 shares of the Company's 
preferred stock were issued to the Company's president and two other 
stockholders of Landmark Partners, Inc., as consideration for advisory 
services rendered to the Company. Accordingly, the Company recognized 
non-cash compensation expense of $50,000 relating to the issuance of these 
shares during the year ended December 31, 1995.

In December 1994, Otis Elevator Company ("Otis Elevator"), a stockholder of 
the Company, purchased 123,400 shares of the Common Stock at a purchase price 
of $12.16 per share. In connection with the purchase, Otis was given the 
right to be notified by the Company of any negotiations which the Company may 
conduct with third parties regarding the sale of the Company. Upon such 
notification, Otis will have the right to negotiate with the Company on its 
own behalf regarding any proposed transaction.

SAFE HARBOR STATEMENT

Statements which are not historical facts in this report are forward looking 
statements, made on a good faith basis.  Such forward looking statements, 
including those concerning the Company's expectations for demand  and sales 
or rentals of new or existing products, profitability, cash flow, etc. all 
involve risk and uncertainties.  Actual results may differ materially from 
forward looking statements for reasons including, but not limited to, changes 
in the healthcare industry, mix of robot rentals versus sales and the 
Company's ability to finance its ongoing operations.

                                       23
<PAGE>

Item 13 Exhibits and Reports on Form 8-K

No reports on Form 8-K were filed  by the registrant during the fourth 
quarter of 1996.

                        INDEX TO FINANCIAL STATEMENTS

Audited Financial Statements:

Report of Independent Auditors .............................................. 1

Balance sheet at December 31, 1996 .......................................... 2

Statements of operations for the years ended December 31, 1996 and 1995 ..... 3

Statements of stockholders' equity (deficit) for the years ended
  December 31, 1996 and 1995 ................................................ 4

Statements of cash flows for the years ended December 31, 1996 and 1995 ..... 5

Notes to Financial Statements ............................................... 6

                               INDEX TO EXHIBITS

  NO.   DESCRIPTION OF EXHIBIT


 3.01   Amended and Restated Certificate of Incorporation of Registrant as
        filed on December 28, 1995 (Incorporated by reference to Form SB2 
        No. 33-99348 filed January 31, 1996, Exhibit No. 3.02)

 3.02   Form of By-Laws of the Registrant, as amended .(Incorporated by 
        reference to Form SB2 No, 33-99348 filed January 31, 1996, Exhibit 
        No. 3.03)
 4.01*  Form of Common Stock Certificate
 4.02*  Form of Warrant Certificate
 4.03*  Form of Unit Certificate
 4.04*  Form of Warrant Agreement
 4.05*  Form of Underwriters' Unit Purchase Option
 4.06*  Pages of the Registrant's Certificate of Incorporation that define 
        the rights of holders of the securities being registered hereby are
        incorporated herein by reference to pages 3, 4, 6 and 7 of Exhibit 3.01
 4.07*  Pages of the Registrant's By-Laws that define the rights of holders of
        the securities being registered hereby are incorporated herein by 
        reference to pages 1, 2, 3, 4, 5, 6, 12 and 13 of Exhibit 3.02
10.01*  Loan Agreement dated November 20, 1990 with Connecticut Innovations,
        Incorporated ("CII").
10.02*  $500,000 Promissory Note dated November 20, 1990 in favor of CII.
10.03*  Security Agreement dated November 20, 1990 in favor of CII.
10.04*  Loan Agreement May 26, 1995 with Joseph F. Engelberger ("Mr.
        Engelberger").
10.05*  $320,000 Promissory Note dated May 26, 1995 in favor of Mr.
        Engelberger.
10.06*  Financing Agreement dated June 14, 1995 with CII.
10.07*  $500,000 Senior Note dated June 14, 1995 in favor of CII.
10.08*  Security Agreement dated June 14, 1995 in favor of CII.
10.09*  Subordination Agreement dated June 14, 1995 among the Registrant, 
        Mr. Engelberger and CII.
10.10*  First Amendment to Financing Agreement dated September 20, 1995 with
        CII.
10.11*  $300,000 Senior Convertible Note dated September 20, 1995 in favor of
        CII.
10.12*  First Amendment to Security Agreement dated September 20, 1995 with
        CII.
10.13*  Amendment to Subordination Agreement dated September 20, 1995 with
        CII.
10.14*  Loan Agreement dated October 3, 1995 with Minnesota Mining and
        Manufacturing Company ("3M").
10.15*  $250,000 Note dated October 3, 1995 in favor of 3M.
10.16*  Loan Agreement dated September 28, 1995 with Landmark Partners Inc.
        ("Landmark").
10.17*  $150,000 Note dated September 28, 1995 in favor of Landmark.
10.18*  Loan Agreement dated September 27, 1995 with Connecticut Financial
        Developments, L.P. ("CFD").
10.19*  $100,000 Note dated September 27, 1995 in favor of CFD.
10.20*  Sales and Maintenance Agreement with Hospital Transporters,
        Limited Partnership dated as of August 19, 1994, with letter agreement 
        dated October 14, 1994, and letter agreement dated August 4, 1995.

                                        24
<PAGE>

  NO.   DESCRIPTION OF EXHIBIT

10.21*  Program Agreement dated May 30, 1995 with Center Capital Corporation.
10.22*  Employment Agreement with Mr. Engelberger dated June 1, 1995 and
        amended as of November 1, 1995.
10.23*  Employment Agreement with John M. Evans, Jr. dated April 17, 1987 and
        amended as of February 1, 1995 and as of November 1, 1995.
10.24*  Employment Agreement dated April 17, 1987 with Carl Weiman.
10.25*  Employment Agreement dated April 17, 1987 with Bala Krishnamurthy.
10.26*  Employment Agreement dated as of November 1, 1995 with Thomas K.
        Sweeny ("Mr. Sweeny")
10.27*  Stock Option Agreement dated as of November 1, 1995 with Mr. Sweeny.
10.28*  Service Agreement dated February 1, 1995 with Landmark (terminated
        pursuant to Exhibit 10.29)
10.29*  Termination Agreement with Landmark dated as of November 1, 1995
10.30*  Amended and Restated Buy and Sell Agreement dated April 17, 1987, as
        amended on September.
10.31*  Development Agreement dated May 1985 with Aktiebolaget Electrolux
        ("Electrolux").
10.32*  Development Agreement dated April 15, 1987 with Electrolux.
10.33*  Development Agreement dated May 1986 between Consolidated Controls 
        Corporation and Connecticut Product Development Corporation (assumed by
        the Registrant and CII, respectively).
10.34*  Royalty Reduction Agreement with CII.
10.35*  Joint Venture Agreement, dated July 1, 1988 with Thrift Drug Company, 
        Automated Prescription Systems, Inc. ("APS") and Retired Persons
        Services, Inc.
10.36*  Agreement for Representation of Manufacturer/Licensee dated August,
        1988 with APS.
10.37*  Distributor Agreement, dated August 14, 1991, with Yaskawa Electric 
        Manufacturing Company, Ltd. ("Yaskawa").
10.38*  Technology Transfer and License Agreement with Yaskawa dated as of 
        May 15, 1992.
10.39*  License Agreement Dated as of December 21, 1992 with Electrolux.
10.40*  Distribution Agreement dated on or about December 1, 1994 with a
        subsidiary of Otis Elevator Company ("Otis").
10.41*  Agreement for Sales with Bell & Howell Mailmobile dated October 18,
        1995.
10.42*  Lease dated as of November 1, 1992 with Westinghouse Electric
        Corporation ("Westinghouse") for premises located at Shelter Rock 
        Lane in Danbury, Connecticut.
10.43*  Letter Agreement dated October 21, 1992, with Westinghouse.
10.44*  Directors and Officers Liability Insurance Policy.
10.45*  Product Liability Insurance Policy.
10.46*  Stock Purchase Agreement dated July 29, 1987 with Transitions
        Two, Limited Partnership ("Transitions Two").
10.47*  Stock Purchase Agreement, dated July 29, 1987 with 3M.
10.48*  Stock Purchase Agreement dated February 24, 1989 with 3M, White
        Consolidated Industries, Inc. ("White"), which is a subsidiary of 
        Electrolux, and Transitions Two, as amended by Amendment to Stock 
        Purchase Agreement, dated March 9, 1989.
10.49*  Stock Purchase Agreement, dated August 14, 1991 with Yaskawa.
10.50*  Preferred Stock Purchase Agreement dated as of May 28, 1993 with CFD.
10.51*  Registration Rights Agreement dated as of May 28, 1993 with CFD.
10.52*  Co-Sale Agreement among the Registrant, Mr. Engelberger, Margaret
        Engelberger, Technology Transitions, Inc., 3M, White, Transitions Two, 
        Yaskawa and CFD.
10.53*  Stock Purchase Agreement dated December 1, 1994 with Otis.
10.54*  Warrant dated November 20, 1990, as amended on June 14, 1995, issued 
        to CII for 5,000 shares of the Registrant's Common Stock, expiring on
        July 1, 2000.
10.55*  Warrant dated January 16, 1991, issued to 3M for 3,000 shares of the
        Registrant's Common Stock, expiring on February 1, 1997.
10.56*  Warrant dated January 16, 1991, issued to Mr. Engelberger for 3,000
        shares of the Registrant's Common Stock, expiring on February 1, 1997.
10.57*  Warrant dated January 16, 1991, issued to White for 3,000 shares of
        the Registrant's Common Stock, expiring on February 1, 1997.
10.58*  Warrant dated January 16, 1991, issued to Transitions Two for 3,000
        shares of the Registrant's Common Stock, expiring on February 1, 1997.
10.59*  Warrant dated July 6, 1992, issued to Mr. Engelberger for 2,000 shares
        of the Registrant's Common Stock, expiring on August 1, 1998.
10.60*  Warrant dated July 6, 1992, issued to Transitions Two for 2,000 shares
        of the Registrant's Common Stock, expiring on August 1, 1998.

