FINANCIAL SUMMARY
<TABLE>
<CAPTION>

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

                                                                                                95 to 96     94 to 95
At or For Year Ended November 30                   1996           1995             1994         % Change     % Change
------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>           <C>             <C>                <C>        <C>   

Operations
------------------------------------------------------------------------------------------------------------------------

Net revenues                                      $6,142,954      $ 7,851,147       $ 9,472,585    (21.8)     (17.1)
Net gain from restructuring of operations         $        -      $   366,764       $         -      NA         NA
Operating income (loss)                           $  195,496      $(1,586,140)      $(1,387,147)     *         14.3
Income (loss) before income taxes (benefit)       $   16,602      $(2,246,272)      $(2,223,165)     *          1.0
Net income (loss)                                 $   45,431      $(2,344,163)      $(1,624,194)     *         44.3
Weighted average common shares outstanding         3,453,451        2,904,322         2,829,691     18.9        2.6

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

Per Share Data^
------------------------------------------------------------------------------------------------------------------------

Net income (loss)                                 $     .01        $    (.81)       $      (.57)    *         42.1
Cash dividends                                    $       -        $       -        $         -     NA         NA
Stockholders' equity                              $     .50        $     .48        $      1.20    4.2       (59.6)

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

Financial Position
------------------------------------------------------------------------------------------------------------------------

Assets                                            $4,556,794      $ 5,084,450       $13,188,231    (10.4)    (61.4)
Working capital                                   $1,416,912      $ 1,227,144       $ 1,935,720     15.5     (36.6)
Property and equipment                            $1,239,799      $ 1,357,555       $ 2,125,692     (8.7)    (36.1)
Long-term debt, less current maturities           $1,102,264      $ 1,170,311       $ 1,258,855     (5.8)     (7.0)
Stockholders' equity                              $1,717,941      $ 1,672,510       $ 3,476,378      2.7     (51.9)

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

Number of employees                                 28                   29                48
Number of stockholders                         approx. 1200       approx. 1200       approx. 1200

------------------------------------------------------------------------------------------------------------------------
</TABLE>
 * Because the data changes from negative to positive, the percentage of change
   is not meaningful.
 ^ Earnings (loss) per share, assuming full dilution, are equivalent to earnings
   (loss) per common share.


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





                                      INDEX
Financial Summary                                     1
Letter to Shareholders                                2
Selected Financial Data                               4
Management's Discussion and Analysis                  5
Independent Auditor's Report                         11
Balance Sheets                                       12
Statements of Operations                             14
Statements of Stockholders' Equity                   15
Statements of Cash Flows                             16
Notes to the Financial Statements                    18
Shareholder Information                              32
Directors and Officers                               32

                                   Page 1
                                     33


<PAGE>


                            DEAR FELLOW SHAREHOLDER:


In 1996, we accomplished our primary goal for the Company; namely, to put a stop
to the losses and return the Company to  profitability.  NDC  Automation is in a
turnaround mode.

I am pleased to report to you that the Company is  considerably  healthier today
than a year ago in almost every respect despite reduced revenues;  our financial
situation is stronger with an improved balance sheet, reduced fixed expenses and
a commitment  for a new banking  relationship;  our human  resources  are better
trained and better  motivated ; our goals,  markets and  strategies  are clearly
defined  and  documented  in a 3-year  revolving  Business  Plan ; our image and
reputation among our customers and users has improved .

Some of the important  events started in 1996 and  continuing  today include the
following:

(Bullet)  We established a working relationship with Munck Autech of Newport
          News, a well-known manufacturer of automated material handling
          equipment, and are supplying control products and engineering services
          to them for two AGV projects, one in the textile industry and one in
          the fast growing CD manufacturing industry.

(Bullet)  We entered into a three-party agreement with The Hyster Company, the
          leading US manufacturer of industrial trucks, and Mentor AGVS, a long
          time partner of ours, for the manufacture and engineering of a demo
          vehicle equipped with NDC laser navigation controls, Lazerway(TM). We
          recently received our first order from Hyster for controls for a
          project with the US Postal Service.

(Bullet)  We have received an order from Rapistan Demag, the largest material
          handling equipment manufacturer in the world, to supply NDC controls
          and engineering services for the retrofitting of an installed AGV
          system at a Ford facility.

(Bullet)  We commissioned a Charlotte market research company to execute an
          extensive market survey to evaluate our image, the market's awareness
          and perception of NDC and other facts relating to our technology. This
          survey has provided us with invaluable information for our future
          marketing strategy and communication program.

We have won a few important battles but not the war. Many challenges have yet to
be overcome in order to grow our  business and to  strengthen  the value of your
investment as a shareholder.  The main objective for 1997 is to firmly establish
our company as the leading supplier of components and technology to providers of
Automatic  Guided Vehicle  Systems ( AGVS ) and  Industrial  Trucks in the North
American market. To do this  successfully,  we will consistently  search for and
offer the best solutions to our  customers'  needs at the best possible value in
order to maximize their satisfaction.

                                       Page 2
                                         34

<PAGE>


NDC AB in Sweden,  an  affiliated  company and main  supplier  of  products  and
technology to the Company, is continuously investing large resources in research
and  development  in order to  improve  the  efficiency  and  benefits  of its
products.  One such  development  is the  "Teach-In",  a concept that will allow
operators of industrial  trucks a greater level of freedom and flexibility  than
exist in the market today. To lessen the dependence on a few dominating  product
areas, the Company is actively  exploring with existing and potential  suppliers
new business  opportunities  to expand its present  product lines to its primary
markets.

Finally,  some  comments on a more  personal  note. I strongly  believe that our
company has an important role to play in the markets we are  addressing,  namely
to  contribute  to  an  increased  level  of  automation  in  the  handling  and
transportation  of materials in North American  industries,  without which their
global   competitiveness  will  be  substantially   impaired.   Our  experience,
resources, products and technologies put us in an unique position to do this. We
are still,  however,  in a turn-around  situation and in a transition phase from
being more of a system  supplier to becoming a focused  distributor  of products
and services to OEM customers and material  handling systems  integrators . Such
transitions  usually  take  some  time and  require  consistent  execution  of a
long-term  strategy  before  momentum  is  gained  and  growth  is  achieved.  I
appreciate  your  understanding  and ask you to share the confidence I have in a
brighter and more profitable future.

I am  excited  about the  opportunities  that lie ahead and I thank you for your
continued interest and support.




Sincerely yours ,




/s/ RALPH DOLLANDER
Ralph Dollander
President and CEO



                                       Page 3
                                         35
<PAGE>


<TABLE>
<CAPTION>
                             SELECTED FINANCIAL DATA

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

                                                                   At or For Year Ended November 30
                                                -----------------------------------------------------------------------

                                                    1996          1995          1994           1993          1992
-----------------------------------------------------------------------------------------------------------------------
<S>                                            <C>            <C>           <C>            <C>           <C>  


Statements of Operations Data:
    Net revenues                                 $  6,142,954  $  7,851,147  $   9,472,585  $ 15,267,479  $ 11,147,089
    Cost of goods sold                              3,864,393     5,597,305      6,214,318     8,993,742     5,795,227
-----------------------------------------------------------------------------------------------------------------------
       Gross profit                              $  2,278,561  $  2,253,842  $   3,258,267  $  6,273,737  $  5,351,862
-----------------------------------------------------------------------------------------------------------------------

Net gain from restructuring of operations        $          -  $    366,764  $           -  $          -  $           -
-----------------------------------------------------------------------------------------------------------------------

Operating expenses:
    Selling                                      $    656,537  $    776,907  $     517,884  $    667,039  $     693,134
    General and administrative                      1,422,586     3,288,619      4,014,174     3,601,896      2,472,703
    Research and development                            3,942       141,220        113,356       224,418        178,738
    Public stock offering expense                           -             -              -       247,078              -
-----------------------------------------------------------------------------------------------------------------------
                                                 $  2,083,065  $  4,206,746  $   4,645,414  $  4,740,431  $   3,344,575
-----------------------------------------------------------------------------------------------------------------------
       Operating income (loss)                   $    195,496  $ (1,586,140) $ (1,387,147)  $  1,533,306  $   2,007,287
-----------------------------------------------------------------------------------------------------------------------

Net interest income (expense):
    Interest income                              $      7,771  $     9,025   $     32,417   $     15,681  $     22,120
    Interest expense                                 (186,665)    (669,157)      (868,435)      (311,013)     (390,235)
-----------------------------------------------------------------------------------------------------------------------
                                                 $   (178,894) $  (660,132)  $   (836,018)  $   (295,332) $   (368,115)
-----------------------------------------------------------------------------------------------------------------------

Income (loss) before income taxes (benefit)      $     16,602  $(2,246,272)  $ (2,223,165)  $  1,237,974  $   1,639,172
Federal and state income taxes (benefit)              (28,829)      97,891       (598,971)       475,047        611,442
-----------------------------------------------------------------------------------------------------------------------
       Net income (loss)                         $     45,431  $(2,344,163)  $ (1,624,194)  $    762,927  $   1,027,730
=======================================================================================================================


Weighted average number of
   common shares outstanding                       3,453,451     2,904,322      2,829,691     2,553,837      2,482,578
=======================================================================================================================

Earnings (loss) per common share:*               $       .01   $      (.81)  $      (.57)   $       .30   $        .41
=======================================================================================================================

Cash dividend declared per common share          $         -   $         -   $          -   $          -  $          -
=======================================================================================================================

Balance Sheets Data:
Working capital                                  $  1,416,912  $  1,227,144  $   1,935,720  $  2,268,784  $   1,773,345
Total assets                                     $  4,556,794  $  5,084,450  $  13,188,231  $ 14,481,806  $   7,933,042
Long-term debt, less current maturities          $  1,102,264  $  1,170,311  $   1,258,855  $  1,509,051  $   1,419,956
Total liabilities                                $  2,838,853  $  3,411,940  $   9,711,853  $ 10,346,333  $   5,234,866
Stockholders' equity                             $  1,717,941  $  1,672,510  $   3,476,378  $  4,135,473  $   2,698,176

</TABLE>

 * Earnings (loss) per share - assuming full dilution are equivalent to earnings
(loss) per common share.

