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, 1997

                         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.)

    100 Marcus Blvd. Hauppauge, NY                                11788p Code)
(Address of principal executive offices)                           (Zip Code)

       Registrant's telephone number, including area code: (516) 342-7400

           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. [ ]

             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 March 4,
                              1998, is $22,522,042.

       As of March 4, 1998, the registrant had 5,139,228 shares of Common
                  Stock, $.01 par value per share, outstanding.

                 -----------------------------------------------
<PAGE>
                                     PART I

ITEM 1.  BUSINESS
         --------

General

         Boundless  Corporation,  formerly  known as SunRiver  Corporation  (the
"Company"),  is engaged,  through its subsidiary,  Boundless Technologies,  Inc.
("Boundless"),  in designing and manufacturing  computer  terminals for business
use. The Company's  general  strategy is to provide highly  efficient,  low cost
access to corporate computing environments, including client/server, mainframes,
LANS, WANS, intranets and the Internet.

         The  1997  fiscal  year has been  one of  turnaround  for the  Company.
Leveraging  the changes  and  internal  restructuring  undertaken  in 1996,  the
Company  recorded  quarterly  and  full-year  profits in 1997.  During  1997 the
Company  released  the  second  generation  of  its   Windows-based   terminals,
participated in a number of important  tradeshows  showcasing this new computing
environment,  and forged important  technological and marketing  partnerships to
strengthen its position in the emerging network  computing  market.  Also during
1997, the Company finalized the  discontinuation  of the operations of TradeWave
Corporation, renamed OTW Corporation ("OTW"), with the sale of certain assets to
Florida-based  CyberGuard  Corporation  for a combination  of cash, a royalty on
future revenues and the assumption of certain liabilities.

     Boundless principally designs, assembles, sells and supports (i) ANSI/ASCII
desktop  computer  display  terminals,  which  generally  do not  have  graphics
capabilities, although some have limited graphics capabilities ("General Display
Terminals");  (ii) desktop display terminals that are significantly  smaller and
have less processing  power and memory than a general purpose PC but that enable
simple,  easy and  cost-effective  access to  corporate  computing  environments
("Windows(R) - based  Terminals"),  and software  supporting  Windows(R) - based
Terminals;  and  (iii)  other  terminal  products  that are used in  multi-user,
personal   computer   and   mini-computer-based    environments   ("MultiConsole
Terminals").  The  Company  is a  limited  partner  in a  partnership  (the "GAI
Partnership")  formed by  Boundless  and  General  Automation,  Inc.  ("GA") and
managed by GA.  The GAI  Partnership  designs,  integrates,  sells and  supports
multi-user  computer  systems  that can manage  large  volumes  of data  running
Boundless' and GA's versions of a data-based  system  licensed from Pick Systems
("Pick").

         The  Company  entered  into  the  General  Display  Terminal  and  high
resolution,  high  performance  desktop  graphics  display  terminals  ("Network
Graphics  Displays")  businesses  in December  1994 when the  Company  purchased
Applied  Digital Data  Systems,  Inc.  ("ADDS")  from NCR  Corporation  ("NCR"),
formerly   AT&T   Global   Information   Solutions   Company   (the   "Boundless
Acquisition").  ADDS changed its name to SunRiver  Data  Systems,  Inc.  and, in
1996, to Boundless  Technologies,  Inc. For more than 25 years,  ADDS had been a
supplier of general purpose desktop display terminals worldwide under either the
customer's or ADDS(R) trademark.  Simultaneously, with the Company's acquisition
of ADDS, the Company  acquired all of the assets and business of SunRiver Group,
Inc. (the "SunRiver Group  Acquisition").  Prior thereto,  SunRiver Group,  Inc.
("SunRiver  Group")  had  been  engaged,  for  more  than  nine  years,  in  the
development and manufacture of software and hardware for MultiConsole Terminals.
SunRiver  Group,  subsequently  renamed  Morgan Kent Group,  Inc.  ("Morgan Kent
Group"), was a pioneer in the development of high-speed  MultiConsole  Terminals
for open system, multi-user platforms.

         In October  1995,  Boundless  acquired  assets  relating to the General
Display  Terminal  products of Digital  Equipment  Corporation  ("Digital") sold
under the VT(R) and Dorio(R)  brands,  excluding the VT 400 Series (the "Digital
Acquisition").  As no  manufacturing  facilities  were  included  in the Digital
Acquisition,  Boundless  has  transferred  all  production  of the VT and  Dorio
product lines from Digital's  facilities in the Far East to Boundless'  plant in
Hauppauge, New York.

         Based on independent  research results, the Company's share of the 1996
General Display Terminal market worldwide,  in the U.S., and in Europe increased
to 36%, 34% and 43%, respectively.  As a result, the Company believes it has the
second  largest  market share  worldwide and in the U.S., and the largest market
share in  Europe,  of General  Display  Terminals.  The  Company  believes  that
Boundless is the second largest manufacturer of General Display Terminals in the
world with an installed user base of more than 5,000,000 units.

<PAGE>
     Boundless  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.  Standard  and custom  model  Windows(R)-based  Terminals  are being
marketed  by  Boundless  primarily  to  telecommunications,  retail,  financial,
general services, healthcare and transportation businesses with light processing
requirements  and the need to provide  concurrent  information to customers on a
variety of topics,  such as billing  and  current  and  historical  product  and
service   information.    MultiConsole   Terminals   are   typically   used   by
small-to-medium-sized  businesses, such as chain stores, requiring predominantly
transaction-oriented  applications.  Sales of systems by the GAI Partnership are
primarily to large distribution centers,  retail establishments,  manufacturers,
local  governments  and data  bases for  credit and  collection,  which  require
management of large volumes of data.

         On March 26, 1998,  the Company  effected a  one-for-ten  reverse split
(the "Reverse Split") of its Common Stock. All information contained within this
Annual Report on Form 10-K has been restated to reflect retroactive  application
of the Reverse Split unless otherwise noted.

         Reference  is made to  Notes  1,  3,  4,  5, 6, 10 and 18 of  Notes  to
Consolidated  Financial  Statements for definitions of certain capitalized terms
and information  regarding the GAI Partnership and acquisitions and dispositions
by the Company since December 1994.

Risk Factors

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

         Debt Structure and Liquidity.  As of December 31, 1997, the Company had
a tangible net worth of $6,979,687  and total  liabilities of  $35,586,183.  The
Company's  cash  requirements  at December  31, 1997  included  repayment of the
remaining balance of $3,250,000, plus interest, of the original $20,000,000 term
loan,  under its bank  credit  line (the  "Chase  Credit  Line")  with The Chase
Manhattan  Bank,  ("Chase") , in four  quarterly  installments;  repayment  of a
revolving loan under the Chase Credit Line of $7,650,000, plus interest; payment
of an $8,000,000 note (requiring  quarterly interest payments) payable to NCR on
January 31, 1999;  payment of  $3,554,692 to NCR if it exercises a put option at
any  time  in  1999;  and  annual  payments  to NCR of  $497,657  in cash or the
Company's  common stock,  $.01 par value per share ("Common  Stock").  While the
Company  believes that cash  generated from  operations and available  under the
Chase Credit Line will be sufficient to pay its other obligations as they become
due, in the event there is a decline in the Company's  sales and earnings and/or
a decrease in availability  under the Chase Credit Line, the Company's cash flow
would be adversely affected. Accordingly, the Company may not have the necessary
cash to fund all of its  obligations.  The  Company's  ability to obtain  equity
financing to reduce its debt and increase its stockholders'  equity is adversely
affected by such leverage and other risks  described  below.  See  "Management's
Discussion  and  Analysis of  Financial  Condition  and Results of  Operations -
Liquidity and Capital Resources."

         Operating History. For the years ended December 31, 1997, 1996 and 1995
the  Company  recorded  earnings/(loss)  available  to  common  shareholders  of
approximately $4,386,000, ($11,736,000), and $168,000, respectively. The Company
recorded  nonrecurring charges of approximately  $2,207,000 in the quarter ended
December 31, 1995 relating to the  acquisition  of in-process  technology by OTW
and the  refinancing of debt in connection  with the  acquisition of assets from
Digital and  non-recurring  charges of  approximately  $8,400,000 in the quarter
ended  December 31, 1996  relating to the  restructuring  of the Company and the
discontinuance  of OTW's  operations.  Prior to the Boundless and SunRiver Group
Acquisitions,  ADDS recorded substantial losses and the results of operations of
Morgan Kent Group were not material.  Accordingly, the Company believes a longer
operating  history is necessary  for a meaningful  evaluation  of the  Company's
performance.  See "Management's  Discussion and Analysis of Financial  Condition
and Results of Operations - Results of Operations."

                                       2
<PAGE>
         Strategy.  Approximately  84% of the Company's sales for the year ended
December 31, 1997 were of General Display Terminals.  The Company's strategy has
been to increase its share of the General  Display  Terminals  market.  However,
other manufacturers have been abandoning the General Display Terminals business,
principally  because of the  erosion of gross  margins  and the market  trend to
newer technologies. The Company has been increasing its market share in order to
increase its installed  base of customers to which it can offer General  Display
Terminals  or, for those  desiring  them,  alternative  products  with  enhanced
features,  such as  Windows(R)-based  Terminals.  The  success of the  Company's
strategy  depends  on  its  ability  to  compete  in the  intensely  competitive
marketplace  for its  products.  Initially,  the  success  of this  strategy  is
dependent on the success of the Company's Windows(R)-based  Terminals. There can
be no  assurance  that the  Company's  strategy  is valid.  See  "-Products  and
Services - Windows(R)-based Terminals."

         Declining  Gross  Profit  Margins;  Competition.  The  business  of the
Company is intensely competitive and characterized by constant pricing pressure.
The computer  industry  has  experienced  industry-wide  declines in the average
sales  prices of  computer  hardware.  As a result,  there has been  significant
downward pressure on gross margin. Many of the Company's current and anticipated
competitors  are much larger  companies with  substantially  greater  technical,
financial and other resources than the Company. The Company's ability to compete
favorably is, in significant part,  dependent upon its ability to control costs,
react  timely and  appropriately  to short and long term  trends,  including  by
developing and  introducing new products that gain wide market  acceptance,  and
competitively price its products. There is no assurance that the Company will be
able to compete effectively.  See "Competition" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

         Dependence  Upon  Major  Customers.  IBM,  NCR  and  Digital  were  the
Company's most significant  customers in 1997, accounting for approximately 16%,
6% and 4%,  respectively,  of the  Company's  total  revenue.  While  Digital is
contractually  committed to purchase 95% of its terminal  requirements  from the
Company  through  October 23, 1999,  it may  terminate  its  agreement for cause
without compensation to the Company.  Although NCR is contractually committed to
purchase 90% of its terminal  requirements  from the Company through December 9,
1999, it may under certain conditions cancel its agreement without  compensation
to the Company.

         On January 20,  1998,  Compaq  Computer  Corp.  ("Compaq")  announced a
Letter of Intent for the  purchase of Digital.  The Company has no  knowledge of
Compaq's  intentions  with  respect to  Digital's  sales,  marketing  or product
strategies.  Accordingly,  there can be no assurance that the existing  business
relationship between the Company and Digital will not be disrupted.  The loss of
IBM,  Digital or NCR as a customer  would have a material  adverse effect on the
Company's  results of operations and liquidity.  See "- Sales and Marketing" and
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations."

         Dependence Upon Key Personnel.  The Company's  success will depend upon
its key management,  sales and technical personnel. The Company and Boundless do
not have  employment  contracts with any of their  employees.  In addition,  the
Company believes 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 its existing key
personnel  or the  inability  to attract and retain key  employees in the future
could  have a  material  adverse  effect  on the  Company.  See  "Directors  and
Executive Officers of the Registrant."

         New  Products  and  Technological  Change.  The  computer  industry  is
characterized by a rapid rate of product  improvement,  technological change and
product  obsolescence.  As a result,  the Company's product lines are subject to
short life cycles.  While the Company is engaged in research and  development of
new  products,  no assurance can be given that the Company will be able to bring
any new products to market to replace  existing  products  rendered  obsolete by
technological  change.  The failure of the  Company to market new  products on a
timely basis could  materially  and  adversely  affect the  Company's  business.
Furthermore,  inventory  management is critical to decreasing  the risk of being
adversely  affected by obsolescence and there is no assurance that the Company's
inventory management and flexible  manufacturing systems will adequately protect
against this risk. Approximately $6,600,000 was charged to operations during the
quarter ended December 31, 1996, when the Company  decided to discontinue  OTW's
business because the Company decided that the resources necessary to bring OTW's
products to market should  instead be allocated to the  Company's  core business
conducted by Boundless. Furthermore, Boundless established inventory reserves of
approximately  $2,200,000 in the fourth quarter of 1996 because of  obsolescence
resulting from technological change.

                                       3
<PAGE>
         Dependence Upon Suppliers;  Shortages of Subassemblies  and Components.
The Company  purchases  subassemblies  and  components  for its products  almost
entirely  from more than 40  domestic  and Far East  suppliers.  Purchases  from
Advanced  Scientific Corp. and Wong Electronics Corp., which manufacture plug-in
logic  boards in Taiwan  and  China,  respectively,  for the  Company's  General
Display Terminals and  Windows(R)-based  Terminals,  accounted for approximately
19% and 16%, respectively, of the dollar amount of the Company's total purchases
in 1997 of subassemblies and components.  While there are at least two qualified
suppliers for the  subassemblies  and components  that are made to the Company's
specifications, they are generally single-sourced so that the Company is able to
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.

         The Company has  experienced  shortages of supplies for components from
time to time as a result of industry-wide  shortages,  which sometimes result in
market price increases and allocated  production  runs.  However,  to date, such
shortages have not had a material adverse effect on the Company's business.

         Research and  Development.  There has been  substantial  investment  in
research  and  development  of the  Company's  existing  products by Morgan Kent
Group, Boundless and Digital. The Company will need to continue to introduce new
products that match the price/performance  levels of competitive  products.  The
development of new products is inherently  risky and expensive and the Company's
working  capital may not be  sufficient  to permit it to fund the  research  and
development  required.  Furthermore,  there can be no assurance that the Company
will  successfully  develop  new  products  or that  any new  products  that are
developed  will be  introduced  in a  timely  manner  and  receive  wide  market
acceptance. See "-Manufacturing - Research and Development".

         Fluctuations in Quarterly Results.  The Company's  quarterly  operating
results  have  fluctuated  in the past and may  fluctuate  significantly  in the
future due to a number of factors, including timing of new product introductions
by the  Company  and  its  competitors;  changes  in the mix of  products  sold;
availability  and pricing of  subassemblies  and components  from third parties;
timing of orders;  difficulty  in  maintaining  margins;  and changes in pricing
policies by the Company,  its competitors or suppliers.  See  "-Manufacturing  -
Suppliers" and "Management's  Discussion and Analysis of Financial Condition and
Results of Operations - Results of Operations."

     Control by Morgan Kent Group.  Morgan Kent Group owns  approximately  51.4%
(approximately  53.8% on a fully diluted basis) of the outstanding shares of the
Company's  Common Stock  (including  307,502  shares  underlying  warrants) and,
accordingly,  has  the  ability  to  elect  all  directors,   authorize  certain
transactions  that require  stockholder  approval and otherwise  control Company
policies,  without  concurrence of the Company's minority  stockholders.  Morgan
Kent  Group's  control of the Company  may have an adverse  effect on the market
price of the  Common  Stock  due to the  perception  by  existing  or  potential
stockholders that influencing or changing the Company's  management or policies,
without Morgan Kent Group's consent, would be difficult;  or the perception that
public  sales of  significant  amounts of Common  Stock by Morgan  Kent Group is
likely.  Such control  would likely  discourage  hostile bids for control of the
Company in which  stockholders  may receive  premiums for their shares of Common
Stock. See "Security  Ownership of Certain Beneficial Owners and Management" for
information regarding a possible future change of control.

         Possibility  of  Volatility  of  Common  Stock  Price.  There  has been
significant  volatility in the market price of the Company's Common Stock and of
the  securities  of companies  engaged in  businesses  similar to the  Company's
business. Various factors and events may have a significant impact on the market
price of the Common  Stock  including  fluctuations  in the  prices of  computer
industry stocks,  generally;  announcements by the Company, its suppliers or its
competitors   concerning   quarterly   and  year  end  results  of   operations;
technological  innovations  or the  introduction  of new products;  shortages or
failure of components or  subassemblies;  and public  concern about the economy,
generally.  See "Market for Registrant's  Common Equity and Related  Stockholder
Matters."

                                       4
<PAGE>
         Forward-Looking  Information  May  Prove  Inaccurate.  This  Form  10-K
contains   forward-looking   statements  and  information   that  are  based  on
management's  beliefs as well as assumptions made by, and information  currently
available to, management.  When used in this document,  the words  "anticipate,"
"believe," "estimate," "will" and "expect," and similar expressions are intended
to identify  forward-looking  statements.  Such statements reflect the Company's
current  views with respect to future  events and are subject to certain  risks,
uncertainties  and  assumptions,  including the specific risk factors  described
above. Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect,  actual results may vary materially from
those anticipated,  believed, estimated or expected. The Company does not intend
to update these forward-looking statements and information.

Products and Services

         General Display Terminals.  The Company's General Display Terminals are
ANSI/ASCII desktop terminals, which generally do not have graphics capabilities,
although some have limited  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.  The ADDS, Dorio and VT brands are complementary
products, providing slightly different features to various user segments.

         In connection with the Boundless Acquisition,  the Company entered into
various  agreements  with NCR  pursuant  to which the Company  will  continue to
supply at least 90% of NCR's terminal requirements  (including  Windows(R)-based
Terminals),  until December  1999.  However,  NCR can terminate such  contracts,
without compensation to the Company, under certain  circumstances.  Accordingly,
there can be no assurance that the long-standing  business  relationship between
Boundless and NCR will continue. In 1997, sales to NCR constituted approximately
6% of total revenues.

         In  connection  with the  Digital  Acquisition,  Boundless  and Digital
entered into a Basic Order  Agreement for Text Terminal  Products and Parts (the
"Digital Supply Agreement") whereby Digital agreed to purchase from Boundless at
least 95% of Digital's worldwide  requirements for General Display Terminals and
related parts for a four-year period ending October 1999.  However,  Digital can
terminate the agreement for cause without compensation to the Company.  Sales of
General  Display  Terminals  to Digital  constituted  approximately  3% of total
General Display Terminal sales for 1997.

         Network Graphics Displays.  The Company's Network Graphics Displays are
a high resolution, high performance,  graphical workstation for use in networked
computer  environments.  Sales of the Company's  Network Graphics  Displays have
generally been limited to a few large  telecommunications  customers. Due to the
small customer base, the low margins  associated with Network Graphics Displays,
and the  emergence  of  Windows(R)-based  Terminals,  the  Company  announced  a
discontinuation of this product family in early 1998.

     Windows(R)-based  Terminals. Recent technological advances have enabled the
Company,  and  others,  to  develop  hardware  and  software  designed  to offer
customers  simple,  easy and  cost-effective  access  to  current  and  emerging
computing  environments  that  include  Windows NT, UNIX and Java  applications,
corporate intranets and the Internet. As these technological  advances allow the
desktop  display  device,  or  client,  to be  configured  with less  memory and
processing  power,  as  compared  to  traditional  PC  configurations,  they are
referred to as network computers or thin client devices ("thin  clients").  Thin
clients,  whose  applications  are  executed  exclusively  on the  server  using
software  from  Microsoft  or  Citrix  Systems,   are  called   Windows(R)-based
Terminals.  The  Company's   Windows(R)-based  Terminals  have  no  applications
storage,  utilize  the  network  servers for  processing  and are  significantly
smaller  than  a  general  purpose  PC.  They  use  Intel  and  Intel-compatible
processors. A second generation  Windows(R)-based Terminal, the Viewpoint(R) TC,
was released in the second  quarter of 1997 that provides  terminal users with a
General Display Terminal replacement,  that maintains the look and feel of their
current  application,  yet  provides  the  ability  to  transition  to  Windows,
intranet, Internet and Java applications with the addition of Boundless' network
administration  software,  called  the  Viewpoint(R)   Administrator,   that  is
downloaded from the network server.  The Company believes that for the following
primary reasons,  Windows(R)-based Terminals, generally, will be able to compete
with PCs and Net PCs used in business  networks,  although there is no assurance
the Company's belief is correct.

         o Windows(R)-based Terminals offer a lower total cost of ownership than
PCs because:

                                       5
<PAGE>
               o    Initial cost is lower.

               o    Maintenance  costs are lower because of their simpler design
                    and fewer components.

               o    Hardware  upgrade  costs  are  lower  because  upgrading  is
                    typically limited to the network server.

               o    Software upgrade, administration and support costs and costs
                    of controlling  the use of differing  software  versions are
                    lower   because   software   is   principally   limited   to
                    centrally-located network servers.

               o    There  is  virtually  no  user  involvement  in  configuring
                    systems,   installing  software  and  correcting   problems,
                    thereby  eliminating   productivity  losses  resulting  from
                    activities not relating to work.

              o     Windows(R)-based   Terminals  have  the   functionality  and
                    performance that businesses generally expect from PCs.

               o    Windows(R)-based  Terminals  allow for better  security,  in
                    significant  part,  because their lack of floppy disk drives
                    prevents them from  introducing a virus into the network and
                    prevents  users  from  removing   sensitive  data  from  the
                    network.

         Target  users  for the  Company's  Windows(R)-based  Terminals  include
retail,  services,  financial,  education,  healthcare,  telecommunications  and
transportation  customers  with light  processing  requirements  and the need to
provide  concurrent  information  to customers  on a variety of topics,  such as
billing and current and historical product and service information.

         MultiConsole  Terminals.  The  Company's  MultiConsole  Terminals  were
developed   by  Morgan  Kent  Group  and  are  based  on  patented   technology.
MultiConsole  Terminals offer a cost-effective upgrade or replacement for serial
character  terminals in multi-user,  micro-computer and personal  computer-based
environments.  The  MultiConsole  Terminal  has the same  look and feel as a PC.
Nevertheless,  MultiConsole  Terminals do not have CPUs since they share the CPU
of the host  computer.  MultiConsole  Terminals  are best  suited  for  small to
medium-sized    businesses    requiring    predominantly    transaction-oriented
applications. Typical users include financial branch offices, hospitals, hotels,
retailers,  pharmacies  and  professional  offices,  such as  accounting  firms,
doctors' and dentists' offices and law firms.

         GAI  Partnership.  Boundless is a limited partner with GA, the managing
partner,  in the GAI  Partnership.  The GAI  Partnership  combines into a single
business the  development,  distribution,  maintenance and support of Pick-based
computer systems and software running Boundless' version and GA's version of the
Pick system on various hardware  platforms.  Boundless'  systems consist of Unix
software with NCR System 3000 hardware and operating  system  software under the
Mentor(R) Operating Environment brand name, as well as a lower cost system under
the Mentor  PRO brand name for use with  standard  PC's  (collectively,  "Mentor
Systems").  Mentor  Systems are used to manage large  volumes of data.  Users of
Mentor  Systems  include  large  distribution  centers,  retail  establishments,
manufacturers,  local governments and data bases for credit and collections. The
business  and  affairs of the GAI  Partnership  are managed  exclusively  by GA,
subject to consultation from time to time with Boundless.

