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                                    FORM 10-K
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON D.C. 20549

                |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
            OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]

                                       OR

              |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
            OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]

                   For the fiscal year ended December 31, 2005

                         Commission File Number 0-17977

                              BOUNDLESS CORPORATION
             (Exact name of registrant as specified in its charter)

                Delaware                               13-3469637
     (State or other jurisdiction of                (I.R.S. Employer
     incorporation or organization)                Identification No.)

   50 Engineers Lane  Farmingdale, NY                     11735
(Address of principal executive offices)               (Zip Code)

       Registrant's telephone number, including area code: (631) 962-1500

           Securities registered pursuant to Section 12(b) of the Act
                                      None

           Securities registered pursuant to Section 12(g) of the Act
                          Common Stock, $.01 par value
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
  the preceding 12 months (or for such shorter period that the registrant was
    required to file such reports), and (2) has been subject to such filing
               requirements for the past 90 days. Yes |X| No |_|

 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
  of Regulation S-K is not contained herein, and will not be contained, to the
 best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
                                 Form 10-K. |_|

   Indicate by check mark whether the registrant is an accelerated filer (as
               defined in Exchange Act Rule 12b-2)

                                 Yes |_| No |X|

                         Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act

                                 Yes |_| No |X|

    The aggregate market value of the voting stock held by non-affiliates of
the registrant, computed by reference to the last sale price of the registrant's
                   Common Stock on December 31, 2005, is $0.

<PAGE>

      As of March 31, 2006 the registrant had 6,705,613 shares of Common Stock,
$.01 par value per share, outstanding.

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

       Boundless Corporation and Subsidiary Companies Report on Form 10-K
                      For the Year Ended December 31, 2005

<TABLE>
<CAPTION>
                                                                                                                          Page
                                                                                                                          ----
<S>                                                                                                                        <C>
                                                            PART I
Item 1.  Business                                                                                                           2
Item 1A. Risk Factors                                                                                                      13
Item 1B. Unresolved Staff Comments                                                                                         15
Item 2.  Properties                                                                                                        15
Item 3.  Legal Proceedings                                                                                                 15
Item 4.  Submission of Matters to a Vote of Security Holders                                                               16

                                                            PART II
Item 5.  Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities  17
Item 6.  Selected Consolidated Financial Data                                                                              18
Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations                             20
Item 7A. Quantitative and Qualitative Disclosures about Market Risk                                                        34
Item 8.  Financial Statements and Supplementary Data                                                                       34
Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                              34
Item 9A. Controls and Procedures                                                                                           35
Item 9B  Other Information                                                                                                 35

                                                           PART III
Item 10. Directors and Executive Officers of the Registrant                                                                36
Item 11. Executive Compensation                                                                                            38
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                    41
Item 13. Certain Relationships and Related Transactions                                                                    43
Item 14. Principal Accountant Fees and Services                                                                            43

                                                            PART IV
Item 15. Exhibits, Financial Statements, Schedules and Reports on Form 8-K                                                 45

         Signatures                                                                                                        50
         Section 302 Certification  (Filed as Exhibit 31)
         Section 906 Certification  (Filed as Exhibit 32)
</TABLE>

<PAGE>

                                     PART I

ITEM 1. BUSINESS

      Boundless  Corporation  (the "Company") was incorporated in 1988 under the
laws of the State of Delaware.  The Company through its subsidiaries,  Boundless
Technologies,   Inc.  ("Boundless  Technologies")  and  Boundless  Manufacturing
Services, Inc. ("Boundless Manufacturing"),  is a manufacturer of text terminals
and provider of manufacturing services. The Company's headquarters is located at
50  Engineers  Lane,  Farmingdale,   New  York  11735  (telephone  number  (631)
962-1500).

      This Form 10-K contains various  "forward-looking  statements"  within the
meaning of Section 27A of the  Securities  Act of 1933, as amended,  and Section
21E  of the  Securities  Exchange  Act  of  1934,  as  amended.  Forward-looking
statements  represent the Company's  expectations and beliefs  concerning future
events,  based on information  available to us on the date of the filing of this
Form 10-K, and are subject to various risks and  uncertainties.  We disclaim any
intent or obligation to update or revise any of the forward-looking  statements,
whether  in  response  to  new   information,   unforeseen   events  or  changed
circumstances  except as required to comply with the disclosure  requirements of
the federal securities laws.

      Forward looking  statements  necessarily  involve known and unknown risks,
uncertainties  and other  factors that may cause the actual  results,  levels of
activity,  performance,  or  achievements  to be materially  different  from any
future results,  levels of activity,  performance,  or achievement  expressed or
implied by such  forward-looking  statements.  Readers are  cautioned  to review
carefully the discussion  concerning  these and other risks which can materially
affect  the  Company's  business,  operations,  financial  condition  and future
prospects.

      In some cases, you can identify forward-looking  statements by terminology
such as "may," "will,"  "should,"  "could,"  "intend,"  "expect,"  "anticipate,"
"assume",    "hope",   "plan,"   "believe,"   "seek,"   "estimate,"   "predict,"
"approximate,"   "potential,"  "continue",   or  the  negative  of  such  terms.
Statements including these words and variations of such words, and other similar
expressions, are forward-looking statements.  Although the Company believes that
the  expectations  reflected in the  forward-looking  statements  are reasonable
based upon its knowledge of its business,  the Company cannot absolutely predict
or  guarantee  its  future  results,   levels  of  activity,   performance,   or
achievements.  Moreover,  neither  the  Company  nor any  other  person  assumes
responsibility for the accuracy and completeness of such statements.

      The Company notes that a variety of factors could cause its actual results
and  experience  to differ  materially  from the  anticipated  results  or other
expectations  expressed  in  its  forward-looking   statements.  The  risks  and
uncertainties  that may  affect the  operations,  performance,  development  and
results of its business include, but are not limited to, the following:  changes
in spending  patterns;  changes in overall  economic  conditions;  the impact of
competition  and  pricing;   the  financial   condition  of  the  suppliers  and
manufacturers  from whom the  Company  sources its  merchandise;  changes in tax
laws;  the Company's  ability to hire,  train and retain a consistent  supply of
reliable  and  effective  participants  in  its  marketing  operations;  general
economic,  business and social  conditions  in the United  States;  the costs of
complying  with  changes in  applicable  labor laws or  requirements,  including
without limitation with respect to health care; changes in the costs of interest
rates,  insurance,  shipping  and  postage,  energy,  fuel  and  other  business
utilities;  the risk of  non-payment  by, and/or  insolvency  or bankruptcy  of,
customers  and others owing  indebtedness  to the  Company;  actions that may be
taken by creditors with respect to the Company's obligations that are subject to
default  proceedings;  threats or acts of terrorism  or war;  and strikes,  work
stoppages or slow downs by unions  affecting  businesses which have an impact on
the Company's ability to conduct its own business operations.

      Forward-looking  statements  that the Company  makes,  or that are made by
others on its behalf with its knowledge


                                       2
<PAGE>

and express permission, are based on knowledge of the Company's business and the
environment  in which it  operates,  but  because of the factors  listed  above,
actual  results  may  differ  from  those  in  the  forward-looking  statements.
Consequently,  these  cautionary  statements  qualify all of the forward looking
statements made herein. The Company cannot assure the reader that the results or
developments  anticipated  by it  will be  realized  or,  even if  substantially
realized,  that  those  results  or  developments  will  result in the  expected
consequences  for it or affect it, its  business  or  operations  in the way the
Company  expects.  Readers are  cautioned  not to place undue  reliance on these
forward-looking  statements,  which  speak  only as of  their  dates,  or on any
subsequent  written  and oral  forward-looking  statements  attributable  to the
Company or persons acting on its behalf,  which are expressly qualified in their
entirety by these  cautionary  statements.  The Company does not  undertake  any
obligation to release publicly any revisions to such forward-looking  statements
to  reflect  events or  circumstances  after the date  hereof or  thereof  or to
reflect the occurrence of unanticipated events, other than as required to comply
with the disclosure requirements of the federal securities laws.

Bankruptcy Considerations

   The following  discussion provides general background  information  regarding
our Chapter 11 cases, and is not intended to be an exhaustive summary.

A.    Pre-Petition History

      Boundless, a publicly-held Delaware corporation, was incorporated in 1988.
Through its subsidiaries,  Boundless  Technologies and Boundless  Manufacturing,
Boundless provides text terminals and manufacturing services.

      Boundless  Technologies  principally  designs,  sells and supports desktop
computer display terminals without graphics' capabilities.  It offers custom and
standard   models  of  display   terminals   primarily  to  retail,   financial,
telecommunications and wholesale distribution  businesses which utilize them for
data entry and point-of-sale activities.

      Boundless Manufacturing operates in the electronic  manufacturing services
("EMS") marketplace.  It provides services in supply chain optimization,  global
supply  base  management,   systems  assembly  and  testing,   distribution  and
logistics,  repair  centers  and  end-of-life  management.  It  offers  in-house
engineering expertise,  product design, test development and product development
for original equipment manufacturers ("OEM").

      The operating losses generated by Boundless Manufacturing,  in combination
with the economic downturn following  September 11, 2001, caused the Company and
its  subsidiaries,  on March 12, 2003, (the "Petition Date"), to seek protection
under Chapter 11 of the Bankruptcy Code.

B.    Pre-Petition Credit Facility with CIT Group/Business Credit, Inc.

   Pursuant to a Financing  Agreement  dated June 27, 2002, the Company  entered
into a credit facility with the CIT Group/Business  Credit, Inc. ("CIT").  Under
this credit  facility,  CIT agreed to make loans and  advances to the Company in
amounts of up to 85% of their aggregate  outstanding  "eligible" accounts,  plus
the lesser of 10% of the aggregate  value of the Company's  eligible  inventory,
85% of the appraised inventory liquidation value or $200,000, whichever is less.
The  credit   facility  also  provided  for  revolving   loans  with  a  maximum
availability  under the credit  facility of $8.5  million.  As security  for the
aforementioned  credit facility,  the Company granted CIT a security interest in
and to substantially all of its personal property.

   Prior to the  Petition  Date,  CIT advised the Company that it would not make
any further  advances (the  "Notification").  At that time, the Company owed CIT
approximately   $600,000.   During  the  ten  day  period   subsequent   to  the
Notification,  payments of the  Company's  receivables  to CIT  satisfied all or
substantially  all of the  amounts  due and owing to CIT.  By  assignment  dated
February 21, 2003,  CIT assigned all of its right,  title and interest in and to
the CIT Credit Facility to Valtec Capital Corporation ("Valtec").  Prior to this
assignment, Valtec was a subordinated secured creditor of the Company.


                                       3
<PAGE>

C.    Pre-Petition Credit Facility with Valtec

   By a loan and  security  agreement  dated  December 3, 2002 (the "Valtec Loan
Agreement"),  the Company  consolidated prior borrowings and received additional
borrowings  from Valtec in the aggregate  amount of  approximately  $1.2 million
(plus accrued and unpaid interest and other  charges).  Valtec agreed to provide
debtor-in-possession financing to the Company so that the Company could continue
to operate  its  respective  businesses  as going  concerns,  provided  that the
Company  filed a petition  under  Chapter 11 and  scheduled a sale of all of its
assets pursuant to ss.363 of the Bankruptcy Code shortly after the filing of the
Company's Chapter 11 petitions.

D.    Procedural History

   The Company and its subsidiaries filed their respective  petitions for relief
pursuant to the  Bankruptcy  Code on March 12, 2003 (the  "Petition  Date").  On
March  14,  2003,  the  Bankruptcy  Court  signed  an Order  directing  that the
bankruptcy   cases  be   consolidated   for  procedural   purposes  and  jointly
administered.  On March 25, 2003, an Official  Committee of Unsecured  Creditors
(the "Committee") was appointed.  The law firm of Platzer Swergold Karlin Levine
Goldberg & Jaslow, LLP was retained to represent the Committee.

E.    The Company's Administrative Period

   During the period from the Petition  Date through and  including  January 28,
2005, Valtec provided debtor-in-possession financing ("Valtec DIP Financing") to
the Company.  Pursuant to the Bankruptcy  Court's Interim Order entered on April
17, 2003 (the "Interim Order"), the Bankruptcy Court approved: (i) the Company's
use of  Valtec's  cash  collateral  ("Valtec's  Cash  Collateral");  (ii) direct
borrowings   from  Valtec  of  an  amount  up  to  $1,500,000;   and  (iii)  the
Debtor-in-Possession  Financing  and Security  Agreement by and among Valtec and
the Company (the "DIP Financing Agreement").

   As a condition to the Valtec DIP  Financing,  Valtec  required the Company to
enter  into the  Ansen  Corporation  Manufacturing  Services  Agreement  ("Ansen
Agreement"),  pursuant  to which,  Ansen  Corporation  ("Ansen")  would  provide
post-petition manufacturing, production and delivery services to the Company. By
Order  dated  April 16,  2003,  the  Bankruptcy  Court  approved  the  Company's
execution of the Ansen Agreement.

   Pursuant to the terms and  conditions of the DIP Financing  Agreement,  on or
before April 30, 2003,  the Company was  obligated to seek an order  pursuant to
ss. 363 of the Bankruptcy  Code  authorizing  the sale of  substantially  all of
their personal  property free and clear of liens,  claims and encumbrances  (the
"ss.  363  Motion").  On March 27, 2003,  the Company  filed the ss. 363 Motion.
However,  prior to the scheduled  auction sale date, Vision  Technologies,  Inc.
("Vision")  submitted  a written  offer to the  Company to  provide  replacement
debtor-in-possession  financing in exchange for receiving  seventy (70%) percent
of the Company's equity when the Company confirmed the Plan.

   In an  effort  to  reorganize  the  Company  and  provide  a return  to their
creditors, which the Company believed would not be effected through the proposed
ss.363  sale,  on April 30,  2003,  on the  Company's  motion  (the  "April 30th
Motion"),  the  Bankruptcy  Court signed an Order to Show Cause that scheduled a
hearing on May 8, 2003, to consider,  inter alia, the Company's  request to: (i)
withdraw  the ss.  363  Motion;  (ii)  obtain  replacement  debtor-in-possession
financing from Vision; (iii) utilize Valtec's Cash Collateral;  and (iv) approve
an  agreement  among  the  Company,   the  Committee  and  Vision  (the  "Vision
Agreement").

   Pursuant to Order of the  Bankruptcy  Court  entered on May 1, 2003 (the "May
Order"), and upon the May 8, 2003 hearing (the "May 8 Hearing"),  the Bankruptcy
Court  authorized  the Company to borrow a total of  $375,000  from Vision on an
emergency basis pending the Bankruptcy Court's final  determination of the April
30th Motion, pursuant to and conditioned upon the terms and conditions contained
in the May  Order,  and as  supplemented  by the  record  of the  May 8  Hearing
(respectively, the "Vision Advances" and the "Vision Priming Orders").

   At a hearing  held on May 14,  2003,  the Court  authorized  the  Company  to
utilize up to $581,000 of Valtec's  Cash  Collateral  (proceeds of collection of
receivables and sale of inventory)  pursuant to and  conditioned  upon the terms
and conditions recited into the record of the May 8 Hearing (the "May 14th Cash
Collateral  Order").  Pursuant to the May 14th


                                       4
<PAGE>

Cash Collateral Order, the Company paid Valtec $300,000 to reduce the Company's
obligations to Valtec under the Valtec DIP Financing Agreement (the "DIP Debt"),
and additional amounts were paid to Valtec as adequate protection for the
Company's use of inventory which was acquired by the Company post-petition and
which collateralized in part the DIP Debt.

   After significant negotiations at a hearing held on May 28, 2003, the parties
(the Company,  the Committee,  Vision and Valtec)  informed the Bankruptcy Court
that they had reached an agreement in  principle  for a settlement  on the terms
and conditions  read into the record on May 28, subject to a formal  stipulation
subsequently  prepared and executed by and between such parties.  Based upon the
settlement  and the  terms  and  conditions  recited  into  the  record,  Valtec
consented  to,  and  the  Bankruptcy  Court  authorized,  the  Company's  use of
additional  amounts of  Valtec's  Cash  Collateral  on the terms and  conditions
contained in the May 14th Cash Collateral Order (together with the May 14th Cash
Collateral Order, the "Valtec Cash Collateral Orders").

F.    Valtec Settlement and Agreement with Vision

   The settlement stipulation dated June 11, 2003 (the "Settlement Stipulation")
by and among the Company,  the  Committee,  Vision and Valtec  resolved all then
outstanding  issues with Valtec and incorporated by reference an amended version
of the Vision Agreement dated May 11, 2003 (the "Amended Vision Agreement"). The
Settlement Stipulation and the Amended Vision Agreement were "So Ordered" by the
Bankruptcy  Court on June 18, 2003.  Pursuant to the Settlement  Stipulation the
parties agreed as follows:

      1.    As of the  close of  business  May 27,  2003,  the  Company's  total
            obligation to Valtec was $1,592,000  comprised of: (i) $1,434,000 of
            pre-petition  debt  ("Pre-Petition  Obligations");  and (ii) the DIP
            Debt of $158,000 (collectively, the "Valtec Obligations").

      2.    The pre-petition  obligations to Valtec were valid,  enforceable and
            not  subject to any claim,  counterclaim,  set-off or defense of any
            kind or nature.

      3.    The Pre-Petition Obligations to Valtec were fully secured.

      4.    The DIP Debt was fully secured.

      5.    Payment of the DIP Debt,  through a  combination  of amounts paid to
            Valtec to reimburse  it for  inventory  acquired by the Company,  in
            part  utilizing  financing  provided  by  Vision,  was to be made in
            weekly  payments  of $13,000,  plus  payment  for  inventory  at the
            Company's cost. As of December 31, 2005, the Company has made all of
            such required payments.

      6.    Upon payment of the DIP Debt, the  Pre-Petition  Obligations will be
            paid by a  combination  of equal  weekly  payments  in the amount of
            $7,500 through the Confirmation Date and subsequent to confirmation,
            in equal monthly  payments  thereafter for a period of 30 months (or
            34 months in the event that Valtec  advanced the  Professional  Fees
            Payment of $200,000 as defined  herein)  with  interest at a rate of
            8%, collateralized by a first lien on all of the Company's assets.

      7.    If on the  Confirmation  Date the Company  does not have  sufficient
            cash to pay in full the allowed fees of the  professionals  retained
            by the Company and the Committee, Valtec will advance up to $200,000
            to the  Company to be applied  toward the  payment of such fees (the
            "Professional  Fees  Payment"),  which amount shall be added to, and
            become part of the Pre-Petition Debt.

      8.    Vision  would  provide  supplemental  financing to the Company in an
            amount  up to  $650,000  plus  interest  (inclusive  of  the  Vision
            advances theretofore provided) as contemplated by the Amended Vision
            Agreement.  Payment of the Vision Debt will  commence  subsequent to
            payment in full of the Valtec Obligations, and shall be secured by a
            lien  subordinate  to  the  lien  securing  payment  of  the  Valtec
            Obligations.  As of  December  31,  2004,  the amounts due under the
            Valtec and Vision  Claims were  approximately  $638,000 and $738,000
            (with  interest),  respectively and the amount of the collateral (as
            defined in the Settlement Stipulation)  collateralizing these claims
            amounted  to  approximately  $2,225,000.  On January  31,  2005,  we
            entered   into  an   agreement   with   Valtec  to   terminate   our
            debtor-in-possession ("DIP") financing and to release their liens on
            our  personal  property.  At the same time,  we entered into another
            secured DIP financing  agreement with  Entrepreneur  Growth Capital,
            LLC  ("EGC")  pursuant to which EGC was granted a lien on all of our
            personal property.

      9.    Valtec  authorized  the continued  use of Valtec's  Cash  Collateral
            during the pendency of the Plan.

      10.   As required in the Settlement Stipulation,  the Company is and shall
            be required to maintain  collateral margins of


                                       5
<PAGE>

            $100,000 in excess of the Valtec  Obligations,  and  provide  Valtec
            with  financial  information  on a weekly basis.  As of December 31,
            2004,  the  Company  had met both the excess  collateral  margin and
            reporting requirements.  The termination of the Valtec DIP financing
            on January 31, 2005,  released the Company from its obligations with
            respect to the excess collateral margin and reporting requirements.

   Pursuant  to the  Amended  Vision  Agreement  by and among the  Company,  the
Committee and Vision, the parties agreed as follows:

      1.    Vision  would  advance to the Company an amount up to $650,000 to be
            secured  by a  security  interest  upon  substantially  all  of  the
            Company's  assets,  subordinate  to the security  interest  securing
            payment of the Valtec Obligations.

      2.    The  establishment of an executive  committee  acceptable to Vision.
            There is no overlap in  functions  or duties  between the  executive
            committee and the Board of Directors. The executive committee of the
            Board of Directors is responsible  for the creation and execution of
            the  Company's  strategic  business  plan.  As of March 31, 2006 the
            executive  committee was comprised of Mr. Frank Stephens,  a current
            member of the  Company's  Board of  Directors;  Mr.  John Ryan,  the
            Company's Chief  Operating  Officer;  and, Mr. Joseph  Gardner,  the
            Company's  Chief Financial  Officer.  No compensation is paid to any
            member of the  executive  committee as a result of being a member of
            the executive committee.

      3.    Cancellation  of all  existing  capital  stock of the  Company,  and
            issuance of a new class of capital  stock  pursuant to the terms and
            conditions of the Amended Vision Agreement or as otherwise agreed by
            the parties.

      4.    Payment of Valtec's Pre-Petition obligations over a term of up to 34
            months  subsequent  to  Confirmation,  and continued use of Valtec's
            Cash Collateral.

      5.    Vision  shall have the right to appoint  all members of the board of
            directors of the reorganized Company post-confirmation.

      6.    The Company would propose a joint plan of reorganization with Vision
            (and the  Committee if the  Committee  believes it to be in the best
            interest of creditors).

      7.    In the event that any entity other than Vision  shall  acquire or be
            entitled to acquire a majority of the  Company's  Capital Stock as a
            going concern or acquire all or  substantially  all of the Company's
            assets Vision shall receive a break-up fee in the amount of $100,000
            pursuant to paragraph A(8) of the Amended Vision Agreement.

      8.    Upon the Bankruptcy Court's approval of the Settlement  Stipulation,
            Amended  Vision  Agreement  and related  documents on June 18, 2003,
            Vision funded the  remainder of the $650,000  ($100,000 of which was
            held in escrow and  utilized for payment of the fees and expenses of
            the  professionals  for the Company and the Committee,  which escrow
            amount with the Vision Advances was the "Vision Funding").

      9.    If the  Company  files a plan other than as  described  hereinabove,
            which does not  provide  Vision  with the  benefits  of the  Amended
            Vision Agreement,  then as a condition precedent to the confirmation
            of any other  Plan,  Vision  must be paid in full  (together  with a
            break-up  fee of $100,000) on the  Effective  Date,  as set forth in
            paragraph 8 of the Amended Vision Agreement.

G.    Valtec Settlement and Agreement with Entrepreneur Growth Capital, LLC

      On November 30, 2004, the Company filed a motion with the Bankruptcy Court
for an  order  authorizing  the  Company  to  (i)  incur  post-petition  secured
indebtedness, and (ii) grant a security interest and priority claims pursuant to
Sections  364(c) and 364(d) of the  Bankruptcy  Code.  On January 27, 2005,  the
Bankruptcy Court approved the order.

      On January  31,  2005,  the Company  entered  into an  agreement  with its
secured lender Valtec Capital,  LLC, as assignee of Valtec Capital  Corporation,
(the "Prior Lender") to terminate our debtor-in-possession ("DIP") financing and
to release their liens on our personal  property.  At the same time, the Company
entered into another secured DIP financing  agreement (the "EGC Agreement") with
Entrepreneur  Growth  Capital,  LLC ("EGC")  pursuant to which EGC was granted a
lien on all of our personal property. The original term of the EGC Agreement was
one year;  and, on January 31,  2006,  the EGC  Agreement  was  extended  for an
additional six months.


                                       6
<PAGE>

      In  general,  the EGC  Agreement  permits  us to  borrow  up to 80% of our
eligible accounts receivable.  Under the EGC Agreement, the annual interest rate
is 6% above the prime rate  announced by  Citibank,  N.A. and we are required to
pay a monthly  service fee equal to three quarters of one percent (0.75%) of the
face  value  of  invoices  assigned  to EGC for  the  preceding  month.  The EGC
Agreement  requires us to pay minimum monthly interest of $5,000 even though our
actual  borrowings  may  result in a lesser  interest  charge.  The  Company  is
responsible for certain fees and fees for early termination of the facility. The
maximum availability under the EGC Agreement is $1,000,000.

      In return for termination of the prior DIP financing we also agreed to pay
Valtec  Capital a total of  $100,000  for legal  fees they  incurred  during our
bankruptcy period. This amount is payable to Valtec Capital on the date that our
Plan of Reorganization becomes effective.

      On February 2, 2005, the Company filed, as exhibits,  the EGC Agreement on
Form 8-K with the Securities and Exchange Commission.

