<PAGE>



MVSI, INC., AND SUBSIDIARIES

Consolidated Financial Statements and Report of
Independent Certified Public Accountants

September 30, 1996 and 1995
--------------------------------------------------
--------------------------------------------------




                                                                             21

<PAGE>

ITEM 7:  FINANCIAL STATEMENTS

MVSI, INC., AND SUBSIDIARIES

Contents

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

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                         23   


CONSOLIDATED FINANCIAL STATEMENTS

     Consolidated Balance Sheets                                           24

     Consolidated Statements of Operations                                 25

     Consolidated Statements of Stockholders' (Deficit) Equity             26

     Consolidated Statements of Cash Flows                                 27

     Notes to Consolidated Financial Statements                         28-43



                                                                             22

<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors
MVSI, Inc., and Subsidiaries


We have audited the accompanying consolidated balance sheets of MVSI, Inc., and
Subsidiaries as of September 30, 1996 and 1995, and the related consolidated
statements of operations, stockholders' (deficit) equity and cash flows for the
years then ended.  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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of MVSI, Inc., and
Subsidiaries as of September 30, 1996 and 1995, and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.




Vienna, Virginia
November 22, 1996



                                                                             23

<PAGE>

MVSI, INC., AND SUBSIDIARIES

Consolidated Balance Sheets
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

<TABLE>

<CAPTION>

SEPTEMBER 30,                                                             1996              1995
----------------------------------------------------------------------------------------------------

<S>                                                                 <C>                 <C>

ASSETS

CURRENT ASSETS
  Cash and cash equivalents                                         $    313,890        $  2,343,036
  Investments                                                          5,881,202           8,001,304
  Accounts receivable, net of allowance for doubtful accounts          4,555,259             708,991
  Note receivable                                                        500,000             200,000
  Inventory                                                            2,612,539             696,606
  Tax credits and income tax receivable                                  405,717             273,479
  Prepaid expenses                                                       348,302             221,389
                                                                    --------------------------------
TOTAL CURRENT ASSETS                                                  14,616,909          12,444,805

PROPERTY AND EQUIPMENT, net                                              383,518             174,451
CAPITALIZED SOFTWARE COSTS                                             1,164,182             271,496
GOODWILL                                                               2,735,638                  --
DEFERRED TAX ASSET                                                     1,158,430                  --
OTHER ASSETS                                                             101,692              68,146
                                                                    --------------------------------
                                                                     $20,160,369         $12,958,898
----------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Line of credit and financing arrangement                          $  1,099,973        $    150,342
  Accounts payable and accrued liabilities                             3,731,002           1,312,056
  Notes payable                                                               --              12,134
  Shareholder loans and interest                                         222,395             724,556
  Advance deposits                                                           761             155,000
                                                                    --------------------------------
TOTAL CURRENT LIABILITIES                                              5,054,131           2,354,088

STOCKHOLDERS' EQUITY
  Common stock, $.01 par value, 50,000,000 shares authorized,
    10,740,000 and 10,140,000 shares issued and outstanding,
    respectively                                                        107,400             101,400
  Stock subscription receivable                                        (150,000)           (150,000)
  Additional paid-in capital                                         20,577,566          17,085,475
  Accumulated deficit                                                (5,475,602)         (6,488,366)
  Unrealized loss on investments available for sale                     (59,786)                 --
  Cumulative translation adjustment                                     106,660              56,301
                                                                    --------------------------------
TOTAL STOCKHOLDERS' EQUITY                                            15,106,238          10,604,810
                                                                    --------------------------------
                                                                    $ 20,160,369        $ 12,958,898
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------

</TABLE>

                THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.



                                                                             24

<PAGE>

MVSI, INC., AND SUBSIDIARIES

Consolidated Statements of Operations

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

<TABLE>

<CAPTION>

YEARS ENDED SEPTEMBER 30,                                     1996                1995
------------------------------------------------------------------------------------------

<S>                                                       <C>                <C>

SALES                                                     $ 15,987,636       $   2,337,797

COST OF SALES                                               12,484,237           1,506,908
                                                          --------------------------------
GROSS PROFIT                                                 3,503,399             830,889

EXPENSES
  Selling                                                      853,577             485,995
  Administrative                                             2,532,337           1,115,295
  Research and development, net of tax credits                 116,176           1,186,052
  Depreciation and amortization                                197,814              20,838
                                                          --------------------------------
                                                             3,699,904           2,808,180
                                                          --------------------------------

LOSS FROM OPERATIONS                                          (196,505)         (1,977,291)

INTEREST INCOME                                                540,345              51,120
INTEREST AND FINANCING CHARGES                                (117,506)            (55,282)
INTEREST EXPENSE FROM BRIDGE FINANCING                              --          (3,500,000)
                                                          --------------------------------
EARNINGS (LOSS) BEFORE INCOME TAXES                            226,334          (5,481,453)

INCOME TAX (BENEFIT) PROVISION
  Current                                                           --                  --
  Deferred                                                    (786,430)                 --
                                                          --------------------------------
                                                              (786,430)                 --
                                                          --------------------------------
NET EARNINGS (LOSS)                                       $  1,012,764       $  (5,481,453)
-------------------------------------------------------------------------------------------
EARNINGS (LOSS) PER SHARE
  Primary                                                 $       0.11       $       (1.10)
-------------------------------------------------------------------------------------------
  Fully diluted                                           $       0.09       $       (1.10)
-------------------------------------------------------------------------------------------
</TABLE>

                 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS

                                                                             25


<PAGE>

MVSI, INC., AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity (Deficit)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30, 1996 AND 1995
--------------------------------------------------------------------------------

<TABLE>

<CAPTION>
                                                               COMMON STOCK             STOCK       ADDITIONAL
                                                        --------------------------   SUBSCRIPTION     PAID-IN     ACCUMULATED
                                                           SHARES         AMOUNT      RECEIVABLE      CAPITAL      (DEFICIT)
------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>            <C>            <C>           <C>           <C>          

BALANCE, OCTOBER 1, 1994                                3,600,000     $   36,000     $     --        1,236,252  $  (1,006,913)

NET LOSS                                                     --             --             --             --       (5,481,453)