         Professional Services. Prior to the formation of the GAI Partnership, a
material portion of the Company's  revenues was derived from its activities as a
provider  of  consulting,   installation,  software  and  hardware  maintenance,
software upgrade and tuning,  disaster backup and other  professional  services.
These  services were provided  almost  exclusively  to Mentor  Systems users and
value added resellers  ("VARs") of systems purchased from the Company as well as
to users of the Company's other products  desiring more service and support than
the basic warranty provides. The Company is continuing to provide these services
with respect to its desk top terminals  and  Windows(R)-based  Terminals.  Depot
service during normal  business hours is also provided  within the United States
by the Company for its desktop terminals.

                                       6
<PAGE>
         Percentage of Total Revenues.  The table below sets forth,  for each of
the  last  three  years  ended  December  31 the  percentage  of  total  revenue
contributed by those classes of similar products or services which accounted for
10% or more of  consolidated  revenue in any of such years.  Information for the
years ended December 31, 1996 and 1995 is based upon the consolidated operations
of the Company  excluding  revenue  generated by OTW and by the General  Display
Terminal business of Digital, prior to the Digital Acquisition in October, 1995.

                 General          Network
                 Display          Graphics       Professional
Period          Terminals         Displays          Services
------          ---------         --------          --------
1997              83.6%             5.9%              3.7%
1996              80.0%             8.6%              5.0%
1995              49.8%            28.5%              13.5%

          Foreign  Sales.  Net  foreign  sales were  approximately  $30,911,000,
$47,500,000 and $15,912,000  for 1997, 1996 and 1995,  respectively.  The tables
below  set  forth  for  each of the  last  three  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
------                        -----                     ------
1997                          31.6%                     27.0%

1996                          33.9%                     29.6%

1995                          16.6%                     13.0%

          The increases in 1997 and 1996 versus 1995 are  attributable  to sales
of VT and Dorio General Display Terminals, sales of which have historically been
strong in Europe.

Manufacturing

          Assembly  Operations.   The  Company's  manufacturing  operations  are
located at its main facility in Hauppauge,  New York and include  procurement of
components  and the assembly and testing of its  products.  The Company does not
manufacture any of the  subassemblies  or components used in the assembly of its
products.  Investment in  production  equipment is not 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 models 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.  The
Company has earned ISO 9002 certification for its manufacturing standards.

          The Company 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.  Backlog at December  31, 1997  totaled  approximately
$7,345,000  as  compared  to  $9,048,000  at December  31,  1996.  Approximately
$6,910,000 of the Company's backlog at December 31, 1997 was for General Display
Terminals.

          The Company is using  approximately  90,000 of its 155,000 square feet
of space in the Hauppauge,  NY, facility for  manufacturing and has the capacity
to manufacture approximately 1,000,000 units per year.

          Suppliers.  The Company purchases subassemblies and components for its
products  from  more  than 40  domestic  and Far East  sources.  Purchases  from
Advanced  Scientific  Corp. and Wong  Electronics  Corp.,  which  manufacture in
Taiwan and China,  respectively,  plug-in logic boards for the Company's General
Display Terminals and  Windows(R)-based  Terminals,  accounted for approximately
19% and 16%,  respectively,  of the total dollar amount of the  Company's  total
purchases in 1997 of subassemblies and components.  While there are at least two
qualified  suppliers for the  subassemblies  and components that are made to the
Company's specifications,  they are generally single-sourced so that the Company
is able to take  advantage of volume  discounts and more easily  ensure  quality

                                       7
<PAGE>
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.  The  Company has  experienced  shortages  of
supplies  for  components  from  time  to  time  as a  result  of  industry-wide
shortages,  which  sometimes  result in market  price  increases  and  allocated
production  runs. To date, such shortages have not had a material adverse effect
on its business.

          Warranties  and  Returns.  The Company  provides a one- to  three-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. During 1995, 1996 and 1997, the Company's
cost of warranty repairs was approximately 1.2%, 2.4% and 2.0%, respectively, of
the Company's total revenues.  Warranty expense increased in 1996 as a result of
the  Company's  Maintenance  Service  Agreement  with  Digital.  Software is not
warranted by the Company 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.

          The  Company  also grants  90-day  stock  rotation  rights to selected
distributors  and,  pursuant to an agreement  with the  Company,  NCR can return
products within 90 days of shipment. If the Company cannot resell such products,
NCR is  required  to pay the  Company  15% of the  sales  price of the  returned
products.   Because  of  the  Company's   ability  to  provide   products  using
just-in-time  manufacturing  techniques,  the Company believes that NCR has been
limiting  orders  to  products  for  which  it has  firm  commitments  from  its
customers.

          Research  and  Development.  During 1997,  1996 and 1995,  the Company
expended approximately $2,912,000,  $4,855,000 and $4,569,000,  respectively, on
research and development activities.  Not included in the foregoing are research
and  development  expenses  incurred  by OTW.  As a part of the  Company's  1996
restructuring  programs,  the Company  consolidated its research and development
activities  by closing its Orlando,  Florida  facility  (the  Company's  primary
Network Graphics  Displays  development  center),  and reducing its research and
development  personnel  from  55 to  24.  Boundless'  research  and  development
activities have historically  related primarily to General Display Terminals and
Network  Graphics  Displays.   Because  General  Display  Terminals  are  mature
products,   development  activities  over  the  past  year  have  only  included
enhancements to the existing product family,  freeing  resources for development
of the Compoany's Windows(R)-based Terminals. The Company intends to devote more
efforts to  developing  and  acquiring  new products and  technologies  that can
shorten  the  time-to-market  of  the  Company's  products.   See  "Management's
Discussion  and  Analysis of  Financial  Condition  and Results of  Operations -
Results of Operations."

Sales and Marketing

          The Company markets its terminal  products through original  equipment
manufacturers  ("OEMs") and reseller  distribution  channels.  OEMs, that do not
want to maintain  engineering or  manufacturing  resources,  can obtain products
with their brand name from Boundless. Customers can buy Boundless' products from
an   international   network  of  value-added   resellers  (VARs)  and  regional
distributors.  In order to reduce its dependence on existing OEM customers,  the
Company has been increasing its distribution channel marketing and sales efforts
and seeking additional OEM customers. Through its sales force, the Company sells
directly  to  large  VARs and  regional  distributors  and  also  sells to major
national and international distributors.  The Company's sales force operates out
of six  geographically  dispersed  locations in the United States and a European
office in the  Netherlands.  During 1997,  the Company  expanded  its  marketing
efforts to include South America, Asia-Pacific, Australia and New Zealand.

          As a result of the Digital  Acquisition,  the Company has expanded its
OEM  relationships  and  worldwide  channels of  distribution,  particularly  in
Europe. The Company entered into distribution  agreements with approximately ten
Western  European  distributors  in 1997.  Sales of VT and Dorio General Display
Terminals have historically been particularly  strong in Europe,  while sales of
the ADDS General Display Terminals have been stronger in the United States.


                                       8
<PAGE>
          In selling  its General  Display  Terminals,  the  Company  emphasizes
customization,  reliability and  compatibility  with a broad range of UNIX, Pick
and  other  operating  systems.   In  selling  the  Company's   Windows(R)-based
Terminals,   the  Company   emphasizes   total  cost  of   ownership,   ease  of
administration,  security and the ability to access numerous  applications.  The
Company's   Windows(R)-based   Terminals   can  access  the  more  than  100,000
applications that run under Microsoft Windows,  including Windows NT and Windows
95. The Company's  Windows(R)-based  Terminals  also provide  access to UNIX and
legacy   applications.   The  Company  believes  its  expertise  in  integrating
Windows(R)-based  Terminals within the total system architecture is an important
selling benefit.

          The  Company  uses  direct   mail,   telemarketing   and   cooperative
advertising and promotion to promote its products.  The Company's installed user
base of more than  5,000,000  General  Display  Terminals is the primary  target
market  for its  Windows(R)-based  Terminals.  The  Company  believes  the  most
effective way to reach this market is via cooperative marketing with its channel
partners and an aggressive use of public relations.

          The  Company's  business  is not  seasonal.  The third  quarter of the
calendar year  contributes  slightly  less  revenue,  as a percent of total year
revenues,  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 year.

Competition

          The General Display  Terminal market has undergone  consolidation  and
the two largest competitors that have emerged are Boundless and Wyse Technology,
Inc. ("Wyse").  General Display Terminal customer purchase criteria are based on
quality, customization, compatibility with other terminals, and price.

          Currently,  Boundless'  principal  competitors  that  manufacture  and
market  Windows(R)-based  Terminals are Wyse, Neoware Systems, Inc., and Network
Computing Devices, Inc. The Company anticipates additional competitors,  such as
Sun Microsystems, will enter the network computer market in 1998 and thereafter.
The  Company's  Windows(R)-based  Terminals  also compete with  low-cost PCs and
traditional  higher-cost PCs. Customer  purchase  criteria for  Windows(R)-based
Terminals  are primarily  based upon reduced  total cost of  ownership,  ease of
administration, reliability, security and the breadth of applications access.

          Boundless'  MultiConsole  Terminals are also  competing in an emerging
market principally based on features and compatibility. Boundless's MultiConsole
Terminals  directly  compete  with  Maxpeed and  indirectly  compete  with other
companies that provide  alternative  technology.  Mentor Systems marketed by the
GAI Partnership  compete in an environment  where features,  compatibility  with
host  systems,  service  and  ease of  doing  business  are the key  competitive
factors.

Patents, Trademarks and Licensing

          The  Company  owns over 30  patents  issued in the  United  States and
various  foreign  countries,  none of which is  believed  to be  material to its
business.  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.

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.

Employees

          At December  31, 1997,  the Company had  approximately  325  full-time
employees  engaged as  follows:  26 in product  design and  engineering,  216 in
manufacturing and repair services,  48 in sales,  systems services and marketing
and 35 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.

                                        9
<PAGE>
ITEM 2. PROPERTIES
        ----------

     The Company owns a 155,000  square foot  facility at 100 Marcus  Boulevard,
Hauppauge,  New  York,  the  principal  manufacturing,  sales  and  distribution
facility of Boundless.  The Company also leases  approximately 8,303 square feet
of office space in Austin,  Texas. The four-year lease for this facility expires
in  1998.  The  Company's  current  annual  rent  for  the  Austin  facility  is
approximately   $124,548.   The  Company  leases  four  other  small  facilities
throughout the United States for depot repair and support  services.  The annual
lease commitments for these facilities are not material.

ITEM 3. LEGAL PROCEEDINGS
        -----------------

          An action was  commenced  by John Marsala  ("Marsala")  on October 20,
1994,  based on breach of  contract,  in the  Supreme  Court of the State of New
York,  County of New York.  This action is entitled "John Marsala v. All Quotes,
Inc. et al.," Index No.  129936-94.  Marsala was a former dealer employed by the
Company to enroll subscribers in its dial-up market services.  Marsala claims in
excess of $1,500,000 in damages  pursuant to the terms of an alleged  dealership
agreement  between the parties.  The Company has denied that it owes any sums to
Marsala and has counterclaimed for fraud against Marsala. The Company intends to
vigorously  defend this suit since it believes that it has meritorious  defenses
to the action. Document requests have been served on Marsala,  however, to date,
no documents have yet been produced and no other discovery has taken place. This
litigation has been inactive since December 1994.


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

          No matter was submitted during the fourth quarter of 1997 to a vote of
stockholders of the Company through the solicitation of proxies or otherwise.


                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
        ---------------------------------------------------------------------

          The Reverse Split became  effective March 26, 1998.  Unless  otherwise
noted,  all  information  in this Annual Report on Form 10-K has been  restated,
applying retroactive treatment of the Reverse Split.

          The  Company's  Common Stock is quoted on The Nasdaq  SmallCap  Market
under the symbol BDLS.  As of February 27, 1998,  there were  approximately  984
holders of record of the Company's  Common Stock. The following table sets forth
the high and low last sale prices for the Company's Common Stock, as reported by
Nasdaq, for the periods indicated. Price per share information has been restated
to give effect to the Reverse Split.


Year Ended December 31, 1997:                                 High         Low
                                                              ----         ---

       First quarter....................................     $19.38       $10.31
       Second quarter...................................     $15.94       $ 6.56
       Third quarter....................................     $15.94       $ 7.19
       Fourth quarter...................................     $16.25       $ 6.56


Year Ended December 31, 1996:

       First quarter....................................     $30.00       $22.50
       Second quarter...................................     $93.75       $20.00
       Third quarter....................................     $83.75       $31.25
       Fourth quarter...................................     $36.25       $13.12

                                       10
<PAGE>

The last sale price of the Company's Common Stock on March 4, 1998 was  $ 9.06.

Dividend Policy

          The Company presently anticipates that all of its future earnings 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. The
Chase  Credit Line  prevents  the Company from  declaring  any  dividends on the
Company's Common Stock and any other class of capital stock of the Company.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations - Liquidity and Capital Resources."





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  statement  of
operations  and balance sheet data for the years ended  December 31, 1997,  1996
and 1995 set forth below have been derived from the financial  statements of the
Company  which have been  audited by BDO  Seidman,  LLP,  independent  certified
public  accountants as indicated in their report included in this Form 10-K. The
statement of operations  data for the years ended December 31, 1994 and 1993 set
forth below have been  derived  from the  financial  statements  of the Company,
which  have been  audited  by Coopers & Lybrand  L.L.P.,  independent  certified
public  accountants.  The selected  financial data 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.

          For  accounting  purposes  the  SunRiver  Group  Acquisition  has been
treated as a  recapitalization  of the  Company  with  Morgan  Kent Group as the
acquirer and with carryover  basis of its assets and  liabilities.  Accordingly,
the historical  financial  information  presented herein, prior to the Boundless
Acquisition, are those of Morgan Kent Group. Financial information presented for
periods  ended on December 31, 1994  includes  the  consolidated  operations  of
Morgan Kent Group for all of 1994 and of Boundless  for the period from December
9, 1994, the effective date of the Boundless  Acquisition,  through December 31,
1994.

                                       11
<PAGE>

Consolidated Statement of Operations Data
For the years ended December 31:
(000's omitted)

<TABLE>
<CAPTION>
                                          1997        1996       1995        1994        1993
                                          ----        -----      ----        ----        ----

<S>                                     <C>         <C>         <C>          <C>         <C>
Total revenues                          $98,271     $138,225    $94,957      $8,344      $2,814
Gross margin                             24,766       28,557     25,573       3,455       1,177
Operating expenses:
  Sales and marketing                     7,417       10,433      7,940       1,092         321
  General and administrative              6,213        8,120      6,337         992         409
  Research and development                2,912        4,855      4,569         990         493
  Other nonrecurring charges             (255)         1,980      (572)          61         (11)
                                         ------        -----   --------      ------      ------
     Total operating expenses            16,287       25,388     18,274       3,135       1,212
                                         ------       ------     ------      ------      ------
Operating income (loss)                   8,479        3,169      7,299         320         (35)
Interest expense                         (3,730)      (3,794)    (1,907)        (97)        (35)
                                        -------      -------    -------        ----        ----

Income (loss) from continuing
  operations                              4,749         (625)     5,392         223         (70)
Income tax expense                         (134)         962     (1,323)       (185)
Loss from discontinued operations                     (9,652)      (870)
Gain (loss) on extinguishment of debt        -            -        (589)         -           -
                                        -------      -------    -------        ----        ----
Net income (loss)                        $4,883     $(11,239)    $2,610         $38        $(70)
                                         ======     =========    ======         ===       =====
Earnings (loss) per common share from
  continuing operations:
Basic                                      $.89        $(.44)      $.37       $(.01)      $(.03)
                                           ====       ======       ====      ======      ======
Diluted                                    $.86        $(.44)      $.35       $(.01)      $(.03)
                                           ====       ======       ====      ======      ======

Earnings (loss) per common share: Basic
Diluted                                    $.89       $(2.50)      $.04       $(.01)      $(.03)
                                           ====      =======       ====       ======     ======
                                           $.86       $(2.50)      $.04       $(.01)      $(.03)
                                           ====      =======       ====      ======      ======
Consolidated Balance Sheet Data
At December 31:
(000's omitted)                            1997        1996        1995        1994        1993
                                           ----        ----        ----        ----        ----

Working capital                          $8,780       $3,172    $15,416      $6,764        $(63)
Total assets                             54,548       69,525     75,856      37,171         940
Revolving credit loan                     7,650       13,950      8,000       4,655          -
Long-term obligations                    10,288       14,300     25,492      16,287         119
Mandatorily redeemable preferred stock    3,555        3,555      3,555       5,536          -
Total long-term obligations              13,843       17,855     29,047      21,823         119
Stockholders' equity (deficit)          $15,407      $ 8,802    $12,837      $2,386         $39
</TABLE>

                                       12
<PAGE>

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

General

          Reference  is  made  to  Notes   1,3,4,5,6,10   and  18  of  Notes  to
Consolidated  Financial  Statements for definitions of certain capitalized terms
and information  regarding the GAI Partnership and acquisitions and dispositions
by the Company since December 1994.


Results of Operations



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

Charges Made in the Quarter Ended December 31, 1996


     The Company  recorded  nonrecurring  charges of $8,915 in the quarter ended
     December 31, 1996 as follows:

     1. $1,473 relating to severance costs associated with a  reduction-in-force
     affecting 130 employees at Boundless in December 1996;

     2. $331 relating to the closing of Boundless' Orlando,  Florida,  facility;
     and

     3. $7,111 relating to the discontinuation of operations, in December, 1996,
     of OTW. See Note 18 of Notes to Consolidated Financial Statements.

     For purposes of classification in the Consolidated Statements of Operations
     for the years ended December 31, 1997,  1996, and 1995,  items 1 and 2 have
     been included in "Other nonrecurring charges".  Item 3 is included in "Loss
     from discontinued operations."



Years Ended December 31, 1997 and 1996

          Revenues:  Revenues for the year ended December 31, 1997 were $98,271,
as compared to $138,225 for the year ended December 31, 1996.

          Sales of the Company's General Display  Terminals  declined to $82,200
for the year ended  December 31, 1997 from $110,671 for the year ended  December
31,  1996,  despite a 35%  increase in sales to IBM.  The  decline is  primarily
attributable  to a  reduction  in sales to Digital of  $16,954,  resulting  from
Digital's purchasing, during the fourth quarter of 1996, a substantial amount of
product to satisfy its obligations  under the Digital Supply Agreement for 1996.
These purchases  satisfied  Digital's  requirements for the majority of 1997. In
addition, sales of the Company's VT/Dorio product fell $10,496 in 1997 following
substantial  sales of this product  during the first quarter of 1996 driven from
pent-up  demand  during the  transition  of the  product  line to the  Company's
Hauppauge manufacturing facility.  Sales in 1997 of General Display Terminals to
NCR  declined  $2,646 from 1996.  The decline in sales to NCR was  expected  and
relates to the disruption  caused by the split-up of AT&T  Corporation and NCR's
change in focus from Unix to NT-based servers.

                                       13
<PAGE>

          Based on independent research, overall industry demand for the General
Display Terminals will continue to decline as competing technologies,  including
Windows(R)-based  Terminals,  gain market share.  Despite this industry decline,
sales of General  Display  Terminals for 1998 are expected to  approximate  1997
results.  The Company has increased its  marketshare  over the last two years in
part  because  of  enhanced  performance,  and  additional  features,  including
Microsoft  Windows(R)  NT and  Internet  support,  that  allow  General  Display
Terminals to compete favorably, in terms of price and performance, with low-cost
personal computers, as well as by aggressive marketing.

          The Company's  strategy in increasing  its share of a market where the
product  and market  are  mature is based  upon its belief  that there will be a
continuing  substantial demand for General Display  Terminals.  To this end, the
Company is leveraging its manufacturing expertise,  installed customer base, and
distribution  networks while shifting  research and  development to software and
hardware  development  that will deliver Windows  applications to the desktop by
means of Windows(R)-based Terminals.

          Sales of Network Graphics  Displays  declined $6,140 to $5,756 for the
year ended December 31, 1997, from $11,896 for the year ended December 31, 1996.
This decline was  anticipated  and relates to the  completion,  during 1996,  of
specific projects  undertaken by NCR in 1995. The Company believes that sales of
Network  Graphics  Displays will continue to decline for the same reasons demand
for General Display Terminals is declining.

          Sales of the Company's  Windows(R)-based  Terminals amounted to $3,218
versus $747 for the years 1997 and 1996, respectively. 1997 was a turbulent year
for this emerging  technology,  as the industry and end-users debated the merits
of  the  Windows(R)-based  Terminal  and  competing  technologies.  Despite  the
substantial  increase in 1997 sales over 1996,  the revenue levels are below the
Company's  expectations due to slower than anticipated market acceptance of this
new technology.  However,  the Company believes that Microsoft's recent decision
to support thin-client computing,  and the recent abandonment of the "Net PC" as
a  competing  technology  by some large  computer  manufacturers,  will  greatly
increase market acceptance for Windows(R)-based Terminals.

     On May 12, 1997,  the Company  launched its first line of  Windows(R)-based
Terminals which, along with network administration  software, are marketed under
the trade names  Viewpoint(R) TC and Viewpoint(R)  Administrator,  respectively.
The Company is targeting the  approximately  35 million users of General Display
Terminals   and  Network   Graphics   Displays,   many  of  whom  are  currently
transitioning or intending to transition to graphical  applications that include
Windows,  the Intranet  and Java.  In  addition,  the Company is  targeting  the
task-oriented users of older, less capable PCs that are unable to run the latest
Windows applications, including those users in business and education.

          The Company  believes its unique ability to customize the Viewpoint(R)
TC to meet specific  end-customer  needs will give it a sustainable  competitive
advantage.  Historically,  this ability has been of great value to the Company's
terminal  customers and the Company  believes that this strategy will be equally
advantageous in the corporate network computer marketplace.

          During the third quarter,  NCR selected Boundless as an OEM to support
its entrance into thin client  computing.  In addition,  Boundless  continued to
witness significant customer support for its Viewpoint(R) TC with the attainment
of new  customers  in a number of  important  markets  including  education  and
retail.  The  Company  is working  with  Microsoft  to promote  Windows(R)-based
Terminals.  The Company  believes that with the release of  Microsoft's  Windows
Terminal Server  software,  code named "Hydra",  acceptance of  Windows(R)-based
Terminals will be further enhanced.

          Net  sales  from  the  Company's  repairs  and  spare  parts  business
decreased  51%, or $3,517,  from $6,867 for the year ended  December 31, 1996 to
$3,350 for the year ended  December  31,  1997.  The  decline was due to reduced
spares sales to NCR and Digital,  resulting from a change in NCR's field support
strategy and inventory  purchasing  habits and the overall decline in unit sales
to Digital.  Ongoing  spares sales to Digital are not expected to reach the 1996
volume levels because Digital's start-up stocking requirements are complete. Due
to new  designs  and  engineering  changes  resulting  in fewer  components  and
increased  reliability,  the Company does not  anticipate  that repair and spare
parts revenue will meet prior period levels.