H.    Sale of 100 Marcus Avenue, Hauppauge, New York

      On or about September 17, 2003, pursuant to that certain Purchase and Sale
Agreement  ("Purchase  Agreement")  by  and  among  the  Company,   Independence
Community Bank ("ICB"), JPMorgan Chase and 100 Marcus LLC, the Company agreed to
transfer all of its right,  title and  interest in and to 100 Marcus  Boulevard,
Hauppauge,  New York, which had served as the Company's main operating  facility
(the  "Premises").  ICB and  JPMorgan  Chase held  mortgages on the Premises and
participated in the sale transaction. The Company successfully negotiated a sale
of  the  Premises  which  provided  for:  (i)  satisfaction  of  all  liens  and
encumbrances  of ICB and JPMorgan Chase;  (ii) payment of all  outstanding  real
estate tax obligations from the proceeds of the sale; (iii) the Company's use of
15,000 square feet, rent free, for a period of one (1) year  post-closing;  (iv)
the payment of $250,000 to the Company and (v) ICB and JP Morgan Chase retaining
unsecured  claims against the Company for the  difference  between the Company's
Obligations  to such  banks and the  amount of the  proceeds  of the sale of the
Premises  remitted  to such bank.  As a result,  such  banks  have  pre-petition
unsecured claims against the Company aggregating approximately $2,271,000.

      On or about  September  17,  2003,  the Company,  ICB and  JPMorgan  Chase
entered  into  that  certain  Proceeds  Distribution  Agreement  (the  "Proceeds
Agreement),  which provided for the distribution of the net proceeds of the sale
of the Premises  between those  parties.  Notwithstanding  that the  outstanding
amounts  of the  mortgages  far  exceeded  the sale  proceeds  of the  Premises,
pursuant to the Proceeds Distribution  Agreement,  the Company received $250,000
from such proceeds of the sale of the Premises.

      On or about  December 9, 2003, the Court signed:  (i) the Order  approving
the Purchase  Agreement  with 100 Marcus LLC; and (ii) the Order  approving  the
Proceeds Agreement.  The closing of the Premises took place on or about December
23,  2003,  and on or about  December 30, 2003,  the Company  received  $190,000
pursuant to the Proceeds Agreement.  On or about May, 2004 the remaining balance
in the escrow was released to the Company.

      Pursuant  to the  Purchase  Agreement  and  the  Proceeds  Agreement,  the
remaining claims of ICB and JPMorgan Chase shall be treated as general unsecured
claims.

I.    Miscellaneous

   Immediately  prior to the Petition Date,  the Company  reduced its staff from
125 to 70.  Subsequent to the Petition  Date,  the Company  further  reduced the
number of its employees to 35. The Company's  business plan focuses primarily on
the  manufacturing,  sale and  support  of its  text  terminal  products,  while
releasing a series of more modern  replacement  products.  The Company  plans to
exploit  its  history  of  success  and  well-established  customer  base in the
Point-of-Sale  (POS)  market.  The Company  further  plans to  capitalize on its
post-manufacturing   services   capability  by  expanding  into  the  repair  of
third-party  products  produced by its existing OEM customers  (such as NCR, IBM
and Hewlett Packard). The Company presently


                                       7
<PAGE>

has retained some, though greatly reduced,  research and development capability,
and has reduced marketing functions.

   We continue to operate our  businesses as  "debtors-in-possession"  under the
jurisdiction  of the  Bankruptcy  Court and in  accordance  with the  applicable
provisions of the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure and
applicable court orders.  All vendors are being paid for all goods furnished and
services  provided  after the Petition Date in the ordinary  course of business.
However,  under Section 362 of the Bankruptcy  Code,  actions to collect most of
our  pre-petition   liabilities  are   automatically   stayed.   Most  of  these
pre-petition  liabilities will be settled under a plan of  reorganization  which
must be approved by the Bankruptcy Court.

   To  successfully  exit  Chapter  11,  we  must  obtain  confirmation  by  the
Bankruptcy Court of a plan of  reorganization.  A plan of reorganization  would,
among other things, resolve our pre-petition obligations,  set forth our revised
capital structure and establish our corporate governance subsequent to exit from
bankruptcy.  The  decision  as to  when we  will  file a plan of  reorganization
depends on the timing and outcome of numerous  ongoing matters in the Chapter 11
process.  We  expect  to file a plan of  reorganization  that  provides  for the
Company's  emergence  from  bankruptcy,  but there can be no assurance  that the
creditors eligible to vote on our plan will support our positions or our plan of
reorganization  (disagreements between us and those eligible to vote on our plan
could adversely affect our reorganization process,  including our emergence from
Chapter  11).  Nor can there be any  assurance  that the  Bankruptcy  Court will
confirm  a plan of  reorganization  or that any such  plan  will be  implemented
successfully.

   We are working towards emerging from Chapter 11 no later than April 30, 2006,
but that timing is dependent on, among other things,  the timely and  successful
confirmation  and  implementation  of a plan of  reorganization.  The rights and
claims of various  creditors and security holders will be determined by the plan
as well.  At this time, it is not possible to predict  accurately  the effect of
the  Chapter  11  reorganization  process on our  business,  nor can we make any
predictions concerning how each of these claims will be valued in the bankruptcy
proceedings.  We believe that Boundless' presently outstanding equity securities
will have no value and it is  expected  that those  securities  will be canceled
under any plan of reorganization that we propose.  For this reason, we urge that
caution be  exercised  with respect to existing  and future  investments  in any
Boundless security.

The Company has commenced preliminary negotiations to have one of its inactive,
non-operating subsidiaries become acquired through a "reverse merger" by an
operating company organized in China which desires to become a public company.

If consummated, approximately 10% of the outstanding common stock of the
post-merged company will remain with Boundless, in which case approximately
one-half of that interest will be distributed to the unsecured creditors.

In the event that Boundless Technologies is the subsidiary that is "reverse
merged" then Boundless will transfer approximately 25,000 of the shares it
receives to each of Mr. Stephens and Mr. Bowman, currently directors of the
Company.

   For  more  information  on  our  bankruptcy  proceedings,   see  Management's
Discussion  and Analysis of Financial  Condition and Results of  Operations  and
Note 1, "Voluntary Reorganization under Chapter 11" in the Notes to Consolidated
Financial Statements.

General

      Boundless Technologies, a wholly-owned subsidiary, is engaged in supplying
computer  terminals for  commercial  use. The Company's  general  strategy is to
provide fast,  easy-to-use,  and  cost-effective  products that enable access to
applications  and data in  commercial  environments,  as well as older  "legacy"
applications, running on mainframes, mid-range, and Unix systems.

      Boundless Technologies principally designs, sells and supports (i) desktop
computer display terminals,  which generally do not have graphics  capabilities,
("General  Display  Terminals"),  and  (ii)  other  products  that  are  used in
multi-user computing  environments.  Boundless  Technologies offers standard and
custom models of its General Display Terminals  primarily to retail,  financial,
telecommunications and wholesale distribution businesses requiring them for data
entry and point of sale activities.

      Boundless  Manufacturing  is  pursuing  opportunities  in  the  electronic
manufacturing  services ("EMS")  marketplace.  As of December 31, 2005 and 2004,
the  Company  owned  75% of the  outstanding  shares  of  common  stock  of this
subsidiary.  Services  include  supply chain  optimization,  global  supply base
management,  systems  assembly  and test,  distribution  and  logistics,  repair
centers and end-of-life management. Boundless Manufacturing also offers in-house
engineering expertise- product design, test development and product development-
to significantly  reduce  time-to-market  for original  equipment  manufacturers
("OEM") customers. Boundless Manufacturing provides a complete supply chain that
is designed and built to each customer's specifications. Boundless Manufacturing
also has post-manufacturing support


                                       8
<PAGE>

capability in New York and Atlanta.

Products and Services

      General Display  Terminals.  The Company's  General Display  Terminals are
ANSI/ASCII  desktop  text  terminals,  which  generally  do  not  have  graphics
capabilities.  The Company offers standard and custom models, primarily for data
entry and point of sale  activities.  General Display  Terminals are sold by the
Company under the Company's ADDS(R),  Dorio(R) and VT(R) trademarks,  as well as
under OEM customers' trademarks. The ADDS, Dorio and VT brands are complementary
products, providing slightly different features to various user segments.

      Electronic   Manufacturing  Services.   Boundless  Manufacturing  Services
participates  in the  EMS  market  space  and  provides  services  that  include
build-to-order mass-customized manufacturing,  supply chain optimization, global
supply base management,  systems assembly and test,  distribution and logistics,
repair centers and end-of-life  management.  Boundless Manufacturing also offers
in-house  engineering  expertise-  product  design,  test  development,  product
development- to significantly reduce time-to-market for OEM customers. Boundless
Manufacturing  provides a complete  supply  chain that is designed  and built to
each customer's specifications.

      Boundless  Manufacturing  is focused on  delivering a level of service and
commitment, to both middle-market OEMs and start-up companies, that is currently
only available to top tier customers from the larger EMS companies. In addition,
it pursues  smaller  programs  with larger OEM customers  typically  serviced by
larger  competitors.  Boundless  Manufacturing  will develop  relationships with
those OEMs and ODMs whose supply chains can be completed or  complemented by the
company's unique  capabilities,  and diversify revenue risk by winning customers
in  several  vertical  markets  including  data  storage,   public  and  private
telecommunications systems, office technology products,  industrial controls and
custom or embedded "PC" applications.

      Percentage of Total Revenues.  The table below sets forth, for each of the
three  calendar  years  ended  December  31  the  percentage  of  total  revenue
contributed by those classes of similar products or services which accounted for
a  material  portion of  consolidated  revenue  in any of such  years.  Material
inter-company revenue has been eliminated.

                    General Display    Electronic Manufacturing
Period                 Terminals               Services
------                 ---------               --------

2005                     89.7%                  10.3%

2004                     87.6%                  12.4%

2003                     88.0%                  12.0%


                                       9
<PAGE>

            Foreign  Sales.  Net foreign  sales were  approximately  $1,527,000,
$1,929,000  and  $3,473,000 for 2005,  2004 and 2003,  respectively.  The tables
below set forth,  for each of the three  calendar  years ended  December 31, the
approximate  percentage of total revenue  attributable  to foreign sales and the
percentage attributable to the European region.

                                    % of Total Revenue
                                    ------------------

Period                        Total                     Europe
------                        -----                     ------

2005                          25.5%                     23.7%

2004                          26.4%                     20.9%

2003                          29.6%                     25.3%

Manufacturing

            Assembly  Operations.  The Company's  manufacturing  operations  are
located in Farmingdale,  New York, and include procurement of components and the
assembly and testing of its products. Investment in production equipment has not
been  material  to the  Company's  manufacturing  operations.  Semi-skilled  and
skilled workers assemble products using a cell-based  manufacturing process that
allows the Company to assemble  various  products at mass production  costs. The
Company generally  cross-trains its workers so that they are able to work at all
work  stations.  Once  assembled,  all  systems  undergo  a  test  cycle,  using
sophisticated diagnostic procedures and test equipment.

            The Farmingdale facility has a flexible manufacturing control system
that is run by  software  developed  by the  Company.  This  system  provides  a
flexible,  customer-focused  manufacturing  approach that enables the Company to
quickly  customize  products  for  orders of one to one  thousand.  Just-in-time
systems  allow the  Company  to achieve  efficient  asset  utilization  and fast
response time to customers.  The Company is generally able to fill orders within
three to five days  after  receipt  of an order.  Accordingly,  backlog  has not
traditionally been material to the Company.

            The Company is using approximately  23,000 of its 32,000 square feet
of space in the Farmingdale, NY, facility for manufacturing and has the capacity
to meet its current and anticipated production needs.

            Suppliers.  The Company  purchases  subassemblies and components for
its products from more than 40 domestic and Far East  suppliers.  Purchases from
Radiance Electronics,  Ansen Corporation and Video Display Corporation accounted
for  approximately  39%, 18% and 9%,  respectively,  of the dollar amount of the
Company's total  purchases of  subassemblies  and components in 2005.  Purchases
from Radiance  Electronics,  Ansen  Corporation  and Video  Display  Corporation
accounted for approximately 34%, 20% and 9%, respectively,  of the dollar amount
of the Company's  total  purchases of  subassemblies  and components in 2004. In
2003, Radiance Electronics,  Ansen Corporation and Hewlett Packard accounted for
approximately  24%,  20% and 18%,  respectively,  of the  dollar  amount  of the
Company's total purchases of subassemblies and components.

      As a condition to the Valtec DIP Financing, Valtec required the Company to
enter  into the  Ansen  Corporation  Manufacturing  Services  Agreement  ("Ansen
Agreement"),  pursuant  to which,  Ansen  Corporation  ("Ansen")  would  provide
post-petition  manufacturing,  production and delivery  services to the Company.
The Company was subject to supply  disruption due to the production  transition;
however, as of July 1, 2003, Ansen had successfully  transitioned  production to
its manufacturing facility and had achieved mass-production capability.

      The Company placed on Ansen initial purchase orders for certain components
with  committed  delivery  dates  beginning  March 2003. The failure of Ansen to
timely deliver the components  resulted in the  cancellation  or rescheduling of
customer orders placed on the Company;  and generally resulted in a reduction of
the number of  components  required by


                                       10
<PAGE>

the Company with respect to the original  delivery  dates.  On November 7, 2003,
Ansen notified the Company of its intention to terminate the Ansen Agreement due
to the alleged  failure of the Company to accept and pay for the  components  as
originally  scheduled.  By  subsequent  agreement,  the Company will continue to
purchase  any  remaining  components  from  Ansen as  needed;  and,  should  any
components  remain as of the Effective  Date, the Company will purchase the then
remaining  balance.  As of December  31,  2005,  Ansen  continues to deliver the
components to the Company and the balance due Ansen is approximately $50,000.

      While there are at least two qualified suppliers for the subassemblies and
components that are made to the Company's specifications,  the Company generally
sources  such  items from a single  supplier  so that it can take  advantage  of
volume discounts and more easily ensure quality control.  The Company  estimates
that the lead-time required before an alternate supplier can begin providing the
necessary  subassembly or component would generally be between six to ten weeks.
The disruption of the Company's  business  during such period of lead-time could
have a material  adverse effect on its sales and results of  operations.  In the
event of a prolonged  interruption in the supply chain,  the Company's cash flow
and working capital position would be adversely affected.

      Warranties.  The Company provides a one-year warranty  covering  defective
materials and  workmanship.  The Company's  products are serviced at depots that
are geographically  dispersed  throughout the world. Users can purchase extended
warranties  of up to three years or can pay for repairs on a time and  materials
basis. For the years 2005, 2004 and 2003, the Company's cost of warranty repairs
was less than 1%,  respectively,  of the Company's total  revenues.  The Company
does not warrant  software,  but users are  permitted  to return  software for a
refund within 30 days after  purchase.  Accordingly,  customers are afforded the
opportunity  to use software on a trial basis through the  Company's  evaluation
program.  A provision for potential  warranty  liability is recorded at the time
revenue is recognized.

      Research and Development. During 2005, 2004 and 2003, the Company expended
approximately  $208,000,  $150,000 and $170,000,  respectively,  on research and
development  activities.  Boundless'  research and  development  activities have
historically  related  primarily to General Display  Terminals and Windows-based
terminals.  As  part  of the  Company's  restructuring  activities,  significant
reductions in the staffing were  implemented  in March 2003,  resulting in lower
research and development  expenditures  as compared to the Company's  historical
experience. Additionally, because General Display Terminals are mature products,
development  activities in the recent past year have only included  enhancements
to the existing product family.  In addition,  the Company incurred research and
development  costs of $27,000 and  $102,000,  respectively;  which  expenses are
included  in "Loss on  reimbursement  of  employee  services"  on the  Company's
statement of operations, as these costs were components of that reimbursement.

Sales and Marketing

      Boundless  Technologies  markets its  terminal  products  through OEMs and
other  multi-tier  distribution  channels.  OEMs  that do not  want to  maintain
engineering or manufacturing resources can obtain products with their brand name
from Boundless Technologies.  Customers can buy Boundless Technologies' products
from an  international  network of  value-added  resellers  (VARs) and  regional
distributors.  In order to reduce its  dependence  on  existing  OEM  customers,
Boundless  Technologies has been increasing its distribution  channel  marketing
and sales efforts and seeking additional OEM customers. Through its sales force,
Boundless  Technologies  sells directly to large VARs and regional  distributors
and also  sells to major  national  and  international  distributors.  Boundless
Technologies' sales force operates out of two geographically dispersed locations
in the United States and a European office in the United Kingdom.

      In  selling  its  General  Display   Terminals,   Boundless   Technologies
emphasizes  customization,  reliability and compatibility  with a broad range of
UNIX, Pick and other operating systems.

      Boundless  Technologies  uses direct mail,  telemarketing  and cooperative
marketing to promote its products.  The company  believes the most effective way
to reach this market is via cooperative marketing with its channel partners.

      Boundless Technologies' business is not seasonal. The third quarter of the
calendar  year  contributes  slightly  less  revenue,  as a percent of the total
year's revenue,  due to extended vacation periods in Europe,  where sales of the
company's  VT/Dorio products are strong.  Other  fluctuations in quarterly sales
result from large orders that are unrelated to the time of


                                       11
<PAGE>

year.

      Boundless   Manufacturing   services  include  systems   assembly,   test,
distribution and logistics, repair centers and end-of-life management. Boundless
Manufacturing also offers in-house  engineering  expertise- product design, test
development, product development- to significantly reduce time-to-market for OEM
customers.  Boundless  Manufacturing  provides a complete  supply  chain that is
designed and built to each customer's specifications.

      The Company has  effectively  implemented an outsourcing  strategy and cut
manufacturing  costs for many prominent OEMs.  Boundless  Manufacturing  is also
focused on delivering a level of service and  commitment to  middle-market  OEMs
and start-up  companies  that is currently  only available to top tier customers
from  the  larger  EMS  companies.   Boundless   Manufacturing's  strategy,  the
implementation  of which is dependent on its ability to raise  working  capital,
includes  aggressively  expanding our geographic  footprint,  service  offering,
technology base, and information technology infrastructure.

      For  35  years,  Boundless  Technologies  has  manufactured  high  quality
products and offered a full suite of  supporting  services.  In the last decade,
Boundless   Technologies  has  specialized  in  build-to-order   mass-customized
manufacturing,  a capability that has evolved into a key core competency that we
believe offers a significant competitive advantage in its key markets.

      The Company's Plan of Reorganization contemplates the consolidation of the
Boundless  subsidiaries  into one legal entity.  The new entity will combine and
leverage the expertise and capabilities  resident within the Boundless family to
deliver  information  access and  control  solutions  through  its  distribution
networks.

      For the year ended  December  31,  2005,  Ingram  Micro and 1st  Solutions
provided 19% and 11%, respectively,  of the Company's total revenue.  During the
year ended  December  31,  2004,  Hewlett  Packard,  Ingram  Micro,  and Jetstar
contributed  16%, 14% and 11%,  respectively,  of the Company's  total  revenue.
Hewlett Packard and NCR were the Company's most  significant  customers in 2003,
accounting for approximately 32% and 13%,  respectively,  of the Company's total
revenue.  The  Company  believes  a  decline  in the  level  of  sales  to these
customers, without growth in other areas of its business, could adversely affect
the Company's results of operations and liquidity.

      During  2003  Hewlett  Packard  advised the  Company of its  intention  to
discontinue  the sale of certain of the  Company's  products to Hewlett  Packard
customers. Hewlett Packard is transitioning its customers to newer technologies,
including  thin client  terminals.  The  Company  continues  to sell  product to
Hewlett Packard, though in smaller volume, and has released the product for sale
to distributors who will sell to customers  unwilling to transition to the newer
technologies.

Competition

            The Company  believes that  alternative  technologies,  particularly
graphics-capable  computers,  together with the  abandoning of text terminals by
both IBM and HP, have eroded the total available market. For 2004, the last year
for which the Company has data,  annual  units  shipped into the text market was
estimated  to be between  100,000 to 130,000  units.  The Company  believes  the
market for  general  purpose  text  terminals  will  continue to erode at 20-30%
annually.  The decline in text sales has resulted in a  consolidation  of former
competitors,  as well as the outsourcing of production  from original  equipment
manufacturers to the remaining industry participants.  Although industry data is
not available,  the Company believes its market share to be  approximately  30%,
with Wyse Technologies ("Wyse"), a Taiwanese company, holding an approximate 45%
market share.  In the period just prior to the  bankruptcy  filing,  the Company
believed the relative  market  shares of Boundless  and Wyse were  approximately
equal at 35% each. The Company believes that the market will continue to decline
and therefore lead to additional  consolidation.  Any market share increases for
the Company will come at the expense of current  industry  competitors.  General
Display Terminal customer purchase criteria are based on quality,  availability,
customization,  compatibility with other terminals, and price. The Company holds
the leadership position in this market.


                                       12
<PAGE>

Patents, Trademarks and Licensing

            The  Company  owns  approximately  20  patents  relating  to General
Display  Terminals  issued in the United States and various  foreign  countries,
none of which is believed to be material  to its  business.  The patents  expire
during the next eight years,  with  expiration  dates  ranging from January 2006
through August 2013.  The Company  believes that the knowledge and experience of
its  management  and  personnel and their  ability to develop,  manufacture  and
market the  Company's  products in response to specific  customer  needs is more
significant than its patent rights.

            The trademarks ADDS, Viewpoint, VT, and Dorio, are registered in the
United States Patent and Trademark Office and in a number of foreign countries.

Backlog

      We believe that backlog is not a meaningful  indicator of future  business
prospects  due to the  build-to-order  manufacturing  processes  employed by the
Company.  This  process  allows the Company to  manufacture  product to customer
specification within three days of the receipt of the customer order. Therefore,
we believe that backlog  information is not material to an  understanding of our
overall business.

Environmental Regulation

      Amounts  incurred by Boundless in complying with federal,  state and local
legislation  pertaining to protection of the  environment  during the past three
years did not have a material effect upon capital  expenditures or the financial
condition  of the  Company.  It is our  policy  to apply  strict  standards  for
environmental  protection  to sites  inside and outside the U.S.,  even when not
subject to local government  regulations.  State and local agencies,  as well as
federal  lawmakers,  may  impose  new laws and  regulations  that  could  have a
significant impact on our business.

Employees

      At March 31, 2006, the Company had  approximately  31 full-time  employees
engaged as follows: 3 in product design and engineering, 21 in manufacturing and
repair  services,   2  in  sales,  systems  services  and  marketing  and  5  in
administration.  None of the  Company's  employees  is covered  by a  collective
bargaining  agreement.  The Company considers relations with its employees to be
satisfactory.

ITEM 1A. RISK FACTORS

The following factors relating to the Company, its business and management
should carefully be considered in evaluating the Company and its prospects.

      Organizational  restructuring.   The  Company  has  undergone  significant
organizational restructuring and it faces substantial operational challenges. We
are in the process of evaluating our future  strategic  direction.  We have been
forced to take  drastic  actions  to reduce  operating  costs and  preserve  our
remaining cash. For example, in March 2003 we effected a reduction in force that
reduced our workforce from approximately 125 to 70 employees. Subsequent actions
further reduced the number of employees to approximately  31. The elimination of
certain engineering and other personnel may have a negative effect on our future
revenues and growth prospects and our ability to support new product initiatives
and generate customer demand.

      Going  Concern  Modification.  The reports of our  independent  registered
public accounting firms contained in the Report on Form 10-K for the years ended
2001 through and including 2005 contain a going concern modification.

      Recent Operating Losses. We have incurred operating losses in our last six
fiscal  years.  There can be no  assurance


                                       13
<PAGE>

that we will be able to achieve or sustain profitable operations in the future.

      Tax Implications of Bankruptcy. Certain tax implications of our bankruptcy
and reorganization  may increase our tax liability.  Certain U.S. tax attributes
of Boundless,  including  net  operating  loss  carryovers,  or NOLs,  have been
reduced or eliminated as a consequence of our bankruptcy and reorganization. The
elimination  or reduction of NOLs and such other tax attributes may increase the
amount of tax payable by Boundless following its reorganization as compared with
the amount of tax payable had no such reduction been required.

      Debt Structure and  Liquidity.  As of December 31, 2005, we had a tangible
net worth  deficit of  $15,006,107  and total  liabilities  of  $17,009,717.  In
addition,  as of December 31, 2005, we had a working  capital  deficit of $9,568
excluding $14,586,204 of liabilities subject to compromise in the bankruptcy.

      Strategy.  Industry-wide sales of general purpose text terminals have been
declining over the past years.  Approximately 90% of the Company's sales for the
fiscal year ended  December  31, 2005 were of general  purpose  text  terminals.
Recognizing the impact of this decline on our  profitability  and liquidity,  we
are  advancing the  strategies  discussed  above.  There can be no assurance our
strategy will be successful.

      Dependence  Upon Key  Personnel.  Our  success  will  depend  upon our key
management,  sales and technical personnel.  We do not have employment contracts
with any of our  employees.  In  addition,  we believe  that,  to succeed in the
future,  it will be  required  to  continue  to  attract,  retain  and  motivate
additional  skilled executive and technical sales and engineering  employees who
are in short supply  because of great demand  throughout  the industry for their
services.  The loss of any of our  existing key  personnel  or the  inability to
attract and retain key  employees  in the future  could have a material  adverse
effect on our business.

      New  Products  and   Technological   Change.   The  computer  industry  is
characterized by a rapid rate of product  improvement,  technological change and
product obsolescence. Inventory management is critical to decreasing the risk of
being  adversely  affected by  obsolescence  and there is no assurance  that our
inventory management and flexible  manufacturing systems will adequately protect
against this risk.

      Dependence Upon Suppliers;  Trade Terms;  Shortages of  Subassemblies  and
Components.  We purchase  subassemblies  and components for our products  almost
entirely from more than 40 domestic and Far East  suppliers.  As a result of our
financial  condition,  the  majority  of  our  purchases  are  transacted  under
"cash-in-advance"   terms.  Prior  to  our  reorganization,   certain  important
suppliers  altered a number of ordinary  trade terms,  including  shortening the
length of time  required to pay for goods and  services  and the  imposition  of
restrictive  credit  requirements.  We cannot assure that our suppliers will not
impose further  restrictive  pricing and trade terms and policies in the future.
Such terms could adversely affect our ability to grow our business.