                                       Page 4
                                         36
<PAGE>




                      MANAGEMENT'S DISCUSSION AND ANALYSIS

     The following  discussion and analysis  should be read in conjunction  with
the financial  statements  (including  the notes  thereto)  presented  elsewhere
herein.

Overview

     The  Company  derives  virtually  all of its  revenues  from  the  sale  of
hardware,   software  and  engineering  services  in  connection  with  projects
incorporating  its Automated Guided Vehicle (AGV) control  technology.  Prior to
1996 the  Company  was also  actively  involved  in the sale of Radio  Frequency
Identification  (RFID)  products.  In  years  prior to 1995  the  Company's  net
revenues from AGV systems,  vehicles and technology were derived  primarily from
sales to customers serving two industries -- textiles and newspaper  publishing.
Net revenues since 1995 however have been less concentrated in these industries.
The  Company's  results of  operations  can be  expected  to  continue to depend
substantially  upon the capital  expenditure  levels in those  industries and in
other  industries  that it may enter.  In  addition,  during  1996,  the Company
refocused its sales efforts to existing Original Equipment  Manufacturers  (OEM)
and system integrators in the AGV systems industry.  This significantly  reduces
the  potential  of selling  systems to end users as the  Company  wants to avoid
competing  with its  potential  customers.  To be  successful  the Company  must
convert several OEM and system integrators away from their AGV technology to the
Company's  technology.  Such technology transfers and agreements can take one to
several   years  before  the  Company   will   recognize   revenues   from  such
relationships.  Such  customers  must also replace in volume and margin what the
Company could  otherwise  obtain  selling  direct to end users.  There can be no
assurances  that such a strategy  will be  successful in the short or long term.
The net  revenues in RFID were  primarily  derived  from after  market  sales to
existing  customers in 1995.  The Company  assigned the  exclusive  distribution
agreement and manufacturing rights back to Statec Technologies SA, the Company's
supplier of such products in March of 1996.

     Due to the long sales cycle involved,  uncertainties in timing of projects,
and the large dollar  amount a typical  project  usually  bears to the Company's
historical  and  current  quarterly  and annual net  revenues,  the  Company has
experienced,  and  may  be  expected  to  continue  to  experience,  substantial
fluctuations in its quarterly and annual results of operations.

     The  Company  sells  its  products  and  services  primarily  in two  ways.
Vehicles,  technology and other products and services may be sold in a "project"
that becomes an integrated AGV system. The primary business is to sell hardware,
software and services as standard items, with less involvement by the Company 
in overall system design.  The Company  generally  would recognize lower
net revenue but would realize a higher gross profit margin percentage in selling
standard  items,  in each case  compared  to the sale of a  project,  due to the
inclusion in project sales of other vendors'  products and services with margins
generally lower than the Company's own products and services.  Between any given
accounting periods, the levels of and mixture of standard item sales and project
sales can cause  considerable  variance in net  revenues,  gross  profit,  gross
profit margin, operating income and net income.

     Revenues from  standard  item sales are  recognized  upon  shipment,  while
revenues from project sales are recognized  under the "percentage of completion"
method.  Under this method,  with respect to any particular  customer  contract,
revenues are recognized as costs are incurred  relative to each major segment of
the project. Although the percentage of completion method will ordinarily smooth
out over time the net revenue and profitability effects of large projects,  such
method nevertheless  subjects the Company's results of operations to substantial
fluctuations  dependent  upon the  progress  of work on project  segments.  Such
segments  can differ  markedly  from one  another in amount and in gross  profit
margin.

     Project  contracts are billed upon attainment of certain  "milestones." The
Company  grants  payment terms of 30 to 90 days to its  customers.  It typically
receives a cash advance  ranging from 10% to 20% of the total  contract  amount.
Bills are thereafter  delivered as milestones are reached.  Upon delivery of the
project,  the customer  typically  reserves a "retainage"  of 10% to 20% pending
system acceptance.


                                       Page 5
                                         37
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS


     Notwithstanding  the receipt by the Company of cash  advances  and periodic
payments  upon  reaching  project  milestones,  the  Company  requires  external
financing  for its costs  and  estimated  earnings  in  excess  of  billings  on
uncompleted contracts, inventories, receivables and other assets.

     The  Company's  backlog  consists of all amounts  contracted  to be paid by
customers but not yet recognized as net revenues by the Company.

Restructuring

     During 1995 the Company continued to incur significant  losses. Such losses
at the end of the third  quarter had reduced the  Company's  working  capital to
only  $521,261,  a level which was too low for current  operations.  The working
capital  issue  caused the  Company's  management  to evaluate  certain  Company
changes in an effort to reduce overhead and improve working capital. The changes
not only were attendant to address working capital issues,  but were designed to
address the following  concerns:  1) satisfy existing  banking  relationships 2)
return  operations to profitability 3) satisfy current vendors payable 4) remain
in compliance  with NASD listing  requirements,  and 5) focus  management on its
primary AGVS market in North America.

The following highlights major restructuring developments:

Sale of certain  intangible  assets related to Company's  laser  technology.  On
November 30,  1995,  the Company sold  certain  intangible  and tangible  assets
related  to its laser  technology  for  $1,000,000  to  Netzler &  Dahlgren,  an
affiliated  company.  The Company's  present  structure  does not lend itself to
manufacturing and research and development activities.  It has for the most part
relied on Netzler & Dahlgren for the research and  development  of AGVS products
it offers to its market. The Company's present financial  condition prevented it
from investing  adequately in the continued  development of the laser product it
owned.  The sale of such  products  to  Netzler  &  Dahlgren  accomplished  four
objectives for the Company:  1) significantly  increased  working capital due to
the  agreed  sell  price (see  Notes 9 and 14 of the  Financial  Statements)  2)
ensured continued  research and development by a vendor with adequate  resources
3) continued  access and distribution of the technology for the Company's market
due to the  existing  Master  License  Agreement  between the  companies  and 4)
reduced overhead expenses by approximately $500,000 annually going forward.

Sale of  Australian  operation.  On November  30,  1995,  the  Company  sold its
Australian  subsidiary  for  minimum  consideration  to  the  subsidiary's  head
engineer  who had been an  officer  since  its  inception.  The  Company,  after
evaluating the present lack of profitability from the Australian  operations and
potential growth for its products in that market, concluded that the cost versus
benefit was not as great compared to equivalent  time spent by management on the
North  American  market versus the  Australian  market.  The primary goal of the
transaction was to reduce  approximately  $300,000 of annual costs forward.  The
Company did not want to completely eliminate operations in Australia as existing
customers  require continued  engineering  support in that area. The sale of the
subsidiary ensured that such support would continue in that area.

Other product lines.  The Company also evaluated other product lines during this
process.  It  concluded  that with new  products  from  Netzler & Dahlgren,  the
Computer  Integrated  Manufacturing  (CIM) software from  Southeastern  Software
Developers  Inc.  (SSDI) for the  textile  industry  and CIM  software  from the
Australian subsidiary were less important to the Company's growth; therefore, it
eliminated the overhead costs associated with those products.

Assignment  of Statec  Distribution  Agreement.  Effective  March 1,  1996,  the
Company reassigned the exclusive  distribution and manufacturing rights in North
America for the Statec RFID product line back to the manufacturer. The agreement
for such an assignment provides for payments to the Company aggregating $183,000
plus the cost of inventory will be paid by Statec.

                                       Page 6
                                         38
<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

     As of January  31, 1997 Statec was in default  under the  agreement  by not
paying or  repurchasing  the inventory worth $71,272 and had not paid the agreed
installments of $6,000 monthly since December 1996. There remain a total number
of 19 unpaid installment equaling $114,000. In February of 1997, the Company was
notified that Statec became subject to a  court-ordered  liquidation  proceeding
under French law. The Company plans to vigorously  pursue its creditor claims in
such proceedings (see Note 13 of the Financial Statements).

Debt to Equity. The above  transactions,  however,  did not completely  increase
working capital to a level  acceptable to the Company's banks and creditors.  In
response to such parties' concerns on this issue, the Company effected a debt to
equity conversion of $550,000 in the aggregate priced at $1 of debt per share to
increase working capital and bring vendors current (see Note 11 of the Financial
Statements).

With the  completion of the  transactions  above the Company  achieved a working
capital of  $1,227,144  as of November  30, 1995 which was  adequate for current
operations.

RESULTS OF OPERATIONS

     The table below shows the relationship of income and expense items relative
to net  revenues for the fiscal  years ended  November 30, 1996,  1995 and 1994,
respectively.

                                                         Percentage of Change
                                                           Period to Period
                            Percentage of net Revenues   Increase (Decrease)
--------------------------------------------------------------------------------
                                                      Year Ended    Year Ended
                               For year Ended        November 30,   November 30,
                             1996     1995     1994  1995 to 1996  1994 to 1995
--------------------------------------------------------------------------------

Net Revenues                  100.0%   100.0%  100.0%     (21.8)%       (17.1)%
Cost of  goods sold            62.9     71.3    65.6      (31.0)         (9.9)
-------------------------------------------------------------------------------

Gross profit                   37.1     28.7    34.4         1.1        (30.8)
Restructuring gain                -      4.7       -     (100.0)            NA
-------------------------------------------------------------------------------

Operating expenses:
   Selling                     10.7      9.9     5.4      (15.5)          50.0
   General and administrative  23.1     41.9    42.4      (56.7)        (18.1)
   Research and development     0.1      1.8     1.2      (97.2)          24.6
                                         
-------------------------------------------------------------------------------

                                33.9    53.6     49.1     (50.5)         (9.4)
                              
-------------------------------------------------------------------------------

Operating income (loss)         3.2    (20.2)  (14.7)        *           14.3
                                      
Net interest expense            2.9      8.4     8.8      (72.9)        (21.0)
-------------------------------------------------------------------------------

Income  (loss)  before  income
taxes (benefit)                 0.3   (28.6)  (23.5)          *           1.0
Income Tax (benefit)           (0.4)    1.2    (6.3)          *         116.3
-------------------------------------------------------------------------------

Net income (loss)              0.7%   (29.9)% (17.2)%         *%         44.3%
===============================================================================
* Because the data changes from negative to positive, or from positive to 
  negative, the percentage of change is not meaningful.