INITIAL PUBLIC OFFERING OF COMMON STOCK,
  NET OF OFFERING COSTS                                 4,140,000         41,400           --       11,673,223           --  

PRIVATE PLACEMENT TRANSACTIONS                          2,400,000         24,000       (150,000)       676,000           --  

ADDITIONAL CAPITAL ASSOCIATED WITH INTEREST FROM 
  ISSUANCE OF BRIDGE UNITS                                   --             --             --        3,500,000           --  

CHANGE IN CUMULATIVE TRANSLATION ADJUSTMENT                  --             --             --             --             --  
                                                    ---------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1995                            10,140,000        101,400       (150,000)    17,085,475     (6,488,366)

ACQUISITION--JMR DISTRIBUTORS                             100,000          1,000           --          508,161           --  

ACQUISITION--SOCRATES, INC.                               350,000          3,500           --        2,385,250           --  

NET EARNINGS                                                 --             --             --             --        1,012,764

WARRANT PURCHASE                                             --             --             --              180           --  

PRIVATE PLACEMENT TRANSACTIONS                            150,000          1,500           --          598,500           --  

CHANGE IN CUMULATIVE TRANSLATION ADJUSTMENT                  --             --             --             --             --  

UNREALIZED GAIN (LOSS) FROM INVESTMENTS                      --             --             --             --             --  
                                                    ---------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1996                           10,740,000     $  107,400    $  (150,000)  $ 20,577,566  $  (5,475,602)
-------------------------------------------------------------------------------------------------------------------------------

</TABLE>

<TABLE>

<CAPTION>
                                                        UNREALIZED    CUMULATIVE
                                                     GAIN (LOSS) ON  TRANSLATION
                                                       INVESTMENTS    ADJUSTMENT       TOTAL
------------------------------------------------------------------------------------------------
<S>                                                 <C>              <C>           <C>         

BALANCE, OCTOBER 1, 1994                               $     --       $  106,443   $    371,782

NET LOSS                                                     --             --       (5,481,453)

INITIAL PUBLIC OFFERING OF COMMON STOCK,
  NET OF OFFERING COSTS                                      --             --       11,714,623

PRIVATE PLACEMENT TRANSACTIONS                               --             --          550,000

ADDITIONAL CAPITAL ASSOCIATED WITH INTEREST FROM 
  ISSUANCE OF BRIDGE UNITS                                   --             --        3,500,000

CHANGE IN CUMULATIVE TRANSLATION ADJUSTMENT                  --          (50,142)       (50,142)
                                                    ---------------------------------------------
BALANCE, SEPTEMBER 30, 1995                                  --           56,301     10,604,810

ACQUISITION--JMR DISTRIBUTORS                                --             --          510,161

ACQUISITION--SOCRATES, INC.                                  --             --        2,388,750

NET EARNINGS                                                 --             --        1,012,764

WARRANT PURCHASE                                             --             --              180

PRIVATE PLACEMENT TRANSACTIONS                               --             --          600,000

CHANGE IN CUMULATIVE TRANSLATION ADJUSTMENT                  --           50,359         50,359

UNREALIZED GAIN (LOSS) FROM INVESTMENTS                   (59,786)          --          (59,786)
                                                    ---------------------------------------------
BALANCE, SEPTEMBER 30, 1996                           $  (59,786)     $  106,660  $  15,106,238
-------------------------------------------------------------------------------------------------
</TABLE>

                                                                             26

<PAGE>

MVSI, INC., AND SUBSIDIARIES

Consolidated Statements of Cash Flows
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

<TABLE>

<CAPTION>

YEARS ENDED SEPTEMBER 30,                                              1996                1995
---------------------------------------------------------------------------------------------------

<S>                                                                 <C>               <C>

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


CASH FLOWS FROM OPERATING ACTIVITIES
     Net income (loss)                                               $1,012,764        $(5,481,453)
                                                                     ------------------------------
     Adjustments to reconcile net income (loss) to net cash 
          from operating activities
          Non-cash interest expense from bridge units                        --          3,500,000
          Deferred income taxes                                        (786,430)                --
          Depreciation and amortization                                 197,814             36,259
          (Gain) loss on foreign exchange                               (50,359)            86,291
          Unrealized loss on investments                                 59,786              7,999
          Changes in operating assets and liabilities, net of
            effects of acquisitions
            (Increase) in accounts receivable                        (1,112,781)          (413,892)
            (Increase) in inventory                                  (1,526,431)          (327,280)
            (Increase decrease in tax credits and income taxes
              receivable                                                (95,952)           345,172
            (Increase) in prepaid expenses                             (115,414)          (206,164)
            Decrease (increase) in other assets                         (16,964)             2,993
            (Decrease) in advance deposits                             (150,854)           (19,717)
            Increase (decrease) in accounts payable and accrued
              liabilities                                              (894,482)           702,425
                                                                     -----------       -----------
NET CASH (USED IN) OPERATING ACTIVITIES                              (3,479,303)        (1,767,367)
                                                                     -----------       -----------

CASH FLOWS FROM INVESTING ACTIVITIES
     Investment purchases                                                    --         (8,009,303)
     Borrowings on margin against investments                         2,120,102                 --
     Property, plant and equipment purchases                           (223,857)          (425,735)
     Capitalized software costs                                        (892,687)                --
     Loan to acquired company and other                                (300,000)          (200,000)
                                                                     -----------       -----------

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                     703,558         (8,635,038)
                                                                     -----------       -----------

CASH FLOWS FROM FINANCING ACTIVITIES
     Net (decrease) increase in line of credit                          609,374             (7,517)
     Proceeds from shareholder loans                                         --          1,079,594
     Payment of shareholder loans                                      (497,269)          (500,000)
     Payment of debt                                                    (19,725)           (31,214)
     Proceeds from issuance of bridge notes payable                          --            500,000
     Proceeds from issuance of common stock                             600,000         12,421,221
     Proceeds from issuance of warrants                                     180                 --
     Initial public offering costs                                           --           (587,132)
                                                                     -----------       -----------

