SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB
        (Mark One)

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

                     For the Fiscal Year Ended June 30, 1996
                                       OR

        ( )      TRANSITION  REPORT  PURSUANT  TO  SECTION  13  OR  15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
                 For the transition period from               to 
                                                --------------   ------------
                           Commission File No. O-12792

                              APOGEE ROBOTICS, INC.
                          ----------------------------
                         (Name of small business Issuer)


           COLORADO                                       84-0916585
 --------------------------------              ------------------------------
(State or other  jurisdiction of              (IRS Employer Identification No.)
 incorporation  or  organization) 

         1301 Meadowood Lane
         Charlotte, North Carolina                            28211
   --------------------------------------                    --------
  (Address of Principal Executive Offices)                   Zip Code
                                                          (704) 363-6816
                                                      Issuer's telephone number


Securities registered under Section 12 (b) of the Exchange Act:  NONE

Securities registered under to Section 12 (g) of the Exchange Act:

                           Common Stock, No Par Value
                                (Title of Class)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the post 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  herein,  and no disclosure  will be contained,  to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [X]

The issuer's revenues for its most recent fiscal year were $335.

Check  whether the issuer has filed all  documents  and  reports  required to be
filed by Section 12, 13 or 15 (d) of the Exchange Act after the  distribution of
securities under a plan confirmed by a court. Yes [X] No [ ]

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant  as of a date  within  60 days  prior  to the date of  filing  is not
determinable due to the absence of any bid or asked price during such period.

The number of shares of Common Stock,  no par value,  outstanding on October 10,
1996 was 18,195,022.

           Documents Incorporated by Reference into this Report: None
       Transitional Small Business Disclosure Format (check one) Yes No X



<PAGE>


                                     PART I

                         ITEM 1. DESCRIPTION OF BUSINESS

General

Apogee  Robotics,  Inc.  ("Apogee" or the "Company") was founded in 1983 for the
purpose of developing  advanced material  handling systems  utilizing  automatic
guided vehicle systems ("AGVS"),  for use in manufacturing  plants,  warehouses,
offices and other  facilities.  Apogee's  AGVS were  computer or  microprocessor
controlled,  driverless vehicles equipped with various material handling devices
to automatically  transport materials for pick-up to various  destinations under
the supervision of computer systems.

On December 9, 1994, Apogee and it's wholly owned subsidiary,  AGV Acquisitions,
Inc. ("AGV") , filed for protection from their creditors under Chapter 11 of the
Federal Bankruptcy Codes in Denver, CO and it currently operating as a debtor in
possession.  This  filing was the  consequence  of  transactions  involving  the
Company  and  Conagher  &  Co.,  Inc.  ("Conagher"),   including  certain  stock
subscription  agreements which, in managements view, Conagher and its principal,
Pattinson Hayton III ("Hayton"),  failed to honor (see "Company  Restructuring,"
and  Part I,  Item 3.  "Legal  Proceedings,"  below  for a  discussion  of these
matters). As a consequence of Apogee's association with Conagher and Hayton, who
also  served as a director  and  chairman of Apogee's  Board of  Directors,  and
Apogee's inability to maintain listing requirements, the Company was delisted by
NASDAQ  on  February  7,  1995.  (See  Part I,  Item 1.  "Business"  below for a
discussion of these matters. )

Automatic Guided Vehicle Systems ("AGVS")

An AGVS  is a  means  of  transportation  that  uses  robotic  vehicles  to move
materials through a manufacturing plant, warehouse,  office, jail, or other such
facilities,  and is frequently  used as an  alternative  to conveyors,  manually
operated vehicles, and other conventional methods of materials handling. Through
a  computer  system,  Apogee's  AGVS were  capable  of  tracking  inventory  and
work-in-process through an entire material handling process,  allowing a user to
implement various strategies to improve productivity.

AGVS  sold by  Apogee  followed  wire,  optical  tape,  or  magnetic  guidepaths
installed in or on a floor.  Apogee's standard optically and magnetically guided
vehicles (the "Orbitor")  represented a substantially less expensive alternative
to wire guidance.  On October 5, 1994,  Apogee  acquired the AGVS Division of SI
Handling Systems,  Inc. ("SI"),  which manufactured AGVS utilizing both wire and
non-wire  guidance  technologies (see "Acquisition of SI Handling AGVS Division"
for a discussion  of this  matter).  This  acquisition  was intended to increase
Apogee's AGVS product and distribution network and add to Apogee's technical and
personnel resources.

As a result of Apogee's  bankruptcy filing on December 9, 1994, all developments
of  AGVS  technology  and  product,  as  well as all  manufacturing,  sales  and
marketing, have been terminated, and management does not expect any resources to
be expended keeping the existing body of technology  current.  As a result,  any
advantages that Apogee technology and product may have enjoyed prior to Apogee's
bankruptcy filing have eroded subsequent to bankruptcy and are expected to erode
further  during  the  pendency  of  bankruptcy  and  thereafter,  unless  merger
candidates  described in the section below entitled  "Bankruptcy Filing," devote
substantial  resources to update  these  products  and  technology,  and restore
manufacturing, sales and marketing activities.

In an effort to mitigate  the complete  loss of any value in the Apogee  product
and  technology  relating to its Orbitor line of products,  the Company  entered
into an Asset Purchase Agreement with FMC Corporation  ("FMC") on July 12, 1995,
wherein FMC acquired certain  electro-mechanical  technology and products of the
Orbitor line, and a quotation  system for $40,000.  The  bankruptcy  court order
approving  this  transaction  was entered on September  13, 1995. A condition of
this  agreement  provides  that if Apogee  emerges  from  bankruptcy  as an AGVS
provider, or if another purchaser emerges,  interested in the acquisition of the
entire body of Apogee's AGVS products and  technology,  the purchase will revert
to an irrevocable license to utilize the technology.

Relationship with Conagher

On May 12, 1994, Apogee entered into a Stock Subscription Agreement (hereinafter
the "Subscription Agreement") with Conagher,  wherein Apogee exchanged 6,000,000
shares of its Common Stock for 6,000,000  shares of Conagher's  Preferred Stock.
The Subscription Agreement provided that between June 15, 1994 and September 15,
1994,  Conagher  would  redeem  all or a portion  of its  Preferred  Shares  for
$2,000,000.  At the end of that period,  shares of Conagher Preferred Stock that
remained  unredeemed  could be exchanged by Apogee for an equal number of shares
of Apogee's  Common Stock held by Conagher.  Simultaneous  with the execution of
the Subscription Agreement,  Conagher assigned,  conveyed,  transferred, or sold
(which  cannot be determined  by Apogee)  5,200,000  shares of the Apogee Common
Stock it acquired from Apogee under the Subscription  Agreement, to Importations
by  Exportations,   SA  ("IMEXSA"),  a  Nicaraguan  company,  that  subsequently
distributed  the Apogee Common Stock,  purportedly  pursuant to Regulation S. On
June 5, 1994,  Conagher  agreed to purchase an  additional  3,000,000  shares of
Apogee's Common Stock for $1,000,000.

                                      - 2 -

<PAGE>



On September 21, 1994,  Apogee and Conagher entered into an Amended and Restated
Stock Acquisition Agreement (hereinafter the "Revised Agreement"),  amending the
May 12, 1994 Subscription  Agreement and terminating the June 5, 1994 agreement.
The Revised Agreement reduced Conagher's obligations for payments to Apogee from
$3,000,000 to $1,028,000.  The Revised Agreement also provided Conagher with the
right to purchase  1,250,000  shares of Apogee's Common Stock for $250,000 prior
to October 1, 1994.

The Revised  Agreement was  purportedly  ratified by Apogee's Board of Directors
consisting of Hayton, principal officer,  director, and shareholder of Conagher,
and Apogee's Chairman;  Sven Kraumanis and William G. Conway, bother nominees of
Conagher;  and Robert Oliphant.  The Company contends that the Revised Agreement
was not approved by a requisite vote of disinterested  board members and, in any
event, was never consummated.

