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                                  Exhibit 99

                         Cautionary Factors Under the
               Private Securities Litigation Reform Act of 1995

We desire to take advantage of the "safe harbor" provisions contained in the
Private Securities Litigation Reform Act of 1995 (the "Act"). This Form 10-Q
contains statements which are intended as "forward-looking statements" within
the meaning of the Act.  The words or phrases "expects", "will continue", "is
anticipated", "we believe", "estimate", "projects", "hope" or expressions of a
similar nature denote forward-looking statements.  Those statements are subject
to certain risks and uncertainties that could cause actual results to differ
materially from historical results or results presently anticipated or
projected. Those risks and uncertainties include those discussed in this Exhibit
99.  We wish to caution you not to place undue reliance on forward-looking
statements. The factors listed in this Exhibit 99 have affected the Company's
performance in the past and could affect future performance. Those factors
include, but are not limited to, the risk that a product may not ship when
expected or may contain technical difficulties; uncertain demand for new or
existing products; the impact of competitor's advertising, products or pricing;
availability or reliability of component parts, including sole source parts;
manufacturing limitations; availability of sources of financing; economic
developments, both domestically and internationally; new accounting standards;
risks associated with the acquisition and integration of new businesses; risks
related to the diversification into new Internet software and information
technology business; and, the impact of the initiation, defense and resolution
of litigation.

     Risks Related to Sale of DGBU.  On October 21, 1999, the Company publicly
announced its intention to sell its DGBU and focus on its Internet and
e-commerce related businesses. On April 19, 2000, the Company announced it had
signed a letter of intent to sell the DGBU for $50 million to a subsidiary of
MacDermid, Inc. The Agreement is subject to due diligence, FTC approval and the
approval of both boards. There can be no assurance that the Company will be able
to successfully complete the sale of the DGBU on terms acceptable to the
Company, if at all. If the Company is unable to sell the DGBU, it will need to
obtain immediate capital from other sources, which may not be available. Failure
to sell the DGBU could also likely have an adverse impact on the value and
performance of that segment in future periods, due to the effect of the sale
announcement on the Company's relationships with customers, vendors and others.
Any failure to sell the DGBU on terms acceptable to the Company would have a
material adverse effect on the Company's business, financial condition and
results of operations.

     Going Concern Opinion. The Company is experiencing difficulty in generating
sufficient cash flow to meet its obligations for the DGBU and to sustain startup
operations of the ISBU, which raises substantial doubt about its ability to
continue as a going concern under the current structure. As a result of the
desire to expand into new markets, management has taken steps to pursue
opportunities outside its traditional DGBU business. In this regard, the Company
is developing a new operating segment in the Business-to-Business electronic
commerce market. The development of this market has required substantial cash,
which has been financed by the cash flow from the DGBU up to this point. Further
development of this market is planned and may result in further significant
losses during the start-up period. In addition, CSC's revolving credit facility
with its senior lender, General Electric Capital Corporation (GECC), will expire
in June 2000. The Company owes GECC $1.4 million. GECC has indicated that it
will not renew this agreement as the Company no longer meets the account size
objectives of their portfolio. B2Bxchange, Inc's (RSPnet.com, Inc.'s) revolving
credit facility expired on November 22, 1999, and was extended until June 2000.
Replacement financing has not yet been secured for either credit facility. As a
result, the Company's independent certified public accountants have indicated in
their report on the Company's financial statements for the year ended June 30,
1999 their substantial doubt as to the Company's ability to continue as a going
concern. Although the Company signed a letter of intent to sell the DGBU which
could potentially provide the Company with significant working capital, there
can be no assurance that the Company will complete the sale of the DGBU and
receive this capital or other financing, or that the Company will be able to
ever operate profitably in the
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future. In the event the Company is unable to sell the DGBU or otherwise solve
its current financial difficulties, the Company may have to cease operations or
otherwise sell assets, intellectual property ("IP") or subsidiary interests.

     Nasdaq Delisting Proceedings.  The Company is subject to a number of
requirements in order to continue to list its Common Stock on the Nasdaq
National Market. These requirements include timely filing of reports with the
SEC and the NASD and maintaining net tangible assets of not less than $4
million.

     On October 15, 1999, the Company received a letter from the NASD,
indicating that the Company's Common Stock would be delisted from the Nasdaq
National Market effective October 25, 1999 unless the Company's Form 10-K for
the year ended June 30, 1999 was filed with the SEC and the NASD by the close of
business on October 22, 1999. As allowed by the NASD rules, the Company appealed
the delisting and requested continued inclusion of its Common Stock on the
Nasdaq National Market.

     On October 22, 1999, the NASD responded to the Company's appeal and
scheduled a hearing on the request for November 18, 1999. The NASD also
indicated that the hearing will not only consider the Company's failure to
timely file its Form 10-K, but will also require the Company to demonstrate its
ability to sustain long-term compliance with all applicable maintenance
criteria, including the net tangible asset requirement. The Company filed its
Form 10-K for the year ended June 30, 1999 on December 7, 1999.

     On January 7, 2000, the Company filed Form 8-K indicating its compliance
with Nasdaq listing requirements by revaluing its deferred tax assets and was
notified on January 12, 2000 it had complied with the requirements set forth by
the Nasdaq Listing Qualifications hearing panel. The Company is subject to
filing requirements as set forth by the SEC and would be subject to delisting
proceedings if it failed to file its required documents in a timely manner in
the future.

     If the Company fails to meet any of Nasdaq National Market listing
requirements, the market value of the Common Stock could fall and holders of
Common Stock would likely find it more difficult to dispose of shares of Common
Stock. In addition, the Company and broker-dealers effecting transactions in the
Common Stock may become subject to additional disclosure and reporting
requirements applicable to low-priced securities, which may reduce the level of
trading activity in the secondary market for the Common Stock and limit or
prevent investors from readily selling their shares of Common Stock.

     Credit Availability.  ColorSpan's revolving credit facility agreement with
General Electric Capital Corporation ("GECC") expired January 17, 1999 and was
subsequently extended until June 30, 2000. However, GECC has notified us of
their intent not to renew the credit facility as we do not meet the account size
objectives of their portfolio. The balance due GECC under this agreement was
$1.4 million as of April 30, 2000.  We believe GECC will continue to hold its
equity interest in the Company. In addition, the B2BXchange, Inc. (RSPnet.com,
Inc.) revolving credit facility expired on May 1, 1999 and has been extended to
June 2000. The balance due Firstar under this agreement was $50,000 as of April
30, 2000. There can be no assurances of this, or that the cash available under
any agreement which can be reached will be adequate to meet our needs, or that
sources of financing will be available to us on favorable terms.

     Cash Needs.  Our credit agreement with a commercial finance company that
has financed its cash requirements in the past expired January 17, 1999 but was
extended to June 30, 2000. Previously, net operating losses in fiscal 1996 of
$10,461,534 and fiscal 1997 of $17,199,688 resulted in a need for additional
financing. In September 1996, projected cash requirements in excess of available
sources required the issuance of private placements of common stock and warrants
to purchase common stock in the Company. We raised $11.8 million in these
private placements. We expect to finance operations throughout the remainder of
fiscal 2000 through cash flow from operating activities, short term borrowings
and ultimately, the proceeds from the sale of the DGBU. Longer term financing
for the B2BXchange, Inc. (RSPnet.com, Inc.) business will likely require the
issuance of additional equity in VirtualFund.com, Inc. or in B2BXchange, Inc.
There can be no assurances
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that cash availability under any credit agreement which may be negotiated will
be adequate to meet future needs, or that other sources of financing will be
available to us on favorable terms, or at all, if our operations are further
affected by declining revenue from a lack of sales, significant research and
development costs, introduction difficulties with new product lines, competitive
product introductions, or by market conditions in general. We are investing
heavily in development of ISBU activities which have limited revenues on which
to build. Many of our competitors in this market have significantly more
available resources with which to attract and service new customers. We expect
to generate a significant amount of cash as a result of the sale of the DGBU,
however, there can be no assurance of our ability to sell the DGBU operations on
terms that meet our short-term cash flow obligations. In addition, there can be
no assurance that we will achieve or maintain profitability on a quarterly or
annual basis in the future. In addition, we may need to raise additional funds
in order to support more rapid expansion, develop new or enhanced services and
products, respond to competitive pressures, acquire complementary businesses or
technologies or take advantage of unanticipated opportunities. Our future
liquidity and capital requirements will depend upon numerous factors, including
the success of our existing and new service offerings and competing
technological and market developments.