NET CASH PROVIDED BY FINANCING ACTIVITIES
                                                                        692,560         12,874,952
                                                                     -----------       -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH                                  54,039          (124,090)
                                                                     -----------       -----------
NET (DECREASE) INCREASE IN CASH                                      (2,029,146)         2,348,457

CASH (CASH OVERDRAFT) AT BEGINNING OF YEAR                            2,343,036             (5,421)
                                                                    -----------        -----------

CASH AT END OF YEAR                                                  $  313,890        $ 2,343,036
                                                                    -----------        -----------
                                                                    -----------        -----------

SUPPLEMENTAL DISCLOSURES:

INCOME TAXES PAID                                                   $        --        $        --
                                                                    -----------        -----------
                                                                    -----------        -----------

INTEREST PAID                                                       $    80,220        $    55,282
                                                                    -----------        -----------
                                                                    -----------        -----------

</TABLE>
                 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS

                                                                             27

<PAGE>

MVSI, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SEPTEMBER 30, 1996 AND 1995
--------------------------------------------------------------------------------

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


    BASIS OF PRESENTATION AND REORGANIZATION
    
    The accompanying consolidated financial statements include the accounts of
    MVSI, Inc. (a Delaware corporation), and its three wholly owned
    subsidiaries, MVS Modular Vision Systems, Inc. (MVS-Canada), a Montreal,
    Quebec-based corporation engaged in the design and manufacture of
    proprietary machine vision products and systems; Socrates, Inc. (Socrates),
    a Gaithersburg, Maryland-based corporation, which integrates, installs and
    supports high-end computer and communication equipment; and JMR
    Distributors, Inc. (JMR), a Lorton, Virginia-based corporation specializing
    in the purchase and sale of computer memory chips and network equipment
    (collectively referred to as the "Company").  Significant intercompany
    accounts and transactions have been eliminated in consolidation.
    
    REVENUE RECOGNITION
    
    Sales are recognized upon shipment of a finished product when title to the
    product transfers to the customer.  Typical terms of sale do not provide
    the customer with the right of return except for defective products, which
    are covered by the Company's warranty.  Revenue billed in advance of
    customer acceptance is deferred until such time as acceptance occurs. 
    Amounts received from customers prior to shipment are recorded as deposit
    liabilities.
    
    CASH AND CASH EQUIVALENTS
    
    Cash and cash equivalents include cash and money market accounts.
    
    INVESTMENTS
    
    Investments consist of short-term U.S. treasury notes, net of margin 
    loans of $2,463,875, which bear interest at 7 1/2%.  In accordance with
    Statement of Financial Accounting Standards No. 115, the Company has
    classified these investments as available for sale, and recorded the
    investments at market value at September 30, 1996 and 1995.  The Company
    has not realized any proceeds from the sale of securities during the years
    ended September 30, 1996 and 1995.  The unrealized loss from investments
    available for sale was $59,786 for the year ended September 30, 1996. 
    Investment market value approximates cost at September 30, 1996.
    
    ACCOUNTS RECEIVABLE
    
    Accounts receivable are stated at the unpaid balances, less allowance on
    collectible accounts.  Management periodically reviews its outstanding
    accounts receivable to assess collectibility of balances based on past
    experience and evaluation of current adverse situations which may affect
    collectibility of receivables.  As of September 30, 1996 and 1995,
    management has established an allowance for doubtful accounts of
    approximately $140,000 and $-0-.

                                                                             28


<PAGE>

MVSI, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements--Continued
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SEPTEMBER 30, 1996 AND 1995
--------------------------------------------------------------------------------

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
    
    
    INVENTORY VALUATION
    
    Inventory is valued at the lower of cost and market.  Cost is determined on
    a first-in, first-out (FIFO) basis.
    
    Management evaluates obsolete and slow-moving inventory at each reporting
    date and excludes such inventory from the valuation.  No reserve to record
    inventory at lower of cost or market was deemed necessary at September 30,
    1996 and 1995.  The value of inventories written off because of
    obsolescence or slow movement has not been material to date.
    
    PROPERTY AND EQUIPMENT
    
    Property and equipment are carried at cost, net of an allowance for
    accumulated depreciation and amortization.  Depreciation is computed on
    equipment and furniture, principally using the double-declining balance
    method over estimated lives ranging from five to seven years. 
    Demonstration and research equipment is depreciated on a straight-line
    basis over a four-year period.  Leasehold improvements are amortized on a
    straight-line basis over the shorter of the lease term or estimated useful
    lives of the related assets.
    
    CAPITALIZED SOFTWARE COSTS
    
    Beginning in fiscal year 1995, certain software development costs not
    reimbursed by the Canadian government have been capitalized.  Software
    development costs incurred subsequent to achievement of technological
    feasibility, and not reimbursed by the Canadian government, were not
    material in previous years.  Technological feasibility occurs when the
    Company has completed all planning and testing activities necessary to
    establish that the product can be produced to meet its design
    specifications including functions, features and technological performance
    requirements.  No amortization has been recorded in the accompanying
    financial statements pending release of the associated products. 
    Management believes that these products will be available for sale during
    fiscal year 1997.  When these products are ready for sale, the Company's
    policy will be to amortize capitalized software costs by the greater of (a)
    the ratio the current gross revenue for a product bear to the total current
    and anticipated future gross revenue for that product or (b) the
    straight-line method over the remaining economic life of the product
    including the period being reported on.  It is reasonably possible that
    those estimates of anticipated future gross revenue, the remaining
    estimated economic life of the product, or both will be reduced
    significantly in the near term.  As a result, the carrying amount of the
    capitalized software costs may be reduced materially in the near term.
    
    GOODWILL
    
    Goodwill represents the excess of cost over the fair value of net assets
    acquired in business combinations accounted for as purchases.  Goodwill is
    being amortized on the straight-line method over ten years.  Amortization
    expense charged to operations for 1996 was $107,939.  No goodwill existed
    prior to 1996.