      While there are at least two qualified suppliers for the subassemblies and
components that are made to our  specifications,  we generally source such items
from a single  supplier so that we can take  advantage of volume  discounts  and
more easily ensure  quality  control.  We estimate  that the lead-time  required
before an alternate  supplier can begin  providing the necessary  subassembly or
component  would  generally be between six to ten weeks.  The  disruption of our
business during such period of lead-time could have a material adverse effect on
our sales and results of operations.  Purchases from Radiance Electronics, Ansen
Corporation and Video Display  Corporation  accounted for approximately 39%, 18%
and 9%,  respectively,  of the dollar amount of the Company's total purchases of
subassemblies and components in 2005.

      Our adoption of "fresh-start" accounting may make evaluating our financial
position  and  results  of  operations,  as  compared  to  prior  periods,  more
difficult.   Upon  our  emergence  from  bankruptcy  pursuant  to  the  Plan  of
Reorganization we will implement  "fresh-start"  accounting.  In accordance with
"fresh-start" accounting, all assets and liabilities will be restated to reflect
their respective estimated fair values. As a result, the consolidated  financial
statements for our  reorganized


                                       14
<PAGE>

company  starting on and going forward from our emergence from  bankruptcy  will
not be comparable to our consolidated financial statements for the periods prior
to our  emergence.  The  change in our  accounting  principles  may make it more
difficult to compare our operations to prior periods.

      Fluctuations in Quarterly  Results.  Our quarterly  operating results have
fluctuated  in the past and may  continue  to  fluctuate  in the future due to a
number of factors,  including: (i) timing of new product introductions by us and
our competitors;  (ii) changes in the mix of products sold;  (iii)  availability
and pricing of subassemblies  and components from third parties;  (iv) timing of
orders;  (v)  difficulty  in  maintaining  margins;  and (vi) changes in pricing
policies by us, our competitors or suppliers.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

      As  of  December  31,  2005,  the  Company's  administrative  offices  and
manufacturing  and  service  activities  are  currently  conducted  in a  leased
facility of approximately 32,000 square feet of space in Farmingdale,  New York.
The lease  expires  February  28,  2009,  and  calls for an annual  base rent of
$216,000 in the first year of the agreement, escalating to $243,200 in the fifth
year. The Company leases one other small facility in Atlanta,  Georgia for depot
repair and support  services.  The annual lease  commitment for this facility is
not material.

ITEM 3. LEGAL PROCEEDINGS

      In re: Boundless Corporation, et. al.

      As discussed above, on the Petition Date, the Company,  and its wholly and
majority owned subsidiaries filed voluntary  petitions for reorganization  under
Chapter 11 of the Bankruptcy Code in the Bankruptcy  Court. The Chapter 11 Cases
are being jointly  administered under the caption "In re Boundless  Corporation,
et al., Case No.  03-81558-478."  As  debtors-in-possession,  we are  authorized
under  Chapter 11 to  continue  to operate as an ongoing  business,  but may not
engage in transactions outside the ordinary course of business without the prior
approval of the Bankruptcy Court. As of the Petition Date, virtually all pending
litigation (including some of the actions described below) is stayed, and absent
further order of the Bankruptcy Court, no party,  subject to certain exceptions,
may take any  action,  again  subject  to  certain  exceptions,  to  recover  on
pre-petition  claims  against  us.  In  addition,  we  may  reject  pre-petition
executory  contracts and unexpired lease  obligations,  and parties  affected by
these rejections may file claims with the Bankruptcy  Court. At this time, it is
not  possible  to predict the outcome of the Chapter 11 process or its effect on
our business.


                                       15
<PAGE>

      An  action  was  commenced  by  Kareem  Mangaroo,  employed  by  Boundless
Technologies  between  February  1994  and  April  1999  as a  material  handler
("Plaintiff"),  on February 5, 2001, against Boundless  Technologies,  Boundless
Corporation,  and  four  employees  of the  Company  (Joseph  Gardner,  its CFO,
Michelle  Flaherty,  formerly  manager  of  Human  Resources,  Thomas  Iavarone,
director of Logistics,  and Anthony San Martin,  manager of  Shipping),  seeking
damages for the unlawful  termination of Plaintiff's  employment in violation of
Plaintiff's  rights under Title VII of the Civil Rights Act of 1964, as amended;
the Equal Protection Clause and Due Process Clause, pursuant to the Civil Rights
Act of 1886, as amended,  42 U.S.C. ss. 1981; and for damages as a result of the
conspiratory  actions of defendants to deprive Plaintiff of his equal protection
and due process  rights  pursuant to 42 U.S.C.  ss.  1985 and for  violation  of
Plaintiff's rights under the Employee  Retirement Income Security Act 29 U.S. C.
ss.1001.  Plaintiff  further  alleges  claims  under  State  law for  breach  of
contract.  The verified complaint was filed in the United States District Court,
Eastern  District of New York.  Plaintiff seeks (i)  compensatory  damages of $1
million from each of Boundless  Technologies  and four  employees of the company
(jointly  and  severally),  (ii)  punitive  damages of $2  million  from each of
Boundless Technologies,  the Company, and four employees of the Company (jointly
and severally),  (iii) $1 million against  Boundless  Technologies for breach of
contract, and (iv) the value of forfeited options, attorney's fees, costs of the
action and other relief as the court deems necessary.

      On February  17, 2003,  the  defendants'  motion for summary  judgment was
granted.  On March 21,  2003,  Plaintiff  served  Notice of Appeal to the United
States Court of Appeals for the Second  Circuit in opposition to the granting of
defendants' motion for summary judgment.  On October 15, 2003, the United States
Court of Appeal for the Second Circuit  granted the  defendants'  motion to Stay
the appeal in accordance with 11 U.S.C.  ss. 362, which Stay is still in effect.
The Company intends to vigorously defend this suit since it believes that it has
meritorious defenses to the action.

      An action was  commenced by Donald W. Lytle  ("Plaintiff")  on February 8,
2001,  against Boundless  Technologies,  Inc., GN Netcom,  Inc., Portal Connect,
Inc.,  and  Wholesale  Audio Video,  Inc. in the Iowa  District  Court,  Johnson
County; Law No. LACV061503 alleging negligence and products defects resulting in
injuries  to  Plaintiff's  hearing  as a result  of the use of one  model of the
Company's  General  Display  Terminals.  Plaintiff  was  suing  for  unspecified
damages.  On January  17,  2003,  Plaintiff  filed a  Dismissal  with  Prejudice
dismissing Plaintiff's claims against Boundless Technologies, Inc.

      In November 2002, Comdial  Corporation filed a demand for arbitration with
the American Arbitration  Association against Boundless  Manufacturing Services,
Inc. ("Boundless"). Among other things, Comdial contends that Boundless breached
its contractual  obligations to Comdial by failing to meet Comdial's  orders for
the delivery of products  manufactured  by Boundless.  The Comdial  demand seeks
damages in excess of $6.0 million.  On February 6, 2003,  Boundless responded to
the demand by  denying  substantially  all of  Comdial's  claims  and  asserting
counterclaims totaling approximately $8.2 million,  including approximately $0.8
million in past due invoiced  amounts.  On March 13, 2003,  Boundless  announced
that it has filed for protection pursuant to Ch. 11 of the U.S. Bankruptcy Code,
causing a stay in the arbitration  matter.  It is not known at this time whether
this filing will have any long-term  impact on the  arbitration,  or whether the
arbitration  will  eventually  proceed.  No  amounts  have been  accrued  in the
Company's  financial  statements for any losses. In May 2005 Comdial Corporation
filed  for  protection  under  Ch.  11 of the U.S.  Bankruptcy  Code.  Since the
Company's   claims  against  Comdial  accrued  prior  to  Comdial's  filing  for
bankruptcy,  any damages  awarded to the Company  will  constitute  pre-petition
claims against Comdial.

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

      No matter was submitted to a vote of  stockholders  of the Company through
the solicitation of proxies or otherwise for the year ended December 31, 2005.


                                       16
<PAGE>

                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY,  RELATED STOCKHOLDER MATTERS,
AND ISSUER PURCHASES OF EQUITY SECURITIES

      Our common stock,  $.01 par value,  ("Common Stock") had previously traded
on The American Stock  Exchange  ("AMEX")  under the symbol BND.  However,  as a
result of the delisting of our  securities,  the last day of trading on the AMEX
was April 9, 2003. The Company's securities have traded on the pink sheets since
then under the symbol BDLSQ.PK.

      Our Common  Stock is subject to the Penny Stock Rules of the SEC.  Trading
in our  securities  has been  conducted  on the Pink  Sheets.  As a  result,  an
investor may find it more difficult to purchase,  dispose of and obtain accurate
quotations as to the value of our securities.

      In addition,  as the trading  price of our common stock has been less than
$5.00 per share, trading in our common stock is also subject to the requirements
of Rule  15g-9  under the  Securities  Exchange  Act of 1934.  Under  that rule,
broker/dealers  who recommend such  low-priced  securities to persons other than
established  customers  and  accredited  investors  must satisfy  special  sales
practice   requirements,   including  (a)  a  requirement   that  they  make  an
individualized  written  suitability  determination  for the  purchaser  and (b)
receive the purchaser's written consent prior to the transaction.

      The  Securities  Enforcement  Remedies  and Penny Stock Reform Act of 1990
also requires  additional  disclosure in connection with any trades  involving a
stock defined as a penny stock (generally,  any equity security not traded on an
exchange or quoted on The NASDAQ SmallCap Market that has a market price of less
than  $5.00  per  share),  including  the  delivery,  prior to any  penny  stock
transaction,  of a disclosure schedule explaining the penny stock market and the
risks therewith.  Such requirements could severely limit the market liquidity of
our securities and the ability of stockholders  to sell their  securities in the
secondary market.

      As of March 31, 2006 there were approximately 625 holders of record of the
Company's  Common Stock.  Price per share  information  for all of 2004 and 2005
were as reported by CBS Marketwatch.

Year Ended December 31, 2005:                                 High         Low
                                                              ----         ---

             First quarter.............................     Nil          Nil
             Second quarter............................     Nil          Nil
             Third quarter.............................     Nil          Nil
             Fourth quarter............................     Nil          Nil

Year Ended December 31, 2004:                                 High         Low
                                                              ----         ---

             First quarter.............................     $ 0.01       $ 0.01
             Second quarter............................     $ 0.05       $ 0.01
             Third quarter.............................     $ 0.01       $ 0.01
             Fourth quarter............................     $ 0.01       $ 0.01

The last sale price of the Company's Common Stock on March 31, 2006 was $ 0.00.


                                       17
<PAGE>

      The Company believes its presently outstanding equity securities will have
no value and it is expected  that those  securities  will be canceled  under any
plan of reorganization that we propose. For this reason, we urge that caution be
exercised  with  respect to  existing  and  future  investments  in any  Company
security.

Recent Sales of Unregistered Securities

      None

Dividend Policy

      The Company presently anticipates that all of its future earnings, if any,
will be retained for development of its business and does not anticipate  paying
cash dividends on its Common Stock in the foreseeable future. The payment of any
future  dividends will be at the discretion of the Company's  Board of Directors
and will  depend  upon,  among  other  things,  restrictions  on the  payment of
dividends imposed by its lenders,  future earnings,  capital  requirements,  the
general financial condition of the Company, and general business conditions.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

      The following  table sets forth selected  consolidated  financial data for
the Company for the periods and the dates indicated.  The  consolidated  balance
sheet data and the  consolidated  statement of operations data as of and for the
year  ended  December  31,  2001 are  derived  from the  consolidated  financial
statements  which were audited by BDO Seidman,  LLP, an  independent  registered
public accounting firm. The consolidated balance sheet data and the consolidated
statement of  operations  data as of and for the years ended  December 31, 2005,
2004, 2003 and 2002 are derived from the consolidated financial statements which
were  audited  by  BP  Audit  Group,  PLLC,  an  independent  registered  public
accounting  firm. The selected  financial data as of December 31, 2005 and 2004,
and for each of the years in the  three-year  period  ended  December  31,  2005
should be read in conjunction  with, and are qualified in their entirety by, the
Consolidated  Financial  Statements  of the Company and related  Notes and other
financial information included elsewhere herein.


                                       18
<PAGE>

Consolidated Statement of Operations Data
For the years ended December 31:
  (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                       2005          2004          2003           2002         2001
                                                     --------      --------      --------      --------      --------
<S>                                                  <C>           <C>           <C>           <C>           <C>
Total revenues                                       $  5,989      $  7,309      $ 11,750      $ 26,843      $ 59,581

Gross margin (loss)                                     1,448         1,852           788          (537)        6,283

Interest expense                                          185           129           804         1,402         1,599
Reorganization items                                      406           484           655            --            --
Gain on restructuring of payables                          --            --            --        (3,924)           --
Income tax expense                                         --            --            --            --         1,383
Loss from continuing
   operations                                            (101)          (28)       (3,579)       (7,623)       (8,792)
Loss from discontinued operations                          --            --            --            --        (2,150)
                                                     --------      --------      --------      --------      --------
Net loss                                                 (101)          (28)       (3,579)       (7,623)      (10,942)
Accretion on preferred stock                               --            --            99           148            --
                                                     --------      --------      --------      --------      --------
Loss applicable to
   common shareholders                               $   (101)     $    (28)     $ (3,678)     $ (7,771)     $(10,942)
                                                     ========      ========      ========      ========      ========

Loss per common share from
   continuing operations:

Basic and diluted                                    $  (0.02)     $     --      $  (0.55)     $  (1.21)     $  (1.74)
                                                     ========      ========      ========      ========      ========

Loss per common share:

Basic and diluted                                    $  (0.02)     $     --      $  (0.55)     $  (1.21)     $  (2.17)
                                                     ========      ========      ========      ========      ========

Consolidated Balance Sheet Data
At December 31:
(in thousands)
Working capital (deficit)                            $    (10)     $    632      $    (39)     $ (9,775)     $(16,473)
Total assets                                            2,004         3,010         4,138        13,236        33,215
Revolving credit loan (short-term)                         --            --            --            --         8,507
Current maturities of long-term debt                       --           350           837         3,142         6,855
Liabilities and other items subject to
   compromise                                          14,586        14,622        13,207            --            --
Long-term obligations                                     450           953         1,581         8,294           833
Mandatorily redeemable preferred
   stock                                                   --            --            --         1,554            --
Stockholder's deficit                                 (15,006)      (14,905)      (14,877)      (11,199)       (4,143)
</TABLE>


                                       19
<PAGE>

ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

General

      The  numbers and  percentages  contained  in this Item 7 are  approximate.
Dollar amounts are stated in thousands.

Critical Accounting Policies

      We  have  identified  the  policies  below  as  critical  to our  business
operations and the  understanding  of our results of operations.  The impact and
any  associated  risks related to these  policies on our business  operations is
discussed throughout Management's Discussion and Analysis of Financial Condition
and Results of Operations  where such policies  affect our reported and expected
financial  results.  For a detailed  discussion on the  application of these and
other  accounting  policies,   see  the  Notes  to  the  Consolidated  Financial
Statements  in  Item 15 of this  Annual  Report  on Form  10-K.  Note  that  our
preparation of this Annual Report on Form 10-K requires us to make estimates and
assumptions   that  affect  the  reported  amount  of  assets  and  liabilities,
disclosure of  contingent  assets and  liabilities  at the date of our financial
statements,  and the  reported  amounts  of  revenue  and  expenses  during  the
reporting period.  There can be no assurance that actual results will not differ
from those estimates.

Bankruptcy Considerations- Financial Statement Presentation

      The  consolidated  financial  statements  have been prepared in accordance
with American Institute of Certified Public  Accountants'  Statement of Position
90-7 ("SOP 90-7"),  "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code," and on a going-concern basis, which contemplates continuity of
operations,  realization  of  assets  and  satisfaction  of  liabilities  in the
ordinary course of business.

      SOP 90-7 requires that the financial  statements for periods subsequent to
the  Chapter 11 filing  petition  distinguish  transactions  and events that are
directly associated with the reorganization from the operations of the business.
Accordingly,  revenues,  expenses (including  professional fees), realized gains
and  losses,   and  provisions   for  losses   directly   associated   with  the
reorganization and restructuring of the business are reported  separately in the
financial statements.  The Consolidated Balance Sheet distinguishes pre-petition
liabilities and other items subject to compromise  from both those  pre-petition
liabilities   that  are  not  subject  to  compromise  and  from   post-petition
liabilities.  Liabilities  and other items subject to compromise are reported at
the  amounts  expected  to be  allowed,  even if they may be settled  for lesser
amounts.

      In  addition,  as a result of the Chapter 11 filing,  the  realization  of
assets and  satisfaction  of  liabilities,  without  substantial  adjustments or
changes in ownership, are subject to uncertainty.  Given this uncertainty, there
is substantial doubt about the Company's ability to continue as a going concern.
While operating as  debtors-in-possession  under the protection of Chapter 11 of
the Bankruptcy Code and subject to approval of the Bankruptcy Court or otherwise
as permitted in the ordinary course of business,  the Debtors,  or some of them,
may sell or otherwise dispose of assets and liquidate or settle  liabilities for
some  amounts  other  than  those  reflected  in  the   consolidated   financial
statements.  Further,  a plan of  reorganization  could  materially  change  the
amounts and classifications in the historical consolidated financial statements.

Basis of Presentation

      Boundless  Corporation is a holding company whose  principal  subsidiaries
are Boundless Technologies,  Inc. and Boundless Manufacturing Services, Inc. The
consolidated  financial  statements include the accounts of all of the Company's
majority-owned  subsidiaries.  We  sometimes  collectively  refer  to  Boundless
Corporation,  together with our consolidated


                                       20
<PAGE>

subsidiaries,   as  "we,"   "Boundless"  or  the   "Company."  All   significant
intercompany  transactions are eliminated.  Certain prior year amounts have been
reclassified to conform to the current year's presentation.

Use of Estimates

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

Sales returns and other allowances, allowance for doubtful accounts.

      Our  management  must make estimates of potential  future product  returns
related  to current  period  product  revenue.  Management  analyzes  historical
returns,  current economic trends, and changes in customer demand and acceptance
of our products  when  evaluating  the  adequacy of the sales  returns and other
allowances. Significant management judgments and estimates must be made and used
in connection with  establishing  the sales returns and other  allowances in any
accounting period.  Material  differences may result in the amount and timing of
our revenue for any period if management  made  different  judgments or utilized
different  estimates.  Historically  the  Company has not  experienced  material
levels of product returns.

      Similarly,  our management must make estimates of the  uncollectibility of
our accounts receivable.  Management  specifically  analyzes accounts receivable
and  analyzes   historical   bad  debts,   customer   concentrations,   customer
credit-worthiness,  current  economic trends and changes in our customer payment
terms when  evaluating  the adequacy of the  allowance  for  doubtful  accounts.
Management's   review  of  this  allowance  could  result  in  a  reduction  and
corresponding credit to the statement of operations.

            During 2004 the Company reduced the allowance for doubtful  accounts
by $117, due primarily to accounts receivable  collection activity which reduced
the value of  outstanding  receivables  aged greater than 90 days. In 2005,  the
Company increased the allowance for doubtful accounts by $56 due to the aging of
receivables from UCSI. At December 31, 2005, the allowance for doubtful accounts
was $544 as compared to $501 at December 31, 2004.

Warranty and product guaranties.

            We provide for the estimated cost of product  warranties at the time
revenue is recognized.  While the Company  engages in extensive  product quality
programs and processes, including actively monitoring and evaluating the quality
of its  component  suppliers,  our  warranty  obligation  is affected by product
failure rates,  material usage and service delivery costs incurred in correcting
a product  failure.  Should actual  product  failure  rates,  material  usage or
service  delivery  costs differ from our  estimates,  revisions to the estimated
warranty liability may be required.


                                       21
<PAGE>

Inventory obsolescence.

      We record  inventory  valuation  allowances for estimated  obsolescence or
unmarketable inventory equal to the difference between the cost of inventory and
the estimated market value based upon assumptions about future demand and market
conditions. If actual future demand or market conditions are less favorable than
those projected by management,  additional inventory valuation allowances may be
required.  Management's review of this allowance could result in a reduction and
corresponding credit to the statement of operations.

      In 2003 the Company placed non-cancellable  purchase orders for components
in an amount  which,  based on the Company's  policies,  required the Company to
record  additions  to the  inventory  valuation  allowance  of  $522.  Continued
utilization  of this component  throughout  2004 and 2005 allowed the Company to
reduce the  inventory  valuation  allowance by $109 in 2004 and $175 in 2005. At
December 31, 2005, the manufacturing inventory valuation allowance was $618.

Deferred Taxes

      The carrying  value of the  Company's  net deferred tax assets is based on
assumptions as to whether the Company will be able to generate sufficient future
taxable income in certain tax jurisdictions,  based on applicable  estimates and
assumptions to utilize its existing loss carry-forwards.  If these estimates and
related  assumptions change in the future, the Company may be required to record
applicable  adjustments  to the  valuation  allowances  against its deferred tax
assets resulting in income tax credits in the Company's  consolidated  statement
of operations. Management evaluates the realizability of the deferred tax assets
quarterly  and  assesses  the  need  for  changes  in the  valuation  allowances
quarterly.  For the years ended December 31, 2005, 2004 and 2003 the Company has
recorded valuation allowances at 100% of its deferred tax assets.

Results of Operations

Years Ended December 31, 2005 and 2004

      Revenues:  Revenues for the year ended  December 31, 2005 were $5,989,  as
compared to $7,309 for the year ended  December 31, 2004. The decline in revenue
is  attributable  to a  reduction  in  sales  of the  Company's  text  terminals
products,  as customers  moved to alternative  technologies,  including  graphic
displays.

      Sales of the Company's General Display Terminals declined by 16% to $5,360
for the year ended December 31, 2005 from $6,400 for the year ended December 31,
2004.

      Customer  Services  revenue for 2005 was $595  compared to $669 in 2004, a
decline of 11%.  Customer  services  revenue  includes  the sale of spare parts,
repair of product  outside of the warranty  period,  and the sale of  multi-year
warranty contracts. Historically,  customer service revenue has been driven from
the sales of the Company's text terminal products.

      The  Company's  engineering  efforts  have focused on cost  reduction  and
reliability improvements.  These efforts have decreased the average failure rate
of the Company's text terminals and extended the average useful life of the text
terminal.  These  improvements  have reduced the  Company's  ability to generate
revenue from spare parts sales and repair activities. In addition, a substantial
market has evolved around the sale of used equipment, as customers trade in text
terminals when they switch to  alternative  technologies,  thereby  reducing the
Company's opportunity to sell new equipment.

      During  2004 the  Company  recorded  EMS  revenue  of $240,  entirely  for
logistics  services  provided  to UCSI.


                                       22
<PAGE>

During 2005 the Company recorded EMS revenue of $23.

      Ingram  Micro  and 1st  Solutions  were  the  Company's  most  significant
customers in 2005,  accounting for approximately 19% and 11%,  respectively,  of
the  Company's  total  revenue.   Hewlett  Packard,  Ingram  Micro  and  Jetstar
contributed 16%, 14% and 11%, respectively of Company revenues in 2004.

      Gross Margin. Gross margin for the year ended December 31, 2005 was $1,448
(24% of revenue),  as compared to gross  margin for the year ended  December 31,
2004 of $1,852 (25% of  revenue).  Product  margins  and  revenue  mix  remained
relatively constant between the two years;  however,  fixed overhead expenses in
2005, primarily  non-direct labor personnel expenses and depreciation,  were 16%
of Company revenue as compared to 15% of revenue in 2004, resulting in a decline
in gross margin as a percent of revenue from 2004 to 2005.

      Gross margin in future periods may be affected by several  factors such as
sales  volume,  shifts in product mix,  pricing  strategies  and  absorption  of
manufacturing costs.

      Changes in retail  pricing did not have a material  adverse  effect on the
Company's  gross margin in 2005 or 2004. In a continuing  effort to maintain and
improve margins in an industry  otherwise  characterized  by commodity  pricing,
management has focused on quality, flexibility, and product cost reductions.

      From time-to-time  margins are adversely affected by industry shortages of
key  components.  The  Company  emphasizes  product and cost  reductions  in its
research  and  development   activities  and  frequently  reviews  its  supplier
relationships  with the view to obtaining the best component  prices  available.
See "Asset Management."

      Total Operating Expenses.  For the year ended December 31, 2005, operating
expenses,  excluding interest and reorganization  expenses,  were $1,146 (19% of
revenue), compared to expenses for 2004 of $1,434 (20% of revenue).

      Sales and Marketing Expenses. Sales and marketing expenses decreased 8% to
$271 (5% of revenue)  for the year ended 2005 from $295 (4% of revenue)  for the
year ended December 31, 2004. The decrease is attributable to the reorganization
of the Company  which  resulted in a major  reduction in personnel and marketing
programs.

      Boundless Technologies promotes its products by means of a balanced mix of
direct mail, telemarketing and cooperative channel marketing programs. Boundless
Manufacturing promotes its services through its direct sales force.

      General and Administrative  Expenses.  General and administrative expenses
decreased 33%, or $322, to $667 (11% of revenue), from $989 (14% of revenue) for
the periods ending December 31, 2005 and 2004, respectively.  The decrease stems
from reductions in personnel costs, travel and professional services.