                                         25
<PAGE>

  NO.   DESCRIPTION

10.61*  Warrant dated March 22, 1993, issued to Transitions Two for 5,000
        shares of the Registrant's Common Stock, expiring on March 21, 1999.
10.62*  Warrant dated July 1, 1993, issued to Electrolux for 4,300 shares of
        the Registrant's Common Stock, expiring on June 30, 1999.
10.63*  Warrant dated May 26, 1995, issued to Mr. Engelberger for 4,000 shares
        of the Registrant's Common Stock, expiring May 25, 2005.
10.64*  Stock Subscription Warrant dated June 14, 1995, issued to CII for
        10,000 shares of the Registrant's Common Stock, expiring June 14, 2005.
10.65*  Warrant and Stock Put Agreement dated June 14, 1995 between the
        Registrant and CII.
10.66*  Stock Subscription Warrant dated September 20, 1995, issued to
        CII for 6,000 shares of the Registrant's Common Stock, expiring 
        September 20, 2005.
10.67*  Warrant and Stock Put Agreement dated September 20, 1995 with CII.
10.68*  Stock Subscription Warrant dated October 3, 1995, issued to 3M for 
        5,000 shares of the Registrant's Common Stock, expiring 
        September 30, 2005.
10.69*  Stock Subscription Warrant dated September 28, 1995, issued to
        Landmark for 3,000 shares of the Registrant's Common Stock, expiring 
        September 30, 2005.
10.70*  Stock Subscription Warrant dated September 27, 1995, issued to CFD for
        2,000 shares of the Registrant's Common Stock, expiring 
        September 30, 2005.
10.71*  1984 Nonqualified Stock Option Plan dated September 21, 1984.
10.72*  1988 Nonqualified Stock Option Plan dated October 27, 1988.
10.73*  Form of 1995 Stock Option Plan.
10.74   Purchase, Security and Remarketing Agreement with Leasing Technologies
        International, Inc. dated as of February 7, 1997. 1995 (Incorporated by
        reference to Form 8-K filed February 21, 1997, Exhibit No. 10.01)
10.75   Master Lease Agreement with Leasing Technologies International, Inc.
        dated as of January 23, 1997 and related Equipment Schedules No. 01 
        through No. 05. 1995 (Incorporated by reference to Form 8-K No. filed 
        February 21, 1997, Exhibit No. 10.02)
10.76   Letter Agreement with Leasing Technologies International, Inc. dated 
        as of February 7, 1997. 1995 (Incorporated by reference to Form 8-K
        filed February 21, 1997, Exhibit No. 10.03)
10.77   HelpMate Robotics Inc. 1996/1997 Vendor Marketing Program dated
        12/12/96.
11.01   Statement Re: Computation of Primary Per Share Earnings.
11.02   Statement Re: Computation of Supplemental Per Share Earnings
27.1    Financial Data Schedule for the year ended December 31, 1996

*   Incorporated by reference to Form SB2 Number 33-99348 filed January 31,
    1996 under the same exhibit number as filed therein.

                                           26
<PAGE>
                                  SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant 
caused this report to be signed on its behalf by the undersigned thereunto 
duly authorized.

(REGISTRANT) HELPMATE ROBOTICS INC.

By        /s/ Thomas K. Sweeny
  --------------------------------------                Date   March 27, 1997
          (Signature and Title)
            Thomas K. Sweeny,
  President and Chief Executive Officer,
    Director, Treasurer and Principal
            Financial Officer



By         /s/ Marc D. Greenberg
   --------------------------------------                Date   March 27, 1997
          (Signature and Title)
            Marc D. Greenberg,
   Controller and Assistant Treasurer,
       Principal Accounting Officer


In accordance with the Exchange Act, this report has been signed below by the 
following persons on behalf of the registrant and in the capacities and the 
dates indicated.



By       /s/ Joseph F. Engelberger
  -------------------------------------                   Date   March 27, 1997
         (Signature and Title)
         Joseph F. Engelberger,
       Chairman and Director Date



By         /s/ Thomas K. Sweeny
  --------------------------------------                  Date   March 27, 1997
           (Signature and Title)
             Thomas K. Sweeny,
  President and Chief Executive Officer,
          Director, Treasurer and
        Principal Financial Officer



By       /s/ John M. Evans Jr.
  --------------------------------------                  Date   March 27, 1997
           (Signature and Title)
             John M. Evans Jr.,
   Vice President Engineering, Secretary
                and Director



By          /s/ Theodore Sall
  --------------------------------------                  Date   March 27, 1997
           (Signature and Title)
          Theodore Sall, Director


By          /s/ John Barry
  --------------------------------------                  Date   March 27, 1997
           (Signature and Title)
           John Barry, Director



By          /s/ Sheldon Sandler
  --------------------------------------                  Date   March 27, 1997
           (Signature and Title)
         Sheldon Sandler, Director



By          /s/ Kevin Littlejohn
  --------------------------------------                  Date   March 27, 1997
           (Signature and Title)
         Kevin Littlejohn, Director





                                    27

<PAGE>
                                 REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
HelpMate Robotics Inc.

    We have audited the balance sheet of HelpMate Robotics Inc. as of December
31, 1996 and the related statements of operations, stockholders' equity and cash
flows for each of the two years in the period ended December 31, 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 audit to obtain
reasonable assurance about whether the financial statements are free of 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 HelpMate Robotics Inc. at
December 31, 1996 and the results of its operations and its cash flows for each
of the two years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
 
    As discussed in Note 1 to the financial statements, the Company changed the
period over which installation costs related to equipment leased to others is
amortized.
 