                                                                             29


<PAGE>

MVSI, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements--Continued
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SEPTEMBER 30, 1996 AND 1995
--------------------------------------------------------------------------------

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
    
    RESEARCH AND DEVELOPMENT COSTS
    
    Research and development costs are expensed as incurred.  Through
    October 31, 1994, tax credits received or due from the Canadian government
    for research and development costs incurred have been offset against these
    expenditures and included as a receivable in the accompanying balance
    sheet, as such amounts are currently refundable in cash in the year
    following the year in which they are incurred.  Effective November 1, 1994,
    the date of the acquisition disclosed in Note A, the rate used in computing
    such tax credits decreased.  Prior to the acquisition, the Company
    qualified for tax credits equal to 35% of qualified research and
    development salaries from the Canadian federal government and 40% of
    research and development salaries from the Province of Quebec. 
    Substantially all such credits were refundable currently from each
    government upon the submission of tax credit filings.  Effective
    November 1, 1994, the rate applied in computing tax credits for Canadian
    federal government purposes is 20%, and the resulting tax credit can be
    realized only as an offset to future taxes payable from income generated in
    Canada.  Tax credits can be carried forward up to ten years from the date
    generated.  In addition, the rate applied in computing the Quebec tax
    credit is 20%, effective November 1, 1994, although the Quebec tax credits
    continue to be refundable currently.  Equipment used in research and
    development activities which has alternative future uses is capitalized and
    depreciated.
    
    INCOME TAXES
    
    The Company has net operating loss carryforwards and tax credit
    carryforwards to offset future taxable income and taxes payable. Although
    the Company, has recognized income before income taxes through September
    30, 1996, this has not resulted in the recognition of income tax expense
    due to the existence of available net operating loss carryforwards. 
    Deferred taxes are recognized, subject to a valuation allowance, for 
    temporary differences in the timing of recognition of certain income and 
    expenses.
    
    EARNINGS PER SHARE
    
    Earnings per share (EPS), both primary and fully diluted, are computed
    based on the weighted average number of shares actually outstanding plus
    the shares that would be outstanding assuming conversion, at the beginning
    of the year, of the Company's Class A and Class B warrants which are
    considered to be common stock equivalents.  Using the modified treasury
    stock method, the number of shares that would be issued from the assumed
    exercise of the warrants has been reduced by the number of shares that
    could have been purchased from the proceeds, at the average market price
    (primary EPS) and at the closing market price (fully diluted EPS) of the
    Company's stock for the year ended September 30, 1996, subject to a 20%
    limitation. 
    
    Once the proceeds have been applied to purchase common stock up to 20% of
    the outstanding common stock, the balance of the proceeds is assumed to be
    invested in government securities.  Accordingly, net earnings (for both
    primary and fully diluted EPS) have been adjusted for interest revenue, 
    net of taxes from the assumed purchase of government securities with the 
    excess proceeds. The weighted average number of common and common 
    equivalent shares used in the primary and fully diluted EPS computations 
    was 14,728,603 for the year ended September 30, 1996.  Primary and fully 
    diluted earnings per share amounts had not been shown previously for the 
    year ended September 30, 1995, because they were anti-dilutive.  Earnings 
    per share for the year ended September 30, 1995, was based on 5,000,833 
    weighted average shares outstanding.

                                                                             30

<PAGE>

MVSI, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements--Continued
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SEPTEMBER 30, 1996 AND 1995
--------------------------------------------------------------------------------

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
    
    USING ESTIMATES IN PREPARING FINANCIAL STATEMENTS
    
    In preparing financial statements in conformity with generally accepted
    accounting principles, management is required to make estimates and
    assumptions that affect the reported amounts of assets and liabilities and
    the disclosure of contingent assets and liabilities at the date of the
    financial statements and revenue and expenses during the reporting period. 
    Actual results could differ from those estimates.
    
    RECLASSIFICATIONS
    
    Certain prior year amounts have been reclassified to conform to the current
    year presentation.
    
    FAIR VALUE OF FINANCIAL INSTRUMENTS
    
    The following methods and assumptions were used to estimate the fair value
    of each class of financial instruments for which it is practicable to
    estimate the value:
    
    The carrying amount approximates fair value for cash and cash equivalents,
    accounts receivable, notes receivable, accounts payable, line of credit and
    other accrued liabilities.
    
    Investment securities classified as current assets are based on quoted
    market price.
    
    TRANSLATION OF FOREIGN CURRENCY AND CONCENTRATION OF CREDIT RISK
    
    A portion of the Company's operations are transacted in 
    Canadian dollars.  The balance sheet of Canadian operations is translated
    into U.S. dollars at the year-end rate of exchange, and all statement of
    operations items are translated at the weighted average exchange rates for
    the year.  The resulting translation adjustments are made directly to a
    separate component of stockholders' equity.
    
    The Company's customers are not concentrated in any specific geographic
    region.  As a matter of policy, the Company requires its larger customers
    to furnish letters of credit (and in some instances, advance deposits) to
    minimize credit risk to the Company after shipment of the products.  For
    other customers, the Company reviews a customer's credit history before
    extending credit.


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


NOTE B--ACQUISITIONS

    
    On October 12, 1995, MVSI, Inc., acquired all the outstanding stock of JMR,
    effective October 1, 1995, whereby MVSI, Inc., exchanged 100,000 restricted
    shares of MVSI, Inc., common stock for all outstanding shares of JMR. In
    addition, MVSI, Inc., loaned JMR $200,000 to fund compensation due to an
    officer/stockholder of JMR for services rendered prior to the acquisition.
    The acquisition of JMR was accounted for as a purchase.  The results of
    operations of JMR are included in the accompanying financial statements
    since the date of acquisition. The cost in excess of the fair value of net
    assets acquired (goodwill) of approximately $450,000 will be amortized 
    using an estimated life of ten years.

                                                                             31


<PAGE>

MVSI, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements--Continued
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SEPTEMBER 30, 1996 AND 1995
--------------------------------------------------------------------------------

NOTE B--ACQUISITIONS--CONTINUED

    
    The Company acquired Socrates, effective July 1, 1996. MVSI exchanged 
    350,000 shares of its restricted common stock for all the shares of common
    stock held by Socrates' stockholder. The acquisition of Socrates was 
    accounted for as a purchase. The cost in excess of the fair value of net 
    assets acquired (goodwill) of approximately $2,323,000 will be amortized 
    using an estimated life of ten years. The results of operations of Socrates
    are included in the accompanying financial statements since the date of 
    acquisition.