     We may be required to raise additional funds through public or private
financing, strategic relationships or other arrangements, particularly as our
acquisition strategy matures. There can be no assurance that such additional
funding, if needed, will be available on terms acceptable to us, or at all.
Furthermore, any additional equity financing may be dilutive to stockholders,
and debt financing, if available, may involve restrictive covenants, which may
limit our operating flexibility with respect to certain business matters.
Strategic arrangements, if necessary to raise additional funds, may require us
to relinquish our rights to certain of our intellectual property or selected
business opportunities. If additional funds are raised through the issuance of
equity securities, the percentage ownership of our existing stockholders will be
reduced, stockholders may experience additional dilution in net book value per
share, and such equity securities may have rights, preferences or privileges
senior to those of the holders of our Common Stock or newly issued Preferred
Stock. If adequate funds are not available on acceptable terms, we may be unable
to develop or enhance our services and products, take advantage of future
opportunities or respond to competitive pressures, any of which could have a
material adverse effect on our business, financial condition, results of
operations and prospects.

     Potential Acceleration of Senior Debt. Our current Senior Debt Agreement
includes financial covenants including capital expenditures, additions to
capitalized software and intellectual property, minimum debt service coverage
ratio and the maintenance of a minimum net worth, which we must meet. Our past
financial performance has made it necessary for us to renegotiate the minimum
net worth and minimum debt service coverage covenants to avoid being declared in
violation of the covenants by GECC. Any replacement financing is expected to
include certain financial covenants, which we must meet as a condition of the
financing.  If future financial performance causes covenant violations and we
are unable to renegotiate our loan covenants at that time, we could be forced to
seek replacement financing at prices which may not be favorable to us.  If
adequate sources of financing are not available, we may be required to sell
certain product lines or technologies on less than favorable terms.  As of April
30, 2000, the outstanding balance on our Senior Debt Agreement was $1,400,000.
Upon the sale of the DGBU, this debt will be retired.

          Expansion and Diversification to Software and Services Outside of our
Core Printer Business.  Our continuing efforts to expand sales and increase
profits and our desire to reposition ourselves as a diversified technology
company are stimulating a series of new product development activities. The
current focus of these new business opportunities is primarily Internet-based
software and service businesses. In October 1999, we launched our newest
Internet software product called B2BXchange. The product is an Internet Commerce
Environment Operating System ("CEOS") which will offer some basic activities and
services for free, while attempting to convert those subscribers to paying
customers who rent storage space, Internet access and software applications from
our offerings associated with B2BXchange. We have continued to upgrade the
product with additional product releases. There can be no assurance we will be
able

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to convert enough subscribers from the free offerings to those that are billable
in B2BXchange. If we are unable to convert users to paying customers, our
business and revenue models will have to be significantly modified.

     Our expansion into technologies outside of the core hard-copy base printer
business involves significant risk. Risks include, but are not limited to, the
following factors. New products may not meet customer needs or may face
significant competition from companies with lower overhead and product costs
and/or greater marketing and promotional budgets. In addition, we may not be
able to attract and retain key personnel and may not be able to develop the
products in the time needed to gain market acceptance. In addition, because of
early stage development, we may not be able to predict product features needed
to gain market acceptance; development may require more time and resources than
anticipated for the development; or it may turn out that the product can not be
feasibly developed. Our diversification also carries the risk that the new
activity will distract management time and resources from focusing on the core
hard-copy based printer business. In addition, diversification may involve risks
related to the resources required to participate in this new business including,
but not limited to, risks related to raising cash or obtaining cash investments,
doing business with one or more "partners" as a partnership or joint venture,
and risks related to acquisitions or other combinations of businesses.

     The market for Internet professional services, software and e-commerce
solutions is characterized by rapid technological change, changes in user and
client requirements and preferences, frequent new product and service
introductions embodying new processes and technologies and evolving industry
standards and practices that could render our existing service practices and
methodologies obsolete. Our success will depend, in part, on our ability to
improve our existing services and develop new services and solutions that
address the increasingly sophisticated and varied needs of our current and
prospective clients, and respond to technological advances, emerging industry
standards and practices, and competitive service offerings. Failure to do so
could result in the loss of existing customers or the inability to attract and
retain new customers, either of which could have a material adverse effect on
our business, financial condition, results of operations and prospects. There
can be no assurance that we will be successful in responding quickly, cost-
effectively and sufficiently to these developments. If we are unable, for
technical, financial or other reasons, to adapt in a timely manner in response
to changing market conditions or client requirements, our business, financial
condition, results of operations and prospects would be materially adversely
affected.

     The Internet software industry is characterized by rapidly changing
technology and product development. There is no assurance that current product
development efforts for the Internet Services Business Unit (ISBU) will properly
anticipate the market and target customer needs, or will not be displaced by new
or other technology, products or services offered by others. Although we do not
believe that we have a quality and reliability reputation that may unfavorably
affect products at this time, if one or more products experiences product
failures, we may develop an unfavorable reputation which could dissuade a
purchaser or subscriber from our products. Such a reputation, if it were to
develop, may unfavorably affect new products even though they may not suffer
from any similar quality or reliability problems.

     Product Acceptance/Market Anticipation. Our products may not achieve market
acceptance. In addition, the market anticipation or the announcement of new
products and technologies, whether offered by us or our competitors, could cause
customers to defer purchases of our existing products, which could have a
material adverse effect on our business and financial condition.

     Our Internet Services Business Unit announced, during the second quarter of
fiscal 1999, the first outside customer site using E-Com(TM) Tools, our
proprietary e-commerce software. Subsequently, this product has been renamed
XcomTOOLS(TM) and a basic version is included for no charge when a customer
signs up as a B2BXchange customer. We have successfully used a version of the
software for our Supplies-By-Air(TM) business. However, there is no assurance
that outside customers will accept the software, or that it will be sufficiently
flexible to meet the variety of needs that exist in the target marketplace, that
the license fees for the software will be competitive, or that future offerings
by competitors will not displace current

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licenses of our software product. Our products may not be accepted by the target
market for technological or other reasons. In addition, we have not previously
sold Internet commerce software and may lack the sales and marketing expertise
to successfully sell the product, or we may not accurately predict the sales
cycle or sales volume which could adversely affect the financial results. Our
inability to achieve market acceptance of the e-commerce product could have a
material adverse effect on our financial condition and may affect the ability of
the Internet Services Business Unit to effectively market its other services or
other outside or proprietary software products.

     Potential Liability to Clients.  Many of our ISBU service and consulting
engagements involve the development, implementation and maintenance of
applications that are critical to the operations of our clients' businesses. Our
failure or inability to meet a client's expectations in the performance of our
services could injure our business reputation or result in a claim for
substantial damages against us, regardless of our responsibility for such
failure. In addition, B2Bxchange, Inc. (RSPnet.com, Inc.) provides data services
that may include confidential or proprietary client information. Although we
have implemented policies to prevent such client information from being
disclosed to unauthorized parties, lost, or used inappropriately, any such
unauthorized disclosure, loss or use could result in a claim for substantial
damages. We have attempted to limit contractually our damages arising from
negligent acts, errors, mistakes or omissions in rendering professional
services; however, there can be no assurance that any contractual protections
will be enforceable in all instances or would otherwise protect us from
liability for damages. Although we maintain general liability insurance
coverage, including coverage for errors and omissions, there can be no assurance
that such coverage will continue to be available on reasonable terms or will be
available in sufficient amounts to cover one or more large claims, or that the
insurer will not disclaim coverage as to any future claim. The successful
assertion of one or more large claims against us that are uninsured, exceed
available insurance coverage or result in changes to our insurance policies,
including premium increases or the imposition of a large deductible or co-
insurance requirements, could adversely affect our business, results of
operations and financial condition.