                                       Page 7
                                         39

<PAGE>


                      MANAGEMENT'S DISCUSSION AND ANALYSIS


Fiscal Year Ended  November 30, 1996 Compared To Fiscal Year Ended  November 30,
1995.

     Net revenues  decreased by $ 1,708,193 or 21.8 %, from  $7,851,147  for the
fiscal  year ended  November  30, 1995 to  $6,142,954  for the fiscal year ended
November 30, 1996.  The primary reason for the decrease in 1996 compared to 1995
is that the Company recognized no revenues in 1996 from its two subsidiaries NDC
Laser AB (NDCL) and NDC  Australia  PTY  Ltd.(NDCTA),  which were sold  November
30,1995. The Company ceased to distribute its RFID product line in March of 1996
which also contributed to the Company  realizing lower net revenues in 1996 
compared to 1995 (see Note 13 of the Financial Statements).

     Cost of goods sold decreased from $5,597,305 to $3,864,393,  or 31.0%,  due
primarily  to the  decreased  level  of net  revenues.  As a  percentage  of net
revenues,  cost of goods sold  decreased  to 62.9%  compared  to 71.3% the prior
year,  due to a lower  percentage  of  non-standard  product  revenues and lower
engineering costs.  Gross profit increased by $24,719,  or 1.1%, from $2,253,842
to $2,278,561 due to the same factors.


     Selling  expenses  decreased from $776,907 to $656,537,  or 15.5% primarily
due  to  decreases  in  show,  personnel  and  general  selling  expenses.   The
elimination of the Company's two subsidiaries NDCL and NDCTA also contributed to
lowering selling expenses.  General and  administrative  expenses decreased from
$3,288,619  to  $1,422,586,  or 56.7%.  The  lower  general  and  administrative
expenses  were  the  result  of  reductions  in  personnel,   depreciation   and
amortization,  litigation  expenses  and a general  across the board  cutback of
expenses from the  Company's  restructuring  in November of 1995.  The Company's
sale of NDCL and NDCTA eliminated  approximately  $800,000 of fixed expenses for
the Company in 1996.

     Primarily as a result of the foregoing,  the operating  income increased by
$1,781,636, from a loss of $1,586,140 to a income of $195,496.

     Net interest  expense  decreased  from $660,132 to $178,894,  a decrease of
72.9%.  The decrease is primarily  due to reduced  borrowing  needs arising from
lower inventory levels, a significant cash receipt from the settlement of the
Schlafhorst  arbitration case in the fourth quarter of 1995, and the reduction 
of current debt resulting from the Company's restructuring.

     Income before income taxes increased by $2,262,874 , from a loss of
$2,246,272, to an income of $16,602 due primarily to the foregoing factors.

     The  Company  realized an income tax benefit of $28,829 in 1996 by applying
its current tax loss against its deferred tax  liability.  Income tax expense in
1995 of $97,891 was primarily due to income taxes of one of its subsidiaries.

     Primarily as a result of the foregoing, net income increased by $2,389,594,
from a loss of $2,344,163 to a net income of $45,431.

Backlog

     Backlog consists of all amounts  contracted to be paid by customers but not
yet recognized as net revenues by the Company. At November 30, 1996, the Company
had a backlog of approximately $780,000 compared to approximately $1,415,000 one
year earlier.  Substantial  fluctuations in backlog are considered normal due to
the size of AGV  system  contracts.  Substantial  fluctuations  in the  industry
makeup of the Company's backlog also are considered normal.


                                       Page 8
                                         40
<PAGE>


                      MANAGEMENT'S DISCUSSION AND ANALYSIS


Fiscal Year Ended  November 30, 1995 Compared To Fiscal Year Ended  November 30,
1994.

     Net revenues  decreased by $1,621,438  or 17.1%,  from  $9,472,585  for the
fiscal  year ended  November  30, 1994 to  $7,851,147  for the fiscal year ended
November 30, 1995. The arbitration during 1995 created uncertainty in the market
place  as  to  whether  the  Company  could  continue  as a  going  concern.  In
management's  opinion,  this uncertainty adversely affected actual and potential
customers  from placing  orders with the Company  resulting in lower backlog and
revenues in 1995. The RFID business was primarily replacement parts or additions
to existing facilities also limiting the potential for growth.

     Cost of goods sold  decreased from  $6,214,318 to $5,597,305,  or 9.9%, due
primarily  to the  decreased  level  of net  revenues.  As a  percentage  of net
revenues,  cost of goods sold  increased  to 71.3%  compared  to 65.6% the prior
year,  due to a higher  percentage  of  non-standard  product  revenues,  higher
engineering  costs,  cost  overruns  on  existing  projects  and a write down of
certain  inventory  due to  obsolescence.  The  net  effect  of the  Schlafhorst
arbitration award resulted in a reduction of cost of goods sold of approximately
$150,000.  Gross profit  decreased by $1,004,425,  or 30.8%,  from $3,258,267 to
$2,253,842 due to the same factors.

     The net gain from restructuring of operations of $366,764 in 1995 resulted
from the sale of certain assets related to its laser technology and the sale of
its two foreign subsidiaries, NDC Laser, AB. and NDC Australia PTY. Ltd. (see
Notes 9 and 14 of the Financial Statements).

     Selling  expenses  increased from $517,884 to $776,907,  or 50.0% primarily
due to increases in show,  personnel and general selling  expenses  enabling the
Company to  aggressively  pursue new market areas.  The receipt of export grants
from the Australian  government were lower in 1995 compared to 1994. General and
administrative  expenses decreased from $4,014,174 to $3,288,619,  or 18.1%. The
lower  general and  administrative  expenses  were the result of  reductions  in
personnel,  litigation  expenses  and a  general  across  the board  cutback  of
expenses.  The Company incurred additional costs of approximately  $370,000 when
such reduction in expenses were made in the third quarter of 1995.

     Primarily as a result of the foregoing, the operating loss increased by
$198,993, from $1,387,147 to a loss of $1,586,140.

     Net interest  expense  decreased  from $836,018 to $660,132,  a decrease of
21.0%. The decrease is primarily due to reduced borrowing needs arising from the
Schlafhorst projects which created negative cash flows for the Company.

     Loss before income taxes increased by $23,007 or 1.0%, from $2,223,165, to
a loss of $2,246,272 due primarily to the foregoing factors.

     The Company incurred an income tax expense of $97,891 in spite of the above
losses  compared to a benefit of $598,971  in 1994.  The primary  reason for the
1995 expense was the reduction of deferred tax assets whose  realization  is not
more likely than not. The Company was no longer able to carry back its 1995 year
loss as in the prior year due to the fact that the Company had received maximum 
refunds available for income taxes previously paid in 1994.

     Primarily as a result of the foregoing, net loss increased by $719,969, or
44.3%, from $1,624,194 to a net loss of $2,344,163.


                                       Page 9
                                         41
<PAGE>



                      MANAGEMENT'S DISCUSSION AND ANALYSIS


Liquidity and Capital Resources

The Company  experiences  needs for external sources of financing to support its
working capital,  capital  expenditures and acquisition  requirements  when such
requirements  exceed its cash generated from operations in any particular fiscal
period.  The  amount  and  timing  of  external  financing  requirements  depend
significantly  upon  the  nature,  size,  number  and  timing  of  projects  and
contractual billing  arrangements with customers relating to project milestones.
The Company has relied upon bank  financing  under a revolving  working  capital
facility,  as well as  long-term  debt and  capital  leases and  proceeds of its
public and private offerings, to satisfy its external financing needs.

During  the  year  ended  November  30,  1996  net cash  provided  by  operating
activities was $355,840.  The Company  reduced its inventory by $803,251  during
the year ending  November  30, 1996 which  allowed it to create  operating  cash
flows to reduce current liabilities.  The significant reduction in inventory was
primarily  due to successful  negotiations  with Netzler & Dahlgren in returning
$527,622 of excess inventory to Netzler & Dahlgren at the Company's cost.

The Company's  net cash used in financing  activities  was $85,119.  The Company
made timely  principle  payments of $237,961  towards its  long-term  borrowings
which were its mortgage payable, a note payable to a bank for $25,000 and a note
payable  to  Netzler &  Dahlgren  for  $200,000.  The line of credit  borrowings
increased as of November 30, 1996 due to a large  increase in  receivables.  The
line was significantly  reduced as the receivables were collected in December of
1996 and January of 1997.

The  Company  continues  to  operate  with its  line of  credit  under  modified
financial  covenants  and  cash  collateral  accounts.  The  net  effect  of the
collateral  accounts  gives the bank the  authority  to  monitor  the  Company's
outgoing cash flows.  The Company's line of credit of $1,200,000 at prime plus 1
1/2% was extended initially from March 31, 1996 to May 31, 1996 and then later
to November 29, 1996 at a lending rate of prime plus 4% .With each extension the
line became  smaller in  availability  and more  restrictive as to the borrowing
base  formula.  The line was then  further  extended to  February  28, 1997 to a
maximum of $750,000. The new borrowing base terms of the extension include 1) an
increase in the interest rate to prime plus 3.25% per annum 2) the percentage of
inventory  against which inventory is available was reduced to 40% from 50% to a
maximum of $300,000 3) allowing  only trade  receivables  that are not generated
from project  invoicing to be included in the borrowing base calculations and 4)
an irrevocable  standby  letter of credit of $450,000 in additional  collateral.
The Company's  present line of credit is due to expire  February 28, 1997. As of
February 15, 1997 the Company had $398,782 available under the current borrowing
base  calculation.  During  the  year  ending  November  30,  1996  the  Company
consistently  paid its  vendors  in a timely  manner  and  honored  all its loan
obligations.  In December  1996,  the Company  obtained a commitment  from a new
lender to  replace  the  existing  line to a  maximum  of  $1,250,000  with more
favorable  terms  for the  Company.  The new  lender  must  conclude  their  due
diligence  on the  Company  before  the line is  approved  and would  make funds
available.  The  Company  presently  has no  assurance  that  such  line will be
approved.