    Following is a pro forma consolidated income statement for the years 
    ended September 30, 1996 and 1995, reflecting the acquisitions as if they 
    were consummated on October 1, 1994, accounted for as a purchase business 
    combination. The pro forma information is not necessarily indicative of 
    the financial position which would have resulted had the acquisitions 
    occurred on October 1, 1994. The pro forma information should be read in 
    conjunction with these historical financial statements.


                                                                             32


<PAGE>


MVSI, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements--Continued

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

SEPTEMBER 30, 1996 AND 1995
--------------------------------------------------------------------------------


NOTE B--ACQUISITIONS--CONTINUED

    PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
    YEAR ENDED SEPTEMBER 30, 1996
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                            PRO FORMA
                                            HISTORICAL    ADJUSTMENTS     PRO FORMA 
---------------------------------------------------------------------------------------
<S>                                       <C>            <C>            <C>         
    Sales                                 $ 15,987,638   $  9,376,121   $ 25,363,757
    Cost of sales                           12,484,237      8,430,373     20,914,610
                                           --------------------------------------------

    Gross profit                             3,503,399        945,748      4,449,147

    Operating expenses*                      3,699,904      1,269,587      4,969,491
                                           --------------------------------------------

    Loss from operations                      (196,505)      (323,839)      (520,344)

    Interest and financing charges            (422,839)            --       (422,839)
                                           --------------------------------------------

    Income (loss) before taxes                 226,334       (323,839)       (97,505)

    Income tax provision (benefit)            (786,430)      (372,000)    (1,158,430)

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

    Net income (loss)                     $  1,012,764   $     48,161    $ 1,060,925
                                           --------------------------------------------

    Net (loss) income per share           $       0.11   $         --    $      0.11
                                           --------------------------------------------

</TABLE>

* The pro forma adjustments reflect the operations of each company acquired, 
  adjusted for goodwill amortization. These operations include a non-recurring 
  $600,000 bonus payment to a stockholder.
                                                                             33

<PAGE>

MVSI, INC., AND SUBSIDIARY

Notes to Consolidated Financial Statements--Continued

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

SEPTEMBER 30, 1996 AND 1995
--------------------------------------------------------------------------------


NOTE B--ACQUISITIONS--CONTINUED

    
  PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
  YEAR ENDED SEPTEMBER 30, 1995
  ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                           PRO FORMA
                                            HISTORICAL    ADJUSTMENTS     PRO FORMA 
    ---------------------------------------------------------------------------------
<S>                                      <C>            <C>            <C>          
    Sales                                $   2,337,797  $  17,554,705  $  19,892,502
    Cost of sales                            1,506,908     15,834,757     17,341,665
                                          --------------------------------------------
    Gross profit                               830,889      1,719,948      2,550,837

    Operating expenses                       2,808,180      1,728,184      4,536,364
                                          --------------------------------------------
    (Loss) from operations                  (1,977,291)        (8,236)    (1,985,527)
    Interest and financing charges          (3,504,162)       (22,730)    (3,526,892)
                                          --------------------------------------------
    Loss before taxes                       (5,481,453)       (30,966)    (5,512,419)

    Income tax provision                            --             --             --
                                          --------------------------------------------
    Net loss                             $  (5,481,453)  $    (30,966)  $ (5,512,419)
                                          --------------------------------------------
    Net loss per share                   $       (1.10)  $         --   $      (1.10)
                                          --------------------------------------------

</TABLE>

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


NOTE C--SIGNIFICANT TRANSACTIONS

    
    PRIVATE PLACEMENT TRANSACTIONS
    
    In November 1994, the Company issued 400,000 shares of common stock to one
    nonaffiliated person in a private placement transaction for aggregate
    consideration of $200,000, represented by one promissory note, and for
    legal services rendered valued at $50,000.  The securities are pledged as
    collateral for the payment of the note.
    
    In January 1995, in a transaction arranged by the underwriter of the
    Company's initial public offering, the Company issued 1,000,000 shares of
    common stock to six nonaffiliated persons in a private placement
    transaction for aggregate consideration of $500,000 or $.50 per share. 
    

                                                                             34


<PAGE>

MVSI, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements--Continued

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

SEPTEMBER 30, 1996 AND 1995
--------------------------------------------------------------------------------


NOTE C--SIGNIFICANT TRANSACTIONS--CONTINUED

    
    Also in January 1995, the Company borrowed $500,000 in a bridge loan 
    from six nonaffiliated persons (lenders) at the rate of 8% simple annual 
    interest, which was repaid at the closing of the initial public offering 
    of the Company's securities. In further consideration of the bridge 
    loan, the Company issued 1,000,000 shares of common stock, 1,000,000 
    Class A warrants and 1,000,000 Class B warrants to the lenders.  The 
    shares of common stock and Class A warrants issued to the lenders were 
    registered in the initial public offering.  The Class A warrants issued 
    to the lenders are identical to the Class A warrants included in the 
    units offered by the Company.  The Class B warrants, which were not 
    registered in the offering, are identical to the Class A warrants 
    included in the units being offered by the Company, except that the 
    exercise price is $4.20.  The registered securities held by the 
    lenders may be sold commencing 13 months from the date of the 
    prospectus, subject to earlier release at the sole discretion of the 
    representative, and such securities include a legend with such 
    restrictions. The Company believes, to the best of its knowledge, that 
    the registered securities held by the lenders were released by said 
    representive and were sold after the date of the Prospectus and are 
    reflected in the Company's number of outstanding shares as of September 
    30, 1996. Interest expense related to the issuance of these securities 
    of $3,500,000 was charged to the statement of operations for the year 
    ended September 30, 1995, with a corresponding credit to paid-in 
    capital. 
    
    In June 1996, the Company issued 150,000 shares of restricted common stock
    to two accredited and nonaffiliated persons in a private placement
    transaction for aggregate consideration of $600,000, or $4.00 per share.
    