                                                   Ernst & Young LLP
 
Stamford, Connecticut
March 7, 1997

                                       1

<PAGE> 

                                 HelpMate Robotics Inc.

                                    BALANCE SHEET
 
                                  December 31, 1996

<TABLE>
<S>                                                               <C>
Assets
Current assets:
Cash............................................................  $  609,808
Accounts receivable, net of allowance for doubtful accounts of
  $60,000.......................................................     340,047
Inventory, net of reserve for obsolescence of $50,000 (Notes 1
  and 2)........................................................   1,554,674
Other...........................................................      13,000
                                                                  ----------
Total current assets............................................   2,517,529
Installation costs, net of accumulated amortization of $761,742
  (Note 1)......................................................     353,353
Equipment leased to others, net of accumulated depreciation of
  $764,864 (Notes 1 and 3)......................................   1,331,412
Property and equipment, net of accumulated depreciation of
  $618,359 (Notes 1 and 3)......................................     520,704
                                                                  ----------
                                                                  $4,722,998
                                                                  ----------
                                                                  ----------
Liabilities and stockholders' equity
Current liabilities:
  Accounts payable..............................................  $  740,462
  Accrued expenses..............................................     245,121
  Accrued compensation and employee benefits....................     231,807
  Current portion notes payable (Note 5)........................     507,821
  Customer advances.............................................      36,830
                                                                  ----------
Total current liabilities.......................................   1,762,041
Notes payable, less current portion (Note5).....................   1,152,559
Commitments (Note 10)
Stockholders' equity: (Note 7)
  Common stock, no par value; 10,000,000 shares authorized;
  6,288,507 shares issued and outstanding.......................  16,961,140
  Capital surplus...............................................   5,112,226
  Accumulated deficit........................................... (20,264,968)
                                                                  ----------
Total stockholders' equity......................................   1,808,398
                                                                  ----------
                                                                  $4,722,998
                                                                  ----------
                                                                  ----------
</TABLE>
 
See accompanying notes.
                                       2

<PAGE> 

                             HelpMate Robotics Inc.
 
                            STATEMENTS OF OPERATIONS
 
                       Years ended December 31, 1996 and 1995
 
<TABLE>
<CAPTION>
                                                                      1996           1995
                                                                  -------------  -------------
<S>                                                               <C>            <C>
Revenues:
  Sales revenues................................................  $   1,160,373  $   1,680,353
  Rental revenues...............................................      1,282,154        949,045
  Research and development contracts............................        174,550        129,555
                                                                  -------------  -------------
Total revenues..................................................      2,617,077      2,758,953
Cost of revenues:
  Cost of sales.................................................        739,573      1,282,510
  Cost of rentals...............................................      1,185,175        907,263
  Cost of research and development contracts....................        155,380         95,298
                                                                  -------------  -------------
Total costs of revenues.........................................      2,080,128      2,285,071
                                                                  -------------  -------------
Gross profit....................................................        536,949        473,882
Operating expenses:
  Selling, general and administrative...........................      5,423,127      2,736,873
  Non-cash compensation expense (Notes 1 and 11)................         45,938        698,787
                                                                  -------------  -------------
                                                                      5,469,065      3,435,660
                                                                  -------------  -------------
Operating loss..................................................     (4,932,116)    (2,961,778)
Non-cash financing expense (Notes 4 and 5)......................       --             (461,933)
Interest expense (Note 5).......................................       (334,324)      (328,630)
Interest income.................................................        133,994            927
Other income....................................................         74,588         68,140
                                                                  -------------  -------------
                                                                       (125,742)      (721,496)
                                                                  -------------  -------------
Loss before preferred stock dividends...........................     (5,057,858)    (3,683,274)
Preferred stock dividends paid (Note7)..........................         57,147        790,866
                                                                  -------------  -------------
  Net loss applicable to common stock...........................  $  (5,115,005) $  (4,474,140)
                                                                  -------------  --------------
                                                                  -------------  --------------
  Per share amounts:
  Net loss applicable to common stock...........................  $       (0.88) $       (2.76)
                                                                  -------------  -------------
                                                                  -------------  -------------
  Weighted average number of shares of common stock outstanding
    (Note 1)....................................................      5,847,781      1,623,802
                                                                  -------------  -------------
                                                                  -------------  -------------
  Supplemental net loss applicable to common stock..............  $       (0.84)
                                                                  -------------  
                                                                  -------------  
  Supplemental weighted average number of shares of common stock
    outstanding (Note 1)........................................      6,001,628
                                                                  -------------  
                                                                  -------------  
</TABLE>
 
    See accompanying notes.

                                          3

<PAGE>

                                  HelpMate Robotics Inc.

                       Statements of Stockholders' Equity (Deficit)

<TABLE>
<CAPTION>
                                                 Series A
                                                Convertible
                                                 Preferred      Common        Capital       Accumulated      Treasury
                                                   Stock         Stock        Surplus        Deficit           Stock     Total
                                                 ----------     ----------    -----------     -----------     --------  ----------
<S>                                              <C>           <C>           <C>           <C>              <C>        <C>
Balance at December 31, 1994.................... $6,216,534    $2,594,987    $5,149,881    ($11,523,836)    ($16,300)  $ 2,421,266
Common stock issued for rent (11,040 shares)....          -       134,191             -               -            -       134,191
Preferred stock issued for services rendered
   (500 shares).................................     50,000             -             -               -            -             -
Preferred stock dividends:
   Issuance of 7,909 shares of preferred stock..    790,866             -      (790,866)              -            -             -
Issuance of warrants............................          -             -        31,166               -            -        31,166
Compensatory element related to conversion
   rights of convertible promissory notes.......          -             -       430,767               -            -       430,767
Issuance of 148,080 shares of common stock......          -             -       444,240               -            -       444,240
Issuance of stock options below fair market
   value........................................          -             -        84,547               -            -        84,547
Net loss........................................          -             -             -      (3,683,274)           -    (3,683,274)
                                                 ----------     ----------    -----------     -----------     --------  -----------
Balance at December 31, 1995....................  7,057,400     2,729,178     5,349,735     (15,207,110)     (16,300)      (87,097)

Preferred Stock Dividends Paids.................          -             -       (57,147)              -            -       (57,147)
Cancellation of Treasury Stock..................          -             -       (16,300)              -       16,300             -
Conversion of preferred stock (71,438 shares)
   into common stock (1,604,409 shares)......... (7,057,400)    7,057,400             -               -            -             -
Conversion of promissory notes payable into
   common stock (393,844 shares)................          -       800,000             -               -            -       800,000
Issuance of common stock (38,400 shares) in
   consideration of cancellation of obligtion
   to chairman..................................          -       120,000             -               -            -       120,000
Issuance of common stock (2,505,992 shares)
   net of expenses..............................          -     6,093,441             -               -            -     6,093,441
Issuance of common stock in consideration of
   amendment to 1986 development agreement
   (50,000 shares)..............................          -       156,250             -               -            -       156,250
Redemption of common stock (34,552 shares)
   issued for rent..............................          -             -      (210,000)              -            -      (210,000)
Exercise of stock options (16,155 shares).......          -         4,871             -               -            -         4,871
Issuance of stock options below fair market
   value........................................          -             -        45,938               -            -        45,938
Net loss........................................          -             -             -      (5,057,858)           -    (5,057,858)
                                                 ----------     ----------    -----------     -----------     --------  -----------
Balance at December 31, 1996.................... $        -   $16,961,140    $5,112,226    ($20,264,968)      $    -    $1,808,398
                                                 ----------     ----------    -----------     -----------     --------  -----------
                                                 ----------     ----------    -----------     -----------     --------  -----------
</TABLE>

                                           4

<PAGE>
 
                                  HelpMate Robotics Inc.
 