The Company believes that its working capital of $1,416,912 at November 30, 1996
is adequate for its current operations.


The assets and liabilities of the Company are primarily monetary in nature and
changes in interest rates have a greater impact on the Company's performance
than do the effects of inflation.

                                       Page 10
                                          42
<PAGE>

                        Independent Auditor's Report

To the Board of Directors
NDC Automation, Inc.
Charlotte, North Carolina

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


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

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

/s/ McGLADREY & PULLEN, LLP
Charlotte, North Carolina
January 24, 1997

                                       Page 11
                                          43

<PAGE>



                                 BALANCE SHEETS

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

                                                          November 30,
                                                      1996           1995
--------------------------------------------------------------------------------

      ASSETS (Note 5)

CURRENT ASSETS
     Cash and cash equivalents (Note 15)               $  399,501  $  164,781
     Accounts receivable, net (Notes 2 and 6)           1,526,390   1,203,137
     Inventories (Note 9)                               1,126,398   1,929,649
     Costs and estimated earnings in excess of
            billings on uncompleted contracts (Note 3)     49,277     123,260
     Prepaid expenses and other assets                     51,935      31,333
--------------------------------------------------------------------------------
             Total current assets                      $3,153,501  $3,452,160
--------------------------------------------------------------------------------
OTHER ASSETS                                           $   21,281  $   16,281
--------------------------------------------------------------------------------

PROPERTY AND EQUIPMENT
      Land                                             $  300,000  $  300,000
      Building and improvements                         1,126,623   1,126,623
      Furniture, fixtures, and office equipment           226,559     389,709
      Machinery and equipment                             153,572     371,512
      Software (Note 14)                                  102,650     103,557
      Vehicles                                             23,629      30,754

--------------------------------------------------------------------------------
                                                       $1,933,033  $2,322,155
       Less accumulated depreciation                      693,234     964,600

--------------------------------------------------------------------------------
                                                       $1,239,799  $1,357,555
--------------------------------------------------------------------------------
INTANGIBLE ASSETS (Note 4)                             $  142,213  $  258,454
================================================================================
                                                       $4,556,794  $5,084,450
================================================================================

See Notes to Financial Statements


                                       Page 12
                                         44
<PAGE>

                                 BALANCE SHEETS
<TABLE>
<CAPTION>

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

                                                                  November 30,
                                                              1996            1995
--------------------------------------------------------------------------------------
<S>                                                       <C>             <C> 

      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
     Note payable, bank (Note 5)                            $    847,217  $   644,375
     Current maturities of long-term debt (Note 5)                68,410      288,324
     Accounts payable and accrued expenses;
             including affiliates $422,050 at 1996
             and $25,104 at 1995 (Note 9)                        702,305    1,002,574
     Billings in excess of costs and estimated
             earnings on uncompleted contracts (Note 3)          118,657      277,527
     Deferred  income taxes  (Note 7)                                  -       12,216
--------------------------------------------------------------------------------------
             Total current liabilities                      $  1,736,589  $ 2,225,016
--------------------------------------------------------------------------------------
LONG-TERM DEBT (Note 5)                                     $  1,102,264  $ 1,170,311
--------------------------------------------------------------------------------------

DEFERRED INCOME TAXES  (Note 7)                             $          -  $    16,613
--------------------------------------------------------------------------------------

COMMITMENTS AND CONTINGENCIES (Note 10 )

STOCKHOLDERS' EQUITY (Notes 11, 12 and 15)
       Preferred stock, par value $.01 per share
             authorized 1,000,000 shares; no shares issued  $          -  $         -
       Common stock, par value $.01 per share;
             11,000,000 shares authorized
             at 1996 and 1995; 3,453,451 shares
             were issued at 1996
             and 1995, respectively                               34,534       34,534
       Additional paid-in capital                              4,211,566    4,211,566
       Accumulated deficit                                    (2,528,159)  (2,573,590)
-------------------------------------------------------------------------------------
                                                            $  1,717,941  $ 1,672,510
=====================================================================================
                                                            $  4,556,794  $ 5,084,450
=====================================================================================
</TABLE>


                                       Page 13
                                         45
<PAGE>


                            STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

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

                                                                  Years ended November 30,
                                                               1996          1995          1994
----------------------------------------------------------------------------------------------------
<S>                                                        <C>           <C>         <C>    

Net revenues (Notes 6 and 9)                                $  6,142,954   $ 7,851,147  $ 9,472,585
Cost of goods sold (Note 9)                                    3,864,393     5,597,305    6,214,318
----------------------------------------------------------------------------------------------------
    Gross profit                                            $  2,278,561   $ 2,253,842  $ 3,258,267
----------------------------------------------------------------------------------------------------

Net gain from restructuring of operations (Notes 9 and 14 ) $          -   $  366,764   $         -
----------------------------------------------------------------------------------------------------

Operating expenses:
      Selling                                               $    656,537   $   776,907  $    517,884
      General and administrative (Notes 10 and 13)             1,422,586     3,288,619     4,014,174
      Research and development                                     3,942       141,220       113,356
----------------------------------------------------------------------------------------------------
                                                            $  2,083,065   $ 4,206,746  $  4,645,414
----------------------------------------------------------------------------------------------------
            Operating income (loss)                         $    195,496   $(1,586,140) $ (1,387,147)
----------------------------------------------------------------------------------------------------

Net interest income (expense):
      Interest income                                       $      7,771   $     9,025  $     32,417
      Interest expense (Note 9)                                 (186,665)     (669,157)     (868,435)
----------------------------------------------------------------------------------------------------
                                                            $   (178,894)  $  (660,132) $   (836,018)
----------------------------------------------------------------------------------------------------

Income (loss) before income taxes                           $     16,602   $(2,246,272) $ (2,223,165)

Federal and state income taxes (benefit) (Note 7)                (28,829)       97,891      (598,971)
----------------------------------------------------------------------------------------------------
           Net income (loss)                                $     45,431   $(2,344,163) $ (1,624,194)
====================================================================================================

Average shares outstanding: (Note 15)
      Primary                                                  3,453,451     2,904,322    2,829,691
      Assuming full dilution                                   3,453,451     2,904,322    2,829,691
====================================================================================================

Primary earnings per common and
    common equivalent shares (Note 15 )                     $        .01   $     (.81)  $     (.57)
====================================================================================================

Earnings per common share-
    assuming full dilution (Note 15 )                       $        .01   $     (.81)  $     (.57)
====================================================================================================

Dividends per common share (Note 15 )                       $          -   $         -  $         -
====================================================================================================
</TABLE>

See Notes to Financial Statements

                                       Page 14
                                         46
<PAGE>



                       STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>

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


                                                                   Years Ended November 30,
------------------------------------------------------------------------------------------------------------------------------
                                                         1996                         1995                     1994
                                                 Amount         Shares        Amount        Shares       Amount      Shares
<S>                                          <C>             <C>          <C>              <C>       <C>           <C>

Common Stock:
        Balance, beginning                      $    34,534    3,453,451    $     29,024   2,902,514    $   25,655  2,565,662
        Stock options exercised (Note 12)                 -            -              10         937            24      2,352
        Issuance of common stock (Note 11)                -            -           5,500     550,000         3,345    334,500
==============================================================================================================================
        Balance, ending                         $    34,534    3,453,451    $     34,534   3,453,451    $   29,024  2,902,514
==============================================================================================================================

Additional Paid-in Capital:
       Balance, beginning                       $ 4,211,566                 $  3,666,335                $2,729,412
       Stock options exercised (Note 12)                  -                          731                     2,378
       Issuance of common stock (Note 11)                 -                      544,500                   934,545
==============================================================================================================================
       Balance, ending                          $ 4,211,566                 $  4,211,566                $3,666,335
==============================================================================================================================

Retained Earnings (Deficit):
       Balance (deficit), beginning             $(2,573,590)                $   (229,427)               $1,394,767
       Net income (loss)                             45,431                   (2,344,163)               (1,624,194)
==============================================================================================================================
       Balance (deficit), ending                $(2,528,159)                $(2,573,590)                $ (229,427)
==============================================================================================================================


Cumulative Currency Translation Adjustment:

       Balance, beginning                       $         -                 $     10,446                $  (14,361)
       Adjustment for period                              -                      (10,446)                   24,807
==============================================================================================================================
       Balance, ending                          $         -                 $          -                $   10,446
==============================================================================================================================

==============================================================================================================================
Stockholders' Equity at November 30             $ 1,717,941  3,453,451      $  1,672,510   3,453,451    $3,476,378  2,902,514
==============================================================================================================================
</TABLE>

See Notes to Financial Statements

                                       Page 15
                                         47
<PAGE>



                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

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

                                                                         Years ended November 30,
                                                                     1996         1995          1994
----------------------------------------------------------------------------------------------------------
<S>                                                                 <C>       <C>            <C>