                                       14
<PAGE>
          The GAI Partnership agreement provides for the payment of royalties to
the Company as a percentage of  partnership  revenues,  commencing  May 1995, as
follows:  months 1-12, 12%; months 13-24,  10%; months 25-36,  9%; months 37-48,
8%; and months 49-60, 7%. GAI Partnership royalties received for the year ending
December 31, 1997, were $1,459 versus $2,473 for 1996. An additional  $1,047 was
past due.  Discussions  regarding  payment of the past due  amount are  ongoing.
During the fourth quarter of 1997,  the Company began to record GAI  Partnership
revenue only to the extent of cash received.

          IBM was the most  significant  customer  for the  Company's  products,
accounting  for 16% of revenues for the year ended  December 31, 1997.  Sales to
NCR and Digital accounted for 6% and 4%, respectively,  of revenues in 1997. The
loss of IBM, NCR or Digital as a customer, and as a distribution channel for the
Company's General Display Terminals, would have a material adverse effect on the
Company's results of operations and liquidity.

     Gross Margin. Gross margin for the year ended December 31, 1997 was $24,766
(25.2% of revenue),  as compared to gross margin for the year ended December 31,
1996 of $28,557  (20.7% of revenue).  Sales of the  Company's  Network  Graphics
Displays  accounted for a smaller  percentage of the Company's total revenues in
1997 as compared to 1996.  This change in product mix increased the gross margin
percent,  year-to-year,  due to the relatively low gross margin  associated with
Network Graphics Displays.  In addition,  during the fourth quarter of 1996, the
Company  recorded  inventory  reserves and write-offs of $2,241  representing an
estimate  of excess  material on hand as of the end of the year;  and  wrote-off
$284 of previously  capitalized research and development cost as a result of the
cancellation  of certain  programs.  The combined  effect of these  reserves and
write-offs was to reduce 1996 gross margin.  As a result of pricing  actions and
inventory  reduction  programs  undertaken  during 1997, the Company was able to
release  reserves of $1,263,  resulting  in an increase in the 1997 gross margin
percentage.  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 1997 or 1996. 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. In
addition,  sales of the Company's  Viewpoint(R)  TC, which carry margins greater
than its  General  Display  Terminals,  are  expected to  positively  impact the
Company's  gross margin.  However,  there can be no assurance,  given the recent
introduction  of this new  technology,  that the  Company's  new  products  will
sustain the 1997 gross margin levels.

          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, 1997,  operating
expenses  were  $16,287  (16.6% of  revenue),  compared to expenses  for 1996 of
$25,388  (18.4% of  revenue).  The decline  stems from a  reorganization  of the
Company,  including a reduction of 130  employees at the  Company's  subsidiary,
Boundless, and the discontinuation of the operations of OTW.

          Sales and Marketing  Expenses.  Sales and marketing  expenses declined
28.9% from $10,433  (7.5% of revenue) for the year ended 1996 to $7,417 (7.5% of
revenue) for the year ended December 31, 1997. The decline stems from reductions
in corporate advertising, marketing consulting and bad debt expense.

     The Company  promotes its products by means of a mix of media  advertising,
direct  mail,  telemarketing,  trade shows,  public  relations  and  cooperative
channel marketing programs. The Company's installed base of over 5,000,000 units
is the primary  target market for the  Viewpoint(R)  TC. The  Company's  plan to

                                       15
<PAGE>
reach  this  market  is based on direct  mail,  telemarketing  and  advertising,
participating  in events  with its key  partners,  including  Microsoft,  and an
aggressive   public   relations   campaign,   including   several  domestic  and
international  press tours. The Company will also participate in key trade shows
during 1998.

          General  and  Administrative  Expenses.   General  and  administrative
expenses  decreased  23.5% from $8,120  (5.9% of  revenue),  to $6,213  (6.3% of
revenue) for the periods ending  December 31, 1996 and 1997,  respectively.  The
decline is a result of the  reduction  in force as well as declines in legal and
audit expenses which related to its acquisition and restructuring activities.

          Research and Development  Expenses.  Research and development expenses
decreased  from  $4,855  in 1996 to  $2,912 in 1997.  Research  and  development
expenses  for 1996  included  a  write-off  of $649 for  previously  capitalized
expenses  associated  with  research  projects  the Company has  abandoned.  The
remainder of the decline  resulted from a consolidation  of research  activities
including the closing of the Company's Orlando, Florida, facility.

          Research  and  development  expenses  are  shifting  to  software  and
hardware development that will deliver user-friendly  Windows-based applications
to the desktop while maintaining current cost and administrative benefits of the
shared resource  multi-user  computing model.  The Company's  Viewpoint(R) TC is
designed to offer customers simple,  easy and  cost-effective  access to current
and  emerging  computing  environments  that  include  Windows NT, UNIX and Java
applications, corporate intranets and the Internet.

          Other  Nonrecurring  Charges.   During  the  fourth  quarter  of  1996
Boundless  recorded  reserves  of  $1,804  relating  to  the  reduction-in-force
discussed above. Of this amount,  $1,473 related to severance  payments and $331
related to the closing of the Company's Orlando, Florida, facility.

          Interest  Expense.  Interest expense (net of interest income) amounted
to $3,730 for the year ended December 31, 1997 compared to $3,794 for 1996.

          Income Tax  Credit/Expense.  The Company recorded an income tax credit
of $134 for the year ended  December 31, 1997  compared to income tax expense of
$962 for the year ended 1996. The tax credit results from the utilization of net
operating loss carryforward credits of $1,481 and a tax adjustment for valuation
of the  Company's  deferred tax asset.  As of December  31,  1997,  there are no
remaining net operating loss  carryforwards.  During the fourth quarter of 1995,
the Company recorded a reversal of a deferred tax valuation  allowance resulting
in a reduction in tax expense of $1,100.  This reversal was due to  management's
reassessment  of the  realizability  of the deferred  tax asset.  The income tax
expense in 1996 relates to state income taxes of Boundless  and to the Company's
determination that the valuation allowance should be re-established. The Company
continues to provide a valuation  allowence against 100% of its net deferred tax
asset.

          Loss  From  Discontinued  Operations.  The  Company  recorded  a  loss
relating to the  discontinuation  of OTW of $9,652 for the period ended December
31, 1996. Since commencing  business in 1995, OTW incurred net losses; and OTW's
predecessor  incurred net losses of $645 in 1993 and $285 in 1994.  OTW recorded
revenues of $1,900 for 1996 but was not able to generate  material revenues from
its  products.  The  discontinuation  of OTW  was a  material  component  of the
Company's restructuring program and is intended to allow the Company to focus on
its core businesses conducted by Boundless.

          Net Income/  (Loss).  For the year ended December 31, 1997, net income
was $4,883 (5.0% of revenue),  compared to a net loss of $(11,239)  for the year
ended December 31, 1996.



Years Ended December 31, 1996 and 1995

Charges Made in the Quarter Ended December 31, 1995


                                       16
<PAGE>

     The Company  recorded  nonrecurring  charges of $2,382 in the quarter ended
     December 31, 1995, as follows:

     1. $ 1,225  relating to OTWs  acquisition  of  in-process  technology  from
     Microelectronics and Computer Technology Corporation ("MCC") classified and
     included  in  "Loss  from  discontinued  operations"  in  the  Consolidated
     Statement of Operations;

     2.  $982,   classified  and  included  in  "Extraordinary   loss  on  early
     extinguishment  of debt",  relating to the  prepayment of the debt facility
     from Congress Financial  Corporation using the Chase Credit Line, such $982
     consisting of a $700 early  termination  fee and $282 of  unamortized  debt
     issuance costs; and

     3. $175 for a portion of the costs  relating to the  registration,  in July
     1996,  of  1,444,421  shares of Common  Stock on Form S-1,  classified  and
     included in "Other  nonrecurring  charges",  of which 1,194,421 shares were
     registered for resale by selling stockholders from time to time and 250,000
     shares were registered for sale by the Company from time to time.



          Revenues: Revenues for the year ended December 31, 1996 were $138,225,
as compared to $94,957 for the year ended  December  31,  1995.  The increase is
wholly attributable to increases in sales of General Display Terminals.

          Sales of the Company's  General  Display  Terminals  more than doubled
from $47,274 for the year ended December 31, 1995 to $110,671 for the year ended
December  31,  1996.  The  increase  was due to the  Digital  Acquisition,  with
increases in sales to other OEM's offsetting a $6,500 decline in sales to NCR.

          Sales of Network Graphic Displays  declined $14,425 to $12,643 for the
year ended December 31, 1996, from $27,068 for the year ended December 31, 1995.
This decline related to specific projects undertaken by NCR during 1995.

          Net  sales  from  the  Company's  repairs  and  spare  parts  business
increased  71%, or $2,861 from  $4,006 for the year ended  December  31, 1995 to
$6,867 for the year ended  December 31, 1996.  The increase was due to increased
spares sales to NCR and start-up  spares  sales to Digital  under a  maintenance
service agreement entered into in connection with the Digital Acquisition.

          GAI Partnership  royalties for the year ending December 31, 1996, were
$2,917  versus $1,383 for 1995  (May-December).  The GAI  Partnership  agreement
provides  for the  payment  of  royalties  to the  Company  as a  percentage  of
partnership  revenues,commencing  May 1995, as follows: months 1-12, 12%; months
13-24, 10%; months 25-36, 9%; months 37-48, 8%; and months 49-60, 7%.

          Digital was the most significant  customer for the Company's products,
accounting for 15.7% of revenues for the year ended December 31, 1996.  Sales to
NCR accounted for 13.7% of revenues in 1996.

          Gross  Margin.  Gross margin for the year ended  December 31, 1996 was
$28,557  (20.7% of  revenue),  as  compared  to gross  margin for the year ended
December 31, 1995 of $25,573 (26.9% of revenue).  The decline in gross margin as
a  percent  of  revenue  was due to a shift in  revenue  mix  from  sales of the
Company's  higher margin Pick systems (until May, 1995, when the GAI partnership
was formed) and post-sale support business to the Company's lower margin Network
Graphics Displays and General Display Terminals. In addition,  during the fourth
quarter of 1996,  the Company  recorded  inventory  reserves and  write-offs  of
$2,241  representing an estimate of excess material on hand as of the end of the
year; and wrote-off  approximately $284 of previously  capitalized  research and
development  cost as a result  of the  cancellation  of  certain  programs.  The
combined  effect of these  reserves and write-offs was to reduce gross margin by
1.8%.  Changes in retail  pricing did not have a material  adverse effect on the
Company's gross margin in 1997 or 1995.

                                       17
<PAGE>

          Total  Operating  Expenses.  For the year  ended  December  31,  1996,
operating  expenses  were $25,388  (18.4% of revenue),  compared to expenses for
1995 of $18,274 (19.2% of revenue).

          Sales and Marketing  Expenses.  Sales and marketing expenses increased
31.4% from  $7,940 for the year ended 1995 to $10,433  for the year ended  1996.
The increase  related to marketing and  advertising  efforts  focused on the new
name for Boundless as well as public  relations  activities  to develop  channel
partners, launch the Company's thin client product line and integrate the VT and
Dorio product line into Boundless' product family.

          General  and  Administrative  Expenses.   General  and  administrative
expenses  increased  28.1% from $6,337  (6.7% of  revenue),  to $8,120  (5.9% of
revenue)  for the  periods  ending  December  31,  1995 and 1996,  respectively.
Amortization of goodwill  associated with the Boundless  Acquisition and Digital
Acquisition increased $860 offsetting declines in legal and audit expenses.

          Research and Development  Expenses.  Research and development expenses
increased  from  $4,569  in 1995 to  $4,855 in 1996.  Research  and  development
expenses  for  1996  include  a  write-off  of $649 for  previously  capitalized
expenses associated with research projects the Company had abandoned.

          Other  Nonrecurring  Charges.   During  the  fourth  quarter  of  1996
Boundless  recorded  reserves  of  $1,804  relating  to  the  reduction-in-force
discussed above. Of this amount,  $1,473 related to severance  payments and $331
related to the closing of the Company's Orlando, Florida, facility.

          Interest  Expense.  Interest expense (net of interest income) amounted
to $3,794 for the year ended  December 31, 1996 compared to $1,907 for 1995. The
increase was  attributable to the Digital  Acquisition,  which was financed,  in
part, with the Chase Credit Line.

          Income Tax Expense. Income tax expense for the year ended December 31,
1996 was $962  compared  to $1,538  for the year ended  1995.  During the fourth
quarter of 1995,  the Company  recorded a reversal of a deferred  tax  valuation
allowance  resulting in a reduction in tax expense of $1,100.  This reversal was
due to management's reassessment of the realizability of the deferred tax asset.
The income tax expense in 1996 related to state income taxes of Boundless and to
the   Company's   determination   that  the   valuation   allowance   should  be
re-established.

          Loss From  Discontinued  Operations.  For the year ended  December 31,
1995 the  Company  recorded a loss of $223  relating  to its  disposition  of an
investment in a diamond mining property  located in Sierra Leone.  Additionally,
for the year  ended  December  31,  1995,  the  Company  realized a gain (net of
applicable  taxes) of $1,372 from the sale,  in January  1995,  of a business in
which it was  previously  engaged  and  which  was  unrelated  to the  Company's
business.

          The Company also  recorded a loss relating to OTW of $9,652 and $2,019
for the periods ended December 31, 1996 and 1995, respectively. Since commencing
business in 1995 OTW incurred  net losses;  and OTW's  predecessor  incurred net
losses of $645 in 1993 and $285 in 1994.  OTW  recorded  revenues  of $1,900 for
1996 but was not able to generate material revenues from its products.

          Extraordinary  Loss on Early  Extinguishment  of Debt.  During October
1995,  the Company  incurred  expenses of $589 (net of a tax benefit of $393) in
connection  with the Digital  Acquisition.  The total  charge was composed of an
early termination fee under the Company's previous revolving  line-of-credit and
related costs that had been  capitalized  when the previous  line-of-credit  was
originally obtained.

          Net Income/ (Loss). For the year ended December 31, 1996, the net loss
was $(11,239) , compared to net income of $2,610 for the year ended December 31,
1995.

                                       18
<PAGE>
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.  Management  does not  believe  that  the  developing
economic  recession  in  Asia  will  have an  adverse  impact  on the  Company's
operation.

Liquidity and Capital Resources

          The discussion below regarding  liquidity and capital resources should
be read together with the information  included under Notes 5 and 18 of Notes to
Consolidated Financial Statements.

          Working  capital was  approximately  $8,780 as of December  31,  1997,
compared to $3,172 as of December 31, 1996. Historically, the Company has relied
on cashflow from  operations,  bank  borrowings and sales of its common stock to
finance its working capital, capital expenditures and acquisitions.

          The Company  currently has a bank credit  facility that is provided by
Chase.  At December  31,  1997,  the Chase  Credit Line  consisted  of a $15,000
revolving  line of credit  ("Revolving  Loan")  and a $20,000  term loan  ("Term
Loan").  Borrowing under the Revolving Loan is based on a borrowing base formula
of up to 80% of eligible receivables, plus 50% of delineated eligible inventory,
plus 30% of non-delineated  eligible inventory.  Up to $7,500 is available under
the Revolving Loan for letters of credit. At December 31, 1997, the Company owed
Chase $10,900,  of which $7,650 was owed under the Revolving Loan and $3,250 was
owed under the Term Loan.  The  balance  of the Term Loan is  repayable  in four
quarterly installments of $1,000 terminating December 31, 1998, the same day the
Revolving Loan terminates. At December 31, 1997, the Company had availability of
$1,094 under the Revolving Loan. As a result of the borrowing base formula,  the
credit  available to the Company  could be adversely  restricted in the event of
further  declines in the Company's sales and increases in orders may not be able
to be financed under the Chase Credit Line.

          During  1996,  the Company  violated  certain  covenants  of the Chase
Credit Line.  Prior to the fourth quarter covenant  violations,  Chase, as agent
for the bank syndicate,  had been granting waivers of these covenant  violations
without requiring any material change in the governing documents. As a result of
the fourth quarter  violations,  the Company entered into  negotiations with the
bank  syndicate  to revise  the  covenants  and to obtain a waiver of the fourth
quarter violations.  During March 1997, the Company completed  negotiations with
the bank  syndicate and obtained  both the requested  revisions to the covenants
and the waiver of the fourth quarter  violations,  principally in exchange for a
payment  of  $500  by  the  Company.  As a  result  of  continued  profitability
throughout 1997, and the significant reduction in outstanding debt, the Company,
during  December,  1997,  renegotiated  its  loan  agreements  to  provide  more
favorable  terms to the  Company.  While the Company  believes it will  maintain
compliance with the revised covenants, there can be no assurance that it will be
able to comply.

          Net cash  provided  by  operating  activities  related  to  continuing
operations  during the year ended  December  31, 1997 was  $16,688,  principally
related to collections  of accounts  receivable and reductions in inventories of
$6,872 and $5,438, respectively. These collections and reductions were partially
offset by reductions in accounts  payable and other accrued  expenses of $3,146.
Net cash used to settle the remaining payables of the discontinued operations of
OTW was $3,492.  Net cash used in investing  activities was comprised of capital
expenditures  of $247.  Net cash used in financing  activities  was  principally
comprised of repayments of outstanding  obligations  under the Chase Credit Line
of $16,423  and a loan  renegotiation  fee of $450,  offset by net  proceeds  of
$1,513 from the issuance of convertible  notes,  and the exercise of options and
warrants which provided net cash of $136.

          In addition to obligations  previously  discussed,  long-term  capital
requirements at December 31, 1997 included: (i) a secured note payable to NCR of
$8,000 (the "NCR Note") bearing interest at 8% per annum payable  quarterly with
principal due on or before  January 31, 1999;  (ii) $3,555 payable upon exercise
by NCR in 1999  of the  Amended  Put  Option  (defined  in  Note 3 of  Notes  to
Consolidated Financial Statements);and (iii) a lease commitment of $130 per year
through December 1998 for the Company's Austin, Texas facility.

                                       19
<PAGE>

          The  terms of the NCR Note and the Put  Option  were  restructured  in
October  1995,  in  connection  with the Digital  Acquisition.  As a part of the
restructuring,  the  Company  agreed  to pay NCR  $498 in cash or the  Company's
Common  Stock on each  October 20 until the  Amended  Call Option or Amended Put
Option is exercised.  The October 1997  obligation was satisfied by the delivery
of  shares of  Common  Stock to NCR.  Also,  as part of the  restructuring,  the
maturity  date of the NCR Note was extended to January 31, 1999 from the earlier
of  December 9, 1997 or the closing of a public  offering  by  Boundless  or the
Company.

          The Company's principal  obligations under the Amended Put Option come
due after the  expiration of the Chase Credit Line.  The Company will attempt to
finance the payment of this obligation as part of a replacement  credit facility
which will be required to refinance the  Company's  existing  revolving  line of
credit.

          At  December  31,  1997,  the  Company's   total  long-term  debt  was
approximately  $10,288  and  the  current  portion  of the  long-term  debt  was
approximately  $3,250.  The Company  believes that cash  generated by Boundless'
operations will be sufficient to pay the Company's  current and long-term debts,
when due,  except that the Company will be required to  refinance  the NCR Note,
which is secured by a  mortgage  on the  Company's  Hauppauge  facility,  by its
January 31, 1999 due date.



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.  The Company  follows an  inventory  cycle  count  program  which
dictates either monthly,  quarterly,  or semi-annual  physical  inventory counts
depending  upon product  cost and usage.  Additionally,  an annual  wall-to-wall
physical count is conducted and results are compared to the Company's  perpetual
inventory records.

          The Company utilizes various subcontractors that manufacture component
parts of its products  based on  specifications  supplied by the  Company.  As a
guideline, the Company attempts to have two qualified subcontractors for each of
its high dollar value, long lead time, customized components which it chooses to
outsource.  In certain cases, the Company may decide to purchase components from
only one of the qualified  subcontractors in an attempt to control manufacturing
overhead  costs tied to  supplier  management  and  development.  In most cases,
backup qualified  subcontractors are identified by the Company in the event that
termination of the primary source could occur. If such a termination occurs, the
Company may experience  short-term  production  delays and increases in material
and freight costs as the alternate  subcontractor  initiates production runs and
expedites  delivery to the  Company.  Furthermore,  worldwide  shortages  of raw
material  creates supply  problems for the computer  industry from time to time.
Such supply shortages may cause market price increases and allocated  production
runs which could have an adverse effect on the Company's business.

          Inventory turnover was 3.2 times in 1995 versus 4.2 times in 1996, and
4.2 times in 1997.  The  inventory  turnover  rate  increased  from 1995 to 1996
primarily due to a significant  decline in the net average inventory position of
the Company  from  $25,758 for 1995 to $18,525 for 1996.  Inventory  reserves at
December  31, 1996 were $5,853 and were $3,996 for the year ended  December  31,
1997.

          Accounts Receivable.  The Company sells its products on prepayment and
net 30 day terms.  Receivable  turnover was 7.6 in 1995,  7.4 in 1996 and 6.0 in
1997.

                                       20
<PAGE>
Compliance with Year 2000

          Management  has  initiated  a Company  wide  program  to  prepare  the
Company's  computer  systems  and  applications  for Year 2000  compliance.  The
Company  expects  to  incur  internal  staff  costs  as well as  other  expenses
necessary to prepare its systems for the year 2000. The Company  expects to both
replace some systems and upgrade others.  Maintenance or modification costs will
be expensed as incurred. The total cost of this effort is still being evaluated,
but is not expected to be material to the Company.


New Accounting Pronouncements

          Statement of Financial  Accounting  Standards No. 129,  "Disclosure of
Information about Capital Structure" ("SFAS No. 129") is effective for financial
statements ending after December 15, 1997. The new standard  reinstates  various
securities  disclosure   requirements  previously  in  effect  under  Accounting
Principles  Board Opinion No. 15, which has been superseded by SFAS No. 128. The
Company does not expect adoption of SFAS No. 129 to have a material  effect,  if
any, on its consolidated financial position or results of operations.

          Statement  of  Financial  Accounting  Standards  No.  130,  "Reporting
Comprehensive  Income"  ("SFAS No. 130") is effective for  financial  statements
with fiscal years  beginning  after  December 15, 1997.  Earlier  application is
permitted.  SFAS No. 130  establishes  standards  for  reporting  and display of
comprehensive  income  and  its  components  in a full  set  of  general-purpose
financial statements.  The Company has yet to determine the preferred format for
presenting this information.

          Statement of Financial  Accounting Standard No. 131, "Disclosure about
Segments of an Enterprise and Related Information" ("SFAS No. 131") is effective
for financial  statements  beginning  after  December 15, 1997. The new standard
requires that public  business  enterprises  report  certain  information  about
operating  segments in complete sets of financial  statements of the  enterprise
and in condensed financial statements of interim periods issued to stockholders.
It also requires that public  business  enterprises  report certain  information
about their products and services,  the  geographic  areas in which they operate
and their major  customers.  The Company is presently  evaluating  the impact of
SFAS No. 131 on its financial reporting.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
         ---------------------------------------------------------

          None.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
        -------------------------------------------

          See Item 14(a)(1) and (2) of Part IV of this Report.