     Competition; Low Barriers to Entry. Many competitors in the Internet
software industry are not profitable. The need to be competitive with the prices
and services offered by these competitors may impair the ability of the ISBU to
operate profitably. The market for Internet software and hosting services is
relatively new, intensely competitive, rapidly evolving and subject to rapid
technological change. We expect competition to persist, intensify and increase
in the future. Our ISBU competitors can be divided into several groups: computer
hardware and service vendors; Internet integrators and Web presence providers;
Internet Portals targeting small- to medium-sized companies; web design media
and advertising agencies; large information technology consulting service
providers; telecommunications companies; Internet and online service providers;
and software vendors. Many of our ISBU current and potential competitors have
longer operating histories, larger installed customer bases, longer
relationships with clients and significantly greater financial, technical,
marketing and public relations resources than us and could decide at any time to
increase their resource commitments to our target markets. In addition, the
market for Intranet, Extranet and web site development is relatively new and
subject to continuing definition, and, as a result, may better position our
competitors to compete in this market as it matures. As a strategic response to
changes in the competitive environment, we may from time to time make certain
pricing, service, technology or marketing decisions or business or technology
acquisitions that could have a material adverse effect on our business,
financial condition, results of operations and prospects. Competition of the
type described above could materially adversely affect our business, results of
operations, financial condition and prospects.

     In addition, our ability to maintain existing client relationships and
generate new clients will depend to a significant degree on the quality of our
services and our reputation among our clients and potential clients, compared
with the quality of services provided by, and the reputations of, our
competitors. To the extent we lose clients to our competitors because of
dissatisfaction with our services or our reputation is adversely affected for
any other reason, our business, financial condition, results of operations and
prospects could be materially adversely affected.

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     There are relatively low barriers to entry into the ISBU's professional
services business. Because professional services firms rely on the skill of
their personnel and the quality of their client service, they have no patented
technology that would preclude or inhibit competitors from entering their
markets. We are likely to face additional competition from new entrants into the
market in the future. There can be no assurance that existing or future
competitors will not develop or offer services that provide significant
performance, price, creativity or other advantages over those offered by us,
which could have a material adverse effect on our business, financial condition,
results of operations and prospects.

     Fluctuations in Quarterly Operating Results.  Our quarterly results of
operations have fluctuated and are expected to continue to fluctuate
significantly. These fluctuations have been caused by various factors,
including, but not limited to: the timing of new product announcements; product
introductions and price reductions by us or our competitors; the availability
and cost of key components and materials for our products; fluctuations and
availability in customer financing; the relative percentages of sales of
consumables and printer architectures; risks related to international sales and
trade; and general economic conditions. In addition, our operating results are
influenced by the seasonal buying patterns of our customers, which have in the
past generally resulted in reduced revenues and earnings during our first fiscal
quarter. Further, our customers typically order products on an as-needed basis,
and, as a result, virtually all of our sales in any given quarter result from
orders received in that quarter. We rarely operate with a backlog of orders from
quarter to quarter. Certain products require significant capital expenditures,
causing some customers to delay their purchasing decision. Delays in purchases
of low-volume, high-cost printers may cause significant fluctuations in the
sales volume for a given period. Our manufacturing plans, sales staffing levels
and marketing expenditures are primarily based on sales forecasts. Accordingly,
deviations from these sales forecasts may cause significant fluctuations in
operating results from quarter to quarter and may result in unanticipated
quarterly earnings shortfalls or losses. Historically, a large percentage of
orders have been received and shipped near the end of each month. If anticipated
sales and shipments do not occur, expenditure and inventory levels may be
disproportionately high and operating results could be adversely affected.

     Intellectual Property and Proprietary Rights.  Our ability to compete
effectively will depend, in part, on our ability to maintain the proprietary
nature of our technologies through patents, copyrights and trade secrets.
Important features of our products are incorporated in proprietary software,
some of which is licensed from others and some of which we own.   We attempt to
protect our proprietary software with a combination of patents, copyrights,
trademarks and trade secrets, employee and third-party nondisclosure agreements
and other methods of protection.  Despite these precautions, unauthorized third
parties may be able to copy certain portions of our products or to reverse-
engineer or obtain and use information that we regard as proprietary. Further,
our intellectual property may not be subject to the same level of protection in
all countries where the products are sold.  There can be no assurance that the
measures we take will be adequate to protect the intellectual property or that
others will not independently develop or patent products similar or superior to
those we have developed, patented or planned, or that others will not be able to
design products which circumvent any patents we rely upon.

     Recently certain companies have sought and received patents for their
Internet business model.  As additional companies seek protection for business
models, the Company's ISBU may be foreclosed from business opportunities
currently available or under consideration which could have an adverse effect on
revenues for the ISBU.

     Although we have not received notices from third parties alleging
infringement claims which we believe would have a material adverse effect on our
business, there can be no assurance that third parties will not claim that our
current or future products infringe on their proprietary rights.  Any such
claim, with or without merit, could result in costly litigation or might require
us to enter into a royalty or licensing agreement.  A royalty or licensing
agreement, if required, may not be available on terms acceptable to us, or at
all, which could have a material adverse effect upon our business, financial
condition and results of operations.  If we do not obtain such licenses, we
could encounter delays in product introductions while we

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attempt to design around such issues, or we could find that the development or
sale of products requiring such licenses could be enjoined. In addition, we
could incur substantial costs in defending ourselves in suits brought against us
on such patents or in bringing suits to protect our patents against
infringement, which could adversely affect our financial condition or results.
If the outcome of any such litigation is adverse, our business and financial
results could be adversely affected.

     Litigation and Litigation Costs.  We are engaged in various actions related
to transactional matters, employee matters, customers' credit and product
quality and/or warranty issues.  In an action recently settled, it was alleged
that we were liable for copyright misuse and unfair competition.  Some of these
actions include claims against us for punitive, exemplary or multiple damages.
An award of punitive damages may not bear a direct relationship to the actual or
compensatory damages claimed from us.  Any agreement for the sale of the DGBU
will likely require certain indemnifications of the buyer.  Although we do not
believe there are any actions pending or threatened against us which would have
a material adverse impact on our financial position, there is no assurance that
there will not be a similar claim in other actions or an adverse award of
multiple punitive or exemplary damages which could adversely affect our cash
position.   Any litigation which we are involved in may have an adverse impact
on our operations and may result in a distraction or diversion of management's
attention, thereby adversely affecting our operations.

     Risks Related to Future Acquisitions or Partners.  A key component of our
continued growth strategy is expected to be the acquisition or partnering of
professional service firms that meet our goals for strategic growth and
expansion. The successful implementation of this acquisition strategy will
depend on our ability to identify suitable acquisition candidates, acquire such
companies on acceptable terms and integrate their operations successfully with
those of ours. There can be no assurance that we will be able to continue to
identify additional suitable acquisition candidates or that we will be able to
acquire such candidates on acceptable terms. Moreover, in pursuing acquisition
opportunities we may compete with other companies with similar growth
strategies, certain of which competitors may be larger and have greater
financial and other resources than us. Competition for these acquisition targets
may also result in increased prices of acquisition targets and a diminished pool
of companies available for acquisition. Acquisitions also involve a number of
other risks, including adverse effects on our reported operating results from
increases in goodwill amortization, acquired in-process technology, stock
compensation expense and increased compensation expense resulting from newly
hired employees, the diversion of management attention, potential disputes with
the sellers of one or more acquired entities and the possible failure to retain
key acquired personnel. Lack of client satisfaction or performance problems with
an acquired firm could also have a material adverse impact on our reputation as
a whole, and any acquired company could significantly underperform relative to
our expectations. For all of these reasons, our pursuit of an overall
acquisition strategy or any individual pending or future acquisition may have a
material adverse effect on our business, financial condition, results of
operations and prospects. To the extent we choose to use cash consideration for
acquisitions in the future, we may be required to obtain additional financing,
and there can be no assurance that such financing will be available on favorable
terms, if at all. As we issue stock to complete future acquisitions, existing
stockholders will experience further ownership dilution.