Subsequent to the foregoing  events,  Apogee's  management  determined  that the
ratification  of the  Revised  Agreement  by  Apogee's  then  current  Board  of
Directors on September 23, 1994 was improper.  Further  investigation  by Apogee
management  revealed  other  irregularities  relating to  Conagher's  actions on
behalf of Apogee,  in addition to their ongoing  obligations to Apogee under the
various agreements. Negotiations with Conagher to cure these irregularities were
delayed as a result of Hayton's  chairmanship  of the Company and his  effective
control of the Company's  Board of Directors,  as well as his extended  absences
overseas.  Furthermore,  an article in the October 13,  1994-edition of The Wall
Street Journal revealed allegations regarding Hayton's character, integrity, and
business  practices  that  effectively  terminated  Apogee's  access  to  public
financial markets and damaged Apogee's reputation such that it could not execute
its business plan.

On or about  November  1,  1994,  Hayton  reached an  agreement  with a Canadian
company,  480452  B.C.  Ltd.  ("480452"),  to acquire  substantially  all of the
Conagher's  obligations to Apogee. These negotiations were conducted without any
participation from Apogee management, but required Apogee's consent to close the
transaction.  At the same time,  Company  management  was advised by NASDAQ that
Apogee  would be  delisted  immediately  as a  result  of its  affiliation  with
Conagher and Hayton, which delisting notification, Conagher and Hayton failed to
disclose to the principal of 480452. Company management's  subsequent disclosure
of the delisting  notice to the principal of 480452  resulted in the termination
of the agreement  between Conagher and 480452. If the agreement between Conagher
and 480452 had closed,  it would not have been ratified by the Company,  because
the  principal  of 480452  was under  investigation  by the  Vancouver  (Canada)
Exchange  for  certain  securities  violations,   and  the  agreement  contained
provisions unsatisfactory to the Company.

Subsequent  negotiations with Conagher contained various unfulfilled commitments
for funding the Company, which were ultimately terminated contemporaneously with
the abrupt  resignation  of Hayton and his  designees'  from  Apogee's  Board of
Directors on November 21, 1994.  In a press  release by Conagher  dated the same
day,  Hayton  accused  Apogee  and  certain of its  managers  and  directors  of
fraudulent misrepresentation.

On December 2, 1994,  Conagher filed an action against Apogee and certain of its
managers  and  directors  in the United  States  District  Court for the Central
District of California, Case #CV-ED94-270 RT (GAKK), alleging various securities
violations and financial misrepresentations.  This case was removed February 16,
1995 to the U.S.  District  Court for the District of Colorado.  By operation of
the  bankruptcy   rules,   this  action  remained  under  automatic  stay  until
subsequently withdrawn by Hayton. (See Part I, Item 3. "Legal Proceedings" below
for a discussion of these matters.)

Additionally,  on December 2, 1994,  Conagher filed a complaint against James R.
Currier,  Sr., Apogee's newly appointed President and CEO, in the Superior Court
for the State of  California  for the County of Riverside,  Palm Springs  Branch
(Case #079188),  alleging  misrepresentation  of certain financial conditions of
Apogee.  This  action  was  dismissed  May  1,1995  due to the lack of  personal
jurisdiction.  On May 1, 1995,  Currier  filed an action  against  Conagher  and
Hayton in the U.S.  District  Court for the Western  District of North  Carolina
(Case  #3:95CV207H)  seeking a  declaratory  judgement  relative  to  Conagher's
California  claims and asserting claims of fraud and  misrepresentation  against
them.  This  action  resulted  in a default  judgement  in favor of  Currier  on
September  26,  1996.  (See  Part I,  Item 3.  "Legal  Proceedings"  below for a
discussion of these matters.)

On December 4, 1994,  prior to the  declaration  of bankruptcy by the Company on
December 9, 1994, Robert Oliphant and James W. Jones were reelected directors of
Apogee.  Oliphant  subsequently  resigned  December  30,  1994 to  pursue  other
employment interests. Jones and Currier remain the Company's sole directors.

As a result of the declaration of bankruptcy and the failure of the subscription
agreements  between  Apogee and  Conagher,  settlement  agreements  described in
Apogee's  Annual  report on Form 10K for the year ended June 30,  1994 under the
section  "Company  Restructuring",  with  certain  persons to whom  Apogee  owed
approximately  $500,000 were not ratified by Apogee's  Board of  Directors,  and
remain  obligations  of the bankruptcy  estate,  with the exception of shares in
Princeton Electronic Products that collateralized a loan to the Company and were
subsequently  transferred to the security holder by bankruptcy court order dated
August 15, 1995. 

                                     - 3 -

<PAGE>



Acquisition of SI Handling AGVS Division

AGV  (which  became  Apogee's  wholly  owned  subsidiary  simultaneous  with the
acquisition)  acquired SI's AGVS Division on October 4, 1994. Under Amendment #2
to the Asset Purchase  Agreement  between AGV and SI, SI was required to furnish
Apogee with certain assignment  consents and lien waivers no later than November
4, 1994,  which items were omitted  under the original  purchase  documentation.
After  receipt of those  consents and  waivers,  Apogee would be required to pay
$250,000  to close the  transaction.  SI  subsequently  failed to provide  these
consents and waivers.  Apogee management  attempted to restructure certain terms
and conditions of the Asset Purchase  Agreement to avoid declaration of default.
Hayton's abrupt  resignation from Apogee's Board of Directors and repudiation of
Conagher's   stock   subscription   agreements  with  Apogee   terminated  those
negotiations.

In early  January 1995, SI seized  control of the disputed  assets.  Thereafter,
Apogee filed an adversary  proceeding against SI in the Federal Bankruptcy Court
on January  10,  1995 to resolve the dispute  over  ownership  of the  purchased
assets.  In a Compromise  Agreement  between Apogee and SI, dated  September 12,
1995, a motion was filed with the bankruptcy court and notice issued, to dismiss
the adversary  proceeding with prejudice and unwind the Asset Purchase Agreement
of October 4, 1994.  This matter  received  approval of the bankruptcy  court on
October 30, 1995. (See Part I, Item 3. "Legal  Proceedings"  for a discussion of
these matters.)

Bankruptcy Filing

On December 9, 1994,  Apogee and AGV filed for protection  from their  creditors
under Chapter 11 of the Federal Bankruptcy Codes in the Federal Bankruptcy Court
in Denver, CO. This filing was the consequence of transactions  involving Apogee
and  Conagher,   including  certain  stock  subscription  agreements  which,  in
management's view, Conagher and Hayton failed to honor.  Management believes the
satisfaction of Conagher's  obligations under the stock subscription  agreements
with Apogee would have provided adequate  liquidity for the Company to prosecute
its ongoing business  objectives.  Company management believes Apogee is current
in all of its bankruptcy  filings. A Creditor's  Committee has been appointed by
the court and relations  between this committee and the Company are  cooperative
and amicable.

Company   management,   in  cooperation  with  Company  bankruptcy  counsel  are
vigorously pursuing the following items:

1)       Filing of a  Reorganization  Plan on or about  December  31, 1996 under
         which outstanding claims relating to employees,  creditors,  and equity
         holders will be settled. Company management believes that settlement of
         all debt  will be  accomplished  through  its  Plan of  Reorganization,
         although  there  can  be  no  assurance  that   management's   Plan  of
         Reorganization  will be confirmed by the bankruptcy  court.  Management
         intends to pursue merger opportunities with other companies involved in
         the factory  automation  industry,  and believes that  Apogee's  public
         status will make it an attractive  merger candidate with successful and
         profitable   privately  owned   operations.   Management  is  currently
         investigating several such opportunities,  although no assurance can be
         given  that such a merger  can be  negotiated  on terms  acceptable  to
         Apogee's  shareholders or the bankruptcy  court. Nor can any assurances
         be given that management's  intention to exit the bankruptcy proceeding
         as a  non-operating  entity for  purposes of arranging a merger will be
         ratified by Company creditors, equity holders, or the bankruptcy court.

2)       Company  management is currently  preparing a Disclosure  Statement and
         Omnibus  Claims   Objection,   and  expects  to  file  these  documents
         concurrent with the Reorganization Plan.