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

          On December 17, 1996,  Coopers & Lybrand L.L.P.  ("Coopers & Lybrand")
resigned as the  independent  accountants of the Company.  During the two fiscal
years,  and any interim  period,  preceding  December  17, 1996 (the  "Reporting
Period"),  none of  Coopers  &  Lybrand's  reports  on the  Company's  financial
statements  contained  an adverse  opinion or a  disclaimer  of opinion,  or was
qualified or modified as to uncertainty,  audit scope or accounting  principles.
During the Reporting  Period,  there were, to the best knowledge of the Company,
no matters of  disagreement  between it and  Coopers & Lybrand  which would have
caused  Coopers & Lybrand to make a  reference  thereto in  connection  with its
report.

          During the Reporting Period,  the Company was not advised by Coopers &
Lybrand (1) that internal controls necessary for the Company to develop reliable
financial  statements did not exist;  (2) that Coopers & Lybrand would no longer

                                       21
<PAGE>

be able to rely on management's  representations  or that it was unwilling to be
associated  with the  financial  statements  prepared  by  management;  (3) that
Coopers & Lybrand  needed to expand  significantly  the scope of its audit;  (4)
that Coopers & Lybrand had received  information  which did, or which might,  if
further  investigated,  impact  the  fairness  or  reliability  of a  report  or
financial  statement  previously  issued  or to be  issued or which did or might
cause Coopers & Lybrand to be unwilling to rely on  management's  representation
or be associated with the Company's financial  statements;  or (5) that Cooper &
Lybrand did not conduct such further investigation or expanded audit, or was not
able  to  resolve  its  concerns  about  the  Company,  because  of its  pending
resignation as the Company's accountant or any other reason.

          On January 7, 1997,  BDO Seidman,  LLP was appointed by the Company as
its independent accountant. In addition to auditing the financial statements for
the years ended  December 31, 1997 and 1996,  BDO Seidman,  LLP  re-audited  the
financial statements for the year ended December 31, 1995.

                                       22
<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
----                  ---      ---------------------

J. Gerald Combs       48       Chairman of the Board of Directors,
                               Chief Executive Officer

Jeffrey K. Moore      28       Vice President- Corporate Development, Director

Joseph Gardner        38       Vice-President - Finance, Chief Financial Officer

Gary Wood             54       Director

Daniel Matheson       48       Director


          J. Gerald Combs was elected  Chairman and Chief  Executive  Officer of
the Company and its subsidiaries on May 9, 1997. Mr. Combs has been the Chairman
and CEO of Morgan Kent Group,  the majority  shareholder  of the Company,  since
April  1997 and  Chairman  and CEO of  Merrico  Corporation,  a  privately  held
financial  consulting  firm since 1992.  Mr.  Combs also served as  President of
All-Quotes,  Inc., the predecessor of the Company, from October 1993 to December
1994.

          Jeffrey K. Moore has served as a member of the  Company's  Board and a
Vice  President of Boundless  since  January  1997. He joined the Company in May
1996 as a financial  analyst  reporting to the Company's Chief Financial Officer
and President. From September 1996 to April 1997, he had served as President and
Chairman of the Board of Morgan Kent Group.  From  February 1994 to August 1995,
he participated in an executive  training program with Sewell Lexus,  Inc. Prior
to February 1994, Mr. Moore attended Baylor  University  where he received a BBA
in Finance.

          Joseph  Gardner  was  appointed  Vice  President-  Finance  and  Chief
Financial  Officer of the Company  effective  October 31, 1997.  Mr. Gardner has
been employed by Boundless  since April of 1990.  Prior to October 31, 1997, Mr.
Gardner  served as the  Controller  and Vice  President-  Quality  Assurance  of
Boundless.

          Gary Wood has been a member of the Company's  Board of Directors since
November  1996 and has been serving since  September 1, 1997 as Chief  Operating
Officer of Collins Financial Services,  Inc. He serves on the board of directors
of The Capital Network,  Inc., and the Mental Health  Association in Texas. From
April 1988 to December 1995, he served as President of Texas Research League.

          Daniel  Matheson has been a member of the Company's Board since August
1996. Mr. Matheson has been counsel to the law firm of Locke Purnell Rain Harrel
P.C.  in Austin,  Texas  since June 1995 and has  practiced  law in the  general
banking, corporate, securities and state government (legislative and regulatory)
areas  for more  than  twenty  years.  Between  May 1993  and May  1996,  he was
Executive  Vice-President  and General Counsel of The Capital  Network  Systems,
Inc., a  privately-held  telecommunications  company.  Between  January 1994 and
December 1996, he was also Chairman of the Board of The Capital Network, Inc., a
not-for-profit economic development agency.

                                       23
<PAGE>

          The  following   individuals,   although  not  executive  officers  or
directors, are key employees and are expected to make significant  contributions
to the business of the Company:

          Brian L. Hann was appointed  Vice President of Operations of Boundless
in March 1997 after  serving as Vice  President  of  Manufacturing  of Boundless
since December 1994. Mr. Hann has been employed by Boundless since March of 1986
and has  served as  Assistant  Vice  President  of  Manufacturing  and  Customer
Services.

          Michael D. Stebel was appointed Vice President of Global  Marketing of
Boundless in December,  1996.  Mr. Stebel joined  Boundless in 1992 as Marketing
Manager for Boundless' Systems business.

          Non-employee  members  of the  Company's  Board of  Directors  receive
$12,000 annually as compensation  for services  rendered to the Company in their
capacity as directors of the Company.  Gary Wood and Daniel  Matheson  were each
granted options on July 1, 1997,  15,000 and 25,000,  respectively,  to purchase
shares of Common  Stock at $6.60  per  share  that  expire in July 2002 and vest
immediately  on the date of grant.  In addition,  Mr.  Matheson was paid $50,000
during 1997 in  recognition  for  services  rendered  to the Company  during the
period from August, 1996, to July, 1997, for which services Mr. Matheson had not
otherwise been compensated.


Section 16(a)  Beneficial Ownership Reporting Compliance

          A review of the Forms 3 and 4  relating  to the  Company's  securities
indicates  that the Form 3 relating to Mr.  Jeffrey  Moore's  appointment to the
Board in January 1997, and the Form 4 relating to Morgan Kent Group's assignment
in June 1997 of less than 1% of its warrants to purchase shares of Common Stock,
were not timely  filed with the  Commission.  The Company has been  advised that
such tardiness was inadvertent.


                                       24
<PAGE>



ITEM 11. EXECUTIVE COMPENSATION
         ----------------------

          The table below discloses all cash compensation  awarded to, earned by
or paid to the  Company's  present  and  former  Chief  Executive  Officer,  the
executive  officer of the  Company who earned more than  $100,000  for  services
rendered in all  capacities to the Company during the fiscal year ended December
31, 1997, and the two highest paid individuals who earned more than $100,000 for
services rendered to the Company but who were not executive officers at December
31,  1997  (collectively,  the "named  executive  officers").  In  addition,  it
provides information with respect to the compensation paid by the Company to the
named executive officers during 1996 and 1995.


                           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>
J. Gerald Combs(1)          12/31/97         $123,436              -             $8,497           65,000                 -
CEO and Chairman            12/31/96                -              -                  -                -            11,546
                            12/31/95                -              -                  -                                  -


Leonard MacKenzie           12/31/97                -              -                  -                                  -
Former CEO and              12/31/96                -              -                  -           50,000                 -
Chairman                    12/31/95                -              -                  -                -                 -


Thomas Upton(2)             12/31/97          $96,058              -            $67,244           12,500                 -
President, Boundless        12/31/96          $95,733         $1,031            $35,227            5,500                 -
Global Distribution         12/31/95          $75,610              -           $117,451            1,000                 -

Joseph Gardner              12/31/97         $100,000        $25,000                  -           10,000                 -
Vice President-Finance                        $99,673        $23,440                  -            1,500                 -
Chief Financial Officer                       $93,559         $5,480                  -            6,500                 -

Brian Hann                  12/31/97         $119,788              -                  -           12,500                 -
Vice President                               $111,577        $34,511                  -            3,000                 -
Operations                                    $99,996         $5,925                  -            6,500                 -
</TABLE>


(1)  Other annual  compensation for 1997 includes taxable fringe benefits.  "All
     Other Compensation" for 1996 consists of 11,546 shares of registered Common
     Stock  granted  during the period Mr.  Combs acted as a  consultant  to the
     Company. In 1997, Mr. Combs' pre-existing options to purchase 90,000 shares
     of Common  Stock at an  exercise  price of $15.00  per share  (expiring  on
     January 24,  1999 as to 20,000  options and on October 3, 1999 as to 70,000
     options)  were  amended so that the  exercise  price is $6.60 per share and
     they expire on July 1, 2002.

(2)  Other  annual  compensation  consisted of  commissions  of $67,244 in 1997,
     $35,227 in 1996, $31,702 in 1995 and reimbursement for relocation  expenses
     of $85,749 in 1995. Resigned January 24, 1998.



                                       25
<PAGE>


Employment Agreements

          None of the  Company's  officers has an  employment  contract with the
Company.

Compensation Committee Interlocks and Insider Participation

          Mr. Combs, Mr. Jeffrey Moore,  Leonard  MacKenzie and Wayne Schroeder,
who were executive officers of the Company during 1997, were also members of the
Company's Board of Directors during such times and participated in deliberations
concerning executive officer  compensation.  Their joint deliberations gave rise
to conflicts of interest  which could have affected their  compensation  and the
number of stock  options  granted to them  individually  and as a group.  During
parts of 1997,  Mr.  Combs  and Mr.  Moore  were also  members  of the Board and
officers of Morgan Kent Group which had certain relationships,  and entered into
certain  transactions,  with the Company  during 1997 as  described  below under
"Item 13- Certain Relationships and Related Transactions."



                                       26
<PAGE>

1995/ 1997 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.

                        Option Grants in Last Fiscal Year
                        ---------------------------------


          The following table sets forth  information,  as of December 31, 1997,
regarding the outstanding options to purchase the Company's Common Stock granted
in 1997 under either the Company's  1995  Incentive  Plan or 1997 Incentive Plan
("1995/1997 Plan" ) to the named executive officers:



<TABLE>
<CAPTION>
                             Number of                                                      Potential Realizable
                             Securities     Percent of Total                                  Value at Assumed
                             Underlying       Options/SARs     Exercise or                  Annual Rates of Stock
                            Options/SARs     Granted under     Base Price   Expiration      Price Appreciation for
          Name             Granted (#)(3)    1995 /1997 Plan      ($/Sh)       Date              Option Term
          ----             --------------    ---------------      ------       ----              -----------
                                                                                               5% ($)      10% ($)
                                                                                               ------      -------
<S>                        <C>               <C>                <C>          <C>              <C>          <C>
J.Gerald Combs (1)(3)          65,000             14.7%          $ 6.60      7/02/02          118,525      261,909
Thomas Upton (2)(3)            12,500              2.8%          $10.00      6/07/02           34,535       76,314
Joseph Gardner (2)(3)          10,000              2.3%          $10.00      6/07/02           27,628       61,051
Brian Hann (2)(3)              12,500              2.8%          $10.00      6/07/02           34,535       76,314

</TABLE>





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

          (1)  Options  vest as  follows:  With  respect to 40,000  shares,  the
options  vested at the date of grant  specified  in footnote 3; with  respect to
12,500 shares,  the options vest one year after the  applicable  grant date, and
the  remaining  options  to  purchase  12,500  shares  vest two years  after the
applicable grant date.

          (2) Options  vest 50% one year  following  the  applicable  grant date
specified  in  footnote  3, below and the  remainder  vest pro rata on a monthly
basis over the subsequent three years.

          (3) Grant  dates  are as  follows:  Combs:  7/01/97;  Upton:  6/06/97;
Gardner: 6/06/97; Hann: 6/06/97.


                                       27
<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,  1997.

<TABLE>
<CAPTION>
                                                                         Value of  Unexercised
                                       Number of  Unexercised  Options   In-the-Money Options at
                                           at December 31, 1997 (#)      December 31, 1997 ($)(1)
                                       -------------------------------  -------------------------

                    Shares
                  Acquired on   Value
     Name         Exercise(#)  Realized  Exercisable  Unexercisable     Excisable  Unexercisable
     ----         -----------  --------  -----------  -------------     ---------  -------------
<S>                    <C>        <C>         <C>         <C>               <C>         <C>

J. Gerald Combs       $0          $0       130,000         25,000           $0          $0

Leonard Mackenzie      0           0        50,000            -              0           0

Thomas Upton           0           0         3,021         15,979            0           0

Joseph Gardner         0           0         2,885         13,115            0           0

Brian Hann             0           0         5,635         16,365            0           0

</TABLE>

(1)  The last sale price of the Company's  Common Stock on December 31, 1997, as
     reported by The Nasdaq SmallCap Market, was $ 6.56.



                                       28
<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 5,
1998, 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 Morgan Kent Group is 711 Fifth Avenue, 5th Floor, New York, NY 10022.
The address of Stephen  Maysonave is 919  Corriente  Pointe,  Redwood  City,  CA
94065.

                                   Number of Shares         Percentage  of
Name of Beneficial Owner           Beneficially Owned     Outstanding Shares
------------------------           ------------------     ------------------


Morgan Kent Group, Inc.               2,951,440(1)               54.2%
Stephen Maysonave, Voting Trustee     2,951,440(1)(2)            54.2%
J. Gerald Combs                         131,100(3)                2.5%
Leonard Mackenzie                        50,000(3)                1.0%
Gary Wood                                15,000(3)                   *
Daniel Matheson                          25,000(3)                   *
Jeffrey Moore                            25,000(2) (3)               *
Joseph Gardner                            3,885(3)                   *
Thomas Upton                              8,760(3)                   *
Brian Hann                               10,823(3)                   *
All current directors and executive
 officers as a group
 (seven individuals)                    219,569(3)                4.1%
--------------------------------

*    Less than 1%.

(1)  Includes  307,502  shares  underlying the warrant held by Morgan Kent Group
     (the "Morgan Kent Group  Warrant") to purchase shares of Common Stock at an
     exercise  price of  $7.50  per  share.  These  warrants  were  repriced  in
     September,  1997, from $18.40 per share and the number of shares underlying
     the warrants were reduced from 414,970 to 327,847.

(2)  Includes the shares beneficially owned by Morgan Kent Group, as a result of
     Mr.  Maysonave's  beneficial  ownership,  as voting  trustee,  of 3,330,000
     shares of Series B  Preferred  Stock of Morgan  Kent Group  (the  "Series B
     Preferred")  pursuant  to a  voting  trust  expiring  March  1999.  Under a
     stockholders agreement, the Series B Preferred has the power to elect three
     of the five  directors  constituting  Morgan Kent  Group's  entire board of
     directors  which has the sole voting power and,  with the  stockholders  of
     Morgan Kent Group,  shares the investment  power with respect to the Common
     Stock owned by Morgan Kent Group. The 3,330,000 shares  constitute 51.2% of
     the 6,500,000 outstanding shares of the Series B Preferred. Messrs. Jeffrey
     K.  Moore and  Matthew  R.  Moore (the  "Moore  Brothers")  together  own a
     majority of the outstanding shares of the Series B Preferred and a majority
     of the shares in the voting trust,  and,  voting  together,  have the power
     under the voting  trust  agreement to replace  Stephen  Maysonave as voting
     trustee at any time for any reason.  Each of the Moore  Brothers  disclaims
     beneficial  ownership of the other's shares of Morgan Kent Group's Series B
     Preferred.  There can no assurance  that a change of control of the Company
     will not  occur as a result  of sales of  Series B  Preferred  owned by the
     Moore Brothers in order to satisfy court orders  (currently being appealed)
     for restitution of $12 million to federal agencies by William Moore,  their
     father.

(3)  Includes or consists of shares of Common Stock  issuable  upon  exercise of
     options as follows: Mr. Combs:  130,000;  Mr. Mackenzie:  50,000; Mr. Wood:
     15,000; Mr. Matheson:  25,000; Mr. Moore:  25,000; Mr. Gardner:  3,885; Mr.
     Upton:  3,760; and Mr. Hann:  6,823. Mr. Mackenzie is a former Chairman and
     Chief Executive Officer of the Company.


                                       29
<PAGE>


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
         ----------------------------------------------

          During a  portion  of 1997,  Morgan  Kent  Group  was a  guarantor  of
$750,000  owed  by OTW to MCC  through  the  end of 1997  under  the  Technology
Agreement  between OTW and MCC.  Additionally,  in connection with the Company's
acquisition of OTW, OTW owed MCC $1,250,000  payable through the end of 1997 and
MCC was  disputing  the adequacy of the delivery of 6,000 shares of Common Stock
to satisfy a $250,000  payment due in 1996. In March 1997, MCC, OTW, the Company
and Morgan Kent Group entered into agreements  whereby all prior  obligations of
the parties,  including Morgan Kent Group's guaranty,  were discharged and OTW's
membership in MCC was terminated.  The Company paid MCC $500,000 and OTW granted
MCC a  non-exclusive  license to use  TradeVPI and assigned to a designee of MCC
OTW's rights in the Infosleuth Project.

          As of April, 1997, the Company agreed to pay Morgan Kent Group $20,000
per month for financial consulting  services,  which services the Company deemed
critical to its success. In October,  the Company prepaid this fee in the amount
of $380,000, and for 1997 recorded an expense of $162,500.

          In connection  with the Digital  Acquisition  in October 1995,  Morgan
Kent Group pledged (the "Pledge")  2,143,938 shares of Common Stock to Chase and
500,000  shares of Common  Stock to NCR. In  consideration  of the  Pledge,  the
Company  had agreed to issue to Morgan  Kent Group  warrants  to  purchase  such
number of shares of Common Stock at $38.75 per share, subject to adjustment,  as
the Board of Directors of the Company determined was appropriate after obtaining
independent  advice  regarding  the  fairness  of  such  warrants  (a  "fairness
opinion"). In December,  1997, Morgan Kent Group accepted the Company's offer of
$300,000 in lieu of such warrants,  an amount approved by the Board of Directors
after  receiving  quotations  for the cost of a fairness  opinion  regarding the
value of such  warrants.  The  Company  paid this  obligation  during  the first
quarter of 1998. The Pledge to Chase was terminated December 1997.

          The Company and Morgan Kent Group had  anticipated  that the operating
results of the Company, as a result of the Digital Acquisition, would enable the
Company to meet its  covenants  under the Chase  Credit Line and  terminate  the
Chase portion of the Pledge by November,  1996.  The Company did not achieve the
operating  results  necessary  to release  Morgan  Kent Group from the Pledge to
Chase and, as a result,  the Company agreed to pay Morgan Kent Group,  effective
January 1, 1997, an asset  utilization  fee of $17,500 per month for each month,
or part thereof, that the Pledge, either to Chase or NCR, remains in effect. For
1997 such fees amounted to $192,500.  The Pledge to Chase was canceled  December
1997. The Pledge to NCR remains in effect.


          In July,  1997,  the Company  loaned Morgan Kent Group $50,000 and, in
return,  Morgan Kent Group signed a promissory  note due July,  1999 and bearing
interest at a rate equal to the  Company's  borrowing  rate under its  revolving
credit line.  Interest is payable one year  following the date of the note,  and
quarterly thereafter.

          In  September,  1997,  the Company and Morgan Kent Group  negotiated a
repricing of the warrant (the "Morgan Kent Group Warrant") which had been issued
to Morgan Kent Group in consideration  for Morgan Kent Group's  guarantee of the
Amended Put Option to NCR.  Using the  Black-Scholes  option  pricing  model the
Morgan Kent Group Warrant to purchase  414,970  shares of Common Stock at $18.40
per share was repriced to $7.50 per share, and the number of Common Stock shares
purchasable  upon  exercise  of the Morgan  Kent Group  Warrant  was  reduced to
327,847 shares.


                                       30
<PAGE>




                                     PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE,
         AND REPORTS ON FORM 8-K                                        Page No.
         ----------------------- ---------------                        --------

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


                  Index to Financial Statements


         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, 1997 or is
         not applicable or required.


         (3)      The  exhibits  listed in the  exhibit  index  attached to this
                  Report are filed as part of this Report.

(b)      Reports on Form 8-K
         -------------------

         The  Company  did not file any  reports  on Form 8-K  during the fourth
quarter of 1997.



                                       31
<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:  March 30, 1998

                                          BOUNDLESS CORPORATION




                                          By:  /s/
                                               ---------------------------------
                                               J. Gerald Combs
                                               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.



/s/                    Chairman of the Board of Directors,        March 30, 1998
---------------------
J. Gerald Combs        Chief Executive Officer


/s/                    Vice-President - Finance, Chief Financial  March 30, 1998
---------------------
Joseph Gardner         Officer (Principal Accounting Officer)


                       Vice President, Director                   March 30, 1998
---------------------
Jeffrey K. Moore


/s/                    Director                                   March 30, 1998
---------------------
Daniel Matheson


/s/                    Director                                   March 30, 1998
---------------------
Gary Wood



<PAGE>

                                  EXHIBIT INDEX
                                  -------------


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

3.1**          Certificate  of  Incorporation   and  Certificates  of  Amendment
               thereto.

3.2[5]         By-Laws


10(a)[2]       Joint  Marketing  and Volume  Purchase  Agreement  by and between
               Applied  Digital Data Systems,  Inc. and AT&T Global  Information
               Solutions Company, dated December 12, 1994.

10(b)[4]       Lease,  dated August 22,  1994,  between  International  Software
               Systems,  Inc. and SunRiver  Corporation  (now Morgan Kent Group,
               Inc.) of the  premises  located at Suite 201,  Building  IV, 9430
               Research  Blvd.  Austin,  Texas.  (Originally  filed  as  exhibit
               10(e).)

10(c)[3]       Operating  Agreement for General  Automation LLC, dated as of May
               22,  1995,  between  SunRiver  Data  Systems,  Inc.  and  General
               Automation, Inc. (Originally filed as exhibit 10(g).)

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

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

10(f)[1]       Asset Purchase  Agreement,  dated as of October 20, 1995, between
               Digital  Equipment  Corporation,  as Seller,  and  SunRiver  Data
               Systems, Inc., as Purchaser. (Originally filed as exhibit 2(a).)

10(g)[1]       Basic Order  Agreement  for Text  Terminals  Products  and Parts,
               dated  as  of  October  20,  1995,   between  Digital   Equipment
               Corporation,  as Buyer,  and  SunRiver  Data  Systems,  Inc.,  as
               Seller,  with  Registrant  as  guarantor  of the  obligations  of
               SunRiver  Data Systems,  Inc.  thereunder.  (Originally  filed as
               exhibit 2(b).)

10(h)[1]       Maintenance  Service  Agreement,  dated as of October  20,  1995,
               between  SunRiver  Data  Systems,   Inc.  and  Digital  Equipment
               Corporation. (Originally filed as exhibit 2(e).)