    INITIAL PUBLIC OFFERING
    
    On August 15, 1995, the Company completed an initial public offering of
    2,070,000 units at a price of $7.00 per share.  Each unit consists of two
    shares of common stock and two redeemable Class A warrants.  Each Class A
    warrant entitles the holder to purchase one share of common stock at $4.00
    per share during the four-year period commencing August 15, 1996.  In
    addition, the underwriter exercised the over-allotment option provided in
    the underwriting agreement, resulting in total outstanding shares following
    the offering of 10,140,000.
    
    Accounting, legal and other costs incurred in connection with the offering
    were capitalized and deferred until completion of the offering, at which
    time the costs were charged against additional paid-in capital.


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


NOTE D--FOURTH QUARTER ADJUSTMENTS


    The Company's fourth quarter 1996 operations were negatively impacted by
    charges incurred in restructuring the Company's Canadian operations. 
    Management determined the organizational restructuring to be necessary in
    order for the Company to further strengthen its position in the worldwide
    market of laser-based machine vision products, and to ensure continued
    profitability in the future.  The restructuring included the hiring of a
    new management team in operations, finance, and sales and marketing, and
    the implementation of a revised business plan.  Management's objective is
    to improve product quality, expand product lines, increase sales and
    marketing efforts, and revise existing cost structures.  The Company
    believes these efforts will further enhance the Company's state-of-the-art
    proprietary laser technology, and allow the Company to better capitalize on
    the rapidly growing machine vision market. 

                                                                             35


<PAGE>

MVSI, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements--Continued

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

SEPTEMBER 30, 1996 AND 1995
--------------------------------------------------------------------------------


NOTE D--FOURTH QUARTER ADJUSTMENTS--CONTINUED


    The impact of the changes incurred, in addition to certain fourth-quarter 
    adjustments made to establish an accounts receivable reserve and 
    write-off non-recoverable travel and installation costs, can be seen in 
    the accompanying statement of operations as an increase in operating 
    expenses and a sizable reduction in sales growth during the quarter.  
    The effect of these items was to reduce net income for the fourth quarter 
    by approximately $650,000 ($0.05 per share). 

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


NOTE E--INVENTORY


    Inventory consists of the following at September 30:
    
                                                    1996           1995   
    ---------------------------------------------------------------------------
         Raw materials                         $    623,415    $   442,409
         Work in progress                           595,224        130,105
         Finished goods                           1,393,900        124,092
                                           -------------------------------------
                                               $  2,612,539    $   696,606
                                           -------------------------------------

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


NOTE F--PROPERTY AND EQUIPMENT


    Property, plant and equipment consist of the following at September 30:

                                                    1996            1995
    ---------------------------------------------------------------------------
         Autos and trucks                       $    52,372    $        --
         Furniture and office equipment             277,834         36,731
         Manufacturing equipment                      9,850          8,273
         Research and development equipment         239,012        231,913
         Purchased software                          43,270          2,880
         Leasehold improvements                      23,340          6,155
                                               ---------------------------------
                                                    645,678        285,952

         Less accumulated depreciation             (262,160)      (111,501)
                                               ---------------------------------
                                                $   383,518    $   174,451
                                               ---------------------------------

                                                                             36


<PAGE>

MVSI, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements--Continued

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

SEPTEMBER 30, 1996 AND 1995
--------------------------------------------------------------------------------

NOTE G--LINE OF CREDIT


    The Company maintains a $365,000 line of credit with a Canadian bank to
    support the short-term cash needs of the Company's Canadian operations. 
    Borrowings bear interest at the bank's prime rate plus 2% (prime was 5.75%
    at September 30, 1996).  At September 30, 1996 and 1995, borrowings
    outstanding on the line of credit amounted to $275,735 and $150,342,
    respectively.  The line of credit is collateralized by all present and
    future accounts receivable and inventory of the Company's Canadian
    subsidiary.  Under terms of the line-of-credit agreement, which is subject
    to annual review, the Company must also comply with certain financial and
    reporting covenants.  As of September 30, 1996, the Company was in 
    compliance with these covenants.
    
    The Company also maintains a credit agreement with a local Finance Company
    for inventory financing for one of its subsidiaries.  The agreement provides
    the Company with the ability to pay certain inventory balances (purchases)
    in scheduled interest-free installments.  Borrowings outstanding under 
    the agreement, at September 30, 1996, amounted to $824,238. The agreement 
    is subject to annual renewal and is collateralized by all present and 
    future accounts receivable and inventory of the Company's subsidiary.  
    The Company must also comply with certain financial and reporting 
    covenants.  As of September 30, 1996, the Company was in compliance with 
    these covenants.


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


NOTE H--ACCOUNTS PAYABLE AND ACCRUED LIABILITIES


    Accounts payable and accrued liabilities consist of the following at
    September 30:

                                                    1996           1995   
    ---------------------------------------------------------------------------

         Vendor trade payables                $   1,942,283   $    589,576
         Salaries and commissions payable         1,331,134        483,670
         Other accrued liabilities                  457,585        238,810
                                             -----------------------------------
                                              $   3,731,002   $  1,312,056
                                             -----------------------------------

                                                                             37

<PAGE>

MVSI, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements--Continued

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

SEPTEMBER 30, 1996 AND 1995
--------------------------------------------------------------------------------


NOTE I--INCOME TAXES


  The income tax (benefit) provision consists of the following at September 30:

                                                      1996           1995 
    ---------------------------------------------------------------------------

         Current
              United States                      $       --   $         --
              Foreign                                    --             --
                                                --------------------------------
    
                                                         --             --
    
         Deferred
              United States                          77,085     (1,454,000)
              Foreign                              (183,201)      (243,000)
                                                --------------------------------
    
                                                   (106,116)    (1,697,000)

         Valuation allowance--deferred tax 
              asset                                (680,314)     1,697,000
                                                --------------------------------

         Net provision                           $ (786,430)  $         --
                                                --------------------------------


    
    The effective tax rates for the years ended September 30, 1996 and 1995,
    were -0-%.  Reconciliations between the U.S. federal statutory rate and the
    effective tax rates follow as of September 30:
    

                                                      1996           1995 
    ---------------------------------------------------------------------------

         Tax (benefit) at U.S. federal 
              statutory rates                   $    76,954   $ (1,863,694)
    