     Integration of Acquired Businesses.  During December 1998 we completed the
acquisition of K & R Technologies, Inc.  Our future performance will depend on
our ability to integrate this and other acquired businesses, which, even if
successful, may take a significant period of time, may place a significant
strain on our management and resources, and could subject us to additional
expenses during the integration process and to the risks commonly encountered in
acquisitions of businesses. Such risks include, among other things, the
difficulty of assimilating the operations and personnel of the acquired
businesses, the potential disruption of our ongoing business, the inability of
management to maximize our financial and strategic position through the
successful incorporation of acquired personnel and clients, the maintenance of
uniform standards, controls, procedures and policies and the impairment of
relationships with employees and clients as a result of any integration of new
management personnel. There can be no assurance that the services, technologies,
key personnel and businesses of the acquired business(es) will be effectively
integrated into our business or service offerings, or that such integration will
not adversely affect our business, financial

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condition, results of operations or prospects. There can also be no assurance
that any acquired services, technologies or businesses will contribute at
anticipated levels to our sales or earnings, or that the sales and earnings from
combined business(es) will not be adversely affected by the integration process.
Because the acquisition was completed in December 1998, we are currently facing
all of these challenges and our ability to meet them over the long term and in
volume has not been established. The failure to integrate such acquisitions
successfully could have a material adverse effect on our business, financial
condition, results of operations and prospects.

     Recruitment and Retention of Consulting Professionals.  Our business of
delivering Internet and information technology professional services is labor
intensive. Accordingly, our success depends in large part on our ability to
identify, hire, train and retain consulting professionals who can provide the
Internet strategy, technology, marketing, audience development and creative
skills required by clients. There is currently a shortage of such personnel, and
this shortage is likely to continue for the foreseeable future. We will
encounter intense competition for qualified personnel from other companies, and
there can be no assurance that we will be able to identify, hire, train and/or
retain other highly qualified technical, marketing and managerial personnel in
the future. The inability to attract and retain the necessary technical,
marketing and managerial personnel would have a material adverse effect on our
business, financial condition, results of operations and prospects.

     Dependence on Key Personnel.  Our success depends to a significant extent
upon certain key personnel, including Mr. Masters, Chief Executive Officer and
President, and key research and development staff. The loss of our key
management or technical personnel could adversely affect our business. We
maintain key person life insurance in the amount of $2,000,000, payable to the
Company, on Mr. Masters. In addition, we have certain non-compete and
continuation contracts with key personnel. We also depend on our ability to
attract and retain highly skilled personnel. Competition for employees in
technology related markets is high and there can be no assurance that we will be
able to attract and retain the employees needed. In addition, our past financial
performance may limit our ability to hire and retain management professionals.

     Risks Associated with Failure to Manage Growth.  The anticipated growth of
the ISBU and any future growth by acquisition would place a significant strain
on our limited personnel, management and other resources. In the future, we will
be required to attract, train, motivate and manage new employees successfully,
to effectively integrate new employees into our operations and to continue to
improve our operational, financial, management and information systems and
controls. There can be no assurance that our systems, procedures or controls
will be adequate to support our operations or that our management will be able
to achieve the rapid execution necessary to exploit the market for our business
model. The failure to effectively manage any further growth could have a
material adverse effect on our business, financial condition, results of
operations and prospects.

     Developing Internet Economy, Market for E-Commerce Solutions. A material
portion of our revenues is expected to be derived from services that depend upon
the adoption of Internet solutions by companies to improve their business
positioning and processes, and the continued development of the World Wide Web,
the Internet and E-Commerce. The Internet may not prove to be a viable
commercial marketplace because of inadequate development of the necessary
infrastructure, lack of development of complementary products, implementation of
competing technology, delays in the development or adoption of new standards and
protocols required to handle increased levels of Internet activity, governmental
regulation, or other reasons. The Internet has experienced, and is expected to
continue to experience, significant growth in the number of users and volume of
traffic. There can be no assurance that the Internet infrastructure will
continue to be able to support the demands placed on it by this continued
growth. Our business model anticipates revenue and growth from Internet hosting
services and access. Technological changes in the delivery of Internet service
could adversely affect our ability to achieve operational and financial
objectives. Moreover, critical issues concerning the use of Internet and E-
Commerce solutions (including security, reliability, cost, ease of deployment
and administration and quality of service) remain unresolved and may affect the
growth of the use of such technologies to maintain, manage and operate a
business, expand product

                                       8
<PAGE>

marketing, improve corporate communications and increase business efficiencies.
The adoption of Internet solutions for these purposes, particularly by those
individuals and enterprises that have historically relied on traditional means,
can be capital intensive and generally requires the acceptance of a new way of
conducting business and exchanging information. If critical issues concerning
the ability of Internet solutions to improve business positioning and processes
are not resolved or if the necessary infrastructure is not developed, our
business, financial condition, results of operations and prospects will be
materially adversely affected.

     Even if these issues are resolved, there can be no assurance that
businesses will elect to outsource the design, development, hosting and
maintenance of their Web sites to Internet professional services firms.
Companies may decide to assign the design, development, and implementation of
Internet solutions and hosting of the site to their internal information
technology divisions, which have ready access to both key client decision makers
and the information required to prepare proposals for such solutions. If
independent providers of Internet professional services prove to be unreliable,
ineffective or too expensive, or if software companies develop tools that are
sufficiently user-friendly and cost-effective, enterprises may choose to design,
develop or maintain all or part of their Intranets, Extranets or web sites in-
house. If the market for such services does not continue to develop or develops
more slowly than expected, or if our services do not achieve market acceptance,
our business, results of operations, financial condition and prospects will be
materially adversely affected.

     Government Regulation and Legal Uncertainties. The Securities and Exchange
Commission (SEC), Nasdaq and the Financial Accounting Standards Board (FASB) all
have recently issued or are currently considering regulations or requirements
that can or will impact our financial results and/or potentially our stock price
in the future. Certain accounting treatments commonly used by Technology
companies have been limited or changed recently. The use of the Pooling of
Interest method of accounting for certain mergers has come under direct scrutiny
by the SEC and the related accounting boards. Future use of this treatment will
be significantly limited if the proposals under review at this time are adopted.

     With the use of the Pooling treatment significantly limited, most companies
will be forced to use the Purchase method of accounting when accounting for
future and current acquisitions.  One of the accounting principles associated
with this area utilized by many technology related acquisitions has been the
practice of taking a current charge to operations for certain "In Process
Research and Development Expenses" at the time of acquisition. The SEC has been
issuing new guidelines and examining many of these charges as a result. Many
companies have been required to restate acquisition-related charges as a result
of these activities by the SEC. The restatement of acquisition related costs
could result in a material change in our previously reported results which could
have an adverse impact on our stock price. While we do not expect the new
guidelines to change our historical accounting treatment of transactions, the
Company has only completed one transaction which has utilized the pooling
method. That July 1998 acquisition had a total aggregate value of less than $6.0
million.