10(i)[1]       Credit  Agreement  and  Guaranty,  dated as of October 20,  1995,
               among  SunRiver  Data  Systems,   Inc.,  as  Borrower,   SunRiver
               Acquisition Corp. and Registrant, as Guarantors,  SunRiver Group,
               Inc., as  Hypothecator,  and The Chase Manhattan  Bank,  N.A., as
               Agent and Bank. (Originally filed as exhibit 2(k).)

10(j)**        Amendments  1  through  7,  amending  the  Credit  Agreement  and
               Guaranty, dated as of October 20, 1995, among Chase et al.

10(k)          Intentionally Omitted.


10(l)[1]       Security  Agreement,  dated as of October 20,  1995,  between The
               Chase Manhattan Bank,  N.A., as agent and bank, and SunRiver Data
               Systems, Inc. (Originally filed as exhibit 2(n).)

10(m)[1]       Patent Security Interest Agreement, dated as of October 20, 1995,
               between The Chase  Manhattan  Bank,  N.A., as agent and bank, and
               SunRiver Data Systems, Inc. (Originally filed as exhibit 2(o).)

                                      E-1
<PAGE>

10(n)[1]       Trademark  Security Interest  Agreement,  dated October 20, 1995,
               between The Chase Manhattan Bank, N.A. and SunRiver Data Systems,
               Inc. (Originally filed as exhibit 2(p).)

10(o)[1]       Copyright  Security Interest  Agreement,  dated as of October 20,
               1995,  between The Chase Manhattan Bank, N.A., as agent and bank,
               and SunRiver  Data  Systems,  Inc.  (Originally  filed as exhibit
               2(q).)

10(p)[1]       Pledge  Agreement,  dated  October  20,  1995,  between The Chase
               Manhattan Bank, N.A. and Registrant  (Originally filed as exhibit
               2(r).)

10(q)[1]       Pledge  Agreement,  dated  October  20,  1995,  between The Chase
               Manhattan Bank, N.A. and SunRiver  Acquisition Corp.  (Originally
               filed as exhibit 2(s).)

10(r)[1]       Hypothecation  Agreement,  dated  October 20,  1995,  between The
               Chase Manhattan Bank, N.A. and SunRiver Group,  Inc.  (Originally
               filed as exhibit 2(t).)

10(s)[1]       Release and  Reassignment  Agreement,  dated  October  20,  1995,
               between  SunRiver  Data  Systems,  Inc.  and  Congress  Financial
               Corporation. (Originally filed as exhibit 2(u).)

10(t)[1]       Supplementary  Agreement,  dated October 20, 1995, among SunRiver
               Group, Inc., SunRiver  Acquisition Corp.,  SunRiver Data Systems,
               Inc. and AT&T Global Information  Solutions Company.  (Originally
               filed as exhibit 2(v).)

10(u)[1]       Cancellation  of  Pledge  Agreements,  dated  October  20,  1995,
               executed   by  AT&T   Global   Information   Solutions   Company.
               (Originally filed as exhibit 2(w).)

10(v)[1]       Pledge  Agreement,  dated  October 20, 1995,  between AT&T Global
               Information  Solutions Company,  as pledgee,  and SunRiver Group,
               Inc., as pledgor. (Originally filed as exhibit 2(x).)

10(w)[1]       Amended and Restated Call Option, dated October 20, 1995, granted
               to  SunRiver  Data  Systems,  Inc.  relating  to 1,000  shares of
               preferred stock of SunRiver Data Systems,  Inc. (Originally filed
               as exhibit 2(y).)

10(x)[1]       Amended and Restated Put Option,  dated October 20, 1995, granted
               to AT&T Global  Information  Solutions  Company relating to 1,000
               shares  of  preferred  stock  of  SunRiver  Data  Systems,   Inc.
               (Originally filed as exhibit 2(z).)

10(y)[1]       Agreement to Extend  Promissory Note and Mortgage,  dated October
               20,  1995,  among  SunRiver  Acquisition  Corp.,   SunRiver  Data
               Systems,   Inc.  and  AT&T  Global  Information   Systems,   Inc.
               (Originally filed as exhibit 2(aa).)

10(z)[2]       Promissory  Note Secured by Real Estate  Mortgage  from  SunRiver
               Acquisition Corp.  payable to AT&T Global  Information  Solutions
               Company,  dated  December 9, 1994.  (Originally  filed as exhibit
               2(f).)

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

16[6]          Letter  of  Coopers  &  Lybrand  L.L.P.  regarding  change of the
               Company's  certifying  accountant.  (Originally  filed as exhibit
               16(b).)

21**           List of Subsidiaries

23**           Consent of BDO Seidman, LLP.

                                      E-2
<PAGE>


27**           Financial Data Schedule.


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

*              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.

[1]  Incorporated by reference to Registrant's  Current Report on Form 8-K dated
     October 23, 1995.

[2]  Incorporated by reference to Registrant's  Current Report on Form 8-K dated
     December 12, 1994.

[3]  Incorporated  by reference to  Registrant's  amended  Annual Report on Form
     10-K/A for the transition period July 1 through December 31, 1994.

[4]  Incorporated  by reference to  Registrant's  Annual Report on Form 10-K for
     the transition period July 1 through December 31, 1994.

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

[6]  Incorporated  by reference to the  Registrant's  Current Report on Form 8-K
     dated December 17, 1996.



                                      E-3
<PAGE>
                    BOUNDLESS CORPORATION AND SUBSIDIARIES
                         INDEX TO FINANCIAL STATEMENTS


Report of Independent Certified Public Accountants                         F-2

Consolidated Balance Sheets as of December 31, 1997 and 1996               F-3

Consolidated Statements of Operations
  for the years ended December 31, 1997, 1996 and 1995                     F-4

Consolidated  Statements of Changes in Stockholders' Equity
  for the years ended December 31, 1997, 1996 and 1995                     F-5

Consolidated Statements of Cash Flows
  for the years ended December 31, 1997, 1996 and 1995                     F-6

Notes to Consolidated Financial Statements                                 F-8

Schedule I - Condensed  Financial  Information of Registrant (Parent Company)

Condensed Balance Sheets as of December 31, 1997 and 1996                  S-1

Condensed Statements of Operations
  for the years ended December 31, 1997, 1996 and 1995                     S-2

Condensed Statements of Cash Flows
  for the years ended December 31, 1997, 1996 and 1995                     S-3

Schedule II - Valuation and Qualifying Accounts                            S-4



                                       F-1
<PAGE>
                     BOUNDLESS CORPORATION AND SUBSIDIARIES
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS






To the Board of Directors and Stockholders
Boundless Corporation

We have  audited  the  accompanying  consolidated  balance  sheets of  Boundless
Corporation  and  Subsidiaries  as of December 31, 1997 and 1996 and the related
statements of  operations,  stockholders'  equity and cash flows for each of the
three years in the period  ended  December  31,  1997.  We have also audited the
schedules  listed in the index on page F-1 of this Form  10-K.  These  financial
statements  and  financial  statement  schedules are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements and financial statement schedules based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,   the  consolidated  financial  position  of  Boundless
Corporation  and  Subsidiaries  as  of  December  31,  1997  and  1996  and  the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period ended  December 31, 1997 in conformity  with generally
accepted accounting principles.

Also, in our opinion,  the schedules present fairly,  in all material  respects,
the information set forth therein.

                                BDO Seidman, LLP


Dallas, Texas
February 23,  1998,  except for Notes 1, 11 and 19 as
to which the date is March 26, 1998




                                       F-2


<PAGE>
                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                     (in thousands, except per share data)

                                     ASSETS

                                                                 December 31,
                                                            --------------------
                                                               1997       1996
                                                            ---------  ---------

Current assets:                                            $   2,929  $   5,213
   Cash and cash equivalents
   Trade accounts receivable (including $224
      and $2,393 from related parties), net                   14,395     20,928
   Income tax refunds                                            800      1,118
   Inventories (Notes 7 and 10)                               13,682     18,525
   Deferred income taxes (Note 9)                              1,561        -
   Prepaid expenses and other current assets                     711        256
                                                           ---------  ---------
     Total current assets                                     34,078     46,040
Property and equipment, net (Note 8)                          10,614     11,474
Goodwill, net (Note 5)                                         8,428      9,505
Other assets                                                   1,428      2,506
                                                           ---------  ---------
                                                           $  54,548  $  69,525
                                                           =========  =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Note payable (Note 10)                                  $   7,650  $  13,950
   Current portion of long-term debt (Note 10)                 3,250      8,009
   Accounts  payable                                           8,840     10,891
   Accrued  expenses                                           5,378      6,346
   Deferred revenue                                              180        180
   Net liabilities of discontinued operation (Note 18)            -       3,492
                                                           ---------   --------
     Total current liabilities                                25,298     42,868
Long-term liabilities:
  Long-term debt, less current maturities (including
     $8,000 and $8,000 to a related party) (Note 10)           8,000     13,382
  Deferred income taxes (Note 9)                               1,561        -
  Other                                                          727        918
                                                           ---------   --------

     Total long-term liabilities                              10,288     14,300
                                                           ---------   --------
       Total liabilities                                      35,586     57,168

Commitments and  contingencies  (Notes 1, 14, 15, 17 and 18)    -           -

Mandatorily redeemable preferred stock of subsidiary
(Notes 3 and 5)                                                3,555      3,555

Stockholders' equity (Notes 11 and 19):
  Preferred stock                                               -           -
  Common stock                                                    51         49
  Additional paid-in capital                                  34,094     31,877
  Accumulated deficit                                        (18,738)   (23,124)
                                                           ---------   --------

    Total stockholders' equity                                15,407      8,802
                                                           ---------   --------
                                                           $  54,548   $ 69,525
                                                           =========   ========

                  The accompanying notes are an integral part
                  of these consolidated financial statements.

                                       F-3

<PAGE>
                     BOUNDLESS CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                               For the Years Ended
                     (in thousands, except per share data)

                                                       December 31,
                                             ----------------------------------
                                                1997        1996       1995
Revenue:
   Product sales (including sales
      to related parties of $6,476,
      $21,855 and $39,600)                   $  94,607   $ 130,733   $  81,761
   Services                                      3,664       7,492      13,196
                                             ---------   ---------   ---------
      Total revenue                             98,271     138,225      94,957
Cost of revenue:
  Product sales                                 71,477     107,029      62,555
  Services                                       2,028       2,639       6,829
                                             ---------   ---------   ---------
     Total cost of revenue                      73,505     109,668      69,384
                                             ---------   ---------   ---------
       Gross margin                             24,766      28,557      25,573
Operating expenses:
  Sales and marketing                            7,417      10,433       7,940
  General and administrative                     6,213       8,120       6,337
  Research and development                       2,912       4,855       4,569
  Other nonrecurring charges (credits)            (255)      1,980        (572)
                                             ---------   ---------   ---------
    Total operating expenses                    16,287      25,388      18,274
                                             ---------   ---------   ---------
      Operating income                           8,479       3,169       7,299
  Interest expense                               3,730       3,794       1,907
                                             ---------   ---------   ---------
Income (loss) before income taxes,
  extraordinary  item and discontinued
  operations                                     4,749        (625)      5,392
Income tax expense                                (134)        962       1,323
                                             ---------   ---------   ---------
Income (loss) from  continuing  operations       4,883      (1,587)      4,069
Loss from discontinued operations                   -       (9,652)       (870)
                                             ---------   ---------   ---------

Income (loss) before extraordinary item          4,883     (11,239)      3,199
Extraordinary loss on early extinguishment
  of debt, net of tax benefit of $393               -           -         (589)
                                             ---------   ---------   ---------
Net income (loss)                                4,883     (11,239)      2,610
Dividend on  preferred stock of subsidiary         497         497          93
Accretion  to  preferred  stock of subsidiary       -           -          681
Restructuring of preferred stock of subsidiary      -           -        1,668
                                             ---------   ---------   ---------
Earnings (loss) available for common
    shareholders                             $   4,386   $ (11,736)  $     168
                                             =========   =========   =========
Weighted average common shares outstanding       4,925       4,702       4,366
                                             =========   =========   =========
Earnings (loss) per common share from:
  Continuing operations                      $    0.89   $   (0.44)  $    0.37
  Discontinued operations                         0.00       (2.06)      (0.20)
  Extraordinary loss                              0.00        0.00       (0.13)
                                             ---------   ---------   ---------
Basic earnings (loss) per common share       $    0.89   $   (2.50)  $    0.04
                                             =========   =========   =========
Earnings (loss) available for common
  shareholders  adjusted for income
  impact of assumed  conversions             $   4,426   $ (11,736)  $     193
                                             =========   =========   =========
Weighted average dilutive shares outstanding     5,103       4,702       4,674
                                             =========   =========   =========
Diluted earnings (loss) per common share     $    0.86   $   (2.50)  $    0.04
                                             ---------   ---------   ---------
                  The accompanying notes are an integral part
                  of these consolidated financial statements.

                                      F-4
<PAGE>
                     BOUNDLESS CORPORATION AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                     (in thousands, except per share data)

                                                  Additional
                                   Common Stock    Paid-in   Accumulated
                                   -------------
                                   Shares Amount   Capital     Deficit   Total
                                   ------ ------   -------   ---------- --------
Balance, January l, 1995            3,882    $39   $13,902    ($11,556)  $2,385
Common stock sold                     441      5     5,540                5,545
Conversion of notes payable           306      3     4,572                4,575
Distribution of net assets            (74)    (1)   (2,356)              (2,357)
Warrants issued in connection
  with placement of  debt                            1,691                1,691
Restructuring of mandatorily redeemable
  preferred stock of subsidiary                        830      (1,668)    (838)
Dividend on preferred stock
  of subsidiary                                                    (93)     (93)
Accretion to preferred stock
  of subsidiary                                                   (681)    (681)
Net income                                                       2,610    2,610
                                   ------ ------   -------    --------  -------

Balance, December 31, 1995         4,555     46    24,179      (11,388)  12,837
Conversion of notes payable           78      1     1,499                 1,500
Common stock sold                    127      1     2,869                 2,870
Common stock issued for payment
  of long-term debt                    6              300                   300
Options and warrants issued for
  services to non-employees                           526                   526
Stock options exercised               59      1       884                   885
Deferred  compensation
  from below market grants of stock
  options of subsidiary                               107                   107
Dividend on preferred stock
  of subsidiary                       17              497        (497)       -
Warrants exercised                    51      1     1,422                 1,423
Common stock repurchased and
  retired                            (73)    (1)   (1,304)               (1,305)
Common stock issued for
  consulting services                 37              898                   898
Net loss                                                      (11,239)  (11,239)
                                   ------ ------   -------    --------  -------
Balance, December 31, 1996         4,857     49    31,877     (23,124)    8,802

Conversion of notes payable, net
  of expenses                        218      2     1,520                 1,522
Options and warrants  issued for
  services to non-employees                            63                    63
Stock options exercised               16              116                   116
Dividend on preferred stock of
  subsidiary                          35              497         (497)      -
Warrants exercised                    13               21                    21
Net income                                                       4,883    4,883
                                   ------ ------   -------    --------  -------
Balance, December 31, 1997         5,139    $51    $34,094    ($18,738) $15,407
                                   ------ ------   -------    --------  -------


                   The accompanying notes are an integral part
                   of these consolidated financial statements.

                                        F-5

<PAGE>
                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                               For the Years Ended
                      (in thousands, except per share data)

                                                       December 31,
                                             ----------------------------------
                                                1997        1996          1995
                                             -----------  ----------   ---------
Cash flows from operating activities:
  Net income (loss)                          $   4,883    $  (11,239)  $  2,610
  Adjustments to reconcile net income
      (loss) to net cash provided by (used in)
      operating activities:
    Loss loss from discontinued operations          -          9,652        870
    Depreciation  and  amortization              3,725         3,957      2,857
    Loss from  disposal  of assets                  -            133         -
    Deferred  revenues                              -           (647)    (3,193)
    Provision (credit) for doubtful accounts       (20)          180      1,072
    Provision (credit) for excess and
      obsolete inventory                          (595)        3,845        348
    Deferred taxes                                  -            358     (2,256)
    Write off of intangible assets                  -             -       1,554
    Shares issued in settlement of
      management agreement                          -             -         155
    Extraordinary loss on early extinguishment
      of debt                                       -             -         282
    Changes in assets and liabilities:
    Trade accounts receivable                    6,872        (3,548)   (12,270)
    Inventories                                  5,438         3,388     (7,595)
    Other assets                                  (470)        1,592     (1,595)
    Accounts payable and accrued expenses       (3,145)          (76)     8,938
                                               -------       -------    -------
Net cash:
  Provided by (used in) continuing operations   16,688         7,595     (8,223)
  Used in discontinued operations               (3,492)       (6,160)    (1,629)
                                               -------       -------    -------
Net cash provided by (used in) operating
  activities                                    13,196         1,435     (9,852)
Cash flows from investing activities:
  Capital  expenditures                           (247)       (1,384)      (229)
  Purchase of Digital Assets                        -             -     (14,970)
                                               -------       -------    -------
Net cash used in investing activities             (247)       (1,384)   (15,199)
                                               -------       -------    -------
Cash flows from financing activities:
  Net proceeds from issuance of common stock       136         5,177      2,164
  Proceeds from debt issuance                    1,700         1,500     24,575
  Purchase and retirement of common stock           -         (1,305)        -
  Advances on loans payable                         -          5,950      3,365
  Payments on loans payable                    (16,423)       (6,526)        -
  Costs associated with issuance of debt          (637)           -      (1,284)
  Restructuring of mandatorily redeemable
    preferred stock of subsidiary                   -             -      (3,500)
  Payments on capital leases                        (9)           (3)       (11)
                                               -------       -------    -------
Net cash provided by (used in) financing
  activities                                   (15,233)        4,793     25,309
                                               -------       -------    -------
Net increase (decrease) in cash and cash
  equivalents                                   (2,284)        4,844        258
Cash and cash equivalents at beginning
  of period                                      5,213           369        111
                                               -------       -------    -------
Cash and cash equivalents at end of period     $ 2,929       $ 5,213    $   369
                                               =======       =======    =======

                  The accompanying notes are an integral part
                   of these consolidated financial statements.

                                       F-6
<PAGE>
                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
                              For the Years Ended
                     (in thousands, except per share data)

                                                  ------------------------------
                                                     1997       1996      1995
                                                  ------------------------------
Non-cash transactions:
  Accretion to preferred stock of subsidiary      $    -      $    -    $   681
  Dividend on Preferred Stock of Subsidiary           497         497        93
  Distribution of net assets                           -           -      2,357
  Conversion of notes payable to common stock       1,700       1,500     4,575
  Issuance of common stock for Note Payment            -          300        -
  Estimated value of compensatory options and
    warrants                                           63         526     3,216
  Issuance of common stock for consulting services      -         898       380
  Issuance of common stock in Digital Acquisition       -          -      3,000
  Equipment acquisitions funded through capital leases  -         107       232
Cash paid for:
  Interest                                          2,742       4,293     1,615
  Taxes                                               634        (794)    1,553






                  The accompanying notes are an integral part
                   of these consolidated financial statements

                                       F-7
<PAGE>
                     BOUNDLESS CORPORATION AND SUBSIDIARIES
                   Notes To Consolidated Financial Statements
                       (In thousands, except share data)

1.   Background

As further  described  in Note 19, the Company  declared a  one-for-ten  reverse
stock split effective March 26, 1998. All per share amounts in the  consolidated
financial  statements and notes to the  consolidated  financial  statements have
been restated to reflect the  one-for-ten  reverse stock split unless  otherwise
noted.

Boundless  Corporation  (the  "Company")  is engaged,  through  its  subsidiary,
Boundless  Technologies,  Inc.  ("Boundless"),  in designing  and  manufacturing
computer terminals and network computers for business use. The Company's general
strategy is to provide highly efficient,  low cost access to corporate computing
environments, including client/server, mainframes, LANS, WANS, intranets and the
Internet.

The Company entered into the General Display Terminal and high resolution,  high
performance  desktop graphics display terminals  ("Network  Graphics  Displays")
businesses  in  December  1994  when  the  Company,  through  its  wholly  owned
subsidiary,  SunRiver  Acquisition  Corp.  ("Acquisition"),   purchased  Applied
Digital Data Systems, Inc. ("ADDS") from NCR Corporation ("NCR"),  formerly AT&T
Global Information Solutions Company (the "Boundless Acquisition"). ADDS changed
its name to SunRiver Data Systems, Inc. and, in 1996, to Boundless Technologies,
Inc. For more than 25 years, ADDS had been a supplier of general purpose desktop
display  terminals  worldwide under either the customer's or ADDS(R)  trademark.
Simultaneously, with the Company's acquisition of ADDS, the Company acquired all
of the  assets and  business  of  SunRiver  Group,  Inc.  (the  "SunRiver  Group
Acquisition").  Prior thereto,  SunRiver Group, Inc. ("SunRiver Group") had been
engaged,  for more  than nine  years,  in the  development  and  manufacture  of
software and hardware for MultiConsole Terminals.  SunRiver Group,  subsequently
renamed  Morgan  Kent Group,  Inc.  ("Morgan  Kent  Group") was a pioneer in the
development  of high-speed  MultiConsole  Terminals for open system,  multi-user
platforms.

In October  1995,  Boundless  acquired  assets  relating to the General  Display
Terminal  products of Digital Equipment  Corporation  ("Digital") sold under the
"VT" and "Dorio" brands (excluding the VT 400 Series) (see Note 5).

A  partnership  formed in May 1995 by  Boundless  and General  Automation,  Inc.
("GA"), and managed by GA, designs,  integrates,  sells and supports  multi-user
computer  systems that can manage large volumes of data running  Boundless's and
GA's version of the database system  licensed from Pick Systems.  Boundless also
offers post-sale customer support services for its desktop terminals.
Boundless' products and services are offered solely to businesses.

                                       F-8
<PAGE>
                    BOUNDLESS CORPORATION AND SUBSIDIARIES
             Notes To Consolidated Financial Statements, continued
                       (In thousands, except share data)

In April 1995,  the  Company,  through  OTW  Corporation  ("OTW")  (see Note 4),
formerly TradeWave  Corporation,  had been engaged in the business of developing
and selling Internet software and value-added  services which enabled businesses
to conduct private,  secure  communication and electronic commerce  transactions
over the Internet. During December 1996, the Company discontinued the operations
of OTW and, during the first quarter of 1997 finalized the discontinuation  with
the sale of certain  assets of OTW to a company  for a  combination  of cash,  a
royalty on future revenue and the assumption of certain  liabilities.  (See Note
18).

2. Summary of Significant Accounting Policies

Principles of Consolidation
---------------------------

The consolidated  financial  statements  include the accounts of the Company and
its wholly-owned  subsidiaries,  Acquisition and Boundless, after elimination of
intercompany accounts and transactions. Certain reclassifications have been made
to  prior  years'   financial   statements   to  conform  to  the  current  year
presentation.

Cash and Cash Equivalents
-------------------------

All highly  liquid  investments  with  original  maturities at purchase of three
months or less are considered cash equivalents.

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.  Buildings
and  improvements  are  depreciated  over a 25-year  period,  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 income.