      Research  and  Development  Expenses.  Research and  development  expenses
increased to $208 in 2005 from $150 in 2004.  Because General Display  Terminals
are  mature  products,  development  activities  over the past  year  have  only
included  enhancements to the existing  product  family.  Beginning in the first
quarter of 2004 the Company agreed to provide UCSI resources,  primarily Company
employees,  to  allow  UCSI to  pursue  programs  critical  to  their  continued
development of the thin client market.  UCSI is wholly-owned by Mr. Oscar Smith.
Mr. Smith is also the majority  owner of Vision  Technologies,  Inc., the entity
which is expected to own 100% of the Company upon  confirmation of the Company's
plan  of  reorganization.   In  addition,  the  Company  incurred  research  and
development costs of $27 and $102, respectively;  which expenses are included in
"Loss on  reimbursement  of employee  services"  on the  Company's  statement of
operations, as these costs were components of that reimbursement.


                                       23
<PAGE>

      Interest  Expense.  Interest  expense  amounted to $185 for the year ended
December  31,  2005  compared  to $129 for 2004.  During all of 2004 and through
January 31, 2005,  the Company's  working  capital  requirements  were satisfied
through the use of cash collateral authorized by the bankruptcy court as part of
the settlement  stipulation  with Valtec.  The settlement  stipulation  required
weekly  cash  payments to Valtec of $8 and annual  interest  on the  outstanding
balance of the Valtec debt of 8%. As of January 31,  2005,  the Company  entered
into an agreement  with Valtec to  terminate  its  debtor-in-possession  ("DIP")
financing and to release their liens on our personal property. At the same time,
the  Company  entered  into  another   secured  DIP  financing   agreement  with
Entrepreneur  Growth  Capital,  LLC ("EGC")  pursuant to which EGC was granted a
lien on all of our personal property. The original term of the EGC Agreement was
one year;  and, on January 31,  2006,  the EGC  Agreement  was  extended  for an
additional six months.

      Under the EGC  Agreement,  the annual  interest rate is 6% above the prime
rate  announced by Citibank,  N.A. and we are required to pay a monthly  service
fee equal to three quarters of one percent (0.75%) of the face value of invoices
assigned to EGC for the preceding  month.  The EGC Agreement  required us to pay
minimum  monthly  interest  of $8 even  though  our actual  borrowings  may have
resulted in a lesser interest charge.  As part of the negotiations to extend the
EGC Agreement, the minimum monthly interest was reduced to $5 beginning February
1, 2006.

      Loss on reimbursement of employee services. Beginning in the first quarter
of 2004 the Company agreed to provide resources,  principally Company employees,
to UCSI to allow it to pursue programs  critical to their continued  development
of the thin client market. UCSI is wholly-owned by Mr. Oscar Smith. Mr. Smith is
also the  majority  owner of Vision  Technologies,  Inc.,  the  entity  which is
expected to own 100% of the Company upon  confirmation  of the Company's plan of
reorganization.  A monthly charge to UCSI was agreed to based upon the Company's
estimate  of the  percentage  of time its  employees  would be  devoted  to UCSI
projects. For 2004 the Company charged UCSI $255 and incurred estimated expenses
of $306, resulting in a loss on reimbursement of employee services of $51.

      In May 2005 the Company  discontinued the arrangement with UCSI, directing
its resources  toward  development  of new products to address the emerging RFID
marketplace.  For the period  January 1, 2005  through  May 31, 2005 the Company
charged UCSI $50 and incurred  estimated expenses of $58, resulting in a loss on
reimbursement of employee services of $8.

      Other Credits.  Credits for the year ended December 31, 2005 were $197 and
include $20 from the  overpayment  in prior years of personal  property taxes on
the  Company's  former  manufacturing  facility  and  equipment  in Florida.  In
addition,  in 2003  the  Company  placed  non-cancellable  purchase  orders  for
components in an amount which,  based on the  Company's  policies,  required the
Company  to record  additions  to the  inventory  valuation  allowance  of $522.
Continued  utilization  of this component  throughout  2004 and 2005 allowed the
Company to reduce the inventory  valuation allowance by $109 in 2004 and $175 in
2005.  Credits for the year ended 2004 were $218 and included  the  reduction in
reserves for trade receivables of $117 and inventory of $109.

      Reorganization  Items.  For the year ended  December  31, 2005 the Company
recorded net reorganization expenses of $406. The expenses for 2005 include $300
for legal fees associated with the Company's  bankruptcy  filing, $30 in fees to
the United States  Trustee  administering  the case and $37 relating to facility
relocation  expenses.  For the year ended December 31, 2004 the Company recorded
net  reorganization  expenses of $485.  The  expenses  for 2004 include $278 for
legal fees associated with the Company's  bankruptcy filing and $157 of expenses
relating to the relocation of the Company's manufacturing operations.

      Income Tax  Expense/Credit.  Due to the net  losses,  the  Company did not
record an income tax  expense or credit for either of the years  ended  December
31, 2005 and 2004.  The Company has provided a valuation  allowance  against the
total  amount of the net deferred  tax assets due to the  uncertainty  of future
realization.

      Net Loss.  For the year ended  December 31,  2005,  the net loss was $101,
compared to a net loss of $28 for the year ended December 31, 2004.


                                       24
<PAGE>

Years Ended December 31, 2004 and 2003

      Revenues:  Revenues for the year ended  December 31, 2004 were $7,309,  as
compared to $11,750 for the year ended December 31, 2003. The decline in revenue
is  attributable  to a  reduction  in  sales  of the  Company's  text  terminals
products,  as customers  moved to alternative  technologies,  including  graphic
displays.

      Text  revenue  includes  sales of the  Company's  general-purpose  display
terminals.  The Company's product family falls into two general classes: ANSI or
ASCII display terminals. The general purpose segment of the Text market, whether
ANSI or ASCII, is primarily  characterized as a "replacement sale" market. There
exists limited  opportunities for sales of the general display terminal into new
installations.  Text terminal customer purchasing criteria are based on quality,
customization, compatibility with other terminals, price and, as a result of the
markets  replacement  characterization,  lead-times.  Prior  to its  filing  for
bankruptcy, the Company has been a leader in these categories.

      Sales of the Company's General Display Terminals declined by 38% to $6,400
for the year ended  December 31, 2004 from  $10,347 for the year ended  December
31, 2003. The decline is  attributable  to a reduction in sales of the Company's
OEM products to Hewlett Packard and IBM, which, in combination,  accounted for a
decline of approximately $2,477, or 62%, from sales in 2003.

      The  decline  in text  sales has  resulted  in a  consolidation  of former
competitors,  as well as the outsourcing of production  from original  equipment
manufacturers to the remaining industry participants.  Although industry data is
not available,  the Company believes its market share to be  approximately  25%,
with Wyse Technologies ("Wyse"), a Taiwanese company, holding an approximate 45%
market share.  In the period just prior to the  bankruptcy  filing,  the Company
believes the relative  market  shares of Boundless  and Wyse were  approximately
equal at 35% each. The Company believes that the market will continue to decline
and therefore lead to additional  consolidation.  Any market share increases for
the Company will come at the expense of current industry competitors.

      Customer  Services  revenue for 2004 was $669  compared to $1,032 in 2003.
Customer  services revenue  includes the sale of spare parts,  repair of product
outside of the warranty period, and the sale of multi-year  warranty  contracts.
Historically,  customer  service  revenue  has been driven from the sales of the
Company's text terminal products.

      The  Company's  engineering  efforts  have focused on cost  reduction  and
reliability improvements.  These efforts have decreased the average failure rate
of the Company's text terminals and extended the average useful life of the text
terminal.  These  improvements  have reduced the  Company's  ability to generate
revenue from spare parts sales and repair activities. In addition, a substantial
market has evolved around the sale of used equipment, as customers trade in text
terminals when they switch to  alternative  technologies,  thereby  reducing the
Company's opportunity to sell new equipment.

      During  2004 the  Company  recorded  EMS  revenue  of $240,  entirely  for
logistics  services  provided  to UCSI.  During 2003 the  Company  recorded  EMS
revenue of $371.

      Hewlett Packard,  Ingram Micro and Jetstar  contributed  15.6%,  13.8% and
10.9%,  respectively of Company  revenues in 2004.  Hewlett Packard and NCR were
the Company's most significant  customers in 2003,  accounting for approximately
32% and 13%, respectively, of the Company's total revenue.


                                       25
<PAGE>

            During 2003 Hewlett  Packard advised the Company of its intention to
discontinue  the sale of certain of the  Company's  products to Hewlett  Packard
customers. Hewlett Packard is transitioning its customers to newer technologies,
including  thin client  terminals.  The  Company  continues  to sell  product to
Hewlett Packard, though in smaller volume, and has released the product for sale
to distributors who will sell to customers  unwilling to transition to the newer
technologies.

      Gross Margin. Gross margin for the year ended December 31, 2004 was $1,852
(25% of revenue),  as compared to gross  margin for the year ended  December 31,
2003 of $788 (7% of revenue).

            To reduce overhead  expenses,  in December 2003 the Company sold its
manufacturing  facility in Hauppauge,  New York,  thereby  eliminating $8,578 in
principal  amount of secured debt and $634 of accrued property tax and interest.
Under the terms of the sales transaction,  the Company leased 15,000 sq. feet of
administrative  and engineering  space at no out of pocket cost to it during the
first  year of the lease.  In  accordance  with  generally  accepted  accounting
principles,  a factor  for  reasonable  rent  expense  was  imputed  to the sale
transaction.  In February  2004 the Company  executed a lease to rent 32,000 sq.
ft. of manufacturing  space in a facility located in Farmingdale,  New York. The
lease term is 5 years and calls for first year annual  rent of $216,  escalating
to $243 in the final year.

      During  the  bankruptcy  period,  the  supply  chain  disruption  and  the
Company's  lack  of  adequate  working  capital  caused  the  Company  to  incur
substantial  airfreight expenses in order to accelerate receipt of raw materials
to meet  customers'  demands and the Company's  commitments.  For the year ended
2003,  airfreight  expense totaled $414. Had the Company been able to avoid this
expense, gross margin would have been improved by 3.5 points. As of December 31,
2003,  the Company  has  restructured  the supply  chain for raw  materials  and
eliminated unfavorable airfreight expense.

      In December  2003 the Company  recorded a charge of $778, or 6.6 points of
gross margin, to reserve against excess and obsolete inventory.  Of this amount,
$175  represents a reserve  against  exposure  positions  existing  prior to the
Filing Date. In addition,  the Company accrued $528 to reserve against a portion
of the inventory located at Ansen.

      Gross margin in future periods may be affected by several  factors such as
sales  volume,  shifts in product mix,  pricing  strategies  and  absorption  of
manufacturing costs.

      Changes in retail  pricing did not have a material  adverse  effect on the
Company's  gross margin in 2004 or 2003. In a continuing  effort to maintain and
improve margins in an industry  otherwise  characterized  by commodity  pricing,
management has focused on quality, flexibility, and product cost reductions.

      From time-to-time  margins are adversely affected by industry shortages of
key  components.  The  Company  emphasizes  product and cost  reductions  in its
research  and  development   activities  and  frequently  reviews  its  supplier
relationships  with the view to obtaining the best component  prices  available.
See "Asset Management."

      Total Operating Expenses.  For the year ended December 31, 2004, operating
expenses,  excluding interest and reorganization  expenses,  were $1,434 (20% of
revenue), compared to expenses for 2003 of $2,812 (24% of revenue).

      Sales and Marketing  Expenses.  Sales and marketing expenses decreased 52%
from $610 (5% of revenue)  for the year ended 2003 to $295 (4% of  revenue)  for
the  year  ended  December  31,  2004.  The  decrease  is  attributable  to  the
reorganization  of the Company which resulted in a major  reduction in personnel
and marketing programs.

      Boundless Technologies promotes its products by means of a balanced mix of
direct mail, telemarketing and cooperative channel marketing programs. Boundless
Manufacturing promotes its services through its direct sales force.

      General and Administrative  Expenses.  General and administrative expenses
decreased 51%, or $1,043, to $989 (14% of revenue), from $2,032 (17% of revenue)
for the periods ending  December 31, 2004 and 2003,  respectively.  The


                                       26
<PAGE>

decrease  stems from  reductions  in personnel  costs,  travel and  professional
services.

      Research  and  Development  Expenses.  Research and  development  expenses
decreased to $150 in 2004 from $170 in 2003.  Because General Display  Terminals
are  mature  products,  development  activities  over the past  year  have  only
included enhancements to the existing product family.

      Interest  Expense.  Interest  expense  amounted to $129 for the year ended
December 31, 2004  compared to $804 for 2003.  The decrease is  attributable  to
lower levels of debt carried by the Company  during 2004 and the  elimination of
the mortgage  interest due to the sale of the  Company's  Hauppauge  facility in
December  2003.  In  addition,  during  the first  quarter  of 2003 the  Company
assigned all of its right,  title and interest in and to the CIT Credit Facility
to Valtec Capital Corporation ("Valtec").  Prior to this assignment, the Company
had been amortizing the capitalized debt financing costs associated with the CIT
agreement to interest  expense.  For the first quarter ended March 31, 2003, the
amortized capitalized debt financing costs were $63.

      Loss on reimbursement of employee services. Beginning in the first quarter
of 2004 the Company agreed to provide resources,  principally Company employees,
to UCSI to allow it to pursue programs  critical to their continued  development
of the thin client market. UCSI is wholly-owned by Mr. Oscar Smith. Mr. Smith is
also the  majority  owner of Vision  Technologies,  Inc.,  the  entity  which is
expected to own 100% of the Company upon  confirmation  of the Company's plan of
reorganization.  A monthly charge to UCSI was agreed to based upon the Company's
estimate  of the  percentage  of time its  employees  would be  devoted  to UCSI
projects. For 2004 the Company charged UCSI $255 and incurred estimated expenses
of $306, resulting in a loss on reimbursement of employee services of $51.

      Loss on extinguishment of debt. In connection with the bankruptcy  filing,
during   the   quarter   ended   March   31,   2003,   the   Company    obtained
debtor-in-possession  financing with Valtec  Capital,  LLC and wrote off $289 of
capitalized  debt  financing  costs  associated  with  the  asset-based  lending
agreement with the Company's prior lender.

      Other Credits.  Credits for the year ended 2004 were $218 and included the
reduction  in reserves  for trade  receivables  of $117 and  inventory  of $109.
Credits for the year ended December 31, 2003 were $193

      Reorganization  Items.  For the year ended  December  31, 2004 the Company
recorded net reorganization expenses of $485. The expenses for 2004 include $278
for legal  fees  associated  with the  Company's  bankruptcy  filing and $157 of
expenses relating to the relocation of the Company's  manufacturing  operations.
For the year ended  December 31, 2003 the Company  recorded  net  reorganization
expenses of $655. The expenses for 2003 include $1,298 for legal fees associated
with the Company's bankruptcy filing and $685 of gains from the sale of assets.

      Income Tax  Expense/Credit.  Due to the net  losses,  the  Company did not
record an income tax  expense or credit for either of the years  ended  December
31, 2004 and 2003.  The Company has provided a valuation  allowance  against the
total  amount of the net deferred  tax assets due to the  uncertainty  of future
realization.

      Net Loss.  For the year ended  December  31,  2004,  the net loss was $28,
compared to a net loss of $3,579 for the year ended December 31, 2003.

      Accretion  on  Preferred  Stock.  Convertible  preferred  stock  issued in
connection  with the 2002 debt  restructuring  in the face  amount of $4,365 was
recorded at its estimated fair value of $1,406.  Assuming none of the holders of
the  Preferred  Stock  convert to Common  Stock of  Boundless  Corporation,  the
Company  would  be  required  to  record  a  charge  to  earnings  available  to
stockholders over the ten-year redemption period such that the carrying value of
the  Preferred   Stock  equals  its  face  value  at  the  time  of  redemption.
Pre-petition,  the difference  between the carrying value of the preferred stock
and its face  value was being  treated  as a dividend  and  charged to  earnings
available to stockholders over the ten-year redemption


                                       27
<PAGE>

period unless  conversion  occurs,  in which case  accretion  terminates at that
point.  As a result of the  bankruptcy,  during  2003 the  Company  discontinued
accreting to earnings the difference  between the carrying value and face amount
of the preferred  stock. The aggregate  accretion at the time of  discontinuance
was $247.

      Net Loss  Applicable to Common  Shareholders.  For the year ended December
31, 2004, the net loss applicable to common  shareholders was $28, compared to a
net loss applicable to common shareholders of $3,678 for the year ended December
31, 2003.

Impact of Inflation

      The  Company  has  not  been  adversely   affected  by  inflation  because
technological  advances and competition  within the microcomputer  industry have
generally caused prices of products sold by the Company to decline.  The Company
has flexibility in its pricing and could, if necessary, pass along price changes
to most of its customers.

Liquidity and Capital Resources

      The discussion below regarding  liquidity and capital  resources should be
read together with the  information  included in Item 1.  Business-  "Bankruptcy
Considerations",  and Notes 1, 6, 7, 8 and 12 of Notes to Consolidated Financial
Statements.

      The matters described in "Liquidity and Capital  Resources," to the extent
that they relate to future events or expectations, may be significantly affected
by the Chapter 11 process.  Those proceedings involve, or may result in, various
restrictions on the Company's activities,  limitations on financing, the need to
obtain  Bankruptcy Court and Creditors'  Committee  approval for various matters
and  uncertainty  as to  relationships  with vendors,  suppliers,  customers and
others with whom we may conduct or seek to conduct business.

      Generally,  under the Bankruptcy Code, most of a debtor's liabilities must
be  satisfied  in  full  before  the  debtor's   stockholders  can  receive  any
distribution  on account of such  shares.  The rights and claims of our  various
creditors  and security  holders will be  determined  by the  confirmed  plan of
reorganization.  Further,  it is also likely that pre-petition  unsecured claims
against the  Company  will be  substantially  impaired  in  connection  with our
reorganization.  At this time we can make no prediction  concerning  how each of
these claims will be valued in the bankruptcy  proceedings.  We believe that the
Company's  presently  outstanding equity securities will have no value and it is
expected that those securities will be canceled under any plan of reorganization
that we propose. For this reason, we urge that caution be exercised with respect
to existing and future claims or investments in any Boundless security.

      The Company is highly leveraged.  As of December 31, 2005, the Company had
a tangible net worth deficit of $15,006 and total  liabilities  of $17,010.  The
Company had a working capital deficit,  inclusive of liabilities and other items
subject to  compromise,  of  approximately  $14,596  as of  December  31,  2005,
compared  to  working  capital  deficit  of $13,990  as of  December  31,  2004.
Historically,  the  Company  has  relied  on cash  flow  from  operations,  bank
borrowings and sales of its common stock to finance its working capital, capital
expenditures and acquisitions.

      On the Effective  Date, the Company shall issue, or cause to be issued for
Vision's  benefit,  and in its name, shares of Boundless Common Stock sufficient
to  provide  Vision  with  100%  of  the  Boundless   Common  Stock  issued  and
outstanding,  or to be issued  and  outstanding,  under  the Plan  (the  "Vision
Shares").  Such  issuance  of the  Vision  Shares  shall be deemed to be in full
satisfaction  of the  Vision  Claim,  which  claim was $800,  including  accrued
interest, at December 31, 2005.

      Pursuant to the sale of 100 Marcus Blvd, Hauppauge, New York, Independence
Community  Bank and  JPMorgan  Chase  will have  pre-petition  unsecured  claims
against the Company aggregating approximately $2,271.


                                       28
<PAGE>

      The Company's  Plan of  Reorganization  contemplates  an annual payment of
cash to holders of allowed unsecured claims (the "Claims"). The Company believes
that these  Claims  aggregate  approximately  $14,586.  Holders of Claims  shall
receive their Pro Rata share of cash payments in an amount equal to 2% of annual
revenues up to and including $7 million,  on each of the first, second and third
anniversary dates of the Effective Date; and cash payments in an amount equal to
4% of annual  revenues  exceeding $7 million,  on each of the first,  second and
third anniversary dates of the Effective Date.

      Payments of Claims shall be escrowed on a monthly  basis,  and the Company
must forward  monthly sales reports and  confirmation of the escrow to Committee
Counsel.  Each of the annual payments to be distributed to holders of the Claims
shall be:  (i) not less than  $150 on each of the first and  second  anniversary
dates;  and (ii) not less than $200 on the third  anniversary  dates.  The total
amount to be  distributed  to holders of the Claims  shall be not less than $500
(the "Minimum Distribution").

      If the Company merges with another entity or is acquired by another entity
prior to the payments of all amounts due and owing pursuant to the payment plan,
the remaining  entity must assume the Company's  obligations  contained  herein.
Annual  revenues shall include only those  revenues  generated from sales of the
Company's product line existing prior to any merger or acquisition.

      At  December  31,  2005,  the Company  had  accrued  approximately  $1,154
primarily for legal assistance throughout the bankruptcy period. As of March 31,
2006,  outstanding  professional fees, inclusive of legal fees, are estimated to
approximate  $1,450 as of the  Effective  Date.  Upon  application  for  payment
pursuant to ss.ss.  330, 331 and 503(a) of the  Bankruptcy  Code and approval by
the Bankruptcy  Court, any and all  professional  fees not paid on or before the
Effective  Date shall be paid by the Company on such terms as the parties  shall
agree.  Interest shall accrue on any unpaid professional fees from the Effective
Date at a rate of eight (8%) percent per annum.

      Since it is anticipated that  professional  fees shall not be paid in full
on the Effective Date, the Professionals  (other than auditors) shall be granted
a security  interest  upon all of the Company's  assets,  junior to the security
interest thereon of Valtec but pari passu with the Vision security interest,  if
any. When the Professionals  shall have been paid in full, the security interest
in their favor shall be cancelled and be of no further force and effect.

      Our liquidity is affected by many factors,  some of which are based on the
normal  ongoing  operations  of our  businesses  and  some of which  arise  from
uncertainties  related to global  economies.  In the event there is a decline in
the Company's  sales and earnings  and/or a decrease in  availability  under the
credit  line,  the  Company's  cash flow  would be further  adversely  affected.
Accordingly,  the  Company  may not have the  necessary  cash to fund all of its
obligations.

      As of January 31, 2005, the Company  entered into an agreement with Valtec
to  terminate  our DIP  financing  and to release  their  liens on our  personal
property.  At the same time,  the  Company  entered  into  another  secured  DIP
financing  agreement with Entrepreneur  Growth Capital,  LLC ("EGC") pursuant to
which EGC was granted a lien on all of our personal property.  The original term
of the EGC Agreement was one year;  and, on January 31, 2006,  the EGC Agreement
was extended for an additional six months.

      Under the EGC  Agreement,  the annual  interest rate is 6% above the prime
rate  announced by Citibank,  N.A. and we are required to pay a monthly  service
fee equal to three quarters of one percent (0.75%) of the face value of invoices
assigned to EGC for the preceding  month.  The EGC Agreement  required us to pay
minimum  monthly  interest  of $8 even  though  our actual  borrowings  may have
resulted in a lesser interest charge.  As part of the negotiations to extend the
EGC Agreement, the minimum monthly interest was reduced to $5 beginning February
1, 2006.


                                       29
<PAGE>

      The Company's total cash and cash equivalents decreased approximately $110
to $14 at December 31, 2005 from $124 at the end of fiscal 2004.  Income  before
reorganization  items of $305, net of non-cash effects of $92,  provided $213 of
the $750 in cash generated from operating  activities in fiscal 2005. Changes in
current  assets and  liabilities  also  contributed to the increase in cash from
operating  activities  by  $537  as  follows:  reductions  in  trade  and  other
receivables  of $459,  cash on deposit with the Company's  prior lender of $271,
and  inventories of $399.  These  increases to cash provided by operations  were
offset by a  decline  in  accounts  payable  and  accrued  expenses  of $505 and
increases in other assets of $87.

Net cash used in reorganization  activities in fiscal 2005 was $274, composed of
$300 related to legal expenses, $30 in expenses associated with the U.S. Trustee
administering  the  bankruptcy  case,  $37  related  to  the  relocation  of the
Company's  manufacturing facility and miscellaneous  bankruptcy expenses of $39.
These expenses were offset by increases in accrued liabilities,  principally for
legal expenses of $132.

Net cash used in investing  activities  in fiscal 2005  consisted of $29 for the
purchase of machinery and equipment.

Net cash used in financing  activities  amounted to $557 in fiscal  2005,  which
amount  included  repayments  of the  Company's  prior DIP debt in the amount of
$653,  offset  by net  borrowings  under the  Company's  current  DIP  financing
agreement in the amount of $96.

<TABLE>
<CAPTION>
                                                            For the fiscal years ended December 31,
                                                               2005           2004           2003
                                                            ---------      ---------      ---------
<S>                                                         <C>            <C>            <C>
Net cash provided by (used in) operating activities         $     750      $     651      $    (617)
Net cash provided by (used in) reorganization activities         (274)          (211)            25
Net cash provided by (used in) investing activities               (29)           (15)           117
Net cash provided by (used in) financing activities              (557)          (674)           844
                                                            ---------      ---------      ---------

Net increase (decrease) in cash and cash equivalents        $    (110)     $    (249)     $     369
                                                            =========      =========      =========
</TABLE>

      Net cash provided by operating  activities  during the year ended December
31,  2004 was $651,  principally  related  to net income  before  reorganization
expenses of $456,  reductions  in  inventory  of $1,087,  reductions  in cash on
deposit with the Company's DIP lender of $57,  reductions in prepaid expenses of
$120 and  non-cash  depreciation  of $43.  This  amount was  offset by  non-cash
credits  consisting of inventory  provisions  and accounts  receivable  doubtful
accounts allowances totaling $226. Net cash provided by operating activities was
further reduced by increases in accounts receivable and affiliate receivables of
$213 and decreases in accounts payable and other accrued expenses of $583.