CASH FLOWS FROM OPERATING ACTIVITIES
         Net income (loss)                                           $ 45,431   $(2,344,163)  $(1,624,194)
         Adjustments to reconcile net income (loss) to net
             cash provided by (used in) operating activities:
             Depreciation                                             149,107       403,996       466,215
             Amortization                                             103,364       221,481       215,044
             Amortization of unearned discount                              -        (1,588)       (3,325)
             (Decrease) increase in provision for doubtful accounts   (42,500)     (149,332)          -
             Currency translation (gain)                                    -       (24,745)      (10,973)
             Loss (gain) on sale of property and equipment             20,630         3,634        (1,306)
             Loss (gain) on foreign currency exchange rate             (3,103)        5,123           -
             Net restructuring gain                                         -      (366,764)          -
             Deferred income taxes                                    (28,829)       98,502      (79,451)
        Change in assets and liabilities:
             (Increase) decrease in accounts receivable              (280,753)    1,890,787      (991,418)
             Decrease in licence fee receivable                             -        38,412        20,000
             (Increase) decrease in inventories                       803,251      (267,030)      646,674
             (Increase) decrease in income tax receivable                   -       542,900      (356,421)
             Decrease in costs and estimated earnings in
                 excess of billings on uncompleted contracts           73,983     4,407,306        906,941
             (Increase) decrease in prepaid expenses
                 and other assets                                     (20,602)         (879)        37,597
             (Increase) decrease in long-term receivables              (5,000)      (10,519)         7,329
             Decrease in accounts payable
                 and accrued expenses                                (300,269)   (2,159,168)      (341,249)
             Increase (decrease) in billings in excess of costs and
                estimated earnings on uncompleted contracts          (158,870)     (950,271)       662,454
             Decrease in income taxes payable                               -       (55,828)       (6,008)
----------------------------------------------------------------------------------------------------------
             NET CASH PROVIDED BY (USED IN)
                 OPERATING ACTIVITIES                                $355,840   $ 1,281,854   $  (452,091)
----------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
        Proceeds from the sale of property and equipment             $  1,941   $    12,503   $     5,202
        Proceeds from  the sales of  subsidiaries and related assets        -     1,000,000            -
        Purchase of property and equipment                           (41,045)      (66,418)       (90,616)
----------------------------------------------------------------------------------------------------------
             NET CASH PROVIDED BY ( USED IN)
                  INVESTING ACTIVITIES                               $(39,104)  $   946,085   $   (85,414)
----------------------------------------------------------------------------------------------------------
</TABLE>

See Notes to Financial Statements

                                       Page 16
                                          48
<PAGE>


                                           STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

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

                                                                      Years ended November 30,
                                                                  1996         1995          1994
---------------------------------------------------------------------------------------------------
<S>                                                              <C>       <C>          <C>    

CASH FLOW FROM FINANCING ACTIVITIES
        Net borrowings (payments) on revolving credit agreement   $202,842   $(2,934,404) $(480,346)
        Principle payments on long-term borrowings,
            including capital lease obligations                   (287,961)     (130,409)  (474,716)
        Proceeds from current and long-term borrowings                   -       200,000          -
        Net proceeds from exercise of stock options
             and common stock issued                                     -       550,741    940,291
---------------------------------------------------------------------------------------------------

             NET CASH  USED IN
                  FINANCING ACTIVITIES                            $(85,119)  $(2,314,072) $ (14,771)
---------------------------------------------------------------------------------------------------
       Effect of foreign currencies exchange rate changes
          on cash and cash equivalents                            $  3,103   $   (5,123)  $       -
---------------------------------------------------------------------------------------------------
       Increase (decrease) in cash and cash equivalents           $234,720   $  (91,256)  $ (552,276)

      Cash and cash equivalents:

           Beginning                                               164,781      256,037     808,313
---------------------------------------------------------------------------------------------------
           Ending                                                 $399,501   $  164,781   $ 256,037
===================================================================================================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION 
       Cash payments ( receipts) for :
           Interest                                               $187,614   $  669,157   $ 887,773
           Income taxes                                           $      -   $ (489,423)  $(149,378)

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
    AND FINANCING ACTIVITIES

         Issuance of common stock                                        -      550,741         -
---------------------------------------------------------------------------------------------------
                                                                  $      -   $  550,741   $     -
===================================================================================================
</TABLE>

                                       Page 17
                                          49
<PAGE>





                          NOTES TO FINANCIAL STATEMENTS

Note 1.  Nature of Business and Significant Accounting Policies

Nature of business:

The Company was formed to acquire, develop, market, and sell hardware,  software
and  engineering  services  that  are  incorporated  into  and  used to  control
automatic  guided  vehicle  systems  ("AGVS").  The Company  also  marketed  and
distributed product identification devices using radio frequency  identification
("RFID") technology.  The Company markets its products and services to designers
of integrated  automation  systems,  original equipment  manufacturers,  and end
users primarily within the North American continent. On July 1, 1992 the Company
purchased  a  wholly-owned  subsidiary,   NDC  Technology  Australia  Pty.  Ltd.
("NDCTA")  which was  formed  for the same  purposes  as the  Company  but which
attempted to take  advantage of the  opportunities  in the Pacific  basin market
area. On June 22, 1993 the Company  acquired the assets of  AutoNavigator  AB, a
Swedish   manufacturer  of  laser  guidance  software  and  related   equipment,
whereupon,  a new  subsidiary,  NDC Laser AB ("NDC Laser") was formed to produce
and distribute these assets.

In an effort to focus the  Company  on its  primary  AGVS  product  line and its
business in North America, the Company sold certain intangible assets related to
its laser  technology and its stock in NDC Laser and NDCTA on November 30, 1995.
In February of 1996 the Company  reached an agreement with its primary  supplier
of  RFID  equipment,  Statec  Technologies,  S.A.,  to  reassign  the  Company's
exclusive  distribution and  manufacturing  rights for North America back to the
manufacturer. The effective date of the transfer was March 1, 1996. A summary of
the Company's significant accounting policies follows:

Principles of consolidation:

The consolidated financial statements as of and for the years ended November 30,
1995  and  1994,  respectively  include  the  accounts  of the  Company  and its
wholly-owned  subsidiaries,  NDCTA  and NDC  Laser.  All  material  intercompany
balances and  transactions  were  eliminated  in  consolidation.  The  financial
statements for 1996 are not  consolidated  as both NDCTA and NDC Laser were sold
on November 30,1995.

Revenue recognition:

The  Company  recognizes  revenue  from the  sales  of  commercial  products  as
shipments are made.

The Company recognizes  revenues under long-term  contracts on the percentage of
completion method, measured by the percentage of each component cost incurred to
date to  estimated  total  component  contract  costs for each  component in the
contract.   Component  costs  include  material,  direct  labor,   subcontracts,
engineering overhead,  and miscellaneous costs.  Provisions for estimated losses
are made in the period in which they first become determinable.

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

Estimates:

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



                                       Page 18
                                         50
<PAGE>





                          NOTES TO FINANCIAL STATEMENTS


Note 1.  Nature of Business and Significant Accounting Policies (Continued)

Cash and cash equivalents:

For purposes of reporting the  statements of cash flows,  the Company  considers
all cash  accounts  (see  Note  15),  and all  highly  liquid  debt  instruments
purchased with a maturity of three months or less, to be cash equivalents.

Inventories:

The  inventories  are  priced at the lower of cost or  market,  with cost  being
determined by the weighted  average  method.  Inventories  consist  primarily of
parts for computerized  material  handling systems  purchased from the affiliate
Netzler & Dahlgren and  motor-in-wheel  drive units  purchased from  Schabmuller
GMBH.

Property and equipment:

Property and  equipment is stated at cost.  Depreciation  and  amortization  are
primarily  computed  using the  straight-line  method over the following  useful
lives:
                                                            Years

          Building and improvements                         21-28
          Furniture, fixtures and office equipment            4-7
          Machinery and equipment                             3-5
          Software                                            3-5
          Vehicles                                            3-5


When certain  property and equipment  are fully  depreciated  or amortized  (and
cannot be resold),  it is the  Company's  practice to write off the cost against
accumulated  depreciation,  or  amortization,  so  that  only  costs  not  fully
depreciated  are carried on the balance sheet.  For the years ended November 30,
1996 and 1995,  the Company has  cumulatively  written off $908 and  $982,616 of
fully depreciated software, $221,543 and $39,780 of machinery and equipment, and
$193,955 and $142,379 of furniture and office equipment, respectively.

Foreign currency translation:

Payables to foreign  companies that are  denominated  in foreign  currencies are
translated  at rates that  approximate  the  year-end  foreign  exchange  rates.
Resultant  gains or losses are  reflected  in cost of goods  sold.  The costs of
items of foreign origin which are included in inventory have been  translated at
historical exchange rates prevailing at the date of acquisition.

Forward  exchange  contracts  are  purchased to hedge  general  exposed  foreign
currency  net asset or  liability  positions.  Gains  and  losses  from  forward
exchange  contracts  that are intended to hedge  identifiable  foreign  currency
commitments  are included in the  measurement  of the related  foreign  currency
transaction.  Management  may from time to time enter into  speculative  hedging
transactions  depending on market conditions.  Gains and losses from such hedges
are  recognized  in the  determination  of net income  (loss) as exchange  rates
fluctuate.

The functional  currency for the Company's foreign  operations is the applicable
local currency.  The translation of the foreign  currencies into U.S. dollars is
performed for balance sheet accounts  using current  exchange rates in effect at
the balance  sheet date and for revenue  and expense  accounts  using a weighted
average exchange rate during the period.


                                       Page 19
                                          51
<PAGE>





                          NOTES TO FINANCIAL STATEMENTS

Note 1.  Nature of Business and Significant Accounting Policies (Continued)

Income taxes:

Provisions for income taxes are provided on a liability  method whereby deferred
tax  assets are  recognized  for  deductible  temporary  differences,  operating
losses,  and  tax  credit  carryforwards,   and  deferred  tax  liabilities  are
recognized for taxable  temporary  differences.  Temporary  differences  are the
differences between the reported amounts of assets and liabilities and their tax
bases.  Deferred tax assets are reduced by a valuation  allowance  when,  in the
opinion of  management,  it is more likely than not that some  portion or all of
the  deferred  tax  assets  will  not  be  realized.  Deferred  tax  assets  and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.

Intangible assets:

The  marketing  and  manufacturing  rights  are  recorded  at cost and are being
amortized  by the  straight-line  method  over ten years.  NDC Laser  rights and
product  rights,   patents  and  the  Statec   Technologies,   S.A.   ("Statec")
distribution  agreement  were also  recorded at cost and were  amortized  by the
straight-line  method over five, ten and ten years,  respectively.  The goodwill
recognized in the business  acquisition of NDCTA  represented  the excess of the
cost of acquiring the company over the fair value of the net assets  received at
the date of acquisition.  Goodwill was amortized over a 20 year period using the
straight-line method.