Long Lived Assets
-----------------

In accordance with Statement of Financial  Accounting  Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of," management  reviews long-lived assets and intangible assets for
impairment  whenever  events or changes in  circumstances  indicate the carrying
amount  of an asset  may not be fully  recoverable.  As part of the  assessment,
management  prepares an analysis of the undiscounted cash flows for each product
that has significant  long-lived or intangible asset values  associated with it.
This analysis for the asset values as of December 31, 1997  indicated  there was
no impairment to these assets' carrying values.

Fair Value of Financial Instruments
-----------------------------------

The  carrying  amounts  of cash and  cash  equivalents,  mandatorily  redeemable
preferred  stock and long-term debt reported on the balance  sheets  approximate
their fair value. The Company  estimated the fair value of redeemable  preferred
stock and  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.

Research and Development
------------------------

Research and  development  expenses are charged to operations as incurred.  Once
technological feasibility has been established,  costs are capitalized until the
product is ready to be marketed, pursuant SFAS No. 86. At December 31, 1997,1996
and 1995,  capitalized  software development costs, net of amortization were $0,
$74 and $319.
                                    F-9
<PAGE>
                    BOUNDLESS CORPORATION AND SUBSIDIARIES
             Notes To Consolidated Financial Statements, continued
                       (In thousands, except share data)

Revenue Recognition
-------------------

The Company recognizes revenue from product sales upon shipment to the customer.
A provision for estimated  future  returns and potential  warranty  liability is
recorded  at the time  revenue  is  recognized.  The  Company  has  recorded  an
allowance  for doubtful  accounts of $284 and $1,227 as of December 31, 1997 and
1996,  respectively.  Service  revenue is recognized when services are performed
and billable.  Revenue from  maintenance  and extended  warranty  agreements are
deferred and recognized ratably over the term of the agreement.  The Company had
revenue from one customer  representing  16% of total  revenues in 1997, and had
revenues from two customers  representing 16% and 14% of total revenues in 1996.
One customer represented 42% of the 1995 revenue.

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.

Advertising
-----------

Advertising  costs are expensed as incurred.  The amount  charged to advertising
expense was $1,158, $1,631 and $561 for the years ended December 31, 1997, 1996
and 1995.

Goodwill
--------

Goodwill  represents  the excess of the purchase  price and related direct costs
over the fair value of net assets  acquired  as of the date of the  acquisition.
Goodwill is amortized on a  straight-line  basis over 10 years.  Amortization of
goodwill  amounted to $1,078,  $1,117 and $386 for the years ended  December 31,
1997, 1996 and 1995.

Earnings (Loss) Per Common Share
--------------------------------

Earnings (loss)  available for common  shareholders  includes the effects of the
accretion to the preferred stock of a subsidiary and preferred stock dividends.

SFAS  No.  128,  "Earnings  Per  Share"  ("EPS"),  is  effective  for  financial
statements  issued for the periods  ending after  December  15, 1997,  including
interim periods.  SFAS No. 128 requires restatement of all prior period EPS data
presented.  The  adoption of SFAS No. 128 did not have a material  effect on the
Company's EPS calculation.  The new standard also requires a  reconciliation  of
the numerator and  denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS which is as follows:

                                       F-10

<PAGE>
                     BOUNDLESS CORPORATION AND SUBSIDIARIES
             Notes To Consolidated Financial Statements, continued
                       (In thousands, except share data)

                                          For the Year Ended December 31, 1997
                                        ----------------------------------------
                                          Income         Shares       Per Share
                                        (Numerator)   (Denominator)     Amount
                                        -----------   -------------  -----------
Net income                                  $4,883
Preferred stock dividends                     (497)
                                        ----------
  Basic earnings per share:
  Income available to common shareholders    4,386           4,925        $0.89
                                                                     ==========
  Effect of dilutive securities:
  options and warrants                          -              101
  convertible notes                             40              77
                                        ----------    ------------
  Diluted earnings per share:
  Income available to common shareholders
    plus assumed conversions                 4,426           5,103        $0.86
                                        ==========    ============   ==========

                                          For the Year Ended December 31, 1996
                                        ----------------------------------------
                                          Income         Shares       Per Share
                                        (Numerator)   (Denominator)     Amount
                                        -----------   -------------  -----------
Loss from continuing operations            ($1,587)
Discontinued operations                     (9,652)
Preferred stock dividends                     (497)
                                        ----------
  Basic earnings per share:
  Loss available to common shareholders    (11,736)         4,702        ($2.50)
                                                                      =========
  Effect of dilutive securities:
  options and warrants                          -              -
  convertible notes                             -              -
                                        ----------     ----------
  Diluted earnings per share:
  Loss available to common shareholders
    plus assumed conversions              ($11,736)         4,702        ($2.50)
                                        ==========    ============   ==========

                                          For the Year Ended December 31, 1995
                                        ----------------------------------------
                                          Income         Shares       Per Share
                                        (Numerator)   (Denominator)     Amount
                                        -----------   -------------  -----------
Net income                                  $4,069
Extraordinary loss on early
  extinguishment of debt                      (589)
Loss from discontinued operations             (870)
Preferred stock restructuring               (2,349)
Preferred stock dividends                      (93)
                                        ----------
  Basic earnings per share:
  Income available to common shareholders      168          4,366         $0.04
                                                                     ==========
  Effect of dilutive securities:
  options and warrants                          -             248
  convertible notes                             25             60
                                        ----------     ----------
  Diluted earnings per share:
  Income available to common shareholders
    plus assumed conversions                  $193          4,674         $0.04
                                        ==========    ============   ==========


                                      F-11

<PAGE>
                     BOUNDLESS CORPORATION AND SUBSIDIARIES
             Notes To Consolidated Financial Statements, continued
                       (In thousands, except share data)

Options to purchase  289,908 shares of common stock at a weighted  average price
of $17.66 per share were not included in the computation of diluted earnings per
share in 1997 because the options'  exercise  price was greater than the average
market  price of the  common  shares.  The  options  were still  outstanding  at
December 31, 1997.

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.

Income Taxes
------------

As more fully  discussed in Note 9, 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.

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

New Accounting Standards
------------------------

SFAS No.  130,  "Reporting  Comprehensive  Income" is  effective  for  financial
statements  with  fiscal  years  beginning  after  December  15,  1997.  Earlier
application is permitted.  SFAS No. 130 establishes  standards for reporting and
display  of   comprehensive   income  and  its  components  in  a  full  set  of
general-purpose  financial  statements.  The  Company has yet to  determine  the
preferred format for presenting this information.

SFAS  No.  131,  "Disclosure  about  Segments  of  an  Enterprise   and  Related
Information"  is effective for financial  statements with fiscal years beginning
after  December  15,  1997.  The new  standard  requires  that  public  business
enterprises report certain information about operating segments in complete sets
of financial  statements of the enterprise and in condensed financial statements
of interim periods issued to stockholders. It also requires that public business
enterprises  report certain  information about their products and services,  the
geographic areas in which they operate and their major customers. The Company is
presently evaluating the impact of SFAS No. 131 on its financial reporting.

3. Acquisition of SunRiver Group and Boundless

Issuance of Common Stock to Morgan Kent Group (formerly SunRiver Group)
-----------------------------------------------------------------------

Pursuant to the terms of the SunRiver Group Acquisition agreement referred to in
Note 1, on  December 9, 1994 the Company  issued  559,400   shares of its common
stock, $.01 par value ("Common  Stock"), to Morgan Kent Group and also agreed to
issue to Morgan Kent Group,  that number of newly issued  shares that would have
increased  Morgan Kent  Group's  total  ownership of the  Company's  outstanding
common stock to not less than 63% after giving effect to certain other issuances
of Common Stock.

                                      F-11
<PAGE>
                    BOUNDLESS CORPORATION AND SUBSIDIARIES
             Notes To Consolidated Financial Statements, continued
                       (In thousands, except share data)

On December 9, 1994,  the Company did not have a sufficient  number of shares of
authorized  but  unissued  Common Stock  available to complete the  transactions
required by the SunRiver Group Acquisition agreement.  Accordingly, the Board of
Directors  of the  Company  agreed  to take all  steps  required  to  amend  its
Certificate  of  Incorporation  to increase the number of authorized  shares and
issue the required shares to establish Morgan Kent Group's ownership at not less
than 63% of the Company's then  outstanding  common stock.  At December 9, 1994,
the Company  delivered  to Morgan Kent Group proxy and voting  agreements  which
entitled  Morgan Kent Group to represent and vote 310,300  shares at any meeting
of stockholders on any matter requiring  stockholder  approval.  These proxy and
voting agreements, along with the shares issued to Morgan Kent Group at closing,
represented  at  least  51% of the  voting  rights  of  the  outstanding  common
stockholders.  As Morgan Kent Group  unconditionally  controlled the Company and
had the intent and ability to maintain  ongoing  ownership as noted  above,  the
transaction  was  accounted  for effective  December 9, 1994.  During 1995,  the
Company amended its Certificate of Incorporation to increase the total number of
shares of Common Stock  authorized  from 2,000,000 to 6,000,000,  and issued the
additional  shares  (2,084,538),  required under the SunRiver Group  Acquisition
agreement.

During  October 1995,  pursuant to the terms of the SunRiver  Group  Acquisition
agreement and in consideration  for SunRiver Group's guarantee of the Put Option
referred  to in Note 5, the  Company  issued to Morgan  Kent  Group a warrant to
acquire  an  additional  417,470  shares  of the  Company's  Common  Stock at an
exercise price equal to the market value per share of the Company's Common Stock
on December 9, 1994. The value of these warrants was determined to be immaterial
under APB 25 during 1994.

Exchange Offer
--------------

On  December  9,  1994,  the  Company  agreed to assign  all of its  assets  and
liabilities  to  its  wholly  owned   subsidiary,   All-Quotes   Capital,   Inc.
("Capital"),  and  effectively  cease  all  existing  business  operations.  The
proceeds from a private  placement then in process (more fully described  below)
and the Morgan Kent Group assets and  liabilities  were excluded from the assets
and liabilities  assigned to Capital.  Capital entered into an escrow  agreement
whereby  cash and  shares  of its  common  stock  were  deposited  in  escrow as
collateral  for all of the Company  liabilities  transferred  to it. The Company
agreed to prepare  and  complete  an exchange  offer  whereby the Company  would
exchange  all of its common  stock of Capital for shares of Common  Stock of the
Company held by certain of its  shareholders  of record as of the closing  date,
none of whom were part of Morgan Kent Group.

As  more  fully  described  in  Note  18,  in  January  1995  the  Company  sold
substantially  all of the operating  assets of its dial-up  market data services
business and later disposed of its remaining interest in Capital.

Boundless Acquisition
---------------------

The Company, through Acquisition acquired all of the outstanding common stock of
Boundless  from the  former  owner,  NCR  Corporation  ("NCR")  (the  "Boundless
Acquisition"),  for $5,000 in cash, an $8,000  mortgage note payable to NCR (the
"NCR Note") and $5,472 of mandatorily  redeemable  preferred stock of Boundless.
Additionally,  approximately  $441 in expense  associated  with the purchase was
incurred.  Under  the  terms of the  agreement,  NCR  assumed  all  intercompany
balances,  tax  liabilities,  accrued  pension  liabilities,  and  accruals  for
employee-related plans, such as medical and workers compensation of Boundless as
of December 9, 1994.  Also,  NCR retained the liability for any post  employment
benefits  related to  terminations  within six months of the closing date of the
transaction.  Benefits  payable under the pension plan,  which were frozen as of
the closing date, are maintained in NCR's defined  benefits plan.  Additionally,
NCR assumed the defense of certain  legal  proceedings  at its own expense.  NCR
also agreed to pay, at its own expense,  any amounts paid in settlement  related
to these proceedings.
                                       F-12

<PAGE>
                    BOUNDLESS CORPORATION AND SUBSIDIARIES
             Notes To Consolidated Financial Statements, continued
                       (In thousands, except share data)

Boundless has 1,000 authorized shares of mandatorily  redeemable preferred stock
(the  "Boundless  Preferred  Stock"),  all  of  which  are  issued  to  NCR  and
outstanding. In connection with the Boundless Acquisition, NCR was granted a put
option  (the  "Put  Option")  to  require  Acquisition  to  purchase  all of the
preferred  stock of  Boundless  owned by NCR.  In  addition,  NCR granted a call
option (the "Call Option") to Boundless that permitted Boundless to purchase the
preferred  stock. As more fully described in Note 5, the terms of the Put Option
and the Call Option were restructured in October 1995.

A portion of the purchase price for the Boundless  Acquisition was funded by the
sale of  700,000  shares  of  Common  Stock at  $5.00  per  share to  accredited
investors in a private  placement in which an underwriter (RAS Securities Corp.)
acted as the exclusive  placement agent. As of December 31, 1994, 407,745 shares
of Common Stock had been issued in connection  with such private  offering.  The
remaining  292,255  shares were issued in 1995.  Total gross  proceeds  from the
offering were $3,500.  Expenses  relating to this  offering  were  approximately
$1,343,  of which RAS  received  $945,  consisting  of a  commission  of 10%,  a
non-accountable  expense  allowance  of 3% of the  gross  proceeds,  $250  as an
investment  banking fee and a $240  consulting  fee.  The per share price of the
offering was determined by arms-length negotiations between the Company and RAS.
The balance of the cash portion of the purchase  price was paid from  borrowings
on a revolving line of credit.

The Boundless  Acquisition has been accounted for under the purchase method and,
accordingly,  the  operating  results  of the  Company  include  the  results of
operations of Boundless since the date of acquisition.

4.   Acquisition of Enterprise Integration Network Technology

During  April 1995,  the  Company,  through its  wholly-owned  subsidiary  EINet
Acquisition  Corporation (name changed to TradeWave Corporation and subsequently
to OTW Corporation), acquired the Enterprise Integration Network technology (the
"TradeWave  Technology")  from the  Microelectronics  and  Computer  Technology
Corporation ("MCC") (the "TradeWave  Acquisition") for approximately $1,300 plus
royalties.

At the same time,  OTW entered  into a  technology  agreement  (the  "Technology
Agreement")  with  MCC  to  participate  in  current  and  future  research  and
development projects selected by the Company. The current project focused on the
development of technology to intelligently navigate dynamic information networks
such as the Internet.

The purchase of the TradeWave Technology from MCC was funded in part through the
issuance of $1,000 principal amount of 10% convertible notes ("Tradewave Notes")
to investors  outside the United  States.  These notes have been  converted into
127,038  shares of the  Company's  common  stock.  In April  1995,  the  Company
allocated  substantially  the  entire  $1,300  purchase  price of the  Tradewave
technology  (inclusive  of  approximately  $300 of  capitalized  costs  directly
related to the Tradewave Acquisition) to purchased  intellectual property.  This
allocation  was  based  upon the  belief  that  the web  browser  and  directory
technology included in the Tradewave  Technology were ready to be commercialized
profitably.  Subsequently in 1995, management recognized that sales practices of
its Internet  competitors of providing  Internet browser software free of charge
and listings and advertising space in Internet directories free or for a nominal
charge had impaired the revenue potential of this technology. Nevertheless, this
technology was considered a valuable component of OTW's Virtual Private Internet
product.   In  October  1995,  OTW  developed  a  new  strategic   plan,   which
de-emphasized  the web browser and  directory  services  technology  and instead
emphasized the OTW's Virtual Private Internet solution integrating applications,
information  servers,  directory  services and security ("Trade VPI").  Based on
this revised business plan, the Company recognized that no significant  revenues
would  result until  development  of the  integrated  Virtual  Private  Internet
solution was completed and released for commercialization.  Accordingly,  in the
quarter  ended  December 3l,  1995,  the  Company  recognized  a  $1,225  charge
associated with in-process research and development.

                                      F-13
<PAGE>
                    BOUNDLESS CORPORATION AND SUBSIDIARIES
             Notes To Consolidated Financial Statements, continued
                       (In thousands, except share data)

The  Company had  continuing  monetary  obligations  to MCC under  the TradeWave
Acquisition Agreement and the Technology Agreement. The Release,  Settlement and
Satisfaction of Indebtedness Agreement ("Release Agreement") dated March 5, 1997
with MCC  released  OTW,  the  Company  and  Morgan  Kent Group from any and all
obligations  in return  for $500 and a  non-exclusive  license  to the  software
developed  by OTW.  Morgan Kent Group was a guarantor  of the amounts owed under
the Technology Agreement.

5. Acquisition of Text Terminal Business From Digital Equipment Corporation

The Transaction
---------------

During  October 1995,  Boundless  purchased from Digital  Equipment  Corporation
("Digital")  certain assets (the "Digital Assets") relating to Digital's general
purpose  character-cell,  host-dependent  computer display  terminals  ("General
Display  Terminals")  product lines,  including products sold under the "VT" and
"Dorio" brands (the "Digital  Acquisition").  The Digital  Acquisition  has been
accounted for as a purchase.

The Digital Assets consisted principally of inventory,  trade names,  trademarks
and patents.  Software and other  intellectual  property  used by Digital in its
General Display Terminal business were simultaneously  licensed to Boundless. As
no  manufacturing  facilities  were  included in the Digital  Assets,  Boundless
transferred  production of the acquired product lines from Digital's  facilities
in the Far East to the Boundless plant in Hauppauge, New York.

Pursuant  to a  related  supply  agreement,  Digital  agreed  to  purchase  from
Boundless at least 95 percent of Digital's  worldwide  requirements  for General
Display  Terminals and related parts for a four-year  period,  with a minimum of
80,000 units of General Display Terminals during the first year. The Company has
guaranteed all of the obligations of Boundless under the supply agreement.

Boundless and Digital also entered into agreements pursuant to which Digital (i)
manufactured for Boundless  General Display  Terminals  through January 30, 1996
and modules until June 30, 1996; (ii) provided to Boundless  certain  technical,
sales,  marketing  and  administrative  services  relating  to  General  Display
Terminal  products  through  February  19, 1996 and (iii) is  providing  certain
worldwide warranty and post-warranty servicing on General Display Terminals sold
and designated for such servicing by Boundless for a period of four years.

The  purchase  price  of  the  Digital  Assets,  $18,697,  included  $7,481  for
inventory, $188 for other assets and $250 for intellectual property. The Company
recorded  $10,777 in  goodwill,  which is the excess of the  purchase  price and
related  direct  costs of the  acquisition  of $2,199 over the fair value of net
assets  acquired.  In addition,  Boundless was obligated to pay $347 for certain
tooling and equipment delivered by Digital prior to June 30, 1996.

The Financing
-------------

Of the amount paid to Digital,  $13,498 was paid in cash with $3,000 paid by the
issuance of 100,000  shares of the  Company's  Common  Stock,  which the Company
registered in July 1996,  at its cost,  for resale under  applicable  securities
laws.  Boundless  obtained bank financing (the "Bank Financing") to pay the cash
portion of the purchase price of the Digital Assets from Chase  Manhattan  Bank,
N.A.,  acting for itself and as agent for other  participating  banks ("Chase"),
under  a  term  loan  in  the  principal  amount  of  $20,000  and  a  revolving
line-of-credit  providing  for  revolving  loans of up to  $20,000,  based  upon
lending  formulas and subject to sub-limits  and other terms as are set forth in
the loan  documents.  Boundless  also used proceeds of the Bank Financing to pay
all  outstanding  amounts owed to Congress  Financial  Corporation  ("Congress")
under a revolving  line-of-credit,  plus a $700 early termination fee, which the
Company  recorded as an expense in October 1995. The Company recorded an expense
of  approximately  $282  related  to costs  that had been  capitalized  when the
Congress  line-of-credit  was originally  obtained.  The Company  incurred costs
related  to the Bank  Financing  of  $1,295,  which  are  being  amortized  on a
straight-line basis over the three-year term of such Bank Financing.

                                       F-14
<PAGE>
                     BOUNDLESS CORPORATION AND SUBSIDIARIES
             Notes To Consolidated Financial Statements, continued
                       (In thousands, except share data)

The Company  guaranteed the  obligations of Boundless  under the Bank Financing,
which was  collateralized by a pledge of all of the outstanding  common stock of
Acquisition.  Acquisition also guaranteed the obligations of Boundless under the
Bank  Financing and  collateralized  its  guarantee  with a pledge of all of the
outstanding  common stock of Boundless.  Morgan Kent Group also  guaranteed  the
obligations  of Boundless,  which was  collateral  ized by a pledge of 2,143,938
shares of Common Stock of the Company owned by Morgan Kent Group.

In addition, the Company issued to Chase a warrant to purchase 100,000 shares of
common  stock  exercisable  at  $36.90  per  share,   subject  to  anti-dilution
adjustments,  at any time  after  October  20,  1996 and  prior to the  close of
business on October 19, 2000. These warrants were valued at $1,660 and are being
amortized as debt issue costs. In November, 1997, the Company agreed to exchange
the  warrant  for  100,000  shares at $36.90 per share for a warrant to purchase
31,375  shares at $10.00 per  share.  These  warrants  were  determined  to have
approximately the same value as determined by a Black-Scholes valuation model.

The NCR Restructuring
---------------------

As a condition to the Bank  Financing,  Boundless,  Acquisition  and Morgan Kent
Group were required to  restructure  (the  "Restructuring")  obligations  to NCR
which  were  incurred  in  December  1994  in  connection   with  the  Company's
acquisition of Boundless from NCR.

                                      F-15
<PAGE>
                     BOUNDLESS CORPORATION AND SUBSIDIARIES
             Notes To Consolidated Financial Statements, continued
                       (In thousands, except share data)

Boundless has 1,000 shares of mandatorily  redeemable  preferred  stock,  all of
which are issued to NCR and currently outstanding.  In the Restructuring (i) the
Company paid NCR $3,500 in cash; (ii) the Call Option  permitting the Company to
purchase the preferred stock of Boundless owned by NCR was amended (the "Amended
Call Option") to reduce its aggregate exercise price to $3,555 and to change its
expiration  date  to the  earlier  of  January  30,  1999 or the  completion  by
Boundless  or any of its parent  companies of a public  offering;  (iii) the Put
Option  requiring the Company to purchase the  preferred  stock was amended (the
"Amended  Put  Option") to reduce its  exercise  price to $3,555,  and to become
exercisable  on or after the  expiration  date of the Amended  Call Option until
December 31, 1999; (iv) the Company issued to NCR a warrant,  valued at $830, to
purchase 50,000 shares of Common Stock of the Company, exercisable at $38.75 per
share,  subject to  adjustment,  at any time after October 20, 1996 and prior to
the close of  business  on  October  20,  1998;  (v)  Boundless  and its  parent
companies  agreed  to pay NCR  $497,  a rate of 14% on the  Boundless  preferred
stock,  (the "Annual Payment  Amount") on October 20, 1996 and each  anniversary
thereafter (the "Annual  Payment Date"),  until either the Amended Put Option or
the Amended Call Option has been exercised or canceled,  each such payment to be
made in cash, to the extent  permitted by the terms of the Bank Financing,  and,
to the extent not so permitted, the balance of the Annual Payment Amount must be
paid by  delivering  to NCR such number of shares of Common Stock of the Company
which,  if sold on the applicable  Annual  Payment Date,  would net such balance
due; (vi) the maturity date of the $8,000 Promissory Note payable by the Company
to NCR was  extended  to  January  31,  1999 and if  Acquisition  makes a public
offering  of its  securities,  it must prepay the  Promissory  Note in an amount
equal to the difference  between the net proceeds of the offering and the amount
paid to NCR or any of its affiliates on  redemption  or purchase by  Acquisition
of the Boundless  Preferred  Stock plus the amount paid to Chase under the terms
of the Bank Financing;  (vii) Boundless Acquisition Corp.'s pledge to NCR of the
Boundless  common stock was canceled and the Boundless  common stock was pledged
to Chase;  (viii)  Morgan  Kent  Group's  pledge  to NCR of Common  Stock of the
Company  was  reduced to  500,000  shares and  Morgan  Kent  Group  pledged  the
remainder of its Common Stock of the Company to Chase.