                                 STATEMENTS OF CASH FLOWS
 
                          Years ended December 31, 1996 and 1995
 
<TABLE>
<CAPTION>
                                                                      1996           1995
                                                                  -------------  -------------
<S>                                                               <C>            <C>
Operating activities
Net loss........................................................  $  (5,057,858) $  (3,683,274)
Adjustments to reconcile net loss to net cash used by operating
  activities:
  Rent (Note10).................................................       --              134,191
  Interest (Note 5).............................................        249,974        219,258
  Royalty (Note 8)..............................................        156,250       --
  Compensation (Notes 1 and 11).................................         45,938        698,787
  Financing (Notes 4 and 5).....................................       --              461,933
  Provision for doubtful accounts...............................         71,355         55,096
  Provision for inventory obsolescence..........................       --               50,000
  Depreciation and amortization (Notes 1 and 3).................        982,202        757,058
  Other.........................................................         44,547       --
Changes in operating accounts:
  (Increase) decrease in accounts receivable....................         22,917         33,889
  (Increase) decrease in inventory..............................       (289,718)       101,238
  (Increase) decrease in other assets...........................         14,460         23,460
  (Decrease) increase in accounts payable and accrued expenses..        507,325         62,071
  (Decrease) increase in customer advances......................        (83,083)       (42,840)
                                                                    -------------  -------------
Total adjustments...............................................      1,722,167      2,554,141
                                                                    -------------  -------------
Net cash used by operating activities...........................     (3,335,691)    (1,129,133)
                                                                    -------------  -------------
Investing activities
Installation costs..............................................       (385,597)      (193,666)
Equipment leased to others......................................     (1,174,038)      (410,284)
Purchase of property and equipment..............................       (352,234)       (45,178)
                                                                    -------------  -------------
Net cash used by investing activities...........................     (1,911,869)      (649,128)
                                                                    -------------  -------------
Financing activities
Proceeds from issuance of notes payable (Note 5)................       --            1,287,981
Proceeds from issuance of convertible promissory notes (Note
  4)............................................................       --              800,000
Repayments of notes payable (Note 5)............................       (393,549)      (393,720)
Proceeds from exercise of stock options (Note 7)................          4,871       --
Redemption of common stock issued for rent (Notes 7 and 10).....       (210,000)      --
Deferred equity issuance costs..................................       --              (45,500)
Proceeds from issuance of common stock, net of expenses (Note
  7)............................................................      6,093,441       --
Preferred stock dividends paid (Note 7).........................        (57,147)      --
                                                                  -------------  -------------
Net cash provided by (used in) financing activities.............      5,437,616      1,648,761
                                                                  -------------  -------------
Net increase (decrease) in cash and cash equivalents............        190,056       (129,500)
Cash at beginning of year.......................................        419,752        549,252
                                                                  -------------  -------------
Cash at end of year.............................................  $     609,808  $     419,752
                                                                  -------------  -------------
                                                                  -------------  -------------
Supplemental Information:
Cash interest paid (Note 5).....................................  $      84,350  $     108,445
                                                                  -------------  -------------
                                                                  -------------  -------------
</TABLE>
 
See accompanying notes.

                                       5

<PAGE> 
                             HELPMATE ROBOTICS INC.

                         NOTES TO FINANCIAL STATEMENTS
 
1. Organization, Nature of Business and Summary of Significant Accounting
Policies
 
ORGANIZATION / NATURE OF BUSINESS
 
    HelpMate Robotics Inc. ("HelpMate", "HRI", or the "Company"), was
incorporated in May 1984. The Company is primarily engaged in the design,
manufacture and sale of the Company's flagship product, the
HelpMate-Registered Trademark- robotics courier system, a trackless robotic
courier used primarily in the healthcare industry to transport materials. The
Company derives revenue from three principal sources: rentals and sales of
HelpMates; sales of robotic components such as LabMate, LightRanger and BiSight
and from research and development contracts.
 
BASIS OF PRESENTATION
 
    The financial statements have been prepared in conformity with generally
accepted accounting principles. Such preparation requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual amounts may differ from these
estimates. In addition, certain amounts for prior periods have been reclassified
to be comparable with the current period presentation.
 
    The accompanying financial statements have also been prepared assuming the
Company will continue as a going concern. The Company anticipates obtaining
additional working capital financing during the Spring or Summer of 1997 which
will allow HRI to utilize an existing commitment for up to $5 million in
additional rental financing and up to $10 million in lease financing. The
Company has however taken actions and will institute other measures such as
employee termination, salary deferrals, and the curtailment of sales, marketing
and production activity to ensure that operations would continue throughout 1997
if the additional financing transactions are not consummated. The Company
believes that even at a reduced level of operations, it will be able to produce,
rent and/or sell, and install those units for which it has received firm orders.
The Company continues to actively seek additional financing alternatives in
order to strengthen its liquidity situation in the short term, and although the
Company has identified some potential sources of such financing, the Company has
no current commitments or agreements with respect to such and there can be no
assurance that any additional financing will be available to the Company on
acceptable terms, or at all.
 
SIGNIFICANT ACCOUNTING POLICIES
 
    REVENUE RECOGNITION
 
    Revenues from rentals for equipment leased to others is recognized on a
straight line basis over the lease term which commences upon the delivery,
installation and training of personnel on the product. Revenues from HelpMate
product sales are recognized upon the delivery, installation and training of
personnel on the product. Revenues from the Company's foreign licensors, who are
also shareholders of the Company, and revenues from sales of robotic components
are recognized upon shipment of product. Revenues from research and development
contracts are accounted for on the percentage of completion method, based upon
costs incurred and are comprised principally of studies and prototypes of
robotic applications predominantly for governmental agencies. Where estimated
losses on research and development contracts exist, they are provided for on the
entire contract.
 
    Revenues from the Company's shareholders approximated $284,000 and $615,000
for the years ended December 31, 1996 and 1995, respectively.
 
                                       6
<PAGE>
                             HELPMATE ROBOTICS INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
1. Organization, Nature of Business and Summary of Significant Accounting
Policies (CONTINUED)

CONCENTRATION OF CREDIT RISK
 
    The Company markets its robotic couriers mainly to hospitals in the United
States. The Company performs periodic credit evaluations of its customer's
financial condition and generally does not require collateral. Credit losses
have historically been within the Company's expectations. Further, the Company
maintains two federally insured disbursing accounts for its cash. The Company
has potential credit risk associated with cash balances in excess of federal
depository insurance.
 
    At December 31, 1996, amounts due from government agencies approximated 14%
and amounts due from shareholders approximated 16% of total accounts receivable,
respectively.
 
INVENTORY
 
    Inventory is stated at the lower of cost (first-in first-out method) or
market and is evaluated periodically to determine what level of a reserve for
obsolescence is required. The Company has approximately thirty primary suppliers
and several hundred secondary vendors. Two such suppliers each provide more than
ten percent of the cost for the HelpMate Robotic Courier Systems. The Company
believes that with appropriate hardware or engineering effort several
commercially available alternatives for parts from these vendors exist.
 
PROPERTY AND EQUIPMENT
 
    Furniture and fixtures, machinery and equipment and leasehold improvements
are stated at cost. Depreciation is computed on the straight line method based
upon the estimated useful lives of the assets. These include furniture and
fixtures (three to five years); machinery and equipment (five to ten years); and
leasehold improvements (over the term of the lease). Depreciation expense for
property and equipment was $98,530 and $72,770 for the years ended December 31,
1996 and 1995, respectively.
 