         Increase (decrease) resulting from:
              State tax (benefit)                        --       (255,436)
              Foreign income (loss) impact of
                  taxation at different rates        (4,365)       404,330
              Valuation allowance against
                  deferred tax asset               (680,314)     1,697,000
              Other permanent differences          (178,705)        17,800
                                               --------------------------------
              Income tax provision              $  (786,430)  $         --
                                               --------------------------------

                                                                             38


<PAGE>

MVSI, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements--Continued

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

SEPTEMBER 30, 1996 AND 1995
--------------------------------------------------------------------------------

NOTE I--INCOME TAXES--CONTINUED


    The tax effect of temporary differences between the financial statement
    amounts and tax bases of assets and liabilities which give rise to a
    deferred tax asset are as follows at September 30:
    

                                                     1996           1995  
    ---------------------------------------------------------------------------
         Research and development tax credits   $   766,864   $    700,000
         Net operating losses and unclaimed 
          R&D expenses                            2,515,060      2,384,684
         Accrued bonus payable                      232,200             --
         Other                                      (54,017)        (2,693)
         Valuation allowance                     (2,301,677)    (3,081,991)
                                               --------------------------------
         Net deferred tax asset                 $ 1,158,430   $         --
                                               --------------------------------
    
    The Company has net operating loss carryforwards available to offset future
    taxable income generated in Canada totaling approximately $730,000 at
    September 30, 1996, expiring in 2010.  In addition, the Company has net
    operating loss carryforwards available to offset U.S. taxable income of
    approximately $1,761,000 at September 30, 1996, expiring in 2011.  In the
    event a change of control occurs in the future, use of all or a portion of
    U.S. carryforwards could be affected.
    
    As of September 30, 1995, the Company had established a 100% valuation
    allowance against the tax benefits relating to these carryforwards because
    of the uncertain realizability of the tax benefits.  In the third and
    fourth quarters of fiscal year 1996, management re-evaluated the valuation
    allowance, resulting in the recording of a deferred tax asset (benefit) of
    $224,265 in the third quarter and $562,165 in the fourth quarter.  In 
    connection with the acquisition of Socrates, Inc., a $372,000 deferred tax 
    asset (benefit) was recorded as a reduction of goodwill.  Factors
    considered by the Company in the re-evaluation included the Company's
    year-to-date earnings, exclusive of non-recurring expenses and 
    adjustments, as well as anticipated future earnings based on
    increased product demand, primarily attributable to the awarding of 
    significant new contracts and orders which will be completed in fiscal year 
    1997.  After recording the deferred tax asset (benefit), the Company 
    continues to carry a valuation allowance approximating 67% of the 
    deferred tax assets.  The Company will review the valuation allowance 
    quarterly to determine the future realizability of the deferred tax 
    assets.

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


NOTE J--STOCK WARRANTS
    
    
    At September 30, 1996, the Company has outstanding, 5,140,000 Class A
    Warrants and 1,000,000 Class B Warrants to purchase common stock.  The
    Class A Warrants and Class B Warrants are exercisable at $4.00 and $4.20,
    respectively, and expire in the year 2000. 

                                                                            39
<PAGE>

MVSI, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements--Continued

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

SEPTEMBER 30, 1996 AND 1995
--------------------------------------------------------------------------------


NOTE K--COMMITMENTS AND CONTINGENT LIABILITIES
    
    
    LEASES
    
    The minimum rental payments payable under a long-term lease for premises,
    exclusive of certain operating costs determined annually, and for the lease
    of equipment at September 30, 1996, are approximately as follows:
    
         YEAR ENDING SEPTEMBER 30,
    ---------------------------------------------------------------------------

              1997                                              $  160,821
              1998                                                 147,920
              1999                                                 119,085
              2000                                                  74,916
              2001                                                  18,866
                                                             -------------------
    
                                                               $   521,608
                                                             -------------------

    
    EMPLOYMENT AGREEMENTS
    

                                                                             40

<PAGE>


MVSI, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements--Continued

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

SEPTEMBER 30, 1996 AND 1995
--------------------------------------------------------------------------------


NOTE K--COMMITMENTS AND CONTINGENT LIABILITIES--CONTINUED
    
    
    The Company has entered into separate employment agreements with three of
    its officers, which are subject to certain termination rights by both the
    Company and the officers.  In addition to minimum salary and bonus
    commitments by the Company, these officers are eligible to receive all
    employee benefits which may from time to time be awarded or be made
    available.  During the fourth quarter, one of the officers gave notice of
    resignation in accordance with the terms of his employment agreement. 
    This officer has resigned from his position as a director of the Company 
    but will remain with the Company on a consulting basis. Another officer 
    retains his employment agreement while negotiations continue to convert it 
    to a consulting agreement. This officer remains an officer and director 
    of the Company.
    
    LEGAL MATTERS

    In the ordinary course of conducting business, the Company is subject, 
    from time to time, to certain legal proceedings concerning the Company's 
    business. Management does not believe that any current legal 
    proceedings will have a material impact on the Company's business or its 
    financial statements.

    LOANS FROM STOCKHOLDERS
    
    From July 1994 through August 1995, the Company borrowed funds from a
    stockholder.  Such loans bear interest at 9% and are due on demand.  At
    September 30, 1996 and 1995, loans and accrued interest outstanding totaled
    $222,395 and $724,556, respectively.
    
    OTHER TRANSACTIONS
    
    A certain director who is a stockholder was paid consulting fees totaling
    $100,000 and $50,000 in fiscal years 1995 and 1994, respectively.  In 1996
    and 1995, the Company paid $161,000 and $100,000, respectively, in legal
    fees to an attorney who is also a stockholder of the Company.


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

NOTE L--SEGMENT INFORMATION
    
    
    For purposes of segment reporting for the year ended September 30, 1996,
    management considers the Company to operate in two industry segments; the
    machine vision industry and the computer distribution and reseller
    industry.  For the year ended September 30, 1995, management considered the
    Company to operate in only one segment, the machine vision industry. 
    
    For the year ended September 30, 1996, the Company had one customer which
    accounted for approximately 10 percent of its total revenue.  For the year
    ended September 30, 1995, the Company derived 40% of its sales from three
    customers.  In addition, approximately, 19% and 67% of the Company's sales
    in fiscal years 1996 and 1995, respectively, were to customers outside
    North America.
    