Employees

On November 28, 1994 all  employees of the Company were  discharged.  Currently,
the Company contracts services from it's officers, and other outside contractors
from time to time as the circumstances dictate.

Licenses and Proprietary Technologies; Patents

Apogee has  developed  proprietary  technology  for AGVS,  including  stationary
control systems,  featuring guidepath optimization,  traffic control,  automatic
battery  charging,   and  automatic  load  transfer;   interface  software;  and
management reporting systems. No patent protection was sought for these software
products;  however,  the Company has copyright and trade secret protection under
applicable federal and state statutes.  Apogee has received a U.S. patent on its
magnetic  guidance  technology.  Certain  of  the  Company's  electro-mechanical
technology was  transferred  to FMC as part of an Asset Purchase  Agreement with
FMC (see "Automated Guided Vehicles Systems").


                                      - 4 -

<PAGE>



As a consequence of the bankruptcy filing,  Apogee has not incurred any expenses
for  research  and  development.  The  Company  has no plans to make any further
expenditures to maintain the existing body of its AGVS  technology,  software or
products, or to pursue any enhancements thereof.

ITEM 2. DESCRIPTION OF PROPERTY

Facilities

Apogee has no plant or office space. The Company's  principal  executive offices
are located at the office of the Company's President,  located at 1301 Meadowood
Lane, Charlotte, North Carolina 28211.

ITEM 3. LEGAL PROCEEDINGS

The following  legal  proceeding  involving  the Company have been  successfully
resolved:

1)       Case No. CV-ED94-270-RT (GAKX) filed in the US. District Court, Central
         District of California,  December 2, 1994 and  subsequently  removed to
         the U.S.  District  Court,  District of Colorado on February  16, 1995.
         This  action was filed by  Conagher  against  Apogee;  certain  Company
         managers and directors;  and the Company's  outside  auditors,  Brock &
         Co.,    Inc.,    alleging    various    securities    violations    and
         misrepresentations.   These   proceedings  were  under  automatic  stay
         provided  under  bankruptcy  statutes.  As a result of a Proof of claim
         filed by Conagher,  these claims,  in addition to  counterclaims,  were
         defended in the bankruptcy court under Claims Objection proceedings.

         On March 4,  1996  Apogee  submitted  a Motion to Amend  Objection  and
         Assert  Counterclaims  against  Conagher.  This  motion was  granted by
         action of the  Bankruptcy  Court on April 8,  1996.  Furthermore,  as a
         result of a Release and Settlement Agreement  ("Settlement  Agreement")
         entered  into  between  Conagher;   Apogee's   Directors  and  Officers
         Liability  Insurance  carrier;  Hayton;  and  James  W.  Jones,  Robert
         Oliphant, and Dennis C. Foss; Conagher withdrew this action. Conagher's
         motion to  withdraw  its Proof of Claim was also  granted,  subject  to
         certain  conditions.  (Please  see the  Company's  Form 8-K  filing  of
         February 27, 1996 for a discussion of this matter).

         On September 10, 1996 the  Bankruptcy  Court entered a default  against
         Conagher for failure to conduct discovery and produce documents, and on
         September 30, 1996 entered judgment on the default in the aggregate sum
         of $2,590,336 in favor of the Company and against Conagher.

         Apogee will seek to enforce this judgment in jurisdictions  the Company
         believes  Conagher  domiciles or is  conducting  business  in.  Company
         Management  is not  optimistic  any  collection  will  be  made  on the
         judgement.

2)       Case No. 3:95CV207H  filed in the U.S. District Court, Western District
         of  North  Carolina,  May  1,  1995 by James R.  Currier,  Sr.  against
         Conagher  and  Hayton.  This  action  was  filed  by  Currier  to see a
         declaratory  judgement  relative to claims  asserted  by Conagher in an
         action  against  Currier filed in the Superior  court  for the State of
         California  that was dismissed for the  lack of personal  jurisdiction.
         Currier  has made  additional  claims of  fraud  and  misrepresentation
         against Conagher and Hayton in this proceeding.

         On September 26, 1996 a default  judgement was entered against Hayton &
         Conagher  jointly and  severally  for $773,025 in damages and $2,727 in
         attorneys' fees in favor of Currier.  Currier has commenced  collection
         proceedings.

The following legal proceedings involving the Company are still pending:

1)       Case No. 94-22193-CEM,  Chapter  11 and Case No. 94-22194-MSK,  Chapter
         11,  jointly  administered  under  Case No.  94-22193-CEM  filed in the
         United States Bankruptcy Court, District  of Colorado December 9, 1994.
         Apogee and it's wholly owned  subsidiary,  AGV  sought  protection from
         its  creditors  under  Chapter 11 of  the Federal  Bankruptcy  Statutes
         appertaining thereto.  Management  believes that the Company is current
         in all  of its  bankruptcy  filings.  (See Item 1.  Business,  sections
         "Company  Restructuring"  and "Bankruptcy  Filing" for a  discussion of
         this proceeding.)

2)       Case No. 95-1653 PAC  filed by Apogee on October 20, 1995 in the United
         States Bankruptcy  Court,  District of Colorado.  Apogee seeks turnover
         of  60,000  shares  of  stock  in  Loronix  Information  Systems,  Inc.
         ("Loronix"),  from creditor Foss  Realty  Corporation,  ("Foss")  which
         claims a  perfected  security  interest  in the  stock to secure a note
         payable  from the  Company,  and from Robert  Oliphant,  who  holds the
         stock certificate.  Oliphant has disclaimed any interest in  the 60,000
         Loronix  shares  and  has  entered  an  interpleading  approved  by the
         Bankruptcy  Court  on  February  6,  1996.  Oliphant  was  subsequently
         dismissed from the case.

                                      - 5 -

<PAGE>


         On July 29, 1996 the  Bankruptcy  Court granted a motion by the Company
         wherein the security  interest of Foss in the Loronix stock was voided.
         The  Company  subsequently  filed a motion to sell the  Loronix  stock,
         which is still pending.

         Foss  retained  former  Company  counsel  Hart & Trinen LLP and filed a
         motion  to set  aside  the July 29,  1996  ruling.  Company  management
         believes  this  motion  will be  denied,  in that no new  evidence  was
         offered and the motion was not filed in a timely manner.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         Not Applicable.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCK HOLDER MATTERS

         The Company's  Common Stock was traded in the  over-the-counter  market
         and was  quoted on the  NASDAQ  Small Cap  Market  until  delisting  on
         February  7,  1995.  Currently  there  is no  trading  or  quotes.  The
         following  table  sets  forth  the  high  and  low bid  prices  for the
         Company's Common Stock for the periods indicated as reported by NASDAQ.
         Prices set forth  below do not reflect  retail  markups,  markdowns  or
         commissions and may not necessarily represent actual transactions.

                                        High              Low
                                        ====              ====
         Fiscal 1995
         ===========
         First Quarter                  $0.34             $0.16
         Second Quarter                 $0.22             $0.03
         Third Quarter                  NO TRADES OR QUOTES
         Fourth Quarter                 NO TRADES OR QUOTES

         Fiscal 1996
         ===========
         First Quarter                  NO TRADES OR QUOTES
         Second Quarter                 NO TRADES OR QUOTES
         Third Quarter                  NO TRADES OR QUOTES
         Fourth Quarter                 NO TRADES OR QUOTES

         As of October 10,  1996,  there were  approximately  1100 owners of the
         Company's  Common  Stock.  The number of persons  owning the  Company's
         securities   includes  both  record  holders  and  person  holding  the
         securities through banks, brokers or other nominees.  No dividends have
         been paid on the Company's  Common Stock and no dividends  will be paid
         in the foreseeable future.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

General

Revenues  derived  from  long-term  contracts  are  recognized  according to the
percentage-of-completion method, measured by the percentage of costs incurred to
date versus the estimated  total contract cost for each contract.  Costs include
materials,  direct labor,  subcontractors,  and  engineering  and  manufacturing
overhead.  Provision for  estimated  losses is made in the period for which they
become determinable.