     Our ISBU is not currently subject to direct government regulation, other
than pursuant to certain franchising regulations, the securities laws and the
regulations thereunder applicable to all publicly owned companies, and laws and
regulations applicable to businesses generally, and there are currently few laws
or regulations directly applicable to access to or commerce on the Internet.
However, due to the increasing popularity and use of the Internet, it is likely
that a number of laws and regulations may be adopted at the local, state,
national or international levels with respect to the Internet covering issues
such as user privacy, freedom of expression, pricing of products and services,
taxation, advertising, intellectual property rights, information security or the
convergence of traditional communications services with Internet communications.
For example, the Telecommunications Act of 1996 (the "Telecommunications Act")
imposes criminal penalties on anyone who distributes obscene or indecent
communications over the Internet. Although the anti-indecency provisions of the
Telecommunications Act have been declared unconstitutional by the federal
courts, the increased attention focused upon these liability issues as a result
of the Telecommunications Act could adversely affect the growth of the Internet
and therefore demand for our

                                       9
<PAGE>

services. In addition, because of the growth in the electronic commerce market,
Congress has held hearings on whether to regulate providers of services and
transactions in the electronic commerce market, which regulations could
negatively affect client demand for Internet solutions that facilitate
electronic commerce. Moreover, the adoption of any such laws or regulations may
decrease the growth of the Internet, which could in turn decrease the demand for
our services or increase the cost of doing business or in some other manner have
a material adverse effect on our business, financial condition, results of
operations or prospects. In addition, the applicability to the Internet of
existing laws governing issues such as property ownership, copyrights and other
intellectual property issues, taxation, libel and personal privacy is uncertain.
The vast majority of such laws were adopted prior to the advent of the Internet
and related technologies and, as a result, do not contemplate or address the
unique issues of the Internet and related technologies. Changes to such laws
intended to address these issues, including some recently proposed changes,
could create uncertainty in the marketplace which could reduce demand for our
services or increase the cost of doing business as a result of costs of
litigation or increased service delivery costs, or could in some other manner
have a material adverse effect on our business, financial condition, results of
operations and prospects.

     Dependence on Key Accounts.  The ISBU's current revenues are based mainly
on staff augmentation and service agreements with customers of the operations
acquired in December 1998. A significant portion of the revenue for that
operation has historically come from engagements with John Deere operations.  To
the extent that any or all of the John Deere contracts are terminated there
could be a direct and immediate material adverse effect on our business,
financial condition, results of operations and prospects. Additionally, once a
project is completed there can be no assurance that a client will engage the
ISBU for further services. In addition, the ISBU's clients may unilaterally
reduce their use of the ISBU's services or terminate existing projects. The
termination of the ISBU's business relationship with any of its significant
clients or a material reduction in the use of ISBU's services by a significant
client may have a material adverse effect on our business, financial condition
and operating results.

     Client Uncertainty; Conflicts.  Uncertainty regarding the acquisition may
affect the ability of the ISBU to maintain existing relationships or attract new
clients. In addition, some clients desire that their vendors avoid providing
similar services to the competitors of such clients. The ISBU is actively
engaging non-exclusive channel partners to facilitate the licensing and service
opportunities for the e-commerce software and cross-selling of services.
Contracts with channel partners or certain customers may generate client
conflicts and potentially cause the loss of current clients or an inability to
perform services for certain competing businesses. The loss of significant
clients or an inability to provide services to a significant group of potential
clients could have a material adverse effect on our business, financial
condition, results of operations and prospects.

     Risks of Fixed-Price Engagements.  The ISBU generates a portion of its
revenues through project fees in a fixed fee for service basis and based on
current trends, it may need to increase the percentage of its engagements that
are billed on a fixed-price basis to remain competitive, and as a result,
increase the percentage of revenues derived from fixed-price engagements.  The
ISBU will assume greater financial risk from fixed-price type contracts than on
either time-and-material or cost-reimbursable contracts. The failure to estimate
accurately the resources and time required for an engagement, to manage client
expectations effectively regarding the scope of services to be delivered for the
estimated fees or to complete fixed-price engagements within budget, on time and
to clients' satisfaction would expose us to risks associated with cost overruns
and, in certain cases, penalties, any of which could have a material adverse
effect on our business, results of operations and financial condition.

     Environmental.  We are subject to local and federal laws and regulations
regarding the use, storage and disposition of inks used with our print products.
Although we believe we are in compliance with all such laws and regulations, and
are not aware of any notice or complaint alleging any violation of such laws or
regulations, there can be no assurance that there will not be some accidental
contamination, disposal or injury from the use, storage, or disposition of inks
or other materials used in our DGBU operations.  In the event of such accident,
we could be held liable for any damages that result and any such liability could
have a

                                       10
<PAGE>

material adverse effect on our financial condition. In addition, there can be no
assurance that we will not be required to comply with environmental claims,
laws, or regulations in the future which could result in significant costs which
could materially adversely affect our financial condition.

     Tax Liability.  We sell our products from our offices in Eden Prairie,
Minnesota and report sales and income tax liability based on sales occurring at
that location.  It is possible that one or more state or local taxing
authorities could determine that there have been taxable transactions occurring
within their jurisdiction and seek recovery of taxes for current and/or past
periods.  In addition, it is possible that local, state or federal taxing
authorities will take issue with the reporting or determination of tax liability
and seek additional taxes for current and/or past periods. We currently have a
net operating loss ("NOL") carryforward that may be used to offset future
federal taxable income. However, there is no assurance that the NOL will
continue to be available as an offset against future federal taxable income or
that there will be sufficient taxable income to fully utilize the NOL. We have
been contacted by one state recently regarding possible sales and use tax nexus
as a result of the use of third parties to service products sold by us. An audit
of our records is underway.

     Deferred Tax Assets.  We have recorded deferred tax assets and the related
valuation allowances in accordance with the existing accounting standards. The
valuation of these assets is dependent on our ability to generate taxable income
with which to utilize these assets. There can be no assurance with our operating
history that sufficient taxable income can be generated to utilize these assets.
If the utilization of these assets comes into question, additional valuation
allowances will need to be recorded. The recording of additional valuation
allowances could have a material adverse affect on our financial results.

     Volatility of Stock Price.  The trading price of our common stock is
subject to wide fluctuations in response to variations in operating results,
changes in the laws or regulations to which we may be subject, announcements of
new products or technological innovations by us or our competitors, overall
economic conditions and indicators, market conditions unrelated to our
performance, and general conditions in the industry. Factors such as quarterly
variation in actual or anticipated operating results, changes in earnings
estimates by analysts, and analysts' reactions to our statements and actions
also contribute to stock price fluctuations. In addition, the prices of
securities of many high technology companies have experienced significant
volatility in recent years for reasons frequently unrelated to the operating
performance of the specific companies. These fluctuations may materially affect
the market price of our common stock.

     One time in the past, following fluctuations in the market price of our
stock, a securities action was commenced alleging that the Company and certain
insiders had knowledge of certain material, adverse information about us prior
to the time that such information allegedly caused a drop in the market price of
the stock. Because our stock has historically fluctuated significantly, it is
possible that following a significant change in the market price of the stock
another securities action could be commenced against us. Such action, whether
commenced by one or more individuals or by a class of securities holders, could
result in substantial costs and diversion of our management's attention and
resources and thereby cause an adverse affect on our business and financial
performance.

     Overall Market Fluctuations/Margin Calls.  The overall stock market has
been relatively volatile recently. The price of small capitalization stocks like
VFND may be significantly impacted by overall market declines. The impact on the
price of VFND common stock during a market decline may be magnified because of
the limited "float" available for an investor or investors who may seek or may
be required to sell their shares of VFND common stock to satisfy margin calls
from their individual brokers. The impact of market declines may be enhanced if
Company "insiders" are required to sell their shares of the Company's common
stock in such a situation. Such a sale by an insider under these circumstances
could cause adverse market perceptions which could result in a widespread sell
off of the stock in the general market and cause the stock price to decrease
further. It is likely there will be further fluctuations in the overall stock
market due to the complexities of the worldwide market that exists today. There
can be no assurance future market volatility will not precipitate a significant
sell off of VFND common stock.

                                       11
<PAGE>

     Brand Awareness. Our business plan for B2BXchange calls for the development
of the B2BXchange brand in the Internet business-to-business e-commerce market.
The low barrier to entry in the Internet markets makes this a significant risk
area. In other Internet markets like the business-to-consumer  market, being the
first to market or the most recognizable name has been a major method of
differentiation from the competition in these markets. There is no assurance we
can generate the brand market awareness for B2BXchange or any other of our
products that will be necessary in order for us to compete in this market space.
The failure to generate the brand awareness is likely to have a significant
impact on our ability to grow revenues in this area in the future. The inability
to grow revenue would likely cause a significant change to our business model.