The  Company  annually  assesses  the  remaining  unamortized  amounts  of  such
intangible  assets to  determine if  impairment  has  occurred.  The Company has
written  off  the  remaining  unamortized  goodwill  related  to  NDCTA  as  the
subsidiary  was sold November 30, 1995. The  intangibles  related to Statec were
fully amortized during 1995 except for the patent,  marketing and  manufacturing
rights;  however,  such rights,  were written-off during 1996 as the Company and
Statec  entered into an agreement  which  reassigned  all the rights back to the
manufacturer in March of 1996 ( see Note 13 for recent developments).


Research and development costs:

Research  and  development  costs are charged to expense  when  incurred and are
included in the statements of operations.  However,  certain qualifying expenses
after the research and  development  phase was  completed  were  capitalized  in
accordance with Financial  Accounting  Standard No. 86, "Computer Software to be
Sold, Leased or Otherwise Marketed".


Earnings (losses) per common share:

Primary earnings  (losses) per common and common equivalent share are calculated
using the weighted average number of common shares  outstanding during each year
and on the net  additional  number of shares  which would be  issuable  upon the
exercise of employee stock options,  assuming that the Company used the proceeds
received to purchase additional common shares at market value.

Fully diluted earnings  (losses) per common and common  equivalent share use the
same computations.

                                       Page 20
                                          52
<PAGE>


                          NOTES TO FINANCIAL STATEMENTS


Note 2. Accounts Receivable

Accounts  receivable  consist of the  following  at November  30, 1996 and 1995,
respectively:


                                                      1996          1995
------------------------------------------------------------------------------
Trade and contract, including $0 retainages   $      1,550,632   $  1,215,749
Less: Allowance for doubtful accounts                  (65,000)       (87,500)
------------------------------------------------------------------------------
                                              $      1,485,632   $  1,128,249
Other                                                   36,515         72,500
Officers and employees                                   4,243          2,388
------------------------------------------------------------------------------
                                              $      1,526,390   $  1,203,137
=============================================================================








Note 3.  Costs and Estimated Earnings on Uncompleted Contracts

Costs and estimated  earnings on uncompleted  contracts consist of the following
at November 30, 1996 and 1995, respectively:



                                                             1996     1995
------------------------------------------------------------------------------
Costs incurred on uncompleted contracts                $  280,606  $ 1,104,414
Estimated earnings                                        155,075      407,251
------------------------------------------------------------------------------
                                                          435,681  $ 1,511,665
Less billings to date                                    (505,061)  (1,665,932)
------------------------------------------------------------------------------
                                                       $  (69,380) $  (154,267)
===============================================================================
Included in the accompanying balance sheets under the
  following captions:



Included in the accompanying balance sheets under the following captions:


                                                             1996         1995
------------------------------------------------------------------------------
Costs and estimated earnings in excess of billings
     on uncompleted contracts                          $   49,277  $   123,260

Billings in excess of costs and estimated earnings
     on uncompleted contracts                            (118,657)    (277,527)
------------------------------------------------------------------------------
                                                       $  (69,380) $  (154,267)
===============================================================================




                                       Page 21
                                          53
<PAGE>


                          NOTES TO FINANCIAL STATEMENTS


Note 4.  Intangible Assets

The Company had certain other intangible patents,  marketing,  and manufacturing
rights that had been acquired  from Statec.  These rights were to be returned to
Statec per the termination and release  agreement between the Company and Statec
(see Note 13). Therefore during 1996 the Company removed such intangibles.

Product  rights  were  purchased  from  Netzler  &  Dahlgren  Co AB in  1993  to
compliment the technology acquired by the Company from Autonavigator AB. The NDC
Laser rights were sold to Netzler and Dahlgren on November 30, 1995 (see Notes 9
and 14) as part of restructuring the Company.  Intangible assets at November 30,
1996 and 1995, respectively, consisted of the following:

                                                       1996      1995

--------------------------------------------------------------------------
Marketing rights                                   $        -   $  38,212
Manufacturing rights                                        -      72,247
Patents                                                     -      25,000
Netzler & Dahlgren navigator card products rights     449,092     449,092
--------------------------------------------------------------------------
                                                      449,092   $ 584,551
Less accumulated amortization                         306,879     326,097
--------------------------------------------------------------------------

                                                   $  142,213   $ 258,454
==========================================================================


Note 5.  Pledged Assets, Note Payable, Bank and Long-Term Debt

The Company has the following note payable to a bank at November 30, 1996:

Line of credit for $750,000 is with interest
at prime plus 3.25%. Advances under the line
of credit will not exceed the lesser of the
sum of 80% of the Company's current accounts
receivable that are not project receivables,
40% of the book value of its current
inventory to a maximum of $300,000. The line
is additionally secured by an irrevocable
standby letter of credit of $450,000. The
line of credit also contains 
financial covenants to which the Company must
adhere. As of November 30,1996, the Company
was not in compliance with certain of these 
covenants,  however this credit facility is 
being paid with funds from a new line of 
credit. The termination date of the line
is February 28, 1997. (1)(2) In December 1996
the Company obtained a commitment from a new
lender to replace the existing line to a
maximum of $1,250,000. The new lender must
conclude its due diligence on the Company
before the loan is approved.                                        $ 847,217
================================================================================

Long-term debt consists of the following at November 30, 1996:

Mortgage note payable to a bank, based on a
7.75% fixed rate. Original principal balance
to be repaid in fifty-nine (59) consecutive
monthly principal and interest payments of
$13,057, with one final payment of
approximately $1,083,660 due on February 10,
1998. The note is collaterized by the
Company's land and building with a carrying
value of $ 1,061,556 The loan also contains
certain financial covenants to which the
Company must adhere. As of November 30,1996,
the Company obtained waivers for certain
financial covenants as specified by
the line of credit agreement.                                    $ 1,170,674

Less current maturities:                                              68,410
--------------------------------------------------------------------------------

                                                                 $ 1,102,264
================================================================================

(1) The prime rate at November 30, 1996 was 8.25%
(2) The line of credit is secured by a first priority  security  interest in the
    Company's accounts receivable, inventory, software and intangibles.

                                       Page 22
                                          54
<PAGE>


                          NOTES TO FINANCIAL STATEMENTS


Note 5.  Pledged Assets, Note Payable, Bank and Long-Term Debt (continued)

Maturities of long-term debt at November 30, 1996 are as follows:

Year Ending
November 30
-------------------------------------------------------------------------------

1997                                                               $     68,410
1998                                                                  1,102,264
===============================================================================
                                                                   $  1,170,674
===============================================================================


Note 6.  Major Customers

Net revenues and accounts  receivable as of and for the years ended November 30,
1996,  1995,  and  1994,  respectively,  include  sales to the  following  major
customers  (each of which accounted for 10% or more of the total net revenues of
the Company for those years):

                           Amount of Net Revenues
                           Year Ended November 30,

Customer                                1996             1995            1994
-------------------------------------------------------------------------------

A                                     $      *    $  1,033,991      $        *
B                                            *       1,007,997       1,325,797
C                                            *         903,210               *
D                                      666,457               *               *

                             Accounts Receivable
                                November 30,

                                       1996             1995            1994
-------------------------------------------------------------------------------

A                                       $     *    $     75,847       $       *
B                                             *               -         638,867
C                                             *         143,710               *
D                                        76,448               *               *


*Not a major customer.

Because  of the  nature of the  Company's  business,  the major  customers  vary
between years. Company B is NDC, Netzler & Dahlgren Co. AB (see Note 9)

                                       Page 23
                                          55
<PAGE>


                          NOTES TO FINANCIAL STATEMENTS


Note 7.   Income Taxes


Income taxes (benefit)  consist of the following  components for the years ended
November 30, 1996, 1995, and 1994, respectively:
                                           1996        1995              1994
-------------------------------------------------------------------------------

Current                           $      -    $          (611) $      (519,520)
Deferred                          $(28,829)            98,502          (79,451)
-------------------------------------------------------------------------------
                                  $(28,829)   $        97,891  $      (598,791)
===============================================================================

Net deferred tax assets (liabilities)  consist of the following components as of
November 30, 1996 and 1995, respectively:

                                                    1996            1995
--------------------------------------------------------------------------------
Deferred tax liabilities:
     Capitalized research and development cost  $             -  $       28,000
     Unrealized gain on foreign currency exchange             -             829
--------------------------------------------------------------------------------
                                                $             -  $       28,829
--------------------------------------------------------------------------------
Deferred tax assets:
     Allowance for doubtful accounts            $        25,425  $       34,230
     Inventory valuation reserves                        43,524          82,152
     Capitalized cost in ending inventory                11,479           9,099
     Net operating loss carryforward                    803,195         790,698
     General business credit carryforwards              206,547         220,069
     Depreciation                                           162          11,670
     Other reserves                                       6,063               -
     Unrealized losses or foreign currency exchange       1,637               -
--------------------------------------------------------------------------------
                                                $     1,098,032  $    1,147,918

     Less valuation allowance                         1,098,032       1,147,918
--------------------------------------------------------------------------------

     Net deferred tax liabilities               $             -  $     ( 28,829)
================================================================================



The net deferred tax assets  (liabilities)  mentioned above have been classified
on  the  accompanying   Balance  Sheets  as  of  November  30,  1996  and  1995,
respectively, as follows:
                                                      1996             1995
-------------------------------------------------------------------------------
Current liabilities                                 $      -    $      (12,216)
Non-current liabilities                                    -           (16,613)
================================================================================
                                                    $      -    $      (28,829)
===============================================================================

                                      Page 24
                                         56
<PAGE>


                          NOTES TO FINANCIAL STATEMENTS


Note 7.   Income Taxes (continued)

The changes in the valuation  allowance  for the years ended  November 30, 1996,
1995 and 1994 were $(49,886), $845,970 and $301,948, respectively. The valuation
reserve is the result of management's  determination that the Company may not be
able to  generate  sufficient  future  taxable  income to realize  the  recorded
deferred tax assets.