Since Apogee's contract revenues have historically consisted of large sales to a
limited  number of  customers  and since  large  projects  are billed  under the
percentage-of-completion  method,  certain  balance  sheet items will  fluctuate
substantially  between  periods  as many  large  projects  are billed at certain
intervals,  as  opposed  too  monthly,  the  balance  sheet  category  costs and
Estimated  Earnings  will increase as costs on the project  accumulate.  Once an
invoice is sent to the  customer,  such  amounts  are  transferred  to  Contract
Receivables.  Contract  receivables  in turn will vary as Costs and  Earnings on
large  projects are billed and  subsequently  collected.  Conversely,  if Apogee
receives  an  advance or down  payment on an order,  the  amounts  received  are
reflected as Billings in Excess of Costs and  Estimated  Earnings.  Such amounts
are gradually  transferred to Contract Revenues Earned as Apogee progresses with
work on the particular project.

On  November  28,  1994,  Apogee  suspended  operations  pending the filing of a
petition under Chapter 11 of the Federal  Bankruptcy  Rules on December 9, 1994.
The financial  statements  from the fiscal year ended June 30, 1995 reflect both


                                      - 6 -

<PAGE>



the  short  period  of  operations,  as  well  as  activities  undertaken  as  a
debtor-in-possession.  The  financial  statements  for the period ended June 30,
1996 reflect no operations.

Liquidity and Capital Resources

Apogee's  total assets  decreased  from $497,958 on June 30, 1995 to $288,338 on
June 30, 1996 as a result of the  write-offs of the Company's  investment in AGV
and purchased software.

As a  result  of the  bankruptcy  filing,  Apogee's  current  liabilities  as of
December  9, 1994 were  reclassified  and  recorded  as  Liabilities  Subject to
Compromise,  and consist of all  creditor  claims  against  Apogee's  bankruptcy
estate,  including  claims that the Company will  contest.  In  particular,  the
Company  intends to contest all creditors and employee claims in connection with
the acquisition of the AGVS assets of SI and the subsequent  settlement thereof.
Current liabilities as of June 30, 1996 consist of amounts owed primarily to the
Company's  bankruptcy  and  litigation  counsel.  Additionally,  the Company has
accrued amounts believed owed to certain taxing authorities.

Historically,  Company  operations  did not generate cash.  Working  capital was
generated  through  public and private sales of the Company's  Commons Stock and
from short-term, fully collateralized borrowing. Since 1983, Apogee has received
net proceeds from the sale of its Common Stock in excess of $9,500,000.

Apogee's  only material  future  capital  commitments  are funding the extensive
litigation  necessitated  by the  Conagher  lawsuit.  Management  believes  that
sufficient funds exist for the sponsorship of this litigation as a result of the
liquidation of its remaining assets.

Results of Operations

Fiscal 1996

The net loss of $289,805 for the fiscal year ended June 30, 1996  resulted  from
expenses associated with the maintenance of the bankruptcy estate.

Fiscal 1995

The net loss of  $4,100,364  for the year  ended  June 30,  1995  resulted  from
operations  prior to their  suspension on November 28, 1994;  and the subsequent
write down of  substantially  all Company assets,  contract  receivables,  stock
subscription  receivables,  accrual  of  professional  fees,  and  recording  of
creditor claims under the bankruptcy estate. Any proceeds of liquidation will be
recorded  in  subsequent  periods  and  distributed  pursuant  to the  Company's
Reorganization Plan.

ITEM 7.  FINANCIAL STATEMENTS

         See the financial statements attached to this report.

ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

         None

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT

The  following  table sets forth the names,  ages and positions of the Company's
directors and executive officers:

Name                           Age       Position
----                           ---       --------
James R. Currier, Sr.          50        Chairman of the Board of Directors,
                                         President, Chief Executive Officer,
                                         Chief Financial Officer, and Director

James W. Jones                 50        Vice-President, Secretary, and Director


                                      - 7 -

<PAGE>


There are no family relationships  between the Company's officers and directors.
The directors of the Company will serve in such  capacity  until the next annual
meeting of the Company's  shareholders and until their successors have been duly
elected and  qualified.  The Company's  officers  serve at the discretion of the
Company's Board of Directors.

James R. Currier,  Sr. has been Apogee's  President and Chief Executive  Officer
and a director  since  October 5, 1994,  and it's  Chairman and Chief  Financial
Officer since December 7, 1994. From August 1982 through November 1992,  Currier
was Executive Vice President of N.C. Automation, Inc.

James W. Jones has been  Apogee's  Vice  President  since  September  1994 and a
director since December 1994. From June 1983 through  September 1994,  Jones was
Apogee's  President and Chief Executive  Officer.  From 1968 through 1983, Jones
was employed as a research and development engineer at Hewlett-Packard Company.

ITEM 10.  EXECUTIVE COMPENSATION

Compensation

The following table sets forth in summary form the compensation  received during
each of the  Company's  last  three  completed  fiscal  years  by (I) the  chief
Executive  Officer of the Company,  and (ii) by each other executive  officer of
the Company who received annual  compensation in the form of salary and bonus in
excess of $100,000.
<TABLE>
<CAPTION>

                           SUMMARY COMPENSATION TABLE


Name/Principal                                               Other Annual       All Other
Position                         Fiscal Year    Salary       Compensation     Compensation
--------------                   -----------    ------       ------------     ------------
                                                 (1)               (2)            (3)
<S>                                  <C>       <C>              <C>            <C>
James R. Currier, Sr.............    1996      $48,450             --           $48,450
President/CEO                        1995      $43,750          $20,000         $43,025
</TABLE>

               1)   The  dollar  value  of  base  salary  (cash  and   non-cash)
                    received.

               2)   Any other annual  compensation  not properly  categorized as
                    salary or bonus, including  prerequisites and other personal
                    benefits,  securities  or  property.  In the case of  Jones,
                    amount represents an automobile allowance of $2,500 per year
                    received from the company, a disability insurance premium of
                    approximately  $4,000 per year,  and an allowance for health
                    club  expenses  of  $1,500  per  year,  premiums  on a  life
                    insurance policy and funding the  supplemental  compensation
                    arrangement   described   below.  The  Company  is  not  the
                    beneficiary of the  disability  policy or the life insurance
                    policy and the supplemental compensation arrangement.

               3)   Compensation   received  for  consulting   services  in  the
                    post-petition bankruptcy estate.

Compensation of Directors

         During  the  fiscal  year  nded  June 30,  1996 the  directors  of the
         Company were paid no compensation.

Employment Contracts

         Apogee entered into an employment  agreement with James R. Currier, Sr.
         for a three-year term ending in October 1997 at base salary of $210,000
         per year. Under the terms of the agreement, Currier's salary would have
         been increased on each  anniversary  of the  employment  agreement by a
         percentage  equal to the annual  percentage  increase  in the  consumer
         price index.  Currier's  employment  agreement  also  provides for paid
         vacations and the right to  participate  in any employee  benefit plans
         that the Company may, from time to time, adopt.

         The employment  agreement with Currier remains in full force and effect
         and  constitutes  an  obligation  of the Company  under the  bankruptcy
         estate.  Currier is compensated $75 per hour for services  rendered the
         Company while the Company remains a debtor in possession,  which amount
         is credited against the Company's salary obligation to Currier.



                                      - 8 -

<PAGE>



ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of October 10, 1996 the number and percentage
of outstanding  shares of Common Stock owned by each officer and director of the
Company,  by all officers  and  directors as a group and by each person known to
own more than 5% of the Company's Common Stock.
<TABLE>
<CAPTION>

Name and Address                                   Number of Shares   Percentage of Class
----------------                                   ----------------   -------------------
<S>                                                   <C>                    <C>  
Princeton Electronic Products, Inc. ..........        1,000,000              5.50%
Address Unknown

James R. Currier, Sr .........................           30,000               .17%
1301 Meadowood Lane
Charlotte, NC 28211

James W. Jones ...............................          158,000               .87%
1428 Glenda Court
Loveland, CO 80537

All Officers and .............................          188,000              1.04%
Directors as a Group (2 persons)
</TABLE>

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

              None.

                                     PART IV

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>

         (a)      Exhibits
                  ---------

    <S>  <C>      <C>                                <C>                   
     3   (a)      Articles of Incorporation          Incorporated by reference to Exhibit 3 (a) to the Company's
                                                     Registration Statement on Form S-18, Registration No. 2-87181-D.