     Control of the Company's Stock. As of April 30, 2000, officers and
directors as a group beneficially owned 20.3% of the outstanding shares of our
stock. One of our DGBU suppliers owned 12.3% of our outstanding shares. The
impact of the holdings of the officers and directors and the supplier is not
believed to be material. However, such control may reduce liquidity of the
stock, which may affect shareholder value.

     Our Board has adopted a Shareholder Rights Agreement. The Shareholder
Rights Agreement was adopted to provide our Board of Directors an opportunity to
assess and evaluate any takeover bid, and in the event a bid is made, to provide
the Board with an appropriate period of time to explore and develop alternatives
which maximize shareholder value. We cannot assure that shareholders or the
market may view or react adversely to this Shareholder Rights Agreement
adversely affecting shareholder value.

     In addition, Minnesota Statutes govern "control share acquisitions" and
require potential acquirers of at least 20% of the Company's stock to provide
notice and information to us about the proposed acquisition of stock and limits
voting rights in acquired stock unless such voting rights are approved by an
affirmative vote of shareholders and the control share acquisition is
consummated within 180 days after shareholder approval. The effect of the
statute is to limit the opportunity for a hostile takeover of control of the
Company unless a majority of shareholders consent.  There is no assurance that
the control share acquisition statute will not adversely affect shareholder
value.

     Dilution.  We have outstanding a large number of stock options and warrants
to purchase our Common Stock.  To the extent such options or warrants are
exercised, there will be further dilution. We expect to seek additional
acquisitions in pursuing our strategies and intend to grant additional stock
options and stock bonuses to the employees of the acquired companies.  For these
reasons, our acquisition program will result in further substantial ownership
dilution to investors.


Risk factors associated with discontinued operations

     Technology and Industry Pressures/Reliance on New Technology.  The pre-
press and wide-format color printing industries are highly competitive and are
characterized by frequent technological advances and new product introductions
and enhancements. As product life cycles get shorter, the resulting consumable
stream generated by the installed base may be negatively impacted. Accordingly,
we believe that our future success for the DGBU depends upon our ability to
enhance current products, to develop and introduce new and superior products on
a timely basis and at acceptable pricing, to respond to evolving customer
requirements, and to design and build products which achieve general market
acceptance.

     Product Quality/Malfunction Issues.  Any quality, durability or reliability
problems with existing or new products, regardless of materiality, or any other
actual or perceived problems with our products could have a material adverse
effect on market acceptance of such new products.  Any quality problems with
components could result in wide-spread failures of the products in the field
causing return and refund requests that would likely have a material effect on
our financial results and future sales potential. Such

                                       12
<PAGE>

problems or perceived problems could potentially arise with respect to any
existing products. The failure to resolve ink functionality issues, or some
other failure of the product to perform as expected by the customer may result
in customer requests for compensatory supplies or other requests which could
have a material adverse effect on our financial performance.

     We are aware of the intermittent presence of contaminants in certain inks
that caused perceived flaws in output from some of the Company's printers. We
have taken steps with our ink supplier to mitigate such contamination problems
and have compensated customers with replacement ink and media. In addition,
early versions of our PressMate(R) and DisplayMaker(R) Express products
experienced quality, durability and reliability problems associated with the use
of new technologies that had not received proper testing. We believe we have
addressed the problems associated with PressMate and DisplayMaker Express by
replacing certain components found in the original designs. All of these
problems contributed to our net losses incurred in fiscal years 1997 and 1996.
Two products which we introduced in the past several years experienced what we
consider "limited market acceptance." One product allowed the use of a very
limited variety of media types (paper, etc.) with the product. Another product
offering received limited market acceptance due to the amount of manual
intervention needed to produce output from the device. While the device
delivered significantly higher quality output than any competitive product
available at the time, the manual media handling and required maintenance was
seen by some users as a product limitation.

     New Product Design and Development.  The process of developing new products
involves adopting new and emerging technologies and components which may not
have product histories or long term use testing to establish expected life
cycles in the field or to assure long term field use. The time and expense
required to adopt new and emerging technologies and components, or to develop
new technologies cannot always be predicted with accuracy. There is no assurance
that new product design and development will occur within anticipated or
budgeted time and financial restrictions. New product design and development may
also delay product introductions, which could affect marketability of the
product, or may be more costly than anticipated.

     Product Acceptance/Market Anticipation.  Our products may not achieve
market acceptance.  In addition, the market anticipation or the announcement of
new products and technologies, whether offered by us or our competitors, could
cause customers to defer purchases of our existing products, which could have a
material adverse effect on our business and financial condition.

     Our Digital Graphics Business Unit introduced a new family of printers, the
DisplayMaker Series XII, during March 1999.  In March 2000, we released a
modified version of that product called the FabriJet XII. Although we have had
successes introducing new products in the past, some earlier products
experienced limited market acceptance and the introductions of some products
have been delayed.  In addition, the quality and reliability reputation of
certain existing products may unfavorably affect new products.  We may not be
successful with current or future product introductions, future market
introductions may not be timely and competitive, future products may not be
priced appropriately, or future products may not achieve market acceptance. Our
inability to achieve market acceptance, for technological or other reasons,
could have a material adverse effect on our financial condition.

     Dependence on Suppliers.  Our aqueous inkjet printers require use of a
sole-sourced printhead supplied pursuant to a written contract with Hewlett-
Packard(R) Company ("HP"). We do not anticipate availability or quality issues
that would affect the supply of printheads supplied by HP. Our revenues
associated with sales of this product or products including those components
represent approximately 70% of our fiscal 1999 revenue. If we were unable to
resolve potential future availability or quality issues, our production and
support of our installed base will be materially adversely affected. We are also
dependent on sole-source suppliers for the heads for PressMate-FS and
DisplayMaker Express ("DME"). Over the time that we have worked with the
supplier for the PressMate printheads, there have been quality and consistency
issues with the printheads supplied. We do not have a written agreement with
this supplier and cannot purchase the supplies from another source. Currently,
we do not sell significant numbers of the PressMate-FS

                                       13
<PAGE>

printers which utilize the sole-sourced component. However, we have an installed
base of PressMate-FS users who purchase consumables from us and could experience
head failure or need a replacement. Overall, the percentage of our revenues
related to the product utilizing this head was 5% of fiscal 1999 revenue. We are
also dependent upon a sole-source supplier for the heads for the DME printer.
The quality and consistency of the printheads delivered by this supplier have
also been a problem in the past and, in some cases, have caused printer returns
from our customers. We believe we have addressed these problems by designing and
providing test equipment to enhance the manufacturing repeatability of the
critical components of the DME printheads and by having had certain employees
spend time at the vendor's facilities to identify and remove the contaminants
that were causing problems with the ink. Costs incurred by us to identify and
mitigate these problems and to meet our warranty obligations and keep these
printers operational contributed to our net losses incurred in fiscal years 1997
and 1996. Although we currently sell very few new DME printers, there is an
installed base of DME users who purchase consumables from us and could
experience printhead failure or require replacement. We have a written agreement
with the sole-source supplier of the DME heads. The written agreement includes
the manufacturing specifications and directions which would allow a second
supplier to produce the printheads if the current supplier were unable to cure
any defaults under the manufacturing and supply agreement. If we were unable to
resolve a quality or supply issue with the head supplier, the effect may be
material and could result in a significant increase in returns of the DME
printer based on the inability to supply replacement printheads. Overall, the
percentage of our revenues related to the product utilizing this head was 5% of
fiscal 1999 revenue.