EQUIPMENT LEASED TO OTHERS
 
    Equipment leased to others is stated at cost. Depreciation is computed on
the straight line method based upon the estimated useful lives of the assets
(five years). Depreciation expense for equipment leased to others was $736,335
and $566,264 for the years ended December 31, 1996 and 1995, respectively. The
total of guaranteed future minimal rentals on equipment leased to others at
December 31, 1996 was $950,762, which consists of $815,360 in 1997 and $135,402
in 1998.
 
INSTALLATION COSTS
 
    The Company incurs certain direct expenses associated with the 
installation of its equipment leased to others. The Company has recast its 
fiscal 1995 statements of operations, cash flows and stockholders' equity to 
reflect a change in the period over which the Company's installation costs 
related to its equipment leased to others is amortized. The Company 
previously amortized such costs over a five year period. Under the new policy 
such costs are amortized over the initial term of the lease in accordance 
with the generally accepted accounting principles prescribed for leases. In 
1996, such costs increased in significance in relation to the Company's 
financial statements, which was attributable to among other things, the 
Company's increased volume of business and current market conditions which 
required the Company to incur more of these costs. This change affects the 
financial statements of the Company primarily by amortizing such costs more 
rapidly, as typically the initial term of the leases entered into by the 
Company range from one to three years. This change increased the Company's 
previously reported 1995 net loss by $119,118 ($0.07 per share). Further, 
accumulated deficit and stockholder's equity (deficit) as of January 1, 1995 
have been increased and decreased, respectively by $123,086 for the effect of 
applying this change retroactively. Amortization expense for installation 
costs was $147,337 and $118,024 for the years ended December 31, 1996 and 
1995, respectively.

 
                                       7
<PAGE>
                             HELPMATE ROBOTICS INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
1. Organization, Nature of Business and Summary of Significant Accounting
Policies (CONTINUED)

SOFTWARE DEVELOPMENT COSTS
 
    Software development costs incurred by the Company have historically been
expensed as incurred as the Company has, to date, not been able to demonstrate
recovery (net realizable value) based upon future cash flows from the rental or
sale of the associated products. Current enhancements to the Company's software
are not of a nature considered to be material modifications and therefore would
not be capitalized under SFAS 86. The Company will continue to evaluate the
significance of capitalizing software development costs.
 
EARNINGS PER SHARE AND SUPPLEMENTAL NET LOSS PER SHARE
 
    Earnings per common share is computed using the treasury stock method based
on the weighted average number of common shares and common stock equivalent
shares outstanding during the period, as adjusted retroactively for the stock
split described in Note 7. Shares from the assumed exercise of options and
warrants granted by the Company and shares issuable in connection with the
Company's convertible preferred stock have been included in the computations of
earnings per share for all periods unless their inclusion would be
anti-dilutive. However, for purposes of computing net loss per share, options
and warrants granted by the Company during the 12 months preceding the initial
public offering date, including those shares issuable in connection with the
anti-dilution provisions of certain warrant agreements have been included in the
calculation of common stock and common stock equivalent shares outstanding as if
they were outstanding for all periods presented using the treasury stock method
and the public offering price of $6.25 per unit or $3.00 per share and $0.25 per
warrant. (See Note 7)
 
    Supplemental net loss per share of common stock for the year ended December
31, 1996 was ($0.84). Supplemental net loss per share of common stock is
computed using the if-converted method based on the pro forma weighted average
number of shares of common stock and common stock equivalent as defined above,
and convertible preferred shares that were converted into common stock on a
1-4.55 basis upon the closing of the initial public offering (described in Note
7), adjusted retroactively for the aforementioned stock split. Net loss per
share used in the supplemental loss per share calculation was decreased for
dividend requirements on preferred shares.
 
STOCK BASED COMPENSATION
 
    The Company accounts for stock option grants in accordance with APB 25 and
expects to continue to do so in the future. Accordingly, non-cash compensation
expense of $45,938 and $84,547 for stock options granted below fair market value
has been recorded in the years ended December 31, 1996 and 1995, respectively.
In 1995, the Financial Accounting Board also issued Statement No. 123
"Accounting for Stock Based Compensation" ("SFAS 123") and the Company only make
the financial statement disclosures required by SFAS 123, if material or
otherwise required. No disclosures related to SFAS 123 have been recorded for 
the year ended December 31, 1996.
 
FAIR VALUE OF FINANCIAL INSTRUMENTS
 
    Cash, Accounts Receivable and Accounts Payable--The carrying amount reported
in the balance sheet for these accounts approximate their fair value.
 
    Long Term Debt--The fair value of the Company's long term debt is estimated
using discounted cash flow analyses, based upon the Company's current
incremental borrowing rates for similar types of borrowing arrangements. Such
fair value is approximately $16,000 less than the carrying amount.

                                       8
<PAGE>
                             HELPMATE ROBOTICS INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
2. INVENTORY
 
    Inventory is comprised of the following at December 31, 1996:
 
<TABLE>
<S>                                                               <C>
Raw materials...................................................  $1,015,570
Work in process.................................................     82,437
Finished goods..................................................    506,667
                                                                  ---------
                                                                  1,604,674
Reserve for obsolescence........................................    (50,000)
                                                                  ---------
                                                                  $1,554,674
                                                                  ---------
                                                                  ---------
</TABLE>
 
3. PROPERTY AND EQUIPMENT AND EQUIPMENT LEASED TO OTHERS
 
    Property and equipment and equipment leased to others is comprised of the
following at December 31, 1996:
 
<TABLE>
<S>                                                               <C>
Furniture and fixtures..........................................  $  90,843
Machinery and equipment.........................................  1,021,928
Leasehold improvements..........................................     26,292
                                                                  ---------
                                                                  1,139.063
Less accumulated depreciation and amortization..................   (618,359)
                                                                  ---------
                                                                  $ 520,704
                                                                  ---------
                                                                  ---------
Equipment leased to others......................................  $2,096,276
Less accumulated depreciation and amortization..................   (764,864)
                                                                  ---------
                                                                  $1,331,412
                                                                  ---------
                                                                  ---------
</TABLE>
 
4. CONVERTIBLE PROMISSORY NOTES PAYABLE
 
    In October, 1995, four entities which previously provided equity 
financing to the Company, Connecticut Innovations Inc., Minnesota Mining and 
Manufacturing, Landmark Partners and Connecticut Financial Developments, L.P. 
(collectively, the "Selling Bridge Security Holders") advanced an aggregate 
of $800,000 to the Company in exchange for, among other things, certain notes 
which, immediately prior to the Company's initial public offering of 
securities (Note 7) were convertible at a rate of one unit for each $4.06 
advanced or 196,922 units. The notes bore interest at a rate of 10% and were 
due and payable on or before October 1, 2000. In conjunction with the 
advancement of the aforementioned funds, the Selling Bridge Security Holders 
were issued warrants to purchase an aggregate of 78,976 shares of the 
Company's common stock at an exercise price of $4.05 per share. Such warrants 
were canceled upon the consummation the Company's initial public offering and 
the Company recognized $430,767 as a non cash financing expense related to 
the conversion rights of these notes in the year ended December 31, 1995.
  
                                       9
<PAGE>
                             HELPMATE ROBOTICS INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
5. NOTES PAYABLE
 
    Notes Payable is comprised of the following at December 31, 1996:
 
<TABLE>
<S>                                                               <C>
Secured note payable at 12%.....................................  $  32,711
Secured notes payable to Center Capital at rates ranging from
  15% to 17.5%..................................................    127,116
Secured notes payable at 10%....................................    651,719
Secured notes payable to HTLP at 24%............................    848,834
                                                                  ---------
Less current portion............................................   (507,821)
                                                                  ---------
                                                                  $1,152,559
                                                                  ---------
                                                                  ---------
</TABLE>
 
    Maturities of notes payable are $507,821 in 1997, $519,087 in 1998, $477,076
in 1999 and $156,396 in 2000.
 