         (b)      Amended Articles                   Incorporated by reference to Exhibit 3(c) of the Company's
                                                     Registration Statement, Registration No. 33-7805.

         (c)      Bylaws                             Incorporated by reference to Exhibit 3 (b) to the Company's
                                                     Registration Statement on Form S-18, Registration No. 2-87181-D.

         (d)      Amended Bylaws                     Incorporated by reference to Exhibit 3 (d) to the Company's
                                                     Registration Statement, Registration No. 33-7805.

    10   (a)      License Agreement                  Incorporated by reference to Exhibit 10 (b) to the
                                                     Company's Registration Statement on Form S-18,
                                                     Registration No. 2-87181-D.

         (b)      Supply Agreement                   Incorporated by reference to Exhibit 10 (c) to the
                                                     Company's Registration Statement on Form S-18,
                                                     Registration No. 2-87181-D.

         (c)      Amendment to License               Filed as Exhibit 10 (e) to the Company's Registration
                                                     Statement on Form S-1, Registration No. 33-7805.

         (d)      License Agreement with             Incorporated by reference to Exhibit 10 (h) to the
                  Hewlett-Packard Company            Company's Registration Statement, Registration No.
                                                     33-7805.

         (e)      Agreement with Stow                Filed as Exhibit 90 (e) to the Company's Registration
                  International NV                   Statement on Form S-1, Registration No. 33-42749.

         (f)      Amended and Restated               Filed as Exhibit 10 (f) to the Company's Report on Form
                  Stock Acquisition                  8-K dated September 23, 1994.
                  Agreement


                                      - 9 -

<PAGE>
<CAPTION>

    <S>  <C>      <C>                                <C>                   
         (g)      Asset Purchase Agreement           Filed as Exhibit 10 (g) to the Company's Report on Form
                  Relating to SI Handling            8-K dated September 23, 1994.
                  Systems

         (h)      Consulting Agreement               Filed as Exhibit 10 (h) to the Company's Report on Form
                  (Pat Hayton)                       8-K dated September 23, 1994.

         (I)      Employment Agreement               Filed as Exhibit 10 (i) to the Company's Report on Form
                  (James R. Currier, Sr.)            8-K dated September 23, 1994.

         (J)      Asset Purchase Agreement           Filed as Exhibit 10 (j) to the Company's report on Form
                  Between FMC Corporation            10-K dated January 29, 1996.
                  and Apogee

         (k)      Settlement Agreement               Filed as Exhibit 10 (k) to the Company's report on Form
                  between SI and Apogee              10-K dated January 29, 1996.

         21       Subsidiaries of the Registrant     Filed with this report

         27       Financial Data Schedule            Filed with this report

         (b)      Reports on Form 8-K                None.

</TABLE>
                                   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.

                             APOGEE ROBOTICS, INC.

                             By: /s/ James R. Currier , Sr.
                                ------------------------------------
                                   James R. Currier, Sr., Chairman, President,
                                   Chief Executive Officer, and Chief Financial
                                   Officer (Principal Executive, Financial and
                                   Accounting Officer)

                             Date: October 10, 1996


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 on the
dates indicated.

         Signature                  Title                     Date
         ---------                  -----                     ----

/s/ James R. Currier, Sr.           Director                  October 10, 1996
   ----------------------
James R. Currier, Sr.

/s/ James W. Jones                  Director                  October 10, 1996
   ---------------
James W. Jones

                                     - 10 -

<PAGE>
                          INDEX TO FINANCIAL STATEMENTS






                                                                            PAGE
                                                                            ----
Independent Auditor's Report...................................................2

Balance Sheet - June 30, 1996..................................................3

Statements of Operations - For the Years Ended June 30, 1996 and 1995..........4

Statement of Stockholders' Deficit - For the Period from July 1, 1994
   through June 30, 1996.......................................................5

Statements of Cash Flows - For the Years Ended June 30, 1996 and 1995..........6

Notes to Financial Statements..................................................7




                                       -1-

<PAGE>



                          INDEPENDENT AUDITOR'S REPORT






Board of Directors
Apogee Robotics, Inc.
Charlotte, North Carolina


We have audited the accompanying  balance sheet of Apogee  Robotics,  Inc. as of
June 30, 1996, and the related statements of operations,  stockholders' deficit,
and cash  flows for the years  ended  June 30,  1996 and 1995.  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 audit.

We conducted our audit 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 audit provides 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 Apogee Robotics,  Inc. as of
June 30,  1996,  and the  results of its  operations  and its cash flows for the
years  ended June 30,  1996 and 1995,  in  conformity  with  generally  accepted
accounting principles.

The accompanying  financial  statements have been prepared  assuming the Company
will  continue  as a going  concern.  As  discussed  in Note 1 to the  financial
statements,  the Company has recurring  operating losses and negative cash flows
from operations,  and has filed for reorganization  under Chapter 11 of the U.S.
Bankruptcy  Code.  These  factors  raise  substantial  doubt about the Company's
ability to continue as an ongoing concern. Management's plans in regard to these
matters are  described in Note 2. The  financial  statements  do not include any
adjustments that might result from the outcome of this uncertainty.



/s/ HEIN + ASSOCIATES LLP
HEIN + ASSOCIATES LLP

Denver, Colorado
October 10, 1996



                                       -2-

<PAGE>

<TABLE>
<CAPTION>
                              APOGEE ROBOTICS, INC.
                             (Debtor-in-Possession)

                                  BALANCE SHEET
                                  JUNE 30, 1996


                                     ASSETS
<S>                                                                <C>         

CURRENT ASSETS:
    Cash ........................................................  $    103,920
    Inventories .................................................        10,491
    Nonmarketable securities, at estimated fair value,
      aggregate cost of $438,480 ................................       168,255
                                                                    -----------
             Total current assets ...............................       282,666
                                                                    -----------
DEPOSITS AND OTHER ASSETS .......................................         5,672
                                                                    -----------
TOTAL ASSETS ....................................................  $    288,338
                                                                    ===========

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

LIABILITIES NOT SUBJECT TO COMPROMISE:
    Accounts payable ............................................  $     63,994
    Other accrued liabilities ...................................        64,052
                                                                    -----------
             Total current liabilities ..........................       128,046
                                                                    -----------
LIABILITIES SUBJECT TO COMPROMISE ...............................     3,497,132
                                                                    -----------
COMMITMENTS AND CONTINGENCIES (NOTES 8 AND 11)

STOCKHOLDERS' DEFICIT:
    Preferred stock, $.01 par value; 100,000 shares authorized ..          --
    Common stock, no par value; 50,000,000 shares authorized;
         18,195,022 shares issued and outstanding ...............    10,683,590
    Other capital ...............................................        33,349
    Accumulated deficit .........................................   (14,053,779)
                                                                    -----------
             Total stockholders' deficit ........................    (3,336,840)
                                                                    -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT ....................   $    288,338
                                                                    ===========

</TABLE>







   The accompanying notes are an integral part to these financial statements.

                                       -3-

<PAGE>

<TABLE>
<CAPTION>


                              APOGEE ROBOTICS, INC.
                             (Debtor-in-Possession)

                            STATEMENTS OF OPERATIONS



                                                      FOR THE YEARS ENDED
                                                            JUNE 30,
                                                   ---------------------------
                                                       1996           1995
                                                   -----------   ------------
<S>                                                <C>           <C>         

CONTRACT REVENUES AND SALES ....................   $      --     $    457,233

COST OF REVENUES AND SALES .....................          --        1,622,174
                                                   -----------   ------------

GROSS LOSS .....................................          --       (1,164,941)
                                                   -----------   ------------

OPERATING EXPENSES:
    Selling, general and administrative expenses        44,445      1,104,627
    Loss on investment in AGVI .................          --          636,083
                                                   -----------   ------------
         Total operating expenses ..............        44,445      1,740,710
                                                   -----------   ------------
LOSS FROM OPERATIONS ...........................       (44,445)    (2,905,651)
                                                   -----------   ------------
OTHER INCOME (EXPENSE):
    Investment losses ..........................          --           (3,750)
    Interest expense ...........................          --          (72,846)
    Other, net .................................           258         11,815
                                                   -----------   ------------
         Net other income (expense) ............           258        (64,781)
                                                   -----------   ------------
LOSS BEFORE REORGANIZATION ITEMS ...............       (44,187)    (2,970,432)

REORGANIZATION ITEMS:
    Interest income ............................            77          1,482
    Provision for rejected executory contracts .          --       (1,066,994)
    Professional fees ..........................      (245,695)       (64,420)
                                                   -----------   ------------
NET LOSS .......................................   $  (289,805)  $ (4,100,364)
                                                   ===========   ============
LOSS PER COMMON SHARE ..........................   $      (.02)  $       (.23)
                                                   ===========   ============
WEIGHTED AVERAGE SHARES OUTSTANDING ............    18,195,022     18,051,446
                                                   ===========   ============
</TABLE>






   The accompanying notes are an integral part to these financial statements.