     Competitive Pricing/Product Introductions. Various potential actions by any
of our competitors, especially those with a substantial market presence, could
have a material adverse effect on our business, financial condition and results
of operations. Such actions may include price reductions, increased promotion,
announcement or accelerated introduction of new or enhanced products, product
giveaways, product bundling or other competitive actions. Additionally, a
competitor's entry into the wide-format market in such ways to permit it to
compete more directly and effectively with our products could adversely affect
operational results.

     Recently, HP offered significant rebates to potential customers. The
rebates included the trade-in of ColorSpan and other wide-format devices for the
reduction of the purchase price of a comparable HP printer. Programs such as
this can potentially impact us by reducing the number of printers we sell
currently and by reducing the installed base of printers to which we sell
consumables.

     Uncertainty Regarding Development of Wide-Format Market; Uncertainty
Regarding Market Acceptance of New Products. The Wide-Format market is
relatively new and evolving.  The future financial performance of the DGBU will
depend in large part on the continued growth of this market and the continuation
of present Wide-Format printing trends such as use and customization of large-
format advertisements, use of color, transferring of color images onto a variety
of substrates, point-of-purchase printing, in-house graphics design and
production and the demand for limited printing runs of less than 200 copies.
If the Wide-Format market does not achieve anticipated growth levels or there is
a substantial change in Wide-Format printing customer preferences, our business,
financial condition and results of operations could be adversely affected.
Additionally, in a new market, customer preferences can change rapidly and new
technology can quickly render existing technology obsolete. Our failure to
respond effectively to changes in the Wide-Format market, to develop or acquire
new technology or to successfully conform to industry standards could have a
material adverse effect on our business and financial condition and results of
operations.

     Technological Advancements. The digital color inkjet printing market is
rapidly moving to two distinct technologies for the placement of ink on a
substrate: thermal inkjet cartridges and piezo-electric ink jet printheads.
Without a secure, economical source of one or both of these products we will
face serious competitive pricing and margin pressures going forward.  We
currently have a license to remanufacture specific HP 600 dpi and 300 dpi inkjet
cartridges for use in our wide-format, roll-fed color inkjet printers.

                                       14
<PAGE>

HP and Encad have also introduced inkjet printers with a capability of producing
output resolution of 600 dpi. HP and other inkjet cartridge manufacturers are
continuing to develop new cartridges to enhance resolution or performance
features. If new cartridge technology developed by HP or other companies
provides a competitive advantage, we will need to secure an adequate source at
reasonable prices or develop a reasonably priced substitute. If we were unable
to secure a reasonable source or develop a substitute, sales of printer engines
and the related gross margins could be negatively impacted.

     Our DGBU products target the market for high quality printing output.
Hardware and software technological advances have enhanced actual and perceived
resolution. Other companies may achieve actual or apparent resolution with less
expensive printers and supplies and therefore capture the market held by our
higher cost printers.

     Intense Competition. The computer printer industry is intensely competitive
and rapidly changing. Some of our existing competitors, as well as a number of
potential new competitors, have longer operating histories, greater technical
resources, more established and larger sales and marketing organizations,
greater name recognition, larger customer bases and significantly greater
financial resources than we do, which may result in a competitive advantage.
Suppliers of Wide-Format print engines and systems compete on the basis of print
quality, cost, color, print time, print size, product features, including ease
of use, service, and price. Competitive product sales practices such as price
reductions, increased promotion, product giveaways and bundling, or announcement
or accelerated introduction of new or enhanced products could have a material
adverse effect on our sales and financial condition. New product introductions
and changes in pricing structure by competitors have had, and can be expected to
continue to have, a significant impact on the demand for our products. Our
thermal inkjet printers compete with piezo head printers which offer greater
media flexibility and increased outdoor durability for unlaminated prints.
Currently Encad and Hewlett-Packard are shipping new versions of their printer
lines with 600 dpi cartridges and anticipate releasing 6 color versions in the
future. Epson has released a new wide-format printer. These products compete for
market share with our current DisplayMaker Series XII printers and anticipated
new product offerings. It is possible that our sales of certain products will
compete with, or displace sales of, other products we sell.

     Our DisplayMaker Series XII, FabriJet XII, DisplayMaker HiRes 8-Color
Series and Giclee PrintMakerFA(TM) products are based on relatively new
technology, are complex and must be reliable and durable to achieve market
acceptance and enhance revenue opportunities. Development and production of new,
complex technologies and products often have associated difficulties and delays.
Consequently, customers may experience unanticipated reliability and durability
problems that arise only as the product is subjected to extended use over a
prolonged period of time. We cannot assure that we have completely resolved
operational problems that have occurred in the past or that we will successfully
resolve any future problems in the manufacture or operation of our existing
printers or any new product. Our failure to resolve manufacturing or operational
problems with existing printers or any new product in a timely manner could have
a material adverse effect on our business, financial condition and results of
operations.

     Our DisplayMaker Series XII, FabriJet XII, DisplayMaker HiRes 8-Color
Series and Giclee PrintMakerFA products utilize HP licensed inkjet technology.
We also purchase licensed inkjet cartridges from HP who is a sole-source of the
cartridge component for our aqueous ink consumable offerings. We also compete
with HP in the wide-format digital color printing market. Currently, we have
been granted access to these and selected new technologies for use in our
products and pay a royalty for these rights. Our revenue associated with the
sale of these products including HP components was approximately 70% of our
fiscal 1999 revenues. As new technologies are developed, there can be no
assurance that we will be able to negotiate additional licenses for newly
developed technologies or that the new terms are equal to the terms currently in
place.

     Certain companies that supply us with consumable products such as ink and
media compete with us by selling directly to our users or selling to competitors
who may offer the products to our users. Additionally, OEM private label ink
products that may be used in their own products may compete with

                                       15
<PAGE>

ColorSpan(R) products. Further, a number of competitors have introduced
consumables which they allege to be compatible with our products and have priced
the consumables below the ColorSpan-branded consumables.

     Although we believe that our Big Color(R) products possess certain
advantages over the competitors' products such as greater color gamut and better
built-in productivity features, the increased competition has negatively
impacted sales volumes and margins and may continue to impact volumes and
margins in the future. We have generally competed in these markets by
introducing technologically advanced products that create new market demand and
products which offer optimum performance characteristics. There can be no
assurance that we will be able to continue to innovate to the extent necessary
to maintain a competitive advantage in these markets or that other competitors
will not achieve sufficient product performance to achieve customer satisfaction
with their products offering better pricing or other competitive features.

     Industry Consolidation. As a growth industry, the Wide-Format digital
printing market has generated many new entrants into the fragmented market with
new products and new technologies. As the market matures, and the industry's
growth rate slows, companies with greater product distributions, brand
awareness, or technological or manufacturing efficiency advantages will emerge
as the market leaders maintaining or increasing their market share. Companies
with less marketable advantages will face significant pressure on revenue growth
and gross margins. In order to remain competitive, the smaller companies within
this sector may have to seek merger or consolidation opportunities with other
companies.

     If we were to merge with another company within the printer industry,
short-term financial results and the market price of our stock may be negatively
impacted. Merger or consolidation of competitors may enhance the financial
strength and competitive abilities of such competitor(s) which could adversely
affect our sales and financial performance.

     Dependence on Component Availability and Costs. Certain components used in
our current and planned products, including print head and other printer
components, are currently available from sole sources, and certain other
components are available from only a limited number of sources. Substantially
all of our revenue is subject to these risks. In the past we have experienced
delays as a result of the failure of certain suppliers to meet requested
delivery schedules and standards of product performance and quality. In
addition, past losses from operations have restricted cash availability and the
ability to keep supplier debt current or within the established credit limits.
Although we have not experienced material delays in delivery schedules due to
our inability to pay suppliers, the requirement to bring certain component
suppliers' debt obligations current, or other restrictions in credit terms of
such component suppliers, could result in an inability to manufacture certain
product lines and thereby adversely affect our financial performance. Our
inability to obtain sufficient supply of components, or to develop alternative
sources, could result in delays in product introductions, interruptions in
product shipments, the need to redesign products to accommodate substitute
components or the need to substitute alternative components which may not have
the same performance capabilities, any of which could have a material adverse
effect on our operating results. A portion of the total manufacturing cost of
our typesetting and Big Color products is represented by certain components
whose prices have fluctuated significantly in recent years. Significant
increases or decreases in the price or reductions in the availability of certain
components could have a material affect on our operating results.