    During the period August-December 1995, the Company assigned the operating
leases for four HelpMate-Registered Trademark- robotics courier systems to
Center Capital to provide the Company with additional capital to fund its
operations. The total proceeds obtained from such financings approximated
$228,000 and as stipulated by the assignment agreements, the Company remains
responsible for the maintenance of the systems. The Company accounted for these
transactions as a financing, recognizing the proceeds received as obligations at
the discounted present value of the lease payments having effective interest
rates of 15% to 17.5% on the remaining obligations. The related leased assets
are being depreciated over the life of the assets. On August 15, 1996, the
revenue stream from one of the systems reverted back to the Company as the fixed
term of the operating lease assigned had expired.
 
    In 1995 and 1994, the Company entered into three agreements with Hospital
Transporters Limited Partnership ("HTLP"), a limited partnership whose limited
partners include the Chairman, the Chairman's brother and the President of the
Company, whereby the Company transferred title and assigned the related rental
agreements to thirteen of its HelpMate robotic courier systems to HTLP to
provide the Company with additional capital to fund its operations. Under the
agreements, the Company guaranteed payments to HTLP of $2,020,829 over a five
year period and at the expiration of the five year period the Company can
repurchase from HTLP the HelpMate robotic courier systems. The total proceeds
obtained from these agreements approximated $1,170,000 and as stipulated by
these agreements, the Company remains responsible for the maintenance of the
systems for which HTLP agreed to pay $3,500 per unit per year to the Company.
The Company accounted for these transactions as a financing, recognizing the
proceeds received as obligations at the discounted present value of the
guaranteed payments having an effective interest rate of approximately 24%. The
related assets are being depreciated over their estimated economic life.

    In June, 1995, Connecticut Innovations Incorporated ("CII") extended a 
loan ("CII Loan") to the Company in the amount of $500,000 with an annual 
interest rate of 10%. Interest alone was payable on the note in its first 
year and thereafter principal and interest is payable in forty eight equal 
installments. In connection with this loan, the Company granted to CII 
security interests in certain of its assets, including all of its 
intellectual property relating to HelpMate in the North and South American 
markets, and issued to CII warrants to purchase an aggregate of 74,074 shares 
of Common Stock at an exercise price of $2.70 per share, which expire on June 
14, 2005. By virtue of this loan agreement, the Company is also required to, 
among other things, retain its principal place of business, and a majority of 
its employees and operations in the State of Connecticut until June, 2001. In 
November 1996, the Company received from CII permission to postpone the 
repayment schedule on this loan for a period not to exceed six months.
 
                                       10
<PAGE>
                             HELPMATE ROBOTICS INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
5. NOTES PAYABLE (CONTINUED)

    In June, 1995, the Company entered into a financing transaction ("Loan
Agreement") with the Company's Chairman in the amount of $200,000 on
substantially the same terms as the CII Loan. Concurrently, the Company had
committed to make a lump sum payment of $120,000 to its Chairman upon the
occurrence of certain events. The Company and its Chairman however agreed to add
the $120,000 obligation to the term of the Loan Agreement in the form of a
promissory note and subsequently in conjunction with the Company's initial
public offering (see Note 7) the $120,000 obligation was converted into 19,200
units. Accordingly, the Company recorded $120,000 as non cash compensation
expense in the year ended December 31, 1995. In consideration for making the
Loan Agreement, the Company issued to its Chairman warrants to purchase an
aggregate of 29,630 shares of Common Stock at an exercise price of $2.70 per
share, which expire on May 25, 2005. The Loan Agreement relieves the Company of
any previous obligations with its Chairman. In November 1996, the Company,
received from its Chairman, permission to delay the repayment schedule on this
loan for a period not to exceed six months. No additional interest was accrued
on this obligation by virtue of the delay in repayment.
 
    The Company also recognized $31,166 as a non-cash financing expense in the
year ended December 31, 1995 to account for the compensatory nature of the
issuance of the aforementioned warrants.
 
    In November, 1990, the Company entered into a loan agreement with CII. The
agreement provided the Company with a $500,000 secured note, which is secured by
the Company's property and equipment. The note is payable monthly, including
interest at 12% in sixty equal installments commencing January 1, 1992. As
additional consideration for entering into the loan agreement, the Company
issued to CII warrants to purchase an aggregate of 40,947 shares of Common Stock
at an exercise price of $2.44 per share, which expire on July 1, 2000. In
November 1996, the Company received from CII permission to postpone the
repayment schedule on this loan for a period not to exceed six months.
 
    The Company recognized $334,324 and $327,703 in interest on its notes
payable and convertible promissory notes payable for the years ended December
31, 1996 and 1995, respectively.
 
6. INCOME TAXES
 
    Significant components of the Company's deferred tax assets as of December
31, 1996 are as follows:
 
<TABLE>
<S>                                                            <C>        
Net operating loss carryforwards.............................  $6,555,886
Allowance for doubtful accounts..............................      23,964
Reserve for inventory obsolescence...........................      19,970
Compensation expense.........................................     220,030
Vacation accrual.............................................      68,331
Equipment leased to others...................................     179,730
Other........................................................     136,676
                                                                ---------
Total deferred tax assets....................................   7,204,587
Valuation allowance for deferred tax assets..................  (7,204,587)
                                                                ---------
Amount recognized in the financial statements................  $  --
                                                               ---------
                                                               ---------
</TABLE>
 
    The valuation allowance increased by approximately $1,713,000 during the
year ended December 31, 1996 primarily to fully reserve the net operating loss
generated during the year.
 
    At December 31, 1996, the Company had net operating loss carryforwards for
federal tax purposes of approximately $17.1 million, which expire from 1999
through 2011. However, under the Tax Reform Act of 1986, the ability of the
Company to realize a future tax benefit from its net operating loss
carryforwards is severely limited due to changes in the proportionate ownership
of the Company and the entities which own stock in the Company. At December 31,
1996, the Company has net operating loss carryforwards for state tax purposes of
approximately $10.6 million which expire from 1997 through 2001.

                                       11
<PAGE>
                             HELPMATE ROBOTICS INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
7. STOCKHOLDERS' EQUITY
 
INITIAL PUBLIC OFFERING
 
    The Company completed an initial public offering on January 31, 1996 of
1,449,918 units with each unit consisting of two shares of common stock, no par
value per share, and one redeemable common stock purchase warrant, whereby
1,252,996 units were sold by the Company and 196,922 units were sold by certain
lenders who provided interim financing to the Company (the "Selling Bridge
Securityholders") (Note 4). The Company received proceeds of approximately $6.1
million net of expenses of approximately $1.7 million and has used such proceeds
for, among other things, the expansion of its sales and marketing activities.
Further, $210,000 of the proceeds were used to redeem certain common shares
issued for rent.
 
    Immediately prior to the closing of the initial public offering, the
following became effective: (i) all outstanding shares of preferred stock of the
Company were converted into common stock, (ii) certain convertible notes issued
to the Selling Bridge Securityholders in the original principal amount of
$800,000 were converted into 196,622 units, (iii) the Company's certificate of
incorporation was amended to increase the authorized common stock of the Company
to 10,000,000 shares, (iv) the Company's certificate of incorporation was
amended to eliminate the class of preferred stock, and (v) a 4.93599--to--1
stock split with respect to common stock was effected. Accordingly, all common
share amounts have been restated to give effect to the 4.93599--to--1 stock
split.
 
PREFERRED STOCK
 
    In 1993, the Company authorized the issuance of up to 150,000 shares of
Series A convertible preferred stock with a par value of $100 per share. The
authorization entitled the purchaser to elect preferred stock that paid a 12%
preferred stock dividend or an 8% cash dividend. The preferred stock had no
voting rights and was convertible at any time into 4.55 shares of common stock
for each share of preferred stock. Effective January 1, 1996 all owners of
preferred stock elected to receive the 8% cash dividend and immediately prior to
the Company's initial public offering all outstanding shares of preferred stock
of the Company were converted into common stock.
 