A reconciliation of the statutory income tax to the income tax expense (benefit)
included in the Statements of Operations is as follows:

<TABLE>
<CAPTION>


                                                        Years Ended November 30,
                                         1996                  1995               1994
--------------------------------------------------------------------------------------------------
                                             % of                   % of                 % of
                               Dollar        Pre-tax   Dollar       Pre-tax     Dollar   Pre-tax
                               Amount        Income    Amount       Income      Amount   Income
-------------------------------------------------------------------------------------------------
<S>                           <C>           <C>       <C>          <C>       <C>       <C>

Statutory federal income
  tax (benefit)                  $    5,645     34.0   $  (763,427)  (34.0) $  (755,876)   (34.0)
                                      
Increase (decrease) in
taxes resulting from:
State income taxes                    1,873     11.3       (61,423)   (2.7)    (113,279)    (5.1)
Changes in valuation allowance     (49,886)   (300.5)      845,970    37.7      301,948     13.6
General business tax credits              -         -            -       -     (45,407)     (2.0)
Other                                13,529    (81.6)       76,771     3.4       13,643       .6
=================================================================================================
                                $  (28,829)   (173.6)  $    97,891     4.4 $  (598,971)    (26.9)
=================================================================================================

</TABLE>

                                       Page 25
                                          57

<PAGE>


                          NOTES TO FINANCIAL STATEMENTS



Note 8.   Profit Sharing Plan

The  Company  has  a  profit  sharing  plan,  the  contributions  to  which  are
discretionary.

The Company  established a 401(k) profit  sharing plan during 1990 to which both
the Company and  eligible  employees  may  contribute.  The Company  may, at its
discretion,  match the participant's  contribution quarterly, up to a maximum of
$700 per plan year. The Company's  contribution for the years ended November 30,
1996, 1995 and 1994 amounted to $18,550, $0, and $0, respectively.


Note 9.   Related Party Transactions

The  Company is related to NDC,  Netzler & Dahlgren  Co. AB (Netzler & Dahlgren)
through common ownership (see Note 11).

Netzler & Dahlgren is the Company's largest supplier of AGVS control technology.
Accordingly,  the Company's success is dependent upon its ability to obtain such
products on a timely  basis.  Although  the  Company has entered  into a written
agreement with Netzler & Dahlgren for the supply of such products,  there can be
no assurance  that this company will continue to fulfill its  obligations  under
the agreement.

On December 1, 1987, the Company signed a ten (10) year master license agreement
with Netzler & Dahlgren to purchase certain products at prices stipulated in the
agreement.  The Master License Agreement was set to expire December 1, 1997, and
provided for certain  royalty  payments  based on 10% of revenues on license fee
contracts  entered  into after  November 30,  1987.  On November  30, 1995,  the
Company  entered into a restated  Master License  Agreement which resulted in an
additional ten year term through November 30, 2005.

On November 30, 1995 the Company sold certain  intangibles  related to its laser
technology and its stock in NDC Laser to Netzler & Dahlgren for $1,000,000.  The
net  effect of the sale  caused  the  Company to  immediately  increase  working
capital and realize a restructuring  gain on the  transaction  (see Note 14). As
part of the sales price the Company receives  contingent laser fees from Netzler
&  Dahlgren  for the  years  ending  1996,  1997 and 1998.  For the year  ending
November 30, 1996 the Company earned and netted against trade payables  $174,750
in laser fees to Netzler & Dahlgren.

At November 30, 1995,  trade  payables  were  converted to a note payable due to
Netzler & Dahlgren in the amount of $200,000. The maturity date was May 31, 1996
and accrued interest of 10 1/2% annually. The note payable was fully paid during
1996.


                                       Page 26
                                         58
<PAGE>


                          NOTES TO FINANCIAL STATEMENTS



Note 9.   Related Party Transactions (Continued)


The Company had the following transactions with Netzler & Dahlgren for the years
ended November 30, 1996, 1995, and 1994, respectively:



<TABLE>
<CAPTION>

                                                            1996           1995          1994
<S>                                                     <C>            <C>             <C>   
---------------------------------------------------------------------------------------------------
Sales                                                    $     261,199  $   1,007,997  $  1,325,797
===================================================================================================
Purchases of hardware, software & engineering services   $   1,049,324  $     737,375  $    550,000
===================================================================================================
Interest expense                                         $           -  $     279,540  $    428,717
===================================================================================================
Litigation support expense                               $           -  $           -  $    233,000
===================================================================================================
</TABLE>



For the years ended November 30, 1996, 1995, and 1994, royalties expense was $0,
$500, and $1,250, respectively. During 1996 the Company returned for full credit
$527,622  worth of  inventory  to Netzler & Dahlgren  to improve  its  liquidity
position.

Note 10.  Commitments

At November 30, 1996, the Company had no outstanding forward exchange contracts.
These contracts are purchased as needed to hedge  identifiable  foreign currency
commitments.

The Company leases  property and equipment  under  operating  leases expiring on
various  dates  through  August,  2001.  Rental  expense,   including  rent  for
facilities rented on a month-to-month basis, was $38,514, $201,183, and $303,064
for the years ended November 30, 1996, 1995, and 1994, respectively.

Minimum rental commitments under long-term operating leases at November 30, 1996
were as follows:

1997                     $    70,935  
1998                          27,429   
1999                          14,103   
2000                           8,227   
2001                           5,008   
                    -----------------
                          $  125,702
                    =================



The Company has an employment  contract with the President  which provides for a
minimum  annual base salary of $120,000  plus  $12,000  being  contributed  to a
retirement  plan.  The base salary is subject to annual  reviews.  The  contract
expires on March 1, 1999.

Note 11.  Issuance of Common Stock

On November 30, 1995, the Company issued 550,000 shares of its common stock, par
value  $.01 per  share by  converting  $550,000  of debt  payable  to  Netzler &
Dahlgren (see Note 9) to equity shares.  The price for the shares sold was $1.00
per share and the shares are restricted pursuant to Rule section 144 promulgated
under the Securities Act of 1933.

On March 25,  1994,  the Company sold 334,500  shares of its common  stock,  par
value  $.01  per  share  in  an  offering  executed  pursuant  to  Regulation  S
promulgated by the Securities and Exchange Commission. These shares could not be
transferred or sold in the U.S. or to U.S.  persons (as defined in Regulation S)
until May 5, 1994.  The net  proceeds to the Company from the sale of the shares
was $937,890  (after  deducting  discounts  and other  offering  expenses).  The
Company applied an estimated $186,000 of such proceeds to repay seller financing
provided  to  purchase  Autonavigator  AB's  assets.  The  Company  applied  the
remainder of such proceeds to working capital and other general corporate needs.

                                       Page 27
                                          59
<PAGE>


                          NOTES TO FINANCIAL STATEMENTS


Note 12.  Stock Option Plans

On October  10,  1990,  the  Compensation  Committee  of the Board of  Directors
adopted the NDC  Automation,  Inc.  1990 Stock Option Plan ("the 90 Plan"),  the
adoption of which was ratified by the shareholders at the annual meeting held on
April 10, 1991. In September  1992, the Company  registered up to 178,613 shares
of common stock for issuance. On October 23, 1993, the Compensation Committee of
the Board of Directors  adopted the NDC Automation,  Inc. 1993 Stock Option Plan
("the 93 Plan"),  the adoption of which was ratified by the  shareholders at the
annual  meeting  held on May 5, 1994.  On  December  7, 1996 , the  Compensation
Committee of the Board of Directors adopted The NDC Automation,  Inc. 1997 Stock
Option Plan ("the 97 Plan"),  to be ratified by the  shareholders  at the annual
meeting to be held April 25, 1997.

Options to purchase  174,375 shares of common stock were granted pursuant to the
90 Plan and are  available  for  exercise  upon  achievement  by the  Company of
certain financial performance targets set by the Board of Directors on an annual
basis.  The options will be exercisable  for a term of ten years,  commencing on
the date of the grant at an exercise price of $.7917 to $1.56 for new employees.
The 93 Plan  authorized  100,000  options to  purchase  common  stock,  of which
100,000 were granted and are  available  for exercise  upon  achievement  by the
Company of certain financial  performance  targets set by the Board of Directors
on an annual basis.  On October 24, 1994, the 93 Plan options were repriced with
approval  by the  Compensation  Committee  at an  exercise  price of  $1.56. On
November 30, 1995 as part of his termination package, 30,000 options were 
issued to Mr. Lofgren at a price of 1.4419. These options with a price in excess
of fair value were approved by the Board of Directors and are not part of any 
formal Stock Option Plan. Such options are exercisable without restriction. 
The 97 Plan authorized 225,000 options to purchase common stock, of which 
210,000 were granted and are available for exercise  upon achievement by the 
Company of certain financial  performance targets set by the Board of 
Directors on an annual basis.

Of the 274,375 total shares of common stock granted, the Compensation  Committee
granted to the  Company's  current  and  former  executive  officers  options to
purchase  120,375  shares of common stock at an exercise price of $.7917 for the
90 Plan,  18,000 shares of common stock for the 93 Plan at an exercise  price of
$1.56, and 75,000 shares of common stock were granted  January,  1997 for the 97
plan at an exercise price of $.50 . The exercise price of the options granted is
based on the fair market  value of the common stock for the five  business  days
preceding the date of the grant.

Transactions  involving  the plans at November 30, 1996 and 1995,  respectively,
are summarized as follows:



STOCK OPTIONS                     1996               1995
-----------------------------------------------------------
Outstanding, December 1          160,929            176,209
Granted                             -                30,000
Canceled                         (13,596)           (44,343)
Exercised                            -                 (937)
-----------------------------------------------------------
Outstanding, November 30         147,333            160,929
===========================================================
Exercisable, November 30         147,333             97,929
===========================================================




The exercise price per share of options outstanding at November 30, 1996 for the
90 Plan is $.7917 to $1.56 and for the 93 Plan is $1.4419 to $1.56. The exercise
price per share of  exercisable  options for the 90 and 93 plan at November  30,
1996 is $.7917 to $1.56.