     Returns Reserves. We have established reserves for the return of
merchandise. The amount of the returns reserve is based on historical data
regarding returns of products. For new products there may be insufficient
information to accurately predict return rate and therefore the required reserve
may not be sufficient. Additionally, there may be an unknown or unanticipated
problem with a product or any component thereof, or a defect or shortage of
repair components or the consumable media or inks that are needed to use the
product which could cause the actual returns to exceed the reserves. Returns of
a product which exceed reserves could have an adverse effect on our financial
operations and results.

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     Dependence on Consumables Revenues. We anticipate we will derive an
increasing percentage of our DGBU revenues and operating income from the sale of
ink, paper, film and other consumables to our customers. During the third
quarter of fiscal 2000, consumables revenue was 72% of total revenue. To the
extent sales of our consumables are reduced because our customers are
unsuccessful in marketing their own printing services, product iterations by
ourselves or competitors make our products obsolete or customers substitute
third-party or private label consumables for ours, our results of operations
could be adversely affected. Reduced life cycles of hardware products are
expected to negatively impact consumable revenues. Further, although our
consumables are manufactured specifically to operate with our printing products
to produce optimum results, there can be no assurances that other manufacturers
of printing inks and papers will not develop products that can be sold and
compete with our printing products, or that other products will not produce
results which are satisfactory to the customer at a lower cost. We allege that
at least one manufacturer has improperly used our trade secrets to commence such
competition. Although we have been involved in legal action against such
manufacturer for misappropriation of trade secrets, there can be no assurances
that other manufacturers will not independently or legitimately develop
competing consumable products. In addition, product quality issues, limitations
in the availability of sole source consumables or changes in credit or trade
terms from sole sources could adversely affect the sales of consumables.

     Intellectual Property and Proprietary Rights. We have been granted various
United States patents for inventions related to resolution of conventional laser
printer engines, high-resolution imaging and image enhancement and wide-format
printing technologies and techniques, our Big Ink(R) Delivery System, product
patents, and consumable formulations. Additional patent applications are
pending. There can be no assurance that patents will be issued from any of these
pending applications. With regard to current patents or patents that may be
issued, there can be no assurance that the claims allowed will be sufficiently
broad to protect our technology or that issued patents will not be challenged,
invalidated or violated, requiring expenditures of cash to pursue and enforce
our rights in the patented technology. Applications to patent the basic
TurboRes(R), ThermalRes(R) and Big Ink Delivery System approaches and related
technologies have been filed in selected foreign countries. Patent applications
filed in foreign countries are subject to laws, rules and procedures which
differ from those of the United States, and there can be no assurance that
foreign patents will be granted as a result of these applications. Furthermore,
even if these patent applications result in the issuance of foreign patents,
some foreign countries provide significantly less patent protection than the
United States.

     We rely on a variety of trademarks in the promotion and identification of
our products. We have a variety of trademarks which are registered, and others
that are not registered, or cannot be registered. There is no assurance that
there will not be some challenge to our rights to use one or more trademarks, or
an allegation that the use or display of one or more trademark violates the
trademark rights of another party, which could subject us to damages and losses
related to the loss of our opportunity to use recognized marks in the promotion
of our products.

     Additionally, patent, copyright and trademark protection has not been
sought, or may not be available in all foreign countries.  Although we have not
received any notices from third parties alleging intellectual or proprietary
property infringement, there can be no assurance that third parties will not
assert infringement claims against us in the future or that any such assertion
will not require us to expend funds defending such claims or require us to enter
into royalty arrangements on such terms as may be available, which may adversely
affect our financial performance.  Any claim that our current or future products
or manufacturing processes infringes on the proprietary rights of others, with
or without merit, could result in costly litigation which could adversely affect
our financial performance.

     We are actively pursuing development of new and unique print solutions and
processes, media and inks.  There are a significant number of patents which have
been filed relating to printing cartridges, printing methods and processes,
mechanical printer features, media and inks.  Many of these patents are held by
companies which are larger and have greater resources to pursue violation of
intellectual property.  Although

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our research and development process involves an analysis of protected
proprietary rights in any technology that is being pursued, there is no
assurance that we have completely reviewed and analyzed all applicable patents,
or that competitors or others will not interpret any such products or processes
we develop as violating protected intellectual rights and pursue legal action,
which could be costly and may affect our financial performance. In addition,
although we do not know of any violations of our intellectual property rights,
there can be no assurance that we will not be forced to take action to protect
our intellectual property portfolio. Such enforcement activity could require us
to expend significant cash resources and could affect our financial performance.

     Although we have not received notices from third parties alleging
infringement claims we believe would have a material adverse effect on our
business, there can be no assurance that third parties will not claim that our
current or future products or manufacturing processes infringe on their
proprietary rights. Any such claim, with or without merit, could result in
costly litigation or might require us to enter into a royalty or licensing
agreement. A royalty or licensing agreement, if required, may not be available
on terms acceptable to us, or at all, which could have a material adverse effect
upon our business, financial condition and results of operations. If we do not
obtain such licenses, we could encounter delays in product introductions while
we attempt to design around such patents, or we could find that the development,
manufacture or sale of products requiring such licenses could be enjoined. In
addition, we could incur substantial costs in defending ourselves in suits
brought against us on such patents or in bringing suits to protect our patents
against infringement, which could adversely affect our financial condition or
results. If the outcome of any such litigation is adverse, our business and
financial results could be adversely affected.

     International Operations. Historically international revenues have
represented a substantial portion of our total revenues in the Digital Graphics
Business Unit. For the year ended June 30, 1999, international operations
composed 36.4% of total sales, compared to 41.1% for the same period last year.
Worsening economic conditions and exchange rate problems in the Japan,
Asia/Pacific, Latin America and Europe regions contributed to this decrease.
International operations are subject to various risks, including exposure to
currency fluctuations, political and economic instability, differing economic
conditions and trends, differing trade and business laws, unexpected changes in
applicable laws, rules, regulatory requirements or tariffs, difficulty in
staffing and managing foreign operations, longer customer payment cycles,
greater difficulty in accounts receivable collection, potentially adverse tax
consequences and varying degrees of intellectual property protection.
Fluctuations in currency exchange rates could result in lower sales volume
reported in U.S. Dollars. Fluctuations in foreign exchange rates are
unpredictable and may be substantial. From time to time we have engaged in
limited foreign currency hedging transactions. Our European subsidiary extends
credit in the normal course of business in five relatively stable European
currencies. In addition, the financing agreement in place allows our subsidiary
to factor those receivables and receive Dutch guilders in which it pays its
expenses. Significant fluctuation in the relatively stable Dutch guilder could
have an adverse impact on the Company. Substantially all of our other
transactions are in U.S. dollars. There can be no assurance that we will be
successful in limiting our foreign currency exposure in the future.

     Reliance on Indirect Distribution. We market and sell our products
domestically and internationally primarily through specialty distributors,
dealers, VARs and OEMs. Our sales are principally made through distributors,
which may carry competing product lines. Such distributors could reduce or
discontinue sales of our products, which could have a material adverse effect on
our business. There can be no assurance that these independent distributors will
devote the resources necessary to provide effective sales and marketing support
of our products. In addition, we are dependent upon the continued viability and
financial stability of these distributors, many of which are small organizations
with limited capital. These distributors, in turn, are substantially dependent
on general economic conditions and other unique factors affecting the wide-
format printer market. We believe that our future growth and success will
continue to depend in large part upon our distribution channels. To expand its
distribution channels, we entered into select OEM and private label arrangements
that allow it to address specific market segments. We cannot assure that we will
be successful in developing OEM and private label relationships, or that those
relationships will result in incremental business.

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