      Net cash used in  reorganization  activities  during 2004 was $211 arising
from expenses  associated  with the  relocation  of the Company's  manufacturing
facility in the amount of $184 and payments of fees to the United States Trustee
of $25.

      Net cash used in investing  activities  during 2004 consisted of equipment
purchases of $15. Net cash used in financing  activities was $674  consisting of
payments to Valtec.

      Net cash used in operating  activities  during the year ended December 31,
2003 was $617, principally related to a net loss before reorganization  expenses
of  $2,924.   This  amount  was  offset  by  non-cash  expenses   consisting  of
depreciation and amortization, inventory provisions, write-off of debt financing
costs, and accounts  receivable  doubtful accounts  allowances  totaling $2,362,
decreases in accounts receivable of $1,357 and decreases in accounts payable and
other accrued  expenses of $763.  Net cash used in operating  activities for the
year ended December 31, 2003,  also includes an increase in cash on deposit with
the Company's DIP lender of $328, increases in inventories of $198, decreases in
deferred  revenues of $94,  increases in other  receivables  of $60 and non-cash
gains on the disposition of assets of $44.

      Net cash provided by reorganization activities during 2003 amounted to $25
principally  from  proceeds  of $189  from the sale of the  Company's  Hauppauge
facility  and  payment  of legal  fees of  professionals  and fees of the United
States  Trustee.  Net cash  provided  by  investing  activities  during 2003 was
comprised of $117 stemming from the sale of  miscellaneous  equipment.  Net cash
provided by financing activities during 2003 was $844 which includes proceeds of
$1,572 from DIP loans offset by payments on loans and capital leases of $728.

Capital Commitments.

      Following  is a summary  of our  material  contractual  cash  obligations,
including  operating lease commitments and accrued interest (which are sometimes
referred to as "off-balance sheet debt") as of December 31, 2005.

<TABLE>
<CAPTION>
                                            Less than         Years           Years
                                             one year        2 and 3         4 and 5          Total
                                           -----------     -----------     -----------     -----------
<S>                                        <C>             <C>                     <C>     <C>
Long-term debt                             $       296     $       450     $        --     $       746
Operating leases                                   228             477              41             746
                                           -----------     -----------     -----------     -----------
Total contractual cash obligations         $       524     $       927     $        41     $     1,492
                                           ===========     ===========     ===========     ===========
</TABLE>


                                       30
<PAGE>

      The  Company  is  not   generally   permitted  to  make  any  payments  on
pre-petition debt as a result of the bankruptcy  filing. The Company has reached
repayment  agreements with its secured lenders, as well as other  administrative
creditors.  The  amounts  included  in the  above  table  represent  only  those
obligations for which we have finalized an agreement; however, these numbers are
still  subject  to  change  until  such  time as the plan of  reorganization  is
approved and we emerge from bankruptcy. In addition, we may still assume, assume
and assign or reject certain  executory  contracts and unexpired leases pursuant
to the Bankruptcy Code. As a result,  we anticipate that other lease obligations
as currently identified in the above table will continue to change as well.

Going Concern Comment and Management's Plan of Action

      Our  auditor's  report  on our  financial  statements  includes  a comment
regarding our ability to continue as a going concern.

      The  primary  issues  management  will  focus  on  immediately   following
confirmation of the Company's Plan of Reorganization include:

      o     Working with its secured lender on a  restructuring  of the terms of
            the DIP debt which it holds,  thereby reducing the Company's cost of
            borrowing.

      o     Initiating  negotiations with suppliers to secure trade financing of
            working  capital  of  approximately  $1-2  million  under  terms and
            conditions  to be agreed upon.  There can be no assurance  that such
            financing will materialize.

      o     The continual  negotiation of material contracts for the sale of its
            manufacturing  services to customers which management  believes will
            provide  additional  liquidity  for  operations.  There  can  be  no
            assurances that these contracts will materialize.

      o     The ability of the Company to generate cash from  operations  and to
            maintain adequate cash on hand; and

      o     The ability of the Company to achieve profitability.

      The Company believes that positive  operating  cashflows and profitability
will not come from the general  purpose text terminal  marketplace.  The Company
has been and will  continue  to focus on the current  business  from the current
customers in order to provide a reliable cash flow with which to execute  growth
plans. The paths to growth that the Company has developed include:

      1.  Repositioning the Company's business from a text terminal company to a
Point-of-Service/Point-of-Sale  ("POS") technology  company,  and build upon our
historical  success in POS to establish a strong link between the  Company's and
POS'  applications.  A key  activity in support of the POS  initiative  includes
leveraging the Company's existing technology platforms

      2. Gaining  access to a more modern and growing market through new product
offerings  including Web terminals and terminals  utilizing the Linux  operating
system  which  provide  high  security,  high  levels of  productivity  and high
reliability.

      3. Enter the Radio Frequency  Identification  ("RFID") market place with a
high  value-to-cost  offering.  Position  the company as a RFID  provider to POS
integrators and OEMs. RFID  Controllers - read/write RFID modules for both 13.56
mhz and 900 mhz- will be embedded into the Company's technology platforms.

      4. Applying its robust Build-to-Order ("BTO") processes to growth products
and markets.


                                       31
<PAGE>

Asset Management

      Inventory.  Management has instituted  policies and procedures to maximize
product  availability  and delivery while  minimizing  inventory levels so as to
lessen the risk of product obsolescence and price fluctuations.  Most components
and  sub-assemblies  are stocked to provide for an order-to-ship  cycle of seven
days.

Key metrics:

<TABLE>
<CAPTION>
                                                                December 31,     December 31,     December 31,
                                                               --------------   --------------   -------------
                                                                    2005             2004            2003
                                                               --------------   --------------   -------------
<S>                                                                       <C>              <C>              <C>
Days of sales outstanding in accounts receivable                           40               59              28
Days of supply in inventory                                                69               72              68
Days of purchases outstanding in accounts payable                          (4)              (3)            (30)
                                                               --------------   --------------   -------------

Cash conversion cycle                                                     105              128              66
                                                               ==============   ==============   =============
</TABLE>

      Days of sales  outstanding  in accounts  receivable  ("DSO")  measures the
average number of days the Company's trade  receivables are outstanding.  DSO is
calculated by dividing trade accounts receivable,  net of allowance for doubtful
accounts,  by a 90-day  average net revenue.  Affiliate  trade  receivables  and
revenue, primarily transactions with UCSI, are excluded from the calculation.

      Days of supply in inventory  ("DOS")  measures the average  number of days
from procurement to sale of the Company's product. DOS is calculated by dividing
inventory by a 90-day average cost of goods sold.

      Days of purchases  outstanding in accounts  payable  ("DPO")  measures the
average number of days our accounts  payable  balances are  outstanding.  DPO is
calculated by dividing accounts payable by a 90-day average cost of goods sold.

      The  Company's  working  capital  requirements  depend upon our  effective
management of the cash conversion cycle, which represents effectively the number
of days  that  elapse  from the day the  Company  pays for the  purchase  of raw
materials to the  collection  of cash from our  customers.  The cash  conversion
cycle is the sum of DSO and DOS less DPO.

      The  increase in DSO from 2003 to 2004 is a result of  increased  sales to
Ingram  Micro,  which  pays  its  obligations  on  net  60 day  terms,  and  who
contributed  approximately  14% of total revenue for the year ended December 31,
2004 as compared to 6% of revenue for the year ended  December 31, 2003.  During
2005 collection efforts with Ingram Micro resulted in reducing the percentage of
its receivables aged greater than 60 days from 51% to 20%.

      The decrease in DPO from 2003  through 2005 is a result of the  bankruptcy
filing  and  the  change  in  the  Company's   payment  terms  for  material  to
cash-in-advance.

New Accounting Pronouncements

      In November  2004,  the FASB issued  SFAS No.  151,  "Inventory  Costs--An
Amendment of ARB No. 43,  Chapter 4" ("SFAS 151").  SFAS 151 amends the guidance
in ARB No. 43,  Chapter 4,  "Inventory  Pricing," to clarify the  accounting for
abnormal amounts of idle facility expense,  freight,  handling costs, and wasted
material  (spoilage).  Among


                                       32
<PAGE>

other  provisions,  the new  rule  requires  that  items  such as idle  facility
expense,  excessive spoilage, double freight, and rehandling costs be recognized
as current-period  charges  regardless of whether they meet the criterion of "so
abnormal"  as stated in ARB No. 43.  Additionally,  SFAS 151  requires  that the
allocation of fixed production  overheads to the costs of conversion be based on
the normal  capacity of the  production  facilities.  SFAS 151 is effective  for
fiscal  years  beginning  after June 15,  2005 and is  required to be adopted by
Boundless  in the first  quarter of fiscal  2006,  beginning on January 1, 2006.
Boundless is currently  evaluating the effect that the adoption of SFAS 151 will
have on its consolidated  results of operations and financial condition but does
not expect SFAS 151 to have a material impact.

      In  December  2004,   the  FASB  issued  SFAS  No.  123  (revised   2004),
"Share-Based  Payment" ("SFAS 123R"),  which replaces SFAS No. 123,  "Accounting
for  Stock-Based  Compensation"  ("SFAS 123") and supersedes APB Opinion No. 25,
"Accounting  for Stock Issued to Employees."  SFAS 123R requires all share-based
payments  to  employees,  including  grants of  employee  stock  options,  to be
recognized in the financial statements based on their fair values. As amended by
an SEC pronouncement,  SFAS 123R is effective with the first annual period after
June 15,  2005,  with  early  adoption  encouraged.  The pro  forma  disclosures
previously  permitted  under  SFAS 123,  no  longer  will be an  alternative  to
financial statement recognition. We are required to adopt SFAS 123R in the first
quarter of fiscal  2006,  beginning  January 1, 2006.  Under SFAS 123R,  we must
determine the  appropriate  fair value model to be used for valuing  share-based
payments,  the  amortization  method for  compensation  cost and the  transition
method  to  be  used  at  date  of  adoption.  The  transition  methods  include
prospective and retroactive  adoption  options.  Under the retroactive  options,
prior periods may be restated either as of the beginning of the year of adoption
or for all periods presented.  The prospective method requires that compensation
expense be recorded for all unvested stock options and  restricted  stock at the
beginning of the first quarter of adoption of SFAS 123R,  while the  retroactive
methods  would record  compensation  expense for all unvested  stock options and
restricted stock beginning with the first period restated. We are evaluating the
requirements  of SFAS 123R and we expect that the adoption of SFAS 123R will not
have a material  impact on our  consolidated  results of operations and earnings
per share.  We have not yet  determined  the method of adoption or the effect of
adopting SFAS 123R, and we have not determined  whether the adoption will result
in amounts that are similar to the current pro forma disclosures under SFAS 123.

      In December 2004, the FASB issued SFAS No. 153,  "Exchanges of Nonmonetary
Assets--An   Amendment  of  APB  Opinion  No.  29,  Accounting  for  Nonmonetary
Transactions"  ("SFAS 153").  SFAS 153  eliminates the exception from fair value
measurement for nonmonetary  exchanges of similar productive assets in paragraph
21(b) of APB Opinion No. 29,  "Accounting  for  Nonmonetary  Transactions,"  and
replaces  it  with an  exception  for  exchanges  that  do not  have  commercial
substance.  SFAS  153  specifies  that a  nonmonetary  exchange  has  commercial
substance  if the  future  cash  flows of the  entity  are  expected  to  change
significantly as a result of the exchange.  SFAS 153 is effective for the fiscal
periods beginning after June 15, 2005 and is required to be adopted by Boundless
in the third  quarter of fiscal 2005,  beginning  on July 1, 2005.  Boundless is
currently  evaluating  the effect that the adoption of SFAS 153 will have on its
consolidated  results of operations and financial  condition but does not expect
it to have a material impact.

      In  March  2005,  the  FASB  issued  FASB  Interpretation  (FIN)  No.  47,
"Accounting for Conditional Asset Retirement  Obligations,  an interpretation of
FASB Statement No. 143". FIN No. 47 clarifies that conditional  asset retirement
obligations  meet the  definition of liabilities  and should be recognized  when
incurred if their fair values can be reasonably estimated. The Interpretation is
effective no later than December 31, 2005.  The  cumulative  effect of initially
applying  the  Interpretation  will be  recognized  as a  change  in  accounting
principle.  The Company  does not  believe  that FIN No. 47 will have a material
effect on its consolidated financial statements.

      In June 2005,  the FASB  issued FASB Staff  Position  (FSP) No. FAS 143-1,
"Accounting for Electronic  Equipment Waste Obligations," that provides guidance
on how commercial  users and producers of electronic  equipment should recognize
and measure asset retirement  obligations associated with the European Directive
2002/96/EC on Waste Electrical and Electronic  Equipment (the  "Directive").  In
the second quarter of 2005, the company  adopted FSP FAS 143-1 in those European
Union (EU) member countries that transposed the Directive into  country-specific
laws. In the third quarter of 2005, the company adopted FSP FAS 143-1 in several
additional EU-member countries that enacted country-specific laws


                                       33
<PAGE>

in the current reporting period. The adoption of the FSP in the second and third
quarter of 2005 did not have a  material  effect on the  company's  consolidated
financial statements.  As of the end of the current quarter, the majority of the
EU-member  countries have transposed the Directive into  country-specific  laws.
The  effect of  applying  FSP FAS  143-1 in the  remaining  countries  in future
periods is not expected to have a material effect on the company's  consolidated
financial statements.

      In June 2005, the FASB issued SFAS No. 154,  "Accounting Changes and Error
Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3." SFAS
No. 154 will become  effective for accounting  changes and corrections of errors
made in fiscal year 2006.  The  adoption of this  statement  is not  expected to
effect the company's consolidated financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company's  exposure to market risk for changes in interest  rates is related
primarily  to  the  Company's  revolving  credit  facility  and  long-term  debt
obligations.

      The Company places its  investments  with high credit quality issuers and,
by policy,  is averse to principal loss and ensures the safety and  preservation
of its invested  funds by limiting  default risk,  market risk and  reinvestment
risk.  As of  December  31, 2005 the  Company's  investments  consisted  of cash
balances maintained in its corporate account with JPMorganChase Bank.

      The  majority  of sales  arrangements  with  international  customers  are
denominated  in U.S.  dollars.  International  customers  are permitted to elect
payment of their next month's orders in local currency based on an exchange rate
provided one month in advance from the Company. The Company does not use foreign
currency forward exchange contracts or purchased currency options to hedge local
currency cash flows or for trading purposes.  Foreign currency transaction gains
or losses have not been material to the Company's results of operations.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         See Item 15(a)(1) and (2) of Part IV of this Report.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         None.


                                       34
<PAGE>

ITEM 9A. CONTROLS AND PROCEDURES.

      An  evaluation  was  carried  out  under  the  supervision  and  with  the
participation of the Company's management, including the Chief Executive Officer
("CEO")  and  Chief  Financial  Officer  ("CFO"),  of the  effectiveness  of the
Company's  disclosure  controls and procedures as of December 31, 2005. Based on
that  evaluation,  the  Company's  management,  including  the CEO and CFO,  has
concluded that the Company's  disclosure controls and procedures were effective.
During the period  covered by this report,  there was no change in the Company's
internal control over financial  reporting that has materially  affected,  or is
reasonably  likely to materially  affect,  the Company's  internal  control over
financial reporting.

ITEM 9B. OTHER

      Not applicable.


                                       35
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors and Executive Officers

       The directors and executive officers of the Company are as follows:

Name                 Age      Positions and Offices
----                 ---      ---------------------

Frank Stephens       54       Chairman of the Board of Directors

Richard Bowman       45       Director

John D. Ryan         55       Acting Chief Executive Officer

Joseph Gardner       46       Vice President - Finance, Chief Financial Officer

      J. Frank  Stephens  has been a member of the Board  since  July 2001.  Mr.
Stephens  has  over  30  years  domestic  and  international  experience  in the
consumer,  food service, and industrial  ingredients channels.  Since April 1997
Mr.  Stephens  has held the  office  of  President,  Capital  Sigma  Investments
("CSI"),  a privately  funded  equity  group  focused in the health and soyfoods
category.  Since April 1998,  concurrent  with CSI's  acquisition of Quong Hop &
Co.,  a  regional  soy  foods  company,  Mr.  Stephens  has  served as the Chief
Executive  Officer of Quong Hop & Co. Prior to this,  and from August 1996 until
March 1997, Mr. Stephens served as the Director of Strategic Planning for Global
Consumer Products,  Inc., a company  specializing in new product development and
branding for consumer-oriented companies.

      Mr. Bowman has served on the Board of the company since  February 2002. He
has  extensive  experience  in  agribusiness,  technology  development  and  the
financing of commercial  agri-processing projects in lesser developed countries.
He is presently the President,  Chief Executive Officer,  and Corporate Director
of AgCheck  Canada  Ltd.,  a  Canadian  based firm  specialized  in the  design,
implementation  and marketing of carbon offset  projects.  He has served in this
position since January,  2003. Prior to this, from March 2000 until starting his
current position, Mr. Bowman served as an executive consultant,  advising select
agribusiness and environmental firms in North America in the areas of production
management,  environmental  compliance,  and options for  environmentally  based
financing.

      John D. Ryan ("Jack") has served as the Vice President of Operations since
2000,  and as the acting  Chief  Executive  Officer  since June 2004.  Jack is a
manufacturing   executive  with  over  30  years   experience  in  Manufacturing
Operations,  Supply Base Management,  Quality Assurance and Product  Development
within the Computer, Computer Peripheral,  Microelectronics,  and Communications
industries.   He  is  currently  the  Chief  Operating   Officer  for  Boundless
Corporation.

      Prior to  joining  Boundless  Corporation,  Jack held a variety  of senior
management  positions  in  Manufacturing,   Supply  Chain  Management,   Product
Outsourcing,  and Quality Assurance for companies including  Solectron,  NCR and
AT&T.  Jack has worked at the SUNY Stony Brook Harriman School of Management and
Policy as a lecturer on topics including High Velocity  Flexible  Manufacturing,
and Strategic Planning for Manufacturing.


                                       36
<PAGE>

      Joseph Gardner has served as Vice President of Finance and Chief Financial
Officer of the Company since October 31, 1997.  Mr. Gardner has been employed by
Boundless  Technologies,  Inc.  since April of 1990.  Prior to 1997, Mr. Gardner
served as the Controller  and Vice President of Quality  Assurance for Boundless
Technologies.  Before joining Boundless, Mr. Gardner served in various executive
financial  positions with NCR Corporation  including  Business  Planning for the
Financial  Systems  Division  and  Cash  Management/Foreign   Exchange  Exposure
Management.  Mr.  Gardner is also a  Certified  Public  Accountant  as well as a
Certified  Management  Accountant  and received his MBA from Bowling Green State
University.

Audit Committee Financial Expert

      The Board of Directors of Boundless  Corporation  has  determined  that J.
Frank Stephens,  Chair of the Audit Committee,  is an audit committee  financial
expert as defined by Item 401(h) of Regulation  S-K of the  Securities  Exchange
Act of 1934,  as amended  (the  "Exchange  Act") and is  independent  within the
meaning  of  Item  7(d)(3)(iv)  of  Schedule  14A  and  Items  401(h)(1)(ii)  of
Regulation S-K of the Exchange Act.

Audit Committee

      The Audit  Committee  consists of the Company's  Board of  Directors.  The
members of the Audit Committee are J. Frank Stephens and Richard Bowman.

Code of Ethics

Information  on Boundless'  code of business  conduct and ethics for  directors,
officers and employees,  also known as the "Code of Ethics and Business  Conduct
Guidelines"  is  set  forth  under  "Corporate  Governance  Principles"  on  the
Company's website at www.boundless.com.

Section 16(a) Beneficial Ownership Reporting Compliance

      A review of the Forms 3, 4 and 5 filed or due with the  Commission in 2005
indicates that each of Frank  Stephens,  Richard  Bowman,  John Ryan, and Joseph
Gardner did not file a Form 5 as required  under  section  16(a) of the Exchange
Act.


                                       37
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

      The table below discloses all cash  compensation  awarded to, earned by or
paid to our Chief  Executive  Officer and our Chief Financial  Officer,  each of
whom earned more than  $100,000 for services  rendered in all  capacities  to us
during the  fiscal  year  ended  December  31,  2005  (collectively,  the "named
executive  officers").  In addition, it provides information with respect to the
compensation paid by us to the named executive officers during 2004 and 2003.

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                                                        Long-Term
                                                    Annual Compensation               Compensation
                                         ----------------------------------------     ------------
Name and Principal                                                   Other Annual                          All Other
Position                       Year        Salary          Bonus     Compensation      Options(#)       Compensation
--------                       ----        ------          -----     ------------      ----------       ------------
<S>                          <C>          <C>                 <C>          <C>                <C>              <C>
Joseph Gardner               12/31/05     $133,954           --           --                 --                --
Vice President-Finance       12/31/04     $128,762           --           --                 --                --
Chief Financial Officer      12/31/03     $136,610           --           --                 --                --

John D. Ryan                 12/31/05     $133,954           --           --                 --                --
Acting Chief Executive       12/31/04     $128,762           --           --                 --                --
Officer                      12/31/03     $ 88,990           --           --                 --                --
</TABLE>

Employment Agreements and Change-in-Control Arrangements

      None

1995/ 1997/ 2000 Incentive Plans

The Company's  1995  Incentive Plan covered the issuance of up to 600,000 shares
of Common  Stock.  As  additional  shares were no longer  available to be issued
under the 1995 Incentive Plan, the Board adopted the 1997 Incentive Plan in July
1997 which  covers the issuance of up to 1,000,000  shares of Common  Stock.  In
December  2000 the Board  created  the 2000  Incentive  Plan which  covers up to
1,000,000  shares of Common  Stock.  The number of shares  granted on a calendar
year basis under the 2000 Incentive Plan is limited to 5% of the total number of
shares of Common Stock  outstanding,  or 10% of the outstanding  Common Stock in
any five-year period.


                                       38
<PAGE>

                        Option Grants in Last Fiscal Year

      The Company did not grant options to the named  executive  officers during
the fiscal years ending December 31, 2005.


                                       39
<PAGE>

                 Aggregated Option Exercises in Last Fiscal Year
                        and Fiscal Year-End Option Values

      The  following  table  provides  information  on the  value  of the  named
executive  officers'  unexercised  options to purchase shares of Common Stock at
December 31, 2005. No options were exercised during the year.

<TABLE>
<CAPTION>
                                                                                            Value of Unexercised
                                                   Number of Unexercised Options           In-the-Money Options at
                                                      at December 31, 2005 (#)             December 31, 2005 ($)(1)
                                                   ------------------------------      ------------------------------
                         Shares
                      Acquired on      Value
     Name             Exercise(#)    Realized      Exercisable      Unexercisable      Exercisable      Unexercisable
     ----             -----------    --------      -----------      -------------      -----------      -------------
<S>                         <C>          <C>            <C>             <C>                <C>               <C>
Joseph Gardner              0            0              72,833          4,167              --                --
John D. Ryan                0            0              82,833          4,167              --                --
</TABLE>

(1)   The last sale price of the  Company's  Common  Stock on December 31, 2005,
      $0.00.


                                       40
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

            The  following  table sets forth certain  information  regarding the
beneficial  ownership of the Company's  outstanding Common Stock as of March 31,
2006, by (i) each of the Company's  directors  and "named  executive  officers,"
(ii)  directors and executive  officers of the Company as a group and (iii) each
person  believed  by  the  Company  to  own  beneficially  more  than  5% of its
outstanding  shares of Common  Stock.  Except as indicated  each such person has
sole  voting and  investment  powers  with  respect to his and her  shares.  The
address  of Unique  Co-Operative  Solutions  Inc./  Oscar L. Smith is 9185 Bond,
Overland  Park, KS 66214.  The address of Neoware  Systems,  Inc. is 400 Feheley
Dr., King of Prussia, PA 19406.

<TABLE>
<CAPTION>
                                               Number of Shares                  Percentage of
Name of Beneficial Owner                      Beneficially Owned               Outstanding Shares
------------------------                      ------------------               ------------------
<S>                                                <C>                               <C>
Unique Co-Operative Solutions, Inc./
  Oscar L. Smith                                   1,002,389 (1)(3)                  14.8%
J. Gerald Combs                                      905,923 (2)(3)(6)               12.0%
JPMorganChase                                        750,000 (5)                     11.2%
Neoware Systems, Inc                                 383,335 (4)                      5.7%
Valtec Capital Corp.                                 400,000 (8)                      5.6%
John D. Ryan                                         173,122 (3)                      2.5%
Joseph Gardner                                        86,991 (3)                      1.3%
J. Frank Stephens                                     87,293 (3)(7)                   1.3%
Richard Bowman                                        60,000 (3)                      0.9%
All current directors and executive                  407,406                          5.9%
  officers as a group
  (four individuals)
</TABLE>

----------
(1)   Includes  41,667  shares  issuable  upon the  exercise  of a warrant.  The
      warrant was granted June 4, 2001, in connection  with a sale of our common
      stock. The warrant vested immediately,  has an exercise price per share of
      common stock of $1.30, and expires five years following the date of grant.

(2)   Resigned as the Chief Executive  Officer of the Company  effective January
      2002.

(3)   Includes or consists of shares of Common Stock  issuable  upon exercise of
      options as follows:  Mr.  Smith:  25,000;  Mr. Combs:  480,000;  Mr. Ryan:
      82,083; Mr. Gardner: 72,083; Mr. Bowman: 25,000; and Mr. Stephens: 43,000.
      Includes or consists of shares of Common Stock  issuable  upon exercise of
      warrants as follows:  Mr. Combs:  5,834; Mr. Ryan: 3,889; and Mr. Gardner:
      1,945.