                                       Page 28
                                          60




<PAGE>


                          NOTES TO FINANCIAL STATEMENTS



Note 13.  Reassign back Statec Exclusive distribution agreement

On  February  21,  1996  the  Company  and  Statec  entered  into  a  letter  of
understanding  under  which  the  Company  reassigned  to Statec  the  exclusive
distribution and manufacturing rights for North America effective March 1, 1996.
The assignment was  contingent  upon Statec making the following  payments for a
total of $183,000, excluding inventory. The payments required were as follows:

(Bullet) A down payment of $15,000 was due March 1, 1996

(Bullet) Twenty-eight (28) monthly  installments of $6,000 each, commenced March
          1, 1996 for a total of $168,000.

(Bullet) Statec was to repurchase all NDCA inventory  related to Statec products
          at the Company's net book value plus $15,000. All the inventory was to
          be repurchased on or before November 30, 1996.

The transfer  permitted the Company to reduce associated fixed overhead expenses
with the sale of such  products  and allowed the Company to focus  solely on its
AGVS product line.

As of January 31, 1997 Statec was in default  under the  agreement by not paying
or  repurchasing  the  inventory  worth  $71,272  and had not  paid  the  agreed
installments of $6,000 monthly since December 1996. There remains a total number
of 19 unpaid installment equaling $114,000. In February of 1997, the Company was
notified that Statec became subject to a  court-ordered  liquidation  proceeding
under French law. The Company plans to vigorously  pursue its creditor claims in
such proceedings .

Note 14.  Net Gain From Restructuring of Operations

On November 30, 1995, the Company sold certain  intangible assets related to its
laser  technology  and its stock in NDC Laser and NDCTA  (see Notes 4 and 9). In
addition, the Company also reduced its activities with the CIM products acquired
from SSDI (a former  subsidiary)  resulting in the  write-off  of the  remaining
carrying value of such software.  The transactions described above resulted in a
net gain from  restructuring  of operations for the year ended November 30, 1995
as follows:

                        Gain on sale of NDC Laser rights         $    595,941
                        Gain on sale of NDC Laser stock                 4,317
                        Loss on sale of NDCTA stock                   (99,996)
                        Write-off of the remaining unamortized
                          portion of goodwill related to the
                          business acquisition of NDCTA               (41,273)
                        Write-off of the remaining carrying
                          value of CIMTEX software                    (92,225)
                                                                      -------
                                                                 $    366,764
                                                                      =======

There were no restructuring activities for the years ended November 30, 1996 and
1994.




                                       Page 29
                                         61
<PAGE>


                         NOTES TO FINANCIAL STATEMENTS

Note 15.  Restricted Cash and Credit Risk

Under the Company's line of credit agreement,  the Company's cash  disbursements
are  controlled  and  approved  by the bank.  Cash  received  by the  Company is
deposited into bank-monitored cash collateral accounts where cash funds are used
to pay down the bank line of credit.  Daily cash operating  requirements  of the
Company are then funded through advances under the borrowing base formula of the
line of credit (see Note 5).

Note 16.  Reclassification

Certain amounts in the consolidated  financial statements for 1995 and 1994 have
been reclassified to conform with  classifications used in the November 30, 1996
financial statements. These reclassifications had no effect on 1995 and 1994 net
loss or accumulated deficit.


Note 17.  FASB Statements And Proposed Regulations

The following disclosure of the estimated fair value of financial instruments is
made in  accordance  with the  requirements  of  financial  Standards  No.  107,
DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL  INSTRUMENTS.  The estimated fair value
amounts have been determined by the Company using available  market  information
and valuation methodologies  described below. However,  considerable judgment is
required in  interpreting  market data to develop the  estimates  of fair value.
Accordingly, the estimates presented herein may not be indicative of the amounts
the Company could  realize in a current  market  exchange.  The use of different
market assumptions or valuation  methodologies may have a material effect on the
estimated fair value amounts.

The carrying values of accounts and notes  receivable,  accounts  payable,  note
payable and line-of-credit  borrowings  approximate their fair values due to the
short-term  maturities  of  these  instruments.  The  carrying  values  of notes
receivable and long-term debt  approximate  fair values at November 30, 1996 due
to rates being at current market rates.

The  FASB has  issued  Statement  No.  121,  ACCOUNTING  FOR THE  IMPAIRMENT  OF
LONG-LIVED  ASSETS AND FOR  LONG-LIVED  ASSETS TO BE DISPOSED  OF, which has not
been adopted by the Company as of November 30, 1996.  FASB  Statement No. 121 is
effective for fiscal years beginning after December 15, 1995. FASB Statement No.
121 establishes  accounting  standards for the impairment of long-lived  assets,
certain  identifiable  intangibles,  and goodwill  related to those assets to be
held and used for long-lived assets and certain  identifiable  intangibles to be
disposed  of.  Under the  guidelines  of the new  standard,  the Company will be
required to review long-lived assets and certain identifiable  intangibles to be
held for impairment whenever events or changes in circumstances,  as outlined in
Statement  No. 121,  indicate  that the  carrying  amount of an asset may not be
recoverable.  If these  events or changes  in  circumstances  indicate  that the
carrying  amount of an asset  that an entity  expects to hold and use may not be
recoverable, the Company shall estimate the future cash flows expected to result
from  the use of the  asset  and  its  eventual  disposition.  If the sum of the
expected  future cash flows is less than the carrying  amount of the asset,  the
Company shall recognize an impairment loss in accordance with the Statement. The
Company has determined  that there will be no material  impact of FASB Statement
No. 121 on the financial statements.

The Company has adopted  Financial  Accounting  Standards Board Statement No.123
ACCOUNTING FOR STOCK-BASED  COMPENSATION FASB No.123,  requires that the Company
account for its stock based  compensation  plan using a fair value based  method
which  measures  compensation  cost at the grant  date  based  upon the value of
awards,  which  is then  recognized  over the  vesting  period.  The  accounting
requirements  of the  statement  apply to awards to  employees  entered  into in
fiscal  years  that begin  after  December  15,  1995 and to  transactions  with
non-employees entered into after December 15, 1995. The Statement allows and the
Company has elected to continue to use APB Opinion No. 25  ACCOUNTING  FOR STOCK
ISSUED TO EMPLOYEES to measure  compensation  cost,  but is required to disclose
the pro forma  effects  on net  income and  earnings  per share to  reflect  the
difference  between the  compensation  cost  applying APB Opinion No. 25 and the
related cost measured by the fair value method  defined in the statement for all
awards beginning after December 15, 1994.


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                                          62

<PAGE>


                            SHAREHOLDERS INFORMATION





For your  convenience,  NDC  Automation,  Inc.'s  financial  information  may be
obtained from the Internet through the EDGAR filing system,  such information is
made available to the public. To assist our shareholders in retrieving financial
information (such as 10QSB,  10KSB,  Proxy,  8K's, etc.) in a more timely manner
please follow the instructions below:



ADDRESS:  http://www.sec.gov\


Select:  SEARCH the EDGAR Archives

Type in the block, NDC  and hit ENTER

Select document desired.


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                                          63
<PAGE>



                             SHAREHOLDER INFORMATION

===============================================================================
<TABLE>
<CAPTION>

<S>                                                                       <C>   

ANNUAL MEETING                                                                  DIRECTORS
  The annual meeting will be held at 10:00 am, Friday,
  April 25, 1997, at NDC Automation's Corporate offices                     Goran P.R. Netzler
  in Charlotte, North Carolina.                                             Chairman of the Board of Directors, NDC Automation, Inc.
                                                                            President
SHAREHOLDER RELATIONS                                                       Netzler and Dahlgren Co. AB
 A copy of NDC's Annual Report
  and form 10-KSB,  which is filed with the  Securiries  and Exchange       Ralph Dollander
  Commission,  will  be sent to any  shareholder  upon                      President
  written request to Manager-Investor Relations                             NDC Automation, Inc.
  NDC Automation, Inc.,
  3101 Latrobe Drive                                                        Jan H.L. Jutander
  Charlotte, North Carolina 28211-4849                                      Vice President, Operation
                                                                            Netzler and Dahlgren Co. AB
CORPORATE OFFICES
  NDC Automation, Inc.                                                      Richard D. Schofield
  3101 Latrobe Drive                                                        Director
  Charlotte, North Carolina 28211-4849
                                                                            T. Randolph Whitt
  (704) 362-1115 Telephone                                                  Director
  (704) 364-4039 Facsimile                                                  President, Hitchner Whitt & Co.,P.A.

STOCK EXCHANGE LISTINGS                                                     OFFICERS
  Over the Counter: OTC Bulletin Board
  OTC Symbol: "AGVS"                                                        Ralph Dollander
                                                                            President
TRANSFER AGENT                                                              Chief Executive Officer
  First Citizens bank
  Raleigh, North Carolina                                                   Claude Imbleau
                                                                            Vice President, Finance and Administration
LEGAL COUNSEL                                                               Chief Financial Officer
  Parker, Poe, Adams and Bernstein, LLP
  Charlotte, North Carolina                                                 E. Thomas Watson
                                                                            Secretary, NDC Automation, Inc.
  Shumaker, Loop and Kendrick, LLP                                          Partner
  Charlotte, North Carolina                                                 Parker, Poe, Adams and Bernstein LLP

AUDITORS
  McGladrey & Pullen, LLP
  Charlotte, North Carolina
</TABLE>

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

COMMON STOCK DATA
                                   Market Price Per Share
                  
                              1996                       1995
                   ------------------------------------------------------------
Quarter Ended         High            Low       High            Low
                  Bid^    Ask^   Bid^  Ask^   Bid   Ask    Bid         Ask
-------------------------------------------------------------------------------
 February 29       5/8      7/8   3/8  15/32    1 9/16*             1*
 May 31          1 1/16  1 5/16  3/8    1/2     1 9/16*            7/8*
 August 31         5/8     7/8   1/4   1/2      2 5/8*           1 1/8*
 November 30       5/8     3/4   1/4    3/8     1 1/2*     7/16^      13/16^
===============================================================================
* Prior to the quarter ended  November 30, 1995,  the Company's  stock traded on
the NASDAQ  National  Market  System.

^On November  21, 1995 the Company  began trading on the OTC Bulletin Board.



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<PAGE>