                                       -4-

<PAGE>

<TABLE>
<CAPTION>

                                                        APOGEE ROBOTICS, INC.
                                                       (Debtor-in-Possession)

                                                 STATEMENT OF STOCKHOLDERS' DEFICIT
                                       FOR THE PERIOD FROM JULY 1, 1994 THROUGH JUNE 30, 1996


                                                         PREFERRED STOCK          COMMON STOCK
                                                      ---------------------  ------------------------         Other      Accumulated
                                                        Shares      Amount      Shares       Amount           Capital      Deficit
                                                      ---------    --------  ----------    ----------         -------    -----------
<S>                                                   <C>         <C>        <C>         <C>            <C>            <C>          
BALANCES, July 1, 1994 .........................      1,082,912   $ 10,829   16,472,110  $  9,968,153   $     853,414  $ (9,663,610)

  Conversion of preferred stock to
     common stock ..............................     (1,082,912)   (10,829)   1,712,912       830,894        (820,065)       --
  Write-off unredeemed preferred stock of
     investee determined to be uncollectible
     issued for common stock ...................          --          --          --         (165,457)           --          --
  Issuance of common stock for commissions
     payable ...................................          --          --         10,000        50,000            --          --
  Net loss for the year ended June 30, 1995 ....          --          --          --             --              --      (4,100,364)
                                                     ----------    -------   ----------    ----------    ------------   -----------
BALANCES, June 30, 1995 ........................          --          --     18,195,022    10,683,590          33,349   (13,763,974)

  Net loss for the year ended June 30, 1996 ....          --          --          --             --              --        (289,805)
                                                     ----------    -------   ----------    ----------    ------------   -----------
BALANCES, June 30, 1996 ........................          --      $   --     18,195,022  $ 10,683,590    $     33,349  $(14,053,779)
                                                     ==========    =======   ==========    ==========    ============   ===========
</TABLE>












   The accompanying notes are an integral part to these financial statements.

                                       -5-
<PAGE>

<TABLE>
<CAPTION>

                              APOGEE ROBOTICS, INC.
                             (Debtor-in-Possession)

                            STATEMENTS OF CASH FLOWS



                                                                             FOR THE YEARS ENDED
                                                                                   JUNE 30,
                                                                          --------------------------
                                                                              1996          1995
                                                                          -----------     ----------
<S>                                                                       <C>            <C>         
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss ..........................................................   $  (289,805)   $(4,100,364)
    Adjustments to reconcile net loss to net cash used in
       operating activities:
            Depreciation and amortization .............................          --           83,016
            Write-down of property and software to net realizable value          --          352,220
            Provision for inventory losses ............................          --          280,000
            Loss on investment in AGVI ................................          --          636,083
            Investment losses .........................................          --            3,750
    Increase (decrease) from changes in assets and liabilities:
            Liabilities subject to compromise .........................          --        2,239,365
            Contract receivables ......................................          --            7,317
            Inventories ...............................................          --            9,247
            Cost and estimated earnings in excess of billings on
                uncompleted contracts .................................          --          176,650
            Accounts payable and accrued liabilities not subject
                to compromise .........................................        80,185       (325,254)
            Billings in excess of costs and estimated earnings on
                uncompleted contracts .................................          --         (219,231)
            Other .....................................................         5,176          2,703
                                                                            ---------      ---------
        Net cash used in operating activities .........................      (204,444)      (854,498)
                                                                            ---------      ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Proceeds from AGVI Settlement .....................................       150,000           --
    Proceeds from sale of other assets ................................        40,000           --
    Proceeds from investments .........................................          --          199,245
    Other .............................................................          --          (42,553)
                                                                            ---------      ---------
        Net cash provided by investing activities .....................       190,000        156,692
                                                                            ---------      ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Cash advance from an affiliate of a former director ...............          --          115,000
    Repayments under short-term debt agreements .......................          --          (12,426)
    Proceeds from issuance of common stock and common stock
      warrants ........................................................          --          663,921
                                                                            ---------      ---------
        Net cash provided by financing activities .....................          --          766,495
                                                                            ---------      ---------
DECREASE IN CASH ......................................................       (14,444)        68,689

CASH, at beginning of year ............................................       118,364         49,675
                                                                            ---------      ---------
CASH, at end of year ..................................................   $   103,920    $   118,364
                                                                            =========      =========
</TABLE>












   The accompanying notes are an integral part to these financial statements.

                                       -6-

<PAGE>

                              APOGEE ROBOTICS, INC.
                             (Debtor-in-Possession)

                          NOTES TO FINANCIAL STATEMENTS


1.   PROCEEDINGS UNDER CHAPTER 11:

     On December 9, 1994 (petition date), Apogee Robotics, Inc. (the Debtor) and
     its wholly owned  subsidiary,  AGV  Acquisitions,  Inc.,  filed a voluntary
     petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code in
     the United States Bankruptcy Court (the Chapter 11 proceedings). The Debtor
     continues  business  operations  as  debtor-in-possession,  subject  to the
     approval of the Court for certain of its proposed actions.

     As of the petition date, actions to collect pre-petition  indebtedness were
     stayed and other  contractual  obligations may not be enforced  against the
     Debtor.  In addition,  the Debtor may reject executory  contracts and lease
     obligations  during  pendency  of the Chapter 11  proceedings,  and parties
     affected by these  rejections may file claims with the Bankruptcy  Court in
     accordance with the  reorganization  process.  Substantially  all unsecured
     liabilities of the Debtor as of the petition date are subject to compromise
     under a plan of  reorganization  which  has not yet  been  completed;  when
     completed,  the plan of  reorganization  must be voted upon by all impaired
     classes of  creditors  and equity  security  holders  and  approved  by the
     Bankruptcy  Court (see Note 6 for a description of the liabilities  subject
     to compromise).

     The   Company  has   accounted   for  all   transactions   related  to  the
     reorganization  proceedings in accordance  with Statement of Position 90-7,
     "Financial  Reporting by Entities in  Reorganization  Under the  Bankruptcy
     Code," issued by the American  Institute of Certified Public Accountants in
     November 1990. Accordingly, all pre-petition liabilities of the Debtor that
     are expected to be impaired under the plan of reorganization and ultimately
     approved by the  Bankruptcy  Court are reported  separately in the Debtor's
     balance  sheet  as  liabilities   subject  to  compromise   (see  Note  6).
     Reorganization items,  primarily professional fees and interest income, are
     reported separately in the statements of operations.


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     Nature of Operations - The Company previously designed, manufactured, sold,
     and installed  comprehensive,  advanced  material  handling and information
     systems.  These  activities  were  discontinued  in December  1994 when the
     Company filed for bankruptcy. Management plans to merge the Company with or
     otherwise acquire additional operations in the same line of business.

     Use of Estimates - The preparation of the Company's  consolidated financial
     statements in conformity  with  generally  accepted  accounting  principles
     requires the Company's  management to make estimates and  assumptions  that
     affect the amounts reported in these financial  statements and accompanying
     notes. Actual results could differ from those estimates.