(4)   Includes  50,001  shares  issuable  upon the  exercise  of a warrant.  The
      warrant was issued June 29, 2001, in connection  with a sale of our common
      stock.  The  warrant has an  exercise  price per share of common  stock of
      $1.10,  and the warrant expires five years following the date of grant. In
      June 2001  Neoware  Systems  Inc.  purchased  our  Windows-based  terminal
      product line for  $1,600,000.  As part of the  transaction,  we secured an
      agreement to manufacture certain products for Neoware Systems, Inc.

(5)   On June 27, 2002,  the Company  entered  into an  agreement  with its then
      secured  lenders to  terminate  its  revolving  line of credit (the "Chase
      Credit  Line").  In return for  termination  of the Chase Credit Line, the
      Company,  amongst other  consideration,  agreed to issue 750,000 shares of
      its common  stock and shares of its  newly-created  convertible  preferred
      stock (the  "Preferred  Stock")  with a stated  value of  $1,250,000.  The


                                       41
<PAGE>

      Company  had  agreed to  register  under the  Securities  Act of 1933 such
      common  stock  and the  shares  into  which  the  Preferred  Stock  may be
      converted.  The lenders have certain  anti-dilution  protection  for their
      shares of common  stock.  The Preferred  Stock may be converted  after the
      first  anniversary of their  issuance into shares of the Company's  common
      stock at $3.00 per share and,  unless sooner  converted into common stock,
      must be redeemed by the Company on June 30, 2012 for their stated value.

(6)   Includes  380,000 shares of Common Stock issuable upon the conversion of a
      convertible  promissory note. The principal amount of the note is $475,000
      and may be converted  into shares of Common  Stock of the Company,  at the
      option of Mr.  Combs,  at a conversion  price of $1.25 per share of Common
      Stock.

(7)   Includes  19,905 shares of Common Stock  issuable upon the conversion of a
      convertible  promissory  note. The principal amount of the note is $18,667
      and may be converted  into shares of Common  Stock of the Company,  at the
      option of Mr. Stephens, at a conversion price of $1.05 per share of Common
      Stock.  See Item 10- "Directors and Executive  Officers of the Registrant"
      for additional  information concerning the issuance of the promissory note
      to Mr. Stephens.

(8)   By a Loan and Security  Agreement dated December 3, 2002 (the "Valtec Loan
      Agreement"),  the  Company  consolidated  prior  borrowings  and  received
      additional borrowings from Valtec in the aggregate amount of approximately
      $1.2 million  (plus  accrued and unpaid  interest and other  charges).  In
      connection with the Valtec Loan Agreement, the Company issued a warrant to
      Valtec to purchase  400,000  shares of the  Company's  Common  Stock.  The
      common shares underlying the warrant,  have an exercise price per share of
      common stock of $0.36,  and the warrant  expires five years  following the
      date of grant.

Under the Plan of  Reorganization,  all outstanding  common stock and derivative
securities of the Company will be cancelled  upon the Company's  emergence  from
bankruptcy.  It is highly unlikely the promissory  notes issued to Mssrs.  Combs
and Stephens will be converted to common stock of the Company.  As a result, the
principal and accrued interest thereon are included with liabilities  subject to
compromise.


                                       42
<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Net revenue from EMS  activities,  primarily  logistics  services  sold to
Unique  Co-operative  Solutions,  Inc.  ("UCSI"),  were $240 for the year  ended
December 31, 2004, and $23 for the year ended December 31, 2005.  UCSI is wholly
owned  by Mr.  Oscar  Smith,  who also is the  majority  shareholder  of  Vision
Technologies,  Inc. ("Vision").  The Company's Plan of Reorganization,  assuming
approval by the Bankruptcy Court,  contemplates that Vision will own 100% of the
Company.  Mr. Smith currently owns  approximately 15% of the outstanding  common
stock of the Company.

      Beginning  in the first  quarter  of 2004,  the  Company  recognized  that
certain of its employees  were  underutilized,  and outsourced a portion of this
underutilization to UCSI. In the absence of this arrangement,  the Company would
have  absorbed the entire  expense of the  underutilization.  For the year ended
December 31, 2004,  these costs were  estimated to be $306 for which the Company
charged UCSI $255.  The $255 charged by the Company was less than the  estimated
personnel and personnel related expenses.  The resulting loss of $51 is reported
in the statement of operations.  The Company  discontinued  its arrangement with
UCSI in May 2005.  For the period  January 1, 2005  through  May 31,  2005,  the
Company charged UCSI $50 and incurred  personnel and personnel  related expenses
of $58. The resulting loss of $8 is reported in the statement of operations.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Independent Accountant Fees

      The aggregate fees billed for professional  services  rendered by BP Audit
Group and by BDO Seidman,  LLP for the years ended  December 31, 2005,  2004 and
2003 are as follows (amounts in dollars):

                                                2005         2004         2003
                                             ---------    ---------    ---------
BP Audit Group
Audit fees                                   $  52,250    $  58,356    $  71,863
Audit-related fees                              15,893       10,427           --
Tax fees                                         7,127       15,384           --

                                             ---------    ---------    ---------
                                                75,270       84,167       71,863
                                             ---------    ---------    ---------

BDO Seidman, LLP
Audit fees                                                                 2,500
Audit-related fees                                                            --
Tax fees                                                                      --

                                             ---------    ---------    ---------
                                                    --           --        2,500
                                             ---------    ---------    ---------
Total Independent Accountant Fees
Audit fees                                      52,250       58,356       74,363
Audit-related fees                              15,893       10,427           --
Tax fees                                         7,127       15,384           --

                                             ---------    ---------    ---------
                                             $  75,270    $  84,167    $  74,363
                                             =========    =========    =========


                                       43
<PAGE>

      Fees for audit  services  consist of audits of the Company's  consolidated
financial statements and limited reviews of the Company's consolidated quarterly
financial statements.

      Fees  for  audit-related  services  consist  of  statutory  audits  of the
Company's 401K plan.

      Fees for tax services  consisted of assistance  with  preparation of state
and federal tax returns.

      All of the  services  under the  Audit  Related,  Tax and All  Other  Fees
categories above have been approved by the Audit Committee pursuant to paragraph
(c)(7)(i)(c) of Rule 2-01 of Regulation S-X of the Exchange Act.

Audit Committee Pre-Approval Policy and Procedures.

      The Audit Committee of the Boundless Board of Directors adopted the policy
on  pre-approval  of services of  independent  accountants  in October 2003. The
policy  provides  that the  Audit  Committee  shall  pre-approve  all  audit and
non-audit  services  to be provided  to the  Company  and its  subsidiaries  and
affiliates  by its  auditors.  The  process by which  this is carried  out is as
follows:

      For recurring  services,  the Audit Committee  reviews and pre-approves BP
Audit  Group's  annual  audit  services  and  employee  benefit  plan  audits in
conjunction with the Committee's annual appointment of the outside auditors. The
materials  include a description  of the services  along with related fees.  The
Committee  also reviews and  pre-approves  other  classes of recurring  services
along  with fee  thresholds  for  pre-approved  services.  In the event that the
pre-approval  fee thresholds are met and additional  services are required prior
to the next scheduled  Committee meeting,  pre-approvals of additional  services
follow the process described below.

      Any  requests  for  audit,  audit-related,  tax  and  other  services  not
contemplated  with the  recurring  services  approval  described  above  must be
submitted to the Audit Committee for specific  pre-approval  and cannot commence
until such  approval has been  granted.  Normally,  pre-approval  is provided at
regularly  scheduled  meetings.   However,   the  authority  to  grant  specific
pre-approval between meetings, as necessary,  has been delegated to the Chairman
of the Audit  Committee.  The  Chairman  must update the  Committee  at the next
regularly   scheduled  meeting  of  any  services  that  were  granted  specific
pre-approval.

      On a periodic basis,  the Audit  Committee  reviews the status of services
and fees incurred  year-to-date and a list of newly pre-approved  services since
its last regularly scheduled meeting


                                       44
<PAGE>

                                     PART IV


ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K

                                                                       Page No.
                                                                       -------

(a)   (1)(2)   Financial Statements and Schedules

               Index to Consolidated Financial Statements and
               Financial Statement Schedules                                F-1

      All other financial  statements and schedules not listed have been omitted
      since  the  required  information  is  either  included  in the  Financial
      Statements  and the Notes  thereto as  included  in the  Company's  Annual
      Report  on Form  10-K  for the  Year  ended  December  31,  2005 or is not
      applicable or required.

(b)   Reports on Form 8-K

      On February 2, 2005, we filed a current  report on Form 8-K  disclosing we
entered  into a secured  post-petition  financing  agreement  with  Entrepreneur
Growth Capital,  LLC ("EGC")  pursuant to which EGC was granted a lien on all of
our personal property


                                       45
<PAGE>

                                  EXHIBIT INDEX

Exhibit No.*    Description of Exhibit
------------    ----------------------

3.1[2]          Certificate of Incorporation of Registrant and Certificates of
                Amendment thereto.

3.2[1]          By-Laws of Registrant.

10(a)           Registrant's 1995 Incentive Plan (Incorporated by reference to
                   and filed as Exhibit E to Registrant's Information Statement,
                   dated September 28, 1995).

10(b)           Registrant's 1997 Incentive Plan (Incorporated by reference to
                   and filed as Exhibit A to Registrant's Information Statement,
                   dated March 6, 1998).

10(c)[6]        Registrant's 2000 Incentive Plan.

10(d)[4]        Restatement, Extension, Assumption and Modification Agreement,
                   dated June 24, 1999, between Boundless Technologies, Inc. and
                   Independence Community Bank (Originally filed as Exhibit
                   10(a)).

10(e)[4]        Restated Business Installment Promissory Note, dated June 24,
                   1999, from Boundless Technologies, Inc. to Independence
                   Community Bank (Originally filed as Exhibit 10(b)).

10(f)[4]        Restated Mortgage and Security Agreement, dated June 24, 1999,
                   between Boundless Technologies, Inc. and Independence
                   Community Bank (Originally filed as Exhibit 10(c)).

10(g)[5]        Promissory Note, dated September 30, 1999, in the amount of
                   $500,000 from General Automation, Inc. to Boundless
                   Technologies, Inc. (Originally filed as Exhibit 10(p)).

10(h)[5]        Secured Convertible Promissory Note from General Automation,
                   Inc. to Boundless Technologies, Inc (Originally filed as
                   Exhibit 10(o)).

10(i)[5]        Warrant issued by General Automation, Inc. to Boundless
                   Technologies, Inc (Originally filed as Exhibit 10(q)).

10(j)[5]        Employment Agreement, dated July 1, 1999, among Registrant,
                   Boundless Manufacturing Services, Inc. and Joseph Joy
                   (Originally filed as Exhibit 10(f)).

10(k)[5]        Employment Agreement, dated July 1, 1999, among Registrant,
                   Boundless Manufacturing Services, Inc. and Anthony
                   Giovaniello (Originally filed as Exhibit 10(g)).

10(l)[6]        Employment Agreement, dated March 1, 2000, among Registrant,
                   Boundless Technologies, Inc. and James Gerald Combs.

10(m)[6]        Employment Agreement, dated March 1, 2000, among Registrant,
                   Boundless Technologies, Inc. and Jeffrey K. Moore.


                                       46
<PAGE>

Exhibit No.*    Description of Exhibit
------------    ----------------------

10(n)[6]        Second Amended and Restated Credit Agreement and Guaranty (plus
                   exhibits thereto) dated as of May 25, 2000 among Boundless
                   Technologies, Inc., Boundless Manufacturing Services, Inc.
                   and Merinta as co-borrowers, Boundless Acquisition Corp. and
                   Boundless Corporation, as guarantors, and The Chase Manhattan
                   Bank, Silicon Valley Bank and National Bank of Canada as the
                   Banks and The Chase Manhattan Bank, as Administrative Agent
                   for the Banks.

10(o)[6]        First Amendment, dated as of July 31, 2000, to Second Amended
                   and Restated Credit Agreement and Guaranty with Chase.

10(p)[6]        Second Amendment, dated as of November 7, 2000, to Second
                   Amended and Restated Credit Agreement and Guaranty with
                   Chase.

10(q)[6]        Third Amendment, dated as of November 16, 2000, to Second
                   Amended and Restated Credit Agreement and Guaranty with
                   Chase.

10(r)[6]        Form of Warrant issued by Merinta Inc. to the Chase Manhattan
                   Bank, Silicon Valley Bank and National Bank of Canada for the
                   purchase of a total of 100,000 shares of Merinta common stock
                   (40,000 shares on May 25, 2000, 25,000 shares on July 31,
                   2000 and 35,000 shares on November 7, 2000).

10(s)[3]        Common Stock Purchase Warrant dated as of April 14, 1999 issued
                   to Chase Manhattan Bank for the purchase of Registrant's
                   common stock (Originally filed as Exhibit 10(b)).

10(t)[6]        Common Stock Purchase Warrant, dated as of May 25, 2000, issued
                   to Chase Manhattan Bank for the purchase of Registrant's
                   common stock.

10(u)[6]        Merinta Inc.'s Amended and Restated Certificate of
                   Incorporation, effective November 6, 2000, including the
                   terms of Merinta's Series A Convertible Preferred Stock
                   issued to National Semiconductor Corporation.

10(v)[7]        Registrant's 2001 Incentive Plan. (Incorporated by reference
                   to and filed as Appendix B to Definitive Proxy Statement,
                   dated January 31, 2002).

10(w)[8]        Separation Agreement and General Release, effective as of
                   January 1, 2002, with Mr. J. Gerald Combs.

10(x)[8]        Consulting Agreement, effective as of January 1, 2002, with
                   Mr. J. Gerald Combs.

10(y)[8]        Non-negotiable Convertible Note by and between the Registrant
                   and Mr. J. Gerald Combs.

10(z)[8]        List of Stock Options held by Jeffrey K. Moore and list of
                   additional consideration or benefits to be provided to him
                   pursuant to the Separation Agreement and General Release,
                   dated as of January 1, 2002, by and between him and the
                   Registrant (including the Registrant's subsidiaries)
                   (constituting Exhibits B and E to such Agreement).

10(aa)[9]       Seventh Amendment, dated as of March 27, 2002, to Second Amended
                   and Restated Credit Agreement and Guaranty with Chase.


                                       47
<PAGE>

Exhibit No.*    Description of Exhibit
------------    ----------------------

10(ab)[10]      Letter Agreement, dated January 27, 2005, from Entrepreneur
                   Growth Capital LLC to Boundless Corporation and its
                   subsidiaries.

10(ac)[10]      Loan and Security Agreement, dated January 27, 2005, by and
                   among Entrepreneur Growth Capital LLC and Boundless
                   Corporation and its subsidiaries.

10(ad)[10]      Corporate Guaranty of All Liability with Collateral, dated
                   January 27, 2005, by Boundless Corporation and its
                   subsidiaries in favor of Entrepreneur Growth Capital LLC.

10(ae)[10]      Certificate of Corporate Resolutions, dated January 27, 2005, of
                   Boundless Corporation, Boundless Acquisition Corp., Boundless
                   Technologies, Inc., and Boundless Manufacturing Services,
                   Inc.

10(af)[10]      Intercreditor and Subordination Agreement, dated January 27,
                   2005, by and between Vision Technologies, Inc. and
                   Entrepreneur Growth Capital.

11**            Statement re Computation of Per Share Earnings. See Consolidated
                   Financial Statements.

21[5]           List of Subsidiaries

31              Section 302 Certification

32              Section 906 Certification

----------

[1]             Incorporated by reference to Registrant's Registration Statement
                on Form S-18 (File No. 33-32396-NY).

[2]             Incorporated by reference to the Registrant's Annual Report on
                Form 10-K for the year ended December 31, 1997.

[3]             Incorporated by reference to the Registrant's Quarterly Report
                on Form 10-Q for the quarter ended March 31, 1999.

[4]             Incorporated by reference to the Registrant's Quarterly Report
                on Form 10-Q for the quarter ended June 30, 1999.

[5]             Incorporated by reference to the Registrant's Annual Report on
                Form 10-K for the year ended December 31, 1999.

[6]             Incorporated by reference to the Registrant's Annual Report on
                Form 10-K for the year ended December 31, 2000.

[7]             Incorporated by reference to the Registrant's Definitive Proxy
                Statement on Form DEF 14A, filed January 31, 2002.


                                       48
<PAGE>

Exhibit No.*    Description of Exhibit
------------    ----------------------

[8]             Incorporated by reference to the Registrant's Report on Form 8-K
                filed January 23, 2002.

[9]             Incorporated by reference to the Registrant's Annual Report on
                Form 10-K for the year ended December 31, 2001.

[10]            Incorporated by reference to the Registrant's Report on Form 8-K
                filed February 2, 2005. Originally filed as exhibits 12.1-12.5

*     Numbers inside brackets indicate documents from which exhibits have been
      incorporated by reference. Unless otherwise indicated, documents
      incorporated by reference refer to the identical exhibit number in the
      original documents from which they are being incorporated.

**    Filed herewith


                                       49
<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Date: April 13, 2006

                                         BOUNDLESS CORPORATION


                                         By:  /s/  John D. Ryan
                                             -----------------------------------
                                             John D. Ryan
                                             Acting Chief Executive Officer

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<S>                      <C>                                          <C>
/s/ John D. Ryan         Acting Chief Executive Officer               April 13, 2006
---------------------
John D. Ryan

/s/ Joseph Gardner       Vice President - Finance, Chief Financial
---------------------    Officer (Principal Accounting Officer)       April 13, 2006
Joseph Gardner

/s/ Richard Bowman       Director                                     April 13, 2006
---------------------
Richard Bowman

/s/ Frank Stephens       Chairman, Board of Directors                 April 13, 2006
---------------------
Frank Stephens
</TABLE>


                                       50
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (Debtor and Debtors-in-Possession)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

Report of Independent Registered Public Accounting Firm                 F-2

Consolidated Balance Sheets as of December 31, 2005 and 2004            F-3

Consolidated Statements of Operations
for the years ended December 31, 2005, 2004 and 2003                    F-4

Consolidated Statements of Changes in Stockholders' Deficit
for the years ended December 31, 2005, 2004 and 2003                    F-5

Consolidated Statements of Cash Flows
for the years ended December 31, 2005, 2004 and 2003                    F-6

Notes to Consolidated Financial Statements                              F-8-22

Schedule II - Valuation and Qualifying Accounts                         S-1


                                      F-1
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
Boundless Corporation (Debtor-in-Possession)
Farmingdale, New York

We have  audited  the  accompanying  consolidated  balance  sheets of  Boundless
Corporation and Subsidiaries (Debtor and  Debtors-in-Possession)  as of December
31, 2005 and 2004 and the related consolidated statements of operations, changes
in stockholders'  deficit and cash flows for each of the years in the three-year
period then ended. We have also audited the schedule of valuation and qualifying
accounts for each of the years ended  December 31,  2005,  2004 and 2003.  These
financial  statements  and  schedule  are the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements and schedule based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements  and schedule are free of material  misstatement.  The Company is not
required  to have,  nor were we engaged  to  perform,  an audit of its  internal
control over financial reporting.  Our audits included consideration of internal
control over financial  reporting as a basis for designing audit procedures that
are appropriate in the  circumstances,  but not for the purpose of expressing an
opinion on the  effectiveness  of the Company's  internal control over financial
reporting.  Accordingly,  we express  no such  opinion.  An audit also  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the financial statements and schedule,  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  consolidated  financial  position  of  Boundless
Corporation and Subsidiaries (Debtor and  Debtors-in-Possession)  as of December
31, 2005 and 2004 and the  consolidated  results of their  operations  and their
cash  flows  for  each of the  years  in the  three-year  period  then  ended in
conformity with accounting principles generally accepted in the United States of
America. Also, in our opinion, the schedule of valuation and qualifying accounts
presents fairly, in all material respects, the information set forth therein.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial  statements,  the Company and its  subsidiaries  filed for  protection
under Chapter 11 of the U.S.  Bankruptcy Code on March 12, 2003. The Company has
suffered  substantial  losses  from  operations  in each of its last six  fiscal
years.  In addition,  as of December 31, 2005,  the Company has a  stockholders'
deficit of $15,006,107 and has a working  capital  deficit of $9,568,  excluding
liabilities and other items subject to compromise of $14,586,204.  These factors
raise  substantial  doubt  about the  Company's  ability to  continue as a going
concern.  Although the Company and its subsidiaries  are currently  operating as
debtors-in-possession  under  the  jurisdiction  of the  Bankruptcy  Court,  the
continuation  of the business as a going  concern is first  contingent  upon the
ability of the Company to confirm a plan of reorganization  under the Bankruptcy
Code and emerge from bankruptcy  protection and then  subsequently,  among other
things:  (1) the ability of the Company to restructure  the terms of its secured
debtors-in-possession financing, thereby reducing its cost of borrowing; (2) the
ability of the Company to negotiate trade financing with suppliers at acceptable
terms; (3) the ability of the Company to negotiate contracts for the sale of its
manufacturing   services  to  customers  to  provide  additional  liquidity  for
operations;  (4) the ability of the Company to generate cash from operations and
to maintain adequate cash on hand; and (5) the ability of the Company to achieve
profitability.  Management's plans in regard to these matters are also described
in Note 1. The accompanying consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.


/s/ BP Audit Group, PLLC

Farmingdale, NY

March 31, 2006


                                      F-2
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (Debtor and Debtors-in-Possession)
                           CONSOLIDATED BALANCE SHEETS
                          At December 31, 2005 and 2004
                                 (in thousands)

<TABLE>
<CAPTION>
ASSETS
                                                               -----------     -----------
                                                                   2005            2004
                                                               -----------     -----------
<S>                                                            <C>             <C>
Current assets:
  Cash and cash equivalents                                    $        14     $       124
  Cash on deposit with lender                                           --             271
  Trade accounts receivable, net                                       657           1,150
  Acounts receivable affiliates                                         92              92
  Other receivables                                                     95             117
  Inventories (Note 3)                                                 870           1,094
  Prepaid expenses and other current assets                            146              59
                                                               -----------     -----------
     Total current assets                                            1,874           2,907
Property and equipment, net (Note 4)                                   130             103
                                                               -----------     -----------
    Total assets                                               $     2,004     $     3,010
                                                               ===========     ===========

LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities not subject to compromise
Current liabilities:
  Current portion of long-term debt                            $       296     $       350
  Accounts payable                                                      50              44
  Accrued salaries                                                      73              86
  Accrued legal fees                                                 1,154           1,029
  Purchase order commitments                                            50             561
  Accrued payroll and sales tax payable                                 28              30
  Accrued warranty                                                      30              18
  Other accrued liabilities (Note 6)                                   203             157
                                                               -----------     -----------
     Total current liabilities                                       1,884           2,275
Long-term liabilities:

  Long-term debt, less current maturities (Note 8)                     450             953
  Deferred credits                                                      90              65
  Items subject to compromise:
  Manditorily redeemable preferred stock (Note 7 & 9)                1,652           1,652
  Liabilities subject to compromise (Note 7)                        12,934          12,970
                                                               -----------     -----------
         Total liabilities                                          17,010          17,915
                                                               -----------     -----------

         COMMITMENTS AND CONTINGENCIES (Notes 1, 12 and 13)

Stockholders' deficit: (Note 9)
  Common stock                                                          67              67
  Additional paid-in capital                                        35,844          35,844
  Accumulated deficit                                              (50,917)        (50,816)
                                                               -----------     -----------
     Total stockholders'  deficit                                  (15,006)        (14,905)
                                                               -----------     -----------
    Total liabilities and stockholders' deficit                $     2,004     $     3,010
                                                               ===========     ===========
</TABLE>

              THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
                        CONSOLIDATED FINANCIAL STATEMENTS


                                      F-3
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (Debtor and Debtors-in-Possession)
                      CONSOLIDATED STATEMENT OF OPERATIONS
              For the Years Ended December 31, 2005, 2004 and 2003
                      (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                             ----------     ----------     ----------
                                                                2005           2004           2003
                                                             ----------     ----------     ----------
<S>                                                          <C>            <C>            <C>
Revenue:
  Product sales                                              $    5,371     $    6,400     $   10,718
  Services                                                          618            909          1,032
                                                             ----------     ----------     ----------
    Total revenue                                                 5,989          7,309         11,750
                                                             ----------     ----------     ----------
Cost of revenue
  Product sales                                                   4,298          5,010         10,165
  Services                                                          243            447            797
                                                             ----------     ----------     ----------
    Total cost of revenue                                         4,541          5,457         10,962
                                                             ----------     ----------     ----------

     Gross margin                                                 1,448          1,852            788
                                                             ----------     ----------     ----------

Operating expenses
  Sales and marketing                                               272            295            610
  General and administrative                                        667            989          2,032
  Research and development                                          208            150            170
  Interest expense (excludes contractual interest of $67,
    $64 and $49 not recognized in 2005, 2004 and 2003)              185            129            804
                                                             ----------     ----------     ----------
                                                                  1,332          1,563          3,616
                                                             ----------     ----------     ----------
                                                                    116            289         (2,828)
Other expense (credits)
  Loss on reimbursement of employee services
    (net of reimbursement of $50 and $255 in
    2005 and 2004)                                                    8             51             --
  Loss on extinguishment of debt                                     --             --            289
  Other credits                                                    (197)          (218)          (193)
                                                             ----------     ----------     ----------
Income (loss) before reorganization items                           305            456         (2,924)