In the event of liquidation  of Boundless,  NCR is entitled to $3,555 before any
amount is paid to holders of the  Boundless  common  stock.  While the Boundless
preferred stock is outstanding, Boundless is restricted from creating any shares
of stock which shall be in any respect on parity with or have any preferences to
take priority over the Boundless  preferred stock, or to alter in any manner the
rights or preferences of the Boundless preferred stock.

The Company recorded a charge of $1,668 to retained  earnings at the date of the
Restructuring for the difference between the change in the carrying value of the
Boundless  preferred stock and the sum of the cash payment and the fair value of
the warrant for 50,000 shares of common stock of the Company issued to NCR.

The cash  payment  of  $3,500  made to NCR was paid by the  Company  from  gross
proceeds of $4,250  received  by the  Company  from  Regulation  S offerings  to
investors  outside of the United States.  In two  offerings,  the Company issued
non-interest  bearing  convertible  promissory  notes for  $2,500  (the  "$2,500
Notes")  and $750 (the  "$750  Notes"),  respectively.  The  $2,500  Notes  were
converted  on  November  30,  1995 into  123,686  shares of Common  Stock of the
Company determined by dividing $2,500 by 70% of the average closing bid price of
the Common Stock of the Company on the five business days immediately  preceding
the  conversion.  The $750 Notes were  converted  in  November  1995 into 35,969
shares of Common Stock of the Company  determined by dividing $750 by 70% of the
average  closing  bid  price  of the  common  stock of the  Company  on the five
business days  immediately  preceding the  conversion.  Upon  conversion of such
non-interest  bearing  notes,  depending on the  significance  of the amount,  a
portion of the  difference  between the carrying value of the notes and the fair
market value of the shares issued is accounted for as financing  expense and the
remainder as cost of equity.  The amount to be  allocated to financing  expense,


                                      F-16
<PAGE>
                     BOUNDLESS CORPORATION AND SUBSIDIARIES
             Notes To Consolidated Financial Statements, continued
                       (In thousands, except share data)

assuming an estimated  interest rate of approximately  20%, was determined to be
immaterial.  In a third  Regulation  S  offering,  the  Company  received  gross
proceeds of $1,000 by selling  47,259 shares of common stock.  In addition,  the
Company  obtained bridge  financing of $1,000 at 6% interest  approximately  ten
days before the close of the  offerings.  This loan was repaid from the proceeds
of the offerings described above.

In addition, warrants, valued at $661, to purchase 52,500 shares of common stock
of the Company  exercisable at $36.25 to $38.75, the market price on the date of
grant,  were granted to financial  advisors in October 1995 in  connection  with
these offerings. These warrants are exercisable for three years from the date of
grant and the  holders  have  registration  rights  with  respect  to the shares
issuable upon exercise of these warrants. A portion of the value of the warrants
was  recorded  as a cost of  equity  and a  portion  as debt  issuance  costs in
accordance  with the terms of the  associated  equity or debt  instruments.  The
following  unaudited  pro forma  summary  presents the  consolidated  results of
operations as if the acquisition of Digital Assets had occurred at the beginning
of 1995. The pro forma presentation  reflects the impact of certain adjustments;
(a)  amortization of goodwill,  (b) increased  interest  expense,  (c) increased
depreciation  expense,  and (d) decrease of corporate overhead charges.  It does
not purport to be indicative of the financial results, which actually would have
occurred  had the  acquisition  been made at the  beginning  of 1995,  or of the
results that may occur in the future.

                                                                 1995
                                                            -------------
Net sales                                                   $    150,352
Income from continuing operations                                    466
Income per share from continuing operations                        $0.10

6.   GAI Partnership

Effective May 1995,  Boundless and GA formed a limited  liability  company ("the
GAI  Partnership")  with  GA  owning  51%  and  Boundless  owning  49%.  The GAI
Partnership  was  formed to allow GA to  acquire  the  former  ADDS  Pick  based
business owned by Boundless. This business was acquired by Boundless from NCR in
December 1994 along with a terminal business. (See Notes 1 and 3)

Under the terms of the  operating  agreement  which governs the operation of the
GAI Partnership,  (the "Operating Agreement"),  the GAI Partnership operates and
manages  GA's and  Boundless'  Pick  business.  Under the  Operating  Agreement,
Boundless is entitled to receive cash  distributions from the GAI Partnership in
an amount equal to a percentage of the GAI Partnership's net revenues,  which is
payable whether or not the GAI Partnership is profitable or generating  positive
cash flow. The percentage of net revenues to which Boundless is entitled was 12%
for the first year of the Operating Agreement (subject to a minimum of $2,900 in
the first year only) and will  decline  annually  thereafter  in steps  until it
reaches 7% in the fifth year. However, the percentage of net revenues payable to
Boundless  is  subject  to  adjustment   (upward  or  downward)   under  certain
circumstances.  Subsequent  to the fifth year of the  Operating  Agreement,  the
percentage  of net  revenues  to be paid to  Boundless  is to be  determined  by
negotiations  between  GA and  Boundless.  GA is  entitled  to  retain  all cash
generated by the GAI Partnership,  if any, after the payment to Boundless of the
net revenue percentage described above.

                                      F-17
<PAGE>
                     BOUNDLESS CORPORATION AND SUBSIDIARIES
             Notes To Consolidated Financial Statements, continued
                       (In thousands, except share data)

Under the Operating  Agreement,  the business and affairs of the GAI Partnership
are managed  exclusively by GA.  However,  in the event that the GAI Partnership
fails to achieve  agreed upon revenue or profit  projections,  Boundless has the
right to the GAI  Partnership to pay to Boundless the percentage of net revenues
to which Boundless is entitled, Boundless has the right to thereafter replace GA
as the  sole  manager  of the GAI  Partnership.  During  the  first  year of the
Operating  Agreement,  Boundless  paid a management fee of  $1,031 in connection
with GA's duties as manager of the GAI Partnership.  However,  subsequent to the
first  year  of  the  Operating  Agreement,  GA  will  not  be  entitled  to any
compensation for acting as manager of the GAI Partnership.

Boundless received cash distributions of $1,459, $2,473 and $1,475 for the years
ended December 31, 1997,  1996 and 1995,  which are included in product sales in
the accompanying consolidated statements of operations. The Company accounts for
the GAI Partnership revenue as a royalty rather than an equity investment due to
the  uncertainty  regarding  the initial  value of its  contribution  to the GAI
partnership.

As of December  31,  1997,  the  Company was owed $1,047  under the terms of the
agreement and had not received required payments during the second half of 1997.
Due to the  uncertainty  regarding  the  collectibility  of such  payments,  the
Company has recognized  revenue only to the extent of cash  collected.  Although
the  Company,  under the terms of the  Partnership  Agreement,  may  assume  the
management responsibilities of the Partnership, the Company has been negotiating
a  settlement  of  the  receivable  with  General  Automation.  There  can be no
assurance the Company will be successful in this effort.

                                      F-18
<PAGE>
                     BOUNDLESS CORPORATION AND SUBSIDIARIES
             Notes To Consolidated Financial Statements, continued
                       (In thousands, except share data)

7. Inventories

The major components of inventories are as follows:
                                                              December 31,
                                                       -------------------------
                                                           1997         1996
                                                       -----------   -----------
Raw materials and purchased components                  $  10,723     $  12,845
Finished goods                                              2,477         4,942
Demonstration equipment                                       135           396
Service parts                                                 347           342
                                                       -----------   -----------
                                                       $   13,682     $  18,525
                                                       ===========   ===========

Inventories  are stated at the lower of cost or market.  Cost is determined on a
first-in first-out basis.

8. Property and Equipment

Property and equipment consists of the following:
                                                              December 31,
                                                       -------------------------
                                                           1997         1996
                                                       -----------   -----------

Land                                                    $   3,780     $   3,780
Buildings and improvements                                  6,193         6,175
Machinery and equipment                                     5,058         4,846
                                                       -----------   -----------
                                                           15,031        14,801

Less accumulated depreciation and amortization              4,417         3,327
                                                       -----------   ----------
                                                       $   10,614     $  11,474
                                                       ===========   ==========

9. Income Taxes

The  provision  for income taxes  consisted of the following for the years ended
December 31:

                                          1997          1996          1995
                                      -----------    ----------   ------------
Current:
 Federal                              $    (347)     $   (340)    $     597
   State                                    213           413           431
                                      ---------      --------     ---------
                                           (134)           73         1,028
                                      ---------      --------     ---------

Deferred:
  Federal                                 2,573        (3,176)          (83)
  State                                     208            -            (29)
  Valuation allowance                    (2,781)        4,065        (1,121)
                                      ---------      --------     ---------
                                             -            889        (1,233)
                                      ---------      --------     ---------
                                      $    (134)     $    962     $    (205)
                                      =========      ========     =========
The provision for income taxes differs from the amount of income tax  determined
by applying the statutory  federal  income tax rate to operations  before income
taxes as a result of the following:

                                      F-19
<PAGE>
                     BOUNDLESS CORPORATION AND SUBSIDIARIES
             Notes To Consolidated Financial Statements, continued
                       (In thousands, except share data)

                                          1997          1996          1995
                                      -----------    ----------   ------------
Federal income tax at statutory rate   $   1,615      $ (3,760)    $      463
Utilization of prior year net
  operating loss carryforwards            (1,481)           -              -
State income taxes, net of federal
  income tax benefit                         278           273            243
Other, net                                    23           609            210
Changes in net deferred tax assets and
  valuation allowances                      (569)        3,840         (1,121)
                                       ---------      --------     ----------
    Income tax expense (benefit)       $    (134)     $    962     $     (205)
                                       =========      ========     ==========

The income tax benefit of $205 for the year ended  December 31, 1995  includes a
$393 tax benefit of an extraordinary  loss and a $1,135 tax benefit from the OTW
discontinued  operations  which  are  reflected  net of tax in the  accompanying
consolidated statements of operations.

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

                                                       December 31,
                                                  -----------------------
                                                     1997         1996
                                                  ----------   ----------
Current deferred tax assets:
  Inventory                                       $   1,759    $   2,524
  Accounts receivable                                   108          466
  Warranties                                            753          723
  Other                                                  -           764
                                                  ---------    ---------
    Total current deferred tax assets                 2,620        4,477

Current deferred tax liabilities:
  Software capitalized and other                         -           (28)
                                                  ---------    ---------

  Net current deferred tax assets                     2,620        4,449
                                                  ---------    ---------
Noncurrent deferred tax assets:
  Net operating loss carryforwards                       -         1,466
  Other                                                 307           -
                                                  ---------    ---------

    Total noncurrent deferred tax assets                307        1,466
Noncurrent deferred tax liabilities:
  Property and equipment                             (1,868)      (2,075)
                                                  ---------    ---------

    Net noncurrent deferred tax liabilities          (1,561)        (609)
                                                  ---------    ---------
     Net deferred tax assets                          1,059        3,840
     Less valuation allowance                        (1,059)      (3,840)
                                                  ---------    ---------
                                                  $      -     $      -
                                                  ---------    ---------
                                      F-20
<PAGE>
                     BOUNDLESS CORPORATION AND SUBSIDIARIES
             Notes To Consolidated Financial Statements, continued
                       (In thousands, except share data)

At  December  31,  1997 and 1996,  the  Company  has  recorded a 100%  valuation
allowance on the net deferred tax asset since it could not be  determined if the
asset was more likely than not to be realized.

The Company files a consolidated  federal income tax return.  As of December 31,
1997 there are no remaining net operating loss carryforwards.

10. Debt

Notes Payable
-------------
Notes  payable at December  31, 1997  consisted  of a $15,000  revolving  credit
agreement  included  in the Chase  Credit  Line for loans and letters of credit,
based upon the  availability of collateral,  generally a percentage of inventory
and accounts  receivable as specified in the agreement.  This was reduced from a
revolving credit limit of $20,000 in 1996. The interest rate is prime plus 1.25%
or LIBOR plus 2.5% (9.75% at December 31, 1997).  The revolving loan outstanding
at December 31, 1997 and 1996 was $7,650 and $13,950.

During the year ended  December  31,  1996,  the  Company  was in  violation  of
substantially  all loan covenants,  including  maintaining  specified  levels of
tangible  net worth,  fixed  charge  coverage,  interest  coverage and cash flow
coverage.  In March 1997 the revolving  loan agreement was amended to revise the
loan covenants. The banks also waived all prior loan covenant violations through
that date.  As a result,  the Company has  presented  its current  maturities of
long-term debt in accordance  with the original  terms of the  agreement,  which
were not affected by the amendment.

Each drawing under a trade letter of credit is subject to a drawing fee equal to
a minimum of 0.25% of the amount drawn.  In addition,  a letter of credit fee of
2% per  annum of the  average  face  amount  of all  standby  letters  of credit
outstanding is payable  quarterly.  There were letters of credit totaling $1,000
and $4,050  outstanding  at December  31, 1997 and 1996.  The maximum  amount of
additional  credit  available  under the revolving loan at December 31, 1997 and
1996 was  $1,094  and  $4,607,  subject  to  limitations  based on the amount of
eligible collateral.

The  commitment  fee is 0.5%  per year on the  average  daily  unused  principal
balance  of the  revolving  loan and the  outstanding  letters  of  credit.  The
weighted  average  interest rate on short-term  borrowings was 10.25%,  9.5% and
10.5% for the years ended December 31, 1997, 1996 and 1995, respectively.

Long-term Debt
--------------
Long-term debt at December 31, 1997 and 1996 consisted of the following:

Note payable to NCR, bearing                  1997           1996
 interest at 8% payable quarterly,            ----           ----
 principal due on or before
 January 31, 1999, collateralized
 by land and  building                   $   8,000        $  8,000

Term loan
 payable to banks, due December 1998
 and  collateralized by accounts
 receivable, inventories and
 substantially all other assets of
 the Company,  bearing interest
 at a variable rate payable quarterly
 (9.75 % at December 31, 1997)               3,250          13,382
Other                                            -               9
                                             -----          ------
                                            11,250          21,391
Less current maturities
 on long-term debt                           3,250           8,009
                                             -----           -----
                                        $    8,000       $  13,382
                                         =========        ========

OTW  had a  non-interest  bearing  note  payable  (effective  rate  of  9%) to a
corporation in  installments  through 1997. The note had a balance of $500 as of
December  31,  1996,  and is included  in the net  liabilities  of  discontinued
operations in the accompanying  Consolidated  Balance Sheets. This note was paid
in full in March 1997.
                                      F-21
<PAGE>
                     BOUNDLESS CORPORATION AND SUBSIDIARIES
             Notes To Consolidated Financial Statements, continued
                       (In thousands, except share data)

Acquisition is the legal obligor of the note payable to NCR. The note is payable
on or before  January  31,  1999.  However,  the note and  accrued  interest  is
immediately  due  should  Acquisition  make an  offering  of its  stock  or debt
pursuant to the Securities Exchange Act of 1933.

Boundless is  prohibited  from  declaring or paying  dividends on its stock,  or
redeeming or otherwise  acquiring  any class of capital stock during the term of
the Chase  agreement.  The maximum  aggregate  amount that Boundless may loan or
advance  to the  Company in a fiscal  year is $500 less the total cash  dividend
Boundless  paid to the  Company  in that  year.  The  term  and  revolving  loan
agreement  requires  the  Company to make  contingent  payments on the term loan
should the Company obtain financing above a certain level by issuing stock.

The Company  guaranteed the  obligations of Boundless  under the Bank Financing,
which was  collateralized by all of the outstanding common stock of Acquisition.
Acquisition  also  guaranteed  the  obligations  of  Boundless  under  the  Bank
Financing and  collateralized  its guarantee with all of the outstanding  common
stock  of  Boundless.   Morgan  Kent  Group   collateralized  its  guarantee  of
Boundless's  obligations to Chase with  2,143,938  shares of common stock of the
Company.

As a result of the Company's  financial  performance  throughout  1997,  and the
substantial  reduction in debt, the Company and Chase  renegotiated the terms of
its revolving loan  agreement,  including the release of the Morgan Kent Group's
shares of Common Stock which were pledged to Chase.

Aggregate debt scheduled maturities at December 31, 1997 were as follows:

1998                               $  3,250
1999                                  8,000
                                   --------
                                   $ 11,250
                                   ========
11. Equity

At December 31, 1997 and 1996, stockholders' equity consisted of the following:

Preferred stock, $0.01 par value,                 1997           1996
 1,000,000 shares authorized,                     ----           ----
 none issued                                 $      -       $      -
Common  stock,  $0.01 par value,
 25,000,000  shares  authorized,
 5,139,228 and 4,857,231 shares
 issued at December 31, 1997
 and 1996, respectively                            51              49
Additional paid-in capital                     34,094          31,877
Accumulated deficit                           (18,738)        (23,124)
                                             ---------        --------
       Total stockholders' equity             $ 15,407         $ 8,802
                                             =========        ========


The Company  amended  its  Certificate  of  Incorporation  during  April 1997 to
authorize  the Company to issue up to 1,000,000  shares of  preferred  stock and
10,000,000 shares of Common Stock,  subsequently increased to 25,000,000 through
an amendment  filed on March 26, 1998. The preferred  stock may be issued in one
or more series, with preference and other rights as determined from time to time
by the Board of Directors.  No such shares of preferred stock had been issued at
December 31, 1997.

The Company  issued  20,000 and 22,500  shares of its Common Stock during August
1995 and January 1996,  valued at $16.30 and $25.60 per share,  to an individual
whose sons are  significant  shareholders  of Morgan  Kent Group,  the  majority
shareholder  of the  Company,  which was charged to expense in  connection  with
special consulting services rendered in 1995.

                                      F-22
<PAGE>
                     BOUNDLESS CORPORATION AND SUBSIDIARIES
             Notes To Consolidated Financial Statements, continued
                       (In thousands, except share data)

The Company  issued 1,700 and 11,546  shares of its Common Stock during 1995 and
1996,  valued at $32.50 and $24.20 per  share,  to the former  President  of the
Company,  which was charged to expense in  connection  with  certain  consulting
services rendered in 1995.

The Company issued 2,000 shares of its Common Stock during January 1996,  valued
at $11.20 per  share,  to an  investment  advisor in  connection  with  services
rendered in 1995.

The Company issued 1,000 shares of its Common Stock during January 1996,  valued
at $11.94 per share, to the former audit firm of the Company.

The Company issued 6,000 shares of its Common Stock during July 1996,  valued at
$50.00  per  share,  to  MCC  as  payment  of  installment  due  on  outstanding
obligations of OTW.

The Company issued 34,620 shares of its Common Stock on October 1997,  valued at
$14.40 per share,  to NCR as payment of  dividends  due on  Boundless  preferred
stock (See Note 3).

The Company  completed several offerings of securities under Regulation S of the
Securities Act of 1933 during 1996 and 1997 as follows:

1.   The Company received gross proceeds of $400 by issuing, in a sale completed
     March 14, 1997,  convertible  notes bearing interest at 8% per annum. As of
     December 31, 1997, the entire note had been converted into 58,849 shares of
     Common Stock.

2.   The Company received gross proceeds of $1,000 on February 28, 1997, through
     the  issuance of  interest-bearing  convertible  notes.  As of December 31,
     1997,  the entire note had been  converted  into  127,360  shares of Common
     Stock.  In connection  with this offering the Company issued  warrants to a
     financial  advisor to purchase  5,045 shares of Common Stock at an exercise
     price of $13.75 per share. This warrant was valued at $19.

3.   The  Company  received  gross  proceeds  of  $500  by  selling  convertible
     non-interest  bearing notes. During the year ended December 31, 1996, these
     notes were  converted  into 25,483 shares of Common Stock.  The proceeds of
     this  offering  were used to  repurchase  27,333  shares of Common Stock at
     $18.00 per share.

4.   The Company received gross proceeds of $1,000  by  selling 59,424 shares of
     Common  Stock for $16.80 per share.  Approximately  $505 of the proceeds of
     this  offering was used to fund working  capital of OTW. The balance of the
     proceeds was used to repurchase  27,500 shares of restricted  shares of its
     Common Stock at $18.00 per share.

                                      F-23
<PAGE>
                     BOUNDLESS CORPORATION AND SUBSIDIARIES
             Notes To Consolidated Financial Statements, continued
                       (In thousands, except share data)

5.   The  Company  received  gross  proceeds  of $1,000 by  selling  convertible
     non-interest  bearing notes. During the year ended December 31, 1996, these
     notes were converted  into 52,849 shares of Common Stock. A portion,  $810,
     of the proceeds of this  offering was used to  repurchase  17,667 shares of
     Common  Stock at $18.00 per share.  The  balance of the  proceeds  was used
     primarily to fund working capital of OTW.

12.  Options and Warrants

In March 1995,  the Company  adopted an  Incentive  Stock Option Plan (the "1995
Plan") which permits the Board of Directors to grant performance  shares,  stock
awards,  stock  options,  Stock  appreciation  rights  and  incentive  awards to
employees, non-employee directors and others. The maximum number of shares to be
issued under the 1995 Plan is not to exceed 600,000.  The exercise price of each
option  granted is to be equal to or less 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.

Prior to the 1995 Plan,  the Company had adopted the 1991  Employee and Director
Stock Option Plan (the "1991  Plan").  After the adoption of the 1995 Plan,  the
Company  amended the 1991 Plan,  eliminating any further grants of options under
the 1991 Plan. As of December 31, 1996 there were 109,850 fully vested options
outstanding, expiring in 2002.

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".
During  the years  ended  December  31,  1997 and 1996,  all  options  issued to
officers and  employees  were  granted at an exercise  price,  which  equaled or
exceeded  the market  price per share at the date of grant and  accordingly,  no
compensation was recorded.