     Contract Revenue and Cost Recognition - Revenues under long-term  contracts
     have been recognized on the  percentage-of-completion  method,  measured by
     the percentage of costs incurred to date to estimated  total contract costs
     for each  contract.  Costs include  material,  direct labor,  subcontracts,
     engineering and  manufacturing  overhead.  Provisions for estimated  losses
     were made in the  period  in which  they  first  become  determinable.  All
     significant  performance  warranty  costs  are  provided  at  the  time  of
     completion of the warranted product contracts.

                                       -7-

<PAGE>


                              APOGEE ROBOTICS, INC.
                             (Debtor-in-Possession)

                          NOTES TO FINANCIAL STATEMENTS


     Costs and estimated earnings in excess of billings on uncompleted contracts
     represents  revenue  recognized  in excess of amounts  billed.  Billings in
     excess of costs and estimated earnings on uncompleted  contracts represents
     billings in excess of revenues recognized.

     Inventories  -  Inventory  consists  of robotics  components  and  assembly
     supplies.  Inventories  are stated at lower of first-in,  first-out  (FIFO)
     cost or market.

     Investments  - Effective  July 1, 1994,  the Company  adopted  Statement of
     Financial Accounting (SFAS) No. 115, "Accounting for Certain Investments in
     Debt and Equity  Securities." This  pronouncement  addresses the accounting
     and reporting for certain  investments in debt and equity securities.  SFAS
     No. 115 requires that certain  securities  be classified  into one of three
     categories,  which then  determines  the  accounting and reporting for that
     security.  The Company's  investments at June 30, 1996 are considered to be
     available  for sale in  accordance  with SFAS No.  115,  and are  valued at
     estimated fair value.

     Depreciation  and  Amortization - The Company provided for depreciation and
     amortization using the straight-line method over the estimated useful lives
     of the  assets  which  was five to  twelve  years for  office,  plant,  and
     promotional  equipment.  All property and equipment was written down to its
     estimated net realizable value of $-0- as of June 30, 1995.

     The purchased automated guided vehicle systems (AGVS) software was recorded
     at cost and was being  amortized  using the  greater  of the  straight-line
     method over the estimated economic life, generally five years, or the ratio
     of current revenues to estimated total revenues of each product. The amount
     by  which  the  unamortized  costs  of  computer  software  exceed  the net
     realizable  value of the software is charged to expense in the period it is
     first  determinable.  Unamortized costs of $243,192 were charged to expense
     in 1995.  During 1994, fully amortized  purchased AGVS software of $465,403
     was written off.

     Income Taxes - In 1994, the Company  adopted the provisions of Statement of
     Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
     109).   Under  this  method,   deferred  tax  assets  and  liabilities  are
     determined,  based on the difference  between the financial  statements and
     tax bases of assets and  liabilities  using enacted tax rates in effect for
     the year in which the differences are expected to reverse.

     Research and  Development - Acquisition  of materials  used in research and
     development  activities which had alternative future uses were capitalized.
     All other  research  and  development  costs  were  charged  to  expense as
     incurred.

     Per Share Data - Earnings  (loss) per common share is based on the weighted
     average number of common shares outstanding during the period.  Outstanding
     stock warrants,  options,  and convertible  preferred  shares have not been
     included in the  computation  of the loss per common share since the effect
     would have been antidilutive.

                                       -8-

<PAGE>


                              APOGEE ROBOTICS, INC.
                             (Debtor-in-Possession)

                          NOTES TO FINANCIAL STATEMENTS



  
     Cash and Cash  Equivalents - For purposes of the  statements of cash flows,
     the Company  considers  all highly  liquid  investments  purchased  with an
     original maturity of three months or less to be cash equivalents.

     Impact  of  Recently  Issued  Accounting  Standards  - In March  1995,  the
     Financial   Accounting  Standards  Board  issued  a  new  statement  titled
     "Accounting  for  Impairment  of Long-Lived  Assets." In October 1995,  the
     Financial   Accounting  Standards  Board  issued  a  new  statement  titled
     "Accounting  for Stock- Based  Compensation"  (FAS 123). The new statements
     are  effective  for fiscal years  beginning  after  December 15, 1995.  The
     Company does not believe  that  adoption of the new  standards  will have a
     material effect on the financial statements.


3.   ACQUISITION OF AGV ACQUISITIONS INC.:

     On  October  5,  1994,   the  Company   acquired  the  net  assets  of  AGV
     Acquisitions,  Inc.  (AGVI),  a  company  wholly  owned by  certain  of the
     Company's directors,  which on the same date acquired  substantially all of
     its net assets from SI Handling  Systems,  Inc. (SI).  The acquired  assets
     consisted  primarily of technology,  inventories,  equipment and machinery,
     and contract rights. An affiliate of a former director advanced $250,000 at
     closing of the  acquisition on behalf of the Company.  SI failed to provide
     certain  consents and waivers,  and  subsequent  to the Company  filing for
     bankruptcy, SI seized control of the disputed assets. Apogee and SI reached
     a compromise  agreement in September  1995 to unwind the  transaction.  The
     agreement  was  approved  by the  bankruptcy  court in  October  1995.  The
     Company's  investment  in AGVI,  originally  recorded at  $250,000  paid at
     closing,  was reduced to the  $150,000  which SI remitted to the Company in
     accordance with the Compromise Agreement.

     The Company has not  consolidated the assets of AGVI during the period they
     were owned since control was  temporary;  claims filed by AGVI's  creditors
     and employees  have been included in  liabilities  subject to compromise as
     disputed claims.


4.   NONMARKETABLE SECURITIES:

     During 1994,  the Company  acquired  100,000  restricted  common  shares of
     Loronix Information Systems, Inc. in exchange for 60,000 Series D Preferred
     shares and 40,000 Series F preferred  shares.  The investment was valued at
     $730,800, based on the fair market value of the Company's stock at the date
     of exchange. During June 1994, the Company recorded a charge of $434,550 to
     reflect the investment at estimated net realizable value. In June 1995, the
     Company sold 40,000 shares of Loronix stock at no gain or loss.



                                       -9-

<PAGE>

                              APOGEE ROBOTICS, INC.
                             (Debtor-in-Possession)

                          NOTES TO FINANCIAL STATEMENTS


5.   NOTES PAYABLE:

     Following is a summary of notes payable as of June 30, 1996:

          Notes Payable
          -------------

          Notes  payable with  combined  face amount of $300,000.  A
          $200,000 note was collateralized by securities held by the
          Company.  During fiscal 1995, the note holder enforced his
          security   interest   and   obtained   ownership   of  the
          securities.  However, the note holder has filed a claim in
          bankruptcy  for both notes.  The $100,000 note is included
          in liabilities subject to compromise.                        $ 100,000
                                                                        ========
          Notes Payable - Related Parties
          -------------------------------

          An  unsecured  note  payable to a former  director  of the
          Company.  Note  is  included  in  liabilities  subject  to
          compromise.                                                  $ 100,000

          A note payable to a former  director of the Company with a
          face  amount  of  $200,000.  During  September  1994,  the
          Company  agreed  to  exchange  60,000  shares  of  Loronix
          Information  Systems,  Inc.,  with  a  carrying  value  of
          $168,255,  in full  payment of the note.  The exchange was
          not completed The note is included in liabilities  subject
          to compromise.                                               $ 200,000
                                                                        --------
                Total notes payable - related parties                  $ 300,000
                                                                        ========
6.   LIABILITIES SUBJECT TO COMPROMISE:

     Liabilities recorded by the Debtor that will be subject to compromise under
     a plan of reorganization as of June 30, 1996 consist of the following:

       Undisputed priority claims filed by former employees .......   $   37,753
       Undisputed claims filed by former employees ................      227,156
       Undisputed claims filed by trade creditors and miscellaneous      330,980
           claims
       Undisputed claim filed by note holder ......................      100,000
       Accrued payroll taxes ......................................      131,673
       Other, including accrued interest on notes payable .........      174,956
                                                                      ----------
                     Subtotal - undisputed claims .................    1,002,518
                                                                      ----------


                                      -10-

<PAGE>

                              APOGEE ROBOTICS, INC.
                             (Debtor-in-Possession)

                          NOTES TO FINANCIAL STATEMENTS



       Disputed claims filed by trade creditors of AGVI ...........      411,688
       Disputed claims filed by former employees of AGVI ..........       81,079
       Disputed warranty claims by former customers ...............      239,036
       Disputed claims filed by former trade creditors ............      154,064
       Disputed claims filed by former employees ..................      943,747
                                                                      ----------
                     Subtotal - disputed claims ...................    1,829,614
                                                                      ----------
       Related Parties
       ---------------

      Notes payable to former director ............................      100,000
      Notes payable to former director ............................      200,000
      Advances from an affiliate of a former director .............      365,000
                                                                      ----------
                                                                         665,000
                                                                      ----------
                    Total .........................................   $3,497,132
                                                                      ==========

     The Company is in the process of disputing certain claims filed,  including
     all  claims  filed  by  former   employees  and  trade   creditors  of  AGV
     Acquisitions, Inc. Management of the Company believes that such liabilities
     represent a liability of SI Handling, Inc. The Company is unable to predict
     whether or not it will be successful in disputing claims filed.