WARRANTS
 
    As of December 31, 1996, the Company had issued warrants to purchase an
aggregate of 1,845,960 shares of common stock. The warrants have exercise prices
ranging from $2.44--$5.75 per share, are exercisable upon issuance and expire as
follows: June 2005 (74,074); May 2005 (29,630); January 2001 (1,494,118); July
2000 (40,947); June 1999 (35,214); March 1999 (40,947); August 1998 (32,758) and
February 1997 (98,272).
 
DIVIDENDS ON COMMON STOCK
 
    To date and for the foreseeable future, the Company has not nor does it
anticipate paying dividends on its common stock. Moreover, the ability of the
Company to pay dividends is subject to contractual restrictions through
September, 2001. Specifically during that period, the Company may not, unless
approved by CII, directly or indirectly declare, order, pay or reserve any sum
or property for the payment of any dividend or other distribution on the
Company's common stock until such time as the Company has achieved a net profit
for three consecutive fiscal quarters.

                                       12
<PAGE>
                             HELPMATE ROBOTICS INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
7. Stockholders' Equity (CONTINUED)
 
STOCK OPTION PLANS
 
    The Company has three stock option plans. The 1984 and 1988 Nonqualified 
Stock Option Plans, provide for the granting of nonqualified stock options 
for 235,279 shares of common stock at an exercise price based upon a formula 
determined by the Company's Board of Directors, with a minimum price of not 
less than $0.20 per share. Options are exercisable starting one year from the 
date of grant to the extent of 20% per year on a cumulative basis and expire 
ten years from the date of grant. Option holders, upon approval by the 
Company, may surrender their options to the Company in exchange for the 
difference between the fair market value of the shares covered by the option 
and the option exercise price. In the event of cessation of employment, an 
option holder may exercise his stock options within a six month period at 
which time the stock option is canceled. At December 31, 1996 6,844 options 
are available for grant under these plans and 155,457 shares of common stock 
are reserved for issuance.
 
    The Company's 1995 Amended and Restated Stock Option Plan provides for the
granting of up to 500,000 shares of the Company's common stock to officers,
directors and employees of the Company at an exercise price not less than 100%
of the fair market value of the Company's common stock on the date of grant.
Options are exercisable starting one year from the date of grant to the extent
of 20% per year on a cumulative basis and expire ten years from the date of
grant. At December 31, 1996 430,000 options are available for grant under this
plan and 500,000 shares of common stock are reserved for issuance.
 
    The 1984 plan terminated on September 21, 1994, the 1988 plan will terminate
on October 27, 1998 and the 1995 plan will terminate on February 5, 2006, except
as to options outstanding. The 1988 plan can be terminated by the Company's
Board of Directors at any time.
 
    The following table describes the Company's stock option activity:
 
<TABLE>
<CAPTION>
                                                                           OPTION PRICE PER
                                                      NUMBER OF SHARES           SHARE
                                                      -----------------  ---------------------
<S>                                                   <C>                <C>
Outstanding at December 31, 1995....................         146,335         $  0.20-$1.42
Granted.............................................          94,000         $  1.00-$3.88
Exercised...........................................          16,155         $  0.20-$0.41
Canceled / Expired..................................           5,567         $  0.20-$3.88
                                                             -------           -----------
Outstanding at December 31, 1996....................         218,613         $  0.20-$3.88
                                                             -------           -----------
                                                             -------           -----------
</TABLE>
 
    At December 31,1996, 96,215 options are exercisable, the weighted average
exercise price of options is $1.71 and the weighted average remaining
contractual life of these options is 7.25 years.

                                       13
<PAGE>
                             HELPMATE ROBOTICS INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
INITIAL PUBLIC OFFERING (CONTINUED)
 
8. DEVELOPMENT CONTRACT AND RELATED ROYALTY AGREEMENT
 
    During 1986, the Company entered into a contract with an independent
corporation (the "Corporation") to assist in the development and manufacturing
of a trackless robotic courier to be used primarily in the healthcare industry
to transport materials ("HelpMate"). The Corporation had entered into a
development agreement with CII, a state sponsored development corporation, in
which CII would reimburse the Corporation for a portion of the development costs
for the HelpMate-Registered Trademark-robotics courier system (the "sponsored
products"). The contract between the Corporation and the Company granted the
Company the right to assume the Corporation's rights under the agreement with
CII.
 
    During 1987, the Company assumed the Corporation's rights under the
agreement, pursuant to which CII reimbursed the Company for $441,000 of
development costs related to the sponsored products. In return for such
reimbursement, the Company must pay royalties aggregating $2,205,000 to CII as
follows: (i) five percent of the Company's net sales of Sponsored Products, and
(ii) fifty percent of any royalties received by the Company for payments against
shipments of Sponsored Products by licensees of the Company. Thereafter, the
Company must continue to pay royalties for a period equal to the period of time
taken to satisfy this $2,205,000 royalty obligation, except that the royalty
rate on the Company's net sales of Sponsored Products shall be reduced to
one-half of one percent during such period. Such royalties are payable only to
the extent that sales and license fees are realized. Through December 31, 1996,
the Company had paid approximately $250,000 in royalties to CII.
 
    In January 1996, the Company and CII agreed that during the two-year 
period commencing on the closing of the Company's initial public offering, 
the obligation (described in (i) in the preceding paragraph) to pay a royalty 
at a rate of five percent of sales of Sponsored Products would be reduced so 
that the payment with respect thereto would not exceed the greater of (i) one 
and one-half percent of the net sales of Sponsored Products or (ii) twenty 
percent (20%) of the Company's pre-tax profits (but in no event would such 
payment be more than five percent of net sales of Sponsored Products.) In 
addition, the Company will receive a credit of $300,000 against the 
$2,205,000 royalty obligation. In consideration of this modification, the 
Company issued to CII 50,000 shares of its Common Stock and a warrant to 
purchase 25,000 additional shares at $5.75 per share immediately prior to the 
closing of the Company's initial public offering. In addition, the Company 
may, at its option, extend the period permitting reduced royalty payments for 
an additional two years and receive another $300,000 credit against the 
royalty obligation by issuing to CII an additional 50,000 shares of Common 
Stock and warrants to purchase an additional 25,000 shares exercisable at 
$5.75 per share. Under the agreement, if the Company relocates its business 
outside the State of Connecticut, among other things, the Company must grant 
CII a nonexclusive right to all existing and future patents pertaining to the 
Sponsored Products. CII also may exercise a nonexclusive, worldwide and 
royalty-free license to manufacture, use and sell the Sponsored Products and 
to use all patent and trademark rights, technical information and know-how 
relating to the Sponsored Products in the event the Company defaults under 
the agreement. Accordingly, the Company recorded $156,250 of non-cash 
royalty expense in the year ended December 31, 1996 related to the issuance 
of these securities.
 
9. EMPLOYEE BENEFIT PLANS
 
    The Company sponsors a defined contribution plan for substantially all of
its employees. Employees can contribute to the plan, on a pre tax basis, a
percentage of their qualifying compensation up to the legal limits allowed. No
Company contributions were made to the plan.

                                       14
<PAGE>
                             HELPMATE ROBOTICS INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
10. COMMITMENTS
 
    In December, 1992, the Company entered into an operating lease agreement for
its office and research facility which expires in December, 2002. In addition to
the minimum lease payments, the Company is obligated to pay its proportionate
share of operating expenses of the facility. For the first three years of the
lease, the Company was permitted to issue common stock at the rate of $12.16 per
share in satisfaction of its minimum lease payments as adjusted for the issuance
by the Company of additional shares of common stock at a lesser price. A total
of 34,552 shares of common stock were issued in connection with this lease
arrangement, all of which were subsequently repurchased by the Company, at the
rate of $0.50 per $1.00 of stock issued, with the proceeds from the Company's
initial public offering (Note 7).
 