                                                                            41


<PAGE>

MVSI, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements--Continued

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

SEPTEMBER 30, 1996 AND 1995
--------------------------------------------------------------------------------


NOTE L--SEGMENT INFORMATION--CONTINUED


    Financial information relating to 
    the Company's industry segments for 
    the years ended September 30, 1996 
    and 1995, is as follows:
    

<TABLE>
<CAPTION>
                                                                 1996
                              ----------------------------------------------------------------------
                                                   COMPUTER  
                                                 DISTRIBUTION
                                  MACHINE        AND RESELLER        GENERAL  
                              VISION SEGMENT       SEGMENT          CORPORATE           TOTAL  
  --------------------------------------------------------------------------------------------------
  Sales to unaffiliated
    customers                 $    4,566,341    $  11,421,295    $          --     $ 15,987,636
  Operating profit (loss)            498,648          380,965       (1,076,118)        (196,505)
  Net income                         555,094          215,609          242,061        1,012,764
  Identifiable assets              5,670,201        7,439,956        7,050,212       20,160,369
  
                                                                 1995
                              ----------------------------------------------------------------------
                                                   COMPUTER  
                                                 DISTRIBUTION
                                  MACHINE        AND RESELLER        GENERAL  
                              VISION SEGMENT       SEGMENT          CORPORATE          TOTAL   
  --------------------------------------------------------------------------------------------------
  <S>                         <C>               <C>             <C>               <C>
  Sales to unaffiliated
    customers                 $    2,337,797    $          --   $           --    $   2,337,797
  Operating profit (loss)         (1,609,534)              --         (367,757)      (1,977,291)
  Net income                      (1,722,482)              --       (3,758,971)      (5,481,453)
  Identifiable assets              2,189,281               --       10,769,617       12,958,898
</TABLE>

    The following is a breakdown of the Company's sales by geographic region 
    for the years ended September 30, 1996 and 1995:

    SALES TO UNAFFILIATED CUSTOMERS:
    

                                                      1996             1995   
    ---------------------------------------------------------------------------
    North America*                             $   12,970,563    $   1,094,025
    Far East                                        1,810,054          974,141
    Europe                                          1,207,019          269,631
                                              --------------------------------

                                               $   15,987,636    $   2,337,797
                                               --------------------------------

     * principally the United States


                                                                            42


<PAGE>

MVSI, INC., AND SUBSIDIARIES

Notes to Consolidated Financial Statements--Continued

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

SEPTEMBER 30, 1996 AND 1995
--------------------------------------------------------------------------------

NOTE M--SUBSEQUENT EVENTS
    
    
    ACQUISITION OF e-NET, INC.
    
    On October 16, 1996, the Company signed an agreement with e-Net, Inc.
    (e-Net), under which MVSI intends to acquire e-Net, as a wholly owned 
    subsidiary of MVSI, subject to obtaining a fairness opinion and the 
    ratification by a majority of MVSI shareholders at a 1997 shareholders
    meeting.  Under the agreement, the Company has the right to waive 
    obtaining a fairness opinion and ratification by the shareholders, if so 
    decided by its board of directors. e-Net, a development stage Washington, 
    D.C., area-based telecommunications company, produces proprietary 
    telecommunications products and software which allow individuals and 
    organizations to execute secure, private voice communications across the 
    Internet and intranets, through the use of authentication technology, for 
    local, national and international telephone communications, information 
    exchange and commerce.
    
    Among the principal terms and conditions of the proposed acquisition, the
    Company intends to exchange, on a proposed tax-free basis, 4,000,000 shares 
    of its common stock, for all e-Net's 8,000,000 shares of common stock.  In
    addition, e-Net's 2,000,000 Class A Warrants and 2,000,000 Class B Warrants
    may be exercisable into a total of 2,000,000 shares of the Company's common
    stock.  The newly issued MVSI securities in the acquisition may not be sold
    for a 24-month period.  The chairman and chief executive officer of MVSI 
    is a principal stockholder and warrantholder of e-Net; a director of MVSI 
    is also a director and a stockholder of e-Net. Subject to
    consummation of the acquisition, which requires satisfaction 
    of the aforementioned conditions precedent, MVSI intends provide at least 
    $5.3 million to e-Net over a 24-month period ending in September 1998 in 
    order to finance its business operations.  The acquisition agreement 
    contains terms and other conditions which are customary and usual to 
    such acquisitions. As of September 30, 1996, MVSI has provided e-Net 
    $500,000 in working capital (see notes receivable in accompanying balance 
    sheet) and has on November 1, 1996, provided e-Net an 
    additional $500,000 in working capital, pursuant to a promissory note.  
    Terms of the promissory note include the payment of interest at 9% per 
    annum and repayment due no later than September 6, 1997. Management 
    intends to collect such amounts when due.

    The Company received a letter, dated December 23, 1996, from 
    outside legal counsel to e-NET, Inc. (the "December 23, 1996 
    Letter"). The December 23, 1996 Letter, which was written on behalf 
    of e-NET, Inc., alleges that the  Company has breached certain 
    provisions of the October 16, 1996 Acquisition Agreement by and 
    among the Company, e-NET, Inc. and e-NET, Inc.'s shareholders (the 
    "Acquisition Agreement"). The December 23, 1996 Letter demands that 
    the Company cure the alleged breaches of the Acquisition Agreement 
    within any applicable cure period and states that the failure to do 
    so will allow e-NET, Inc. to unilaterally terminate the Acquisition 
    Agreement in accordance with its terms. The Company believes that it 
    is not in breach of any provision of the Acquisition Agreement and that 
    all of the allegations of breach of the Acquisition Agreement by the  
    Company in the December 23, 1996 Letter are without merit. The Company is 
    preparing a written response to the December 23, 1996 Letter and intends to 
    request a meeting with e-NET, Inc.'s management in early January, 1997 to 
    seek to resolve any disputes over the Acquisition Agreement. As of 
    the date of this report, the Company is unable to determine the 
    effects of this recent development on the consummation of the 
    transactions contemplated by the Acquisition Agreement.


                                                                             43