     No provision has been made for the effect of preference or other actions as
     they cannot be determined at this time.


7.   STOCKHOLDERS' EQUITY:

     During  August  1994,  all  shares  of  preferred  stock  outstanding  were
     converted to 1,712,912 shares of the Company's common stock.

     On May 12, 1994,  Apogee entered into a Stock  Subscription  Agreement with
     Conagher, wherein Apogee exchanged 6,000,000 shares of its common stock for
     6,000,000 shares of Conagher's preferred stock. The Subscription  Agreement
     provided that between June 15, 1994 and September 15, 1994,  Conagher would
     redeem all or a portion of its preferred shares for $2,000,000.  At the end
     of that period, shares of Conagher preferred stock that remained unredeemed
     could be  exchanged  by Apogee  for an equal  number of shares of  Apogee's
     common  stock held by  Conagher.  Simultaneous  with the  execution  of the
     Subscription Agreement,  Conagher assigned, conveyed,  transferred, or sold
     (which  cannot be  determined  by  Apogee)  5,200,000  shares of the Apogee
     common stock it acquired from Apogee under the Subscription  Agreement,  to
     Importationes y Exportationes,  SA ("IMEXSA"),  a Nicaraguan company,  that
     subsequently  filed a Regulation S registration of the Apogee common stock.
     On June 5, 1994, Conagher agreed to purchase an additional 3,000,000 shares
     of Apogee's common stock for $1,000,000.


                                      -11-

<PAGE>

                             APOGEE ROBOTICS, INC.
                             (Debtor-in-Possession)

                         NOTES TO FINANCIAL STATEMENTS


     On  September  23, 1994,  Apogee and  Conagher  entered into an Amended and
     Restated   Stock   Acquisition   Agreement,   amending  the  May  12,  1994
     Subscription  Agreement and terminating  the June 5, 1994  agreement.  This
     Revised  Agreement  reduced the total payments to Apogee from $3,000,000 to
     $1,200,000.  It also provided for the purchase of an  additional  1,750,000
     shares of Apogee's  common stock for $310,000 prior to October 1, 1994. The
     Revised Agreement was purportedly  ratified by Apogee's Board of Directors.
     The Company contends that the Revised Agreement never closed.

     As of June 30,  1994,  1,021,400  shares  were  redeemed  for  $175,000  by
     Conagher.  During  fiscal 1995,  an  additional  $663,921 was received from
     Conagher,  and $23,623 of the Company's  liabilities were paid on behalf of
     the Company. Additionally,  $115,000 was received from another entity which
     was apparently on behalf of Conagher. However, this entity has filed claims
     in  bankruptcy  for this  amount,  therefore,  it has been  recorded  as an
     advance.

     A summary of common stock purchase warrants outstanding at June 30, 1996 is
     as follows:

                                         Number of   Exercise     Expiration
               Issued For                 Shares       Price         Date
     --------------------------------   ----------   --------    -------------
     Common stock ...................     506,456     $ 2.00      October 1996
     Services .......................     150,000     $ 1.00      January 1998
     Services .......................     150,000     $ 0.60     December 1996
     Services .......................     100,000     $ 0.75      January 1998
     Short-term debt ................      56,250     $ 0.75    September 1996*
     Services .......................      50,000     $ 0.88     February 1998
                                       ----------
     Total shares reserved for common
         stock purchase warrants ....   1,012,706
                                       ==========
     ----------------------
     *  Warrants expired unexercised subsequent to June 30, 1996.


8.   STOCK OPTION PLANS:

     The Company maintained the 1987 and 1988 Incentive Stock Option Plans which
     provide for the grant of up to 300,000 shares of the Company's common stock
     in the 1987 plan and  700,000  shares in the 1988  plan.  A 1994  Incentive
     Stock  Option  Plan  for  800,000  shares  was  terminated  when it was not
     submitted for approval by stockholders.

     Options  granted  pursuant to the stock option plans were  incentive  stock
     options within the meaning of the Internal Revenue Code. The exercise price
     of the  options  granted  under the plans was not less than the fair market
     value of the common  stock.  The options  were granted for terms of five or
     ten years.  No options were  exercisable  until at least one year following
     the date of the grant, and the options were subject to certain acceleration
     and termination provisions.


                                      -12-

<PAGE>


                              APOGEE ROBOTICS, INC.
                             (Debtor-in-Possession)

                          NOTES TO FINANCIAL STATEMENTS



     A summary of incentive stock option activity is as follows:

                                     Number of     Option      Exercisable
                                      Shares        Price     Option Shares
                                    ----------    ----------  -------------

       Outstanding, July 1, 1994     1,624,403    $.50-$2.00      764,403
           Cancelled ............   (1,624,403)   $.50-$2.00         --
                                                  ----------   ----------
       Outstanding, June 30, 1995         --            --           --
           Cancelled ............         --            --           --
                                    ----------    ----------   ----------

       Outstanding, June 30, 1996         --            --           --
                                    ==========    ==========   ==========

     Directors  of the Company  had  nonqualified  options to  purchase  125,000
     shares of common stock at prices ranging from $.50 to $1.375 per share. The
     options were terminated in fiscal 1995 pursuant to the terms and conditions
     of the plan.


9.   INCOME TAXES:

     The Company  has net  operating  loss  carryforwards  of  approximately  $9
     million  available  to  offset  future  taxable  income,  if  any;  the net
     operating losses expire in varying amounts  beginning in 1998 through 2011.
     However,  the net operating losses may be limited on an annual basis due to
     changes in control.

     The components of deferred tax assets  (liabilities)  in the balance sheet,
     which are fully eliminated by a valuation allowance, are as follows:

                                                             1996       
                                                          ----------    

         Net operating loss carryforwards ............   $ 3,315,000    
         Disputed claims .............................       658,000    
         Other, net ..................................       156,000    
                                                          ----------    
                                                           4,129,000    
         Less valuation allowance ....................    (4,129,000)   
                                                          ----------    
         Net deferred tax asset ......................   $     --       
                                                          ==========    




                                      -13-

<PAGE>

                              APOGEE ROBOTICS, INC.
                             (Debtor-in-Possession)

                          NOTES TO FINANCIAL STATEMENTS



10.  CASH FLOW INFORMATION:

     The  supplemental  disclosures  for the  statements  of cash  flows  are as
     follows:
                                                                  June 30,
                                                            --------------------
                                                              1996        1995
                                                            --------    --------

     Cash paid during the year for interest ............   $    --      $ 23,128
     Noncash investing and financing activities:
         Common stock and preferred shares issued
              for common and preferred shares of
              investees ................................   $    --      $   --
         Common stock and compensatory stock
              options and warrants issued for services
              and premiums on short-term debt ..........   $    --      $ 50,000
         Exchange of preferred shares for common
              shares ...................................   $    --      $830,894
         Advance from affiliate of Conagher paid for
              acquisition of AGVI ......................   $    --      $250,000
         Surrender of investments in payment of debt ...   $    --      $400,000


11.  CONTINGENCIES:

     The  Company  is a  defendant  in certain  legal  actions  with  creditors,
     investors and former investors.  All pre-petition claims will be subject to
     settlement in accordance with a plan of reorganization.












                                      -14-