    Future minimum lease payments as of December 31, 1996 are as follows:
 
<TABLE>
<S>                                                     <C>      
1997                                                    $ 165,000
1998                                                      213,000
1999                                                      213,000
2000                                                      213,000
2001                                                      213,000
Thereafter                                                212,000
                                                        ---------
                                                       $1,229,000
                                                        ---------
                                                        ---------
</TABLE>
 
    Rent expense for the years ended December 31, 1996 and 1995 approximated
$165,000 and $144,000, respectively.
 
11. RELATED PARTY TRANSACTIONS
 
    On October 1, 1995, 500 shares of the Company's preferred stock were 
issued to the Company's president and two other stockholders of Landmark 
Partners, Inc. as consideration for advisory services rendered to the 
Company. (Landmark Partners Inc. ("Landmark"), is an entity which owns a 
significant amount of the Company's common stock through its affiliates 
Technology Transitions, Inc. and Transitions Inc., Limited Partnership.) 
Accordingly, the Company recognized non-cash compensation expense of $50,000 
relating to the issuance of these shares during the year ended December 31, 
1995.
 
    In June, 1995, the Company entered into a financing transaction ("Loan 
Agreement") with the Company's Chairman in the amount of $200,000 on 
substantially the same terms as the CII Loan. Concurrently, the Company had 
committed to make a lump sum payment of $120,000 to its Chairman upon the 
occurrence of certain events. The Company and its Chairman however agreed to 
add the $120,000 obligation to the term of the Loan Agreement in the form of 
a promissory note and subsequently in conjunction with the Company's initial 
public offering (see Note 7) the $120,000 obligation was converted into 
19,200 units. Accordingly, the Company recorded $120,000 as non cash 
compensation expense in the year ended December 31, 1995. In consideration 
for making the Loan Agreement, the Company issued to its Chairman warrants to 
purchase an aggregate of 29,630 shares of Common Stock at an exercise price 
of $2.70 per share, which expire on May 25, 2005.
 
    In February, 1995, Landmark agreed to make the services of its employee, 
Thomas K. Sweeny available to the Company as its President and Chief 
Executive Officer for a period of three years. To that end, since November, 
1, 1995, the Company has directly employed Mr. Sweeny as its President and 
Chief Executive Officer pursuant to an employment agreement. From February 1, 
1995 to October 31, 1995, Mr. Sweeny's services as President and Chief 
Executive Officer were provided to the Company pursuant to a service 
agreement between the Company and Landmark. As consideration, Landmark 
received an aggregate sum of $100,000 and 37,020 shares of the Company's 
common stock and Mr. Sweeny received 111,060 shares of the Company's common 
stock. Accordingly, the Company recognized non-cash compensation expense of 
$444,200 relating to the issuance of these shares during the year ended 
December 31, 1995.

                                       15
<PAGE>
                             HELPMATE ROBOTICS INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
12. SUBSEQUENT EVENT
 
    On February 7, 1997, HelpMate Robotics Inc. ("HRI" or the "Company") 
entered into a Purchase, Security and Remarketing Agreement and a Master 
Lease Agreement with Leasing Technologies International, Inc. ("LTI") for the 
sale and leaseback of fifteen of its robotic courier systems which are 
currently under rent from the Company to hospitals across the United States 
("sold units"). The total proceeds obtained from this transaction was 
$1,230,000. As part of the transaction, the Company assigned all of its right 
title and interest in the underlying rental agreements for the sold units and 
granted a security interest in fifteen additional rental agreements for units 
that were not sold to LTI ("collateral units"). The Purchase, Security and 
Remarketing Agreement requires the Company to, among other things, refurbish 
any sold unit that ceases to be rented by a hospital and place that sold unit 
on rent with another hospital prior to the Company placing one of its own 
units with another hospital. In addition, the Company is responsible for the 
maintenance of both the sold units and the collateral units. Upon the 
expiration of the Master Lease Agreement (36 months), the Company shares in 
residual rental payments from the sold units in the following manner: a)75% 
for the Company and 25% for LTI until such time as the Company receives an 
additional $372,032 and b) 50% for the Company and 50% for LTI thereafter. 
Finally, the Company has no right to repurchase the sold units from LTI. The 
Master Lease Agreement will be classified as an operating lease in accordance 
with Statement of Financial Accounting Standards No. 13, "Accounting for 
Leases". The book value and related depreciation of the sold units, 
approximately $937,000 and $321,000, respectively, will be removed from the 
accounts and the gain realized on the sale of approximately $614,000 will be 
deferred and amortized over the term of the Master Lease Agreement, 36 
months. The maintenance costs expected to be incurred for the sold units 
during the lease term will be accrued as of the date of the sale, amortized 
over the term of the Master Lease Agreement and correspondingly reduce the 
gain on the sale. Such costs are expected to approximate $158,000 thereby 
reducing the gain to be deferred and amortized to approximately $456,000. No 
provision for the refurbishment of the sold units will be made, as the 
Company's historical experience demonstrates that units do not cease being 
rented. Payments under the Master Lease Agreement are payable monthly 
commencing in March, 1997 and approximate $526,000 annually.

                                       16
<PAGE>
                             HELPMATE ROBOTICS INC.
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
 
13. Quarterly Financial Data (unaudited)
 
    As discussed in Note 1, the Company changed the period over which the
Company's installation costs related to its equipment leased to others is
amortized and has recast its fiscal 1995 statements of operations, cash flows
and stockholders' equity. The following table presents the recast quarterly data
for fiscal years 1995 and 1996 for the effect of applying this change
retroactively. (see quarterly reports filed on form 10-QSB for data previously
reported.)
 
<TABLE>
<CAPTION>
(000'S OMITTED)                                      FIRST QUARTER  SECOND QUARTER   THIRD QUARTER  FOURTH QUARTER
---------------------------------------------------  -------------  ---------------  -------------  --------------
<S>                                                  <C>            <C>              <C>            <C>
1995
Accumulated Deficit--Beginning of period               $(11,524)      $(12,166)        $(12,968)       $(13,558)  
Accumulated Deficit--End of period.................     (12,166)       (12,968)         (13,558)        (15,207)
Stockholder's Equity (Deficit).....................        2,410         1,642            1,086             (87)
Net Loss...........................................         (642)         (802)            (590)         (1,649)
Net Loss per share.................................    $   (0.51)    $   (0.61)       $   (0.49)       $  (1.15)
1996
Accumulated Deficit--Beginning of period               $(15,207)      $(16,087)        $(17,089)       $(18,387)
Accumulated Deficit--End of period.................     (16,087)       (17,089)         (18,387)        (20,265)
Stockholder's Equity...............................       5,780          4,825            3,527           1,808
Net Loss...........................................        (880)        (1,002)          (1,298)         (1,878)
Net Loss per share.................................    $  (0.21)     $   (0.16)       $   (0.20)       $  (0.31)

</TABLE>
 
    Accumulated deficit and stockholders equity as of January 1, 1995 
increased and decreased, respectively by $123,086. The net loss for first, 
second, third and fourth quarters in 1995 increased by $31,554, $53,723, 
$18,983, and $14,858, respectively or ($0.02 per share, $0.03 per share, 
$0.01 per share and $0.01 per share, respectively). The net loss for first, 
second, and third quarters in 1996 increased by $79,889, $160,619 and 
$130,399, respectively or ($0.02 per share, $0.03 per share and $0.02 per 
share, respectively).
 
                                       17