Reorganization items (Note 16)                                     (406)          (484)          (655)
                                                             ----------     ----------     ----------
Net loss                                                           (101)           (28)        (3,579)
  Accretion of preferred stock                                       --             --             99
                                                             ----------     ----------     ----------
Net loss attributable to common stockholders                 $     (101)    $      (28)    $   (3,678)
                                                             ==========     ==========     ==========

Basic and diluted loss per common share                      $    (0.02)    $       --     $    (0.55)
                                                             ==========     ==========     ==========

Basic and diluted weighted average shares outstanding             6,706          6,706          6,706
                                                             ==========     ==========     ==========
</TABLE>

              THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
                       CONSOLIDATED FINANCIAL STATEMENTS


                                      F-4
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (Debtor and Debtors-in-Possession)
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
              For the Years Ended December 31, 2005, 2004 and 2003
                                 (in thousands)

<TABLE>
<CAPTION>
                                     Common Stock           Additional
                              -------------------------       Paid-in    Accumulated
                                 Shares        Amount         Capital       Deficit          Total
                              ----------     ----------     ----------   -----------     ----------
<S>                                <C>       <C>            <C>           <C>            <C>
Balance, January 1, 2003           6,705             67         35,844       (47,110)       (11,199)
Net loss                                                                     (3,579)        (3,579)
Preferred stock accretion                                                       (99)           (99)
                              ----------     ----------     ----------    ----------     ----------
Balance, December 31, 2003         6,705             67         35,844       (50,788)       (14,877)
Net loss                                                                         (28)           (28)
                              ----------     ----------     ----------    ----------     ----------
Balance, December 31, 2004         6,705             67         35,844       (50,816)       (14,905)
Net loss                                                                        (101)          (101)
                              ----------     ----------     ----------    ----------     ----------
Balance, December 31, 2005         6,705     $       67     $   35,844    $  (50,917)    $  (15,006)
                              ==========     ==========     ==========    ==========     ==========
</TABLE>

              THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
                       CONSOLIDATED FINANCIAL STATEMENTS


                                      F-5
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (Debtor and Debtors-in-Possession)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the Years Ended December 31, 2005, 2004 and 2003
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                            2005            2004           2003
                                                                        -----------     -----------     -----------
<S>                                                                     <C>             <C>             <C>
Cash flows from operating activities:
  Income (loss) before reorganization items                                     305             456          (2,924)
  Adjustments to reconcile income (loss) before reorganization
       items to net cash provided by (used in) operating activities:
    Depreciation and amortization                                                 2              43             800
    Write-off of debt financing costs                                            --              --             289
    Gain on the disposition of assets                                            --              --             (44)
    Change in deferred credits                                                   25            (116)            (94)
    Provision (credit) for doubtful accounts                                     56            (117)            104
    Provision (credit) for excess and obsolete inventory                       (175)           (109)          1,169
Changes in assets and liabilities:
  Cash on deposit with lender                                                   271              57            (328)
  Trade accounts receivable                                                     437            (121)          1,357
  Accounts receivable affiliates                                                  0             (92)             --
  Other receivables                                                              22              26             (60)
  Income tax refunds                                                             --              --               4
  Inventories                                                                   399           1,087            (198)
  Other assets                                                                  (87)            120              71
  Accounts payable and accrued expenses                                        (505)           (583)           (763)
                                                                        -----------     -----------     -----------
Net cash provided by (used in) operating activities
  excluding reorganization items                                                750             651            (617)
                                                                        -----------     -----------     -----------
Cash flows from reorganization activities:
  Reorganization expenses                                                      (406)           (484)           (655)
  Gain on disposition of property and equipment                                  --             (23)           (685)
  Proceeds from disposition of property                                          --              23             189
  Increase in liabilities, net                                                  132             273           1,176
                                                                        -----------     -----------     -----------
Net cash provided by (used in) reorganization activities                       (274)           (211)             25
                                                                        -----------     -----------     -----------
Cash flows from investing activities:
  Capital expenditures                                                          (29)            (15)             --
  Proceeds from sale of assets                                                   --              --             117
                                                                        -----------     -----------     -----------
Net cash provided by (used in) investing activities                             (29)            (15)            117
                                                                        -----------     -----------     -----------
Cash flows from financing activities:
  Net borrowings under new DIP/AR financing                                      96              --           1,572
  Repayments of prior DIP debt                                                 (653)           (674)           (728)
                                                                        -----------     -----------     -----------
Net cash provided by (used in) financing activities                            (557)           (674)            844
                                                                        -----------     -----------     -----------
Net increase (decrease) in cash and cash equivalents                           (110)           (249)            369
Cash and cash equivalents at beginning of year                                  124             373               4
                                                                        -----------     -----------     -----------
Cash and cash equivalents at end of year                                $        14     $       124     $       373
                                                                        ===========     ===========     ===========
</TABLE>

              THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
                       CONSOLIDATED FINANCIAL STATEMENTS


                                      F-6
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (Debtor and Debtors-in-Possession)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the Years Ended December 31, 2005, 2004 and 2003
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                          2005         2004         2003
                                                                       ---------    ---------    ---------
<S>                                                                    <C>          <C>          <C>
Non-cash investing and financing transactions:
  Refininancing of DIP debt                                            $     599    $      --    $      --
  Asset sale proceeds paid directly to creditors                              --           --        7,000
  Equipment acquisitions funded through debt                                  --           --           --
  Common stock issued in exchange for debt                                    --           --           --
  Manditorily redeemable prefered stock issued in exchange for debt           --           --           --
Cash paid for:
  Interest                                                                   126           91          123
  Taxes                                                                       --            4           --
</TABLE>

              THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
                        CONSOLIDATED FINANCIAL STATEMENTS


                                      F-7
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (DEBTOR AND DEBTORS-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 (in thousands, except share and per share data)

1. Voluntary Reorganization Under Chapter 11 of the Bankruptcy Code

The Company  voluntarily  petitioned  for relief under  Chapter 11 of the United
States  Bankruptcy Code on March 12, 2003,  (the "Petition  Date") in the United
States Bankruptcy Court for the Eastern District of New York, Central Islip.

The Debtor continues to operate its business as "debtor-in-possession" under the
jurisdiction  of the  Bankruptcy  Court and in  accordance  with the  applicable
provisions of the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure and
applicable court orders.  In general,  as  debtors-in-possession,  the Debtor is
authorized under Chapter 11 to continue to operate as an ongoing  business,  but
may not engage in transactions  outside the ordinary course of business  without
the prior approval of the Bankruptcy Court.

In order to successfully exit Chapter 11, the Company will need to propose,  and
obtain  confirmation by the Bankruptcy Court of, a plan of  reorganization  that
satisfies the requirements of the Bankruptcy Code.

The Company has commenced preliminary negotiations to have one of its inactive,
non-operating subsidiaries become acquired through a "reverse merger" by an
operating company organized in China which desires to become a public company.

If consummated, approximately 10% of the outstanding common stock of the
post-merged company will remain with Boundless, in which case approximately
one-half of that interest will be distributed to the unsecured creditors.

In the event that Boundless Technologies is the subsidiary that is "reverse
merged" then Boundless will transfer approximately 25,000 of the shares it
receives to each of Mr. Stephens and Mr. Bowman, currently directors of the
Company.

Background

Boundless Corporation (the "Company") was incorporated in 1988 under the laws of
the  State  of  Delaware.  The  Company  through  its  subsidiaries,   Boundless
Technologies,   Inc.  ("Boundless  Technologies")  and  Boundless  Manufacturing
Services, Inc. ("Boundless Manufacturing"),  is a provider of text terminals and
manufacturing services.

Boundless  Technologies,  a  wholly-owned  subsidiary,  is engaged in  supplying
computer  terminals for  commercial  use. The Company's  general  strategy is to
provide fast,  easy-to-use,  and  cost-effective  products that enable access to
applications  and data in  commercial  environments,  as well as older  "legacy"
applications, running on mainframes, mid-range, and Unix systems.

Boundless  Technologies  principally  designs,  sells and  supports  (i) desktop
computer display terminals,  which generally do not have graphics  capabilities,
and (ii) other  products  that are used in  multi-user  computing  environments.
Boundless  Technologies offers standard and custom models of its general display
terminals  primarily  to retail,  financial,  telecommunications  and  wholesale
distribution  businesses  requiring  them  for  data  entry  and  point  of sale
activities.

Boundless   Manufacturing   is   pursuing   opportunities   in  the   electronic
manufacturing  services ("EMS")  marketplace.  As of December 31, 2005 and 2004,
the  Company  owned  75% of the  outstanding  shares  of  common  stock  of this
subsidiary.  Services  include  supply chain  optimization,  global  supply base
management,  systems  assembly  and test,  distribution  and  logistics,  repair
centers and end-of-life management. Boundless Manufacturing also offers in-house
engineering expertise- product design, test development and product development-
to significantly  reduce  time-to-market  for original  equipment  manufacturers
("OEM") customers. Boundless Manufacturing provides a complete supply chain that
is designed and built to each customer's specifications. Boundless Manufacturing
also has post-manufacturing support capability in New York and Atlanta.

Financial Statement Presentation.

The  accompanying  consolidated  financial  statements  have  been  prepared  in
accordance with American Institute of Certified Public Accountants' Statement of
Position 90-7 ("SOP 90-7"),  "Financial  Reporting by Entities in Reorganization
Under the Bankruptcy  Code," and on a going-concern  basis,  which  contemplates
continuity of operations,  realization of assets and satisfaction of liabilities
in the ordinary course of business.

SOP 90-7 requires that the financial  statements  for periods  subsequent to the
Chapter 11 filing petition distinguish transactions and events that are directly
associated  with  the  reorganization  from  the  operations  of  the  business.
Accordingly,  revenues,  expenses (including  professional fees), realized gains
and  losses,   and  provisions   for  losses   directly   associated   with  the
reorganization and restructuring of the business are reported  separately in the
financial statements.  The Consolidated Balance Sheet distinguishes pre-petition
liabilities and other items subject to compromise  from both those  pre-petition
liabilities   that  are  not  subject  to  compromise  and  from   post-petition
liabilities.  Liabilities  and other items subject to compromise are reported at
the  amounts  expected  to be  allowed,  even if they may be settled  for lesser
amounts.

In addition, as a result of the Chapter 11 filing, the realization of assets and
satisfaction  of  liabilities,  without  substantial  adjustments  or changes in
ownership,  are  subject  to  uncertainty.  Given  this  uncertainty,  there  is
substantial  doubt about the Company's  ability to continue as a going  concern.
While operating as  debtors-in-possession  under the protection of Chapter 11 of
the Bankruptcy Code and


                                      F-8
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (DEBTOR AND DEBTORS-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

subject to approval of the  Bankruptcy  Court or  otherwise  as permitted in the
ordinary course of business, the Debtors, or some of them, may sell or otherwise
dispose of assets and  liquidate or settle  liabilities  for some amounts  other
than those reflected in the consolidated  financial statements.  Further, a plan
of reorganization could materially change the amounts and classifications in the
historical consolidated financial statements.

   The primary issues management will focus on immediately following
confirmation of the Company's Plan of Reorganization include:

      o     Working with its secured lender on a  restructuring  of the terms of
            the DIP debt which it holds,  thereby reducing the Company's cost of
            borrowing.

      o     Initiating  negotiations with suppliers to secure trade financing of
            working  capital  of  approximately  $1-2  million  under  terms and
            conditions  to be agreed upon.  There can be no assurance  that such
            financing will materialize.

      o     The continual  negotiation of material contracts for the sale of its
            manufacturing  services to customers which management  believes will
            provide  additional  liquidity  for  operations.  There  can  be  no
            assurances that these contracts will materialize.

      o     The ability of the Company to generate cash from  operations  and to
            maintain adequate cash on hand; and

      o     The ability of the Company to achieve profitability.

      The Company believes that positive  operating  cashflows and profitability
will not come from the general  purpose text terminal  marketplace.  The Company
has been and will  continue  to focus on the current  business  from the current
customers in order to provide a reliable cash flow with which to execute  growth
plans. The paths to growth that the Company has developed include:

      1.  Repositioning the Company's business from a text terminal company to a
Point-of-Service/Point-of-Sale  ("POS") technology  company,  and build upon its
historical  success in POS to establish a strong link between the  Company's and
POS'  applications.  A key  activity in support of the POS  initiative  includes
leveraging the Company's existing technology platforms

      2. Gaining  access to a more modern and growing market through new product
offerings  including Web terminals and terminals  utilizing the Linux  operating
system  which  provide  high  security,  high  levels of  productivity  and high
reliability.

      3. Enter the Radio Frequency  Identification  ("RFID") market place with a
high  value-to-cost  offering.  Position  the company as a RFID  provider to POS
integrators and OEMs. RFID  Controllers - read/write RFID modules for both 13.56
mhz and 900 mhz- will be embedded into the Company's technology platforms.

      4. Applying its robust Build-to-Order ("BTO") processes to growth products
and markets.

      There is no  assurance  that the Company will be  successful  in obtaining
confirmation of its Plan of Reorganization. If not, liquidation of the Company's
assets  would most likely  ensue.  If the Company  does emerge from  Chapter 11,
there is no  assurance  that its  operations  will be  profitable  and cash flow
positive;  in the  alternative,  the  scope  of  operations  could  be  severely
curtailed or discontinued entirely. The accompanying financial statements do not
include  any   adjustments   that  might   result  from  the  outcome  of  these
uncertainties.

DIP Financing

During the period from the Petition  Date through and  including  January  2005,
Valtec Capital Corporation ("Valtec").  provided debtor-in-possession  financing
to the Company.  Pursuant to the  Bankruptcy  Court's  Interim  Order entered on
April 17, 2003, the Bankruptcy Court approved: (i) the Company's use of Valtec's
cash collateral ; (ii) direct  borrowings from Valtec of an amount up to $1,500;
and (iii) the Debtor-in-Possession Financing and Security Agreement by and among
Valtec and the Company. See "Cash and Cash Equivalents" below.

On November 30, 2004, the Company filed a motion with the  Bankruptcy  Court for
an  order   authorizing   the  Company  to  (i)  incur   post-petition   secured
indebtedness, and (ii) grant a security interest and priority claims pursuant to
Sections  364(c) and 364(d) of the  Bankruptcy  Code.  On January 27, 2005,  the
Bankruptcy Court approved the order.

On January 31, 2005,  the Company  entered  into an  agreement  with its secured
lender  Valtec  Capital,  LLC,  as assignee of Valtec  Capital  Corporation,  to
terminate its debtor-in-possession ("DIP") financing and to release its liens on
the Company's  personal  property.  At the same time,  the Company  entered into
another secured DIP financing  agreement with Entrepreneur  Growth Capital,  LLC
("EGC")  pursuant  to  which  EGC was  granted  a lien  on all of the  Company's
personal property.


                                      F-9
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (DEBTOR AND DEBTORS-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In  general,  the new  agreement  permits the Company to borrow up to 80% of our
eligible accounts receivable.  Under the agreement,  the annual interest rate is
6% above the Citibank, N.A. prime rate. The Company is required to pay a monthly
service fee equal to three quarters of one percent  (0.75%) of the face value of
invoices  assigned to EGC for the preceding  month.  The agreement,  which had a
term of one year but which was extended for an additional  six months,  requires
minimum monthly interest of  approximately $5 even though actual  borrowings may
result in a lesser interest charge.  The Company is responsible for certain fees
and fees for early termination of the facility.  The maximum  availability under
the agreement is $1,000.

In return for  termination of the prior DIP financing the Company also agreed to
pay  Valtec  Capital a total of $100 for legal  fees they  incurred  during  the
bankruptcy period. This amount is payable to Valtec Capital on the date that the
Plan of Reorganization becomes effective.

2. Summary of Significant Accounting Policies

Principles of Consolidation

Boundless  Corporation is a holding  company whose  principal  subsidiaries  are
Boundless  Technologies,  Inc. and Boundless  Manufacturing  Services,  Inc. The
consolidated   financial   statements   include  the  accounts  of  all  of  the
majority-owned subsidiaries.  Due to the equity deficits in less than 100% owned
subsidiaries, no minority interest is reflected.

All significant  intercompany  transactions  are eliminated.  Certain prior year
amounts,   specifically  the  presentation  of  interest   expense,   have  been
reclassified   to   conform   to  the   current   year's   presentation.   These
reclassifications  had  no  effect  on  the  Company's  income  or  loss  before
reorganization  items,  net loss,  or related  per share  amounts for any period
presented.

Cash and Cash Equivalents

All highly  liquid  investments  with  maturities at purchase of three months or
less are considered cash  equivalents.  The Company had $271 classified as "cash
on deposit with lender" at December 31, 2004,  respectively,  representing  cash
on-hand in a lockbox account under the control of the Company's then lender.

Allowance for Doubtful Accounts

An  allowance  for   uncollectible   trade  receivables  is  provided  based  on
management's  analysis of write-off history,  aging analysis,  and any specific,
known  troubled  accounts.  Periodically  management's  review of this allowance
could  result  in a  reduction  and  corresponding  credit to the  statement  of
operations.  The Company  recorded bad debt  expense of $56 in 2005,  recorded a
credit to bad debt  expense of $117 in 2004,  and  recorded  bad debt expense of
$104 for the year ended December 31, 2003.  The allowance for doubtful  accounts
was $544 and $501 at December 31, 2005 and 2004, respectively.

Inventory

Boundless values inventory at the lower of cost or market, with cost computed on
a first-in, first-out basis.

Property and Equipment

Property  and  equipment  are stated at cost.  Depreciation  is  computed on the
straight-line  method over the estimated  useful lives of the assets.  Leasehold
improvements  are  depreciated  over the shorter of the life of the lease or the
estimated  useful life of the  improvement;  and  machinery  and  equipment  are
depreciated over periods ranging from 2 to 15 years.  Expenditures that increase
the  value or  extend  the  life of an asset  are  capitalized,  while  costs of
maintenance and repairs are expensed as incurred.  Gains or losses upon disposal
of assets are recognized in the statements of operations.

Beginning January 2005 the Company discontinued  recording  depreciation expense
against  machinery  and  equipment as those assets had reached  their  estimated
salvage value. The Company continues to record depreciation  expense against its
leasehold improvements.

Minority Interest

In the absence of a commitment by minority shareholders to fund losses in excess
of their equity, such losses have been attributed to


                                      F-10
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (DEBTOR AND DEBTORS-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the Company.

Fair Value of Financial Instruments

The  carrying  amounts of cash and cash  equivalents,  current  liabilities  and
long-term debt reported on the balance sheets  approximate their fair value. The
Company  estimated  the fair value of long-term  debt by comparing  the carrying
amount  to the  future  cash  flows  of the  instrument,  discounted  using  the
Company's  incremental rate of borrowing for a similar  instrument.  The Company
believes the fair value of liabilities  and other items subject to compromise is
not determinable.

Revenue Recognition

The Company  recognizes revenue from product sales upon shipment to the customer
or  passage  of title and  assumption  of risk.  The  Company  monitors  product
returns,  generally  which are for stock rotation with a coinciding  replacement
order,  and records  provisions  for  estimated  future  returns  and  potential
warranty  liability  at  the  time  revenue  is  recorded.  Service  revenue  is
recognized  when services are performed and billable.  Revenue from  maintenance
and extended  warranty  agreements is deferred and  recognized  ratably over the
term of the agreement.

Supplier Concentration

The Company  purchases  subassemblies  and components for its products from more
than 40  domestic  and Far  East  suppliers.  In 2005  purchases  from  Radiance
Electronics,  Ansen Corporation and Video Display Corporation accounted for 39%,
18%,  and 9%,  respectively,  of the  Company's  total  purchases  of  material.
Purchases  from  Radiance  Electronics,  Ansen  Corporation  and  Video  Display
Corporation,  accounted for approximately 34%, 20% and 9%, respectively,  of the
dollar amount of the Company's total purchases of  subassemblies  and components
in 2004.  Purchases from Radiance  Electronics,  Ansen  Corporation  and Hewlett
Packard,  accounted for  approximately  24%, 20% and 18%,  respectively,  of the
dollar amount of the Company's total purchases of  subassemblies  and components
in 2003.

Concentration of Credit Risk

The  Company is  required  by SFAS No. 105,  "Disclosure  of  Information  about
Financial   Instruments  with   Concentrations  of  Credit  Risk,"  to  disclose
concentrations  of  credit  risk  regardless  of the  degree of such  risk.  The
Company's  financial  instruments that are exposed to  concentrations  of credit
risk  consist  primarily  of  cash  and  cash  equivalents  and  trade  accounts
receivable.  The  Company's  cash policy limits credit  exposure;  however,  for
limited  periods  of time  during  the year bank  balances  may  exceed the FDIC
insurance coverage. The Company routinely assesses the financial strength of its
customers and as a  consequence,  believes that its accounts  receivable  credit
risk exposure is limited. No collateral is required.  The Company extends credit
in the normal  course of business to a number of  distributors  and  value-added
resellers in the computer industry.  The Company had two customers  representing
19% and 11% of revenues,  respectively,  in 2005,  three customers  representing
16%,  14%  and  11%  of  revenues,  respectively,  in  2004,  and  two  customer
representing 32% and 13% of revenues, respectively, in 2003.

Shipping and Handling

The Company  records as revenue all amounts  billed to customers  for  out-bound
shipping and handling. All costs associated with in-bound and out-bound shipping
and handling are included in cost of revenue.

Advertising

Advertising  costs are expensed as incurred.  The amount  charged to advertising
expense was $0, $3 and $12 for the years ended December 31, 2005, 2004 and 2003.

Income Taxes

As more fully  discussed in Note 5, income taxes are provided in accordance with
the liability  method of accounting  for income taxes  pursuant to SFAS No. 109.
Accordingly,  deferred  income  taxes are  recorded  to  reflect  the future tax
consequences of differences  between the tax basis of assets and liabilities and
their  financial  amounts at  year-end.  Deferred  tax assets are  reduced by an
estimated valuation allowance.

Stock Based Compensation

The Company  accounts  for stock  options and  warrants  issued to  employees in
accordance  with APB 25 "Accounting  for Stock Issued to Employees." The Company
follows SFAS No. 123  "Accounting  for Stock Based  Compensation"  for financial
statement   disclosure


                                      F-11
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (DEBTOR AND DEBTORS-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

purposes and  issuances of options and  warrants to  non-employees  for services
rendered.

Net Loss Per Common Share

Net  loss  attributable  to  common  stockholders   includes  the  accretion  of
mandatorily redeemable preferred stock in 2003.

Pervasiveness of 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  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 those  estimates.  Material  reductions  in
estimated valuation  allowances related to accounts receivable and inventory are
reported as "other credits" in the statement of operations.

New Accounting Pronouncements

In March 2005, the FASB issued FASB Interpretation (FIN) No. 47, "Accounting for
Conditional  Asset Retirement  Obligations,  an interpretation of FASB Statement
No. 143". FIN No. 47 clarifies that  conditional  asset  retirement  obligations
meet the  definition of  liabilities  and should be recognized  when incurred if
their fair values can be reasonably  estimated.  The Interpretation is effective
no later than December 31, 2005. The cumulative effect of initially applying the
Interpretation  will be  recognized  as a change in  accounting  principle.  The
Company  does not  believe  that FIN No. 47 will have a  material  effect on its
consolidated financial statements.

In June  2005,  the FASB  issued  FASB  Staff  Position  (FSP)  No.  FAS  143-1,
"Accounting for Electronic  Equipment Waste Obligations," that provides guidance
on how commercial  users and producers of electronic  equipment should recognize
and measure asset retirement  obligations associated with the European Directive
2002/96/EC on Waste Electrical and Electronic  Equipment (the  "Directive").  In
the second quarter of 2005, the company  adopted FSP FAS 143-1 in those European
Union (EU) member countries that transposed the Directive into  country-specific
laws. In the third quarter of 2005, the company adopted FSP FAS 143-1 in several
additional EU-member countries that enacted country-specific laws in the current
reporting  period.  The  adoption of the FSP in the second and third  quarter of
2005 did not have a  material  effect on the  company's  consolidated  financial
statements.  As of the end of the current quarter, the majority of the EU-member
countries have transposed the Directive into  country-specific  laws. The effect
of applying FSP FAS 143-1 in the  remaining  countries in future  periods is not
expected  to have a  material  effect on the  company's  consolidated  financial
statements.

In the third quarter of 2005,  the company  adopted SFAS No. 153,  "Exchanges of
Nonmonetary  Assets,  an amendment of APB Opinion No. 29." SFAS No. 153 requires
that  exchanges of productive  assets be accounted for at fair value unless fair
value  cannot be  reasonably  determined  or the  transaction  lacks  commercial
substance.  The  adoption of SFAS No. 153 did not have a material  effect on the
company's consolidated financial statements.

In June 2005,  the FASB  issued  SFAS No.  154,  "Accounting  Changes  and Error
Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3." SFAS
No. 154 will become  effective for accounting  changes and corrections of errors
made in fiscal year 2006.  The  adoption of this  statement  is not  expected to
effect the company's consolidated financial statements.

3. Inventories

Inventories are stated at the lower of cost or market with costs determined on a
first-in  first-out basis. On a periodic basis the Company reviews quantities on
hand and on order and  records a  provision  for excess and  obsolete  inventory
based on forecasted  demand.  Should this analysis  indicate that the demand for
product has increased from previous estimates,  a decrease in the reserves would
be affected through a credit to the statement of operations.  For the year ended
December 31, 2005 the Company  recorded a credit of $175 for excess and obsolete
inventory. For the year ended December 31, 2004 the Company recorded a credit of
$109 for excess and  obsolete  inventory as compared to a provision of $1,169 in
2003.