Effective  for the year ended  December  31,  1996,  the Company was required to
adopt the disclosure portion of FASB Statement 123,  "Accounting for Stock-Based
Compensation".  This  statement  requires  the  Company  to  provide  pro  forma
information  regarding net income (loss)  applicable to common  stockholders and
income (loss) 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
with the following weighted average assumptions used for grants in 1997 and 1996
as follows:

         1. Dividend yield of 0% for all years

         2. Expected volatility ranging from .71 to .78

         3. Risk-free interest rates ranging from 5.22% to 5.83%

         4. Expected terms ranging from 2 to 5 years.

Under the  accounting  provisions  of SFAS No. 123, the  Company's  net earnings
(loss)  applicable to common  stockholders  and earnings  (loss) per share would
have been increased to the pro forma amounts indicated below:



                                         1997             1996           1995
                                         ----             ----           ----
Net earnings (loss) applicable to
common shareholders

 As reported                         $   4,386      $   (11,736)    $     168
 Under SFAS No. 123                      2,269          (13,263)         (211)

Earnings (loss) per share
 As reported - basic                 $    0.89      $     (2.50)    $     0.04
 As reported - diluted                    0.86            (2.50)          0.O4
 Under SFAS No. 123 - basic               0.46            (2.82)         (0.05)
 Under SFAS No. 123- diluted              0.44            (2.82)         (0.05)

A summary  of the status of the  Company's  stock  options  and  warrants  as of
December 31, 1997 and 1996,  and changes  during the years ending on those dates
is presented below:

                                      F-24
<PAGE>
                     BOUNDLESS CORPORATION AND SUBSIDIARIES
             Notes To Consolidated Financial Statements, continued
                       (In thousands, except share data)

The  following  table  summarizes  information  about  fixed  stock  options and
warrants outstanding at December 31, 1997:

 Options                         1997                              1996
 -------              ----------------------------     -------------------------
                                         Weighted                   Weighted
                                         Average                     Average
                      Shares         Exercise Price    Shares     Exercise Price
                      ------------   --------------    ---------  --------------

Outstanding at
 beginning of year       526,515      $      16.80       393,750  $   14.32
   Granted               536,875              8.90       403,912      18.34
   Exercised             (16,529)            (6.90)      (92,742)     (9.54)
   Forfeited            (348,063)           (14.70)     (178,405)    (18.76)
                      -----------     -------------    ---------     -------
 Outstanding at
 end of year             698,798       $     11.98       526,515   $  16.75
                      ===========     =============    =========   =========
Options exercisable
 at end of year          519,344       $     12.26       310,077   $  16.80
                      ===========     =============    =========   =========
Weighted average fair
 value of options
 granted during the year               $      4.86                 $    22.00
                                       ===========                 ==========

Warrants                        1997                              1996
--------              ----------------------------     -------------------------
                                         Weighted                   Weighted
                                         Average                     Average
                      Shares         Exercise Price    Shares     Exercise Price
                      ------------   --------------    ---------  --------------

Outstanding at
 beginning of year       667,062      $      24.40       753,659  $    29.55
   Granted               397,017              8.60        32,500       26.95
   Exercised             (23,094)            (7.50)      (51,097)     (27.86)
   Forfeited            (565,376)           (22.40)      (68,000)     (82.50)
                      -----------     -------------    ---------      -------
 Outstanding at
 end of year             475,609       $     14.56       667,062   $   24.15
                      ===========     =============    =========   =========
Options exercisable
 at end of year          475,609       $     14.56       667,062   $   24.15
                      ===========     =============    =========   ==========
Weighted average fair
 value of warrants
 granted during the year               $      6.14                 $   26.30
                                      =============                ==========


                                      F-25

<PAGE>
   The following  tables summarize  information  about fixed stock options and
warrants outstanding at December 31, 1997:


                                                Weighted
                   Number                        Average             Number
               Outstanding at                   Remaining        Exercisable  at
                December 31,     Exercise    Contractual Life      December 31,
Options             1997          Price          (Years)              1997
                ----------------------------------------------------------------

                   258,250   $     6.60           4.50                   205,250

                       300         7.20           4.55                        --

                    62,440        10.00           4.43                        --

                    75,000        10.30           4.25                    75,000

                    12,900        11.30           4.83                        --

                   138,203        13.50           2.10                   102,246

                    25,000        15.70           4.97                    25,000

                    13,100        16.30           1.19                    13,100

                     1,250        17.50           1.20                     1,250

                     5,500        20.60           1.59                     5,500

                    64,000        21.30           1.93                    61,958

                    24,250        25.60           2.09                    20,313

                    17,465        28.20           2.94                     9,110

                     1,140        32.80           2.78                       617

                  ---------     --------        ---------            -----------
                   698,798       $11.98           3.56                   519,344
                  =========     ========        =========            ===========



                                                Weighted
                   Number                        Average             Number
               Outstanding at                   Remaining        Exercisable at
                 December 31,     Exercise    Contractual Life      December 31,
 Warrants           1997          Price          (Years)              1997
               --------------    --------    ----------------    ---------------

                   307,502       $   7.50         6.95                   307,502

                    31,375          10.00         2.80                    31,375

                     1,440          13.80         2.44                     1,440

                     2,500          18.40         6.95                     2,500

                    30,000          18.40         4.39                    30,000

                     7,292          26.90         1.08                     7,292

                     7,500          26.90         1.14                     7,500

                     5,000          27.40         1.07                     5,000

                     5,000          30.00         1.00                     5,000

                     2,625          36.30         0.83                     2,625

                     1,875          36.60         2.83                     1,875

                    21,000          37.80         0.80                    21,000

                    52,500          38.80         0.80                    52,500
                   ---------      --------     ----------               --------
                    475,609        $14.56         5.2                    475,609
                   =========      ========     ==========               ========

                                      F-26

<PAGE>

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.

In connection with the February 1997 offerings of securities  under Regulation S
of the Securities Act of 1933, the Company issued warrants to financial advisors
to purchase  5,045  shares of Common  Stock at exercise  price $13.75 per share,
exercisable  through  February 1999. These warrants were valued at approximately
$19.

A  warrant  to  purchase  30,000  shares of Common  Stock of the  Company  at an
exercise  price of $18.70 per share,  exercisable  through  January 31, 2002 was
granted July 1997 in consideration  for ongoing services provided in the area of
financial consulting. The warrant is valued at approximately $63.

The warrants issued to  non-employees  were recorded based on the fair values of
the warrants on the grant date, using the Black-Scholes option-pricing model.

OTW  adopted a 1995  Stock  Option  Plan  during  1995.  The  discontinuance  of
operations at OTW during December,  1996,  caused the options  outstanding to be
without value.

                                      F-27
<PAGE>
                     BOUNDLESS CORPORATION AND SUBSIDIARIES
             Notes To Consolidated Financial Statements, continued
                       (In thousands, except share data)

13.  Related Party Transactions

The Company sells display desktop  devices to and purchases  components from NCR
and its  subsidiaries.  The  Company's  sales to NCR and its  subsidiaries  were
$5,858,  $15,454,  and $39,600 for 1997, 1996 and 1995  respectively.  Purchases
from NCR and its  subsidiaries  were $87,  $2,440,  and  $13,088  for those same
periods,  respectively. The Company had accounts receivable outstanding from NCR
and its subsidiaries of  approximately  $224 and $2,422 at December 31, 1997 and
1996,  respectively.  In addition,  the Company received cash distributions from
GAI of $1,459, $2,473 and $1,475 for the years ended December 31, 1997, 1996 and
1995.

The Company has entered into  agreements with NCR, which have an initial term of
approximately  five years, under which NCR will purchase display desktop devices
from the  Company,  which NCR will market and sell under its own logo.  NCR will
supply  computer  system  platform  products  to the Company for resale with its
system  software.  To support this ongoing  relationship,  NCR will also provide
field support  services to the Company's  customers.  Under the agreements,  NCR
must purchase from the Company a minimum percentage of the Seller's total volume
of purchases of this type of desktop  device for domestic  delivery.  Pricing of
the product sold under the agreements is a specified  percentage of list prices,
such percentage to be negotiated annually.

During  April,  1997,  the  Company  agreed to pay  Morgan  Kent  Group an asset
utilization  fee of $17 per month,  or part thereof,  for each month that Common
Stock  owned by Morgan Kent Group  remained  pledged as  collateral  against the
Company's  indebtedness to Chase or NCR. For 1997 such fees amounted to $192. At
December  31,  1997,  500,000  shares of Common Stock owned by Morgan Kent Group
remained pledged to NCR.

In April, 1997, the Company signed a consulting agreement with Morgan Kent Group
under which the Company agreed to pay Morgan Kent Group $20 per month to provide
financial advisory services.  In October,  1997, the Company prepaid this fee in
the amount of $380 for services to be rendered in October  1997 and  thereafter.
Expenses for 1997 under this agreement were $162.

On July 18, 1997,  Morgan Kent Group issued to the Company a promissory  note in
the amount of $50,  bearing interest at the rate applicable to the Company under
its revolving credit line, in consideration for a loan made by the Company.  The
first  interest  payment is due one year following the execution of the note and
quarterly thereafter. The note matures July 18, 1999.

During September, 1997, the Company and Morgan Kent Group negotiated a repricing
of the warrant  which had been  delivered to Morgan Kent Group in  consideration
for Morgan Kent Group's guarantee of the Amended Put Option to NCR. The original
warrant  to  purchase  414,970  shares of Common  Stock at $18.40  per share was
exchanged for a warrant to purchase 327,847 shares of Common Stock for $7.50 per
share.  These warrants were determined to have  approximately  the same value as
determined by a Black-Scholes valuation model.

In  connection  with the  Digital  Acquisition  (see Note 4) Morgan  Kent  Group
pledged  2,143,938  shares of Common Stock to Chase and 500,000 shares of Common
Stock to NCR. In consideration of such pledge, the Company had expected to issue
to Morgan Kent Group  warrants to purchase such number of shares of Common Stock
at $38.75 per share as the Board of  Directors  of the  Company  determined  was
appropriate  after obtaining  independent  advice regarding the fairness of such
warrants.  During December, 1997, Morgan Kent Group accepted the Company's offer
of  $300  in  lieu  of the  warrant;  such  amount  having  been  determined  by
independent advice.

14. Leases

The Company  leases  certain sales offices and  miscellaneous  office  equipment
under  operating  lease  agreements,  which expire at various  times through May
2001.  Total  rent  expense  was $572,  $636,  and $622 in 1997,  1996 and 1995,
respectively.

                                 F-28
<PAGE>
                     BOUNDLESS CORPORATION AND SUBSIDIARIES
             Notes To Consolidated Financial Statements, continued
                       (In thousands, except share data)

Future minimum rental commitments as of December 31, 1997 were as follows:

  1998                                          $      466
  1999                                                 205
  2000                                                 101
  2001                                                  34
  2002                                                   1
                                                  --------
                                                $      807
                                                  --------
15.  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.

In  accordance  with the terms of the  SunRiver  Group  Acquisition  Agreements,
Capital agreed to assume the defense of those legal proceedings  initiated prior
to the  date  of  the  acquisitions  at its  expense,  including  all  potential
liability  that may result  from an adverse  judgment  in any of those  matters.
While the  Company  believes  that the  indemnification  will be  sufficient  to
protect the Company from loss,  there can be no assurance  that the Company will
be fully indemnified for losses, if any, it may incur in connection with pending
litigation.

16.  Foreign Sales

Foreign sales were approximately $30,911, $47,500 and $15,912 for 1997, 1996 and
1995,  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:

                            1997               1996                 1995
                            ----               ----                 ----
  Europe                     27%                30%                  13%
  Other                       5%                 4%                   4%
                            ----               ----                 ----
  Total                      32%                34%                  17%
                            ====               ====                 ====

17.  Defined Contribution Plan

The Company  provides a 401(k)  retirement  savings plan (the "401(k) Plan") for
its  full-time  employees.  Under  the  provisions  of  the  401(k)  Plan,  each
participant  may elect to contribute up to 15% of his or her annual  salary.  At
its discretion,  the Company may make  contributions to the 401(k) Plan.  During
the years ended  December 31, 1997 and 1996, the Company made  contributions  of
$33 and $17 to the plan.  No  contributions  were  made  during  the year  ended
December 31, 1995.

18.  Discontinued Operations

The Company adopted a formal plan in December 1996 to discontinue  operations by
March 31,  1997 of its OTW  subsidiary.  The plan  contemplated  the sale of the
business  or its  assets if  possible,  or a  dissolution  through  a  Voluntary
Petition  for  Bankruptcy  under  Chapter  7 of the  Bankruptcy  Code.  All  OTW
employees were terminated by March 5, 1997 and a small group of consultants were
retained to affect an orderly  cessation  of its  customer  obligations.  During
April,  1997, the Company finalized the  discontinuation of OTW with the sale of
certain  assets to a company  for a  combination  of cash,  a royalty  on future
revenues and the assumption of certain liabilities.

The assets of OTW,  consisting  primarily of equipment and accounts  receivable,
were  written  down  to  their  liquidation  value,   resulting  in  a  loss  of
approximately  $360. All unsecured  liabilities that could be discharged through
bankruptcy have been written off,  resulting in income for 1996 of approximately
$1,470. The debts and commitments that were guaranteed by the Company and Morgan
Kent  Group,  including  the OTW note  payable to MCC,  severance  pay and lease
commitments,  totaling  approximately  $3,492 are  included in the  accompanying
consolidated balance sheet.

                                      F-29
<PAGE>
                     BOUNDLESS CORPORATION AND SUBSIDIARIES
             Notes To Consolidated Financial Statements, continued
                       (In thousands, except share data)

The  estimated  loss  on  the  disposal  of  the   discontinued   operations  of
approximately $3,860 represents the estimated loss on the disposal of the assets
of OTW and a provision of approximately  $4,200 for the expected  operating loss
during the phase out  period  from  December  1996  through  March,  1997,  when
operations  ceased.  Approximately  $2,300 of the  operating  loss was  incurred
during 1996.

Operating  results of OTW for the eleven  months  ended  November  30,  1996 are
reflected  separately  in  the  accompanying   Statements  of  Operations.   The
Consolidated  Balance Sheets and Consolidated  Statements of Operations for 1996
have been  restated for the period from  inception of OTW,  April 1995,  through
December 31, 1995.

Net sales of OTW for 1996 and 1995 were $2,086 and $ l,165

In 1995,  the Company  sold  substantially  all of the  operating  assets of its
dial-up market data services business.

Pursuant to the SunRiver Group  Acquisition  Agreement,  the Company disposed of
substantially  all of its interest in diamond mining  properties in Sierra Leone
(owned through  Capital and its subsidiary  All-Quotes  Data, Ltd. which changed
its name to AmCan Minerals, Ltd. ("AmCan")) by granting to Bronson Conrad and J.
Gerald Combs (who simultaneously resigned as Chairman of the Board and President
and director, respectively, of the Company) a proxy to vote all shares of common
stock of Capital owned by the Company (which then  constituted 100% of Capital's
outstanding  common  stock) on all matters  upon which the common  stock had the
right to vote such shares.  As a result,  the Company  relinquished its indirect
beneficial  ownership of approximately 67% of AmCan. Capital subsequently issued
15,000,000  shares of its  common  stock to  Deston  Holdings,  Ltd.,  a company
beneficially  owned by Bronson  Conrad.  The  Company's  ownership  of Capital's
common  stock was thereby  reduced  from 100% to less than 1% and  stockholders'
equity of the Company was reduced by approximately  $2,357,  which was its basis
in  Capital.  The  Company's  remaining  interest  in Capital  was  subsequently
repurchased  by Capital in exchange for 73,650  shares of the  Company's  common
stock, which were retired.

The results of these  discontinued  operations  for the years ended December 31,
1996 and 1995 are summarized below:

                                            1996             1995
                                        ---------       -----------
Loss on discontinued operations         $ (4,243)         $ (2,242)
Gain (loss) on disposal of part
  of discontinued operations              (5,409)            1,372
                                        ---------       -----------
  Loss from discontinued operations     $ (9,652)         $   (870)
                                        =========       ===========
No tax benefit is given for the loss on  discontinued  operations of OTW for the
year ended  December  31,  1996,  as it could not be  determined  if it was more
likely than not that the net operating  loss would be realized.  The loss on the
discontinued operations of OTW for the year ended December 31, 1995 is reflected
net of tax benefit of $1,135.

The gain on the sale of a portion of the discontinued  operations of the diamond
mining  property  for the year ended  December 31, 1995 had no tax effect due to
the availability of net operating loss carryforwards which are not available for
offset against the Company's income from continuing operations.

19.  Subsequent Events

On March 6, 1998,  the Company  filed an  Information  Statement on Schedule 14C
with the Securities and Exchange Commission in connection with the following:

                                      F-30
<PAGE>
                     BOUNDLESS CORPORATION AND SUBSIDIARIES
             Notes To Consolidated Financial Statements, continued
                        In thousands, except share data)


     1.   amending the Company's  Certificate of  Incorporation  (a) to effect a
          one-for-ten  reverse  split of the  issued and  outstanding  shares of
          Common Stock, and (b) to decrease the total number of shares of Common
          Stock  which the  Company  has  authority  to issue from  100,000,000,
          pre-reverse split, to 25,000,000, post-reverse split; and

     2.   approving the Company's 1997  Incentive  Plan  permitting the grant of
          stock options,  stock appreciation  rights,  performance shares, stock
          awards,  stock units and incentive awards to employees,  directors and
          others.

This  Information  Statement was furnished on March 6, 1998 to holders of record
as of the close of  business on  December  31,  1997 of the Common  Stock of the
Company.  The actions  described  in item 1, above,  including  the  one-for-ten
reverse split were effected on March 26, 1998.


                                      F-31
<PAGE>

           SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                (PARENT COMPANY)
                            CONDENSED BALANCE SHEETS
                     (In thousands, except per share data)

                     ASSETS                              December 31,
                                                  ------------------------
                                                  1997                1996
                                                  ----                ----
Current assets:
 Cash and cash equivalents                        $      -       $       6
 Accounts receivable                                    50             340
 Other current assets                                  403               -
                                                  ------------------------
  Total current assets                                 453             346

Investments in and advances to subsidiaries
  (eliminated in consolidation):
 Investments, at equity                                616          (4,154)
 Advances to subsidiaries, net                      15,134          12,752
 Other assets                                           45              84
                                                  ------------------------
                                                  $ 16,248       $   9,028
                                                  ========================

                      LIABILITIES AND STOCKHOLDER'S EQUITY

Current liabilities:
 Accounts payable and accrued expenses                 $841           $226
                                                  ------------------------
  Total current liabilities                             841            226
                                                  ------------------------
  Total  liabilities                                    841            226
Commitments and contingencies
Stockholder's equity:
Preferred stock, $0.01 par value,
  1,000,000  shares  authorized,
  none issued                                             -             -
Common stock, $0.01 par value,
  25,000,000 shares authorized,
  5,139,228 and 4,857,231 shares
  issued at December 31, 1997 and 1996,
  respectively                                             51           49
  Additional paid-in capital                           34,094       31,877
  Accumulated deficit                                 (18,738)     (23,124)
                                                  -------------------------
   Total stockholder's equity                          15,407        8,802
                                                  -------------------------
                                                  $    16,248    $   9,028
                                                  =========================

                                      S-1
<PAGE>
           SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                (PARENT COMPANY)
                       CONDENSED STATEMENTS OF OPERATIONS
                               FOR THE YEARS ENDED
                     (In thousands, except per share data)

                                                       December 31,
                                             ---------------------------------
                                             1997           1996          1995
                                             ---------------------------------
Sales                                        $     -   $       -      $     -
Cost of Sales                                      -           -            -
                                             ---------------------------------
  Gross margin                                     -           -            -
Expenses:
  Operating                                       234         2,367       651
  Interest                                         98            52         2
  Other (income) and expenses                     250          (323)        -
                                             ---------------------------------

                                                  582         2,096       653
                                             ---------------------------------
Loss before  benefit for income
  taxes and other items below                    (582)      (2,096)      (653)
Benefit (provision) for income taxes              198         (191)       215
                                             ---------------------------------
Loss before equity from consolidated
  subsidiaries                                   (384)      (2,287)      (438)
Equity in income (loss) of consolidated
  subsidiaries                                   4,770         203       (543)
                                             ---------------------------------
Loss from continuing operations                  4,386      (2,084)      (981)

Equity from gain (loss)on disposal
  of discontinued operations                        -       (9,652)     1,149
                                             ---------------------------------
Earnings (loss) available for
  common shareholders                        $   4,386    $(11,736)   $   168
                                             =================================

                                      S-2
<PAGE>
            SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                (PARENT COMPANY)
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                               For the Years Ended
                     (In thousands, except per share data)

                                          -------------------------------------
                                           1997           1996           1995
                                          -------------------------------------
Net cash flows provided by
  (used in) operating activities             5,497       (10,747)     (1,619)
Cash flows from
  investing activities:
  Decrease (increase) in net
    advances to subsidiaries                (2,382)       (4,113)     (5,629)
  Increase(decrease) in investment
    in consolidated subsidiaries, net       (4,770)        9,324         508
  Payments for other assets                      -           (44)          -
                                        -------------------------------------
    Net cash provided by (used in)
      investing activities                  (7,152)        5,167      (5,121)
Cash flows from financing activities:
  Proceeds from sale of convertible
   notes                                     1,700         1,500       4,575
  Costs associated with issuance
    of debt                                   (187)            -           -
  Net Proceeds from issuance of
    common stock                               136         3,980       2,164
                                        -------------------------------------
    Net cash provided by financing
      activities                             1,649         5,480       6,739
                                        -------------------------------------
 Net increase  (decrease) in cash
    and cash equivalents                        (6)         (100)         (1)
 Cash and cash equivalents
    at beginning of year                         6           106         107
 Cash and cash equivalents              -------------------------------------
    at end of year                               0             6         106
                                        =====================================
  Non-cash transactions:
  Conversion of convertible notes
    into common stock                        1,700          1,500       4,575
  Compensatory value of options
   and warrants                                 63            526       3,216
  Common stock issued for
   consulting  services                          -            898         380
  Accrual of services to
    be paid in  common  stock                    -              -         857
  Distribution of assets of
    discontinued  operations                     -              -       2,358
  Issuance of common  stock in
    Digital purchase                             -              -       3,000
  Issuance of common stock for
    preferred dividend of subsibiary           497             497
  Issuance of common stock for
    TradeWave obligation                         -             300

                                       S-3
<PAGE>
                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                        For the Years Ended December 31,
                     (In thousands, except per share data)

                         Balance at
                       Beginning of                              Balance at End
      Description         Period        Additions    Deductions     of Period
---------------------  ------------    -----------  -----------  --------------
Allowances:
Doubtful accounts:
1997                     1,227           (20)           923 (A)       284
1996                     1,407            150           330 (A)     1,227
1995                     1,067          1,072           732 (A)     1,407

Inventory reserves:
1997                     5,853           (595)        1,262 (B)     3,996
1996                     3,032          3,845         1,024b(B)     5,853
1995                     3,998             99         1,065 (B)     3,032


A)  Includes  accounts  written  off during  the  period.
B)  Includes  inventory written off during the period.

                                       S-4

<PAGE>
                               BOUNDLESS CORPORATION

                           INDEX OF EXHIBITS ATTACHED




     Exhibit No.                Description of Exhibits
     -----------                -----------------------

         3.1            Certificate of Incorporation and Certificates of
                        Amendment thereto

        10(j)           Amendments 1 through 7, amending the Credit Agreement
                        and Guaranty, dated as of October 20, 1995, among Chase
                        et al.

         21             List of Subsidiaries

         23             Consent of BDO Seidman, LLP

         27             Financial Data Schedule