The major components of inventories are as follows:


                                      F-12
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (DEBTOR AND DEBTORS-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                                    December 31,    December 31,
                                                    ------------    ------------
                                                        2005            2004
                                                    -----------     -----------
Raw materials and purchased components              $     1,004     $     1,584
Finished goods                                              169             126
Manufacturing inventory reserves                           (618)           (935)
Service parts                                               315             319
                                                    -----------     -----------
                                                    $       870     $     1,094
                                                    ===========     ===========

4. Property and Equipment

Property and equipment consists of the following:

                                                    December 31,    December 31,
                                                    ------------    ------------
                                                        2005            2004
                                                    -----------     -----------
Leasehold improvements                              $        17     $        14
Machinery and equipment                                   6,531           6,505
                                                    -----------     -----------
                                                          6,548           6,519
Less accumulated depreciation and amortization            6,418           6,416
                                                    -----------     -----------
                                                    $       130     $       103
                                                    ===========     ===========

Depreciation  expense for the years ending  December 31, 2005, 2004 and 2003 was
$3, $43 and $752,  respectively.  The Company  recorded  repairs and maintenance
expenses  of $3, $13 and $26 for the years ended  December  31,  2005,  2004 and
2003.

5. Income Taxes


                                      F-13
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (DEBTOR AND DEBTORS-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      Due to the reported net losses,  there were no  provisions  for current or
deferred  federal or state income  taxes for the years ended  December 31, 2005,
2004 or 2003.

The benefit from income taxes differs from the amount of income tax determined
by applying the statutory federal income tax rate to continuing operations
before income taxes as a result of the following:

<TABLE>
<CAPTION>
                                                -----------     -----------     -----------
                                                    2005            2004            2003
                                                -----------     -----------     -----------
<S>                                             <C>             <C>             <C>
Federal income tax benefit at statutory rate    $       (34)    $       (10)    $    (1,217)
Losses not producing tax benefits                        34              10           1,217
                                                -----------     -----------     -----------
  Income tax benefit                            $        --     $        --     $        --
                                                ===========     ===========     ===========
</TABLE>

The Company has provided a valuation  allowance  against the total amount of the
net deferred tax assets due to the uncertainty of future realization.

The components of the net deferred tax assets and liabilities were as follows:

                                                    -----------     -----------
                                                        2005            2004
                                                    -----------     -----------
Current deferred tax assets:
  Inventory                                         $       642     $       702
  Accounts receivable                                       278             259
  Warranties                                                 83              79
  Other deferred tax assets                                 679             679
  Less valuation allowance                               (1,682)         (1,719)
                                                    -----------     -----------
    Total current deferred tax assets               $        --     $        --
                                                    ===========     ===========

Non-current other deferred tax assets               $       828     $       828
Non-current deferred tax liabilities- property
   and equipment                                           (758)           (675)
Net operating loss carryforwards                         16,110          15,955
Less valuation allowance                                (16,180)        (16,108)
                                                    -----------     -----------
    Net non-current deferred tax assets             $        --     $        --
                                                    ===========     ===========

The increase (decrease) in the valuation allowance for deferred tax assets for
the years ending December 31 was as follows:

                                                    -----------     -----------
                                                        2005            2004
                                                    -----------     -----------
Current deferred tax asset valuation allowance      $       (37)    $      (125)
Long-term deferred tax asset valuation allowance             72             135
                                                    -----------     -----------
                                                    $        35     $        10
                                                    ===========     ===========


                                      F-14
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (DEBTOR AND DEBTORS-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. Other accrued liabilities

      At December 31, 2005 and 2004 other accrued  liabilities  consisted of the
following:

                                                     -----------    -----------
                                                         2005           2004
                                                     -----------    -----------
Accrued interest expense                             $       152    $       100
Accrued audit expense                                         10              1
Other accrued expenses                                        41             56
                                                     -----------    -----------
                                                     $       203    $       157
                                                     ===========    ===========

7. Liabilities and Other Items Subject to Compromise

Liabilities and other items subject to compromise refers to liabilities incurred
and the issuance of preferred stock prior to the  commencement of the Chapter 11
Cases.  These amounts  represent  the  Company's  estimate of known or potential
pre-petition claims to be resolved in connection with the Chapter 11 Cases. Such
claims  remain  subject  to future  adjustments.  Adjustments  may  result  from
negotiations, actions of the Bankruptcy Court, the determination as to the value
of any  collateral  securing  claims,  proofs  of claim or other  events.  It is
anticipated  that such  adjustments  may be  material.  Payment  terms for these
amounts will be established in connection with the Chapter 11 Cases.

At December  31, 2005 and 2004,  the  Company  had  liabilities  and other items
subject to compromise of  approximately  $14,586 and $14,622 which  consisted of
the following:

                                                    December 31,    December 31,
                                                    ------------   ------------
                                                        2005           2004
                                                    ------------   ------------
Liabilities:
Accounts payable                                    $     10,912   $     10,948
Convertible notes payable, principally related to
  prior separation agreements                                965            965
Accrued salaries                                             397            397
Accrued warranty                                             222            222
Capital lease obligations                                    438            438
                                                    ------------   ------------
                                                          12,934         12,970
Other:
Manditorily redeemable preferred stock                     1,652          1,652
                                                    ------------   ------------
                                                    $     14,586   $     14,622
                                                    ============   ============

      The mandatorily  redeemable  preferred stock is convertible into shares of
common stock of the Company at a conversion  price of $3 per share.  The Plan of
Reorganization  contemplates that all equity  instruments of the Company will be
cancelled on the Effective  Date. As a result,  the  conversion of the preferred
stock to  shares of common  stock is  doubtful  and  therefore  the  mandatorily
preferred stock is included with other items subject to compromise.

      The  preferred   stock  was  issued  in  connection  with  the  2002  debt
restructuring  in the face amount of $4,365 and was  recorded  at its  estimated
fair value $1,406.  Assuming none of the holders of the Preferred  Stock convert
to Common  Stock of  Boundless  Corporation,  the  Company  would be required to
record a  charge  to  earnings  available  to  stockholders  over  the  ten-year
redemption period such that the carrying value of the Preferred Stock equals its
face value at the time of redemption.  Pre-petition,  the difference between the
carrying value of the preferred  stock and its face value was being treated as a
dividend  and charged to earnings  available to  stockholders  over the ten-year
redemption period unless conversion  occurs, in which case accretion  terminates
at  that  point.  As a  result  of  the  bankruptcy,  during  2003  the  Company
discontinued accreting to earnings the difference between the carrying value and
face amount of the  preferred  stock.  The  aggregate  accretion  at the time of
discontinuance was $247.


                                      F-15
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (DEBTOR AND DEBTORS-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

      If all of such Preferred  Stock,  including the Preferred  Stock which the
Company is required to issue to the lenders, are converted, the Company would be
required to issue approximately 1,455,073 shares of its common stock, subject to
adjustment.  As part of the Company's  Plan of  Reorganization,  which  requires
Bankruptcy Court approval, it is contemplated that the shares issuable under the
Preferred  Stock  will be  cancelled.  The  carrying  value  of the  mandatorily
redeemable  stock is included in other items  subject to  compromise at December
31, 2005 and 2004.

      As of the Petition Date, and absent further order of the Bankruptcy Court,
no party,  subject to certain exceptions,  may take any action, again subject to
certain exceptions, to recover on pre-petition claims.. The Company has rejected
pre-petition  executory contracts and unexpired lease obligations,  and they are
included with liabilities  subject to compromise.  The parties affected by these
rejections  may file claims with the Bankruptcy  Court.  At this time, it is not
possible  to predict  the outcome of the Chapter 11 process or its effect on the
Company's business.

      The  Company's  statement of operations  for the years ended  December 31,
2005,  2004  and  2003  do not  include  interest  expense  on debt  subject  to
compromise subsequent to the Petition Date. If the Company had reported interest
on the basis of the amounts it was  contractually  required  to pay,  additional
interest  expense of $67, $64 and $49 would have been recorded in 2005, 2004 and
2003, respectively.

8. Debt

Long-term  debt, as described in Note 1, consisted at December 31, 2005 and 2004
of the following:

<TABLE>
<CAPTION>
                                                                       ----------    ----------
                                                                          2005          2004
                                                                       ----------    ----------
<S>                                                                    <C>           <C>
Note payable toValtec Capital Corporation, bearing interest at
  8%, collateralized by receivables, inventory and equipment           $       --    $      653
Notes payable toVision Technologies, Inc., bearing interest at
  8%, payable  in 36 equal monthly installments, commencing the
  month following payment in full of the Valtec Capital note
  collateralized by receivables, inventory and equipment,
  subordinate to Valtec Capital and Entrepreneur Growth Capital               650           650
Revolving loan payable to Entrepreneur Growth Capital, bearing
  interest at the prime rate plus 6%, collateralized by receivables
  inventory and equipment, due July 2006                                       96
                                                                       ----------    ----------
                                                                       $      746    $    1,303
Less current maturities on long-term debt                                     296           350
                                                                       ----------    ----------
                                                                       $      450    $      953
                                                                       ==========    ==========
</TABLE>

The aggregate debt schedule maturities is as follows:

2006                                       $      296
2007                                              216
2008                                              234
2009
2010
                                           ----------
                                           $      746
                                           ==========

As part of the Plan of  Reorganization,  the Company is proposing  that the note
payable to Vision  Technologies,  Inc.,  including accrued interest thereon,  be
exchanged for equity in the Reorganized Debtor.  Accordingly,  payments have not
commenced even though the Valtec debt has been extinguished.

9. Equity

At December 31, 2005 and 2004, stockholders' deficit consisted of the following:


                                      F-16
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (DEBTOR AND DEBTORS-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                           2005           2004
                                                        ----------     ----------
<S>                                                     <C>            <C>
Preferred stock, $0.01 par value, 1,000,000 shares
  authorized, none issued                               $       --     $       --
Common stock, $0.01 par value, 25,000,000 shares
  authorized,6,705,613 shares issued and outstanding            67             67
Additional paid-in capital                                  35,844         35,844
Accumulated deficit                                        (50,917)       (50,816)
                                                        ----------     ----------
     Total stockholders' deficit                        $  (15,006)    $  (14,905)
                                                        ==========     ==========
</TABLE>

      In  2002,  the  Company  sold  to  nine  individuals   267,367  shares  of
unregistered  Common  Stock of the Company for proceeds of $162.  In  connection
with this sale, the Company  granted to these  individuals  warrants to purchase
267,367 shares of the Company's  Common Stock.  The warrants are  exercisable at
between  $0.47  and $0.70  per  share of  Common  Stock and  expire on the fifth
anniversary from the date of issuance.

10. Options and Warrants

The Company believes its presently  outstanding  equity  securities will have no
value and it is expected that those  securities  will be canceled under any plan
of reorganization.

In 1997 the Board adopted the 1997 Incentive  Plan. The maximum number of shares
to be issued  under the 1997  Incentive  Plan is not to  exceed  1,000,000.  The
exercise  price of each  option  granted is to be equal to or  greater  than the
market  price of the  Company's  stock on the date of  grant.  The  terms of the
options are generally  over five years with vesting  occurring in 25% increments
beginning  one year after the grant date. In December 2000 the Board created the
2000  Incentive  Plan that covers up to 1,000,000  shares of Common  Stock.  The
number of shares  granted on a calendar year basis under the 2000 Incentive Plan
is limited to 5% of the total number of shares of Common Stock  outstanding,  or
10% in any five-year period.

The Company has  elected to  continue  to account  for stock  options  issued to
employees in accordance with APB 25, "Accounting for Stock Issued to Employees".

The  Company  follows  the  disclosure   requirements  of  FASB  Statement  123,
"Accounting for Stock-Based  Compensation".  This statement requires the Company
to provide pro forma  information  regarding net income and net income per share
as if  compensation  cost for the Company's  employee stock options  granted had
been  determined  in accordance  with the fair value based method  prescribed in
SFAS No. 123. The Company  estimates  the fair value of each stock option at the
grant  date by using the  Black-Scholes  option  pricing  model.  No  options or
warrants were granted in 2005, 2004 or 2003.


                                      F-17
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (DEBTOR AND DEBTORS-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Under the accounting  provisions of SFAS No. 123, the effective  options granted
prior to 2003 on the  Company's  net loss and net loss per share would have been
equal to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                            ----------     ----------     ----------
                                                2005           2004          2003
                                            ----------     ----------     ----------
<S>                                         <C>            <C>            <C>
Net loss
  As reported                               $     (101)    $      (28)    $   (3,579)
  Under SFAS No. 123                              (104)           (28)        (3,696)

Net loss per share
  As reported - basic and diluted           $    (0.02)    $    (0.00)    $    (0.55)
  Under SFAS No. 123 - basic and diluted         (0.02)         (0.00)         (0.55)
</TABLE>

A summary of the status of the Company's stock options and warrants  outstanding
as of December 31, 2005 and 2004,  and changes  during the years ending on those
dates is as follows:

<TABLE>
<CAPTION>
                                         --------------------------     ---------------------------
Options -Boundless Corporation                      2005                           2004
                                         --------------------------     ---------------------------
                                                         Weighted                         Weighted
                                                         Average                          Average
                                                         Exercise                         Exercise
                                            Shares         Price           Shares           Price
                                         -----------    -----------     -----------     -----------
<S>                                        <C>          <C>               <C>           <C>
Outstanding at beginning of year           1,405,450    $      2.74       1,992,715     $      2.50
  Granted                                         --             --              --              --
  Exercised                                       --             --              --              --
  Forfeited                                 (142,800)         (1.38)       (587,265)          (1.94)
                                         -----------    -----------     -----------     -----------
Outstanding at end of year                 1,262,650    $      2.89       1,405,450     $      2.74
                                         ===========    ===========     ===========     ===========
Options exercisable at end of year         1,250,898    $      2.91       1,362,032     $      2.81
                                         ===========    ===========     ===========     ===========
Weighted average fair value
  of options granted during the year                            N/A                             N/A
                                                        ===========                     ===========

<CAPTION>
                                         --------------------------     ---------------------------
Warrants- Boundless Corporation                     2005                           2004
                                         --------------------------     ---------------------------
                                                         Weighted                         Weighted
                                                         Average                          Average
                                                         Exercise                         Exercise
                                            Shares         Price           Shares           Price
                                         -----------    -----------     -----------     -----------
<S>                                        <C>          <C>               <C>           <C>
Outstanding at beginning of year           1,083,558    $      1.86       1,463,560     $      3.27
  Granted                                         --             --              --              --
  Exercised                                       --             --              --              --
  Forfeited                                 (227,500)         (5.63)       (380,002)          (7.30)
                                         -----------    -----------     -----------     -----------
Outstanding at end of year                   856,058    $      0.85       1,083,558     $      1.86
                                         ===========    ===========     ===========     ===========
Warrants exercisable at end of year          856,058    $      0.85       1,083,558     $      1.86
                                         ===========    ===========     ===========     ===========
Weighted average fair value
  of warrants granted during the year                           N/A                             N/A
                                                        ===========                     ===========
</TABLE>

The following table summarizes information about fixed stock options and
warrants outstanding at December 31, 2005:


                                      F-18
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (DEBTOR AND DEBTORS-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                     Weighted
                                        Number        Weighted       Average         Number
                                     Outstanding      Average       Remaining     Exercisable
                                     at December      Exercise     Contractual    at December
      Options - Boundless Corp.        31, 2005         Price      Life (Years)     31, 2005
                                     -----------     ----------    -----------    -----------
<S>                                    <C>           <C>                  <C>       <C>
                                         187,900     $     0.45           1.83        176,148
                                         215,000           1.03           0.81        215,000
                                         148,000           1.05           1.14        148,000
                                         100,000           1.50           1.00        100,000
                                          26,750           2.60           0.15         26,750
                                         130,000           4.50           1.00        130,000
                                         150,000           4.88           1.00        150,000
                                         100,000           5.00           1.00        100,000
                                         205,000           5.62           1.00        205,000
                                      ----------     ----------     ----------     ----------
                                       1,262,650     $     2.89           1.09      1,250,898
                                      ==========     ==========     ==========     ==========

<CAPTION>
                                                                     Weighted
                                        Number        Weighted       Average         Number
                                     Outstanding      Average       Remaining     Exercisable
                                     at December      Exercise     Contractual    at December
      Warrants - Boundless Corp.       31, 2005         Price      Life (Years)     31, 2005
                                     -----------     ----------    -----------    -----------
<S>                                    <C>           <C>                  <C>       <C>
                                         400,000     $     0.36           1.92        400,000
                                          95,632           0.63           1.52         95,632
                                          76,798           0.67           1.51         76,798
                                          94,938           0.70           1.52         94,938
                                          50,001           1.10           0.49         50,001
                                           1,737           1.26           0.43          1,737
                                          62,672           1.30           0.42         62,672
                                           6,946           1.33           0.43          6,946
                                          20,834           1.36           0.41         20,834
                                          46,500           5.00           0.01         46,500
                                      ----------     ----------     ----------     ----------
                                         856,058     $     0.85           1.45        856,058
                                      ==========     ==========     ==========     ==========
</TABLE>

In accordance  with SFAS No. 123, the Company is required to account for options
issued to non-employees  for services  rendered using the fair value method over
their vesting period.

Due to the expected  cancellation  of all of the  Company's  outstanding  equity
securities, including the mandatorily redeemable Preferred Stock, as a result of
the  Chapter 11  proceedings,  none of the  outstanding  warrants  or options is
believed to have any economic or dilutive effect on the Company's finances.

11. Related Party Transactions

Net revenue from EMS  activities,  primarily  logistics  services sold to Unique
Co-operative  Solutions,  Inc. ("UCSI"), was $23 for the year ended December 31,
2005. Net revenue from UCSI during 2004 was $240 and immaterial in 2003. UCSI is
wholly owned by


                                      F-19
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (DEBTOR AND DEBTORS-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Mr. Oscar Smith,  who also is the majority  shareholder of Vision  Technologies,
Inc. ("Vision"). The Company's Plan of Reorganization,  assuming approval by the
Bankruptcy  Court,  contemplates  the issuance to Vision of new shares of common
stock,  representing  100% of the new shares issued, in full satisfaction of the
Vision note  payable and accrued  interest  thereon.  Mr. Smith  currently  owns
approximately 15% of the outstanding common stock of the Company.

Beginning in the first quarter of 2004, the Company outsourced certain employees
to UCSI. For the year ended December 31, 2004,  these costs were estimated to be
$306 for which the Company  charged  UCSI $255.  The $255 charged by the Company
was less than the  estimated  personnel  and  personnel  related  expenses.  The
resulting  loss of $51 is reported in the statement of  operations.  The Company
discontinued the arrangement with UCSI in May 2005. From January 1, 2005 through
May 31, 2005 the Company charged UCSI $50 and incurred  estimated  personnel and
personnel  related  expenses of $58. The resulting loss of $8 is reported in the
statement of operations.

12. Commitments

Leases

The Company leases certain  manufacturing,  sales and administrative  facilities
and office equipment under operating lease  agreements,  which expire at various
times through February 2009.

Total rent expense was $261 and $336 in 2005 and 2004, respectively.

Future minimum rental commitments as of December 31, 2005 were as follows:

2006                   $       228
2007                           235
2008                           242
2009                            41
                       -----------
                       $       746
                       ===========

13. Contingencies

The Company is subject to lawsuits and claims that arose in the normal course of
business.  Management is of the opinion that all such matters are without merit,
or are of such kind,  or involve such  amounts,  as would not have a significant
effect on the  financial  position,  results of  operations or cash flows of the
Company if disposed unfavorably.

14. Segment Reporting and Geographic Information

Operating  segments are  identified as  components of an enterprise  about which
separate  financial  information  is available  for  evaluation  by its decision
making  group.  For 2002,  the Company  had two  reportable  segments.  With the
Company's restructuring in conjunction with Chapter 11 filing on March 12, 2003,
the business segment reporting ceased.

The Company's  manufacturing is conducted at its New York facility and its sales
force  operates  from three  geographically  dispersed  locations  in the United
States and United Kingdom.

Foreign sales were  approximately  $1,527,  $1,929 and $3,473 for 2005, 2004 and
2003,  respectively.  The following  table shows the  approximate  percentage of
total revenue  attributable to export sales to the regions described for each of
the years ended December 31:

                                       ----------     ----------     ----------
                                          2005           2004            2003
                                       ----------     ----------     ----------
Western Europe                                 24%            21%            25%
Other European countries                        0%             1%             0%
Other foreign countries                         2%             5%             4%
                                       ----------     ----------     ----------
     Total                                     26%            27%            29%
                                       ==========     ==========     ==========


                                      F-20
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (DEBTOR AND DEBTORS-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

All significant long-lived assets of the Company are in the United States.

15. Defined Contribution Plan

Concurrent  with its filing for protection  under Chapter 11, the Company ceased
providing a 401(k) retirement savings plan (the "401(k) Plan") for its full-time
employees. Effective March 1, 2002, the Company had terminated its contributions
to the 401(k) plan, with only employee contributions remaining. During 2003, the
Company discontinued employee contributions.

16. Reorganization Expenses

Reorganization  expenses for the years ended  December  31, 2005,  2004 and 2003
were as follows:

<TABLE>
<CAPTION>
                                                        2005          2004           2003
                                                     ----------    ----------     ----------
<S>                                                  <C>           <C>            <C>
Professional fees                                    $      300    $      298     $    1,266
United States District Court fees                            30            25             32
Facility relocation expenses                                 37           184             42
Other expenses                                               39            --             --
Gain on the disposition of building and equipment            --           (23)          (685)
                                                     ----------    ----------     ----------
                                                     $      406    $      484     $      655
                                                     ==========    ==========     ==========
</TABLE>

      On or about September 17, 2003, pursuant to that certain Purchase and Sale
Agreement  by and  among  the  Company,  Independence  Community  Bank  ("ICB"),
JPMorgan  Chase and 100 Marcus LLC,  the Company  agreed to transfer  all of its
right, title and interest in and to 100 Marcus Boulevard,  Hauppauge,  New York,
which had served as the Company's main operating facility (the "Premises").  ICB
and JPMorgan Chase held mortgages on the Premises and  participated  in the sale
transaction.  The Company  successfully  negotiated a sale of the Premises which
provided for: (i) satisfaction of all liens and encumbrances of ICB and JPMorgan
Chase;  (ii) payment of all  outstanding  real estate tax  obligations  from the
proceeds of the sale;  (iii) the Company's use of 15,000 square feet, rent free,
for a period  of one (1) year  post-closing;  (iv)  the  payment  of $250 to the
Company and (v) ICB and JP Morgan Chase retaining  unsecured  claims against the
Company for the difference  between the Company's  Obligations to such banks and
the amount of the proceeds of the sale of the Premises remitted to such bank. As
a result,  such banks have  pre-petition  unsecured  claims  against the Company
aggregating  approximately  $2,271. The Company recognized a gain on the sale of
the  building  and other  miscellaneous  assets  of $685;  which  gain  includes
approximately  $150,  representing  the fair market rental value of the premises
for the one-year rent-free period.

17. Selected Quarterly Financial Data - (unaudited)

Provided below is the selected unaudited  quarterly financial data from 2005 and
2004.


                                      F-21
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (DEBTOR AND DEBTORS-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                        For the three months ended
                                                        December 31,  September 30,      June 30,        March 31,
                                                        ------------  -------------    -----------     -----------
                                                            2005          2005             2005           2005
                                                        -----------    -----------     -----------     -----------
<S>                                                     <C>            <C>             <C>             <C>
Net revenue                                             $     1,427    $     1,411     $     1,536     $     1,615
Cost of product sold and services                             1,095          1,055           1,192           1,199
Gross margin                                                    332            356             344             416
Net income (loss)                                       $        70    $      (101)    $       (50)    $       (20)

Per share amounts:
Basic and diluted net income (loss) per common share    $      0.01    $     (0.02)    $     (0.01)    $     (0.00)

<CAPTION>
                                                                        For the three months ended
                                                        December 31,  September 30,      June 30,        March 31,
                                                        ------------  -------------    -----------     -----------
                                                            2004           2004            2004            2004
                                                        -----------    -----------     -----------     -----------
<S>                                                     <C>            <C>             <C>             <C>
Net revenue                                             $     1,903    $     1,412     $     1,811     $     2,183
Cost of product sold and services                             1,471          1,077           1,370           1,539
Gross margin                                                    432            335             441             644
Net income (loss)                                       $        85    $       (13)    $      (111)    $        11

Per share amounts:
Basic and diluted net income (loss) per common share    $      0.01    $     (0.00)    $     (0.02)    $      0.00
</TABLE>

18. Subsequent Events

On January 31, 2006, the Company  extended its expiring DIP financing  agreement
with EGC for six months. Terms of the new agreement are substantially similar to
the expiring  agreement,  except that the minimum monthly interest payable under
the agreement is reduced to $5 per month from $8 per month.


                                      F-22
<PAGE>

                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                       (DEBTOR AND DEBTORS-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                        For the Years Ended December 31,
                                     (In thousands)

<TABLE>
<CAPTION>
                                        Balance at                                       Balance
                                        Beginning                                         at End
          Description                   of Period      Additions       Deductions       of Period
--------------------------------       ------------   -----------     ------------      ----------
<S>                                     <C>             <C>             <C>               <C>
Allowances:
Doubtful accounts:
         2005                           $     501       $    56         $    13           $    544
         2004                                 623          (117)              5 (A)            501
         2003                                 763           104             244 (A)            623
Manufacturing inventory reserves:
         2005                                 935          (175)            142                618
         2004                               1,242          (109)            198 (B)            935
         2003                                 789         1,169             716 (B)          1,242
</TABLE>

(A)   Includes accounts written off during the period.

(B)   Includes inventory written off during the period.


                                       S-1